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	47-2266942
(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)

(214) 884-3777

Registrant’s telephone number, including area code:

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol (s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	CSWI	Nasdaq Stock Market LLC

Securities registered pursuant to section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☐    No  ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ☐    No  ☒

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, 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 ☐   

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 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. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

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	1
ITEM 1A:	Risk Factors	10
ITEM 1B:	Unresolved Staff Comments	19
ITEM 2:	Properties	19
ITEM 3:	Legal Proceedings	19
ITEM 4:	Mine Safety Disclosures	20
PART II
ITEM 5:	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	21
ITEM 6:	Selected Financial Data	22
ITEM 7:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
ITEM 7A:	Quantitative and Qualitative Disclosures About Market Risk	36
ITEM 8:	Financial Statements and Supplementary Data	37
ITEM 9:	Changes In and Disagreements With Accountants on Accounting and Financial Disclosure	76
ITEM 9A:	Controls and Procedures	76
ITEM 9B:	Other Information	78
PART III
ITEM 10:	Directors, Executive Officers and Corporate Governance	78
ITEM 11:	Executive Compensation	78
ITEM 12:	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	78
ITEM 13:	Certain Relationships and Related Transactions, and Director Independence	78
ITEM 14:	Principal Accounting Fees and Services	78
PART IV
ITEM 15:	Exhibits, Financial Statement Schedules	79
SIGNATURES		82
EX-10.3
EX-21.1
EX-23.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 XBRL Instance Document
EX-101 XBRL Taxonomy Extension Schema
EX-101 XBRL Taxonomy Extension Calculation Linkbase Document
EX-101 XBRL Taxonomy Extension Definition Linkbase Document
EX-101 XBRL Taxonomy Extension Label Linkbase Document
EX-101 XBRL Taxonomy Extension Presentation Linkbase Document

PART I

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.

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.

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.

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Business Segment	Principal Product Categories	Key End Use Markets	Representative Industrial Brands
Industrial Products	•      Building safety products including         custom-engineered railings and         expansion joints •      Grilles, registers and diffusers •      Fire and smoke protection products •      Specialty mechanical products •      Storage, filtration and application        equipment for use with our specialty        chemicals and other products for        general industrial applications	•      Architecturally-specified        building products •      Commercial construction •      General industrial •      Electrical •      HVAC/R •      Plumbing •      Rail car and locomotive
Specialty Chemicals	•      Adhesives/solvent cements •      Anti-seize compounds •      Chemical formulations •      Degreasers and cleaners •      Drilling compounds •      Firestopping sealants and caulks •      Lubricants and greases •      Penetrants •      Pipe thread sealants	• Cement • Commercial construction • Electrical • Energy • General industrial • HVAC/R • Infrastructure drilling        and boring • Mining • Oil and gas • Plumbing • Power generation • Rail • Steel • Water well drilling

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.

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Our key product types and brand names are shown below:

PRODUCT TYPES	BRAND NAMES
Specialty Mechanical Products
•      air diffusers for use by professional air conditioning contractors	•      Airtec®
•      condensate removal pumps and equipment mounting brackets	•      AquaGuard®
•      condensate switches, traps and pans	•      All-Access®
•      grilles, registers and diffusers	•      ArmorPadTM
•      decorative roof drain downspout nozzles	•      Clean Check®
•      drain waste and vent systems mechanical products	•      EZ Trap®
•      ductless mini-split systems installation support tools and accessories	•      Fortress®
•      equipment pads	•      Goliath®
•      line set covers	•      G-O-N®
•      tamper resistant locking refrigerant caps	•      HubsetTM
•      wire pulling head tools	•      Kickstart®
	•      Magic Vent®
	•      Mighty BracketTM
	•      Novent®
	•      Safe-T-Switch®
	•      Slim DuctTM
	•      SureSeal®
	•      TitanTM
	•      TRUaire
	•      Wire GrabberTM
	•      Wire SnaggerTM
Fire and Smoke Protection Products
•      fire-rated and smoke-rated opening protective systems	•      FIRE+SMOKE®
	•      Smoke Guard®
Architecturally-Specified Building Products
•      architectural grating	•       Balco®
•      engineered railing	•       DuraFlexTM
•      entrance mats and grids	•       Greco®
•      expansion joint covers	•       llumiTreadTM
•      fire barriers	•       MetaBlock®
•      partition closure systems	•       MetaFlex®
•      photoluminescent egress markings and signage	•       MetaGrateTM
•      specialty silicone seals	•       MetaMatTM
•      stair nosings	•       Michael Rizza
•      trench and access covers	•       UltraGridTM
Storage, Filtration and Application Equipment
•      lubrication application and management systems	•       Air Sentry®
•      storage and filtration devices	• Guardian®
	•       Oil Safe®
	•       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

