UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): November 7, 2016
CAPITAL SOUTHWEST CORPORATION
(Exact Name Of Registrant As Specified In Charter)
|
Texas |
814-00061 |
75-1072796 |
|
(State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
5400 Lyndon B. Johnson Freeway, Suite 1300
Dallas, Texas 75240
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including area code: (214) 238-5700
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
|
|
☐ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|
|
☐ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
|
|
|
☐ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
|
|
☐ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 Results of Operations and Financial Condition.
On November 7, 2016, Capital Southwest Corporation (the “Company”) issued a press release, a copy of which has been furnished as Exhibit 99.1 hereto.
The information furnished in this Current Report on Form 8-K under Item 2.02, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1934, except as shall be expressly set forth by reference in a future filing.
Item 7.01 Regulation FD Disclosure.
The Company expects to hold a conference call with analysts and investors on November 8, 2016. A copy of the investor presentation slides to be used by the Company on such conference call is furnished as Exhibit 99.2 to this Form 8-K and incorporated herein by reference.
The information set forth under this Item 7.01, including Exhibit 99.2, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
|
Exhibit No. |
|
Description |
|
99.1 |
|
Press release issued by Capital Southwest Corporation on November 7, 2016 |
|
99.2 |
|
Investor presentation slides |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: November 7, 2016
|
|
By: |
/s/ Bowen S. Diehl |
|
|
|
Name: Bowen S. Diehl |
|
|
|
Title: Chief Executive Officer and President |
EXHIBIT INDEX
|
Exhibit No. |
|
Description |
|
|
Press release issued by Capital Southwest Corporation on November 7, 2016 |
|
|
|
Investor presentation slides |
Exhibit 99.1
|
|
Lincoln Centre Tower I 5400 Lyndon B. Johnson Freeway, Suite 1300 Dallas, Texas 75240 T 214.238.5700 F 214.238.5701 |
Capital Southwest Announces Financial Results for Second Fiscal Quarter Ended September 30, 2016
CSWC Grows Pre-Tax Net Investment Income to $0.11 Per Share
Dallas, Texas – November 7, 2016 – Capital Southwest Corporation (“Capital Southwest” or the “Company”; Nasdaq: CSWC) today announced its financial results for the second fiscal quarter ended September 30, 2016.
Second Quarter Fiscal Year 2017 Financial Highlights
|
· |
Total Investment Portfolio: $238.3 million |
|
o |
Total Credit Portfolio: $137.6 million |
|
o |
$55 MM in new credit investments originated during the quarter |
|
o |
Total CSWC investment in I-45 SLF: $50.5 million |
|
ü |
I-45 SLF portfolio increased to $172.5 million from $134.5 million during the quarter |
|
ü |
I-45 SLF portfolio consists of 36 credits; 98% 1st Lien Debt and 2% 2nd Lien Debt |
|
o |
Total Equity Portfolio, excluding investment in I-45 SLF: $50.2 million |
|
· |
Pre-Tax Net Investment Income of $1.8 million, or $0.11 per weighted average diluted share |
|
· |
Dividends paid: $0.11 per share |
|
· |
Total Cash: $57.8 million |
|
· |
Net Realized and Unrealized Portfolio Appreciation: $5.6 million |
|
· |
Total Net Assets: $278.9 million |
|
· |
Net Asset Value per Share: $17.74 |
|
· |
Weighted Average Yield on Debt Investments: 10.00% |
|
· |
One legacy investment asset currently on non-accrual with fair value of $2.5 million, representing 1.8% of the total credit portfolio |
In commenting on the Company's results, Bowen Diehl, President and Chief Executive Officer, stated, “This quarter, we experienced robust origination volume across both the Upper and Lower Middle Markets. We closed on approximately 2% of the opportunities we reviewed resulting in $55 million invested in six new and three existing portfolio companies. With our new ING led balance sheet credit facility, the additional capacity on our I-45 credit facility and our cash on hand, we are well positioned to continue to thoughtfully grow our credit portfolio.”
