CSW INDUSTRIALS, INC.CSW
CSW INDUSTRIALS, INC. Income Taxes Disclosure
INCOME TAXES
Income before income taxes was comprised of the following (in thousands):
| Year Ended March 31, | ||||||||||||||||||||
| 2026 | 2025 | 2024 | ||||||||||||||||||
| U.S. Federal | $ | 145,556 | $ | 163,935 | $ | 127,647 | ||||||||||||||
| Foreign | (3) | 16,182 | 12,833 | |||||||||||||||||
| Income before income taxes | $ | 145,553 | $ | 180,117 | $ | 140,480 | ||||||||||||||
The following table summarized by jurisdiction our income taxes paid, net of refunds (in thousands):
| Year Ended March 31, | ||||||||||||||||||||
| 2026 | 2025 | 2024 | ||||||||||||||||||
| Federal | $ | 31,400 | $ | 38,263 | $ | 30,916 | ||||||||||||||
| State | 10,544 | 9,677 | 6,448 | |||||||||||||||||
| Foreign | 4,472 | 2,926 | 1,931 | |||||||||||||||||
| $ | 46,416 | $ | 50,866 | $ | 39,295 | |||||||||||||||
No single state or foreign jurisdiction exceeded five percent of total income taxes paid for the fiscal years ended March 31, 2026, 2025 and 2024.
Income tax expense consists of the following (in thousands):
| Current | Deferred | Total | ||||||||||||||||||
| March 31, 2026 | ||||||||||||||||||||
| U.S. Federal | $ | 24,892 | $ | (320) | $ | 24,572 | ||||||||||||||
| State and local | 9,022 | (2,004) | 7,018 | |||||||||||||||||
| Foreign | 3,546 | (2,430) | 1,116 | |||||||||||||||||
| Provision for income taxes | $ | 37,460 | $ | (4,754) | $ | 32,706 | ||||||||||||||
| March 31, 2025 | ||||||||||||||||||||
| U.S. Federal | $ | 35,448 | $ | (4,888) | $ | 30,560 | ||||||||||||||
| State and local | 9,371 | (1,374) | 7,997 | |||||||||||||||||
| Foreign | 4,378 | (302) | 4,076 | |||||||||||||||||
| Provision for income taxes | $ | 49,197 | $ | (6,564) | $ | 42,633 | ||||||||||||||
| March 31, 2024 | ||||||||||||||||||||
| U.S. Federal | $ | 28,832 | $ | (2,560) | $ | 26,272 | ||||||||||||||
| State and local | 8,057 | (10) | 8,047 | |||||||||||||||||
| Foreign | 3,444 | 178 | 3,622 | |||||||||||||||||
| Provision for income taxes | $ | 40,333 | $ | (2,392) | $ | 37,941 | ||||||||||||||
Income tax expense differed from the amounts computed by applying the U.S. federal statutory income tax rate of 21.0% to income before income taxes as a result of the following (in thousands):
| Year Ended March 31, | ||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2024 | ||||||||||||||||||||||||||||||||||||
| Amount | Percent | Amount | Percent | Amount | Percent | |||||||||||||||||||||||||||||||||
| Income before income tax | $ | 145,553 | $ | 180,117 | $ | 140,480 | ||||||||||||||||||||||||||||||||
| U.S. federal statutory tax rate | 30,566 | 21.0 | % | 37,825 | 21.0 | % | 29,501 | 21.0 | % | |||||||||||||||||||||||||||||
| United States | ||||||||||||||||||||||||||||||||||||||
State and local income taxes (1), (2), (3) | 5,544 | 3.8 | % | 6,325 | 3.5 | % | 6,358 | 4.5 | % | |||||||||||||||||||||||||||||
| Effect of cross-border tax laws | (758) | (0.5) | % | (908) | (0.5) | % | (345) | (0.2) | % | |||||||||||||||||||||||||||||
| Tax credits | (389) | (0.3) | % | (274) | (0.2) | % | (21) | — | % | |||||||||||||||||||||||||||||
| Changes in valuation allowances | — | — | % | (216) | (0.1) | % | (132) | (0.1) | % | |||||||||||||||||||||||||||||
| Nontaxable or nondeductible items | ||||||||||||||||||||||||||||||||||||||
| Executive compensation limitation | 1,731 | 1.2 | % | 2,062 | 1.1 | % | 2,070 | 1.5 | % | |||||||||||||||||||||||||||||
| Indemnification asset | 269 | 0.2 | % | 124 | 0.1 | % | 1,789 | 1.3 | % | |||||||||||||||||||||||||||||
| Other | 289 | 0.2 | % | (1,453) | (0.8) | % | (541) | (0.4) | % | |||||||||||||||||||||||||||||
| Other adjustments | (750) | (0.5) | % | 286 | 0.2 | % | (1,856) | (1.3) | % | |||||||||||||||||||||||||||||
| Foreign tax effects | ||||||||||||||||||||||||||||||||||||||
| Canada | 1,722 | 1.2 | % | 607 | 0.3 | % | 1,119 | 0.8 | % | |||||||||||||||||||||||||||||
