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What changed in GRIFFON CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of GRIFFON CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+377 added−402 removedSource: 10-K (2023-11-16) vs 10-K (2022-11-18)

Top changes in GRIFFON CORP's 2023 10-K

377 paragraphs added · 402 removed · 264 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

82 edited+20 added−28 removed61 unchanged
Biggest changeIn 2022, with the addition of Hunter Fan, 58% (55%, excluding Hunter Fan sales) of CPP's' sales occurred during the second and third quarters compared to 53% in both 2021 and 2020. HBP’s business is driven by renovation and construction during warm weather, which is historically at reduced levels during the winter months, generally in our second quarter.
Biggest changeHBP’s business is driven by renovation and construction during warm weather, which is historically at reduced levels during the winter months, generally in our second quarter. In 2023, 54% of CPP's' sales occurred during the second and third quarters compared to 58% in 2022 and 53% in 2021.
Griffon has assessed the environmental risk from its operations and has focused its efforts to date on areas with the potential to have the greatest environmental impact. Where available, we use recycled materials to construct our products, and we continuously improve our packaging to reduce both volume and environmental impact.
Griffon has assessed the environmental risk from its operations and focused its efforts to date on areas with the potential to have the greatest environmental impact. Where available, we use recycled materials to construct our products, and we continuously improve our packaging to reduce both volume and environmental impact.
The following is a brief description of CPP's primary product lines: • Seasonal Outdoor Tools • Long-Handled Tools: An extensive line of engineered tools including shovels, spades, scoops, rakes, hoes, cultivators, weeders, post hole diggers, scrapers, edgers and forks, marketed under leading brand names including AMES®, True Temper®, UnionTools®, Garant®, Cyclone® and Kelso™, as well as contractor-oriented brands including Razor-Back® Jackson® and Darby™. 6 • Wheelbarrows: AMES designs, develops and manufactures a full line of wheelbarrows and lawn carts, primarily under the AMES®, True Temper®, Jackson® Professional Tools, UnionTools®, Garant® and Westmix™ brand names.
The following is a brief description of CPP's primary product lines: • Seasonal Outdoor Tools • Long-Handled Tools: An extensive line of engineered tools including shovels, spades, scoops, rakes, hoes, cultivators, weeders, post hole diggers, scrapers, edgers and forks, marketed under leading brand names including AMES®, True Temper®, UnionTools®, Garant®, Cyclone® and Kelso™, as well as contractor-oriented brands including Razor-Back® Jackson® and Darby™. • Wheelbarrows: AMES designs, develops and manufactures a full line of wheelbarrows and lawn carts, primarily under the AMES®, True Temper®, Jackson® Professional Tools, UnionTools®, Garant® and Westmix™ brand names.
In addition, gardening hand tools, such as trowels, cultivators, weeders and other specialty garden hand tools, are marketed under the AMES® brand name. • Outdoor Décor and Watering • Planters and Lawn Accessories: AMES is a designer, manufacturer and distributor of indoor and outdoor planters and accessories, sold under the Southern Patio®, Northcote Pottery™, Tuscan Path, La Hacienda®, Hills®, Kelkay®, Quatro Design® and Dynamic Design®™ brand names, as well as various private label brands.
In addition, gardening hand tools, such as trowels, cultivators, weeders and other specialty garden hand tools, are marketed under the AMES® brand name. 7 • Outdoor Décor and Watering • Planters and Lawn Accessories: AMES is a designer, manufacturer and distributor of indoor and outdoor planters and accessories, sold under the Southern Patio®, Northcote Pottery™, Tuscan Path, La Hacienda®, Hills®, Kelkay®, Quatro Design® and Dynamic Design®™ brand names, as well as various private label brands.
These improvements include lighting energy efficiency projects saving in excess of 1.5 million kilowatt-hours, major upgrades to our loading and unloading operations (which had been the source of a significant portion of our worker injuries), ergonomic improvements, machine guarding and elimination of certain high-risk repetitive jobs through use of robotics.
These improvements include lighting energy efficiency projects saving in excess of 1.5 million kilowatt-hours annually, major upgrades to our loading and unloading operations (which had been the source of a significant portion of our worker injuries), ergonomic improvements, machine guarding and elimination of certain high-risk repetitive jobs through the use of robotics.
CPP has made significant investments in automation, facilities expansion and fulfillment operations to support e-commerce growth. Raw Materials and Suppliers CPP's primary raw material inputs include resin (primarily polypropylene and high density polyethylene), wood (particleboard and hardwoods including ash, hickory and poplar logs) and steel (hot rolled, cold rolled, and wire rod).
CPP has made significant investments in automation, facilities expansion and fulfillment operations to support e-commerce growth. 8 Raw Materials and Suppliers CPP's primary raw material inputs include resin (primarily polypropylene and high density polyethylene), wood (particleboard and hardwoods including ash, hickory and poplar logs) and steel (hot rolled, cold rolled, and wire rod).
The process engineering teams also work to develop new manufacturing processes and production techniques aimed at improving manufacturing efficiencies and ensuring quality-made products. Sales and Marketing The Clopay sales and marketing organization supports our customers, consults on new product development and aggressively markets door solutions, with a primary focus on the North American market.
The process engineering teams also work to develop new manufacturing processes and production techniques aimed at improving manufacturing efficiencies and ensuring quality-made products. 5 Sales and Marketing The Clopay sales and marketing organization supports our customers, consults on new product development and aggressively markets door solutions, with a primary focus on the North American market.
Selected wood product brands include MasterSuite®, Suite Symphony®™, ExpressShelf®, Style+®, and SpaceCreations®. • Fans: CPP designs and sells residential, industrial and commercial fans under the Hunter Fan and Casablanca brand names. • Cleaning Products : CPP offers a complete line of cleaning products for professional, home, and industrial use, including brooms, brushes, squeegees, and other cleaning products, primarily under the Harper® brand.
Selected wood product brands include MasterSuite®, Suite Symphony®™, ExpressShelf®, Style+®, and SpaceCreations®. • Fans: CPP designs and sells residential, industrial and commercial fans under the Hunter Fan®, Hunter Industrial® and Casablanca® brand names. • Cleaning Products : CPP offers a line of cleaning products for professional, home, and industrial use, including brooms, brushes, squeegees, and other cleaning products, primarily under the Harper® brand.
In March 2018, we announced the combination of the ClosetMaid operations with those of AMES, which improved operational efficiencies by leveraging the complementary products, customers, warehousing and distribution, manufacturing, and sourcing capabilities of the two businesses. In February 2018, we closed on the sale of our Clopay Plastics Products ("Plastics") business to Berry Global, Inc.
In March 2018, we announced the combination of the ClosetMaid operations with those of AMES, which improved operational efficiencies by leveraging the complementary products, customers, warehousing and distribution, manufacturing, and sourcing capabilities of the two businesses. 3 In February 2018, we closed on the sale of our Clopay Plastics Products ("Plastics") business to Berry Global, Inc.
Griffon has also invested significant time and capital reducing ergonomic injuries through better work positioning and lifting improvements. Griffon has also invested over one million dollars in improvements to employee welfare facilities, such as break areas and cafeterias. We view our employees as more than just workers.
Griffon has also invested significant time and capital in reducing ergonomic injuries through better work positioning and lifting improvements. Griffon has invested over one million dollars in improvements to employee welfare facilities, such as break areas and cafeterias. More importantly, we view our employees as more than just workers.
(“Overstock”) , and Spreetail LLC. (“Spreetail”). Home Depot, Lowe's, Menards and Bunnings are significant customers of CPP. The loss of any of these customers would have a material adverse effect on the CPP business and on Griffon. 7 Product Development CPP product development efforts focus on both new products and product line extensions.
(“Overstock”), and Spreetail LLC. (“Spreetail”). Home Depot, Lowe's, Menards and Bunnings are significant customers of CPP. The loss of any of these customers would have a material adverse effect on the CPP business and on Griffon. Product Development CPP product development efforts focus on both new products and product line extensions.
The loss of all or a portion of volume from any one of these customers could have a material adverse impact on Griffon’s financial results, liquidity and operations. 11 Seasonality Griffon's revenue and earnings are generally lowest in our first and fourth quarters ending December 31, and September 30, respectively, and highest in the second and third quarters ending March 31, and June 30, respectively, primarily due to the seasonality within the CPP and HBP businesses.
The loss of all or a portion of volume from any one of these customers could have a material adverse impact on Griffon’s financial results, liquidity and operations. 10 Seasonality Griffon's revenue and earnings are generally lowest in our first and fourth quarters ending December 31, and September 30, respectively, and highest in the second and third quarters ending March 31, and June 30, respectively, primarily due to the seasonality within the HBP and CPP businesses.
Suncast Corporation competes in the hose reel and accessory market, and more recently in the long-handled plastic snow shovel category. In addition, there is competition from imported or sourced products from China, India and other low-cost producing countries, particularly in long-handled tools, wheelbarrows, planters, striking tools and pruning tools. The home storage and organizational solutions industry is also highly fragmented.
Suncast Corporation competes in the hose reel and accessory market, and in the long-handled plastic snow shovel category. In addition, there is competition from imported or sourced products from China, India and other low-cost producing countries, particularly in long-handled tools, wheelbarrows, planters, striking tools and pruning tools. The home storage and organizational solutions industry is also highly fragmented.
R&D costs, not recoverable under contractual arrangements, are charged to expense as incurred. Intellectual Property Griffon follows a practice of actively protecting and enforcing its proprietary rights in the U.S. and throughout the world where Griffon’s products are sold. All intellectual property information presented in this section is as of September 30, 2022.
R&D costs, not recoverable under contractual arrangements, are charged to expense as incurred. Intellectual Property Griffon follows a practice of actively protecting and enforcing its proprietary rights in the U.S. and throughout the world where Griffon’s products are sold. All intellectual property information presented in this section is as of September 30, 2023.
From July 2009 to July 2015, Griffon's Chief Accounting Officer. From May 2005 to June 2009, Assistant Controller of Dover Corporation, a diversified global manufacturer (NYSE:DOV). Prior to this time, held various finance and accounting roles with Hearst Argyle Television (Formerly NYSE:HTV), John Wiley and Sons, Inc. (NYSE:JW.A) and Arthur Andersen, LLP. Seth L.
From July 2009 to July 2015, Griffon's Chief Accounting Officer. From May 2005 to June 2009, Assistant Controller of Dover Corporation, a diversified global manufacturer (NYSE:DOV). Prior to this time, held various finance and accounting roles with Hearst Argyle Television (Formerly NYSE:HTV), John Wiley and Sons, Inc. (NYSE:WLY) and Arthur Andersen, LLP. Seth L.
Generally, the total number of employees of Griffon and its subsidiaries does not significantly fluctuate throughout the year. However, acquisition activity or the opening of new branches or lines of business, or other changes in the level of Griffon's business activity (for instance, based on actual or anticipated customer demand or other factors), could require staffing level adjustments.
Generally, the total number of employees of Griffon and its subsidiaries does not significantly fluctuate throughout the year. However, acquisition activity or the opening of new branches or lines of business, efficiency initiatives, or other changes in the level of Griffon's business activity (for instance, based on actual or anticipated customer demand or other factors), could require staffing level adjustments.
Design patents are generally valid for fourteen years, and utility patents are generally valid for twenty years, from the date of filing. Griffon's patents are in various stages of their terms of validity. 12 Environmental, Social and Governance Griffon and its operating companies have always taken into account environmental, social and governance (ESG) considerations in the management of our businesses.
Design patents are generally valid for fourteen years, and utility patents are generally valid for twenty years, from the date of filing. Griffon's patents are in various stages of their terms of validity. 11 Environmental, Social and Governance Griffon and its operating companies have always taken into account environmental, social and governance (ESG) considerations in the management of our businesses.
Executive Officers of the Registrant The following is a current list of Griffon’s executive officers: Name Age Positions Held and Prior Business Experience Ronald J. Kramer 64 Chief Executive Officer since April 2008, Chairman of the Board since January 2018, Director since 1993, Vice Chairman of the Board from November 2003 to January 2018.
Executive Officers of the Registrant The following is a current list of Griffon’s executive officers: Name Age Positions Held and Prior Business Experience Ronald J. Kramer 65 Chief Executive Officer since April 2008, Chairman of the Board since January 2018, Director since 1993, Vice Chairman of the Board from November 2003 to January 2018.
Kaplan 53 Senior Vice President, General Counsel and Secretary since May 2010. From July 2008 to May 2010, Assistant General Counsel and Assistant Secretary at Hexcel Corporation (NYSE:HXL), a manufacturer of advanced composite materials for space and defense, commercial aerospace and wind energy applications. From 2000 to July 2008, Senior Corporate Counsel and Assistant Secretary at Hexcel.
Kaplan 54 Senior Vice President, General Counsel and Secretary since May 2010. From July 2008 to May 2010, Assistant General Counsel and Assistant Secretary at Hexcel Corporation (NYSE:HXL), a manufacturer of advanced composite materials for space and defense, commercial aerospace and wind energy applications. From 2000 to July 2008, Senior Corporate Counsel and Assistant Secretary at Hexcel.
The range of planter sizes (from 6 to 32 inches) is available in various designs, colors and materials. • Garden Hose and Storage: AMES offers a wide range of manufactured and sourced garden hoses and hose reels under the AMES®, NeverLeak® and Nylex® brand names. • Home Organization : AMES designs, manufactures and sells a comprehensive portfolio of wire and wood shelving, containers, storage cabinets and other closet and home organization accessories primarily under the highly recognized ClosetMaid® brand name and other private label brands.
The range of planter sizes (from 6 to 32 inches) is available in various designs, colors and materials. • Garden Hose and Storage: AMES offers a wide range of manufactured and sourced garden hoses and hose reels under the AMES®, NeverLeak® and Nylex® brand names. • Home Organization : AMES designs, manufactures and sells a comprehensive portfolio of wire and wood shelving, containers, storage cabinets and other closet and home organization accessories primarily under the highly recognized ClosetMaid® brand name.
From May 2006 to August 2008, Executive Vice President and Chief Operating Officer of DRS and from January 2001 to May 2006, Executive Vice President, Business Operations and Strategy, of DRS. Brian G. Harris 53 Senior Vice President and Chief Financial Officer since August 2015. From November 2012 to July 2015, Vice President and Controller of Griffon.
From May 2006 to August 2008, Executive Vice President and Chief Operating Officer of DRS and from January 2001 to May 2006, Executive Vice President, Business Operations and Strategy, of DRS. Brian G. Harris 54 Senior Vice President and Chief Financial Officer since August 2015. From November 2012 to July 2015, Vice President and Controller of Griffon.
For example, bags used for AMES’ Kelkay aggregate products in the UK are made from plant-based materials, and not from petroleum. Seventy percent of the steel used in HBP's garage doors is recycled steel.
For example, bags used to pack AMES’ Kelkay aggregate products in the UK are made from plant-based materials, and not from petroleum. Seventy percent of the steel used in HBP's garage doors is recycled steel.
In all of our geographies, we use on-site inspections and specific contractual terms to manage our supply chains to ensure compliance with environmental and social laws and regulations, as well as our policies in these areas, including with respect to human rights, child labor, slave labor and unsafe working conditions.
In all of our geographies, we use on-site inspections of suppliers and specific contractual terms to manage our supply chains to ensure compliance with environmental and social laws and regulations, as well as with our policies, including with respect to human rights, child labor, slave labor and unsafe working conditions.
And, while doing so, we expect them to respect and adhere to our environmental, social and governance commitments and policies, and to make our company a place at which all employees are proud to come to work every day.
And, while doing so, we expect them to respect and adhere to our environmental, social and governance commitments and policies, and to make our company a place where all employees are proud to come to work every day.
For example, employees at our Clopay subsidiary built a new home for Habitat for Humanity, and AMES contributed tools and products to that effort. Our communities know that they can count on us in a crisis. Over the last five years, we have invested millions of dollars in capital improvements relating to energy consumption and to employee safety and health.
For example, Clopay employees built a new home for Habitat for Humanity, and AMES contributed tools and products to that effort. Our communities know they can count on our support. Over the last five years, we have invested millions of dollars in capital improvements relating to energy consumption and employee safety and health.
Regulation Griffon’s operations are subject to various environmental, health, and employee safety laws and regulations. Griffon believes that it is in material compliance with these laws and regulations. Historically, compliance with environmental, health, and employee safety laws and regulations have not materially affected, and are not expected to materially affect, Griffon’s capital expenditures, earnings or competitive position.
Griffon believes that it is in material compliance with these laws and regulations. Historically, compliance with environmental, health, and employee safety laws and regulations have not materially affected, and are not expected to materially affect, Griffon’s capital expenditures, earnings or competitive position.
Accordingly, all references made to results and information in this Annual Report on Form 10-K are to Griffon's continuing operations unless noted otherwise. Griffon Corporation Employees As of September 30, 2022, Griffon and its subsidiaries employ approximately 6,200 employees located primarily throughout the U.S., Canada, the United Kingdom, Australia, and China.
Accordingly, all references made to results and information in this Annual Report on Form 10-K are to Griffon's continuing operations, unless noted otherwise. Griffon Corporation Employees As of September 30, 2023, Griffon and its subsidiaries employ approximately 5,700 employees located primarily throughout the U.S., Canada, the United Kingdom, Australia, and China.
The HBP and CPP businesses have approximately 1,671 registered trademarks and approximately 174 pending trademark applications around the world. Griffon’s rights in these trademarks endure for as long as they are used and registered. Patents are also important to the HBP and CPP businesses.
The HBP and CPP businesses have approximately 1,647 registered trademarks and approximately 139 pending trademark applications around the world. Griffon’s rights in these trademarks endure for as long as they are used and registered. Patents are also important to the HBP and CPP businesses.
Clopay competes on the basis of service, quality, price, brand awareness and product design. Clopay brand names are widely recognized in the building products industry. Clopay believes that it has earned a reputation among installing dealers and retailers for producing a broad range of innovative, high-quality doors with industry leading lead times.