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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.

Competition – 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.

Customers – 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.

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Our key product types and brand names are shown below:

PRODUCT TYPES	BRAND NAMES
• chemical sealants to stop air-conditioning refrigerant leaks	• BioRail®
• engineered specialty thread sealants designed to seal and secure metal	• Caliber®
• oil field anti-seize products for drilling and conveyance piping	• Deacon®
• open gear specialty lubricants for heavy equipment	• Decathalon®
• railroad track lubricants, conditioners and positive friction    consumables	• DesolvTM
• solvent cements and fire stop caulks	• Envirolube®
• specialty lubricants for various industrial applications	• Gearmate®
• specialty sealants for high temperature applications	• KATS Coatings®
• water well treatment products and services	• KOPR-KOTE®
	• Jet-Lube®
	• Leak Freeze®
	• Matrix®
	• Medallion
	• Metacaulk®
	• No. 5®
	• ParagonTM
	• RailArmor®
	• RenewzTM
	• Sterilene®
	• Surstik®
	• Surtac®
	• T Plus 2®
	• TOR Armor®
	• Tru-BluTM
	• UnicidTM
	• 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 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.

Competition – 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.

Customers – 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

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manufacturers, construction companies, utilities, plant maintenance customers, building contractors and repair service companies.

Discontinued Operations

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.

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.

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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.

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

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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.

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 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:

•adding work from home flexibility

•encouraging those who are sick or have symptoms to stay home

•increasing cleaning protocols across all locations

•regular communications regarding health and safety protocols and procedures

•establishing physical distancing and personal protective equipment procedures for employees

•providing masks and cleaning supplies

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•implementing protocols to address actual and suspected COVID-19 cases and potential exposure

•limiting non-essential domestic and international travel for all employees

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 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.

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 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.

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.

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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.

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 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

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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 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.

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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 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

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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.

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:

•we may experience difficulty in identifying appropriate acquisition candidates;

•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;

•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;

•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;

•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;

•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;

•we could experience difficulty in integrating financial and other controls and systems;

•we may lose key employees or customers of the acquired company;

•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;

•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

•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.

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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 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.

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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 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.

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 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.

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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.

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 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 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.

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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”).

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.

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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 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:

•our business strategy;

•future levels of revenues, operating margins, income from operations, net income or earnings per share;

•anticipated levels of demand for our products and services;

•short and long-term effects of the COVID-19 pandemic;

•future levels of research and development, capital, environmental or maintenance expenditures;

•our beliefs regarding the timing and effects on our business of health and safety, tax, environmental or other legislation, rules and regulations;

•the success or timing of completion of ongoing or anticipated capital, restructuring or maintenance projects;

•expectations regarding the acquisition or divestiture of assets and businesses;

•our ability to obtain appropriate insurance and indemnities;

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•the potential effects of judicial or other proceedings, including tax audits, on our business, financial condition, results of operations and cash flows;

•the anticipated effects of actions of third parties such as competitors, or federal, foreign, state or local regulatory authorities, or plaintiffs in litigation;

•the expected impact of accounting pronouncements; and

•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.

