10q10k10q10k.net

What changed in CSW INDUSTRIALS, INC.'s 10-K — 2023 vs 2024

vs

Paragraph-level year-over-year comparison of CSW INDUSTRIALS, INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+243 added−249 removedSource: 10-K (2024-05-23) vs 10-K (2023-05-25)

Top changes in CSW INDUSTRIALS, INC.'s 2024 10-K

243 paragraphs added · 249 removed · 202 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

64 edited+5 added−9 removed44 unchanged
Biggest changeOur Board of Directors, senior leadership and human resources team are fully aligned in their commitment to promoting the above policies to ensure we remain an employer of choice. 9 Table of Contents 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.
Biggest changeIt is our goal to create a positive and dynamic workplace where diversity and inclusion principles govern and all employees can flourish. Our Board of Directors, senior leadership and human resources team are fully aligned in their commitment to promoting the above policies to ensure we remain an employer of choice.
ITEM 1: BUSINESS General CSWI is a diversified industrial growth company with a strategic focus on providing niche, value-added products in the end markets we serve. We operate in three business segments: Contractor Solutions, Engineered Building Solutions and Specialized Reliability Solutions.
ITEM 1: BUSINESS General CSWI is a diversified industrial growth company with a strategic focus on providing niche, value-added products in the end markets we serve. We operate in three business segments: Contractor Solutions, Specialized Reliability Solutions and Engineered Building Solutions.
Business Segments Our business is organized into three reportable segments: Contractor Solutions, Engineered Building Solutions and Specialized Reliability Solutions. The table below provides an overview of these business segments.
Business Segments Our business is organized into three reportable segments: Contractor Solutions, Specialized Reliability Solutions and Engineered Building Solutions. The table below provides an overview of these business segments.
For financial information regarding our segments, see Note 20 to our consolidated financial statements included in Item 8 Financial Statements and Supplementary Data ("Item 8") of this Annual Report. 1 Table of Contents Business Segment Key End Use Markets Contractor Solutions • HVAC/R • Plumbing • General Industrial • Architecturally-Specified Building Products Engineered Building Solutions • Architecturally-Specified Building Products Specialized Reliability Solutions • Energy • General Industrial • Mining • Rail Transportation Contractor Solutions Our Contractor Solutions segment manufactures efficiency and performance enhancing products predominantly for residential and commercial HVAC/R and plumbing applications, which are designed primarily for the professional trades.
For financial information regarding our segments, see Note 20 to our consolidated financial statements included in Item 8 Financial Statements and Supplementary Data ("Item 8") of this Annual Report. 1 Table of Contents Business Segment Key End Use Markets Contractor Solutions • HVAC/R • Plumbing • General Industrial • Architecturally-Specified Building Products Specialized Reliability Solutions • Energy • General Industrial • Mining • Rail Transportation Engineered Building Solutions • Architecturally-Specified Building Products Contractor Solutions Our Contractor Solutions segment manufactures efficiency and performance enhancing products predominantly for residential and commercial HVAC/R and plumbing applications, which are designed primarily for the professional trades.
We believe that the compensation and benefits, and other components of our total rewards program provided to our employees, give us a competitive edge and differentiate us in a challenging labor market. We seek to recruit and retain high performing talent and provide safe, secure and dignified retirements for our employees.
We believe that the compensation, benefits, and other components of our total rewards program provided to our employees give us a competitive edge and differentiate us in a challenging labor market. We seek to recruit and retain high performing talent and provide safe, secure and dignified retirements for our employees.
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.
Intellectual Property We own and maintain a substantial portfolio of trademarks and patents relating to the names, designs and configurations 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.
Customers – Specialized Reliability Solutions products are primarily sold through value-added distribution partners, as well as maintenance and repair operations or catalog channels. Our Specialized Reliability Solutions' organization provides both market-specific and product line specific training to both the distribution partners and potential end-users.
Customers – Specialized Reliability Solutions products are primarily sold through value-added distribution partners, as well as maintenance and repair operations or catalog channels. Our Specialized Reliability Solutions organization provides both market-specific and product line specific training to both the distribution partners and potential end-users.
Our compensation program includes market-aligned salary grades, an annual incentive compensation program for majority of our employees, referral and rewards incentive programs available to employees based on job function, premium pay for employees working extended hours and a long-term incentive plan ("LTIP") for select employees.
Our compensation program includes market-aligned salary grades, an annual incentive compensation program for the majority of our employees, referral and rewards incentive programs available to employees based on job function, premium pay for employees working extended hours and a long-term incentive plan ("LTIP") for select employees.
We analyze our compensation and benefits program annually, and make changes as necessary, to ensure that we remain competitive. We believe maintaining competitive pay and benefits for our employees is important to promote professional excellence and career progression.
We analyze our compensation and benefits program annually, and make changes as necessary, to ensure we remain competitive. We believe maintaining competitive pay and benefits for our employees is important to promote professional excellence and career progression.
("ACG"), based in Orlando, Florida, which offer lineset covers and HVAC/R condenser protection cages. In the third quarter of the fiscal year ended March 31, 2022, we acquired Shoemaker Manufacturing ("Shoemaker"), based in Cle Elum, Washington, which offers high-quality customizable GRD for commercial and residential markets, and expands CSWI’s HVAC/R product offering and regional exposure in the northwest U.S.
("ACG"), based in Orlando, Florida, which offer lineset covers and HVAC/R condenser protection cages. In the third quarter of the fiscal year ended March 31, 2022, we acquired Shoemaker Manufacturing ("Shoemaker") based in Cle Elum, Washington, which offers high-quality customizable GRDs for commercial and residential markets, and expands CSWI’s HVAC/R product offering and regional exposure in the northwest U.S.
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. Specialized Reliability Solutions' customers include petrochemical facilities, industrial manufacturers, construction companies, utilities, plant maintenance customers, building contractors and rail and mining operators, among others.
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. Specialized Reliability Solutions customers include petrochemical facilities, industrial manufacturers, construction companies, utilities, plant maintenance customers, building contractors and rail and mining operators, among others.
For the year ended March 31, 2023, 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.
For the year ended March 31, 2024, 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.
Our team of R&D, 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.
Our team of R&D, sales and marketing personnel work together to identify product opportunities and methodically pursue development of innovative new products. Through the development of 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.
Our wellness plan offers a range of programs focused on improving health awareness and well-being. Helping our employees stay healthy and safe is a priority, and our monthly wellness challenges engage employees and often incorporate community-outreach efforts and special events.
Our wellness plan offers a range of programs focused on improving health awareness and well-being. Helping our employees stay healthy and safe is a priority, and our quarterly wellness challenges engage employees and often incorporate community-outreach efforts and special events.
In calendar year 2022, Cigna recognized our wellness program with a Gold-level Healthy Workforce Designation marking the third consecutive year that we have received Cigna’s highest honor. Our retirement savings program includes a 401(k) plan and an Employee Stock Ownership Plan ("ESOP").
In calendar year 2024, Cigna recognized our wellness program with their Gold-level Healthy Workforce Designation marking the third consecutive year that we have received Cigna’s highest honor. Our retirement savings program includes a 401(k) plan and an Employee Stock Ownership Plan ("ESOP").
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 5 Table of Contents solutions that are attractive in our existing end markets where we can drive revenue growth, improved profitability and increased cash flow.
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, improved profitability and increased cash flow.
These products help minimize maintenance down-time, protect and extend the working life of large capital equipment such as cranes, rail transportation 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.
These products help minimize maintenance downtime, protect and extend the working life of large capital equipment such as cranes, rail transportation 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.
We gather "voice of the customer" market research through organized focus groups and online surveys, as well as through less formal channels. Ideas for new products or enhancements to existing products are also generated by our relationships with end-users, independent sales representatives, distributors and our internal sales and marketing team. We also actively monitor the competitive landscape.
We 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.
Our key product types and brand names are shown below in alphabetical order: Product Types Brand Names • condensate pads, pans and pumps • AquaGuard® • condensate switches and traps • Aspen® Pumps • drain waste and vent systems mechanical products • Clean Check® • ductless mini-split systems installation support tools and accessories • Cover Guard TM • electrical protection for HVAC • Desolv TM • grilles, registers, diffusers and vents • EZ Trap® • installation supplies for HVAC • Falcon Stainless® • line set covers • Fortress® • maintenance chemicals for HVAC • Goliath® • refrigerant caps • G-O-N® • solvents, cements, traps, vents, and thread sealants • Hubsett TM • wire pulling head tools • Kickstart® • Leak Freeze® • No. 5® • Novent® • PRO-Fit TM • RectorSeal® • Safe-T-Switch® • Shoemaker Manufacturing® • Slimduct® • SureSeal® • TRU-BLU TM • TRUaire® 2 Table of Contents New Product Development – Customer experience is a core competency in our Contractor Solutions segment.
Our key product types and brand names are shown below in alphabetical order: Product Types Brand Names • condensate pads, pans and pumps • AquaGuard® • condensate switches and traps • Aspen® Pumps* • drain waste and vent systems mechanical products • Clean Check® • ductless mini-split systems installation support tools and accessories • Cover Guard TM • electrical protection for HVAC/R • Desolv TM • grilles, registers, diffusers and vents • Dust Free® • installation supplies for HVAC/R • EZ Trap® • line set covers • Falcon Stainless® • maintenance chemicals for HVAC/R • Fortress® • refrigerant caps • Goliath® • solvents, cements and thread sealants • G-O-N® • wire pulling head tools • Guardian Drain Lock® • Hubsett TM • Kickstart® • Leak Freeze® • No. 5® • Novent® • PRO-Fit TM • RectorSeal® • Safe-T-Switch® • Shoemaker Manufacturing® • Slimduct® • SureSeal® • TRU-BLU TM • TRUaire® *We are the exclusive US provider of this brand 2 Table of Contents New Product Development – Customer experience is a core competency in our Contractor Solutions segment.
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.
While we have implemented policies, 9 Table of Contents 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.
The survey results are reviewed by our senior leadership team and shared with our managers and employees who collaborate to act on identified areas of improvement to implement measures of success. About 79% of our employees participated in our fiscal 2023 survey, which was conducted through Great Place To Work®.
The survey results are reviewed by our senior leadership team and shared with our managers and employees who collaborate to act on identified areas of improvement to implement measures of success. About 75% of our employees participated in our fiscal 2024 survey, which was conducted through Great Place To Work®.
Our key product types and brand names are shown below in alphabetical order: Product Types Brand Names • anti-seize products • AccuTrack® • compounds, lubricants and sealants • Air Sentry® • contamination control • BioRail® • desiccant breather filtration products • Deacon® • industrial maintenance and repairs • Envirolube® XE Extreme • lubricant management systems • Extreme® • operations solutions • Gearmate® 1000 ICT • rail friction modifiers • Jet-Lube® • sealants • Kopr-Kote® • Matrix® • NCS-30® ECF TM • OilSafe® • RailArmor® • Run-N-Seal® ECF TM • TOR Armor® • Whitmore® 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.
These products enhance, repair or condition the internal working systems of industrial systems and are critical to ensuring safe, efficient and effective long-term operational integrity. 3 Table of Contents Our key product types and brand names are shown below in alphabetical order: Product Types Brand Names • anti-seize products • AccuTrack® • compounds, lubricants and sealants • Air Sentry® • contamination control • BioRail® • desiccant breather filtration products • Deacon® • industrial maintenance and repairs • Envirolube® XE Extreme • lubricant management systems • Extreme® • operations solutions • Gearmate® 1000 ICT • rail friction modifiers • Jet-Lube® • sealants • Kopr-Kote® • Matrix® • NCS-30® ECF TM • OilSafe® • RailArmor® • Rocket Wrap® • Run-N-Seal® ECF TM • TOR Armor® • Whitmore® 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 the calendar year ended December 31, 2022, our total recordable incident rate ("TRIR") for employees was 1.9, which was a slight increase over the prior calendar year and included the TRIR performance of recently-acquired companies. For the first three months of calendar 2023, our TRIR was 1.0.