Clopay competes on the basis of service, quality, brand awareness, product design and price. Clopay brand names are widely recognized in the building products industry. Clopay believes that it has earned a reputation among installing dealers and retailers for producing a broad range of innovative, high-quality doors with industry leading lead times supported by an extensive distribution network.
Sales into the commercial market are driven by the aging of nonresidential buildings, including warehouses, institutional and industrial facilities, increased business activity, changes to building codes , security of facilities and trends of improving function and performance. Clopay has approximately 2,900 employees.
Sales into the commercial market are driven by commercial construction and repair and replacement, including the aging of nonresidential buildings, warehouses and institutional and industrial facilities, as well as increased business activity, changes to building codes , security of facilities, and trends of improving function and performance. Clopay has approximately 2,900 employees.
Rolling steel door and grille products designed for commercial, industrial, institutional, and retail use are sold under the Cornell and Cookson brands. 5 Reportable Segments: CONSUMER AND PROFESSIONAL PRODUCTS Consumer and Professional Products (“CPP”) is a leading North American manufacturer and a global provider of branded consumer and professional tools; residential, industrial and commercial fans; home storage and organization products; and products that enhance indoor and outdoor lifestyles.
Rolling steel door and grille products designed for commercial, industrial, institutional, and retail use are sold under the Cornell and Cookson brands. • Consumer and Professional Products (“CPP”) is a leading global provider of branded consumer and professional tools; residential, industrial and commercial fans; home storage and organization products; and products that enhance indoor and outdoor lifestyles.
Clopay distributes its products through a wide range of distribution channels, including a national network of 52 distribution centers with a total of approximately 1,200,000 square feet.
Clopay distributes its products through a wide range of distribution channels, including a national network of 54 distribution centers with a total of approximately 1,100,000 square feet.
Our operating companies are involved in the local communities in which they operate. We are involved in more than 100 charitable and community organizations, including well known national concerns such as Habitat for Humanity, Boys and Girls Clubs, the Home Depot Foundation (Diamond Sponsor) and the American Cancer Society, as well as local groups such as garden clubs.
We are involved in more than 100 charitable and community organizations, including well known national concerns such as Habitat for Humanity, Boys and Girls Clubs, the Home Depot Foundation (Diamond Sponsor) and the American Cancer Society, as well as local groups such as garden clubs.
From 2002 through March 2008, President and a Director of Wynn Resorts, Ltd. (Nasdaq:WYNN), a developer, owner and operator of destination casino resorts. From 1999 to 2001, Managing Director at Dresdner Kleinwort Wasserstein, an investment banking firm, and its predecessor Wasserstein Perella & Co.
From 2002 through March 2008, President and a Director of Wynn Resorts, Ltd. (Nasdaq:WYNN), a developer, owner and operator of destination casino resorts. From 1999 to 2001, Managing Director at Dresdner Kleinwort Wasserstein, an investment banking firm, and its predecessor Wasserstein Perella & Co. Member of the board of directors of Douglas Elliman Inc.
In 2022, Home Depot represented 13% of Griffon’s consolidated revenue, 19% of CPP's revenue and 7% of HBP's revenue. No other customer accounted for 10% or more of consolidated revenue. Future operating results will continue to substantially depend on the success of Griffon’s largest customers and Griffon's relationships with them.
In 2023, Home Depot represented 12% of Griffon’s consolidated revenue, 9% of HBP's revenue and 15% of CPP's revenue. No other customer accounted for 10% or more of consolidated revenue. Future operating results will continue to substantially depend on the success of Griffon’s largest customers and Griffon's relationships with them.
HBP holds approximately 45 issued patents and 23 pending patent applications in the U.S., as well as approximately 19 and 46 corresponding foreign patents and patent applications, primarily related to garage door system components and operation.
HBP holds approximately 45 issued patents and 24 pending patent applications in the U.S., as well as approximately 20 and 98 corresponding foreign patents and patent applications, primarily related to garage door system components and operation.
This acquisition broadens AMES' product offerings in the U.K. market and increases its in-country operational footprint. Apta contributed approximately $20,000 in revenue in the first twelve months after the acquisition. On February 13, 2018, AMES acquired Kelkay, a leading U.K. manufacturer and distributor of decorative outdoor landscaping products sold to garden centers, retailers and grocers in the U.K. and Ireland.
This acquisition broadens AMES' product offerings in the U.K. market and increases its in-country operational footprint. On February 13, 2018, AMES acquired Kelkay, a leading U.K. manufacturer and distributor of decorative outdoor landscaping products sold to garden centers, retailers and grocers in the U.K. and Ireland.
Over the past five years, we have undertaken a series of transformative transactions. We divested our specialty plastics business in 2018 to focus on our core markets and improve our free cash flow conversion.
Over the past five years, we have undertaken a series of transformative transactions. We divested our specialty plastics business in 2018 to focus on our core markets and improve our free cash flow conversion. In our Home and Building Products ("HBP") segment, we acquired CornellCookson, Inc.
Accordingly, all references made to results and information in this Annual Report on Form 10-K are to Griffon's continuing operations, unless noted otherwise. 2 On December 17, 2021, Griffon entered into a definitive agreement to acquire Hunter, a market leader in residential ceiling, commercial, and industrial fans, from MidOcean Partners (“MidOcean”) for a contractual purchase price of $845,000 and completed the acquisition on January 24, 2022.
Accordingly, all references made to results and information in this Annual Report on Form 10-K are to Griffon's continuing operations, unless noted otherwise. On January 24, 2022, Griffon acquired Hunter, a market leader in residential ceiling, commercial, and industrial fans, from MidOcean Partners (“MidOcean”) for a contractual purchase price of $845,000.
Approximately 70 of these employees are covered by collective bargaining agreements in the U.S., with the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union (an affiliate of the American Federation of Labor and Congress of Industrial Organizations), and the United Food & Commercial Workers International Union.
As of September 30, 2023, approximately 54 CPP employees were covered by collective bargaining agreements in the U.S., with the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union (an affiliate of the American Federation of Labor and Congress of Industrial Organizations), and the United Food & Commercial Workers International Union.
Griffon classified the results of operations of our Telephonics business as a discontinued operation in the Consolidated Statements of Operations for all periods presented and classified the related assets and liabilities associated with the discontinued operation in the consolidated balance sheets.
As such, the results of operations of our Telephonics business is classified as a discontinued operation in the Consolidated Statements of Operations for all periods presented and the related assets and liabilities have been classified as assets and liabilities of the discontinued operation in the Consolidated Balance Sheets.
Clopay's market position and brand recognition are key marketing tools for expanding its customer base, leveraging its distribution network and increasing its market share. Manufacturing and Distribution Clopay's principal manufacturing facilities include 1,480,000 square feet in Troy and Russia, Ohio, 279,000 square feet in Mountain Top, Pennsylvania and 163,000 square feet in Goodyear, Arizona.
Clopay's market position, brand recognition, and proprietary software applications and systems are key marketing tools for expanding its customer base. Manufacturing and Distribution Clopay's principal manufacturing facilities include 1,487,000 square feet in Troy and Russia, Ohio, 279,000 square feet in Mountain Top, Pennsylvania and 163,000 square feet in Goodyear, Arizona.
CPP protects its designs and product innovation through the use of patents, and currently has approximately 723 issued patents and approximately 211 pending patent applications in the U.S., as well as approximately 310 and 107 corresponding foreign patents and patent applications, respectively.
CPP protects its designs and product innovation through the use of patents, and currently has approximately 674 issued patents and approximately 247 pending patent applications in the U.S., as well as approximately 275 and 97 corresponding foreign patents and patent applications, respectively.
CPP, primarily under the ClosetMaid brands, sells through retail, direct to consumer (e-commerce category) and direct to installer (building) channels and competes with a significant number of companies across each of these unique channels. Principal competition for retail wire products is from Newell Brands, Inc. through their Rubbermaid® product line.
CPP, primarily under the ClosetMaid brands, sells through retail, direct to consumer (e-commerce category) and direct to installer (building) channels and competes with a significant number of companies across each of these unique channels. Principal competition for retail wire products is from products sourced from China, India and other low-cost producing countries.
Griffon classified the results of operations of the Telephonics business as a discontinued operation in the Consolidated Statements of Operations for all periods presented and classified the related assets and liabilities associated with the discontinued operation as held for sale in the consolidated balance sheets.
As such, the results of operations of our Telephonics business is classified as a discontinued operation in the Consolidated Statements of Operations for all periods presented and the related assets and liabilities have been classified as assets and liabilities of the discontinued operation in the Consolidated Balance Sheets.
CPP's size, depth and breadth of product offering, category knowledge, research and development (“R&D”) investment, service and its ability to react to sudden changes in demand from seasonal weather patterns, especially during harsh winter months, are competitive advantages.
CPP's size, depth and breadth of product offering, category knowledge, research and development (“R&D”) investment, service and its ability to react to sudden changes in demand from seasonal weather patterns, especially during harsh winter months, are competitive advantages. Manufacturing and Distribution CPP sources products for sale through a combination of internal and external global manufacturing sources and supply chain partners.
In January 2020, Griffon amended its credit agreement to increase the total amount available for borrowing from $350,000 to $400,000, extend its maturity date from March 22, 2021 to March 22, 2025 and modify certain other provisions of the facility (the "Credit Agreement").
On August 1, 2023, Griffon amended its credit agreement to increase the total amount available for borrowing under its revolving credit facility from $400,000 to $500,000, extend the maturity date of the revolving credit facility from March 22, 2 2025 to August 1, 2028 and modify certain other provisions of the facility (the "Credit Agreement").
Clopay maintains a strong promotional presence, in both traditional and digital media. Clopay customers utilize a proprietary residential door web application, the MyDoor ® mobile enabled app, that guides consumers through an easy to use visualization and pricing program, allowing them to select the optimal door for their home.
Within the MyClopay application suite, Clopay customers use a proprietary residential door web application, the MyDoor® mobile enabled app, that guides consumers through an easy to use door visualization and pricing process, allowing them to select the optimal door for their home.
Over its long life, AMES has grown organically and through the acquisition of other leading and historic tool businesses such as True Temper, Union Tools, and Garant.
AMES, founded in Massachusetts in 1774, has the distinction of being one of the oldest companies in continuous operation in the United States. Over its long life, AMES has grown organically and through the acquisition of other leading and historic tool businesses such as True Temper, Union Tools, and Garant.
The majority of Clopay's sales come from home remodeling and renovation projects, with the balance from commercial construction and new residential housing construction. Sales into the home remodeling market are driven by the aging of the housing stock, existing home sales activity, and the trends of improving both home appearance and energy efficiency.
Sales into the home remodeling market are driven by the aging of the housing stock, existing home sales activity, and the trends of improving both home appearance and energy efficiency.
For Clopay's commercial products, Clopay's Commercial Door Quoter (CDQ ®™ ) and CornellCookson's WebGen ™ systems are available to assist our professional dealers streamline their quoting and submittal process for greater productivity and back office efficiency improvement. Raw Materials and Suppliers The principal raw material used in Clopay's manufacturing is galvanized steel.
For Clopay’s commercial products, Clopay’s Commercial Door Quoter (CDQ®™) and WebGen™ applications deliver a streamlined quoting and bid submittal process to our professional dealers, providing improved close rates, productivity, and back office efficiency. Raw Materials and Suppliers The principal raw material used in Clopay's manufacturing is galvanized steel.
Griffon has appointed a lead independent director and has four principal board committees - Audit, Compensation, 13 Nominating and Corporate Governance, and Finance - each of which has its responsibilities set forth in a charter available on the Griffon website.
Griffon has appointed a lead independent director and has four principal board committees - Audit, Compensation, Nominating and Corporate Governance, and Finance - each of which has its responsibilities set forth in a charter available on the Griffon website. 12 We expect each of our employees and suppliers around the world to work hard to deliver outstanding products to our customers and to deliver value to our shareholders.
Brands CPP's brands are among the most recognized across its primary product categories in North America, Australia and the United Kingdom. Its brand portfolio for long-handled tools, outdoor décor, and landscaping product includes AMES®, True Temper®, Garant®, Harper®, UnionTools®, Westmix™, Cyclone®, Southern Patio®, Northcote Pottery™, Nylex®, Hills®, Kelkay®, Tuscan Path®, La Hacienda®, Kelso™, Dynamic Design®™, Apta® and Quatro Design®.
Its brand portfolio for long-handled tools, outdoor décor, and landscaping product includes AMES®, True Temper®, Garant®, Harper®, UnionTools®, Westmix™, Cyclone®, Southern Patio®, Northcote Pottery™, Nylex®, Hills®, Kelkay®, Tuscan Path®, La Hacienda®, Kelso™, Dynamic Design®™, Apta® and Quatro Design®. Contractor-oriented tool brands include Razor-Back® Professional Tools and Jackson® Professional Tools.
Member of the board of directors of Franklin BSP Capital Corporation, Franklin BSP Lending Corporation and Franklin Private Credit Fund. Robert F. Mehmel 60 Director since May 2018, President and Chief Operating Officer since December 2012.
(NYSE:DOUG), Franklin BSP Capital Corporation, Franklin BSP Lending Corporation and Franklin Private Credit Fund. Robert F. Mehmel 61 President and Chief Operating Officer since December 2012, director from May 2018 to March 2022.
We established an integrated headquarters for CPP in Orlando, Florida for our portfolio of leading brands that includes AMES, Hunter, True Temper and ClosetMaid.
In our Consumer and Professional Products ("CPP") segment, we expanded the scope of our brands through the acquisition of Hunter Fan Company ("Hunter") in January 2022 and ClosetMaid, LLC ("ClosetMaid") in 2018. We established an integrated headquarters for CPP in Orlando, Florida for our portfolio of leading brands that includes AMES, Hunter, True Temper and ClosetMaid.
CPP operates smaller manufacturing facilities, including wood mills, at several other locations in the United States, and internationally in Jiangmen, China; and Grafton, New South Wales and Wonthaggi, Victoria, both in Australia.
Principal North American manufacturing and distribution facilities include a 676,000 square foot facility in Ocala, Florida, and a 353,000 square foot manufacturing center in St. Francois, Quebec, Canada. CPP operates smaller manufacturing facilities, including wood mills, at several other locations in the United States, and internationally in Jiangmen, China, and Grafton, New South Wales and Wonthaggi, Victoria, both in Australia.
Clopay operates technical development centers where its research engineers design and develop new products and technologies and perform durability and performance testing of new and existing products, materials and finishes. Clopay continually improves its door offerings through these development efforts, focusing on characteristics such as strength, design, operating performance and durability, and energy efficiency.
Clopay continually improves its door offerings through these development efforts, focusing on characteristics such as strength, design, operating performance and durability, and energy efficiency.
All significant CPP suppliers worldwide must periodically submit to a Factory Compliance and Capacity Assessment, which evaluates not only quality control and vendor capabilities, but assesses to what extent each supplier emphasizes environmental, labor and social considerations in the operation of its business. These activities have continued despite the travel difficulties caused by COVID.
All significant suppliers worldwide will be required to periodically submit to an SCC audit, which evaluates not only quality control and vendor capabilities, but assesses to what extent each supplier emphasizes environmental, labor and social considerations in the operation of its business.
On September 27, 2021, we announced we were exploring strategic alternatives for our Defense Electronics ("DE") segment, which consisted of our Telephonics Corporation ("Telephonics") subsidiary. On June 27, 2022, we completed the sale of Telephonics to TTM Technologies, Inc. (NASDAQ:TTMI) ("TTM") for $330,000 in cash, excluding customary post-closing adjustments, primarily related to working capital.
On June 27, 2022 we completed the sale of our Defense Electronics segment which consisted of our Telephonics subsidiary for $330,000 in cash, excluding customary post-closing adjustments.
The Code prohibits all business courtesies except for those with an insignificant value, and even then, only under limited circumstances. Our Corporate Governance Guidelines are published on our website. While the guidelines require that a majority of directors be independent, currently all of our directors are independent except our CEO (constituting over 92% of our directors).
The Code prohibits all business courtesies except for those with an insignificant value, and even then, only under limited circumstances. Our SCC reinforces the same expectations from our suppliers. Our Corporate Governance Guidelines are published on our website.
Reportable Segments: Griffon conducts its operations through two reportable segments: • Consumer and Professional Products (“CPP”) is a leading North American manufacturer and a global provider of branded consumer and professional tools; residential, industrial and commercial fans; home storage and organization products; and products that enhance indoor and outdoor lifestyles.
CONSUMER AND PROFESSIONAL PRODUCTS Consumer and Professional Products (“CPP”) is a leading global provider of branded consumer and professional tools; residential, industrial and commercial fans; home storage and organization products; and products that enhance indoor and outdoor lifestyles. CPP sells products globally through a portfolio of leading brands including AMES, Hunter and ClosetMaid.
This portfolio contains many iconic brands and is anchored by six core product categories: seasonal outdoor tools, project tools, outdoor décor and watering, home organization, fans and cleaning products. As a result of brand portfolio recognition, outstanding product quality, industry leading service and strong customer relationships, CPP has earned market-leading positions in its six core product categories.
As a result of brand portfolio recognition, outstanding product quality, industry leading service and strong customer relationships, CPP has earned market-leading positions in its six core product categories.
On May 16, 2022, Griffon announced that its Board of Directors initiated a process to review a comprehensive range of strategic alternatives to maximize shareholder value including a sale, merger, divestiture, recapitalization or other strategic transaction. This process is active and discussions with potential counterparties are ongoing with respect to a number of these options.
Hunter, which is part of Griffon's Consumer and Professional Products segment, complements and diversifies our portfolio of leading consumer brands and products. On May 16, 2022, Griffon announced that its Board of Directors initiated a process to review a comprehensive range of strategic alternatives to maximize shareholder value including a sale, merger, divestiture, recapitalization or other strategic transaction.