Portfolio and Investment Activities
During the quarter ended September 30, 2016, the Company originated six new on-balance sheet credit investments totaling $48.3 million and made follow-on investments in three existing credit investments totaling $6.5 million. The Company also grew the I-45 SLF investment portfolio to $172.5 million from $134.5 million. The Company received proceeds related to scheduled repayments of certain debt securities totaling $1.0 million. New investment and follow-on investment transactions which occurred during the quarter ended September 30, 2016 are summarized as follows:
New Investments:
Amware Fulfillment, LLC, $13.4 million 1st Lien Senior Secured Debt: Amware provides logistics fulfillment services for business-to-consumer, business-to-business, and multi-channel verticals.
AG Kings Holdings, Inc., $10.0 million 1st Lien Senior Secured Debt (Last-Out Unitranche): AG Kings is a leading regional specialty food retailer under two regionally recognized banners, Kings Foods markets and Balducci’s.
California Pizza Kitchen, Inc., $5.0 million 1st Lien Senior Secured Debt: California Pizza Kitchen is a polished-casual restaurant concept with 273 locations (192 Company-operated; 81 franchised) in 218 cities in 14 countries.
Redbox Automated Retail, LLC, $10.0 million 1st Lien Senior Secured Debt: Redbox delivers affordable and convenient new entertainment through a network of approximately 40,000 kiosks across every U.S. state where consumers can rent or purchase standard definition DVD movies, Blu-ray movies and video games.
Dunn Paper, Inc., $3.0 million 2nd Lien Senior Secured Debt: Dunn Paper is a supplier of high performance, specialty paper materials customized for a range of lightweight food packaging, hygiene, and consumer applications.
Premiere Global Services, Inc., $6.9 million 1st Lien Senior Secured Debt: Premiere Global is a leading global provider of audio conferencing solutions and SaaS‐based web and video collaboration solutions to large global companies, mid‐sized companies, and SMBs.
Follow-on Investments:
Imagine! Print Solutions, $0.9 million 1st Lien Senior Secured Debt: Imagine! is the leading provider of in-store marketing solutions in North America.
InfoGroup Inc., $3.2 million 1st Lien Senior Secured Debt: InfoGroup helps companies increase sales and customer loyalty through its high value data and innovative multi-channel digital and offline marketing solutions.
Digital River Inc., $2.4 million 1st Lien Senior Secured Debt: Digital River is a leading provider of mission-critical, end-to-end outsourced e-commerce solutions to tier 1 and tier 2 enterprises across many industry verticals.
Subsequent to quarter end, the Company originated one new senior secured debt investment totaling $8.0 million in Lighting Retrofit International and received a full prepayment on its investment in Vivid Seats in the amount of $6.9 million, recognizing a realized gain of $0.5 million and an IRR of 21.5%.
Second Fiscal Quarter 2017 Operating Results
For the quarter ended September 30, 2016, Capital Southwest reported total investment income of $4.7 million, compared to $4.2 million in the prior quarter. The increase in investment income was attributable to both an increase in average debt investments outstanding and dividends paid from I-45 SLF.
For the quarter ended September 30, 2016, total expenses (excluding tax expense) were $2.9 million, compared to $3.2 million in the prior quarter. The decrease in expenses was primarily due to the legal and accounting fees incurred in connection with the 2016 audit during the quarter ended June 30, 2016.
For the quarter ended September 30, 2016, total pre-tax net investment income was $1.8 million compared to $0.9 million in the prior quarter.
For the quarter ended September 30, 2016, there was a tax expense of $0.4 million recorded compared to $0.5 million in the prior quarter.
During the quarter ended September 30, 2016, Capital Southwest recorded realized and unrealized gains on investments of $5.6 million. The net increase in net assets resulting from operations was $6.9 million, compared to $2.7 million in the prior quarter.
The company’s net asset value, or NAV, at September 30, 2016 was $17.74 per share, as compared to $17.39 at June 30, 2016. The increase in NAV was primarily due to an increase in net realized and unrealized gains in the current quarter.
Liquidity and Capital Resources
At September 30, 2016, Capital Southwest had unrestricted cash and money market balances of approximately $57.8 million, total assets of approximately $307.3 million, and net assets of approximately $278.9 million. During the current period, the Company entered into a credit facility to provide additional liquidity to support its investment and operational activities. The facility includes total commitments of $100.0 million from a diversified group of five lenders and is scheduled to mature on August 30, 2020. As of September 30, 2016, Capital Southwest had no borrowings outstanding.
