cswi-20230630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

__________________________________________

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File No. 001-37454


CSW INDUSTRIALS, INC. (Exact name of registrant as specified in its charter)


Delaware						47-2266942
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

5420 Lyndon B. Johnson Freeway, Suite 500, Dallas, Texas						75240
(Address of principal executive offices)						(Zip Code)

(214) 884-3777

Registrant’s telephone number, including area code

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

Title of each class

Trading symbol (s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

CSWI

Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒

Accelerated filer ☐

Non-accelerated filer ☐

(Do not check if smaller reporting company)

Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of July 31, 2023, there were 15,544,050 shares of the issuer’s common stock outstanding.

CSW INDUSTRIALS, INC.

FORM 10-Q

TABLE OF CONTENTS


		Page No.
PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements	1
	Condensed Consolidated Statements of Income and Condensed Consolidated Statements of Comprehensive Income for the three months ended June 30, 2023 and 202 2 (unaudited)	1
	Condensed Consolidated Balance Sheets as of June 30, 2023 and March 31, 202 3 (unaudited)	3
	Condensed Consolidated Statements of Equity as of June 30, 2023 and 202 2 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the three months ended June 30, 2023 and 202 2 (unaudited)	5
	Notes to the Condensed Consolidated Financial Statements (unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	28

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 5.	Other Information	30
Item 6.	Exhibits	31
SIGNATURES		32

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

CSW INDUSTRIALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)



	Three Months Ended June 30,
(Amounts in thousands, except per share amounts)	2023		2022
Revenues, net	$	203,360	$	199,934
Cost of revenues	(111,193)		(113,509)
Gross profit	92,167		86,425
Selling, general and administrative expenses	(46,961)		(45,552)

Operating income	45,206		40,873
Interest expense, net	(4,009)		(1,784)
Other income, net	314		169
Income before income taxes	41,511		39,258
Provision for income taxes	(10,455)		(9,620)
Net income	31,056		29,638
Less: Income attributable to redeemable noncontrolling interest	(445)		(195)

Net income attributable to CSW Industrials, Inc.	$	30,611	$	29,443


Net income per share attributable to CSW Industrials, Inc.
Basic	$	1.97	$	1.88
Diluted	$	1.97	$	1.88

Weighted average number of shares outstanding:
Basic	15,520		15,643
Diluted	15,547		15,652

See accompanying notes to condensed consolidated financial statements.

CSW INDUSTRIALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended June 30,
(Amounts in thousands)	2023		2022
Net income	$	31,056	$	29,638
Other comprehensive income (loss):
Foreign currency translation adjustments	514		(2,278)
Cash flow hedging activity, net of taxes of $(394) and $(67), respectively	1,481		253
Pension and other postretirement effects, net of taxes of $0 and $(1), respectively	1		3
Other comprehensive gain (loss)	1,996		(2,022)
Comprehensive income	$	33,052	$	27,616
Less: Comprehensive income attributable to redeemable noncontrolling interest	(445)		(195)
Comprehensive income attributable to CSW Industrials, Inc.	$	32,607	$	27,421

See accompanying notes to condensed consolidated financial statements.

CSW INDUSTRIALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(Amounts in thousands, except for per share amounts)	June 30, 2023		March 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	14,788	$	18,455
Accounts receivable, net of allowance for expected credit losses of $1,422 and $1,365, respectively	127,075		122,753
Inventories, net	157,042		161,569
Prepaid expenses and other current assets	19,775		20,279

Total current assets	318,680		323,056
Property, plant and equipment, net of accumulated depreciation of $95,736 and $92,703, respectively	89,392		88,235
Goodwill	243,162		242,740
Intangible assets, net	313,355		318,903
Other assets	68,510		70,519

Total assets	$	1,033,099	$	1,043,453

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	46,252	$	40,651
Accrued and other current liabilities	60,193		67,388


Total current liabilities	106,445		108,039
Long-term debt	210,000		253,000
Retirement benefits payable	1,148		1,158
Other long-term liabilities	136,503		137,117

