CSW Industrials, Inc.
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ITEM 1: BUSINESS
General
CSWI is a diversified industrial growth company with a strategic focus on providing niche, value-added products in the end markets we serve. We operate in three business segments: Contractor Solutions, Specialized Reliability Solutions and Engineered Building Solutions. 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, mining and electrical. 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 in the U.S., Canada, the U.K. and Australia.
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. 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 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. 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, mining and electrical end markets. 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 separation was executed on September 30, 2015 through a pro-rata share distribution of all the then outstanding shares of common stock of CSWI to the holders of common stock of Capital Southwest (the "Share Distribution"). Since the separation, CSWI has been an independent, publicly-traded company, listed on the Nasdaq Global Select Market. On April 29, 2025, we announced our intention to transfer the listing of our common stock from the Nasdaq Global Select Market to the New York Stock Exchange, effective on or about June 9, 2025. CSWI common stock will trade on the New York Stock Exchange under the stock symbol “CSW”.
Recent Developments
On May 2, 2025, the Company entered into a Third Amended and Restated Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, and other lenders party thereto. The Third Amended and Restated Credit Agreement renewed the Company’s existing Revolving Credit Facility, which refreshed the term for five years and increased the commitment to $700.0 million. Refer to Note 8 for additional information.
On May 1, 2025, the Company completed the acquisition of 100% of the equity interests of Aspen Manufacturing, LLC. In accordance with the terms of the acquisition agreements, we paid an aggregate purchase price of approximately $330.4 million, including cash consideration, estimated working capital true-up payment and opening cash, which was funded with a combination of cash on hand and borrowings under our existing Revolving Credit Facility, as defined in Note 8. Aspen Manufacturing is one of the largest independent evaporator coil and air handler manufacturers for the HVAC/R industry and is a recognized leader in product quality and indoor comfort. Aspen Manufacturing’s current product suite includes a vast range of high-quality residential and light commercial evaporator coils, blowers, and air handling units for single-family, multi-family, and manufactured homes. Aspen Manufacturing will be included in our Contractor Solutions segment after the acquisition date.
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Business Segments
Our business is organized into three reportable segments: Contractor Solutions, Specialized Reliability Solutions and Engineered Building Solutions.
The table below provides an overview of these business segments. For financial information regarding our segments, see Note 20 to our consolidated financial statements included in Item 8 Financial Statements and Supplementary Data ("Item 8") of this Annual Report.
| Business Segment | Key End Use Markets | ||||||||
| Contractor Solutions | •HVAC/R •Plumbing •General Industrial •Architecturally-Specified Building Products •Electrical | ||||||||
| Specialized Reliability Solutions | •Energy •General Industrial •Mining •Rail Transportation | ||||||||
| Engineered Building Solutions | • Architecturally-Specified Building Products | ||||||||
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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. 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 the professional trades have been using our industry-leading solutions for generations. 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.
Our key product types and brand names are shown below in alphabetical order:
| Product Types | Brand Names | ||||
• condensate pads, pans and pumps | • AquaGuard® | ||||
• condensate switches and traps | • Aspen ManufacturingTM* | ||||
• drain management systems | • Aspen® Pumps** | ||||
• drain waste and vent systems mechanical products | • Clean Check® | ||||
• ductless mini-split systems installation support tools and accessories | • Cover GuardTM | ||||
• electrical protection for HVAC | • DesolvTM | ||||
• evaporator coils and air handlers* | • Dust Free® | ||||
• grilles, registers, diffusers and vents | • EZ Trap® | ||||
• installation supplies for HVAC | • Falcon Stainless® | ||||
• line set covers | • Fortress® | ||||
• load management systems | • Goliath® | ||||
• maintenance chemicals for HVAC | • G-O-N® | ||||
| • refrigerant caps | • Guardian Drain Lock® | ||||
| • solvents, cements, traps, vents, and thread sealants | • HubsettTM | ||||
| • surge protection products | • Kickstart® | ||||
• wire pulling head tools | • Leak Freeze® | ||||
• No. 5® | |||||
| • Novent® | |||||
• PF WaterWorksTM | |||||
| • PRO-Fit® | |||||
• PSP ProductsTM | |||||
• RectorSeal® |
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Financial statements
data from SEC XBRL filings. Values are as-reported; restatements supersede originals. Values reported in .
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes included in this Quarterly Report, as well as our consolidated financial statements and related notes for the fiscal year ended March 31, 2025 included in our Annual Report. This discussion and analysis contains forward-looking statements based on current expectations relating to future events and our future performance that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements” below. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those risk factors set forth in our Annual Report and in this Quarterly Report.
Overview
CSW Industrials, Inc. (the “Company,” “CSW,” “we,” “our” or “us”) is a diversified industrial growth company with a strategic focus on providing niche, value-added products in the end markets we serve. We operate in three business segments: Contractor Solutions, Specialized Reliability Solutions and Engineered Building Solutions. 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, electrical, general industrial, energy, rail transportation and mining. 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.
Drawing on our innovative and proven technologies, we seek to deliver solutions primarily to 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. 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.
