What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2021-11-17 compared with 2020-11-13 · 64 added, 38 removed, 312 unchanged (25% of the section changed)

10 unchanged sentences

The COVID-19 outbreak could adversely impact our results of operations.

The future impact of the COVID-19 outbreak 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.

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.

The COVID-19 outbreak has led countries around the world, as well as most states in the U.S., to implement restrictions from time-to-time relating to the operation of almost all types of businesses.

1 unchanged sentence

We believe, based on the various standards published to date, that our businesses meet the requisite standard in all U.S states.

We also believe that our businesses meet the applicable standards to remain open in Canada, the United Kingdom, Ireland and Australia.

As of the date

of this filing, all of our manufacturing and distribution facilities in the U.S., Canada, the United Kingdom, Ireland, Australia and China are operating, although some of them are operating at reduced capacity as a result of our implementation of procedures designed to prevent the spread of the virus, such as social distancing and staggered shifts.

We also believe that our businesses meet the applicable standards to remain open in Canada, the U.K., Ireland and Australia.

As of the date of this filing, all of our manufacturing and distribution facilities in the U.S., Canada, the U.K., Ireland, Australia and China are operating, although some of them are operating at reduced capacity as a result of our implementation of procedures designed to prevent the spread of the virus, such as social distancing and staggered shifts.

However, government actions taken based on the changing nature of the outbreak in the U.S.

or in other countries in which we do business, as well as the changing of standards regarding what type of facilities are permitted to remain open and evolving interpretations of existing standards, could result in additional closures of Griffon facilities.

To date, our supply chain has not experienced significant disruptions, and at this time we do not anticipate any such significant disruptions in the near term.

However, our suppliers could be required by government authorities to temporarily cease operations in accordance with the various restrictions discussed above;

Our supply chain has experienced certain disruptions which, together with other factors such as a shortage of labor, has resulted in longer delivery lead times and restricted manufacturing capacity for certain of our products.

Commodity prices have increased during COVID-19 and may continue to increase, and we may not be able to pass off all or any of such price increases to our customers on a timely basis, or at all.

It is difficult to predict whether the supply chain disruptions that impact us will improve, worsen or remain the same in the near term.

Our suppliers could be required by government authorities to temporarily cease operations in accordance with the various restrictions discussed above;

might be limited in their production capacity due to complying with restrictions relating to the operation of businesses during the COVID-19 pandemic;

or could suffer their own supply chain disruptions, impacting their ability to continue to supply us with the quantity of materials required by us.

On September 9, 2021, President Biden announced a proposed new rule requiring that all employers with at least 100 employees require that their employees be fully vaccinated or tested weekly.

Department of Labor’s Occupational Safety and Health Administration (“OSHA”) issued an emergency temporary standard regulation to carry out this mandate.

On November 6, 2021, the Unites States Court of Appeals for the Fifth Circuit granted a stay of the emergency temporary standard, and on November 12, 2021 the Court upheld its stay and barred OSHA from enforcing the mandate “pending adequate judicial review” of a motion for permanent injunction.

At this time, it is unclear, among other things, when the vaccine mandate will go into effect (or if it will go into effect at all);

whether it will apply to all employees or only to employees who work in the office;

and how compliance will be documented.

As a company with more than 100 employees, it is anticipated that, should the vaccine mandate go into effect, we would be subject to the OSHA regulation concerning COVID-19 vaccination and the vaccine mandate.

Should the mandate apply to us, we may be required to implement a requirement that all of our employees get vaccinated, subject to limited exceptions.

At this time, it is not possible to predict the impact that a vaccine mandate, or a vaccine requirement should we adopt one, will have on us or on our workforce.

Any vaccine requirement or vaccine mandate, if implemented, may result in employee attrition, which could materially and adversely affect our business and results of operations.

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, or extend the time period for existing protective actions, it may have a material adverse impact on Griffon’s businesses and operating results.