CPP sells products globally through a portfolio of leading brands including AMES, since 1774, Hunter, since 1886, True Temper, and ClosetMaid. • Home and Building Products ("HBP") conducts its operations through Clopay. Founded in 1964, Clopay is the largest manufacturer and marketer of garage doors and rolling steel doors in North America.
Reportable Segments: Griffon conducts its operations through two reportable segments: • Home and Building Products ("HBP") conducts its operations through Clopay Corporation ("Clopay"). Founded in 1964, Clopay is the largest manufacturer and marketer of garage doors and rolling steel doors in North America.
This applies to all terms and conditions of employment, including recruiting, hiring, placement, promotion, termination, layoff, recall, transfer, leaves of absence, compensation and training. All applicants and employees are treated with the same high level of respect regardless of their gender, ethnicity, religion, national origin, age, marital status, political affiliation, sexual orientation, gender identity, disability or protected veteran status.
All applicants and employees are treated with the same high level of respect regardless of their gender, ethnicity, religion, national origin, age, marital status, political affiliation, sexual orientation, gender identity, disability or protected veteran status. Regulation Griffon’s operations are subject to various environmental, health, and employee safety laws and regulations.
In June 2018, Clopay acquired CornellCookson, a leading provider of rolling steel service doors, fire doors, and grilles, for an effective purchase price of approximately $170,000.
The cost to implement this new business platform included one-time charges of $51,869 and capital investments of approximately $13,000, net of proceeds from the sale of exited facilities. In June 2018, Clopay acquired CornellCookson, a leading provider of rolling steel service doors, fire doors, and grilles, for an effective purchase price of approximately $170,000.
Clopay also offers a complete line of entry door systems uniquely designed to complement its popular residential garage door styles. Commercial door products manufactured and marketed by Clopay include rolling steel service doors, fire doors, shutters, steel security grilles, and room dividers.
Commercial door products manufactured and marketed by Clopay include rolling steel service doors, fire doors, shutters, steel security grilles, and room dividers. Clopay also manufactures and markets commercial sectional doors, which are similar to residential garage doors, but are designed to meet the more demanding performance specifications of a commercial application.
The fiscal 2021 ESG Report discusses community involvement, charitable giving, employee safety, employee education and welfare, energy consumption, water consumption, waste generated, recycled raw materials, and packaging initiatives. We are preparing to set ESG goals in fiscal 2023 and fiscal 2024 based on the metrics gathered in fiscal 2021, which process continued through 2022, and will continue through fiscal 2023.
We expect to file our fiscal 2022 ESG report before the end of calendar 2023. The fiscal 2021 ESG Report discusses employee safety, employee education and welfare, energy consumption, water consumption, waste generation, recycled raw materials, and packaging initiatives, as well as community involvement and charitable giving.
Additionally, approximately 200 employees in Canada are represented by the Trade Union Advisory Committee. Griffon believes its relationships with its employees are satisfactory. In managing its human capital resources, Griffon aims to attract a qualified workforce through an inclusive and accessible recruiting process that utilizes online recruiting platforms, campus outreach, internships and job fairs.
In managing its human capital resources, Griffon aims to attract a qualified workforce through an inclusive and accessible recruiting process that utilizes online recruiting platforms, campus outreach, internships and job fairs. Griffon also seeks to retain employees by offering competitive wages, benefits and training opportunities, as well as promoting a safe and healthy workplace.
AMES is a member of the Appalachian Hardwood Manufacturers Association, which provides sustainable hardwoods for AMES tools, and is committed to purchasing hardwoods through the Sustainable Forestry Initiative. Griffon continues its efforts to reduce carbon emissions by reducing electricity and natural gas usage at its operating facilities.
AMES is a member of the Appalachian Hardwood Manufacturers Association, which provides sustainable hardwoods for AMES tools, and is committed to purchasing hardwoods through the Sustainable Forestry Initiative. Our operating companies are involved in the local communities in which they operate.
Founded in 1964 and acquired by Griffon in 1986, Clopay has grown organically and through acquisitions to become the largest manufacturer and marketer of garage doors and rolling steel doors in North America. Clopay also manufactures a complete line of entry door systems uniquely designed to complement its popular residential garage door styles.
Founded in 1964 and acquired by Griffon in 1986, Clopay has grown organically and through acquisitions to become the largest manufacturer and marketer of residential and commercial garage doors and rolling steel doors in North America. The majority of Clopay's sales come from home remodeling and renovation projects, with the balance from commercial construction and new residential housing construction.
The loss of either of these customers would have a material adverse effect on Clopay and Griffon. Clopay distributes its garage doors directly to customers from its manufacturing facilities and through its distribution centers located throughout the U.S. and Canada.
Clopay distributes its garage doors directly to customers from its manufacturing facilities and through its distribution centers located throughout the U.S. and Canada. These distribution centers allow Clopay to maintain an inventory of garage doors near installing dealers and provide quick-ship service to retail and professional dealer customers.
These strategies focus on enhancement of brand value, with the goal of de-commoditizing CPP products through identity and functionality elements that makes each top brand unique, attractive and visually recognizable by the consumer. Products CPP manufactures and markets a broad portfolio of long-handled tools, landscaping products, home organization products and residential, industrial and commercial fans.
In addition, given the breadth of its brand portfolio and product category depth, CPP is able to offer specific, differentiated branding strategies for key retail customers. These strategies focus on enhancement of brand value, with the goal of de-commoditizing CPP products through identity and functionality elements that makes each top brand unique, attractive and visually recognizable by the consumer.
Contractor-oriented tool brands include Razor-Back® Professional Tools and Jackson® Professional Tools. CPP's home organization, general living storage, and garage storage products are sold primarily under the ClosetMaid® brand. CPP's residential, industrial and commercial fan products are sold under the Hunter Fan and Casablanca brands.
CPP's home organization, general living storage, and garage storage products are sold primarily under the ClosetMaid® brand. CPP's residential, industrial and commercial fan products are sold under the Hunter Fan®, Hunter Industrial® and Casablanca® brands. This strong portfolio of brands enables CPP to build and maintain long-standing relationships with leading retailers and distributors.
Griffon also seeks to retain employees by offering competitive wages, benefits and training opportunities, as well as promoting a safe and healthy workplace. Griffon and all of its businesses strictly comply with all applicable state, local and international laws governing nondiscrimination in employment in every location in which Griffon and its businesses have facilities.
Griffon and all of its businesses strictly comply with all applicable state, local and international laws governing nondiscrimination in employment in every location in which Griffon and its businesses have facilities. This applies to all terms and conditions of employment, including recruiting, hiring, placement, promotion, termination, layoff, recall, transfer, leaves of absence, compensation and training.
On April 28, 2022, Griffon announced a reduced scope and an accelerated timeline for the initiative, which was completed in fiscal 2022. These changes reflect the rapid progress made with the initiative, and reduced investment in facilities expansion and equipment given recent significant increases in construction and equipment costs.
On April 28, 2022, Griffon announced a reduced scope and accelerated timeline for the initiative, which was completed in fiscal 2022. This initiative resulted in annual cash savings of $25,000 in fiscal 2023.
Clopay also manufactures and markets commercial sectional doors, which are similar to residential garage doors, but are designed to meet the more demanding performance specifications of a commercial application. Customers Clopay is currently the exclusive supplier of residential garage doors throughout North America to Home Depot and Menards.
Clopay is currently the exclusive supplier of residential and commercial garage doors to Home Depot and Menards locations throughout North America, and has relationships with each of more than 25 years. The loss of either of these customers would have a material adverse effect on Clopay and Griffon.
These distribution centers allow Clopay to maintain an inventory of garage doors near installing dealers and provide quick-ship service to retail and professional dealer customers. 9 Product Development Clopay product development efforts focus on both new products and improvements to existing products. Products are developed through in-house design and engineering staffs.
Product Development Clopay product development efforts focus on both new products and improvements to existing products. Products are developed through in-house design and engineering staffs. Clopay operates technical development centers where its research engineers design and develop new products and technologies and perform durability and performance testing of new and existing products, materials and finishes.
Smaller distribution centers are also strategically located in the U.S. in Ocala, Florida, and internationally in Canada, Australia, the United Kingdom and Ireland. HOME AND BUILDING PRODUCTS The HBP segment consists of Clopay.
Smaller distribution centers are also strategically located in the U.S. in Ocala, Florida, and internationally in Canada, Australia, the United Kingdom and Ireland. 9 Discontinued Operation: DEFENSE ELECTRONICS On June 27, 2022, Griffon completed the sale of its Defense Electronics segment, which consisted of Griffon's Telephonics subsidiary, for $330,000, excluding certain customary post-closing adjustments.
CPP sells products globally through a portfolio of leading brands including AMES, Hunter and ClosetMaid. AMES, founded in Massachusetts in 1774, has the distinction of being one of the oldest companies in continuous operation in the United States.
CPP sells products globally through a portfolio of leading brands including AMES, since 1774, Hunter, since 1886, True Temper, and ClosetMaid. 4 Reportable Segments: HOME AND BUILDING PRODUCTS The HBP segment consists of Clopay.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn 2022, with the addition of Hunter Fan, 58% (55%, excluding Hunter Fan sales) of AMES' sales occurred during the second and third quarters compared to 53% in both 2021 and 2020. HBP’s business is driven by renovation and construction during warm weather, which is generally at reduced levels during the winter months, generally in our second quarter.
Biggest changeHBP’s business is driven by renovation and construction during warm weather, which is historically at reduced levels during the winter months, generally in our second quarter. In 2023, 54% of CPP's' sales occurred during the second and third quarters compared to 58% in 2022 and 53% in 2021.
Purchases of many CPP and HBP products are discretionary for consumers who are generally more willing to purchase products during periods in which favorable macroeconomic conditions prevail.
Purchases of many HBP and CPP products are discretionary for consumers who are generally more willing to purchase products during periods in which favorable macroeconomic conditions prevail.
The CPP and HBP businesses serve residential and commercial construction and renovation, and are influenced by market conditions that affect these industries.
The HBP and CPP businesses serve residential and commercial construction and renovation, and are influenced by market conditions that affect these industries.
The strength of the U.S. economy, the age of existing home stock, job growth, interest rates, consumer confidence and the availability of consumer credit, as well as demographic factors such as migration into the U.S. and migration of the population within the U.S., have an effect on CPP and HBP.
The strength of the U.S. economy, the age of existing home stock, job growth, interest rates, consumer confidence and the availability of consumer credit, as well as demographic factors such as migration into the U.S. and migration of the population within the U.S., have an effect on HBP and CPP.
To the extent market conditions for residential or commercial construction and renovation are weaker than expected, this will likely have an adverse impact on the performance and financial results of the CPP and HBP businesses. Griffon is exposed to fluctuations in inflation, which could negatively affect its business, financial condition and results of operations.
To the extent market conditions for residential or commercial construction and renovation are weaker than expected, this will likely have an adverse impact on the performance and financial results of the HBP and CPP businesses. Griffon is exposed to fluctuations in inflation, which could negatively affect its business, financial condition and results of operations.
Griffon's operating companies may face additional competition from companies that operate in countries with significantly lower operating costs. Many CPP and HBP customers are large mass merchandisers, such as home centers, warehouse clubs, discount stores, commercial distributors and e-commerce companies.
Griffon's operating companies may face additional competition from companies that operate in countries with significantly lower operating costs. Many HBP and CPP customers are large mass merchandisers, such as home centers, warehouse clubs, discount stores, commercial distributors and e-commerce companies.
To address all of these challenges, CPP and HBP must be able to respond to these competitive pressures, and the failure to respond effectively could result in a loss of sales, reduced profitability and a limited ability to recover cost increases through price increases.
To address all of these challenges, HBP and CPP must be able to respond to these competitive pressures, and the failure to respond effectively could result in a loss of sales, reduced profitability and a limited ability to recover cost increases through price increases.
If this customer were to become insolvent or otherwise unable to pay its debts, the financial condition, results of operations and cash flows of CPP, HBP and Griffon could be adversely affected. Reliance on third party suppliers and manufacturers may impair the ability of CPP and HBP to meet their customer demands.
If this customer were to become insolvent or otherwise unable to pay its debts, the financial condition, results of operations and cash flows of HBP, CPP and Griffon could be adversely affected. Reliance on third party suppliers and manufacturers may impair the ability of HBP and CPP to meet their customer demands.
Reduced product quality or failure to deliver products timely may jeopardize relationships with certain of CPP's and HBP's key customers. In addition, reliance on third party suppliers or manufacturers may result in the failure to meet CPP and HBP customer demands. Continued turbulence in the worldwide economy may affect the liquidity and financial condition of CPP and HBP suppliers.
Reduced product quality or failure to deliver products timely may jeopardize relationships with certain of HBP's and CPP's key customers. In addition, reliance on third party suppliers or manufacturers may result in the failure to meet HBP and CPP customer demands. Continued turbulence in the worldwide economy may affect the liquidity and financial condition of HBP and CPP suppliers.
Should any of these parties fail to manufacture sufficient supply, go out of business or discontinue a particular component, alternative suppliers may not be found in a timely manner, if at all. Such events may impact the ability of CPP and HBP to fill orders, which could have a material adverse effect on customer relationships.
Should any of these parties fail to manufacture sufficient supply, go out of business or discontinue a particular component, alternative suppliers may not be found in a timely manner, if at all. Such events may impact the ability of HBP and CPP to fill orders, which could have a material adverse effect on customer relationships.
In recent years, both CPP and HBP have experienced price increases for most of their raw materials. While most key raw materials used in Griffon’s businesses are generally available from numerous sources, raw materials are subject to price fluctuations.
In recent years, both HBP and CPP have experienced price increases for most of their raw materials. While most key raw materials used in Griffon’s businesses are generally available from numerous sources, raw materials are subject to price fluctuations.
In particular, sharp increases in raw material prices are more difficult to pass through to customers and may negatively affect short-term financial performance. CPP is subject to risks from sourcing from international locations, especially China CPP's business is global, with products and raw materials sourced from, manufactured in and sold in multiple countries around the world.
In particular, sharp increases in raw material prices are more difficult to pass through to customers and may negatively affect short-term financial performance. CPP is subject to risks from sourcing from international locations, especially China CPP's business is global, with products and raw materials sourced from, and manufactured and sold in multiple countries around the world.
The ability of CPP and HBP to compete successfully depends in part on the company’s ability to develop and maintain leading brands so that retail and other customers will need its products to meet consumer demand. Leading brands allow both CPP and HBP to realize economies of scale in its operations.
The ability of HBP and CPP to compete successfully depends in part on the company’s ability to develop and maintain leading brands so that retail and other customers will need its products to meet consumer demand. Leading brands allow both CPP and HBP to realize economies of scale in its operations.
While CPP and HBP plan to continue to increase its expenditures for advertising and promotion and other brand-building and marketing initiatives over the long term, the initiatives may not deliver the anticipated results and the results of such initiatives may not cover the costs of the increased investment.
While HBP and CPP plan to continue to increase its expenditures for advertising and promotion and other brand-building and marketing initiatives over the long term, the initiatives may not deliver the anticipated results and the results of such initiatives may not cover the costs of the increased investment.
However, activist campaigns that contest, or conflict with, our strategic direction could have an adverse effect on us because: 24 a. responding to actions by activist shareholders can disrupt our operations, be costly and time consuming, and divert the attention of our Board and senior management from the pursuit of our business strategies, and b. perceived uncertainties as to our future direction may cause (i) instability or lack of continuity, which may be exploited by our competitors, (ii) concern on the part of current or potential customers, (iii) loss of business opportunities, or (iv) difficulties in attracting and retain qualified personnel and business partners.
However, activist campaigns that contest, or conflict with, our strategic direction could have an adverse effect on us because: a. responding to actions by activist shareholders can disrupt our operations, be costly and time consuming, and divert the attention of our Board and senior management from the pursuit of our business strategies, and b. perceived uncertainties as to our future direction may cause (i) instability or lack of continuity, which may be exploited by our competitors, (ii) concern on the part of current or potential customers, (iii) loss of business opportunities, or (iv) difficulties in attracting and retain qualified personnel and business partners.
In addition, there can be no assurance that Griffon will not encounter increased competition in the future, which could have a material adverse effect on Griffon’s financial results. The loss of large customers can harm financial results. A small number of customers account for, and are expected to continue to account for, a substantial portion of Griffon's consolidated revenue.
In addition, there can be no assurance that Griffon will not encounter increased competition in the future, which could have a material adverse effect on Griffon’s financial results. 14 The loss of large customers can harm financial results. A small number of customers account for, and are expected to continue to account for, a substantial portion of Griffon's consolidated revenue.
These conditions could make it more difficult to obtain additional credit on favorable terms for investments in current businesses or for acquisitions, or could render financing unavailable; in addition, while we do not have any near term debt maturities, if these conditions persist, we may have difficulty refinancing our debt when it comes due.
These conditions 13 could make it more difficult to obtain additional credit on favorable terms for investments in current businesses or for acquisitions, or could render financing unavailable; in addition, while we do not have any near term debt maturities, if these conditions persist, we may have difficulty refinancing our debt when it comes due.
In addition, the intense 15 competition in the retail and e-commerce sectors, combined with the overall increasingly competitive economic environment, may result in a number of customers experiencing financial difficulty, or failing in the future. The loss of, or a failure by, one of CPP’s or HBP’s significant customers could adversely impact our sales and operating cash flows.
In addition, the intense competition in the retail and e-commerce sectors, combined with the overall increasingly competitive economic environment, may result in a number of customers experiencing financial difficulty, or failing in the future. The loss of, or a failure by, one of HBP’s or CPP’s significant customers could adversely impact our sales and operating cash flows.
Additionally, Griffon’s operating companies may be unable to raise the prices of their products and services at or above the rate at which their costs increase, which may reduce revenues and operating margins and have a material adverse effect on financial results and future growth. Griffon operates in highly competitive industries and may be unable to compete effectively.
