CSW Industrials : 2022 Proxy Statement

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20

Resilient

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Proxy Statement and Notice of Annual Meeting of Stockholders

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Invitation to

2022 Annual Meeting of Stockholders

Thursday, August 25, 2022 9:00 a.m., Central Time

Virtual Meeting Site: www.virtualshareholdermeeting.com/CSWI2022

Joseph B. Armes

Chairman, CEO and President

"Positioning CSWI for sustainable, long-term success."

Dear Fellow Stockholder:

On behalf of your Board of Directors, I am pleased to invite you to attend CSW Industrials' 2022 Annual Meeting of Stockholders. This year's Proxy Statement highlights our accomplishments in fiscal 2022 and presents the matters for which we are seeking your approval at the 2022 Annual Meeting.

I am pleased to report that CSW Industrials persevered through multiple challenges and thrived in fiscal 2022, thanks to the solid financial foundation we've established, the deliberate business practices we've followed, and the strategic planning we have executed. Despite a global pandemic and supply-chain disruptions, we continued our successful track record of delivering exceptional performance and, for the second consecutive year, registered record revenue, EBITDA, and earnings per share. In addition, during this past fiscal year we executed on all aspects of our capital allocation strategy, investing $44 million in inorganic growth and $16 million in capital expenditures. We also returned $23.9 million of cash to our stockholders through our share repurchase program and dividends.

We can attribute these outstanding accomplishments to our diversified business model, disciplined capital allocation, and commitment to operational excellence, which drove impressive profitability despite global disruption and turmoil. However, as I have stated in the past, this is not the only way we measure success, because at CSWI, how we succeed matters. We are extremely proud of the way our team continues to demonstrate steady leadership, informed by our guiding objectives of treating our employees well, serving our customers well, effectively managing our supply chain, and positioning CSWI for sustainable, long-term success. We are more committed than ever to treating our team members well and promoting our employee-centric culture, which enables our delivery of compelling growth and long-term stockholder value.

We believe this year's proxy statement demonstrates our continued commitment to sound governance practices and enhanced disclosure and transparency. Consistent with our focus on continual improvement across all areas of our business, we have continued to enhance our disclosures around Board composition, governance, and executive compensation. We are pleased to share this important information with you.

Your vote is very important to us and to our business, so I encourage you to vote before the meeting. You may vote online, by telephone, or by signing and returning your proxy card by mail, so that your shares will be represented and voted at the meeting. You can find instructions on how to vote beginning on page 3.

I hope that you participate in the meeting. Thank you in advance for voting and for your continued support of CSW Industrials.

Very truly yours,

• 2022 Proxy Statement

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Table of Contents

Proxy Summary	4
Proposal One: Election of Directors	12
Required Vote and Recommendation	12
Board of Directors - Biographical Information	13
The Board and Committees	16
Governance Overview	16
Board Composition	19
Board Committees	19
Board of Directors Compensation	21
Corporate Sustainability, Culture & Compliance	22
Executive Officers	25
Proposal Two: Advisory Vote on Executive Compensation	26
Required Vote and Recommendation	27
Proposal Three: Advisory Vote on Frequency of Conducting the Advisory Vote on Executive
Compensation	28
Required Vote and Recommendation	28
Executive Compensation	29
Compensation & Talent Development Committee Report	29
Compensation Discussion and Analysis	30
Annual Executive Compensation Program Review and Compensation Risk	51
Summary Compensation Table	52
2022 Grants of Plan-Based Awards	54
Outstanding Equity Awards at Year-End 2022	55
2022 Option Exercises and Stock Vested	56
2022 Pension Benefits	56
Potential Payments upon Termination or Change-In-Control	56
CEO Pay Ratio	60
Equity Compensation Plan Information	61
Section 16(a) Beneficial Ownership Reporting Compliance	61
Proposal Four: Ratification of Appointment of Grant Thornton LLP to Serve as our Independent
Registered Public Accounting Firm for Fiscal 2023	62
Required Vote and Recommendation	62
Report of The Audit Committee	63
Other Audit Information	64
Relationship with Independent Registered Public Accounting Firm	64
Audit and Non-Audit Fees and Services	64
Audit Committee Approval Policy	64
Security Ownership of Directors and Certain Executive Officers	65
Security Ownership of Certain Beneficial Owners	66
General Voting and Meeting Information	67
Solicitation	67
Voting	67
Other Information About this Solicitation	70
Cost of Proxy Solicitation	70
Stockholders Sharing an Address	70
Stockholder Proposals and Nominations	70
Exhibit A	71
GAAP to NON-GAAP Reconciliations	71

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Virtual Meeting Site:	NOTICE
Thursday, August 25, 2022
9:00 a.m., Central Time
www.virtualshareholdermeeting.com/CSWI2022	of Annual Meeting
	of Stockholders

REVIEW YOUR PROXY STATEMENT AND VOTE IN ONE OF FOUR WAYS:

INTERNET

Visit the website on your proxy card

BY TELEPHONE Call the telephone number on your proxy card

BY MAIL Sign, date and return your proxy card in the enclosed envelope

AT THE MEETING Attend the Annual Meeting virtually at www.virtualshareholdermeeting.com/CSWI2022

Please refer to the enclosed proxy materials or the information forwarded by your bank, broker or other holder of record to see which voting methods are available to you.

Stockholders of record of the Company's common stock at the close of business on July 8, 2022, are entitled to notice of and to vote at the Annual Meeting. This notice and the enclosed Proxy Statement are first being mailed to stockholders on or about July 15, 2022.

At the Annual Meeting, stockholders will vote on the following matters:

• the election of eight director nominees to serve a one-year term expiring at the 2023 annual meeting of stockholders;
• the approval, on an advisory basis, of the Company's executive compensation, or the "Say on Pay" vote;
• an advisory vote on how often the Company conducts the advisory "Say on Pay" vote;
• the ratification of Grant Thornton LLP's appointment to serve as our independent registered public accounting firm for fiscal year 2023; and
• the transaction of any other business properly presented at the Annual Meeting.

The enclosed Proxy Statement contains other important information that you should read and consider before you vote. The Proxy Statement and annual report to stockholders and any other proxy materials are available at www.proxyvote.com. For additional related information, please refer to the "Important Notice Regarding the Availability of Materials for the Stockholder Meeting to be held on August 25, 2022" in the enclosed Proxy Statement.

Your vote is important. Even if you plan to attend the Annual Meeting, your prompt cooperation in voting in advance is greatly appreciated. Thank you in advance for voting and for your support of the Company.

By Order of the Board of Directors,

Luke E. Alverson

Senior Vice President,

General Counsel and Secretary

July 15, 2022

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Proxy Summary

This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all the information that you should consider, and you should read the entire proxy statement carefully before voting.

Information About the Annual Meeting

Time and Place

Our Annual Meeting will be held as follows:

Time and Date

Location

Record Date

9:00 a.m., Central Time

Via live webcast at

July 8, 2022

Thursday, August 25, 2022

www.virtualshareholdermeeting.com/CSWI2022

Voting Matters

Proposal

Board's Recommendation

Page Reference

1.

Election of Directors

FOR each Director Nominee

12

2.

Advisory Vote on Executive Compensation

FOR

26

3.

Advisory Vote on Frequency of Advisory Vote on Executive Compensation

ONE YEAR (annual)

28

4.

Ratification of Auditors

FOR

62

We may also transact any other business that may properly come before the Annual Meeting. As of the date of this proxy statement, we are not aware of any other business to be presented for consideration other than the matters described in this proxy statement.

Fiscal 2022 Performance Highlights

In fiscal 2022, we continued our successful track record of exceptional performance, delivering our second consecutive year of record revenue, operating income, EBITDA, and earnings per share. It also marked our fifth consecutive year of year over year increases in revenue and EBITDA. Our stated priorities of treating our employees well, serving our customers well, and managing our supply chains effectively drove record results in growth and profitability. Fiscal 2022 revenue reached $626 million, nearly 50% growth over the prior year, and of that total growth, half resulted from organic growth, and half came from our TRUaire and Shoemaker acquisitions. Fiscal 2022 EBITDA reached $133 million, or 46% growth over fiscal 2021. These outstanding accomplishments are attributable to our

diversified business model, disciplined capital allocation, and commitment to operational excellence, which drove impressive operating leverage, despite unprecedented global disruption and turmoil.

