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OFFON

CSW INDUSTRIALS, INC.

(CSWI)
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CSW INDUSTRIALS, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

11/03/2021 | 05:23am EST
The following discussion and analysis of our operations financial condition and
results of operations should be read together with our condensed 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, 2021 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


We are a growth-oriented, diversified industrial company with a strategic focus
on providing niche, value-added products in the end markets we serve. Our broad
portfolio of leading products provides performance optimizing and life safety
solutions to our customers. Our products include mechanical products for
heating, ventilation, air conditioning and refrigeration ("HVAC/R"), grilles,
registers and diffusers, engineered building products and high-performance
specialty lubricants and sealants. End markets that we serve include HVAC/R,
architecturally-specified building products, plumbing, energy, rail, mining and
general industrial. The reputation of our product portfolio is built on more
than 100 highly respected industrial brands including No. 5®, KOPR-KOTE®, Kats
Coatings®, Safe-T-Switch®, Air Sentry®, Deacon®, Leak Freeze®, Greco® and
TRUaire®. Our manufacturing operations are concentrated in the United States
("U.S."), Canada and Vietnam, and we also have distribution operations in 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, including: Australia, Belgium, Brazil, Canada, China,
Colombia, Germany, Japan, the Netherlands, Russia, Saudi Arabia, Singapore,
South Africa, Sweden, the U.K., United Arab Emirates and the U.S.

We conduct our operations through three business segments. Our Contractor
Solutions segment manufactures and supplies products predominantly for
residential and commercial HVAC/R and plumbing applications, which are designed
primarily for professional tradespeople. Our Engineered Building Solutions
segment provides primarily code-driven products focused on life safety that are
engineered to provide aesthetically-pleasing solutions for the construction,
refurbishment and modernization of commercial, institutional, and multi-family
residential buildings. Our Specialized Reliability Solutions segment provides
products for increasing the reliability, performance and lifespan of industrial
assets and solving equipment maintenance challenges.

We believe that our broad portfolio of products and markets served, as well as
our brand recognition, will continue to provide opportunities; however, we face
ongoing challenges affecting many companies, such as environmental and other
regulatory compliance, combined with overall global economic uncertainty.

The COVID-19 pandemic and its resulting impacts had an overall negative impact
on our financial results in the three and six months ended September 30, 2020.
During the three and six months ended September 30, 2021, the direct impact of
the COVID-19 pandemic on our consolidated operating results was limited, in all
material respects, to our operations in Vietnam. In early August 2021, the
Vietnamese government mandated numerous restrictions in an effort to mitigate
the spread of COVID-19, including closures of non-essential businesses,
limitations on movements of individuals, and the imposition of other
highly-restrictive measures for businesses, like ours, that continued operations
in compliance with the restrictions. In addition, the indirect impacts of the
COVID-19 pandemic have resulted in material and freight cost inflation and
supply chain disruptions, driven by numerous factors including countermeasures
taken by U.S. federal, state and/or local governments and the Federal Reserve,
labor supply shortages, and recovering demand. We expect supply chain
challenges, material and freight cost inflation and freight delays to continue
in the near-term, and we are addressing these impacts through focused vendor
management and by continuing and increasing the pricing initiatives that began
in the three months ended March 31, 2021.

While the COVID-19 pandemic and its indirect effects have contributed to
increased demand in certain parts of our business, including the HVAC/R end
market, we expect customer demand levels and our overall results of operations
and financial condition to have some level of volatility through the duration of
the pandemic when compared to pre-pandemic periods. Despite strong demand in
certain of our end markets and signs of recovery in others, we cannot reasonably
estimate the magnitude or length of the pandemic's direct and indirect adverse
impact, including its ultimate impact on our business or financial condition,
due to continued uncertainty regarding (1) the duration and severity of the
COVID-19 pandemic and (2) the continued potential for short and long-term
impacts on our facilities and employees, customer demand and supply chain.


                                       24
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Whitmore Joint Venture


On April 1, 2021, Whitmore Manufacturing, LLC ("Whitmore"), a wholly-owned
subsidiary of CSWI, completed the formation of the previously announced 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 formation was consummated
through a transaction in which Whitmore sold to Shell a 50% interest in a
wholly-owned subsidiary (containing certain existing operating assets) in
exchange for consideration of $13.4 million from Shell in the form of cash and
intangible assets. The Whitmore JV is deemed to be a variable interest entity
("VIE") and the Company is the primary beneficiary of this VIE, primarily due to
Whitmore having the power to direct the manufacturing activities, which are
considered the most significant activities for the Whitmore JV. Refer to Note 3
for further information on the Whitmore JV. The Whitmore JV has been
consolidated into the operations of the Company and its activity has been
included in our Specialized Reliability Solutions segment since the formation
date.