For the calendar year ended December 31, 2023, our total recordable incident rate ("TRIR") for employees was a historically low rate of 0.9, which included the TRIR performance of recently-acquired companies. For the first three months of calendar 2024, our TRIR was 1.1.
Amid the COVID-19 pandemic, we worked closely with our customers to provide them with the products and services that they need to continue conducting their operations.
Through the height of the COVID-19 pandemic, we worked closely with our customers to provide them with the products and services they needed to continue conducting their operations.
Our key product types and brand names are shown below in alphabetical order: Product Types Brand Names • architectural railings and metals • Balco® Expansion Joint Systems • fire and smoke protection solutions • BlazeSeal TM • fire stopping solutions • Greco® Architectural Railings & Metals • pre-engineered and custom architectural building components • IllumiTread TM • Metacaulk® • MetaflexPro TM • Smoke Guard® Elevator Protection • Smoke Guard® Large Curtain Solutions • Smoke Guard® Perimeter Protection New Product Development – Strategic investment in new product innovation, technical advancement, and customer driven product development enhances demand for our products and enriches relationships with end-users.
The safety and sustainability of our engineered building products enables them to be easily incorporated into the Leadership in Energy and Environmental Design (“LEED”) building market. 4 Table of Contents Our key product types and brand names are shown below in alphabetical order: Product Types Brand Names • architectural railings and metals • Balco® Expansion Joint Systems • fire and smoke protection solutions • BlazeSeal TM • fire stopping solutions • Greco® Architectural Railings & Metals • pre-engineered and custom architectural building components • IllumiTread TM • Metacaulk® • MetaflexPro TM • Smoke Guard® Elevator Protection • Smoke Guard® Large Curtain Solutions • Smoke Guard® Perimeter Protection New Product Development – Strategic investment in new product innovation, technical advancement, and customer-driven product development enhances demand for our products and enriches our relationships with end-users.
While products are sold throughout the year, revenues tend to peak during the spring and summer months. Engineered Building Solutions Our Engineered Building Solutions segment provides primarily code-driven, life-safety products that are engineered to provide aesthetically-pleasing solutions for the construction, refurbishment and modernization of commercial, institutional and multi-family residential buildings.
Engineered Building Solutions Our Engineered Building Solutions segment provides primarily code-driven, life safety products that are engineered to provide aesthetically-pleasing solutions for the construction, refurbishment and modernization of commercial, institutional and multi-family residential buildings.
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 an employee stock ownership plan ("ESOP"), a defined contribution plan ("401(k)"), paid time off, health and wellness care and college tuition reimbursement.
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 an employee stock ownership plan ("ESOP"), a defined contribution plan ("401(k)"), paid time off and health and wellness care. 7 Table of Contents As of March 31, 2024, we employed approximately 2,600 individuals globally.
We compete primarily on the basis of product differentiation, superior performance and quality and customer-centric service. When compared to many commodity consumables, the product sales cycle is often long, typically resulting in quantified, verified and repeat product performance being the key driver of buying decisions, rather than price.
When compared to many commodity consumables, the product sales cycle is often long, typically resulting in quantified, verified and repeat product performance being the key driver of buying decisions, rather than price.
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.
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.
Approximately 90 employees received one or both of these forms of equity awards in fiscal 2023. Our equity compensation plans are designed to promote long-term performance, as well as to create long-term employee retention, continuity of leadership and an ownership culture whereby management and employees think and act as shareholders of the Company.
Our equity compensation plans are designed to promote long-term performance, as well as to create long-term employee retention, continuity of leadership and an ownership culture whereby management and employees think and act as shareholders of the Company.
Our company-wide (all employees) voluntary retention rate (excluding retirements) was 83%, representing a 4% improvement from the prior fiscal year.
Our company-wide (all employees) voluntary retention rate (excluding retirements) was 83%, which reflects the same retention rate from the prior fiscal year.
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.
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 team is located in Rockwall, Texas and actively targets additional end markets for product use and penetration.
We Innovate New Products to Accelerate Organic Growth The collaborative relationships and open feedback channels we have with our distributors and end-user 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.
In addition, we seek to leverage our existing customer base to cross-sell our products and solutions across our three business segments, thereby driving organic growth. 6 Table of Contents 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.
In particular, we have continued to focus on the health and safety practices at our Vietnam facility since the acquisition in December 2020 through training and equipment upgrades.
Safety awareness and employee engagement programs have been implemented at the Company’s facilities and have generated meaningful reductions in workplace safety incidents. In particular, we have continued to focus on the health and safety practices at our Vietnam facility since the acquisition in December 2020 through training and equipment upgrades.
Employee feedback from the survey indicated our overall employee engagement score remains high and in January 2023, we received the Great Place To Work® Certification™.
Employee feedback from the survey indicated our overall employee engagement score remains high and in February 2024, we received the Great Place To Work® Certification™ marking the second consecutive year that we have received the award.
In the fire and smoke protection product category, we compete with McKeon, US Smoke & Fire, Won Door and others, typically based on product quality, knowledge of building codes and customer service.
In the fire and smoke protection solutions category, we compete with McKeon, US Smoke & Fire, Won Door and others, typically based on product quality, knowledge of building codes and customer service. In the architecturally-specified building component, we compete primarily with Construction Specialties, Emseal and InPro on the basis of product quality, price and driving architectural specifications.
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.
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.
Our 401(k) plan has a 96% participation rate, which is significantly higher than the recognized industry benchmark of approximately 65% according to the ASPPA (American Society of Pension Professionals & Actuaries). Current and former domestic employees who have participated in our ESOP collectively own approximately 3% of the company.
Our 401(k) plan has a 91% participation rate, which is significantly higher than the recognized industry benchmark of approximately 63% according to Principal's manufacturing benchmark. Current and former domestic employees who have participated in our ESOP collectively own approximately 3% of the company. We believe this ESOP strongly aligns the interests of our employees with those of our stockholders.
Our team of sales representatives, engineers and other technical personnel continues to proactively collaborate with our distributors and contractors 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 three business segments, thereby driving organic growth.
Our team of sales representatives, engineers and other technical personnel continues to proactively collaborate with our distributors and contractors to enhance and adapt existing products and solutions to meet evolving customer needs.
Additionally, we believe Whitmore's 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.
For example, RectorSeal's No. 5 ® pipe thread sealant is widely regarded as an industry standard for thread sealants for HVAC/R, plumbing and electrical applications. Additionally, we believe Whitmore's 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.
As we have managed through supply chain challenges caused by the COVID-19 pandemic over the last several years, we continue to take proactive steps to limit the impact of current and anticipated supply chain challenges.
Utilizing our supply chain management experience and expertise, honed through successful management of supply chain challenges caused by the COVID-19 pandemic, we continue to take proactive steps to limit the impact of current and anticipated supply chain challenges.
As of March 31, 2023, we employed approximately 2,400 individuals globally. Regionally, approximately 1,100 of our employees are in North America, approximately 1,300 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 2,000 hourly employees.
Regionally, approximately 1,300 of our employees are in North America, approximately 1,300 are in Asia Pacific, and approximately 10 are in Europe, the Middle East and Africa. Our workforce is made up of approximately 460 salaried employees and 2,100 hourly employees. Of these employees, approximately 1.7% of our U.S. workforce is represented by unions.
No unionized facility accounted for more than 10% of our consolidated revenues for the fiscal year ended March 31, 2023. We assess employee engagement through targeted surveys, which provide feedback on a variety of subjects including safety, communications, diversity and inclusion, performance management, development opportunities, respect and recognition and management support.
We assess employee engagement through targeted surveys, which provide feedback on a variety of subjects including safety, communications, diversity and inclusion, performance management, development opportunities, respect and recognition and management support.
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. Customers – Our primary customers are wholesalers and distributors in the HVAC/R and plumbing end markets. Some of these are single location distributors, the majority are regional or national with hundreds of locations.
Most of our products are sold through distribution channels, and we compete in this space by leveraging the breadth of our product lines, customer service and pricing. Customers – Our primary customers are wholesalers and distributors in the HVAC/R and plumbing end markets.
We believe this ESOP strongly aligns the interests of our employees with those of our stockholders. We maintain a culture that engages and rewards performance of key leaders that is supported through LTIP, an equity compensation plan through which employees receive equity awards in the form of restricted common stock and performance shares.
We maintain a culture that engages and rewards the performance of key leaders that is supported through LTIP, an equity compensation plan through which employees receive equity awards in the form of restricted common stock and performance shares. More than 100 employees received one or both of these forms of equity awards in fiscal 2024.
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.
The strong, long-term relationships we have developed with our wholesale distribution partners and exclusive dealers position 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.
For example, in all 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.
For example, in all of our reportable segments, we have taken actions to consolidate our 5 Table of Contents manufacturing footprint and distribution centers in order to optimize capacity, improve efficiency and leverage technologies while enhancing product quality.
In the products serving the HVAC/R end market category, we compete with DiversiTech, DuraVent, Intermatic, Nu-Calgon, Little Giant, Supco and others. In the products serving the plumbing end market category, we compete with IPS, J.R. Smith, Mainline, Oatey and others.
Competitors range from small entrepreneurial companies with a single product, to large multinational original equipment manufacturers (“OEMs”). In the products serving the HVAC/R end market category, we compete with DiversiTech, DuraVent, Intermatic, Little Giant, NSI Industries, Nu-Calgon, RGF and others. In the products serving the plumbing end market category, we compete with BrassCraft, IPS, J.R. Smith, Mainline, Oatey and others.
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.
We focus on product enhancements and product line extensions that are designed to meet the specific application needs of the professional trades. 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.
We manufacture the majority of our mechanical and chemical products internally, we strategically engage third-party manufacturers for outsourced products and we act as a master distributor for certain products. We ensure the quality of internally- and externally-manufactured products through our stringent quality control review procedures backed by our "RectorSeal to the Rescue" commitment around quality, warranty and differentiated support.
We ensure the quality of in-house and outsourced manufactured products through our stringent quality control review procedures backed by our "RectorSeal to the Rescue" commitment around quality, warranty and differentiated support.
We acquire raw materials and components from numerous sources, and we do not depend on a single source of supply for any significant amount of raw materials and components.
Raw Materials and Suppliers We rely on suppliers and commodity markets to secure components and raw materials such as base oils, copper flakes, steel, aluminum, polyvinyl chloride and tetra-hydrofuran. We acquire raw materials and components from numerous sources, and we do not depend on a single source of supply for any significant amount of raw materials and components.
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 the professional trades.
We invested more than $140.0 million for the multiple acquisitions made in fiscal 2022, 2023 and 2024. 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.
Of these employees, approximately 1.8% of our U.S. workforce is represented by unions. We also have an employee organization in Vietnam. We believe that relations with our employees throughout our operations are generally positive, including those employees represented by unions or employee organizations.
We also have an employee organization in Vietnam. We believe that relations with our employees throughout our operations are generally positive, including those employees represented by unions or employee organizations. No unionized facility accounted for more than 10% of our consolidated revenues for the fiscal year ended March 31, 2024.
While we continuously work to build on our Company's strong culture, these scores indicate that we are continuing to raise the bar to increase pride, optimism and engagement across the Company and strive to create the best employee experience. 7 Table of Contents As a result of maintaining a consistent focus on our employee-centric culture, the retention rate (excluding retirements) for our high performance talent in the fiscal year ended March 31, 2023 was 91%.
While we continuously work to build on our Company's strong culture, our scores indicate that we are continuing to raise the bar to increase pride, optimism and engagement across the Company and strive to create the best employee experience.
Specialized Reliability Solutions Our Specialized Reliability Solutions segment provides products for increasing the reliability, efficiency, performance and lifespan of industrial assets. Through our commercial team and supply chain partners, our Specialized Reliability Solutions segment delivers products that protect assets in the most demanding environments and extreme conditions and solve equipment maintenance challenges.