1 unchanged sentence

Any disruption of our supply chain or the businesses of our customers could adversely impact our businesses and results of operations.

The COVID-19 outbreak has recently worsened in many U.S.

states, and as a result, certain states have put in place new restrictions regarding the operation of many types of businesses or have tightened up restrictions already in place.

The COVID-19 outbreak has recently worsened in some U.S.

states, and as a result, some states have put in place new restrictions regarding the operation of many types of businesses or have tightened up restrictions already in place.

Many medical experts believe that during the winter, as the weather gets colder and more people spend time with others indoors, the COVID-19 infection rate will worsen.

3 unchanged sentences

These potential impacts, while uncertain, could adversely affect our operating results.

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 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.

Current worldwide economic uncertainty and market volatility could adversely affect Griffon’s businesses.

3 unchanged sentences

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.

Disruptions in the credit markets have increased the spread between the yields realized on risk-free and higher risk securities, resulting in illiquidity in parts of the credit markets .

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;

24 unchanged sentences

Home Depot accounted for approximately 19% of consolidated revenue, 26% of CPP's revenue and 10% HBP's revenue for the year ended September 30, 2021.

Government and its agencies and subcontractors, including Lockheed Martin and Boeing, is a significant customer of DE, and together accounts for approximately 10% of consolidated revenue and 69% of DE segment revenue (Lockheed Martin and Boeing each individually represent less than 10% of consolidated revenue inclusive of such sales to the U.S.

Future operating results will continue to substantially depend on the success of Griffon’s largest customers, as well as Griffon’s relationships with them.

6 unchanged sentences

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 CPP and HBP ability to meet its customer demands.

A significant customer of our discontinued DE segment is the U.S.

Government and its agencies and subcontractors, including Lockheed Martin and Boeing, and together accounts for approximately 69% of DE revenue.

Reliance on third party suppliers and manufacturers may impair the ability of CPP and HBP to meet its customer demands.

CPP and HBP rely on a limited number of domestic and foreign companies to supply components and manufacture certain of its products.

6 unchanged sentences

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 could impact the ability of CPP and HBP to fill orders, which could have a material adverse effect on customer relationships.

Such events may impact the ability of CPP and HBP to fill orders, which could have a material adverse effect on customer relationships.

Recently, one of our suppliers informed HBP that a component it supplies to HBP was found to infringe on the intellectual property rights of one of its competitors.

This supplier has assured HBP that it is developing an alternative design for such component that will allow it to continue to meet HBP’s needs on an uninterrupted basis.

However, should the supply of this component be interrupted, it could adversely impact HBP’s business and results of operations.

If Griffon is unable to obtain raw materials for products at favorable prices it could adversely impact operating performance.

2 unchanged sentences

If temporary shortages due to disruptions in supply caused by weather, transportation, production delays or other factors require raw materials to be secured from sources other than current suppliers, the terms may not be as favorable as current terms or certain materials may not be available at all.

In recent years, both CPP and HBP have experienced price increases in steel and plastic resins.

In recent years, both CPP and HBP have experienced price increases for most of its 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.

5 unchanged sentences

There are risks associated with conducting a business that may be impacted by political and other developments associated with international trade.

In this regard, certain products sold by CPP in the United States and elsewhere are sourced from China;

In this regard, certain products sold by CPP in the United States and elsewhere are sourced

and raw materials used by CPP may be sourced from China and therefore may have their prices impacted by tariffs imposed on trade between the United States and China.

3 unchanged sentences

The relative inexperience of China’s judiciary 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 reflecting domestic political changes.

In addition, interpretation of statutes and regulations in China may be subject to government policies or political changes.

Because of the volume of sourcing by CPP from China, the ongoing trade dispute between the U.S.

8 unchanged sentences

On May 8, 2020, the two countries reaffirmed their Phase 1 trade agreement notwithstanding the COVID-19 pandemic.

