DEF: Griffon Corp. Sets 2026 Meeting, Reports Record FY25 Performance

Griffon Corporation announces its 2026 Annual Meeting of Shareholders, highlighting record adjusted EBITDA and EPS in fiscal 2025, alongside strong corporate governance and executive compensation practices.

Summary

• Griffon Corporation will hold its Annual Meeting of Shareholders on February 18, 2026, to elect eleven directors, conduct an advisory vote on executive compensation, and ratify Grant Thornton LLP as its independent auditor for fiscal year 2026.
• The company achieved record adjusted EBITDA of $522.3 million and record adjusted EPS of $5.65 in fiscal year 2025.
• Free cash flow for fiscal 2025 was $323 million, enabling the return of $174 million to shareholders through dividends and share repurchases.
• The net debt to EBITDA leverage ratio improved from 2.6x in fiscal 2024 to 2.4x in fiscal 2025.
• The Board of Directors is fully declassified, and 45% of independent directors are women or persons of color, meeting a 2022 commitment by 2024.
• The Board size was reduced from a range of twelve to fourteen directors to nine to eleven directors in 2025.
• Executive compensation is heavily performance-based, with over 81% of the CEO's and 55% of other NEOs' 2025 compensation tied to company performance.
• New long-term cash incentive awards for fiscal years 2025-2027 are based on aggregate Core EPS (75%) and Free Cash Flow (25%).
• New performance-based restricted stock grants for NEOs (November 12, 2024) vest on November 30, 2027, based on average Return on Invested Capital (ROIC) (60%) and relative Total Shareholder Return (TSR) (40%).
• The company approved the Griffon Corporation 2025 Retiree Medical Plan (RMP) for NEOs and their spouses, with vesting requirements met by August 5, 2026.
• The Employee Stock Ownership Plan (ESOP) was fully repaid and frozen in December 2024, with new discretionary profit-sharing contributions to the 401(k) plan beginning in calendar year 2025.
• Shareholder outreach indicated strong approval (89.7%) for the say-on-pay proposal at the March 11, 2025 annual meeting.
• ESG was removed as a performance metric for the fiscal 2025 short-term bonus program based on prior shareholder feedback, but the company continues to track and report on ESG progress.

Sentiment

Score: 8

Explanation: The company demonstrates robust financial health with record adjusted EBITDA and EPS, significant free cash flow, and a strong balance sheet with reduced leverage and no near-term debt maturities. Proactive corporate governance, including board diversity and declassification, along with a performance-aligned executive compensation structure, indicates sound management. The company's TSR has outperformed its peer group, suggesting effective strategy execution. While net income and revenue saw some declines, these were largely attributed to non-cash impairments and strategic shifts, with adjusted metrics showing robust growth.

Positives

• Achieved record adjusted EBITDA of $522.3 million in fiscal 2025.
• Achieved record adjusted EPS of $5.65 in fiscal 2025.
• Generated substantial free cash flow of $323 million in fiscal 2025.
• Returned $174 million to shareholders through dividends and share repurchases in fiscal 2025.
• Improved net debt to EBITDA leverage ratio from 2.6x to 2.4x in fiscal 2025.
• Strong balance sheet and solid free cash flow provide flexibility for capital returns, debt reduction, and strategic acquisitions.
• Met the goal of 40% women or persons of color among independent directors by 2024, ahead of the 2025 commitment.
• Board is fully declassified by 2024, enhancing accountability.
• Reduced Board size from 12-14 to 9-11 directors in 2025, streamlining governance.
• Executive compensation is heavily performance-based (81% for CEO, 55% for other NEOs in FY2025).
• Shareholder approval of executive compensation (say-on-pay) was 89.7% at the 2025 annual meeting.
• Long-term cash incentive plan and equity awards incorporate free cash flow, ROIC, and relative TSR metrics, aligning with shareholder interests.
• No significant debt maturity until 2028, indicating strong financial health.
• Successful and on-budget completion of the global sourcing strategy for the CPP segment by end of fiscal 2024, ahead of schedule.
• Strong growth in Home and Building Products business, generating almost $100 million more in EBITDA in fiscal 2023 compared to fiscal 2022, and maintaining similar levels in fiscal 2024 and 2025.

Negatives

• Net cash provided by operating activities from continuing operations decreased from $380.0 million in 2024 to $357.4 million in 2025.
• Revenue decreased from $2,623,520 thousand in 2024 to $2,519,926 thousand in 2025.
• Income (loss) before taxes from continuing operations decreased significantly from $296.7 million in 2024 to $127.4 million in 2025, primarily due to goodwill and intangible asset impairments.
• Earnings (loss) per share from continuing operations decreased from $4.23 in 2024 to $1.09 in 2025, also due to impairments.
• The ESOP was frozen in December 2024, meaning no additional employees will become participants and no new voluntary contributions will be made.
• Net Income declined significantly in 2022 and 2025 due to non-cash impairment charges.
• The global sourcing strategy for the CPP segment involved eliminating over 600 jobs and closing facilities, which presented challenges related to retaining and motivating employees.

Risks

• Ongoing uncertainties and challenges relating to the U.S. and global economies (e.g., U.S. tariffs, international military conflicts, interest rate volatility, shaky consumer confidence).
• Uncertainty regarding future trends relating to residential and commercial construction, remodeling, and renovation, which directly impacts the company's businesses.
• Challenges in retaining and motivating employees during strategic initiatives involving job eliminations and facility closures (e.g., CPP global sourcing strategy).
• Potential for excessive risk-taking by executives if compensation programs are not properly structured.
• The inherent tension between maintaining a strong working capital position and mandates to increase earnings growth through acquisitions and return cash to shareholders.
• Decisions regarding share repurchases and acquisitions are not ultimately within management's control, potentially impacting working capital targets.
• Net Income can be significantly impacted by non-cash impairment charges, as seen in 2022 and 2025.

Future Outlook

The company's strong balance sheet, solid free cash flow, and proven ability to access capital markets provide flexibility to return capital to shareholders, reduce debt, and/or pursue strategic acquisitions. Management is tasked with determining how capital is best deployed for future growth, including potential acquisitions and divestitures. The company is always open to opportunities that may arise to maximize shareholder value, and the Compensation Committee sets robust targets for growth, indicating an expectation of continued strong performance.

Management Comments

• Our 2025 operating results continue to reflect the impact of the strategic actions taken to strengthen Griffon and position ourselves for additional growth and increased profitability, while providing the flexibility to return substantial capital to shareholders.
• Our business model is delivering results. We generated record adjusted EBITDA and adjusted earnings per share (EPS), and substantial free cash flow, in fiscal 2025.
• Our strong balance sheet, coupled with our solid free cash flow and proven ability to access the capital markets, provides flexibility to return capital to shareholders, reduce debt and/or pursue strategic acquisitions.
• We recognize that strong corporate governance contributes to long-term shareholder value. We strive to ensure that our corporate governance reflects best practices tailored, as necessary, to our culture, goals and strategy.
• We strive to provide incentives to senior management to achieve both short-term and long-term objectives and to reward exceptional performance. We believe our compensation practices and our overall level of executive compensation reflect our commitment to performance-based pay.
• We believe the Company's performance in recent years demonstrates that our compensation programs create incentives that produce strong operational results and increase value for shareholders.
• We are committed to having a regular, ongoing dialogue with our significant shareholders and encouraged each such shareholder to reach out at any time with any concerns it might have.
• We are, however, always open to opportunities that may arise to maximize shareholder value.

Industry Context

The company acknowledges ongoing uncertainties and challenges in the U.S. and global economies, including U.S. tariffs, international military conflicts, interest rate volatility, and shaky consumer confidence. It also notes the uncertainty in residential and commercial construction, remodeling, and renovation, which directly impacts its businesses. The company's peer group for executive compensation consists mostly of public companies in the building products and consumer products industries, with some diversified manufacturing companies, reflecting its diversified business model.

Comparison to Industry Standards

• The company's Total Shareholder Return (TSR) has substantially outperformed the Dow Jones Diversified Industrials Index (Peer Group TSR) for the period fiscal 2021 to fiscal 2025.
• The company adopted a maximum performance level of 300% of target for equity awards, aligning with a number of companies in the marketplace.
• Return on Invested Capital (ROIC) is utilized as a performance metric, which is commonly used by institutional investors and ISS to evaluate portfolio stocks and by many public companies for incentive compensation.
• Free Cash Flow is used as a performance metric, recognized as a strong indicator of value creation and a standard metric for investors.
• Core EPS is used as a performance metric, with a historical correlation to stock price and potential for increasing shareholder value.
• The company is included in a minority of public companies that has granted almost exclusively performance-based equity awards to its named executive officers in recent years.

Management Changes

Corporate Governance

Related Party Transactions

• A written policy requires review and pre-approval of all potential transactions valued at greater than $50,000 involving the company or any directors, executive officers, stockholders owning greater than 5% of any class of securities, or their immediate family members.
• The Audit Committee evaluates and authorizes transactions over $120,000, while the Chief Executive Officer handles transactions between $50,000 and $120,000 (unless the CEO is a related person).

Stakeholder Impact

• Shareholders: Benefited from $174 million returned through dividends and share repurchases. Strong financial performance (record adjusted EBITDA and EPS) and improved leverage ratio are positive. Enhanced corporate governance and alignment of executive compensation with shareholder interests. Say-on-pay approval indicates satisfaction.
• Employees: Over 600 jobs eliminated and facilities closed in the CPP segment due to global sourcing strategy, presenting retention and motivation challenges. The ESOP was frozen, but new 401(k) profit-sharing contributions were initiated. Executive officers receive competitive compensation, benefits, and a new retiree medical plan.
• Customers: Global sourcing strategy for CPP aims to maintain product quality and ensure continuous supply.
• Creditors: Improved net debt to EBITDA leverage ratio and no significant debt maturity until 2028 indicate reduced credit risk.
• Management: Compensation heavily tied to performance, with new long-term incentives and equity awards. New Retiree Medical Plan provides significant benefits.

Next Steps

• Annual Meeting of Shareholders on February 18, 2026, to vote on director elections, executive compensation, and auditor ratification.
• Continued execution of Griffon's strategic plan to maximize shareholder value.
• Ongoing analysis of capital allocation, business line expansion/curtailment/disposal, and diversification into new business lines.
• Management to continue negotiating and arranging multiple financings while maintaining a strong balance sheet.
• The Board can, at any future point, determine to unfreeze the ESOP by causing additional voluntary contributions.
• Discretionary profit-sharing contributions to the 401(k) plan for U.S. employees, beginning with calendar year 2025.

Key Dates

Recommendation

The company demonstrates robust financial health with record adjusted EBITDA and EPS, significant free cash flow, and a strong balance sheet with reduced leverage and no near-term debt maturities. Proactive corporate governance, including board diversity and declassification, along with a performance-aligned executive compensation structure, indicates sound management. The company's TSR has outperformed its peer group, suggesting effective strategy execution. While there were some non-cash impairments and revenue decline, the underlying adjusted operational metrics are very strong, and the company is positioned for continued growth and shareholder returns through strategic capital allocation and potential acquisitions.

Keywords

Proxy Statement, Annual Meeting, Corporate Governance, Executive Compensation, Financial Performance, Adjusted EBITDA, Adjusted EPS, Free Cash Flow, Net Debt, Shareholder Value, Board of Directors, Director Election, Audit Committee, Grant Thornton LLP, Compensation Committee, Risk Management, Stock Ownership Guidelines, Clawback Policy, Insider Trading, Retiree Medical Plan, ESOP, Capital Allocation, Acquisitions, Divestitures, Strategic Initiatives, Supply Chain, Home and Building Products, Consumer and Professional Products, Russell 2000, TSR, ROIC