Through our commercial team and supply chain partners, our Specialized Reliability Solutions segment delivers products that solve equipment maintenance challenges and protect assets in the most demanding environments and extreme conditions. Our customers depend on their mission-critical equipment, and thus they depend on our trusted specialty lubricants, compounds, sealants, desiccant breather filtration products, and lubrication management systems.
The development team is located in Rockwall, Texas and actively targets additional end markets for product use and penetration. 4 Table of Contents Competition – In general, our products demand premium valuation, as compared to commodity products, and competitors tend to be varied and include global, regional and local companies that may be large or small.
Competition – In general, our products demand premium valuation, as compared to 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.
These products are generally sold domestically; however, a small portion is sold internationally through similar channels, and a small number of OEMs purchase these products directly. Seasonality – A significant portion of our products are sold into the HVAC/R market, which is seasonal by nature.
Some of these are single location distributors, while the majority are regional or national distributors with up to hundreds of locations. Our products are generally sold domestically; however, a small portion is sold internationally through similar channels. A small number of OEMs purchase these products directly.
These high performance products are typically used in harsh operating conditions, including extreme heat and pressure and chemical exposure, where commodity products would fail.
Our Specialized Reliability Solutions segment manufactures and supplies highly specialized consumables that impart or enhance properties such as lubricity, anti-seize qualities, friction, sealing and heat control. Our high performance products are typically used in harsh operating conditions, including extreme heat and pressure and chemical exposure, where commodity products would fail.
In the architecturally-specified building component, we compete primarily with Construction Specialties, Emseal and InPro on the basis of product quality, price and driving architectural specifications. 3 Table of Contents Customers – 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.
Customers – 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 components and fire stopping solutions are primarily sold through independent sales representatives and building product distributors to general contractors or subcontractors.
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.
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. Our commitment to these health and safety practices was evidenced in how we responded to and managed through the COVID-19 pandemic.
Architecturally-specified building components are primarily sold through independent sales representatives and building product distributors to general contractors or sub-contractors. Engineered Building Solutions' end use customers include multi-family residential buildings, educational facilities or institutions, warehouses, construction companies, plant maintenance customers, building contractors and repair service companies, among others.
Engineered Building Solutions' end use customers include multi-family residential buildings, educational facilities and institutions, warehouses, construction companies, plant maintenance companies, building contractors and repair service companies, among others. Our Competitive Strengths As discussed in this section, we believe we have a variety of competitive strengths.
We develop new products and modify existing products in our research and development (“R&D”) labs in Houston, Texas and Cle Elum, Washington. Competition – Our competition in the Contractor Solutions segment is varied. Competitors range from small entrepreneurial companies with a single product, to large multinational original equipment manufacturers (“OEMs”).
We also actively monitor the competitive landscape and develop new products and modify existing products in our research and development (“R&D”) labs co-located with our manufacturing sites in Royse City, Texas; Fall River, Massachusetts; Houston, Texas; Dong Nai, Vietnam; and Cle Elum, Washington. Competition – Our competition in the Contractor Solutions segment is varied.
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.
Broad Portfolio of Industry Leading Products and Solutions In our targeted end markets, we have industry-leading 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.
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 position us to successfully introduce organically developed products and acquired products.
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.
Removed
The safety and sustainability of our engineered building products enables them to be easily incorporated into the Leadership in Energy and Environmental Design (“LEED”) building market.
Added
We manufacture the majority of our mechanical and chemical products in-house, and we also strategically engage third-party manufacturers for outsourced products and act as a master distributor for other products.
Removed
Our customers depend on their mission-critical equipment, and thus they depend on our trusted specialty lubricants, compounds, sealants, desiccant breather filtration products, and lubrication management systems. Our Specialized Reliability Solutions segment manufactures and supplies highly specialized consumables that impart or enhance properties such as lubricity, anti-seize qualities, friction, sealing and heat control.
Added
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. Specialized Reliability Solutions Our Specialized Reliability Solutions segment provides products for increasing the reliability, efficiency, performance and lifespan of industrial assets.
Removed
These products enhance, repair or condition the internal working systems of industrial systems and are critical to ensuring safe, efficient and effective long-term operational integrity.
Added
In the fourth quarter of fiscal year ended March 31, 2024, we acquired Dust Free, LP., based in Royse City, Texas, which offers an extensive line of patented products for residential and commercial indoor air quality and HVAC/R applications.
Removed
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's No. 5 ® pipe thread sealant is widely regarded as an industry standard for thread sealants for HVAC/R, plumbing and electrical applications.
Added
As a result of maintaining a consistent focus on our employee-centric culture, the retention rate (excluding retirements) for our high performance talent in the fiscal year ended March 31, 2024 was 94%, representing a 3% improvement from prior fiscal year.
Removed
In the third quarter of the fiscal year ended March 31, 2021, we acquired T.A. Industries, Inc. (“TRUaire”), a leading manufacturer of GRD for the residential and commercial HVAC/R end market, based in Santa Fe Springs, California. We invested more than $490 million for the multiple acquisitions made in fiscal 2021, 2022 and 2023.
Added
Government Regulations Our operations are subject to an array of foreign, federal, state and local regulatory requirements including, but not limited to trade, labor and environmental, health and safety matters. Management believes that our business is operated in material compliance with all such regulations.
Removed
Once acquired, we strive to utilize our extensive distribution networks to increase revenue by selling those products and solutions to our diversified customer base. 6 Table of Contents Raw Materials and Suppliers We rely on suppliers and commodity markets to secure components and raw materials such as base oils, copper flakes, steel, aluminum, polyvinyl chloride and tetra-hydrofuran.
Removed
The COVID-19 pandemic underscored the importance of keeping our employees safe and healthy and our focus on employee health and safety was evident in how we responded to it.
Removed
Our actions included adding work from home flexibility, encouraging those who are sick or have symptoms to stay home, increasing cleaning protocols across all locations, providing regular communications regarding health and safety protocols and procedures, establishing physical distancing and personal protective equipment procedures for employees, providing masks and cleaning supplies, implementing protocols to address actual and suspected COVID-19 cases and potential exposure and limiting non-essential domestic and international travel for all employees.
Removed
It is our goal to create a positive and dynamic workplace where all employees can flourish.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

28 edited+4 added−9 removed138 unchanged
Biggest changeOur 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.
Biggest changeThe 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.
Existing and future 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 and raw materials, product demand, or manufacturing.
Existing and future climate change-driven environmental and social regulations may negatively impact our business, customers, or suppliers, in terms of availability and cost of natural resources and raw materials, product demand, or manufacturing.
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, including Vietnam.
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 in North America, Europe, the Middle East, Australia and Asia, including Vietnam.
Physical risks from climate change could, among other things, include an increase in extreme weather events (such as floods, droughts, tornados or hurricanes), limitations on availability of water and reliable energy, and the health and well-being of individuals in communities where we conduct business.
Physical risks from climate change could, among other things, include an increase in extreme weather events (such as floods, droughts, tornadoes or hurricanes), limitations on availability of water and reliable energy, and the health and well-being of individuals in communities where we conduct business.
If these technologies, systems, products or services are damaged, cease to function properly, are compromised due to employee or third-party contractor error, user error, malfeasance, system errors, or other vulnerabilities, or are subject to cybersecurity attacks, such as those involving denial of service attacks, unauthorized access, malicious software, or other intrusions, including by criminals, nation states or insiders, our business may be adversely impacted.
If these technologies, systems, products or services are damaged, cease to function properly, are compromised due to employee or third-party contractor error, user error, malfeasance, system errors, or other vulnerabilities, or are subject to cybersecurity attacks, such as those involving denial of service attacks, unauthorized access, malicious software, or other intrusions, including by criminals, nation states or insiders, our business may be adversely 13 Table of Contents impacted.
The outcome of new legislation or regulation in the U.S. and other jurisdictions in which we operate may result in fees or restrictions on certain activities or materials and new or additional requirements, including to fund energy efficiency activities or renewable energy use and to disclose information regarding our greenhouse gas emissions performance, renewable energy usage and efficiency, waste generation and recycling 11 Table of Contents rates, climate-related risks, opportunities and oversight and related strategies and initiatives across our global operations.
The outcome of new legislation or regulation in the U.S. and other jurisdictions in which we operate may result in fees or restrictions on certain activities or materials and new or additional requirements, including directives to fund energy efficiency activities or renewable energy use and to disclose information regarding our greenhouse gas emissions performance, renewable energy usage and efficiency, waste generation and recycling rates, climate-related risks, opportunities and oversight and related strategies and initiatives across our global operations.
Accordingly, any disruptions to a critical suppliers' operations or the availability of key product inputs could have a material adverse effect on our business and results of operations. Macroeconomic conditions and the COVID-19 pandemic have caused supply chains for many companies to be interrupted, slowed or temporarily rendered inoperable.
Accordingly, any disruptions to a critical suppliers' operations or the availability of key product inputs could have a material adverse effect on our business and results of operations. Macroeconomic conditions have caused supply chains for many companies to be interrupted, slowed or temporarily rendered inoperable.
Some of these systems are maintained or operated by third-party contractors, including cloud-based systems. Despite our efforts to secure our information systems from cyber-security attacks or breaches, our 13 Table of Contents information technology systems may be vulnerable to attacks by hackers or breached or disrupted due to employee error, malfeasance or other disruptions.
Some of these systems are maintained or operated by third-party contractors, including cloud-based systems. Despite our efforts to secure our information systems from cyber-security attacks or breaches, our information technology systems may be vulnerable to attacks by hackers or breached or disrupted due to employee error, malfeasance or other disruptions.
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.
The effect of such tax law changes or regulations and interpretations, 16 Table of Contents 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.
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.
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 tarnishing the value of our brand or relationships with our customers.
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; • changes in local political, economic, social and labor conditions; • potential disruptions from wars and military conflicts, including Russia's invasion of Ukraine; • future levels of revenues, operating margins, income from operations, net income or earnings per share; 20 Table of Contents • the ability to respond to anticipated inflationary pressure, including reductions on consumer discretionary income and our ability to pass along rising costs through increased selling prices; • anticipated levels of demand for our products and services; • the actual impact to supply, production levels and costs from global supply chain logistics and transportation challenges • 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; • 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.
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; • changes in local political, economic, social and labor conditions; • potential disruptions from wars and military conflicts, including geopolitical uncertainty due to the conflicts in the Middle East and Ukraine; 20 Table of Contents • future levels of revenues, operating margins, income from operations, net income or earnings per share; • the ability to respond to anticipated inflationary pressure, including reductions on consumer discretionary income and our ability to pass along rising costs through increased selling prices; • anticipated levels of demand for our products and services; • the actual impact to supply, production levels and costs from global supply chain logistics and transportation challenges; • 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; • 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.
Despite our efforts to timely comply with climate change initiatives, implement measures to improve our operations and execute on our related strategies and initiatives, any actual or perceived failure to comply with new or additional requirements or meet stakeholder expectations with respect to the impacts of our operations on the environment and related strategies and initiatives may result in adverse publicity, increased litigation risk and adversely affect our business and reputation, which could adversely impact our business, financial condition, results of operation and cash flow.
Despite our efforts to timely comply with climate change initiatives, implement 11 Table of Contents measures to improve our operations and execute on our related strategies and initiatives, any actual or perceived failure to comply with new or additional requirements or meet stakeholder expectations with respect to the impacts of our operations on the environment and related strategies and initiatives may result in adverse publicity and increased litigation risk, which could adversely impact our business, financial condition, results of operation and cash flow.
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, 2023, we had approximately 2,400 full-time employees, of which 15 were subject to collective bargaining agreements in the United States, and approximately 1,300 of which are located in Vietnam.
As a manufacturing company, we rely on a positive relationship with our employees to produce our products and maintain our manufacturing processes and productivity. As of March 31, 2024, we had approximately 2,600 full-time employees, of which 15 were subject to collective bargaining agreements in the United States, and approximately 1,300 of which are located in Vietnam.