Segment Realignment

Beginning with the quarter ended June 30, 2021, we revised our segment structure
to align with how our chief operating decision maker (who was determined to be
our Chief Executive Officer) views our business, assesses performance and
allocates resources to our business components. This segment structure revision
became effective on April 1, 2021, and followed the completion of various
strategic transactions including the acquisition of TRUaire and the formation of
the Whitmore JV. Refer to Accounting Policies in Note 1 to our condensed
consolidated financial statements included in this Quarterly Report for detailed
descriptions of our three business segments.

As a result of the business segment revision, reclassification of certain prior
year financial information has been made to conform with the current period's
presentation. None of the changes impact the Company's previously reported
consolidated net revenue, operating income, net income or net income per share.
Refer to Note 18 o our condensed consolidated financial statements included in
this Quarterly Report for additional information on the Company's segment
realignment.


RESULTS OF OPERATIONS

The following discussion provides an analysis of our condensed consolidated results of operations and results for each of our segments.


All acquisitions are described in Note 2 to our condensed consolidated financial
statements included in this Quarterly Report. TRUaire activity has been included
in our results within our Contractor Solutions segment since the December 15,
2020 acquisition date. Whitmore JV activity has been included in our Specialized
Reliability Solutions segment since the April 1, 2021 formation date.
Consolidation of VIE (related to the Whitmore JV) is described in Note 3 to our
condensed consolidated financial statements included in this Quarterly Report.

Revenues, net
                                              Three Months Ended September 30,
        (Amounts in thousands)                      2021                      2020
        Revenues, net                 $         155,585                    $ 104,940

                                               Six Months Ended September 30,
        (Amounts in thousands)                      2021                      2020
        Revenues, net                 $         316,850                    $ 195,904



Net revenues for the three months ended September 30, 2021 increased $50.6
million, or 48.3%, as compared with the three months ended September 30, 2020.
The increase was primarily due to the TRUaire acquisition ($35.2 million or
33.6%). Excluding the acquisition impact, the organic sales increased $15.4
million, or 14.7%, from the prior year due to increased sales volumes and
implemented pricing initiatives. Sales volumes increased in energy, rail, HVAC/R
and mining end markets and decreased in the plumbing end market. Pricing
initiatives, which began in the three months ended March 31, 2021, continued and
increased during the three months ended September 30, 2021 to mitigate rising
costs.

                                       25
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Net revenues for the six months ended September 30, 2021 increased $120.9
million, or 61.7%, as compared with the six months ended September 30, 2020. The
increase was primarily due to the TRUaire acquisition ($68.8 million or 35.1%).
Excluding the acquisition impact, the organic sales increased $52.1 million, or
26.6%, from the prior year due to increased sales volumes and implemented
pricing initiatives. Sales volumes increased in HVAC/R, energy, mining, rail,
general industrial, plumbing and architecturally-specified building products end
markets. Pricing initiatives, which began in the three months ended March 31,
2021, continued and increased during the six months ended September 30, 2021 to
mitigate rising costs.

Gross Profit and Gross Profit Margin

                                                                     Three Months Ended September 30,
(Amounts in thousands, except percentages)                               2021                    2020
Gross profit                                                     $         63,051           $    48,736
Gross profit margin                                                          40.5   %              46.4  %

                                                                      Six Months Ended September 30,
(Amounts in thousands, except percentages)                               2021                    2020
Gross profit                                                     $        131,649           $    91,488
Gross profit margin                                                          41.5   %              46.7  %



Gross profit for the three months ended September 30, 2021 increased $14.3
million, or 29.4%, as compared with the three months ended September 30, 2020.
The increase was primarily a result of the impact of the TRUaire acquisition and
increased sales. Gross profit margin of 40.5% for the three months ended
September 30, 2021 decreased as compared to 46.4% for the three months ended
September 30, 2020. The decrease was primarily due to the inclusion of the
TRUaire acquisition, a $1.0 million of under-absorption costs resulting from
reduced production levels at the TRUaire Vietnam facility and $0.2 million of
incremental compensation expenses incurred to maintain TRUaire Vietnam's
operations in accordance with COVID-19 restrictions ("TRUaire Vietnam COVID COGS
Impact"). Material and freight cost increases outpaced the implemented pricing
initiatives and had a negative impact on gross profit margin. A shift in sales
to lower margin projects also contributed to the gross profit margin decrease.

