0001624794-19-000075.txt : 20191105 0001624794-19-000075.hdr.sgml : 20191105 20191105070008 ACCESSION NUMBER: 0001624794-19-000075 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 92 CONFORMED PERIOD OF REPORT: 20190930 FILED AS OF DATE: 20191105 DATE AS OF CHANGE: 20191105 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CSW INDUSTRIALS, INC. CENTRAL INDEX KEY: 0001624794 STANDARD INDUSTRIAL CLASSIFICATION: ADHESIVES & SEALANTS [2891] IRS NUMBER: 472266942 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-37454 FILM NUMBER: 191191692 BUSINESS ADDRESS: STREET 1: 5420 LYNDON B. JOHNSON FREEWAY STREET 2: SUITE 500 CITY: DALLAS STATE: TX ZIP: 75240 BUSINESS PHONE: (214) 884-3777 MAIL ADDRESS: STREET 1: 5420 LYNDON B. JOHNSON FREEWAY STREET 2: SUITE 500 CITY: DALLAS STATE: TX ZIP: 75240 FORMER COMPANY: FORMER CONFORMED NAME: CSWC Newco Corp. DATE OF NAME CHANGE: 20141110 10-Q 1 cswi-20190930.htm 10-Q Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________________________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019
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 No. 001-37454
CSW INDUSTRIALS, INC.
(Exact name of registrant as specified in its charter)

Delaware47-2266942
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
5420 Lyndon B. Johnson Freeway, Suite 500, Dallas, Texas
75240
(Address of principal executive offices)
(Zip Code)
(214884-3777
Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol (s) Name of each exchange on which registered
Common Stock, par value $0.01 per shareCSWI Nasdaq Stock Market LLC

Indicate by check mark 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.    ☒  Yes    ☐  No
Indicate by check mark 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).    ☒  Yes    ☐  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See 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
 
  
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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).      Yes    ☒  No
As of October 31, 2019, there were 15,048,551 shares of the issuer’s common stock outstanding.



CSW INDUSTRIALS, INC.
FORM 10-Q

TABLE OF CONTENTS
Page
No.
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
  Item 6.




PART I — FINANCIAL INFORMATION
Item 1. Financial Statements.
CSW INDUSTRIALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

Three Months Ended
September 30,
Six Months Ended
September 30,
(Amounts in thousands, except per share amounts)2019201820192018
Revenues, net$101,324  $91,612  $203,657  $181,190  
Cost of revenues(53,920) (49,403) (109,018) (96,892) 
Gross profit47,404  42,209  94,639  84,298  
Selling, general and administrative expenses(27,282) (25,005) (54,195) (49,349) 
Operating income20,122  17,204  40,444  34,949  
Interest expense, net(299) (420) (800) (805) 
Other (expense) income, net(7,367) 82  (7,454) 820  
Income before income taxes12,456  16,866  32,190  34,964  
Provision for income taxes(3,638) (4,442) (8,027) (8,534) 
Income from continuing operations8,818  12,424  24,163  26,430  
(Loss) income from discontinued operations, net of tax(35) 2,732  (174) 400  
Net income$8,783  $15,156  $23,989  $26,830  
Basic earnings (loss) per common share:
Continuing operations$0.59  $0.80  $1.61  $1.69  
Discontinued operations(0.01) 0.18  (0.01) 0.02  
Net income$0.58  $0.98  $1.60  $1.71  
Diluted earnings (loss) per common share:
Continuing operations$0.58  $0.79  $1.59  $1.67  
Discontinued operations  0.18  (0.01) 0.03  
Net income$0.58  $0.97  $1.58  $1.70  
See accompanying notes to condensed consolidated financial statements.
1


CSW INDUSTRIALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)