During fiscal 2022, we executed on all aspects of our capital allocation strategy, investing $44 million with the Shoemaker acquisition in December 2021 and $16 million in capital expenditures. We returned $23.9 million of cash to our stockholders through our share repurchase program and dividends. Subsequent to fiscal year end, we increased our quarterly cash dividend by 13%, to $0.17 per share, and have remained active under our share repurchase program.

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Proxy Summary

Financial and Operational Performance

We achieved the following financial and operational results in fiscal 2022 (comparisons to fiscal 2021):

Adjusted Operating

Revenues

Adjusted EPS*

Operating

Income*

$626.4m $101.3m

+49.4% +39.6%

Adjusted EBITDA*

$133.3m

+46.0%

• Reconciliation to GAAP amounts appear on Exhibit A.

Cash Flow

$4.39 $69.1m

+30.7%+4.3%

3-Year TSR

109.3%

Revenue

(in millions)

2022

2021 $419.2

2020 $385.9

Adjusted Operating Income

(in millions)

2022 $101.3

2021 $72.5

2020 $66.2

Operating Cash Flow

(in millions)

2022 $69.1

2021 $66.2

2020 $71.4

Total Shareholder Return

	%
$626.4	150
	120			109.3%
	90
	60
	30			39.5%
			24.9%
	0
	-30
	2019	2020	2021	2022
	CSWI	RusseII 2000	Custom Peer Group

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Proxy Summary

Board of Directors Highlights (page 13)

Current Board Members

Name

Director

Age Since Occupation

		Committee Memberships
				Comp &	Nom &
Independent		Audit Talent Dev	Gov

Joseph B. Armes

Michael R. Gambrell

Bobby Griffin

Terry L. Johnston

Linda A. Livingstone,

Ph.D.

Anne B. Motsenbocker

Robert M. Swartz

(Lead Independent Director)

J. Kent Sweezey

Debra L. von Storch*

• Denotes Chair

1. 2015

1. 2015

1. 2021

1. 2017

1. 2015

1. 2022

1. 2015

1. 2016

1. 2020

Chairman, CEO and President, CSW Industrials, Inc.

Former EVP, The Dow Chemical Company

Chief Diversity, Equity & Inclusion Officer, Rockwell Automation

Former EVP and COO,

Commercial Segment, Lennox

International

President, Baylor University

Former Managing Director, J.P. Morgan Chase

Former EVP and COO, Glazer's Inc.

Founding Partner, Turnbridge Capital, LLC

Former Partner, Ernst & Young

LLP

•				•		◊
•				•		•
•		•				•
•				•		•
•		•		•
•		◊				•
•		•		◊
•				•

• As disclosed on the Form 8-K filed with the Securities and Exchange Commission on June 28, 2022, Ms. von Storch has indicated she will not stand for reelection at this Annual Meeting.

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Proxy Summary

Eight of our nine current Board members are nominated for re-election at the Annual Meeting. As shown below, our eight Director nominees strengthen our Board with their varied professional backgrounds and experiences.

2022 BOARD NOMINEE HIGHLIGHTS

	Directors
	8
Independent	Independent Director Tenure
7/8		4.4
88%	2	5
0-4 years	Average	5 or more
			years

Age

Gender

1		4
63.5	60-64	2	25%	6
59 and
under	Average		Female	Female	Male
1
70-74	2
	65-69

Director Skills

Executive Leadership									8
Finance/Accounting									5
Industry/End Market Expertise									5
Corporate Development									6
& Strategy
								8
Risk Management
Cybersecurity and Information							2
Global Business						4
Sales & Marketing					3
Corporate Governance			5
Human Capital Management				7

Governance Highlights

Our Board of Directors is committed to sound governance practices, including the following:

