QUARTERLY OVERVIEW

Net sales from continuing operations for the three months ended March 31, 2009 were $276.1 million, compared to $298.6 million last year. Loss from continuing operations was $1.5 million, or $.03 per diluted share, for the second quarter of fiscal 2009 compared to $4.1 million, or $.13 per diluted share, last year. Income from discontinued operations for the second quarter of fiscal 2009 was $.6 million, or $.01 per diluted share, compared to a loss of $17.2 million, or $.53 per diluted share, last year. Net loss for the second quarter of fiscal 2009 was $.9 million, or $.02 per diluted share, compared to $21.4 million, or $.66 per diluted share, last year.

The Electronic Information and Communications Systems segment continues to perform well as core business sales grew by approximately $11.8 million, or 14%. The Electronic Information and Communications Systems segment last year was awarded contracts in excess of $400 million for the MH-60 program that are expected to be incrementally funded over the next several years. Based on these contract awards, this program is anticipated to generate revenues at a run rate of approximately $100 million per year for the next several years.

The Company's Garage Doors segment results continued to be impacted by the sustained downturn in the residential housing and credit markets, with sales and operating profits decreasing from the prior-year period. The segment continues to be challenged by the trends in market conditions and the outlook for the remainder of 2009. The segment remains committed to retaining its customer base and, where possible, growing market share to offset the shrinking market. Steel costs, a key component of garage doors, rose considerably in the prior fiscal year, which adversely impacted those results. Selling prices were increased starting in the latter part of the prior fiscal year, partially offsetting those rising costs. Steel costs began to soften during the second quarter of fiscal 2009 as a faltering global economy weakened demand. However, most of the steel consumed in production during the second quarter was purchased at higher prices earlier in the fiscal year.

The Specialty Plastic Films segment had a decrease in sales of $14.4 million, or 12.6%, in the second quarter of fiscal 2009; however, its operating income improved by $2.2 million, or 51.1%. The segment's operating results were favorably impacted by lower resin costs. Over the past several years, the segment has been successful in diversifying its customer portfolio. The segment remains optimistic that their progress on cost reduction programs and product mix should result in further improved performance, but expects to be challenged with volume and new product roll-outs.

Discontinued operations - Installation Services

As a result of the downturn in the residential housing market, in fiscal 2008, the Company exited substantially all of the operating activities of its Installation Services segment. The Installation Services segment sold, installed and serviced garage doors, garage door openers, fireplaces, floor coverings, cabinetry and a range of related building products primarily for the new residential housing market. Operating results of substantially all of the Installation Services segment have been reported as discontinued operations in the Condensed Consolidated Statements of Operations for all periods presented herein, and the Installation Services segment is excluded from segment reporting.

RESULTS OF OPERATIONS

Three months ended March 31, 2009 and 2008

Operating results from continuing operations (in thousands) by business segment were as follows for the three-month periods ended March 31:

                                            Net sales             Segment operating profit (loss)
                                        2009         2008            2009                 2008

Electronic Information and
Communication Systems                $   96,567   $   98,397   $          8,252     $          7,139
Garage Doors                             79,251       85,499            (11,841 )             (8,946 )
Specialty Plastic Films                 100,269      114,675              6,578                4,352
                                     $  276,087   $  298,571   $          2,989     $          2,545

Electronic Information and Communication Systems

Net sales of the Electronic Information and Communication Systems segment decreased $1.8 million, or 1.9%, compared to last year. The sales decrease was primarily attributable to the favorable impact on the prior year's second quarter sales from contracts with the Syracuse Research Corporation (SRC) that were winding down, partially offset by growth in the Radar Systems Division driven by increases in the Lamps MMR, CP-140 and ARPDD programs. Excluding the prior-period sales related to the SRC contracts, core business sales grew by approximately $11.8 million, or 14%.

Gross profit of the Electronic Information and Communication Systems segment increased by $.2 million compared to last year. Gross margin percentage increased to 20.4% from 19.8% last year, principally due to program mix. Selling, general and administrative ("SG&A") expenses decreased $1.2 million compared to last year and decreased, as a percentage of sales, to 11.7% compared to 12.7% last year. The decrease in SG&A expenses is primarily due to lower expenditures relating to research and development. Operating profit of the Electronic Information and Communication Systems segment increased $1.1 million, or 15.6%.