Three Months Ended
September 30,
Six Months Ended
September 30,
(Amounts in thousands)2019201820192018
Net income$8,783  $15,156  $23,989  $26,830  
Other comprehensive income (loss):
Foreign currency translation adjustments(669) (43) (411) (1,442) 
Cash flow hedging activity, net of taxes of $58, $(56), $137 and $(71), respectively
(217) 209  (514) 252  
Pension and other postretirement effects, net of taxes of $(674), $0, $(673) and $(6), respectively
2,534  1  2,530  22  
Other comprehensive income (loss)1,648  167  1,605  (1,168) 
Comprehensive income$10,431  $15,323  $25,594  $25,662  
See accompanying notes to condensed consolidated financial statements.
2


CSW INDUSTRIALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in thousands, except per share amounts)September 30, 2019March 31, 2019
ASSETS
Current assets:
Cash and cash equivalents$23,677  $26,651  
Accounts receivable, net of allowance for doubtful accounts of $946 and $591, respectively
68,711  66,136  
Inventories, net52,851  51,429  
Prepaid expenses and other current assets4,038  7,030  
Current assets, discontinued operations  21  
Total current assets149,277  151,267  
Property, plant and equipment, net of accumulated depreciation of $68,440 and $65,548, respectively
54,864  53,639  
Goodwill92,252  86,295  
Intangible assets, net50,472  50,466  
Other assets22,451  10,965  
Noncurrent assets, discontinued operations2,061    
Total assets$371,377  $352,632  
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable$14,813  $19,024  
Accrued and other current liabilities34,966  29,426  
Current portion of long-term debt561  561  
Current liabilities, discontinued operations368  161  
Total current liabilities50,708  49,172  
Long-term debt10,618  30,898  
Retirement benefits payable2,038  1,978  
Other long-term liabilities18,897  6,114  
Noncurrent liabilities, discontinued operations2,677  784  
Total liabilities84,938  88,946  
Equity:
Common shares, $0.01 par value
159  158  
Shares authorized – 50,000
Shares issued – 16,000 and 16,001, respectively
Preferred shares, $0.01 par value
    
Shares authorized and issued – 10,000 and 0, respectively
Additional paid-in capital49,067  46,633  
Treasury shares, at cost (975 and 962 shares, respectively)
(50,757) (49,964) 
Retained earnings297,094  277,588  
Accumulated other comprehensive loss(9,124) (10,729) 
Total equity286,439  263,686  
Total liabilities and equity$371,377  $352,632  
See accompanying notes to condensed consolidated financial statements.
3


CSW INDUSTRIALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)

(Amounts in thousands)Common StockTreasury SharesAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive LossTotal Equity
Balance at March 31, 2019$158  $(49,964) $46,633  $277,588  $(10,729) $263,686  
Share-based compensation—  —  1,213  —  —  1,213  
Stock activity under stock plans1  (793) —  —  —  (792) 
Adoption of ASC 842 Leases—  —  —  (400) —  (400) 
Net income—  —  —  15,204  —  15,204  
Dividends declared—  —  —  (2,041) (2,041) 
Other comprehensive loss, net of tax—  —  —  —  (43) (43) 
Balance at June 30, 2019$159  $(50,757) $47,846  $290,351  $(10,772) $276,827  
Share-based compensation—  —  1,196  —  —  1,196  
Net income—  —  —  8,783  —  8,783  
Dividends declared—  —  25  (2,040) —  (2,015) 
Other comprehensive income, net of tax—  —  —  —  1,648  1,648  
Balance at September 30, 2019$159  $(50,757) $49,067  $297,094  $(9,124) $286,439  


(Amounts in thousands)Common StockTreasury SharesAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive LossTotal Equity
Balance at March 31, 2018$158  $(3,252) $42,684  $233,650  $(7,475) $265,765  
Share-based compensation—  —  929  —  —  929  
Repurchase of common shares—  (7,366) —  —  —  (7,366) 
Stock activity under stock plans—  (136) —  —  —  (136) 
Adoption of ASU 2016-16—  —  —  (1,232) —  (1,232) 
Adoption of ASC 606 Revenue—  —  —  (692) —  (692) 
Net income—  —  —  11,675  —  11,675  
Other comprehensive loss, net of tax—  —  —  (1,335) (1,335) 
Balance at June 30, 2018$158  $(10,754) $43,613  $243,401  $(8,810) $267,608  
Share-based compensation—  —  865  —  —  865  
Repurchase of common shares—  (23,466) (23,466) 
Stock activity under stock plans—  (29) —  —  —  (29) 
Net income—  —  15,156  —  15,156  
Other comprehensive income, net of tax—  —  —  —  167  167  
Balance at September 30, 2018$158  $(34,249) $44,478  $258,557  $(8,643) $260,301  

