CSW Industrials Annual Report 2021

FY2021 Annual Report · CSW Industrials
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2021
Annual Report  
to Shareholders

CSW Industrials, Inc. is a diversiﬁed industrial growth company with well-established, scalable platforms 
and domain expertise across two segments: Industrial Products and Specialty Chemicals. 

Through its broad portfolio of products, CSWI delivers solutions to help customers optimize 
performance, serving the HVAC/R, rail, plumbing, architecturally-speciﬁed building products, energy, 
mining and general industrial markets.

A letter to CSWI’s 
stakeholders

Joseph B. Armes
Chairman, CEO and President

Our Fiscal 2021 
Performance
As  we  began  fiscal  2021  amid  the 
backdrop of the COVID-19 pandemic, 
a global recessionary environment and 
signiﬁcant uncertainty within our served 
end markets, we articulated four guiding 
objectives: treating our employees well; 
serving our customers well; effectively 
managing  our  supply  chains;  and 
positioning the Company for sustainable, 
long-term success. With these objectives 
in  mind,  we  began  fiscal  2021  well 
positioned to successfully navigate near-
term uncertainty with singular focus on 
emerging as an even stronger company.

I am proud to report that fiscal 2021 
was, by many measures, our best year 
on  record.  Our  achievements  were 
enabled by the strength of our diversified 
business  model,  our  team’s  tireless 

work and dedication, and our continued 
strategic and disciplined allocation of 
capital. Not only did our sustainable 
business  model  demonstrate  its 
strength and resilience, but with the 
support of our strong balance sheet, we 
executed on all aspects of our capital 
allocation strategy, including:

 (cid:122) Investing in inorganic growth, including 
the $360 million acquisition of TRUaire 
and  its  leading  portfolio  of  grilles, 
registers  and  diffusers  for  HVAC 
systems in December 2020;

 (cid:122) Returning $15.4 million to stockholders 
t h r o u g h   d i v i d e n d s   a n d   s h a r e 
repurchases; and

 (cid:122) Investing  $8.8  million  in  capital 
expenditures  and  forming  the  Shell 
& Whitmore Reliability Solutions joint 
venture just after the end of the ﬁscal 
year,  all  focused  on  fueling  organic 
growth. 

Revenue
(in millions)
2021

2020

2019

Adjusted Operating Income
(in millions)
2021

$419.2

$385.9

$350.1

$72.8

$66.4

2020

2019

Operating Cash Flow
(in millions)

2021

2020

2019

$58.6

$66.2

$71.4

$68.1

Total Shareholder Return

%
250

200

150

100

50

0

-50

204.0%

51.1%
37.9%

2018

2019

2020

2021

CSWI

RusseII 2000

Custom Peer Group

All these actions ultimately translated 
into impressive financial results, despite 
the unique challenges of the last year. 
Consolidated revenue from continuing 
operations increased 8.6% to $419.2 
million.  Adjusted  operating  income 
increased 9.6% to $72.8 million. 

Adjusted net earnings from continuing 
operations  were  $51.0  million,  or 
$3.37 per share, an increase of 5.3% 
on adjusted earnings per share from 
the prior year. All of this translated to 
impressive returns for our shareholders, 
with  a  total  shareholder  return  of 
over 109% in fiscal 2021, and a total 
shareholder  return  of  204%  over 
the last three years, as compared to 
Russell 2000 Index returns of 93.4% 
and 51.1%, respectively.

Throughout the year, our team continued 
to  demonstrate  a  commitment  to 
maintaining a conservative financial 
position, including a strong resilient 
balance  sheet,  ongoing  access  to 
capital, and ample liquidity. We ended 
fiscal 2021 with $10.1 million of cash 
on hand and delivered cash flow from 
operations  of  $66.3  million,  even 
with the one-time transaction costs 
associated with growth investments 
during the year. Additionally, at year end 
our pro forma leverage ratio was 1.9x, 
and shortly after year end, we executed 
a new $400 million, five-year revolving 
credit  facility  to  ensure  continued 
ample liquidity. These actions further 
strengthened our balance sheet and 
provided ready access to capital for 
future growth opportunities.

Culture and Corporate 
Responsibility
For many years, I have emphasized our 
steadfast commitment to our employee-
centric culture where we recognize that 
our  talented  employees  are  our  most 
valuable  asset  and  believe  that  our 
skilled, engaged workforce represents a 
true competitive advantage. Corporate 
responsibility  lies  at  the  heart  of  our 
culture and speaks directly to our core 
values of Integrity, Respect, Excellence, 
Stewardship, Citizenship, Accountability 
and Teamwork. Driven by our executive 
leadership team, sustainability inﬂuences 
how we operate our business, take care 
of our people, and serve our customers.

At CSWI, how we succeed matters. We 
live out our commitment to doing the right 
things the right way by ﬁrst taking care of 
the health, safety, and wellbeing of our 
employees. We are committed to creating 
and maintaining a safe, heathy working 
environment, and we have developed a 
health and safety program that focuses 
on ensuring our employees understand 
this commitment. 

This  year  underscored  for  us  the 
importance of keeping our employees 
safe  and  healthy.  In  response  to  the 
pandemic,  we  developed  a  business 
continuity  plan  that  was  aligned  with 
guidance  from  the  World  Health 
Organization and the Centers for Disease 
Control and Prevention to protect the 
health  and  safety  of  our  workforce 
and enable us to continue to serve our 
customers. Supported by these efforts, 
all  our  production  sites  maintained 
operations  throughout  the  pandemic 
with  minimal  disruption.  To  enable 
this business continuity, we mobilized 
nearly 100% of our non-manufacturing 
employees to remote work or flexible 
work  arrangements;  strengthened 
programs focused on employee wellness, 
including paid leave for personal or family 
illness; and limited non-essential travel. 

We are most proud of the fact that we 
had zero pandemic-related furloughs, 
layoffs  or  reductions  in  force  in  fiscal 
2021.  Despite  short-term  pandemic 
driven demand degradation in some of 
our end markets, this commitment to our 
employees enabled us to retain important 
institutional knowledge and experience, 
increase  business  continuity,  and 
bolster employee retention. Additionally, 
we  are  proud  to  have  maintained 
our  comprehensive  and  competitive 
retirement, benefit, and profit sharing 
plans  without  interruption,  including 
our Employee Stock Ownership Plan, 
through which our employees collectively 
own over 4% of CSWI, strongly aligning 
CSWI’s employees’ interests with the 
interests of our stockholders.

Looking Forward
Our team delivered tremendous ﬁnancial 
performance in a very challenging ﬁscal 
2021 through disciplined and strategic 
execution, which leaves us well positioned 
for continued success and sustainable 
long-term growth. We remain focused on 

continuing to drive growth in excess of the 
end markets we serve as well as building 
on favorable market trends and delivering 
on our commitments to our employees, 
customers, and stockholders.

The four guiding objectives with which 
we began fiscal 2021 will continue to 
serve us well into the 2022 ﬁscal year. We 
believe that continuing to focus ﬁrst on 
treating our employees well will serve as 
the foundation and catalyst for success. 
Moreover, it enables achievement of the 
other objectives, as our second guiding 
objective of serving our customers well – 
and realizing the organic growth beneﬁts 
that  come  from  positive,  long-term 
relationships — cannot happen without 
an engaged, fulﬁlled workforce. 

Acknowledging  that  external  factors 
such  as  supply  chain  challenges  and 
cost inﬂation could moderate the positive 
effects  of  anticipated  improvement  in 
market  conditions,  our  third  guiding 
objective  keeps  us  focused  on  the 
ongoing  need  to  manage  our  supply 
chains well. The strength of our balance 
sheet and financial position enables us 
to strategically anticipate supply chain 
challenges and proactively address them. 
As we execute on these guiding objectives, 
we will continue to invest in financially 
and strategically attractive growth, thus 
addressing our fourth guiding objective—
positioning the company for sustainable, 
long-term success. 

In closing, I would like to recognize my fellow 
CSW Industrials Board member, William 
Quinn, who will be retiring from our Board 
at the 2021 Annual Meeting.  Mr. Quinn 
was one of ﬁve original Board members 
when we became an independent public 
company in September 2015 and has 
contributed meaningfully to making CSW 
Industrials the company it is today. I know 
you will join me in thanking Mr. Quinn for 
his years of distinguished service to the 
Company and the important leadership 
role he has played in our collective success.

On behalf of all of my colleagues and 
fellow stockholders at CSW Industrials, 
thank you for your continued support of 
our company.

Very truly yours,

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the ﬁscal year ended March 31, 2021 
OR

  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     .
Commission ﬁle number 001-37454

CSW INDUSTRIALS, INC.

(Exact name of registrant as speciﬁed in its charter)

DELAWARE
(state or other jurisdiction of incorporation or organization)
5420 Lyndon B. Johnson Freeway, Suite 500, Dallas, Texas
(Address of principal executive ofﬁces)

47-2266942
(I.R.S. Employer Identiﬁcation No.)
75240
(zip code)

(214) 884-3777
Registrant’s telephone number, including area code:

Title of each class
Common Stock, par value $0.01 per share

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Trading symbol (s)
CSWI

Name of each exchange on which registered
Nasdaq Stock Market LLC

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: 
NONE

Indicate by check mark

YES

NO

(cid:122)  if the registrant is a well-known seasoned issuer, as deﬁned in Rule 405 of the Securities Act.

(cid:122)  if the registrant is not required to ﬁle reports pursuant to Section 13 or Section 15(d) of the Act.
(cid:122)  whether the registrant (1) has ﬁled all reports required to be ﬁled by Section 13 or 15(d) of the Securities 
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was 
required to ﬁle such reports) and (2) has been subject to such ﬁling requirements for the past 90 days.
(cid:122)  whether the registrant has submitted electronically every Interactive Data File required to be submitted 
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or 
for such shorter period that the registrant was required to submit such ﬁles).

(cid:122)  whether the registrant is a large accelerated ﬁler, an accelerated ﬁler, a non-accelerated ﬁler, smaller reporting company, or an emerging 
growth company. See the deﬁnitions of “large accelerated ﬁler,” “accelerated ﬁler,” “smaller reporting company,” and “emerging growth 
company” in Rule 12b-2 of the Exchange Act.

Large accelerated ﬁler 

Accelerated ﬁler 

Non-accelerated ﬁler 
(Do not check if smaller 
reporting company)

Smaller reporting company 

Emerging growth company 

(cid:122)  If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition 
period for complying with any new or revised ﬁnancial accounting standards provided pursuant to Section 13(a) of the 
Exchange Act.

(cid:122)  whether the registrant has ﬁled a report on and attestation to its management’s assessment of the effectiveness of its 
internal control over ﬁnancial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered 
public accounting ﬁrm that prepared or issued its audit report.

(cid:122)  whether the registrant is a shell company (as deﬁned in Rule 12b-2 of the Exchange Act).

The aggregate market value of the registrant’s common stock held by non-afﬁliates, based on the last sale price for the common stock 
as reported by the Nasdaq Global Select Market on September 30, 2020, the last business day of our most recently completed second 
ﬁscal quarter was approximately $1,116.8 million.
As of May 12, 2021, the latest practicable date, 15,687,489 shares of the registrant’s common stock, par value $0.01 per share, 
were issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
Certain information contained in the deﬁnitive proxy statement for the registrant’s Annual Meeting of Stockholders is incorporated by 
reference into Part III hereof.

 
 
 
 
 
 
Table of Contents

Part I 

Item 1:  Business 

Item 1A:  Risk Factors 

Item 1B:  Unresolved Staff Comments 

Item 2:  Properties 

Item 3: 

Legal Proceedings 

Item 4:  Mine Safety Disclosures 

Part II 

Item 5: 

 Market for Registrant’s Common Equity, Related Stockholder Matters and 
Issuer Purchases of Equity Securities 

Item 6:  Selected Financial Data 

Item 7: 

 Management’s Discussion and Analysis of Financial Condition and Results 
of Operations 

Item 7A:  Quantitative and Qualitative Disclosures About Market Risk 

Item 8: 

Financial Statements and Supplementary Data 

Item 9: 

 Changes in and Disagreements with Accountants on Accounting and 
Financial Disclosure 

Item 9A:  Controls and Procedures 

Item 9B:  Other Information 

Part III 

Item 10:  Directors, Executive Officers and Corporate Governance 

Item 11:  Executive Compensation 

Item 12: 

 Security Ownership of Certain Beneficial Owners and Management and Related 
Stockholder Matters 

Item 13:  Certain Relationships and Related Transactions, and Director Independence 

Item 14:  Principal Accounting Fees and Services 

Part IV 

Item 15:  Exhibits, Financial Statement Schedules 

Signatures 

1

1

10

19

19

19

19

20

20

22

23

33

34

70

71

73

74

74

74

74

74

74

75

75

77

Unless otherwise speciﬁed, or the context otherwise requires, the references in this Annual Report on Form 10-K for the ﬁscal year ended March 31, 2021 
(“Annual Report”) to “our company,” “we,” “us,” “our” or “CSWI” refer to CSW Industrials, Inc. together with our wholly-owned subsidiaries.

Part I
Item 1:  Business

General

CSWI  is  a  diversified  industrial  growth  company  with  well-
established, scalable platforms and domain expertise across two 
business segments: Industrial Products and Specialty Chemicals. 
Our broad portfolio of leading products provides performance 
optimizing  and  life  safety  solutions  to  our  customers.  Our 
products include mechanical products for heating, ventilation, 
air conditioning and refrigeration (“HVAC/R”), grilles, registers and 
diffusers, building safety solutions and high-performance specialty 
lubricants and sealants. End markets that we serve include 
HVAC/R, architecturally-speciﬁed building products, plumbing, 
energy, rail, mining and general industrial. Our manufacturing 
operations are concentrated in the United States (“U.S.”), Canada 
and Vietnam, and we have distribution operations in the U.S., 
Australia, Canada and the United Kingdom (“U.K.”). Our products 
are sold directly to end users or through designated channels 
in over 100 countries around the world, including: Australia, 
Belgium, Brazil, Canada, China, Colombia, Germany, Japan, 
the Netherlands, Russia, Saudi Arabia, Singapore, South Africa, 
Sweden, the U.K., United Arab Emirates and the U.S.

Drawing on our innovative and proven technologies, we seek to 
deliver solutions primarily to our professional end-use customers 
that place a premium on superior performance and reliability. We 
believe our industrial brands are well-known in the speciﬁc end 
markets we serve and have a reputation for high quality. We rely on 
both organic growth and inorganic growth through acquisitions to 
provide an increasingly broad portfolio of performance optimizing 
solutions that meet our customers’ ever-changing needs. We have 
a successful record of making attractive, synergistic acquisitions 
in support of this objective, and we remain focused on identifying 
additional acquisition opportunities in our core end markets.

Through our operating companies, we have a well-established 
legacy  of  providing  high  quality  products  accompanied  by 
dependable service and attention to customer satisfaction. For 
example, our specialty lubricants were used on the excavation 
equipment for the Panama Canal. We also have a long history 
of innovation, and as an example, we believe that we were the 
pioneers of the acid neutralizer market, being the ﬁrst to develop 
a method for removing internal acid from air conditioning and 
refrigeration systems. We partner with our customers to solve 
speciﬁc challenges and have developed a robust line of chemical 
and mechanical products. These products are distributed through 
an extensive wholesale distribution network serving the plumbing, 
industrial, HVAC/R, construction, electrical, and hardware market 
places. Many of our products have built a strong following among 
contractors due to their differentiated performance and from being 
the ﬁrst to tackle challenges faced by the professional trades.

CSWI is a Delaware corporation and was incorporated in 2014 
in anticipation of CSWI’s separation from Capital Southwest 
Corporation (“Capital Southwest”); however, our history dates 
back many decades through our well-established operating 
companies. The separation was executed on September 30, 2015 
through a pro-rata share distribution of all the then outstanding 
shares of common stock of CSWI to the holders of common 
stock of Capital Southwest (the “Share Distribution”). Since the 
separation, CSWI has been an independent, publicly-traded 
company, listed on the Nasdaq Global Select Market.

  |  2021 Annual Report

1

Part I
Item 1  Business

Business Segments

We operate in two business segments: Industrial Products and Specialty Chemicals. The table below provides an overview of these 
business segments. For ﬁnancial information regarding our segments, see Note 19 to our consolidated ﬁnancial statements included 
in Item 8 Financial Statements and Supplementary Data (“Item 8”) of this Annual Report.

Business Segment

Principal Product Categories

Key End Use Markets

Representative Industrial Brands

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Industrial Products

 (cid:122) Building safety products including 
custom-engineered railings and 
expansion joints

 (cid:122) Grilles, registers and diffusers
 (cid:122) Fire and smoke protection products
 (cid:122) Specialty mechanical products
 (cid:122) Storage, ﬁltration and application 

equipment for use with our specialty 
chemicals and other products for 
general industrial applications

 (cid:122) Architecturally-speciﬁed  

building products

 (cid:122) Commercial construction
 (cid:122) General industrial
 (cid:122) Electrical
 (cid:122) HVAC/R
 (cid:122) Plumbing
 (cid:122) Rail car and locomotive

Specialty Chemicals

 (cid:122) Adhesives/solvent cements
 (cid:122) Anti-seize compounds
 (cid:122) Chemical formulations
 (cid:122) Degreasers and cleaners
 (cid:122) Drilling compounds
 (cid:122) Firestopping sealants and caulks
 (cid:122) Lubricants and greases
 (cid:122) Penetrants
 (cid:122) Pipe thread sealants

 (cid:122) Cement
 (cid:122) Commercial construction
 (cid:122) Electrical
 (cid:122) Energy
 (cid:122) General industrial
 (cid:122) HVAC/R
 (cid:122) Infrastructure drilling and boring
 (cid:122) Mining
 (cid:122) Oil and gas
 (cid:122) Plumbing
 (cid:122) Power generation
 (cid:122) Rail
 (cid:122) Steel
 (cid:122) Water well drilling

2

  |  2021 Annual Report

Part I
Item 1  Business

Industrial Products

Our Industrial Products segment consists of: specialty mechanical 
products; grilles, registers and diffusers; ﬁre and smoke protection 
products; architecturally-speciﬁed building products; and storage, 
ﬁltration and application equipment for use with our specialty 
chemicals and other products for general industrial applications. 
Generally, we manufacture industrial products internally, although 
we strategically engage third-party manufacturers for certain 

products. We ensure the quality of internally- and externally-
manufactured products through our stringent quality control review 
procedures. The safety and sustainability of our building products 
enables them to be easily incorporated into the Leadership in 
Energy and Environmental Design (“LEED”) Building market. 

Our key product types and brand names are shown below:

Product Types

Specialty Mechanical Products

 (cid:122) air diffusers for use by professional air conditioning contractors
 (cid:122) condensate removal pumps and equipment mounting brackets
 (cid:122) condensate switches, traps and pans
 (cid:122) grilles, registers and diffusers
 (cid:122) decorative roof drain downspout nozzles
 (cid:122) drain waste and vent systems mechanical products
 (cid:122) ductless mini-split systems installation support tools  

and accessories
 (cid:122) equipment pads
 (cid:122) line set covers
 (cid:122) tamper resistant locking refrigerant caps
 (cid:122) wire pulling head tools

Fire and Smoke Protection Products

 (cid:122) ﬁre-rated and smoke-rated opening protective systems

Architecturally-Speciﬁed Building Products

 (cid:122) architectural grating
 (cid:122) engineered railing
 (cid:122) entrance mats and grids
 (cid:122) expansion joint covers
 (cid:122) ﬁre barriers
 (cid:122) partition closure systems
 (cid:122) photoluminescent egress markings and signage
 (cid:122) specialty silicone seals
 (cid:122) stair nosings
 (cid:122) trench and access covers

Storage, Filtration and Application Equipment

 (cid:122) lubrication application and management systems
 (cid:122) storage and ﬁltration devices

Brand Names

 (cid:122) Airtec®
 (cid:122) AquaGuard®
 (cid:122) All-Access®
 (cid:122) ArmorPadTM
 (cid:122) Clean Check®
 (cid:122) EZ Trap®
 (cid:122) Fortress®
 (cid:122) Goliath®
 (cid:122) G-O-N®
 (cid:122) HubsetTM
 (cid:122) Kickstart®
 (cid:122) Magic Vent®
 (cid:122) Mighty BracketTM
 (cid:122) Novent®
 (cid:122) Safe-T-Switch®
 (cid:122) Slim DuctTM
 (cid:122) SureSeal®
 (cid:122) TitanTM
 (cid:122) TRUaire
 (cid:122) Wire GrabberTM
 (cid:122) Wire SnaggerTM

 (cid:122) FIRE+SMOKE®
 (cid:122) Smoke Guard®

 (cid:122) Balco®
 (cid:122) DuraFlexTM
 (cid:122) Greco®
 (cid:122) llumiTreadTM
 (cid:122) MetaBlock®
 (cid:122) MetaFlex®
 (cid:122) MetaGrateTM
 (cid:122) MetaMatTM
 (cid:122) Michael Rizza
 (cid:122) UltraGridTM

 (cid:122) Air Sentry®
 (cid:122) Guardian®
 (cid:122) Oil Safe®
 (cid:122) Whitmore RailTM

New Product Development

Customer experience is a core competency in our Industrial 
Products segment. We gather “voice of the customer” market 
research through organized focus groups and online surveys, as 
well as through less formal channels. Ideas for new products or 
enhancements to existing products are also generated by our 
relationships with end users, independent sales representatives, 

distributors and our internal sales and marketing team. We also 
actively monitor the competitive landscape. We develop new 
products and modify existing products in our research and 
development (“R&D”) labs in Houston, Texas; Rockwall, Texas; 
Boise, Idaho; and Wichita, Kansas.

  |  2021 Annual Report

3

Part I
Item 1  Business

Competition

Customers

Our competition in the Industrial Products segment is varied. 
Competitors range from small entrepreneurial companies with 
a  single  product,  to  large  multinational  original  equipment 
manufacturers (“OEMs”). In the specialty mechanical products 
category, we compete with Diversitech, Supco, Little Giant, Oatey, 
Mainline, Jay R. Smith and others. Most of our products are sold 
through distribution channels, and we compete in this channel 
based on breadth of product line, customer service and pricing. 
In the ﬁre and smoke protection category, we compete with Won 
Door, Stoebich, McKeon and others, typically on the basis of 
product innovation, knowledge of building codes and customer 
service. In the architecturally-speciﬁed building products category, 
we compete primarily with Emseal, Inpro, and MM Systems on 
the basis of product innovation, price and driving architectural 
specifications. In the lubricant storage, filtration and transfer 
space, we compete with Des-Case, Hy-Pro, IFH and others on 
the basis of superior performance, brand strength and breadth 
of product line.

Our primary customers for specialty mechanical products are 
HVAC/R, plumbing and electrical wholesalers and distributors. 
Some of these are single location distributors, but many are 
regional or national in scope with hundreds of locations. The 
majority of these products are sold domestically; however, a small 
portion is sold internationally through similar channels, and a small 
number of OEMs purchase these products directly. Fire and smoke 
protection products are sold through internal sales and installation 
teams, as well as local building products distributors that also 
perform installations and service. Architecturally-speciﬁed building 
products are sold primarily through a network of distributors. 
Storage, ﬁltration and application products are marketed and 
sold worldwide through a service-intensive distribution network.

Seasonality

A signiﬁcant portion of our products are sold into the HVAC/R 
market, which is seasonal by nature. While products are sold 
throughout the year, revenues tend to peak during the spring 
and summer months.

Specialty Chemicals

Our Specialty Chemicals segment manufactures and supplies 
highly specialized consumables that impart or enhance properties 
such as lubricity, anti-seize qualities, friction, sealing and heat 
control. In addition, the segment includes penetrants, pipe thread 
sealants, firestopping sealants and caulks and adhesives/solvent 
cements, which are primarily blended at our facilities to create 
proprietary premium products. These highly-specialized products 
are typically used in harsh operating conditions, including extreme 
heat and pressure and chemical exposure, where commodity 
products would fail. These products protect and extend the 
working life of large capital equipment such as cranes, rail systems, 
mining equipment, oil rigs and rotating and grinding equipment 

found in various industrial segments such as steel mills, canning 
and bottling, mining and cement. Additionally, our Specialty 
Chemicals segment blends and supplies specialty products used 
in the plumbing and building markets. These products enhance, 
repair or condition the internal working systems of both industrial 
and residential systems and are critical to ensuring safe, efficient 
and  effective  long-term  operational  integrity.  The  Specialty 
Chemicals segment also supplies products and services into 
the water well treatment space, which includes testing services 
and diagnosis of current conditions, coupled with consumable 
solutions to resolve any identified problems. 

Our key product types and brand names are shown below:

Product Types

 (cid:122) chemical sealants to stop air-conditioning refrigerant leaks
 (cid:122) engineered specialty thread sealants designed to seal and  

secure metal

 (cid:122) oil ﬁeld anti-seize products for drilling and conveyance piping
 (cid:122) open gear specialty lubricants for heavy equipment
 (cid:122) railroad track lubricants, conditioners and positive  

friction consumables

 (cid:122) solvent cements and ﬁre stop caulks
 (cid:122) specialty lubricants for various industrial applications
 (cid:122) specialty sealants for high temperature applications
 (cid:122) water well treatment products and services

Brand Names

 (cid:122) BioRail®
 (cid:122) Caliber®
 (cid:122) Deacon®
 (cid:122) Decathalon®
 (cid:122) DesolvTM
 (cid:122) Envirolube®
 (cid:122) Gearmate®
 (cid:122) KATS Coatings®
 (cid:122) KOPR-KOTE®
 (cid:122) Jet-Lube®
 (cid:122) Leak Freeze®
 (cid:122) Matrix®
 (cid:122) Medallion

 (cid:122) Metacaulk®
 (cid:122) No. 5®
 (cid:122) ParagonTM
 (cid:122) RailArmor®
 (cid:122) RenewzTM
 (cid:122) Sterilene®
 (cid:122) Surstik®
 (cid:122) Surtac®
 (cid:122) T Plus 2®
 (cid:122) TOR Armor®
 (cid:122) Tru-BluTM
 (cid:122) UnicidTM
 (cid:122) Well-Guard®

New Product Development

We develop relationships with end-users and channel partners to 
understand a multitude of operating conditions where technical 
innovation  or  enhancement  is  needed.  For  example,  these 
relationships have generated innovation in the areas of modifying 
existing lubrication products to operate in arctic conditions or 

4

  |  2021 Annual Report

modifying an existing product for use in an application where 
saltwater may be present. The development teams located in 
Rockwall, Texas and Houston, Texas are also actively targeting 
additional end markets for product use and penetration.

Part I
Item 1  Business

Competition 

Customers 

In general, our products are specialty products that demand 
premium  valuation,  rather  than  commodity  products,  and 
competitors tend to be varied and include global, regional and 
local companies that may be large or small. We compete primarily 
on the basis of product differentiation, superior performance and 
quality and customer-centric service. The product sales cycle is 
often long when compared to many commodity consumables, 
typically resulting in quantified, verified and repeat product 
performance being the key driver of buying decisions, rather than 
price. As these products protect and enhance the operation of 
large capital equipment, qualification is based on the proof of 
value in application, resulting in a high changeover risk barrier. 
Typical competitors include Shell, Castrol, Fuchs and Exxon-
Mobil. Competitors of our sealants and adhesives products 
include  Dow  Corning  Corporation,  Henkel,  3M  Company, 
Specified Technologies Inc. and Hilti.

Discontinued Operations

Specialty Chemicals products are primarily sold through value-
added distribution partners, as well as maintenance and repair 
operations  or  catalog  channels.  Our  Specialty  Chemicals 
organization provides both market-specific and product line 
specific training to both the distribution partners and potential 
end users. Our specialists often visit end users with distribution 
partners to advise on critical application issues, which enhances 
our ability to both “pull” demand from the end-user and “push” 
demand to distributor partners. Specialty Chemicals customers 
include  petrochemical  facilities,  industrial  manufacturers, 
construction companies, utilities, plant maintenance customers, 
building contractors and repair service companies.

During the third quarter of the fiscal year ended March 31, 2018, 
we committed to a plan to divest our Strathmore Products 
business (the “Coatings business”). As a result, we reclassified 
the assets comprising that business to assets held-for-sale, and 
made a corresponding adjustment to our consolidated statements 
of operations to reflect discontinued operations for all periods 
presented. During the quarter ended September 30, 2018, we 

received an aggregate of $6.9 million for the sale of assets that 
related to our Coatings business in multiple transactions. During 
the quarter ended March 31, 2020, we received $1.5 million for 
the sale of the last remaining real property owned by our former 
Coatings business and, as such, we do not expect to have any 
ongoing results of discontinued operations related to the Coating 
business in future fiscal years.

Our Competitive Strengths

As discussed in this section, we believe we have a variety of competitive strengths.

Broad Portfolio of Industry Leading Products and Solutions

In our targeted end markets, we have leading industry positions 
among our broad portfolio of products. We believe our products 
and solutions are differentiated from those of our competitors 
by superior performance, quality and total value delivered to 
customers. For example, RectorSeal No. 5® pipe thread sealant 

is widely regarded as an industry standard for thread sealants 
for HVAC/R, plumbing and electrical configurations. Additionally, 
we believe KOPR-KOTE® anti-seize lubricant is recognized as 
the anti-seize compound of choice for use in oil and gas drilling 
operations, where it is requested by name.

Organic Revenue Growth Platform and Optimizing Performance

We focus on developing our presence in end markets with 
strong growth trends, continuously evaluating the potential 
uses of existing products to broaden end market penetration. 
We historically have a loyal customer base that recognizes the 
performance results and quality of our products and solutions. 
Further,  our  customer  base  is  diverse.  For  the  year  ended 
March 31, 2021, no single customer represented 10% or more 
of our net revenues.

These  factors  have  enabled  us  to  generate  strong  organic 
revenue growth performance, while remaining focused on strong 

profitability through optimizing our manufacturing processes. 
This effort is supported by a culture of continuous improvement, 
looking to refine processes in all of our manufacturing facilities to 
reduce manufacturing costs, increase production capacity and 
improve product quality. Additionally, we often evaluate strategic 
investments to drive transformational changes in our manufacturing 
processes. For example, in both of our reportable segments, we 
have taken actions to consolidate our manufacturing footprint 
in order to optimize capacity, improve efficiency and leverage 
technologies while enhancing product quality.

  |  2021 Annual Report

5

Part I
Item 1  Business

Diverse Sales and Distribution Channels

Many of our products are sold through full-service distribution 
networks where product knowledge and customer satisfaction 
are  key  success  factors.  We  primarily  market  through  an 
international  network  of  both  internal  and  third-party  sales 
representatives that call on our wholesale distributors, contractors 
and direct customers. The strong, long-term relationships we have 

developed with our wholesale distribution partners and exclusive 
dealers allow us to successfully introduce organically developed 
products and acquired products. In addition, our extensive 
distribution network allows us to reach and serve niche end 
markets that provide organic growth opportunities and a source 
of opportunities for our acquisition strategy.

Focus on Inorganic Growth Investment with Proven Track Record

We  believe  our  experience  in  identifying,  completing  and 
integrating acquisitions is one of our core competitive strengths, 
as evidenced by our portfolio of more than 10 acquisitions 
completed since the inception of the Company. Historically, 
we have pursued product-line acquisitions with relatively low 
integration risk that have the potential to benefit from our extensive 
distribution network and manufacturing efficiencies. More recently, 
we began targeting commercially-proven products and solutions 
that are attractive in our existing end markets where we can drive 
revenue growth and improved profitability and cash flow.

In the third quarter of the fiscal year ended March 31, 2021, we 
acquired T.A. Industries, Inc. (“TRUaire”), a leading manufacturer 

of grilles, registers, and diffusers for the residential and commercial 
HVAC/R end market, based in Santa Fe Springs, California. In 
the fourth quarter of the fiscal year ended March 31, 2019 and 
in early fiscal year 2020, we acquired two companies: MSD 
Research, Inc. (“MSD”), including its leading All-Access® line of 
air conditioning condensate switches and line cleanouts; and 
Petersen Metals, Inc. (“Petersen”), a designer, manufacturer and 
installer of engineered railings and safety systems for institutional 
and commercial structures in the Southeast U.S. We invested 
over $400 million for all three acquisitions. We did not complete 
any acquisitions during the fiscal year ended March 31, 2018.

Culture of Product Enhancement and Customer-Centric Solutions

Our  highly-trained  and  specialized  personnel  work  closely 
with our customers, industry experts and research partners to 
continuously improve our existing products to meet evolving 
customer and end market requirements. We focus on product 
enhancements and product line extensions that are designed 
to meet the specific application needs of our professional end 
use customers. Customer-centric solutions underpin our strong 
industrial brands and reputation for high quality products, in turn 
leading us to realize improved customer retention and loyalty. 
Further, our ability to meet the needs of high-value, niche end 
markets with customized solutions that leverage our existing 

products has enabled us to differentiate ourselves from larger 
competitors that may not be as willing or able to respond quickly 
to evolving customer demands.

Amid the novel coronavirus (“COVID-19”) pandemic, we have 
worked closely with our customers to provide them with the 
products and services that they need to continue conducting 
their operations. This includes ensuring that our supply chains 
are secure, that we maintain an adequate level of inventory to 
meet our customers’ needs and that we remain able to operate 
our facilities at the levels required to meet customer demand.

Our Growth Strategy

We are focused on creating long-term stockholder value by increasing our revenue, profitability and cash flow. Identifying strategic 
end markets yielding sustainable growth, expanding market share through our new product development and targeted acquisitions 
are all components of our strategy.

We Leverage Existing Customer Relationships and Products and Solutions

We expect to drive revenue growth by leveraging our reputation 
for  providing  high  quality  products  to  our  broad  customer 
base. Our team of sales representatives, engineers and other 
technical personnel continues to proactively collaborate with our 
distributors and professional end user customers to enhance and 

adapt existing products and solutions to meet evolving customer 
needs. In addition, we seek to leverage our existing customer 
base to cross-sell our products and solutions across our two 
business segments, thereby driving organic growth.

6

  |  2021 Annual Report

Part I
Item 1  Business

We Innovate New Products to Accelerate Organic Growth

The collaborative relationships and open feedback channels we 
have with our distributors and end users allow us to add value 
not only through enhancing and adapting existing products and 
solutions, but also through efficiently developing new products 
and solutions to meet existing and future customer needs. Our 
research and development and sales and marketing personnel 

work together to identify product opportunities and methodically 
pursue  development  of  innovative  new  products.  Through 
developing new products and solutions to both address new 
markets and complement our product portfolio in markets we 
currently serve, we create increased opportunities to drive organic 
growth.

We Invest in Focused Acquisitions that Leverage our Distribution Channels

While we are focused on new product development, improving 
our existing products and penetrating new markets with these 
products,  we  expect  to  continue  to  identify  and  execute 
acquisitions that will broaden our portfolio of products and 
offer attractive risk-adjusted returns. We primarily focus on 

commercially proven products and solutions that would benefit 
from a broader distribution network and are attractive to customers 
in our targeted end markets. Once acquired, we strive to utilize 
our extensive distribution networks to increase revenue by selling 
those products and solutions to our diversified customer base.