Garage Doors

Net sales of the Garage Doors segment decreased by $6.2 million, or 7.3%, compared to last year primarily due to the continuing effects of the weak housing and credit markets. The sales decline was principally due to reduced unit volume and, to a lesser extent, the impact of foreign exchange translation, offset partially by higher selling prices to pass through increased material costs and product mix.

Gross profit of the Garage Doors segment decreased by $6.9 million compared to last year. Gross margin percentage decreased to 19.3% from 25.9% last year, primarily due to reduced sales volume and associated plant efficiency loss, higher material costs and the unfavorable impact of foreign translation on Canadian-dollar denominated sales. SG&A expenses were approximately $3.3 million lower than last year from selling and marketing related reductions associated with the sales decrease, as well as other cost reduction activities. As a percentage of sales, SG&A decreased to 34.0% from 35.4% last year. The segment continues to develop and implement initiatives to reduce its operating costs. The operating loss of the Garage Doors segment increased by $2.9 million compared to last year. The operating loss in the prior-year period was impacted by restructuring and other related charges associated with the closure of the Tempe, AZ manufacturing facility.

Specialty Plastic Films

Net sales of the Specialty Plastic Films segment decreased $14.4 million, or 12.6%, compared to last year. The decrease was principally due to the impact of lower exchange rates on translated foreign sales, the negative impact from the pass through of lower resin pricing and lower unit volumes, partially offset by a favorable product mix.

Gross profit of the Specialty Plastic Films segment increased by $3.3 million compared to last year. Gross margin percentage increased to 18.7% from 13.5% last year. The favorable contribution to gross margin from lower resin costs and from an improving product mix was partially offset by foreign exchange translation and lower unit volumes. SG&A expenses increased $.5 million from last year. As a percentage of sales, SG&A increased to 12.4% from 10.4% last year due to the sales decrease. Operating profit of the Specialty Plastic Films segment increased $2.2 million, or 51.1%, compared to last year.

Other income (expense)

Interest expense decreased $.6 million primarily as a result of a decrease in average borrowings outstanding during the period, which were significantly reduced by the repurchase of convertible notes in the first quarter of fiscal 2009.

Interest income declined $.4 million primarily as a result of reduced interest rates, partially offset by an increase in average invested cash and cash equivalents during the period.

Other income (expense) included approximately $(306) and $620 for the three-month periods ended March 31, 2009 and 2008, respectively, of foreign exchange gains (losses) in connection with the translation of receivables and payables denominated in currencies other than the functional currencies of the Company and its subsidiaries.

Provision for income taxes

The Company's overall effective tax rate when combining results from continuing and discontinued operations for the second quarter of fiscal 2009 was a benefit of approximately 75.0% compared to 13.5% last year. The rate change was principally due to tax planning with respect to foreign tax credits and differences in the mix of foreign and domestic income, which are subject to tax at different rates.

Discontinued operations - Installation Services

The Company substantially concluded its remaining disposal activities in the second quarter of fiscal 2009. Net sales of the Installation Services' operating units were nil and $30.1 million for the three months ended March 31, 2009 and 2008, respectively, as a result of the Company's exit from the segment in fiscal 2008. Operating income (loss) of the Installation Services' operating units was $1.0 million and $(19.2) million for the three months ended March 31, 2009 and 2008, respectively.

Six months ended March 31, 2009 and 2008

Operating results from continuing operations (in thousands) by business segment were as follows for the six-month periods ended March 31:

                                            Net sales              Segment operating profit (loss)
                                        2009         2008            2009                  2008

Electronic Information and
Communication Systems                $  177,394   $  174,257   $          13,630     $          12,622
Garage Doors                            188,069      198,043             (16,234 )             (10,321 )
Specialty Plastic Films                 212,958      221,073              12,114                10,350
                                     $  578,421   $  593,373   $           9,510     $          12,651

Electronic Information and Communication Systems

Net sales of the Electronic Information and Communication Systems segment increased $3.1 million, or 1.8%,

compared to last year. The sales increase was primarily attributable to growth in the Radar Systems Division driven by increases in the Lamps MMR, CP-140 and ARPDD programs. Last year's second quarter sales were favorably impacted by contracts with the Syracuse Research Corporation (SRC) that were winding down in the latter part of fiscal 2007. Excluding the prior-period sales related to the SRC contracts, core business sales grew by approximately $21.2 million, or 14%.