Gross profit for the six months ended September 30, 2021 increased $40.2
million, or 43.9%, as compared with the six months ended September 30, 2020. The
increase was primarily a result of the impact of the TRUaire acquisition and
increased sales. Gross profit margin of 41.5% for the six months ended
September 30, 2021 decreased as compared to 46.7% for the six months ended
September 30, 2020. The decrease is primarily due to the inclusion of the
TRUaire acquisition, a $3.9 million purchase accounting effect and the TRUaire
Vietnam COVID COGS Impact discussed above. Material and freight cost increases
outpaced the implemented pricing initiatives and had a negative impact on gross
profit margin. A shift in sales to lower margin projects also contributed to the
gross profit margin decrease.

Operating Expenses

                                                                     Three Months Ended September 30,
(Amounts in thousands, except percentages)                              2021                    2020
Operating expenses                                               $        37,159           $    26,556
Operating expenses as a percentage of revenues, net                         23.9   %              25.3  %

                                                                      Six Months Ended September 30,
(Amounts in thousands, except percentages)                              2021                    2020
Operating expenses                                               $        77,284           $    53,056
Operating expenses as a percentage of revenues, net                         24.4   %              27.1  %



Operating expenses for the three months ended September 30, 2021 increased $10.6
million, or 39.9%, as compared with the three months ended September 30, 2020.
The increase was primarily due to the added expenses related to the inclusion of
TRUaire and the Whitmore JV in the current period, increased equity compensation
expenses and increased spending on sales commissions, depreciation expenses
related to enterprise resource planning systems, headcount and travel. The
decrease in operating expenses as a percentage of revenues was primarily
attributable to sales increasing by a greater percentage than the increase in
operating expenses.
                                       26
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Operating expenses for the six months ended September 30, 2021 increased $24.2
million, or 45.7%, as compared with the six months ended September 30, 2020. The
increase was primarily due to the added expenses related to the inclusion of
TRUaire and the Whitmore JV in the current period, increased equity compensation
expenses and increased spending on sales commissions, depreciation and
optimization expenses related to enterprise resource planning systems, headcount
and travel. The decrease in operating expenses as a percentage of revenues was
primarily attributable to sales increasing by a greater percentage than the
increase in operating expenses.


Operating Income

                                                                     Three Months Ended September 30,
(Amounts in thousands, except percentages)                              2021                    2020
Operating income                                                 $        25,892           $    22,180
Operating margin                                                            16.6   %              21.1  %

                                                                      Six Months Ended September 30,
(Amounts in thousands, except percentages)                              2021                    2020
Operating income                                                 $        54,365           $    38,432
Operating margin                                                            17.2   %              19.6  %



Operating income for the three months ended September 30, 2021 increased $3.7
million, or 16.7%, as compared with the three months ended September 30, 2020,
primarily as a result of the increase in gross profit, partially offset by the
increase in operating expenses, as discussed above.

Operating income for the six months ended September 30, 2021 increased $15.9
million, or 41.5%, as compared with the six months ended September 30, 2020,
primarily as a result of the increase in gross profit, partially offset by the
increase in operating expenses, as discussed above.

Other Income and Expense


Net interest expense of $1.4 million for the three months ended September 30,
2021 increased $1.1 million as compared to the three months ended September 30,
2020. Net interest expense of $3.0 million for the six months ended
September 30, 2021 increased $2.4 million as compared to the six months ended
September 30, 2020. The increase was due to increased outstanding long-term
debt, primarily resulting from borrowings to fund our acquisition of TRUaire.

Other expense, net decreased $0.2 million to net expense of $0.1 million for the
three months ended September 30, 2021 as compared with net expense of $0.4
million for the three months ended September 30, 2020. The decrease was due to
decreased losses arising from transactions in currencies other than functional
currencies. Other expense, net decreased $0.4 million to net expense of $0.3
million for the six months ended September 30, 2021 as compared with net expense
of $0.7 million for the six months ended September 30, 2020. The decrease was
due to decreased losses arising from transactions in currencies other than
functional currencies.