Raw Materials and Suppliers

Our products are manufactured using various raw materials, 
including base oils, copper flake, steel, aluminum, polyvinyl 
chloride and tetra-hydrofuran. These raw materials are available 
from numerous sources, and we do not depend on a single 
source of supply for any significant amount of raw materials. We 
are continuing to monitor the effect of the COVID-19 pandemic 
on raw materials in our supply chain, along with the related 

impact on our end markets, both of which are causing supply 
chain disruptions for many companies. While we do not currently 
anticipate significant shortages of raw materials, the long-term 
impact of these events is uncertain and may cause isolated 
disruptions or generalized inefficiencies in our raw materials supply 
chain in the short term. In an effort to drive efficient margins, we 
generally purchase raw materials and components as needed.

Intellectual Property

We own and maintain a substantial portfolio of trademarks and 
patents relating to the names and designs of our products. We 
consider our trademarks and patents to be valuable assets. In 
addition, our pool of proprietary information, consisting of know-
how and trade secrets related to the design, manufacture and 
operation of our products, is considered particularly valuable. 
Accordingly, we take proactive measures to protect proprietary 
information. In aggregate, we own the rights to the products that 

we manufacture and sell and are not materially encumbered by 
licensing or franchise agreements. Our trademarks can typically 
be renewed indefinitely as long as they remain in use, whereas 
our patents generally expire 10 to 20 years from the dates they 
were filed. Our patents expire from time to time, but we do not 
believe that the expiration of any individual patent will have a 
material adverse impact on our business, financial condition or 
results of operations.

Export Regulations

We  are  subject  to  export  control  regulations  in  countries 
from which we export products and services. These controls 
may apply by virtue of the country in which the products are 
located or by virtue of the origin of the content contained in the 
products. The level of control generally depends on the nature 
of the goods and services in question. Where controls apply, 
we typically need an export license or authorization (either on 

a per-product or per transaction basis) or the transaction must 
qualify for a license exception or the equivalent. In certain cases 
corresponding reporting requirements may apply. See Note 19 
to our consolidated financial statements included in Item 8 of this 
Annual Report for financial and other information regarding our 
operations on a geographical basis.

  |  2021 Annual Report

7

Part I
Item 1  Business

Human Capital Management

We believe that our employees are our most valuable assets and 
that our skilled, engaged workforce provides us with a competitive 
advantage. As part of our commitment to our employees, we 
provide a safe work environment, ongoing training and professional 
development, competitive compensation and a generous health 
and retirement benefits package that includes paid time off, health 
and wellness care and available paid college tuition.

As  of  March  31,  2021,  we  employed  approximately  2,300 
individuals within our continuing operations globally. Regionally, 
approximately 900 of our employees are in North America, 

approximately 1,400 are in Asia Pacific, and approximately 10 
are in Europe, the Middle East and Africa. Our workforce is made 
up of approximately 400 salaried employees and 1,900 hourly 
employees. Of these employees, approximately 1% of our U.S. 
workforce is represented by unions. We also have an employee 
works council in Vietnam. We believe relations with our employees 
throughout our operations are generally positive, including those 
employees represented by unions or works councils. No unionized 
facility accounted for more than 10% of our consolidated revenues 
for the fiscal year ended March 31, 2021.

Workplace Health and Safety

We are committed to creating and maintaining a safe, healthy 
working environment, and we have developed a health and safety 
program that focuses on implementing policies and training 
programs to ensure all employees understand this commitment. 
Our health and safety strategies are consistently reviewed and 
updated as changes occur in our business, and employees are 
empowered to identify and report safety concerns and take 
corrective actions. Safety awareness and employee engagement 
programs have been implemented at the Company’s facilities 
and have generated meaningful reductions in workplace safety 
incidents.

The COVID-19 pandemic has underscored for us the importance 
of keeping our employees safe and healthy. In response to the 
pandemic, the Company has taken actions aligned with the 
World Health Organization and the Centers for Disease Control 
and Prevention to protect our workforce so they can more safely 
and effectively perform their work. We manufacture products 
which are deemed essential to the critical infrastructure and all 
production sites have continued operating during the COVID-19 

Training, Development and Ethics

Consistent with our belief that our employees are our most 
valuable assets, developing our people is a critical aspect of 
our culture. Successful execution of the Company’s strategy 
depends on attracting and retaining highly qualified individuals. 
We provide developmental opportunities to help our employees 
build the skills necessary to reach their career goals, including on-
the-job training, online learning, professional memberships, and 
leadership and management training. To help our employees see 
how their efforts contribute to our Company’s overall success, we 
utilize a robust performance management process and provide 
regular feedback to increase engagement and maximize talent 
development efforts.

Our core values of integrity, respect, excellence, stewardship, 
citizenship, accountability and teamwork form the foundation 
for our decentralized, entrepreneurial culture, and our Code of 

8

  |  2021 Annual Report

pandemic. As such, we have invested in creating physically safe 
work environments for our employees. Our health and safety 
focus is evident in our response to the COVID-19 pandemic and 
includes the following:

 (cid:122) adding work from home ﬂexibility
 (cid:122) encouraging those who are sick or have symptoms to stay 

home

 (cid:122) increasing cleaning protocols across all locations
 (cid:122) regular communications regarding health and safety protocols 

and procedures

 (cid:122) establishing  physical  distancing  and  personal  protective 

equipment procedures for employees
 (cid:122) providing masks and cleaning supplies
 (cid:122) implementing protocols to address actual and suspected 

COVID-19 cases and potential exposure

 (cid:122) limiting non-essential domestic and international travel for all 

employees

Business Conduct represents our shared commitment to living 
out these core values with the highest level of ethical conduct. All 
our employees across the globe, including our executive officers, 
are required to abide by our Code of Business Conduct to ensure 
that our business is conducted in a consistently legal and ethical 
manner. Our Code of Business Conduct covers many topics, 
including conflicts of interest, anticorruption, financial reporting, 
confidentiality, insider trading, antitrust and competition law, 
cybersecurity and information security, appropriate use of social 
media, and respect in the workplace. All our employees receive 
training on all topics addressed in our Code of Business Conduct 
every year through on-line and in-person training, and are required 
to certify that they will comply with the Code.

Part I
Item 1  Business

and accident insurance plan. We offer employees the opportunity 
to contribute to a Flexible Spending Account and a Health Savings 
Account. As part of our employee wellness program, and in 
an effort to encourage employees to participate, we provide 
financial incentives to our employees who choose to participate. 
Our retirement savings program includes a defined contribution 
plan plus an employee stock ownership plan (“ESOP”) through 
which our employees collectively own approximately 5% of our 
company. We believe this ESOP strongly aligns the interests of 
our employees with those of our stockholders.

Compensation and Beneﬁts

We strive to support both the short-term and long-term well-
being  of  our  employees.  This  commitment  extends  to  the 
communities in which our employees live, where we are positive, 
active corporate citizens. A key element of employee well-being is 
providing pay and benefits for our employees that are competitive 
and equitable based on local markets. We believe it is important to 
reward employees with competitive pay and benefits to recognize 
professional excellence and career progression.

Our employees are all eligible to participate in Company-subsidized 
medical, dental, vision, life and long-term disability insurance 
plans. We also provide employees with a paid supplemental life 

Diversity and Inclusion

We are committed to promoting equal employment opportunity 
in all of our operations. We also believe that a truly innovative 
workforce  needs  to  be  diverse  and  leverage  the  skills  and 
perspectives of a broad range of backgrounds and experiences. It 
is our policy, specifically noted in the Company’s Code of Business 
Conduct, that we do not tolerate discrimination for any reason, 
including without limitation race, color, religion, martial status, 
gender, gender identity, veteran status, sexual orientation, disability 
or perceived disability, whether or not such discrimination violates 

law. It is also our policy to comply fully with all laws prohibiting 
discrimination and promoting opportunity and advancement in 
employment. This policy extends to all aspects of employment 
opportunity including recruitment, hiring, compensation, benefits, 
promotion, transfer, layoff, recall, reduction in force, termination, 
retirement, placement, training and all other privileges, terms and 
conditions of employment. These initiatives align with our goal of 
creating a positive and dynamic workplace where all employees 
can flourish.

Government Regulations

Our operations are subject to certain foreign, federal, state and 
local regulatory requirements relating to environmental, waste 
management, labor and health and safety matters. Management 
believes that our business is operated in material compliance with 
all such regulations. To date, the cost of such compliance has not 
had a material impact on our capital expenditures, earnings or 
competitive position or that of our operating subsidiaries. While we 

have implemented policies, practices and procedures to prevent 
and mitigate risks, violations may occur in the future as a result 
of human error, equipment failure or other causes. Further, we 
cannot predict the nature, scope or effect of future environmental 
legislation or regulatory requirements that could be imposed, or 
how existing or future laws or regulations will be administered or 
interpreted.

Available Information

We file annual, quarterly and current reports, proxy statements 
and other information with the U.S. Securities and Exchange 
Commission (“SEC”). Our SEC filings are available to the public 
at the SEC’s website (www.sec.gov). We also make these filings 
available free of charge on our website (www.cswindustrials.com) 
as soon as reasonably practicable after we electronically file those 
documents with the SEC.

Also available on our website are our Corporate Governance 
Guidelines  and  Code  of  Business  Conduct,  as  well  as  the 

charters for the Audit, Compensation & Talent Development, and 
Nominating & Corporate Governance Committees of our Board of 
Directors and other important governance documents. All of the 
foregoing may be obtained through our website noted above and 
are available in print without charge to stockholders who request 
them. The information on or accessible through our website is 
not incorporated by reference into, or otherwise made part of, 
this Annual Report or any other document we file with or furnish 
to the SEC.

  |  2021 Annual Report

9

Item 1A: Risk Factors

Consider carefully the following risk factors, which we believe 
are the principal risks that we face and of which we are currently 
aware, and the other information in this Annual Report, including 
our consolidated ﬁnancial statements and related notes to those 
financial statements. It is possible that additional risks and 

uncertainties not presently known to us, or that we currently deem 
immaterial, may also impair our business operations. Furthermore, 
the impact of the COVID-19 pandemic may exacerbate the risks 
discussed in this Annual Report, which could have a material 
effect on the Company.

Market, Economic and Geopolitical Risks

Adverse changes in global economic 
conditions, particularly in the U.S. and 
including changes resulting from the effects 
of the COVID-19 pandemic, could materially 
adversely affect our financial position, 
results of operations and cash flows.

Our served industries and key end markets are affected by changes 
in economic conditions outside our control, which can affect our 
business in many ways. We are closely monitoring the potential 
impact on our business resulting from the COVID-19 pandemic 
and the corresponding decline in economic activity, in particular 
the effect it may have on demand for our products in the short and 
long term. Reduced demand may cause us and our competitors 
to compete on the basis of price, which would have a negative 
impact on our revenues and proﬁtability. In turn, this could cause 
us to not be able to satisfy the ﬁnancial and other covenants to 
which we are subject under our existing indebtedness. Reduced 
demand may also hinder our growth plans and otherwise delay 
or impede execution of our long-term strategic plan and capital 
allocation strategy. If there is deterioration in the general economy 
or in the industries we serve, our business, results of operations 
and ﬁnancial condition could be materially adversely affected.

The industries in which we operate are 
highly competitive, and many of our 
products are in highly competitive markets. 
We may lose market share to producers of 
other products that directly compete with or 
that can be substituted for our products.

The industries in which we operate are highly competitive, and 
we face signiﬁcant competition from both large domestic and 
international competitors and from smaller regional competitors. 
Our competitors may improve their competitive position in our 
served markets by successfully introducing new or substitute 
products, improving their manufacturing processes or expanding 
their capacity or manufacturing facilities. Further, some of our 
competitors beneﬁt from advantageous cost positions that could 
make it increasingly difﬁcult for us to compete in markets for less-
differentiated applications. If we are unable to keep pace with our 
competitors’ products and manufacturing process innovations 

10

  |  2021 Annual Report

or cost position, our ﬁnancial condition and results of operations 
could be materially adversely affected.

Certain end markets that we serve are 
cyclical, which can cause significant 
fluctuations in our results of operations and 
cash flows.

The cyclical nature of the supply and demand balance of certain 
end markets that we serve, including manufacturing, construction, 
energy and mining, poses risks to us that are beyond our control 
and can affect our operating results. These markets are highly 
competitive; are driven to a large extent by end-use markets; and 
may experience overcapacity, all of which may affect demand for 
and pricing of our products and result in volatile operating results 
and cash ﬂows over our business cycle. Our operations and 
earnings may also be signiﬁcantly affected by changes in oil, gas 
and petrochemical prices and drilling activities, which depend on 
local, regional and global events or conditions that affect supply 
and demand for the relevant commodity. Additionally, the cyclical 
nature of these end markets could be further exaggerated or 
interrupted by the effects of the COVID-19 pandemic, which in 
turn could signiﬁcantly affect demand for our products. Product 
demand may not be sufﬁcient to utilize current or future capacity. 
Excess industry capacity may continue to depress our volumes 
and margins on some products. Our operating results, accordingly, 
may be volatile as a result of excess industry capacity, as well as 
from rising energy and raw materials costs.

Growth of our business will depend in 
part on market awareness of our industrial 
brands, and any failure to develop, maintain, 
protect or enhance our industrial brands 
would hurt our ability to retain or attract 
customers.

We believe that building and maintaining market awareness, 
brand recognition and goodwill is critical to our success. This 
will depend largely on our ability to continue to provide high-
quality products, and we may not be able to do so effectively. 
Our efforts in developing our industrial brands may be affected 
by the marketing efforts of our competitors and our reliance on 

Part I
Item 1A  Risk Factors

our independent dealers, distributors and strategic partners to 
promote our industrial brands effectively. If we are unable to 
cost-effectively maintain and increase positive awareness of 
our industrial brands, our businesses, results of operations and 
ﬁnancial condition could be harmed.

Climate change could have an adverse 
effect on our business.

While we seek to mitigate our business risks associated with 
climate change, we recognize that there are inherent climate 
related risks wherever business is conducted, and climate change 

could create physical and ﬁnancial risk to our business. Physical 
risks from climate change could, among other things, include an 
increase in extreme weather events (such as ﬂoods, tornados or 
hurricanes), limitations on availability in water and reliable energy, 
and the health and well-being of individuals in communities 
where we conduct business. Additionally, climate change-driven 
environmental and social regulations may negatively impact our 
business, our customers or our suppliers, in terms of availability 
and cost of natural resources, product demand or manufacturing. 
Such events have the potential to disrupt our business, our third-
party suppliers or the businesses of our customers, which in turn 
could have an adverse effect on our ﬁnancial condition and results 
of operations.

Business, Operations and Human Capital Risks

Our attempts to address evolving customer 
needs require that we continually enhance 
our products. Our efforts to enhance 
our products may not be commercially 
viable and failure to develop commercially 
successful products or keep pace with our 
competitors could harm our business and 
results of operations.

A failure to develop commercially successful products or product 
enhancements or to identify product extensions could materially 
adversely affect our ﬁnancial results. If our attempts to develop or 
enhance products are unsuccessful, we may be unable to recover 
our development costs, which could have an adverse effect on 
our business and results of operations. In addition, our inability to 
enhance or develop products that can meet the evolving needs 
of our customers, including a failure to do so that results in our 
products lagging those of new or existing competitors, could 
reduce demand for our products and may have a material adverse 
effect on our business and results of operations.

Our international sales and manufacturing 
operations, including our use of third party 
manufacturers for certain products that we 
sell, involve inherent risks that could result 
in harm to our business.

We have worldwide sales and manufacturing operations, including 
in North America, Europe, the Middle East, Australia and Asia. 
We also use third parties to manufacture certain of our products, 
most of which are located in jurisdictions outside the United 
States, including China. Foreign sales and manufacturing are 
subject to a number of risks, including political and economic 
uncertainty, social unrest, sudden changes in laws and regulations 
(including those enacted in response to pandemics), ability to 
enforce existing or future contracts, labor shortages and work 
stoppages, natural disasters, currency exchange rate ﬂuctuations, 
transportation delays or loss or damage to products in transit, 

expropriation, nationalization, compliance with foreign laws and 
changes in domestic and foreign governmental policies, including 
the imposition of new or increased tariffs and duties on exported 
and imported products.

To the extent that we rely on independent third parties to perform 
sales and manufacturing functions, we do not directly control 
their activity, including product delivery schedules and quality 
assurance, which may result in product shortages or quality 
assurance problems that could delay shipments of products, 
increase manufacturing, assembly, testing or other costs, or 
diminish our brand recognition or relationships with our customers. 
If a third party sales representative or manufacturer experiences 
capacity constraints or ﬁnancial difﬁculties, suffers damage to 
its facilities, experiences power outages, natural disasters, labor 
shortages or labor strikes, or any other disruption, we may not 
be able to obtain alternative resources in a timely manner or 
on commercially acceptable terms. Any of these factors could 
negatively affect our business, results of operations and ﬁnancial 
condition.

Loss of key suppliers, the inability to secure 
raw materials on a timely basis, or our 
inability to pass commodity price increases 
on to customers could have an adverse 
effect on our business.

Materials used in our manufacturing operations are generally 
available on the open market from multiple sources. However, 
some of the raw materials we use are only available from a limited 
number of sources. Accordingly, any disruptions to a critical 
suppliers’ operations could have a material adverse effect on 
our business and results of operations. We are closely monitoring 
the impact of the COVID-19 pandemic and other macroeconomic 
conditions on our supply chain, which is causing supply chains 
for many companies to be interrupted, slowed or temporarily 
rendered inoperable. While we believe many challenges are 
temporary and can be managed in the near-term, our business 
and results of operations could be materially adversely affected 
by prolonged or increasing supply chain disruptions. Availability 
and cost of raw materials could be affected by a number of 

  |  2021 Annual Report

11

Part I
Item 1A  Risk Factors

factors, including the condition of the energy industry and other 
commodity prices; tariffs and duties on imported materials; foreign 
currency exchange rates; and phases of the general business 
cycle and global demand. We may be unable to pass along price 
increases to our customers, which could have a material adverse 
effect on our business and results of operations.

We rely on independent distributors as a 
channel to market for many of our products. 
Termination of a substantial number of our 
distributor relationships or an increase in 
a distributor’s sales of our competitors’ 
products could have a material adverse 
effect on our business, financial condition, 
results of operations or cash flows.

We  depend  on  the  services  of  domestic  and  international 
independent distributors to sell our products and, in many cases, 
provide service and aftermarket support to end users of our 
products. Rather than serving as passive conduits for delivery 
of products, our distributors play a signiﬁcant role in determining 
which of our products are available for purchase by contractors 
to service end users. While the use of distributors expands the 
reach and customer base for our products, the maintenance 
and administration of distributor relationships is costly and time 
consuming. The loss of a substantial number of our distributors, 
for  any  reason,  including  among  others  changing  market 
conditions resulting from the COVID-19 pandemic, could have a 
material adverse effect on our business, ﬁnancial condition, results 
of operations or cash ﬂows. In certain international jurisdictions, 
distributors are conferred certain legal rights that could limit our 
ability to modify or terminate distribution relationships.

Many of the distributors with whom we transact business also 
offer competitors’ products and services to our customers. An 
increase in the distributors’ sales of our competitors’ products to 
our customers, or a decrease in the number of our products the 
distributor makes available for purchase, could have a material 
adverse effect on our business, ﬁnancial condition, results of 
operations or cash ﬂows.

Our insurance policies may not cover, or 
fully cover, us against natural disasters, 
global conflicts or environmental risk.

We currently have insurance policies for certain business risks, 
which include property damage, business interruption, operational 
and product liability, transit, directors’ and officers’ liability, 
cybersecurity, industrial accident and other risks customary in 
the industries in which we operate. However, we may become 
subject to liability (including in relation to pollution, occupational 
illnesses, injury resulting from tampering, product contamination 
or degeneration or other hazards) against which we have not 
insured or cannot fully insure.

For example, hurricanes may affect our facilities or the failure of our 
information systems as a result of breakdown, malicious attacks, 
unauthorized access, viruses or other factors could severely 
impair several aspects of operations, including, but not limited 
to, logistics, revenues, customer service and administration. In 
addition, in the event that a product liability or third-party liability 
claim is brought against us, we may be required to recall our 
products in certain jurisdictions if they fail to meet relevant quality 
or safety standards, and we cannot guarantee that we will be 
successful in making an insurance claim under our policies or 
that the claimed proceeds will be sufﬁcient to compensate the 
actual damages suffered.

Should we suffer a major uninsured loss, a product liability 
judgment against us or a product recall, future earnings could be 
materially adversely affected. We could be required to increase our 
debt or divert resources from other investments in our business 
to discharge product related claims. In addition, adverse publicity 
in relation to our products could have a signiﬁcant effect on future 
revenues, and insurance may not continue to be available at 
economically acceptable premiums. As a result, our insurance 
coverage may not cover the full scope and extent of claims 
against us or losses that we incur.

Cybersecurity breaches and other 
disruptions to our information technology 
systems could compromise our information, 
disrupt our operations, and expose us to 
liability, which may adversely impact our 
operations.

In the ordinary course of our business, we store sensitive data, 
including our proprietary business information and that of our 
customers, suppliers and business partners, and personally 
identifiable information of our employees in our information 
technology systems, including in our data centers and on our 
networks. The secure processing, maintenance and transmission 
of this data is critical to our operations. Despite our efforts to 
secure our information systems from cyber-security attacks or 
breaches, our information technology systems may be vulnerable 
to attacks by hackers or breached or disrupted due to employee 
error, malfeasance or other disruptions. Although such attempts 
have been made to attack our information technology systems, no 
material harm has resulted. Any such attack, breach or disruption 
could compromise our information technology systems and the 
information stored in them could be accessed, publicly disclosed, 
lost or stolen and our business operations could be disrupted. 
Additionally, any signiﬁcant disruption or slowdown of our systems 
could cause customers to cancel orders or cause standard 
business processes to become inefﬁcient or ineffective, which 
could adversely affect our ﬁnancial position, results of operations 
or cash flows. Any such access, disclosure or other loss of 
information or business disruption could result in legal claims 
or proceedings, liability under laws that protect the privacy of 
personal information, and damage to our reputation, which could 
adversely impact our operations.

12

  |  2021 Annual Report

Part I
Item 1A  Risk Factors

Our relationships with our employees could 
deteriorate, which could adversely affect 
our operations.

As a manufacturing company, we rely on a positive relationship 
with  our  employees  to  produce  our  products  and  maintain 
our production processes and productivity. As of March 31, 
2021,  we  had  approximately  2,300  full-time  employees,  of 
which approximately 22 were subject to collective bargaining 
agreements, and approximately 1,400 of which are located in 
Vietnam. If our workers were to engage in a strike, work stoppage 
or other slowdown, our operations could be disrupted, or we 
could experience higher labor costs. In addition, if signiﬁcant 
portions of our employees were to become unionized, we could 
experience signiﬁcant operating disruptions and higher ongoing 
labor costs, which could adversely affect our business, ﬁnancial 
condition and results of operations.

Loss of key personnel or our inability to 
attract and retain new qualified personnel 
could hurt our business and inhibit our 
ability to operate and grow successfully.

Our success in the highly competitive end markets in which 
we operate will continue to depend to a signiﬁcant extent on 
the experience and expertise of our senior leaders. Loss of the 
services of any of these individuals could have an adverse effect 
on our business. Further, we may not be able to retain or recruit 
qualiﬁed individuals to join our company. The loss of executive 
ofﬁcers or other key employees could result in high transition costs 
and could disrupt our operations.

Strategic Transactions and Investments Risks

Our acquisition and integration of 
businesses could negatively impact our 
financial results.

Inorganic growth is an important part of our strategic growth 
plans, and we seek to acquire businesses, some of which may 
be material, in pursuit of our plans. Acquiring businesses involves 
a number of ﬁnancial, accounting, managerial, operational, legal, 
compliance and other risks and challenges, including the following, 
any of which could adversely affect our ﬁnancial statements:

 (cid:122) we may experience difﬁculty in identifying appropriate acquisition 

candidates;

 (cid:122) any acquired business, technology, service or product could 
under-perform relative to our expectations and the price that 
we paid for it, not achieve cost savings or other synergies in 
accordance with our anticipated timetable or require us to take 
an impairment related to the acquired business;

 (cid:122) we may decide to divest businesses, technologies, services or 
products for ﬁnancial, strategic or other reasons, which may 
require signiﬁcant ﬁnancial and managerial resources and may 
result in unfavorable accounting treatment;

 (cid:122) we may incur or assume signiﬁcant debt in connection with our 
acquisitions, which would increase our leverage and interest 
expense, thereby reducing funds available to us for purposes 
such as working capital, capital expenditures, research and 
development and other general corporate purposes;

 (cid:122) pre-closing and post-closing earnings and charges could 
adversely impact operating results in any given period, and 
the impact may be substantially different from period to period;
 (cid:122) the process of integrating acquired operations may create 
operating difﬁculties and may require signiﬁcant ﬁnancial and 
managerial resources that would otherwise be available for 
existing operations;

 (cid:122) we could experience difﬁculty in integrating ﬁnancial and other 

controls and systems;

 (cid:122) we may lose key employees or customers of the acquired 

company;

 (cid:122) we may assume liabilities that are unknown or for which our 
indemniﬁcation rights are insufﬁcient, or known or contingent 
liabilities may be greater than anticipated;

 (cid:122) conforming  the  acquired  company’s  standards,  process, 
procedures and controls, including accounting systems and 
controls, with our operations could cause deﬁciencies related 
to our internal control over ﬁnancial reporting or exposure to 
regulatory sanctions resulting from the acquired company’s 
activities; and

 (cid:122) the COVID-19 pandemic may impact our ability to conduct 
due diligence on acquisitions in the normal manner, including 
forecasting future ﬁnancial performance, which could cause a 
delay in executing transactions until alternate methods of due 
diligence are determined or the impacted due diligence is able 
to be conducted by customary means.

As a result of the TRUaire acquisition, we 
have become subject to risks relating to the 
business conducted by TRUaire.

Following the consummation of the TRUaire acquisition, we 
have become subject to a variety of risks relating to the business 
conducted by TRUaire, many of which we have already faced in 
our business and that are described in further detail within other 
risk factors. Some of the speciﬁc risks facing TRUaire include risks 
relating to the residential and commercial HVAC/R end market, 
including general conditions in the industry, changes in current or 
new regulations and legislation and potential structural changes 
in the industry; additional information technology risks, including 
cyber security and data privacy risks relating to TRUaire’s services; 
risks relating to intellectual property held or used by TRUaire; 
the ability of TRUaire’s services to adequately compete with the 
products and services offered by other companies, including 
through  attracting  new  customers  and  retaining  or  selling 

  |  2021 Annual Report

13

Part I
Item 1A  Risk Factors

additional products and service offerings to existing customers; 
risks relating to current and future legal proceedings involving 
TRUaire;  risks  relating  to  labor  and  employment,  including 
employee relations and the potential loss of key personnel; risks 
relating to manufacturing products and operating in Vietnam, 
including environmental, health and safety laws, uncertainty of 
local laws and possible economic or political disruption; risks 
relating to U.S. trade policies; and risks relating to foreign currency 
exchange rates.

The occurrence of any of such risks could have a material adverse 
impact on the ﬁnancial condition, business or results of operations 
of TRUaire, which could impair or eliminate our ability to achieve 
the expected cost savings and synergies from the TRUaire 
acquisition on a timely basis, if ever, or could impair our ability 
to achieve such cost savings and synergies without adversely 
affecting our current revenues or investments in future growth. 
Additionally, the occurrence of any such risks could impair our 
ability to integrate the business of TRUaire with our businesses 
in an efﬁcient and timely manner, if at all.

We may be unable to successfully execute 
and realize the expected financial benefits 
from strategic initiatives.

From time to time, our business has engaged in strategic initiatives, 
and such activities may occur in the future. These efforts have 
included consolidating manufacturing facilities, rationalizing our 
manufacturing processes, and more recently, establishing a joint 
venture within our Specialty Chemicals segment.

While we expect meaningful ﬁnancial beneﬁts from our strategic 
initiatives, we may not realize the full beneﬁts expected within 
the anticipated time frame. Adverse effects from strategy-driven 
organizational change could interfere with our realization of 
anticipated synergies, customer service improvements and cost 
savings from these strategic initiatives. Additionally, our ability to 
fully realize the beneﬁts and implement strategic initiatives may be 
limited by certain contractual commitments. Moreover, we may 
incur substantial expenses in connection with the execution of 

strategic plans in excess of what is forecasted. Further, strategic 
initiatives can be a complex and time-consuming process that 
can place substantial demands on management, which could 
divert attention from other business priorities or disrupt our daily 
operations. Any of these failures could materially adversely affect 
our business, ﬁnancial condition, results of operations and cash 
ﬂows, which could constrain our liquidity.

Changes in future business or other 
market conditions could cause business 
investments and/or recorded goodwill or 
other long-term assets to become impaired, 
resulting in substantial losses and write-
downs that would materially adversely 
affect our results of operations and financial 
condition.

From time to time, we acquire businesses, following careful analysis 
and due diligence procedures designed to achieve a desired return 
or strategic objective. These procedures often involve certain 
assumptions and judgments in determining acquisition price. 
After acquisition, such assumptions and judgments may prove 
to be inaccurate due to a variety of circumstances, which could 
adversely affect the anticipated returns or which are otherwise not 
recoverable as an adjustment to the purchase price. Additionally, 
actual operating results for an acquisition may vary signiﬁcantly 
from initial estimates. As of March 31, 2021, we had goodwill of 
$218.8 million recorded in our consolidated balance sheet, the 
majority of which was recorded in connection with the TRUaire 
acquisition. We evaluate the recoverability of recorded goodwill 
annually, as well as when we change reporting units and when 
events or circumstances indicate the possibility of impairment. 
Because of the signiﬁcance of our goodwill and other intangible 
assets, a future impairment of these assets could have a material 
adverse effect on our results of operations and ﬁnancial condition. 
For additional information on our accounting policies related to 
goodwill, see our discussion under Note 1 to our consolidated 
ﬁnancial statements in Item 8 of this Annual Report.

Financial Risks

Our outstanding indebtedness and the 
restrictive covenants in the agreements 
governing our indebtedness limit our 
operating and financial flexibility.

We are required to make scheduled repayments and, under 
certain  events  of  default,  accelerated  repayments  on  our 
outstanding indebtedness, which may require us to dedicate a 
substantial portion of our cash ﬂows from operations to payments 
on our indebtedness. Such repayment requirements could reduce 
the availability of our cash ﬂows to fund working capital, capital 
expenditures, R&D efforts and other general corporate purposes, 
and could generally limit our ﬂexibility in planning for, or reacting 
to, changes in our business and industry.

In addition, the agreements governing our indebtedness impose 
certain operating and ﬁnancial restrictions on us and somewhat 
limit management’s discretion in operating our businesses. These 
agreements limit or restrict our ability, among other things, to: 
incur additional debt; pay dividends and make other distributions; 
make investments and other restricted payments; create liens; sell 
assets; and enter into transactions with afﬁliates.

In the event we incur additional indebtedness, the risks described 
above could increase. In addition, certain or our variable rate 
indebtedness use the London Inter-bank Offered Rate (“LIBOR”) 
as a benchmark for establishing the rate of interest. LIBOR has 
been the subject of national, international, and other regulatory 
guidance and proposals for reform, and it is currently expected 
that LIBOR will be discontinued after June 2023. While our 

14

  |  2021 Annual Report

Part I
Item 1A  Risk Factors

material ﬁnancing agreements indexed to LIBOR provide for an 
alternative base rate that could be applied in the event that LIBOR 
is discontinued, there can be no assurances as to whether such 
alternative base rate will be more or less favorable than LIBOR. 
We intend to monitor developments with respect to the phasing 
out of LIBOR and will work to minimize the impact of any LIBOR 
transitions. The consequences of these developments cannot 
be entirely predicted but could include an increase in the cost of 
variable rate indebtedness.

We  are  also  required  to  comply  with  leverage  and  interest 
coverage ﬁnancial covenants and deliver to our lenders audited 
annual and unaudited quarterly ﬁnancial statements. Our ability to 
comply with these covenants may be affected by events beyond 
our control. Failure to comply with these covenants could result 
in an event of default that, if not cured or waived, may have a 
material adverse effect on our business, ﬁnancial condition, results 
of operations and cash ﬂows.

Fluctuations in currency exchange rates 
may significantly impact our results of 
operations and may significantly affect 
the comparability of our results between 
financial periods.

Our operations are conducted in many countries. The results of 
the operations and the ﬁnancial position of these subsidiaries are 
reported in the relevant foreign currencies and then translated 
into U.S. dollars at the applicable exchange rates for inclusion 
in our consolidated ﬁnancial statements. The main currencies 
to which we are exposed, besides the U.S. dollar, are primarily 
the Australian dollar, the British pound, the Canadian dollar 
and the Vietnamese Dong. The exchange rates between these 
currencies and the U.S. dollar in recent years have ﬂuctuated 
signiﬁcantly and may continue to do so in the future for a variety of 
reasons, including general economic conditions and event-driven 
circumstances. For example, the dynamics and uncertainties 
associated with the U.K.’s exit from the European Union (“Brexit”) 
could produce signiﬁcant ﬂuctuations in global currency exchange 
rates. A depreciation of these currencies against the U.S. dollar 
will decrease the U.S. dollar equivalent of the amounts derived 
from these operations reported in our consolidated financial 
statements, and an appreciation of these currencies will result in 
a corresponding increase in such amounts.

Because many of our raw material costs are determined with 
respect to the U.S. dollar rather than these currencies, depreciation 
of these currencies may have an adverse effect on our proﬁt 
margins or our reported results of operations. Conversely, to the 
extent that we are required to pay for goods or services in foreign 
currencies, the appreciation of such currencies against the U.S. 
dollar will tend to negatively impact our results of operations. In 
addition, currency ﬂuctuations may affect the comparability of our 
results of operations between ﬁnancial periods.

will be effective or that any volatility in currency exchange rates 
will not have a material adverse effect on our ﬁnancial condition 
or results of operations.

Changes in effective tax rates or adverse 
outcomes resulting from examination of our 
income tax returns could adversely affect 
our results.

Our future effective tax rates could be adversely affected by 
changes  in  tax  laws,  regulations,  accounting  principles  or 
interpretations  thereof,  which  can  impact  our  current  and 
future years’ tax provision. The effect of such tax law changes 
or regulations and interpretations, as well as any additional tax 
reform legislation in the U.S., U.K, Canada, Australia, Vietnam or 
elsewhere, could have a material adverse effect on our business, 
ﬁnancial condition and results of operations. In addition, we are 
also subject to periodic examination of our income tax returns 
by the Internal Revenue Service and other tax authorities. We 
regularly assess the likelihood of adverse outcomes resulting 
from these examinations to determine the adequacy of our 
provision for income taxes. As of March 31, 2021, we had a 
reserve of $13.2 million relating to uncertain tax positions, and 
taxing authorities may disagree with the positions we have 
taken regarding the tax treatment or characterization of our 
transactions. There can be no assurance that the outcomes from 
these examinations will not have a material adverse effect on our 
business, ﬁnancial condition and results of operations.