See accompanying notes to condensed consolidated financial statements.
4


CSW INDUSTRIALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended September 30,
(Amounts in thousands)20192018
Cash flows from operating activities:
Net income$23,989  $26,830  
Less: (Loss)/Income from discontinued operations(174) 400  
Income from continuing operations24,163  26,430  
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation4,162  3,750  
Amortization of intangible and other assets3,503  3,236  
Provision for inventory reserves229  700  
Provision for doubtful accounts547    
Share-based and other executive compensation2,434  1,794  
Net gain on disposals of property, plant and equipment(744) (2,539) 
Pension plan termination expense6,559    
Net pension benefit (198) (211) 
Net deferred taxes(875) 8,647  
Changes in operating assets and liabilities:
Accounts receivable, net(1,101) 1,473  
Inventories(899) (5,749) 
Prepaid expenses and other current assets3,021  (4,163) 
Other assets20  190  
Accounts payable and other current liabilities(3,110) (1,153) 
Retirement benefits payable and other liabilities(215) 109  
Net cash provided by operating activities, continuing operations37,496  32,514  
Net cash used in operating activities, discontinued operations(389) (7,574) 
Net cash provided by operating activities 37,107  24,940  
Cash flows from investing activities:
Capital expenditures(4,571) (2,742) 
Proceeds from sale of assets1,089  3,547  
Cash paid for acquisitions(11,837)   
Net cash (used in) provided by investing activities, continuing operations(15,319) 805  
Net cash provided by investing activities, discontinued operations  7,151  
Net cash (used in) provided by investing activities(15,319) 7,956  
Cash flows from financing activities:
Borrowings on lines of credit7,500  8,000  
Repayments of lines of credit(27,781) (10,281) 
Purchase of treasury shares(793) (30,997) 
Dividends paid to shareholder(4,081)   
Net cash used in financing activities(25,155) (33,278) 
Effect of exchange rate changes on cash and equivalents393  (111) 
Net change in cash and cash equivalents(2,974) (493) 
Cash and cash equivalents, beginning of period26,651  11,706  
Cash and cash equivalents, end of period$23,677  $11,213  
See accompanying notes to condensed consolidated financial statements.
5


CSW INDUSTRIALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1.ORGANIZATION AND OPERATIONS AND SUMMARY OF 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, ventilating, air conditioning and refrigeration (“HVAC/R”), sealants, architecturally-specified building products 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® thread sealants, KOPR-KOTE® anti-seize lubricants, KATS Coatings®, Safe-T-Switch® condensate overflow shutoff devices, Air Sentry® breathers, Deacon® high temperature sealants, AC Leak Freeze® to stop refrigerant leaks and Greco Aluminum Railings.

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

Basis of Presentation

The condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2019 (“Quarterly 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”).

The condensed consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary to present a fair statement of CSWI’s financial position as of September 30, 2019 and the results of operations for the three and six month periods ended September 30, 2019 and 2018. All adjustments are of a normal and recurring nature. All significant intercompany balances and transactions have been eliminated in consolidation.

The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in CSWI’s Annual Report on Form 10-K for the fiscal year ended March 31, 2019 (the “Annual Report”).

Accounting Policies

We have consistently applied the accounting policies described in our Annual Report in preparing these condensed consolidated financial statements.  We have not made any changes in significant accounting policies disclosed in the Annual Report, with the exception of the lease accounting policy described below as a result of adopting the new lease standards.

