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What changed in CSW INDUSTRIALS, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of CSW INDUSTRIALS, INC.'s 2022 and 2023 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 2023 report.

+333 added−313 removedSource: 10-K (2023-05-25) vs 10-K (2022-05-18)

Top changes in CSW INDUSTRIALS, INC.'s 2023 10-K

333 paragraphs added · 313 removed · 257 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

74 edited+16 added−13 removed27 unchanged
Biggest changeWe ensure the quality of internally- and externally-manufactured products through our stringent quality control review procedures. 2 Table of Contents Our key product types and brand names are shown below: PRODUCT TYPES BRAND NAMES • condensate removal pumps and equipment mounting brackets • AC Leak Freeze® • condensate switches, traps and pans • AquaGuard® • decorative roof drain downspout nozzles • Aspen® Pumps • drain waste and vent systems mechanical products • Calci-Free® • ductless mini-split systems installation support tools and accessories • Clean Check® • equipment pads • Desolv TM • grilles, registers and diffusers • EZ Trap® • line set covers • Fortress® • solvents, cements, traps, vents, and thread sealants • Goliath® • tamper resistant locking refrigerant caps • G-O-N® • wire pulling head tools • Nokorde® • Novent® • RectorSeal® No. 5 • Safe-T-Switch® • Shoemaker Manufacturing TM • Slimduct® • SureSeal® • T Plus 2® • TRUaire® New Product Development – Customer experience is a core competency in our Contractor Solutions segment.
Biggest changeOur 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 manufacturing operations are concentrated in the United States (“U.S.”), Canada and Vietnam, and we have distribution operations in the U.S., Australia, Canada and the United Kingdom (“U.K.”). Our products are sold directly to end users or through designated channels in over 100 countries around the world, primarily including Australia, Canada, the U.K. and the U.S.
Our manufacturing operations are concentrated in the United States (“U.S.”), Vietnam and Canada, and we have distribution operations in the U.S., Australia, Canada and the United Kingdom (“U.K.”). Our products are sold directly to end-users or through designated channels in over 100 countries around the world, primarily including the U.S., Canada, the U.K. and Australia.
Our core values of integrity, respect, excellence, stewardship, citizenship, accountability and teamwork form the foundation for our decentralized, entrepreneurial culture, and our Code of Business Conduct represents our shared commitment to living out these core values with the highest level of ethical conduct.
Our core values of accountability, citizenship, teamwork, respect, integrity, stewardship, and excellence form the foundation for our decentralized, entrepreneurial culture, and our Code of Business Conduct (our "Code") represents our shared commitment to living out these core values with the highest level of ethical conduct.
As part of our comprehensive total rewards program, our employees are eligible to participate in Company-subsidized medical, dental, vision, life, short-term and long-term disability insurance plans. We provide employees with a paid supplemental life and accident insurance plan. We offer employees the opportunity to contribute to a Flexible Spending Account and a Health Savings Account.
As part of our comprehensive total rewards program, our employees are eligible to participate in Company-subsidized medical, dental, vision, life, short-term and long-term disability insurance plans. We provide employees with a paid supplemental life and accident insurance plan and we offer employees the opportunity to contribute to a Flexible Spending Account and a Health Savings Account.
We believe that the compensation and benefits, and other components of our total rewards program we 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 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.
Diversity and Inclusion We are committed to promoting equal employment opportunities in all our operations, which begins with employee recruiting process and continues through our employees' relationship with the Company. We also believe that a truly innovative workforce needs to be diverse and must leverage the skills and perspectives of a broad range of backgrounds and experiences.
Diversity and Inclusion We are committed to promoting equal employment opportunities in all our operations, which begins with the employee recruiting process and continues through our employees' relationship with the Company. We also believe that a truly innovative workforce needs to be diverse and must leverage the skills and perspectives of a broad range of backgrounds and experiences.
It is also our policy to comply fully with all laws prohibiting discrimination and promoting opportunity and advancement in employment. This policy extends to all aspects of employment opportunity including recruitment, hiring, compensation, benefits, promotion, transfer, layoff, recall, reduction in force, termination, retirement, placement, training and all other privileges, terms and conditions of employment.
It is also our policy to fully comply with all laws prohibiting discrimination and promoting opportunity and advancement in employment. This policy extends to all aspects of employment including recruitment, hiring, compensation, benefits, promotion, transfer, layoff, recall, reduction in force, termination, retirement, placement, training and all other privileges, terms and conditions of employment.
Our customers depend on their mission-critical equipment, and thus they depend on our trusted specialty lubricants, compounds, sealants, desiccant breather filtration, 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.
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.
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. End markets that we serve include HVAC/R, architecturally-specified building products, plumbing, energy, rail, mining and general industrial.
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. End markets that we serve include HVAC/R, architecturally-specified building products, plumbing, general industrial, energy, rail transportation and mining.
Our key product types and brand names are shown below: PRODUCT TYPES BRAND NAMES • fire and smoke protection solutions • Balco® Expansion Joint Systems • fire stopping solutions • Balco® IllumiTread TM • pre-engineered and custom architectural building components • Balco® MetaflexPro TM • architectural railings and metals • BlazeSeal TM • Greco Architectural Railings & Metals • Metacaulk® • 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.
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.
Additionally, we believe Kopr-Kote ® anti-seize lubricant is recognized as the anti-seize compound of choice for use in oil and gas drilling operations, where it is requested by name.
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.
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.
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.
See Note 21 to our consolidated financial statements included in Item 8 of this Annual Report for financial and other information regarding our operations on a geographical basis. Human Capital Management We believe that our employees are our most valuable assets and that our skilled, engaged workforce provides us with a competitive advantage.
See Note 20 to our consolidated financial statements included in Item 8 of this Annual Report for financial and other information regarding our operations on a geographical basis. Human Capital Management We believe that our employees are our most valuable assets and that our skilled, engaged workforce provides us with a competitive advantage.
We primarily market through an international network of both internal and third-party sales representatives that call on our wholesale distributors, contractors and direct customers. The strong, long-term relationships we have developed with our wholesale distribution partners and exclusive dealers allow us to successfully introduce organically developed products and acquired products.
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.
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.
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.
For the year ended March 31, 2022, 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, 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.
This commitment extends to the communities in which our employees live, where we are positive, active corporate citizens. A key element of employee well-being is providing pay and benefits for our employees that are competitive and equitable based on local markets.
This commitment extends to the communities in which our employees live, where we are positive, active corporate citizens. A key element of employee well-being is providing compensation and benefits for our employees that are competitive and equitable based on local markets.
Of these employees, approximately 1.6% 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.
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.
Our Code of Business Conduct covers many topics, including conflicts of interest, anticorruption, financial reporting, confidentiality, insider trading, antitrust and competition law, cybersecurity and information security, appropriate use of social media, and respect in the workplace.
Our Code covers many topics, including conflicts of interest, anticorruption, financial reporting, confidentiality, insider trading, antitrust and competition law, cybersecurity and information security, appropriate use of social media, and respect in the workplace.
To help our employees see how their efforts contribute to our Company’s overall success, we utilize a robust performance management process and 8 Table of Contents provide regular feedback to increase engagement and maximize talent development efforts. We have also established various talent development programs for current and future leaders during the critical stages of their careers.
To help our employees see how their efforts contribute to our Company’s overall success, we utilize a robust performance management process and provide regular feedback to increase engagement and maximize talent development efforts. We have also established various talent development programs for current and future leaders during the critical stages of their careers.
While products are sold throughout the year, revenues tend to peak during the spring and summer months. 3 Table of Contents 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.
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.
All our employees across the globe, including our executive officers, are required to abide by our Code of Business Conduct to ensure that our business is conducted in a consistently legal and ethical manner.
All our employees across the globe, including our executive officers, are required to abide by our Code to ensure that our business is conducted in a consistently legal and ethical manner.
Further, our ability to meet the needs of high-value, niche end 6 Table of Contents markets with customized solutions that leverage our existing products has enabled us to differentiate ourselves from larger competitors that may not be as willing or able to respond quickly to evolving customer demands.
Further, our ability to meet the needs of high-value, niche end markets with customized solutions that leverage our existing products has enabled us to differentiate ourselves from larger competitors that may not be as willing or able to respond quickly to evolving customer demands.
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.
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.
This effort is supported by a culture of continuous improvement, looking to refine processes in all of our manufacturing facilities to reduce manufacturing costs, increase production capacity and improve product quality. Additionally, we often evaluate strategic investments to drive transformational changes in our manufacturing processes.
This effort is supported by a culture of continuous improvement, which looks to refine processes in all of our manufacturing facilities to reduce manufacturing costs, increase production capacity and improve product quality. Additionally, we often evaluate strategic investments to drive transformational changes in our manufacturing processes.
Amid the novel coronavirus ("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.
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.
Our team of research, development, 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 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.
Development teams are located in Boise, Idaho; Hudson, Florida; Wichita, Kansas and Windsor Ontario, Canada. Competition – Our products generally demand premium valuation. We compete primarily on the basis of competitive lead times, superior customer specification levels and customer-centric service, which are the key drivers of our customers' buying decisions.
Development teams are located in Boise, Idaho; Hudson, Florida; Wichita, Kansas and Windsor Ontario, Canada. Competition – Our products generally demand premium valuation. We compete primarily on the basis of competitive lead times, superior custom specification standards and customer-centric service, which we believe are the key drivers of our customers' buying decisions.
We believe our products and solutions are differentiated from those of our competitors by superior performance, quality and total value delivered to customers. For example, RectorSeal No. 5 ® pipe thread sealant is widely regarded as an industry standard for thread sealants for HVAC/R, plumbing and electrical configurations.
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.
Drawing on our innovative and proven technologies, we seek to deliver solutions primarily to our professional end-use customers that place a premium on superior performance and reliability. We believe our brands are well-known in the specific end markets we serve and have a reputation for high quality.
Drawing on our innovative and proven technologies, we seek to deliver solutions primarily to our contractors that place a premium on superior performance and reliability. We believe our brands are well-known in the specific end markets we serve and have a reputation for high quality.
Our team of sales representatives, engineers and other technical personnel continues to proactively collaborate with our distributors and professional end user customers to enhance and adapt existing products and solutions to meet evolving customer needs. In addition, we seek to leverage our existing customer base to cross-sell our products and solutions across our 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. 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.
Inorganic Growth Investment with Proven Track Record We believe our experience in identifying, completing and integrating acquisitions is one of our core competitive strengths, as evidenced by our portfolio of 7 acquisitions completed since the inception of the Company.
Inorganic Growth Investment with Proven Track Record We believe our experience in identifying, completing and integrating acquisitions is one of our core competitive strengths, as evidenced by our portfolio of more than 10 acquisitions completed since the inception of the Company.