Many of our products are used to protect the capital assets of our customers that are expensive to repair or replace and are critical to their operations. We have a source of recurring revenue from the maintenance, repair and overhaul and consumable nature of many of our products. We also provide some custom engineered products that strengthen and enhance our customer relationships. The reputation of our product portfolio is built on more than 100 well-respected brand names, such as AC Guard®, Air Sentry®, Aspen ManufacturingTM, Balco®, Cover Guard®, Deacon®, Dust Free®, Falcon Stainless®, Greco®, Hydrotex®, Jet-Lube®, Kopr-Kote®, Leak Freeze®, MARS®, Metacaulk®, No. 5®, OilSafe®, PF WaterWorksTM, ProAction Fluids®, PSP ProductsTM, RectorSeal®, Safe-T-Switch®, Shoemaker Manufacturing®, Smoke Guard®, TRUaire® and Whitmore®.
As of the date of this report, there continues to be uncertainty regarding overall macroeconomic conditions, including increased geopolitical tensions, risk of recessions, and the effects of potential trade policies including tariffs. In April 2025, the President of the United States issued an executive order to regulate imports by imposing country-specific tariffs on multiple nations around the world, including Vietnam and China, which are relevant to our business due to our manufacturing presence in Vietnam and our use of third-party manufacturing in China and other foreign countries. In addition, the United States imposed and/or reimposed certain commodity-specific tariffs, including tariffs on steel, aluminum and copper, which are used as inputs for some of our products. We have responded by negotiating cost reductions with certain suppliers, transitioning certain sources of supply, and by raising prices to our customers on certain products across our three segments to partially offset the impact. The current situation is dynamic, and the ultimate effect will be dependent on the magnitude and duration of the tariffs and the countries implicated, as well as our ability to mitigate their impact, where we continue to actively assess and implement mitigation options.
On June 9, 2025, we transferred the listing of our common stock from the Nasdaq Global Select Market to the New York Stock Exchange. Our common stock now trades on the New York Stock Exchange under the stock symbol “CSW”.
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Our Outlook
We expect to maintain a strong balance sheet in fiscal year 2026, which provides us with access to capital through our cash on hand, internally-generated cash flow, and availability under our Revolving Credit Facility and Senior Secured Term Loan A ("TLA"). Our capital allocation strategy continues to guide our investing decisions, with a priority to direct capital to the highest risk adjusted return opportunities, within the categories of organic growth, strategic acquisitions and the return of cash to shareholders through our share repurchase and dividend programs. With the strength of our financial position, we will continue to invest in financially and strategically attractive expanded product offerings, key elements of our long-term strategy of targeting long-term profitable growth. We will continue to invest our capital in maintaining our facilities and in continuous improvement initiatives. We recognize the importance of, and remain committed to, continuing to drive organic growth, as well as investing additional capital in opportunities with attractive risk-adjusted returns, driving increased penetration in the end markets we serve. We remain disciplined in our approach to acquisitions, particularly as it relates to our assessment of valuation, prospective synergies, diligence, cultural fit and ease of integration, especially in light of economic conditions.
RESULTS OF OPERATIONS
The following discussion provides an analysis of our consolidated results of operations and results for each of our segments.
All acquisitions are described in Note 2 to our consolidated financial statements included in this Quarterly Report. ProAction Fluids, LLC ("ProAction Fluids") activity has been included in our results within our Specialized Reliability Solutions segment since the November 20, 2025 acquisition date. Hydrotex Holdings Inc. ("Hydrotex") activity has been included in our results within our Specialized Reliability Solutions segment since the November 5, 2025 acquisition date. Dusk Acquisition Corporation and its wholly owned subsidiaries, Motors & Armatures Parts, LLC and HVAC South, LLC (collectively, “MARS Parts”) activity has been included in our results within our Contractor Solutions segment since the November 4, 2025 acquisition date. Aspen Manufacturing, LLC ("Aspen Manufacturing") activity has been included in our results within our Contractor Solutions segment since the May 1, 2025 acquisition date. PF WaterWorks, L.P. ("PF WaterWorks") activity has been included in our results within our Contractor Solutions segment since the November 4, 2024 acquisition date. PSP Products, Inc. (“PSP Products”) activity has been included in our results within our Contractor Solutions segment since the August 1, 2024 acquisition date.
Revenues, net
| Three Months Ended December 31, | |||||||||||||
| (Amounts in thousands) | 2025 | 2024 | |||||||||||
| Revenues, net | $ | 232,992 | $ | 193,649 | |||||||||
| Nine Months Ended December 31, | |||||||||||||
| (Amounts in thousands) | 2025 | 2024 | |||||||||||
| Revenues, net | $ | 773,589 | $ | 647,752 | |||||||||
Net revenues for the three months ended December 31, 2025 increased $39.3 million, or 20.3%, as compared with the three months ended December 31, 2024. The increase was primarily due to the acquisitions of MARS Parts, Aspen Manufacturing, Hydrotex, ProAction Fluids and PF WaterWorks ($45.0 million or 23.2%). Organic revenue decreased $5.7 million, or 2.9%, due to lower unit volumes partially offset by pricing actions. Net revenue increased in the HVAC/R, electrical, general industrial, plumbing, architecturally-specified building products, and mining end markets and decreased in the energy and rail transportation end markets.