Gross profit of the Electronic Information and Communication Systems segment decreased by $.3 million compared to last year. Gross margin percentage decreased to 19.9% from 20.4% last year, principally due to program mix, as certain non-recurring cost savings benefited the margins on certain projects completed in the prior-year. SG&A expenses decreased $1.9 million compared to last year and decreased, as a percentage of sales, to 12.1% compared to 13.4% last year. The decrease in SG&A expenses was primarily due to lower expenditures relating to research and development. Operating profit of the Electronic Information and Communication Systems segment increased $1.0 million, or 8.0%.

Garage Doors

Net sales of the Garage Doors segment decreased by $10.0 million, or 5.0%, compared to last year primarily due to the continuing effects of the weak housing and credit markets. The sales decline was principally due to reduced unit volume and, to a lesser extent, the impact of foreign exchange translation, offset partially by higher selling prices to pass through increased material costs and product mix.

Gross profit of the Garage Doors segment decreased by $12.3 million compared to last year. Gross margin percentage decreased to 22.2% from 27.3% last year, primarily due to reduced sales volume and associated plant efficiency loss, higher material costs, the unfavorable impact of foreign translation on Canadian-dollar denominated sales and an increased mix of certain higher-priced, but lower-margin, commercial products. SG&A expenses were approximately $4.8 million lower than last year and, as a percentage of sales, decreased to 30.5% from 31.4% last year. The operating loss of the Garage Doors segment increased by $5.9 million compared to last year. The operating loss in the prior-year period was impacted by restructuring and other related charges associated with the closure of the Tempe, AZ manufacturing facility.

Specialty Plastic Films

Net sales of the Specialty Plastic Films segment decreased $8.1 million, or 3.7%, compared to last year. The decrease was principally due to lower unit volumes and the impact of lower exchange rates on translated foreign sales, partially offset by a favorable product mix in all regions.

Gross profit of the Specialty Plastic Films segment increased by $3.4 million compared to last year. Gross margin percentage increased to 16.6% from 14.4% last year. The favorable contribution to gross margin was driven by lower resin costs, partially offset by lower unit volumes and an unfavorable foreign exchange translation. SG&A expenses increased $.9 million from last year and, as a percentage of sales, increased to 11.2% from 10.4% last year due to the sales increase. Operating profit of the Specialty Plastic Films segment increased $1.8 million, or 17%, compared to last year.

Other income (expense)

In first quarter of fiscal 2009, the Company reported a non-cash, pre-tax gain from debt extinguishment of approximately $6.7 million, net of a proportionate write-off of deferred financing costs, that resulted from its October 2008 purchase of $35.5 million of its outstanding convertible notes at a discount.

Interest expense decreased $1.0 million primarily as a result of a decrease in average borrowings outstanding during the period, which were significantly reduced by the repurchase of convertible notes.

Interest income declined $.8 million primarily as a result of reduced interest rates, partially offset by an increase in average invested cash and cash equivalents during the period.

Other income (expense) included approximately $(874) and $799 for the six-month periods ended March 31, 2009 and 2008, respectively, of foreign exchange gains (losses) in connection with the translation of receivables and payables denominated in currencies other than the functional currencies of the Company and its subsidiaries.

Provision for income taxes

The Company's overall effective tax rate when combining results from continuing and discontinued operations for the first half of fiscal 2009 was a benefit of approximately 10.3% compared to 16.1% last year. The rate change was principally due to tax planning with respect to foreign tax credits and differences in the mix of foreign and domestic income, which are subject to tax at different rates.

Discontinued operations - Installation Services

Net sales of the Installation Services' operating units were nil and $76.7 million for the six months ended March 31, 2009 and 2008, respectively, as a result of the Company's exit from the segment in fiscal 2008. Operating income
(loss) of the Installation Services' operating units was $1.1 million and $(24.2) million for the six months ended March 31, 2009 and 2008, respectively.