LeasesWe 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 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. 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 condensed consolidated income statements as the obligation is incurred. As of September 30, 2019, we did not have material leases that imposed significant restrictions or covenants, material related party leases or sale-leaseback arrangements.

6


Accounting Developments

Pronouncements Implemented

In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)," which has been subsequently amended with additional ASUs including ASU No. 2018-10 and ASU No. 2018-11 issued in July 2018, and ASU No. 2018-20 issued in December 2018, to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from previous U.S. GAAP. This ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2018. Modified retrospective application is permitted with certain practical expedients. Early adoption is permitted. We adopted this standard effective April 1, 2019, using the modified retrospective approach for leases existing at or entered into before the effective date. As such, the cumulative effect of the implementation has been recorded to the opening balance of retained earnings in the period of adoption and prior periods have not been adjusted. Upon adoption, we elected the package of three practical expedients permitted under the transition guidance, which include the carry forward of our leases without reassessing whether any contracts are leases or contain leases, lease classification and initial direct lease costs. We also elected the transition practical expedient to apply hindsight when determining the lease term and when assessing impairment of ROU assets at the adoption date, which allows us to update our assessments according to new information and changes in facts and circumstances that have occurred since lease inception. Adoption of this ASU resulted in recognition of ROU assets and lease liabilities of $16.9 million and $18.6 million, respectively, including leases classified as discontinued operations, as well as a reduction to opening retained earnings of $0.4 million, at the date of adoption. Refer to Note 8 for details of the impact of the adoption of this ASU.

In August 2017, the FASB issued ASU No. 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements of Accounting for Hedging Activities." The purpose of this ASU is to better align a company's risk management activities and financial reporting for hedging relationships. Additionally, the ASU simplifies the hedge accounting requirements and improves the disclosures of hedging arrangements. This ASU was amended by ASU 2018-16 to include the secured overnight financing rate as an acceptable reference rate. This ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2018. Adoption of this ASU effective April 1, 2019, did not have a material impact on our consolidated financial condition or results of operations.

Pronouncements not yet implemented

In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments," as amended, which requires, among other things, the use of a new current expected credit loss ("CECL") model in order to determine our allowances for doubtful accounts with respect to accounts receivable. The CECL model requires that we estimate our lifetime expected credit loss with respect to our receivables and contract assets and record allowances that, when deducted from the balance of the receivables, represent the net amounts expected to be collected. We will also be required to disclose information about how we developed the allowances, including changes in the factors that influenced our estimate of expected credit losses and the reasons for those changes. This ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2019. We are currently evaluating the impact of this ASU on our consolidated financial condition and results of operations.

In August 2018, the FASB issued ASU No. 2018-13, "Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement," which modifies the disclosure requirements on fair value measurements. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. An entity is permitted to early adopt any removed or modified disclosures and delay adoption of the additional disclosures until their effective date. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. We do not expect adoption of this ASU to have a material impact on our consolidated financial condition and results of operations.

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
7


retrospective basis, for fiscal years ending after December 15, 2020. Early adoption is permitted. We do not expect adoption of this ASU to have a material impact on our consolidated financial condition and results of operations.

In August 2018, the FASB issued ASU No. 2018-15, "Customer's Accounting for the Implementation Costs Incurred in Cloud Computing Arrangement That is a Service Contract." The amendments in this ASU align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). This ASU is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years, and should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. Early adoption is permitted. We do not expect adoption of this ASU to have a material impact on our consolidated financial condition and results of operations.

2. ACQUISITIONS

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 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 preliminary 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 preliminary 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.

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 Coatings business manufactured specialized industrial coating 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 condensed consolidated balance sheets, and as discontinued operations, net of tax, in the accompanying condensed consolidated statements of income 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 the quarter ended December 31, 2017.

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 three months ended September 30, 2018, we received an aggregate
8


of $6.9 million for the sale of assets 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.