Net revenues for the nine months ended December 31, 2025 increased $125.8 million, or 19.4%, as compared with the nine months ended December 31, 2024. The increase was primarily due to the acquisitions of MARS Parts, Aspen Manufacturing, PSP Products, and PF WaterWorks ($150.6 million or 23.2%). Organic revenue decreased $24.8 million, or 3.8%, due to lower unit volumes partially offset by pricing actions. Net revenue increased in the HVAC/R, electrical, plumbing, general industrial, mining, and architecturally-specified building product end markets and decreased in the energy and rail transportation end markets.
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Gross Profit and Gross Profit Margin
| Three Months Ended December 31, | |||||||||||||
| (Amounts in thousands, except percentages) | 2025 | 2024 | |||||||||||
| Gross profit | $ | 92,443 | $ | 80,106 | |||||||||
| Gross profit margin | 39.7 | % | 41.4 | % | |||||||||
| Nine Months Ended December 31, | |||||||||||||
| (Amounts in thousands, except percentages) | 2025 | 2024 | |||||||||||
| Gross profit | $ | 327,070 | $ | 291,428 | |||||||||
| Gross profit margin | 42.3 | % | 45.0 | % | |||||||||
Gross profit for the three months ended December 31, 2025 increased $12.3 million, or 15.4%, as compared with the three months ended December 31, 2024. The increase was primarily a result of increased revenue and favorable freight costs, partially offset by increases in tariffs and material costs directly and indirectly driven by tariffs. Gross profit margin of 39.7% for the three months ended December 31, 2025 decreased as compared to 41.4% for the three months ended December 31, 2024. The decrease was driven by the inclusion of recent acquisitions and increases in tariffs and material costs, partially offset by pricing actions and favorable freight costs.
Gross profit for the nine months ended December 31, 2025 increased $35.6 million, or 12.2%, as compared with the nine months ended December 31, 2024. The increase was primarily a result of the increase in revenue and favorable freight costs, partially offset by increases in tariffs and material costs directly and indirectly driven by tariffs. Gross profit margin of 42.3% for the nine months ended December 31, 2025 decreased as compared to 45.0% for the three months ended December 31, 2024. The decrease was driven by the inclusion of recent acquisitions and increases in aforementioned tariffs and material costs, partially offset by pricing actions and favorable freight costs.
Operating Expenses
| Three Months Ended December 31, | |||||||||||||
| (Amounts in thousands, except percentages) | 2025 | 2024 | |||||||||||
| Operating expenses | $ | 75,105 | $ | 50,511 | |||||||||
| Operating expenses as a percentage of revenues, net | 32.2 | % | 26.1 | % | |||||||||
| Nine Months Ended December 31, | |||||||||||||
| (Amounts in thousands, except percentages) | 2025 | 2024 | |||||||||||
| Operating expenses | $ | 198,076 | $ | 155,224 | |||||||||
| Operating expenses as a percentage of revenues, net | 25.6 | % | 24.0 | % | |||||||||
Operating expenses for the three months ended December 31, 2025 increased $24.6 million, or 48.7%, as compared with the three months ended December 31, 2024. The increase was primarily due to added expenses related to the inclusion of MARS Parts, Aspen Manufacturing, Hydrotex and PF WaterWorks in the current period, including amortization of intangible assets and the acquisition-related transaction and integration expenses, as well as a nonrecurring inventory write down. The increase in operating expenses as a percentage of revenues was attributable to the operating expenses increasing by a greater percentage than the revenue increase.
Operating expenses for the nine months ended December 31, 2025 increased $42.9 million, or 27.6%, as compared with the nine months ended December 31, 2024. The increase was primarily due to added expenses related to the inclusion of MARS Parts, Aspen Manufacturing, PSP Products, Hydrotex and PF WaterWorks in the current period, including amortization of intangible assets, as well as the acquisition-related transaction and integration expenses. The increase in operating expenses as a percentage of revenues was attributable to the operating expenses increasing by a greater percentage than the revenue increase.
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Operating Income
| Three Months Ended December 31, | |||||||||||||
| (Amounts in thousands, except percentages) | 2025 | 2024 | |||||||||||
| Operating income | $ | 17,338 | $ | 29,595 | |||||||||
| Operating margin | 7.4 | % | 15.3 | % | |||||||||
| Nine Months Ended December 31, | |||||||||||||
| (Amounts in thousands, except percentages) | 2025 | 2024 | |||||||||||
| Operating income | $ | 128,994 | $ | 136,204 | |||||||||
| Operating margin | 16.7 | % | 21.0 | % | |||||||||
Operating income for the three months ended December 31, 2025 decreased $12.3 million, or 41.4%, as compared with the three months ended December 31, 2024, as a result of the increase in operating expenses, as discussed above, partially offset by the increase in gross profit.
Operating income for the nine months ended December 31, 2025 decreased $7.2 million, or 5.3%, as compared with the nine months ended December 31, 2024, as a result of the increase in operating expenses, as discussed above, partially offset by the increase in gross profit.
