What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2023-11-16 compared with 2022-11-18 · 112 added, 99 removed, 234 unchanged (47% of the section changed)

10 unchanged sentences

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

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.

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.

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.

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;

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.

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.

1 unchanged sentence

Adverse trends and general economic conditions, especially those that relate to construction and renovation, will impact Griffon’s business.

The CPP and HBP businesses serve residential and commercial construction and renovation, and are influenced by market conditions that affect these industries.

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.

The HBP and CPP businesses serve residential and commercial construction and renovation, and are influenced by market conditions that affect these industries.

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.

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.

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.

and migration of the population within the U.S., have an effect on HBP and CPP.

Griffon is exposed to fluctuations in inflation, which could negatively affect its business, financial condition and results of operations.

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.

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.

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.

Inflation rates, particularly in the United States, increased to historic levels in 2022.

Although, according to the U.S.

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.

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.

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.

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.

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.

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.

3 unchanged sentences

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.

Many HBP and CPP customers are large mass merchandisers, such as home centers, warehouse clubs, discount stores, commercial distributors and e-commerce companies.

The growing share of the market represented by these large mass merchandisers, together with changes in consumer shopping patterns, have contributed to the increase of multi-category retailers and e-commerce companies that have strong negotiating power with suppliers.

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.

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 CPP’s or HBP’s significant customers could adversely impact our sales and operating cash flows.

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.

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.

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.

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.

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.

1 unchanged sentence

A small number of customers account for, and are expected to continue to account for, a substantial portion of Griffon's consolidated revenue.

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.

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

3 unchanged sentences

Griffon cannot assure that its largest customers will be retained or that additional key customers will be recruited.

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.

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.

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.

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.

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.

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.

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.

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 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.

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.

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.

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.

The supplier is also appealing the initial finding of infringement and believes it has a reasonable likelihood of success.

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.

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

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.

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.

CPP and HBP suppliers primarily provide resin, wood, steel and wire rod.

HBP and CPP 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.

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 for most of their raw materials.

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.

Because raw materials in the aggregate constitute a significant component of the cost of goods sold, price fluctuations could have a material adverse effect on Griffon’s results of operations.

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.

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.

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.

CPP's business is global, with products and raw materials sourced from, and manufactured and sold in multiple countries around the world.

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

1 unchanged sentence

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

closes numerous U.S.

facilities, CPP may increase its reliance on suppliers in China, which could further impact pricing and tariffs.

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.

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.

The relative limited Chinese judicial precedent on matters of international trade in many cases creates additional uncertainty as to the outcome of any litigation.

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.

2 unchanged sentences

at various times since March 2018, represents a continuing risk to CPP revenue and operating performance.

The tariffs currently apply to approximately $375 billion in annual U.S.

imports from China.

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.

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.

As of September 30, 2023 the four-year review remains ongoing.

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.

In addition to tariffs, an increased global focus on forced labor in supply chains has the potential to impact our business operations.

2 unchanged sentences

This requires that the importer submit detailed information regarding every supplier and sub-supplier, as well as all components and raw materials, relating to the goods being detained, and detention costs accrue during the pendency of CBP’s evaluation.

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.

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.

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.

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.

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.

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.

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.

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.

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 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.

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.

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 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 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.

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.

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.

Although these trade agreements generally have positive effects on trade liberalization, sourcing flexibility and the 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 HBP and CPP.

With the expansion of its global sourcing strategy and the closure of numerous US manufacturing locations, CPP is likely to experience a diminished ability to take advantage of the trade benefits of the USMCA.

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.

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 issues, along with the ongoing war between Russia and Ukraine, could delay importation of products or require HBP and CPP 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 the business and financial results of HBP and CPP.

The expansion of CPP’s global sourcing strategy may not achieve its intended results.

On May 3, 2023, in response to changing market conditions, Griffon announced that its CPP segment will expand its global sourcing strategy to include long handled tools, material handling, and wood storage and organization product lines.