We may acquire various structured financial 
instruments for purposes of hedging or 
reducing our risks, which may be costly and 
ineffective.

We may seek to hedge against commodity price ﬂuctuations 
and credit risk by using structured ﬁnancial instruments such as 
futures, options, swaps and forward contracts. Use of structured 
ﬁnancial instruments for hedging purposes may present signiﬁcant 
risks, including the risk of loss of the amounts invested. Defaults 
by the other party to a hedging transaction can result in losses in 
the hedging transaction. Hedging activities also involve the risk 
of an imperfect correlation between the hedging instrument and 
the asset being hedged, which could result in losses both on the 
hedging transaction and on the instrument being hedged. Use 
of hedging activities may not prevent signiﬁcant losses and could 
increase our losses.

We may inadvertently fail to maintain 
effective disclosure controls and procedures 
and internal controls over financial 
reporting.

We incur currency transaction risk whenever we enter into either a 
purchase or sale transaction using a currency other than the local 
currency of the transacting entity. Given the volatility of exchange 
rates, there can be no assurance that we will be able to effectively 
manage our currency transaction risks, that our hedging activities 

Effective  internal  controls  are  necessary  for  us  to  provide 
reliable ﬁnancial reports, effectively prevent fraud and operate 
successfully as a public company. If we cannot provide reliable 
ﬁnancial reports or effectively prevent fraud, our reputation and 
operating results could be harmed. If we are unable to maintain 

  |  2021 Annual Report

15

Part I
Item 1A  Risk Factors

effective disclosure controls and procedures and internal controls 
over ﬁnancial reporting, we may not be able to provide reliable 
ﬁnancial reports, which in turn could affect our operating results 
or cause us to fail to meet our reporting obligations. Ineffective 
internal controls could also cause investors to lose conﬁdence in 

reported ﬁnancial information, which could negatively affect our 
stock price, limit our ability to access capital markets in the future, 
and require additional costs to improve internal control systems 
and procedures.

Legal and Regulatory Risks

Regulatory and statutory changes 
applicable to us or our customers could 
adversely affect our financial condition and 
results of operations.

We and many of our customers are subject to various national, 
state and local laws, rules and regulations. Changes in any of 
these areas could result in additional compliance costs, seizures, 
conﬁscations, recall or monetary ﬁnes, any of which could prevent 
or inhibit the development, distribution and sale of our products.

In addition, we beneﬁt from certain regulations, including building 
code regulations, which require the use of products that we and 
other manufacturers sell. For example, certain environmental 
regulations may encourage the use of more environmentally 
friendly products, such as some of the lubricants and greases 
that we manufacture. If these regulations were to change, demand 
for our products could be reduced and our results of operations 
could be adversely affected.

Compliance with extensive environmental, 
health and safety laws could require 
material expenditures, changes in our 
operations or site remediation.

Our operations and properties are subject to regulation under 
environmental laws, which can impose substantial sanctions for 
violations. We must conform our operations to applicable regulatory 
requirements and adapt to changes in such requirements in all 
jurisdictions in which we operate. Certain materials we use in the 
manufacture of our products can represent potentially signiﬁcant 
health and safety concerns. We use hazardous substances 
and generate hazardous wastes in certain of our manufacturing 
operations. Consequently, our operations are subject to extensive 
environmental, health and safety laws and regulations at the 
international, national, state and local level in multiple jurisdictions. 
These laws and regulations govern, among other things, air 
emissions, wastewater discharges, solid and hazardous waste 
management, site remediation programs and chemical use and 
management. Many of these laws and regulations have become 
more stringent over time, and the costs of compliance with these 
requirements may increase, including costs associated with any 
necessary capital investments. In addition, our production facilities 
require operating permits that are subject to renewal and, in some 
circumstances, revocation. The necessary permits may not be 
issued or continue in effect, and renewals of any issued permits 
may contain signiﬁcant new requirements or restrictions. The 
nature of the chemical industry exposes us to risks of liability 

16

  |  2021 Annual Report

due to the use, production, management, storage, transportation 
and sale of materials that may be hazardous and can cause 
contamination or personal injury or damage if released into the 
environment.

Compliance with environmental laws and regulations generally 
increases the costs of transportation and storage of raw materials 
and finished products, as well as the costs of storage and 
disposal of wastes. We may incur substantial costs, including 
ﬁnes, damages, criminal or civil sanctions and remediation costs, 
or experience interruptions in our operations for violations arising 
under environmental laws, regulations or permit requirements.

We are subject to the U.S. Foreign 
Corrupt Practices Act and other 
anti-corruption laws, as well as other 
laws governing our operations. If we fail 
to comply with these laws, we could be 
subject to civil or criminal penalties, other 
remedial measures, and legal expenses, 
which could adversely affect our business, 
financial condition and results of operations.

Our operations are subject to anti-corruption laws, including the 
U.S. Foreign Corrupt Practices Act (“FCPA”), and other anti-
corruption laws that apply in countries where we do business. 
The FCPA and these other laws generally prohibit us and our 
employees and intermediaries from bribing, being bribed or 
making other prohibited payments to government ofﬁcials or other 
persons to obtain or retain business or gain some other business 
advantage. We conduct business in a number of jurisdictions that 
pose a high risk of potential FCPA violations, and we participate 
in relationships with third parties whose actions could potentially 
subject us to liability under the FCPA or other anti-corruption laws. 
In addition, we cannot predict the nature, scope or effect of future 
regulatory requirements to which our international operations 
might be subject or the manner in which existing laws might be 
administered or interpreted.

We are also subject to other laws and regulations governing our 
international operations, including regulations administered by the 
U.S. Department of Commerce’s Bureau of Industry and Security, 
the U.S. Department of Treasury’s Ofﬁce of Foreign Asset Control 
and various non-U.S. government entities, including applicable 
export control regulations, economic sanctions on countries and 
persons, customs requirements, currency exchange regulations 
and transfer pricing regulations (collectively, “Trade Control Laws”).

Part I
Item 1A  Risk Factors

We have and maintain a compliance program with policies, 
procedures and employee training to help ensure compliance 
with applicable anti-corruption laws and the Trade Control Laws. 
However, despite our compliance programs, there is no assurance 
that we will be completely effective in ensuring our compliance 
with all applicable anti-corruption laws, including the FCPA or 
other legal requirements, or Trade Control Laws. If we are not in 
compliance with the FCPA and other anti-corruption laws or Trade 
Control Laws, we may be subject to criminal and civil penalties, 
disgorgement and other sanctions and remedial measures, and 
legal expenses, which could have an adverse impact on our 
business, ﬁnancial condition, results of operations and liquidity.

Likewise, any investigation of any potential violations of the FCPA, 
other anti-corruption laws or Trade Control Laws by the U.S. or 
foreign authorities could also have an adverse impact on our 
reputation, business, ﬁnancial condition and results of operations.

Our permits, licenses, registrations 
or authorizations and those of our 
customers or distributors may be modified, 
suspended, terminated or revoked before 
their expiration or we and/or they may 
be unable to renew them upon their 
expiration. We may bear liability for failure 
to obtain, maintain or comply with required 
authorizations.

We are required to obtain and maintain, and may be required 
to obtain and maintain in the future, various permits, licenses, 
registrations and authorizations for the ownership or operation 
of our business, including the manufacturing, distribution, sale 
and marketing of our products and importing of raw materials. 
These permits, licenses, registrations and authorizations could be 
modiﬁed, suspended, terminated or revoked or we may be unable 
to renew them upon their expiration for various reasons, including 
for non-compliance. These permits, licenses, registrations and 
authorizations can be difﬁcult, costly and time consuming to 
obtain and could contain conditions that limit our operations. 
Our  failure  to  obtain,  maintain  and  comply  with  necessary 
permits, licenses, registrations or authorizations for the conduct 
of our business could result in ﬁnes or penalties, which may be 
signiﬁcant. Additionally, any such failure could restrict or otherwise 
prohibit certain aspects of our operations, which could have a 
material adverse effect on our business, ﬁnancial condition and 
results of operations.

Many of our customers and distributors require similar permits, 
licenses, registrations and authorizations to operate. If a signiﬁcant 
customer, distributor or group thereof were to lose an important 
permit, license, registration or authorization, forcing them to cease 
or reduce their business, our revenues could decrease, which 
would have a material adverse effect on our business, ﬁnancial 
condition and results of operations.

Chemical processing is inherently 
hazardous, which could result in accidents 
that disrupt our operations or expose us to 
significant losses or liabilities.

Hazards associated with chemical processing and the related 
storage and transportation of raw materials, products and wastes 
exist in our operations and the operations of other occupants 
with whom we share manufacturing sites. These hazards could 
lead to an interruption or suspension of operations and have an 
adverse effect on the productivity and proﬁtability of a particular 
manufacturing facility or on us as a whole. These potential risks 
include, but are not necessarily limited to, chemical spills and 
other discharges or releases of toxic or hazardous substances 
or  gases,  pipeline  and  storage  tank  leaks  and  ruptures, 
explosions and ﬁres and mechanical failure. These hazards may 
result in personal injury and loss of life, damage to property 
and contamination of the environment, which may result in a 
suspension of operations and the imposition of civil or criminal 
penalties, including governmental ﬁnes, expenses for remediation 
and claims brought by governmental entities or third parties. The 
loss or shutdown of operations over an extended period at any of 
our major operating facilities could have a material adverse effect 
on our ﬁnancial condition and results of operations. Our property, 
business interruption and casualty insurance may not fully insure 
us against all potential hazards incidental to our business.

Regulation of our employees’ exposure 
to certain chemicals or other hazardous 
products could require material 
expenditures or changes in our operations.

Certain chemicals and other raw materials that we use in the 
manufacture of our products may have adverse health effects. 
The Occupational Safety and Health Administration limits the 
permissible employee exposure to some of those materials. 
Future studies on the health effects of certain chemicals and 
materials may result in additional or new regulations that further 
restrict or prohibit the use of, and exposure to, certain chemicals 
and materials. Additional regulation of certain chemicals and 
materials could require us to change our operations, and these 
changes could affect the quality of our products and materially 
increase our costs.

We may be unable to protect our 
trademarks, trade secrets, other intellectual 
property and proprietary information, which 
could harm our competitive position.

Our ability to protect and preserve our trademarks, trade secrets 
and  other  intellectual  property  and  proprietary  information 
relating to our business is an important factor to our success. 
However, we may be unable to prevent third parties from using 
our intellectual property and other proprietary information without 

  |  2021 Annual Report

17

Part I
Item 1A  Risk Factors

our authorization or from independently developing intellectual 
property and other proprietary information that is similar to ours, 
particularly in those countries where the laws do not protect our 
proprietary rights to the same degree as in the U.S. In addition, 
because certain of our products are manufactured by third parties, 
we have necessarily shared some of our intellectual property 
with those third parties. There can be no guarantee that those 
third parties, some of whom are located in jurisdictions where 
intellectual property risks may be more pronounced, will comply 
with contractual and other legal commitments to preserve and 
protect our intellectual property.

The  use  of  our  intellectual  property  and  other  proprietary 
information by others could reduce or eliminate any competitive 
advantage we have developed, potentially causing us to lose 
sales or otherwise harm our business. If it becomes necessary 
for us to litigate to protect these rights, any proceedings could be 
burdensome and costly, and we may not prevail.

Our intellectual property may not provide us with any competitive 
advantage and may be challenged by third parties. Moreover, our 
competitors may already hold or in the future may hold intellectual 
property rights in the U.S. or abroad that, if enforced or issued, 
could possibly prevail over our rights or otherwise limit our ability 
to manufacture or sell one or more of our products in the U.S. or 
internationally. Despite our efforts, we may be sued for infringing 
on the intellectual property rights of others. This litigation is costly 
and, even if we prevail, the costs of such litigation could adversely 
affect our ﬁnancial condition.

Adequate  remedies  may  not  be  available  in  the  event  of 
an unauthorized use or disclosure of our trade secrets and 
manufacturing  expertise.  The  loss  of  employees  who  have 
specialized knowledge and expertise could harm our competitive 
position and cause our revenues and operating results to decline 
as a result of increased competition. In addition, others may obtain 
knowledge of our trade secrets through independent development 
or other access by legal means.

Forward-Looking Statements

This Annual Report contains forward-looking statements within 
the meaning of the Private Securities Litigation Reform Act of 
1995. These statements reﬂect the current views of our senior 
management with respect to future events and our financial 
performance.  These  statements  include  forward-looking 
statements with respect to our business and industry in general. 
Statements that include the words “may,” “expects,” “plans,” 
“anticipates,” “estimates,” “believes,” “potential,” “projects,” 
“forecasts,” “intends,” or the negative thereof or other comparable 
terminology and similar statements of a future or forward-looking 
nature identify forward-looking statements for purposes of the 
federal securities laws or otherwise.

Forward-looking statements include, but are not limited to, 
statements that relate to, or statements that are subject to risks, 
contingencies or uncertainties that relate to:

 (cid:122) our business strategy;
 (cid:122) future levels of revenues, operating margins, income from 

operations, net income or earnings per share;

 (cid:122) anticipated levels of demand for our products and services;
 (cid:122) short and long-term effects of the COVID-19 pandemic;
 (cid:122) future levels of research and development, capital, environmental 

or maintenance expenditures;

 (cid:122) our beliefs regarding the timing and effects on our business of 
health and safety, tax, environmental or other legislation, rules 
and regulations;

 (cid:122) the success or timing of completion of ongoing or anticipated 

capital, restructuring or maintenance projects;

 (cid:122) expectations regarding the acquisition or divestiture of assets 

and businesses;

 (cid:122) our ability to obtain appropriate insurance and indemnities;
 (cid:122) the potential effects of judicial or other proceedings, including 
tax audits, on our business, financial condition, results of 
operations and cash ﬂows;

 (cid:122) the anticipated effects of actions of third parties such as 
competitors,  or  federal,  foreign,  state  or  local  regulatory 
authorities, or plaintiffs in litigation;

 (cid:122) the expected impact of accounting pronouncements; and
 (cid:122) the other factors listed above under “Risk Factors.”

Although  we  believe  that  the  expectations  reflected  in  the 
forward-looking statements are reasonable based on our current 
knowledge of our business and operations, we cannot guarantee 
future results, levels of activity, performance or achievements. The 
foregoing factors should not be construed as exhaustive. If one 
or more of these or other risks or uncertainties materialize, or if 
our underlying assumptions prove to be incorrect, actual results 
may differ materially from what we anticipate. The impact of the 
COVID-19 pandemic may also exacerbate the risks discussed in 
this Annual Report, which could have a material impact on our 
company. Any forward-looking statements you read in this Annual 
Report reﬂect our views as of the date of this Annual Report 
with respect to future events and are subject to these and other 
risks, uncertainties and assumptions relating to our operations, 
results of operations, growth strategy and liquidity. You should 
not place undue reliance on these forward-looking statements 
and you should carefully consider all of the factors identiﬁed in 
this Annual Report that could cause actual results to differ. We 
assume no obligation to update or revise these forward-looking 
statements, except as required by law.

18

  |  2021 Annual Report

Item 1B: Unresolved Staff Comments

Part I
Item 4  Mine Safety Disclosures

Not applicable.

Item 2:  Properties

Properties

Our principal executive offices are located at 5420 Lyndon 
B.  Johnson  Freeway,  Suite  500,  Dallas,  Texas  75240.  Our 
headquarters is a leased facility. The current lease term expires 
August 31, 2026, but may be renewed.

We  consider  the  many  manufacturing  and  R&D  facilities, 
distribution centers, warehouses, ofﬁces and other properties that 
we own or lease to be in good condition and generally suitable for 
the purposes for which they are used. The following table presents 
our principal physical locations by segment and excludes facilities 
classiﬁed as discontinued operations.

Location

Boise, Idaho

Use

Manufacturing, Ofﬁce and R&D

Dong Nai, Vietnam

Manufacturing and Ofﬁce

Fall River, Massachusetts

Manufacturing and Ofﬁce

Segment

Industrial Products

Industrial Products

Both

Greenwood, Indiana

Distribution Center & Ofﬁce

Industrial Products

Houston, Texas

Houston, Texas

Hudson, Florida

Manufacturing, Ofﬁce, R&D and Warehouse

Both

Distribution Center & Ofﬁce

Manufacturing, Ofﬁce and R&D

Jacksonville, Florida

Distribution Center & Ofﬁce

North East, Maryland

Distribution Center & Ofﬁce

Rockwall, Texas

Manufacturing, Ofﬁce, R&D and Warehouse

Both

Santa Fe Springs, California

Distribution Center & Ofﬁce

Wichita, Kansas

Manufacturing and Ofﬁce

Windsor, Ontario, Canada

Manufacturing, Ofﬁce and R&D

Industrial Products

Industrial Products

Industrial Products

Industrial Products

Industrial Products

Industrial Products

Industrial Products

Square 
Footage

42,000

634,000

140,200

54,000

253,900

150,000

40,000

217,000

150,000

227,600

240,000

42,800

42,000

Owned/Leased

Leased

Owned

Leased

Leased

Owned

Leased

Leased

Leased

Leased

Owned

Leased

Owned

Leased

We believe that our facilities are adequate for our current operations. We may endeavor to selectively reduce or expand our existing 
lease commitments as circumstances warrant. See Note 8 to our consolidated ﬁnancial statements included in Item 8 of this Annual 
Report for additional information regarding our lease obligations.

Item 3:  Legal Proceedings

We may, from time to time, be involved in litigation arising out of 
our operations in the normal course of business or otherwise. 
Furthermore, third parties may try to seek to impose liability on us 
in connection with the activities of our operating companies. We 

are not currently a party to any legal proceedings that, individually 
or in the aggregate, are expected to have a material effect on 
our business, ﬁnancial condition, results of operations or ﬁnancial 
statements, taken as a whole.

Item 4:  Mine Safety Disclosures

Not applicable.

  |  2021 Annual Report

19

Part II
Item 5:   Market for Registrant’s Common 

Equity, Related Stockholder Matters 
and Issuer Purchases of Equity 
Securities

Market Information

Our common shares are listed on the Nasdaq Global Select Market under the symbol “CSWI.”

Holders

As of May 12, 2021, there were 413 holders of record of our common stock. The number of holders of record is based upon the 
actual numbers of holders registered at such date and does not include holders of shares in “street name” or persons, partnerships, 
associates, corporations or other entities in security position listings maintained by depositories.

Issuer Purchases of Equity Securities

Note 11 to our consolidated ﬁnancial statements included in Item 8 of this Annual Report includes a discussion of our share repurchase 
program. No shares were repurchased during the quarter ended March 31, 2021.

Period

January 1 - 31

February 1 - 28

March 1 - 31

Total Number 
of Shares 
Purchased

Average 
Price Paid 
per Share
($)

Total Number of 
Shares Purchased 
as Part of Publicly 
Announced Program

—

—

—

—

—

—

—

—

—

—

—

Maximum Number of Shares (or 
Approximate Dollar Value) That 
May Yet Be Purchased Under 
the Program
($)

(in millions)

100.0

100.0

100.0

20

  |  2021 Annual Report

Part II
Item 5  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Stock Performance Chart

The following graph compares the cumulative total shareholder 
return on our common stock from April 1, 2016 (the date on 
which our common shares began “regular way” trading on the 
Nasdaq Global Select Market) through March 31, 2021 compared 
with the Russell 2000 Index, of which CSWI is a component, 
and a composite custom peer group, selected on an industry 

basis. The graph assumes that $100 was invested at the market 
close on April 1, 2016 and that all dividends were reinvested. The 
stock price performance of the following graph is not necessarily 
indicative of future stock price performance. The custom peer 
group consists of the following:

Astec Industries, Inc.

Chase Corporation

Futurefuel Corp.

Gorman-Rupp Co.

Columbus McKinnon Corp

Innospec Inc.

Landec Corporation

Quaker Chemical Corp.

Littelfuse, Inc.

LSB Industries, Inc.

Tredegar Corp.

WD-40 Company

CTS Corporation

Koppers Holdings Inc.

Methode Electronics, Inc.

Flotek Industries, Inc.

Kraton Corp.

NN, Inc.

Omnova Solutions Inc. was removed from the custom peer group 
as it was acquired by Synthomer plc in 2020 and its shares are 
no longer publicly traded.

This graph is furnished and not ﬁled with the SEC. Notwithstanding 
anything to the contrary set forth in any of our previous ﬁlings 
made under the Securities Act of 1933 or the Exchange Act 
that incorporate future ﬁlings made by us under those statutes, 
the stock performance graph below is not to be incorporated 
by reference in any prior ﬁlings, nor shall it be incorporated by 
reference into any future ﬁlings made by us under those statutes.

$
480

430

380

330

280

230

180

130

80

$438

$222
$213

04/01/16

03/31/17

03/30/18

03/29/19

03/31/20

03/31/21

● CSWI

● RusseII 2000

● Custom Peer Group

  |  2021 Annual Report

21

Item 6:   Selected Financial Data

(Amounts in thousands, except per share data)

RESULTS OF OPERATIONS

Revenues, net

Gross proﬁt

Year Ended March 31,

2021
($)

(a),(b)

2020
($)

(c),(d)

2019
($)

(e),(f)

2018
($)

(g)

2017
($)

(h)

419,205

184,800

385,871

177,050

350,155

161,370

326,222

147,940

287,460

128,956

Selling, general and administrative expenses

(125,330)

(110,032)

(100,930)

(98,281)

(95,601)

Operating income

Interest expense, net

Provision for income taxes

Income from continuing operations

Diluted earnings per share – continuing operations

Cash dividends per share

FINANCIAL CONDITION

Working capital

Total assets

Total debt

Retirement obligations and other liabilities

Total equity

59,470

(2,383)

66,067

(1,331)

60,440

(1,442)

49,659

(2,317)

32,040

(2,695)

(10,830)

(12,784)

(15,389)

(15,565)

(14,360)

40,288

44,817

46,052

32,682

17,800

2.66

0.54

2.95

0.54

2.96

—

2.09

—

1.12

—

131,805

874,957

242,337

138,420

412,013

90,899

369,245

10,898

23,021

102,095

352,632

31,459

8,092

82,713

340,816

24,020

6,738

108,547

398,427

73,207

14,844

276,741

263,686

265,765

272,438

(a)  Result of operations in the year ended March 31, 2021 included transaction expenses related to the TRUaire acquisition and the formation of a joint venture within 

our Specialty Chemicals segment of $10.4 million ($8.8 million, net of tax).

(b)  Result of operations in the year ended March 31, 2021 included an indemnification expense of $5.0 million ($0.3 million net benefit after considering a tax benefit of 
$5.3 million resulting from the release of the relevant tax contingency reserves) due to the partial release of a tax indemnification asset related to the TRUaire acquisition.
(c)  Result of operations in the year ended March 31, 2020 included a charge of $6.5 million ($5.0 million, net of tax) resulting from the termination of our qualified U.S. 

defined benefit pension plan.

(d)  Results of operations and financial condition for the year ended March 31, 2020 reflect the adoption of ASU No. 2016-02 “Leases (Topic 842),” as amended.
(e)  Results of operations in the year ended March 31, 2019 included gains of $2.6 million ($1.9 million, net of tax) on sales of property, plant and equipment used in 

operations and $1.5 million ($2.4 million including tax benefit resulting from tax basis loss) on sales of non-operating assets.

(f)  Results of operations for the year ended March 31, 2019 reflect the adoption of ASU No. 2014-09 “Revenue from Contracts with Customers (Topic 606),” as amended.
(g)  Results of operations for the year ended March 31, 2018 included costs of $1.4 million ($0.9 million, net of tax) resulting from restructuring and realignment initiatives.
(h)  Results of operations for the year ended March 31, 2017 included costs of $6.6 million ($4.3 million, net of tax) resulting from restructuring and realignment initiatives.

22

  |  2021 Annual Report

Item 7:   Management’s Discussion and 

Analysis of Financial Condition and 
Results of Operations

The following discussion and analysis is provided to increase the understanding of, and should be read in conjunction with, the 
accompanying consolidated ﬁnancial statements and notes. See “Item 1A. Risk Factors” and the “Forward-Looking Statements” 
included in this Annual Report for a discussion of the risks, uncertainties and assumptions associated with these statements. Unless 
otherwise noted, all amounts discussed herein are consolidated.

Executive Overview

Our Company

We  are  a  diversified  industrial  growth  company  with  well-
established, scalable platforms and domain expertise across two 
segments: Industrial Products and Specialty Chemicals. Our broad 
portfolio of leading products and systems provides performance 
optimizing solutions to our customers, helping contractors do their 
jobs better, faster and easier; making buildings safer and more 
aesthetically pleasing; protecting valuable assets from corrosion; 
and improving the reliability of mission critical equipment. Our 
products include mechanical products for heating, ventilation, air 
conditioning and refrigeration (“HVAC/R”), grilles, registers and 
diffusers, building safety solutions and high-performance specialty 
lubricants and sealants. End markets that we serve include 
HVAC/R, architecturally-speciﬁed building products, plumbing, 
energy, rail, mining and general industrial. Our manufacturing 
operations  are  concentrated  in  the  United  States  (“U.S.”), 
Canada and Vietnam, and we have distribution operations in 
U.S., Australia, Canada and the United Kingdom (“U.K.”). Our 
products are sold directly or through designated channels both 
domestically and internationally.

Many of our products are used to protect the capital assets of our 
customers that are expensive to repair or replace and are critical 
to their operations. We have a source of recurring revenue from 
the maintenance, repair and overhaul and consumable nature of 
many of our products. We also provide some custom engineered 
products that strengthen and enhance our customer relationships. 
The reputation of our product portfolio is built on more than 100 
well-respected brand names, such as RectorSeal No. 5, KOPR-
KOTE, Jet-Lube, Smoke Guard, Safe-T-Switch, Mighty Bracket, 
Balco, Whitmore Rail, Air Sentry, Oil Safe, Deacon, Leak Freeze, 
Greco and TRUaire.

Business Developments

On April 1, 2021, Whitmore Manufacturing, LLC (“Whitmore”), 
a wholly-owned subsidiary of CSWI, completed the formation 
of the previously announced joint venture with Pennzoil-Quaker 
State Company dba SOPUS products (“Shell”), a wholly-owned 
subsidiary of Shell Oil Company that comprises Shell’s U.S. 
lubricants business. The formation was consummated through 

a transaction in which Whitmore sold to Shell a 50% interest in 
a wholly-owned subsidiary (containing certain existing operating 
assets) in exchange for consideration of $13.7 million from Shell 
in the form of cash and intangible assets.

On December 15, 2020, we acquired 100% of the outstanding 
equity of T.A. Industries, Inc. (“TRUaire”), a leading manufacturer 
of grilles, registers, and diffusers for the residential and commercial 
HVAC/R end market, based in Santa Fe Springs, California. The 
acquisition also included TRUaire’s wholly-owned manufacturing 
facility based in Vietnam. The acquisition is expected to extend 
the Company’s product offerings to the HVAC market as well as 
add new customers and provide strategic distribution facilities. 
The consideration paid for TRUaire included cash of $284 million 
and 849,852 shares of the Company’s common stock. The cash 
consideration was funded through a combination of cash on hand 
and borrowings under our revolving credit facility, and 849,852 
shares of common stock were reissued from treasury shares. 
TRUaire activity has been included in our Industrial Products 
segment since the acquisition date.

During the quarter ended December 31, 2017, we committed to 
a plan to divest our Strathmore Products business (the “Coatings 
business”). This determination resulted in the reclassiﬁcation of 
the assets comprising that business to assets held-for-sale, and 
a corresponding adjustment to our consolidated statements 
of operations to reﬂect discontinued operations for all periods 
presented. During the quarter ended September 30, 2018, we 
received an aggregate of $6.9 million for the sale of certain tangible 
and all intangible assets that related to our former Coatings 
business in multiple transactions. During the quarter ended 
March 31, 2020, we received $1.5 million for the sale of the last 
remaining real property owned by our former Coatings business 
and, as such, we do not expect to have results of discontinued 
operations resulting from the Coatings business in future years.

The COVID-19 pandemic continues to have an impact on human 
health, the global economy and society at large. The pandemic 
and its resulting impacts had an adverse impact on our ﬁnancial 
results in the ﬁscal year ended March 31, 2021, as compared with 
the prior year, most notably within the ﬁrst and second quarters 
of ﬁscal 2021. While the COVID-19 pandemic has contributed to 
increased demand in certain parts of our business, including the 
HVAC/R end market, we expect our overall results of operations 

  |  2021 Annual Report

23

Part II
Item 7  Management’s Discussion and Analysis of Financial Condition and Results of Operations

and ﬁnancial condition to continue to be adversely impacted 
through the duration of the pandemic when compared to pre-
pandemic periods. Despite strong demand in certain of our end 
markets and signs of recovery in others, we cannot reasonably 
estimate the magnitude or length of the pandemic’s adverse 
impact, including the effects of any vaccine or its ultimate impact 
on our business or ﬁnancial condition, due to continued uncertainty 
regarding (1) the duration and severity of the COVID-19 pandemic 
and (2) the continued potential for short and long-term impacts on 
our facilities and employees, customer demand and supply chain.

All of our operations and products support critical infrastructure 
and are considered “essential” in all of the relevant jurisdictions in 
which we operate. In response to the COVID-19 pandemic, we 
took numerous measures across our operating sites to ensure 
we continue to place the highest priority on the health, safety 
and well-being of our employees, while continuing to support 
our customers. Through the date of this ﬁling, our businesses 
have continued to operate throughout the COVID-19 pandemic 
with appropriate safeguards for our employees and without any 
material disruptions.

Our Markets

HVAC/R

The HVAC/R market is our largest market served and it represented 
approximately 42% and 31% of our net revenues in the years 
ended March 31, 2021 and 2020, respectively. We provide an 
extensive array of products for installation, repair and maintenance 
of HVAC/R systems that includes condensate switches, pans and 
pumps, grilles, registers and diffusers, refrigerant caps, line set 
covers and other chemical and mechanical products. The industry 
is driven by replacement and repair of existing HVAC/R systems, 
as well as new construction projects. New HVAC/R systems 
are heavily inﬂuenced by macro trends in building construction, 
while replacement and repair of existing HVAC/R systems are 
dependent on weather and age of unit. The HVAC/R market tends 
to be seasonal with the peak sales season beginning in March and 
continuing through August. Construction and repair is typically 
performed by contractors, and we utilize our global distribution 
network to drive sales of our brands to such contractors.

Architecturally-Specified Building Products

Architecturally-specified  building  products  represented 
approximately 27% and 29% of our net revenues in the years 
ended March 31, 2021 and 2020, respectively. We manufacture 
and sell products such as engineered railings, smoke and ﬁre 
protection systems, expansion joints and stair edge nosings for 
commercial buildings, multi-family housing, healthcare, education 
and government facilities. Sales of these products are driven by 
architectural speciﬁcations and safety codes. The sales process 
is typically long as these can be multi-year construction projects. 
The construction market, both commercial and multi-family, is a 
key driver for sales of architecturally-speciﬁed building products.

General Industrial

The general industrial end market represented approximately 
10% and 13% of our net revenues in the years ended March 31, 
2021 and 2020, respectively. We provide products focused on 
asset protection and reliability, including lubricants, desiccant 
breathers and ﬂuid management products. The general industrial 
market includes the manufacture of chemicals, steel, cement, 
food and beverage, pulp and paper and a wide variety of other 
processed materials. We serve this market primarily through 
a network of distributors. The growth trajectory of the general 
industrial end market is expected to reﬂect a blended average of 
the aforementioned end use markets.

Plumbing

The plumbing market represented approximately 10% and 11% 
of our net revenues in the years ended March 31, 2021 and 
2020, respectively. We provide many products to the plumbing 
industry including thread sealants, solvent cements, ﬁre-stopping 
products, condensate switches and trap guards, as well as other 
mechanical products, such as drain traps. Installation is typically 
performed by contractors, and we utilize our global distribution 
network to drive sales of our products to contractors.

Energy

The energy market represented approximately 4% and 6% of 
our net revenues in the years ended March 31, 2021 and 2020, 
respectively. We provide market-leading lubricants and anti-
seize compounds, as well as greases, for use in oilﬁeld drilling 
activity and maintenance of oilfield drilling and valve related 
equipment. We sell our products primarily through distributors 
that are strategically situated near the major oil and gas producing 
areas across the globe. The outlook for the energy industry is 
heavily dependent on the global demand expectations from 
developed and emerging economies, as well as oil price and local 
government policies relative to oil exploration, drilling, storage 
and transportation.

Rail

The rail market represented approximately 4% and 6% of our 
net revenues in the years ended March 31, 2021 and 2020, 
respectively.  We  provide  an  array  of  products  into  the  rail 
industry, including lubricants and lubricating devices for rail lines, 
which increase efﬁciency, reduce noise and extend the life of rail 
equipment such as rails and wheels. We leverage our technical 
expertise to build relationships with key decision-makers to ensure 
our products meet required speciﬁcations. We sell our products 
primarily through a direct sales force, as well as through distribution 
partners. End markets for Rail include Class 1 Rail as the primary 
end market in North America and Transit Rail as the primary end 
market in all other geographies. Cyclical product classes such 
as farm products and petrochemical products can also impact 
volumes in Class 1 Rail. While coal transport is diminishing demand 
for Class 1 Rail in North America, global investment in Transit Rail 
systems is expected to more than offset this decline.

24

  |  2021 Annual Report

Part II
Item 7  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Mining

Our Outlook

The  mining  market  represented  approximately  3%  and  4% 
of our net revenues in the years ended March 31, 2021 and 
2020,  respectively.  Across  the  globe,  we  provide  market-
leading lubricants to open gears used in large mining excavation 
equipment, primarily through direct sales agents, as well as a 
network of strategic distributors. The North American mining 
industry is heavily weighted toward coal production and has 
experienced headwinds due to continued decline in domestic 
coal demand, partially mitigated by the seaborne coal export 
market. Globally, coal demand has been robust, and focused 
efforts in coal markets outside of the U.S., coupled with enhanced 
focus on markets such as iron, gold, diamonds and uranium in 
Southeast Asia, South America, Africa and Russia, have delivered 
growth that has generally offset the weakness in North American 
coal demand. Outside of coal, the mining market tends to move 
with global industrial output as basic industrial metals such as 
copper, tin, aluminum, and zinc, which are critical inputs to many 
industrial products.

