CSW 10-K & 10-Q changes, risk factors and insider trading

We have significant manufacturing operations in Vietnam, in addition to using third parties located in China and elsewhere outside the United States to manufacture some of our products. Since February 2025, the current United States presidential administration has imposed or threatened to impose tariffs in various jurisdictions. In April 2025, the President of the United States issued an executive order to regulate imports by imposing reciprocal country specific tariffs on multiple nations around the world, including Vietnam and China. A further executive order issued in April 2025 paused the implementation of the country specific tariffs on Vietnam and many other countries for 90 days, maintaining a 10% global baseline tariff, while the United States works with its trade partners to negotiate new trade agreements. Significant tariffs remain in effect between the U.S. and China. The current situation is dynamic, and it is unknown if the United States and its trade partners will reach an agreement to further pause or eliminate the pending tariffs. Tariffs or other trade restrictions may lead to continuing uncertainty and volatility in U.S. economic conditions and commodity markets, declining consumer confidence, significant inflation and diminished expectations for the economy, and ultimately reduced demand for our products. Such conditions could have a material adverse impact on our future net sales, cost of goods sold in the United States, profit and cash flow. The current situation is dynamic, and the ultimate effect will be dependent on the magnitude and duration of the tariffs and the countries implicated.implicated, as well as our ability to mitigate their impact. The Company is evaluating the potential impacts of these tariffs, as well as assessing and implementing options to mitigate any potential impact. Changing our operations in accordance with new or changed trade restrictions can be expensive, time-consuming, disruptive to our operations and distracting to management. Such restrictions have been, and in the future may be, announced, amended, paused, reinstated or rescinded with little or no advance notice, and we may not be able to mitigate all adverse impacts from such measures, effectively.

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. 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. Our operations and earnings may also be 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. 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.

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. California has enacted a climate disclosure lawslaw that, if not modifiedoverturned orin rescinded,ongoing litigation, will require us to report our greenhouse gas emissions andby August 10, 2026. Another climate disclosure law, which requires the reporting of climate change-related financial risksrisks, beginninghad inan inaugural reporting date of January 2026. This law, however, is currently subject to a federal court injunction issued by the U.S. Court of Appeals for the Ninth Circuit, and enforcement is paused while litigation proceeds. A number of other government authorities and agencies have introduced, or are contemplating, regulatory changes to address climate change, including the regulation and disclosure of greenhouse gas emissions. For example, on March 6, 2024, the SEC adopted final rules to enhance and standardize climate-related disclosures by requiring registrants to disclose certain climate-related information in registration statements and periodic reports. On March 21, 2024, the Judicial Panel on Multidistrict Litigation issued an order consolidating the petitions for review in the U.S. Court of Appeals for the Eighth Circuit; and, on April 4, 2024, the SEC issued an order that the climate-related disclosure rules were stayed pending the completion of judicial review of the consolidated Eighth Circuit petitions. On March 27, 2025, the SEC terminated its defense of the rules, and on April 24, 2025, the Eighth Circuit paused the litigation and directed the SEC to explain its plan for the rules in a July 2025 status report. In the July 2025 status report, the SEC stated that it did not intend to review or reconsider the rules at that time and requested that the Eighth Circuit proceed to resolve the litigation on the merits but declined to state whether it would enforce or adhere to the rules if they survived judicial review. On September 12, 2025, the Eighth Circuit ordered that the litigation would again be held in abeyance until the SEC reconsiders or renews its defense of the rules. If the rules become effective, we will be required to provide the enhanced climate-related disclosures.

Loss of key suppliers, the inability to secure raw materials on a timely basis, the potential impacts of global inflation,inflation and global conflicts, or our inability to pass commodity price increases on to customers could have an adverse effect on our business.

Materials used in our manufacturing operations are generally available on the open market from multiple sources. However, some of the raw materials we use are only available from a limited number of sources. Accordingly, any disruptions to a critical suppliers' operations or the availability of key product inputs could have a material adverse effect on our business and results of operations. Macroeconomic conditions have caused supply chains for many companies to be interrupted, slowed or temporarily rendered inoperable. In addition, supply chain shortages and cost increases due to new or increased tariffs and other domestic and international trade policies 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, changing interest rates could materially adversely affect our business. In response to increasing inflation, the U.S. Federal Reserve began to raise interest rates in March 2022. Although the Federal Reserve began reducing the federal funds rate in late 2024 and continued in 2025 as a response to weakening inflation, there is no guarantee that the Federal Reserve will continue to reduce rates or that further changes in inflationary conditions will not occur. We are unable to predict changes in the Federal Reserve’s policies, the macroeconomic factors that influence those policies noror the impact that future changes will have on the economy and our business. 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.

While we believe many challenges are temporary and can be managed in the near-term, our business and results of operations could be materially adversely affected by prolonged or increasing supply chain disruptions. Availability and cost of raw materials could be affected by a number of factors, including the cost of reliable energy; commodity prices; inflation; tariffs and duties on imported materials; international trade policies; foreign currency exchange rates; and phases of the general business cycle and global demand. We may be unable to pass along price increases to our customers, which could have a material adverse effect on our business and results of operations.

For example, hurricanes may affect our facilities or the failure of our information systems could fail as a result of breakdown, malicious attacks, unauthorized access, viruses or other factorsfactors, which could severely impair several aspects of operations, including, but not limited to, logistics, revenues, customer service and administration. In addition, in the event that a product liability or third-party liability claim is brought against us, we may be required to recall our products in certain jurisdictions if they fail to meet relevant quality or safety standards, and we cannot guarantee that we will be successful in making an insurance claim under our policies or that the claimed proceeds will be sufficient to compensate the actual damages suffered.

From time to time, our business has engaged in strategic initiatives, and such activities may occur in the future. These efforts have included consolidating manufacturing facilities, rationalizing our manufacturing processes, realigning organizational structures, divesting lines of business, and establishing a joint venture within our Specialized Reliability Solutions segment.

Our operations and properties are subject to regulation under environmental laws, which can impose substantial sanctions for violations. We must conform our operations to applicable regulatory requirements and adapt to changes in such requirements in all jurisdictions in which we operate. Certain materials we use in the manufacture of our products can represent potentially significant health and safety concerns. We use hazardous substances and generate hazardous wastes in certain of our manufacturing operations. Consequently, our operations are subject to extensive environmental, health and safety laws and regulations at the international, national, state and local level in multiple jurisdictions. These laws and regulations govern, among other things, air emissions, wastewater discharges, solid and hazardous waste management, site remediation programs and chemical use and management. Many of these laws and regulations have become more stringent over time, and the costs of compliance with these requirements may increase, including costs associated with any necessary capital investments. In addition, our production facilities require operating permits that are subject to renewal and, in some circumstances, revocation. The necessary permits may not be issued or continue in effect, and renewals of any issued permits may contain significant new requirements or restrictions.

Compliance with environmentalenvironmental, health and safety laws and regulations generally increases the costs of transportation and storage of raw materials and finished products, as well as the costs of storage and disposal of wastes. We may incur substantial costs, including fines, damages, criminal or civil sanctions and remediation costs, or experience interruptions in our operations for violations arising under environmentalenvironmental, health and safety laws, regulations or permit requirements.

We are 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, electrical 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, railmining, transportation, miningelectrical and electrical.rail transportation. 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.

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®, Duckt-Strip®, 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®, Turbo 200® and Whitmore®.

On May 1, 2025, wethe Company completed the acquisition of 100% of the equity interests of Aspen Manufacturing, LLC ("Aspen Manufacturing"). In accordance with the terms of the acquisition agreements, we paidfor an aggregate purchase price of approximately $330.4$327.6 million, including cash consideration, estimated working capital true-up payment and the 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.Facility. Aspen Manufacturing is one of the largest independent evaporator coil and air handler manufacturers for the HVAC/R industry and is recognized as 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.

The rail transportation market represented approximately 2%1% and 2% of our net revenues in each of the years ended March 31, 20252026 and 2024, respectively.2025. 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. 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. Cyclical product classes such as farm products and petrochemical products can impact volumes in Class 1 Rail. While coal transport is diminishing demand for Class 1 Rail in North America, global investment in Transit Rail systems is expected to more than offset this decline.

Net revenues for the year ended March 31, 20252026 increased $85.5$204.2 million, or 10.8%,23.3%, as compared with the year ended March 31, 2024.2025. The increase was partiallyprimarily due to the acquisitions of DustMARS Free,Parts, PSP,Aspen Manufacturing, Hydrotex, ProAction Fluids and PF WaterWorks ($47.5$222.6 millionmillion, or 6.0%25.3%). Excluding the impact of the acquisitions, organic sales increaseddecreased $37.9$18.4 million, or 4.8%,2.1%, from the prior year due to increasedlower unit volumes andpartially offset by pricing actions. Net revenue increased in the HVAC/R, plumbing, electrical, mining, and general industrial, architecturally-specified building products, and plumbingindustrial end markets and decreased in the energy, mining and rail transportationenergy end markets.market.

Net revenues for the year ended March 31, 20242025 increased $34.9$85.5 million, or 4.6%,10.8%, as compared with the year ended March 31, 2023.2024. The increase was partially due to the acquisitions of Dust Free, PSP Products, and PF WaterWorks ($47.5 million or 6.0%). Excluding the impact of the acquisitions, organic sales increased $23.9$37.9 million, or 3.1%,4.8%, from the prior year drivendue primarily byto increased unit volumes and pricing actions. Inorganic revenue increased $11.0 million, or 1.5%, due to the acquisitions of CG, ACG, Falcon and Dust Free. Net revenue increased in the HVAC/R, electrical, general industrial, architecturally-specified building products, HVAC/R, plumbing, general industrial, mining and energyplumbing end markets and decreased in the energy, mining and rail transportation end market.markets.

Net revenues into the Americas, Europe, Middle East and Africa ("EMEA") and the Asia Pacific regions for the yearyears ended March 31, 2025,2026, 20242025 and 20232024 are presented below. 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 2021 to our consolidated financial statements included in Item 8 of this Annual Report.

Gross profit for the year ended March 31, 20252026 increased $42.6$60.4 million, or 12.1%,15.3%, as compared with the year ended March 31, 2024.2025. The increase was primarily a result of the increasedincrease netin revenue,revenue includingand thefavorable recentfreight acquisitionscosts, partially offset by increases in tariffs and material costs directly and indirectly driven by tariffs, acquisition integration expenses, a discrete inventory write-down associated with a realignment of Dustour Free,distribution PSP,strategy and PFGreco WaterWorks.Canada Exit related expenses. Gross profit margin for the year ended March 31, 20252026 of 44.8%41.9% increaseddecreased from 44.2%44.8% for the year ended March 31, 2024.2025. The increasedecrease was primarily driven by the resultinclusion of therecent Contractoracquisitions Solutions segment experiencing a more rapid growth rate in comparison toand the otheraforementioned segments.expenses, partially offset by pricing actions and favorable freight costs.

Gross profit for the year ended March 31, 20242025 increased $32.5$42.6 million, or 10.2%,12.1%, as compared with the year ended March 31, 2023.2024. The increase was primarily a result of a reduction in ocean and domestic freight expense, pricing initiatives,the increased unitnet volumesrevenue, andincluding the recent acquisitions of CG,Dust ACG,Free, FalconPSP Products, and DustPF Free.WaterWorks. Gross profit margin for the year ended March 31, 20242025 of 44.2%44.8% increased from 42.0%44.2% for the year ended March 31, 2023.2024. The increase was primarily duethe toresult pricing initiatives and reduced ocean and domestic freight expenses as compared toof the priorContractor yearSolutions period.segment growing at a faster rate than the other segments.

Selling, general and administrative expenses for the year ended March 31, 20242026 increased $12.5$73.1 million, or 7.0%,34.5%, as compared with the year ended March 31, 2023.2025. The increase iswas primarily due to increasedthe expensesinclusion of MARS Parts, Aspen Manufacturing, PSP Products, Hydrotex and PF WaterWorks acquisitions in the current period, including amortization of intangible assets, a $15.6 million impairment related to employee compensation, a trademark impairment recognized during the threeGreco months ended March 31, 2024 and travel, along with increased depreciation and amortization and addedbusinesses, expenses related to the inclusionGreco ofCanada DustExit, Freeas inwell theas currentacquisition year.related transaction and integration expenses. The increase in operatingselling, general and administrative expenses as a percentage of sales was primarily attributable to salesthe operating expenses increasing by a lowergreater percentage than the increaserevenue in operating expenses.increase.

Operating Income and Operating Margin

Interest expense, net for the year ended March 31, 20242026 decreasedincreased $0.5 million to $12.7$22.0 million, or 3.6%,8,182.4%, to $22.2 million, as compared with the year ended March 31, 2023,2025, due to reducedincreased borrowing under our Revolving Credit Facility and TLA to fund the acquisitions (describeddiscussed in Note 82) as a result of strong operating cash flows generated during the year and theshare benefitrepurchasing fromactivities the(discussed $100in millionNote interest rate swap, partially offset by higher interest rates.13).

Other expense, net decreased by $5.1 million for the year ended March 31, 2025 to net expense of $0.9 million as compared with net expense of $5.9 million for the year ended March 31, 2024. During the currentyear year,ended March 31, 2025, a non-cash $0.9 million tax indemnification asset related to the Falcon acquisition was released and recognized in other expense. During the prior year ended March 31, 2024, $8.5 million in non-cash tax indemnification assets related to the T.A. Industries, Inc. (“TRUaire”) and Falcon acquisitions were released and recognized in other expense. The decrease in other expense was due to the above mentioned releases of non-cash tax indemnification assets, as well as a $1.4 million gain reported in the previous year in connection with the sale of a property previously held for investment that did not recur. The remaining change is attributed to foreign currency gains/losses related to transactions in currencies other than functional currencies.

The effective tax rates for the years ended March 31, 2025,2026, 2025 and 2024 and 2023 were 23.7%,22.5%, 27.0%23.7% and 23.3%,27.0%, respectively. As compared with the statutory rate for the year ended March 31, 2025,2026, the provision for income taxes was primarily impacted by state tax expense (net of federal benefits), which increased the provision by $6.3$5.5 million and effective rate by 3.5%,3.8%; executive compensation limitation, which increased the provision by $2.7$1.7 million and the effective tax rate by 1.5%.1.2%; and Canada's foreign tax effect, driven primarily by an impairment impact of $1.2 million and 0.8%, which increased the provision by $1.7 million and the effective tax rate by 1.2%. This was partially offset by uncertain tax positions,UTP which decreased the provision by $2.3$5.2 million ($3.6$6.4 million UTP release offset by $1.3$1.0 million of additional penalties and interest) and the effective tax rate of 1.3%; tax benefits related to the restricted stock vesting, which decreased the provision by $1.4 million and the effective tax rate by 0.8% and IRC section 250 deductions, which decreased the provision by $1.2 million and the effective tax rate by 0.7%.3.6%.

As compared with the statutory rate for the year ended March 31, 2024,2025, the provision for income taxes was primarily impacted by the state tax expense (net of federal benefits),expense, which increased the provision by $6.4$6.3 million and the effective rate by 4.5%;3.5%, impactexecutive ofcompensation the tax indemnification asset release,limitation, which increased the provision by $1.8$2.1 million and the effective rate by 1.1%. This was offset by UTP, which decreased the provision by $2.3 million ($3.6 million UTP release offset by $1.3 million additional penalties and interest) and the effective tax rate by 1.3%; executivetax compensationbenefits limitation,related to restricted stock vesting, which increaseddecreased the provision by $1.4 million and the effective tax rate of 0.8% and IRC section 250 deductions, which decreased the provision by $1.2 million and the effective tax rate by 0.9%; impact of repatriation of foreign earnings, which increased the provision by $0.5 million and the effective rate by 0.3%. This was partially offset by IRC section 250 deductions, which decreased the provision by $1.1 million and the effective tax rate by 0.7%.

Net revenues for the year ended March 31, 20252026 increased $80.8$193.0 million, or 15.1%,31.3%, as compared with the year ended March 31, 2024.2025. The increase was partially due to the acquisitions of DustMARS Free,Parts, PSP,Aspen Manufacturing, and PF WaterWorks ($47.5$215.1 million or 8.9%34.8%). Excluding the impact of acquisitions, organic sales increaseddecreased by $33.3$22.1 million, or 6.2%,3.6%, due primarily to an increase inlower unit volumes andpartially offset by pricing actions. Net revenue increased in the HVAC/R, electrical, and plumbingall end markets and decreased in the architecturally-specified building products end market.served.

Net revenues for the year ended March 31, 20242025 increased $22.7$80.8 million, or 4.4%,15.1%, as compared with the year ended March 31, 2023.2024. The increase was partially due to the acquisitions of Dust Free, PSP Products, and PF WaterWorks ($47.5 million or 8.9%). Excluding the impact of acquisitions, organic sales increased by $11.7$33.3 million, or 2.3%,6.2%, due primarily to pricing initiatives and an increase in unit volumes. The remainder of the increase was due to the acquisitions of CG, ACG, Falconvolumes and Dustpricing Free ($11.0 million or 2.1%).actions. Net revenue increased in allthe HVAC/R, electrical, and plumbing end markets served.and decreased in the architecturally-specified building products end market.

Operating income for the year ended March 31, 20242026 increased $15.8$9.8 million, or 12.5%,5.9%, as compared with the year ended March 31, 2023.2025. The increase was primarily due to athe reductionincreased in oceanrevenue and domesticfavorable freight expenses, increased net revenue, and the inclusion of the CG, ACG, Falcon and Dust Free acquisitions,costs, partially offset by higher intangible assets amortization resulting from acquisitions, increased operatingtariffs, $9.5 million of acquisition related transaction and integration expenses including employee compensation and a trademarkdiscrete impairmentinventory duringwrite-down theassociated threewith monthsa endedrealignment Marchof 31,our 2024.distribution strategy. Operating margin of 26.5%21.7% for the year ended March 31, 20242026 increaseddecreased as compared to 24.6%26.9% for the year ended March 31, 2024.2025. This increasedecrease was due to grossthe margininclusion improvementof drivenrecent primarilyacquisitions, including the related amortization, transaction and integration costs, and aforementioned expenses, partially offset by thepricing aforementioned reduction in oceanactions and domesticlower freight expenses, combined with the positive effect of pricing initiatives.costs.

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,Report on Form 10-Q for the quarterly period ended June 30, 2026 (the "Quarterly Report"), as well as our consolidated financial statements and related notes for the fiscal year ended March 31, 20252026 included in our Annual Report.Report on Form 10-K for the fiscal year ended March 31, 2026 (the "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.

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”),diffusers, 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 transportationtransportation, mining and mining.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 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,attractive and 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®, Amrad®, Aspen ManufacturingTM, Balco®, Cover Guard®, Deacon®, Duckt-Strip®, 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®.

We expect to maintain a strong balance sheet in fiscal year 2026,2027, which provides us with access to capital through our cash on hand, internally-generated cash flow, and availability under our Revolving Credit Facility ("RCF") 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.

All acquisitions are described in Note 2 to our consolidated financial statements included in this Quarterly Report. ProActionDuckt-Strip Fluids,activity LLChas ("been included in our results within our Contractor Solutions segment since the March 12, 2026 acquisition date. 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.

Net revenues for the three months ended DecemberJune 31,30, 20252026 increased $39.3$87.0 million, or 20.3%,33.0%, as compared with the three months ended DecemberJune 31,30, 2024.2025. The increase was primarily due to the acquisitions of MARS Parts, Aspen Manufacturing, Hydrotex, and ProAction Fluids and PF WaterWorks ($45.0$73.0 million or 23.2%27.7%). Organic revenue decreasedincreased $5.7$14.0 million, or 2.9%,5.3%, due to lower unit volumes partially offsetdriven by pricing actions.actions and higher unit volumes. Net revenue increased in the HVAC/R, electrical, general industrial, plumbing, architecturally-specified building products, and mining end markets and decreased in the energyarchitecturally-specified building products, rail transportation, and rail transportationelectrical end markets.

Gross profit for the three months ended DecemberJune 31,30, 20252026 increased $12.3$41.9 million, or 15.4%,36.3%, as compared with the three months ended DecemberJune 31,30, 2024.2025. The increase was primarily a result of increased revenue and favorable freight costs,revenue, partially offset by increases in tariffsmaterial and materialfreight costs directly and indirectly driven by tariffs.costs. Gross profit margin of 39.7%44.9% for the three months ended DecemberJune 31,30, 20252026 decreasedincreased as compared to 41.4%43.8% for the three months ended DecemberJune 31,30, 2024.2025. The decreaseincrease was driven by the inclusion of recent acquisitions and increases in tariffs and material costs, partially offset by pricing actions and favorable product mix, partially offset by increases in material and freight costs.

Operating expenses for the ninethree months ended DecemberJune 31,30, 20252026 increased $42.9$16.9 million, or 27.6%,28.0%, as compared with the ninethree months ended DecemberJune 31,30, 2024.2025. The increase was primarily due to added expenses related to the inclusion of MARS Parts, Aspen Manufacturing, PSP Products, Hydrotex and PFProAction WaterWorksFluids in the current period, including amortization of intangible assets,assets as well asand the acquisition-related transaction and integration expenses. The increasedecrease in operating expenses as a percentage of revenues was attributable to the operatingrevenue expensesgrowing increasing by a greater percentagefaster than the operating expenses, resulted from successful operating expense leverage from recent acquisitions and organic revenue increase.growth.

Operating income for the three months ended DecemberJune 31,30, 20252026 decreasedincreased $12.3$25.0 million, or 41.4%,45.5%, as compared with the three months ended DecemberJune 31,30, 2024,2025, as athe result of the increase in gross profit, partially offset by the increase in operating expenses, as discussed above,above. partiallyOperating offsetmargin of 22.8% for the three months ended June 30, 2026 increased as compared to 20.8% for the three months ended June 30, 2025. The increase was driven by the aforementioned increase in gross profit.profit margin and decrease in operating expenses as a percentages of revenue.

Net interest expense of $8.1$12.7 million for the three months ended DecemberJune 31,30, 20252026 increased $10.1$11.7 million as compared to net interest incomeexpense of $2.0$1.0 million for the three months ended DecemberJune 31,30, 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, 2024.2025. The increase in the three and nine months ended DecemberJune 31,30, 20252026 was due to the increased average borrowing under our Revolving Credit FacilityRCF and TLA to fund the acquisitions (discussed in Note 2) and share repurchasing activities (discussed in Note 1112).

Other expense, net of $1.3$0.2 million for the three months ended DecemberJune 31,30, 20252026 increased $1.0$0.7 million, as compared to the net expenseincome of $0.3$0.5 million for the three months ended DecemberJune 31,30, 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, 2024.2025. The change in the three and nine months ended DecemberJune 31,30, 20252026 was due to the foreign currency gains/losses related to transactions in currencies other than functional currencies.

For the three months ended DecemberJune 31,30, 2025,2026, we earned $7.9$66.9 million from operations before taxes and recognized net income tax benefitsexpenses of $2.7$17.1 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%.25.6%. The provision for income taxes differed from the statutory rate for the three and nine months ended DecemberJune 31,30, 20252026 primarily due to state income tax (net of federal benefit), executive compensation limitations, and 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.credits, and foreign-derived intangible income (“FDII”).