LIQUIDITY AND CAPITAL RESOURCES

Cash flows provided by continuing operations during the six-month period ended March 31, 2009 were $5.3 million compared to cash provided by continuing operations of $29.6 million last year. Working capital decreased to $529.6 million at March 31, 2009 compared to $562.1 million at September 30, 2008, primarily as a result of the purchase of $35.5 million face value of Notes for $28.4 million. Operating cash flows from continuing operations were favorably impacted by decreased receivables and decreased inventories, and unfavorably impacted by decreased accounts payable. Prior-period cash generated from continuing operations benefitted from decreased receivables and increased accounts payable. The current period decrease in receivables is primarily attributable to lower sales volume in the Garage Doors and Specialty Plastic Films segments. The current period decrease in inventories is primarily attributable to lower sales volume and decreased costs of materials, particularly steel and resin, in the Garage Doors and Specialty Plastic Films segments. The current period decrease in accounts payable affected all segments as there were less purchases overall due to sales volume decreases compared to the prior year, and, with respect to the Electronic Information and Communication Systems segment, there was a reduction in liabilities associated with the nature and timing of contract obligations.

Payments from revenues derived from the Electronic Information and Communication Systems segment are received in accordance with the terms of development and production subcontracts to which the Company is a party. Certain of the payments received in this segment are progress payments. Customers in the Specialty Plastic Films segment are generally substantial industrial companies whose payments have been steady, reliable and made in accordance with the terms governing such sales. Our sales in this segment are made to satisfy orders that are received in advance of production, where payment terms are established in advance of production and sale. With respect to the Garage Doors segment, there have been no material adverse impacts on payment for sales.

A small number of customers have accounted for a substantial portion of historical net sales, and the Company expects that a limited number of customers will continue to represent a substantial portion of sales for the foreseeable future. Approximately 18% of total net sales from continuing operations for the three and six months ended March 31, 2009, respectively, and 50% of Specialty Plastic Films' sales for the three and six months ended March 31, 2009, respectively, were made to Procter & Gamble, which is the largest customer in the Specialty Plastic Films segment. The Home Depot, Inc. and Menards, Inc. are significant customers of the Garage Doors segment and Lockheed Martin Corporation and the Boeing Company are significant customers of the Electronic Information and Communication Systems segment. Future operating results will continue to substantially depend on the success of the largest customers and the Company's relationships with them. Orders from these customers are subject to fluctuation and may be reduced materially. The loss of all or a portion of the sales volume from any one of these customers would have an adverse affect on the Company's liquidity and operations

During the six-month period ended March 31, 2009, the Company used cash from investing activities of continuing operations of $12.4 million compared to $8.5 million last year, primarily for capital expenditures.

During the six-month period ended March 31, 2009, the Company used cash from financing activities of continuing operations of $28.6 million compared to $27.5 million last year, primarily as a result of the purchase of $35.5 million face value of convertible notes for $28.4 million and the purchase of common stock by the Company's Employee Stock Ownership Plan ("ESOP") of $4.4 million, partially offset by the receipt of $5.3 million of rights offering proceeds (see below). Approximately 1.4 million shares of common stock are available for purchase pursuant to the Company's stock buyback program and additional purchases, including pursuant to a 10b5-1 plan, may be made, depending upon market conditions and other factors, at prices deemed appropriate by management.

In August 2008, the Company's Board of Directors authorized a 20 million share common stock rights offering to its shareholders in order to raise equity capital for general corporate purposes and to fund future growth. The rights had an exercise price of $8.50 per share. In conjunction with the rights offering, GS Direct agreed to back stop the rights offering by purchasing, on the same terms, any and all shares not subscribed through the exercise of rights. GS Direct also agreed to purchase additional shares of common stock at the rights offering price if it did not acquire a minimum of 10 million shares of common stock as a result of its back stop commitment. In September 2008, the Company received $241.3 million of gross proceeds from the first closing of its rights offering and the closing of the related investments by GS Direct and by the Company's Chief Executive Officer. An additional $5.3 million of rights offering proceeds were received in October 2008 in connection with the second closing of the rights offering. In April 2009, an additional $2.0 million of rights offering proceeds were received in connection with the rights offering.

In June 2008, Clopay Building Products Company, Inc. ("BPC") and Clopay Plastic Products Company, Inc. ("PPC"), each a wholly-owned subsidiary of the Company, entered into a credit agreement for their domestic operations 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, senior secured revolving credit facility of $100 million (the "Clopay Credit Agreement"). At March 31, 2009, $34.9 million was outstanding under the Clopay Credit Agreement and approximately $24.5 million was available for borrowing.