We expect to maintain a strong balance sheet in ﬁscal year 2022, 
which provides us with access to capital through our cash on 
hand, internally-generated cash ﬂow and availability under our 
revolving credit facility. Our capital allocation strategy continues 
to guide our investing decisions, with a priority to direct capital to 
the highest risk adjusted return opportunities, within the categories 
of organic growth, strategic acquisitions and the return of cash to 
shareholders through our share repurchase and dividend programs. 
With the strength of our ﬁnancial position, we will continue to 
invest in ﬁnancially and strategically attractive expanded product 
offerings, key elements of our long-term strategy of targeting long-
term proﬁtable growth. We will continue to invest our capital in 
maintaining our facilities and in continuous improvement initiatives. 
We recognize the importance of, and remain committed to, 
continuing to drive organic growth, as well as investing additional 
capital in opportunities with attractive risk-adjusted returns, driving 
increased penetration in the end markets we serve.

We remain disciplined in our approach to acquisitions, particularly 
as it relates to our assessment of valuation, prospective synergies, 
diligence, cultural ﬁt and ease of integration, especially in light of 
the economic conditions due to the pandemic.

Results of Operations

The following discussion provides an analysis of our consolidated 
results of operations and results for each of our segments.

The operations of TRUaire have been included in our consolidated 
results of operations and in the operating results of our Industrial 
Products  segment  since December 15, 2020, the effective 
date of the acquisition. The operations of Petersen Metals, Inc. 
(“Petersen”) have been included in our consolidated results of 

operations and in the operating results of our Industrial Products 
segment since April 2, 2019, the effective date of the acquisition. 
The operations of MSD Research, Inc. (“MSD”) have been included 
in our consolidated results of operations and in the operating 
results of our Industrial Products segment since January 31, 2019, 
the effective date of the acquisition. All acquisitions are described 
in Note 2 to our consolidated ﬁnancial statements included in Item 
8 of this Annual Report.

Net Revenues

(Amounts in thousands)

Revenues, net

Year Ended March 31,

2021
($)

2020
($)

2019
($)

419,205

385,871

350,155

Net revenues for the year ended March 31, 2021 increased 
$33.3 million, or 8.6%, as compared with the year ended March 31, 
2020. The increase was primarily due to the December 15, 2020 
acquisition of TRUaire ($33.8 million or 8.8%). Excluding the 
acquisition impact, the organic sales remained relatively ﬂat from 
the prior year with a slight sales decrease ($0.5 million in total 
or 0.1%) primarily due to decreased sales into general industrial 
($9.0 million), energy ($7.5 million), rail ($5.5 million) and mining 
($1.1 million) end markets, mostly offset by increased sales 
volumes into the HVAC/R ($22.2 million) and architecturally-
speciﬁed building products ($2.0 million) end markets. Although 
the energy and mining end markets decreased over the prior ﬁscal 
year, those decreases occurred during the ﬁrst nine months of the 
ﬁscal year, while the fourth ﬁscal quarter showed improvements 
as compared with the same period in the prior year. The plumbing 

end market experienced growth in the fourth ﬁscal quarter as 
compared with the same period in the prior year, offsetting the 
slight decreases in the ﬁrst nine months of the ﬁscal year.

Net revenues for the year ended March 31, 2020 increased 
$35.7 million, or 10.2%, as compared with the year ended 
March  31,  2019.  The  increase  was  primarily  due  to  recent 
acquisitions ($15.1 million or 4.3%) and organic sales increases 
($20.6  million  in  total  or  5.9%)  driven  by  increased  sales 
volumes into the HVAC/R ($12.0 million), plumbing ($3.2 million), 
architecturally-specified building products ($2.1 million), rail 
($1.2  million),  mining  ($1.2  million)  and  general  industrial 
($0.9 million) end markets. Although the mining and rail end 
markets increased over the prior fiscal year, those increases 
occurred during the ﬁrst nine months of the ﬁscal year, while 

  |  2021 Annual Report

25

Part II
Item 7  Management’s Discussion and Analysis of Financial Condition and Results of Operations

the fourth ﬁscal quarter was relatively ﬂat as compared with the 
same period in the prior year. The energy end market experienced 
growth in the ﬁrst nine months of the ﬁscal year, but declines in 
the fourth ﬁscal quarter as compared with the same period in the 
prior year offset most of that growth.

Net  revenues  into  the  Americas,  the  Europe,  Middle  East 
and Africa (“EMEA”) and the Asia Paciﬁc regions represented 
approximately 93%, 4%, and 3%, respectively, of net revenues for 

the year ended March 31, 2021. Net revenues into the Americas, 
EMEA and the Asia Paciﬁc regions represented approximately 
90%, 6%, and 4%, respectively, of net revenues for both of the 
years ended March 31, 2020 and 2019. The presentation of net 
revenues by geographic region is based on the location of the 
customer. For additional information regarding net revenues by 
geographic region, see Note 19 to our consolidated ﬁnancial 
statements included in Item 8 of this Annual Report.

Gross Proﬁt and Gross Proﬁt Margin

(Amounts in thousands, except percentages)

Gross proﬁt

Gross proﬁt margin

Year Ended March 31,

2021
($)

2020
($)

2019
($)

184,800

177,050

161,370

44.1%

45.9%

46.1%

Gross  profit  for  the  year  ended  March  31,  2021  increased 
$7.8 million, or 4.4%, as compared with the year ended March 31, 
2020. The increase was primarily due to the TRUaire acquisition, 
partially offset by decreased gross margin and an $0.8 million gain 
on sales of property, plant and equipment in the prior year that did 
not recur. Gross proﬁt margin for the year ended March 31, 2021 of 
44.1% decreased from 45.9% for the year ended March 31, 2020, 
primarily due to the TRUaire acquisition, including a $3.5 million 
amortization related to the inventory fair value step-up, and increased 
freight and transportation costs in the fourth ﬁscal quarter.

Gross  profit  for  the  year  ended  March  31,  2020  increased 
$15.7 million, or 9.7%, as compared with the year ended March 31, 
2019. The increase was primarily due to increased revenues, 
recent acquisitions and an $0.8 million gain on sales of property, 
plant and equipment, partially offset by a $2.6 million gain on sales 
of property, plant and equipment in the prior year period that did 
not recur. Gross proﬁt margin for the year ended March 31, 2020 
of 45.9% decreased from 46.1% for the year ended March 31, 
2019, primarily attributable to product mix.

Selling, General and Administrative Expense

(Amounts in thousands, except percentages)

Operating expenses

Operating expenses as a % of revenues

Selling, general and administrative expense for the year ended 
March 31, 2021 increased $14.3 million, or 12.9%, as compared 
with the year ended March 31, 2020. The increase was primarily 
due to transaction expenses related to the TRUaire acquisition 
($7.8 million) and the formation of a joint venture in our Specialty 
Chemicals segment ($2.6 million), the inclusion of TRUaire’s 
operations and employee severance costs ($0.7 million), partially 
offset by reduced spend on travel and entertainment expenses and 
a trademark impairment ($1.0 million) in the prior year that did not 
recur. The increase in operating expense as a percentage of sales 
was primarily attributable to transaction expenses discussed above.

Year Ended March 31,

2021
($)

2020
($)

2019
($)

 125,330

110,983

100,930

29.9%

28.8%

28.8%

Selling, general and administrative expense for the year ended 
March 31, 2020 increased $10.1 million, or 10.0%, as compared 
with the year ended March 31, 2019. The increase was primarily 
attributable to acquisitions ($3.2 million), and increased employee-
related costs, as well as a net increase in trademark impairments 
and write-offs ($0.6 million). Operating expenses as a percentage 
of revenues for the year ended March 31, 2020 was comparable 
to the year ended March 31, 2019, as leverage on increased 
revenues was partially offset by increased employee-related costs.

Operating Income

(Amounts in thousands, except percentages)

Operating income

Operating margin

26

  |  2021 Annual Report

Year Ended March 31,

2021
($)

2020
($)

2019
($)

59,470

66,067

60,440

14.2%

17.1%

17.3%

 
Part II
Item 7  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Operating income for the year ended March 31, 2021 decreased 
by $6.6 million, or 10.0%, as compared with the year ended 
March 31, 2020. The decrease was a result of the $14.3 million 
increase in selling, general and administrative expense, partially 
offset by the $7.8 million increase in gross proﬁt.

Operating income for the year ended March 31, 2020 increased by 
$5.6 million, or 9.3%, as compared with the year ended March 31, 
2019. The increase was a result of the $15.7 million increase in 
gross proﬁt, partially offset by the $10.1 million increase in selling, 
general and administrative expense as discussed above.

Other Income and Expense

Interest  expense,  net  for  the  year  ended  March  31,  2021 
increased $1.1 million to $2.4 million as compared with the year 
ended March 31, 2020, due to increased borrowing under our 
Revolving Credit Facility (described in Note 7 to our consolidated 
ﬁnancial statements included in Item 8 of this Annual Report) to 
fund a portion of the purchase price for the TRUaire acquisition.

Interest  expense,  net  for  the  year  ended  March  31,  2020 
decreased $0.1 million to $1.3 million as compared with the year 
ended March 31, 2019, primarily due to an overall reduction in 
average outstanding debt under our Revolving Credit Facility, as 
well as lower interest rates.

Other expense, net decreased by $1.2 million for the year ended 
March 31, 2021 to expense of $6.0 million as compared with the 
year ended March 31, 2020. The decrease was primarily due to an 
indemniﬁcation expense of $5.0 million due to the partial release 
of a tax indemniﬁcation asset related to the TRUaire acquisition 
and loss arising from transactions in currencies other than our 
sites’ functional currencies, entirely offset by a charge of $6.5 
million resulting from the termination of our U.S. deﬁned beneﬁt 
pension plan and a lease termination cost of $0.5 million in the 
prior year that did not recur.

Other income (expense), net decreased by $9.6 million for the year 
ended March 31, 2020 to expense of $7.1 million as compared 
with the year ended March 31, 2019. The decrease was primarily 
due to a charge of $6.5 million resulting from the termination of 
our U.S. deﬁned beneﬁt pension plan, $1.8 million of gains on 
sales of non-operating assets in the prior year that did not recur, 
and a lease termination cost of $0.5 million.

Provision for Income Taxes and 
Effective Tax Rate

The provision for income taxes for the year ended March 31, 2021 
was $10.8 million, representing an effective tax rate of 21.2%, 
as compared with the provision of $12.8 million, representing an 
effective tax rate of 22.2%, for the year ended March 31, 2020 

Business Segments

and the provision of $15.4 million, representing an effective tax 
rate of 25.0%, for the year ended March 31, 2019. As compared 
with the statutory rate for the year ended March 31, 2021, the 
provision for income taxes was primarily impacted by the release 
of uncertain tax positions, which decreased the provision by 
$4.7 million and the effective rate by 9.2% offset by the state tax 
expense (net of federal beneﬁts), which increased the provision 
by $2.4 million and the effective rate by 4.7% and additional 
non-deductible expenses, which increased the provision by  
$1.4 million and the effective rate by 2.8%.

As compared with the statutory rate for the year ended March 31, 
2020, the provision for income taxes was primarily impacted by 
the state tax expense (net of federal beneﬁts), which increased the 
provision by $1.9 million and the effective rate by 3.4%, and the 
release of uncertain tax positions, which decreased the provision by 
$1.6 million and the effective rate by 2.8%. Other items impacting 
the effective tax rate for the prior years include adjustments for the 
closing of the IRS audit for tax year ended March 31, 2017, foreign 
withholding tax paid during the tax year ended March 31, 2020 for 
prior year periods, and the reversal of a pension adjustment related 
to a former wholly-owned subsidiary for the tax period ended 
September 30, 2015, in which the statute of limitations expired.

We recorded total tax contingency reserves of $17.3 million, 
including unrecognized tax benefit of $13.6 million, accrued 
interest and penalty of $1.4 million and $2.3 million, respectively, 
through purchase accounting as a result of the TRUaire acquisition 
discussed in Note 2. During the three months ended March 31, 
2021, a tax beneﬁt of $5.3 million, including release of accrued 
interest ($0.6 million) and penalty ($0.6 million), was recognized as 
a result of receiving the audit closing letter from Internal Revenue 
Service related to calendar 2017, a pre-acquisition tax year. 
For the year ended March 31, 2021, the interest and penalties 
related to the uncertain tax position resulted in a net decrease 
of $0.9 million in income tax expense. We accrued interest 
and penalties on uncertain tax positions of $1.0 million and  
$1.8 million, respectively, as of the year ended March 31, 2021. We 
recognize accrued interest and penalties related to unrecognized 
tax beneﬁts within our income tax provision.

We  are  currently  under  examination  by  the  IRS  for  a  short 
period return ending September 30, 2015 for a CSWI subsidiary 
company. Our federal income tax returns for the years ended 
March 31, 2020, 2019 and 2018 remain subject to examination. 
Our income tax returns for TRUaire’s pre-acquisiton periods 
including calendar years 2017, 2018 and 2019 remain subject 
to examinations. Our income tax returns in certain state income 
tax jurisdictions remain subject to examination for various periods 
for the period ended September 30, 2015 and subsequent years.

As of both March 31, 2021 and 2020, we had no tax effected 
operating loss carryforwards net of valuation allowances. Net 
operating loss carryforwards will expire in periods beyond the 
next ﬁve years.

We conduct our operations through two business segments based on type of product and how we manage the business. We evaluate 
segment performance and allocate resources based on each segment’s operating income. The key operating results for our two 
business segments are discussed below.

  |  2021 Annual Report

27

Part II
Item 7  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Industrial Products Segment Results

Industrial Products includes specialty mechanical products, ﬁre and smoke protection products, architecturally-speciﬁed building 
products and storage, ﬁltration and application equipment for use with our specialty chemicals and other products for general industrial 
application.

(Amounts in thousands, except percentages)

Revenues, net

Operating income

Operating margin

Year Ended March 31,

2021
($)

289,416

55,641

2020
($)

234,895

55,725

2019
($)

205,931

48,817

19.2%

23.7%

23.7%

Net revenues for the year ended March 31, 2021 increased $54.5 
million, or 23.2%, as compared with the year ended March 31, 
2020. The increase was primarily due to the TRUaire acquisition 
($33.8 million or 14.4%) and organic sales increases ($20.7 
million in total or 8.8%) driven by increased sales volumes into the 
HVAC/R ($20.3 million), architecturally-speciﬁed building products 
($4.8 million) and plumbing ($1.4 million) end markets, partially 
offset by decreases in rail ($2.7 million) and general industrial ($3.1 
million) end markets.

Net revenues for the year ended March 31, 2020 increased $29.0 
million, or 14.1%, as compared with the year ended March 31, 
2019. The increase was primarily due to recent acquisitions ($15.1 
million or 7.3%) and organic sales increases ($13.9 million in total 
or 6.8%) driven by increased sales volumes into the HVAC/R 

($12.0 million) and plumbing ($2.6 million) end markets, partially 
offset by a decline in the rail ($0.5 million) end market.

Operating income for the year ended March 31, 2021 decreased 
$0.1 million, or 0.2%, as compared with the year ended March 
31, 2020. The decrease was primarily attributable to transaction 
expenses related to the TRUaire acquisition ($7.8 million), partially 
offset by increased revenues.

Operating income for the year ended March 31, 2020 increased 
$6.9 million, or 14.2%, as compared with the year ended March 
31, 2019. The increase was primarily attributable to recent 
acquisitions ($4.0 million) and increased revenues, partially offset 
by a $0.5 million gain on the sale of property, plant and equipment 
in the prior year that did not recur.

Specialty Chemicals Segment Results

Specialty Chemicals includes pipe thread sealants, ﬁrestopping sealants and caulks, adhesives/solvent cements, lubricants and greases, 
drilling compounds, anti-seize compounds, chemical formulations and degreasers and cleaners.

(Amounts in thousands, except percentages)

Revenues, net

Operating income

Operating margin

Year Ended March 31,

2021
($)

129,789

18,263

2020
($)

150,976

24,691

2019
($)

144,224

23,930

14.1%

16.4%

16.6%

Net revenues for the year ended March 31, 2021 decreased 
$21.2  million,  or  14.0%,  as  compared  with  the  year  ended 
March 31, 2020. The decrease was primarily attributable to 
decreased sales volumes into the energy ($7.5 million), general 
industrial ($6.0 million), architecturally-speciﬁed building products 
($2.8 million), rail ($2.7 million) and mining ($1.1 million) end markets.

Net revenues for the year ended March 31, 2020 increased 
$6.8 million, or 4.7%, as compared with the year ended March 31, 
2019. The increase was primarily attributable to increased sales 
volumes into the architecturally-specified building products 
($2.1 million), rail ($1.7 million), general industrial ($1.3 million), 
mining ($1.2 million) and plumbing ($0.6 million) end markets.

Operating income for the year ended March 31, 2021 decreased 
$6.4  million,  or  26.0%,  as  compared  with  the  year  ended 

March 31, 2020. The decrease was primarily attributable to 
decreased sales and $2.6 million of transaction expenses related 
to the formation of a joint venture, partially offset by decreases in 
travel and personnel-related expenses and sales commissions.

Operating income for the year ended March 31, 2020 increased 
$0.8 million, or 3.2%, as compared with the year ended March 31, 
2019.  The  increase  was  primarily  attributable  to  increased 
revenues, partially offset by a net decrease in year-over-year gains 
on sales of property, plant and equipment ($1.4 million) and an 
increase in net trademark impairments and write-offs ($0.6 million).

For  additional  information  on  segments,  see  Note  19  to 
our consolidated ﬁnancial statements included in Item 8 of this 
Annual Report.

28

  |  2021 Annual Report

  
 
Part II
Item 7  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Liquidity and Capital Resources

Cash Flow Analysis

(Amounts in thousands)

Net cash provided by operating activities, continuing operations

Net cash used in investing activities, continuing operations

Net cash provided by (used in) ﬁnancing activities

Existing cash, cash generated by operations and borrowings 
available under our Revolving Credit Facility are our primary 
sources  of  short-term  liquidity.  We  monitor  the  depository 
institutions that hold our cash and cash equivalents on a regular 
basis, and we believe that we have placed our deposits with 
creditworthy ﬁnancial institutions. Our sources of operating cash 
generally include the sale of our products and services and the 
conversion of our working capital, particularly accounts receivable 
and  inventories.  Our  cash  balance  at  March  31,  2021  was 
$10.1 million, as compared with $18.3 million at March 31, 2020.

For the year ended March 31, 2021, our cash provided by 
operating activities from continuing operations was $66.3 million, 
as compared with $71.4 million and $68.2 million for the years 
ended March 31, 2020 and 2019, respectively.

 (cid:122) Working capital used cash for the year ended March 31, 2021 
due to higher accounts receivable ($7.2 million), higher prepaid 
expenses and other current assets ($4.2 million) and higher 
inventories ($3.4 million), partially offset by higher accounts 
payable and other current liabilities ($13.9 million).

 (cid:122) Working capital provided cash for the year ended March 31, 
2020 due to higher accounts payable and other current liabilities 
($5.9 million) and lower prepaid expenses and other current 
assets ($4.0 million), mostly offset by higher accounts receivable 
($8.0 million) and higher inventories ($1.7 million).

 (cid:122) Working capital used cash for the year ended March 31, 2019 
due to higher inventory ($5.5 million) and higher accounts 
receivable ($3.8 million), partially offset by higher accounts 
payable and other current liabilities ($5.7 million).

Cash ﬂows used in investing activities from continuing operations 
during the year ended March 31, 2021 were $289.9 million as 
compared with $22.0 million and $10.4 million for the years ended 
March 31, 2020 and 2019, respectively.

 (cid:122) Capital  expenditures  during  the  years  ended  March  31, 
2021, 2020 and 2019 were $8.8 million, $11.4 million and 
$7.5 million, respectively. Our capital expenditures have been 

Acquisitions and Dispositions

Year Ended March 31,

2021
($)

2020
($)

2019
($)

66,254  

71,397  

68,159

(289,889)

214,049

(21,982)

(57,151)

(10,415)

(39,273)

focused on enterprise resource planning systems, new product 
introductions, capacity expansion, continuous improvement, 
automation and consolidation of manufacturing facilities.

 (cid:122) During the year ended March 31, 2021 we acquired TRUaire 
for $286.9 million (after working capital adjustment) in cash 
consideration and stock consideration valued at $97.7 million, 
during the year ended March 31, 2020 we acquired Petersen 
for $11.8 million, and during the year ended March 31, 2019, 
we acquired MSD for $10.1 million, net of cash acquired, as 
discussed in Note 2 to our consolidated ﬁnancial statements 
included in Item 8 of this Annual Report.

Cash ﬂows used in ﬁnancing activities during the years ended 
March 31, 2021, 2020 and 2019 were $214.0 million, $57.2 million 
and $39.3 million, respectively. Cash outﬂows resulted from:

 (cid:122) Repayments on our lines of credit (as discussed in Note 7 
to our consolidated ﬁnancial statements included in Item 8 of 
this Annual Report) of $23.6 million, $28.1 million and $20.6 
million during the years ended March 31, 2021, 2020 and 2019, 
respectively.

 (cid:122) Repurchases of shares under our share repurchase programs 
(as  discussed  in  Note  11  to  our  consolidated  financial 
statements  included  in  Item  8  of  this  Annual  Report)  of 
$7.7 million, $26.5 million and $45.6 million during the years 
ended March 31, 2021, 2020 and 2019, respectively.

 (cid:122) Dividend payments of $8.1 million and $8.1 million during 
the years ended March 31, 2021 and 2020, respectively. No 
dividends were paid during the years ended March 31, 2019.

Cash inﬂows resulted from borrowings on our Revolving Credit 
Facility of $255.0 million, $7.5 million and $28.0 million during 
the years ended March 31, 2021, 2020 and 2019, respectively.

We believe that available cash and cash equivalents, cash ﬂows 
generated through operations and cash available under our 
Revolving Credit Facility will be sufﬁcient to meet our liquidity 
needs,  including  capital  expenditures,  for  at  least  the  next 
12 months.

We regularly evaluate acquisition opportunities of various sizes. The cost and terms of any ﬁnancing to be raised in conjunction with any 
acquisition, including our ability to raise capital, is a critical consideration in any such evaluation. Note 2 to our consolidated ﬁnancial 
statements included in Item 8 of this Annual Report contains a discussion of our acquisitions.

  |  2021 Annual Report

29

  
Part II
Item 7  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Financing

Credit Facilities

See Note 7 to our consolidated ﬁnancial statements included in Item 8 of this Annual Report for a discussion of our indebtedness. We 
were in compliance with all covenants contained in our Revolving Credit Facility as of March 31, 2021.

We have entered into an interest rate swap agreement to hedge our exposure to variable interest payments related to our indebtedness. 
This agreement is more fully described in Note 9 to our consolidated ﬁnancial statements included in Item 8 and in “Item 7A. Quantitative 
and Qualitative Disclosures about Market Risk” of this Annual Report.

Off-Balance Sheet Arrangements

As of March 31, 2021, we did not have any off-balance sheet arrangements that we believe have or are reasonably likely to have a 
material adverse effect on our ﬁnancial condition or results of operations.

Contractual Obligations

The following table presents a summary of our contractual obligations for continuing operations at March 31, 2021 (in thousands):

Long-term debt obligations, principal

Long-term debt obligations, interest

Operating lease obligations(b)(c)

Purchase obligations(d)

TOTAL

Payments due by Period(a)

< 1 Year
($)

1-3 Years
($)

3-5 Years
($)

> 5 Years
($)

Total
($)

561  

233,122  

1,122  

7,532  

242,337

5,113

9,551

49,703

2,848

17,919

1,570

354

17,571

—

482

26,518

—

8,797

71,559

51,273

64,928  

255,459  

19,047  

34,532  

373,966

(a)  The less than one-year category represents the year ended March 31, 2022, the 1-3 years category represents years ending March 31, 2023 and 2024, the 3-5 years 
category represents years ending March 31, 2025 and 2026 and the greater than five years category represents years ending March 31, 2027 and thereafter.
(b)  Sales taxes, value added taxes and goods and services taxes included as part of recurring lease payments, as well as variable maintenance and executory costs, are 

excluded from the amounts shown above.

(c)  Operating lease and purchase obligations denominated in foreign currencies are projected based on the exchange rate in effect on March 31, 2021.
(d)  Purchase obligations include agreements to purchase goods or services that are enforceable, legally binding and specify all significant terms, including: fixed or minimum 
quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Purchase obligations exclude agreements that 
are cancellable without penalty.

Critical Accounting Estimates

The process of preparing ﬁnancial statements in conformity with 
U.S. GAAP requires the use of estimates and assumptions to 
determine reported amounts of certain assets, liabilities, revenues 
and expenses and the disclosure of related contingent assets 
and liabilities. These estimates and assumptions are based upon 
information available at the time of the estimates or assumptions, 
including our historical experience, where relevant. The most 
signiﬁcant estimates made by management include: timing and 
amount of revenue recognition; deferred taxes and tax reserves; 
pension  benefits;  and  valuation  of  goodwill  and  indefinite-
lived intangible assets, both at the time of initial acquisition, as 
well as part of recurring impairment analyses, as applicable. 
The signiﬁcant estimates are reviewed at least annually, if not 
quarterly, by management. Because of the uncertainty of factors 
surrounding the estimates, assumptions and judgments used in 

30

  |  2021 Annual Report

the preparation of our ﬁnancial statements, actual results may 
differ from the estimates, and the difference may be material.

Our critical accounting policies are those policies that are both 
most important to our ﬁnancial condition and results of operations 
and require the most difﬁcult, subjective or complex judgments on 
the part of management in their application, often as a result of 
the need to make estimates about the effect of matters that are 
inherently uncertain. We believe that the following represent our 
critical accounting policies. For a summary of all of our signiﬁcant 
accounting policies, see Note 1 to our consolidated ﬁnancial 
statements included in Item 8 of this Annual Report. Management 
and our external auditors have discussed our critical accounting 
estimates and policies with the Audit Committee of our Board 
of Directors.

  
 
Part II
Item 7  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Revenue Recognition

We recognize revenues to depict the transfer of control of promised 
goods or services to our customers in an amount that reﬂects the 
consideration to which we expect to be entitled in exchange for 
those goods or services. Refer to Note 18 for further discussion. 
We recognize revenue when all of the following criteria have 
been met: (i) a contract with a customer exists, (ii) performance 
obligations have been identiﬁed, (iii) the price to the customer has 
been determined, (iv) the price to the customer has been allocated 
to the performance obligations, and (v) performance obligations 
are satisﬁed, which are more fully described below.

(i)  We identify a contract with a customer when a sales agreement 
indicates approval and commitment of the parties; identiﬁes 
the rights of the parties; identiﬁes the payment terms; has 
commercial substance; and it is probable that we will collect 
the consideration to which we will be entitled in exchange for 
the goods or services that will be transferred to the customer. In 
most instances, our contract with a customer is the customer’s 
purchase order. For certain customers, we may also enter into 
a sales agreement that outlines a framework of terms and 
conditions that apply to all future purchase orders for that 
customer. In these situations, our contract with the customer is 
both the sales agreement and the speciﬁc customer purchase 
order. Because our contract with a customer is typically for a 
single transaction or customer purchase order, the duration of 
the contract is one year or less. As a result, we have elected 
to apply certain practical expedients and, as permitted by the 
Financial Accounting Standards Board, omit certain disclosures 
of remaining performance obligations for contracts that have 
an initial term of one year or less.

(ii)  We identify performance obligations in a contract for each 
promised good or service that is separately identiﬁable from 
other promises in the contract and for which the customer can 
beneﬁt from the good or service either on its own or together 
with other resources that are readily available to the customer. 
Goods and services provided to our customers that are deemed 
immaterial are included with other performance obligations.

(iii)  We  determine  the  transaction  price  as  the  amount  of 
consideration we expect to be entitled to in exchange for 
fulﬁlling the performance obligations, including the effects of 
any variable consideration.

(iv)  For any contracts that have more than one performance 
obligation,  we  allocate  the  transaction  price  to  each 
performance obligation in an amount that depicts the amount 
of consideration to which we expect to be entitled in exchange 
for satisfying each performance obligation. We have excluded 
disclosure of the transaction price allocated to remaining 
performance obligations if the performance obligation is part 
of a contract that has an original expected duration of one 
year or less as the majority of our contracts are short-term in 
nature with a term of one year or less.

(v)  We recognize revenue when, or as, we satisfy the performance 
obligation in a contract by transferring control of a promised 
good or service to the customer.

We exclude from the measurement of the transaction price all 
taxes assessed by a governmental authority that are both imposed 

on and concurrent with a speciﬁc revenue-producing transaction 
and collected from a customer. As such, we present revenue net 
of sales and other similar taxes. Shipping and handling costs 
associated with outbound freight after control over a product has 
transferred to a customer are accounted for as a fulﬁllment cost 
and are included in cost of revenues. Costs to obtain a contract, 
which include sales commissions recorded in selling, general 
and administrative expense, are expensed when incurred as the 
amortization period is one year or less. We do not have customer 
contracts that include signiﬁcant ﬁnancing components.

Deferred Taxes and Tax Reserves

Deferred tax assets and liabilities are determined based on 
temporary differences between the ﬁnancial statement carrying 
amounts and the tax basis of assets and liabilities, applying 
enacted tax rates expected to be in effect for the year in which 
the differences are expected to reverse. The effect on deferred 
tax assets and liabilities of a change in tax rates is recognized in 
income in the period that includes the enactment date. Based on 
the evaluation of available evidence, both positive and negative, 
we recognize future tax benefits, such as net operating loss 
carryforwards and tax credit carryforwards, to the extent that 
these beneﬁts are more likely than not to be realized. We base our 
judgment of the recoverability of our deferred tax assets primarily 
on historical earnings, our estimate of current and expected future 
earnings using historical and projected future operating results, 
and prudent and feasible tax planning strategies.

The amount of income taxes we pay is subject to ongoing audits 
by federal, state and foreign tax authorities, which may result 
in proposed assessments. Signiﬁcant judgment is required in 
determining income tax provisions and evaluating tax positions. 
We establish reserves for open tax years for uncertain tax positions 
that may be subject to challenge by various taxing authorities. 
The consolidated tax provision and related accruals include the 
impact of such reasonably estimable losses and related interest 
and penalties as deemed appropriate. Tax beneﬁts recognized 
in the financial statements from uncertain tax positions are 
measured based on the largest beneﬁt that has a greater than 
50% likelihood of being realized upon ultimate settlement. For 
the year ended March 31, 2021, we had a net increase in our 
uncertain tax position of $9.7 million. This included an increase 
of $13.9 million primarily related to uncertain tax positions taken 
by TRUaire during pre-acquisiton periods, partially offset by a 
decrease of $4.2 million in uncertain tax positions. For the year 
ended March 31, 2021, the interest and penalties related to the 
uncertain tax position resulted in a net decrease of $0.9 million 
in income tax expense. For the year ended March 31, 2020, we 
had a net decrease in our uncertain tax position of $1.4 million. 
This included settlements of $0.2 million, increases of $0.1 million 
and a release of $1.3 million in federal uncertain tax positions. 
The interest and penalties related to the uncertain tax position 
resulted in a reduction of $0.4 million in income tax expense. For 
the year ended March 31, 2019, we had an immaterial change 
in our uncertain tax position due to negligible changes from 
settlements in the current and prior years. Our liability for uncertain 
tax positions contains uncertainties as management is required to 
make assumptions and apply judgments to estimate exposures 
associated with our tax positions.

  |  2021 Annual Report

31

Part II
Item 7  Management’s Discussion and Analysis of Financial Condition and Results of Operations

As of March 31, 2021, we are currently under examination by the 
IRS for a short period return ending September 30, 2015 for a 
CSWI subsidiary company. Our federal income tax returns for the 
years ended March 31, 2020, 2019 and 2018 remain subject to 
examination. Our income tax returns for TRUaire’s pre-acquisiton 
periods including calendar years 2017, 2018 and 2019 remain 
subject  to  examinations.  Our  income  tax  returns  in  certain 
state income tax jurisdictions remain subject to examination for 
various periods for the period ended September 30, 2015 and 
subsequent years.

While we believe we have adequately provided for any reasonably 
foreseeable outcome related to these matters, our future results 
may include favorable or unfavorable adjustments to our estimated 
tax liabilities. To the extent that the expected tax outcome of these 
matters changes, such changes in estimate will impact the income 
tax provision in the period in which such determination is made.

Goodwill and Indeﬁnite-Lived 
Intangible Assets

The initial recording of goodwill and intangible assets requires 
subjective judgements concerning estimates of the fair value of 
the acquired assets. We test the value of goodwill for impairment 
as of January 31 each year or whenever events or circumstances 
indicate such asset may be impaired.

The test for goodwill impairment involves signiﬁcant judgement 
in estimating projections of fair value generated through future 
performance of each of the reporting units. The identiﬁcation of 
our reporting units began at the operating segment level and 
considered whether components one level below the operating 
segment levels should be identiﬁed as reporting units for purpose 
of testing goodwill for impairment based on certain conditions. 
These conditions included, among other factors, (i) the extent to 
which a component represents a business and (ii) the aggregation 
of  economically  similar  components  within  the  operating 
segments. Other factors that were considered in determining 

Accounting Developments

whether the aggregation of components was appropriate included 
the similarity of the nature of the products and services, the nature 
of the production processes, the methods of distribution and the 
types of industries served.

Accounting Standards Codiﬁcation (“ASC”) 350 allows an optional 
qualitative assessment, prior to a quantitative assessment test, to 
determine whether it is more likely than not that the fair value of 
a reporting unit exceeds its carrying amount. We bypassed the 
qualitative assessment and proceeded directly to the quantitative 
test. If the carrying value of a reporting unit exceeds its fair value, 
the goodwill of that reporting unit is impaired and an impairment 
loss is recorded equal to the excess of the carrying value over its 
fair value. We estimate the fair value of our reporting units based 
on an income approach, whereby we calculate the fair value of 
a reporting unit based on the present value of estimated future 
cash ﬂows. A discounted cash ﬂow analysis requires us to make 
various judgmental assumptions about future sales, operating 
margins, growth rates and discount rates, which are based on 
our budgets, business plans, economic projections, anticipated 
future cash ﬂows and market participants. Our quantitative test 
performed as of January 31, 2021 indicated that no goodwill 
impairment loss should be recognized for the year ended March 
31, 2021. There were no impairment loss recognized for the years 
ended March 31, 2020 and 2019, respectively.

We have indeﬁnite-lived intangible assets in the form of trademarks 
and license agreements. We test these intangible assets for 
impairment at least annually as of January 31 or whenever events 
or circumstances indicate that the carrying amount may not be 
recoverable. Signiﬁcant assumptions used in the impairment test 
include the discount rate, royalty rate, future sales projections 
and terminal value growth rate. These inputs are considered 
non-recurring level three inputs within the fair value hierarchy. 
An impairment loss would be recognized when estimated future 
cash ﬂows are less than their carrying amount. We recorded 
impairment losses on intangible assets (excluding those related 
to discontinued operations) of $0, $1.0 million and $0 for the years 
ended March 31, 2021, 2020 and 2019, respectively.

We have presented the information about accounting pronouncements not yet implemented in Note 1 to our consolidated ﬁnancial 
statements included in Item 8 of this Annual Report.