We develop new products and modify existing products in our research and development (“R&D”) lab in Houston, Texas. 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 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”).
As of March 31, 2022, we employed approximately 2,400 individuals within our continuing operations 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.
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.
It is our policy, specifically noted in the Company’s Code of Business Conduct, that we do not tolerate discrimination for any reason, including without limitation race, color, religion, marital status, gender, gender identity, veteran status, sexual orientation, disability or perceived disability, whether or not such discrimination violates law.
It is our policy, specifically noted in our Code, that we do not tolerate discrimination for any reason, including without limitation race, color, religion, marital status, gender, gender identity, veteran status, sexual orientation, disability or perceived disability, whether or not such discrimination violates law.
Our trademarks can typically be renewed indefinitely as long as they remain in use, whereas our patents generally expire 10 to 20 years from the 7 Table of Contents dates they were filed.
Our trademarks can typically be renewed indefinitely as long as they remain in use, whereas our patents generally expire 10 to 20 years from the dates they were filed.
This includes ensuring that our supply chains are secure, that we maintain an adequate level of inventory to meet our customers' needs and that we remain able to operate our facilities at the levels required to meet customer demand. Our Growth Strategy We are focused on creating long-term stockholder value by increasing our revenue, profitability and cash flow.
This included ensuring that our supply chains were secure, that we maintained an adequate level of inventory to meet our customers' needs and that we remained able to operate our facilities at the levels required to meet customer demand. Our Growth Strategy We are focused on creating long-term stockholder value by increasing our revenue, profitability and cash flow.
Our health and safety focus is evident in our response to the COVID-19 pandemic and includes adding work from home flexibility, encouraging those who are sick or have symptoms to stay home, increasing cleaning protocols across all locations, regular communications regarding health and safety protocols and procedures, establishing physical distancing and personal protective equipment procedures for employees, providing masks and cleaning supplies, implementing protocols to address actual and suspected COVID-19 cases and potential exposure and limiting non-essential domestic and international travel for all employees.
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.
In the products serving the HVAC/R end market category, we compete with Diversitech, Dura-Vent/Hart & Cooley, 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.
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.
These products protect and extend the working life of large capital equipment such as cranes, rail systems, mining equipment, oil rigs and rotating and grinding equipment found in various industrial segments such as steel mills, canning and bottling, mining and cement.
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.
Every year, through online and in personal training, our employees receive training on all topics addressed in our Code of Business Conduct, and are required to certify that they will comply with our Code. Compensation and Benefits We strive to support both the short-term and long-term well-being of our employees.
Every year, through online and in-person training, our employees receive training on all topics addressed in our Code, and they are required to certify that they will comply with our Code. 8 Table of Contents Compensation and Benefits We strive to support both the short-term and long-term well-being of our employees.
These highly-specialized products are typically used in harsh operating conditions, including extreme heat and pressure and chemical exposure, where commodity products would fail.
These high performance products are typically used in harsh operating conditions, including extreme heat and pressure and chemical exposure, where commodity products would fail.
Our key product types and brand names by the end markets we serve are shown below: PRODUCT TYPES BRAND NAMES • anti-seize products • Air Sentry® • contamination control • Jet-Lube® Deacon® • lubricants and lubricant management products • Jet-Lube® Extreme® • rail friction modifiers • Jet-Lube® Kopr-Kote® • sealants • Jet-Lube® NCS-30® ECF TM • Jet-Lube® Run-N-Seal® ECF TM • OilSafe® • Whitmore® Envirolube® XE Extreme • Whitmore® Gearmate® 1000 ICT • Whitmore® Matrix® • Whitmore® AccuTrack® • Whitmore® BioRail® • Whitmore® RailArmor® • Whitmore® TOR Armor® 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.
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.
We analyze our compensation and benefits program annually, and make changes as necessary, to ensure that we remain competitive and make changes as necessary. We believe it is important to reward employees with competitive pay and benefits to recognize professional excellence and career progression.
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.
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. In the third quarter of the fiscal year ended March 31, 2021, we acquired T.A.
("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.
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.
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.
About 93% of our employees participated in our fiscal 2022 survey. The survey results are reviewed by our senior leadership and shared with our managers and employees who collaborate to act on identified areas of improvement to implement measures of success.
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®.
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 is actively targeting additional end markets for product use and penetration.
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.
Our company-wide (all employees) voluntary retention rate (excluding retirements) was 79%. Workplace Health and Safety We are committed to creating and maintaining a safe, healthy working environment, and we have developed a health and safety program that focuses on implementing policies and training programs to ensure that all employees understand this commitment.
Workplace Health and Safety We are committed to creating and maintaining a safe, healthy working environment, and we have developed a health and safety program that focuses on implementing policies and training programs to ensure that all employees understand this commitment. We maintain a global Environmental, Health & Safety policy that is applicable to all our employees, operations and activities.
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.
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.
In the fire and smoke protection product category, we compete with McKeon, US Smoke & Fire, Won Door and others, typically based on product innovation, knowledge of building codes and customer service. In the architecturally building component, we compete primarily with Construction Specialties, EMSEAL and Inpro on the basis of product innovation, price and driving architectural specifications.
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.
CSWI is a Delaware corporation and was incorporated in 2014 in anticipation of CSWI's separation from Capital Southwest Corporation ("Capital Southwest"). Our well-established operating companies provide a collective history that spans more than a century.
Our desire to develop solutions for our contractors, combined with the differentiated nature of our niche product offerings, drives loyalty to our brands. CSWI is a Delaware corporation and was incorporated in 2014 in anticipation of CSWI's separation from Capital Southwest Corporation ("Capital Southwest"). Our well-established operating companies provide a collective history that spans more than a century.
The discontinued operations have had no activities since the year ended March 31, 2020. 5 Table of Contents 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.
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.
To date, the cost of such compliance has not had a material impact on our capital expenditures, earnings or competitive position or that of our operating subsidiaries. While we have implemented policies, practices and procedures to prevent and mitigate risks, violations may occur in the future as a result of human error, equipment failure or other causes.
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.
For financial information regarding our segments, see Note 21 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 Principal Product Categories Key End Use Markets Representative Industrial Brands Contractor Solutions • Cements • Diffusers • Grilles • Registers • Solvents • Thread sealants • Traps • Vents • HVAC/R • Plumbing • General Industrial • Architecturally-Specified Building Products Engineered Building Solutions • Architectural railings and associated services • Fire and smoke protection solutions • Pre-engineered and custom architectural building components • Architecturally-Specified Building Products Specialized Reliability Solutions • Compounds • Contamination control • Industrial maintenance and repairs • Lubricants • Lubricant management products • Operations solutions • Sealants • Energy • General Industrial • Mining • Railing 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 professional end -use customers.
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.
We invested over $440 million for all three acquisitions. 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.
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.
This segment is comprised primarily of our Balco, Greco, and Smoke Guard operating companies. Our Engineered Building Solutions segment is a market leader in providing unique solutions to architects and contractors that meet code requirements, while adding functionality, performance, and aesthetically-pleasing designs.
Our Engineered Building Solutions segment is a market leader in providing architects, contractors and other construction professionals with unique solutions that meet code requirements and support life safety, while adding functionality, performance, and aesthetically-pleasing designs.
We rely on both organic growth and inorganic growth through acquisitions to provide an increasingly broad portfolio of performance optimizing solutions that meet our customers’ ever-changing needs. We have a successful record of making attractive, synergistic acquisitions that support expansion of our broad portfolio of solutions, and we remain focused on identifying additional acquisition opportunities in our core end markets.
We rely on both organic growth and inorganic growth through acquisitions to provide an increasingly broad portfolio of performance optimizing solutions that meet our customers’ ever-changing needs.
Our retirement savings program includes a 401(k) plan plus an ESOP plan. Our 401(k) plan has a 96% participation rate, which we believe is significantly higher than recognized industry benchmarks. Current and former domestic employees who have participated in our ESOP collectively own approximately 4% of our company.
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.
The segment is comprised primarily of our Whitmore operating company and the Whitmore JV. 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.
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.
These initiatives align with our goal of creating a positive and dynamic workplace where all employees can flourish.
It is our goal to create a positive and dynamic workplace where all employees can flourish.
We focus on product enhancements and product line extensions that are designed to meet the specific application needs of our professional end use customers. Customer-centric solutions underpin our strong industrial brands and reputation for high quality products, in turn leading us to realize improved customer retention and loyalty.
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.
Raw Materials and Suppliers Our products are manufactured using various raw materials, including base oils, copper flake, steel, aluminum, polyvinyl chloride and tetra-hydrofuran. These raw materials are available from numerous sources, and we do not depend on a single source of supply for any significant amount of raw materials.
We 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.
These products are distributed through an extensive wholesale distribution network serving the HVAC/R, architecturally-specified buildings products, plumbing, general industrial, energy, rail and mining end markets. Our desire to develop solutions for our professional end-use customers, combined with the differentiated nature of our niche product offerings, drives loyalty to our brands.
We also have a long history of innovation, through which we have developed a robust line of products to solve our customers' specific challenges. These products are distributed through an extensive wholesale distribution network serving the HVAC/R, architecturally-specified buildings products, plumbing, general industrial, energy, rail transportation and mining end markets.
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 building components are primarily sold through independent sales representatives and building product distributors to general contractors or sub-contractors.
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.
Competition – In general, our products demand premium valuation, rather than commodity products, and competitors tend to be varied and include global, regional and local companies that may be large or small. We compete primarily on the basis of product differentiation, superior performance and quality and customer-centric service.
The 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.
Industries, Inc. (“TRUaire”), a leading manufacturer of GRD for the residential and commercial HVAC/R end market, based in Santa Fe Springs, California. In early fiscal year 2020, we acquired Petersen Metals, Inc. ("Petersen"), a designer, manufacturer and installer of engineered railings and safety systems for institutional and commercial structures in the Southeast U.S.
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.
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. 9 Table of Contents 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.
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. 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.
The table below provides an overview of these business segments.
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.
The segment is compromised primarily of our RectorSeal, TRUaire and Shoemaker operating companies and provides a wide range of products designed to create efficiency and expediency for professional end-user customers, while delivering home and building owners with trusted solutions. Our Contractor Solutions segment is strategically positioned to grow in each market served by leveraging our sales channels and distribution networks.
It provides an innovative line of installation and service products designed to create efficiency and expediency for the professional trades. Our Contractor Solutions segment is strategically positioned to grow in each market served by leveraging our sales channels and distribution networks. HVAC/R contractors ask for our products by name, and professional plumbers have been using our industry-leading solutions for generations.
Through our operating companies, we have a well-established legacy of providing high quality products accompanied by dependable service and attention to customer satisfaction. We also have a long history of innovation, through which we have developed a robust line of products to solve our customers' specific challenges.
