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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2010

o         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to                  

Commission File Number:  1-06620

GRIFFON CORPORATION

(Exact name of registrant as specified in its charter)

(212) 957-5000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes  o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  o Yes  o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  o Yes  x No

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 62,552,893 shares of Common Stock as of January 31, 2011.

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Griffon Corporation and Subsidiaries

Contents

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Part I — Financial Information

Item 1 — Financial Statements

GRIFFON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

GRIFFON CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

(Unaudited)

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

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GRIFFON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(Unaudited)

Note:  Due to rounding, the sum of earnings per share of Continuing operations and Discontinued operations may not equal earnings per share of Net income.

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

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GRIFFON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

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GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

(Unaudited)

(Unless otherwise indicated, references to years or year-end refer to Griffon’s fiscal period ending September 30)

NOTE 1 — DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

About Griffon Corporation

Griffon Corporation (the “Company” or “Griffon”), is a diversified management and holding company that conducts business through wholly-owned subsidiaries.  Griffon oversees the operations of its subsidiaries, allocates resources among them and manages their capital structures.  Griffon provides direction and assistance to its subsidiaries in connection with acquisition and growth opportunities as well as in connection with divestitures.  Griffon, to further diversify, also seeks out, evaluates and, when appropriate, will acquire additional businesses that offer potentially attractive returns on capital.

Headquartered in New York, N.Y., Griffon was incorporated in New York in 1959, and reincorporated in Delaware in 1970.

Griffon operates through three business segments: Home & Building Products, Telephonics Corporation and Clopay Plastic Products Company.

·                  Home & Building Products consists of:

-                    Clopay Building Products Company (“CBP”), a leading manufacturer and marketer of residential, commercial and industrial garage doors to professional installing dealers and major home center retail chains.

-                    Ames True Temper, Inc. (“ATT”), acquired by Griffon on September 30, 2010, is a global provider of non-powered landscaping products that make work easier for homeowners and professionals.  Due to the timing of the acquisition, none of ATT’s 2010 results of operations were included in Griffon’s results for the year ended September 30, 2010.

·                  Telephonics Corporation (“Telephonics”) designs, develops and manufactures high-technology integrated information, communication and sensor system solutions to military and commercial markets worldwide.

·                  Clopay Plastic Products Company (“Plastics”), an international leader in the development and production of embossed, laminated and printed specialty plastic films used in a variety of hygienic, health-care and industrial applications.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these financial statements do not include all the information and footnotes required by U.S. GAAP for complete financial statements. As such, they should be read with reference to Griffon’s Annual Report on Form 10-K for the year ended September 30, 2010, which provides a more complete explanation of Griffon’s accounting policies, financial position, operating results, business properties and other matters. In the opinion of management, these financial statements reflect all adjustments considered necessary for a fair statement of interim results. The results of operations of any interim period are not necessarily indicative of the results for the full year.

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The unaudited condensed consolidated balance sheet information at September 30, 2010 was derived from the audited financial statements included in Griffon’s Annual Report on Form 10-K for the year ended September 30, 2010.

The consolidated financial statements include the accounts of Griffon Corporation and all subsidiaries. Intercompany accounts and transactions are eliminated on consolidation.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods.  These estimates may be adjusted due to changes in economic, industry or customer financial conditions, as well as changes in technology or demand.  Significant estimates include revenue recorded using a percentage of completion, allowances for doubtful accounts receivable and returns, net realizable value of inventories, restructuring reserves, valuation of goodwill and intangible assets, pension assumptions, useful lives associated with depreciation and amortization of intangible and fixed assets, warranty reserves, sales incentive accruals, stock based compensation assumptions, income taxes and tax valuation reserves, environmental reserves, legal reserves, insurance reserves, fair value of hedges and the valuation of discontinued assets and liabilities, and the accompanying disclosures. These estimates are based on management’s best knowledge of current events and actions Griffon may undertake in the future. Actual results may ultimately differ from these estimates.