Total liabilities	454,096		499,314
Commitments and contingencies (See Note 13)
Redeemable noncontrolling interest	18,909		18,464
Equity:
Common shares, $0.01 par value	163		163
Shares authorized – 50,000
Shares issued – 16,431 and 16,378, respectively
Preferred shares, $0.01 par value	—		—
Shares authorized (10,000) and issued (0)
Additional paid-in capital	128,451		123,336
Treasury shares, at cost (887 and 902 shares, respectively)	(83,072)		(82,734)
Retained earnings	520,965		493,319
Accumulated other comprehensive loss	(6,413)		(8,409)
Total equity	560,094		525,675
Total liabilities, redeemable noncontrolling interest and equity	$	1,033,099	$	1,043,453

See accompanying notes to condensed consolidated financial statements.

CSW INDUSTRIALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)


(Amounts in thousands)	Common Stock		Treasury Shares		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total
Balance at March 31, 2023	$	163	$	(82,734)	$	123,336	$	493,319	$	(8,409)	$	525,675
Share-based compensation	—		—		2,805		—		—		2,805
Stock activity under stock plans	—		(2,864)		—		—		—		(2,864)
Reissuance of treasury shares	—		2,526		2,292		—		—		4,818

Net income	—		—		—		30,611		—		30,611
Dividends	—		—		18		(2,965)		—		(2,947)
Other comprehensive income, net of tax	—		—		—		—		1,996		1,996
Balance at June 30, 2023	$	163	$	(83,072)	$	128,451	$	520,965	$	(6,413)	$	560,094


(Amounts in thousands)	Common Stock		Treasury Shares		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total
Balance at March 31, 2022	$	162	$	(46,448)	$	112,924	$	407,522	$	(5,074)	$	469,086
Share-based compensation	—		—		2,284		—		—		2,284
Stock activity under stock plans	—		(2,002)		—		—		—		(2,002)
Reissuance of treasury shares	—		2,016		1,075		—		—		3,091
Repurchase of common shares	—		(30,491)		—		—		—		(30,491)
Net income	—		—		—		29,443		—		29,443
Dividends	—		—		22		(2,691)		—		(2,669)
Other comprehensive income, net of tax	—		—		—		—		(2,022)		(2,022)
Balance at June 30, 2022	$	162	$	(76,925)	$	116,305	$	434,274	$	(7,096)	$	466,720

See accompanying notes to condensed consolidated financial statements.

CSW INDUSTRIALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Three Months Ended June 30,
(Amounts in thousands)	2023		2022
Cash flows from operating activities:
Net income	$	31,056	$	29,638
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	3,239		3,273
Amortization of intangible and other assets	5,868		5,340
Provision for inventory reserves	2,509		1,667
Provision for doubtful accounts	108		1,060
Share-based and other executive compensation	2,805		2,284

Net loss on disposals of property, plant and equipment	(12)		(5)

Net pension benefit	17		49
Impairment of assets	92		—
Net deferred taxes	843		310
Changes in operating assets and liabilities:
Accounts receivable	(4,319)		(21,044)
Inventories	2,141		(15,020)
Prepaid expenses and other current assets	2,443		458
Other assets	(788)		81
Accounts payable and other current liabilities	3,233		8,426
Retirement benefits payable and other liabilities	1,022		296
Net cash provided by operating activities	50,257		16,813
Cash flows from investing activities:
Capital expenditures	(4,971)		(2,015)

Proceeds from sale of assets	12		20
Cash paid for acquisitions	(112)		(2,000)

Net cash used in investing activities	(5,071)		(3,995)
Cash flows from financing activities:
Borrowings on line of credit	15,432		34,797
Repayments of line of credit and term loan	(58,432)		(13,937)

Purchase of treasury shares	(2,864)		(31,398)


Dividends	(2,947)		(2,670)
Net cash used in financing activities	(48,811)		(13,208)
Effect of exchange rate changes on cash and equivalents	(42)		(710)
Net change in cash and cash equivalents	(3,667)		(1,100)
Cash and cash equivalents, beginning of period	18,455		16,619
Cash and cash equivalents, end of period	$	14,788	$	15,519

See accompanying notes to condensed consolidated financial statements.