We have a successful record of making attractive and synergistic acquisitions that support expansion of our broad portfolio of solutions, and we remain focused on identifying additional acquisition opportunities in our core end markets. Through our operating companies, we have a well-established legacy of providing high quality products accompanied by dependable service and attention to customer satisfaction.
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. Specialized Reliability Solutions Our Specialized Reliability Solutions segment provides products for increasing reliability, efficiency, performance and lifespan of industrial assets and solving equipment maintenance challenges.
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.
No unionized facility accounted for more than 10% of our consolidated revenues for the fiscal year ended March 31, 2022. 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, 2022 was 93%.
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%.
For the fiscal year ended March 31, 2022, our total recordable incident rate ("TRIR") for employees was 1.2, a reduction of 0.5 from the prior year. The COVID-19 pandemic has underscored the importance of keeping our employees safe and healthy.
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.
Removed
Business Segments Beginning with the quarter ended June 30, 2021, we revised our segment structure to align with how our chief operating decision maker (who was determined to be our Chief Executive Officer) views our business, assesses performance and allocates resources to our business components.
Added
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.
Removed
Effective April 1, 2021, following the completion of various strategic transactions including the acquisition of T.A. Industries, Inc.
Added
In the third quarter of fiscal year ended March 31, 2023, we acquired Falcon Stainless, Inc ("Falcon"), based in Temecula, California, which offers products that enhance water flow delivery. In the second quarter of fiscal year ended March 31, 2023, we acquired the assets of Cover Guard, Inc. (“CG”) and AC Guard, Inc.
Removed
("TRUaire") and the formation of a joint venture owned by Whitmore Manufacturing, LLC ("Whitmore"), a wholly-owned subsidiary of CSWI, and Pennzoil-Quaker State Company dba SOPUS Products ("Shell"), a wholly-owned subsidiary of Shell Oil Company that comprises of Shell's U.S. lubricants business ("Whitmore JV"), our business is organized into three reportable segments: Contractor Solutions, Engineered Building Solutions and Specialized Reliability Solutions.
Added
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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAny adverse occurrence, including among others, industry slowdown, recession, public health crisis, political instability, costly or constraining 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, prolonged disruptions in one or more of our customers' production schedules or labor disturbances, could materially adversely affect our business, financial condition, and operating results.
Biggest changeAny 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.
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; 19 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 • 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 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.
Despite our efforts, we may be sued for infringing on the intellectual property rights of others. This litigation is costly and, even if we prevail, the costs of such litigation could adversely affect our financial condition. Adequate remedies may not be available in the event of an unauthorized use or disclosure of our trade secrets and manufacturing expertise.
Despite our efforts, we may be sued for infringing on the intellectual property rights of others. This litigation is costly and, even if we prevail, the costs of such litigation could adversely affect our financial condition. Adequate remedies may not be available in the event of unauthorized use or disclosure of our trade secrets and manufacturing expertise.
Physical risks from climate change could, among other things, include an increase in extreme weather events (such as floods, tornados or hurricanes), limitations on availability in water and reliable energy, and the health and well-being of individuals in communities where we conduct business.
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.
You should not place undue reliance on these forward-looking statements and you should carefully consider all of the factors identified in this Annual Report that could cause actual results to differ. We assume no obligation to update or revise these forward-looking statements, except as required by law. 20 Table of Contents ITEM 1B: UNRESOLVED STAFF COMMENTS Not applicable.
You should not place undue reliance on these forward-looking statements and you should carefully consider all of the factors identified in this Annual Report that could cause actual results to differ. We assume no obligation to update or revise these forward-looking statements, except as required by law. 21 Table of Contents ITEM 1B: UNRESOLVED STAFF COMMENTS Not applicable.
Rather than serving as passive conduits for delivery of products, our distributors play a significant role in determining which of our products are available for purchase by contractors to service end users. While the use of distributors expands the reach and customer base for our products, the maintenance and administration of distributor relationships is costly and time consuming.
Rather than serving as passive conduits for delivery of products, our distributors play a significant role in determining which of our products are available for purchase either by end-users or by contractors to service end-users. While the use of distributors expands the reach and customer base for our products, the maintenance and administration of distributor relationships is costly and time-consuming.
Our insurance policies may not cover, or fully cover, us against natural disasters, global conflicts or environmental risk. We currently have insurance policies for certain business risks, which include property damage, business interruption, operational and product liability, transit, directors’ and officers’ liability, cybersecurity, industrial accident and other risks customary in the industries in which we operate.
Our insurance policies may not cover, or fully cover, us against natural disasters, global conflicts or environmental risk. We currently have insurance policies for certain business risks, which include property damage, business interruption, operational and product liability, transit, directors’ and officers’ liability, cybersecurity, industrial accidents and other risks customary in the industries in which we operate.
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. Also, after June 30, 2023, the remaining U.S. dollar settings will cease.
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.
If we are not in compliance with the FCPA and other anti-corruption laws or Trade Control Laws, we may be subject to criminal and civil penalties, disgorgement and other sanctions and remedial measures, and legal expenses, which could have an adverse impact on our business, financial condition, results of operations and liquidity.
If we are not in compliance with the FCPA and other anti-corruption laws or Trade Control Laws, we may be subject to criminal and civil penalties, disgorgement and other sanctions and 18 Table of Contents remedial measures, and legal expenses, which could have an adverse impact on our business, financial condition, results of operations and liquidity.
These hazards may result in personal injury and loss of life, damage to property 18 Table of Contents and contamination of the environment, which may result in a suspension of operations and the imposition of civil or criminal penalties, including governmental fines, expenses for remediation and claims brought by governmental entities or third parties.
These hazards may result in personal injury and loss of life, damage to property and contamination of the environment, which may result in a suspension of operations and the imposition of civil or criminal penalties, including governmental fines, expenses for remediation and claims brought by governmental entities or third parties.
We may be unable to pass along price increases to our customers, which could have a material adverse effect on our business and results of operations. 12 Table of Contents We rely on independent distributors as a channel to market for many of our products.
We may be unable to pass along price increases to our customers, which could have a material adverse effect on our business and results of operations. We rely on independent distributors as a channel to market for many of our products.
We may incur substantial costs, including fines, damages, criminal or civil sanctions and remediation costs, or experience interruptions in our operations for violations arising under environmental laws, regulations or permit requirements. 17 Table of Contents We are subject to the U.S. Foreign Corrupt Practices Act and other anti-corruption laws, as well as other laws governing our operations.
We may incur substantial costs, including fines, damages, criminal or civil sanctions and remediation costs, or experience interruptions in our operations for violations arising under environmental laws, regulations or permit requirements. We are subject to the U.S. Foreign Corrupt Practices Act and other anti-corruption laws, as well as other laws governing our operations.
These markets are highly competitive; are driven to a large extent by end-use markets; and may experience overcapacity, all of which may affect demand for and pricing of our products and result in volatile operating results and cash flows over our business cycle.
These markets are highly competitive; are driven to a large extent by end-use markets; are affected by distributor stocking behaviors; and may experience overcapacity, all of which may affect demand for and pricing of our products and result in volatile operating results and cash flows over our business cycle.
Availability and cost of raw materials could be affected by a number of factors, including the condition of the energy industry and other commodity prices; inflation; tariffs and duties on imported materials; foreign currency exchange rates; and phases of the general business cycle and global demand.
Availability and cost of raw materials could be affected by a number of factors, including the cost of reliable energy; commodity prices; inflation; tariffs and duties on imported materials; foreign currency exchange rates; and phases of the general business cycle and global demand.
In addition, because certain of our products are manufactured by third parties, we have necessarily shared some of our intellectual property with those third parties.
In addition, because certain of our products are manufactured 19 Table of Contents by third parties, we have necessarily shared some of our intellectual property with those third parties.
Any such access, disclosure or other loss of information or business disruption could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, and damage to our reputation, which could adversely impact our operations. Our relationships with our employees could deteriorate, which could adversely affect our operations.
Any such access, disclosure or other loss of information or business disruption could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, and damage to our reputation, which could adversely impact our operations.
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, 2022, we had approximately 2,400 full-time employees, of which approximately 20 were subject to collective bargaining agreements, 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 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.
Climate change could have an adverse effect on our business. While we seek to mitigate our business risks associated with climate change, we recognize that there are inherent climate related risks wherever business is conducted, and climate change could create physical and financial risk to our business.
While we seek to mitigate our business risks associated with climate change, we recognize that there are inherent climate-related risks wherever business is conducted, and climate change could create physical and financial risk to our business.
Foreign sales and manufacturing are subject to a number of risks, including political and economic uncertainty, social unrest, sudden changes in laws and regulations (including those enacted in response to pandemics), ability to enforce existing or future contracts, labor shortages and work stoppages, natural disasters, currency exchange rate fluctuations, transportation delays or loss or damage to products in transit, expropriation, nationalization, compliance with foreign laws and changes in domestic and foreign governmental policies, including the imposition of new or increased tariffs and duties on exported and imported products.
Foreign sales and manufacturing are subject to a number of risks, including political and economic uncertainty, social unrest, sudden changes in laws and regulations (including those enacted in response to pandemics and those that may be related to climate change or otherwise), ability to enforce existing or future contracts, labor shortages and work stoppages, natural disasters, currency exchange rate fluctuations, transportation delays or loss or damage to products in transit, expropriation, nationalization, business disruptions due to cybersecurity incidents, compliance with foreign laws and changes in domestic and foreign governmental policies, including the imposition of new or increased tariffs and duties on exported and imported products.
Acquiring businesses involves a number of financial, accounting, managerial, operational, legal, compliance and other risks and challenges, including the following, any of which could adversely affect our financial statements: • we may experience difficulty in identifying appropriate acquisition candidates; • any acquired business, technology, service or product could under-perform relative to our expectations and the price that we paid for it, not achieve cost savings or other synergies in accordance with our anticipated timetable or require us to take an impairment related to the acquired business; • we may decide to divest businesses, technologies, services or products for financial, strategic or other reasons, which may require significant financial and managerial resources and may result in unfavorable accounting treatment; • we may incur or assume significant debt in connection with our acquisitions, which would increase our leverage and interest expense, thereby reducing funds available to us for purposes such as working capital, capital expenditures, research and development and other general corporate purposes; • pre-closing and post-closing earnings and charges could adversely impact operating results in any given period, and the impact may be substantially different from period to period; • the process of integrating acquired operations may create operating difficulties and may require significant financial and managerial resources that would otherwise be available for existing operations; • we could experience difficulty in integrating financial and other controls and systems; • we may lose key employees or customers of the acquired company; • we may assume liabilities that are unknown or for which our indemnification rights are insufficient, or known or contingent liabilities may be greater than anticipated; 14 Table of Contents • conforming the acquired company's standards, process, procedures and controls, including accounting systems and controls, with our operations could cause deficiencies related to our internal control over financial reporting or exposure to regulatory sanctions resulting from the acquired company's activities; and • the COVID-19 pandemic may impact our ability to conduct due diligence on acquisitions in the normal manner, including forecasting future financial performance, which could cause a delay in executing transactions until alternate methods of due diligence are determined or the impacted due diligence is able to be conducted by customary means.