32

  |  2021 Annual Report

Item 7A:  Quantitative and Qualitative 

Disclosures About Market Risk

We are exposed to market risk from changes in interest rates 
and foreign currency exchange rates, which may adversely affect 
our consolidated ﬁnancial position and results of operations. 
We seek to minimize these risks through regular operating and 
ﬁnancing activities, and when deemed appropriate, through the 

use of interest rate swaps. It is our policy to enter into interest 
rate swaps only to the extent considered necessary to meet our 
risk management objectives. We do not purchase, hold or sell 
derivative ﬁnancial instruments for trading or speculative purposes.

Variable Rate Indebtedness

We  are  subject  to  interest  rate  risk  on  our  variable  rate 
indebtedness. Fluctuations in interest rates have a direct effect on 
interest expense associated with our outstanding indebtedness. 
As of March 31, 2021, we had $232.0 million in outstanding 
variable rate indebtedness, after consideration of the interest rate 
swap. We manage, or hedge, interest rate risks related to our 
borrowings by means of interest rate swap agreements. At March 
31, 2021, we had an interest rate swap agreement that covered 
4.3% of our $242.3 million of our total outstanding indebtedness. 
At March 31, 2021, we had $232.0 million in unhedged variable 
rate indebtedness with a weighted average interest rate of 2.11%. 
Each quarter point change in interest rates would result in a 

change of approximately $0.6 million in our interest expense on 
an annual basis.

We may also be exposed to credit risk in derivative contracts we 
may use. Credit risk is the failure of the counterparty to perform 
under the terms of the derivative contract. If the fair value of a 
derivative contract is positive, the counterparty will owe us, which 
creates credit risk for us. If the fair value of a derivative contract 
is negative, we will owe the counterparty and, therefore, do not 
have credit risk. We have sought to minimize the credit risk in 
derivative instruments by entering into transactions with high-
quality counterparties.

Foreign Currency Exchange Rate Risk

We conduct a small portion of our operations outside of the U.S. 
in currencies other than the U.S. dollar. Our non-U.S. operations 
are conducted primarily in their local currencies, which are also 
their functional currencies, and include the Australian dollar, British 
pound, Canadian dollar and Vietnamese dong. Foreign currency 
exposures arise from translation of foreign-denominated assets 
and liabilities into U.S. dollars and from transactions denominated 
in a currency other than a non-U.S. operation’s functional currency. 
We realized net (losses) gains associated with foreign currency 
translation of $4.8 million, $(2.3) million and $(2.0) million for the 
years ended March 31, 2021, 2020 or 2019, respectively, which 
are included in accumulated other comprehensive income (loss). 

We recognized foreign currency transaction net gains (losses) of 
$(0.9) million, $0.3 million and $0.4 million for the years ended 
March 31, 2021, 2020 or 2019, respectively, which are included 
in other income (expense), net on our consolidated statements 
of operations.

Based on a sensitivity analysis at March 31, 2021, a 10% change 
in the foreign currency exchange rates for the year ended March 
31, 2021 would have impacted our income from continuing 
operations by less than 1%. This calculation assumes that all 
currencies change in the same direction and proportion relative 
to the U.S. dollar and that there are no indirect effects, such as 
changes in non-U.S. dollar sales volumes or prices.

  |  2021 Annual Report

33

Item 8:   Financial Statements and 

Supplementary Data

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders 
CSW Industrials, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets 
of CSW Industrials, Inc. (a Delaware corporation) and subsidiaries 
(the “Company”) as of March 31, 2021 and 2020, the related 
consolidated statements of operations, comprehensive income 
(loss), equity and cash ﬂows for each of the three years in the 
period ended March 31, 2021, and the related notes (collectively 
referred to as the “financial statements”). In our opinion, the 
ﬁnancial statements present fairly, in all material respects, the 
ﬁnancial position of the Company as of March 31, 2021 and 2020, 
and the results of its operations and its cash ﬂows for each of the 
three years in the period ended March 31, 2021, in conformity 

Basis for Opinion

with accounting principles generally accepted in the United States 
of America.

We also have audited, in accordance with the standards of the 
Public Company Accounting Oversight Board (United States) 
(“PCAOB”), the Company’s internal control over ﬁnancial reporting 
as of March 31, 2021, based on criteria established in the 2013 
Internal Control—Integrated Framework issued by the Committee 
of  Sponsoring  Organizations  of  the  Treadway  Commission 
(“COSO”), and our report dated May 20, 2021 expressed an 
unqualiﬁed opinion.

These ﬁnancial statements are the responsibility of the Company’s 
management. Our responsibility is to express an opinion on the 
Company’s ﬁnancial statements based on our audits. We are a 
public accounting ﬁrm registered with the PCAOB and are required 
to be independent with respect to the Company in accordance 
with the U.S. federal securities laws and the applicable rules and 
regulations of the Securities and Exchange Commission and the 
PCAOB.

We conducted our audits in accordance with the standards of the 
PCAOB. Those standards require that we plan and perform the 
audit to obtain reasonable assurance about whether the ﬁnancial 

statements are free of material misstatement, whether due to error 
or fraud. Our audits included performing procedures to assess 
the risks of material misstatement of the ﬁnancial statements, 
whether due to error or fraud, and performing procedures that 
respond to those risks. Such procedures included examining, 
on a test basis, evidence regarding the amounts and disclosures 
in the ﬁnancial statements. Our audits also included evaluating 
the accounting principles used and signiﬁcant estimates made 
by management, as well as evaluating the overall presentation 
of the ﬁnancial statements. We believe that our audits provide a 
reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising 
from the current period audit of the ﬁnancial statements that 
was communicated or required to be communicated to the 
audit committee and that: (1) relates to accounts or disclosures 
that are material to the ﬁnancial statements and (2) involved our 
especially challenging, subjective, or complex judgments. The 

communication of critical audit matters does not alter in any way 
our opinion on the ﬁnancial statements, taken as a whole, and 
we are not, by communicating the critical audit matter below, 
providing a separate opinion on the critical audit matter or on the 
accounts or disclosures to which it relates.

34

  |  2021 Annual Report

Valuation of Acquired Identifiable Intangible 
Assets

As described in Note 2 of the consolidated ﬁnancial statements, 
the  Company  completed  its  acquisition  of  T.A.  Industries, 
Inc. (“TRUaire”) for a total purchase price of approximately 
$384.6  million  on  December  15,  2020.  The  Company’s 
accounting for the acquisition required the estimation of the fair 
value of assets acquired and liabilities assumed, which included 
a preliminary purchase price allocation of identiﬁable intangible 
assets of $202.5 million to customer lists and $43.5 million to a 
tradename. We have identiﬁed the valuation of customer lists and 
tradename to be a critical audit matter.

The principal consideration for our determination that the valuation 
of customer lists and tradename is a critical audit matter is the 
signiﬁcant estimation uncertainty involved in determining fair value. 
The signiﬁcant assumptions used to estimate the fair value of 
the identiﬁable intangible assets included the discount rates, 
royalty rate, and forecasted revenue growth rates and gross proﬁt 
margins. These signiﬁcant assumptions are forward-looking and 
could be affected by future changes in economic and market 
conditions and require signiﬁcant auditor judgment in evaluating 
the reasonableness of the assumptions.

Part II
Item 8  Financial Statements and Supplementary Data

Our audit procedures related to the valuation of customer lists 
and tradename included the following, among others. We tested 
the design and operating effectiveness of the Company’s internal 
controls over accounting for the TRUaire acquisition, including 
controls over the recognition and measurement of the customer 
lists  and  trade  name  intangible  assets  and  management’s 
judgments and evaluation of the underlying assumptions with 
regard to the valuation model applied.

We evaluated the signiﬁcant assumptions used by comparing 
the forecasted revenue growth rates and gross proﬁt margins to 
current industry and market trends and to the historical results 
of  the  acquired  TRUaire  business.  In  addition,  we  involved 
valuation specialists to assist in our evaluation of the valuation 
methodology and reasonableness of signiﬁcant assumptions used 
by the Company. These procedures included developing a range 
of independent estimates for the discount rates and royalty rate 
and comparing those to the rates selected by management as 
well as performing sensitivity analyses of signiﬁcant assumptions 
to evaluate the changes in the fair value of the acquired customer 
lists and trade name intangible assets that would result from 
changes in the assumptions.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2015.

Dallas, Texas 
May 20, 2021

  |  2021 Annual Report

35

Part II
Item 8  Financial Statements and Supplementary Data

CSW Industrials, Inc.  
Consolidated Balance Sheets 

(Amounts in thousands, except per share amounts)

ASSETS

Current assets:

Cash and cash equivalents

Accounts receivable, net

Inventories, net

Prepaid expenses and other current assets

Total current assets

Property, plant and equipment, net

Goodwill

Intangible assets, net

Other assets

TOTAL ASSETS

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable

Accrued and other current liabilities

Current portion of long-term debt

Total current liabilities

Long-term debt

Retirement beneﬁts payable

Other long-term liabilities

Total liabilities

Equity:

Common shares, $0.01 par value

Shares authorized – 50,000

Shares issued – 16,162 and 16,055, respectively

Preferred shares, $0.01 par value

Shares authorized (10,000) and issued (0)

Additional paid-in capital

Treasury shares, at cost (511 and 1,311 shares, respectively)

Retained earnings

Accumulated other comprehensive loss

Total equity

TOTAL LIABILITIES AND EQUITY

See accompanying notes to consolidated ﬁnancial statements.

36

  |  2021 Annual Report

March 31,

2021 
($)

2020 
($)

10,088

96,695

98,086

9,684

214,553

82,554

218,795

283,060

75,995

874,957

32,444

49,743

561

82,748

241,776

1,695

136,725

462,944

18,338

74,880

53,753

3,074

150,045

57,178

91,686

46,185

24,151

369,245

21,978

36,607

561

59,146

10,337

1,879

21,142

92,504

161

159

—

—

104,689

(34,075)

347,234

(5,996)

412,013

874,957

48,327

(75,377)

315,078

(11,446)

276,741

369,245

CSW Industrials, Inc.  
Consolidated Statements of Operations 

(Amounts in thousands, except per share amounts)

Revenues, net

Cost of revenues

Gross proﬁt

Selling, general and administrative expenses

Impairment expenses

Operating income

Interest expense, net

Other (expense) income, net

Income before income taxes

Provision for income taxes

Income from continuing operations

Income (loss) from discontinued operations, net of tax

NET INCOME

Basic earnings (loss) per common share:

Continuing operations

Discontinued operations

NET INCOME

Diluted earnings (loss) per common share:

Continuing operations

Discontinued operations

NET INCOME

Part II
Item 8  Financial Statements and Supplementary Data

Year Ended March 31,

2021 
($)

2020 
($)

2019 
($)

419,205

385,871

350,155

(234,405)

(208,821)

(188,785)

184,800

177,050

161,370

(125,330)

(110,032 )

(100,930)

—

59,470

(2,383)

(5,969)

51,118

(10,830)

40,288

—

40,288

2.68

—

2.68

2.66

—

2.66

(951)

66,067

(1,331)

(7,135)

57,601

(12,784)

44,817

1,061

45,878

2.98

0.07

3.05

2.95

0.07

3.02

—

60,440

(1,442)

2,443

61,441

(15,389)

46,052

(478)

45,574

2.99

(0.03)

2.96

2.96

(0.03)

2.93

Consolidated Statements of Comprehensive Income 

(Amounts in thousands)

Net income

Other comprehensive (loss) income:

Foreign currency translation adjustments

Cash ﬂow hedging activity, net of taxes of $(156), $265 and $72, respectively

Pension and other postretirement effects, net of taxes of $(34), $(682) and $177, respectively

Other comprehensive (loss) income

COMPREHENSIVE INCOME

See accompanying notes to consolidated ﬁnancial statements.

Year Ended March 31,

2021 
($)

40,288

4,791

587

72

5,450

45,738

2020 
($)

2019 
($)

45,878

45,574

(2,316)

(996)

2,595

(717)

45,161

(2,032)

(286)

(936)

(3,254)

42,320

  |  2021 Annual Report

37

Part II
Item 8  Financial Statements and Supplementary Data

CSW Industrials, Inc.  
Consolidated Statements of Equity

(Amounts in thousands)

Balance at March 31, 2018

Adoption of ASU 2016-09

Adoption of ASC 606

Adoption of ASU 2018-02

Share-based compensation

Stock activity under stock plans

Repurchase of common shares

Net loss

Other comprehensive loss, net of tax

Balance at March 31, 2019

Adoption of ASC 842

Share-based compensation

Stock activity under stock plans

Repurchase of common shares

Net income

Dividends

Other comprehensive loss, net of tax

Balance at March 31, 2020

Share-based compensation

Stock activity under stock plans

Repurchase of common shares

Reissuance of treasury shares

Net income

Dividends

Other comprehensive income, net of tax

Common 
Stock 
($)

Treasury 
Shares 
($)

Year Ended March 31,

Additional 
Paid-In 
Capital 
($)

Accumulated 
Other 
Comprehensive 
Loss  
($)

Retained 
Earnings 
($)

Total  
Equity 
($)

158

(3,252)

42,684

233,650

(7,475)

265,765

—

—

—

—

—

—

—

—

—

—

—

—

(1,086)

(45,626)

—

—

—

—

—

3,949

—

—

—

—

(1,232)

(692)

288

—

—

—

45,574

—

—

—

—

—

—

—

—

(3,254)

(1,232)

(692)

288

3,949

(1,086)

(45,626)

45,574

(3,254)

158

(49,964)

46,633

277,588

(10,729)

263,686

—

—

1

—

—

—

—

—

—

1,451

(26,864)

—

—

—

159

(75,377)

—

2

—

—

—

—

—

—

(2,812)

(7,291)

51,405

—

—

—

—

5,074

(3,432)

—

—

52

—

48,327

5,085

(2)

—

51,232

—

47

—

(206)

—

—

—

45,878

(8,182)

—

—

—

—

—

—

—

(717)

(206)

5,074

(1,980)

(26,864)

45,878

(8,130)

(717)

315,078

(11,446)

276,741

—

—

—

—

40,288

(8,132)

—

—

—

—

—

—

—

5,450

5,085

(2,812)

(7,291)

102,637

40,288

(8,085)

5,450

BALANCE AT MARCH 31, 2021

161

(34,075)

104,689

347,234

(5,996)

412,013

See accompanying notes to consolidated ﬁnancial statements.

38

  |  2021 Annual Report

CSW Industrials, Inc.  
Consolidated Statements of Cash Flows

(Amounts in thousands)

Cash ﬂows from operating activities:

Net income

Less: Income (loss) from discontinued operations, net of tax

Income from continuing operations

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation

Amortization of intangible and other assets

Provision for inventory reserves

Provision for doubtful accounts

Share-based and other executive compensation

Net gain on disposals of property, plant and equipment

Pension plan termination expense

Net pension beneﬁt

Impairment of intangible assets

Realized deferred taxes (Note 14)

Net deferred taxes

Changes in operating assets and liabilities:

Accounts receivable

Inventories

Prepaid expenses and other current assets

Other assets

Accounts payable and other current liabilities

Retirement beneﬁts payable and other liabilities

Net cash provided by operating activities, continuing operations

Net cash used in operating activities, discontinued operations

Net cash provided by operating activities

Cash ﬂows from investing activities:

Capital expenditures

Proceeds from sale of assets held for investment

Proceeds from sale of assets

Cash paid for acquisitions

Net cash used in investing activities, continuing operations

Net cash provided by investing activities, discontinued operations

Part II
Item 8  Financial Statements and Supplementary Data

Year Ended March 31,

2020 
($)

2019 
($)

2021 
($)

40,288

—

40,288

9,194

13,843

1,308

696

5,086

(23)

—

163

—

—

(1,737)

(7,219)

(3,377)

(4,246)

(1,532)

13,856

(46)

66,254

—

66,254

(8,833)

6,152

30

(287,238)

(289,889)

—

45,878

1,061

44,817

7,918

6,927

(28)

909

5,074

(833)

6,559

(121)

951

—

537

(7,997)

(1,653)

3,969

29

5,884

(1,545)

71,397

(1,500)

69,897

(11,437)

—

1,292

(11,837)

(21,982)

1,538

45,574

(478)

46,052

7,411

6,425

231

818

3,949

(4,320)

—

(416)

—

10,419

206

(3,825)

(5,537)

725

920

5,704

(603)

68,159

(8,449)

59,710

(7,515)

3,905

3,295

(10,100)

(10,415)

7,356

(3,059)

  |  2021 Annual Report

39

Net cash used in investing activities

(289,889)

(20,444)

Part II
Item 8  Financial Statements and Supplementary Data

CSW Industrials, Inc.  
Consolidated Statements of Cash Flows

(Amounts in thousands)

Cash ﬂows from ﬁnancing activities:

Borrowings on lines of credit

Repayments of lines of credit

Payments of deferred loan costs

Purchase of treasury shares

Proceeds from stock option activity

Dividends paid to shareholders

Net cash provided by (used in) ﬁnancing activities

Effect of exchange rate changes on cash and equivalents

Net change in cash and cash equivalents

Cash and cash equivalents, beginning of period

CASH AND CASH EQUIVALENTS, END OF PERIOD

Supplemental non-cash disclosure:

Cash paid during the year for interest

Cash paid during the year for income taxes

See accompanying notes to consolidated ﬁnancial statements.

Year Ended March 31,

2021 
($)

2020 
($)

2019 
($)

255,000

(23,561)

(148)

7,500

(28,061)

—

28,000

(20,561)

—

(10,489)

(28,460)

(46,712)

1,330

(8,083)

214,049

1,336

(8,250)

18,338

10,088

1,875

14,021

—

(8,130)

(57,151)

(615)

(8,313)

26,651

18,338

1,165

8,873

—

—

(39,273)

(2,433)

14,945

11,706

26,651

1,302

2,888

40

  |  2021 Annual Report

Part II
Item 8  Financial Statements and Supplementary Data

CSW Industrials, Inc. 
Notes to Consolidated Financial Statements

1. Organization and Operations and Summary of Signiﬁcant Accounting 
Policies

CSW Industrials, Inc. (“CSWI,” “we,” “our” or “us”) is a diversiﬁed 
industrial  growth  company  with  well-established,  scalable 
platforms and domain expertise across two segments: Industrial 
Products and Specialty Chemicals. Our broad portfolio of leading 
products provides performance optimizing solutions to our 
customers. Our products include mechanical products for heating, 
ventilation, air conditioning and refrigeration (“HVAC/R”), sealants 
and high-performance specialty lubricants. Drawing on our 
innovative and proven technologies, we seek to deliver solutions 
to our professional customers that require superior performance 
and reliability. Our diverse product portfolio includes more than 
100 highly respected industrial brands including RectorSeal 
No. 5®, KOPR-KOTE®, KATS Coatings®, Safe-T-Switch®, Air 
Sentry®, Deacon®, Leak Freeze®, Greco® and TRUaire®.

Our products are well-known in the speciﬁc industries we serve 
and have a reputation for high quality and reliability. Markets that we 
serve include HVAC/R, architecturally-speciﬁed building products, 
plumbing, energy, rail, mining and general industrial markets.

The COVID-19 pandemic continues to have an impact on human 
health, the global economy and society at large. The pandemic 
and its resulting impacts had an adverse impact on our ﬁnancial 
results in the ﬁscal year ended March 31, 2021, as compared with 
the prior year, most notably within the ﬁrst and second quarters 
of ﬁscal 2021. While the COVID-19 pandemic has contributed to 
increased demand in certain parts of our business, including the 
HVAC/R end market, we expect our overall results of operations 
and ﬁnancial condition to continue to be adversely impacted 
through the duration of the pandemic when compared to pre-
pandemic periods. Despite strong demand in certain of our end 
markets and signs of recovery in others, we cannot reasonably 
estimate the magnitude or length of the pandemic’s adverse 
impact, including the effects of any vaccine or its ultimate impact 
on our business or ﬁnancial condition, due to continued uncertainty 
regarding (1) the duration and severity of the COVID-19 pandemic 
and (2) the continued potential for short and long-term impacts on 
our facilities and employees, customer demand and supply chain.

All of our operations and products support critical infrastructure 
and are considered “essential” in all of the relevant jurisdictions in 
which we operate. In response to the COVID-19 pandemic, we 
took numerous measures across our operating sites to ensure 
we continue to place the highest priority on the health, safety 
and well-being of our employees, while continuing to support 
our customers. Through the date of this ﬁling, our businesses 
have continued to operate throughout the COVID-19 pandemic 
with appropriate safeguards for our employees and without any 
material disruptions.

Basis of Presentation

The consolidated ﬁnancial position, results of operations and 
cash ﬂows included in this Annual Report on Form 10-K for the 
ﬁscal year ended March 31, 2021 (“Annual Report”) include all 
revenues, costs, assets and liabilities directly attributable to CSWI 
and have been prepared in accordance with United States (“U.S.”) 
generally accepted accounting principles (“GAAP”).

Use of Estimates

The process of preparing ﬁnancial statements in conformity with 
U.S. GAAP requires us to make estimates and assumptions that 
affect reported amounts of certain assets, liabilities, revenues 
and expenses. We believe our estimates and assumptions are 
reasonable; however, actual results may differ materially from such 
estimates. The most signiﬁcant estimates and assumptions are 
used in determining:

 (cid:122) Timing and amount of revenue recognition;
 (cid:122) Deferred taxes and tax reserves; and
 (cid:122) Valuation of goodwill and indeﬁnite-lived intangible assets.

Cash and Cash Equivalents

We consider all highly liquid instruments purchased with original 
maturities of three months or less and money market accounts to 
be cash equivalents. We maintain our cash and cash equivalents 
at ﬁnancial institutions for which the combined account balances 
in individual institutions may exceed insurance coverage and, as 
a result, there is a concentration of credit risk related to amounts 
on deposit in excess of insurance coverage. We had deposits in 
domestic banks of $6.1 million and $11.7 million at March 31, 
2021 and 2020, respectively, and balances of $4.0 million and 
$6.6 million were held in foreign banks at March 31, 2021 and 
2020, respectively.

Accounts Receivable, Allowance for 
Doubtful Accounts and Credit Risk

Trade accounts receivables are recorded at the invoiced amounts 
and do not bear interest. We record an allowance for credit losses 
on trade receivables that, when deducted from the gross trade 
receivables balance, presents the net amount expected to be 
collected. We estimate the allowance based on an aging schedule 
and according to historical losses as determined from our billings 
and collections history. This may be adjusted after consideration of 
customer-speciﬁc factors such as ﬁnancial difﬁculties, liquidity issues 
or insolvency, as well as both current and forecasted macroeconomic 

  |  2021 Annual Report

41

Part II
Item 8  Financial Statements and Supplementary Data

conditions as of the reporting date. We adjust the allowance and 
recognize credit losses in the income statement each period. Trade 
receivables are written off against the allowance in the period when 
the receivable is deemed to be uncollectible. Subsequent recoveries 
of amounts previously written off are reﬂected as a reduction to 
periodic credit losses in the income statement. Our allowance for 
expected credit losses for short-term receivables as of March 31, 
2021 was $0.9 million, compared to $1.2 million as of March 31, 
2020. The activity for the year ended March 31, 2021 included write 
off of trade receivables of $0.7 million for current period adjustments.

Credit  risks  are  mitigated  by  the  diversity  of  our  customer 
base  across  many  different  industries  and  by  performing 
creditworthiness analyses on our customers. Additionally, we 
mitigate credit risk through letters of credit and advance payments 
received from our customers. We do not believe that we have any 
signiﬁcant concentrations of credit risk.

Inventories and Related Reserves

Inventories are stated at the lower of cost or net realizable value 
and include raw materials, supplies, direct labor and manufacturing 
overhead. Cost is determined using the last-in, ﬁrst-out (“LIFO”) 
method for valuing inventories at most of our domestic operations. 
Our foreign subsidiaries and some domestic operations use either 
the ﬁrst-in, ﬁrst out method or the weighted average cost method to 
value inventory. Foreign inventories represent approximately 12% and 
6% of total inventories as of March 31, 2021 and 2020, respectively.

Reserves are provided for slow-moving or excess and obsolete 
inventory  based  on  the  difference  between  the  cost  of  the 
inventory and its net realizable value and by reviewing quantities 
on hand in comparison with historical and expected future usage. 
In estimating the reserve for excess or slow-moving inventory, 
management considers factors such as product aging, current 
and future customer demand and market conditions.

Property, Plant and Equipment

Property, plant and equipment are stated at cost and depreciated 
using the straight-line method over the estimated useful lives of 
the individual assets. When property, plant and equipment are 
retired or otherwise disposed of, the related cost and accumulated 
depreciation are removed from the accounts, and the resulting 
gain or loss is included in income from operations for the period. 
Generally, the estimated useful lives of assets are:

Land improvements

Buildings and improvements

Plant, ofﬁce and lab equipment

5 to 40 years

7 to 40 years

5 to 10 years

We review property, plant and equipment for impairment whenever 
events or changes in circumstances indicate the carrying amount 
of an asset may not be recoverable.

Repairs and maintenance costs are expensed as incurred, and 
significant improvements that either extend the useful life or 
increase the capacity or efﬁciency of property and equipment 
are capitalized and depreciated.

Valuation of Goodwill and Intangible Assets

The value of goodwill is tested for impairment at least annually as 
of January 31 or whenever events or circumstances indicate such 
assets may be impaired. The identiﬁcation of our reporting units 
began at the operating segment level and considered whether 
components one level below the operating segment levels should 
be identiﬁed as reporting units for purpose of testing goodwill 
for impairment based on certain conditions. These conditions 
included, among other factors, (i) the extent to which a component 
represents a business and (ii) the aggregation of economically 
similar components within the operating segments. Other factors 
that were considered in determining whether the aggregation of 
components was appropriate included the similarity of the nature of 
the products and services, the nature of the production processes, 
the methods of distribution and the types of industries served.

Accounting Standards Codiﬁcation (“ASC”) 350 allows an optional 
qualitative assessment, prior to a quantitative assessment test, to 
determine whether it is more likely than not that the fair value of 
a reporting unit exceeds its carrying amount. We bypassed the 
qualitative assessment and proceeded directly to the quantitative 
test. If the carrying value of a reporting unit exceeds it fair value, 
the goodwill of that reporting unit is impaired and an impairment 
loss is recorded equal to the excess of the carrying value over its 
fair value. We estimate the fair value of our reporting units based 
on an income approach, whereby we calculate the fair value of 
a reporting unit base on the present value of estimated future 
cash ﬂows. A discounted cash ﬂow analysis requires us to make 
various judgmental assumptions about future sales, operating 
margins, growth rates and discount rates, which are based on our 
budgets, business plans, economic projections, anticipated future 
cash ﬂows and market participants. No goodwill impairment loss 
was recognized as a result of the impairment tests for the years 
ended March 31, 2021, 2020 or 2019.

We have intangible assets consisting of patents, trademarks, 
customer lists and non-compete agreements. Definite-lived 
intangible assets are assessed for impairment whenever events or 
changes in circumstances indicate the carrying amount may not 
be recoverable. In addition, we have other trademarks and license 
agreements that are considered to have indeﬁnite lives. We test 
indeﬁnite-lived intangible assets for impairment at least annually 
as of January 31 or whenever events or circumstances indicate 
that the carrying amount may not be recoverable. Signiﬁcant 
assumptions used in the impairment test include the discount 
rate, royalty rate, future sales projections and terminal value 
growth rate. These inputs are considered non-recurring Level III 
inputs within the fair value hierarchy. An impairment loss would be 
recognized when estimated future cash ﬂows are less than their 
carrying amount. We recorded an impairment of intangible assets 
of continuing operations of $0, $1.0 million and $0 for the years 
ended March 31, 2021, 2020 and 2019, respectively.

Property Held for Investment

One of our non-operating subsidiaries holds and manages a non-
operating property, which is valued at lower of cost or market and 
disposed of as opportunities arise to maximize value.

42

  |  2021 Annual Report

Deferred Loan Costs

Deferred loan costs related to our credit facility, which are reported 
in other assets and consist of fees and other expenses associated 
with debt ﬁnancing, are amortized over the term of the associated 
debt using the effective interest method.

Fair Values of Financial Instruments

Our  financial  instruments  are  presented  at  fair  value  in  our 
consolidated balance sheets, with the exception of our long-
term debt, as discussed in Note 7. Fair value is deﬁned as the 
price that would be received to sell an asset or paid to transfer a 
liability in an orderly transaction between market participants at 
the measurement date. Where available, fair value is based on 
observable market prices or parameters or derived from such 
prices or parameters. Where observable prices or inputs are not 
available, valuation models may be applied.

Assets and liabilities recorded at fair value in our consolidated 
balance  sheets  are  categorized  based  upon  the  level  of 
judgment associated with the inputs used to measure their fair 
values. Hierarchical levels, as deﬁned by Accounting Standards 
Codification  (“ASC”)  820,  “Fair  Value  Measurements  and 
Disclosures,” are directly related to the amount of subjectivity 
associated with the inputs to fair valuation of these assets and 
liabilities. An asset or a liability’s categorization within the fair value 
hierarchy is based on the lowest level of signiﬁcant input to its 
valuation. Hierarchical levels are as follows:

Level I –  Inputs are unadjusted, quoted prices in active markets 
for identical assets or liabilities at the measurement date.

Level II –  Inputs (other than quoted prices included in Level I) are 
either directly or indirectly observable for the asset or liability 
through correlation with market data at the measurement 
date and for the duration of the instrument’s anticipated life.

Level III –  Inputs reflect management’s best estimate of what 
market participants would use in pricing the asset or 
liability at the measurement date.

Consideration  is  given  to  the  risk  inherent  in  the  valuation 
technique and the risk inherent in the inputs to the model.

Recurring fair value measurements are limited to investments in 
derivative instruments and assets held in deﬁned beneﬁt pension 
plans. The fair value measurements of our derivative instruments 
are  determined  using  models  that  maximize  the  use  of  the 
observable market inputs including interest rate curves and both 
forward and spot prices for currencies, and are classiﬁed as Level 
II under the fair value hierarchy. The fair values of our derivative 
instruments are included in Note 9. The fair values of assets held 
in deﬁned beneﬁt pension plans are discussed in Note 13.

Leases

We determine if a contract is or contains a lease at inception by 
evaluating whether the contract conveys the right to control the 
use of an identiﬁed asset. Right-of-Use (“ROU”) assets and lease 
liabilities are initially recognized at the commencement date based 

Part II
Item 8  Financial Statements and Supplementary Data

on the present value of remaining lease payments over the lease 
term calculated using our incremental borrowing rate, unless the 
implicit rate is readily determinable. ROU assets represent the right 
to use an underlying asset for the lease term, including any upfront 
lease payments made and excluding lease incentives. Lease 
liabilities represent the obligation to make future lease payments 
throughout the lease term. As most of our operating leases do not 
provide an implicit rate, we apply our incremental borrowing rate 
to determine the present value of remaining lease payments. Our 
incremental borrowing rate is determined based on information 
available at the commencement date of the lease. The lease 
term includes renewal periods when we are reasonably certain 
to exercise the option to renew. The ROU asset is amortized over 
the expected lease term. Lease and non-lease components, when 
present on our leases, are accounted for separately. Leases with 
an initial term of 12 months or less are excluded from recognition 
in the balance sheet, and the expense for these short-term 
leases and for operating leases is recognized on a straight-line 
basis over the lease term. We have certain lease contracts with 
terms and conditions that provide for variability in the payment 
amount based on changes in facts or circumstances occurring 
after the commencement date. These variable lease payments 
are recognized in our consolidated income statements as the 
obligation is incurred. As of March 31, 2021, we did not have 
material leases that imposed signiﬁcant restrictions or covenants, 
material related party leases or sale-leaseback arrangements.

Derivative Instruments and Hedge 
Accounting

We do not use derivative instruments for trading or speculative 
purposes. We enter into interest rate swap agreements for the 
purpose of hedging our cash ﬂow exposure to ﬂoating interest 
rates on certain portions of our debt. All derivative instruments 
are recognized on the balance sheet at their fair values. Changes 
in the fair value of a designated interest rate swap are recorded 
in other comprehensive loss until earnings are affected by the 
underlying hedged item. Any ineffective portion of the gain or 
loss is immediately recognized in earnings. Upon settlement, 
realized gains and losses are recognized in interest expense in 
the consolidated statements of operations.

We discontinue hedge accounting when (1) we deem the hedge to 
be ineffective and determine that the designation of the derivative 
as a hedging instrument is no longer appropriate; (2) the derivative 
matures, terminates or is sold; or (3) occurrence of the contracted or 
committed transaction is no longer probable or will not occur in the 
originally expected period. When hedge accounting is discontinued 
and the derivative remains outstanding, we carry the derivative at its 
estimated fair value on the balance sheet, recognizing changes in the 
fair value in current period earnings. If a cash ﬂow hedge becomes 
ineffective, any deferred gains or losses remain in accumulated other 
comprehensive loss until the underlying hedged item is recognized. 
If it becomes probable that a hedged forecasted transaction will 
not occur, deferred gains or losses on the hedging instrument are 
recognized in earnings immediately.

  |  2021 Annual Report

43

Part II
Item 8  Financial Statements and Supplementary Data

We are exposed to risk from credit-related losses resulting from 
nonperformance by counterparties to our ﬁnancial instruments. 
We perform credit evaluations of our counterparties under forward 
exchange contracts and interest rate swap agreements and 
expect all counterparties to meet their obligations. If necessary, 
we adjust the values of our derivative contracts for our or our 
counterparties’ credit risk.

Pension Obligations

Determination of pension beneﬁt obligations is based on estimates 
made by management in consultation with independent actuaries. 
Inherent in these valuations are assumptions including discount 
rates,  expected  rates  of  return  on  plan  assets,  retirement 
rates, mortality rates and rates of compensation increase and 
other factors, all of which are reviewed annually and updated if 
necessary. Current market conditions, including changes in rates 
of return, interest rates and medical inﬂation rates, are considered 
in selecting these assumptions.

 (cid:122) Discount rates are estimated using high quality corporate bond 
yields with a duration matching the expected beneﬁt payments. 
The discount rate is obtained from a universe of AA-rated non-
callable bonds across the full maturity spectrum to establish a 
weighted average discount rate. Our discount rate assumptions 
are impacted by changes in general economic and market 
conditions that affect interest rates on long-term high-quality 
debt securities, as well as the duration of our plans’ liabilities.
 (cid:122) The  expected  rates  of  return  on  plan  assets  are  derived 
from reviews of asset allocation strategies, expected future 
experience for trust asset returns, risks and other factors 
adjusted for our speciﬁc investment strategy. These rates are 
impacted by changes in general market conditions, but because 
they are long-term in nature, short-term market changes do 
not signiﬁcantly impact the rates. Changes to our target asset 
allocation also impact these rates.

Actuarial gains and losses and prior service costs are recognized 
in accumulated other comprehensive loss as they arise, and we 
amortize these costs into net pension expense over the remaining 
expected service period.

We  used  a  measurement  date  of  March  31  for  all  periods 
presented.