This expansion of CPP’s global sourcing strategy will increase Griffon’s exposure to certain other risks to which it is subject, including those related to the procurement of products from third party suppliers, many of whom are located in China and other non U.S.

jurisdictions.

Griffon will also be subject to unique risks associated with the implementation of CPP’s expanded global sourcing strategy, including potential negative effects relating to the closing of domestic manufacturing facilities and the related termination of employees.

There is a risk that CPP’s ability to provide products to its customers will be disrupted as CPP increases its reliance on third party suppliers and expands its distribution system for products manufactured by third parties.

CPP may also not realize the proceeds it expects from the sale of facilities that will no longer be used by CPP.

CPP’s expanded global sourcing strategy may also increase its exposure to cybersecurity risks, as discussed in the below risk factor titled “Griffon’s operations and reputation may be adversely impacted if our information technology (IT) systems, or the IT systems of third parties with whom we do business, fail to perform adequately or if we or such third parties are the subject of a data breach or cyber-attack."

CPP’s expanded global sourcing strategy is designed to better position CPP to serve customers with a more flexible and cost-effective sourcing model that leverages supplier relationships around the world, which is in turn expected to improve CPP’s competitive positioning and financial performance.

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.

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 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.

Most of these restrictions have been eliminated or reduced due to a reduction in the health risk of COVID-19.

As of the date of this filing, all of our manufacturing and distribution facilities are operating.

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 could result in temporary closures of Griffon facilities.

On May 11, 2023, the U.S.

Department of Health and Human Services declared the end of the Public Health Emergency for COVID-19;

however, the effects of COVID-19 continue to linger throughout the global economy and our businesses.

Though the severity of COVID-19 has subsided, new variants or any other future pandemic could interrupt business, cause renewed labor and supply chain disruptions, and negatively impact the global and US economy, which could materially and adversely impact our businesses.

During the height of COVID-19 our supply chain experienced certain disruptions which, together with other factors such as a shortage of labor, resulted in longer delivery lead times and restricted manufacturing capacity for certain of our products.

1 unchanged sentence

for example, certain of our suppliers could be required by government authorities to temporarily cease operations or might be limited in their production capacity.

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.

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.

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 within the AMES and HBP businesses.

In 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.

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.

In 2023, 54% of CPP's' sales occurred during the second and third quarters compared to 58% in 2022 and 53% in 2021.

Demand for lawn and garden products is influenced by weather, particularly weekend weather during the peak gardening season.

6 unchanged sentences

In addition, any renegotiation or renewal of labor agreements could result in higher wages or benefits paid to unionized employees, which could increase operating costs and as a result have a material adverse effect on profitability.

As a result of the expansion of CPP’s global sourcing strategy, CPP is closing a number of its U.S.

facilities, some of which employ union workers;

accordingly, the number of Griffon employees that belong to a union will decrease.

Griffon’s operations and reputation may be adversely impacted if our information technology (IT) systems, or the IT systems of third parties with whom we do business, fail to perform adequately or if we or such third parties are the subject of a data breach or cyber-attack.

11 unchanged sentences

If these systems are damaged, infiltrated, shutdown, or cease to function properly (whether by planned upgrades, force majeure, telecommunications failures, hardware or software break-ins or viruses, other cyber security incidents, or otherwise), we may suffer disruption in our ability to manage and operate our business.

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.

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.

Any such disruption could have a material adverse effect on our business and results of operations.

5 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, Apta in November 2019, Quatro in December 2020 and Hunter Fan in January 2022.

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

Griffon closed the acquisition of Hunter Fan, its largest acquisition ever, in January 2022;

the integration of Hunter Fan with CPP is ongoing.

In the past, Griffon has consummated a group of acquisitions within a short time period, which could occur again;

the risks relating to integration of an acquisition may be exacerbated when numerous acquisitions are consummated in a short time period.

In implementing an acquisition growth strategy, the following may be encountered:

6 unchanged sentences

We may also incur debt or assume contingent liabilities in connection with acquisitions, which could impose restrictions on our business operations and harm our operating results.

The pendency of our current process to explore strategic alternatives and the possible failure to consummate a strategic transaction could adversely affect the trading price of our common stock and our future business and results of operations.

In May 2022, Griffon’s Board of Directors publicly announced that it would explore 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 ongoing.

The uncertainties associated with this process, and the expenses and efforts involved, may negatively affect our business and our relationships with employees, customers, suppliers, distributors and vendors.

If we do not enter into or consummate a strategic transaction, our business and results of operations could be adversely affected.

Furthermore, if we do not consummate a transaction, the price of our common stock may decline from the current market price, as the current market price might incorporate a market assumption that a transaction will be consummated.

A failed transaction may also result in reduced employee morale and productivity, negative publicity and a negative impression of us in the investment community.

Further, any disruptions to our business resulting from any announcement and pendency of a transaction, including any adverse changes in our relationships with our customers, suppliers, distributors, vendors and employees or recruiting and retention efforts, could continue or accelerate in the event of a failed acquisition.

Matters relating to any failed transaction may require significant costs and expenses and substantial management time and resources, which could otherwise have been devoted to operating and growing our businesses.

Risks Related to Our Indebtedness

While Griffon’s senior notes, which have limited covenants, are not due until 2028;

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 $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.

and its $500 million revolving line of credit, which has greater covenant requirements, does not mature until 2028.

However, in the event the 2028 Senior Notes are not repaid, refinanced, or replaced prior to December 1, 2027, the Revolver will mature on December 1, 2027.

There are potential impacts from Griffon’s use of debt to finance certain of its activities, especially acquisitions and expansions, as set forth below.

Compliance with restrictions and covenants in Griffon’s debt agreements may limit its ability to take corporate actions.

34 unchanged sentences

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.

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.

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.

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.

The development and maintenance of such brands require significant investment in brand-building and marketing initiatives.

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.

Griffon may be required to record impairment charges for goodwill and indefinite-lived intangible assets.

2 unchanged sentences

If goodwill or indefinite-lived intangible assets were to become impaired, the results of operations could be materially and adversely affected.

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.

These non-cash impairments resulted in an aggregate decrease of $1.49 and $8.43 in our earnings per share for the fiscal year ended September 30, 2023 and 2022, respectively.

Should we have to record additional impairment charges in the future, it could similarly have a significant negative impact on our earnings per share for the year in which any such impairment charge is recorded.

49 unchanged sentences

It is also possible that Griffon’s suppliers may inadvertently infringe on, or be accused of infringing on, proprietary rights held by others.

For example, 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.

If other Griffon suppliers are found to have infringed (or are alleged to have infringed) on

the propriety rights of others, such infringement may have a material adverse effect on Griffon’s business, results of operations and financial condition.

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.

Any such infringement (or alleged infringement) may have a material adverse effect on Griffon’s business, results of operations and financial condition.

For example, in the past, a 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.

24 unchanged sentences

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.

Further changes in the tax laws could arise as a result of the base erosion and profit shifting project undertaken by the Organization for Economic Co-operation and Development (“OECD”).

In December 2022, the European Union (“EU”) member states reached an agreement to implement the minimum tax component (“Pillar Two”) of the OECD’s tax reform initiative.

The directive is expected to be enacted into the national law of the EU member states by December 31, 2023.

If similar directives under Pillar Two are adopted by taxing authorities in other countries in which we do business, such changes could materially increase the amount of taxes we pay and therefore materially decrease our results of operations and cash flows.

The amount of income taxes paid is subject to audits by U.S.

3 unchanged sentences

Similar to the activist shareholder campaign initiated in 2021, 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.

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:

4 unchanged sentences

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