Acquiring businesses involves a number of financial, accounting, managerial, operational, legal, compliance and other risks and challenges, including the following, any of which could adversely affect our financial statements: • we may experience difficulty in identifying appropriate acquisition candidates; • any acquired business, technology, service or product could under-perform relative to our expectations and the price that we paid for it, not achieve cost savings or other synergies in accordance with our anticipated timetable or require us to take an impairment related to the acquired business; • we may decide to divest businesses, technologies, services or products for financial, strategic or other reasons, which may require significant financial and managerial resources and may result in unfavorable accounting treatment; • we may incur or assume significant debt in connection with our acquisitions, which would increase our leverage and interest expense, thereby reducing funds available to us for purposes such as working capital, capital expenditures, research and development and other general corporate purposes; • pre-closing and post-closing earnings and charges could adversely impact operating results in any given period, and the impact may be substantially different from period to period; • the process of integrating acquired operations may create operating difficulties and may require significant financial and managerial resources that would otherwise be available for existing operations; • we could experience difficulty in integrating financial and other controls and systems; • we may lose key employees or customers of the acquired company; • we may assume liabilities that are unknown or for which our indemnification rights are insufficient, or known or contingent liabilities may be greater than anticipated; and • conforming the acquired company's standards, process, procedures and controls, including accounting systems and controls, with our operations could cause deficiencies related to our internal control over financial reporting or exposure to regulatory sanctions resulting from the acquired company's activities.
As of March 31, 2022, we had a reserve of $14.0 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.
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.
Our operations and earnings may also be significantly affected by changes in oil, gas and petrochemical prices and drilling activities, which depend on local, regional and global events or conditions that affect supply and demand for the relevant commodity.
Our operations and earnings may also be significantly affected by changes in oil, gas and petrochemical prices and drilling activities, which depend on local, regional and global events or conditions that affect supply and demand for the relevant commodity. Product demand may not be sufficient to utilize current or future capacity.
The cyclical nature of the supply and demand balance of certain end markets that we serve, including manufacturing, construction, energy and mining, poses risks to us that are beyond our control and can affect our operating results.
The cyclical nature of the supply and demand balance of certain end markets that we serve, including HVAC/R, general industrial, construction, energy, rail transportation and mining, poses risks to us that are beyond our control and can affect our operating results.
Moreover, there has been a rise in the number of cyberattacks that depend on human error 13 Table of Contents or manipulation, including phishing attacks or schemes that use social engineering to gain access to systems or perpetuate wire transfer or other frauds.
There has been a rise in the number of cyberattacks targeting confidential business information generally and in the manufacturing industry specifically. Moreover, there has been a rise in the number of cyberattacks that depend on human error or manipulation, including phishing attacks or schemes that use social engineering to gain access to systems or perpetuate wire transfer or other frauds.
As of March 31, 2022, we had goodwill of $224.7 million recorded in our consolidated balance sheet, the majority of which was recorded in connection with the TRUaire acquisition. We evaluate the recoverability of recorded goodwill annually, as well as when we changed reporting units and when events or circumstances indicate the possibility of impairment.
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.
Financial Risks Our outstanding indebtedness and the restrictive covenants in the agreements governing our indebtedness limit our operating and financial flexibility. We are required to make scheduled repayments and, under certain events of default, accelerated repayments on our outstanding indebtedness, which may require us to dedicate a substantial portion of our cash flows from operations to payments on our indebtedness.
We are required to make scheduled repayments and, under certain events of default, accelerated repayments on our outstanding indebtedness, which may require us to dedicate a substantial portion of our cash flows from operations to payments on our indebtedness.
If our attempts to develop or enhance products are unsuccessful, we may be unable to recover our development costs, which could have an adverse effect on our business and results of operations.
A failure to develop commercially successful products or product enhancements or to identify product extensions could materially adversely affect our financial results. If our attempts to develop or enhance products are unsuccessful, we may be unable to recover our development costs, which could have an adverse effect on our business and results of operations.
Forward-Looking Statements This Annual Report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect the current views of our senior management with respect to future events and our financial performance. These statements include forward-looking statements with respect to our business and industry in general.
These statements reflect the current views of our senior management with respect to future events and our financial performance. These statements include forward-looking statements with respect to our business and industry in general.
Ineffective internal controls could also cause investors to lose confidence in reported financial information, which could negatively affect our stock price, limit our ability to access capital markets in the future, and require additional costs to improve internal control systems and procedures.
Ineffective internal controls could also cause investors to lose confidence in reported financial information, which could negatively affect our stock price, limit our ability to access capital markets in the future, and require additional costs to improve internal control systems and procedures. 17 Table of Contents Legal and Regulatory Risks Regulatory and statutory changes applicable to us or our customers could adversely affect our financial condition and results of operations.
Our ability to comply with these covenants may be affected by events beyond our control. Failure to comply with these covenants could result in an event of default that, if not cured or waived, may have a material adverse effect on our business, financial condition, results of operations and cash flows.
Failure to comply with these covenants could result in an event of default that, if not cured or waived, may have a material adverse effect on our business, financial condition, results of operations and cash flows. In the event we incur additional indebtedness, or if interest rates on our indebtedness increase, the risks described above could increase.
Existing 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. Furthermore, future regulations may impose new operational burdens, require investment in additional emission control technology, or result in unfavorable market changes.
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.
Strategic Transactions and Investments Risks Our acquisition and integration of businesses could negatively impact our financial results. Inorganic growth is an important part of our strategic growth plans, and we seek to acquire businesses, some of which may be material, in pursuit of our plans.
Inorganic growth is an important part of our strategic growth plan, and we also seek to acquire businesses, some of which may be material, in pursuit of our plans.
Materials used in our manufacturing operations are generally available on the open market from multiple sources. However, some of the raw materials we use are only available from a limited number of sources. Accordingly, any disruptions to a critical suppliers' operations could have a material adverse effect on our business and results of operations.
Materials used in our manufacturing operations are generally available on the open market from multiple sources. However, some of the raw materials we use are only available from a limited number of sources.
LIBOR has been the subject of national, international, and other regulatory guidance and proposals for reform. On March 5, 2021, the United Kingdom’s Financial Conduct Authority published the dates 15 Table of Contents that the use of LIBOR as an index for commercial loans will be phased out.
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.
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.
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.
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.
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.
Reduced demand may cause us and our competitors to compete on the basis of price, which would have a negative impact on our revenues and profitability. In turn, this could cause us to not be able to satisfy the financial and other covenants to which we are subject under our existing indebtedness.
Reduced demand may cause us and our competitors to compete on the basis of price, which would have a negative impact on our revenues and profitability.
Compliance with extensive environmental, health and safety laws could require material expenditures, changes in our operations or site remediation. Our operations and properties are subject to regulation under environmental laws, which can impose substantial sanctions for violations. We must conform our operations to applicable regulatory requirements and adapt to changes in such requirements in all jurisdictions in which we operate.
If these regulations were to change, demand for our products could be reduced and our results of operations could be adversely affected. Compliance with extensive environmental, health and safety laws could require material expenditures, changes in our operations or site remediation. Our operations and properties are subject to regulation under environmental laws, which can impose substantial sanctions for violations.
Compliance with environmental laws and regulations generally increases the costs of transportation and storage of raw materials and finished products, as well as the costs of storage and disposal of wastes.
The necessary permits may not be issued or continue in effect, and renewals of any issued permits may contain significant new requirements or restrictions. Compliance with environmental laws and regulations generally increases the costs of transportation and storage of raw materials and finished products, as well as the costs of storage and disposal of wastes.
The cost of compliance with stringent climate change regulations could adversely affect our ability to compete with companies in locations that are not subject to stringent climate change regulations. 11 Table of Contents Business, Operations and Human Capital Risks Our attempts to address evolving customer needs require that we continually enhance our products.
The cost of compliance with stringent climate change regulations could adversely affect our ability to compete with companies in locations that are not subject to stringent climate change regulations.
In particular, the COVID-19 pandemic and subsequent supply chain disruptions and uncertainties have had a significant negative impact on the global economy in 2020 and 2021, including negatively impacting the global supply chain and increasing the cost of materials and operations . 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.
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.
Because of the significance of our goodwill and other intangible assets, a future impairment of these assets could have a material adverse effect on our results of operations and financial condition. For additional information on our accounting policies related to goodwill, see our discussion under Note 1 to our consolidated financial statements in Item 8 of this Annual Report.
Because of the significance of our goodwill and other intangible assets, a future impairment of these assets could have a material adverse effect on our results of operations and financial condition.
Our efforts to enhance our products may not be commercially viable and failure to develop commercially successful products or keep pace with our competitors could harm our business and results of operations. A failure to develop commercially successful products or product enhancements or to identify product extensions could materially adversely affect our financial results.
Business, Operations and Human Capital Risks Our attempts to address evolving customer needs require that we continually enhance our products. Our efforts to enhance our products may not be commercially viable and failure to develop commercially successful products or keep pace with our competitors could harm our business and results of operations.
Current or future efforts by the government to stimulate the economy may increase the risk of significant inflation, 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. 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.
We may also be required to pay higher prices for raw materials due to inflationary trends regardless of supply. In addition, inflation can also result in higher interest rates. With inflation, the costs of capital increases, and the purchasing power of our and our end users’ cash resources can decline.
In addition, supply chain shortages have negatively impacted, and could continue to negatively impact, our manufacturing costs and logistics costs and, in turn, our gross margins. We may also be required to pay higher prices for raw materials due to inflationary trends regardless of supply. In addition, inflation can also result in higher interest rates.
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.
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.
It is possible that additional risks and uncertainties not presently known to us, or that we currently deem immaterial, may also impair our business operations. Furthermore, the impact of the COVID-19 pandemic may exacerbate the risks discussed in this Annual Report, which could have a material effect on the Company.
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.
Our efforts in developing our industrial brands may be affected by the marketing efforts of our competitors and our reliance on our independent dealers, distributors and strategic partners to promote our industrial brands effectively. If we are unable to cost-effectively maintain and increase positive awareness of our industrial brands, our businesses, results of operations and financial condition could be harmed.