Additionally, Griffon’s operating companies may be unable to raise the prices of their products and services at or above the rate at which their costs increase, which may reduce operating margins and have a material adverse effect on financial results and future growth. Griffon operates in highly competitive industries and may be unable to compete effectively.
In addition, lack of snow or lower than average snowfall during the winter season may result in reduced sales of certain AMES' products such as snow shovels and other snow tools. As a result, AMES' results of operations, financial results and cash flows could be adversely impacted. 18 Unionized employees could strike or participate in a work stoppage.
In addition, lack of snow or lower than average snowfall during the winter season may result in reduced sales of certain AMES' products such as snow shovels and other snow tools. As a result, AMES' results of operations, financial results and cash flows could be adversely impacted. Unionized employees could strike or participate in a work stoppage.
Our Board of Directors and management team strive to maintain constructive, ongoing communications with all shareholders who wish to speak with us, including activist shareholders, and welcomes their views and opinions with the goal of working together constructively to enhance value for all shareholders.
Our Board of Directors and management team strive to maintain constructive, ongoing communications with all shareholders who wish to speak with us, including activist shareholders, and welcomes their views and opinions with the goal of working together 23 constructively to enhance value for all shareholders.
Griffon has identified the following specific risks and uncertainties that it believes have the potential to materially affect its business and financial condition. 14 Risks Related to Our Business Current worldwide economic uncertainty and market volatility could adversely affect Griffon’s businesses.
Griffon has identified the following specific risks and uncertainties that it believes have the potential to materially affect its business and financial condition. Risks Related to Our Business Current worldwide economic uncertainty and market volatility could adversely affect Griffon’s businesses.
Griffon’s ability to pass raw material price increases to customers is limited due to supply arrangements and competitive pricing pressure, and there is 16 generally a time lag between increased raw material costs and implementation of corresponding price increases for Griffon’s products.
Griffon’s ability to pass raw material price increases to customers is limited due to supply arrangements and competitive pricing pressure, and there is generally a time lag between increased raw material costs and implementation of corresponding price increases for Griffon’s products.
The ability of CPP and HBP to import products in a timely and cost-effective manner may continue to be affected by conditions at ports or issues that otherwise affect transportation and warehousing providers, such as port and shipping capacity, labor disputes, severe weather or increased homeland security requirements in the U.S. and other countries, as well as the potential for increased costs due to currency exchange fluctuations.
The ability of HBP and CPP to import products in a timely and cost-effective manner may continue to be affected by conditions at ports or issues that otherwise affect transportation and warehousing providers, such as port and shipping capacity, fuel prices, labor disputes, severe weather or increased homeland security requirements in the U.S. and other countries, as well as the potential for increased costs due to currency exchange fluctuations.
In addition, manufacturing costs may increase significantly and Griffon may not be able to pass along all or any of such increase to its customers; and when such increases are passed off to customers, there will be a time lag, which may be significant. 21 If CPP and HBP do not continue to develop and maintain leading brands or realize the anticipated benefits of advertising and promotion spend, its operating results may suffer.
In addition, manufacturing costs may increase significantly and Griffon may not be able to pass along all or any of such increase to its customers; and when such increases are passed off to customers, there will be a time lag, which may be significant. 20 If HBP and CPP do not continue to develop and maintain leading brands or realize the anticipated benefits of advertising and promotion spend, its operating results may suffer.
If Griffon raises additional funds by issuing equity securities, current holders of its common stock may experience significant ownership interest dilution and the holders of the new securities may have rights senior to the rights associated with current outstanding common stock. 20 Griffon’s indebtedness and interest expense could limit cash flow and adversely affect operations and Griffon’s ability to make full payment on outstanding debt.
If Griffon raises additional funds by issuing equity securities, current holders of its common stock may experience significant ownership interest dilution and the holders of the new securities may have rights senior to the rights associated with current outstanding common stock. 19 Griffon’s indebtedness and interest expense could limit cash flow and adversely affect operations and Griffon’s ability to make full payment on outstanding debt.
For example, trade agreements can result in setting quotas on products that may be imported from a particular country into key markets including the U.S., Canada, Australia and the U.K., or may make it easier for other companies to compete by eliminating restrictions on products from countries where CPP and HBP competitors source products.
For example, trade agreements can result in setting quotas on products that may be imported from a particular country into key markets including the U.S., Canada, Australia and the U.K., or may make it easier for other companies to compete by eliminating restrictions on products from countries in which HBP and CPP competitors source products.
In addition, sales generated by new products could cause a decline in sales of Griffon’s other existing products. If new product development and commercialization efforts are not successful, Griffon’s financial results could be adversely affected. 22 Product and technological developments are accomplished both through internally-funded R&D projects, as well as through strategic partnerships with customers.
In addition, sales generated by new products could cause a decline in sales of Griffon’s other existing products. If new product development and commercialization efforts are not successful, Griffon’s financial results could be adversely affected. 21 Product and technological developments are accomplished both through internally-funded R&D projects, as well as through strategic partnerships with customers.
Although these trade agreements generally have positive effects on trade liberalization, sourcing flexibility and cost of goods by reducing or eliminating the duties and/or quotas assessed on products manufactured in a particular country, trade agreements can also adversely affect CPP and HBP businesses.
Although these trade agreements generally have positive effects on trade liberalization, sourcing flexibility and the cost of goods by 16 reducing or eliminating the duties and/or quotas assessed on products manufactured in a particular country, trade agreements can also adversely affect HBP and CPP.
The current worldwide economic uncertainty and market volatility could continue to have an adverse effect on Griffon during 2023, within both the CPP and HBP segments, which are linked to the U.S. housing and the commercial property markets, and the U.S. economy in general.
The current worldwide economic uncertainty and market volatility could continue to have an adverse effect on Griffon during 2024, within both the HBP and CPP segments, which are linked to the U.S. housing and the commercial property markets, and the U.S. economy in general.
The relative limited Chinese judicial precedent on matters of international trade in many cases creates additional uncertainty as to the outcome of any litigation. In addition, interpretation of statutes and regulations in China may be subject to government policies or political changes.
The relatively limited Chinese judicial precedent on matters of international trade in many cases creates additional uncertainty as to the outcome of any litigation. In addition, interpretation of statutes and regulations in China may be subject to government policies or political changes.
For example, the supplier may not be able to develop an alternative design that meets Griffon’s needs at a comparable cost or at all, and the supply of certain products or components to Griffon may be interrupted. Griffon is exposed to product liability and warranty claims.
For example, in the past, a supplier may not be able to develop an alternative design that 22 meets Griffon’s needs at a comparable cost or at all, and the supply of certain products or components to Griffon may be interrupted. Griffon is exposed to product liability and warranty claims.
Neither CPP nor its suppliers currently manufacture or source products, components or raw materials from the Uyghur region of China; however, CBP takes a broad approach when targeting shipments they believe may have originated from the Uyghur region based on product definitions, tariff codes and supplier names that lead them to suspect the goods come from the Uyghur region.
Neither CPP nor its suppliers currently manufacture or source products, components or raw materials from the Uyghur region of China; however, CBP takes a broad approach when targeting shipments it believes may have originated from the Uyghur region based on product definitions, tariff codes and supplier names that lead them to suspect the goods come from the Uyghur region.
We cannot be certain that our products will not be targeted or that our shipments will not be detained, which may impact our operating performance. Forced labor enforcement initiatives are targeting imports from other countries besides China, and we are monitoring the products and countries subject to increased scrutiny for potential impacts to our operations.
We cannot be certain that our products will not be targeted or that our shipments will not be detained, which may impact our operating performance. Forced labor enforcement initiatives are also targeting imports from other countries besides China, and we will continue to monitor the products and countries subject to increased scrutiny for potential impacts to our operations.
The tariffs currently apply to approximately $375 billion in annual U.S. imports from China. Section 301 of the Trade Act of 1974 requires that the duties must terminate after four years unless one or more domestic beneficiaries of the tariffs requests their continuation.
The tariffs currently apply to approximately 66% of U.S. imports from China, or more than $330 billion of trade. Section 301 of the Trade Act of 1974 requires that the duties must terminate after four years unless one or more domestic beneficiaries of the tariffs requests their continuation.
For the year ended September 30, 2022, approximately 47% and 53% of Griffon’s consolidated revenue was derived from the CPP and HBP segments, respectively, which were dependent on renovation of existing homes, new home construction, and commercial non-residential construction, repair and replacement.
For the year ended September 30, 2023, approximately 59% and 41% of Griffon’s consolidated revenue was derived from the HBP and CPP segments, respectively, which were dependent on renovation of existing homes, new home construction, and commercial non-residential construction, repair and replacement.
In the event inflation continues to increase, we may seek to increase the sales prices of our products and services in order to maintain satisfactory margins. Any attempts to offset Griffon’s cost increases with price increases may result in reduced sales, increase customer dissatisfaction or harm to reputation.
As a result of fluctuations in inflation, we may seek to increase the sales prices of our products and services in order to maintain satisfactory margins. Any attempts to offset Griffon’s cost increases with price increases may result in reduced sales, increased customer dissatisfaction or harm to reputation.
As a result, CPP shipments may be targeted for detention in which case they become subject to the rebuttable presumption that they were sourced from the Uyghur region even though they are demonstrably outside the scope of the UFLPA.
As a result, CPP shipments may be targeted for detention in which case they become subject to the rebuttable presumption that they were sourced from the Uyghur region even though they are not imported directly from China or are otherwise demonstrably outside the scope of the UFLPA.
In view of the increased enforcement of forced labor initiatives, we are updating our compliance measures and working with our China supply base to validate their supply chains, from raw materials through components to finished goods, to ensure our goods are not made using forced labor.
In view of the increased enforcement of forced labor initiatives, we are continuing to update our compliance measures and work with our supply base to validate their supply chains, from raw materials through components to finished goods, to ensure our goods are not made using forced labor.
Many of these retailers import products directly from foreign suppliers to source and sell products under their own private label brands to compete with CPP and HBP products and brands, which puts increasing price pressure on the products of these businesses.
Many of these retailers import products directly from suppliers based in low-cost countries to source and sell products under their own private label brands to compete with HBP and CPP products and brands, which puts increasing price pressure on the products of these businesses.
Also, both CPP and HBP extend credit to its customers, which exposes it to credit risk. The largest customer accounted for approximately 26%, 7% and 17% of the net accounts receivable of CPP, HBP and Griffon as of September 30, 2022, respectively.
Also, both HBP and CPP extend credit to its customers, which exposes it to credit risk. The largest customer accounted for approximately 7%, 19% and 13% of the net accounts receivable of HBP, CPP and Griffon as of September 30, 2023, respectively.
Sales of products through non-U.S. subsidiaries accounted for approximately 17% of consolidated revenue for the year ended September 30, 2022.
Sales of products through non-U.S. subsidiaries accounted for approximately 15% of consolidated revenue for the year ended September 30, 2023.
CPP and HBP rely on a limited number of domestic and foreign companies to supply components and manufacture certain of their products. The percentage of CPP and HBP worldwide sourced finished goods as a percent of revenue approximated 34% and 5%, respectively, in 2022.
HBP and CPP rely on a limited number of companies globally to supply components and manufacture certain of their products. The percentage of HBP and CPP worldwide sourced finished goods as a percent of revenue approximated 5% and 27%, respectively, in 2023.
The percentage of CPP and HBP's worldwide sourced components as a percent of cost of goods sold approximated 13% and 14%, respectively, in 2022. Reliance on third party suppliers and manufacturers may reduce control over the timing of deliveries and quality of both CPP and HBP products.
The percentage of HBP and CPP's worldwide sourced components as a percent of cost of goods sold approximated 20% and 4%, respectively, in 2023. Reliance on third party suppliers and manufacturers may reduce control over the timing of deliveries and quality of both HBP and CPP products.
At September 30, 2022, Griffon employed approximately 6,200 people on a full-time basis, approximately 4% of whom are covered by collective bargaining or similar labor agreements.
At September 30, 2023, Griffon employed approximately 5,700 people on a full-time basis, approximately 4% of whom are covered by collective bargaining or similar labor agreements.
In addition, Griffon is authorized to issue, without stockholder approval, up to 85,000,000 shares of common stock, of which 57,064,331 shares, net of treasury shares, were outstanding as of September 30, 2022. Additionally, Griffon is authorized to issue, without stockholder approval, securities convertible into either shares of common stock or preferred stock.
In addition, Griffon is authorized to issue, without stockholder approval, up to 85,000,000 shares of common stock, of which 53,062,352 shares, net of treasury shares, were outstanding as of September 30, 2023. Additionally, Griffon is authorized to issue, without stockholder approval, securities convertible into either shares of common stock or preferred stock.
This integration risk may be exacerbated when numerous acquisitions are consummated in a short time period. 19 In implementing an acquisition growth strategy, the following may be encountered: • Costs associated with incomplete or poorly implemented acquisitions; • Expenses, delays and difficulties of integrating acquired companies into Griffon’s existing organization; • Dilution of the interest of existing stockholders; • Diversion of management’s attention; or • Difficulty in obtaining financing on acceptable terms, or at all.
In implementing an acquisition growth strategy, the following may be encountered: • Costs associated with incomplete or poorly implemented acquisitions; • Expenses, delays and difficulties of integrating acquired companies into Griffon’s existing organization; • Dilution of the interest of existing stockholders; • Diversion of management’s attention; or • Difficulty in obtaining financing on acceptable terms, or at all.
To the extent the COVID-19 outbreak adversely affects our businesses, operations, financial condition and operating results, it may also have the effect of heightening many of the other risks factors such as those relating to our high level of indebtedness, our need to generate sufficient cash flows to service our indebtedness, and our ability to comply with the covenants contained in the agreements that govern our indebtedness, as described in more detail below.
To the extent such resurgence or new outbreak adversely affects our businesses, operations, financial condition and operating results, it may also have the effect of heightening many of the other risks factors such as those relating to our high level of indebtedness, our need to generate sufficient cash flows to service our indebtedness, and our ability to comply with the covenants contained in the agreements that govern our indebtedness, as described in more detail below. 17 Griffon’s businesses are subject to seasonal variations and the impact of uncertain weather patterns.
Home Depot, Lowe’s and Bunnings are significant customers of CPP, and Home Depot and Menards are significant customers of HBP. Home Depot accounted for approximately 13% of consolidated revenue, 19% of CPP's revenue and 7% of HBP's revenue for the year ended September 30, 2022.
Home Depot and Menards are significant customers of HBP and Home Depot, Lowe’s and Bunnings are significant customers of CPP. Home Depot accounted for approximately 12% of consolidated revenue, 9% of HBP's revenue and 15% of CPP's revenue for the year ended September 30, 2023.
Griffon’s effective tax rate could be adversely affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in any valuation allowance for deferred tax assets or the amendment or enactment of tax laws. The amount of income taxes paid is subject to audits by U.S.
Griffon’s effective tax rate could be adversely affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in any valuation allowance for deferred tax assets or the amendment or enactment of tax laws.
There can be no assurance that the precautions which we have taken against certain events that could disrupt the operations of our information systems will prevent the occurrence of such a disruption. Any such disruption could have a material adverse effect on our business and results of operations.
There can be no assurance that the precautions which we have taken against certain events that could disrupt the operations of our IT systems will prevent the occurrence of such a disruption.
Griffon may be unable to implement its acquisition growth strategy, which may result in added expenses without a commensurate increase in revenue and income, and divert management’s attention. Making strategic acquisitions is a significant part of Griffon’s growth plans.
Any such disruption could have a material adverse effect on our business and results of operations. 18 Griffon may be unable to implement its acquisition growth strategy, which may result in added expenses without a commensurate increase in revenue and income, and divert management’s attention. Making strategic acquisitions is a significant part of Griffon’s growth plans.
Increases in interest rates, especially if coupled with reduced government spending and volatility in financial markets, may have the effect of further increasing economic uncertainty and heightening these risks, which may result in economic recession.
In addition, the United States Federal Reserve has raised, and may continue to raise, interest rates in response to concerns about inflation. Increases in interest rates, especially if coupled with reduced government spending and volatility in financial markets, may have the effect of further increasing economic uncertainty and heightening these risks, which may result in economic recession.
The continuing political and economic conflicts between U.S. and China have resulted in and may continue to cause retaliatory policies from both countries, and it is unknown whether current US-China relations over Taiwan, including the commencement of negotiations regarding a new trade initiative between the United States and Taiwan, will impact the ongoing trade dispute with China.
The continuing political and economic conflicts between U.S. and China have resulted in, and may continue to result in retaliatory actions from, both countries, and it is unknown whether current US-China relations over Taiwan, including the signature of the US-Taiwan Initiative on 21 st Century Trade signed in May 2023, will impact the ongoing trade dispute with China.
From June 21, 2022 through September 30, 2022, more than 1,450 shipments from China to U.S importers, valued at approximately $429 million, were targeted by CBP for further inspection.
From October 1, 2022 through September 30, 2023, more than 4,000 shipments to U.S importers, valued at approximately $1.4 billion, were targeted by CBP for further inspection.
Risks Related to Our Indebtedness While Griffon’s senior notes, which have limited covenants, are not due until 2028; its $800 million Term Loan B (current balance of $496 million), which also has limited covenants, is not due until 2029; and its $400 million revolving line of credit, which has greater covenant requirements, does not mature until 2025, there are potential impacts from Griffon’s use of debt to finance certain of its activities, especially acquisitions and expansions, as set forth below.
Risks Related to Our Indebtedness Griffon’s senior notes, which have limited covenants, are not due until 2028; its $800 million Term Loan B (current balance of $463 million), which also has limited covenants, is not due until 2029; and its $500 million revolving line of credit, which has greater covenant requirements, does not mature until 2028.