In view of potential discussions between the Chinese and U.S.

governments on a second phase agreement, for which discussions only among trade negotiators are currently scheduled, the ultimate level of tariffs, the ultimate scope of them, and whether or how the proposed additional tariffs will impact our business is uncertain.

The imposition of additional tariffs by the U.S.

In October 2021 the U.S.

and Chinese trade representatives discussed the status of the Phase 1 agreement after the Biden administration outlined its agenda for trade policy with China.

The Biden administration has indicated it will continue the strict tariffs against Chinese imports to maintain pressure on China to live up to its commitments under the Phase 1 agreement, while reinstating the process for U.S.

importers to seek exclusions from the tariffs.

In view of the early stage of re-engagement on trade policy between the Chinese and U.S.

governments, any potential impact on our business remains uncertain.

Any escalation of trade tensions or the imposition of additional tariffs by the U.S.

Government on various steel and aluminum finished goods, as well as a variety of resins, fabrics and wood products could materially affect our operations.

7 unchanged sentences

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.

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.

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 United Kingdom, or may make it easier for other companies to compete by eliminating restrictions on products from countries where CPP and HBP competitors source products.

The ability of CPP and HBP to import products in a timely and cost-effective manner may also 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.

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.

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.

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.

2 unchanged sentences

Griffon’s businesses are subject to seasonal variations and the impact of uncertain weather patterns.

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 of the AMES business.

In 2021, 53% of AMES' sales occurred during the second and third quarters compared to 53% and 56% in 2020 and 2019, respectively.

In 2020, as a result of the COVID-19 pandemic, sales orders shifted somewhat into the third and fourth quarters resulting in revenue increasing in these two quarters to 55% of 2020 sales.

Clopay’s business is driven by residential renovation and construction, which occurs more during warm weather, than during the winter months, and so revenues and earnings of Clopay are generally lower in the second quarter.

In 2021 and 2020, as a result of the COVID-19 pandemic, sales orders shifted somewhat into the third and fourth quarters resulting in revenue increasing in these two quarters to 55% in each of 2021 and 2020 sales.

Clopay’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.

Telephonics historically has had higher revenue and earnings in the second half of Griffon's fiscal year ending September 30 (although this has not always been the case).

4 unchanged sentences

Unionized employees could strike or participate in a work stoppage.

At September 30, 2020, Griffon employed approximately 7,400 people on a full-time basis, approximately 6% of whom are covered by collective bargaining or similar labor agreements (all within Telephonics and CPP).

At September 30, 2021, Griffon employed approximately 6,700 people on a full-time basis, excluding approximately 700 related to Telephonics, approximately 5% of whom are covered by collective bargaining or similar labor agreements (all within Telephonics and CPP).

If unionized employees engage in a strike or other work stoppage, or if Griffon is unable to negotiate acceptable extensions of agreements with labor unions, a significant disruption of operations and increased operating costs could occur.

4 unchanged sentences

In the year ended September 30, 2021, U.S.

government contracts and subcontracts accounted for approximately 10% of Griffon’s consolidated revenue.

government contracts and subcontracts accounted for approximately 10% of the combined revenue of Griffon’s consolidated revenue and Telephonics revenue.

Contracts involving the U.S.

17 unchanged sentences

Even if funding is continued, Telephonics may fail to compete successfully to obtain funding pursuant to such programs.

Reductions to funding on existing programs or delays in the funding of new opportunities could affect the timing of revenue recognition, and impact Telephonics' and Griffon's results of operations.

Reductions to funding on existing

programs or delays in the funding of new opportunities could affect the timing of revenue recognition, and impact Telephonics' and Griffon's results of operations.

Telephonics’ business could be adversely affected by a government shutdown

23 unchanged sentences

defense contractor, Telephonics, in particular, may be the target of cyber security threats to its information technology infrastructure and unauthorized attempts to gain access to sensitive or highly confidential information that could compromise U.S.

types of threats could vary from attacks common to most industries to more advanced and persistent, highly organized adversaries who target Telephonics because of national security information in its possession.