If we are unable to cost-effectively maintain and increase positive awareness of our industrial brands, our businesses, results of operations and financial condition could be harmed. Climate change could have an adverse effect on our business.
Changes in any of these areas could result in additional compliance costs, seizures, confiscations, recall or monetary fines, any of which could prevent or inhibit the development, distribution and sale of our products. In addition, we benefit from certain regulations, including building code regulations, which require the use of products that we and other manufacturers sell.
We and many of our customers are subject to various national, state and local laws, rules and regulations. Changes in any of these areas could result in additional compliance costs, seizures, confiscations, recalls or monetary fines, any of which could prevent or inhibit the development, distribution and sale of our products.
In certain international jurisdictions, distributors are conferred certain legal rights that could limit our ability to modify or terminate distribution relationships. Many of the distributors with whom we transact business also offer competitors’ products and services to our customers.
Many of the distributors with whom we transact business also offer competitors’ products and services to our customers.
Certain materials we use in the manufacture of our products can represent potentially significant health and safety concerns. We use hazardous substances and generate hazardous wastes in certain of our manufacturing operations. Consequently, our operations are subject to extensive environmental, health and safety laws and regulations at the international, national, state and local level in multiple jurisdictions.
We must conform our operations to applicable regulatory requirements and adapt to changes in such requirements in all jurisdictions in which we operate. Certain materials we use in the manufacture of our products can represent potentially significant health and safety concerns. We use hazardous substances and generate hazardous wastes in certain of our manufacturing operations.
There can be no assurance that the outcomes from these examinations will not have a material adverse effect on our business, financial condition and results of operations. 16 Table of Contents We may acquire various structured financial instruments for purposes of hedging or reducing our risks, which may be costly and ineffective.
If future audits find that additional taxes are due, we may be subject to incremental tax liabilities, possibly including interest and penalties, which could have a material adverse effect on our business, financial condition and results of operations. We may acquire various structured financial instruments for purposes of hedging or reducing our risks, which may be costly and ineffective.
Our operating results, accordingly, may be volatile as a result of excess industry capacity, as well as from rising energy and raw materials costs. Growth of our business will depend in part on market awareness of our industrial brands, and any failure to develop, maintain, protect or enhance our industrial brands would hurt our ability to retain or attract customers.
Growth of our business will depend in part on market awareness of our industrial brands, and any failure to develop, maintain, protect or enhance our industrial brands would hurt our ability to retain or attract customers. We believe that building and maintaining market awareness, brand recognition and goodwill is critical to our success.
The loss of a substantial number of our distributors, for any reason, including among others changing market conditions resulting from the COVID-19 pandemic, could have a material adverse effect on our business, financial condition, results of operations or cash flows.
The loss of a substantial number of our distributors, for any reason could have a material adverse effect on our business, financial condition, results of operations or cash flows. In certain international jurisdictions, distributors are conferred certain legal rights that could limit our ability to modify or terminate distribution relationships.
Changes in effective tax rates or adverse outcomes resulting from examination of our income tax returns could adversely affect our results. Our future effective tax rates could be adversely affected by changes in tax laws, regulations, accounting principles or interpretations thereof, which can impact our current and future years' tax provision.
Changes in effective tax rates or adverse outcomes resulting from examination of our income tax returns could adversely affect our results. We are subject to tax laws and regulations in the United States and multiple foreign jurisdictions.
For example, certain environmental regulations may encourage the use of more environmentally friendly products, such as some of the lubricants and greases that we manufacture. If these regulations were to change, demand for our products could be reduced and our results of operations could be adversely affected.
In addition, we benefit from certain regulations, including building code regulations, which require the use of products that we and other manufacturers sell. For example, certain environmental regulations may encourage the use of more environmentally friendly products, such as some of the lubricants and greases that we manufacture.
In addition, the overall financial markets may be disrupted as a result of the replacement of LIBOR, which could have an adverse effect on our cost of capital and our financial position. We are also required to comply with leverage and interest coverage financial covenants and deliver to our lenders audited annual and unaudited quarterly financial statements.
We are also required to comply with leverage and interest coverage financial covenants and deliver to our lenders audited annual and unaudited quarterly financial statements. Our ability to comply with these covenants may be affected by events beyond our control.
In addition, our production facilities require operating permits that are subject to renewal and, in some circumstances, revocation. The necessary permits may not be issued or continue in effect, and renewals of any issued permits may contain significant new requirements or restrictions.
Many of these laws and regulations have become more stringent over time, and the costs of compliance with these requirements may increase, including costs associated with any necessary capital investments. In addition, our production facilities require operating permits that are subject to renewal and, in some circumstances, revocation.
We believe that building and maintaining market awareness, brand recognition and goodwill is critical to our success. This will depend largely on our ability to continue to provide high-quality products, and we may not be able to do so effectively.
This will depend largely on our ability to continue to provide high-quality products, and we may not be able to do so effectively. Our efforts in developing our industrial brands may be affected by the marketing efforts of our competitors and our reliance on our independent dealers, distributors and strategic partners to promote our industrial brands effectively.
We are closely monitoring the impact of the COVID-19 pandemic and other macroeconomic conditions on our supply chain, which is causing supply chains for many companies to be interrupted, slowed or temporarily rendered inoperable. In addition, supply chain shortages have negatively impacted, and could continue to negatively impact, our manufacturing costs and logistics costs and, in turn, our gross margins.
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.
These laws and regulations govern, among other things, air emissions, wastewater discharges, solid and hazardous waste management, site remediation programs and chemical use and management. Many of these laws and regulations have become more stringent over time, and the costs of compliance with these requirements may increase, including costs associated with any necessary capital investments.
Consequently, our operations are subject to extensive environmental, health and safety laws and regulations at the international, national, state and local level in multiple jurisdictions. These laws and regulations govern, among other things, air emissions, wastewater discharges, solid and hazardous waste management, site remediation programs and chemical use and management.
Removed
We are closely monitoring the potential impact on our business resulting from the COVID-19 pandemic and the corresponding decline in economic activity, in particular the effect it may have on demand for our products in the short and long term.
Added
Additionally, adverse changes in economic conditions in the United States and worldwide may reduce the demand for some of our products, adversely impact our ability to predict and meet any future changes in the demand for our products and impair the ability of those with whom we do business to satisfy their obligations to us.
Removed
Additionally, the cyclical nature of these end markets could be further exaggerated or interrupted by the effects of the COVID-19 pandemic, which in turn could significantly affect demand for our products. Product demand may not be sufficient to utilize current or future capacity. Excess industry capacity may continue to depress our volumes and margins on some products.
Added
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.
Removed
There has been a rise in the number of cyberattacks targeting confidential business information generally and in the manufacturing industry specifically.
Added
Excess industry capacity may continue to depress our volumes and margins on some products. Our operating results, accordingly, may be volatile as a result of excess industry capacity, as well as from rising energy and raw materials costs.
Removed
Loss of the services of any of these individuals could have an adverse effect on our business. Further, we may not be able to retain or recruit qualified individuals to join our company. The loss of executive officers or other key employees could result in high transition costs and could disrupt our operations.
Added
Increased global focus on climate change may result in the imposition of new or additional regulations or requirements applicable to, and increased financial and transition risks for, our business and the industries in which we operate.
Removed
In the event we incur additional indebtedness, or if interest rates on our indebtedness increase, the risks described above could increase. In addition, certain or our variable rate indebtedness use the London Inter-bank Offered Rate ("LIBOR") as a benchmark for establishing the rate of interest.
Added
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.
Removed
While our material financing agreements indexed to LIBOR provide for an alternative base rate that could be applied in the event that LIBOR is discontinued, there can be no assurances as to whether such alternative base rate will be more or less favorable than LIBOR.
Added
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.
Removed
We intend to monitor developments with respect to the phasing out of LIBOR and will work to minimize the impact of any LIBOR transitions. The consequences of these developments cannot be entirely predicted but could include an increase in the cost of variable rate indebtedness.
Added
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.
Removed
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.
Added
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.
Removed
Legal and Regulatory Risks Regulatory and statutory changes applicable to us or our customers could adversely affect our financial condition and results of operations. We and many of our customers are subject to various national, state and local laws, rules and regulations.
Added
The domestic and international regulatory environment related to information security, collection and privacy is increasingly rigorous and complex, with new and rapidly changing requirements applicable to our business, which often require changes to our business practices.
Removed
The impact of the COVID-19 pandemic may also exacerbate the risks discussed in this Annual Report, which could have a material impact on our company.

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Item 2. Properties

Properties — owned and leased real estate

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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, Office and Warehouse Specialized Reliability Solutions & Engineered Building 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 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.
We may endeavor to selectively reduce or expand our existing lease commitments as circumstances warrant. See Note 10 to our consolidated financial statements included in Item 8 of this Annual Report for additional information regarding our lease obligations.
We may endeavor to selectively reduce or expand our existing lease commitments as circumstances warrant. See Note 9 to our consolidated financial statements included in Item 8 of this Annual Report for additional information regarding our lease obligations.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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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. 21 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. 22 Table of Contents

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeLittelfuse, Inc. Quaker Chemical Corp. Astec Industries, Inc. Gorman-Rupp Co. LSB Industries, Inc. Tredegar Corp. Chase Corporation Innospec Inc. Methode Electronics, Inc. Columbus McKinnon Corp Kraton Corp. NN, Inc. This graph is furnished and not filed with the SEC.
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.
Under the current program, shares may be repurchased from time to time in the open market or in privately negotiated transactions. Our Board of Directors has established an expiration date of December 31, 2022, for completion of the new repurchase program; however, the program may be limited or terminated at any time at our discretion without notice.
Under the current program, shares may be repurchased from time to time in the open market or in privately negotiated transactions. Our Board of Directors has established an expiration date of December 31, 2024, for completion of the new repurchase program; however, the program may be limited or terminated at any time at our discretion without notice.
Issuer Purchases of Equity Securities Note 13 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, 2022.
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.
ITEM 5: MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common shares are listed on the Nasdaq Global Select Market under the symbol "CSWI." Holders As of May 12, 2022, there were 377 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 22, 2023, there were 326 holders of record of our common stock.
(b) Includes 39 shares tendered by employees to satisfy minimum tax withholding amounts for restricted share vesting at an average price per share of $125.56. 23 Table of Contents Stock Performance Chart The following graph compares the cumulative total shareholder return on our common stock from April 1, 2017 through March 31, 2022 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) 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.
Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Program Maximum Number of Shares (or Approximate Dollar Value) That May Yet Be Purchased Under the Program (in millions) January 1 - 31 5,497 (a) (b) $ 112.00 5,458 $ 98.9 February 1 - 28 115,291 (a) 114.52 115,291 85.7 March 1 - 31 1,191 (a) 114.84 1,191 85.6 121,979 121,940 (a) On October 30, 2020, we announced that our Board of Directors authorized a new program to repurchase up to $100.0 million of our common stock, which replaced a previously announced $75.0 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 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.