Other Income and Expense
Net interest expense of $8.1 million for the three months ended December 31, 2025 increased $10.1 million as compared to net interest income of $2.0 million for the three months ended December 31, 2024. Net interest expense of $10.5 million for the nine months ended December 31, 2025 increased $8.6 million as compared to the net interest expense of $1.9 million for the nine months ended December 31, 2024. The increase in the three and nine months ended December 31, 2025 was due to the increased average borrowing under our Revolving Credit Facility and TLA to fund the acquisitions (discussed in Note 2) and share repurchasing activities (discussed in Note 11).
Other expense, net of $1.3 million for the three months ended December 31, 2025 increased $1.0 million, as compared to the net expense of $0.3 million for the three months ended December 31, 2024. Other expense, net of $0.8 million for the nine months ended December 31, 2025 increased $0.1 million, as compared to the net expense of $0.7 million for the nine months ended December 31, 2024. The change in the three and nine months ended December 31, 2025 was due to the foreign currency gains/losses related to transactions in currencies other than functional currencies.
Provision for Income Taxes and Effective Tax Rate
For the three months ended December 31, 2025, we earned $7.9 million from operations before taxes and recognized net income tax benefits of $2.7 million, resulting in an effective tax rate of (34.2)%. For the nine months ended December 31, 2025, we earned $117.7 million from operations before taxes and provided for income taxes of $25.2 million, resulting in an effective tax rate of 21.4%. The provision for income taxes differed from the statutory rate for the three and nine months ended December 31, 2025 primarily due to state income tax (net of federal benefit), executive compensation limitations, provision for global intangible low-taxed income ("GILTI"), and non-deductible transaction costs; offset by release of uncertain tax position ("UTP") due to lapse of statute, excess tax deductions related to equity compensation, and foreign tax credits.
In connection with the T.A. Industries, Inc. (“TRUaire”) acquisition that closed in December 2020, the Company recognized a UTP of $17.3 million related to pre-acquisition tax periods. In addition, in accordance with the tax indemnification provided by the seller to the Company for up to $12.5 million related to UTPs taken in pre-acquisition years, we recognized a tax indemnification asset of $12.5 million, $5 million of which was released in the three months ended March 31, 2021. During the three months ended December 31, 2023, the remaining $7.5 million tax indemnification asset expired and was recognized as non-cash other expense on the statement of income, which is not deductible for income tax purposes. During the three months ended December 31, 2025 and 2024, $5.0 million and $2.7 million of the UTP accrual (including penalties and interests accrued post-acquisition), respectively, were released due to the expiration of the tax statutes and were recorded as income tax benefits. As of December 31, 2025, the UTP accrual related to TRUaire's pre-acquisition tax periods was $8.5 million, including penalties and interests accrued post-acquisition, and is expected to be released in the future as the statutes on the open tax years expire.
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In connection with the Falcon Stainless, Inc. (“Falcon”) acquisition that closed in October 2022, the Company recognized a UTP of $3.0 million related to pre-acquisition tax periods. In addition, in accordance with the tax indemnification provided by the seller to the Company for up to $4.5 million related to UTPs taken in pre-acquisition years, we recognized an initial tax indemnification asset of $3.0 million, which will either be settled or expire upon the closure of the tax statutes for the pre-acquisition periods. During the three months ended December 31, 2025, 2024 and 2023, as a result of the statute expiration, $1.4 million, $0.9 million and $1.0 million UTP, respectively, were released and the corresponding $1.4 million, $0.9 million and $1.0 million tax indemnification assets expired concurrently and were recognized as non-cash other expense on the statement of income, which is not deductible for income tax purposes. As of December 31, 2025, the UTP reserves, including penalties and interests accrued post-acquisition, and offsetting indemnification asset related to Falcon's pre-acquisition period were $0.5 million. The Falcon UTP reserves and offsetting indemnification asset will either be settled or expire upon the closure of the tax statutes for the pre-acquisition period.
For the three months ended December 31, 2024, we earned $31.3 million from operations before taxes and provided for income taxes of $4.3 million, resulting in an effective tax rate of 13.8%. For the nine months ended December 31, 2024, we earned $133.6 million from operations before taxes and provided for income taxes of $31.2 million, resulting in an effective tax rate of 23.3%. The provision for income taxes differed from the statutory rate for the three and nine months ended December 31, 2024 primarily due to state income tax (net of federal benefit), executive compensation limitations, and provision for GILTI; offset by release of UTPs due to lapse of statute, excess tax deductions related to equity compensation, foreign currency rate impact on the cumulative unrepatriated foreign earnings, foreign tax credits and foreign-derived intangible income (“FDII”).
The Company expects $6.4 million of reserves for UTPs to either be settled or expire within the next 12 months as the statutes of limitations expire.
We are under examination by the state of Michigan for the fiscal years ended March 31, 2021 through 2024. We have not been notified of any material adjustments.
The Organization for Economic Cooperation and Development introduced a framework under pillar two ("Pillar Two"), which includes a global minimum tax rate of 15% applied on a county-by-country basis for companies with global revenues and profits above certain thresholds. Certain jurisdictions in which we do business have enacted laws implementing Pillar Two. We are monitoring these developments and do not believe these rules will have a material impact on our financial condition and/or consolidated results.