In response to increasing inflation, the U.S. Federal Reserve began to raise interest rates in March 2022 has done so multiple times since then, and has kept open the possibility of further 12 Table of Contents increases. We expect inflationary pressures to impact customer behavior during calendar year 2023.
In response to increasing inflation, the U.S. Federal Reserve began to raise interest rates in March 2022, has done so multiple times since then, and has kept open the possibility of further increases. We expect inflationary pressures to impact customer behavior during calendar year 2024.
Any adverse occurrence, including among others, industry slowdown, recession, public health crises (including the COVID-19 pandemic), political instability, costly or constraining government policies, laws and regulations, armed hostilities (including any impacts from Russia’s invasion of the Ukraine and economic or trade sanctions enacted to condemn or counteract Russian aggression), terrorism, excessive inflation (including the current high inflationary environment), interest rates, tax rates, unemployment rates, high labor costs, labor disturbances, prolonged disruptions in one or more of our customers' production schedules, supply chain disruptions (including those caused by industry capacity constraints, labor shortages, raw material availability and transportation and logistics delays and constraints), business disruptions due to cybersecurity incidents and other economic factors have in the past and could in the future materially adversely affect our business, financial condition, and operating results and that of our customers and third-party suppliers.
Any adverse occurrence, including among others, industry slowdown, recession, public health crises, political instability, costly or constraining government policies, laws and regulations, armed hostilities (including conflicts in the Middle East and Ukraine), terrorism, excessive inflation (including the current high inflationary environment), interest rates, tax rates, unemployment rates, high labor costs, labor disturbances, prolonged disruptions in one or more of our customers' production schedules, supply chain disruptions (including those caused by industry capacity constraints, labor shortages, raw material availability and transportation and logistics delays and constraints), business disruptions due to cybersecurity incidents and other economic factors have in the past and could in the future materially adversely affect our business, financial condition, and operating results and that of our customers and third-party suppliers.
As of March 31, 2023, we had goodwill of $242.7 million recorded in our consolidated balance sheet. We evaluate the recoverability of recorded goodwill annually, as well as when we changed reporting units and when events or circumstances indicate the possibility of impairment.
As of March 31, 2024, we had goodwill of $247.2 million recorded in our consolidated balance sheet. We evaluate the recoverability of recorded goodwill annually, as well as when we changed reporting units and when events or circumstances indicate the possibility of impairment.
As of March 31, 2023, we had a reserve of $16.5 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.
As of March 31, 2024, we had a reserve of $17.0 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.
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.
In addition, our inability to enhance or develop products that can meet the evolving needs of our customers could cause our products to lag behind 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.
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.
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.
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. 16 Table of Contents 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.
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.
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.
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.
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.
Current or future efforts by the government to manage inflationary pressures or stimulate the economy may result in unintended economic consequences, which could have a direct and indirect adverse impact on our business and results of operations. 12 Table of Contents 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.
Whether or not SOFR attains market acceptance as a LIBOR replacement tool remains in question. As such, the future of SOFR at this time remains uncertain. 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.
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.
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.
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. Market, Economic and Geopolitical Risks Adverse changes in global economic conditions, particularly in the U.S., could materially adversely affect our financial position, results of operations and cash flows.
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.
Further, some of our competitors benefit from advantageous cost positions 10 Table of Contents 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.
A number of government authorities and agencies have introduced, or are contemplating, regulatory changes to address climate change, including the regulation and disclosure of greenhouse gas emissions.
A number of government authorities and agencies have introduced, or are contemplating, regulatory changes to address climate change, including the regulation and disclosure of greenhouse gas emissions. For example, on March 6, 2024, the SEC adopted final rules to enhance and standardize climate-related disclosures by requiring registrants to disclose certain climate-related information in registration statements and periodic reports.
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.
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.
With inflation, the cost of capital has increased, and the purchasing power of our and our end-users’ cash resources has declined. Current or future efforts by the government to manage inflationary pressures or stimulate the economy may result in unintended economic consequences, which could have a direct and indirect adverse impact on our business and results of operations.
With inflation, the cost of capital has increased, and the purchasing power of our and our end-users’ cash resources has declined.
Removed
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.
Added
Certain end markets that we serve are cyclical, which can cause significant fluctuations in our results of operations and cash flows.
Removed
In particular, the COVID-19 pandemic and subsequent supply chain disruptions and uncertainties have had a significant negative impact on the global economy since 2020, including negatively impacting the global supply chain and increasing the cost of materials and operations.
Added
On March 21, 2024, the Judicial Panel on Multidistrict Litigation issued an order consolidating the petitions for review in the U.S. Court of Appeals for the Eighth Circuit; and, on April 4, 2024, the SEC issued an order that the climate-related disclosure rules were stayed pending the completion of judicial review of the consolidated Eighth Circuit petitions.
Removed
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 10 Table of Contents Reduced demand may also hinder our growth plans and otherwise delay or impede execution of our long-term strategic plan and capital allocation strategy.
Added
If the rules become effective and are not overturned, we will be required to provide the enhanced climate-related disclosures.
Removed
The phase-out of LIBOR and transition to SOFR as a benchmark interest rate will have uncertain and possibly adverse effects. London Inter-bank Offered Rate ("LIBOR") has been the subject of national, international, and other regulatory guidance and proposals for reform.
Added
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.
Removed
On March 5, 2021, the United Kingdom’s Financial Conduct Authority published the dates that the use of LIBOR as an index for commercial loans will be phased out.
Removed
Foreign currency indices, including the British pound, the Euro, and Swiss franc, along with the U.S. dollar 1-week and 2-month settings ceased after December 31, 2021, while the remaining U.S. dollar settings will cease after June 30, 2023.
Removed
In December 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-06, “Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848,” which extended the sunset date from December 31, 2022 to December 31, 2024.
Removed
On December 15, 2022, we entered into an amendment to our Second Amended and Restated Credit Agreement, dated as of May 18, 2021, and as part of that amendment we transitioned from the use of LIBOR to the Secured Overnight Funding Rate (“SOFR”) in such agreement. We have no other material financing agreements that use LIBOR as an interest index.
Removed
There is no guarantee that the transition from LIBOR to SOFR will not result in financial market disruptions, significant increases in benchmark rates, or borrowing costs to borrowers, any of which could affect our interest expense and earnings and may have an adverse effect on our business, results of operations, financial condition, and stock price.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed3 unchanged
Biggest changeLocation Use Segment Square Footage Owned/Leased Boise, Idaho Manufacturing, Office and R&D Engineered Building Solutions 42,000 Leased Cle Elum, Washington Distribution Center, Manufacturing, Office, R&D and Warehouse Contractor Solutions 180,000 Leased Dong Nai, Vietnam Manufacturing and Office Contractor Solutions 634,000 Owned Fall River, Massachusetts Manufacturing and Office Contractor Solutions 140,200 Leased Greenwood, Indiana Distribution Center & Office Contractor Solutions 54,000 Leased Houston, Texas Manufacturing, Office, R&D and Warehouse Contractor Solutions 253,900 Owned Houston, Texas Distribution Center & Office Contractor Solutions 150,000 Leased Hudson, Florida Manufacturing, Office and R&D Engineered Building Solutions 40,000 Leased Jacksonville, Florida Distribution Center & Office Contractor Solutions 217,000 Leased North East, Maryland Distribution Center & Office Contractor Solutions 150,000 Leased Rockwall, Texas Manufacturing, Office, R&D and Warehouse Specialized Reliability Solutions 227,600 Owned Terrell, Texas Manufacturing Specialized Reliability Solutions 101,000 Leased Santa Fe Springs, California Distribution Center & Office Contractor Solutions 240,000 Leased Wichita, Kansas Manufacturing and Office Engineered Building Solutions 42,800 Owned Windsor, Ontario, Canada Manufacturing, Office and R&D Engineered Building Solutions 42,000 Leased We believe that our facilities are adequate for our current operations.
Biggest changeLocation Use Segment Square Footage Owned/Leased Boise, Idaho Manufacturing, Office and R&D Engineered Building Solutions 42,000 Leased Cle Elum, Washington Distribution Center, Manufacturing, Office, R&D and Warehouse Contractor Solutions 180,000 Leased Dong Nai, Vietnam Manufacturing and Office Contractor Solutions 634,000 Owned Fall River, Massachusetts Manufacturing, Office and R&D Contractor Solutions 140,200 Leased Greenwood, Indiana Distribution Center & Office Contractor Solutions 54,000 Leased Houston, Texas Manufacturing, Office, R&D and Warehouse Contractor Solutions 253,900 Owned Houston, Texas Distribution Center & Office Contractor Solutions 150,000 Leased Hudson, Florida Manufacturing, Office and R&D Engineered Building Solutions 40,000 Leased Jacksonville, Florida Distribution Center & Office Contractor Solutions 217,000 Leased North East, Maryland Distribution Center & Office Contractor Solutions 150,000 Leased Rockwall, Texas Manufacturing, Office, R&D and Warehouse Specialized Reliability Solutions 227,600 Owned Royse City, Texas Manufacturing, Office and Warehouse Contractor Solutions 94,500 Leased Tejon Ranch, California (a) Distribution Center & Office Contractor Solutions 241,000 Leased Terrell, Texas Distribution Specialized Reliability Solutions 101,000 Leased Santa Fe Springs, California (b) Distribution Center & Office Contractor Solutions 240,000 Leased Wichita, Kansas Manufacturing and Office Engineered Building Solutions 75,000 Leased Windsor, Ontario, Canada Manufacturing, Office and R&D Engineered Building Solutions 42,000 Leased (a) Lease starts in May 2024 (b) Lease ends in August 2024 We believe that our facilities are adequate for our current operations.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed1 unchanged
Biggest changeWe 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. 22 Table of Contents
Biggest changeWe 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. 23 Table of Contents

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+0 added−0 removed3 unchanged
Biggest changeThe custom peer group consists of the following: Aaon, Inc Columbus McKinnon Corp LSB Industries, Inc Standex International Armstrong Industries, Inc CTS Corporation Methode Electronics, Inc. Tredegar Corp. Astec Industries, Inc. Futurefuel Corp. Mueller Water Products Barnes Group Gorman-Rupp Co. PGT Innovations Chase Corporation Innospec Inc. Quaker Houghton This graph is furnished and not filed with the SEC.
Biggest changeMueller Water Products Astec Industries, Inc. Gorman-Rupp Co. Standex International Barnes Group Innospec Inc. Tredegar Corp. Columbus McKinnon Corp LSB Industries, Inc This graph is furnished and not filed with the SEC.
Issuer Purchases of Equity Securities Note 12 to our consolidated financial statements included in Item 8 of this Annual Report includes a discussion of our share repurchase program. The following table represents the number of shares repurchased during the quarter ended March 31, 2023.
Issuer Purchases of Equity Securities Note 12 to our consolidated financial statements included in Item 8 of this Annual Report includes a discussion of our share repurchase program. The following table represents the number of shares repurchased during the quarter ended March 31, 2024.
(b) Represents shares tendered by employees to satisfy minimum tax withholding amounts related to the vesting of equity awards. 24 Table of Contents Stock Performance Chart The following graph compares the cumulative total shareholder return on our common stock from April 1, 2018 through March 31, 2023 compared with the Russell 2000 Index, of which CSWI is a component, and a composite custom peer group, which was selected on an industry basis and is periodically reviewed and updated (if necessary) to ensure it provides reasonable comparability based on products offered and end markets served by CSWI.
(b) Includes 28 shares tendered by employees to satisfy minimum tax withholding amounts related to the vesting of equity awards. 25 Table of Contents Stock Performance Chart The following graph compares the cumulative total shareholder return on our common stock from April 1, 2019 through March 31, 2024 compared with the Russell 2000 Index, of which CSWI is a component, and a composite custom peer group, which was selected on an industry basis and is periodically reviewed and updated (if necessary) to ensure it provides reasonable comparability based on products offered and end markets served by CSWI.
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 22, 2023, there were 326 holders of record of our common stock.
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 20, 2024, there were 314 holders of record of our common stock.
Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Program (a) Maximum Number of Shares (or Approximate Dollar Value) That May Yet Be Purchased Under the Program (in millions) January 1 - 31 67 (b) $ 119.49 — $ 100.0 February 1 - 28 — — — 100.0 March 1 - 31 — — — 100.0 67 — (a) On December 15, 2022, we announced that our Board of Directors authorized a new program to repurchase up to $100.0 million of our common stock, which replaced a previously announced $100.0 million program.
Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Program (a) Maximum Number of Shares (or Approximate Dollar Value) That May Yet Be Purchased Under the Program (in millions) January 1 - 31 7,511 (a) (b) $ 209.22 7,483 $ 92.6 February 1 - 29 6,565 (a) 225.90 6,565 91.1 March 1 - 31 6,740 (a) 233.40 6,740 89.5 20,816 20,788 (a) On December 16, 2022, we announced that our Board of Directors authorized a new program to repurchase up to $100.0 million of our common stock, which replaced a previously announced $100.0 million program.
The graph assumes that $100 was invested at the market close on April 1, 2018 and that all dividends were reinvested. The stock price performance of the following graph is not necessarily indicative of future stock price performance.
The graph assumes that $100 was invested at the market close on April 1, 2019 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: Aaon, Inc CTS Corporation Methode Electronics, Inc. Armstrong Industries, Inc Futurefuel Corp.
As of March 31, 2023, 336,347 shares of our common stock had been repurchased for an aggregate amount of $35.7 million under the prior $100.0 million program and no shares had been repurchased under the current $100.0 million program.
As of March 31, 2024, 53,133 shares were repurchased for an aggregate amount of $10.5 million under the current $100.0 million program.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

96 edited+32 added−29 removed68 unchanged
Biggest changeFor the year ended March 31, 2023, our cash provided by operating activities was $121.5 million, as compared with $69.1 million and $66.3 million for the years ended March 31, 2022 and 2021, respectively. • Working capital used cash for the year ended March 31, 2023 due to higher inventories ($11.4 million), lower accounts payable and other current liabilities ($7.0 million), and higher prepaid expenses and other current assets ($1.3 million), partially offset by lower accounts receivable ($1.1 million). • Working capital used cash for the year ended March 31, 2022 due to higher inventories ($49.4 million) and higher accounts receivable ($26.7 million), partially offset by higher accounts payable and other current liabilities ($28.0 million) and lower prepaid expenses and other current assets ($3.5 million). • Working capital used cash for the year ended March 31, 2021 due to higher accounts receivable ($7.2 million), higher prepaid expenses and other assets ($4.2 million) and higher inventory ($3.4 million), partially offset by higher accounts payable and other current liabilities ($13.9 million).
Biggest changeFor the year ended March 31, 2024, our cash provided by operating activities was $164.3 million, as compared with $121.5 million and $69.1 million for the years ended March 31, 2023 and 2022, respectively. • Working capital provided cash for the year ended March 31, 2024 due to higher accounts payable and other current liabilities ($12.3 million), lower inventories ($10.4 million), lower prepaid expenses and other current assets ($4.6 million) and lower other assets ($1.1 million), partially offset by higher accounts receivable ($17.9 million). • Working capital used cash for the year ended March 31, 2023 due to higher inventories ($11.4 million) and lower accounts payable and other current liabilities ($7.0 million), and higher prepaid expenses and other current assets ($1.3 million), partially offset by lower accounts receivable ($1.1 million). • Working capital used cash for the year ended March 31, 2022 due to higher inventory ($49.4 million) and higher accounts receivable ($26.7 million), partially offset by higher accounts payable and other current liabilities ($28.0 million) and lower prepaid expenses and other assets ($3.5 million).
We operate in three business segments: Contractor Solutions, Engineered Building Solutions and Specialized Reliability Solutions. Our products include mechanical products for heating, ventilation, air conditioning and refrigeration ("HVAC/R"), plumbing products, grilles, registers and diffusers ("GRD"), building safety solutions and high-performance specialty lubricants and sealants.
We operate in three business segments: Contractor Solutions, Specialized Reliability Solutions and Engineered Building Solutions. Our products include mechanical products for heating, ventilation, air conditioning and refrigeration ("HVAC/R"), plumbing products, grilles, registers and diffusers ("GRD"), building safety solutions and high-performance specialty lubricants and sealants.
We manufacture and sell products such as engineered railings, smoke and fire protection systems, expansion joints and stair edge nosings for end use customers including multi-family residential buildings, educational facilities or institutions, warehouses, construction companies, plant maintenance customers, building contractors and repair service companies. Sales of these products are driven by architectural specifications and safety codes.
We manufacture and sell products such as engineered railings, smoke and fire protection systems, expansion joints and stair edge nosings for end use customers including multi-family residential buildings, educational facilities or institutions, warehouses, construction companies, plant maintenance customers, building contractors and repair service companies. Sales of these products are driven by architectural specifications and safety and building codes.
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 economic conditions. 29 Table of Contents RESULTS OF OPERATIONS The following discussion provides an analysis of our consolidated results of operations and results for each of our segments.
We 29 Table of Contents 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 economic conditions. RESULTS OF OPERATIONS The following discussion provides an analysis of our consolidated results of operations and results for each of our segments.
The increase was partially due to the acquisitions of Shoemaker, CG, ACG and Falcon ($35.9 million or 5.7%). Excluding the impact of the acquisitions, organic sales increased $95.6 million, or 15.3%, from the prior year due to pricing initiatives. Net revenue increased in all end markets including HVAC/R, architecturally-specified building products, energy, mining, general industrial, rail transportation and plumbing.
Excluding the impact of the acquisitions, organic sales increased $95.6 million, or 15.3%, from the prior year due to pricing initiatives. The increase was partially due to the acquisitions of Shoemaker, CG, ACG and Falcon ($35.9 million or 5.7%). Net revenue increased in all end markets including HVAC/R, architecturally-specified building products, energy, mining, general industrial, rail transportation and plumbing.
Our income tax returns for TRUaire's pre-acquisition periods including calendar years 2018, 2019 and 2020 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.
Our income tax returns for TRUaire's pre-acquisition periods including calendar years 2018, 2019 and 2020 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.
The operations of CG and ACG have been included in our consolidated results of operations and in the operating results of our Contractor Solutions segment since July 8, 2022, the effective date of the acquisition.
The operations of CG and ACG have been included in our consolidated results of operations and in the operating results of our Contractor Solutions segment since the July 8, 2022 date of acquisition.
The operations of Falcon have been included in our consolidated results of operations and in the operating results of our Contractor Solutions segment since October 4, 2022, the effective date of the acquisition.
The operations of Falcon have been included in our consolidated results of operations and in the operating results of our Contractor Solutions segment since the October 4, 2022 date of acquisition.
The cash consideration was funded with cash on hand and borrowings under our existing Revolving Credit Facility (as defined in Note 8). Falcon's products are well-known among the professional trades for supplying enhanced water flow delivery and increased customer satisfaction and supplement our Contractor Solutions segment's existing product portfolio.
The cash consideration was funded with cash on hand and borrowings under our existing Revolving Credit Facility (as defined in Note 8). The Falcon products are well known among the professional trades for supplying enhanced water flow delivery and increased customer satisfaction and supplement our Contractor Solutions segment's existing product portfolio.
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 18% and 19% of our net revenues in the years ended March 31, 2023 and 2022, respectively.
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 19% and 18% of our net revenues in the years ended March 31, 2024 and 2023, respectively.
Energy The energy market represented approximately 7% and 6% of our net revenues in the years ended March 31, 2023 and 2022, respectively. We provide market-leading lubricants and anti-seize compounds, as well as greases, for use in oilfield drilling activity and maintenance of oilfield drilling and valve related equipment.
Energy The energy market represented approximately 6% and 7% of our net revenues in the years ended March 31, 2024 and 2023, respectively. We provide market-leading lubricants and anti-seize compounds, as well as greases, for use in oilfield drilling activity and maintenance of oilfield drilling and valve related equipment.
In conjunction with the acquisition, we agreed to pay an additional $3.7 million, comprised of cash consideration of $1.5 million and 5-year annuity payments (value of $2.2 million) to a third party to secure the related intellectual property. CG and ACG product lines further expand Contractor Solutions’ offering of leading HVAC/R accessories, including lineset covers and HVAC/R condenser protection cages.
In conjunction with the acquisition, we agreed to pay an additional $3.7 million, comprised of cash consideration of $1.5 million and 5-year annuity payments (value of $2.2 million) to a third party to secure the related intellectual property. The CG and ACG products further expand Contractor Solutions’ offering of leading HVAC/R accessories, including lineset covers and HVAC/R condenser protection cages.
Absent deterioration of market conditions, we believe that cash flows from operating and financing activities, primarily Revolver Borrowings, will provide adequate resources to satisfy our working capital, scheduled principal and interest payments on debt, anticipated dividend payments, periodic share repurchases, and anticipated capital expenditure requirements for both our short-term and long-term capital needs.
Absent deterioration of market conditions, we believe that cash flows from operating and financing activities, primarily Revolver Borrowings, will provide adequate resources to satisfy our working capital, scheduled principal and interest payments on debt, anticipated dividend payments, periodic share repurchases, contingent consideration obligations and anticipated capital expenditure requirements for both our short-term and long-term capital needs.
The consolidated tax provision and related accruals include the impact of such reasonably estimable losses 38 Table of Contents 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.
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.
Operating margin of 24.6% for the year ended March 31, 2023 increased as compared to 23.1% for the year ended March 31, 2022. This increase was primarily due to the above-mentioned TRUaire-related expenses incurred in the prior year period that did not recur combined with the positive effect of pricing initiatives.
Operating margin of 24.6% for the year ended March 31, 2023 increased as compared to 23.1% for the year ended March 31, 2022. This increase was primarily due to the 33 Table of Contents above-mentioned TRUaire-related expenses incurred in the prior year period that did not recur combined with the positive effect of pricing initiatives.
During the year ended March 31, 2022, we acquired 100% of the outstanding equity of Shoemaker. The aggregate purchase price for the Shoemaker acquisition was $43.6 million. These acquisitions were funded through a combination of cash on hand, borrowings under our Revolving Credit Facility and stock consideration.
During the year ended March 31, 2022, we acquired 100% of the outstanding equity of Shoemaker for an aggregate purchase price of $43.6 million. These acquisitions were funded through a combination of cash on hand, borrowings under our Revolving Credit Facility and stock consideration.
As compared with the statutory rate for the year ended March 31, 2023, the provision for income taxes was primarily impacted by state tax expense (net of federal benefits), which increased the provision by $2.9 million and effective rate by 2.3%, executive compensation limitation, which increased the provision by $1.6 million and the effective tax rate by 1.2%; impact of GILTI inclusions, which increased the provision by $1.1 million and the effective tax rate by 0.9%; impact of repatriation of foreign earnings, which increased the provision by $0.9 million and the effective rate by 0.7%; and non-deductible expenses, which increased the provision by $0.6 million and the effective tax rate by 0.4%.
As compared with the statutory rate for the year ended March 31, 2023, the provision for income taxes was primarily impacted by the state tax expense, which increased the provision by $2.9 million and the effective rate by 2.3%, executive compensation limitation, which increased the provision by $1.6 million and the effective rate by 1.2%; impact of GILTI inclusions, which increased the provision by $1.1 million and the effective tax rate by 0.9%; impact of repatriation of foreign earnings, which increased the provision by $0.9 million and the effective rate by 0.7% and the additional non-deductible expenses. which increased the provision by $0.6 million and the effective rate by 0.4%.
The reputation of our product portfolio is built on more than 100 well-respected brand names, such as AC Guard TM , Air Sentry®, Cover Guard TM , Deacon®, Falcon Stainless®, Greco®, Jet-Lube®, Kopr-Kote®, Leak Freeze®, Metacaulk®, No. 5®, OilSafe®, Safe-T-Switch®, Shoemaker Manufacturing®, Smoke Guard®, TRUaire® and Whitmore®.