ITEM 1B: UNRESOLVED STAFF COMMENTS

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	Use	Segment	Square  Footage	Owned/Leased
Boise, Idaho	Manufacturing, Office and R&D	Industrial Products	42,000	Leased
Dong Nai, Vietnam	Manufacturing and Office	Industrial Products	634,000	Owned
Fall River, Massachusetts	Manufacturing and Office	Both	140,200	Leased
Greenwood, Indiana	Distribution Center & Office	Industrial Products	54,000	Leased
Houston, Texas	Manufacturing, Office, R&D and Warehouse	Both	253,900	Owned
Houston, Texas	Distribution Center & Office	Industrial Products	150,000	Leased
Hudson, Florida	Manufacturing, Office and R&D	Industrial Products	40,000	Leased
Jacksonville, Florida	Distribution Center & Office	Industrial Products	217,000	Leased
North East, Maryland	Distribution Center & Office	Industrial Products	150,000	Leased
Rockwall, Texas	Manufacturing, Office, R&D and Warehouse	Both	227,600	Owned
Santa Fe Springs, California	Distribution Center & Office	Industrial Products	240,000	Leased
Wichita, Kansas	Manufacturing and Office	Industrial Products	42,800	Owned
Windsor, Ontario, Canada	Manufacturing, Office and R&D	Industrial Products	42,000	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.

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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.

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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	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)
January 1 - 31	—	$	—	—	$	100.0
February 1 - 28	—	—		—	100.0
March 1 - 31	—	—		—	100.0
	—			—

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.	Futurefuel Corp.	Landec Corporation	Quaker Chemical Corp.
Chase Corporation	Gorman-Rupp Co.	Littelfuse, Inc.	Tredegar Corp.
Columbus McKinnon Corp	Innospec Inc.	LSB Industries, Inc.	WD-40 Company
CTS Corporation	Koppers Holdings Inc.	Methode Electronics, Inc.
Flotek Industries, Inc.	Kraton Corp.	NN, Inc.

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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.

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ITEM 6: SELECTED FINANCIAL DATA

	Year Ended March 31,
Amounts in thousands, except per share data)	2021		2020		2019		2018		2017
RESULTS OF OPERATIONS	(a), (b)		(c), (d)		(e), (f)		(g)		(h)
Revenues, net	$	419,205	$	385,871	$	350,155	$	326,222	$	287,460
Gross profit	184,800		177,050		161,370		147,940		128,956
Selling, general and administrative expenses	(125,330)		(110,032)		(100,930)		(98,281)		(95,601)
Operating income	59,470		66,067		60,440		49,659		32,040
Interest expense, net	(2,383)		(1,331)		(1,442)		(2,317)		(2,695)
Provision for income taxes	(10,830)		(12,784)		(15,389)		(15,565)		(14,360)
Income from continuing operations	40,288		44,817		46,052		32,682		17,800
Diluted earnings per share - continuing operations	$	2.66	$	2.95	$	2.96	$	2.09	$	1.12
Cash dividends per share	$	0.54	$	0.54	$	—	$	—	$	—
FINANCIAL CONDITION
Working capital	$	131,805	$	90,899	$	102,095	$	82,713	$	108,547
Total assets	874,957		369,245		352,632		340,816		398,427
Total debt	242,337		10,898		31,459		24,020		73,207
Retirement obligations and other liabilities	138,420		23,021		8,092		6,738		14,844
Total equity	412,013		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.

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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

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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.

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

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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.

Mining

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.

Our Outlook

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.

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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

	Year Ended March 31,
(amounts in thousands)	2021		2020		2019
Revenues, net	$	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 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

	Year Ended March 31,
(amounts in thousands, except percentages)	2021			2020			2019
Gross profit	$	184,800		$	177,050		$	161,370
Gross profit margin	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.