On July 4, 2025, the "One Big Beautiful Bill Act" (the "Act") was enacted into law. The Act includes changes to the U.S. tax laws that are applicable to the Company, including the reinstatement of 100% bonus depreciation and 100% expensing of research and development costs, a change in the calculation of deductible interest expense, and changes to the U.S. tax treatment of GILTI and FDII. We evaluated the Act, including estimating the impact of certain provisions of the Act that may impact the estimated annual effective tax rate for the current year, and estimated it to have an immaterial impact on our income tax expenses. We expect the Act will change the timing of our cash tax payments in the current fiscal year and future periods. We will continue to evaluate the impact of the Act as additional guidance becomes available.
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Business Segments
We conduct our operations through three business segments based on how we manage the business. We evaluate segment performance and allocate resources based on each segment's operating income. The key operating results for our three 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 and electrical applications, which are designed primarily for professional end-use customers.
| Three Months Ended December 31, | |||||||||||||
| (Amounts in thousands) | 2025 | 2024 | |||||||||||
| Revenues, net | $ | 167,999 | $ | 132,150 | |||||||||
| Operating income | 16,790 | 26,756 | |||||||||||
| Operating margin | 10.0 | % | 20.2 | % | |||||||||
| Nine Months Ended December 31, | |||||||||||||
| (Amounts in thousands) | 2025 | 2024 | |||||||||||
| Revenues, net | $ | 573,207 | $ | 451,403 | |||||||||
| Operating income | 122,923 | 122,894 | |||||||||||
| Operating margin | 21.4 | % | 27.2 | % | |||||||||
Net revenues for the three months ended December 31, 2025 increased $35.8 million, or 27.1%, as compared with the three months ended December 31, 2024. The increase was primarily due to the acquisitions of MARS Parts, Aspen Manufacturing, and PF WaterWorks ($42.7 million or 32.3%). Organic revenue decreased $6.8 million, or 5.1%, due to lower unit volumes partially offset by pricing actions. Net revenue increased in the HVAC/R, electrical, plumbing, and architecturally-specified building product end markets.
Net revenues for the nine months ended December 31, 2025 increased $121.8 million, or 27.0%, as compared with the nine months ended December 31, 2024. The increase was primarily due to the acquisitions of MARS Parts, Aspen Manufacturing, PSP Products, and PF WaterWorks ($148.2 million or 32.8%). Organic revenue decreased $26.4 million, or 5.9%, due to lower unit volumes partially offset by pricing actions. Net revenue increased in the HVAC/R, electrical, plumbing, and architecturally-specified building product end markets.
Operating income for the three months ended December 31, 2025 decreased $10.0 million, or 37.2%, as compared with the three months ended December 31, 2024. The decrease was primarily due to the increased tariffs, incremental spend related to the completion and integration of acquisitions and a nonrecurring inventory write down, which offset the increased revenue and favorable freight costs. Operating income margin of 10.0% for the three months ended December 31, 2025 decreased as compared to 20.2% for the three months ended December 31, 2024. This decrease was due to the inclusion of recent acquisitions, including the related acquisition completion and integration costs, the increase in tariffs and a nonrecurring inventory write down, partially offset by pricing actions and lower freight costs.
Operating income for the nine months ended December 31, 2025 was comparable to the nine months ended December 31, 2024. Operating income margin of 21.4% for the nine months ended December 31, 2025 decreased as compared to 27.2% for the nine months ended December 31, 2024. This decrease was due to the inclusion of recent acquisitions, including the related acquisition completion and integration costs and increased tariffs, partially offset by pricing actions and lower freight costs.
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Specialized Reliability Solutions Segment Results
The Specialized Reliability Solutions segment provides products for increasing reliability, efficiency, performance and lifespan of industrial assets and solving equipment maintenance challenges.
| Three Months Ended December 31, | |||||||||||||
| (Amounts in thousands) | 2025 | 2024 | |||||||||||
| Revenues, net | $ | 38,284 | $ | 34,565 | |||||||||
| Operating income | 4,518 | 5,238 | |||||||||||
| Operating margin | 11.8 | % | 15.2 | % | |||||||||
| Nine Months Ended December 31, | |||||||||||||
| (Amounts in thousands) | 2025 | 2024 | |||||||||||
| Revenues, net | $ | 113,897 | $ | 109,893 | |||||||||
| Operating income | 14,853 | 18,208 | |||||||||||
| Operating margin | 13.0 | % | 16.6 | % | |||||||||
Net revenues for the three months ended December 31, 2025 increased $3.7 million, or 10.8%, as compared to the three months ended December 31, 2024. The increase was primarily due to the acquisitions of Hydrotex and ProAction Fluids ($2.3 million or 6.8%). Organic revenue increased $1.4 million, or 4.0% due to higher unit volume and pricing actions. Net revenue increased in the general industrial and mining end markets and decreased in the energy and rail transportation end markets.
Net revenues for the nine months ended December 31, 2025 increased $4.0 million, or 3.6% as compared to the nine months ended December 31, 2024. The increase was primarily due to the acquisitions of Hydrotex and ProAction Fluids ($2.3 million or 2.1%). Organic revenue increased $1.7 million, or 1.5% due to higher unit volume and pricing actions. Net revenue increased in the general industrial and mining end markets and decreased in the energy and rail transportation end markets.