We cannot predict what new and additional retaliatory policies and regulations may be implemented by the Chinese government in response to the U.S./Taiwan engagement, and any such policies and regulations or other responses may adversely affect our business operations in China. 17 CPP and HBP operations are also subject to the effects of international trade agreements and regulations such as the United States-Mexico-Canada Agreement, and the activities and regulations of the World Trade Organization.
We cannot predict what new retaliatory policies and regulations may be implemented by the Chinese government in response to the U.S./Taiwan engagement, and any such policies and regulations or other responses may adversely affect our business operations in China.
China does not have a well-developed, consolidated body of laws governing agreements with international customers. Enforcement of existing laws or contracts based on existing law may be uncertain and sporadic, and it may be difficult to obtain swift and equitable enforcement or to obtain enforcement of a judgment by a court of another jurisdiction.
Enforcement of existing laws or contracts based on existing law may be uncertain and sporadic, and it may be difficult to obtain swift and equitable enforcement or to obtain enforcement of a judgment by a court of another jurisdiction, including other jurisdictions within China itself.
For the fiscal year ended September 30, 2022, we recorded a non-cash, pre-tax goodwill impairment of $342,027, and a non-cash pre-tax indefinite-lived intangible assets impairment of $175,000. These non-cash impairments resulted in an aggregate decrease of $8.43 in our earnings per share for the fiscal year ended September 30, 2022.
For the fiscal year ended September 30, 2023, we also recorded a non-cash, pre-tax indefinite-lived intangible assets impairment of $109,200. For the fiscal year ended September 30, 2022, we recorded a non-cash, pre-tax indefinite-lived intangible asset impairment of $175,000 and a non-cash, pre-tax goodwill impairment of $342,027.
If as a result of the COVID-19 outbreak, including a potential resurgence of the virus in the fall and winter months, governments take additional protective actions, it may have a material adverse impact on Griffon’s businesses and operating results for the reasons described above.
If as a result of a resurgence of COVID-19 or the outbreak of a new pandemic, governments take protective actions, it may have a material adverse impact on Griffon’s businesses and operating results for the reasons described above. In such event, the extent and duration of any impact on our businesses would be difficult to predict.
Continued high inflation or increases in inflation may result in decreased demand for Griffon’s products and services and increased operating costs and expenses, including labor costs and costs of raw materials and supplies.
Department of Labor, the annual inflation rate for the United States decreased to 3.7% for the twelve months ended September 30, 2023, high inflation or increases in inflation may result in decreased demand for Griffon’s operating company’s products and services and increased operating costs and expenses, including for labor, raw materials and supplies.
If other Griffon suppliers are found to have infringed (or are alleged to have infringed) on 23 the propriety rights of others, such infringement may have a material adverse effect on Griffon’s business, results of operations and financial condition.
Any such infringement (or alleged infringement) may have a material adverse effect on Griffon’s business, results of operations and financial condition.
These issues could delay importation of products or require CPP and HBP to locate alternative ports or warehousing providers to avoid disruption to customers. These alternatives may not be available on short notice or could result in higher transit costs, which could have an adverse impact on CPP and HBP business and financial condition.
These alternatives may not be available on short notice or could result in higher transit costs, which could have an adverse impact on the business and financial results of HBP and CPP. The expansion of CPP’s global sourcing strategy may not achieve its intended results.
If Griffon is unable to obtain raw materials for products at favorable prices it could adversely impact operating performance. CPP and HBP suppliers primarily provide resin, wood, steel and wire rod. Both of these businesses could experience shortages of raw materials or components for products or be forced to seek alternative sources of supply.
See the risk below titled “The expansion of CPP’s global sourcing strategy may not achieve its intended results.” If Griffon is unable to obtain raw materials for products at favorable prices it could adversely impact operating performance. HBP and CPP suppliers primarily provide resin, wood, steel and wire rod.
In September 2022, the United States Trade Representative (USTR) announced that it had received such requests and would therefore continue the tariffs pending a comprehensive review of their necessity. The process for completing this review, which contemplates a period of public comment, means the tariffs will remain in effect for several months at least, with an unpredictable outcome.
In September 2022, the United States Trade Representative (USTR) announced that it had received such requests and would therefore continue the tariffs pending a comprehensive review of their necessity. As of September 30, 2023 the four-year review remains ongoing.
The COVID-19 outbreak, or any other future pandemic could adversely impact our results of operations.
There is no guarantee that the restructuring will achieve these intended results. The COVID-19 outbreak, or any other future pandemic, could adversely impact our results of operations. On May 11, 2023, the U.S.
Certain raw materials used by CPP may be sourced from China and therefore may have their prices and availability impacted by tariffs imposed on trade between the United States and China. The sourcing of CPP finished goods, components and raw materials from China are generally subject to supply agreements with Chinese companies.
Certain raw materials used by CPP may be sourced from China and therefore may have their prices and availability impacted by tariffs imposed on trade between the United States and China. As it executes its expanded sourcing strategy and 15 closes numerous U.S. facilities, CPP may increase its reliance on suppliers in China, which could further impact pricing and tariffs.
Inflation rates, including residential mortgage rates, particularly in the United States, have increased recently to historic levels. According to the U.S. Department of Labor, the annual inflation rate for the United States was approximately 8.2% for the twelve months ended September 30, 2022.
Inflation rates, particularly in the United States, increased to historic levels in 2022. Although, according to the U.S.
Removed
In particular, higher home mortgage rates typically result in a slowdown in both the purchase and construction of new homes and renovation of existing homes, which will reduce demand for certain of Griffon’s products. In addition, the United States Federal Reserve has raised, and may again raise, interest rates in response to concerns about inflation.
Added
In May 2023, in response to changing market conditions, Griffon announced that CPP will expand its global sourcing strategy. This will increase CPP’s reliance on third-party suppliers and therefore is likely to increase CPP’s exposure to the risks relating to the use of third-party suppliers.
Removed
A product provided to HBP by one of its suppliers was found to infringe on the intellectual property rights of a competitor of this supplier.
Added
Both of these businesses could experience shortages of raw materials or components for products or be forced to seek alternative sources of supply.
Removed
The supplier developed an alternative design for such product that has allowed it to meet HBP’s needs and which the supplier believes is non-infringing; however, the competitor has alleged, in a pending administrative proceeding, that the redesigned product also infringes on its intellectual property rights.
Added
The sourcing of CPP finished goods, components and raw materials from China are generally subject to supply agreements with Chinese companies. China does not have a well-developed, consolidated body of laws governing agreements with international customers.
Removed
The supplier is also appealing the initial finding of infringement and believes it has a reasonable likelihood of success.
Added
In September the USTR announced an extension of certain exclusions from the tariffs through December 31, 2023 to allow the USTR to complete its review. It remains unknown whether the USTR will continue the Section 301 tariffs upon completion of its review.
Removed
However, should the alternative design be deemed to be an infringing product and should the supplier lose its appeal of the initial finding of infringement, and as a result the supply of this product is interrupted, it could adversely impact HBP’s business and results of operations.
Added
Additionally, the Forced Labor Enforcement Task Force has determined that certain industry sectors (including apparel, cotton and cotton products, and silica-based products) have an inherently higher risk of forced labor, such that CBP may detain goods suspected of being manufactured with materials originating from Xinjiang, regardless of their declared country of origin.
Removed
The future impact of the COVID-19 outbreak, or any other future pandemic, and the spread of the pathogen on a global basis could adversely affect our businesses in a number of respects, although the extent, nature and timing of such impact cannot be predicted as of the date of this filing.
Added
HBP and CPP operations are also subject to the effects of international trade agreements and regulations such as the United States-Mexico-Canada Agreement (USMCA), and the activities and regulations of the World Trade Organization.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeSquare Footage Owned/ Leased Lease End Year New York, NY Corporate Headquarters 13,000 Leased 2025 Huntington, NY (1) Corporate Manufacturing 90,000 Owned Troy, OH Home and Building Products Manufacturing 1,230,000 Owned Russia, OH Home and Building Products Manufacturing 250,000 Owned Mountain Top, PA Home and Building Products Manufacturing 279,000 Owned Goodyear, AZ Home and Building Products Manufacturing 163,000 Owned Carlisle, PA Consumer and Professional Products Manufacturing, Distribution 1,409,000 Leased 2035 Reno, NV Consumer and Professional Products Manufacturing, Distribution 997,000 Leased 2034 Camp Hill, PA Consumer and Professional Products Manufacturing 380,000 Owned Harrisburg, PA Consumer and Professional Products Manufacturing 264,000 Owned St.
Biggest changeSquare Footage Owned/ Leased Lease End Year New York, NY Corporate Headquarters 13,000 Leased 2025 Troy, OH Home and Building Products Manufacturing 1,237,000 Owned Russia, OH Home and Building Products Manufacturing 250,000 Owned Mountain Top, PA Home and Building Products Manufacturing 279,000 Owned Mason, OH Home and Building Products Office 131,000 Owned Goodyear, AZ Home and Building Products Manufacturing 163,000 Owned Greenville, OH Home and Building Products Distribution 148,000 Leased 2025 Camp Hill, PA * Consumer and Professional Products Manufacturing 380,000 Owned Harrisburg, PA * Consumer and Professional Products Manufacturing 264,000 Owned Ocala, FL Consumer and Professional Products Office, Manufacturing 619,500 Owned Ocala, FL Consumer and Professional Products Distribution 56,500 Leased 2024 Grantsville, MD * Consumer and Professional Products Manufacturing 155,000 Owned Champion, PA * Consumer and Professional Products Wood Mill 225,000 Owned Cork, Ireland Consumer and Professional Products Manufacturing, Distribution 74,000 Owned St.
Item 2. Properties Griffon occupies approximately 10,460,000 square feet of general office, factory and warehouse space primarily throughout the U.S., Canada, Mexico, Australia, U.K., Ireland and China. For a description of the encumbrances on certain of these properties, see the Notes Payable, Capitalized Leases and Long-Term Debt footnote in the Notes to Consolidated Financial Statements.
Item 2. Properties Griffon occupies approximately 10,490,000 square feet of general office, factory and warehouse space primarily throughout the U.S., Canada, Mexico, Australia, U.K., Ireland and China. For a description of the encumbrances on certain of these properties, see the Notes Payable, Capitalized Leases and Long-Term Debt footnote in the Notes to Consolidated Financial Statements.
In addition, HBP and CPP leases approximately 331,000 square feet of office space throughout the U.S. and various international locations. CPP also owns approximately 169,000 square feet of additional space for operational wood mills in the U.S. All facilities are generally well maintained and suitable for the operations conducted.
In addition to the facilities listed above, HBP leases approximately 1,105,000 square feet of space for distribution centers in numerous facilities throughout the U.S. and in Canada; HBP and CPP lease approximately 180,000 square feet of office space throughout the U.S. and various international locations; and CPP owns approximately 133,000 square feet of additional space for operational wood mills in the U.S.
Removed
Francois, Quebec Consumer and Professional Products Manufacturing, Distribution 353,000 Owned Champion, PA Consumer and Professional Products Wood Mill 225,000 Owned Cork, Ireland Consumer and Professional Products Manufacturing, Distribution 74,000 Owned Pollington Site, UK Consumer and Professional Products Manufacturing, Distribution 115,000 Owned Gloucestershire, UK Consumer and Professional Products Distribution 139,000 Leased 2023 Barmby Moor, UK Consumer and Professional Products Manufacturing 240,000 Leased 2027 Kent, UK Consumer and Professional Products Distribution 32,000 Leased 2026 Australia (various) Consumer and Professional Products 8 Distribution 661,000 Leased 2023 - 2028 Quebec, Canada Consumer and Professional Products Distribution 41,000 Lease 2023 Ocala, FL Consumer and Professional Products Manufacturing 676,000 Leased 2030 Grantsville, MD Consumer and Professional Products Manufacturing 155,000 Owned Reynosa, MX Consumer and Professional Products Manufacturing (owned), Distribution (leased) 133,000 Owned /Leased 2023 Fairfield, IA Consumer and Professional Products Manufacturing 54,000 Leased 2024 Byhalia, MS Consumer and Professional Products Distribution 600,000 Leased 2025 Guangdong, China Consumer and Professional Products Manufacturing 211,000 Leased 2023 (1) This property is owned by Griffon and is leased to a third party. 25 HBP also leases approximately 1,176,000 square feet of space for distribution centers in numerous facilities throughout the U.S. and in Canada.
Added
Francois, Quebec Consumer and Professional Products Manufacturing, Distribution 353,000 Owned Pollington Site, UK Consumer and Professional Products Manufacturing, Distribution 115,000 Owned Carlisle, PA Consumer and Professional Products Manufacturing, Distribution 1,409,000 Leased 2035 United Kingdom (various) Consumer and Professional Products 1 Manufacturing and 2 Distribution 411,000 Leased 2023 - 2027 Reno, NV Consumer and Professional Products Manufacturing, Distribution 997,000 Leased 2034 Australia (various) Consumer and Professional Products 8 Distribution 1 Manufacturing 769,000 Leased 2024 - 2031 Fairfield, IA * Consumer and Professional Products Manufacturing 54,000 Leased 2024 Mt Wellington, New Zealand Consumer and Professional Products Manufacturing 54,000 Leased 2027 Guangdong, China Consumer and Professional Products Manufacturing 211,000 Leased 2023 Byhalia, MS Consumer and Professional Products Distribution 600,000 Leased 2025 Smyrna, TN Consumer and Professional Products Office 100,000 Leased 2025 * Facilities to cease operations during fiscal 2024 as part of CPP's Global Supply Chain expansion.
Added
Some of the CPP wood mills will cease operations during fiscal 2024 as part of CPP's Global Supply Chain expansion. All facilities are generally well maintained and suitable for the operations conducted. 25

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+5 added−1 removed3 unchanged
Biggest changeOn each of August 3, 2016 and August 1, 2018, the Company’s Board of Directors authorized the repurchase of up to $50,000 of Griffon common stock; as of September 30, 2022, $57,955 remained available for purchase under these Board authorized repurchase programs. 28 Performance Graph The performance graph does not constitute soliciting material, is not deemed filed with the SEC and is not incorporated by reference in any of Griffon’s filings under the Securities Act of 1933 or the Exchange Act of 1934, whether made before or after the date of this Annual Report on Form 10-K and irrespective of any general incorporation language in any such filings, except to the extent Griffon specifically incorporates this performance graph by reference therein.
Biggest changeShares were purchased by the Company in open market purchases pursuant to share repurchase plans authorized by the Company's Board of Directors. 28 Performance Graph The performance graph does not constitute soliciting material, is not deemed filed with the SEC and is not incorporated by reference in any of Griffon’s filings under the Securities Act of 1933 or the Exchange Act of 1934, whether made before or after the date of this Annual Report on Form 10-K and irrespective of any general incorporation language in any such filings, except to the extent Griffon specifically incorporates this performance graph by reference therein.
The following graph sets forth the cumulative total return to Griffon’s stockholders during the five years ended September 30, 2022, as well as an overall stock market (S&P Small Cap 600 Index) and Griffon’s peer group index (Dow Jones U.S. Diversified Industrials Index). Assumes $100 was invested on September 30, 2017, including the reinvestment of dividends, in each category.
The following graph sets forth the cumulative total return to Griffon’s stockholders during the five years ended September 30, 2023, as well as an overall stock market (S&P Small Cap 600 Index) and Griffon’s peer group index (Dow Jones U.S. Diversified Industrials Index). Assumes $100 was invested on September 30, 2018, including the reinvestment of dividends, in each category.
Securities Authorized for Issuance Under Equity Compensation Plans The following sets forth information relating to Griffon’s equity compensation plans as of September 30, 2022: (a) (b) (c) Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted- average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity plans (excluding securities reflected in column (a)) Equity compensation plans approved by security holders (1) — $ — 835,122 Equity compensation plans not approved by security holders — $ — — (1) Excludes restricted shares and restricted stock units issued in connection with Griffon’s equity compensation plans.
Securities Authorized for Issuance Under Equity Compensation Plans The following sets forth information relating to Griffon’s equity compensation plans as of September 30, 2023: (a) (b) (c) Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted- average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity plans (excluding securities reflected in column (a)) Equity compensation plans approved by security holders (1) — $ — 328,473 Equity compensation plans not approved by security holders — $ — — _____________________________________ (1) Excludes restricted shares and restricted stock units issued in connection with Griffon’s equity compensation plans.
The total reflected in column (c) includes shares available for grant as any type of equity award under the Incentive Plan. 27 Issuer Purchase of Equity Securities The table below presents shares of Griffon Stock which were acquired by Griffon during the fourth quarter of 2022: ISSUER PURCHASES OF EQUITY SECURITIES Period (a) Total Number of Shares (or Units) Purchased (b) Average Price Paid Per Share (or Unit) (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (1) (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet Be Purchased Under the Plans or Programs July 1 - 31, 2022 — $ — — August 1 - 31, 2022 — — — September 1 - 30, 2022 — — — Total — $ — — $ 57,955 (1) 1.
The total reflected in column (c) includes shares available for grant as any type of equity award under the Incentive Plan. 27 Issuer Purchase of Equity Securities The table below presents shares of Griffon Stock which were acquired by Griffon during the fourth quarter of 2023: ISSUER PURCHASES OF EQUITY SECURITIES Period (a) Total Number of Shares (or Units) Purchased (1) (b) Average Price Paid Per Share (or Unit) (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (1) (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet Be Purchased Under the Plans or Programs July 1 - 31, 2023 59,297 (2) $ 39.65 59,297 August 1 - 31, 2023 509,413 (2) 41.39 509,413 September 1 - 30, 2023 1,032,152 40.67 1,032,152 Total 1,600,862 $ 40.86 1,600,862 $ 107,183 (1) _____________________________________________________ 1.
On November 16, 2022, the Board of Directors declared a cash dividend of $0.10 per share, payable on December 16, 2022 to shareholders of record as of the close of business on November 29, 2022. Holders As of October 31, 2022, there were approximately 12,900 holders of Griffon’s Common Stock.