NOTE 2 — FAIR VALUE MEASUREMENTS

The carrying values of cash and equivalents, accounts receivable, accounts and notes payable and revolving credit debt approximate fair value due to either the short-term nature of such instruments or the fact that the interest rate of the revolving credit debt is based upon current market rates.

The fair value of Griffon’s 2017 4% convertible notes’ fair value approximated $108,500 on December 31, 2010, based upon quoted market prices (level 1 inputs).

The fair value of Griffon’s $370,313 term loan’s fair value approximated $372,000 on December 31, 2010, based upon quoted market prices (level 1 inputs).

Items Measured at Fair Value on a Recurring Basis

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 matures on September 30, 2013 and fixes the LIBOR component of the Term Loan interest rate at 2.085% for the notional amount of the swap.  The swap qualifies for hedge accounting and a $48 liability was recorded at December 31, 2010, with the offset to other comprehensive income, for its fair value.

Insurance contracts with a value of $4,634 and trading securities with a value of $9,778 at December 31, 2010, are measured and recorded at fair value based upon quoted prices in active markets for identical assets (level 1 inputs).

NOTE 3 — ACQUISITION

On September 30, 2010, Griffon purchased all of the outstanding stock of CHATT Holdings, Inc. (“ATT Holdings”), the parent of ATT, on a cash and debt-free basis, for $542,000 in cash, subject to certain adjustments (the “Purchase Price”).  ATT is a global provider of non-powered lawn and garden tools, wheelbarrows, and other outdoor work products to the retail and professional markets.  ATT’s brands include Ames®, True Temper®, Ames True Temper®, Garant®, Union Tools®, Razor-back®, Jackson®, Hound Dog® and Dynamic DesignTM.  ATT’s brands hold the number one or number two market position in their respective major product categories.  The acquisition of ATT expands Griffon’s position in the home and building products market and provides Griffon the opportunity to recognize synergies with its other businesses.

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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 facility (“Term Loan”) and a new $125,000 Asset Based Lending Agreement (“New ABL”).  The acquisition, including all related transaction costs, was funded by proceeds of the Term Loan, $25,000 drawn under the New ABL, and $168,000 of Griffon cash.  ATT’s previous outstanding debt was defeased in connection with the acquisition.

The purchase of ATT occurred on September 30, 2010.  Accordingly, ATT’s results of operations are not included in Griffon’s consolidated statements of operations or cash flows, or related footnotes for any period presented prior to September 30, 2010, except where explicitly stated as pro-forma results.  Griffon’s consolidated balance sheet at September 30, 2010 and related footnotes include ATT’s balances at that date.  The accounts of the acquired company, after adjustments to reflect fair market values assigned to assets and liabilities, have been included in Griffon’s consolidated financial statements from date of acquisition.

The following table summarizes estimated fair values of assets acquired and liabilities assumed as of the date of acquisition, and the amounts assigned to goodwill and intangible assets:

Amounts assigned to goodwill and major intangible asset classifications are as follows:

Pro Forma Information

The following unaudited pro forma information illustrates the effect on Griffon’s revenue and net earnings for the three-month period ended December 31, 2009, assuming the acquisition of ATT took place on October 1, 2009.

The pro forma results of operations have been prepared for comparative purposes only and include certain adjustments to actual financial results, such as imputed financing costs, and estimated amortization and depreciation expense as a

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result of intangibles and fixed assets acquired, measured at fair value.  They do not purport to be indicative of the results of operations that actually would have resulted had the acquisition occurred on the date indicated or that may result in the future.

During the 2011 first quarter, Plastics purchased a business in Shanghai, China for $855.  The purchase price was primarily allocated to fixed assets.

NOTE 4 — INVENTORIES

Inventories, stated at the lower of cost (first-in, first-out or average) or market, were comprised of the following:

NOTE 5 — PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment were comprised of the following:

No event or indicator of impairment occurred during the quarter ended December 31, 2010, which would require additional impairment testing of property, plant and equipment.

NOTE 6 — GOODWILL AND OTHER INTANGIBLES

The following table provides the changes in carrying value of goodwill by segment during the quarter ended December 31, 2010.