CSW INDUSTRIALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1.ORGANIZATION AND OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES

CSW Industrials, Inc. (“CSWI,” “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, 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. The reputation of our product portfolio is built on more than 100 well-respected brand names, such as AC GuardTM, Air Sentry®, Cover GuardTM, Deacon®, Falcon Stainless®, Greco®, Jet-Lube®, Kopr-Kote®, Leak Freeze®, Metacaulk®, No. 5®, OilSafe®, Safe-T-Switch®, Shoemaker Manufacturing®, Smoke Guard®, TRUaire® and Whitmore®. These products are distributed through an extensive wholesale distribution network serving the HVAC/R, architecturally-specified buildings products, plumbing, general industrial, energy, rail transportation and mining end markets. Our desire to develop solutions for our contractors, combined with the differentiated nature of our niche product offerings, drives loyalty to our brands. 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.

We continue to assess and proactively manage the impacts of COVID-19 on all aspects of our business and geographies, including with respect to our employees, customers and communities and supply chain. During the three months ended June 30, 2023, the COVID-19 pandemic had no direct or indirect material impact on our consolidated operating results. While the Federal COVID-19 Public Health Emergency Declaration expired on May 11, 2023, the extent to which the COVID-19 pandemic may impact our business, results of operations, and financial condition will depend on future developments, which are uncertain and cannot be predicted.

We continue to monitor the Russian invasion of Ukraine and its global impact. We have no operations, employees or assets in Russia, Belarus or Ukraine, nor do we source goods or services of any material amount from those countries, whether directly or indirectly. Since shortly after the Russian invasion of Ukraine began in February 2022, we have had no commercial activities including sales in Russia, Belarus or Ukraine. While the conflict continues to evolve and the outcome remains highly uncertain, we do not currently believe the Russia-Ukraine conflict will have a material impact on our business and results of operations. However, if the Russia-Ukraine conflict continues or worsens, leading to greater global economic or political disruptions and uncertainty, our business and results of operations could be materially impacted as a result.

Basis of Presentation

The condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2023 (“Quarterly Report”), include all revenues, costs, assets and liabilities directly attributable to CSWI and have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”). The condensed consolidated financial statements are for us and our consolidated subsidiaries, each of which is a wholly-owned subsidiary, except our 50% investment in a variable interest entity ("VIE") for which we have determined that we are the primary beneficiary and therefore have consolidated into our financial statements. All significant intercompany transactions have been eliminated in consolidation.

The condensed consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary to present a fair statement of CSWI’s financial position as of June 30, 2023, and the results of operations for the three-month period ended June 30, 2023 and 2022. All adjustments are of a normal, recurring nature.

The year-end condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in CSWI’s Annual Report on Form 10-K for the fiscal year ended March 31, 2023 (the “Annual Report”).

Accounting Policies

We have consistently applied the accounting policies described in our Annual Report in preparing these condensed consolidated financial statements.

Accounting Developments

There were not any recently adopted or newly issued accounting pronouncements for the three months ended June 30, 2023, that have had, or are expected to have, a material impact on our consolidated financial statements and disclosures.

2. ACQUISITIONS

Cover Guard, Inc. and AC Guard, Inc.

On July 8, 2022, we acquired the assets of Cover Guard, Inc. (“CG”) and AC Guard, Inc. ("ACG"), based in Orlando, Florida, for an aggregate purchase price of $18.4 million, comprised of cash consideration of $18.0 million and additional contingent considerations initially measured at $0.4 million based on CG and ACG meeting defined financial targets over a period of 5 years. In conjunction with the acquisition, we agreed to pay an additional $3.7 million, comprised of cash consideration of $1.5 million and 5-year annuity payments (value of $2.2 million) to a third party to secure the related intellectual property. The total cash consideration at closing of $19.5 million was funded with cash on hand and borrowings under our existing Revolving Credit Facility (as defined in Note 7). CG and ACG product lines further expand Contractor Solutions’ offering of leading HVAC/R accessories. Through these differentiated products, our Contractor Solutions segment expects to achieve incremental ductless and ducted HVAC/R market penetration. As of the acquisition date, the estimated fair value of the contingent consideration was classified as a long-term liability of $0.4 million and was determined using an option pricing model simulation that determines an average projected payment value across numerous iterations.