On November 14, 2023, the Board of Directors declared a cash dividend of $0.15 per share, payable on December 14, 2023 to shareholders of record as of the close of business on November 28, 2023. Registered Holders As of October 31, 2023, there were approximately 2,322 registered holders of Griffon’s Common Stock.
In addition, on June 27, 2022, the Board of Directors declared a special cash dividend of $2.00 per share, paid on July 20, 2022 to shareholders of record as of the close of business on July 8, 2022.
Additionally, on April 19, 2023, the Board of Directors declared a special cash dividend of $2.00 per share, paid on May 19, 2023, to shareholders of record as of the close of business on May 9, 2023. During 2022, the Company paid a regular quarterly cash dividend of $0.09 per share, totaling $0.36 per share for the year.
Dividends During 2022, 2021 and 2020, the Company declared and paid, in quarterly increments, cash dividends totaling $0.36 per share, $0.32 per share and $0.30 per share, respectively.
Dividends During 2023, the Company declared and paid four regular quarterly cash dividends consisting of two cash dividends of $0.10 per share and two cash dividends of $0.125 per share, totaling $0.45 per share for the year.
Removed
Shares, if any, purchased by the Company in open market purchases are pursuant to share repurchases authorized by the Company’s Board of Directors.
Added
Additionally, on June 27, 2022, the Board of Directors declared a special cash dividend of $2.00 per share, paid on July 20, 2022. During 2021, the Company declared and paid a regular quarterly cash dividend of $0.08 per share, totaling $0.32 per share for the year.
Added
For all dividends, a dividend payable is established for the holders of restricted shares; such dividends will be released upon vesting of the underlying restricted shares.
Added
On April 19, 2023, the Company's Board of Directors approved a $200,000 increase to its share repurchase program to $257,955 from the prior unused authorization of $57,955.
Added
Under the share repurchase program, the Company may, from time to time, purchase shares of its common stock in the open market, including pursuant to a 10b5-1 plan, pursuant to an accelerated share repurchase program or issuer tender offer, or in privately negotiated transactions. As of September 30, 2023, $107,183 remained available for purchase under these Board authorized repurchase programs.
Added
See " Management's Discussion and Analysis of Financial Condition and Results of Operations - LIQUIDITY AND CAPITAL RESOURCES - Liquidity" - for information regarding share repurchases in the first quarter of fiscal 2024 and the amount remaining available for purchase as of immediately prior to the filing of this Annual Report on Form 10-K. 2.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThese circumstances include (i) a sale of at least a majority of the stock, or all or substantially all the assets, of the subsidiary guarantor as permitted by the Indentures; (ii) a public equity offering of a subsidiary guarantor that qualifies as a “Minority Business” as defined in the Indentures (generally, a business the EBITDA of which constitutes less than 50% of the segment adjusted EBITDA of the Company for the most recently ended four fiscal quarters), and that meets certain other specified conditions as set forth in the Indentures; (iii) the designation of a guarantor as an “unrestricted subsidiary” as defined in the Indentures, in compliance with the terms of the Indentures; (iv) Griffon exercising its right to defease the Senior Notes, or to otherwise discharge its obligations under the Indentures, in each case in accordance with the terms of the Indentures; and (v) upon obtaining the requisite consent of the holders of the Senior Notes. 43 Summarized Statements of Operations and Comprehensive Income (Loss) For the Year Ended For the Year Ended September 30, 2022 September 30, 2021 Parent Company Guarantor Companies Parent Company Guarantor Companies Net sales $ — $ 2,301,215 $ — $ 1,727,074 Gross profit $ — $ 752,982 $ — $ 459,879 Income (loss) from operations $ (43,492) $ (127,982) $ (22,321) $ 135,510 Equity in earnings of Guarantor subsidiaries $ (184,618) $ — $ 75,769 $ — Net income (loss) $ (74,423) $ (184,618) $ (40,047) $ 75,769 Summarized Balance Sheet Information For the Year Ended For the Year Ended September 30, 2022 September 30, 2021 Parent Company Guarantor Companies Parent Company Guarantor Companies Current assets $ 49,238 $ 915,329 $ 116,260 $ 746,371 Non-current assets 15,571 1,393,864 15,782 999,138 Total assets $ 64,809 $ 2,309,193 $ 132,042 $ 1,745,509 Current liabilities $ 78,635 $ 275,165 $ 41,334 $ 321,363 Long-term debt 1,538,235 12,886 998,787 $ 14,482 Other liabilities 4,331 322,224 43,337 $ 156,694 Total liabilities $ 1,621,201 $ 610,275 $ 1,083,458 $ 492,539 CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of Griffon’s consolidated financial statements in conformity with accounting principles generally accepted in the U.S. of America (“GAAP”) requires the use of estimates, assumptions, judgments and subjective interpretations of accounting principles that have an impact on assets, liabilities, revenue and expenses.
Biggest changeSummarized Statements of Operations and Comprehensive Income (Loss) For the Year Ended For the Year Ended September 30, 2023 September 30, 2022 Parent Company Guarantor Companies Parent Company Guarantor Companies Net sales $ — $ 2,190,636 $ — $ 2,301,215 Gross profit $ — $ 800,477 $ — $ 752,982 Income (loss) from operations $ (42,948) $ 228,346 $ (43,492) $ (127,982) Equity in earnings of Guarantor subsidiaries $ 149,981 $ — $ (184,618) $ — Net income (loss) $ (85,770) $ 149,981 $ (74,423) $ (184,618) 43 Summarized Balance Sheet Information For the Year Ended For the Year Ended September 30, 2023 September 30, 2022 Parent Company Guarantor Companies Parent Company Guarantor Companies Current assets $ 51,701 $ 707,929 $ 49,238 $ 915,329 Non-current assets 13,954 1,317,575 15,571 1,393,864 Total assets $ 65,655 $ 2,025,504 $ 64,809 $ 2,309,193 Current liabilities $ 76,460 $ 226,532 $ 78,635 $ 275,165 Long-term debt 1,459,952 — 1,538,235 12,886 Other liabilities (9,994) 271,985 4,331 322,224 Total liabilities $ 1,526,418 $ 498,517 $ 1,621,201 $ 610,275 CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of Griffon’s consolidated financial statements in conformity with accounting principles generally accepted in the U.S. of America (“GAAP”) requires the use of estimates, assumptions, judgments and subjective interpretations of accounting principles that have an impact on assets, liabilities, revenue and expenses.
Depreciation and Amortization Depreciation and amortization of $64,658 in 2022 compared to $52,302 in 2021; the increase was primarily due to depreciation for new assets placed in service and the Hunter assets acquired.
Depreciation and amortization of $64,658 in 2022 compared to $52,302 in 2021; the increase was primarily due to depreciation for new assets placed in service and the Hunter assets acquired.
As such, in connection with the preparation of our 46 financial statements for the fiscal year ended September 30, 2022, we performed a quantitative assessment of the CPP reporting units using both an income-based and market-based approach. The impairment tests resulted in a pre-tax, non-cash goodwill impairment charge of $342,027.
As such, in connection with the preparation of our financial statements for the fiscal year ended September 30, 2022, we performed a quantitative assessment of the CPP reporting units using both an income-based and market-based approach. The impairment tests resulted in a pre-tax, non-cash goodwill impairment charge of $342,027.
DISCONTINUED OPERATIONS Defense Electronics On September 27, 2021, Griffon announced it was exploring strategic alternatives for its Defense Electronics segment, which consisted of Telephonics Corporation ("Telephonics"), and on June 27, 2022, Griffon completed the sale of Telephonics to TTM for $330,000, excluding customary post-closing adjustments, primarily related to working capital.
DISCONTINUED OPERATIONS Defense Electronics On September 27, 2021, Griffon announced it was exploring strategic alternatives for its Defense Electronics segment, which consisted of Telephonics Corporation ("Telephonics"), and on June 27, 2022, Griffon completed the sale of Telephonics for $330,000, excluding customary post-closing adjustments, primarily related to working capital.
Other income (expense) also includes rental income of $689 in 2022 and $624 in 2021. Additionally, it includes royalty income of $2,250 for the year ended September 30, 2022. Griffon reported Income (loss) before tax from continuing operations for 2022 of $(270,879) compared to $109,955 for 2021.
Other income (expense) also includes rental income of $689 in 2022 and $624 in 2021. Additionally, it includes royalty income of $2,250 for the year ended September 30, 2022. Griffon reported a loss before tax from continuing operations for 2022 of $270,879 compared to income before tax from continuing operations for 2021 of $109,955.
The liability associated with unrecognized tax benefits is adjusted periodically due to changing circumstances, such as the progress of tax audits, case law developments and new or emerging legislation. Such adjustments are recognized in the period in which they are identified.
The liability associated with unrecognized tax benefits is adjusted periodically due to changing circumstances, such as the progress of tax audits, case law developments and new or 45 emerging legislation. Such adjustments are recognized in the period in which they are identified.
The 2022 income from continuing operations included the following: – Restructuring charges of $16,782 ($12,479, net of tax, or $0.23 per share); – Debt extinguishment, net $4,529 ($3,474, net of tax, or $0.06 per share); – Acquisition costs of $9,303 ($8,149, net of tax, or $0.15 per share); – Strategic review - retention and other of $9,683 ($7,280, net of tax, or $0.13 per share); – Special dividend ESOP charges of $10,538 ($8,083, net of tax, or $0.15 per share); – Proxy expenses of $6,952 ($5,359, net of tax, or $0.10 per share); – Fair value step-up of acquired inventory sold of $5,401 ($4,012, net of tax, or $0.07 per share); – Goodwill and intangible asset impairments of $517,027 ($454,753, net of tax, or $8.43 per share); and 32 – Discrete and certain other tax provision, net, of $3,913 or 0.07 per share.
The 2022 loss from continuing operations included the following: – Restructuring charges of $16,782 ($12,479, net of tax, or $0.23 per share); – Debt extinguishment, net $4,529 ($3,474, net of tax, or $0.06 per share); – Acquisition costs of $9,303 ($8,149, net of tax, or $0.15 per share); – Strategic review - retention and other of $9,683 ($7,280, net of tax, or $0.13 per share); – Special dividend ESOP charges of $10,538 ($8,083, net of tax, or $0.15 per share); – Proxy expenses of $6,952 ($5,359, net of tax, or $0.10 per share); – Fair value step-up of acquired inventory sold of $5,401 ($4,012, net of tax, or $0.07 per share); – Goodwill and intangible asset impairments of $517,027 ($454,753, net of tax, or $8.43 per share); and – Discrete and certain other tax provision, net, of $3,913 or $0.07 per share.
Strategic Initiative and Restructuring Charges In November 2019, Griffon announced the development of a next-generation business platform for CPP to enhance the growth, efficiency, and competitiveness of its U.S. operations, and on November 12, 2020, Griffon announced that CPP was broadening this strategic initiative to include additional North American facilities, the AMES United Kingdom (U.K.) and Australia businesses, and a manufacturing facility in China.
In November 2019, Griffon announced the development of a next-generation business platform for CPP to enhance the growth, efficiency, and competitiveness of its U.S. operations, and on November 12, 2020, Griffon announced that CPP was broadening this strategic initiative to include additional North American facilities, the AMES United Kingdom (U.K.) and Australia businesses, and a manufacturing facility in China.
Selling, general and administrative (“SG&A”) expenses in 2022 of $608,926 increased 29% from $470,530 in 2021. The 2022 SG&A expenses included restructuring charges of $8,818, acquisition costs of $9,303, strategic review (retention and other) of $9,683, special dividend ESOP charges of $10,538, proxy expenses of $6,952. The 2021 SG&A expenses included restructuring charges of $13,495.
Selling, general and administrative expenses in 2022 of $608,926 increased 29% from $470,530 in 2021. The 2022 SG&A expenses included restructuring charges of $8,818, acquisition costs of $9,303, strategic review (retention and other) of $9,683, special dividend ESOP charges of $10,538, proxy expenses of $6,952. The 2021 SG&A expenses included restructuring charges of $13,495.
As of September 30, 2022, outstanding 2028 Senior Notes due totaled $974,775; interest is payable semi-annually on March 1 and September 1. The 2028 Senior Notes are senior unsecured obligations of Griffon guaranteed by certain domestic subsidiaries, and subject to certain covenants, limitations and restrictions.
As of September 30, 2023, outstanding Senior Notes due totaled $974,775; interest is payable semi-annually on March 1 and September 1. The 2028 Senior Notes are senior unsecured obligations of Griffon guaranteed by certain domestic subsidiaries, and subject to certain covenants, limitations and restrictions.
In accordance with Rule 3-10 of Regulation S-X promulgated under the Securities Act, presented below are summarized financial information of the Parent (Griffon) subsidiaries and the Guarantor subsidiaries as of September 30, 2022 and September 30, 2021 and for the years ended September 30, 2022 and 2021.
In accordance with Rule 3-10 of Regulation S-X promulgated under the Securities Act, presented below are summarized financial information of the Parent (Griffon) subsidiaries and the Guarantor subsidiaries as of September 30, 2023 and September 30, 2022 and for the years ended September 30, 2023 and 2022.
Griffon's purchase obligations, which are generally for the purchase of goods and services in the ordinary course of business over the next twelve months is approximately $184,422. Griffon uses blanket purchase orders to communicate expected requirements to certain vendors. Purchase obligations reflect those purchase orders in which the commitment is considered to be firm.
Griffon's purchase obligations, which are generally for the purchase of goods and services in the ordinary course of business over the next twelve months is approximately $160,539. Griffon uses blanket purchase orders to communicate expected requirements to certain vendors. Purchase obligations reflect those purchase orders in which the commitment is considered to be firm.
Unallocated Amounts For 2022, unallocated amounts, excluding depreciation, consisted primarily of corporate overhead costs, totaled $53,888 compared to $50,278 in 2021, with the increase primarily due to compensation and incentive costs. For 2021, unallocated amounts, excluding depreciation, consisted primarily of corporate overhead costs, totaled $50,278 compared to $49,487 in 2020, with the increase primarily due to compensation and incentive costs.
For 2022, unallocated amounts, excluding depreciation, consisted primarily of corporate overhead costs, totaled $53,888 compared to $50,278 in 2021, with the increase primarily due to compensation and incentive costs.
During 2022, cash used by discontinued operations from investing activities of $(2,627) primarily related to DE capital expenditures.
During 2022, cash used by discontinued operations from investing activities of $2,627 primarily related to Telephonics capital expenditures.
Griffon evaluates performance based on Earnings (loss) per share and Income (loss) from continuing operations excluding non-cash impairment charges, restructuring charges, debt extinguishment, acquisition related expenses, discrete and certain other tax items, as well other items that may affect comparability, as applicable. Griffon believes this information is useful to investors for the same reason.
Griffon evaluates performance based on adjusted income from continuing operations and the related adjusted earnings per common share, which excludes non-cash impairment charges, restructuring charges, debt extinguishment, acquisition related expenses and discrete and certain other tax items, as well other items that may affect comparability, as applicable. Griffon believes this information is useful to investors for the same reason.
Proceeds from the 2028 Senior Notes were used to redeem the $1,000,000 of 5.25% Senior Notes due 2022 (the "2022 Senior Notes"). In connection with the issuance and exchange of the 2028 Senior Notes, Griffon capitalized $16,448 of underwriting fees and other expenses incurred, which will amortize over the term of such notes.
Proceeds from the 2028 Senior Notes were used to redeem $1,000,000 of 5.25% Senior Notes due 2022. In connection with the issuance and exchange of the 2028 Senior Notes, Griffon capitalized $16,448 of underwriting fees and other expenses incurred, which is being amortized over the term of such notes.
Griffon rents real property and equipment under operating leases expiring at various dates. Operating lease obligations over the next twelve months is approximately $40,998. Refer to Note 21 - Leases. Customers A small number of customers account for, and are expected to continue to account for, a substantial portion of Griffon’s consolidated revenue.
Griffon rents real property and equipment under operating leases expiring at various dates. Operating lease obligations over the next twelve months is approximately $41,955. Refer to Note 22 - Leases. Customers A small number of customers account for, and are expected to continue to account for, a substantial portion of Griffon’s consolidated revenue.
Excluding the discrete and certain other tax provisions, net, and other items that affect comparability, as listed below, the effective income tax rates for 2021 and 2020 were 31.7% and 33.9%, respectively. These rates reflect the impact of tax reserves and changes in earnings mix between U.S. and non-U.S. operations.
Excluding the discrete and certain other tax provisions, net, and other items that affect comparability, as listed below, the effective income tax rates for 2022 and 2021 were 29.0% and 31.7%, respectively. These rates reflect the impact of tax reserves and changes in earnings mix between U.S. and non-U.S. operations.
During the year ended September 30, 2022, Griffon purchased $25,225 of 2028 Senior Notes in the open market at a weighted average discount of 91.82% of par, or $23,161.
During 2022, Griffon purchased $25,225 of 2028 Senior Notes in the open market at a weighted average discount of 91.82% of par, or $23,161.
The Term Loan B facility requires nominal quarterly principal payments of $2,000, which began with the quarter ended June 30, 2022; potential additional annual principal payments based on a percentage of excess cash flow and certain secured leverage thresholds starting with the fiscal year ending September 30, 2023; and a final balloon payment due at maturity.
The Term Loan B facility requires nominal quarterly principal payments of $2,000, potential additional annual principal payments based on a percentage of excess cash flow and secured leverage thresholds starting with the fiscal year ended September 30, 2023; and a final balloon payment due at maturity.
Griffon believes this information is useful to investors for the same reason. See table provided in Note 18 - Reportable Segments, for a reconciliation of Segment Adjusted EBITDA to Income before taxes from continuing operations.
Griffon believes this information is useful to investors for the same reason. See the table provided in Note 19 - Business Segments for a reconciliation of adjusted EBITDA to income before taxes from continuing operations.