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No event or indicator of impairment occurred during the quarter ended December 31, 2010, which would require impairment testing of goodwill.

The following table provides the gross carrying value and accumulated amortization for each major class of intangible assets:

During the quarter ended December 31, 2010, Griffon reduced the carrying value of unpatented technology by approximately $1,400 due to the expiration of contingency agreements related to both the J-Tech Investments LLC and Short Range Radio asset purchases.

No event or indicator of impairment occurred during the quarter ended December 31, 2010, which would require impairment testing of long-lived intangible assets excluding goodwill.

NOTE 7 — INCOME TAXES

Griffon’s effective tax rate for continuing operations for the quarter ended December 31, 2010 was a benefit of 44.9 %, compared to a provision of 16.6% in the prior year quarter.  The December 31, 2010 quarter effective tax rate reflected a change in earnings mix including the results of ATT which was acquired on September 30, 2010.  In addition, a tax benefit of $320 was recorded in connection with the retroactively extended research tax credit signed into law on December 22, 2010.  The December 31, 2009 quarter effective tax rate benefited from a change in the earnings mix, combined with tax planning with respect to non-U.S. operating locations, and a benefit arising on the filing of certain of Griffon’s tax returns in various jurisdictions.

Excluding the above discrete period items, the effective tax rate on continuing operations for the quarter ended December 31, 2010 would have been a benefit of 34.4%.  The effective tax rate for the quarter ended December 31, 2009, excluding the discrete period items, would have been a provision of 25.2 %.

NOTE 8 — LONG-TERM DEBT

In connection with the ATT acquisition, Clopay Ames entered into the $375,000 secured Term Loan and the $125,000 New ABL.  The acquisition, including all related transaction costs, was funded by proceeds of the Term Loan, $25,000 drawn under the New ABL, and $168,000 of Griffon cash.  ATT’s previous outstanding debt was defeased in connection with the acquisition.

The Term Loan outstanding balance at December 31, 2010 was $370,313.

Clopay Ames has the option to select interest rates in respect of the loans under the Term Loan agreement based upon either the Base Rate or the Adjusted Eurodollar Rate (each as defined in the Term Loan agreement).  Interest on outstanding loans accrues at a rate of 6.00% per annum above the Adjusted Eurodollar Rate, subject to a Eurodollar floor of 1.75%, or 5.00% per annum above the Base Rate.  At December 31, 2010, the interest rate was 7.75%.

Fees and expenses for the Term Loan of $10,900 were capitalized in Other assets and an original issuer discount (“OID”) of $7,500 was recorded as a reduction of Long-term debt; both will amortize into interest expense over the 6 year life of the loan.  Including amortization of OID, capitalized financing costs and the swap, the effective interest rate of the Term Loan was 8.80% for the quarter.

Borrowings under the Term Loan agreement are guaranteed by Clopay Ames True Temper LLC (“Clopay LLC”), the

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parent of Clopay Ames, and certain material domestic subsidiaries of Clopay Ames (collectively, the “Term Loan Guarantors”).  All obligations under the Term Loan agreement are secured by a first-priority security interest in substantially all of Clopay Ames’ assets and substantially all of the assets of the Term Loan Guarantors other than inventory, accounts receivable and cash of Clopay Ames and the Term Loan Guarantors, which collateralizes borrowings under the New ABL on a first-priority basis and borrowings under the Term Loan agreement on a second-priority basis.

The Term Loan agreement contains customary affirmative and negative covenants including, without limitation, restrictions on the following: indebtedness, liens, investments, asset dispositions, certain restricted payments, payment in respect of certain indebtedness, fundamental changes and certain acquisitions, changes in the nature of the business conducted, affiliate transactions, limitations on subsidiary distributions, modifications of constituent documents and debt agreements, capital expenditures, equity issuances and sale/leasebacks.  The covenants under the Term Loan agreement do not materially affect Griffon’s ability to undertake additional debt or equity financing for Griffon, the parent company, as the Term Loan agreement is at the subsidiary level and not guaranteed by Griffon.