Provision for Income Taxes and Effective Tax Rate


For the three months ended September 30, 2021, we earned $24.3 million from
operations before taxes and provided for income taxes of $6.1 million, resulting
in an effective tax rate of 25.2%. For the six months ended September 30, 2021,
we earned $51.1 million from operations before taxes and provided for income
taxes of $12.5 million, resulting in an effective tax rate of 24.5%. The
provision for income taxes differed from the statutory rate for the three and
six months ended September 30, 2021 primarily due to state and foreign income
taxes, executive compensation limitations, provision for global intangible
low-taxed income ("GILTI") and an increase in the reserves for uncertain tax
provisions; offset by excess tax deductions related to stock compensation and
deductions related to foreign-derived intangible income ("FDII") and foreign tax
credits.

For the three months ended September 30, 2020, we earned $21.5 million from
operations before taxes and provided for income taxes of $5.2 million, resulting
in an effective tax rate of 24.1%. For the six months ended September 30, 2020,
we earned $37.2 million from operations before taxes and provided for income
taxes of $8.9 million, resulting in an effective tax
                                       27
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rate of 23.8%. The provision for income taxes differed from the statutory rate
for the three and six months ended September 30, 2020, primarily due to the
investment in a foreign subsidiary, foreign tax credits, adjustments related to
state tax returns and state R&D credits, the provision for global intangible
low-taxed income("GILTI") and an increase in the reserves for uncertain tax
provisions.

We are currently under examination by the Internal Revenue Service for Whitmore's federal short period tax return for tax year ending September 30, 2015. We have not been notified of any material adjustments.

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 and supplies products predominantly for residential and commercial HVAC/R and plumbing applications, which are designed primarily for professional tradespeople.

                                     Three Months Ended September 30,
(Amounts in thousands)               2021                            2020
Revenues, net                 $       103,346                    $  63,372
Operating income                       26,753                       21,651
 Operating margin                        25.9   %                     34.2  %

                                      Six Months Ended September 30,
(Amounts in thousands)               2021                            2020
Revenues, net                 $       213,589                    $ 113,256
Operating income                       56,265                       37,558
 Operating margin                        26.3   %                     33.2  %



Net revenues for the three months ended September 30, 2021 increased $40.0
million, or 63.1%, as compared with the three months ended September 30, 2020.
The increase was primarily due to the TRUaire acquisition ($35.2 million or
55.5%). Excluding the acquisition impact, organic sales increased by $4.8
million, or 7.6%, due to implemented pricing initiatives, which began in the
three months ended March 31, 2021, continued and increased during the three
months ended September 30, 2021 to mitigate rising costs.

Net revenues for the six months ended September 30, 2021 increased $100.3
million, or 88.6%, as compared with the six months ended September 30, 2020. The
increase was primarily due to the TRUaire acquisition ($68.8 million or 60.7%).
Excluding the acquisition impact, organic sales increased by $31.5 million, or
27.9%, due to increased sales volumes and implemented pricing initiatives. Sales
volumes increased in HVAC/R, plumbing and architecturally-specified building
products end markets. Pricing initiatives, which began in the three months ended
March 31, 2021, continued and increased during the six months ended
September 30, 2021 to mitigate rising costs.

Operating income for the three months ended September 30, 2021 increased $5.1
million, or 23.6%, as compared with the three months ended September 30, 2020.
The increase was primarily due to the TRUaire acquisition and implemented
pricing initiatives, partially offset by increased material and freight costs,
the TRUaire Vietnam COVID COGS Impact discussed above, an additional $0.2
million compensation expense incurred for TRUaire Vietnam employees that were on
furlough under the COVID restrictions ("TRUaire Vietnam COVID Furlough Expense")
and increased spending on depreciation and optimization expenses related to
enterprise resource planning systems and headcount.

Operating income for the six months ended September 30, 2021 increased $18.7
million, or 49.8%, as compared with the six months ended September 30, 2020. The
increase was primarily due to the TRUaire acquisition and organic sales growth,
partially offset by increased material and freight costs, a $3.9 million
purchase accounting effect, the TRUaire Vietnam COVID
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COGS Impact and Furlough Expense discussed above, and increased spending on sales commissions, depreciation and optimization expenses related to enterprise resource planning systems, headcount and travel.

Engineered Building Solutions Segment Results

The Engineered Building Solutions segment provides primarily code-driven products focused on life safety that are engineered to provide elegant solutions for the construction, refurbishment and modernization of commercial, institutional, and multi-family residential buildings.

                                      Three Months Ended September 30,
(Amounts in thousands)               2021                             2020
Revenues, net                 $        23,834                      $ 23,696
Operating income                        2,334                         3,531
 Operating margin                         9.8   %                      14.9  %

                                       Six Months Ended September 30,
(Amounts in thousands)               2021                             2020
Revenues, net                 $        49,484                      $ 45,850
Operating income                        6,188                         7,569
 Operating margin                        12.5   %                      16.5  %


Net revenues for the three months ended September 30, 2021 were comparable to the three months ended September 30, 2020.


Net revenues for the six months ended September 30, 2021 increased $3.6 million,
or 7.9%, as compared with the six months ended September 30, 2020.  The increase
was primarily due to enhanced marketing efforts to promote existing and newly
developed products in the architecturally-specified building products end
market, market share gains due to competitive lead times in the market place and
improved specification levels.

Operating income for the three months ended September 30, 2021 decreased $1.2
million, or 33.9%, as compared with the three months ended September 30, 2020.
The decrease was due to a shift in sales to lower margin projects and increased
headcount.

Operating income for the six months ended September 30, 2021 decreased $1.4 million, or 18.2%, as compared with the six months ended September 30, 2020. The decrease was due to a shift in sales to lower margin projects and increased headcount.




                                       29
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Specialized Reliability Solutions Segment Results


Specialized Reliability Solutions segment provides long-established products for
increasing the reliability, performance and lifespan of industrial assets and
solving equipment maintenance challenges.

                                      Three Months Ended September 30,
(Amounts in thousands)               2021                             2020
Revenues, net                 $        28,458                      $ 18,016
Operating income                        1,008                           360
Operating margin                          3.5   %                       2.0  %

                                       Six Months Ended September 30,
(Amounts in thousands)               2021                             2020
Revenues, net                 $        53,904                      $ 37,014
Operating income                        1,277                           667
Operating margin                          2.4   %                       1.8  %



Net revenues for the three months ended September 30, 2021 increased $10.4
million, or 58.0%, as compared with the three months ended September 30, 2020.
The increase was primarily due to demand recovery in the energy, rail and mining
end markets, pricing initiatives that began in the three months ended June 30,
2021 and continued in the three months ended September 30, 2021 to mitigate
rising costs, as well as the newly formed Whitmore JV.

Net revenues for the six months ended September 30, 2021 increased $16.9
million, or 45.6%, as compared with the six months ended September 30, 2020.
The increase was primarily due to demand recovery in the energy, mining, rail
and general industrial end markets, pricing initiatives that began in the three
months ended June 30, 2021 and continued in the three months ended September 30,
2021 to mitigate rising costs, as well as the newly formed Whitmore JV.

Operating income for the three months ended September 30, 2021 increased $0.6
million or 180.0% as compared to the three months ended September 30, 2020. The
increase was primarily due to increased organic sales and newly formed Whitmore
JV, partially offset by increased material expenses outpacing the implemented
pricing initiatives and increased spending on sales commissions and travel.

Operating income for the six months ended September 30, 2021 increased $0.6
million or 91.5% as compared to the six months ended September 30, 2020. The
increase was primarily due to the increased organic sales and newly formed
Whitmore JV, partially offset by increased material expenses outpacing the
implemented pricing initiatives and increased spending on sales commissions and
travel.


LIQUIDITY AND CAPITAL RESOURCES

Cash Flow Analysis
                                                                      Six Months Ended September 30,
(Amounts in thousands)                                                  2021                    2020
Net cash provided by operating activities                        $         42,775          $    44,783
Net cash used in investing activities                                      (3,552)              (4,351)
Net cash used in financing activities                                     (31,684)             (12,274)



Existing cash, cash generated by operations and borrowings available under our
revolving credit facility are our primary sources of short-term liquidity.  We
monitor the depository institutions that hold our cash and cash equivalents on a
regular basis, and we believe that we have placed our deposits with creditworthy
financial institutions.  Our sources of operating cash generally include the
sale of our products and services and the conversion of our working capital,
particularly accounts receivable and inventories.  Our cash balance (including
cash and cash equivalents) at September 30, 2021 was $17.3 million, as compared
with $10.1 million at March 31, 2021.

                                       30
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For the six months ended September 30, 2021, our cash provided by operating activities from operations was $42.8 million, as compared with $44.8 million for six months ended September 30, 2020.