The reputation of our product portfolio is built on more than 100 well-respected brand names, such as AC Guard®, Air Sentry®, Balco®, Cover Guard TM , Deacon®, Dust Free®, Falcon Stainless®, Greco®, Jet-Lube®, Kopr-Kote®, Leak Freeze®, Metacaulk®, No. 5®, OilSafe®, RectorSeal ®, Safe-T-Switch®, Shoemaker Manufacturing®, Smoke Guard®, TRUaire® and Whitmore®.
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.
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 38 Table of Contents that these benefits are more likely than not to be realized.
Cash outflows resulted from: • Net borrowings from our Revolving Credit Facility and the Whitmore Term Loan (as discussed in Note 8 to our consolidated financial statements included in Item 8 of this Annual Report) of $0.2 million, $10.4 million and $231.4 million during the years ended March 31, 2023, 2022 and 2021, respectively. • Payments of $0.7 million of underwriting discounts and fees in connection with amending our Revolving Credit Facility during the year ended March 31, 2023, as discussed in Note 8 to our consolidated financial statements included in Item 8 of this Annual Report. • Proceeds from the redeemable noncontrolling interest shareholder for its investment in the consolidated Whitmore JV of $3.0 million and $6.3 million during the years ended March 31, 2023 and March 31, 2022, respectively, as discussed in Note 3 to our consolidated financial statements included in Item 8 of this Annual Report. • Repurchases of shares under our share repurchase programs (as discussed in Note 12 to our consolidated financial statements included in Item 8 of this Annual Report) of $35.7 million, $14.4 million and $7.3 million during the years ended March 31, 2023, 2022 and 2021, respectively. • Dividend payments of $10.6 million, $9.5 million and $8.1 million were paid during the years ended March 31, 2023, 2022 and 2021, respectively.
Cash outflows resulted from: • Net borrowings (payments) from our Revolving Credit Facility and the Whitmore Term Loan (as discussed in Note 8 to our consolidated financial statements included in Item 8 of this Annual Report) of $(87.0) million, $0.2 million and $10.4 million during the years ended March 31, 2024, 2023 and 2022, respectively. • Payments of $0.0 million, $0.7 million and $2.3 million of underwriting discounts and fees in connection with amending our Revolving Credit Facility during the years ended March 31, 2024, 2023 and 2022, respectively, as discussed in Note 8 to our consolidated financial statements included in Item 8 of this Annual Report. • Proceeds from the redeemable noncontrolling interest shareholder for its investment in the consolidated Whitmore JV of $0.0 million, $3.0 million and $6.3 million during the years ended March 31, 2024, 2023 and 2022, respectively, as discussed in Note 3 to our consolidated financial statements included in Item 8 of this Annual Report. • Repurchases of shares under our share repurchase programs (as discussed in Note 12 to our consolidated financial statements included in Item 8 of this Annual Report) of $10.5 million, $35.7 million and $14.4 million during the years ended March 31, 2024, 2023 and 2022, respectively. • Dividend payments of $11.8 million, $10.6 million and $9.5 million were paid during the years ended March 31, 2024, 2023 and 2022, respectively.
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. Plumbing The plumbing market represented approximately 7% and 9% of our net revenues in the years ended March 31, 2023 and 2022, respectively.
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. Plumbing The plumbing market represented approximately 8% and 7% of our net revenues in the years ended March 31, 2024 and 2023, respectively.
We expect to incur $61.1 million in purchase obligations over the next 12 months. For operating lease commitments, see Note 9 to our consolidated financial statements included in Item 8 of this Annual Report. CRITICAL ACCOUNTING ESTIMATES The process of preparing financial statements in conformity with U.S.
We expect to incur $62.3 million in purchase obligations over the next 12 months. For operating lease commitments, see Note 9 to our consolidated financial statements included in Item 8 of this Annual Report. CRITICAL ACCOUNTING ESTIMATES The process of preparing financial statements in conformity with U.S.
Our quantitative test performed as of January 31, 2023 indicated that no goodwill impairment loss should be recognized for the year ended March 31, 2023. There was no impairment loss recognized for the years ended March 31, 2022 and 2021, respectively. We have indefinite-lived intangible assets in the form of trademarks and license agreements.
Our quantitative test performed as of January 31, 2024 indicated that no goodwill impairment loss should be recognized for the year ended March 31, 2024. There was no impairment loss recognized for the years ended March 31, 2023 and 2022, respectively. We have indefinite-lived intangible assets in the form of trademarks.
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.
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 39 Table of Contents flows and market participants.
During the year ended March 31, 2023, we released a reserve of $1.6 million primarily as a result of the conclusion of TRUaire's Vietnam's audit for the tax periods from January 1, 2019 to March 31, 2022 (refer to Note 15), including accrued interest of $0.4 million and accrued penalties of $0.5 million.
During the year ended March 31, 2023, we released a reserve of $1.6 million primarily as a result of the conclusion of TRUaire's Vietnam's audit for the tax periods from January 1, 2019 to March 31, 2022 (discussed below), including accrued interest of $0.4 million and accrued penalties of $0.5 million.
We plan to continue investing in capital expenditures in the future to improve manufacturing productivity, upgrade information technology infrastructure and security and implement advanced technologies for our existing facilities. Contractual Obligations Our contractual obligations as of March 31, 2023 primarily included purchase obligations and operating lease commitments.
We plan to continue investing in capital expenditures in the future to improve manufacturing productivity, enhance operational safety, upgrade information technology infrastructure and security and implement advanced technologies for our existing facilities. Contractual Obligations Our contractual obligations as of March 31, 2024 primarily included purchase obligations and operating lease commitments.
During the year ended March 31, 2023, we released a reserve of $1.6 million primarily as a result of the conclusion of TRUaire's Vietnam's audit for the tax periods from January 1, 2019 to March 31, 2022 (refer to Note 15), including accrued interest of $0.4 million and accrued penalties of $0.5 million.
During the year ended March 31, 2023, we released a reserve of $1.6 million primarily as a result of the conclusion of TRUaire's Vietnam's audit for the tax periods from January 1, 2019 to March 31, 2022 (discussed below), including accrued interest of $0.4 million and accrued penalties of $0.5 million.
The operations of TRUaire have been included in our consolidated results of operations and in the operating results of our Contractor Solutions segment since December 15, 2020, 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.
The operations of Shoemaker have been included in our consolidated results of operations and in the operating results of our Contractor Solutions segment since the December 15, 2021 date of acquisition. All acquisitions are described in Note 2 to our consolidated financial statements included in Item 8 of this Annual Report.
("ACG"), based in Orlando, Florida, for an aggregate purchase price of $18.4 million, comprised of cash consideration of $18.0 million and additional contingent considerations initially measured at $0.4 million based on CG and ACG meeting defined financial targets over a period of 5 years.
("ACG"), based in Orlando, Florida, for an aggregate purchase price of $18.4 million, comprised of cash consideration of $18.0 million and additional 27 Table of Contents contingent consideration initially measured at $0.4 million based on CG and ACG meeting defined financial targets over a period of five years.
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. 28 Table of Contents Rail Transportation The rail transportation market represented approximately 3% and 3% of our net revenues in the years ended March 31, 2023 and 2022, respectively.
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. Rail Transportation The rail transportation market represented approximately 2% and 3% of our net revenues in each of the years ended March 31, 2024 and 2023.
Cash flows used in investing activities during the year ended March 31, 2023 were $72.2 million as compared with $51.5 million and $289.9 million for the years ended March 31, 2022 and 2021, respectively. • Capital expenditures during the years ended March 31, 2023, 2022 and 2021 were $14.0 million, $15.7 million and $8.8 million, respectively.
Cash flows used in investing activities during the year ended March 31, 2024 were $45.5 million as compared with $72.2 million and $51.5 million for the years ended March 31, 2023 and 2022, respectively. • Capital expenditures during the years ended March 31, 2024, 2023 and 2022 were $16.6 million, $14.0 million and $15.7 million, respectively.
Capital Expenditures During the year ended March 31, 2023, we invested $14.0 million in capital expenditures related to enterprise resource planning systems, capacity expansion, continuous improvement and automation and new product introductions.
Capital Expenditures During the year ended March 31, 2024, we invested $16.6 million in capital expenditures related to continuous improvement and automation, safety, capacity expansion, enterprise resource planning systems and new product introductions.
Through March 31, 2023, under the prior $100.0 million repurchase program, we repurchased 336,347 shares for an aggregate amount of $35.7 million. A total of 462,462 shares had been repurchased for an aggregate amount of $50.1 million under the prior $100.0 million program. As of March 31, 2023, no shares were repurchased under the current $100.0 million program.
Under the prior $100.0 million repurchase program, 336,347 shares were repurchased during the year ended March 31, 2023 for $35.7 million. A total of 462,462 shares had been repurchased for an aggregate amount of $50.1 million under the prior $100.0 million program.
The key operating results for our three business segments are discussed below. Contractor Solutions Segment Results Our Contractor Solutions segment manufactures efficiency and performance enhancing products predominantly for residential and commercial HVAC/R and plumbing applications, which are designed primarily for the professional trades.
Contractor Solutions Segment Results Our Contractor Solutions segment manufactures efficiency and performance enhancing products predominantly for residential and commercial HVAC/R and plumbing applications, which are designed primarily for the professional trades.
The increase was a result of $33.3 million increase in selling, general and administrative expense as discussed above, partially offset by the $71.4 million increase in gross profit.
The increase was a result of the $62.3 million increase in gross profit, partially offset by the $20.6 million increase in selling, general and administrative expense as discussed above.
Provision for Income Taxes and Effective Tax Rate The effective tax rates for the years ended March 31, 2023, 2022 and 2021 were 23.3%, 26.4% and 21.2%, respectively.
Provision for Income Taxes and Effective Tax Rate The effective tax rates for the years ended March 31, 2024, 2023 and 2022 were 27.0%, 23.3% and 26.4%, respectively.
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 20 to our consolidated financial statements included in Item 8 of this Annual Report.
For additional information regarding net revenues by geographic region, see Note 20 to our consolidated financial statements included in Item 8 of this Annual Report.
This was offset by IRC section 250 deductions, which decreased the provision by $1.6 million and the effective tax rate by 1.3%; foreign tax credits, which decreased the provision by $0.6 million and the effective tax rate by 0.5% and tax benefits related to the restricted stock vesting, which decreased the provision by $0.4 million and the effective tax rate by 0.3%.
This was offset by IRC section 250 deductions, which decreased the provision by $1.6 million and the effective tax rate by 1.3%; foreign tax credits, which decreased the provision by $0.6 million and the effective tax rate by 0.5%.
Year Ended March 31, 2023 2022 2021 Americas 94% 94% 93% EMEA 4% 3% 4% Asia Pacific Regions 2% 3% 3% Gross Profit and Gross Profit Margin Year Ended March 31, (amounts in thousands, except percentages) 2023 2022 2021 Gross profit $ 318,214 $ 255,962 $ 184,550 Gross profit margin 42.0 % 40.9 % 44.0 % Gross profit for the year ended March 31, 2023 increased $62.3 million, or 24.3%, as compared with the year ended March 31, 2022.
Year Ended March 31, 2024 2023 2022 Americas 94% 94% 94% EMEA 4% 4% 3% Asia Pacific Regions 2% 2% 3% Gross Profit and Gross Profit Margin Year Ended March 31, (amounts in thousands, except percentages) 2024 2023 2022 Gross profit $ 350,745 $ 318,214 $ 255,962 Gross profit margin 44.2 % 42.0 % 40.9 % Gross profit for the year ended March 31, 2024 increased $32.5 million, or 10.2%, as compared with the year ended March 31, 2023.
The most significant estimates made by management include: timing and amount of revenue recognition; deferred taxes and tax reserves; 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.