Under the Term Loan agreement, Clopay Ames is required to maintain a certain minimum interest coverage ratio, defined as the ratio of EBIDTA to interest expense, which increases over time.  Clopay Ames is also required to keep its leverage ratio below a certain level, defined as the ratio of total debt to EBIDTA, which level decreases over time.

On September 30, 2010, Clopay Ames entered into the New ABL with JPMorgan Chase Bank, N.A. as administrative agent.  The New ABL replaced the credit agreement, dated as of June 24, 2008, by CBP and Plastics.  Fees and expenses for the New ABL of $3,700 were capitalized in Other assets and an OID of $625 was recorded as a reduction of Long-term debt; both will amortize into interest expense over the 5 year life of the facility.  A $1,111 charge to write-off previously capitalized financing costs related to the replaced credit agreement was recorded in September 2010.

The New ABL provides for a revolving credit facility in an aggregate principal amount equal to $125,000 (subject to customary borrowing base limitations) which includes a swingline facility with a sublimit of $12,500 and a letter of credit facility with a sublimit of $25,000.  Borrowings under the New ABL mature on September 30, 2015.  Loans under the New ABL may be repaid and reborrowed from time to time.  At December 31, 2010, $61,140 was outstanding under the New ABL.

Clopay Ames has the option to select interest rates in respect of the loans under the New ABL based upon either the Alternative Base Rate or the Adjusted LIBO Rate (each as defined in the New ABL).  Depending upon availability under the New ABL, interest on borrowings accrues at rates ranging from 1.25% to 1.75% per annum above the Alternative Base Rate or 2.25% to 2.75% per annum above the Adjusted LIBO Rate.  At December 31, 2010, the interest rate was 2.56% (LIBO).  Including amortization of OID, fees and capitalized financing costs, the effective interest rate was 5.37% for the quarter.

Borrowings under the New ABL are guaranteed by Clopay LLC and certain material domestic subsidiaries of Clopay Ames (the “New ABL Guarantors”) and are secured by a first-priority security interest on inventory, accounts receivable and cash of Clopay Ames and the New ABL Guarantors, and a second-priority security interest on substantially all of the other assets of such entities.

The New ABL contains customary affirmative and negative covenants, including without limitation, restrictions on the following: indebtedness, liens, investments, asset dispositions, certain restricted payments, payment in respect of certain indebtedness, fundamental changes and certain acquisitions, changes in the nature of the business conducted, affiliate transactions, limitations on subsidiary distributions, modifications of constituent documents and debt agreements, equity issuances and sale/leasebacks.  The covenants under the New ABL do not materially affect Griffon’s ability to undertake additional debt or equity financing for Griffon, the parent company, as the New ABL is at the subsidiary level and not guaranteed by Griffon.

Each of the Term Loan Agreement and the New ABL contain customary events of default, including without limitation, failure to make certain payments when due, materially incorrect representations and warranties, breach of

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covenants, events of bankruptcy, default on other indebtedness, changes in control with respect to Griffon and certain of its subsidiaries, and the failure of any of the loan documents to remain in full force and effect.

In March 2008, Telephonics entered into a credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto, pursuant to which the lenders agreed to provide a five-year, revolving credit facility of $100,000 (the “TCA”). Borrowings under the TCA bear interest at rates based upon LIBOR or the prime rate and are collateralized by the stock and assets of Telephonics. At December 31, 2010, there were no borrowings under the line and approximately $94,465 was available for borrowing. At September 30, 2010, $30,000 was outstanding under the TCA.

The TCA and the New ABL include various sublimits for standby letters of credit. At December 31, 2010, there was approximately $18,738 of aggregate standby letters of credit outstanding under these credit facilities and $31,262 are available to be drawn.  Additionally, these agreements limit dividends and advances that these subsidiaries may pay to the parent.

In November 2010, Clopay Europe GMBH (“Clopay Europe”) and its subsidiaries entered into a €10,000 revolving credit facility and a €20,000 term loan with a German bank.  The revolving facility accrues interest at the rate of Euribor plus 2.35% per annum, and the term loan accrues interest at a rate of Euribor plus 2.45% per annum.  The revolving facility matures in November 2011, but is renewable upon mutual agreement with the bank.  The term loan can be drawn until April 2011 and, if drawn, repayment will be in ten equal installments beginning 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.  There were no borrowings under the term loan or revolving facility as of December 31, 2010.

