10-K: Griffon's FY25 Net Income Plunges Amid Impairments

Griffon Corporation's fiscal year 2025 saw a significant drop in net income to $51.1 million, primarily due to substantial goodwill and intangible asset impairments in its Consumer and Professional Products segment, despite stable HBP revenue.

Summary

• Consolidated revenue decreased 4% to $2,519,926 in fiscal year 2025 compared to $2,623,520 in fiscal year 2024, driven by a 10% decline in the Consumer and Professional Products (CPP) segment.
• Net income for fiscal year 2025 was $51,110, or $1.09 per share, a significant decrease from $209,897, or $4.23 per share, in fiscal year 2024.
• The decline in net income was primarily due to pre-tax, non-cash impairment charges totaling $243,612 ($4.65 per share) for Hunter Fan's goodwill and trademark within the CPP segment.
• Adjusted net income (excluding non-cash impairment charges, restructuring, and other items) increased to $263,589, or $5.65 per share, in fiscal year 2025 from $254,247, or $5.12 per share, in fiscal year 2024.
• Gross profit margin improved to 42.0% in fiscal year 2025 from 38.9% in fiscal year 2024 (or 40.3% excluding certain charges in 2024).
• The CPP global sourcing strategy expansion was successfully completed as of September 30, 2024, resulting in a 1.2 million square feet facility footprint reduction and a headcount reduction of approximately 600.
• Griffon acquired Pope, an Australian residential watering products provider, for approximately $14,500 in cash on July 1, 2024, which generated over $25,000 in revenue in its first full year of operations.
• Cash provided by operating activities decreased by $22,602 to $357,440 in fiscal year 2025 from $380,042 in fiscal year 2024.
• The company repurchased 1,897,182 shares of common stock for $134,680 in fiscal year 2025, with $298,013 remaining under the Board-authorized repurchase program as of September 30, 2025.
• Quarterly cash dividends of $0.18 per share were declared and paid in fiscal year 2025, totaling $0.72 per share. A $0.22 per share dividend was declared on November 18, 2025, payable on December 16, 2025.

Sentiment

Score: 4

Explanation: While adjusted net income and gross margin improved, the substantial non-cash impairment charges for the Hunter Fan unit and the 4% consolidated revenue decline, particularly in the CPP segment, indicate significant operational challenges and weak consumer demand in key areas. The completion of the global sourcing strategy and increased dividends are positive, but overshadowed by the impairment and revenue contraction.

Positives

• Adjusted net income increased to $263,589 ($5.65 per share) in FY2025 from $254,247 ($5.12 per share) in FY2024, indicating improved underlying operational performance.
• Gross profit margin improved to 42.0% in FY2025 from 38.9% in FY2024, reflecting better cost management or pricing strategies.
• The CPP global sourcing strategy expansion was successfully completed, positioning the segment for a target of 15% EBITDA margin and enhanced free cash flow through improved working capital and reduced capital expenditures.
• The acquisition of Pope in Australia expanded AMES's product portfolio and contributed over $25,000 in revenue in its first full year of operations.
• Interest expense decreased 8% in FY2025 due to decreased outstanding borrowings and lower variable interest rates.
• The net debt to EBITDA leverage ratio was 2.4x at September 30, 2025, indicating manageable debt levels.
• The company continued to return capital to shareholders through quarterly cash dividends, increasing to $0.18 per share in FY2025 and declaring $0.22 per share for Q1 FY2026, and an active share repurchase program.
• Management concluded that internal control over financial reporting was effective as of September 30, 2025, with an unqualified opinion from the independent registered public accounting firm.

Negatives

• Net income significantly decreased to $51,110 ($1.09 per share) in FY2025 from $209,897 ($4.23 per share) in FY2024, primarily due to substantial impairment charges.
• Pre-tax, non-cash impairment charges of $243,612 were recorded for Hunter Fan's goodwill and trademark, driven by weak consumer demand and disrupted customer ordering patterns due to increased tariffs.
• Consolidated revenue decreased 4% in FY2025, with the CPP segment experiencing a 10% decline due to reduced consumer demand in North America and the U.K., and tariff impacts.
• Cash provided by operating activities decreased by $22,602 in FY2025 compared to FY2024.
• Home and Building Products (HBP) adjusted EBITDA decreased 1% in FY2025, primarily due to increased material, labor, and distribution costs.
• Foreign currency translation adjustments resulted in a $6,569 loss in FY2025, contributing to a total other comprehensive loss of $13,896.
• The company's effective income tax rate increased to 59.9% in FY2025 from 29.2% in FY2024, largely due to the non-deductible goodwill impairment.

Risks

• Current worldwide economic uncertainty and market volatility could adversely affect businesses, particularly the HBP and CPP segments, which are linked to the U.S. housing and commercial property markets.
• Fluctuations in inflation could negatively affect the business by decreasing demand for products and increasing operating costs for labor, raw materials, and supplies, potentially reducing operating margins if price increases cannot offset costs.
• Operating in highly competitive industries with larger competitors and increasing pricing pressures from mass merchandisers and e-commerce companies, which may source private label products from low-cost countries.
• The loss of large customers, such as Home Depot, Menards, Lowe's, or Bunnings, which account for a substantial portion of consolidated revenue, could have a material adverse effect.
• Reliance on a limited number of third-party suppliers and manufacturers globally for components and finished goods may impair the ability to meet customer demands, reduce product quality, or jeopardize customer relationships.
• Inability to obtain raw materials (resin, wood, steel, wire rod) at favorable prices or experiencing shortages could adversely impact operating performance due to price fluctuations and competitive pricing pressures.
• Increased reliance on international sourcing, especially from China, due to the expanded global sourcing strategy, exposes the company to risks from U.S. trade policy, tariffs, customs enforcement (e.g., UFLPA), and legal uncertainties in foreign jurisdictions.
• A future pandemic or similar outbreak could have a material adverse impact on businesses and operating results, potentially heightening risks related to indebtedness and cash flows.
• Businesses are subject to seasonal variations and the impact of uncertain weather patterns, such as unseasonably cool/warm temperatures, hurricanes, or lack of snow, which can adversely affect sales volumes.
• Operational disruptions or reputational harm may occur if information technology (IT) systems fail, or if the company or its third-party partners are subject to data breaches or cyber-attacks.
• The company may be unable to implement its acquisition growth strategy successfully, leading to added expenses without commensurate revenue/income increases, diversion of management's attention, or difficulties in integrating acquired businesses.
• Compliance with restrictions and covenants in debt agreements (Senior Notes, Term Loan B, Revolver) may limit the company's ability to take corporate actions, and difficulty refinancing debt could arise if market conditions are unfavorable.
• The ability to issue additional equity securities (common or preferred stock) without stockholder vote or approval could result in dilution to existing stockholders' equity interests.
• Concentration of manufacturing facilities in a few locations, including third-party facilities, makes operations vulnerable to disruptions from natural disasters, pandemics, IT failures, or other events.
• Manufacturing capacity constraints or significant increases in manufacturing costs that cannot be fully passed on to customers could adversely affect business and financial results.
• Failure to continue developing and maintaining leading brands or to realize the anticipated benefits of advertising and promotion spend could negatively impact operating results.
• The company is required to record impairment charges for goodwill and indefinite-lived intangible assets, and future impairment charges could materially and adversely affect results of operations and earnings per share.
• Failure of subcontractors or suppliers to perform their obligations could harm the company's performance, profitability, and ability to win future business.
• The company must continually improve existing products, design and sell new products, and invest in research and development to compete effectively, with inherent risks in new product development and commercialization.
• The loss of certain key officers or employees could adversely affect the business due to their material dependence on such personnel.
• Exposure to a variety of risks relating to non-U.S. sales and operations, including economic and political conditions, trade protection measures, intellectual property rights, regulatory changes, and currency exchange fluctuations.
• Violations of anti-corruption, export controls, or sanctions laws could result in severe criminal or civil sanctions and penalties, adversely affecting international business.
• Inability to adequately protect and maintain the validity of patent and other intellectual property rights, or inadvertent infringement on others' rights, could have a material adverse effect.
• Challenges with properly managing the use of artificial intelligence (AI) tools could result in reputational harm, competitive harm, and legal liability due to deficiencies, inaccuracies, cybersecurity risks, or intellectual property infringement.
• Exposure to product liability and warranty claims in the ordinary course of business, with no assurance that insurance or reserves will be adequate to cover future claims.
• Potential for material expenditures or liabilities in connection with environmental laws and regulations, including related to sites no longer owned or operated.
• Changes in income tax laws and regulations (e.g., Pillar Two, OBBBA) or exposure to additional income tax liabilities could adversely affect profitability.
• Actions taken by activist shareholders could be disruptive and costly, diverting management's attention and potentially causing instability or stock price fluctuations.

Future Outlook

Griffon intends to continue growing and strengthening its existing businesses and diversifying through investments and acquisitions. The completed CPP global sourcing strategy is expected to achieve a 15% EBITDA margin and enhance free cash flow. The company plans to file its calendar year 2024 Sustainability Report by the end of 2025 and intends to pay quarterly dividends, subject to Board discretion. Economic uncertainty and market volatility are anticipated to continue in 2026, potentially impacting the HBP and CPP segments. Decreasing average snowfall levels due to climate change are expected to reduce sales of snow tools. The company will recognize an additional retiree medical plan non-cash charge of $5,362 over the first 10 months of fiscal 2026.

Management Comments

• 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.
• Through operating a diverse portfolio of businesses, we expect to reduce variability caused by external factors such as market cyclicality, seasonality, and weather.
• 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.
• The adoption of an asset-light business model for these U.S. products has positioned CPP to better serve customers with a more flexible and cost-effective sourcing model that leverages supplier relationships around the world, and improved its competitive positioning.
• These actions will be essential for CPP to achieve its target of 15% EBITDA margin while enhancing free cash flow through improved working capital and significantly reduced capital expenditures.
• Management believes, based on facts presently known to it, that the resolution of current legal and environmental matters will not have a material adverse effect on Griffon's consolidated financial position, results of operations or cash flows.
• Management assessed the effectiveness of Griffon's internal control over financial reporting as of September 30, 2025, and concluded that it is effective.

Industry Context

Griffon's Home and Building Products (HBP) and Consumer and Professional Products (CPP) segments are closely tied to the U.S. housing and commercial property markets, making them susceptible to global economic uncertainty and market volatility. The company operates in highly competitive and fragmented industries, including sectional garage doors, commercial rolling steel doors, long-handled tools, landscaping products, home organization, and fans. It faces competition from larger players, smaller regional manufacturers, and private label products sourced from low-cost countries. Global trade tensions, particularly U.S.-China tariffs and increased customs enforcement, are impacting supply chains and costs for the CPP segment. Climate change is also noted as a factor affecting demand for seasonal products like snow tools due to decreasing snowfall.

Comparison to Industry Standards

• Clopay believes it has earned a reputation among installing dealers and retailers for producing a broad range of innovative, high-quality doors with industry-leading lead times supported by an extensive distribution network.
• Clopay's market position, brand recognition, and proprietary software applications and systems (e.g., MyClopay, MyDoor mobile app, Commercial Door Quoter) are considered unique to the industry and key marketing tools.
• CPP differentiates itself and provides value through its history of innovation, dependable supply chain, high on-time delivery rates, product quality and performance, and highly recognized product brands.
• CPP's size, depth and breadth of product offering, category knowledge, research and development investment, and ability to react to sudden changes in demand from seasonal weather patterns are cited as competitive advantages.

Management Changes

Corporate Governance

Legal Proceedings

• **Peekskill Site**: Lightron Corporation and ISC Properties, Inc. (subsidiaries) are involved in a CERCLA matter concerning chlorinated solvents and metals contamination. The EPA added the site to the National Priorities List in May 2019, and an RI/FS is expected to be completed in 2027. An insurance company is defending and covering RI costs, while Lightron and ISCP are paying for the FS. Griffon does not acknowledge responsibility.
• **Memphis, TN Site**: Hunter Fan Company (subsidiary) faces potential liability for PCB and volatile organic compound/metals contamination at a former production plant. The State of Tennessee Department of Environment and Conservation (TDEC) recommended the EPA include the site on the National Priorities List and fund an investigation. Liability is probable, and Hunter has notified a former owner. An RI/FS would be required if the site is added to the NPL, and the EPA may seek reimbursement from Hunter.
• Griffon is involved in other litigation, investigations, and claims arising from normal business operations, including commercial transactions, product liability, warranty claims, environmental, employment, and health and safety matters. Management believes the resolution of these matters will not have a material adverse effect on the company's financial position, results of operations, or cash flows.

Related Party Transactions

• On February 20, 2024, Griffon repurchased 1,500,000 shares of its common stock for $98,250 from Voss Value Master Fund, L.P., Voss Value-Oriented Special Situations Fund, L.P., and four separately managed accounts of which Voss Capital, LLC is the investment manager. Travis W. Cocke, founder of Voss Capital, LLC, resigned from the Board of Directors concurrently.
• On September 5, 2023, Griffon repurchased 400,000 shares of its common stock for $16,746 from two separately managed accounts of which Voss Capital, LLC is the investment manager, to facilitate investor redemptions.

Stakeholder Impact

• **Shareholders**: Experienced a significant decrease in reported net income and EPS due to impairment charges, but adjusted EPS showed an increase. The company continued its quarterly dividend payments and share repurchase program, indicating a commitment to shareholder returns. Potential for dilution exists from future equity issuance, and activist shareholder campaigns could cause stock price volatility.
• **Employees**: Approximately 600 employees were impacted by headcount reductions due to the CPP global sourcing strategy expansion. A new retiree medical plan was implemented for certain eligible employees. The Employee Stock Ownership Plan (ESOP) was frozen as of September 30, 2024, meaning no new participants or voluntary contributions.
• **Customers**: The CPP segment experienced reduced consumer demand in North America and the U.K., and disrupted ordering patterns due to increased tariffs. Strong relationships with major retailers (e.g., Home Depot, Menards, Lowe's, Bunnings) are critical, and the loss of any could materially impact the company.
• **Suppliers**: Increased reliance on third-party suppliers, particularly from China, due to the global sourcing strategy. Suppliers are now bound by a Supplier Code of Conduct (SCC), which extends ESG requirements throughout the supply chain. Risks include supplier financial instability and impacts from international trade policies.
• **Creditors**: The company maintains a net debt to EBITDA leverage ratio of 2.4x and is in compliance with its debt covenants. Key debt maturities include Senior Notes in 2028, the Revolver in 2028, and Term Loan B in 2029.

Next Steps

• File the calendar year 2024 Sustainability Report before the end of calendar 2025.
• The USMCA will undergo a mandatory six-year review in 2026.
• Recognize an additional retiree medical plan non-cash charge of $5,362 ratably over the first 10 months of fiscal 2026.
• Contribute $1,567 to the Clopay Ames Pension Plan and $1,813 to Supplemental Benefits in 2026.
• Evaluate the impact of the new FASB ASU 2024-03 (Income Statement Expenses) for its effective date in fiscal year 2027.

Key Dates

Recommendation

The significant non-cash impairment charges and the revenue decline in the CPP segment are concerning, reflecting weak consumer demand and tariff impacts. However, the improvement in adjusted net income and gross margin, coupled with the successful completion of the global sourcing strategy, suggest underlying operational improvements. The company's commitment to shareholder returns through dividends and share repurchases is positive. Given the mixed results and ongoing economic uncertainties, a 'Hold' recommendation is appropriate as investors await further evidence of sustained recovery in the CPP segment and the full realization of benefits from strategic initiatives.

Keywords

Diversified manufacturing, Home and Building Products, Consumer and Professional Products, Garage doors, Rolling steel doors, Hand tools, Landscaping products, Home organization, Fans, SEC filing, 10-K, Financial results, Impairment, Share repurchase, Dividends, Debt, Supply chain, Tariffs, ESG, Corporate governance