Revenue Recognition

We recognize revenues to depict the transfer of control of promised 
goods or services to our customers in an amount that reﬂects the 
consideration to which we expect to be entitled in exchange for 
those goods or services. Refer to Note 18 for further discussion. 
We recognize revenue when all of the following criteria have 
been met: (i) a contract with a customer exists, (ii) performance 
obligations have been identiﬁed, (iii) the price to the customer has 
been determined, (iv) the price to the customer has been allocated 
to the performance obligations, and (v) performance obligations 
are satisﬁed, which are more fully described below.

(i)  We identify a contract with a customer when a sales agreement 
indicates approval and commitment of the parties; identiﬁes 
the rights of the parties; identiﬁes the payment terms; has 
commercial substance; and it is probable that we will collect 

44

  |  2021 Annual Report

the consideration to which we will be entitled in exchange for 
the goods or services that will be transferred to the customer. In 
most instances, our contract with a customer is the customer’s 
purchase order. For certain customers, we may also enter into 
a sales agreement that outlines a framework of terms and 
conditions that apply to all future purchase orders for that 
customer. In these situations, our contract with the customer is 
both the sales agreement and the speciﬁc customer purchase 
order. Because our contract with a customer is typically for a 
single transaction or customer purchase order, the duration of 
the contract is one year or less. As a result, we have elected 
to apply certain practical expedients and, as permitted by the 
Financial Accounting Standards Board (“FASB”), omit certain 
disclosures of remaining performance obligations for contracts 
that have an initial term of one year or less.

(ii)  We identify performance obligations in a contract for each 
promised good or service that is separately identiﬁable from 
other promises in the contract and for which the customer can 
beneﬁt from the good or service either on its own or together 
with other resources that are readily available to the customer. 
Goods and services provided to our customers that are deemed 
immaterial are included with other performance obligations.

(iii)  We  determine  the  transaction  price  as  the  amount  of 
consideration we expect to be entitled to in exchange for 
fulﬁlling the performance obligations, including the effects of 
any variable consideration.

(iv)  For any contracts that have more than one performance 
obligation,  we  allocate  the  transaction  price  to  each 
performance obligation in an amount that depicts the amount 
of consideration to which we expect to be entitled in exchange 
for satisfying each performance obligation. We have excluded 
disclosure of the transaction price allocated to remaining 
performance obligations if the performance obligation is part 
of a contract that has an original expected duration of one 
year or less as the majority of our contracts are short-term in 
nature with a term of one year or less.

(v)  We recognize revenue when, or as, we satisfy the performance 
obligation in a contract by transferring control of a promised 
good or service to the customer.

We exclude from the measurement of the transaction price all 
taxes assessed by a governmental authority that are both imposed 
on and concurrent with a speciﬁc revenue-producing transaction 
and collected from a customer. As such, we present revenue net 
of sales and other similar taxes. Shipping and handling costs 
associated with outbound freight after control over a product has 
transferred to a customer are accounted for as a fulﬁllment cost 
and are included in cost of revenues. Costs to obtain a contract, 
which include sales commissions recorded in selling, general 
and administrative expense, are expensed when incurred as the 
amortization period is one year or less. We do not have customer 
contracts that include signiﬁcant ﬁnancing components.

Research and Development (“R&D”)

R&D costs are expensed as incurred. Costs incurred for R&D 
primarily include salaries and beneﬁts and consumable supplies, 
as well as rent, professional fees, utilities and the depreciation 
of property and equipment used in R&D activities. R&D costs 
included in selling, general and administrative expense were 

$4.5 million, $4.3 million and $4.3 millions for the years ended 
March 31, 2021, 2020 and 2019, respectively.

Share-based Compensation

Share-based compensation is measured at the grant-date fair 
value. The exercise price of stock option awards and the fair 
value of restricted share awards are set at the closing price of 
our common stock on the Nasdaq Global Select Market on the 
date of grant, which is the date such grants are authorized by our 
Board of Directors. The fair value of performance-based restricted 
share awards is determined using a Monte Carlo simulation model 
incorporating all possible outcomes against the Russell 2000 
Index. The fair value of share-based payment arrangements is 
amortized on a straight-line basis to compensation expense over 
the period in which the restrictions lapse based on the expected 
number of shares that will vest. To cover the exercise of options 
and vesting of restricted shares, we generally issue new shares 
from our authorized but unissued share pool, although we may 
instead issue treasury shares in certain circumstances.

Income Taxes, Deferred Taxes, Tax Valuation 
Allowances and Tax Reserves

We apply the liability method in accounting and reporting for income 
taxes. Under the liability approach, deferred tax assets and liabilities 
are determined based upon the difference between the ﬁnancial 
statement carrying amounts and the tax basis of assets and liabilities 
that will result in taxable or deductible amounts in the future based on 
enacted tax rates expected to be in effect when these differences are 
expected to reverse. The effect on deferred tax assets and liabilities 
resulting from a change in tax rates is recognized in the period that 
includes the enactment date. The deferred income tax assets are 
adjusted by a valuation allowance, if necessary, to recognize future 
tax beneﬁts only to the extent, based on available evidence, that it 
is more likely than not to be realized. This analysis is performed on a 
jurisdictional basis and reﬂects our ability to utilize these deferred tax 
assets through a review of past, current and estimated future taxable 
income in addition to the establishment of viable tax strategies that 
will result in the utilization of the deferred assets.

We recognize income tax related interest and penalties, if any, as 
a component of income tax expense.

Unremitted Earnings

During the ﬁscal quarter ended March 31, 2019, we lifted our 
assertion that the earnings of our United Kingdom (“U.K.”) and 
Australian subsidiaries were indeﬁnitely invested outside of the U.S. 
During the ﬁscal quarter ended September 30, 2020, we lifted our 
assertion that the earnings of our Jet Lube Canada subsidiary were 
indeﬁnitely invested outside of the U.S. We assert that the foreign 
earnings of the U.K., Australian, Vietnam and Jet Lube Canada 
subsidiaries will be remitted to the U.S. through distributions. 
We still consider the earnings of our other Canadian subsidiaries 
indeﬁnitely invested outside the U.S. as we have needs for working 
capital in our other Canadian entities. A provision was made for 
taxes that may become payable upon distribution of earnings from 
our U.K., Australian, Vietnam and Jet Lube Canada subsidiaries.

Part II
Item 8  Financial Statements and Supplementary Data

Uncertain Tax Positions

We establish income tax liabilities to remove some or all of the income 
tax beneﬁt of any of our income tax positions based upon one of 
the following: (1) the tax position is not “more likely than not” to be 
sustained, (2) the tax position is “more likely than not” to be sustained, 
but for a lesser amount or (3) the tax position is “more likely than not” 
to be sustained, but not in the ﬁnancial period in which the tax position 
was originally taken. The amount of income taxes we pay is subject 
to ongoing audits by federal, state, and foreign taxing authorities, 
which often result in proposed assessments. We establish reserves 
for open tax years for uncertain tax positions that may be subject to 
challenge by various taxing authorities. The consolidated tax provision 
and related accruals include the impact of such reasonably estimable 
losses and related interest and penalties as deemed appropriate.

We recognize the tax beneﬁt from an uncertain tax position only 
if it is more likely than not that the tax position will be sustained 
on examination by the taxing authorities. The determination is 
based on the technical merits of the position and presumes that 
each uncertain tax position will be examined by the relevant taxing 
authority that has full knowledge of all relevant information. The tax 
beneﬁts recognized in the ﬁnancial statements from such a position 
are measured based on the largest beneﬁt that has a greater than 
50% likelihood of being realized upon ultimate settlement.

Earnings Per Share

We use the two-class method of calculating earnings per share, 
which determines earnings per share for each class of common stock 
and participating security as if all earnings of the period had been 
distributed. If the holders of restricted stock awards are entitled to vote 
and receive dividends during the restriction period, unvested shares of 
restricted stock qualify as participating securities and, accordingly, are 
included in the basic computation of earnings per share. Our unvested 
restricted shares participate on an equal basis with common shares; 
therefore, there is no difference in undistributed earnings allocated to 
each participating security. Accordingly, the presentation in Note 10 
is prepared on a combined basis and is presented as earnings per 
common share. Diluted earnings per share is based on the weighted 
average number of shares as determined for basic earnings per share 
plus shares potentially issuable in conjunction with stock options.

Foreign Currency Translation

Assets and liabilities of our foreign subsidiaries are translated to 
U.S. dollars at exchange rates prevailing at the balance sheet 
date, while income and expenses are translated at average 
rates for each month. Translation gains and losses are reported 
as a component of accumulated other comprehensive loss. 
Transactional currency gains and losses arising from transactions 
in currencies other than our sites’ functional currencies are 
included in our consolidated statements of operations.

Transaction  and  translation  gains  and  losses  arising  from 
intercompany  balances  are  reported  as  a  component  of 
accumulated other comprehensive loss when the underlying 
transaction stems from a long-term equity investment or from debt 
designated as not due in the foreseeable future. Otherwise, we 
recognize transaction gains and losses arising from intercompany 
transactions as a component of income.

  |  2021 Annual Report

45

Part II
Item 8  Financial Statements and Supplementary Data

Segments

We conduct our operations through two business segments 
based on type of product and how we manage the business. The 
products for our segments are distributed both domestically and 
internationally. For decision-making purposes, our Chief Executive 
Ofﬁcer and other members of senior executive management use 
ﬁnancial information generated and reported at the reportable 
segment level. We evaluate segment performance and allocate 
resources based on each reportable segment’s operating income. 
Our reportable segments are as follows:

 (cid:122) Industrial Products includes specialty mechanical products, 
ﬁre and smoke protection products, architecturally-speciﬁed 
building  products  and  storage,  filtration  and  application 
equipment for use with our specialty chemicals and other 
products for general industrial application.

 (cid:122) Specialty Chemicals includes pipe thread sealants, ﬁrestopping 
sealants and caulks, adhesives/solvent cements, lubricants and 
greases, drilling compounds, anti-seize compounds, chemical 
formulations and degreasers and cleaners.

Intersegment sales and transfers are recorded at cost plus a 
proﬁt margin, with the revenues and related margin on such sales 
eliminated in consolidation. We do not allocate interest expense, 
interest income or other income, net to our segments. Our 
corporate headquarters does not constitute a separate segment. 
The Eliminations and Other segment information is included to 
reconcile segment data to the consolidated ﬁnancial statements 
and includes assets and expenses primarily related to corporate 
functions and excess non-operating properties.

Discontinued Operations

During the third quarter of the ﬁscal year ended March 31, 2019, 
we committed to a plan to divest our Strathmore products 
business (the “Coatings business”). This determination resulted 
in the reclassification of the assets and liabilities comprising 
that business to assets held-for-sale, and a corresponding 
adjustment to our consolidated statements of operations to reﬂect 
discontinued operations for all periods presented.

Accounting Developments

Pronouncements Implemented

In June 2016, the Financial Accounting Standards Board (“FASB”) 
issued Accounting Standards Update (“ASU”) No. 2016-13, 
“Financial Instruments - Credit Losses (Topic 326), Measurement of 
Credit Losses on Financial Instruments.” The ASU requires, among 
other things, the use of a new current expected credit loss model 
in order to determine an allowance for credit losses with respect 
to ﬁnancial assets and instruments held. The CECL model requires 
that we estimate the lifetime of an expected credit loss for ﬁnancial 
assets held at the reporting date based on historical experience, 
current conditions and reasonable and supportable forecasts. 
On April 1, 2020, we adopted the ASU on a prospective basis 

to determine our allowance for credit losses in accordance with 
the requirements of Topic 326, and we modiﬁed our accounting 
policy and processes to facilitate this approach. Our primary 
exposure to ﬁnancial assets that are within the scope of CECL 
are trade receivables. Our adoption of ASU No. 2016-13 effective 
April 1, 2020 did not have a material impact on our condensed 
consolidated ﬁnancial condition and results of operations.

In August 2018, the FASB issued ASU No. 2018-13, “Fair Value 
Measurement (Topic 820): Disclosure Framework—Changes to 
the Disclosure Requirements for Fair Value Measurement.” The 
amendments of the ASU modify the disclosure requirements for 
fair value measurements by removing, modifying or adding certain 
disclosure requirements for assets and liabilities measured at fair 
value in the statement of ﬁnancial position or disclosed in the 
notes to the ﬁnancial statements. The ASU is effective for ﬁscal 
years, and interim periods within those ﬁscal years, beginning after 
December 15, 2019, with early adoption permitted for the removed 
disclosures and delayed adoption until ﬁscal year 2020 permitted 
for the new disclosures. The removed and modiﬁed disclosures 
were adopted on a retrospective basis and the new disclosures 
were adopted on a prospective basis. Our adoption of ASU No. 
2018-13 effective April 1, 2020 did not impact our disclosures.

In August 2018, the FASB issued ASU No. 2018-14, “Disclosure 
Framework – Changes to the Disclosure Requirements for Deﬁned 
Benefit Plans,” which modifies the disclosure requirements 
for employers that sponsor defined benefit pension or other 
postretirement plans. The amendments remove disclosures 
that no longer are considered cost beneﬁcial, clarify the speciﬁc 
requirements of disclosures and add disclosure requirements 
identiﬁed as relevant. This ASU is effective, on a retrospective 
basis, for ﬁscal years ending after December 15, 2020. We have 
adopted the standard and the required disclosure are reﬂected on 
our annual disclosures of the Company’s deﬁned beneﬁt plans.

In August 2018, the FASB issued ASU No. 2018-15, “Intangibles-
Goodwill and Other-Internal-Use Software (Subtopic 350-40): 
Customer’s Accounting for Implementation Costs Incurred in 
a Cloud Computing Arrangement That Is a Service Contract.” 
The  ASU  addresses  how  entities  should  account  for  costs 
associated with implementing a cloud computing arrangement 
that is considered a service contract. Per the amendments of 
the ASU, implementation costs incurred in a cloud computing 
arrangement that is a service contract should be accounted for 
in the same manner as implementation costs incurred to develop 
or obtain software for internal use as prescribed by guidance 
in ASC 350-40. The ASU requires that implementation costs 
incurred in a cloud computing arrangement be capitalized rather 
than expensed. Further, the ASU speciﬁes the method for the 
amortization of costs incurred during implementation, and the 
manner in which the unamortized portion of these capitalized 
implementation  costs  should  be  evaluated  for  impairment. 
The  ASU  also  provides  guidance  on  how  to  present  such 
implementation  costs  in  the  financial  statements  and  also 
creates additional disclosure requirements. The amendments are 
effective for ﬁscal years beginning after December 15, 2019. The 
amendments in this ASU can be applied either retrospectively or 
prospectively to all implementation costs incurred after the date 

46

  |  2021 Annual Report

Part II
Item 8  Financial Statements and Supplementary Data

of adoption. Our adoption of ASU No. 2018-15 effective April 1, 
2020 did not have an impact on our condensed consolidated 
ﬁnancial condition and results of operations.

Pronouncements not yet implemented

In December 2019, the FASB issued ASU No. 2019-12, “Income 
Taxes:  Simplifying  the  Accounting  for  Income  Taxes.”  The 
amendments in this ASU simplify the accounting for income taxes 
by removing certain exceptions and adding some requirements 
regarding  franchise  (or  similar)  tax,  step-ups  in  a  business 
combination, treatment of entities not subject to tax and when to 
apply enacted changes in tax laws. This ASU is effective for ﬁscal 
years beginning after December 15, 2020 and interim periods 
within those ﬁscal years. The amendments related to changes 
in ownership of foreign equity method investments or foreign 
subsidiaries should be applied on a modiﬁed retrospective basis 
through a cumulative-effect adjustment to retained earnings as 
of the beginning of the ﬁscal year of adoption. The amendments 
related to franchise taxes that are partially based on income 
should be applied on either a retrospective basis for all periods 
presented or a modiﬁed retrospective basis through a cumulative-
effect adjustment to retained earnings as of the beginning of the 

ﬁscal year of adoption. All other amendments should be applied 
on a prospective basis. Early adoption is permitted. Our initial 
assessment of this ASU indicates it will not have a material impact 
on our consolidated ﬁnancial condition and results of operations, 
but our assessment is not complete.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate 
Reform (Topic 848) Facilitation of the Effects of Reference Rate 
Reform on Financial Reporting.” This update provides optional 
guidance for a limited period of time to ease potential accounting 
impacts associated with transitioning away from reference rates 
that are expected to be discontinued, such as interbank offered 
rates and LIBOR. In the U.S., the Alternative Reference Rates 
Committee has identified the Secured Overnight Financing 
Rate (“SOFR”) as its preferred alternative to LIBOR. This ASU 
includes practical expedients for contract modiﬁcations due to 
reference rate reform. Generally, contract modiﬁcations related 
to reference rate reform may be considered an event that does 
not require remeasurement or reassessment of a previous 
accounting determination at the modiﬁcation date. This ASU 
is effective immediately; however, it is only available through 
December 31, 2022. The adoption is not expected to have a 
signiﬁcant impact on our consolidated ﬁnancial condition and 
results of operations.

2. Acquisitions

T.A. Industries

On December 15, 2020, we acquired 100% of the outstanding 
equity of T.A. Industries, Inc. (“TRUaire”), a leading manufacturer 
of grilles, registers, and diffusers for the residential and commercial 
HVAC/R end market, based in Santa Fe Springs, California. The 
acquisition also included TRUaire’s wholly-owned manufacturing 
facility based in Vietnam. The acquisition is expected to extend 
the Company’s product offerings to the HVAC market as well as 
add new customers and provide strategic distribution facilities.

The contractual consideration paid for TRUaire included cash of 
$284 million ($286.9 million after working capital and closing cash 
adjustments) and 849,852 shares of the Company’s common 
stock (valued at approximately $76.0 million at transaction signing 
on November 4, 2020) valued at $97.7 million at transaction close 
based on the closing market price of the Company’s common 
shares on the acquisition date. The cash consideration was 
funded through a combination of cash on hand and borrowings 
under our revolving credit facility. The 849,852 shares of common 
stock delivered to the sellers as consideration were reissued from 
treasury shares.

Acquisition Consideration (Amounts in thousands, except for shares)

Cash(a)

Common stock (849,852 shares)

TOTAL CONSIDERATION TRANSFERRED

$

$

286,925

97,656

384,581

(a)  Amount includes working capital and closing cash adjustments, and excludes 
the $1.2 million received by the Company on April 1, 2021 as a result of the 
final working capital true-up adjustment pursuant to the purchase agreement.

The  TRUaire  acquisition  was  accounted  for  as  a  business 
combination under FASB Accounting Standards Codiﬁcation 
Topic 805, Business Combinations (“Topic 805”). Pursuant to 
Topic 805, the Company allocated the TRUaire purchase price to 
tangible and identiﬁable intangible assets acquired and liabilities 
assumed based on their estimated fair values as of the acquisition 
date, December 15, 2020. The excess of the purchase price 
over those fair values was recorded to goodwill. The Company’s 
evaluation of the facts and circumstances available as of the 
acquisition date, to assign fair values to assets acquired and 
liabilities assumed, including income tax related amounts, is 
ongoing. As we complete further analysis of tangible assets, 
intangible assets and liabilities assumed, additional information 
impacting the assets acquired and the related allocation thereof, 
may become available. A change in information related to the 
net assets acquired may change the amount of the purchase 
price assigned to goodwill, and, as a result, the preliminary fair 
values set forth below are subject to adjustments when additional 
information is obtained and valuations are completed. Provisional 
adjustments, if any, will be recognized during the reporting period 
in which the adjustments are determined. We expect to ﬁnalize 
the purchase price allocation as soon as practicable, but no 
later than one year from the acquisition date. The following table 
summarizes the Company’s best initial estimate of the aggregate 
fair value of the assets acquired and liabilities assumed at the date 
of acquisition (in thousands).

  |  2021 Annual Report

47

Part II
Item 8  Financial Statements and Supplementary Data

Cash

Accounts Receivable, net

Inventory

Short-Term Tax Indemnity Assets

Other Current Assets

Property, Plant and Equipment

Trade Name (indeﬁnite life)

Customer Lists (useful life of 15 years)

Right-Of-Use Assets

Long-Term Tax Indemnity Assets

Other Long-term Assets

Accounts Payable

Accrued and Other Current Liabilities

Lease Liabilities - Short-Term

Deferred Tax Liabilities

Tax Contingency Reserve

Lease Liabilities - Long-Term

Estimated fair value of net assets acquired

Goodwill

TOTAL PURCHASE PRICE

Initial Estimated Fair
Value
($)

Measurement Period
Adjustments
($)

Updated Estimated
Fair Value
($)

1,471

13,467

46,313

5,000

1,285

28,832

43,500

194,000

49,040

7,500

2,850

(4,074)

(3,678)

(4,811)

(56,249)

(22,511)

(45,369)

256,566

129,169

385,735

—

—

(1,300)

—

1,041

(3,065)

—

8,500

—

—

402

—

(1,395)

—

(6,912)

5,190

—

2,461

(3,615)

(1,154)

1,471

13,467

45,013

5,000

2,326

25,767

43,500

202,500

49,040

7,500

3,252

(4,074)

(5,073)

(4,811)

(63,161)

(17,321)

(45,369)

259,027

125,554

384,581

Deferred tax liabilities were established to record the deferred 
tax impact of purchase price accounting adjustments, primarily 
related to intangibles assets. Tax contingency reserves relate to 
uncertain tax positions TRUaire took in the periods prior to the 
acquisition date.

In  accordance  with  the  tax  indemnification  included  in  the 
purchase  agreement  of  TRUaire,  the  seller  has  provided 
contractual indemnification to the Company for up to $12.5 
million related to uncertain tax positions taken in prior years. The 
outcome of this arrangement will either be settled or expire by 
2023. During the three months ended March 31, 2021, TRUaire 
received an audit closing letter from Internal Revenue Service 
related to calendar 2017, a pre-acquisition tax year. As a result 
of this, the relevant tax indemniﬁcation asset of $5.0 million was 
released in accordance with the purchase agreement. The release 
of the relevant uncertain tax position accrual of $5.3 million was 
recorded as an income tax beneﬁt for the three months ended 
March 31, 2021, and the offsetting indemniﬁcation expense of 
$5.0 million was recorded in other expense on the consolidated 
statement of operations. As of March 31, 2021, approximately 
$7.5 million of the indemniﬁcation assets remained outstanding.

Goodwill of $125.6 million represents the excess of the purchase 
price over the fair value of the underlying tangible and intangible 
assets acquired and liabilities assumed. The acquisition goodwill 
represents the value expected to be obtained from expanding the 
Company’s product offerings more broadly across the HVAC end 
market. The goodwill recorded as part of this acquisition is included 
in the Industrial Products segment. The goodwill associated with 
the acquisition will not be amortized for ﬁnancial reporting purposes 
and will not be deductible for income tax purposes.

48

  |  2021 Annual Report

TRUaire generated net revenue of $33.8 million and a net loss 
before income taxes of $0.4 million for the period from the 
acquisition date to March 31, 2021. The loss before income taxes 
includes amortization expenses related to the acquired customer 
lists ($3.9 million), the fair value step-up of the inventory ($3.5 
million), the indemniﬁcation expense of $5.0 million discussed 
above, and excludes the transaction expenses discussed below. 
TRUaire activity has been included in our Industrial Products 
segment since the acquisition date. During the year ended 
March 31, 2021, the Company incurred and paid $7.8 million of 
transaction expenses in connection with the TRUaire acquisition, 
which are included in selling, general and administrative expenses 
in the Consolidated Statement of Operations.

Pursuant to Topic 805, unaudited supplemental proforma results 
of operations for the year ended March 31, 2021 and 2020, as 
if the acquisition of TRUaire had occurred on April 1, 2019 are 
presented below (in thousands, except per share amounts):

Revenue, net

Net income

Net earnings per common share:

Diluted

Basic

Year Ended March 31,

2021
($)

495,788

47,891

3.17

3.19

2020
($)

480,285

28,730

1.79

1.81

These proforma results do not present ﬁnancial results that would 
have been realized had the acquisition occurred on April 1, 2019, 
nor are they intended to be a projection of future results. The 

unaudited proforma results include certain proforma adjustments to 
net income that were directly attributable to the acquisition, as if the 
acquisition had occurred on April 1, 2019, including the following:

 (cid:122) Transactions expenses of $0 and $7.8 million for the years 
ended March 31, 2021 and 2020, respectively, that would 
have been recognized by the Company related to the TRUaire 
acquisition;

 (cid:122) Additional depreciation expense of $0.4 million and $0.6 million 
for the years ended March 31, 2021 and 2020, respectively, 
that would have been recognized as a result of the fair value 
step-up of the property, plant and equipment;

 (cid:122) Additional amortization expense of $0 and $7.9 million for the 
years ended March 31, 2021 and 2020, respectively, that would 
have been recognized as a result of the fair value step-up of 
the inventory;

 (cid:122) Additional amortization expense of $9.6 million and $13.5 million 
for the years ended March 31, 2021 and 2020, respectively, 
that would have been recognized as a result of the allocation of 
purchase consideration to customer lists subject to amortization;
 (cid:122) Estimated additional interest expense of $3.2 million and 
$4.5 million for the years ended March 31, 2021 and 2020, 
respectively, as a result of incurring additional borrowing;

 (cid:122) Income tax effect of the proforma adjustments calculated using 
a blended statutory income tax rate of 24.5% of $3.2 million 
and $8.4 million for the years ended March 31, 2021 and 2020, 
respectively.

Petersen Metals

On April 2, 2019, we acquired the assets of Petersen Metals, 
Inc. (“Petersen”), based near Tampa, Florida, for $11.8 million, of 
which $11.5 million was paid at closing and funded through our 
revolving credit facility, and the remaining $0.3 million represented 
a working capital adjustment paid in July 2019. Petersen is a 
leading designer, manufacturer and installer of architecturally-
specified, engineered metal products and railings, including 
aluminum and stainless steel railings products for interior and 

3. Discontinued Operations

During the quarter ended December 31, 2017, we commenced a 
sale process to divest our Coatings business to allow us to focus 
resources on our core growth platforms. Our former Coatings 
business manufactured specialized industrial coatings products 
including urethanes, epoxies, acrylics and alkyds. As of December 
31, 2017, the Coatings business met the held-for-sale criteria 
under ASC 360, “Property, Plant and Equipment,” and accordingly, 
we classified and accounted for the assets and liabilities of 
the Coatings business as held-for-sale in the accompanying 
consolidated balance sheets, and as discontinued operations, 
net of tax in the accompanying consolidated statements of 
operations and cash ﬂows. We completed an initial assessment 
of the assets and liabilities of the Coatings business and recorded 
a $46.0 million impairment based on our best estimates as of the 
date of issuance of ﬁnancial results for quarter ended December 
31, 2017. No adjustments to previously recorded estimates have 
been made subsequently.

Part II
Item 8  Financial Statements and Supplementary Data

exterior applications. The excess of the purchase price over the 
fair value of the identifiable assets acquired was $6.1 million 
allocated to goodwill, which will be deductible for income tax 
purposes. Goodwill represents the value expected to be obtained 
from enabling geographic, end market and product diversiﬁcation 
and expansion as Petersen is a strategic complement to our 
existing line of architecturally-speciﬁed building products. The 
allocation of the fair value of the net assets acquired included 
customer lists of $3.2 million and backlog of $0.4 million, as well 
as accounts receivable, inventory and equipment of $2.2 million, 
$0.8 million and $0.7 million, respectively, net of current liabilities 
of $1.5 million. Customer lists are being amortized over 15 years, 
backlog is amortized over 1.5 years and goodwill is not being 
amortized. Petersen activity has been included in our Industrial 
Products segment since the acquisition date. No pro forma 
information has been provided due to immateriality.

MSD Research, Inc.

On January 31, 2019, we acquired the assets of MSD Research, 
Inc. (“MSD”), based in Boca Raton, Florida, for $10.1 million, 
funded through our revolving credit facility. MSD is a leading 
provider of condensate management products for commercial 
and residential HVAC/R systems, including ﬂoat switches, drain 
line cleanouts and flush tools. The excess of the  purchase 
price over the fair value of the identiﬁable assets acquired was 
$5.2 million allocated to goodwill, which will be deductible for 
income tax purposes. Goodwill represents the value expected to 
be obtained from a more extensive condensation management 
product portfolio for the HVAC/R market and leveraging our larger 
distributor network. The allocation of the fair value of the net assets 
acquired included customer lists, trademarks and technology of 
$3.3 million, $0.8 million and $0.4 million, respectively, as well as 
inventory and accounts receivable of $0.3 million and $0.1 million, 
respectively. Customer lists and technology are being amortized 
over 10 years and 5 years, respectively, while trademarks and 
goodwill are not being amortized. MSD activity has been included 
in our Industrial Products segment since the acquisition date. No 
pro forma information has been provided due to immateriality.

On July 31, 2018, we consummated a sale of assets related to our 
Coatings business to an unrelated third party, the terms of which 
were not disclosed due to immateriality. During the quarter ended 
September 30, 2018, we received an aggregate of $6.9 million for 
the sale of assets that related to our Coatings business in multiple 
transactions. This resulted in gains on disposal of $6.9 million due 
to write-downs of long-lived assets in prior periods.

On March 17, 2020, we completed the sale of the last remaining 
real property owned by the Coatings business to an unrelated third 
party, the terms of which were not disclosed due to immateriality. 
The sale resulted in proceeds and a gain on disposal of $1.5 million 
due to write-downs of long-lived assets in prior periods. The last 
remaining asset of the Coatings business is a long-term lease 
that expires in March 2027. We have not terminated the lease, 
but we have sub-let the property for the remainder of the lease 
term. As such, this lease has been moved back into continuing 
operations, effective March 31, 2020, and the related ROU assets 

  |  2021 Annual Report

49

Part II
Item 8  Financial Statements and Supplementary Data

and lease liabilities were reported as continuing operations as of 
March 31, 2020.

The assets and liabilities of the Coatings business reside in a 
disregarded entity for tax purposes. Accordingly, the tax attributes 
associated with the operations of our Coatings business will 

ultimately ﬂow through to the corporate parent, which ﬁles a 
consolidated federal return. Therefore, any corresponding tax 
assets or liabilities have been reﬂected as a component of our 
continuing operations. Discontinued operations reported no 
assets or liabilities as of March 31, 2021 and 2020, respectively, 
in the consolidated balance sheets.

Summarized selected ﬁnancial information for the Coatings business for the years ended March 31, 2021, 2020 and 2019, is presented 
in the following table (in thousands):

Revenues, net

Gain (loss) from discontinued operations before income taxes

Income tax (expense) beneﬁt

GAIN (LOSS) FROM DISCONTINUED OPERATIONS

4. Goodwill and Intangible Assets

Year Ended March 31,

2021
($)

—

—

—

—

2020
($)

—

1,326

(265)

1,061

2019
($)

5,303

(774)

296

(478)

The changes in the carrying amount of goodwill for the years ended March 31, 2021 and 2020 were as follows (in thousands):

Balance at April 1, 2019

Petersen acquisition

Currency translation

Balance at March 31, 2020

T.A. industries acquisition

Currency translation

BALANCE AT MARCH 31, 2021

Industrial 
Products
($)

54,732

6,128

(737)

60,123

125,554

1,555

187,232

Specialty 
Chemicals
($)

31,563

—

—

31,563

—

—

31,563

Total
($)

86,295

6,128

(737)

91,686

125,554

1,555

218,795

The following table provides information about our intangible assets for the years ended March 31, 2021 and 2020 (in thousands, except years):

Finite-lived intangible assets:

Patents

Customer lists and amortized trademarks

Non-compete agreements

Other

TRADE NAMES AND TRADEMARKS  
NOT BEING AMORTIZED(a):

March 31, 2021

March 31, 2020

Wtd Avg Life
(Years)

Ending Gross
Amount
($)

Accumulated
Amortization
($)

Ending Gross
Amount
($)

Accumulated
Amortization
($)

11

14

5

8

9,461

267,096

982

4,743

282,282

54,594

(7,540)

(42,345)

(790)

(3,141)

(53,816)

9,635

62,806

1,653

5,219

79,313

(6,935)

(33,098)

(1,494)

(2,628)

(44,155)

—

11,027

—

(a) 

In the fiscal quarter ended March 31, 2020, we recorded an impairment of $1.0 million on one of our unamortized trademarks in our Specialty Chemicals segment.

50

  |  2021 Annual Report

Part II
Item 8  Financial Statements and Supplementary Data

Amortization expense for the years ended March 31, 2021, 2020 and 2019 was $10.5 million, $6.7 million and $6.2 million, respectively. 
The following table presents the estimated future amortization of ﬁnite-lived intangible assets for the next ﬁve ﬁscal years ending 
March 31 (in thousands):

2022

2023

2024

2025

2026

Thereafter

TOTAL

$

19,288

18,279

17,567

16,609

15,699

141,024

228,466

5. Share-Based Compensation

We maintain the shareholder-approved 2015 Equity and Incentive Compensation Plan (the “2015 Plan”), which provides for the issuance 
of up to 1,230,000 shares of CSWI common stock through the grant of stock options, stock appreciation rights, restricted shares, 
restricted stock units, performance shares, performance units or other share-based awards, to employees, ofﬁcers and non-employee 
directors. As of March 31, 2021, 675,113 shares were available for issuance under the 2015 Plan.

We recorded share-based compensation expense as follows for the years ended March 31, 2021, 2020 and 2019 (in thousands):

Share-based compensation expense

Related income tax beneﬁt

NET SHARE-BASED COMPENSATION EXPENSE

Share-based compensation expense

Related income tax beneﬁt

NET SHARE-BASED COMPENSATION EXPENSE

Share-based compensation expense

Related income tax beneﬁt

NET SHARE-BASED COMPENSATION EXPENSE

Year Ended March 31, 2021

Stock Options
($)

Restricted Stock
($)

—

—

—

5,085

(1,220)

3,865

Year Ended March 31, 2020

Stock Options
($)

Restricted Stock
($)

—

—

—

5,074

(1,218)

3,856

Year Ended March 31, 2019

Stock Options
($)

Restricted Stock
($)

19

(5)

14

3,924

(942)

2,982

Total
($)

5,085

(1,220)

3,865

Total
($)

5,074

(1,218)

3,856

Total
($)

3,943

(947)

2,996

  |  2021 Annual Report

51

Part II
Item 8  Financial Statements and Supplementary Data

Stock option activity, which represents outstanding CSWI awards resulting from conversion awards held by current and former Capital 
Southwest employees, was as follows:

Outstanding at April 1, 2020

Exercised

Outstanding at March 31, 2021(a)

EXERCISABLE AT MARCH 31, 2021(a)

Year Ended March 31, 2021

Weighted
Average Exercise
Price
($)

Remaining
Contractual Life
(Years)

Aggregate
Intrinsic Value
(in Millions)
($)

25.30

25.40

25.23

25.23

3.4

3.4

7.0

7.0

Number of
Shares

115,858

(52,445)

63,413

63,413

(a)  All remaining awards outstanding and exercisable at March 31, 2021 are held by employees of CSWI.