The types of threats could vary from attacks common to most industries to more advanced and persistent, highly organized adversaries who target Telephonics because of national security information in its possession.

Individuals and groups of hackers and sophisticated organizations, including organizations sponsored by foreign countries, may use a wide variety of methods, such as deploying malicious software or exploiting vulnerabilities in hardware, software, or other infrastructure in order to gain access to our networks or using social engineering techniques to induce our employees to disclose passwords or other sensitive information or take other actions to gain access to our data.

12 unchanged sentences

Further, there is a risk that acquisitions will not be properly integrated into Griffon’s existing structure.

Griffon closed the acquisitions of La Hacienda, Tuscan Path, ClosetMaid and Harper Brush in the months of July through November 2017, Kelkay in February 2018, CornellCookson in June 2018 and Apta in November 2019.

This integration risk may be exacerbated when numerous acquisitions are consummated in a short time period.

42 unchanged sentences

A lack of sufficient manufacturing capacity to meet demand could cause customer service levels to decrease, which may negatively affect customer demand for Griffon's products and customer relations generally, which in turn could have a material adverse effect on Griffon's business, results of operations, financial condition and cash flows.

In addition, operating facilities at or near capacity may also increase production and distribution costs and negatively impact relations with employees or contractors, which could result in disruptions to operations.

In addition, manufacturing costs may increase significantly and Griffon may not be able to successfully recover these cost increases with increased pricing to its customers.

In addition, operating facilities

at or near capacity may also increase production and distribution costs and negatively impact relations with employees or contractors, which could result in disruptions to operations.

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.

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.

18 unchanged sentences

New product development and commercialization efforts, including efforts to enter markets or product categories in which Griffon has limited or no prior experience, have inherent risks.

These risks include the costs involved, such as development and commercialization, product development or launch delays, and

the failure of new products and line extensions to achieve anticipated levels of market acceptance or growth in sales or operating income.

These risks include the costs involved, such as development and commercialization, product development or launch delays, and the failure of new products and line extensions to achieve anticipated levels of market acceptance or growth in sales or operating income.

Griffon also faces the risk that its competitors will introduce innovative new products that compete with Griffon’s products.

14 unchanged sentences

economic and political conditions and fluctuations in exchange rates.

Griffon and its companies conduct operations in Canada, Australasia, the United Kingdom, Mexico and China, and sell their products in many countries around the world.

Griffon and its companies conduct operations in Canada, Australasia, the U.K., Mexico and China, and sell their products in many countries around the world.

Sales of products through non-U.S.

17 unchanged sentences

Though Griffon takes reasonable precautions to ensure it does not infringe on the rights of others, it is possible that Griffon may inadvertently infringe on, or be accused of infringing on, proprietary rights held by others.

If Griffon is found to have infringed on the propriety rights held by

others, any related litigation or settlement relating to such infringement may have a material effect on Griffon’s business, results of operations and financial condition.

If Griffon is found to have infringed on the propriety rights held by others, any related litigation or settlement relating to such infringement may have a material effect on Griffon’s business, results of operations and financial condition.

Griffon is exposed to product liability and warranty claims.

27 unchanged sentences

If such audits result in assessments different from recorded income tax liabilities, Griffon’s future financial results may include unfavorable adjustments to its income tax provision.

Actions taken by activist shareholders could be disruptive and costly and may conflict with or disrupt the strategic direction of our business.

Activist shareholders may from time to time attempt to effect changes in our strategic direction and seek changes regarding Griffon’s corporate governance or structure.

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.

However, activist campaigns that contest, or conflict with, our strategic direction could have an adverse effect on us because:

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

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.

Activist campaigns may also cause significant fluctuations in our stock price based on temporary or speculative market perceptions, or other factors that do not necessarily reflect the fundamental underlying value of our businesses.

Unresolved Staff Comments

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors