10-Q: Griffon Reports Q3 Loss Amid Impairments, HBP Strength

Griffon Corporation reported a net loss for the third quarter ended June 30, 2025, primarily due to significant goodwill and intangible asset impairment charges, despite revenue growth in its Home and Building Products segment.

Summary

• Net loss for the three months ended June 30, 2025, was $120.139 million, or $2.65 per basic and diluted share, compared to net income of $41.086 million, or $0.84 per diluted share, in the prior year quarter.
• Net income for the nine months ended June 30, 2025, was $7.474 million, or $0.16 per basic and diluted share, down from $147.406 million, or $2.94 per diluted share, in the prior year period.
• Revenue for the three months ended June 30, 2025, decreased 5% to $613.627 million from $647.814 million in the prior year quarter.
• Revenue for the nine months ended June 30, 2025, decreased 5% to $1,857.744 million from $1,963.847 million in the prior year period.
• Goodwill and intangible asset impairments totaled $243.612 million ($217.154 million net of tax) for both the quarter and nine months ended June 30, 2025, primarily related to the Hunter Fan reporting unit.
• Excluding special items, adjusted net income for the three months ended June 30, 2025, was $69.247 million, or $1.50 per share, compared to $60.526 million, or $1.24 per share, in the prior year quarter.
• Excluding special items, adjusted net income for the nine months ended June 30, 2025, was $192.719 million, or $4.11 per share, compared to $183.303 million, or $3.66 per share, in the prior year period.
• Home and Building Products (HBP) segment revenue increased 2% to $400.244 million in the current quarter, with adjusted EBITDA up 9% to $128.755 million.
• Consumer and Professional Products (CPP) segment revenue decreased 16% to $213.383 million in the current quarter, with adjusted EBITDA down to $19.222 million.
• Net cash provided by operating activities for the nine months ended June 30, 2025, was $282.481 million, compared to $307.938 million in the prior year period.
• Net debt to EBITDA leverage ratio was 2.5x at June 30, 2025.

Sentiment

Score: 3

Explanation: The significant net loss driven by substantial impairment charges (over $243 million) for the Hunter Fan reporting unit within the CPP segment indicates a material negative re-evaluation of asset values and challenges in that business unit. While adjusted net income showed growth, the reported GAAP loss and revenue decline are concerning. The underlying operational performance in HBP is positive, but the overall financial picture is significantly impacted by the impairments and weakness in CPP.

Positives

• Home and Building Products (HBP) segment revenue increased by 2% to $400.244 million in Q3 2025, driven by favorable price and mix.
• HBP adjusted EBITDA increased by 9% to $128.755 million in Q3 2025, benefiting from increased revenue and reduced material costs.
• Adjusted net income for Q3 2025 increased to $69.247 million ($1.50 per share) from $60.526 million ($1.24 per share) in Q3 2024, indicating improved underlying operational performance excluding one-time items.
• Adjusted net income for the nine months ended June 30, 2025, increased to $192.719 million ($4.11 per share) from $183.303 million ($3.66 per share) in the prior year period.
• The Consumer and Professional Products (CPP) segment benefited from the U.S. global sourcing expansion initiative, improved margins across all geographic regions, and reduced administrative expenses.
• CPP's Australian operations saw increased organic volume and incremental revenue from the Pope acquisition.
• The CPP global sourcing strategy was successfully completed ahead of schedule (September 30, 2024, versus the previously announced December 31, 2024).
• The Hunter Fan Pension Plan termination was completed in July 2025, resulting in a transfer of $6.100 million of excess cash to the company and an expected gain of approximately $2.300 million (net of excise taxes) in Q4 2025.
• The company maintains strong liquidity with $107.279 million in cash and equivalents and $449.510 million available under its Revolver as of June 30, 2025.
• The company was in compliance with all terms and covenants of its credit and loan agreements as of June 30, 2025.

Negatives

• Reported a net loss of $120.139 million for Q3 2025, a significant deterioration from net income of $41.086 million in Q3 2024.
• Incurred substantial non-cash goodwill and intangible asset impairment charges totaling $243.612 million ($217.154 million net of tax) in Q3 2025, primarily related to the Hunter Fan reporting unit within the CPP segment.
• Total revenue decreased by 5% for both the three and nine months ended June 30, 2025, compared to prior year periods.
• Consumer and Professional Products (CPP) segment revenue decreased significantly by 16% in Q3 2025, primarily due to a 19% decrease in volume.
• Reduced consumer demand across all geographic regions (except Australia) and disrupted historical customer ordering patterns in the U.S. due to increased tariffs negatively impacted the CPP segment.
• Increased labor costs partially offset positive impacts in the HBP segment for the nine months ended June 30, 2025.
• Net cash provided by operating activities decreased to $282.481 million for the nine months ended June 30, 2025, from $307.938 million in the prior year, driven by an increase in net working capital (higher inventory, lower accounts payable and accrued liabilities).

Risks

• Current economic conditions and uncertainties in the housing, credit, and capital markets.
• Inability to achieve expected savings and improved operational results from cost control, restructuring, integration, and disposal initiatives.
• Increasing competition and pricing pressures in the markets served by operating companies.
• Inability to expand into new geographic and product markets or anticipate and meet customer demands for new products.
• Increases in the cost or lack of availability of raw materials (e.g., steel, resin, 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, particularly The Home Depot, which represented 10% of consolidated revenue for the nine months ended June 30, 2025.
• Potential impact of seasonal variations and uncertain weather patterns on certain businesses.
• Political events or military conflicts that could impact the worldwide economy.
• A downgrade in credit ratings.
• Changes in international economic conditions including inflation, interest rate, and currency exchange fluctuations.
• Reliance by certain businesses on particular third-party suppliers and manufacturers to meet customer demands.
• The relative mix of products and services offered, 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, including the Peekskill Site and Memphis, TN site environmental liabilities.
• Inability to adequately protect and maintain the validity of patent and other intellectual property rights.
• The cyclical nature of the businesses of certain 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 customers and suppliers.
• Ability to service and refinance debt.
• Impact of recent and future legislative and regulatory changes, including changes in tax laws (e.g., the One Big Beautiful Bill Act).
• Risks from sourcing from international locations, especially China, for the Consumer and Professional Products (CPP) segment.

Future Outlook

The company intends to continue to grow and strengthen its existing businesses and diversify further through investments and acquisitions. It expects to reduce variability from external factors through a diverse portfolio of product offerings and brands across multiple sales channels and countries. The One Big Beautiful Bill Act (OBBBA) is currently being evaluated, but the company does not expect a material impact on its financial position or results of operations. The company currently intends to pay dividends each quarter; however, payment 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.

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."
• "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."
• "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."
• Management believes, based on facts presently known to it, that the resolution of legal and environmental matters will not have a material adverse effect on consolidated financial position, results of operations, or cash flows.

Industry Context

The filing indicates a challenging environment for the Consumer and Professional Products (CPP) segment, specifically citing "ongoing weak consumer demand" and "increased tariffs disrupting historical customer ordering patterns in the U.S." This suggests a broader industry slowdown in consumer goods and potential negative impacts from trade policies. In contrast, the Home and Building Products (HBP) segment showed resilience with revenue growth, indicating a more stable or growing demand in that sector, possibly driven by repair and remodel activities.

Corporate Governance

Legal Proceedings

• Peekskill Site: Lightron Corporation and ISC Properties, Inc. (subsidiaries) are involved in a CERCLA matter regarding chlorinated solvents and metals contamination. The EPA added the site to the National Priorities List, and a Remedial Investigation/Feasibility Study (RI/FS) is expected to be completed in 2025. An insurance company is defending and paying RI costs.
• Memphis, TN site: Hunter Fan Company (subsidiary) operated a site with potential PCB and other contamination. The State of Tennessee Department of Environment and Conservation (TDEC) recommended the EPA include the site on the National Priorities List. Liability is probable, and Hunter has notified a former owner. If the EPA adds the site, an RI/FS will be required, and the EPA may seek reimbursement.
• General legal: Subject to various environmental laws and regulations and legal proceedings arising in the ordinary course of business. Management believes these will not have a material adverse effect on consolidated financial position, results of operations, or cash flows.

Stakeholder Impact

• Shareholders: Experienced a significant net loss due to impairment, but adjusted earnings show underlying profitability. Dividends continue to be paid ($0.18 per share declared). A substantial share repurchase program remains active ($319.568 million available), potentially supporting share price.
• Employees: Headcount reduction of approximately 600 due to the CPP global sourcing expansion. The Employee Stock Ownership Plan (ESOP) was frozen as of September 30, 2024, with the final loan payment made and all shares allocated. A new Retiree Medical Arrangement was approved for senior executives.
• Customers: Reduced consumer demand and disrupted ordering patterns due to tariffs impacted the CPP segment. Reliance on a small number of customers, with The Home Depot accounting for 10% of consolidated revenue, poses a concentration risk.
• Suppliers: The global sourcing strategy for CPP leverages supplier relationships worldwide. Potential risks from increases in raw material costs or lack of availability are noted.
• Creditors: The company is in compliance with all terms and covenants of its credit and loan agreements. The net debt to EBITDA leverage ratio is 2.5x.

Next Steps

• Payment of quarterly cash dividend of $0.18 per share on September 16, 2025.
• Evaluation of the One Big Beautiful Bill Act (OBBBA) for potential impact on financial statements.
• Continued efforts to grow and strengthen existing businesses and diversify through investments and acquisitions.
• Completion of Remedial Investigation/Feasibility Study (RI/FS) for the Peekskill Site in 2025.
• Executives Ronald J. Kramer, Robert F. Mehmel, Brian G. Harris, and Seth L. Kaplan are expected to vest in the Retiree Medical Arrangement in August 2026.

Key Dates

Recommendation

While the reported net loss and significant impairment charges are a major negative, they are non-cash and reflect a re-evaluation of asset values rather than immediate cash flow issues. The underlying adjusted net income and EPS show positive growth, indicating operational improvements in core businesses, particularly HBP. The company maintains strong liquidity and is actively returning capital to shareholders through dividends and a substantial share repurchase program. The challenges in CPP due to weak consumer demand and tariffs are noted, but the company is addressing them through strategic initiatives. Given the mixed signals, a 'hold' recommendation is appropriate, allowing investors to monitor the effectiveness of strategic adjustments in CPP and the continued performance of HBP, while acknowledging the one-time impairment impact.

Keywords

Griffon Corporation, GFF, Quarterly Report, Financial Results, Net Loss, Impairment, Goodwill Impairment, Intangible Asset Impairment, Home and Building Products, HBP, Consumer and Professional Products, CPP, Clopay, AMES, Hunter Fan, Revenue, EBITDA, Cash Flow, Debt, Share Repurchase, Dividends, Risk Factors, Environmental Liabilities, Supply Chain, Consumer Demand, Tariffs