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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

	Year Ended March 31,
(amounts in thousands, except percentages)	2021			2020			2019
Operating expenses	$	125,330		$	110,983		$	100,930
Operating expenses as a % of revenues	29.9		%	28.8		%	28.8		%

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.

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

	Year Ended March 31,
(amounts in thousands, except percentages)	2021			2020			2019
Operating income	$	59,470		$	66,067		$	60,440
Operating margin	14.2		%	17.1		%	17.3		%

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.

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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 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.

Business Segments

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.

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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.

	Year Ended March 31,
(amounts in thousands, except percentages)	2021			2020			2019
Revenues, net	$	289,416		$	234,895		$	205,931
Operating income	55,641			55,725			48,817
Operating margin	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.

	Year Ended March 31,
(amounts in thousands, except percentages)	2021			2020			2019
Revenues, net	$	129,789		$	150,976		$	144,224
Operating income	18,263			24,691			23,930
Operating margin	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.

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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.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flow Analysis

	Year Ended March 31,
(amounts in thousands)	2021		2020		2019
Net cash provided by operating activities, continuing operations	$	66,254	$	71,397	$	68,159
Net cash used in investing activities, continuing operations	(289,889)		(21,982)		(10,415)
Net cash provided by (used in) financing activities	214,049		(57,151)		(39,273)

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.

•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).

•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).

•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.

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

•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:

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•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.

•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.

•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.

ACQUISITIONS AND DISPOSITIONS

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.

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):

	Payments due by Period (a)
	< 1 Year		1-3 Years		3-5 Years		> 5 Years		Total
Long-term debt obligations, principal	$	561	$	233,122	$	1,122	$	7,532	$	242,337
Long-term debt obligations, interest	5,113		2,848		354		482		8,797
Operating lease obligations (b) (c)	9,551		17,919		17,571		26,518		71,559
Purchase obligations (d)	49,703		1,570		—		—		51,273
Total	$	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.

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(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 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.

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

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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.

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 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.

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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.

ACCOUNTING DEVELOPMENTS

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.

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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.

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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 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.

Basis for 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.

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.

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,

37

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

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CSW INDUSTRIALS, INC.

CONSOLIDATED BALANCE SHEETS

	March 31,
(Amounts in thousands, except per share amounts)	2021		2020
ASSETS
Current assets:
Cash and cash equivalents	$	10,088	$	18,338
Accounts receivable, net	96,695		74,880
Inventories, net	98,086		53,753
Prepaid expenses and other current assets	9,684		3,074
Total current assets	214,553		150,045
Property, plant and equipment, net	82,554		57,178
Goodwill	218,795		91,686
Intangible assets, net	283,060		46,185
Other assets	75,995		24,151
Total assets	$	874,957	$	369,245
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	32,444	$	21,978
Accrued and other current liabilities	49,743		36,607
Current portion of long-term debt	561		561
Total current liabilities	82,748		59,146
Long-term debt	241,776		10,337
Retirement benefits payable	1,695		1,879
Other long-term liabilities	136,725		21,142
Total liabilities	462,944		92,504
Equity:
Common shares, $0.01 par value	161		159
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	104,689		48,327
Treasury shares, at cost (511 and 1,311 shares, respectively)	(34,075)		(75,377)
Retained earnings	347,234		315,078
Accumulated other comprehensive loss	(5,996)		(11,446)
Total equity	412,013		276,741
Total liabilities and equity	$	874,957	$	369,245

See accompanying notes to consolidated financial statements.