At September 30, 2022 and 2021, Griffon’s liabilities for Installations Services and other discontinued operations primarily related to insurance claims, income taxes, product liability, warranty and environmental reserves totaled $10,049 and $7,074, respectively. See Note 8, Discontinued Operations.
At September 30, 2023 and 2022, Griffon’s liabilities for Installations Services and other discontinued operations primarily related to insurance claims, income taxes, product liability, warranty and environmental reserves, and totaled $7,202 and $8,072, respectively. See Note 8, Discontinued Operations.
The 2028 Senior Notes were registered under the Securities Act of 1933, as amended (the "Securities Act") via an exchange offer. The fair value of the 2028 Senior Notes approximated $833,433 on September 30, 2022 based upon quoted market prices (level 1 inputs). At September 30, 2022, $10,939 of underwriting fees and other expenses incurred remained to be amortized.
The 2028 Senior Notes were registered under the Securities Act of 1933, as amended (the "Securities Act") via an exchange offer. The fair value of the 2028 Senior Notes approximated $882,171 on September 30, 2023 based upon quoted market prices (level 1 inputs). At September 30, 2023, $8,920 of underwriting fees and other expenses incurred remained to be amortized.
Griffon believes it has sufficient liquidity available to invest in existing businesses and strategic acquisitions while managing its capital structure on both a short-term and long-term basis. As of September 30, 2022, the amount of cash, cash equivalents and marketable securities held by foreign subsidiaries was $54,200.
Griffon believes it has sufficient liquidity available to invest in existing businesses and strategic acquisitions while managing its capital structure on both a short-term and long-term basis. As of September 30, 2023, the amount of cash, cash equivalents and marketable securities held by non-U.S. subsidiaries was $45,500.
Per share impact of using diluted shares represents the impact of converting from the basic shares used in calculating earnings per share from the Loss from continuing operations to the diluted shares used in calculating earnings per share form the adjusted income from continuing operations. 35 REPORTABLE SEGMENTS Griffon evaluates performance and allocates resources based on each segment's operating results from continuing operations before interest income and expense, income taxes, depreciation and amortization, unallocated amounts (primarily corporate overhead), non-cash impairment charges, restructuring charges, debt extinguishment and acquisition related expenses, as well as other items that may affect comparability, as applicable (“Adjusted EBITDA”, a non-GAAP measure).
Per share impact of using diluted shares represents the impact of converting from the basic shares used in calculating earnings per share from the loss from continuing operations to the diluted shares used in calculating earnings per share from the adjusted income from continuing operations. 34 REPORTABLE SEGMENTS Griffon evaluates performance and allocates resources based on each segment's adjusted EBITDA, a non-GAAP measure, defined as income before taxes from continuing operations, excluding interest income and expense, depreciation and amortization, unallocated amounts (mainly corporate overhead), strategic review charges, non-cash impairment charges, restructuring charges, and acquisition related expenses, as well as other items that may affect comparability, as applicable.
On January 24, 2022, Griffon amended and restated its Revolving Credit Facility (as amended, the "Credit Agreement") to provide for a new $800,000 Term Loan B facility, due January 24, 2029, in addition to its current $400,000 revolving credit facility ("Revolver"), and replaced LIBOR with SOFR (Secured Overnight Financing Rate).
On January 24, 2022, Griffon amended and restated its Credit Agreement to provide for a new $800,000 Term Loan B facility, due January 24, 2029, in addition to the Revolver, and replaced LIBOR with SOFR.
In 2022, Home Depot represented 13% of Griffon’s consolidated revenue, 19% of CPP's revenue and 7% of HBP's revenue. No other customer exceeded 10% or more of consolidated revenue. Future operating results will continue to substantially depend on the success of Griffon’s largest customers and our relationships with them.
In 2023, Home Depot represented 12% of Griffon’s consolidated revenue, 9% of HBP's revenue and 15% of CPP's revenue. 42 No other customer exceeded 10% or more of consolidated revenue. Future operating results will continue to substantially depend on the success of Griffon’s largest customers and our relationships with them.
Hunter (purchased on January 24, 2022) contributed $246,474 of revenue in 2022. Gross profit for 2022 was $936,886 compared to $641,113 in 2021. Gross profit as a percent of sales (“gross margin”) for 2022 and 2021 was 32.9% and 28.2%, respectively. In the years ended 2022 and 2021, gross profit included restructuring charges of $7,964 and $7,923, respectively.
Hunter (purchased on January 24, 2022) contributed $246,474 of revenue in 2022. The organic revenue increase was 15%. Gross profit for 2022 was $936,886 compared to $641,113 in 2021. The gross margin for 2022 and 2021 was 32.9% and 28.2%, respectively. In the years ended 2022 and 2021, gross profit included restructuring charges of $7,964 and $7,923, respectively.
During 2022 and 2021, cash provided by discontinued operations from operating activities of $10,198 and $41,961, respectively, primarily related to DE operations and the payment of income taxes, stay bonuses and transaction related expenses as well as payments associated with the settling of certain Installation services and environmental liabilities.
During 2022, cash provided by discontinued operations from operating activities of $10,198 primarily related to Telephonics operations and the payment of income taxes, stay bonuses and transaction related expenses, as well as payments associated with the settling of certain environmental and other liabilities related to other discontinued businesses.
An estimate is considered to be critical if it is subjective and if changes in the estimate using different assumptions would result in a material impact on Griffon’s financial position or results of operations.
An estimate is considered to be critical if it is subjective and if changes in the estimate using different assumptions would result in a material impact on Griffon’s financial position or results of operations. The most significant areas involving management estimates are described below.
In 2022, the Company had an effective income tax rate of (6.2)% compared to 36.1% in 2021. The 2022 tax rate included $3,913 of discrete and certain other tax provisions net, and other items that affect comparability, as listed below.
The income tax provision in 2022 and 2021 translated to an effective income tax rate of 6.2% and 36.1%, respectively. The 2022 and 2021 tax rates included discrete and certain other tax provisions net, and other items that affect comparability, as listed below.
For the fiscal year ended September 30, 2022, we tested long-lived intangible and tangible assets for impairment by comparing estimated future undiscounted cash flows of each CPP asset group to the carrying amount of the asset group and determined that an impairment did not exist. No event or indicator of impairment existed for the HBP assets groups.
As of September 30, 2023 and 2022, we tested long-lived intangible and tangible assets for impairment by comparing estimated future undiscounted cash flows of each CPP asset group to the carrying amount of the asset group and determined that an impairment did not exist.
The receivable purchase facility accrues interest at BBSY (Bank Bill Swap Rate) plus 1.25% per annum (3.96% at September 30, 2022). At September 30, 2022, there was no balance outstanding under the receivable purchase facility with AUD $15,000 ($9,722 as of September 30, 2022) available.
The receivable purchase facility accrues interest at BBSY (Bank Bill Swap Rate) plus 1.25% per annum (5.33% at September 30, 2023). At September 30, 2023, there was no balance outstanding under the receivable purchase facility with AUD 30,000 ($19,188 as of September 30, 2023) available.
CPP sells products globally through a portfolio of leading brands including AMES, since 1774, Hunter, since 1886, True Temper, and ClosetMaid. CPP revenue was 47%, 54%, and 55% of Griffon’s consolidated revenue in 2022, 2021 and 2020, respectively. • Home and Building Products ("HBP") conducts its operations through Clopay.
CPP sells products globally through a portfolio of leading brands including AMES, since 1774, Hunter, since 1886, True Temper, and ClosetMaid. CPP revenue was 41%, 47%, and 54% of Griffon’s consolidated revenue in 2023, 2022 and 2021, respectively.
During 2022, an additional 5,480 shares, with a market value of $144, or $26.31 per share, were withheld from common stock issued upon the vesting of restricted stock units to settle employee taxes due upon vesting.
During 2023, an additional 3,066 shares, with a market 39 value of $108, or $35.31 per share, were withheld from common stock issued upon the vesting of restricted stock units to settle employee taxes due upon vesting.
On November 16, 2022, the Board of Directors declared a cash dividend of $0.10 per share, payable on December 16, 2022 to shareholders of record as of the close of business on November 29, 2022.
On November 14, 2023, the Board of Directors declared a cash dividend of $0.15 per share, payable on December 14, 2023, to shareholders of record as of the close of business on November 28, 2023.
Griffon Australia paid off the term loan in the amount of AUD 9,625 and canceled the AUD 20,000 revolver. The amendment refinanced the existing AUD 15,000 receivable purchase facility. The receivable purchase facility matures in March 2023, but is renewable upon mutual agreement with the lender.
Griffon Australia paid off the term loan in the amount of AUD 9,625 and canceled the AUD 20,000 revolver. In March 2023 the existing receivable purchase facility was renewed and increased from AUD 15,000 to AUD 30,000 ($19,188 as of September 30, 2023). The receivable purchase facility matures in March 2024, but is renewable upon mutual agreement with the lender.
Since September 2021, we have classified the results of operations of our Telephonics business as a discontinued operation in the Consolidated Statements of Operations for all periods presented and classified the related assets and liabilities associated with the discontinued operation as held for sale in the consolidated balance sheets.
As such, the results of operations of our Telephonics business is classified as a discontinued operation in the Consolidated Statements of Operations for all periods presented and the related assets and liabilities have been classified as assets and liabilities of the discontinued operation in the Consolidated Balance Sheets.
At September 30, 2022, there were $97,328 in outstanding borrowings under the Credit Agreement, compared to $13,483 in outstanding borrowings at the same date in 2021. During 2022, the Board of Directors approved four quarterly cash dividends each for $0.09 per share, totaling $0.36.
At September 30, 2023, there were $50,445 in outstanding borrowings under the Credit Agreement, compared to $97,328 in outstanding borrowings at the same date in 2022. During 2023, the Board of Directors approved two quarterly cash dividends each for $0.10 per share, and two quarterly cash dividends of $0.125 per share, totaling $0.45.
On December 17, 2021, Griffon entered into a definitive agreement to acquire Hunter Fan Company (“Hunter”), a market leader in residential ceiling, commercial, and industrial fans, from MidOcean Partners (“MidOcean”) for a contractual purchase price of $845,000 and completed the acquisition on January 24, 2022.
On January 24, 2022, Griffon acquired Hunter Fan Company (“Hunter”), a market leader in residential ceiling, commercial, and industrial fans, from MidOcean Partners (“MidOcean”) for a contractual purchase price of $845,000.
Excluding these items from both reporting periods, 2022 Income from continuing operations would have been $219,786, or $4.07 per share compared to $89,678, or $1.68 per share, in 2021. 2021 Compared to 2020 Revenue for the year ended September 30, 2021 of $2,270,626 compared to $2,066,546 in the year ended September 30, 2020 increased 10% resulting from increased revenue at HBP and CPP of 12% and 8%, respectively.
Excluding these items from both reporting periods, 2023 income from continuing operations would have been $247,721, or $4.54 per share compared to $219,786, or $4.07 per share, in 2022. 2022 Compared to 2021 Revenue for the year ended September 30, 2022 of $2,848,488 compared to $2,270,626 for the year ended September 30, 2021 increased 25% resulting from increased revenue at HBP and CPP of 45% and 9%, respectively.
In January 2020, Griffon amended its credit agreement to increase the total amount available for borrowing from $350,000 to $400,000, extend its maturity date from March 22, 2021 to March 22, 2025 and modify certain other provisions of the facility (the "Credit Agreement").
On August 1, 2023, Griffon amended its credit agreement to increase the total amount available for borrowing under its revolving credit facility from $400,000 to $500,000, extend the maturity date of the revolving credit facility from March 22, 2025 to August 1, 2028 and modify certain other provisions of the facility (the "Credit Agreement").
On January 24, 2022, Griffon completed the acquisition of Hunter Fan Company (“Hunter”), a market leader in residential ceiling, commercial, and industrial fans for a contractual purchase price of $845,000. Hunter adds to Griffon's CPP segment, complementing and diversifying our portfolio of leading consumer brands and products.
On January 24, 2022, Griffon completed the acquisition of Hunter Fan Company (“Hunter”), a market leader in residential ceiling, commercial, and industrial fans for a contractual purchase price of $845,000.
The facility accrues interest at LIBOR (USD) or the Bankers Acceptance Rate (CDN) plus 1.3% per annum (4.44% LIBOR USD and 4.76% Bankers Acceptance Rate CDN as of September 30, 2022). The revolving facility was amended and matures in October 2024, and is renewable upon mutual agreement with the lender. Garant is required to maintain a certain minimum equity.
The facility accrues interest at CDOR or the Bankers Acceptance Rate (CDN) plus 1.3% per annum (6.69% using CDOR and 6.43% using Bankers Acceptance Rate CDN as of September 30, 2023). The revolving facility matures in December 2023, but is renewable upon mutual agreement with the lender. Garant is required to maintain a certain minimum equity.
Segment depreciation and amortization decreased $831 from the comparable prior year period primarily due to fully depreciated assets. 2021 Compared to 2020 HBP revenue in 2021 increased $113,795, or 12%, compared to 2020, primarily due to favorable mix and pricing of 8% driven by both residential and commercial, and increased volume of 4% equally driven by both residential and commercial.
Segment depreciation and amortization decreased $1,473 from the comparable prior year period primarily due to fully depreciated assets. 2022 Compared to 2021 HBP revenue in 2022 increased $465,774, or 45%, compared to 2021, primarily due to favorable pricing and mix of 47% driven by both residential and commercial.
The following table provides a reconciliation of Income (loss) from continuing operations to Adjusted income from continuing operations and Earnings (loss) per common share from continuing operations to Adjusted earnings per common share from continuing operations: GRIFFON CORPORATION AND SUBSIDIARIES RECONCILIATION OF INCOME (LOSS) FROM CONTINUING OPERATIONS TO ADJUSTED INCOME FROM CONTINUING OPERATIONS (Unaudited) For the Years Ended September 30, 2022 2021 2020 Income (loss) from continuing operations $ (287,715) $ 70,302 $ 41,444 Adjusting items: Restructuring charges 16,782 21,418 13,669 Debt extinguishment, net 4,529 — 7,925 Acquisition costs 9,303 — 2,960 Strategic review - retention and other 9,683 — — Acquisition contingent consideration — — (1,733) Special dividend ESOP charges 10,538 — — Proxy expenses 6,952 — — Fair value step-up of acquired inventory sold 5,401 — — Goodwill and intangible asset impairments 517,027 — — Tax impact of above items 1 (76,627) (5,287) (5,584) Discrete and other certain tax provision 3,913 3,245 966 Adjusted income from continuing operations $ 219,786 $ 89,678 $ 59,647 Earnings (loss) per common share from continuing operations $ (5.57) $ 1.32 $ 0.92 Adjusting items, net of tax: Anti-dilutive share impact 2 0.24 — — Restructuring charges 0.23 0.30 0.23 Debt extinguishment, net 0.06 — 0.14 Acquisition costs 0.15 — 0.05 Strategic review - retention and other 0.13 — — Acquisition contingent consideration — — (0.03) Special dividend ESOP charges 0.15 — — Proxy expenses 0.10 — — Fair value step-up of acquired inventory sold 0.07 — — Goodwill and intangible asset impairments 8.43 — — Discrete and other certain tax (benefit) provision 0.07 0.06 0.02 Adjusted earnings per share from continuing operations $ 4.07 1.68 $ 1.33 Weighted-average shares outstanding (in thousands) 51,672 53,369 45,015 Diluted weighted average shares outstanding (in thousands) 2 53,966 53,369 45,015 Note: Due to rounding, the sum of earnings per common share and adjusting items, net of tax, may not equal adjusted earnings per common share. 34 (1) Tax impact for the above reconciling adjustments from GAAP to non-GAAP Income from continuing operations and the related EPS is determined by comparing the Company's tax provision, including the reconciling adjustments, to the tax provision excluding such adjustments.
The following table provides a reconciliation of income (loss) from continuing operations to adjusted income from continuing operations and earnings (loss) per share from continuing operations to adjusted earnings per share from continuing operations: 33 GRIFFON CORPORATION AND SUBSIDIARIES RECONCILIATION OF INCOME (LOSS) FROM CONTINUING OPERATIONS TO ADJUSTED INCOME FROM CONTINUING OPERATIONS (Unaudited) For the Years Ended September 30, 2023 2022 2021 Income (loss) from continuing operations $ 77,617 $ (287,715) $ 70,302 Adjusting items: Restructuring charges (1) 92,468 16,782 21,418 Gain on sale of buildings (12,655) — — Debt extinguishment, net 437 4,529 — Acquisition costs — 9,303 — Strategic review - retention and other 20,225 9,683 — Special dividend ESOP charges 15,494 10,538 — Proxy expenses 2,685 6,952 — Fair value step-up of acquired inventory sold — 5,401 — Goodwill and intangible asset impairments 109,200 517,027 — Tax impact of above items (2) (57,925) (76,627) (5,287) Discrete and other certain tax provision 175 3,913 3,245 Adjusted income from continuing operations $ 247,721 $ 219,786 $ 89,678 Earnings (loss) per common share from continuing operations $ 1.42 $ (5.57) $ 1.32 Adjusting items, net of tax: Anti-dilutive share impact (3) — 0.24 — Restructuring charges (1) 1.26 0.23 0.30 Gain on sale of buildings (0.18) — — Debt extinguishment, net 0.01 0.06 — Acquisition costs — 0.15 — Strategic review - retention and other 0.28 0.13 — Special dividend ESOP charges 0.22 0.15 — Proxy expenses 0.04 0.10 — Fair value step-up of acquired inventory sold — 0.07 — Goodwill and intangible asset impairments 1.49 8.43 — Discrete and other certain tax (benefit) provision — 0.07 0.06 Adjusted earnings per share from continuing operations $ 4.54 4.07 $ 1.68 Weighted-average shares outstanding (in thousands) 52,111 51,672 53,369 Diluted weighted average shares outstanding (in thousands) (3) 54,612 53,966 53,369 Note: Due to rounding, the sum of earnings per common share and adjusting items, net of tax, may not equal adjusted earnings per common share.