The graph assumes that $100 was invested at the market close on April 1, 2017 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 Landec Corporation PGT Innovations Armstrong Industries, Inc Futurefuel Corp.
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.
As of March 31, 2022, 126,115 shares of our common stock had been repurchased under the current program for an aggregate amount of $14.4 million.
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.

Item 7. Management's Discussion & Analysis

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

104 edited+31 added−32 removed58 unchanged
Biggest changeEngineered 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. 32 Table of Contents Year Ended March 31, (amounts in thousands, except percentages) 2022 2021* 2020* Revenues, net $ 97,296 $ 95,672 $ 90,881 Operating income 11,101 14,066 14,278 Operating margin 11.4 % 14.7 % 15.7 % *Years ended March 31, 2021 and 2020 amounts have been adjusted to reflect the change in inventory accounting method, as described in Notes 1 and 7 to the Consolidated Financial Statements.
Biggest changeThis 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.
Gross profit margin for the year ended March 31, 2022 of 40.9% decreased from 44.0% for the year ended March 31, 2021, primarily due to the inclusions of the TRUaire and Shoemaker acquisitions, material and freight costs increases outpacing implemented pricing initiatives and $1.7 million of under-absorption costs resulting from reduced production levels and incremental compensation expenses incurred at the TRUaire Vietnam facility during the year to maintain TRUaire Vietnam's operations in accordance with COVID-19 restrictions ("TRUaire Vietnam COVID COGS Impact").
Gross profit margin for the year ended March 31, 2022 of 40.9% decreased from 44.0% for the year ended March 31, 2021, primarily due to inclusions of the TRUaire and Shoemaker acquisitions, material and freight costs increases outpacing implemented pricing initiatives and $1.7 million of under-absorption costs resulting from reduced production levels and incremental compensation expenses incurred at the TRUaire Vietnam facility during the year to maintain TRUaire Vietnam's operations in accordance with COVID-19 restrictions ("TRUaire Vietnam COVID Impact").
We provide an array of products into the rail industry, including lubricants and lubricating devices for rail lines, which increase efficiency, reduce noise and extend the life of rail equipment such as rails and wheels. We leverage our technical expertise to build relationships with key decision-makers to ensure our products meet required specifications.
We provide an array of products into the rail transportation industry, including lubricants and lubricating devices for rail transportation lines, which increase efficiency, reduce noise and extend the life of rail transportation equipment such as rails and wheels. We leverage our technical expertise to build relationships with key decision-makers to ensure our products meet required specifications.
The increase was primarily due to demand recovery in the energy, mining and rail and general industrial end markets, pricing initiatives to mitigate rising costs that began in the three months ended June 30, 2021 and continued throughout the current year, as well as the inclusion of the newly formed Whitmore JV.
The increase was primarily due to demand recovery in the energy, mining and rail transportation and general industrial end markets, pricing initiatives to mitigate rising costs that began in the three months ended June 30, 2021 and continued throughout the current year, as well as the inclusion of the newly formed Whitmore JV.
(“TRUaire”), a leading manufacturer of grilles, registers, and diffusers for the residential and commercial HVAC/R end market, based in Santa Fe Springs, California. The acquisition also included TRUaire’s wholly-owned manufacturing facility based in Vietnam. The acquisition extended the Company’s product offerings to the HVAC market and provided strategic distribution facilities.
(“TRUaire”), a leading manufacturer of grilles, registers, and diffusers ("GRD") for the residential and commercial HVAC/R end market, based in Santa Fe Springs, California. The acquisition also included TRUaire’s wholly-owned manufacturing facility based in Vietnam. The acquisition extended the Company’s product offerings to the HVAC market and provided strategic distribution facilities.
The organic sales growth contributed to the increased operating income, which was partially offset by increased material and freight costs, the $1.7 million TRUaire Vietnam COVID COGS Impact discussed above and increased spending on sales commissions, depreciation and optimization expenses related to enterprise resource planning systems, headcount and travel.
The organic sales growth contributed to the increased operating income, which was partially offset by increased material and freight costs, the $1.7 million TRUaire Vietnam COVID Impact discussed above and increased spending on sales commissions, depreciation and optimization expenses related to enterprise resource planning systems, headcount and travel.
We sell our products primarily through a direct sales force, as well as through distribution partners. End markets for Rail include Class 1 Rail as the primary end market in North America and Transit Rail as the primary end market in all other geographies.
We sell our products primarily through a direct sales force, as well as through distribution partners. End markets for rail transportation include Class 1 Rail as the primary end market in North America and Transit Rail as the primary end market in all other geographies.
The aggregate purchase price was comprised of cash consideration of $38.5 million, 25,483 shares of the Company's common stock valued at $3.0 million at transaction close and additional contingent consideration of up to $2.0 million based on Shoemaker meeting a defined financial target during the quarter ended March 31, 2022, which was achieved.
The aggregate purchase price was comprised of cash consideration of $38.6 million, 25,483 shares of the Company's common stock valued at $3.0 million at transaction close and additional contingent consideration of up to $2.0 million based on Shoemaker meeting a defined financial target during the quarter ended March 31, 2022, which was achieved.
The increases were partially offset by transactions expenses related to the TRUaire acquisition ($7.8 million) and JV formation ($2.6 million) incurred in the prior year period that did not recur. The decrease in operating expense as a percentage of sales was primarily attributable to sales increasing by a greater percentage than the increase in operating expenses.
The increases were partially offset by transactions expenses related to the TRUaire acquisition ($7.8 million) and JV formation ($2.6 million) incurred in the prior year period that did not recur. The increase in operating expenses as a percentage of sales was primarily attributable to sales increasing by a greater percentage than the increase in operating expenses.
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, 2022 primarily included purchase obligations and operating lease commitments.
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.
Revenue Recognition We recognize revenues to depict the transfer of control of promised goods or services to our customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. Refer to Note 20 for further discussion.
Revenue Recognition We recognize revenues to depict the transfer of control of promised goods or services to our customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. Refer to Note 19 for further discussion.
Our Board of Directors has established an expiration of December 31, 2022 for the $100.0 million repurchase program and we currently expect to continue to repurchase shares in the near future, but such repurchases are dependent upon our financial condition, results of operations, capital requirements, and other factors, including those set forth under Item 1A.
Our Board of Directors has established an expiration of December 31, 2024 for the current $100.0 million repurchase program and we currently expect to continue to repurchase shares in the near future, but such repurchases are dependent upon our financial condition, results of operations, capital requirements, and other factors, including those set forth under Item 1A.
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.
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.
We provide an extensive array of products for installation, repair and maintenance of HVAC/R systems that includes condensate switches, pans and pumps, grilles, registers and diffusers ("GRD"), refrigerant caps, line set covers and other chemical and mechanical products. The industry is driven by replacement and repair of existing HVAC/R systems, as well as new construction projects.
We provide an extensive array of products for installation, repair and maintenance of HVAC/R systems that includes condensate switches, pans and pumps, GRD, refrigerant caps, line set covers and other chemical and mechanical products. The industry is driven by replacement and repair of existing HVAC/R systems, as well as new construction projects.
(i) We identify a contract with a customer when a sales agreement indicates approval and commitment of the parties; identifies the rights of the parties; identifies the payment terms; has commercial substance; and it is probable that we 36 Table of Contents will collect the consideration to which we will be entitled in exchange for the goods or services that will be transferred to the customer.
(i) We identify a contract with a customer when a sales agreement indicates approval and commitment of the parties; identifies the rights of the parties; identifies the payment terms; has commercial substance; and it is probable that we will collect the consideration to which we will be entitled in exchange for the goods or services that will be transferred to the customer.
"Risk Factors" of this Annual Report. See Note 13 to our consolidated financial statements included in Item 8 of this Annual Report for a discussion of our share repurchase program.
"Risk Factors" of this Annual Report. See Note 12 to our consolidated financial statements included in Item 8 of this Annual Report for a discussion of our share repurchase program.
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 9% and 10% of our net revenues in the years ended March 31, 2022 and 2021, 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.
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 (net of federal benefits), 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 effective tax rate by 1.1% and a net increase in the reserve for uncertain tax positions, which increased the provision by $0.8 million and the effective tax rate by 0.8%.
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%.
We remain disciplined in our approach to acquisitions, particularly as it relates to our assessment of valuation, prospective synergies, diligence, cultural fit and ease of integration, especially in light of the economic conditions due to the pandemic. 28 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 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.
Our quantitative test performed as of January 31, 2022 indicated that no goodwill impairment loss should be recognized for the year ended March 31, 2022. There were no impairment loss recognized for the years ended March 31, 2021 and 2020, respectively. We have indefinite-lived intangible assets in the form of trademarks and license agreements.
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.
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 27% of our net revenues in the years ended March 31, 2022 and 2021, 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 18% and 19% of our net revenues in the years ended March 31, 2023 and 2022, respectively.
Energy The energy market represented approximately 6% and 4% of our net revenues in the years ended March 31, 2022 and 2021, 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 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.
Excluding the impact of acquisitions, organic sales increased $104.0 million or 24.8% from the prior year due to implemented pricing initiatives and increased sales volumes. Pricing initiatives, which began in the three months ended March 31, 2021 to mitigate rising costs, continued and increased during the current year.
Excluding the impact of acquisitions, organic sales increased $104.0 million or 24.8% from the prior year due to pricing initiatives and increased unit volumes. Pricing initiatives, which began in the three months ended March 31, 2021 to mitigate rising costs, continued and increased during the year ended March 31, 2022.
For additional information on segments, see Note 21 to our consolidated financial statements included in Item 8 of this Annual Report. 33 Table of Contents LIQUIDITY AND CAPITAL RESOURCES General Existing cash on hand, cash generated by operations and borrowings available under our Revolving Credit Facility ("Revolver Borrowings") are our primary sources of short-term liquidity.
For additional information on segments, see Note 20 to our consolidated financial statements included in Item 8 of this Annual Report. LIQUIDITY AND CAPITAL RESOURCES General Existing cash on hand, cash generated by operations and borrowings available under our Revolving Credit Facility ("Revolver Borrowings") are our primary sources of short-term liquidity.
General Industrial The general industrial end market represented approximately 7% and 10% of our net revenues in the years ended March 31, 2022 and 2021, respectively. We provide products focused on asset protection and reliability, including lubricants, desiccant breathers and fluid management products.
General Industrial The general industrial end market represented approximately 6% and 7% of our net revenues in the years ended March 31, 2023 and 2022, respectively. We provide products focused on asset protection and reliability, including lubricants, desiccant breathers and fluid management products.