Outstanding at April 1, 2019

Exercised

Outstanding at March 31, 2020

EXERCISABLE AT MARCH 31, 2020

Year Ended March 31, 2020

Weighted
Average Exercise
Price
($)

Remaining
Contractual Life
(Years)

Aggregate
Intrinsic Value
(in Millions)
($)

25.12

24.93

25.30

25.30

4.1

4.1

4.6

4.6

Number of
Shares

231,717

(115,859)

115,858

115,858

No options were granted during the years ended March 31, 2021, 
2020 and 2019, and all stock options were vested and recognized 
as of March 31, 2021. The intrinsic value of options exercised 
during the years ended March 31, 2021, 2020 and 2019 was 
$2.5 million, $5.6 million and $0, respectively. Cash received for 
options exercised during the years ended March 31, 2021, 2020 

Restricted stock activity was as follows:

and 2019 was $1.3 million, $2.9 million and $0, respectively, and 
the tax beneﬁt received was $0.4 million, $1.2 million and $0, 
respectively. The total fair value of stock options vested during 
the years ended March 31, 2021, 2020 and 2019 was $0, $0 
and $0.1 million, respectively.

Outstanding at April 1, 2020

Granted

Vested

Canceled

OUTSTANDING AT MARCH 31, 2021(a)

Year Ended March 31, 2021

Weighted Average
Grant Date Fair
Value
($)

60.78

75.88

52.89

70.67

70.50

Number of 
Shares

202,466

119,751

(124,985)

(24,316)

172,916

(a)  All remaining awards outstanding and exercisable at March 31, 2021 are held by employees of CSWI.

During the restriction period, the holders of restricted shares are 
entitled to vote and receive dividends. Unvested restricted shares 
outstanding as of March 31, 2021 and 2020 included 82,728 and 
93,249 shares (at target), respectively, with performance-based 
vesting provisions, having vesting ranges from 0-200% based 
on pre-defined performance targets with market conditions. 
Performance-based  awards  accrue  dividend  equivalents, 
which are settled upon (and to the extent of) vesting of the 
underlying award, and do not have the right to vote until vested. 
Performance-based awards are earned upon the achievement 
of objective performance targets and are payable in common 
shares. Compensation expense is calculated based on the fair 

market value as determined by a Monte Carlo simulation and 
is recognized over a 36-month cliff vesting period. We granted 
34,245 and 31,758 awards with performance-based vesting 
provisions during the years ended March 31, 2021 and 2020, 
respectively, with a vesting range of 0-200%.

At March 31, 2021, we had unrecognized compensation cost 
related to unvested restricted shares of $6.9 million, which will be 
amortized into net income over the remaining weighted average 
vesting period of 1.9 years. The total fair value of restricted shares 
vested during the years ended March 31, 2021 and 2020 was 
$8.5 million and $6.3 million, respectively.

52

  |  2021 Annual Report

Part II
Item 8  Financial Statements and Supplementary Data

6. 

 Details of Certain Consolidated Balance Sheet Captions

Accounts receivable, net consists of the following (in thousands):

Accounts receivable trade

Other receivables

Less: Allowance for doubtful accounts

ACCOUNTS RECEIVABLE, NET

Inventories, net consist of the following (in thousands):

Raw materials and supplies

Work in process

Finished goods

Total inventories

Less: LIFO reserve

Less: Obsolescence reserve

INVENTORIES, NET

Property, plant and equipment, net, consist of the following (in thousands):

Land and improvements

Buildings and improvements

Plant, ofﬁce and laboratory equipment

Construction in progress

Less: Accumulated depreciation

PROPERTY, PLANT AND EQUIPMENT, NET

March 31,

2021
($)

93,366

4,244

97,610

(915)

96,695

March 31,

2021
($)

27,416

6,365

72,452

106,233

(4,565)

(3,582)

98,086

March 31,

2021
($)

3,168

53,020

95,848

3,462

2020
($)

72,601

3,449

76,050

(1,170)

74,880

2020
($)

20,935

6,076

33,771

60,782

(4,816)

(2,213)

53,753

2020
($)

3,106

44,612

72,652

8,163

155,498

128,533

(72,944)

82,554

(71,355)

57,178

Depreciation of property, plant and equipment was $9.2 million, $7.9 million and $7.5 million for the years ended March 31, 2021, 
2020 and 2019, respectively. Of these amounts, cost of revenues includes $7.1 million, $6.6 million and $6.1 million, respectively.

Other assets consist of the following (in thousands):

Right-of-use lease assets
Property held for investment(a)

Deferred income taxes

Long-term tax indemniﬁcation assets

Other

OTHER ASSETS

March 31,

2021
($)

61,707

967

1,462

7,500

4,359

2020
($)

16,383

6,819

—

—

949

75,995

24,151

(a)  As of March 31, 2021 and 2020, $0.5 million and $5.9 million in assets were held for sale, respectively, in the “Elimination and Other” segment.

  |  2021 Annual Report

53

March 31,

2021
($)

2020
($)

19,120

18,666

9,031

8,063

1,463

1,593

3,755

6,718

49,743

March 31,

2021
($)

56,709

66,052

13,228

736

136,725

6,409

3,056

2,892

750

529

4,305

36,607

2020
($)

15,179

3,848

623

1,492

21,142

March 31,

2021
($)

232,000

10,337

242,337

(561)

241,776

2020
($)

—

10,898

10,898

(561)

10,337

Part II
Item 8  Financial Statements and Supplementary Data

Accrued and other current liabilities consist of the following (in thousands):

Compensation and related beneﬁts

Rebates and marketing agreements

Operating lease liabilities

Billings in excess of costs

Non-income taxes

Income taxes payable

Other accrued expenses

ACCRUED AND OTHER CURRENT LIABILITIES

Other long-term liabilities consists of the following (in thousands):

Operating lease liabilities

Deferred income taxes

Tax Reserve

Other

OTHER LONG-TERM LIABILITIES

7. Long-Term Debt and Commitments

Debt consists of the following (in thousands):

Revolving Credit Facility, interest rate of 2.11% and 2.24%, respectively

Whitmore term loan, interest rate of 2.11% and 2.99%, respectively

Total debt

Less: Current portion

LONG-TERM DEBT

54

  |  2021 Annual Report

Revolving Credit Facility Agreement

On December 11, 2015, we entered into a ﬁve-year $250.0 million 
revolving credit facility agreement (“Revolving Credit Facility”), with 
an additional $50.0 million accordion feature, with JPMorgan Chase 
Bank, N.A., as administrative agent, and the other lenders party 
thereto. The agreement was amended on September 15, 2017 to 
allow for multi-currency borrowing with a $125.0 million sublimit 
and to extend the maturity date to September 15, 2022. The 
interest rate, ﬁnancial covenants and all other material provisions 
of the Revolving Credit Facility were not materially changed by this 
amendment. On December 1, 2020, the Company entered into an 
amendment of the Revolving Credit Facility to utilize the accordion 
feature, thus increasing the commitment from $250.0 million to 
$300.0 million, and hence eliminating the available incremental 
commitment by a corresponding amount. On March 10, 2021, the 
Revolving Credit Facility was amended to facilitate the formation 
and future operation of the joint venture discussed in Note 21.

Borrowings under the Revolving Credit Facility bore interest at 
a rate of prime plus 1.00% or London Interbank Offered Rate 
(“LIBOR”) plus 2.00%. We also paid a commitment fee of 0.30% 
for the unutilized portion of the Revolving Credit Facility. Interest 
and commitment fees are payable at least quarterly and the 
outstanding principal balance is due at the maturity date. The 
Revolving Credit Facility is secured by substantially all our assets. 
As of March 31, 2021 and 2020, we had $232.0 million and $0, 
respectively, in outstanding borrowings under the Facility, which 
resulted in a borrowing capacity of $68.0 million and $300.0 
million, respectively, inclusive of the accordion feature. The 
Revolving Credit Facility contained certain customary restrictive 
covenants, including a requirement to maintain a minimum ﬁxed 
charge coverage of ratio of 1.25 to 1.00 and a maximum leverage 
ratio of funded debt to EBITDA (as deﬁned in the agreement) of 
3.75 to 1.00. Covenant compliance is tested quarterly and we 
were in compliance with all covenants as of March 31, 2021.

On May 18, 2021, we entered into a Second Amended and 
Restated Credit Agreement (the “Second Credit Agreement”) with 
JPMorgan Chase Bank, N.A., as administrative agent (in such 
capacity, the “Administrative Agent”) and collateral agent, and 
the lenders, issuing banks and swingline lender party thereto. 
CSW Industrials Holdings, LLC, a wholly-owned subsidiary of 
the Company (the “Borrower”), is the borrower under the Second 
Credit Agreement. The Second Credit Agreement provides for a 
$400.0 million revolving credit facility that contains a $25.0 million 
sublimit for the issuance of letters of credit and a $10.0 million 
sublimit for swingline loans. The Second Credit Agreement is 
scheduled to mature on May 18, 2026.

Part II
Item 8  Financial statements and supplementary data

Borrowings under the Second Credit Agreement bear interest, at 
the Borrower’s option, at either base rate or LIBOR, plus, in either 
case, an applicable margin based on the Company’s leverage ratio 
calculated on a quarterly basis. The base rate is described in the 
Second Credit Agreement as the highest of (i) the Federal funds 
effective rate plus 0.50%, (ii) the prime rate quoted by The Wall 
Street Journal, and (iii) the one-month LIBOR rate plus 1.00%.

Borrowings under the Second Credit Agreement may be used 
for working capital and general corporate purposes, including, 
without limitation, for ﬁnancing permitted acquisitions and fees 
and expenses incurred in connection therewith.

The  obligations  of  the  Borrower  under  the  Second  Credit 
Agreement are guaranteed by the Company and all of its direct 
and indirect domestic subsidiaries. The Second Credit Agreement 
is secured by a ﬁrst priority lien on all tangible and intangible assets 
and stock issued by the Borrower and its domestic subsidiaries, 
subject to speciﬁed exceptions, and 65% of the voting equity 
interests in its ﬁrst-tier foreign subsidiaries.

The  financial  covenants  contained  in  the  Second  Credit 
Agreement require the maintenance of a maximum Leverage Ratio 
of 3.00 to 1.00, subject to a temporary increase to 3.75 to 1.00 for 
18 months following the consummation of permitted acquisitions 
with consideration in excess of certain threshold amounts set 
forth in the Second Credit Agreement, and the maintenance 
of a minimum Fixed Charge Coverage Ratio of 1.25 to 1.00, 
the calculations and terms of which are deﬁned in the Second 
Credit Agreement. The Second Credit Agreement also contains 
(i) afﬁrmative and negative covenants which are customary for 
similar credit agreements, including, without limitation, limitations 
on the Company, the Borrower and its subsidiaries with respect 
to indebtedness, liens, investments, distributions, mergers and 
acquisitions, disposition of assets and transactions with afﬁliates, 
and (ii) customary events of default.

Whitmore Term Loan

As of March 31, 2021, Whitmore Manufacturing, LLC (one of 
our wholly-owned operating subsidiaries) maintained a secured 
term loan related to the warehouse, corporate ofﬁce building and 
remodel of the existing manufacturing and R&D facility. The term 
loan matures on July 31, 2029, with payments of $140,000 due 
each quarter. Borrowings under the term loan bear interest at a 
variable annual rate equal to one-month LIBOR plus 2.0%. As 
of March 31, 2021 and 2020, Whitmore had $10.3 million and 
$10.9 million, respectively, in outstanding borrowings under the 
term loan. Interest payments under the Whitmore term loan are 
hedged under an interest rate swap agreement as described in 
Note 9.

  |  2021 Annual Report

55

Part II
Item 8  Financial statements and supplementary data

Future Minimum Debt Payments

Future minimum debt payments are as follows for years ending March 31 (in thousands):

2022

2023

2024

2025

2026

Thereafter

TOTAL

8. Leases

$

561

232,561

561

561

561

7,532

$

242,337

We have operating leases for manufacturing facilities, ofﬁces, warehouses, vehicles and certain equipment. Our leases have remaining 
lease terms of 1 year to 27 years, some of which include escalation clauses and/or options to extend or terminate the leases.

In October 2019, we terminated two operating leases and paid an early lease termination fee of $0.5 million. The loss on early termination 
is recorded in other income (expense), net as the leased properties were not used in our operations.

We do not currently have any ﬁnancing lease arrangements.

(in thousands)

COMPONENTS OF OPERATING LEASE EXPENSES

Operating lease expense(a)

Short-term lease expense(a)

TOTAL OPERATING LEASE EXPENSE

(a) 

Included in cost of revenues and selling, general and administrative expense

(in thousands)

OPERATING LEASE ASSETS AND LIABILITIES

ROU assets, net(a)

Short-term lease liabilities(b)

Long-term lease liabilities(b)

TOTAL OPERATING LEASE LIABILITIES

(a) 
(b) 

Included in other assets
Included in accrued and other current liabilities and other long-term liabilities, as applicable

(in thousands)

SUPPLEMENTAL CASH FLOW

Cash paid for amounts included in the measurement of operating lease liabilities(a)

ROU assets obtained in exchange for new operating lease obligations

(a) 

Included in our condensed consolidated statement of cash flows, operating activities in accounts payable and other current liabilities

OTHER INFORMATION FOR OPERATING LEASES

Weighted average remaining lease term (in years)

Weighted average discount rate (percent)

56

  |  2021 Annual Report

March 31,

2021 
($)

5,243

377

5,620

2020 
($)

3,524

225

3,749

March 31,

2021 
($)

61,707

8,063

56,709

64,772

2021 
($)

16,383

3,056

15,179

18,235

March 31,

2021 
($)

5,578

114

2021 
($)

3,824

3,187

8.2

2.6 %

6.2

4.3%

Part II
Item 8  Financial statements and supplementary data

(in thousands)

MATURITIES OF OPERATING LEASE LIABILITIES WERE AS FOLLOWS:

2022

2023

2024

2025

2026

Thereafter

Total lease liabilities

Less: Imputed interest

PRESENT VALUE OF LEASE LIABILITIES

$

$

9,551

9,009

8,910

8,785

8,786

26,518

71,559

(6,787)

64,772

9. Derivative Instruments and Hedge Accounting

We enter into interest rate swap agreements to hedge exposure to ﬂoating interest rates on certain portions of our debt. As of  
March 31, 2021 and 2020, we had $10.3 million and $10.9 million, respectively, of notional amount in outstanding designated interest 
rate swaps with third parties. All interest rate swaps are highly effective. At March 31, 2021, the maximum remaining length of any 
interest rate swap contract in place was approximately 8.3 years.

The fair value of interest rate swaps designated as hedging instruments are summarized below (in thousands):

(in thousands)

Current derivative liabilities

Non-current derivative liabilities

March 31,

2021 
($)

280

736

2020 
($)

271

1,492

The impact of changes in the fair value of interest rate swaps is included in Note 17.

Current derivative assets are reported in our consolidated balance sheets in prepaid expenses and other current assets. Current and 
non-current derivative liabilities are reported in our consolidated balance sheets in accrued and other current liabilities and other long-
term liabilities, respectively.

10. Earnings Per Share

The following table sets forth the reconciliation of the numerator and the denominator of basic and diluted earnings per share for the 
years ended March 31, 2021, 2020 and 2019:

(amounts in thousands, except per share data)

Income from continuing operations

Income (loss) from discontinued operations, net of tax

NET INCOME

WEIGHTED AVERAGE SHARES:

Common stock

Participating securities

Denominator for basic earnings per common share

Potentially dilutive securities

DENOMINATOR FOR DILUTED EARNINGS PER COMMON SHARE

March 31,

2021 
($)

2020 
($)

40,288

44,817

—

1,061

40,288

45,878

14,919

14,928

96

111

15,015

15,039

111

167

15,126

15,206

2019 
($)

46,052

(478)

45,574

15,257

157

15,414

118

15,532

  |  2021 Annual Report

57

Part II
Item 8  Financial statements and supplementary data

BASIC EARNINGS (LOSS) PER COMMON SHARE:

Continuing operations

Discontinued operations

NET INCOME

DILUTED EARNINGS (LOSS) PER COMMON SHARE:

Continuing operations

Discontinued operations

NET INCOME

11. Shareholders’ Equity

Share Repurchase Programs

On  November  11,  2016,  we  announced  that  our  Board  of 
Directors authorized a program to repurchase up to $35.0 million 
of our common stock over a two-year time period. As of October 
31, 2018, a total of 656,203 shares had been repurchased 
for an aggregate amount of $35.0 million, and the program 
was completed. During the year ended March 31, 2019, we 
repurchased 629,659 shares of our common stock under this 
program for an aggregate amount of $33.8 million.

On November 7, 2018, we announced that our Board of Directors 
authorized a program to repurchase up to $75.0 million of our 
common stock over a two-year time period. On October 30, 
2020, we announced that our Board of Directors authorized a new 
program to repurchase up to $100.0 million of our common stock, 
which replaced the previously announced $75.0 million program. 
Under the newly-authorized program, shares may be repurchased 
from time to time in the open market or in privately negotiated 
transactions. Repurchases will be made at our discretion, based 
on ongoing assessments of the capital needs of the business, the 
market price of our common stock and general market conditions. 
Our Board of Directors has established an expiration of December 

12. Fair Value Measurements

The fair value of interest rate swaps discussed in Note 9 are 
determined using Level II inputs. The carrying value of our debt, 
included in Note 7, approximates fair value as it bears interest at 
ﬂoating rates. The carrying amounts of other ﬁnancial instruments 

13. Retirement Plans

2.68

—

2.68

2.66

—

2.66

2.98

0.07

3.05

2.95

0.07

3.02

2.99

(0.03)

2.96

2.96

(0.03)

2.93

31,  2022  for  completion  of  the  new  repurchase  program; 
however, the program may be limited or terminated at any time 
at our discretion without notice. We repurchased 115,151 and 
393,836 shares under the prior $75.0 million program during 
the years ended March 31, 2021 and 2020, respectively, for an 
aggregate amount of $7.3 million and $26.9 million, respectively. 
No shares were repurchased under the $100.0 million program 
during the year ended March 31, 2021.

Dividends

On  April  4,  2019,  we  announced  we  had  commenced  a 
dividend program and that our Board of Directors approved a 
regular quarterly dividend of $0.135 per share. Total dividends of 
$8.1 million and $8.1 million were paid during the years ended 
March 31, 2021 and 2020, respectively.

On April 15, 2021, we announced a quarterly dividend of $0.150 
per share payable on May 14, 2021 to shareholders of record as 
of April 30, 2021. Any future dividends at the existing $0.150 per 
share quarterly rate or otherwise will be reviewed individually and 
declared by our Board of Directors in its discretion.

(i.e.,  cash  and  cash  equivalents,  accounts  receivable,  net, 
accounts payable) approximated their fair values at March 31, 
2021 and 2020 due to their short-term nature.

We  had  a  frozen  qualified  defined  benefit  pension  plan 
(the “Qualiﬁed Plan”) that covered certain of our U.S. employees. 
The Qualiﬁed Plan was previously closed to employees hired or 
re-hired on or after January 1, 2015, and it was amended to 
freeze beneﬁt accruals and to modify certain ancillary beneﬁts 
effective as of September 30, 2015. Beneﬁts were based on 
years of service and an average of the highest ﬁve consecutive 
years of compensation during the last ten years of employment. 
The funding policy of the Qualiﬁed Plan was to contribute annual 

amounts that are currently deductible for federal income tax 
purposes. No contributions were made during the years ended 
March 31, 2021, 2020 or 2019. During the year ended March 31, 
2018, we offered lump sum payments to terminated vested 
participants, representing approximately 16% of our liability. 
Approximately 67% of those participants accepted the lump 
sum offer for an aggregate payment of $7.3 million. During the 
six months ended September 30, 2019, we offered lump sum 
payments to eligible active and terminated vested participants, 

58

  |  2021 Annual Report

Part II
Item 8  Financial statements and supplementary data

representing  approximately  42%  of  our  remaining  liability. 
Approximately 74% of those participants accepted the lump sum 
offer for an aggregate payment of $17.0 million in August 2019. 
We entered into an annuity purchase contract for the remaining 
liability in September 2019, and terminated the Qualiﬁed Plan 
effective September 30, 2019. The termination initially required 
an additional contribution of $0.5 million, which was paid in 
September 2019, and resulted in an overall termination charge 
of $7.0 million ($5.4 million, net of tax) recorded in other (expense) 
income, net, due primarily to the recognition of expenses that 
were previously included in accumulated other comprehensive 
loss and the recognition of additional costs associated with the 
annuity purchase contract. After the participant data for the 
annuity purchase contract was ﬁnalized in the ﬁscal fourth quarter 
ended March 31, 2020, the Qualiﬁed Plan had excess funds of 
$0.5 million, which were distributed into the Deﬁned Contribution 
Plan discussed below.

We  maintain  a  frozen  unfunded  retirement  restoration  plan 
(the “Restoration Plan”) that is a non-qualiﬁed plan providing for 
the payment to participating employees, upon retirement, of the 
difference between the maximum annual payment permissible 

under the Qualified Plan pursuant to federal limitations and 
the amount that would otherwise have been payable under the 
Qualiﬁed Plan. As with the Qualiﬁed Plan, the Restoration Plan 
was closed to new participants on January 1, 2015 and amended 
to freeze beneﬁt accruals and to modify certain ancillary beneﬁts 
effective as of September 30, 2015.

We  maintain  a  registered  defined  benefit  pension  plan 
(the “Canadian Plan”) that covers all of our employees based 
at our facility in Alberta, Canada. Employees are eligible for 
membership in the plan following the completion of one year 
of employment. Beneﬁts accrue to eligible employees based on 
years of service and an average of the highest 60 consecutive 
months of compensation during the last 10 consecutive years of 
employment. Beneﬁt eligibility typically occurs upon the ﬁrst day 
of the month following an eligible employee’s reaching age 65, 
and plan beneﬁts are typically paid monthly in advance for the 
lifetime of the participant.

The plans described above (collectively, the “Plans”) are presented 
in aggregate as the impact of the Restoration Plan and Canadian 
Plan to our consolidated ﬁnancial position and results of operations 
is not material.

The following are assumptions related to the Plans:

Assumptions used to determine beneﬁt obligations:

Discount rate

Rate of compensation increases(a)

Assumptions used to determine net pension expense: 

Discount rate

Expected return on plan assets

Rate of compensation increases(a)

March 31,

2021

2020

2019

3.3%

3.0%

3.6%

4.8%

3.0%

3.6%

3.0%

4.0%

4.8%

3.0%

4.0%

3.0%

4.0%

4.6%

3.0%

(a)  Rate of compensation increase is no longer relevant to the Restoration Plan due to freezing benefit accruals. The rate of compensation increase on the Canadian Plan 

is $3.0%.

The factors used in determination of these assumptions are described in Note 1.

Net pension (beneﬁt) expense for the Plans was:

(in thousands)

Service cost – beneﬁts earned during the year

Interest cost on projected beneﬁt obligation

Expected return on assets

Net amortization and deferral

Pension plan termination(a)

NET PENSION EXPENSE (BENEFIT)

(a)  Reflects impact of the termination of the Qualified Plan.

Year Ended March 31,

2021
($)

40

144

(96)

74

—

162

2020
($)

71

1,136

(1,361)

56

6,472

6,374

2019
($)

76

2,113

(2,656)

47

—

(420)

The estimated prior service costs and the estimated net loss for the Plans that will be amortized from accumulated other comprehensive 
loss into pension expense in the year ended March 31, 2022 is $0.1 million.

  |  2021 Annual Report

59

Part II
Item 8  Financial statements and supplementary data

The following is a summary of the changes in the Plans’ pension obligations:

(in thousands)

Beneﬁt obligation at beginning of year

Service cost

Interest cost

Actuarial gain

Beneﬁts paid

Pension plan termination(a)

Currency translation impact

BENEFIT OBLIGATION AT END OF YEAR

ACCUMULATED BENEFIT OBLIGATION

(a) Reflects impact of the termination of the Qualified Plan.

The following is a reconciliation of the Plans’ assets:

(in thousands)

Fair value of plan assets at beginning of year

Actual return on plan assets

Beneﬁts paid

Company contributions

Pension plan termination(a)

Currency translation impact

FAIR VALUE OF PLAN ASSETS AT END OF YEAR

(a)  Reflects impact of the termination of the Qualified Plan.

March 31,

2021
($)

3,880

40

144

212

(265)

—

280

4,291

3,990

March 31,

2021
($)

1,898

441

(159)

69

—

243

2,492

2020
($)

53,993

71

1,136

5,103

(1,697)

(54,605)

(121)

3,880

3,690

2020
($)

55,009

3,093

(1,591)

93

(54,605)

(101)

1,898

We contributed $0.1 million to the Canadian Plan in the year ended March 31, 2021 and estimate that our contribution in the year 
ending March 31, 2022 will be $0.1 million.

The following summarizes the net pension asset for the Plans:

(in thousands)

Plan assets at fair value

Beneﬁt obligation

UNFUNDED STATUS

The following summarizes amounts recognized in the balance sheets for the Plans:

(in thousands)

Current liabilities

Noncurrent liabilities

UNFUNDED STATUS

60

  |  2021 Annual Report

March 31,

2021
($)

2,492

(4,291)

(1,799)

March 31,

2021
($)

(104)

(1,695)

(1,799)

2020
($)

1,898

(3,880)

(1,982)

2020
($)

(103)

(1,879)

(1,982)

Part II
Item 8  Financial statements and supplementary data

The following table presents the change in accumulated other comprehensive loss attributable to the components of the net cost and 
the change in the beneﬁt obligation:

(in thousands)

Accumulated other comprehensive loss at beginning of year

Amortization of net loss

Amortization of prior service beneﬁt (cost)

Pension plan termination(a)

Net gain (loss) arising during the year

Currency translation impact

ACCUMULATED OTHER COMPREHENSIVE LOSS AT END OF YEAR

(a)  Reflects impact of the termination of the Qualified Plan, including changes in assumptions resulting from the termination.
Amounts recorded in accumulated other comprehensive loss consist of:

(in thousands)

Net prior service cost

Net loss

ACCUMULATED OTHER COMPREHENSIVE LOSS

March 31,

2021
($)

(871)

62

(31)

—

96

(55)

(799)

March 31,

2021
($)

27

(826)

(799)

2020
($)

(3,466)

47

21

2,516

(17)

28

(871)

2020
($)

56

(927)

(871)

The Canadian Plan assets, which account for 100% of total assets, are invested in other investments, as described below. The actual 
asset allocations for the Plans were as follows:

Asset category

Equity securities

Fixed income securities

Other

Cash and cash equivalents

TOTAL

March 31,

2021

2020

—%

—%

100%

—%

100%

—%

—%

100%

—%

100%

The Canadian Plan has investments of $2.5 million in a mutual fund that aims to provide a return derived from both income and capital 
appreciation by investing in a diversiﬁed portfolio of Canadian and foreign equity as well as ﬁxed-income securities. This mutual fund 
is considered to have Level II inputs in the fair value hierarchy.

The following table summarizes the expected cash beneﬁt payments for the Plans for ﬁscal years ending March 31 (in millions):

2022

2023

2024

2025

2026

Thereafter

$

0.2

0.2

0.2

0.2

0.2

1.1

  |  2021 Annual Report

61

Part II
Item 8  Financial statements and supplementary data

Defined Contribution Plan

Effective October 1, 2015, we began to sponsor a defined 
contribution plan covering substantially all of our U.S. employees. 
Employees may contribute to this plan, and these contributions 
are matched 100% by us up to 6.0% of eligible earnings. We 
also contribute an additional percentage of eligible earnings to 
employees regardless of their level of participation in the plan, 
which is discretionary and subject to adjustment based on 
proﬁtability. We made discretionary contributions of $3.9 million 
and $4.0 million during the years ended March 31, 2021 and 
2020, respectively.

Employee Stock Ownership Plan

We sponsor a qualiﬁed, non-leveraged employee stock ownership 
plan  (“ESOP”)  in  which  domestic  employees  are  eligible  to 
participate following the completion of one year of service. 

The ESOP provides annual discretionary contributions of up to the 
maximum amount that is deductible under the Internal Revenue 
Code. Contributions to the ESOP are invested in our common 
stock. A participant’s interest in contributions to the ESOP fully 
vests after three years of credited service or upon retirement, 
permanent disability (each, as deﬁned in the plan document) or 
death.

We recorded total contributions to the ESOP of $3.6 million, 
$3.2 million and $1.6 million during the years ended March 31, 
2021, 2020 and 2019, respectively, based on performance in the 
prior year. During the year ended March 31, 2021, $2.6 million 
was recorded to expense based on performance in the year 
ended March 31, 2021 and is expected to be contributed to the 
ESOP during the year ending March 31, 2022.

The ESOP held 628,289 and 718,646 shares of CSWI common 
stock as of March 31, 2021 and 2020, respectively.

14. Income Taxes

Income from continuing operations before income taxes was comprised of the following (in thousands):

U.S. Federal

Foreign

INCOME BEFORE INCOME TAXES

Income tax expense consists of the following (in thousands):

For the year ended:

March 31, 2021

U.S. Federal

State and local

Foreign

PROVISION FOR INCOME TAXES

March 31, 2020

U.S. Federal

State and local

Foreign

PROVISION FOR INCOME TAXES

March 31, 2019

U.S. Federal

State and local

Foreign

PROVISION FOR INCOME TAXES

62

  |  2021 Annual Report

Year Ended March 31,

2021
($)

48,392

2,726

51,118

2020
($)

53,946

3,655

57,601

Current
($)

Deferred
($)

2019
($)

53,375

8,066

61,441

Total
($)

5,623

3,061

2,146

(1,150)

(500)

505

(1,145)

10,830

673

(100)

(222)

351

644

(280)

117

481

9,139

1,899

1,746

12,784

10,942

2,449

1,998

15,389

6,773

3,561

1,641

11,975

8,466

1,999

1,968

12,433

10,298

2,729

1,881

14,908

Part II
Item 8  Financial statements and supplementary data

Income tax expense differed from the amounts computed by applying the U.S. federal statutory income tax rate of 21.0% to income 
from continuing operations before income taxes as a result of the following (in thousands):

Computed tax expense at statutory rate

Increase (reduction) in income taxes resulting from: 

State and local income taxes, net of federal beneﬁts

Amended return items (pension and foreign withholding)

IRS audit adjustments

GILTI and Section 250 Deduction

Foreign rate differential

Uncertain tax positions

Other permanent differences

Foreign tax credits

Repatriation tax, net of tax credit

Other, net

Year Ended March 31,

2021
($)

10,735

2020
($)

2019
($)

12,096

12,903

2,419

1,943

2,222

—

—

440

85

(4,717)

1,438

(554)

822

162

975

502

124

84

(1,615)

(546)

(479)

—

(300)

—

—

749

302

244

(276)

(1,123)

—

368

PROVISION FOR INCOME TAXES CONTINUING OPERATIONS

10,830

12,784

15,389

The effective tax rates for the years ended March 31, 2021, 2020 and 2019 were 21.2%, 22.2% and 25.0%, respectively. As compared 
with the statutory rate for the year ended March 31, 2021, the provision for income taxes was primarily impacted by the release of 
uncertain tax positions, which decreased the provision by $4.7 million and the effective rate by 9.2%, offset by the state tax expense 
(net of federal beneﬁts), which increased the provision by $2.4 million and the effective rate by 4.7% and additional non-deductible 
expenses, which increased the provision by $1.4 million and the effective rate by 2.8%.

As compared with the statutory rate for the year ended March 31, 2020, the provision for income taxes was primarily impacted by 
the state tax expense, which increased the provision by $1.9 million and the effective rate by 3.4%, and the release of uncertain tax 
positions, which decreased the provision by $1.6 million and the effective rate by 2.8%. Other items impacting the effective tax rate 
for the prior years include adjustments for the closing of the IRS audit for tax year ended March 31, 2017, foreign withholding tax paid 
during the tax year ended March 31, 2020 for prior year periods, and the reversal of a pension adjustment related to a former wholly-
owned subsidiary for the tax period ended September 30, 2015, in which the statute of limitations expired.

  |  2021 Annual Report

63

Part II
Item 8  Financial statements and supplementary data

The tax effects of temporary differences that give rise to signiﬁcant portions of the deferred tax assets and deferred tax liabilities at 
March 31 are presented below (in thousands):

March 31,

Deferred tax assets:

Operating lease liabilities

Accrued compensation

Impairment

Pension and other employee beneﬁts

Inventory reserves

Net operating loss carryforwards

Accrued expenses

Foreign tax credit carry-forward

State R&D credit carry-forward

Transaction Costs

Other, net

Deferred tax assets

Valuation allowance

Deferred tax assets, net of valuation allowance

Deferred tax liabilities:

Goodwill and intangible assets

Property, plant and equipment

Operating lease – ROU assets

Repatriation reserve

Other, net

Deferred tax liabilities

NET DEFERRED TAX LIABILITIES

2021
($)

14,680

3,878

386

313

1,330

145

244

130

120

630

1,455

23,311

(145)

23,166

(65,070)

(7,816)

(13,631)

(942)

(297)

(87,756)

(64,590)

2020
($)

4,380

3,997

386

362

197

145

141

40

—

—

934

10,582

(145)

10,437

(5,740)

(4,444)

(3,943)

—

(158)

(14,285)

(3,848)

As the assets and liabilities of our discontinued Coatings business 
discussed in Note 3 reside in a disregarded entity for tax purposes, 
the tax attributes associated with the operations of our Coatings 
business ultimately ﬂow through to our corporate parent, which 
files a consolidated federal return. Therefore, corresponding 
deferred tax assets or liabilities expected to be substantially 
realized by our corporate parent have been reﬂected above as 
assets of our continuing operations and have not been allocated to 
the balances of assets or liabilities of our discontinued operations 
disclosed in Note 3. The statement of cash ﬂows reﬂects the 
impact of the deferred taxes related to the disregarded entity in a 
line captioned “Realized (unrealized) deferred taxes.”

As of both March 31, 2021 and 2020, we had no tax effected 
net operating loss carryforwards, net of valuation allowances. 
Net operating loss carryforwards will expire in periods beyond 
the next 5 years.

Certain earnings of foreign subsidiaries continue to be permanently 
invested outside of the United States. The earnings related to 
these foreign subsidiaries for which taxes are not being provided 
are $17 million. The calculation of the taxes on these undistributed 
earnings are impracticable because it is unknown how these 
earnings would be distributed.