| Other foreign jurisdictions | (289) | (0.2) | % | 543 | 0.3 | % | (60) | — | % | |||||||||||||||||||||||||||||
| Changes in unrecognized tax benefits ("UTP") | (5,229) | (3.6) | % | (2,288) | (1.3) | % | 59 | — | % | |||||||||||||||||||||||||||||
| Income tax expense | $ | 32,706 | 22.5 | % | $ | 42,633 | 23.7 | % | $ | 37,941 | 27.0 | % | ||||||||||||||||||||||||||
(1) State taxes in South Carolina, California, Pennsylvania, and Virginia are attributable to greater than 50% of the net income tax provision (benefit) for the year ended March 31, 2026.
(2) State taxes in California, Texas, and New Jersey are attributable to greater than 50% of the net income tax provision (benefit) for the year ended March 31, 2025.
(3) State taxes in California, Texas and Maryland are attributable to greater than 50% of the net income tax provision (benefit) for the year ended March 31, 2024.
The effective tax rates for the years ended March 31, 2026, 2025 and 2024 were 22.5%, 23.7% and 27.0%, respectively. As compared with the statutory rate for the year ended March 31, 2026, the provision for income taxes was primarily impacted by state tax expense (net of federal benefits), which increased the provision by $5.5 million and effective rate by 3.8%; executive compensation limitation, which increased the provision by $1.7 million and the effective tax rate by 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 UTP which decreased the provision by $5.2 million ($6.4 million UTP release offset by $1.0 million of additional penalties and interest, net of state tax benefit) and the effective tax rate by 3.6%.
As compared with the statutory rate for the year ended March 31, 2025, the provision for income taxes was primarily impacted by the state tax expense, which increased the provision by $6.3 million and the effective rate by 3.5%, executive compensation limitation, which increased the provision by $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%; tax benefits related to restricted stock vesting, which decreased 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 of 0.7%.
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at March 31, 2026 and 2025 are presented below (in thousands):
| March 31, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Deferred tax assets: | ||||||||||||||
| Operating lease liabilities | $ | 17,603 | $ | 16,461 | ||||||||||
| Accrued compensation | 7,390 | 6,197 | ||||||||||||
| Pension and other employee benefits | 1,563 | 554 | ||||||||||||
| Inventory reserves | 8,103 | 4,938 | ||||||||||||
| Accrued expenses | 4,530 | 823 | ||||||||||||
| Credits and carryforwards | 1,222 | 441 | ||||||||||||
| Capitalized R&D | — | 1,859 | ||||||||||||
| Transaction Costs | 2,563 | 1,863 | ||||||||||||
| Other, net | 2,186 | 1,067 | ||||||||||||
| Deferred tax assets | 45,160 | 34,203 | ||||||||||||
| Valuation allowance | (459) | (444) | ||||||||||||
| Deferred tax assets, net of valuation allowance | 44,701 | 33,759 | ||||||||||||
| Deferred tax liabilities: | ||||||||||||||
| Goodwill and intangible assets | (110,463) | (60,979) | ||||||||||||
| Property, plant and equipment | (9,687) | (7,462) | ||||||||||||
| Operating lease right-of-use assets | (15,931) | (14,681) | ||||||||||||
| Repatriation reserve | (2,345) | (2,079) | ||||||||||||
| Other, net | (3,600) | (896) | ||||||||||||
| Deferred tax liabilities | (142,026) | (86,097) | ||||||||||||
| Net deferred tax liabilities | $ | (97,325) | $ | (52,338) | ||||||||||
As of March 31, 2026, we maintained an immaterial valuation allowance related to foreign capital loss carryforwards. As of March 31, 2025, we recorded an immaterial valuation allowance related to foreign capital loss carryforwards, released the valuation allowance related to foreign tax credits and recorded an additional valuation allowance related to loss carryforwards that we do not expect to be able to realize.