On December 22, 2020, AMES acquired Quatro Design Pty Ltd (“Quatro”), a leading Australian manufacturer and supplier of glass fiber reinforced concrete landscaping products for residential, commercial, and public sector projects, for approximately AU$3,500.
Hunter, part of our CPP segment, complements and diversifies our portfolio of leading consumer brands and products. 30 On December 22, 2020, AMES acquired Quatro Design Pty Ltd (“Quatro”), a leading Australian manufacturer and supplier of glass fiber reinforced concrete landscaping products for residential, commercial, and public sector projects.
During 2021, total other comprehensive income (loss), net of taxes, of $26,115 included a gain of $6,433 from foreign currency translation adjustments primarily due to the strengthening of the British, Australian and Canadian currencies, all in comparison to the U.S.
Comprehensive Income (Loss) During 2023, total other comprehensive income (loss), net of taxes, of $12,728 included a gain of $8,447 from foreign currency translation adjustments primarily due to the strengthening of the Euro and British Pound, all in comparison to the U.S.
Deferred tax assets represent items to be used as a tax deduction or credit in future tax returns for which a tax benefit has been recorded in the income statement.
Deferred tax assets and liabilities are recognized based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities. Deferred tax assets represent items to be used as a tax deduction or credit in future tax returns for which a tax benefit has been recorded in the income statement.
During 2022, cash flows from financing activities from continuing operations primarily consisted of the payment of dividends of $126,677, purchase of treasury shares to satisfy vesting of restricted stock of $10,886 and net proceeds from long-term debt of $547,715. During 2022, Griffon prepaid $300,000 aggregate principal amount of the Term Loan B, which permanently reduced the outstanding balance.
During 2022, cash flows provided by financing activities from continuing operations primarily consisted of the payment of dividends of $126,677, purchase of treasury shares to satisfy withholding taxes on vesting of restricted stock of $10,886 and net proceeds from long-term debt of $547,715.
The discount rate used to measure obligations is based on a corporate bond spot-rate yield curve that matches projected future benefit payments, with the appropriate spot rate applicable to the timing of the projected future benefit 48 payments.
The expected return on plan assets is determined based on the nature of the plans’ investments and expectations for long-term rates of return. The discount rate used to measure obligations is based on a corporate bond spot-rate yield curve that matches projected future benefit payments, with the appropriate spot rate applicable to the timing of the projected future benefit payments.
During 2022, 421,860 shares, with a market value of $10,742, or $25.46 per share were withheld to settle employee taxes due upon the vesting of restricted stock and were added to treasury stock.
During 2023, 365,823 shares, with a market value of $12,882, or $35.21 per share were withheld to settle employee taxes due upon the vesting of restricted stock and were added to treasury stock.
Depreciation and amortization of $52,302 in 2021 compared to $52,100 in 2020; the increase was primarily due to depreciation for new assets placed in service. 38 Comprehensive Income (Loss) During 2022, total other comprehensive income (loss), net of taxes, of $(36,761) included a loss of $37,920 from foreign currency translation adjustments primarily due to the weakening of the British, Australian and Canadian currencies, all in comparison to the U.S.
During 2022, total other comprehensive income (loss), net of taxes, of $(36,761) included a loss of $37,920 from foreign currency translation adjustments primarily due to the weakening of the Euro, British Pound, and Australian and Canadian Dollars, all in comparison to the U.S.
Fair value estimates are based on assumptions believed to be reasonable at the time, but such assumptions are subject to inherent uncertainty. Actual results may differ materially from those estimates.
No event or indicator of impairment existed for the HBP assets groups as of September 30, 2023. Fair value estimates are based on assumptions believed to be reasonable at the time, but such assumptions are subject to inherent uncertainty. Actual results may differ materially from those estimates.
Interest expense in 2022 of $84,379 increased 34% compared to 2021 of $63,175, primarily as a result of increased debt levels related to the $800,000 seven year Term Loan B facility entered into in connection with the Hunter acquisition, of which Griffon repaid $300,000 aggregate principal amount in the third quarter of 2022.
Interest expense in 2023 of $101,445 increased 20% compared to 2022 interest expense of $84,379, primarily as a result of an increased effective interest rate related to the $800,000 seven year Term Loan B facility entered into in the prior year in connection with the Hunter acquisition, of which Griffon prepaid $25,000 and $300,000 aggregate principal amount in 2023 and 2022, respectively.
The year ended September 30, 2022 included increased demurrage and detention costs, primarily related to COVID-19 and global supply chain disruptions, of approximately $15,172 ($9,512 related to Hunter). Segment depreciation and amortization increased $13,129 from the comparable prior year period primarily due to depreciation for new assets placed in service and the Hunter assets acquired.
The year ended September 30, 2022 included increased demurrage and detention costs, primarily related to COVID-19 and global supply chain disruptions, of approximately $15,172 ($9,512 related to Hunter).
Borrowings under the Revolver may be repaid and re-borrowed at any time. Interest is payable on borrowings at either a SOFR, SONIA or base rate benchmark rate, plus an applicable margin, which adjusts based on financial performance. Current margins are 0.50% for base rate loans, 1.50% for SOFR loans and 1.50% for SONIA loans.
For the Revolver, interest is payable on borrowings at either a SOFR, SONIA or base rate benchmark rate, plus an applicable margin, which adjusts based on financial performance.
These rates reflect the impact of tax reserves and changes in earnings mix between U.S. and non-U.S. operations. Loss from continuing operations for 2022 was $287,715, or $5.57 per share, compared to Income from continuing operations of $70,302, or $1.32 per share in 2021.
Loss from continuing operations for 2022 was $287,715, or $5.57 per share, compared to income from continuing operations of $70,302, or $1.32 per share in 2021.
In March 2022, Griffon Australia Holdings Pty Ltd and its Australian subsidiaries (collectively, "Griffon Australia") amended its AUD 18,375 term loan, AUD 20,000 revolver and AUD 15,000 receivable purchase facility agreement that was entered into in July 2016 and further amended in fiscal 2020.
At September 30, 2023, there were no outstanding borrowings under the revolving credit facility with CAD 15,000 ($11,117 as of September 30, 2023) available. 41 During 2022, Griffon Australia Holdings Pty Ltd and its Australian subsidiaries (collectively, "Griffon Australia") amended its AUD 18,375 term loan, AUD 20,000 revolver and AUD 15,000 receivable purchase facility agreement that was entered into in July 2016 and further amended in fiscal 2020.
Founded in 1964, Clopay is the largest manufacturer and marketer of garage doors and rolling steel doors in North America. Residential and commercial sectional garage doors are sold through professional dealers and leading home center retail chains throughout North America under the brands Clopay, Ideal, and Holmes.
Residential and commercial sectional garage doors are sold through professional dealers and leading home center retail chains throughout North America under the brands Clopay, Ideal, and Holmes. Rolling steel door and grille products designed for commercial, industrial, institutional, and retail use are sold under the Cornell and Cookson brands.
Our intent is to permanently reinvest these funds outside the U.S., and we do not currently anticipate that we will need funds generated from foreign operations to fund our domestic operations.
Our intent is to permanently reinvest these funds, except in limited circumstances, outside the U.S., and we do not currently anticipate that we will need funds generated from foreign operations to fund our domestic operations. The Company 38 may repatriate cash from its non-U.S. subsidiaries if the Company determines that it is beneficial to the company and tax efficient.
In addition, on June 27, 2022, the Board of Directors declared a special cash dividend of $2.00 per share, paid on July 20, 2022 to shareholders of record as of the close of business on July 8, 2022.
Additionally, on April 19, 2023, the Board of Directors declared a special cash dividend of $2.00 per share, paid on May 19, 2023, to shareholders of record as of the close of business on May 9, 2023.
At September 30, 2022, under the Credit Agreement, there were $97,328 in outstanding borrowings; outstanding standby letters of credit were $12,287; and $290,385 was available, subject to certain loan covenants, for borrowing at that date. At September 30, 2022, Griffon and its subsidiaries were in compliance with the terms and covenants of its credit and loan agreements.
At September 30, 2023, under the Credit Agreement, there were $50,445 in outstanding borrowings; outstanding standby letters of credit were $12,962; and $436,593 was available, subject to certain loan covenants, for borrowing at that date.
We determine the fair value of indefinite-lived intangible assets by using the relief from royalty method, which estimates the value of a trademark by discounting to present value the hypothetical royalty payments that are saved by owning the asset rather than licensing it.
We determine the fair value of indefinite-lived intangible assets by using the relief from royalty method, which estimates the value of a trademark by discounting to present value the hypothetical royalty payments that are saved by owning the asset rather than licensing it. 44 During the fiscal year ended September 30, 2023, the Company performed a qualitative assessment of the HBP reporting unit goodwill and determined that indicators that the fair value was less than the carrying amount were not present.
Cash Flows from Continuing Operations Years Ended September 30, (in thousands) 2022 2021 Net Cash Flows Provided By (Used In): Operating activities $ 59,240 $ 69,808 Investing activities (583,227) (56,167) Financing activities 393,345 (28,245) 39 Cash provided by operating activities from continuing operations for 2022 was $59,240 compared to $69,808 in 2021, a decrease of $10,568.
Cash Flows from Continuing Operations Years Ended September 30, (in thousands) 2023 2022 Net Cash Flows Provided By (Used In): Operating activities $ 431,765 $ 59,240 Investing activities (45,211) (583,227) Financing activities (400,162) 393,345 Cash provided by operating activities from continuing operations for 2023 was $431,765 compared to $59,240 in 2022, an increase of $372,525.
The fair value of the Term Loan B facility approximated $476,160 on September 30, 2022 based upon quoted market prices (level 1 inputs). At September 30, 2022, $8,823 of underwriting fees and other expenses incurred remained to be amortized. The Revolver's maximum borrowing availability is $400,000 and it matures on March 22, 2025.
The fair value of the Term Loan B facility approximated $461,843 on September 30, 2023 based upon quoted market prices (level 1 inputs). At September 30, 2023, $7,039 of underwriting fees and other expenses incurred remained to be amortized. At September 30, 2023, $463,000 of the Term Loan B was outstanding.
In connection with the prepayment of the Term Loan B Griffon recognized a $6,296 charge related to the write-off of capitalized debt issuance costs. In addition, during 2022, Griffon purchased $25,225 of 2028 Senior Notes in the open market at a weighted average discount of 91.82% of par, or $23,161.
In addition, during 2022, Griffon purchased $25,225 of 2028 Senior Notes in the open market at a weighted average discount of 91.82% of par, or $23,161. In connection with these purchases, Griffon recognized a $1,767 net gain on the early extinguishment of debt.
The 2021 tax rate included $3,245 of discrete and certain other tax provisions, net, and other items that affect comparability, as listed below. Excluding the discrete and certain other tax provisions, net, and other items that affect comparability, as listed below, the effective income tax rates for 2022 and 2021 were 29.0% and 31.7%, respectively.
Excluding the discrete and certain other tax provisions, net, and other items that affect comparability, as listed below, the effective income tax rates for 2023 and 2022 were 27.3% and 29.0%, respectively. These rates reflect the impact of tax reserves and changes in earnings mix between U.S. and non-U.S. operations.
Further, we compared the estimated fair values of the CPP indefinite lived intangibles to their carrying amounts which resulted in a pre-tax, non-cash impairment charge of $175,000. A 100-basis point increase in the discount rate would have resulted in an additional impairment charge to our indefinite-lived intangible assets of $34,000.
Further, we compared the estimated fair values of the CPP indefinite lived intangibles to their carrying amounts which resulted in a pre-tax, non-cash impairment charge of $175,000. Indicators of impairment were not present for the HBP indefinite-lived intangibles during 2022.
The receivable purchase facility is secured by substantially all of the assets of Griffon Australia and its subsidiaries. Griffon Australia is required to maintain a certain minimum equity level. In July 2018, the AMES Companies UK Ltd and its subsidiaries (collectively, "Ames UK") entered into a GBP 14,000 term loan, GBP 4,000 mortgage loan and GBP 5,000 revolver.
The receivable purchase facility is secured by substantially all of the assets of Griffon Australia and its subsidiaries. Griffon Australia is required to maintain a certain minimum equity level.
Accordingly, all references made to results and information in this Annual Report on Form 10-K are to Griffon's continuing operations unless noted otherwise. At September 30, 2022 and 2021, Griffon's discontinued assets and liabilities includes the Company's obligation of $8,846 in connection with the sale of Telephonics related to certain customary post-closing adjustments, primarily working capital and retention bonuses.
At September 30, 2023 and 2022, Griffon's discontinued assets and liabilities included the Company's obligation of $4,596 and $8,846, respectively, in connection with the sale of Telephonics related to certain customary post-closing adjustments, primarily working capital and retention bonuses.
For interim financial reporting, the annual tax rate is estimated based on projected taxable income for the full year, and a quarterly income tax provision is recorded in accordance with the anticipated annual rate. As the year progresses, the annual tax rate is refined as new information becomes available, including year-to-date financial results.
Income Taxes Griffon’s effective tax rate is based on income, statutory tax rates and tax planning opportunities available in the various jurisdictions in which Griffon operates. For interim financial reporting, the annual tax rate is estimated based on projected taxable income for the full year, and a quarterly income tax provision is recorded in accordance with the anticipated annual rate.
Other income (expense) of $2,107 and $1,661 in 2021 and 2020, respectively, includes $81 and $915, respectively, of net currency exchange transaction losses from receivables and payables held in non-functional currencies, $283 and $184, respectively, of net gains on investments, and $907 and $1,559, respectively, of net periodic benefit plan income.
Other income (expense) of $2,928 and $6,881 in 2023 and 2022, respectively, includes $302 and $305, respectively, of net currency exchange transaction gains from receivables and payables held in non-functional currencies, $469 and $(225), respectively, of net gains (losses) on investments, and $(866) and $4,256, respectively, of net periodic benefit plan income (expense).
The cost to implement this new business platform, over the duration of the project, included one-time charges of approximately $51,869 and capital investments of approximately $15,000, net of future proceeds from the sale of exited facilities.
On April 28, 2022, Griffon announced a reduced scope and accelerated timeline for the initiative, which was completed in fiscal 2022. The cost to implement this new business platform included one-time charges of approximately $51,869 and capital investments of approximately $13,000, net of future proceeds from the sale of exited facilities.
Cash flows from investing activities from continuing operations is primarily comprised of capital expenditures and business acquisitions as well as proceeds from the sale of businesses, investments and property, plant and equipment. During 2022, Griffon used $583,227 in investing activities from continuing operations compared to $56,167 in 2021.
The increase was due to increased cash generated from operations at HBP and a decrease in working capital across all businesses, primarily inventory and accounts receivable. Cash flows from investing activities from continuing operations is primarily comprised of capital expenditures and business acquisitions as well as proceeds from the sale of businesses, investments and property, plant and equipment.
Any excess of the purchase price over the assigned values of the net assets acquired is recorded as goodwill. Goodwill, Long-Lived Intangible and Tangible Assets, and Impairment As of September 30, 2022, the balance of goodwill on our balance sheet is $335,790 and indefinite-lived intangibles representing our trademarks is $399,668.
Goodwill, Long-Lived Intangible and Tangible Assets, and Impairment As of September 30, 2023, the balance of goodwill on our balance sheet is $327,864 and indefinite-lived intangibles representing our trademarks is $293,447.
On each of August 3, 2016 and August 1, 2018, Griffon’s Board of Directors authorized the repurchase of up to $50,000 of Griffon’s outstanding common stock. Under these share repurchase programs, the Company may purchase shares in the open market, including pursuant to a 10b5-1 plan, or in privately negotiated transactions.
Under the authorized share repurchase program, the Company may, from time to time, purchase shares of its common stock in the open market, including pursuant to a 10b5-1 plan, pursuant to an accelerated share repurchase program or issuer tender offer, or in privately negotiated transactions.
On September 27, 2021, Griffon announced it was exploring strategic alternatives for its Defense Electronics ("DE") segment, which consisted of our Telephonics Corporation ("Telephonics") subsidiary. On June 27, 2022, we completed the sale of Telephonics to TTM Technologies, Inc. (NASDAQ:TTMI) ("TTM") for $330,000 in cash, excluding customary post-closing adjustments, primarily related to working capital.
See Note 12, Long-Term Debt for further details. On June 27, 2022, we completed the sale of our Defense Electronics ("DE") segment, which consisted of our Telephonics Corporation ("Telephonics") subsidiary, for $330,000 in cash, excluding customary post-closing adjustments.
On May 16, 2022, Griffon announced that its Board of Directors initiated a process to review a comprehensive range of strategic alternatives to maximize shareholder value including a sale, merger, divestiture, recapitalization or other strategic transaction. This process is active and discussions with potential counterparties are ongoing with respect to a number of these options.
On May 16, 2022, Griffon announced that its Board of Directors initiated a process to review a comprehensive range of strategic alternatives to maximize shareholder value including a sale, merger, divestiture, recapitalization or other strategic transaction, and on April 20, 2023, Griffon announced that its Board of Directors, after extensive evaluation and deliberation, determined that the ongoing execution of the Company's strategic plan was the best way to maximize value for shareholders and unanimously decided to conclude its review.
Griffon now conducts its operations through two reportable segments: • Consumer and Professional Products (“CPP”) is a leading North American manufacturer and a global provider of branded consumer and professional tools; residential, industrial and commercial fans; home storage and organization products; and products that enhance indoor and outdoor lifestyles.
HBP revenue was 59%, 53% and 46% of Griffon’s consolidated revenue in 2023, 2022 and 2021, respectively. • Consumer and Professional Products (“CPP”) is a leading global provider of branded consumer and professional tools; residential, industrial and commercial fans; home storage and organization products; and products that enhance indoor and outdoor lifestyles.

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