During the quarter, I-45 SLF increased the total commitments outstanding on its credit facility to $145.0 million from $100.0 million. I-45 SLF had $88.0 million in borrowings outstanding as of September 30, 2016.
Share Repurchase Program
On January 25, 2016, Capital Southwest announced that its Board of Directors authorized the repurchase of up to $10 million of its common stock at prices below the Company’s net asset value per share as reported in its most recent financial statements. The Board authorized the plan because it believes that the Company’s common stock may be undervalued from time to time due to market volatility. As of September 30, 2016, no shares have been purchased under the plan.
Second Fiscal Quarter 2017 Financial Results Conference Call and Webcast
Capital Southwest has scheduled a conference call on Tuesday, November 8, 2016, at 11:00 a.m. Eastern Time to discuss the first second quarter 2017 financial results. You may access the call by dialing 1-855-835-4076 and using the passcode 9960163 at least 10 minutes before the call. The call can also be accessed using the Investor Relations section of Capital Southwest's website at www.capitalsouthwest.com, or by using http://edge.media-server.com/m/p/kk87uia4.
A telephonic replay will be available through November 15, 2016 by dialing 1-855-859-2056 and using the passcode 99960163. An audio archive of the conference call will also be available on the Investor Relations section of Capital Southwest’s website.
For a more detailed discussion of the financial and other information included in this press release, please refer to the Capital Southwest Form 10-Q for the period ended September 30, 2016 to be filed with the Securities and Exchange Commission and Capital Southwest’s First Fiscal Quarter 2017 Earnings Presentation to be posted on the Investor Relations section of Capital Southwest’s website at www.capitalsouthwest.com.
About Capital Southwest
Capital Southwest Corporation (Nasdaq: CSWC) is a Dallas, Texas-based publicly traded business development company, with approximately $278.9 million in net assets as of September 30, 2016. On September 30, 2015, Capital Southwest completed the spin-off to shareholders of its industrial businesses, CSW Industrials, Inc. Capital Southwest is a middle market lending firm focused on supporting the acquisition and growth of middle market businesses with $5 to $20 million investments across the capital structure, including first lien, unitranche, second lien and subordinated debt, as well as non-control equity co-investments. Since Capital Southwest's formation in 1961, it has always sought to invest in companies with strong management teams and sound financial performance. As a public company with a permanent capital base, Capital Southwest is fortunate to have the flexibility to be creative in its financing solutions and to invest to support the growth of its portfolio companies over long periods of time.
Forward-Looking Statements
This press release contains historical information and forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995 with respect to the business and investments of Capital Southwest. Forward-looking statements are statements that are not historical statements and can often be identified by words such as “will,” “believe,” “expect” and similar expressions, and variations or negatives of these words. These statements are based on management's current expectations, assumptions and beliefs. They are not guarantees of future results and are subject to numerous risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed in any forward-looking statement. These risks include risks related to changes in the markets in which Capital Southwest invests, changes in the financial and lending markets and general economic and business conditions.
Readers should not place undue reliance on any forward-looking statements and are encouraged to review Capital Southwest's Annual Report on Form 10-K for the year ended March 31, 2016 and subsequent fillings with the Securities and Exchange Commission for a more complete discussion of the risks and other factors that could affect any forward-looking statements. Except as required by the federal securities laws, Capital Southwest does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changing circumstances or any other reason after the date of this press release.