Operating income for the three months ended December 31, 2025 decreased $0.7 million or 13.7% as compared to the three months ended December 31, 2024. The decrease was primarily due to the escalation in material costs, indirectly driven by tariffs, as well as higher freight costs. Operating income margin of 11.8% for the three months ended December 31, 2025 decreased as compared to 15.2% for the three months ended December 31, 2024 due to the aforementioned increase in expenses.
Operating income for the nine months ended December 31, 2025 decreased $3.4 million or 18.4% as compared to the nine months ended December 31, 2024. The decrease was primarily due to the escalation in material costs driven by tariffs and commodity pricing and higher freight costs. Operating income margin of 13.0% for the nine months ended December 31, 2025 decreased as compared to 16.6% for the nine months ended December 31, 2024 due to the aforementioned increase in cost of materials and freight costs.
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Engineered Building Solutions Segment Results
The 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.
| Three Months Ended December 31, | |||||||||||||
| (Amounts in thousands) | 2025 | 2024 | |||||||||||
| Revenues, net | $ | 28,452 | $ | 28,821 | |||||||||
| Operating income | 3,362 | 3,645 | |||||||||||
| Operating margin | 11.8 | % | 12.6 | % | |||||||||
| Nine Months Ended December 31, | |||||||||||||
| (Amounts in thousands) | 2025 | 2024 | |||||||||||
| Revenues, net | $ | 92,261 | $ | 92,386 | |||||||||
| Operating income | 12,192 | 15,451 | |||||||||||
| Operating margin | 13.2 | % | 16.7 | % | |||||||||
Net revenues for the three months ended December 31, 2025 decreased $0.4 million or 1.3% as compared to the three months ended December 31, 2024 due to strategic pricing in response to competitive pressures.
Net revenues for the nine months ended December 31, 2025 was comparable to the nine months ended December 31, 2024, with a slight decrease of $0.1 million.
Operating income for the three months ended December 31, 2025 decreased $0.3 million, or 7.8%, as compared with the three months ended December 31, 2024. The decrease was driven by increased material costs and the aforementioned pricing strategies. Operating income margin of 11.8% for the three months ended December 31, 2025 decreased as compared to 12.6% for the three months ended December 31, 2024 due to the aforementioned material costs increases and pricing strategies.
Operating income for the nine months ended December 31, 2025 decreased $3.3 million, or 21.1%, as compared with the nine months ended December 31, 2024. The decrease was driven primarily by increased material costs, higher warranty expenses and pricing strategies. Operating income margin of 13.2% for the nine months ended December 31, 2025 decreased as compared to 16.7% for the nine months ended December 31, 2024 due to the aforementioned material costs and warranty expenses increases, and pricing strategies.
LIQUIDITY AND CAPITAL RESOURCES
General
Existing cash on hand, cash generated by operations and borrowings available under our Revolving Credit Facility (“Revolver Borrowings”) and TLA are our primary sources of short-term liquidity. Our ability to consistently generate strong cash flow from our operations is one of our most significant financial strengths: it enables us to invest in our people and our brands, make capital investments and strategic acquisitions, provide a cash dividend program, and from time-to-time, repurchase shares of our common stock. Additionally, we use our Revolver Borrowings to support our working capital requirements, capital expenditures and strategic acquisitions. We seek to maintain adequate liquidity to meet working capital requirements, fund capital expenditures, make scheduled interest payments on debt and meet our contingent consideration obligations. Absent a material deterioration of market conditions, we believe that cash flows from operating activities and financing activities (which would primarily consist of Revolver Borrowings), will provide adequate resources to satisfy our working capital, scheduled interest and principal payments on debt, anticipated dividend payments, periodic share repurchases, contingent consideration obligations and anticipated capital expenditure requirements for both our short-term and long-term needs.
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Cash Flow Analysis
| Nine Months Ended December 31, | |||||||||||||
| (Amounts in thousands) | 2025 | 2024 | |||||||||||
| Net cash provided by operating activities | $ | 151,335 | $ | 141,069 | |||||||||
| Net cash used in investing activities | (1,012,136) | (97,539) | |||||||||||
| Net cash provided by financing activities | 675,492 | 148,884 | |||||||||||
Our cash balance (including cash and cash equivalents) at December 31, 2025 was $40.2 million, as compared with $225.8 million at March 31, 2025.
For the nine months ended December 31, 2025, our cash provided by operating activities from operations was $151.3 million, as compared with $141.1 million for nine months ended December 31, 2024.
•Working capital provided cash for the nine months ended December 31, 2025 due to lower accounts receivable ($44.5 million) and higher accounts payable and other current liabilities ($8.3 million), partially offset by higher inventories ($37.8 million) and higher prepaid expenses and other current assets ($14.0 million).
•Working capital used cash for the nine months ended December 31, 2024 due to higher inventories ($42.5 million), higher prepaid and other current assets ($17.2 million), partially offset by lower accounts receivable ($32.3 million) and higher accounts payable and other current liabilities ($21.4 million).
Cash flows used in investing activities from operations during the nine months ended December 31, 2025 were $1,012.1 million, as compared with $97.5 million used in investing activities for the nine months ended December 31, 2024.