In March 2008, Telephonics Corporation ("Telephonics"), a wholly-owned subsidiary of the Company, 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 million (the "Telephonics Credit Agreement"). At March 31, 2009, $38.0 million was outstanding under the Telephonics Credit Agreement and approximately $56.1 million was available for borrowing.

The Telephonics Credit Agreement and the Clopay Credit Agreement include various sublimits for standby letters of credit. At March 31, 2009, there were approximately $19.0 million of aggregate standby letters of credit outstanding under these credit facilities. These credit agreements limit dividends and advances that these subsidiaries may pay to the parent company. The agreements permit the payment of income taxes, overhead and expenses, with dividends or advances in excess of these amounts being limited based on (a) with respect to the Clopay Credit Agreement, maintaining certain minimum availability under the loan agreement or (b) with respect to the Telephonics Credit Agreement, compliance with certain conditions and limited to an annual maximum. At March 31, 2009, the Company was not, nor was it reasonably likely to be, in breach of covenants under its respective credit facilities. The Clopay Credit Agreement provides for credit availability primarily based on working capital assets and imposes only one ratio compliance requirement, which becomes operative only in the event that utilization of that facility were to reach a defined level significantly beyond the March 31, 2009 level. The Telephonics Credit Agreement is a "cash flow based" facility and compliance with required ratios at March 31, 2009 were well within the parameters set forth in that agreement. Further, the covenants within such credit facilities do not materially affect the Company's ability to undertake additional debt or equity financing for Griffon, the parent company, as such credit facilities are at the subsidiary level and are not guaranteed by Griffon.

At September 30, 2008, the Company had $130 million outstanding of 4% convertible subordinated notes due 2023 (the "Notes"). Holders of the Notes may require the Company to repurchase all or a portion of their Notes on July

18, 2010, 2013 and 2018, as well as upon a change in control. If our common stock price is below the conversion price of the debenture on the earliest of these dates, we anticipate that Noteholders will require us to repurchase their outstanding Notes. In October 2008, the Company purchased a $35.5 million face value of the Notes from certain Noteholders for $28.4 million. This resulted in a non-cash net pre-tax gain from debt extinguishment of approximately $6.7 million in the first quarter of fiscal 2009. Due to the nature of these Notes for income tax purposes, the Company has reclassified a deferred income tax liability to a current income tax liability of approximately $7 million from the resultant gain and recapture of interest expense.

In April 2009, the Company purchased $15.1 million face value of the Notes from certain Noteholders for $14.3 million. The Company expects to record a pre-tax gain from debt extinguishment of approximately $.8 million offset by a $.1 million proportionate reduction in the related deferred financing costs for a net gain of $.7 million in the third quarter of fiscal 2009.

The Company's ESOP has a loan agreement guaranteed by the Company, the proceeds of which were used to purchase equity securities of the Company. The loan bears interest at rates based upon the prime rate or LIBOR. In addition, the ESOP had a $5 million line of credit that expired on October 31, 2008. In September 2008, $630,000 was drawn under the ESOP line of credit to purchase equity securities associated with the rights offering and was outstanding at September 30, 2008. In October 2008, the remaining balance of the available ESOP line of credit was drawn for the purpose of purchasing additional equity securities in the Company. In accordance with the terms of the ESOP line of credit agreement, the $5 million outstanding at October 31, 2008 was refinanced along with the balance of the then outstanding ESOP loan amount of $1.25 million. The new ESOP loan provides for quarterly payments of principal and interest through September 2012, at which time the balance of the loan of approximately $3.9 million will be payable.

The Company substantially concluded its remaining disposal activities in the second quarter of fiscal 2009 and does not expect to incur significant expenses in the future. Future net cash outflows to satisfy liabilities related to disposal activities that were accrued as of March 31, 2009 are estimated to range between $3 million and $4 million. Substantially all of such liabilities are expected to be paid during fiscal 2009. Certain of the Company's subsidiaries are also contingently liable for approximately $3.5 million related to certain facilities leases with varying terms through fiscal 2011 that were assigned to the respective purchasers of certain of the Installation Services . . .