The CG and ACG acquisition was accounted for as a business combination under FASB Accounting Standards Codification Topic 805 ("Topic 805"). The excess of the purchase price over the preliminary fair value of the identifiable assets acquired was $1.8 million allocated to goodwill, which represents the value expected to be obtained from owning products that are complementary to our existing HVAC/R and plumbing offerings and provide a meaningful value proposition to our end use customers. The preliminary allocation of the fair value of the assets acquired included customer lists ($9.8 million), patent ($1.8 million), trademarks ($0.7 million), inventory ($3.1 million), accounts receivable ($0.9 million) and equipment ($0.3 million). Customer lists and patents are being amortized over 15 years and 10 years, respectively, while trademarks and goodwill are not being amortized. The Company's evaluation of the facts and circumstances available as of July 8, 2022, to assign fair values to assets acquired is ongoing. We expect to finalize the purchase price allocation as soon as practicable, but no later than one year from the acquisition date. Goodwill and all intangible assets, including customer lists, trademarks and

patent are deductible and amortized over 15 years for income tax purposes. CG and ACG activity has been included in our Contractor Solutions segment since the acquisition date. No pro forma information has been provided due to immateriality.

The additional $3.7 million we agreed to pay a third party was accounted for as an acquisition of intellectual property and will be amortized over 15 years.

Falcon Stainless, Inc.

On October 4, 2022, we acquired 100% of the outstanding equity of Falcon Stainless, Inc. ("Falcon"), based in Temecula, California, for an aggregate purchase price of $37.1 million (including $1.0 million cash acquired), comprising cash consideration of $34.6 million and an additional payment of $2.5 million due one-year from the acquisition date assuming certain business conditions are met. The cash consideration was funded with cash on hand and borrowings under our existing Revolving Credit Facility (as defined in Note 7). Falcon products are well-known among the professional trades for supplying enhanced water flow delivery and increased customer satisfaction and supplement our Contractor Solutions segment's existing product portfolio.

The Falcon acquisition was accounted for as a business combination under Topic 805. The excess of the purchase price over the preliminary fair value of the identifiable assets acquired was $17.5 million allocated to goodwill, which represents the value expected to be obtained from owning products that are complementary to our existing plumbing offerings and provide a meaningful value proposition to our end use customers. The preliminary allocation of the fair value of the assets acquired comprises customer lists ($17.7 million), trademarks ($4.7 million), accounts receivable ($1.4 million), cash ($1.0 million), inventory ($0.7 million), other current asset ($0.1 million) and other assets ($3.2 million), net of current liabilities (0.7 million) and other liabilities ($8.5 million). Customer lists are being amortized over 15 years, while trademarks and goodwill are not being amortized. The Company's evaluation of the facts and circumstances available as of October 4, 2022, to assign fair values to assets acquired is ongoing. We expect to finalize the purchase price allocation as soon as practicable, but no later than one year from the acquisition date. Goodwill and all intangible assets are not deductible for income tax purposes. Falcon activity has been included in our Contractor Solutions segment since the acquisition date. No pro forma information has been provided due to immateriality.

3. CONSOLIDATION OF VARIABLE INTEREST ENTITY AND REDEEMABLE NONCONTROLLING INTEREST

Whitmore Joint Venture

On April 1, 2021, Whitmore Manufacturing, LLC (“Whitmore”), a wholly-owned subsidiary of CSWI, completed the formation of the joint venture (the "Whitmore JV") with Pennzoil-Quaker State Company dba SOPUS Products (“Shell”), a wholly-owned subsidiary of Shell Oil Company that comprises Shell’s U.S. lubricants business.

The Whitmore JV is deemed to be a VIE as the equity investors at risk, as a group, lack the characteristics of a controlling financial interest. The major factor that led to the conclusion that the Company is the primary beneficiary of this VIE is that Whitmore has the power to direct the most significant activities due to its ability to direct the manufacturing decisions of the Whitmore JV. Whitmore JV's total net assets are presented below (in thousands):


	June 30, 2023
Cash	$	4,946
Accounts receivable, net	6,653
Inventories, net	4,320
Prepaid expenses and other current assets	329
Property, plant and equipment, net	13,515
Intangible assets, net	6,276
Other assets	275
Total assets	$	36,314

Accounts payable	$	4,955
Accrued and other current liabilities	1,546
Other long-term liabilities	190
Total liabilities	$	6,691

During the three months ended June 30, 2023, the Whitmore JV generated net income of $0.9 million.