•Capital expenditures during the nine months ended December 31, 2025 and 2024 were $12.1 million and $11.7 million, respectively. Our capital expenditures have been focused on capacity expansion (including $1.8 million and $0.4 million during the current and prior year periods for the Whitmore JV), new product introductions, continuous improvement and automation of manufacturing facilities and enterprise resource planning systems.
•During the nine months ended December 31, 2025, we acquired MARS Parts for an aggregate purchase price, net of cash received, of $667.5 million, including $650.0 million in cash consideration, estimated cash on balance sheet at close of $4.1 million, and contingent consideration initially measured at $13.4 million, as discussed in Note 2 to our consolidated financial statements in this Quarterly Report.
•During the nine months ended December 31, 2025, we acquired ProAction Fluids for a cash purchase price of $9.5 million as discussed in Note 2 to our consolidated financial statements in this Quarterly Report.
•During the nine months ended December 31, 2025, we acquired Hydrotex for an aggregate purchase price of $17.0 million, including $17.0 million in cash consideration and working capital adjustment of less than $0.1 million, as discussed in Note 2 to our consolidated financial statements in this Quarterly Report.
•During the nine months ended December 31, 2025, we acquired Aspen Manufacturing for an aggregate purchase price of $327.6 million, including $313.5 million in cash consideration and working capital adjustment of $14.1 million, as discussed in Note 2 to our consolidated financial statements included in this Quarterly Report.
•During the nine months ended December 31, 2024, we acquired certain assets of PF WaterWorks for an aggregated purchase price of $45.8 million, including $40.0 million in cash consideration and a working capital adjustment of $2.6 million, and contingent considerations initially measured at $3.2 million as discussed in Note 2 to our consolidated financial statements included in this Quarterly Report.
•During the nine months ended December 31, 2024, we acquired certain assets of PSP Products for an aggregated purchase price of $51.3 million, including $32.5 million in cash consideration at closing, subsequent working capital true-up adjustment of $7.0 million and a contingent consideration of $11.8 million.
•During the nine months ended December 31, 2024, $2.9 million cash was paid for immaterial product line acquisitions.
•During the nine months ended December 31, 2024, $2.5 million was paid to acquire a long-term investment.
Cash flows provided by financing activities during the nine months ended December 31, 2025 and 2024 were $675.5 million and $148.9 million, respectively.
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•Net borrowings (repayments) on our Revolving Credit Facility and TLA (as discussed in Note 7 to our consolidated financial statements included in this Quarterly Report) of $800.1 million and $(166.0) million during the nine months ended December 31, 2025 and 2024, respectively.
•As discussed in Note 11 to our consolidated financial statements included in this Quarterly Report, repurchases of shares under our share repurchase program of $92.6 million and $13.7 million during the nine months ended December 31, 2025 and 2024, respectively.
•In connection with the vesting of equity awards under our Long Term Incentive Plan, $6.2 million and $7.2 million were tendered by employees to satisfy minimum tax withholding requirements during the nine months ended December 31, 2025 and 2024, respectively.
•Payments of $5.3 million of underwriting discounts and fees in connection with our Third Credit Agreement and Fourth Credit Agreement during the nine months ended December 31, 2025, as discussed in Note 7 to our consolidated financial statements included in this Quarterly Report.
•During the nine months ended December 31, 2024, we received proceeds of $347.4 million in connection with our September 2024 follow-on equity offering, net of underwriting fees and discounts and expenses incurred directly related to the offering, as discussed in Note 11 to our consolidated financial statements included in this Quarterly Report.
•Dividend payments of $13.6 million and $10.6 million during the nine months ended December 31, 2025 and 2024, respectively.
Acquisitions and Dispositions
We regularly evaluate acquisition opportunities of various sizes. The cost and terms of any financing to be raised in conjunction with any acquisition, including our ability to raise capital, is a critical consideration in any such evaluation. Note 2 to our consolidated financial statements included in this Quarterly Report contains a discussion of the recent acquisitions.
Financing
Credit Facilities
See Note 7 to our consolidated financial statements included in this Quarterly Report for a discussion of our indebtedness. We were in compliance with all covenants as of December 31, 2025. See Note 9 to our consolidated financial statements included in this Quarterly Report for a discussion of our interest rate swaps.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Management’s discussion and analysis of financial condition and results of operations are based on our consolidated financial statements and related footnotes contained within this Quarterly Report. Our critical accounting policies used in the preparation of our consolidated financial statements were discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report. No significant changes to these policies, as described in our Annual Report, have occurred in the nine months ended December 31, 2025.
The process of preparing consolidated financial statements in conformity with U.S. GAAP requires the use of estimates and assumptions to determine certain of the assets, liabilities, revenues and expenses. These estimates and assumptions are based upon what we believe is the best information available at the time of the estimates or assumptions. The estimates and assumptions could change materially as conditions within and beyond our control change. Accordingly, actual results could differ materially from those estimates.
Based on an assessment of our accounting policies and the underlying judgments and uncertainties affecting the application of those policies, we believe that our consolidated financial statements provide a meaningful and fair perspective of our consolidated financial condition and results of operations. This is not to suggest that other general risk factors, such as changes in worldwide demand, changes in material costs, performance of acquired businesses and others, could not adversely impact our consolidated financial condition, results of operations and cash flows in future periods. See “Cautionary Note Regarding Forward-Looking Statements” below.
