CSW INDUSTRIALS, INC.CSW
CSW INDUSTRIALS, INC. Stock Compensation Disclosure
SHARE-BASED COMPENSATION
Prior to September 17, 2024, we maintained the shareholder-approved 2015 Equity and Incentive Compensation Plan (the “2015 Plan”), which provided for the issuance of up to 1,230,000 shares of CSWI common stock through the grant of stock options, stock appreciation rights, restricted shares, restricted stock units, performance shares, performance units or other share-based awards, to employees, officers and non-employee directors. On August 15, 2024, our shareholders approved the 2024 Equity and Incentive Compensation Plan (the “2024 Plan”) and on September 17, 2024, we registered the offering of shares under the 2024 Plan on a Registration Statement on Form S-8 (the “2024 Plan Registration”). Following the 2024 Plan Registration, no further awards have been or will be granted under the 2015 Plan, and the 2015 Plan’s remaining share reserve for new awards was cancelled. Any awards previously granted under the 2015 Plan will remain outstanding and vest in accordance with their original terms and conditions.
The 2024 Plan provides for the issuance of up to 850,000 shares of CSWI common stock through the grant of stock options, stock appreciation rights, restricted shares, restricted stock units, performance shares, performance units or other share-based awards, to employees, officers and non-employee directors. As of March 31, 2025, and due to awards granted under the 2015 Plan prior to the 2024 Plan Registration, as well as new grant activity under the 2024 Plan, 827,271 shares were reserved and available for issuance under the 2024 Plan.
We recorded share-based compensation expense for restricted stock as follows for the years ended March 31, 2025, 2024 and 2023 (in thousands):
| Year Ended March 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Share-based compensation expense | $ | 13,587 | $ | 11,537 | $ | 9,751 | ||||||||||||||
| Related income tax benefit (a) | (3,397) | (2,885) | (2,438) | |||||||||||||||||
| Net share-based compensation expense | $ | 10,190 | $ | 8,652 | $ | 7,313 | ||||||||||||||
(a) Income tax benefit is estimated using the statutory rate.
No options were granted or vested during the years ended March 31, 2025, 2024 and 2023, and all stock options were vested and recognized prior to the year ended March 31, 2019. The intrinsic value of options exercised during the years ended March 31, 2025, 2024 and 2023 was $0.0 million, $0.0 million and $1.2 million, respectively. Cash received for options exercised during the years ended March 31, 2025, 2024 and 2023 was $0.0 million, $0.0 million and $0.3 million, respectively, and the tax benefit received was $0.0 million, $0.0 million and $0.3 million, respectively. As of March 31, 2025, there were no outstanding stock options.
Restricted stock activity was as follows:
| Year Ended March 31, 2025 | ||||||||||||||
| Number of Shares | Weighted Average Grant Date Fair Value | |||||||||||||
| Outstanding at April 1, 2024 | 221,563 | $ | 166.62 | |||||||||||
| Granted | 71,008 | 340.81 | ||||||||||||
| Vested | (94,883) | 178.69 | ||||||||||||
| Canceled | (3,539) | 177.69 | ||||||||||||
| Outstanding at March 31, 2025 | 194,149 | $ | 203.62 | |||||||||||
During the restriction period, the holders of restricted shares are entitled to vote and receive dividends. Unvested restricted shares outstanding as of March 31, 2025 and 2024 included 85,998 and 96,945 shares (at target), respectively, with performance-based vesting provisions, having vesting ranges from 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 18,962 and 29,120 awards with performance-based vesting provisions during the years ended March 31, 2025 and 2024, respectively, with a vesting range of 0-200%.
At March 31, 2025, we had unrecognized compensation cost related to unvested restricted shares of $19.7 million, which will be amortized into net income over the remaining weighted average vesting period of 1.9 years. The total fair value of restricted shares granted during the years ended March 31, 2025 and 2024 was $14.4 million and $12.5 million, respectively. The total fair value of restricted shares vested during the years ended March 31, 2025 and 2024 was $27.8 million and $14.9 million, respectively.
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.