The Whitmore JV's LLC Agreement contains a put option that gives either member the right to sell its 50% equity interest in the Whitmore JV to the other member at a dollar amount equivalent to 90% of the initiating member's equity interest determined based on the fair market value of the Whitmore JV's net assets. This put option can be exercised, at either member's discretion, by providing written notice to the other member during the month of July 2024 and every two years afterwards. This redeemable noncontrolling interest is recorded at the higher of the redemption value or carrying value each reporting period. Changes in redeemable noncontrolling interest for the three-month period ended June 30, 2023 were as follows (in thousands):


Balance at March 31, 2023	$	18,464

Net income attributable to redeemable noncontrolling interest	445



Balance at June 30, 2023	$	18,909

4. INVENTORIES

Inventories consist of the following (in thousands):


	June 30, 2023		March 31, 2023
Raw materials and supplies	$	48,904	$	48,300
Work in process	5,168		5,250
Finished goods	110,096		113,104
Total inventories	164,168		166,654
Less: Obsolescence reserve	(7,126)		(5,085)
Inventories, net	$	157,042	$	161,569

5. GOODWILL AND INTANGIBLE ASSETS

The changes in the carrying amount of goodwill as of June 30, 2023 and March 31, 2023 were as follows (in thousands):


	Contractor Solutions		Specialized Reliability Solutions		Engineered Building Solutions		Total
Balance at March 31, 2023	$	209,160	$	9,278	$	24,302	$	242,740
Falcon acquisition	81		—		—		81
CG and ACG acquisitions	107		—		—		107


Currency translation	(45)		100		179		234
Balance at June 30, 2023	$	209,303	$	9,378	$	24,481	$	243,162

The following table provides information about our intangible assets (in thousands, except years):


		June 30, 2023				March 31, 2023
	Weighted Avg Life (Years)	Ending Gross Amount		Accumulated Amortization		Ending Gross Amount		Accumulated Amortization
Finite-lived intangible assets:
Patents	11	$	13,609	$	(8,727)	$	13,608	$	(8,546)
Customer lists and amortized trademarks	14	324,728		(87,364)		324,472		(81,901)
Non-compete agreements	5	950		(316)		950		(272)
Other	11	6,377		(2,363)		6,377		(2,235)
		$	345,664	$	(98,770)	$	345,407	$	(92,954)
Trade names and trademarks not being amortized:		$	66,461	$	—	$	66,450	$	—

Amortization expenses for the three months ended June 30, 2023 and 2022 were $5.7 million and $5.2 million, respectively. The following table shows the estimated future amortization for intangible assets, as of June 30, 2023, for the remainder of the current fiscal year and the next four fiscal years ending March 31 (in thousands):


2024	$	16,845
2025	21,525
2026	21,158
2027	20,363
2028	19,982
Thereafter	147,021
Total	$	246,894

6. SHARE-BASED COMPENSATION

Refer to Note 5 to our consolidated financial statements included in our Annual Report for a description of the 2015 Equity and Incentive Compensation Plan (the "2015 Plan"). As of June 30, 2023, 369,414 shares were available for issuance under the 2015 Plan.

We recorded share-based compensation expense as follows for the three months ended June 30, 2023 and 2022 (in thousands):


	Three Months Ended June 30,
	2023		2022
Share-based compensation expense	$	2,805	$	2,284
Related income tax benefit	(701)		(571)
Net share-based compensation expense	$	2,104	$	1,713

Restricted share activity was as follows:


	Three Months Ended June 30, 2023
	Number of Shares	Weighted Average Grant Date Fair Value
Outstanding at April 1, 2023:	232,051	$	138.14
Granted	52,673	199.61
Vested	(54,065)	73.44
Canceled	(541)	116.68
Outstanding at June 30, 2023	230,118	$	154.77