39
ACCOUNTING DEVELOPMENTS
We have presented the information about pronouncements not yet implemented in Note 1 to our consolidated financial statements included in this Quarterly Report.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements appearing in this Quarterly Report constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include expected restructuring charges and the results of the restructuring, financial projections, statements of plans and objectives for future operations, statements of future economic performance, and statements of assumptions relating thereto. In some cases, forward-looking statements can be identified by the use of terminology such as “may,” “expects,” “plans,” “anticipates,” “estimates,” “believes,” “potential,” “projects,” “forecasts,” “intends,” or the negative thereof or other comparable terminology. Forward-looking statements may include, but are not limited to, statements that relate to, or statements that are subject to risks, contingencies or uncertainties that relate to:
•our business strategy;
•changes in local political, economic, social and labor conditions;
•potential disruptions from wars and military conflicts, including geopolitical uncertainty due to the conflicts in the Middle East and Ukraine;
•future levels of revenues, operating margins, income from operations, net income or earnings per share;
•the ability to respond to inflationary pressure, including reductions on consumer discretionary income and our ability to pass along rising costs through increased selling prices;
•anticipated levels of demand for our products and services;
•the actual impact to supply, production levels and costs from global supply chain logistics and transportation challenges;
•future levels of research and development, capital, environmental or maintenance expenditures;
•our beliefs regarding the timing and effects on our business of health and safety, tax, environmental or other legislation, rules and regulations;
•the success or timing of completion of ongoing or anticipated capital, restructuring or maintenance projects;
•expectations regarding the acquisition or divestiture of assets and businesses;
•our ability to obtain appropriate insurance and indemnities;
•the potential effects of judicial or other proceedings, including tax audits, on our business, financial condition, results of operations and cash flows;
•the anticipated effects of actions of third parties such as competitors, or federal, foreign, state or local regulatory authorities, or plaintiffs in litigation;
•the expected impact of accounting pronouncements;
•changes in global trade policies and tariffs; and
•the other factors listed under “Risk Factors” in our Annual Report and other filings with the SEC.
Forward-looking statements involve risks, uncertainties and assumptions. Actual results may differ materially from those expressed in these forward-looking statements for a number of important factors, including those listed under “Risk Factors” in our Annual Report and in this Quarterly Report. You should not put undue reliance on any forwarding-looking statements in this Quarterly Report. We assume no obligation to update or revise these forward-looking statements, except as required by law.
Recent insider activity
| Date | Insider | Role | Action | Shares | Price | Value |
|---|---|---|---|---|---|---|
| 2026-05-01 | Alverson Luke | SVP, GC & Secretary | Sell | -1,007 | $289.57 | -$291,598 |
| 2026-04-15 | Sullivan Don | EVP, Chief Strategy Officer | Sell | -166 | $300.26 | -$49,843 |
| 2026-04-15 | Armes Joseph B | Chairman, President & CEO | Sell | -1,500 | $286.77 | -$430,151 |
| 2026-04-07 | Alverson Luke | SVP, GC & Secretary | Sell | -1,007 | $266.11 | -$267,973 |
| 2026-03-23 | Armes Joseph B | Chairman, President & CEO | Sell | -1,500 | $270.11 | -$405,165 |
| 2026-03-13 | Ash Darron K | Director | Buy | +300 | $256.62 | $76,986 |
Source: SEC Form 4 filings.
Next expected filings
- ~2026-05-21 10-K expected by 2026-05-29 (in 1 day)
- ~2026-07-30 10-Q expected by 2026-08-08 (in 71 days)
- ~2026-10-29 10-Q expected by 2026-11-07 (in 162 days)
- ~2027-01-28 10-Q expected by 2027-02-06 (in 253 days)
Predicted from historical filing cadence; not an SEC commitment.
Recent SEC filings
- 2026-01-29 10-Q Quarterly Report
- 2026-01-29 8-K Earnings Release; Financial Statements and Exhibits
- 2025-11-04 8-K Material Agreement Entered; Completion of Acquisition/Disposition; Material Financial Obligation; Regulation FD Disclosure; Financial Statements and Exhibits
- 2025-10-30 10-Q Quarterly Report
- 2025-10-30 8-K Earnings Release; Financial Statements and Exhibits
- 2025-10-01 8-K Material Agreement Entered; Earnings Release; Officer/Director Change; Regulation FD Disclosure; Financial Statements and Exhibits
- 2025-09-02 8-K Officer/Director Change; Shareholder Vote Results
- 2025-07-31 10-Q Quarterly Report
- 2025-07-31 8-K Earnings Release; Financial Statements and Exhibits
- 2025-05-22 10-K Annual Report
- 2025-05-22 8-K Earnings Release; Financial Statements and Exhibits
- 2025-05-05 8-K Material Agreement Entered; Material Financial Obligation; Regulation FD Disclosure; Financial Statements and Exhibits
- 2025-05-01 8-K Completion of Acquisition/Disposition; Delisting Notice; Regulation FD Disclosure; Financial Statements and Exhibits
- 2025-03-18 8-K Material Agreement Entered; Regulation FD Disclosure; Financial Statements and Exhibits
- 2025-01-30 10-Q Quarterly Report