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 $71.4 million increase in gross profit, partially offset by the $33.3 million increase in selling, general and administrative expense as discussed above.
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.
Business Developments On December 15, 2021, we acquired 100% of the outstanding equity of Shoemaker Manufacturing, LLC (“Shoemaker”), based in Cle Elum, Washington, for an aggregate purchase price of $43.5 million, including preliminary working capital and closing cash adjustments and expected contingent consideration.
On December 15, 2021, we acquired 100% of the outstanding equity of Shoemaker Manufacturing, LLC (“Shoemaker”), based in Cle Elum, Washington, for an aggregate purchase price of $43.6 million, including working capital and closing cash adjustments and expected contingent consideration.
We expect to incur $67.4 million in purchase obligations over the next 12 months. For operating lease commitments, see Note 10 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 $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.
During the year ended March 31, 2022, we released a $0.3 million reserve related to positions taken on tax returns for which the statute has expired, and accrued interest and penalties of $0.6 million and $0.5 million, respectively.
During the year ended March 31, 2022, we released a reserve of $1.4 million, including accrued interest of $0.6 million and accrued penalties of $0.5 million, related to positions taken on tax returns for which the statute has expired.
Our largest use of cash in our operations is for purchasing and carrying inventories and carrying seasonal accounts receivable. 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 repay scheduled principal and interest payments on debt.
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.
The consideration paid for TRUaire included cash of $288.0 million and 849,852 shares of the Company’s common stock. The cash consideration was funded through a combination of cash on hand and borrowings under our Revolving Credit Facility, and 849,852 shares of common stock were reissued from treasury shares.
The consideration paid for TRUaire included cash of $288.0 million and 849,852 shares of the Company’s common stock valued at $97.7 million at transaction close. The cash consideration was funded through a combination of cash on hand and borrowings under our Revolving Credit Facility, and 849,852 shares of common stock were reissued from treasury shares.
For the year ended March 31, 2022, our cash provided by operating activities from continuing operations was $69.1 million, as compared with $66.3 million and $71.4 million for the years ended March 31, 2021 and 2020, respectively. • 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 current assets ($4.2 million), and higher inventories ($3.4 million), partially offset by higher accounts payable and other current liabilities ($13.9 million). • Working capital provided cash for the year ended March 31, 2020 due to higher accounts payable and other current liabilities ($5.9 million) and lower prepaid expenses and other assets ($4.0 million), mostly offset by higher accounts receivable ($8.0 million) and higher inventory ($1.7 million).
For 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).
This was offset by tax benefits related to the restricted stock vesting which decreased the provision by $1.9 million and the effective tax rate by 2.1%.
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%.
Cash outflows resulted from: • Net borrowing (repayments) on our lines of credit (as discussed in Note 9 to our consolidated financial statements included in Item 8 of this Annual Report) of $10.4 million, $231.4 million and $(20.6) million during the years ended March 31, 2022, 2021 and 2020, respectively. • Payments of $2.3 million of underwriting discounts and fees in connection with amending and extending our Revolving Credit Facility during the year ended March 31, 2022, as discussed in Note 9 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 $6.3 million during the year ended March 31, 2022, 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 13 to our consolidated financial statements included in Item 8 of this Annual Report) of $14.4 million, $7.3 million and $26.9 million during the years ended March 31, 2022, 2021 and 2020, respectively. • Dividend payments of $9.5 million, $8.1 million and $8.1 million were paid during the years ended March 31, 2022, 2021 and 2020, respectively.
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.
Capital Expenditures During the year ended March 31, 2022, we invested $15.7 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, 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.
We recorded impairment losses on intangible assets (excluding those related to discontinued operations) of $0, $0 and $1.0 million for the years ended March 31, 2022, 2021 and 2020, respectively. 38 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. 39 Table of Contents
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
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.
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.
See Note 13 to our consolidated financial statements included in Item 8 of this Annual Report for a discussion of dividends. 35 Table of Contents Share Repurchase Program On October 30, 2020, our Board of Directors authorized the repurchase up to $100.0 million of our common stock, which replaced the previously announced $75.0 million program.
See Note 12 to our consolidated financial statements included in Item 8 of this Annual Report for a discussion of dividends. Share Repurchase Program On October 30, 2020, our Board of Directors approved a repurchase program authorizing the repurchase of up to $100.0 million of our common stock, which replaced a prior $75.0 million repurchase program.
Net Revenues Year Ended March 31, (amounts in thousands) 2022 2021 2020 Revenues, net $ 626,435 $ 419,205 $ 385,871 Net revenues for the year ended March 31, 2022 increased $207.2 million, or 49.4%, as compared with the year ended March 31, 2021. The increase was primarily due to the acquisitions of TRUaire and Shoemaker ($103.2 million or 24.6%).
Net revenues for the year ended March 31, 2022 increased $207.2 million, or 49.4%, as compared with the year ended March 31, 2021. The increase was primarily due to the acquisitions of TRUaire and Shoemaker ($103.2 million or 24.6%).
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"), grilles, registers and diffusers ("GRD"), building safety solutions and high-performance specialty lubricants and sealants. End markets that we serve include HVAC/R, architecturally-specified building products, plumbing, energy, rail, mining and general industrial.
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.
("Petersen") have been included in our consolidated results of operations and in the operating results of our Engineered Building Solutions segment since April 2, 2019, the effective date of the acquisition. All acquisitions are described in Note 2 to our consolidated financial statements included in Item 8 of this Annual Report.
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.
Cash flows used in investing activities from continuing operations during the year ended March 31, 2022 were $51.5 million as compared with $289.9 million and $22.0 million for the years ended March 31, 2021 and 2020, respectively. • Capital expenditures during the years ended March 31, 2022, 2021 and 2020 were $15.7 million, $8.8 million and $11.4 million, respectively.
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.
Additionally, we received proceeds of $1.4 million as a result of the final working capital true-up adjustment related to the TRUaire acquisition. During the year ended March 31, 2021 we acquired TRUaire for $286.9 million (after working capital adjustment) in cash consideration and stock consideration valued at $97.7 million.
Additionally, we received proceeds of $1.4 million as a result of the final working capital true-up adjustment related to the TRUaire acquisition. • During the year ended March 31, 2021, we acquired TRUaire for $286.9 million (after working capital adjustment) in cash consideration and stock consideration valued at $97.7 million a s discussed in Note 2 to our consolidated financial statements included in Item 8 of this Annual Report .
We have no operations, employees or assets in Russia, Belarus or Ukraine, nor do we source goods or services of any material amount from those countries, whether directly or indirectly.
We continue to monitor the Russian invasion of Ukraine and its global impact. We have no operations, employees or assets in Russia, Belarus or Ukraine, nor do we source goods or services of any material amount from those countries, whether directly or indirectly.
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. Net revenues for the year ended March 31, 2021 increased $4.8 million, or 5.3%, as compared with the year ended March 31, 2020.
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 reputation of our product portfolio is built on more than 100 well-respected brand names, such as RectorSeal No. 5 ® , Kopr-Kote ® , KATS Coatings ® , Safe-T-Switch ® , Air Sentry ® , Deacon ® , Leak Freeze ®, Greco ® and TRUaire® and Shoemaker Manufacturing TM .
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®.
Selling, General and Administrative Expense Year Ended March 31, (amounts in thousands, except percentages) 2022 2021 2020 Operating expenses $ 158,582 $ 125,330 $ 110,983 Operating expenses as a % of revenues 25.3 % 29.9 % 28.8 % Selling, general and administrative expense for the year ended March 31, 2022 increased $33.3 million, or 26.5%, as compared with the year ended March 31, 2021.
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.
F or the year ended March 31, 2021, we recorded an additional net tax contingency reserve of $0.2 million, accrued interest of $0.1 million and accrued penalty of $0.2 million.
For the year ended March 31, 2023, we recorded an additional net tax contingency reserve of less than $0.1 million, accrued interest of $0.7 million and accrued penalty of $0.6 million.
Our Outlook We expect to maintain a strong balance sheet in fiscal year 2023, which provides us with access to capital through our cash on hand, internally-generated cash flow and availability under our Revolving Credit Facility.
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.
The decrease was due to a shift in sales to lower margin projects and added salespeople to achieve long-term revenue growth objectives. Operating income for the year ended March 31, 2021 decreased $0.2 million, or 1.5%, as compared with the year ended March 31, 2020. The decrease was due to a shift in sales to lower margin projects.
The decrease was due to a shift in sales to lower margin projects and added salespeople to achieve long-term revenue growth objectives. Operating margin of 11.4% for the year ended March 31, 2022 decreased as compared to 14.7% for the year ended March 31, 2021.
We believe that the following represent our critical accounting policies. For a summary of all of our significant accounting policies, see Note 1 to our consolidated financial statements included in Item 8 of this Annual Report. Management and our external auditors have discussed our critical accounting estimates and policies with the Audit Committee of our Board of Directors.
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.
Interest expense, net for the year ended March 31, 2021 increased $1.1 million to $2.4 million as compared with the year ended March 31, 2020, primarily due to increased borrowing under our Revolving Credit Facility (described in Note 9 to our consolidated financial statements included in Item 8 of this Annual Report) in connection with the TRUaire acquisition.
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.
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. Contractor Solutions Segment Results The Contractor Solutions segment manufactures efficiency and performance enhancing products predominantly for residential and commercial HVAC/R, plumbing, architecturally-specified building and general industrial applications, which are designed primarily for professional end-use customers.
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.
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. The operations of Petersen Metals, Inc.
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 cost and terms of any financing to be raised in conjunction with any acquisition, including our ability to raise capital, is a critical consideration in any such evaluation. During the year ended March 31, 2022, we acquired 100% of the outstanding equity of Shoemaker Manufacturing, LLC (“Shoemaker”).
The cost and terms of any financing to be raised in conjunction with any acquisition, including our ability to raise capital, is a critical consideration in any such evaluation.
Our federal income tax returns for the years ended March 31, 2021, 2020 and 2019 remain subject to examination. 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 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.
As compared with the statutory rate for the year ended March 31, 2021, the provision for income taxes was primarily impacted by the state tax expense, which increased the provision by $2.4 million and the effective rate by 4.8%, the additional non-deductible expenses, which increased the provision by $1.9 million and the effective rate by 2.1%, and the release of uncertain tax positions, which decreased the provision by $4.7 million and the effective rate by 9.3%.
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%.
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. The increase was primarily due to the acquisitions of TRUaire and Shoemaker, pricing initiatives and increased 29 Table of Contents organic sales.
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.
On April 14, 2022, we announced a 13% quarterly dividend increase to $0.170 per share which was paid on May 13, 2022 to shareholders of record as of April 29, 2022.