The most significant estimates made by management include: timing and amount of revenue recognition; realization of the deferred taxes and measurement of tax reserves; and valuation of goodwill and indefinite-lived intangible assets, both at the time of initial acquisition, as well as part of recurring impairment 37 Table of Contents analyses, as applicable.
The increase was primarily due to increased unit volumes and pricing initiatives. Net revenue increased in all end markets including energy, mining, general industrial and rail transportation. Net revenues for the year ended March 31, 2022 increased $37.7 million, or 48.1%, as compared with the year ended March 31, 2021.
The increase was primarily due to increased unit volumes and pricing initiatives. Net revenue increased in all end markets including energy, mining, general industrial and rail transportation. Operating income for the year ended March 31, 2024 increased $2.1 million, or 10.4%, as compared with the year ended March 31, 2023.
Operating Income Year Ended March 31, (amounts in thousands, except percentages) 2023 2022 2021 Operating income $ 139,066 $ 97,380 $ 59,220 Operating margin 18.3 % 15.5 % 14.1 % Operating income for the year ended March 31, 2023 increased by $41.7 million, or 42.8%, as compared with the year ended March 31, 2022.
Operating Income Year Ended March 31, (amounts in thousands, except percentages) 2024 2023 2022 Operating income $ 159,118 $ 139,066 $ 97,380 Operating margin 20.1 % 18.3 % 15.5 % Operating income for the year ended March 31, 2024 increased by $20.1 million, or 14.4%, as compared with the year ended March 31, 2023.
This decrease was primarily due to the inclusion of TRUaire and increased material and freight costs. 33 Table of Contents Engineered Building Solutions Segment Results The Engineered Building Solutions segment provides primarily code-driven products focused on life safety that are engineered to provide aesthetically-pleasing solutions for the construction, refurbishment and modernization of commercial, institutional, and multi-family residential buildings.
Engineered Building Solutions Segment Results The Engineered Building Solutions segment provides primarily code-driven products focused on life safety that are engineered to provide aesthetically-pleasing solutions for the construction, refurbishment and modernization of commercial, institutional, and multi-family residential buildings.
Selling, General and Administrative Expense Year Ended March 31, (amounts in thousands, except percentages) 2023 2022 2021 Operating expenses $ 179,148 $ 158,582 $ 125,330 Operating expenses as a % of revenues 23.6 % 25.3 % 29.9 % Selling, general and administrative expenses for the year ended March 31, 2023 increased $20.6 million, or 13.0%, as compared with the year ended March 31, 2022.
Selling, General and Administrative Expense Year Ended March 31, (amounts in thousands, except percentages) 2024 2023 2022 Operating expenses $ 191,627 $ 179,148 $ 158,582 Operating expenses as a % of revenues 24.2 % 23.6 % 25.3 % Selling, general and administrative expenses for the year ended March 31, 2024 increased $12.5 million, or 7.0%, as compared with the year ended March 31, 2023.
The decrease in operating expenses as a percentage of sales was primarily attributable to sales increasing by a greater percentage than the increase in operating expenses. Selling, general and administrative expenses for the year ended March 31, 2022 increased $33.3 million, or 26.5%, as compared with the year ended March 31, 2021.
The increase in operating expenses as a percentage of sales was primarily attributable to sales increasing by a lower percentage than the increase in operating expenses. Selling, general and administrative expenses for the year ended March 31, 2023 increased $20.6 million, or 13.0%, as compared with the year ended March 31, 2022.
Year Ended March 31, (amounts in thousands, except percentages) 2023 2022 2021 Revenues, net $ 147,445 $ 116,042 $ 78,365 Operating income 20,176 9,007 581 Operating margin 13.7 % 7.8 % 0.7 % Net revenues for the year ended March 31, 2023 increased $31.4 million, or 27.1%, as compared with the year ended March 31, 2022.
Year Ended March 31, (amounts in thousands, except percentages) 2024 2023 2022 Revenues, net $ 149,614 $ 147,445 $ 116,042 Operating income 22,266 20,176 9,007 Operating margin 14.9 % 13.7 % 7.8 % Net revenues for the year ended March 31, 2024 increased $2.2 million, or 1.5%, as compared with the year ended March 31, 2023.
This increase was primarily due to gross margin improvement as a result of leverage from revenue volume increase, pricing initiatives, as well as reduced growth in operating expense as a percentage of revenue. 34 Table of Contents Operating income for the year ended March 31, 2022 increased $8.4 million, or 1,451.5%, as compared with the year ended March 31, 2021.
Operating margin of 13.7% for the year ended March 31, 2023 increased as compared to 7.8% for the year ended March 31, 2022. This increase was primarily due to gross margin improvement as a result of leverage from revenue volume increase, pricing initiatives, as well as reduced growth in operating expense as a percentage of revenue.
On April 14, 2023, we declared a quarterly dividend and announced an increase of our quarterly dividend rate to $0.19 per share, which was paid on May 12, 2023 to shareholders of record as of April 28, 2023.
On April 12, 2024, we declared a quarterly dividend and announced an increase of our quarterly dividend rate to $0.21 per share, paid on May 10, 2024 to shareholders of record as of April 26, 2024.
Cash Flow Analysis Year Ended March 31, (amounts in thousands) 2023 2022 2021 Net cash provided by operating activities $ 121,453 $ 69,089 $ 66,254 Net cash used in investing activities (72,166) (51,456) (289,889) Net cash (used in) provided by financing activities (46,840) (13,039) 214,049 Our cash balance at March 31, 2023 was $18.5 million, as compared with $16.6 million at March 31, 2022.
Cash Flow Analysis Year Ended March 31, (amounts in thousands) 2024 2023 2022 Net cash provided by operating activities $ 164,332 $ 121,453 $ 69,089 Net cash used in investing activities (45,454) (72,166) (51,456) Net cash used in financing activities (114,073) (46,840) (13,039) Our cash balance at March 31, 2024 was $22.2 million, as compared with $18.5 million at March 31, 2023.
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 37 Table of Contents consolidated financial statements included in Item 8 of this Annual Report.
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 has discussed our critical accounting estimates and policies with the Audit Committee of our Board of Directors.
Operating income for the year ended March 31, 2022 increased $37.1 million, or 62.9%, as compared with the year ended March 31, 2021.
Operating income for the year ended March 31, 2023 increased $30.1 million, or 31.3%, as compared with the year ended March 31, 2022.
On December 16, 2022, we announced that our Board of Directors authorized a new $100.0 million share repurchase program, which replaced the previously announced $100.0 million program. Through March 31, 2023, no shares had been repurchased under the current $100.0 million repurchase program.
On December 16, 2022, we announced that our Board of Directors authorized a new $100.0 million share repurchase program, which replaced the previously announced $100.0 million program. Under the current $100.0 million repurchase program, 53,133 shares were repurchased during the year ended March 31, 2024 for $10.5 million and no shares were repurchased during the year ended March 31, 2023.
Our diverse product portfolio serves attractive and healthy end markets, which supports our revenue growth goals. We expect to maintain a strong balance sheet in fiscal year 2024, which provides us with access to capital through our cash on hand, internally-generated cash flow and availability under our Revolving Credit Facility.
We expect to maintain a strong balance sheet in fiscal year 2025, which provides us with access to capital through our cash on hand, internally-generated cash flow and availability under our Revolving Credit Facility.
Net revenue increased in HVAC/R, plumbing and architecturally-specified building products end markets and decreased in general industrial end market. Operating income for the year ended March 31, 2023 increased $30.1 million, or 31.3%, as compared with the year ended March 31, 2022.
Net revenue increased in the architecturally-specified building products, HVAC/R, plumbing, general industrial, mining and energy end markets and decreased in the rail transportation end market. Net revenues for the year ended March 31, 2023 increased $131.5 million, or 21.0%, as compared with the year ended March 31, 2022.
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.
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.
Year Ended March 31, (amounts in thousands, except percentages) 2023 2022 2021 Revenues, net $ 513,776 $ 416,487 $ 245,528 Operating income 126,204 96,115 59,007 Operating margin 24.6 % 23.1 % 24.0 % Net revenues for the year ended March 31, 2023 increased $97.3 million, or 23.4%, as compared with the year ended March 31, 2022.
Year Ended March 31, (amounts in thousands, except percentages) 2024 2023 2022 Revenues, net $ 536,494 $ 513,776 $ 416,487 Operating income 142,037 126,204 96,115 Operating margin 26.5 % 24.6 % 23.1 % Net revenues for the year ended March 31, 2024 increased $22.7 million, or 4.4%, as compared with the year ended March 31, 2023.
The largest use of cash in our operations is for purchasing and carrying inventories. Additionally, we use our Revolver Borrowings to support our working capital requirements, capital expenditures and strategic acquisitions. We seek to maintain adequate liquidity to meet working capital requirements, fund capital expenditures, and make scheduled principal and interest payments on debt.
Additionally, we use our Revolver Borrowings to support our working capital requirements, capital expenditures and strategic acquisitions. We seek to maintain adequate liquidity to meet working capital requirements, fund capital expenditures, make scheduled principal and interest payments on debt and meet our contingent consideration obligations.
The increase was a result of the $62.3 million increase in gross profit, partially offset by the $20.6 million increase in selling, general and administrative expense as discussed above. Operating income for the year ended March 31, 2022 increased by $38.2 million, or 64.4%, as compared with the year ended March 31, 2021.
The increase was a result of the $32.5 million increase in gross profit, partially offset by the $12.5 million increase in selling, general and administrative expense as discussed above. Operating income for the year ended March 31, 2023 increased by $41.7 million, or 42.8%, as compared with the year ended March 31, 2022.
Year Ended March 31, (amounts in thousands, except percentages) 2023 2022 2021 Revenues, net $ 103,969 $ 97,296 $ 95,672 Operating income 12,889 11,101 14,066 Operating margin 12.4 % 11.4 % 14.7 % Net revenues for the year ended March 31, 2023 increased $6.7 million, or 6.9%, as compared with the year ended March 31, 2022.
Year Ended March 31, (amounts in thousands, except percentages) 2024 2023 2022 Revenues, net $ 114,741 $ 103,969 $ 97,296 Operating income 18,704 12,889 11,101 Operating margin 16.3 % 12.4 % 11.4 % Net revenues for the year ended March 31, 2024 increased $10.8 million, or 10.4%, as compared with the year ended March 31, 2023.
Other income and expense Interest expense, net for the year ended March 31, 2023 increased $7.7 million to $13.2 million, or 142.2%, as compared with the year ended March 31, 2022, due to higher interest rates and increased borrowing during the year under our Revolving Credit Facility (described in Note 8 to our consolidated financial statements included in Item 8 of this Annual Report) primarily in connection with the acquisitions of Shoemaker, CG, ACG and Falcon. 31 Table of Contents Interest expense, net for the year ended March 31, 2022 increased $3.1 million to $5.4 million, or 128.7%, as compared with the year ended March 31, 2021, primarily due to increased borrowing during the year under our Revolving Credit Facility in connection with the TRUaire acquisition.
Interest expense, net for the year ended March 31, 2023 increased $7.7 million, or 142.2%, to $13.2 million, as compared with the year ended March 31, 2022, due to higher interest rates and increased borrowing during the year under our Revolving Credit Facility primarily in connection with the acquisitions of Shoemaker, CG, ACG and Falcon. 31 Table of Contents Other expense, net increased by $6.0 million for the year ended March 31, 2024 to expense of $5.9 million as compared with the year ended March 31, 2023.
See Note 2 to our consolidated financial statements included in Item 8 of this Annual Report for a discussion of our acquisitions. Debt Our long-term debt obligation consists of the Revolver Borrowings with maturity date in fiscal 2027. As of March 31, 2023, we had $253.0 million in outstanding Revolver Borrowings, which resulted in a borrowing capacity of $247.0 million.
See Note 2 to our consolidated financial statements included in Item 8 of this Annual Report for a discussion of our acquisitions. 36 Table of Contents Debt Our long-term debt obligation consists of the Revolver Borrowings with a maturity date in fiscal 2027.