During the restriction period, the holders of restricted shares are entitled to vote and receive dividends. Unvested restricted shares outstanding as of June 30, 2023 and 2022 included 98,029 and 100,082 shares (at target), respectively, with performance-based vesting provisions, and a vesting range of 0%-200% based on pre-defined performance targets with market conditions. Performance-based awards accrue dividend equivalents, which are settled upon (and to the extent of) vesting of the underlying award and do not have the right to vote until vested. Performance-based awards are earned upon the achievement of objective performance targets and are payable in common shares. Compensation expense is calculated based on the fair market value as determined by a Monte Carlo simulation and is recognized over a 36-month cliff vesting period. We granted 29,120 and 21,087 awards with performance-based vesting provisions during the three months ended June 30, 2023 and 2022, respectively, with a vesting range of 0%-200%.

At June 30, 2023, we had unrecognized compensation cost related to unvested restricted shares of $22.3 million, which will be amortized into net income over the remaining weighted average vesting period of approximately 2.6 years. The total fair value of restricted shares granted during the three months ended June 30, 2023 and 2022 was $5.8 million and $3.4 million, respectively. The total fair value of restricted shares vested during the three months ended June 30, 2023 and 2022 was $7.5 million and $5.2 million, respectively.

7. LONG-TERM DEBT

Debt consists of the following (in thousands):


	June 30, 2023		March 31, 2023
Revolving Credit Facility, interest rate of 6.72% and 6.21% (a)	$	210,000	$	253,000


Less: Current portion	—		—
Long-term debt	$	210,000	$	253,000

(a) Represents the interest rate effective on June 30, 2023, and March 31, 2023, respectively, excluding the impact from the interest rate swap.

Revolving Credit Facility

As discussed in Note 8 to our consolidated financial statements included in our Annual Report, prior to May 2021, we maintained a five-year, $300.0 million revolving credit facility agreement (the "First Credit Agreement"), which was scheduled to mature on September 15, 2022. On May 18, 2021, we entered into a Second Amended and Restated Credit Agreement (the “Second Credit Agreement”), which replaced the First Credit Agreement and provides for a $400.0 million revolving credit facility that contains a $25.0 million sublimit for the issuance of letters of credit and a $10.0 million sublimit for swingline loans, with an additional $150 million accordion feature. The Second Credit Agreement is scheduled to mature on May 18, 2026. The Company incurred a total of $2.3 million in underwriting fees, which are being amortized over the life of the Second Credit Agreement. Borrowings under the Second Credit Agreement bear interest at either base rate plus between 0.25% to 1.5% or LIBOR plus between 1.25% to 2.5%, based on the Company’s leverage ratio calculated on a quarterly basis. The base rate is described in the Second Credit Agreement as the highest of (i) the Federal funds effective rate plus 0.50%, (ii) the prime rate quoted by The Wall Street Journal, and (iii) the one-month LIBOR rate plus 1.00%. We pay a commitment fee between 0.15% to 0.4% based on the Company's leverage ratio for the unutilized portion of this facility. Interest and commitment fees are payable at least quarterly and the outstanding principal balance is due at the maturity date. The Second Credit Agreement is secured by a first priority lien on all tangible and intangible assets and stock issued by the Company and its domestic subsidiaries, subject to specified exceptions, and 65% of the voting equity interests in its first-tier foreign subsidiaries.

On December 15, 2022, the Company entered into an Incremental Assumption Agreement No. 1 and Amendment No. 2 to the Second Credit Agreement (the “Second Amendment”) to utilize a portion of the accordion feature, thus increasing the commitment from $400.0 million to $500.0 million, and concurrently reduced the available incremental accordion by a corresponding amount (the term "Revolving Credit Facility" as used throughout this document refers to the First Credit Agreement, the Second Credit Agreement and the Second Amendment, as applicable). The Second Amendment also replaced the LIBOR Rate with individualized metrics based on the specific denomination of borrowings, including a metric based on Term SOFR (as defined in the Second Credit Agreement) for borrowings denominated in U.S. Dollars. The Company incurred a total of $0.3 million in underwriting fees, which are being amortized over the remaining term of the Second Credit Agreement.

During the three months ended June 30, 2023, we borrowed $

SEC Form 10-Q filed by CSW Industrials Inc.