A foreign subsidiary of Plastics maintains a line of credit of approximately $5,000.  Interest on borrowings accrue at a rate of LIBOR plus 4%.  There were no outstanding borrowings under the line as of as of December 31, 2010.

On December 21, 2009, Griffon issued $100,000 principal of 4% convertible subordinated notes due 2017 (the “2017 Notes”).  The initial conversion rate of the 2017 Notes was 67.0799 shares of Griffon’s common stock per $1,000 principal amount of notes, corresponding to an initial conversion price of $14.91 per share.  This represents a 23% conversion premium over the $12.12 per share closing price on December 15, 2009.  The outstanding balance of these notes on December 31, 2010 and September 30, 2010 was $100,000. Griffon used 8.75% as the nonconvertible debt-borrowing rate to discount the 2017 Notes and will amortize the debt discount through January 2017.  On date of issuance, the debt component of the 2017 Notes was $75,437 and debt discount was $24,563.  At December 31, 2010, the 2017 Notes had an unamortized discount of $21,842, a net carrying value of $78,158 and a capital in excess of par component, net of tax, of $15,720.  At September 30, 2010, the 2017 Notes had an unamortized discount of $22,525, a net carrying value of $77,475 and a capital in excess of par component, net of tax, of $15,720.

For the 2017 Notes, the effective interest rate and interest expense was as follows:

At December 31, 2010 and September 30, 2010, Griffon had $532 remaining of 4% convertible subordinated notes due 2023 (the “2023 Notes”).  Holders of the 2023 Notes may require Griffon to repurchase all or a portion of their 2023 Notes on July 18, 2013 and 2018, if Griffon’s common stock price is below the conversion price of the 2023 Notes, as

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well as upon a change in control.  At December 31, 2010 and September 30, 2010, the 2023 Notes had no unamortized discount or capital in excess of par value component as substantially all of these notes were put to Griffon at par and settled in July 2010.

For the 2023 Notes, the effective interest rate and interest expense was as follows:

In January 2010, Griffon purchased $10,100 face value of the 2023 Notes for $10,200.  Griffon recorded a pre-tax gain from debt extinguishment of $32, offset by $20 for a proportionate reduction in  related deferred financing costs for a net pre-tax gain of $12.  Capital in excess of par was reduced by $300 related to the equity portion of the extinguished 2023 Notes and the debt discount was reduced by $200.

In December 2009, Griffon purchased $19,200 face value of the 2023 Notes for $19,400.  Including a proportionate reduction in the related deferred financing costs, Griffon recorded an immaterial net pre-tax loss on the extinguishment in the first quarter of 2010.  Capital in excess of par value was reduced by $700 related to the equity portion of the extinguished 2023 Notes and the debt discount was reduced by $500.

Griffon’s Employee Stock Ownership Plan (“ESOP”) entered into a new loan agreement in September 2010 to borrow an additional $20,000 over a one-year period.  After the first year, Griffon has the option to convert all or a portion of the outstanding loan to a five-year term.  If converted, principal is payable in quarterly installments at the rate of $250 per quarter beginning September 2011, with the remainder due at the final maturity date.  The loan will bear interest at either a) LIBOR plus 2.5% or b) the Bank’s prime rate.  The proceeds of the loan are to be used to purchase common stock of Griffon in the open market.  The loan is secured by a pledge of the shares purchased with the loan proceeds and payments are guaranteed by Griffon.  At December 31, 2010, there were no borrowings under this line.

Griffon’s ESOP has a loan agreement, guaranteed by Griffon, which requires payments of principal and interest through the expiration date of September 2012 at which time the $3,900 balance of the loan, and any outstanding interest, will be payable.  The primary purpose of this loan was to purchase 547,605 shares of Griffon’s common stock in October 2008. The loan bears interest (1.6% at December 31, 2010) at rates based upon the prime rate or LIBOR. The balance of the loan was $4,844 at December 31, 2010; the outstanding balance approximates fair value, as the interest rates are indexed to current market rates.

