ACQUISITIONS

3 Months Ended

Jun. 30, 2025

Business Combination, Asset Acquisition, Transaction between Entities under Common Control, and Joint Venture Formation [Abstract]

ACQUISITIONS

Aspen Manufacturing, LLC

On May 1, 2025, we acquired 100% of the equity interests of Aspen Manufacturing, LLC (“Aspen Manufacturing”), based in Humble, Texas, for a preliminary aggregate purchase price of $325.9 million (including $2.3 million cash acquired), comprised of cash consideration of $313.5 million and an estimated working capital adjustment of $12.4 million. The cash consideration was funded with cash on hand and borrowings under our existing Revolving Credit Facility (as defined in Note 7). Aspen Manufacturing is one of the largest independent evaporator coil and air handler manufacturers for the HVAC/R industry and is recognized as a 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.

The Aspen Manufacturing acquisition was accounted for as a business combination under FASB Accounting Standards Codification Topic 805, Business Combinations ("Topic 805"). Pursuant to Topic 805, the Company allocated the Aspen Manufacturing purchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date, May 1, 2025. The excess of the purchase price over those fair values was recorded to goodwill. The Company's evaluation of the facts and circumstances available of May 1, 2025, to assign fair values to assets acquired and liabilities assumed, including income tax related amounts, is ongoing. The primary areas of preliminary purchase accounting price allocation subject to changes relate to the valuation of working capitals, income tax contingency and related indemnification asset, value of property, plant and equipment and the assumptions used in the valuation model. We expect to finalize the purchase price allocation as soon as practicable, but no later than one year from the acquisition date. The following table summarizes the Company's best initial estimate of the aggregate fair value of the assets acquired and liabilities assumed at the date of acquisition (in thousands).


	Initial Estimated Fair Value
Cash	$	2,289
Accounts Receivable	15,253
Inventory	30,851

Other Current Assets	150
Property, Plant and Equipment	7,916
Trade Name (indefinite life)	22,000
Customer Lists (useful life of 15 years)	165,000
Right-Of-Use Assets	11,855
Long-Term Indemnity Asset	400

Accounts Payable	(5,459)
Accrued and Other Current Liabilities	(8,943)
Lease Liabilities - Short-Term	(1,019)


Lease Liabilities - Long-Term	(10,836)
Contingency Reserve	(400)
Other Long-Term Liabilities	(3,600)
Estimated fair value of net assets acquired	225,457
Goodwill	100,421
Total Purchase Price	$	325,878

Goodwill of $100.4 million represents the excess of the purchase price over the fair value of the underlying tangible and intangible assets acquired and liabilities assumed. The acquisition goodwill represents the value expected to be obtained from expanding the Company’s product offerings more broadly across the HVAC/R end market. The goodwill recorded as part of this acquisition is included in the Contractor Solutions segment. The goodwill and all intangible assets are deductible and amortized over 15 years for income tax purposes.

Aspen Manufacturing generated net revenue of $30.8 million and a net income before income taxes of $5.5 million for the period from the acquisition date to June 30, 2025. Aspen Manufacturing activity is currently included in our Contractor Solutions segment. During the year ended March 31, 2025, the Company incurred $1.1 million of transaction expenses in connection with the Aspen Manufacturing acquisition. During the three months ended June 30, 2025, the Company incurred $0.2 million of transaction expenses in connection with the Aspen Manufacturing acquisition. Transaction expenses are included in selling, general and administrative expenses in the Consolidated Statement of Operations under the Contractor Solutions segment.

Pursuant to Topic 805, unaudited supplemental proforma results of operations for the three months ended June 30, 2025 and 2024, as if the acquisition of Aspen Manufacturing had occurred on April 1, 2024, are presented below (in thousands, except per share amounts):


	Three Months Ended June 30, 2025		Three Months Ended June 30, 2024
Revenues, net	$	274,089	$	261,215
Net income attributable to CSW Industrials, Inc.	40,736		40,070

Net income per share attributable to CSW Industrials, Inc.
Basic	$	2.42	$	2.58
Diluted	2.42		2.57

These proforma results do not present financial results that would have been realized had the acquisition occurred on April 1, 2024, nor are they intended to be a projection of future results. The unaudited proforma results include certain proforma adjustments to net income that were directly attributable to the acquisition, as if the acquisition had occurred on April 1, 2024, including the following:

•Additional amortization expense of $0.9 million and $2.8 million for the three months ended June 30, 2025 and 2024, respectively, that would have been recognized as a result of the allocation of purchase consideration to customer lists subject to amortization;

•Additional amortization expense of $0 and $0.7 million for the three months ended June 30, 2025 and 2024, respectively, that would have been recognized as a result of the allocation of purchase consideration to acquisition inventory step-up;

•Additional depreciation expense of $0.1 million and $0.2 million for the three months ended June 30, 2025 and 2024, respectively, that would have been recognized as a result of the fair value step-up of the property, plant and equipment;

•Transactions expenses of $0 and $1.2 million for the three months ended June 30, 2025 and 2024, respectively, that would have been recognized by the Company related to the acquisition;

•Estimated additional interest expense of $0.6 million and $1.9 million for the three months ended June 30, 2025 and 2024, respectively, as a result of incurring additional borrowing; and

•Income tax effect of the proforma adjustments calculated using a blended statutory income tax rate of 25.0% of $0.4 million and $1.7 million for the three months ended June 30, 2025 and 2024, respectively.

PF WaterWorks, L.P.

On November 4, 2024, we acquired the assets of PF WaterWorks, L.P. (“PF WaterWorks”), based in Houston, Texas for an aggregate purchase price of $45.8 million, comprised of cash considerations of $40.0 million, an estimated working capital true-up adjustment of $2.6 million and contingent considerations initially measured at $3.2 million based on PF WaterWorks meeting defined financial targets over a period of 3.2 years. The cash consideration was funded with cash on hand. PF WaterWorks offers innovative, eco-friendly drain management solutions that expand upon, and are complimentary to, our existing plumbing product portfolio. As of the acquisition date, the estimated fair value of the contingent consideration was classified as a long-term liability of $3.2 million, which was determined using an option pricing model simulation that determines an average projected payment value across numerous iterations. During the year ended March 31, 2025, we incurred $1.4 million in transaction expenses in connection with the PF WaterWorks acquisition, which were included in selling, general and administrative expenses in the Consolidated Statements of Operations under the Contractor Solutions segment. During the three months ended June 30, 2025, no transaction expenses were incurred in connection with the PF WaterWorks acquisition.

The PF WaterWorks acquisition was accounted for as a business combination under FASB Accounting Standards Codification Topic 805, Business Combinations (“Topic 805”). The excess of the purchase price over the preliminary fair value of the identifiable assets acquired and liabilities assumed was $10.4 million allocated to goodwill, which represents the value expected to be obtained from owning products that are expanding our existing plumbing offerings and provide additional drain management solutions to our customers. The preliminary allocation of the fair value of the net assets acquired comprises customer lists ($26.2 million), trade name ($3.1 million), patent ($0.6 million), accounts receivable ($1.6 million), inventory ($4.2 million), other current assets ($0.2 million), equipment ($0.1 million) and other assets ($0.4 million), net of current liabilities ($0.9 million) and other liabilities ($0.1 million). Customer lists and patent are being amortized over 15 years and 5 years, respectively, while the trade name and goodwill are not being amortized. The Company’s evaluation of the facts and circumstances available as of November 4, 2024 to assign fair values to assets acquired is ongoing. The primary area of preliminary purchase price allocation subject to change relates to the valuation of working capital, value of property, plant and equipment and residual goodwill. 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 deductible and amortized over 15 years for income tax purposes. PF WaterWorks activity has been included in our Contractor Solutions segment since the acquisition date.

The disclosure of PF WaterWorks' post-acquisition revenue and net income is not practical due to integration activities since the acquisition date. No pro forma information has been provided due to immateriality.

PSP Products, Inc.

On August 1, 2024, we acquired the assets of PSP Products, Inc. (“PSP Products”), based in Manassas, Virginia for an aggregate purchase price of $51.3 million, comprised of cash consideration of $32.5 million, a working capital true-up adjustment of $7.0 million and contingent considerations initially measured at $11.8 million based on PSP Products meeting defined operational and financial targets over a period of 2.5 years. The cash consideration was funded with cash on hand and borrowings under our existing Revolving Credit Facility, as defined in Note 7. PSP Products offers a family of superior surge protection and load management products to our existing HVAC/R offerings. As of the acquisition date, the estimated fair value of the contingent consideration was classified as a long-term liability of $11.8 million, of which $4.8 million was determined using an option pricing model simulation that determines an average projected payment value across numerous iterations and $7.0 million was determined using a scenario-based analysis on forecasted future results. During the quarter ended March 31, 2025, we increased the fair value of the contingent consideration liability related to the PSP Products acquisition due to the better than expected performance and recognized a $2.1 million expense recorded in general and administrative expenses in the Consolidated Statements of Operations under the Contractor Solutions segment. During the year ended March 31, 2025, we incurred less than $0.5 million in transaction expenses in connection with the PSP Products acquisition, which were included in selling, general and administrative expenses in the Consolidated Statements of Operations under the Contractor Solutions segment. During the three months ended June 30, 2025, no transaction expenses were incurred in connection with the PSP Products acquisition.

The PSP Products acquisition was accounted for as a business combination under FASB Accounting Standards Codification Topic 805, Business Combinations (“Topic 805”). The excess of the purchase price over the preliminary fair value of the identifiable assets acquired and liabilities assumed was $7.3 million allocated to goodwill, which represents the value expected to be obtained from owning products that are complementary to our existing HVAC/R offerings and provide additional electrical offerings to our customers. The preliminary allocation of the fair value of the net assets acquired comprises customer lists ($30.0 million), trade name ($2.4 million), accounts receivable ($4.4 million), inventory ($8.9 million), other current asset ($0.3 million), equipment ($0.3 million) and other assets ($0.7 million), net of current liabilities ($2.7 million) and other liabilities ($0.3 million). Customer lists are being amortized over 15 years while the trade name and goodwill are not being amortized. The Company’s evaluation of the facts and circumstances available as of August 1, 2024, to assign fair values to assets acquired is ongoing. The primary area of preliminary purchase price allocation subject to change relates to the valuation of working capital, value of property, plant and equipment and residual goodwill. 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 deductible and amortized over 15 years for income tax purposes. PSP Products activity has been included in our Contractor Solutions segment since the acquisition date.

The disclosure of PSP Product's post-acquisition revenue and net income is not practical due to integration activities since the acquisition date. No pro forma information has been provided due to immateriality.

- Definition

The entire disclosure for business combination.

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+ Details

CSW INDUSTRIALS, INC. 10-Q