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.
The COVID-19 pandemic and its resulting impacts had an overall negative impact on our financial results in our prior fiscal year ended March 31, 2021. During our current fiscal year ended March 31, 2022, the direct impact of the COVID-19 pandemic on our consolidated operating results was limited, in all material respects, to our operations in Vietnam.
The COVID-19 pandemic and its resulting impacts had an overall negative impact on our financial results in the prior fiscal years ended March 31, 2022 and March 31, 2021.
During the fiscal year ended March 31, 2022, we had no sales into Belarus or Ukraine and our sales into Russia were immaterial to both our consolidated sales and the sales for our Specialized Reliability Solutions segment. Additionally, shortly after the Russian invasion of Ukraine began in February 2022, we indefinitely suspended all business activity in Russia.
Shortly after the Russian invasion of Ukraine began in February 2022, we indefinitely suspended all commercial activities in Russia. During the fiscal year ended March 31, 2023, we had no sales into Belarus or Ukraine.
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.
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.
As of both March 31, 2022 and 2021, we had no tax effected net operating loss carryforwards, net of valuation allowances. Net operating loss carryforwards will expire in periods beyond the next 5 years. 31 Table of Contents Business Segments We conduct our operations through three business segments based on type of product and how we manage the business.
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.
As of March 31, 2022, we had $243.0 million in outstanding Revolver Borrowings, which resulted in a borrowing capacity of $157.0 million. See Note 9 to our consolidated financial statements included in Item 8 of this Annual Report for a discussion of our indebtedness. Dividends Total dividends of $9.5 million were paid during the year ended March 31, 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.
Our income tax returns in certain state income tax jurisdictions remain subject to examination for various periods for the period ended September 30, 2015 and subsequent years. While we believe we have adequately provided for any reasonably foreseeable outcome related to these matters, our future results may include favorable or unfavorable adjustments to our estimated tax liabilities.
While we believe we have adequately provided for any reasonably foreseeable outcome related to these matters, our future results may include favorable or unfavorable adjustments to our estimated tax liabilities.
Our Markets HVAC/R The HVAC/R market is our largest market served and it represented approximately 53% and 42% of our net revenues in the years ended March 31, 2022 and 2021, respectively.
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.
Sales volumes increased in all end markets including HVAC/R, energy, plumbing, mining, rail, architecturally-specified building products and general industrial. Net revenues for the year ended March 31, 2021 increased $33.3 million, or 8.6%, as compared with the year ended March 31, 2020. The increase was primarily due to the December 15, 2020 acquisition of TRUaire ($33.8 million or 8.8%).
Net revenue increased in the HVAC/R, architecturally-specified building products and plumbing end markets and decreased in the general industrial end market. Net revenues for the year ended March 31, 2022 increased $171.0 million, or 69.6%, as compared with the year ended March 31, 2021. The increase was primarily due to the TRUaire and Shoemaker acquisitions ($103.2 million or 42.0%).
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. The increase was primarily due to increased organic sales and the Whitmore JV, partially offset by increased material expenses outpacing implemented price increases, increased spending on sales commissions driven by increased sales and increased travel expense.
The increase was primarily due to increased organic sales and the inclusion of Whitmore JV, partially offset by increased material expenses outpacing implemented price increases, increased spending on sales commissions driven by increased sales and increased travel expense.
The interest and penalties related to the uncertain tax position resulted in a reduction of $0.4 million in income tax expense for the year ended March 31, 2020. Our liability for uncertain tax positions contains uncertainties as management is required to make assumptions and apply judgments to estimate exposures associated with our tax positions.
Our liability for uncertain tax positions contains uncertainties as management is required to make assumptions and apply judgments to estimate exposures associated with our tax positions. Our federal income tax returns for the years ended March 31, 2022, 2021 and 2020 remain subject to examination.
We rely on both organic growth and inorganic growth through acquisitions to provide an increasingly broad portfolio of performance optimizing solutions that meet our customers’ ever-changing needs. We have a successful record of making attractive, synergistic acquisitions in support of this objective, and we remain focused on identifying additional acquisition opportunities in our core end markets.
We believe our brands are well-known in the specific end markets we serve and have a reputation for high quality. We rely on both organic growth and inorganic growth through acquisitions to provide an increasingly broad portfolio of performance optimizing solutions that meet our customers’ ever-changing needs.
The North American mining industry is heavily weighted toward coal production and has experienced headwinds due to continued decline in domestic coal demand, partially mitigated by the seaborne coal export market.
Across the globe, we provide market-leading lubricants to open gears used in large mining excavation equipment, primarily through direct sales agents, as well as a network of strategic distributors. The North American mining industry is heavily weighted toward coal production and has experienced headwinds due to continued decline in domestic coal demand, partially mitigated by the seaborne coal export market.
Specialized Reliability Solutions Segment Results Specialized Reliability Solutions segment provides long-established products for increasing the reliability, performance and lifespan of industrial assets and solving equipment maintenance challenges.
This decrease was due to a shift in sales to lower margin projects and added salespeople to achieve long-term revenue growth objectives. Specialized Reliability Solutions Segment Results The Specialized Reliability Solutions segment provides long-established products for increasing the reliability, performance and lifespan of industrial assets and solving equipment maintenance challenges.
Operating income for the year ended March 31, 2021 increased $0.8 million, or 1.3%, as compared with the year ended March 31, 2020. The increase was primarily attributable to transaction expenses related to the TRUaire acquisition ($7.8 million), partially offset by increased revenues.
Operating income for the year ended March 31, 2023 increased $11.2 million, or 124.0%, as compared with the year ended March 31, 2022. The increase was primarily due to the increased net revenue, partially offset by increased operating expenses.
Net revenues for the year ended March 31, 2021 decreased $26.3 million, or 25.1%, as compared with the year ended March 31, 2020. The decrease was primarily attributable to decreased sales volumes into the general industrial, energy, rail and mining end markets.
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.
Our capital expenditures have been focused on enterprise resource planning systems, capacity expansion, continuous improvement and automation and new product introductions • During the year ended March 31, 2022 we acquired Shoemaker for an aggregate purchase price of $43.5 million, including $38.5 million in cash consideration.
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.
F or the year ended March 31, 2021, we recorded an additional net tax contingency reserve of $0.2 million, accrued interest of $0.1 million and accrued penalty of $0.2 million. Our federal income tax returns for the years ended March 31, 2021, 2020 and 2019 remain subject to examination.
For the year ended March 31, 2023, we recorded an additional net tax contingency 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 the successful execution of a large-scale project and project wins due to competitive lead times. 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.
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.
Other expense, net decreased by $1.2 million for the year ended March 31, 2021 to expense of $6.0 million as compared with the year ended March 31, 2020.
Other expense, net decreased by $0.5 million for the year ended March 31, 2023 to income of less than $0.1 million as compared with the year ended March 31, 2022. The decrease was primarily due to foreign currency exchange changes.
Our manufacturing operations are concentrated in the United States (“U.S.”), Canada and Vietnam, and we have distribution operations in the U.S., Australia, Canada and the United Kingdom (“U.K.”). Our products are sold directly to end users or through designated channels in over 100 countries around the world, primarily including Australia, Canada, the U.K. and the U.S.
Our products are sold directly to end-users or through designated channels in over 100 countries around the world, primarily including the U.S., Canada, the U.K. and Australia. Drawing on our innovative and proven technologies, we seek to deliver solutions primarily to contractors that place a premium on superior performance and reliability.
During the year ended March 31, 2022, we released a $0.3 million reserve related to positions taken on tax returns for which the statute has expired, and accrued interest and penalties of $0.6 million and $0.5 million, respectively. 37 Table of Contents During the year ended March 31, 2021, w e recorded total tax contingency reserves of $17.3 million, including unrecognized tax benefit of $13.6 million, accrued interest and penalty of $1.4 million and $2.3 million, respectively, through purchase accounting as a result of the TRUaire acquisition discussed in Note 2.
During the year ended March 31, 2022, we released a reserve of $1.4 million, including accrued interest of $0.6 million and accrued penalties of $0.5 million, related to positions taken on tax returns for which the statute has expired. Our federal income tax returns for the years ended March 31, 2022, 2021 and 2020 remain subject to examination.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+1 added−1 removed4 unchanged
Biggest changeEach quarter point change in interest rates would result in a change of approximately $0.6 million in our interest expense on an annual basis. We may also be exposed to credit risk in derivative contracts we may use. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract.
Biggest changeStarting 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.
This calculation assumes that all currencies change in the same direction and proportion relative to the U.S. dollar and that there are no indirect effects, such as changes in non-U.S. dollar sales volumes or prices. 40 Table of Contents
This calculation assumes that all currencies change in the same direction and proportion relative to the U.S. dollar and that there are no indirect effects, such as changes in non-U.S. dollar sales volumes or prices. 41 Table of Contents
We realized net (losses) gains associated with foreign currency translation of less than $(0.1) million, $4.8 million and $(2.3) million for the years ended March 31, 2022, 2021 or 2020, respectively, which are included in accumulated other comprehensive income (loss).
We 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).
We recognized foreign currency transaction net gains (losses) of less than $0.1 million, $(0.9) million and $0.3 million for the years ended March 31, 2022, 2021 or 2020, respectively, which are included in other income (expense), net on our consolidated statements of operations.
We recognized foreign currency transaction net gains (losses) of $0.4 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.
If the fair value of a derivative contract is positive, the counterparty will owe us, which creates credit risk for us. If the fair value of a derivative contract is negative, we will owe the counterparty and, therefore, do not have credit risk.
Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. If the fair value of a derivative contract is positive, the counterparty will owe us, which creates credit risk for us. If the fair value of a derivative contract is negative, we will owe the counterparty and, therefore, do not have credit risk.
Based on a sensitivity analysis at March 31, 2022, a 10% change in the foreign currency exchange rates for the year ended March 31, 2022 would have impacted our income from continuing operations by less than 1%.
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%.
Fluctuations in interest rates have a direct effect on interest expense associated with our outstanding indebtedness. We manage, or hedge, interest rate risks related to our borrowings by means of interest rate swap agreements.
Fluctuations in interest rates have a direct effect on the interest expense associated with our outstanding indebtedness. We manage, or hedge, interest rate risks related to our borrowings by means of interest rate swap agreements. As discussed in Note 10, the Whitmore Term Loan interest rate swap was terminated on January 9, 2023.
Removed
As of March 31, 2022, we had $243.0 million in outstanding variable rate indebtedness, after consideration of the interest rate swap, which covered 3.9% of our $252.8 million of our total outstanding indebtedness. At March 31, 2022, we had $243.0 million in unhedged variable rate indebtedness with a weighted average interest rate of 1.95%.
Added
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%.

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