64

  |  2021 Annual Report

A reconciliation of the beginning and ending amount of unrecognized tax beneﬁts is as follows (in thousands):

Part II
Item 8  Financial statements and supplementary data

Balance at beginning of year

Increases related to prior year tax positions

Decreases related to prior year tax positions

Increases related to current year tax positions

Settlement

BALANCE AT END OF YEAR

March 31,

2021
($)

498

13,895

(4,215)

34

—

10,212

2020
($)

1,910

—

(1,304)

64

(172)

498

We recorded total tax contingency reserves of $17.3 million, 
including unrecognized tax benefit of $13.6 million, accrued 
interest and penalty of $1.4 million and $2.3 million, respectively, 
through purchase accounting as a result of the TRUaire acquisition 
discussed in Note 2. During the three months ended March 31, 
2021, a tax beneﬁt of $5.3 million, including release of accrued 
interest ($0.6 million) and penalty ($0.6 million), was recognized 
as a result of receiving the audit closing letter from Internal 
Revenue Service related to calendar 2017, a pre-acquisition 
tax year. For the year ended March 31, 2021, the interest and 
penalties related to the uncertain tax position resulted in a net 
decrease of $0.9 million in income tax expense. We accrued 
interest and penalties on uncertain tax positions of $1.0 million 
and $1.8 million, respectively, as of the year ended March 31, 

2021. We accrued an immaterial interest and penalties during the 
year ended March 31, 2020. We recognize accrued interest and 
penalties related to unrecognized tax beneﬁts within our income 
tax provision.

We  are  currently  under  examination  by  the  IRS  for  a  short 
period return ending September 30, 2015 for a CSWI subsidiary 
company. Our federal income tax returns for the years ended 
March 31, 2020, 2019 and 2018 remain subject to examination. 
Our income tax returns for TRUaire’s pre-acquisiton periods 
including calendar years 2017, 2018 and 2019 remain subject 
to examinations. Our income tax returns in certain state income 
tax jurisdictions remain subject to examination for various periods 
for the period ended September 30, 2015 and subsequent years.

15. Related Party Transactions

We had no related party transactions in the three years ended March 31, 2021, 2020 and 2019.

16. Contingencies

From time to time, we are involved in various claims and legal actions which arise in the ordinary course of business. There are not any 
matters pending that we currently believe are reasonably possible of having a material impact to our business, consolidated ﬁnancial 
position, results of operations or cash ﬂows.

  |  2021 Annual Report

65

Part II
Item 8  Financial statements and supplementary data

17. Other Comprehensive Income (Loss)

The following table provides an analysis of the changes in accumulated other comprehensive income (loss) (in thousands).

March 31,

Currency translation adjustments:

Balance at beginning of period

Foreign currency translation adjustments

BALANCE AT END OF PERIOD

Interest rate swaps:

Balance at beginning of period

Unrealized losses (gain), net of taxes of $(96) and $284, respectively(a)

Reclassiﬁcation of losses included in interest expense, net of taxes of $(60) and $(19), respectively

Other comprehensive loss

BALANCE AT END OF PERIOD

Deﬁned beneﬁt plans:

Balance at beginning of period

Amortization of net prior service cost (beneﬁt), net of taxes of $8 and $(6), respectively(b)

Amortization of net loss, net of taxes of $(16) and $(12), respectively(b)

Net loss (gain) arising during the year, net of taxes of $(26) and $5, respectively

Pension plan termination, net of taxes of $0 and $(669), respectively

Currency translation impact

Other comprehensive loss

BALANCE AT END OF PERIOD

2021
($)

(9,185)

4,791

(4,394)

(1,390)

362

225

587

(803)

(871)

(31)

62

96

—

(55)

72

(799)

2020
($)

(6,869)

(2,316)

(9,185)

(394)

(1,069)

73

(996)

(1,390)

(3,466)

21

47

(17)

2,516

28

2,595

(871)

(a)  Unrealized gains are reclassified to earnings as underlying cash interest payments are made. We expect to recognize a loss of less than $0.2 million, net of deferred 

taxes, over the next twelve months related to a designated cash flow hedge based on its fair value as of March 31, 2021.

(b)  Amortization of prior service costs and actuarial losses out of accumulated other comprehensive loss are included in the computation of net periodic pension expense. 

See Note 13 for additional information.

18. Revenue Recognition

We conduct our operations in two reportable segments: Industrial 
Products and Specialty Chemicals. With the adoption of ASC 
Topic 606, we have concluded that the disaggregation of revenues 
that would be most useful in understanding the nature, timing and 
extent of revenue recognition is the breakout of build-to-order and 
book-and-ship, as deﬁned below:

Build-to-order products are architecturally-speciﬁed building 
products  generally  sold  into  the  construction  industry. 
Revenue generated from sales of products under build-to-
order transactions are currently reﬂected in the results of our 
Industrial Products segment. Occasionally, our built-to-order 
business lines enter into arrangements for the delivery of a 
customer-speciﬁed product and the provision of installation 
services. These orders are generally negotiated as a package 
and are commonly subject to retainage by the customer, which 
means the ﬁnal 10% of the transaction price, when applicable, 

is not collectible until the overall construction project into which 
our products are incorporated is complete. The lead times for 
transfer to the customer can be up to 12 weeks. Revenue for 
goods is recognized at a point in time, but installation services 
are recognized over time as those services are performed. 
Installation services represented approximately 3% of total 
consolidated revenue for the year ended March 31, 2021.

Book-and-ship products are sold across all of our end markets. 
Revenue generated from sales of products under book-and-ship 
transactions have historically been presented in both Industrial 
Products and Specialty Chemicals. These sales are typically 
priced on a product-by-product basis using price lists provided 
to our customers. The lead times for transfer to the customer 
is usually one week or less as these items are generally built to 
stock. Revenue for products sold under these arrangements is 
recognized at a point in time.

66

  |  2021 Annual Report

Disaggregation of revenues reconciled to our reportable segments is as follows (in thousands):

Part II
Item 8  Financial statements and supplementary data

Build-to-order

Book-and-ship

NET REVENUES

Build-to-order

Book-and-ship

NET REVENUES

Build-to-order

Book-and-ship

NET REVENUES

Year Ended March 31, 2021

Industrial
Products
($)

87,057

202,359

289,416

Specialty
Chemicals
($)

—

129,789

129,789

Total
($)

87,057

332,148

419,205

Year Ended March 31, 2020

Industrial
Products
($)

82,357

152,538

234,895

Specialty
Chemicals
($)

—

150,976

150,976

Total
($)

82,357

303,514

385,871

Year Ended March 31, 2019

Industrial
Products
($)

69,564

136,367

205,931

Specialty
Chemicals
($)

—

144,224

144,224

Total
($)

69,564

280,591

350,155

Contract liabilities, which are included in accrued and other current liabilities in our consolidated balance sheets were as follows (in 
thousands):

Balance at April 1, 2020

Revenue recognized

New contracts and revenue added to existing contracts

BALANCE AT MARCH 31, 2021

$

2,892

(2,612)

1,183

$

1,463

19. Segments

As described in Note 1, we conduct our operations through two business segments:

 (cid:122) Industrial Products; and
 (cid:122) Specialty Chemicals.

The following is a summary of the ﬁnancial information of our reporting segments reconciled to the amounts reported in the consolidated 
ﬁnancial statements (in thousands). Historical segment information has been retrospectively adjusted to reﬂect the decision to divest 
the Coatings business.

(in thousands)

Revenues, net

Operating income

Depreciation and amortization

Year Ended March 31, 2021

Specialty
Chemicals
($)

Subtotal -
Reportable
Segments
($)

Eliminations 
and 
Other
($)

Total
($)

129,789

419,205

—

419,205

18,263

6,918

73,904

22,173

(14,434)

864

59,470

23,037

Industrial
Products
($)

289,416

55,641

15,255

  |  2021 Annual Report

67

Part II
Item 8  Financial statements and supplementary data

(in thousands)

Revenues, net

Operating income

Depreciation and amortization

Year Ended March 31, 2020

Specialty
Chemicals
($)

Subtotal -
Reportable
Segments
($)

Eliminations 
and 
Other
($)

Total
($)

150,976

385,871

—

385,871

24,691

7,569

80,416

14,142

(14,349)

702

66,067

14,844

Industrial
Products
($)

234,895

55,725

6,573

In the ﬁscal quarter ended March 31, 2020, we recorded an impairment of $1.0 million on one of our unamortized trademarks in our 
Specialty Chemicals segment.

(in thousands)

Revenues, net

Operating income

Depreciation and amortization

(Amounts in thousands)

March 31, 2021

March 31, 2020

March 31, 2019

Geographic information

Year Ended March 31, 2019

Specialty
Chemicals
($)

Subtotal -
Reportable
Segments
($)

Eliminations 
and 
Other
($)

Total
($)

144,224

350,155

—

350,155

23,930

7,281

72,747

13,152

(12,307)

684

60,440

13,836

TOTAL ASSETS

Specialty
Chemicals
($)

119,992

138,855

137,587

Subtotal -
Reportable
Segments
($)

Eliminations 
and 
Other
($)

861,718

344,373

325,267

13,239

24,872

27,365

Total
($)

874,957

369,245

352,632

Industrial
Products
($)

205,931

48,817

5,871

Industrial
Products
($)

741,726

205,518

187,680

We attribute revenues to different geographic areas based on the destination of the product or service delivery. Long-lived assets are 
classiﬁed based on the geographic area in which the assets are located and exclude deferred taxes. No individual country, except for 
the U.S., accounted for more than 10% of consolidated net revenues or total long-lived assets.

Revenues and long-lived assets by geographic area are as follows (in thousands, except percent data):

U.S.

Non-U.S.(a)

REVENUES, NET

2021
($)

367,169

52,036

419,205

Year Ended March 31,

2020
($)

323,000

62,871

87.6%

12.4%

83.7%

16.3%

100.0%

385,871

100.0%

(a)  No individual country within this group represents 10% or more of consolidated totals for any period presented.

U.S.

Non-U.S.

LONG-LIVED ASSETS(a)

2021
($)

617,258

43,146

660,404

Year Ended March 31,

2020
($)

196,679

22,521

93.5%

6.5%

89.7%

10.3%

100.0%

219,200

100.0%

2019
($)

286,545

63,610

350,155

2019
($)

176,935

24,430

201,365

81.8%

18.2%

100.0%

87.9%

12.1%

100.0%

(a)  Long-lived assets consist primarily of property, plant and equipment, intangible assets, goodwill and other assets, net of deferred taxes.

68

  |  2021 Annual Report

Part II
Item 8  Financial statements and supplementary data

Major customer information 

We have a large number of customers across our locations and do not believe that we have sales to any individual customer that 
represented 10% or more of consolidated net revenues for any of the ﬁscal years presented.

20. Quarterly Financial Data (Unaudited)

The following presents a summary of the unaudited quarterly data for the years ended March 31, 2021 and 2020 (amounts in millions, 
except per share data):

Quarter

Revenues, net

Gross proﬁt

Income before income taxes

Income from continuing operations

Loss from discontinued operations, net

Net income

Basic earnings per common share(a):

Continuing operations

Discontinued operations

NET INCOME

Diluted earnings per common share(a): 

Continuing operations

Discontinued operations

NET INCOME

Quarter

Revenues, net

Gross proﬁt

Income before income taxes

Income from continuing operations

Income (loss) from discontinued operations, net

Net income

Basic earnings (loss) per common share(a):

Continuing operations

Discontinued operations

NET INCOME

Diluted earnings (loss) per common share(a):

Continuing operations

Discontinued operations

NET INCOME

Year Ended March 31, 2021

3rd
($)

89.9

39.3

3.1

2.3

—

2.3

0.16

—

0.16

0.16

—

0.16

2nd
($)

104.9

48.7

21.5

16.4

—

16.4

1.11

—

1.11

1.10

—

1.10

Year Ended March 31, 2020

3rd
($)

83.7

37.7

9.4

7.3

—

7.3

0.48

—

0.48

0.48

—

0.48

2nd
($)

101.3

47.4

12.5

8.8

—

8.8

0.59

(0.01)

0.58

0.58

—

0.58

4th
($)

133.4 

54.0

10.9

9.6

—

9.6

0.62

—

0.62

0.61

—

0.61

4th
($)

98.6

44.8

16.0

13.4

1.2

14.6

0.89

0.08

0.97

0.88

0.08

0.96

1st
($)

91.0

42.8

15.6

12.0

—

12.0

0.81

—

0.81

0.81

—

0.81

1st
($)

102.3

47.2

19.7

15.3

(0.1)

15.2

1.02

(0.01)

1.01

1.01

(0.01)

1.00

(a)  Net earnings per common share is computed independently for each of the quarters presented. The sum of the quarters may not equal the total year amount due to 

the impact of changes in weighted average quarterly shares outstanding.

  |  2021 Annual Report

69

Part II
Item 9  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Signiﬁcant pre-tax adjustments recorded in the quarter ended March 31, 2021 included transaction expenses related to the TRUaire 
acquisition ($0.8 million) and the formation of a joint venture within our Specialty Chemicals segment ($1.6 million) and an indemniﬁcation 
expense ($5.0 million). Signiﬁcant pre-tax adjustments recorded in the quarter ended March 31, 2020 included a trademark impairment 
($1.0 million).

21. Subsequent Events

On April 1, 2021, Whitmore Manufacturing, LLC (“Whitmore”), a wholly-owned subsidiary of CSWI, completed the formation of the 
previously announced joint venture with Pennzoil-Quaker State Company dba SOPUS products (“Shell”), a wholly-owned subsidiary 
of Shell Oil Company that comprises Shell’s U.S. lubricants business. The formation was consummated through a transaction in 
which Whitmore sold to Shell a 50% interest in a wholly-owned subsidiary (containing certain existing operating assets) in exchange 
for consideration of $13.7 million from Shell in the form of cash and intangible assets.

On May 18, 2021, the Company entered into a Second Amended and Restated Credit Agreement that provides for a ﬁve-year $400.0 
million Revolving Credit Facility with JPMorgan Chase Bank, N.A., as administrative agent, and other lenders party hereto. Refer to 
Note 7 for additional information.

Item 9:   Changes in and Disagreements with 

Accountants on Accounting and 
Financial Disclosure

None

70

  |  2021 Annual Report

Item 9A: Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our  disclosure  controls  and  procedures  (as  defined  in 
Rule 13a-15(e) under the Securities Exchange Act of 1934  
(the “Exchange Act”)) are designed to ensure that the information, 
which we are required to disclose in the reports that we file 
or submit under the Exchange Act, is recorded, processed, 
summarized and reported within the time periods specified 
in the United States Securities and Exchange Commission’s 
rules and forms, and that such information is accumulated and 
communicated to our management, including our Principal 
Executive Ofﬁcer and Principal Financial Ofﬁcer, as appropriate 
to allow timely decisions regarding required disclosure.

In connection with the preparation of this Annual Report on 
Form 10-K for the year ended March 31, 2021, our management, 
under the supervision and with the participation of our Principal 
Executive Ofﬁcer and our Principal Financial Ofﬁcer, carried out 
an evaluation of the effectiveness of the design and operation of 
our disclosure controls and procedures as of March 31, 2021 
as required by Rule 13a-15(b) under the Exchange Act. Based 
on this evaluation, our Principal Executive Ofﬁcer and Principal 
Financial Officer concluded that our disclosure controls and 
procedures were effective at the reasonable assurance level as of  
March 31, 2021.

Management’s Report on Internal Control Over Financial Reporting

Our management, under the supervision and with the participation 
of our Principal Executive Ofﬁcer and Principal Financial Ofﬁcer, 
is responsible for establishing and maintaining adequate internal 
control  over  financial  reporting,  as  such  term  is  defined  in 
Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Internal 
control over ﬁnancial reporting is a process designed to provide 
reasonable  assurance  regarding  the  reliability  of  financial 
reporting and the preparation of ﬁnancial statements for external 
purposes in accordance with accounting principles generally 
accepted in the United States (“U.S. GAAP”). Internal control 
over ﬁnancial reporting includes policies and procedures that: 
(1) pertain to the maintenance of records that, in reasonable detail, 
accurately and fairly reﬂect the transactions and dispositions of 
our assets; (2) provide reasonable assurance that transactions 
are recorded as necessary to permit preparation of financial 
statements in accordance with U.S. GAAP, and that our receipts 
and  expenditures  are  being  made  only  in  accordance  with 
authorizations of our management and directors; and (3) provide 
reasonable assurance regarding prevention or timely detection 
of unauthorized acquisition, use or disposition of our assets that 
could have a material effect on the ﬁnancial statements.

The design of any system of control is based upon certain 
assumptions about the likelihood of future events, and there can 
be no assurance that any design will succeed in achieving its 
stated objectives under all future events, no matter how remote, 
or that the degree of compliance with the policies or procedures 
may not deteriorate.

Under the supervision and with the participation of our Principal 
Executive Ofﬁcer and Principal Financial Ofﬁcer, our management 
conducted an assessment of our internal control over ﬁnancial 
reporting as of March 31, 2021, based on the criteria established 
in Internal Control - Integrated Framework (2013), issued by 
the Committee of Sponsoring Organizations of the Treadway 
Commission.  In  accordance  with  guidance  issued  by  the 
SEC,  recently  acquired  businesses  may  be  excluded  from 
management’s assessment of the effectiveness of the Company’s 
internal control over ﬁnancial reporting in the year of acquisition. 
Accordingly, management excluded the TRUaire acquisition from 
management’s assessment of the effectiveness of the Company’s 
internal control over ﬁnancial reporting from the December 15, 
2020 acquisition date, which excluded total assets and total net 
revenues representing approximately 59% and 8%, respectively, 
of  the  Company’s  related  consolidated  financial  statement 
amounts as of and for the year ended March 31, 2021. Based 
on this assessment, our management has concluded that as of 
March 31, 2021, our internal control over ﬁnancial reporting was 
effective based on those criteria.

The effectiveness of our internal control over ﬁnancial reporting 
as of March 31, 2021, has been audited by Grant Thornton LLP, 
our independent registered public accounting ﬁrm, as stated in 
their report, which is included herein.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over ﬁnancial reporting during the quarter ended March 31, 2021 that have materially 
affected, or are reasonably likely to materially affect, our internal control over ﬁnancial reporting.

  |  2021 Annual Report

71

Part II
Item 9A  Controls and Procedures

Report Of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

CSW Industrials, Inc.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting  
of CSW Industrials, Inc. (a Delaware corporation) and subsidiaries 
(the “Company”) as of March 31, 2021, based on criteria established 
in the 2013 Internal Control—Integrated Framework issued by 
the Committee of Sponsoring Organizations of the Treadway 
Commission (“COSO”). In our opinion, the Company maintained, 
in all material respects, effective internal control over financial 
reporting as of March 31, 2021, based on criteria established in 
the 2013 Internal Control—Integrated Framework issued by COSO.

Basis for Opinion

The Company’s management is responsible for maintaining 
effective  internal  control  over  financial  reporting  and  for  its 
assessment of the effectiveness of internal control over ﬁnancial 
reporting, included in the accompanying Management’s Report on 
Internal Control over Financial Reporting. Our responsibility is to 
express an opinion on the Company’s internal control over ﬁnancial 
reporting based on our audit. We are a public accounting ﬁrm 
registered with the PCAOB and are required to be independent 
with respect to the Company in accordance with the U.S. federal 
securities laws and the applicable rules and regulations of the 
Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the 
PCAOB. Those standards require that we plan and perform the 
audit to obtain reasonable assurance about whether effective 
internal control over financial reporting was maintained in all 
material respects. Our audit included obtaining an understanding 
of internal control over ﬁnancial reporting, assessing the risk that 

We also have audited, in accordance with the standards of the 
Public Company Accounting Oversight Board (United States) 
(“PCAOB”), the consolidated ﬁnancial statements of the Company 
as of and for the year ended March 31, 2021, and our report 
dated May 20, 2021 expressed an unqualiﬁed opinion on those 
ﬁnancial statements.

a material weakness exists, testing and evaluating the design 
and operating effectiveness of internal control based on the 
assessed risk, and performing such other procedures as we 
considered necessary in the circumstances. We believe that our 
audit provides a reasonable basis for our opinion.

Our audit of, and opinion on, the Company’s internal control 
over ﬁnancial reporting does not include the internal control over 
ﬁnancial reporting of T.A Industries, Inc. (“Acquired Entity”) whose 
ﬁnancial statements reﬂect total assets and revenues constituting 
59% and 8%, respectively, of the related consolidated ﬁnancial 
statement amounts as of and for the year ended March 31, 
2021. As indicated in Management’s Report on Internal Control 
over Financial Reporting, the Acquired Entity was acquired on 
December 15, 2020. Management’s assertion on the effectiveness 
of the Company’s internal control over ﬁnancial reporting excluded 
internal control over ﬁnancial reporting of the Acquired Entity.

Deﬁnition and Limitations of Internal Control over Financial Reporting

A company’s internal control over ﬁnancial reporting is a process 
designed  to  provide  reasonable  assurance  regarding  the 
reliability of ﬁnancial reporting and the preparation of ﬁnancial 
statements for external purposes in accordance with generally 
accepted accounting principles. A company’s internal control over 
ﬁnancial reporting includes those policies and procedures that 
(1) pertain to the maintenance of records that, in reasonable detail, 
accurately and fairly reﬂect the transactions and dispositions of 
the assets of the company; (2) provide reasonable assurance that 
transactions are recorded as necessary to permit preparation 
of ﬁnancial statements in accordance with generally accepted 
accounting principles, and that receipts and expenditures of the 

company are being made only in accordance with authorizations 
of management and directors of the company; and (3) provide 
reasonable assurance regarding prevention or timely detection 
of unauthorized acquisition, use, or disposition of the company’s 
assets that could have a material effect on the ﬁnancial statements.

Because of its inherent limitations, internal control over ﬁnancial 
reporting  may  not  prevent  or  detect  misstatements.  Also, 
projections of any evaluation of effectiveness to future periods are 
subject to the risk that controls may become inadequate because 
of changes in conditions, or that the degree of compliance with 
the policies or procedures may deteriorate.

/s/ GRANT THORNTON LLP

Dallas, Texas
May 20, 2021

72

  |  2021 Annual Report

Item 9B: Other Information

On May 18, 2021, we entered into a Second Amended and 
Restated Credit Agreement (the “Second Credit Agreement”) 
with JPMorgan Chase Bank, N.A., as administrative agent (in 
such capacity, the “Administrative Agent”) and collateral agent, 
and the lenders, issuing banks and swingline lender party thereto. 
CSW Industrials Holdings, LLC, a wholly-owned subsidiary of the 
Company (the “Borrower”), is the borrower under the Second 
Credit Agreement. The Second Credit Agreement provides for a 
$400.0 million revolving credit facility that contains a $25.0 million 
sublimit for the issuance of letters of credit and a $10.0 million 
sublimit for swingline loans. The Second Credit Agreement is 
scheduled to mature on May 18, 2026.

Borrowings under the Second Credit Agreement bear interest, at 
the Borrower’s option, at either base rate or LIBOR, plus, in either 
case, an applicable margin based on the Company’s leverage ratio 
calculated on a quarterly basis. The base rate is described in the 
Second Credit Agreement as the highest of (i) the Federal funds 
effective rate plus 0.50%, (ii) the prime rate quoted by The Wall 
Street Journal, and (iii) the one-month LIBOR rate plus 1.00%.

Borrowings under the Second Credit Agreement may be used 
for working capital and general corporate purposes, including, 
without limitation, for ﬁnancing permitted acquisitions and fees 
and expenses incurred in connection therewith.

The  obligations  of  the  Borrower  under  the  Second  Credit 
Agreement are guaranteed by the Company and all of its direct 
and indirect domestic subsidiaries. The Second Credit Agreement 
is secured by a ﬁrst priority lien on all tangible and intangible assets 
and stock issued by the Borrower and its domestic subsidiaries, 
subject to speciﬁed exceptions, and 65% of the voting equity 
interests in its ﬁrst-tier foreign subsidiaries.

The ﬁnancial covenants contained in the Second Credit Agreement 
require the maintenance of a maximum Leverage Ratio of 3.00 
to 1.00, subject to a temporary increase to 3.75 to 1.00 for 18 
months following the consummation of permitted acquisitions 
with consideration in excess of certain threshold amounts set 
forth in the Second Credit Agreement, and the maintenance 
of a minimum Fixed Charge Coverage Ratio of 1.25 to 1.00, 
the calculations and terms of which are deﬁned in the Second 
Credit Agreement. The Second Credit Agreement also contains 
(i) afﬁrmative and negative covenants which are customary for 
similar credit agreements, including, without limitation, limitations 
on the Company, the Borrower and its subsidiaries with respect 
to indebtedness, liens, investments, distributions, mergers and 
acquisitions, disposition of assets and transactions with afﬁliates, 
and (ii) customary events of default.

  |  2021 Annual Report

73

Part III
Item 10:  Directors, Executive Ofﬁcers and 

Corporate Governance

The information required by this item is incorporated by reference to our Proxy Statement for the 2021 Annual Meeting of 
Stockholders to be filed with the SEC within 120 days after the fiscal year ended March 31, 2021.

Item 11: Executive Compensation

The information required by this item is incorporated by reference to our Proxy Statement for the 2021 Annual Meeting of 
Stockholders to be filed with the SEC within 120 days after the fiscal year ended March 31, 2021.

Item 12:  Security Ownership of Certain 

Beneﬁcial Owners and Management 
and Related Stockholder Matters

The information required by this item is incorporated by reference to our Proxy Statement for the 2021 Annual Meeting of 
Stockholders to be filed with the SEC within 120 days after the fiscal year ended March 31, 2021.

Item 13:  Certain Relationships and Related 
Transactions, and Director 
Independence

The information required by this item is incorporated by reference to our Proxy Statement for the 2021 Annual Meeting of 
Stockholders to be filed with the SEC within 120 days after the fiscal year ended March 31, 2021.

Item 14:  Principal Accounting Fees and 

Services

The information required by this item is incorporated by reference to our Proxy Statement for the 2021 Annual Meeting of 
Stockholders to be filed with the SEC within 120 days after the fiscal year ended March 31, 2021.

74

  |  2021 Annual Report

Part IV
Item 15:  Exhibits, Financial Statement 

Schedules

The following documents are filed as a part of this Annual Report on Form 10-K:

(1) Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

CSW Industrials, Inc. Consolidated Financial Statements:

Consolidated Balance Sheets at March 31, 2021 and 2020

For each of the three years in the period ended March 31, 2021:

Consolidated Statements of Operations

Consolidated Statements of Comprehensive (Loss) Income

Consolidated Statements of Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

(2) Financial Statement Schedules

None.

(3) Exhibits

Exhibit Index

EXHIBIT
NUMBER

DESCRIPTION

34

36

37

37

38

39

41

2.1

3.1

3.2

4.1

10.1

10.2

10.3*

10.4

10.5

Stock Purchase Agreement, dated November 4, 2020, by and among RectorSeal, LLC, T.A. Industries, Inc. d/b/a TRUaire, Yongki 
Yi as Seller Representative, the Sellers party thereto, and solely for the purposes of Sections 1.8, 6.5(d) and 13.18, CSW Industrials, 
Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, ﬁled on November 5, 2020)

Third Amended and Restated Certiﬁcate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s 
Current Report on Form 8-K, ﬁled on August 15, 2018)

Amended and Restated Bylaws of the Company, adopted and effective August 14, 2018 (incorporated by reference to Exhibit 3.2 to 
the Company’s Current Report on Form 8-K, ﬁled on August 15, 2018)

Description of Securities Registered under Section 12 of the Securities Exchange Act of 1934 (incorporated by reference to Exhibit 
4.1 to the Company’s Annual Report on Form 10-K, ﬁled on May 20, 2020)

First Amended and Restated Credit Agreement, dated as of September 15, 2017, by and among CSW Industrials Holdings, Inc., 
Whitmore Manufacturing, LLC, the other loan parties thereto, the lenders party thereto, and JPMorgan Chase Bank, N.A., as 
administrative agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, ﬁled on September 
19, 2017)

First Amendment (Incremental Amendment) to First Amended and Restated Credit Agreement, dated December 1, 2020, by and 
among CSW Industrials Holdings, Inc. and Whitmore Manufacturing, LLC, the other Loan Parties party thereto and JPMorgan Chase 
Bank, N.A., individually and in its capacity as the Administrative Agent, Swingline Lender and Issuing Bank (incorporated by reference 
to Exhibit 10.1 to the Company’s Current Report on Form 8-K, ﬁled on December 1, 2020)

Second Amendment to First Amended and Restated Credit Agreement, dated March 10, 2021, by and among CSW Industrials 
Holdings, Inc. and Whitmore Manufacturing, LLC, the other Loan Parties party thereto and JPMorgan Chase Bank, N.A., individually 
and in its capacity as the Administrative Agent, Swingline Lender and Issuing Bank

Registration Rights Agreement, dated December 15, 2020, by and among CSW Industrials, Inc. and the Sellers party thereto 
(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, ﬁled on December 16, 2020)

Form of Director and Ofﬁcer Indemniﬁcation Agreement (incorporated by reference to Exhibit 10.5 to Amendment No. 3 to the
Company’s Registration Statement on Form 10, ﬁled on August 28, 2015)

  |  2021 Annual Report

75

Part IV
Item 15  Exhibits, Financial Statement Schedules

EXHIBIT
NUMBER

DESCRIPTION

10.6

10.7

10.8

10.9

10.10

10.11

10.12

10.13

21.1*

23.1*

31.1*

31.2*

32.1**

32.2**

101.INS

101.SCH

101.CAL

101.DEF

101.LAB

101.PRE

104

Amended and Restated CSW Industrials, Inc. 2015 Equity and Incentive Compensation Plan (incorporated by reference to  
Exhibit 10.2 to the Company’s Current Report on Form 8-K, ﬁled on December 12, 2016) +

Employment agreement by and between CSW Industrials, Inc. and Joseph Armes, dated October 1, 2015 (incorporated by reference 
to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, ﬁled on February 16, 2016) +

Form of Employee Time Vested Restricted Share Award Agreement (incorporated by reference to Exhibit 10.1 to the Company’s 
Quarterly Report on Form 10-Q, ﬁled on February 8, 2018)+

Form of Employee Time Vested Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.2 to the Company’s 
Quarterly Report on Form 10-Q, ﬁled on February 8, 2018)+

Form of Employee Performance Share Award Form of Employee Performance Share Award Agreement (incorporated by reference to 
Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, ﬁled on August 8, 2019) +

Form of Non-Employee Director Time Vested Restricted Share Award Agreement (incorporated by reference to Exhibit 10.3 to the 
Company’s Quarterly Report on Form 10-Q, ﬁled on February 8, 2018)+

Form of Non-Qualiﬁed Stock Option Right Award Agreement (executive compensation plan – replacement award agreement) 
(incorporated by reference to Exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q, ﬁled on February 16, 2016) +

CSW Industrials, Inc. Executive Change in Control and Severance Beneﬁt Plan (incorporated by reference to Exhibit 10.1 to the 
Company’s Current Report on Form 8-K ﬁled on December 12, 2016) +

List of subsidiaries of the Company

Consent of Grant Thornton LLP

Certiﬁcation of Principal Executive Ofﬁcer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to  
Section 302 of the Sarbanes-Oxley Act of 2002

Certiﬁcation of Principal Financial Ofﬁcer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to 
Section 302 of the Sarbanes-Oxley Act of 2002

Certiﬁcation of Principal Executive Ofﬁcer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002

Certiﬁcation of Principal Financial Ofﬁcer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- 
Oxley Act of 2002

XBRL Instance Document

XBRL Taxonomy Extension Schema

XBRL Taxonomy Extension Calculation Linkbase Document

XBRL Taxonomy Extension Deﬁnition Linkbase Document

XBRL Taxonomy Extension Label Linkbase Document

XBRL Taxonomy Extension Presentation Linkbase Document

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

 * Filed herewith
 ** Furnished herewith
+ Management contracts and compensatory plans required to be filed as exhibits to this Annual Report on Form 10-K.

76

  |  2021 Annual Report

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this 
report to be signed on its behalf by the undersigned, thereunto duly authorized:

Date: May 20, 2021

CSW INDUSTRIALS, INC.

By:

/S/ JOSEPH B. ARMES

Joseph B. Armes
Chairman and Chief Executive Ofﬁcer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons 
on behalf of the registrant and in the capacities and on the dates indicated:

Name

Title

/S/ JOSEPH B. ARMES

Chief Executive Ofﬁcer

Joseph B. Armes

(Principal Executive Ofﬁcer)

/S/ JAMES E. PERRY

Chief Financial Ofﬁcer

James E. Perry

(Principal Financial and Accounting Ofﬁcer)

/S/ MICHAEL R. GAMBRELL

Director

Michael R. Gambrell

/S/ TERRY L. JOHNSTON

Director

Terry L. Johnston

/S/ LINDA A. LIVINGSTONE

Director

Linda A. Livingstone, Ph.D.

/S/ WILLIAM F. QUINN

Director

William F. Quinn

/S/ ROBERT M. SWARTZ

Director

Robert M. Swartz

/S/ J. KENT SWEEZEY

Director

J. Kent Sweezey

/S/ DEBRA L. VON STORCH

Director

Debra L. von Storch

Date

May 20, 2021

May 20, 2021

May 20, 2021

May 20, 2021

May 20, 2021

May 20, 2021

May 20, 2021

May 20, 2021

May 20, 2021

  |  2021 Annual Report

77

Designed & published by

labrador-company.com

CSW INDUSTRIALS  
Directors and Ofﬁcers 

BOARD OF DIRECTORS

EXECUTIVE OFFICERS

JOSEPH  
B. ARMES 
Chairman,  
Chief Executive  
Ofﬁcer and  
President

TERRY  
L. JOHNSTON 
Former 
Executive Vice 
President and 
COO of Lennox 
International, 
Inc. Commercial 
Segment

WILLIAM  
F. QUINN 
Former Executive 
Chairman and 
Founder of 
American Beacon 
Advisors

J. KENT 
SWEEZY 
Founding Partner 
of Turnbridge 
Capital, LLC

MICHAEL  
R. GAMBRELL 
Former Executive 
Vice President  
of Dow Chemical

LINDA A. 
LIVINGSTONE, 
PH.D. 
President of 
Baylor University

ROBERT  
M. SWARTZ 
Former Executive 
Vice President 
and Chief 
Operating Ofﬁcer 
of Glazer’s Inc.

DEBRA  
L. VON 
STORCH
Former 
Partner,Ernst & 
Young LLP

JOSEPH  
B. ARMES 
Chairman, Chief 
Executive Ofﬁcer 
and President

JAMES  
E. PERRY
Executive Vice 
President and 
Chief Financial 
Ofﬁcer

DONAL  
J. SULLIVAN 
Executive Vice 
President, 
General Manager 
Industrial 
Products

LUKE E. 
ALVERSON 
Senior Vice 
President, 
Genera Counsel 
and Secretary

CORPORATE INFORMATION

TRANSFER  
AGENT

AST 
Brooklyn, New York 
T (800) 937-5449 
www.amstock.com 

STOCK  
LISTING 

NASDAQ Symbol: CSWI 

INDEPENDENT PUBLIC 
ACCOUNTANTS 

ANNUAL  
MEETING 

Grant Thornton LLP 
Dallas, Texas 

August 14, 2020 
Hilton Dallas Lincoln 
Centre 
5410 Lyndon B. Johnson 
Freeway 
Dallas, Texas 75240 

CONTACT  
INFORMATION

CSW Industrials, Inc. 
5420 Lyndon B. Johnson 
Freeway 
Suite 500 
Dallas, Texas 75240 
T (214) 884-3777 
F (214) 279-7101 
www.cswindustrials.com