Board Independence

Board Composition

Board Committees

Leadership Structure

Environmental, Social & Governance Oversight

Risk Oversight

Open Communication

Stock Ownership

• Seven of our eight director nominees are independent
• Our CEO is our only management director
• All Board members are elected annually
• The Board annually assesses and evaluates its performance and the performance of its committees
• The Nominating & Corporate Governance Committee leads the full Board in considering Board competencies in light of Company strategy
• 25% of our director nominees are female
• We have three committees - Audit; Compensation & Talent Development; and Nominating & Corporate Governance
• All committees are composed entirely of independent directors
• Our Board has a lead independent director that works closely with our Chairman, CEO and President in fulfilling responsibilities and duties
• Among other duties, our lead independent director chairs executive sessions of the independent directors
• Our Nominating & Corporate Governance Committee oversees our Environmental, Social & Governance (ESG) Program
• Our Board is responsible for enterprise risk oversight and has designated committees with specific oversight of certain key risks
• Our Audit Committee oversees administration of the Company's Enterprise Risk Management (ERM) Program for the assessment and mitigation of key risks
• We encourage open communication and strong working relationships among the lead independent director, Chairman and other directors
• Our directors have direct access to management and other employees
• Our directors and executive officers are subject to robust stock ownership requirements

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Proxy Summary

Stockholder Engagement

We are actively engaged with our investors. Our senior leaders participate in numerous industry and analyst conferences throughout the year, and we have dedicated resources to engage with all stockholders through a variety of mediums. The table below summarizes our engagement efforts in fiscal 2022.

In fiscal 2022, we met with investors representing

54%

of our outstanding shares

77%

of our actively held shares

90%

of our top 20 active investors

How we engage with investors

We engage with analysts and stockholders through investor and analyst conferences, quarterly conference calls, our investor relations website, and individual meetings and calls

We regularly report our investors' views to our Board of Directors, and all of our Board committees consider these views in conducting committee business

Topics regularly discussed with investors

• Capital allocation
• Strategy and risk management
• Macro trends and long term outlook
• Financial performance
• Segment performance
• ESG and sustainability matters
• Corporate governance
• Executive compensation
• Senior leadership team

Executive Compensation Highlights (page 30)

Executive Compensation Program Objectives and Elements

The Compensation Committee has designed our executive compensation program to support CSWI's growth strategy. Our key executive compensation objectives are:

Align Long-Term	Reward Current	Drive Future	Attract and Retain
Executive and	Performance	Performance	Key Leaders
Stockholder Interests

In furtherance of these objectives, the Compensation Committee maintains a thoughtful approach to our executive compensation program design and governance practices. The following table summarizes these practices.

What We Do

Promote a strong pay for performance plan design

Regularly benchmark executive compensation against peers of comparable size, complexity, and industry

Maintain meaningful stock ownership guidelines for our directors and executive officers

Have double trigger requirements for cash payments following a change in control

Conduct an annual compensation risk review

Provide reasonable and standardized benefits upon severance or change in control

Engage an independent compensation consultant

What We Don't Do

No hedging, pledging, or short sales of stock permitted

No change in control excise tax gross-ups

No option repricing without stockholder approval

No perquisites offered, other than those generally provided to all employees

No dividends paid and no voting rights on unvested performance-based equity awards

No duplication of metrics in annual and long-term incentive plans

No supplemental executive retirement plans

Maintain an incentive compensation "clawback" policy

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Proxy Summary

Our executive compensation program is based on the following foundational elements:

Element		Form		Compensation Objective Addressed
Base Salary		Cash			Reward Current Performance
						Attract and Retain
Annual Incentive		Performance Cash Award			Stockholder Alignment
						Reward Current Performance
						Attract and Retain
Long-Term Equity Incentive		Performance Shares			Stockholder Alignment
						Drive Future Performance
						Attract and Retain
		Restricted Stock			Stockholder Alignment
						Drive Future Performance
						Attract and Retain

Fiscal 2022 Executive Total Target Compensation Mix

CEO Compensation Mix

	18.9%
	Salary
	81.1%
56.6%	At-Risk
24.5%
Equity Incentives
	Annual Incentives

Other NEO Compensation Mix
	31.1%
	Salary
47.5%	68.9%
Equity Incentives	At-Risk
	21.4%
	Annual Incentives

| 2022 Proxy Statement

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