Summarized selected financial information for the Coatings business for the three and six months ended September 30, 2019 and 2018, is presented in the following table:

Three Months Ended September 30,Six Months Ended
September 30,
(amounts in thousands)2019201820192018
Revenues, net$  $1,938  $  $5,303  
(Loss) income from discontinued operations before income taxes(69) 3,612  (224) 532  
Income tax benefit34  (880) 50  (132) 
(Loss) income from discontinued operations, net$(35) $2,732  $(174) $400  

(amounts in thousands)September 30, 2019March 31, 2019
Assets
Prepaid expenses and other current assets (a)$  $21  
Other assets (b)2,061    
Total assets$2,061  $21  
Liabilities
Accounts payable, accrued expenses and other liabilities (b)$3,045  $945  

(a) 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.
(b) Adoption of the new lease standard resulted in recognition of ROU assets and lease liabilities of $1.9 million and $3.0 million, respectively, for the Coatings business. Refer to Note 8 for details and additional discussions on our adoption of the new lease standard.

4. INVENTORIES

Inventories consist of the following (in thousands):
September 30, 2019March 31, 2019
Raw materials and supplies$22,432  $20,267  
Work in process6,718  6,483  
Finished goods31,035  31,876  
Total inventories60,185  58,626  
Less: LIFO reserve(5,026) (5,027) 
Less: Obsolescence reserve(2,308) (2,170) 
Inventories, net$52,851  $51,429  

9


5. GOODWILL AND INTANGIBLE ASSETS

The changes in the carrying amount of goodwill as of September 30, 2019 and March 31, 2019 were as follows (in thousands):

Industrial ProductsSpecialty
Chemicals
Total
Balance at March 31, 2019$54,732  $31,563  $86,295  
Petersen acquisition6,128    6,128  
Currency translation(171)   (171) 
Balance at September 30, 2019$60,689  $31,563  $92,252  

The following table provides information about our intangible assets (in thousands, except years): 
September 30, 2019March 31, 2019
Wtd Avg Life (Years)Ending Gross AmountAccumulated AmortizationEnding Gross AmountAccumulated Amortization
Finite-lived intangible assets:
Patents11$9,634  $(6,532) $9,835  $(6,316) 
Customer lists and amortized trademarks1262,965  (30,874) 60,065  (28,622) 
Non-compete agreements51,766  (1,336) 1,764  (1,066) 
Other85,134  (2,298) 4,808  (2,010) 
$79,499  $(41,040) $76,472  $(38,014) 
Trade names and trademarks not being amortized:$12,013  $—  $12,008  $—  
 
Amortization expense for the three and six months ended September 30, 2019 were $1.7 million and $3.4 million, respectively. Amortization expense for the three and six months ended September 30, 2018, were $1.6 million and $3.1 million, respectively. The following table shows the estimated future amortization for intangible assets, as of September 30, 2019, for the remainder of the current fiscal year and the next five fiscal years ending March 31 (in thousands):

2020$2,913  
20215,504  
20225,100  
20234,244  
20243,938  

10


6. SHARE-BASED COMPENSATION

Refer to Note 6 to our consolidated financial statements included in the Annual Report for a description of the 2015 Equity and Incentive Compensation Plan (the "2015 Plan"). As of September 30, 2019, 825,604 shares were available for issuance under the 2015 Plan.

We recorded share-based compensation expense as follows for the three and six months ended September 30, 2019 and 2018 (in thousands): 
Three months ended September 30, 2019Six months ended September 30, 2019
Stock OptionsRestricted 
Stock
TotalStock OptionsRestricted 
Stock
Total
Share-based compensation expense$  $1,196  $1,196  $  $2,409  $2,409  
Related income tax benefit  (251) (251)   (506) (506) 
Net share-based compensation expense$  $945  $945  $  $1,903  $1,903  
Three Months Ended September 30, 2018Six Months Ended September 30, 2018
Stock OptionsRestricted 
Stock
TotalStock OptionsRestricted 
Stock
Total
Share-based compensation expense$3  $862  $865