The operations of Shoemaker have been included in our consolidated results of operations and in the operating results of our Contractor Solutions segment since December 15, 2021, the effective date of the acquisition.
The operations of Dust Free have been included in our consolidated results of operations and in the operating results of our Contractor Solutions segment since the February 6, 2024 date of acquisition.
As compared with the statutory rate for the year ended March 31, 2022, the provision for income taxes was primarily impacted by the state tax expense, which increased the provision by $4.8 million and the effective rate by 5.2%, executive compensation limitation, which increased the provision by $1.0 million and the effective rate by 1.1%, and a net increase in uncertain tax positions, which increased the provision by $0.8 million and the effective rate by 0.8%.
As compared with the statutory rate for the year ended March 31, 2024, the provision for income taxes was primarily impacted by state tax expense (net of federal benefits), which increased the provision by $6.4 million and effective rate by 4.5%; impact of the tax indemnification asset release, which increased the provision by $1.8 million and the effective tax rate by 1.3%; executive compensation limitation, which increased the provision by $1.2 million and the effective tax rate by 0.9%; impact of repatriation of foreign earnings, which increased the provision by $0.5 million and the effective rate by 0.3%.
We recorded no impairment losses on intangible assets for the years ended March 31, 2023, 2022 and 2021, respectively. 39 Table of Contents 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. 40 Table of Contents
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. 40 Table of Contents
We also recorded total tax contingency reserves of $2.8 million, including unrecognized tax benefit of $2.5 million, accrued interest and penalty of $0.1 million and $0.2 million, respectively, through purchase accounting in connection with the Falcon Stainless acquisition.
We also recorded total tax reserves of $2.8 million, including accrued interest and penalty of $0.1 million and $0.2 million, respectively, through purchase accounting in connection with the Falcon Stainless acquisition. For the year ended March 31, 2023, we recorded an additional tax reserve of less than $0.1 million, accrued interest of $0.7 million and accrued penalty of $0.6 million.
The increase was primarily due to sustained commercial activity, retention of market share and pricing initiatives. Net revenues for the year ended March 31, 2022 increased $1.6 million, or 1.7%, as compared with the year ended March 31, 2021. The increase was primarily due to enhanced marketing efforts and market share gains.
The increase was primarily due to sustained commercial activity, retention of market share and pricing initiatives. Operating income for the year ended March 31, 2024 increased $5.8 million, or 45.1%, as compared with the year ended March 31, 2023.
We also recorded total tax contingency reserves of $2.8 million, including unrecognized tax benefit of $2.5 million, accrued interest and penalty of $0.1 million and $0.2 million, respectively, through purchase accounting in connection with the Falcon Stainless acquisition.
We also recorded total tax reserves of $2.8 million, including accrued interest and penalty of $0.1 million and $0.2 million, respectively, through purchase accounting in connection with the Falcon Stainless acquisition. For the year ended March 31, 2023, we recorded an additional tax reserve of less than $0.1 million, accrued interest of $0.7 million and accrued penalty of $0.6 million.
Net Revenues Year Ended March 31, (amounts in thousands) 2023 2022 2021 Revenues, net $ 757,904 $ 626,435 $ 419,205 Net revenues for the year ended March 31, 2023 increased $131.5 million, or 21.0%, as compared with the year ended March 31, 2022.
Net Revenues Year Ended March 31, (amounts in thousands) 2024 2023 2022 Revenues, net $ 792,840 $ 757,904 $ 626,435 Net revenues for the year ended March 31, 2024 increased $34.9 million, or 4.6%, as compared with the year ended March 31, 2023.
This was offset by tax benefits related to the restricted stock vesting, which decreased the provision by $1.9 million and the effective rate by 2.1% and IRC section 250 deductions, which decreased the provision by $1.1 million and the effective tax rate by 1.2%.
This was partially offset by IRC section 250 deductions, which decreased the provision by $1.1 million and the effective tax rate by 0.7%.
This increase was primarily due to effective management of operating expenses, partially offset by the shift in sales to lower margin projects. Operating income for the year ended March 31, 2022 decreased $3.0 million, or 21.1%, as compared with the year ended March 31, 2021.
The increase was due to the increased net revenue and management of operating expenses. Operating margin of 12.4% for the year ended March 31, 2023 increased as compared to 11.4% for the year ended March 31, 2022. This increase was primarily due to effective management of operating expenses, partially offset by the shift in sales to lower margin projects.
TRUaire activity has been included in our Contractor Solutions segment since the acquisition date. 27 Table of Contents Our Markets HVAC/R The HVAC/R market is our largest market served and it represented approximately 55% and 53% of our net revenues in the years ended March 31, 2023 and 2022, respectively.
The Whitmore JV has been consolidated into the operations of the Company and its activity has been included in our Specialized Reliability Solutions segment since the formation date. Our Markets HVAC/R The HVAC/R market is our largest market served and it represented approximately 54% and 55% of our net revenues in the years ended March 31, 2024 and 2023, 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.
We provide many products to the plumbing industry including thread sealants, solvent cements, fire-stopping products, condensate switches and trap guards, water and gas connectors, as well as other mechanical products, such as drain traps.
Our capital expenditures have been focused on enterprise resource planning systems, capacity expansion, continuous improvement and automation and new product introductions 35 Table of Contents • During the year ended March 31, 2023, we acquired Falcon for an aggregate purchase price of $37.1 million, comprised of $33.6 million in cash consideration (net of cash received), the assets of CG and ACG and the related intellectual property for $19.7 million in cash consideration and additional $0.3 million annuity payments, and other acquisitions for $2.7 million in cash consideration.
Our capital expenditures have been focused on capacity expansion, continuous 35 Table of Contents improvement and automation, safety enhancements, enterprise resource planning systems and new product introductions. • During the year ended March 31, 2024, we acquired Dust Free for an aggregate purchase price of $34.7 million comprised of $27.4 million in cash consideration (net of cash received).
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.
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 a $1.5 million impairment for the year ended March 31, 2024 relating to a trademark, and no impairment for the fiscal years March 31, 2023 and 2022.
See Note 8 to our consolidated financial statements included in Item 8 of this Annual Report for a discussion of our indebtedness. 36 Table of Contents Dividends Total dividends of $10.6 million were paid during the year ended March 31, 2023.
As of March 31, 2024, we had $166.0 million in outstanding Revolver Borrowings, which resulted in a borrowing capacity of $334.0 million. See Note 8 to our consolidated financial statements included in Item 8 of this Annual Report for a discussion of our indebtedness. Dividends Total dividends of $11.9 million were paid during the year ended March 31, 2024.
Net operating loss carryforwards will expire in periods beyond the next 5 years. 32 Table of Contents Business Segments We conduct our operations through three business segments based on the type of product and how we manage the businesses. We evaluate segment performance and allocate resources based on each segment’s operating income.
Business Segments We conduct our operations through three business segments based on the type of product and how we manage the businesses. We evaluate segment performance and allocate resources based on each segment’s operating income. The key operating results for our three business segments are discussed below.
The increase was primarily a result of pricing initiatives, the acquisitions of Shoemaker, CG, ACG and Falcon, along with the $3.9 million TRUaire purchase accounting effect and the $1.7 million TRUaire Vietnam COVID Impact (described below) incurred in the prior year period that did not recur.
The increase was primarily a result of pricing initiatives, the acquisitions of Shoemaker, CG, ACG and Falcon, along with the prior year $3.9 million TRUaire purchase accounting effect and non-recurring $1.7 million of under-absorption costs resulting from reduced production levels and incremental compensation expenses incurred at the TRUaire Vietnam facility during the prior year to maintain TRUaire Vietnam's operations in accordance with COVID-19 restrictions that did not recur.
The increase was due to the above-mentioned TRUaire-related expenses incurred in the prior year period that did not recur and pricing initiatives. 30 Table of Contents Gross profit for the year ended March 31, 2022 increased $71.4 million, or 38.7%, as compared with the year ended March 31, 2021.
("TRUaire Vietnam COVID Impact"). Gross profit margin for the year ended March 31, 2023 of 42.0% increased from 40.9% for the year ended March 31, 2022, was due to the above-mentioned TRUaire-related expenses incurred in the prior year period that did not recur and pricing initiatives.
However, if the Russia-Ukraine conflict continues or worsens, leading to greater global economic or political disruptions and uncertainty, our business and results of operations could be materially impacted as a result. 26 Table of Contents Business Developments On October 4, 2022, we acquired 100% of the outstanding equity of Falcon Stainless, Inc ("Falcon"), based in Temecula, California, for an aggregate purchase price of $37.1 million (including $1.0 million cash acquired), comprising cash consideration of $34.6 million and an additional payment of $2.5 million due one-year from the acquisition date assuming certain business conditions are met.
On October 4, 2022, we acquired 100% of the outstanding equity of Falcon Stainless, Inc ("Falcon"), based in Temecula, California, for an aggregate purchase price of $37.1 million (including $1.0 million cash acquired), comprised of cash consideration of $34.6 million and an additional payment of $2.5 million that was paid one-year from the acquisition date based on certain business conditions being met.
Operating income for the year ended March 31, 2023 increased $1.8 million, or 16.1%, as compared with the year ended March 31, 2022. The increase was due to the increased net revenue and management of operating expenses. Operating margin of 12.4% for the year ended March 31, 2023 increased as compared to 11.4% for the year ended March 31, 2022.
This increase was primarily due to gross margin improvement resulting from pricing initiatives and the aforementioned gain from property sale, along with reduced operating expense as a percentage of revenue. Operating income for the year ended March 31, 2023 increased $1.8 million, or 16.1%, as compared with the year ended March 31, 2022.

… 77 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

5 edited+0 added−0 removed7 unchanged
Biggest changeWe realized net (losses) gains associated with foreign currency translation of $(3.8) million, loss of less than $0.1 million and $4.8 million for the years ended March 31, 2023, 2022 or 2021, respectively, which are included in accumulated other comprehensive income (loss).
Biggest changeWe realized net (losses) gains associated with foreign currency translation of $(1.9) million, $(3.8) million and a loss of less than $0.1 million for the years ended March 31, 2024, 2023 or 2022, respectively, which are included in accumulated other comprehensive income (loss).
Starting in April 2023, each quarter point change in interest rates would result in a change of approximately $0.4 million in our interest expense on an annual basis, inclusive of the interest rate swap. We may also be exposed to credit risk in derivative contracts we may use.
Starting in April 2024, each quarter point change in interest rates would result in a change of approximately $0.2 million in our interest expense on an annual basis, inclusive of the interest rate swap. We may also be exposed to credit risk in derivative contracts we may use.
On February 7, 2023, we entered into an interest rate swap to hedge our exposure to variability in cash flows from interest payments on the first $100.0 million borrowing under our Revolving Credit Facility (defined in Note 8). At March 31, 2023, we had $153.0 million in unhedged variable rate indebtedness with an average interest rate of 6.21%.
On February 7, 2023, we entered into an interest rate swap to hedge our exposure to variability in cash flows from interest payments on the first $100.0 million borrowing under our Revolving Credit Facility (defined in Note 8). At March 31, 2024, we had $66.0 million in unhedged variable rate indebtedness with an average interest rate of 6.68%.
We recognized foreign currency transaction net gains (losses) of $0.4 million, $(0.2) million and less than $0.1 million for the years ended March 31, 2023, 2022 or 2021, respectively, which are included in other income (expense), net on our consolidated statements of operations.
We recognized foreign currency transaction net gains (losses) of $0.3 million, $0.4 million and $(0.2) million for the years ended March 31, 2024, 2023 or 2022, respectively, which are included in other income (expense), net on our consolidated statements of operations.
Based on a sensitivity analysis as of March 31, 2023, a 10% change in the foreign currency exchange rates for the year ended March 31, 2023 would have impacted our income by less than 1%.
Based on a sensitivity analysis as of March 31, 2024, a 10% change in the foreign currency exchange rates for the year ended March 31, 2024 would have impacted our income by approximately 5%.

Other CSW 10-K year-over-year comparisons