A provision was made for taxes that may become payable upon distribution of earnings from our foreign subsidiaries. Deferred income tax has not been recognized on any remaining basis difference that is permanently invested outside the United States.
A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest and penalties, is as follows (in thousands):
| March 31, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Balance at beginning of year | $ | 8,396 | $ | 10,877 | ||||||||||
| Decreases related to lapses of statute of limitations | (3,913) | (2,481) | ||||||||||||
| Balance at end of year | $ | 4,483 | $ | 8,396 | ||||||||||
During the year ended March 31, 2026, we released a reserve of $6.4 million including accrued interest of $1.5 million and accrued penalty of $1.0 million, as a result of the lapse of statute for the 2018, 2020 and 2021 periods. We also recorded additional accrued interest of $0.9 million and accrued penalty of $0.1 million on historical tax positions, as well as an additional $1.1 million reserve and a corresponding tax indemnification asset in connection with the Falcon ($0.1 million) and Aspen ($1.0 million) acquisitions.
During the year ended March 31, 2025, we released a reserve of $3.6 million, including accrued interest of $0.6 million and accrued penalties of $0.5 million as a result of the lapse of the statute for the 2019 and 2020 periods. We also recorded additional accrued interest of $1.2 million, net of state benefit, and accrued penalty of $0.2 million on historical tax positions.
In connection with the Falcon acquisition that closed in October 2022, the Company recognized a UTP of $3.0 million related to pre-acquisition tax periods. In addition, in accordance with the tax indemnification provided by the seller to the Company for up to $4.5 million related to UTPs taken in pre-acquisition years, we recognized an initial tax indemnification asset of $3.0 million which will either be settled or expire upon the closure of the tax statutes for the pre-acquisition periods. During the three months ended December 31, 2025 and 2024, as a result of the statute expiration, $1.4 million and $0.9 million UTPs were released, respectively, and the corresponding tax indemnification assets expired concurrently and were recognized as non-cash other expenses on the statement of income, which is not deductible for income tax purposes. As of March 31, 2026, the UTP reserve and offsetting indemnification asset related to Falcon's pre-acquisition period were $0.6 million. The Falcon UTP reserves and offsetting indemnification asset will either be settled or expire upon the closure of the tax statutes for the pre-acquisition period.
In connection with the T.A. Industries, Inc. ("TRUaire") closed in December 2020, the Company recognized a UTP of $17.3 million million related to pre-acquisition tax periods. In addition, in accordance with the tax indemnification provided by the seller to the Company for up to $12.5 million related to UTPs taken in pre-acquisition years, we recognized a tax indemnification asset of $12.5 million, $5.0 million of which was released in the three months ended March 31, 2021. During the three months ended December 31, 2025 and 2024, $5.0 million and $2.7 million UTP accruals (including penalties and interests accrued post-acquisition), respectively, were released due to the expiration of the tax statutes and were recorded as income tax benefits. As of March 31, 2026, the UTP accrual related to TRUaire's pre-acquisition tax periods was $8.6 million and is expected to be released in the future as the statutes on the open tax years expire.
The Company expects $6.4 million of existing reserves for UTPs to either be settled or expire within the next 12 months as the statutes of limitations expire. Our federal income tax returns remain subject to examination for the years ended March 31, 2025, 2024 and 2023. Our income tax returns for Falcon's pre-acquisition periods including calendar years 2022 (partial year), 2021, 2020 and 2019 remain subject to examinations. Our income tax returns for TRUaire's pre-acquisition periods including calendar years 2017, 2018, 2019 and 2020 remain subject to examinations. Our income tax returns in certain state income tax jurisdictions remain subject to examination for various periods for the period ended September 30, 2015 and subsequent years.Free Sentinel
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | May 26, 2026 | Showing above |
| 2025 | May 22, 2025 | |
| 2024 | May 23, 2024 | |
| 2023 | May 25, 2023 | |
| 2022 | May 18, 2022 | |
| 2021 | May 20, 2021 | |
| 2020 | May 20, 2020 | |
| 2019 | May 22, 2019 | |
| 2018 | May 30, 2018 | |
| 2017 | Jun 14, 2017 | |
| 2016 | Jun 8, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.