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CSW INDUSTRIALS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

	Year Ended March 31,
(Amounts in thousands, except per share amounts)	2021		2020		2019
Revenues, net	$	419,205	$	385,871	$	350,155
Cost of revenues	(234,405)		(208,821)		(188,785)
Gross profit	184,800		177,050		161,370
Selling, general and administrative expenses	(125,330)		(110,032)		(100,930)
Impairment expenses	—		(951)		—
Operating income	59,470		66,067		60,440
Interest expense, net	(2,383)		(1,331)		(1,442)
Other (expense) income, net	(5,969)		(7,135)		2,443
Income before income taxes	51,118		57,601		61,441
Provision for income taxes	(10,830)		(12,784)		(15,389)
Income from continuing operations	40,288		44,817		46,052
Income (loss) from discontinued operations, net of tax	—		1,061		(478)
Net income	$	40,288	$	45,878	$	45,574
Basic earnings (loss) per common share:
Continuing operations	$	2.68	$	2.98	$	2.99
Discontinued operations	—		0.07		(0.03)
Net income	$	2.68	$	3.05	$	2.96
Diluted earnings (loss) per common share:
Continuing operations	$	2.66	$	2.95	$	2.96
Discontinued operations	—		0.07		(0.03)
Net income	$	2.66	$	3.02	$	2.93

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Year Ended March 31,
(Amounts in thousands)	2021		2020		2019
Net income	$	40,288	$	45,878	$	45,574
Other comprehensive (loss) income:
Foreign currency translation adjustments	4,791		(2,316)		(2,032)
Cash flow hedging activity, net of taxes of $(156), $265 and $72, respectively	587		(996)		(286)
Pension and other postretirement effects, net of taxes of $(34), $(682) and $177, respectively	72		2,595		(936)
Other comprehensive (loss) income	5,450		(717)		(3,254)
Comprehensive income	$	45,738	$	45,161	$	42,320

See accompanying notes to consolidated financial statements.

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CSW INDUSTRIALS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(Amounts in thousands)	Common Stock		Treasury Shares		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Equity
Balance at March 31, 2018	$	158	$	(3,252)	$	42,684	$	233,650	$	(7,475)	$	265,765
Adoption of ASU 2016-09	—		—		—		(1,232)		—		(1,232)
Adoption of ASC 606	—		—		—		(692)		—		(692)
Adoption of ASU 2018-02	—		—		—		288		—		288
Share-based compensation	—		—		3,949		—		—		3,949
Stock activity under stock plans	—		(1,086)		—		—		—		(1,086)
Repurchase of common shares	—		(45,626)		—		—		—		(45,626)
Net loss	—		—		—		45,574		—		45,574
Other comprehensive loss, net of tax	—		—		—		—		(3,254)		(3,254)
Balance at March 31, 2019	$	158	$	(49,964)	$	46,633	$	277,588	$	(10,729)	$	263,686
Adoption of ASC 842	—		—		—		(206)		—		(206)
Share-based compensation	—		—		5,074		—		—		5,074
Stock activity under stock plans	1		1,451		(3,432)		—		—		(1,980)
Repurchase of common shares	—		(26,864)		—		—		—		(26,864)
Net income	—		—		—		45,878		—		45,878
Dividends	—		—		52		(8,182)		—		(8,130)
Other comprehensive loss, net of tax	—		—		—		—		(717)		$	(717)
Balance at March 31, 2020	$	159	$	(75,377)	$	48,327	$	315,078	$	(11,446)	$	276,741
Share-based compensation	—		—		5,085		—		—		5,085
Stock activity under stock plans	2		(2,812)		(2)		—		—		(2,812)
Repurchase of common shares	—		(7,291)		—		—		—		(7,291)
Reissuance of treasury shares	—		51,405		51,232		—		—		102,637
Net income	—		—		—		40,288		—		40,288
Dividends	—		—		47		(8,132)		—		(8,085)
Other comprehensive income, net of tax	—		—		—		—		5,450		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.

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CSW INDUSTRIALS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended March 31,
(Amounts in thousands)	2021		2020		2019
Cash flows from operating activities:
Net income	$	40,288	$	45,878	$	45,574
Less: Income (loss) from discontinued operations, net of tax	—		1,061		(478)
Income from continuing operations