Investor Relations Contacts:
Michael S. Sarner, Chief Financial Officer
214-884-3829
Exhibit 99.2
|
|
Capital Southwest Corporation Q2 2017 Earnings Presentation November 8, 2016 5400 Lyndon B. Johnson Freeway, Suite 1300 | Dallas, Texas 75240 | 214.238.5700 | capitalsouthwest.com |
|
|
Forward-Looking Statements • This presentation contains forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995 relating to, among other things the business, financial condition and results of operations of Capital Southwest, the anticipated investment strategies and investments of Capital Southwest, and future market demand. Any statements preceded or followed by or that include the words "believe," "expect," "intend," "plan," "should" or similar words, phrases or expressions or the negative thereof, or any other statements that are not historical statements are forward-looking statements. These statements are made on the basis of the current beliefs, expectations and assumptions of the management of Capital Southwest. There are a number of risks and uncertainties that could cause Capital Southwest’s actual results to differ materially from the forward-looking statements included in this presentation. • In light of these risks, uncertainties, assumptions, and other factors inherent in forward-looking statements, actual results may differ materially from those discussed in this presentation. Other unknown or unpredictable factors could also have a material adverse effect on Capital Southwest’s actual future results, performance, or achievements. For a further discussion of these and other risks and uncertainties applicable to Capital Southwest and its business, see Capital Southwest’s Annual Report on Form 10-K for the fiscal year ended March 31, 2016 and its subsequent filings with the Securities and Exchange Commission. As a result of the foregoing, readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this presentation. Capital Southwest does not assume any obligation revise or to update these forward-looking statements to reflect any new information, subsequent events or circumstances, or otherwise, except as may be required by law. Page 2 |
|
|
Conference Call Participants Bowen S. Diehl President and Chief Executive Officer Michael S. Sarner Chief Financial Officer Chris Rehberger VP Finance / Treasurer Page 3 |
|
|
CSWC Company Overview CSWC has refocused its investment strategy to become a lender to middle-market companies across the capital structure • • • • CSWC was formed in 1961, and became a BDC in 1988 Publicly-traded on Nasdaq under CSWC ticker Internally-managed BDC with RIC status for tax purposes In December 2014, announced split into two separate companies with spin-off of industrial growth company (“CSW Industrials”; Nasdaq: CSWI) which was completed September 30th, 2015 16 employees based in Dallas, Texas Total Assets of $307 MM as of September 30th, 2016 CSWC has made significant strides towards rotating its investment portfolio from equity to credit • • • Page 4 |
|
|
CSWC Corporate Strategy • Building a BDC that pays shareholders attractive and sustainable dividends by establishing: • • • • • A portfolio of investments balanced between liquid and illiquid asset classes A portfolio of predominantly cash generating loans An investment discipline focused on granularity and diversity across asset classes Consistent NAV per share growth through selective equity co-investments A match of fixed and floating rates with financing sources • Maintaining a shareholder friendly Internally Managed structure which: • • • Aligns management incentives with long term sustainable shareholder value creation Incurs lower operating expenses versus the Externally Managed Structure Historically has rewarded performing Internally Managed BDCs with price to book premiums of 0.5x versus Externally Managed peers • Continuing to execute on our I-45 SLF joint venture with Main Street which: • • • • Enhances CSWC origination capabilities in the middle market Grows recurring cash income by investing in a pool of granular and diversified larger middle market first lien loans Allows an appropriate 2:1 leverage, given the asset class, while remaining outside BDC regulatory leverage Cultivates relationships with financial institutions within the Senior Loan Fund credit facility • Pursuing an SBIC License and participation in the Debenture Program to further capitalize our smaller lower middle market investment strategy Page 5 |
|
|
Portfolio Rotation Focused on Credit • Since June 2014, CSWC has transformed its investment portfolio increasing income earning assets from 1% of the investable portfolio to 75% o Exited 22 legacy portfolio equity investments, generating $229 MM in proceeds o Invested $151 MM in 25 middle-market credit investments on balance sheet o Invested $186 MM in 40 credits within I-45 Senior Loan Fund (“I-45”) 1% of Total Assets Generating Recurring Income Debt Assets, 1% 75% of Total Assets Generating Recurring Income Yielding Equity Assets, 12% Cash, 23% Cash, 20% Non-Yielding Assets, 6% I-45, 17% Non-Yielding Assets, 77% Debt Assets, 46% Page 6 9/30/2016 Investable Assets 6/30/2014 (excl. CSWI Companies) |
|
|
Two Pronged Investment Strategy L o w e r M i d d l e M a r ke t ( “ L M M ” ) : CSWC led or Club Deals • • • • • • Companies with EBITDA greater than $3 MM Typically leverage of 2x – 4x Debt to EBITDA through CSWC debt Commitment size up to $20 million with hold sizes of $5 MM to $15 MM Originate both Sponsored and Non-sponsored debt investments Securities include first lien, unitranche, second lien and subordinated debt Non-control equity co-investments alongside debt investments U p p e r M i d d l e M a r ke t ( “ U M M ” ) : Syndicated or Club First and Second Lien • • • • • • Companies typically have in excess of $50 MM in EBITDA Typically leverage of 3x – 5.5x Debt to EBITDA through CSWC debt position Hold sizes of $5 MM to $10 MM Floating Rate First and Second Lien debt securities More liquid assets relative to Lower Middle Market investments Provides flexibility to invest/divest opportunistically based on market conditions and liquidity position Page 7 |
|
|
Q2 2017 Highlights Financial Highlights • Q2 2017 Pre-Tax Net Investment Income of $1.8 MM or $0.11 per weighted average diluted share Paid quarterly dividend of $0.11 per share Closed $100 MM ING led Credit Facility with five bank syndicate • 4 year facility with cost of funding of L + 325 • Includes accordion up to $150 MM Increased Investment Portfolio to $238 MM from $176 MM o $54 MM in net investments added during the quarter Increased I-45 Senior Loan Fund investment portfolio to $173 MM from $134 MM o Increased Deutsche Bank led Credit Facility commitments to $145 MM from $100 MM by adding two new syndicate banks o I-45 distributed $1.3 MM dividend to CSWC during the quarter $58 MM in cash available for investment activity as of quarter end • • • • • Page 8 |
|
|
Financial Highlights Page 9 Quarter Ended 12/31/2015 Quarter Ended 3/31/2016 Quarter Ended 6/30/2016 Quarter Ended 9/30/2016 Financial Highlights Pre-Tax Net Investment Income Per Wtd Avg Diluted Share Pre-Tax Net Investment Income Return on Equity (ROE) Dividends Per Share Earnings Per Wtd Avg Diluted Share Earnings Return on Equity (ROE) NAV Per Share Cash & Cash Equivalents Debt to Equity ($0.04) -0.92% $0.00 ($0.07) -1.67% $17.22 $143,680 0.0x $0.04 1.03% $0.04 $0.16 3.67% $17.34 $95,969 0.0x $0.06 1.34% $0.06 $0.17 3.93% $17.39 $96,957 0.0x $0.11 2.54% $0.11 $0.44 9.87% $17.74 $57,840 0.0x |
|
|
Q2 2017 Portfolio Originations Strong portfolio growth with $55 MM in new investments originated in Q2 2017 at a weighted average YTM of 9.8% Note: Market Segment refers to Upper Middle Market (“UMM”) and Lower Middle Market (“LMM”) Page 10 Portfolio Originations - Since Quarter End NameIndustryTypeMarketPar ValueCoupon Lighting Retrofit InternationalEnvironmental Services1st LienLMM$8,000L + 9.75% (0.5% floor)10.9% Total$8,000 Q2 2017 Portfolio Originations NameIndustryTypeMarket SegmentPar ValueCouponYield to Maturity Infogroup Software & IT Services 1st Lien UMM $3,204 L + 5.5% (1.5% Floor) 8.3% Imagine! Print Solutions Media, Marketing, & Entertainment 1st Lien UMM $900 L + 6.0% (1.0% Floor) 7.3% Amware Fulfillment, LLC Transportation & Logistics 1st Lien LMM $13,400 L + 9.5% (1.0% Floor) 11.3% Digital River Software & IT Services 1st Lien UMM $2,400 L + 6.5% (1.0% Floor) 7.5% AG Kings Food, Agriculture & Beverage 1st Lien UMM $10,000 L + 9.0% (1.0% Floor) 11.6% California Pizza Kitchen Restaurants 1st Lien UMM $5,000 L + 6.0% (1.0% Floor) 7.2% Dunn Paper Paper & Forest Products 2nd Lien UMM $3,000 L + 8.75% (1.0% Floor) 10.1% American Teleconferencing Telecommunications 1st Lien UMM $6,911 L + 6.5% (1.0% Floor) 8.2% Redbox Gaming & Leisure 1st Lien UMM $10,000 L + 7.5% (1.0% Floor) 9.3% Total$54,8159.8% |
|
|
Portfolio Statistics Continuing to demonstrate quarter over quarter credit portfolio growth 1 CSWC’s $2.5 MM sub debt investment (legacy 2012 funding) in Titan Liner is currently in the process of being restructured, with CSWC likely taking a controlling position in the company. 2 CSWC utilizes an internal 1 - 4 investment rating system in which 1 represents material outperformance and 4 represents material underperformance. All new investments are initially set to 2. 3 Excludes CSWC equity investment in I-45 Senior Loan Fund. Page 11 Quarter Ended 12/31/2015 Quarter Ended 3/31/2016 Quarter Ended 6/30/2016 Quarter Ended 9/30/2016 Portfolio Statistics Fair Value of Debt Investments Average Debt Investment Hold Size Fair Value of Debt Investments as a % of Cost % of Debt Portfolio on Non-Accrual (at Fair Value) 1 Weighted Average Investment Rating2 Weighted Average Yield on Debt Investments Total Fair Value of Portfolio Investments Weighted Average Yield on all Portfolio Investments Investment Mix (Debt vs. Equity) 3 Investment Mix (Yielding vs. Non-Yielding) $60,929 $5,077 100% 0.0% 2.0 10.31% $134,935 10.82% 57% / 43% 89% / 11% $92,832 $5,157 99% 0.0% 2.0 10.67% $178,436 9.46% 65% / 35% 90% / 10% $83,730 $4,925 99% 0.0% 1.9 10.08% $175,915 9.35% 62% / 38% 90% / 10% $137,586 $5,982 100% 1.8% 1.9 10.00% $238,319 9.13% 73% / 27% 94% / 6% |
|
|
Portfolio Mix as of 9/30/2016 at Fair Value Current Portfolio of $238 MM continues to be granular, diverse, and focused on income generating securities Current Investment Portfolio (By Type) Current Investment Portfolio (By Industry) Non-Yielding Equity 6% Consumer Services 2% Financial Services 2% Specialty Chemicals 1% Healthcare Services 4% Software & IT Services 6% Multi-Sector Holdings (I-45) 25% Yielding Equity 15% 1st Lien 36% Distribution 10% I-45 Senior Loan Fund 21% Healthcare Products 2% Industrial Products 21% Energy Services (Upstream) 6% Consumer Products and 2nd Lien 16% Retail 6% Senior Subordinated Debt 6% Business Services 7% Media, Marketing, & Entertainment 8% Page 12 |
|
|
I-45 Senior Loan Fund Portfolio Current I-45 Portfolio (By Type) Current I-45 Portfolio (By Industry) CSWC invested $8 MM additional equity to fund I-45 portfolio growth to $173 MM 1st Lien 98% 2nd Lien 2% 13% 11% 10% 9% 8% 7% 6% 5% 4% 4% 4% 3% 3% 3% 3% 3% 3% 1% Q3 2016 Q4 2016 Q1 2017 Q2 2017 Total Debt Investments at Fair Value $82,036 $99,214 $134,470 $172,519 Number of Issuers 19 24 31 36 Avg. Investment Size as a % of Portfolio 5.26% 4.17% 3.23% 2.78% Wtd. Avg. I-45 Leverage on Investments 3.3x 3.3x 3.7x 3.6x Wtd. Avg. Yield to Maturity 7.59% 7.85% 8.36% 8.36% Wtd. Avg. Duration (Yrs) 4.5 4.2 4.2 4.4 I-45 Portfolio Statistics |
|
|
Balance Sheet Highlights Page 14 (In Thousands, except per share amounts) Quarter Ended 12/31/2015 Quarter Ended 3/31/2016 Quarter Ended 6/30/2016 Quarter Ended 9/30/2016 Assets Portfolio Investments Cash & Cash Equivalents Deferred Tax Asset Other Assets $134,935 $143,680 $1,544 $6,421 $178,436 $95,969 $2,342 $7,746 $175,915 $96,957 $1,874 $6,110 $238,319 $57,840 $1,940 $9,176 Total Assets $286,580 $284,493 $280,856 $307,275 Liabilities Payable for Unsettled Transaction Income Tax Payable Other Liabilities $4,850 $2,948 $7,997 $3,940 $0 $7,918 $0 $601 $6,971 $19,361 $733 $8,252 Total Liabilities $15,795 $11,858 $7,572 $28,346 Shareholders Equity Net Asset Value NAV per Share $270,785 $17.22 $272,635 $17.34 $273,284 $17.39 $278,929 $17.74 Debt to Equity Shares Outstanding at Period End 0.0x 15,725 0.0x 15,726 0.0x 15,718 0.0x 15,727 |
|
|
Income Statement Highlights Page 15 (In Thousands, except per share amounts) Quarter Ended 12/31/15 Quarter Ended 3/31/16 Quarter Ended 6/30/16 Quarter Ended 9/30/16 Investment Income Interest Income Dividend Income Fees and Other Income $1,415 $1,612 $280 $2,110 $1,578 $123 $2,292 $1,769 $96 $2,630 $1,995 $101 Total Investment Income $3,307 $3,811 $4,157 $4,726 Expenses Cash Compensation Share Based Compensation General & Administrative Spin-off Related Expenses $1,675 $195 $1,354 $710 $1,403 $257 $1,192 $251 $1,484 $239 $1,344 $172 $1,404 $255 $1,118 $172 Total Expenses Pre-Tax Net Investment Income / (Loss) $3,934 ($627) $3,103 $708 $3,239 $918 $2,949 $1,777 Taxes and Gain / (Loss) Income Tax Benefit (Expense) Net realized gain (loss) on investments Net increase (decrease) in unrealized appreciation of investments $607 ($8,170) $7,060 $788 $12 $1,001 ($547) $199 $2,127 ($412) $3,527 $2,026 Net increase (decrease) in net assets resulting from operations ($1,130) $2,509 $2,697 $6,918 Weighted Average Shares Outstanding Pre-Tax Net Investment Income Per Weighted Average Share Dividends Per Share 15,751 ($0.04) $0.00 15,795 $0.04 $0.04 15,791 $0.06 $0.06 15,806 $0.11 $0.11 |
|
|
Investment Income Detail Constructing a portfolio of investments with recurring cash yield Page 16 (In Thousands) Quarter Ended 12/31/2015 Quarter Ended 3/31/2016 Quarter Ended 6/30/2016 Quarter Ended 9/30/16 Investment Income Breakdown Cash Interest Cash Dividends Management Fees Amortization of purchase discounts and fees Other Income (non-recurring) $1,392 $1,612 $275 $23 $5 $2,063 $1,578 $115 $47 $8 $2,216 $1,769 $95 $76 $1 $2,535 $1,995 $95 $100 $1 Total Investment Income $3,307 $3,811 $4,157 $4,726 Key Metrics Cash Income as a % of Investment Income % of Total Investment Income that is Recurring 99.3% 99.8% 98.8% 99.8% 98.2% 100.0% 97.9% 100.0% |
|
|
Interest Rate Sensitivity Debt Portfolio Well-Positioned for Changes to Base Interest Rates Yielding Debt Portfolio Composition Fixed 9% Floating 91% Note: Illustrative change in NII is based on a projection of our existing debt investments as of 9/30/16, adjusted only for changes in Base Rates. The results of this analysis include the I-45 Senior Loan Fund, which is comprised of 100% floating rate assets and liabilities. Page 17 IllustrativeIllustrative Change in Base Interest RatesNII Change ($'s)NII Change (Per Share) (50bps)$275,074$0.02 50 bps$573,270$0.04 100bps$1,505,025$0.10 150bps$2,456,143$0.16 200bps$3,407,261$0.22 |
|
|
Corporate Information Dallas, TX Capital Southwest Page 18 Securities Listing NASDAQ: CSWC Transfer Agent American Stock Transfer & Trust Company, LLC 800-937-5449 www.amstock.com Corporate Offices & Website 5400 LBJ Freeway 13th Floor Dallas, TX 75240 http://www.capitalsouthwest.com Investor Relations Michael S. Sarner 214-884-3829 msarner@capitalsouthwest.com Corporate Counsel Thompson & Knight / Jones Day Dallas, TX Independent Auditor Grant Thornton Fiscal Year End March 31 Senior Management Bowen S. Diehl President & Chief Executive Officer Michael S. Sarner Chief Financial Officer, Secretary & Treasurer Board of Directors Inside Directors Joseph B. Armes Bowen S. Diehl Independent Directors John H. Wilson William R. Thomas T. Duane Morgan David R. Brooks Jack D. Furst |