For the three months ended DecemberJune 31,30, 2024,2025, we earned $31.3$54.4 million from operations before taxes and provided forrecognized income taxestax expenses of $4.3$13.2 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%.24.3%. The provision for income taxes differed from the statutory rate for the three and nine months ended DecemberJune 31,30, 20242025 primarily due to state income tax (net of federal benefit), executive compensation limitations, and provision for GILTI; offset by release of UTPs dueadjustment to lapsetax ofpayable, statute,foreign tax credits, excess tax deductions related to equity compensation, foreign currency rate impact on the cumulative unrepatriated foreign earnings, foreign tax creditscompensation and foreign-derived intangible income (“FDII”).FDII.

The Company expects $6.4$6.6 million of reserves for UTPsuncertain tax provisions 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 New York for the fiscal years ended March 31, 2024 through March 31, 2025. We have not been notified of any material adjustments.

Net revenues for the three months ended DecemberJune 31,30, 20252026 increased $35.8$79.3 million, or 27.1%,40.3%, as compared with the three months ended DecemberJune 31,30, 2024.2025. The increase was primarily due to the acquisitions of MARS Parts,Parts and Aspen Manufacturing, and PF WaterWorksManufacturing ($42.7$67.6 million or 32.3%34.4%). Organic revenue decreasedincreased $6.8$11.6 million, or 5.1%,5.9%, due to lowerpricing actions and higher unit volumes partially offset by pricing actions.volumes. Net revenue increased in the HVAC/R, electrical, plumbing, and architecturally-specified building product end markets.markets and decreased in the electrical end market.

Operating income for the three months ended DecemberJune 31,30, 20252026 decreasedincreased $10.0$22.3 million, or 37.2%,42.2%, as compared with the three months ended DecemberJune 31,30, 2024.2025. The decreaseincrease was primarily due to the increased tariffs,revenue, which more than offset higher material and freight costs and incremental spend related to the completion and integration of acquisitionscompleted and a nonrecurring inventory write down, which offset the increased revenue and favorable freight costs.acquisitions. Operating income margin of 10.0%27.2% for the three months ended DecemberJune 31,30, 20252026 decreasedincreased as compared to 20.2%26.8% for the three months ended DecemberJune 31,30, 2024.2025. This decreaseincrease was due to thepricing inclusionactions and successful operating expenses leverage of recent acquisitions, including the related acquisition completion and integration costs, the increase in tariffs and a nonrecurring inventory write down, partially offset by pricinghigher actionsmaterial and lower freight costs and acquisition integration costs.

Net revenues for the three months ended DecemberJune 31,30, 20252026 increased $3.7$11.4 million, or 10.8%,30.9%, as compared to the three months ended DecemberJune 31,30, 2024.2025. The increase was primarily due to the acquisitions of Hydrotex and ProAction Fluids ($2.3$5.3 million or 6.8%14.5%). Organic revenue increased $1.4$6.1 million, or 4.0%16.5% 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.market.

Operating income for the three months ended DecemberJune 31,30, 20252026 decreasedincreased $0.7$2.8 million or 13.7%53.6% as compared to the three months ended DecemberJune 31,30, 2024.2025. The decreaseincrease was primarily due to the escalationincreased inrevenue, materialwhich costs,more indirectlythan driven by tariffs, as well asoffset higher freight costs.and material costs and acquisition integration expenses. Operating income margin of 11.8%16.7% for the three months ended DecemberJune 31,30, 20252026 decreasedincreased as compared to 15.2%14.2% for the three months ended DecemberJune 31,30, 20242025, duebenefiting tofrom improved operating leverage from the aforementionedrecent increaseacquisitions inand higher organic volume, pricing actions and a mix shift toward higher-margin products, partially offset by higher freight and material costs and acquisition integration expenses.

Net revenues for the three months ended DecemberJune 31,30, 20252026 decreased $0.4$3.0 million or 1.3%9.3% as compared to the three months ended DecemberJune 31,30, 20242025 due to strategicsoftness in the residential market served by the Greco business, partially offset by pricing actions and volume growth in responsethe toSmoke competitiveGuard pressures.business.

Operating income for the three months ended DecemberJune 31,30, 20252026 decreasedincreased $0.3$0.6 million, or 7.8%,14.4%, as compared with the three months ended DecemberJune 31,30, 2024.2025. The decreaseincrease was drivenprimarily attributed by increasedthe Smoke Guard business, reflecting successful execution of material costssourcing strategies and theimproved aforementionedquality pricingcontrol strategies.that eliminated certain warranty costs incurred in prior period. Operating income margin of 11.8%15.8% for the three months ended DecemberJune 31,30, 20252026 decreasedincreased as compared to 12.6%12.5% for the three months ended DecemberJune 31,30, 20242025 due to the aforementionedmix materialshift coststoward increasesthe andhigher-margin pricingSmoke strategies.Guard business.

Existing cash on hand, cash generated by operations and borrowings available under our Revolving Credit FacilityRCF (“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.

Our cash balance (including cash and cash equivalents) at DecemberJune 31,30, 20252026 was $40.2$47.5 million, as compared with $225.8$33.8 million at March 31, 2025.2026.

For the ninethree months ended DecemberJune 31,30, 2025,2026, our cash provided by operating activities from operations was $151.3$75.6 million, as compared with $141.1$60.6 million for ninethree months ended DecemberJune 31,30, 2024.2025.

•Working capital providedused cash for the ninethree months ended DecemberJune 31,30, 20252026 due to lowerhigher accounts receivable ($44.5$24.6 million), andpartially offset by higher accounts payable and other current liabilities ($8.3$12.5 million), partially offset by higher inventories ($37.8 million) and higherlower prepaid expenses and other current assets ($14.0$7.5 million) and lower inventory ($2.2 million).

•Working capital usedprovided cash for the ninethree months ended DecemberJune 31,30, 20242025 due to higherlower inventories ($42.5$7.6 million), higherlower prepaid and other current assets ($17.2$0.7 million), partially offset by lowerhigher accounts receivable ($32.3 million) and higher accounts payable and other current liabilities ($21.4$7.8 million).

Cash flows used in investing activities from operations during the ninethree months ended DecemberJune 31,30, 20252026 were $1,012.1$6.0 million, as compared with $97.5$326.7 million used in investing activities for the ninethree months ended DecemberJune 31,30, 2024.2025.

•Capital expenditures during the ninethree months ended DecemberJune 31,30, 2026 and 2025 and 2024 were $12.1$6.0 million and $11.7$2.9 million, respectively. Our capital expenditures have been focused on capacity expansion (including $1.8$0.7 million and $0.4$0.3 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 ninethree months ended DecemberJune 31,30, 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.

Cash flows (used in) provided by financing activities during the ninethree months ended DecemberJune 31,30, 2026 and 2025 and 2024 were $675.5$(55.3) million and $148.9$78.4 million, respectively.

•Net borrowings (repayments) on our Revolving Credit FacilityRCF and TLA (as discussed in Note 78 to our consolidated financial statements included in this Quarterly Report) of $800.1$(14.0) million and $(166.0)$95.0 million during the ninethree months ended DecemberJune 31,30, 20252026 and 2024,2025, respectively.

•As discussed in Note 1112 to our consolidated financial statements included in this Quarterly Report, repurchases of shares under our share repurchase program of $92.6$25.5 million and $13.7$4.7 million during the ninethree months ended DecemberJune 31,30, 20252026 and 2024,2025, respectively.

•In connection with the vesting of equity awards under our Long Term Incentive Plan, $6.2$10.9 million and $7.2$4.4 million were tendered by employees to satisfy minimum tax withholding requirements during the ninethree months ended DecemberJune 31,30, 20252026 and 2024,2025, respectively.

•Payments of $5.3$2.8 million of underwriting discounts and fees in connection with our Third Credit AgreementAmended and FourthRestated Credit Agreement during the ninethree months ended DecemberJune 31,30, 2025, as discussed in Note 78 to our consolidated financial statements included in this Quarterly Report.