In December 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% (3.3% at December 31, 2010) with the option to swap to a fixed rate.  The loan balance was $11,834 at December 31, 2010.  These mortgages approximate fair value.

Griffon also has other real estate mortgages that bear interest at rates from 6.3% to 6.6% with maturities extending through 2016 and are collateralized by real property.  These mortgages approximate fair value.

As part of the acquisition of ATT, Griffon acquired interest rate swaps that had fair values totaling $3,845 at September 30, 2010.  These swaps were terminated in October 2010 for $4,303, including accrued interest of $458.

At December 31, 2010, Griffon and its subsidiaries were in compliance with the terms and covenants of its credit agreements and loan agreements.

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NOTE 9 — SHAREHOLDERS’ EQUITY

During 2010, Griffon granted 703,845 shares of restricted stock to employees, with two to four-year cliff vesting, and a total fair value of $7,989, or a weighted average fair value of $11.35 per share.  In connection with the ATT acquisition, Griffon entered into certain retention arrangements with the ATT senior management team.  Under these arrangements, on September 30, 2010, Griffon issued 239,145 shares of common stock to the ATT senior management team, and for each share of common stock purchased, the ATT senior management team received one share of restricted stock that vests in full after four years, subject to the attainment of a specified performance measure.

During the quarter ended December 31, 2010, Griffon granted 450,700 shares of restricted stock to employees, with three-year cliff vesting, and a total fair value of $5,956, or a weighted average fair value of $13.22 per share.

The fair value of restricted stock and option grants is amortized over the respective vesting periods.

For the quarters ended December 31, 2010 and 2009, stock based compensation expense totaled $2,023 and $1,430, respectively.

NOTE 10 — EARNINGS PER SHARE (EPS)

Basic EPS was calculated by dividing income available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted EPS was calculated by dividing income available to common shareholders by the weighted average number of shares of common stock outstanding plus additional common shares that could be issued in connection with stock based compensation.  The 2023 Notes and the 2017 Notes were anti-dilutive due to the conversion price being greater than the weighted-average stock price during the periods presented.

The following table is a reconciliation of the share amounts (in thousands) used in computing earnings per share:

Griffon has the intent and ability to settle the principal amount of the 2017 Notes in cash; therefore the potential issuance of shares related to the principal amount of the 2017 Notes is not included in diluted shares.

NOTE 11 — BUSINESS SEGMENTS

Griffon’s reportable business segments are as follows:

·                  Home & Building Products is a leading manufacturer and marketer of residential, commercial and industrial garage doors to professional installing dealers and major home center retail chains, as well as a global provider of non-powered landscaping products that make work easier for homeowners and professionals.

·                  Telephonics develops, designs and manufactures high-technology integrated information, communication and sensor system solutions to military and commercial markets worldwide.

·                  Plastics is an international leader in the development and production of embossed, laminated and printed specialty plastic films used in a variety of hygienic, health-care and industrial applications.

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Griffon evaluates performance and allocates resources based on operating results before interest income or expense, income taxes and certain nonrecurring items of income or expense.

Information on Griffon’s business segments is as follows:

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GRIFFON CORPORATION

REVENUE, INCOME & OTHER DATA BY SEGMENT

* Includes $11,364 of costs related to the sale of inventory that was recorded at fair value in connection with acquisition accounting for ATT.

Unallocated amounts typically include general corporate expenses not attributable to reportable segment.

NOTE 12 — COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) was as follows:

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NOTE 13 — DEFINED BENEFIT PENSION EXPENSE

Defined benefit pension expense was recognized as follows:

NOTE 14 — RECENT ACCOUNTING PRONOUNCEMENTS

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

NOTE 15 — DISCONTINUED OPERATIONS

The following amounts related to the Installation Services segment, discontinued in 2008, have been segregated from Griffon’s continuing operations and are reported as assets and liabilities of discontinued operations in the condensed consolidated balance sheets: