GRIFFON CORP 10-Q

Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations BUSINESS Overview Griffon Corporation (the “Company”, “Griffon”, "we" or "us") is a diversified management and holding company that conducts business through wholly-owned subsidiaries. The Company was founded in 1959, is a Delaware corporation headquartered in New York, N.Y. and is listed on the New York Stock Exchange (NYSE:GFF). Business Strategy Our strategic objective is to maintain leading positions in the markets we serve by providing innovative, branded products with superior quality and industry-leading service. We place emphasis on our iconic and well-respected brands, which helps to differentiate us and our offerings from our competitors and strengthens our relationship with our customers and those who ultimately use our products. Through operating a diverse portfolio of businesses, we expect to reduce variability caused by external factors such as market cyclicality, seasonality, and weather. We achieve diversity by providing various product offerings and brands through multiple sales and distribution channels and conducting business across multiple countries which we consider our home markets. Griffon oversees the operations of its subsidiaries, allocates resources among them and manages their capital structures. Griffon provides direction and assistance to its subsidiaries in connection with acquisition and growth opportunities as well as divestitures. As long-term investors, we intend to continue to grow and strengthen our existing businesses, and to diversify further through investments in our businesses and acquisitions. Since 2017, we have undertaken a series of transformative transactions to strengthen our core businesses and increase shareholder value. We divested our specialty plastics business in 2018 and our defense electronics (Telephonics) business in 2022 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. ("CornellCookson") in 2018, which has helped establish us as a leading North American manufacturer and marketer of residential garage doors and sectional commercial doors, and rolling steel doors and grille products, under brands that include Clopay, Ideal, Cornell and Cookson. 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. On July 1, 2024, Griffon announced that its subsidiary, The AMES Companies, Inc., ("AMES") expanded the scope of its Australian operations by acquiring substantially all the assets of Pope, a leading Australian provider of residential watering products, from The Toro Company (NYSE:TTC) for a purchase price of approximately AUD 21,800 (approximately $14,500) in cash. This is CPP's seventh acquisition in Australia since 2013, and further expands AMES's product portfolio in the Australian market. Pope is expected to contribute approximately $25,000 in revenue in the first twelve months after this acquisition. Further Information Griffon posts and makes available, free of charge through its website at www.griffon.com , its Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934, as well as press releases, as soon as reasonably practicable after such materials are published or filed with or furnished to the Securities and Exchange Commission (the “SEC”). The information found on Griffon's website is not part of this or any other report it files with or furnishes to the SEC. For information regarding revenue, profit and total assets of each segment, see the Reportable Segments footnote in the Notes to Consolidated Financial Statements. 32 Table of Contents 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. 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. • Consumer and Professional Products (“CPP”) is 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. CPP sells products globally through a portfolio of leading brands including AMES, since 1774, Hunter, since 1886, True Temper, and ClosetMaid. 33 Table of Contents OVERVIEW Revenue for the quarter ended March 31, 2025 was $611,746 compared to $672,880 in the prior year quarter, a decrease of $61,134 or 9%, due to the decreased revenue at HBP and CPP of 6% and 13%, respectively. Net income was $56,762 or $1.21 per share, compared to $64,143, or $1.28 per share, in the prior year quarter. The current year quarter results from operations included the following: – Strategic review - retention and other of $1,199 ($898, net of tax, or $0.02 per share); – Gain on sale of real estate of $183 ($136, net of tax, or $0.00 per share); and – Discrete and certain other tax provisions, net, of $75 or $0.00 per share. The prior year quarter results from operations included the following: – Restructuring charges of $2,401 ($1,769, net of tax, or $0.04 per share); – Strategic review - retention and other of $2,676 ($1,997, net of tax, or $0.04 per share); – Gain on sale of real estate of $11 ($9, net of tax, or $0.00 per share); and – Discrete and certain other tax benefits, net, of $390 or $0.01 per share. Excluding these items from the respective quarterly results, net income would have been $57,599, or $1.23 per share in the three months ended March 31, 2025 compared to $67,510, or $1.35 per share, in the prior year quarter. Revenue for the six months ended March 31, 2025 was $1,244,117 compared to $1,316,033 in the prior year period, a decrease of 5%, due to the decreased revenue at HBP and CPP of 3% and 9%, respectively. Net income was $127,613 or $2.70 per share, compared to net income of $106,320, or $2.10 per share, in the prior year period. The current year-to-date results from operations included the following: – Strategic review - retention and other of $2,850 ($2,113, net of tax, or $0.04 per share); – Gain on sale of real estate of $8,157 ($6,079, net of tax, or $0.13 per share); and – Discrete and certain other tax benefits, net, of $175 or $0.00 per share. The prior year-to-date results from operations included the following: – Restructuring charges of $14,801 ($10,982, net of tax, or $0.22 per share); – Strategic review - retention and other of $7,334 ($5,497, net of tax, or $0.11 per share); – Gain on sale of real estate of $558 ($415, net of tax, or $0.01 per share); and – Discrete and certain other tax provisions, net, of $393 or $0.01 per share. Excluding these items from the respective periods, net income would have been $123,472, or $2.61 per share in the six months ended March 31, 2025, compared to $122,777, or $2.42 per share, in the prior year period. 34 Table of Contents Griffon evaluates performance based on adjusted net income and the related adjusted earnings per share, which are non-GAAP measures that exclude restructuring charges, non-cash impairment charges, loss from debt extinguishment, acquisition related expenses and discrete and certain other tax items, as well as other items that may affect comparability, as applicable. Griffon believes this information is useful to investors for the same reason. The following table provides a reconciliation of net income from operations to adjusted net income and earnings per share to adjusted earnings per share: For the Three Months Ended March 31, For the Six Months Ended March 31, 2025 2024 2025 2024 (Unaudited) Net income $ 56,762 $ 64,143 $ 127,613 $ 106,320 Adjusting items: Restructuring charges (1) — 2,401 — 14,801 Gain on sale of real estate (183) (11) (8,157) (558) Strategic review - retention and other 1,199 2,676 2,850 7,334 Tax impact of above items (2) (254) (1,309) 1,341 (5,513) Discrete and certain other tax (benefits) provisions, net (3) 75 (390) (175) 393 Adjusted net income $ 57,599 $ 67,510 $ 123,472 $ 122,777 Earnings per common share $ 1.21 $ 1.28 $ 2.70 $ 2.10 Adjusting items, net of tax: Restructuring charges (1) — 0.04 — 0.22 Gain on sale of real estate — — (0.13) (0.01) Strategic review - retention and other 0.02 0.04 0.04 0.11 Discrete and certain other tax (benefits) provisions, net (3) — (0.01) — 0.01 Adjusted earnings per common share $ 1.23 $ 1.35 $ 2.61 $ 2.42 Diluted weighted-average shares outstanding (in thousands) 46,900 49,931 47,226 50,714 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. (1) For the three and six months ended March 31 2024, restructuring charges relate to the CPP global sourcing expansion, of which $1,334 and $12,980, are included in Cost of goods and services and $1,067 and $1,821 are included in SG&A in the Company's Condensed Consolidated Statement of Operations. (2) The tax impact for the above reconciling adjustments from GAAP to non-GAAP Net income and EPS is determined by comparing the Company's tax provision, including the reconciling adjustments, to the tax provision excluding such adjustments. (3) Discrete and certain other tax provisions (benefits) primarily relate to the impact of a rate differential between the statutory and annual effective tax rates on items impacting the quarter. 35 Table of Contents RESULTS OF OPERATIONS Three and Six Months ended March 31, 2025 and 2024 Griffon evaluates performance and allocates resources based on each segment adjusted EBITDA, a non-GAAP measure, which is defined as income before taxes, 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. Griffon believes this information is useful to investors for the same reason. See table provided in Note 13 - Reportable Segments for a reconciliation of adjusted EBITDA to income before taxes. Home and Building Products For the Three Months Ended March 31, For the Six Months Ended March 31, 2025 2024 2025 2024 Residential $ 205,893 $ 221,322 $ 434,427 $ 440,120 Commercial 162,355 170,740 329,222 347,733 Total Revenue $ 368,248 $ 392,062 $ 763,649 $ 787,853 Adjusted EBITDA $ 109,434 29.7 % $ 128,924 32.9 % $ 236,476 31.0 % $ 253,643 32.2 % Depreciation and amortization $ 4,334 $ 3,772 $ 8,609 $ 7,405 For the quarter ended March 31, 2025, HBP revenue decreased $23,814 or 6% compared to the prior year quarter, due to decreased volume of 7% primarily reflecting residential sales activity returning to normal seasonality, partially offset by favorable product mix of 1%. For the quarter ended March 31, 2025, adjusted EBITDA of $109,434 decreased $19,490 or 15%, compared to $128,924 in the prior year quarter, resulting from decreased revenue noted above and the related volume impact on overhead absorption, and increased labor and distribution costs, partially offset by reduced material costs. For the six months ended March 31, 2025, revenue decreased $24,204 or 3%, compared to the prior year period, due to decreased volume of 4%, partially offset by favorable product mix of 1%. For the six months ended March 31, 2025, adjusted EBITDA of $236,476 decreased $17,167 or 7%, compared to $253,643 in the prior year period, resulting from decreased revenue noted above and the related volume impact on overhead absorption, and increased labor and distribution costs, partially offset by reduced material costs. For the quarter and six months ended March 31, 2025, segment depreciation and amortization increased $562 and $1,204, respectively, compared to the prior year periods, due to new assets placed in service. Consumer and Professional Products For the Three Months Ended March 31, For the Six Months Ended March 31, 2025 2024 2025 2024 United States $ 144,118 $ 183,142 $ 272,941 $ 334,314 Europe 12,533 18,353 17,073 23,598 Canada 16,306 16,363 32,310 37,391 Australia 65,240 57,030 148,371 121,901 All other countries 5,301 5,930 9,773 10,976 Total Revenue $ 243,498 $ 280,818 $ 480,468 $ 528,180 Adjusted EBITDA 23,726 9.7 % $ 20,121 7.2 % 41,918 8.7 % 25,660 4.9 % Depreciation and amortization $ 11,178 $ 11,171 $ 22,396 $ 22,228 36 Table of Contents For the quarter ended March 31, 2025, revenue decreased $37,320, or 13%, compared to the prior year quarter, primarily driven by decreased volume of 13% due to reduced consumer demand in North America and the United Kingdom ("UK"), partially offset by increased organic volume in Australia. The Pope acquisition contributed 2%. Foreign currency had a 2% unfavorable impact on the current quarter revenue. For the quarter ended March 31, 2025, adjusted EBITDA of $23,726 increased $3,605 compared to $20,121 in the prior year quarter, primarily due to the benefits from the global sourcing expansion initiative and increased volume and improved margin in Australia, partially offset by the unfavorable impact of the reduced North American and UK volume. Foreign currency had a 1% unfavorable impact on the current quarter adjusted EBITDA. For the six months ended March 31, 2025, revenue decreased $47,712 or 9% compared to the prior year period, driven by decreased volume of 11% due to reduced consumer demand in all geographic regions, except Australia, which benefited from increased organic volume. The Pope acquisition contributed 3%. Foreign currency had a 1% unfavorable impact on the current six month period revenue. For the six months ended March 31, 2025, adjusted EBITDA of $41,918 increased $16,258 compared to $25,660 in the prior year period, primarily due to the benefits from the global sourcing expansion initiative, and increased volume and improved margin in Australia, partially offset by the unfavorable impact of the reduced North American and UK volume noted above. Foreign currency had a 1% unfavorable impact on the current six month period adjusted EBITDA. For the quarter and six months ended March 31, 2025, segment depreciation and amortization remained consistent with prior year periods. On July 1, 2024 Griffon announced that its subsidiary, AMES, expanded the scope of its Australian operations by acquiring substantially all the assets of Pope, a leading Australian provider of residential watering products, from The Toro Company (NYSE:TTC) for a purchase price of approximately AUD 21,800 (approximately $14,500) in cash. This is CPP's seventh acquisition in Australia since 2013, and further expands AMES’s product portfolio in the Australian market. Pope is expected to contribute approximately $25,000 in revenue in the first twelve months after the acquisition. Unallocated For the quarter ended March 31, 2025, unallocated amounts, excluding depreciation, consisted primarily of corporate overhead costs totaling $14,635 compared to $14,814 in the prior year quarter; for the six months ended March 31, 2025, unallocated amounts totaled $28,677 compared to $28,721 in the prior year period. The decrease in the current quarter compared to the prior year quarter was primarily due to a decrease in consulting costs. The six month period ended March 31, 2025 remained consistent with the prior year period. Strategic review During the three months ended March 31, 2025 and 2024, we incurred strategic review expenses of $1,199 ($898, net of tax) and $2,676 ($1,997, net of tax), respectively, and during the six months ended March 31, 2025 and 2024, we incurred strategic review expenses of $2,850 ($2,113, net of tax) and $7,334 ($5,497, net of tax), respectively, primarily for retention payments and other costs related to the strategic review process that concluded in April 2023. Segment Depreciation and Amortization For the three months ended March 31, 2025, segment depreciation and amortization of $15,512 increased $569 compared to $14,943 in the prior year quarter, and for the six months ended March 31, 2025, segment depreciation and amortization of $31,005 increased $1,372 compared to $29,633 in the prior year period. The increase in both the three and six months ended March 31, 2025, is primarily due to depreciation for new assets placed in service. 37 Table of Contents Other Income (Expense) For the quarters ended March 31, 2025 and 2024, Other income (expense) of $512 and $626, respectively, includes ($222) and $179, respectively, of net currency exchange transaction gains (losses) from receivables and payables held in non-functional currencies, net periodic benefit plan income (expense) of $299 and ($35), respectively, and net investment income (loss) of ($16) and $29, respectively. Other income (expense) also includes royalty income of $556 and $509 for the three months ended March 31, 2025 and 2024, respectively. For the six months ended March 31, 2025 and 2024, Other income (expense) of $2,344 and $1,258, respectively, includes $218 and $191, respectively, of net currency exchange transaction gains from receivables and payables held in non-functional currencies, net periodic benefit plan income (expense) of $600 and ($69), respectively, as well as $54 and $85, respectively of net investment income. Other income (expense) also includes royalty income of $1,146 and $1,100, for the six months ended March 31, 2025 and 2024, respectively. Provision for income taxes During the quarter ended March 31, 2025, the Company recognized a tax provision of $21,875 on income before taxes of $78,637, compared to a tax provision of $24,430 on income before taxes of $88,573 in the prior year quarter. The current year quarter results included strategic review costs - retention and other of $1,199 ($898, net of tax); gain on sale of real estate of $183 ($136, net of tax); and discrete and certain other tax provisions, net, that affect comparability of $75. The prior year quarter results included strategic review costs - retention and other of $2,676 ($1,997, net of tax); restructuring charges of $2,401 ($1,769, net of tax); gain on sale of real estate of $11 ($9 net of tax); and discrete and certain other tax benefits, net, that affect comparability of $390. Excluding these items, the effective tax rates for the quarters ended March 31, 2025 and 2024 were 27.7% and 27.9%, respectively. During the six months ended March 31, 2025, the Company recognized a tax provision of $48,444 on income before taxes of $176,057, compared to a tax provision of $42,395 on income before taxes of $148,715 in the comparable prior year period. The six month period ended March 31, 2025 included gain on sale of real estate of $8,157 ($6,079, net of tax); strategic review - retention and other of $2,850 ($2,113, net of tax); and discrete and other tax benefits, net, that affect comparability of $175. The six month period ended March 31, 2024 included restructuring charges of $14,801 ($10,982, net of tax); strategic review - retention and other of $7,334 ($5,497, net of tax); gain on sale of real estate of $558 ($415, net of tax); and discrete and other certain tax provisions, net, that affect comparability of $393. Excluding these items, the effective tax rates for the six months ended March 31, 2025 and 2024 were 27.7% and 27.9%, respectively. Stock-based compensation For the quarters ended March 31, 2025 and 2024, stock based compensation expense, which includes expense for both restricted stock grants and the ESOP, totaled $6,515 and $6,257, respectively. For the six months ended March 31, 2025 and 2024, stock based compensation expense totaled $11,893 and $12,674, respectively. The increase in the current quarter expense compared to the prior year quarter was primarily due to an increase in stock compensation expense driven by the timing of equity awards granted, partially offset by a decrease in Employee Stock Ownership Plan (ESOP) expense. The decrease in expense for the six month period ended March 31, 2025 was primarily attributable to a decrease in ESOP expense, partially offset by the increase in stock compensation expense driven by the timing of equity awards granted in the current period compared to the prior year period. The decrease in the ESOP expense was due to the plan being frozen as of September 30, 2024 (meaning that, for plan years after this date, no additional employees will become participants under the ESOP and no new voluntary contributions will be made to the ESOP). Additionally, during the first quarter ended December 31, 2024 the final loan payment was made by the ESOP to the Company and compensation expense was fully offset by dividends paid. As of December 31, 2024 there were 4,166,038 shares of common stock in the ESOP, all of which were allocated to participant accounts. Comprehensive income (loss) For the quarter ended March 31, 2025, total other comprehensive income, net of taxes, of $2,417 included a gain of $2,970 from foreign currency translation adjustments primarily due to the strengthening of the Euro and British Pound in comparison to the U.S. Dollar; and a $541 benefit from pension amortization, partially offset by a $1,094 loss on cash flow hedges. 38 Table of Contents For the quarter ended March 31, 2024, total other comprehensive loss, net of taxes, of $4,896 included a loss of $7,199 from foreign currency translation adjustments primarily due to the weakening of the Euro, British Pound and Australian and Canadian Dollar, all in comparison to the U.S. Dollar; partially offset by a $531 benefit from pension amortization and a $1,772 gain on cash flow hedges. For the six months ended March 31, 2025, total other comprehensive loss, net of taxes, of $15,282 included a loss of $17,048 from foreign currency translation adjustments primarily due to the weakening of the Euro, British Pound and Australian and Canadian Dollar, all in comparison to the U.S. Dollar; partially offset by a $596 benefit from pension amortization; and a $1,170 gain on cash flow hedges. For the six months ended March 31, 2024, total other comprehensive income, net of taxes, of $5,579 included a gain of $3,039 from foreign currency translation adjustments primarily due to the strengthening of the Euro, British Pound and Australian Dollar, partially offset by the weakening of the Canadian Dollar, all in comparison to the U.S. Dollar; a $1,063 benefit from pension amortization; and a $1,477 gain on cash flow hedges. DISCONTINUED OPERATIONS At March 31, 2025 and September 30, 2024, Griffon’s liabilities for discontinued operations primarily relate to insurance claims, income taxes, product liability, warranty and environmental reserves totaling $9,137 and $7,768, respectively. Griffon's assets for discontinued operations primarily relate to insurance claims. There were no reported revenues or costs in the three and six months ended March 31, 2025 and 2024 for discontinued operations. 39 Table of Contents LIQUIDITY AND CAPITAL RESOURCES Liquidity Management assesses Griffon’s liquidity in terms of its ability to generate cash to fund its operating, investing and financing activities. Significant factors affecting liquidity include cash flows from operating activities, capital expenditures, acquisitions, dispositions, bank lines of credit and the ability to attract long-term capital under satisfactory terms. 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 March 31, 2025, the amount of cash, cash equivalents and marketable securities held by foreign subsidiaries was $78,800. 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 may repatriate cash from its non-U.S. subsidiaries if the Company determines that it is beneficial for the company and tax efficient. The Company has accrued a deferred tax liability for withholding taxes on previously taxed earnings and profit (PTEP) which are not considered permanently reinvested. In the event we determine that additional funds from non-U.S. operations are needed to fund operations in the U.S., we will be required to accrue and pay U.S. taxes to repatriate these additional funds. Griffon's primary sources of liquidity are cash flows generated from operations, cash on hand and our secured $500,000 revolving credit facility ("Revolver"), which matures in August 2028. During the six months ended March 31, 2025, the Company generated $159,425 of net cash from operating activities and, as of March 31, 2025, the Company had $364,510 available, subject to certain loan covenants, for borrowing under the Revolver. The Company had cash and cash equivalents of $127,821 at March 31, 2025. The following table is derived from the Condensed Consolidated Statements of Cash Flows: Cash Flows from Operations For the Six Months Ended March 31, 2025 2024 Net Cash Flows Provided by (Used In): Operating activities $ 159,425 $ 185,860 Investing activities (13,599) (32,017) Financing activities (134,000) (132,043) Cash flows provided by operating activities for the six months ended March 31, 2025 was $159,425, compared to $185,860 in the prior year period. The decrease was primarily due to an increase in net working capital, mainly driven by increased inventory in the current year period versus inventory reductions in the prior year period, partially offset by decreases in accounts receivable and prepaid and other current assets. Cash flows used in investing activities is primarily comprised of capital expenditures and proceeds from the sale of property, plant and equipment. During the six months ended March 31, 2025, cash flows used in investing activities was $13,599 compared to $32,017 in the prior year period. Cash flows used in investing activities in the current period consisted of capital expenditures totaling $31,174, partially offset by proceeds of $17,575 primarily from the sale of real estate. In the prior year period, cash flows used in investing activities consisted of capital expenditures totaling $33,289, partially offset by proceeds of $1,272 from the sale of real estate. During the six months ended March 31, 2025, cash used in financing activities totaled $134,000 compared to $132,043 in the prior year period. Cash flows used in financing activities in the current period consisted of the purchase of shares of common stock in connection with the board authorized share repurchase program, including excise taxes, and from common stock withheld to satisfy tax obligations in connection with the vesting of restricted stock, totaling $121,453, and the payment of dividends of $23,441, partially offset by net proceeds from long-term debt of $10,921, primarily related to the Revolver. Cash flows used in financing activities in the prior year period consisted primarily of the purchase of shares of common stock in connection with the Board authorized share repurchase program and from common stock withheld to satisfy tax obligations in connection with the vesting of restricted stock totaling $222,421 and the payment of dividends of $21,676, partially offset by net proceeds from long-term debt of $112,316, primarily related to the Revolver. During the six months ended March 31, 2025, 583,893 shares, with a market value of $45,277, or $77.54 per share, were withheld to settle employee taxes due upon the vesting of restricted stock, and were added to treasury stock. This amount excludes excise tax benefits of $528 for the six months ended March 31, 2025. 40 Table of Contents During the six months ended March 31, 2025, the Board of Directors approved and paid two quarterly cash dividends each for $0.18 per share. During fiscal 2024, the Board of Directors approved and paid four quarterly cash dividends each for $0.15 per share, totaling $0.60 per share. The Company currently intends to pay dividends each quarter; however, payment of dividends is determined by the Board of Directors at its discretion based on various factors, and no assurance can be provided as to the payment of future dividends. On May 7, 2025, the Board of Directors declared a quarterly cash dividend of $0.18 per share, payable on June 18, 2025 to shareholders of record as of the close of business on May 30, 2025. On November 13, 2024, Griffon announced that the Board of Directors approved an additional increase of $400,000 to its share repurchase authorization. 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. Share repurchases during the six months ended March 31, 2025 totaled 1,030,372 shares of common stock, for a total of $72,868, or an average of $70.72 per share. This amount excludes excise taxes incurred for share repurchases of $716 for the six months ended March 31, 2025. As of March 31, 2025, $359,825 remained under the Board authorized repurchase program. During the six months ended March 31, 2025 and 2024, cash used in discontinued operations from operating activities was $289 and $3,273, respectively, primarily related to the settling of certain liabilities and environmental costs. During the six months ended March 31, 2025, cash provided by discontinued operations for investing activities of $137 related to proceeds from an insurance recovery. Cash and Equivalents and Debt March 31, September 30, 2025 2024 Cash and equivalents $ 127,821 $ 114,438 Notes payable and current portion of long-term debt 8,133 8,155 Long-term debt, net of current maturities 1,528,838 1,515,897 Debt discount/premium and issuance costs 13,628 15,633 Total gross debt 1,550,599 1,539,685 Debt, net of cash and equivalents $ 1,422,778 $ 1,425,247 During 2020, Griffon issued, at par, $1,000,000 of 5.75% Senior Notes due 2028 (the “2028 Senior Notes”). Proceeds from the 2028 Senior Notes were used to redeem $1,000,000 of 5.25% Senior Notes due in 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. 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. As of March 31, 2025, 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. 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 $950,406 on March 31, 2025 based upon quoted market prices (Level 1 inputs). At March 31, 2025, $5,890 of underwriting fees and other expenses incurred remained to be amortized. On January 24, 2022, Griffon amended and restated its Credit Agreement (the "Credit Agreement") to provide for a new $800,000 Term Loan B facility, due January 24, 2029, in addition to the revolving credit facility (the "Revolver") provided for under the Credit Agreement. The Term Loan B facility was issued at 99.75% of par value. Since that time, Griffon prepaid $325,000 aggregate principal amount of the Term Loan B, which permanently reduced the outstanding balance. As of March 31, 2025, the Term Loan B outstanding balance was $453,000. On June 26, 2024, Griffon further amended its Credit Agreement to favorably reprice the Term Loan B facility. The amendment reduced the margin above Secured Overnight Financing Rate ("SOFR") by 0.25%, eliminated the credit spread adjustment and reduced the SOFR floor from 0.50% to 0%. In connection with the amendment, Griffon recognized a $1,700 loss on debt extinguishment primarily consisting of the write-off of unamortized debt issuance costs and original issue discount related to portions of the Term Loan B facility that were repaid and then reborrowed from new lenders. At March 31, 2025, $4,795 of costs incurred remained to be amortized. 41 Table of Contents The Term Loan B bears interest at the Term SOFR rate plus a spread of 2.00% (6.32% as of March 31, 2025). The Term Loan B facility continues to require nominal quarterly principal payments of $2,000, potential additional annual principal payments based on a percentage of excess cash flow and certain secured leverage thresholds and a final balloon payment due at maturity. Term Loan B borrowings may generally be repaid without penalty. Once repaid, Term Loan B borrowings may not be reborrowed. The Term Loan B facility is subject to the same affirmative and negative covenants that apply to the Revolver (as described below), but is not subject to any financial maintenance covenants. Term Loan B borrowings are secured by the same collateral that secures borrowings under the Revolver, on an equal and ratable basis. The fair value of the Term Loan B facility approximated $453,000 on March 31, 2025 based upon quoted market prices (Level 1 inputs). On August 1, 2023, Griffon amended and restated the Credit Agreement to increase the maximum borrowing availability under the Revolver from $400,000 to $500,000 and extend the maturity date of the Revolver from March 22, 2025 to August 1, 2028. 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. The amendment also modified certain other provisions of the Credit Agreement, including increasing the letter of credit sub-facility under the Revolver from $100,000 to $125,000 and increasing the customary accordion feature from a minimum of $375,000 to a minimum of $500,000. The Revolver also includes a multi-currency sub-facility of $200,000. Borrowings under the Revolver may be repaid and re-borrowed at any time. Interest is payable on borrowings at either a SOFR, Sterling Overnight Index Average ("SONIA") or base rate benchmark rate, plus an applicable margin, which adjusts based on financial performance. Griffon's SOFR loans accrue interest at Term SOFR plus a credit adjustment spread and a margin of 1.75% (6.17% at March 31, 2025) and base rate loans accrue interest at prime rate plus a margin of 0.75% (8.25% at March 31, 2025). At March 31, 2025, under the Credit Agreement, there was $122,500 in outstanding borrowings on the Revolver; outstanding standby letters of credit were $12,990; and $364,510 was available, subject to certain loan covenants, for borrowing at that date. The Revolver has certain financial maintenance tests including a maximum total leverage ratio, a maximum senior secured leverage ratio and a minimum interest coverage ratio, as well as customary affirmative and negative covenants and events of default. The negative covenants place limits on Griffon's ability to, among other things, incur indebtedness, incur liens, and make restricted payments and investments. Both the Revolver and Term Loan B borrowings under the Credit Agreement are guaranteed by Griffon’s material domestic subsidiaries and are secured, on a first priority basis, by substantially all domestic assets of the Company and the guarantors. In November 2012, Garant G.P. (“Garant”), a Griffon wholly owned subsidiary, entered into a CAD 15,000 revolving credit facility, which expired in December 2024. In January 2025, Garant entered into a new CAD 20,000 revolving credit facility that matures in January 2026 but is renewable upon mutual agreement with the lender. The new facility accrues interest at Canadian Overnight Repo Rate Average ("CORRA") plus a credit adjustment spread and a margin of 1.2% (4.27% as of March 31, 2025). At March 31, 2025 there was no balance outstanding under the facility with CAD 20,000 ($13,992 as of March 31, 2025) available for borrowing. The facility is secured by substantially all of the assets of Garant. Garant is required to maintain a certain minimum equity and a minimum interest coverage ratio. During 2023, Griffon Australia Holdings Pty Ltd and its Australian subsidiaries (collectively, "Griffon Australia") amended its AUD 15,000 receivable purchase facility to AUD 30,000. The receivable purchase facility was renewed as of March 2025 and now matures in March 2026, but is renewable upon mutual agreement with the lender. The receivable purchase facility accrues interest at Bank Bill Swap Rate plus 1.25% (5.35% at March 31, 2025). At March 31, 2025, there was no balance outstanding under the receivable purchase facility with AUD 30,000 ($18,918 as of March 31, 2025) available for borrowing. 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 February 2024, Griffon repaid in full a loan with the Pennsylvania Industrial Development Authority. The balance in other long-term debt consists primarily of finance leases. At March 31, 2025, Griffon and its subsidiaries were in compliance with the terms and covenants of all its credit and loan agreements. N et debt to EBITDA (Leverage ratio), a non-GAAP measure, is a key financial measure that is used by management to assess the borrowing capacity of the Company. The Company has defined its net debt to EBITDA leverage ratio as net debt (total principal debt outstanding net of cash and equivalents) divided by the sum of trailing twelve-month (“TTM”) adjusted EBITDA (as defined above) and TTM stock-based compensation expense. Net Debt to EBITDA, as calculated in accordance with the definition in the Credit Agreement, was 2.6x at March 31, 2025. 42 Table of Contents Capital Resource Requirements Griffon's debt requirements include principal on our outstanding debt, most notably our Senior Notes totaling $974,775 payable in 2028 and related annual interest payments of approximately $56,058, a Term Loan B facility maturing in 2029 with an outstanding balance of $453,000 on March 31, 2025 and Revolver maturing in 2028 with an outstanding balance of $122,500. The Term Loan B accrues interest at the Term SOFR plus a spread of 2.00% (6.32% as of March 31, 2025). The Term Loan B facility continues to require nominal quarterly principal payments of $2,000, potential additional annual principal payments based on a percentage of excess cash flow and certain secured leverage thresholds, and a balloon payment due at maturity. The Revolver accrues interest on borrowings at either a SOFR, SONIA or base rate benchmark rate, plus an applicable margin, which adjusts based on financial performance. Griffon's SOFR loans accrue interest at Term SOFR plus a credit spread adjustment and a margin of 1.75% (6.17% at March 31, 2025) and base rate loans accrue interest at prime rate plus a margin of 0.75% (8.25% at March 31, 2025). Customers A small number of customers account for, and are expected to continue to account for, a substantial portion of Griffon’s consolidated revenue. For the six months ended March 31, 2025, our largest customer, The Home Depot, represented 10% of Griffon’s consolidated revenue, 9% of HBP’s revenue and 12% of CPP's revenue. No other customer is expected to exceed 10% of consolidated revenue. Future operating results will continue to depend substantially on the success of Griffon’s largest customers and our ongoing relationships with them. Orders from these customers are subject to change and may fluctuate materially. The loss of all or a portion of the volume from any one of these customers could have a material adverse impact on Griffon’s liquidity and results of operations. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION Griffon’s Senior Notes are fully and unconditionally guaranteed, jointly and severally by Clopay Corporation, The AMES Companies, Inc., Clopay AMES Holding Corp., ClosetMaid LLC, AMES Hunter Holdings Corporation, Hunter Fan Company, CornellCookson, LLC and Cornell Real Estate Holdings, LLC, all of which are indirectly 100% owned by Griffon. 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 March 31, 2025 and September 30, 2024 and for the six months ended March 31, 2025 and for the year ended September 30, 2024. All intercompany balances and transactions between subsidiaries under Parent and subsidiaries under the Guarantor have been eliminated. The information presented below excludes eliminations necessary to arrive at the information on a consolidated basis. The summarized information excludes financial information of the non-Guarantors, including earnings from and investments in these entities. The financial information may not necessarily be indicative of the results of operations or financial position of the guarantor companies or non-guarantor companies had they operated as independent entities. The guarantor companies and the non-guarantor companies include the consolidated financial results of their wholly-owned subsidiaries accounted for under the equity method. The indentures relating to the Senior Notes (the “Indentures”) contain terms providing that, under certain limited circumstances, a guarantor will be released from its obligations to guarantee the Senior Notes. These 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 Table of Contents Summarized Statements of Operations and Comprehensive Income (Loss) For the Six Months Ended For the Year Ended March 31, 2025 September 30, 2024 Parent Company Guarantor Companies Parent Company Guarantor Companies Net sales $ — $ 999,174 $ — $ 2,147,788 Gross profit $ — $ 433,590 $ — $ 871,822 Income (loss) from operations $ (13,919) $ 208,882 $ (25,982) $ 408,181 Equity in earnings of Guarantor subsidiaries $ 146,359 $ — $ 283,959 $ — Net income (loss) $ (29,503) $ 146,359 $ (74,331) $ 283,959 Summarized Balance Sheet Information As of March 31, 2025 As of September 30, 2024 Parent Company Guarantor Companies Parent Company Guarantor Companies Current assets $ 48,316 $ 629,945 $ 58,194 $ 635,767 Non-current assets 13,659 1,293,320 12,558 1,307,839 Total assets $ 61,975 $ 1,923,265 $ 70,752 $ 1,943,606 Current liabilities $ 51,640 $ 212,150 $ 69,556 $ 213,234 Long-term debt 1,528,719 191 1,515,669 222 Other liabilities 14,581 238,411 23,033 237,432 Total liabilities $ 1,594,940 $ 450,752 $ 1,608,258 $ 450,888 CRITICAL ACCOUNTING POLICIES The preparation of Griffon’s consolidated financial statements in conformity with accounting principles generally accepted in the United States 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. These estimates can also affect supplemental information contained in public disclosures of Griffon, including information regarding contingencies, risk and its financial condition. These estimates, assumptions and judgments are evaluated on an ongoing basis and based on historical experience, current conditions and various other assumptions, and form the basis for estimating the carrying values of assets and liabilities, as well as identifying and assessing the accounting treatment for commitments and contingencies. Actual results may materially differ from these estimates. There have been no changes in Griffon’s critical accounting policies from September 30, 2024. Griffon’s significant accounting policies and procedures are explained in the Management Discussion and Analysis section in the Annual Report on Form 10-K for the year ended September 30, 2024. In the selection of the critical accounting policies, the objective is to properly reflect the financial position and results of operations for each reporting period in a consistent manner that can be understood by the reader of the financial statements. Griffon considers an estimate to be critical if it is subjective and if changes in the estimate using different assumptions would result in a material impact on the financial position or results of operations of Griffon. RECENT ACCOUNTING PRONOUNCEMENTS The FASB issues, from time to time, new financial accounting standards, staff positions and emerging issues task force consensus. See the Notes to Condensed Consolidated Financial Statements for a discussion of these matters. FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q, especially “Management’s Discussion and Analysis”, contains certain “forward-looking statements” within the meaning of the Securities Act, the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Such statements relate to, among other things, income (loss), earnings, cash flows, revenue, changes in operations, operating improvements, the industries in which Griffon Corporation (the “Company” or “Griffon”) operates and the United States and global economies. Statements in this Form 10-Q that are not historical are hereby 44 Table of Contents identified as “forward-looking statements” and may be indicated by words or phrases such as “anticipates,” “supports,” “plans,” “projects,” “expects,” “believes,” "achieves", “should,” “would,” “could,” “hope,” “forecast,” “management is of the opinion,” “may,” “will,” “estimates,” “intends,” “explores,” “opportunities,” the negative of these expressions, use of the future tense and similar words or phrases. Such forward-looking statements are subject to inherent risks and uncertainties that could cause actual results to differ materially from those expressed in any forward-looking statements. These risks and uncertainties include, among others: current economic conditions and uncertainties in the housing, credit and capital markets; Griffon’s ability to achieve expected savings and improved operational results from cost control, restructuring, integration and disposal initiatives (including the expanded CPP global outsourcing strategy announced in May 2023); the ability to identify and successfully consummate, and integrate, value-adding acquisition opportunities; increasing competition and pricing pressures in the markets served by Griffon’s operating companies; the ability of Griffon’s operating companies to expand into new geographic and product markets, and to anticipate and meet customer demands for new products and product enhancements and innovations; increases in the cost or lack of availability of raw materials such as steel, resin and wood, components or purchased finished goods, including any potential impact on costs or availability resulting from tariffs; changes in customer demand or loss of a material customer at one of Griffon’s operating companies; the potential impact of seasonal variations and uncertain weather patterns on certain of Griffon’s businesses; political events or military conflicts that could impact the worldwide economy; a downgrade in Griffon’s credit ratings; changes in international economic conditions including inflation, interest rate and currency exchange fluctuations; the reliance by certain of Griffon’s businesses on particular third party suppliers and manufacturers to meet customer demands; the relative mix of products and services offered by Griffon’s businesses, which impacts margins and operating efficiencies; short-term capacity constraints or prolonged excess capacity; unforeseen developments in contingencies, such as litigation, regulatory and environmental matters; Griffon’s ability to adequately protect and maintain the validity of patent and other intellectual property rights; the cyclical nature of the businesses of certain of Griffon’s operating companies; possible terrorist threats and actions and their impact on the global economy; effects of possible IT system failures, data breaches or cyber-attacks; the impact of pandemics, such as COVID-19, on the U.S. and the global economy, including business disruptions, reductions in employment and an increase in business and operating facility failures, specifically among our customers and suppliers; Griffon’s ability to service and refinance its debt; and the impact of recent and future legislative and regulatory changes, including, without limitation, changes in tax laws. Additional important factors that could cause the statements made in this Quarterly Report on Form 10-Q or the actual results of operations or financial condition of Griffon to differ are discussed under the caption “Item 1A. Risk Factors” and “Special Notes Regarding Forward-Looking Statements” in Griffon’s Annual Report on Form 10-K for the year ended September 30, 2024. Such statements reflect the views of the Company with respect to future events and are subject to these and other risks, as previously disclosed in the Company's Securities and Exchange Commission filings. Readers are cautioned not to place undue reliance on these forward-looking statements. These forward-looking statements speak only as of the date made. Griffon undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.