•Working capital used cash for the six months ended September 30, 2021 due to
higher inventories ($16.8 million) and higher accounts receivable ($12.6
million), partially offset by higher accounts payable and other current
liabilities ($6.3 million), lower prepaid expenses and other current assets
($0.6 million) and lower other assets ($0.5 million).
•Working capital provided cash for the six months ended September 30, 2020 due
to lower accounts receivable ($5.0 million), higher accounts payable and other
current liabilities ($2.0 million) and lower inventories ($0.9 million),
partially offset by higher prepaid expenses and other current assets ($2.4
million).

Cash flows used in investing activities from operations during the six months
ended September 30, 2021 were $3.6 million, as compared with $4.4 million used
in investing activities for the six months ended September 30, 2020.

•Capital expenditures during the six months ended September 30, 2021 and 2020
were $4.9 million and $4.4 million, respectively. Our capital expenditures have
been focused on enterprise resource planning systems, new product introductions,
capacity expansion, continuous improvement, and automation of manufacturing
facilities.
•During the six months ended September 30, 2021, proceeds of $1.4 million were
received as a result of final working capital true-up adjustment related to the
TRUaire acquisition.


Cash flows used in financing activities during the six months ended September 30, 2021 and 2020 were $31.7 million and $12.3 million, respectively. Cash outflows resulted from:


•Net repayments on our line of credit and term loan (as discussed in Note 7 to
our condensed consolidated financial statements included in this Quarterly
Report) of $28.3 million and $0.3 million during the six months ended
September 30, 2021 and 2020, respectively.
•Payments of $2.3 million underwriting discounts and fees in connection with our
line of credit amendment during the six months ended September 30, 2021, as
discussed in Note 7 to our condensed consolidated financial statements included
in this Quarterly Report.
•Repurchases of shares under our share repurchase program (as discussed in Note
11 to our condensed consolidated financial statements included in this Quarterly
Report) of zero and $7.3 million during the six months ended September 30, 2021
and 2020, respectively.
•Proceeds from the acquisition of the redeemable noncontrolling interest
shareholder for its investment in the consolidated Whitmore JV of $6.3 million
during the six months ended September 30, 2021, as discussed in Note 3 to our
condensed consolidated financial statements included in this Quarterly Report.
•Dividend payments of $4.7 million and $4.0 million during the six months ended
September 30, 2021 and 2020, respectively.

We believe that available cash and cash equivalents, cash flows generated
through operations and cash available under our revolving credit facility will
be sufficient to meet our liquidity needs, including capital expenditures, for
at least the next 12 months.

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 condensed consolidated financial statements included
in this Quarterly Report contains a discussion of the recent acquisitions.

Financing

Credit Facilities


See Note 7 to our condensed consolidated financial statements included in this
Quarterly Report for a discussion of our indebtedness.  We were in compliance
with all covenants as of September 30, 2021.

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We have entered into an interest rate swap agreement to hedge our exposure to
variable interest payments related to our indebtedness.  This agreement is more
fully described in Note 9 to our condensed consolidated financial statements
included in this Quarterly Report, and in "Item 3. Quantitative and Qualitative
Disclosures about Market Risk" below.

Off-Balance Sheet Arrangements


As of September 30, 2021, we did not have any off-balance sheet arrangements
that we believe have or are reasonably likely to have a material adverse effect
on our financial condition or results of operations.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES


Management's discussion and analysis of financial condition and results of
operations are based on our condensed consolidated financial statements and
related footnotes contained within this Quarterly Report. Our critical
accounting policies used in the preparation of our condensed 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 six months ended September 30, 2021.

The process of preparing condensed 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 condensed 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.


ACCOUNTING DEVELOPMENTS

We have presented the information about pronouncements not yet implemented in Note 1 to our condensed 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;
•future levels of revenues, operating margins, income from operations, net
income or earnings per share;
•anticipated levels of demand for our products and services;
•short and long-term effects of the COVID-19 pandemic;
•future levels of research and development, capital, environmental or
maintenance expenditures;
•our beliefs regarding the timing and effects on our business of health and
safety, tax, environmental or other legislation, rules and regulations;
•the success or timing of completion of ongoing or anticipated capital,
restructuring or maintenance projects;
•expectations regarding the acquisition or divestiture of assets and businesses;
•our ability to obtain appropriate insurance and indemnities;
•the potential effects of judicial or other proceedings, including tax audits,
on our business, financial condition, results of operations and cash flows;
                                       32

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•the anticipated effects of actions of third parties such as competitors, or
federal, foreign, state or local regulatory authorities, or plaintiffs in
litigation;
•the effective date and expected impact of accounting pronouncements; and
•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.

© Edgar Online, source Glimpses

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