Texas
|
814-00061
|
75-1072796
|
(State or Other Jurisdiction of Incorporation)
|
(Commission File Number)
|
(IRS Employer Identification No.)
|
☐
|
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 2.01
|
Completion of Acquisition or Disposition of Assets
|
Item 5.02
|
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
|
Item 9.01
|
Financial Statements and Exhibits
|
Exhibit No.
|
Description
|
10.1
|
Amended and Restated Employee Matters Agreement, dated September 14, 2015 between Capital Southwest Corporation and CSW Industrials, Inc. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on September 14, 2015)
|
99.1
|
Unaudited pro forma consolidated financial information
|
By:
|
/s/ Bowen S. Diehl
|
||
Name:
|
Bowen S. Diehl
|
||
Title:
|
Chief Executive Officer and President
|
Exhibit No.
|
Description
|
10.1
|
Amended and Restated Employee Matters Agreement, dated September 14, 2015 between Capital Southwest Corporation and CSW Industrials, Inc. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on September 14, 2015)
|
Unaudited pro forma consolidated financial information
|
Historical
|
CSWI
Transaction
Adjustments
|
Pro Forma
|
||||||||||
Assets
|
||||||||||||
Investments at market or fair value
|
||||||||||||
Companies more than 25% owned
|
$
|
495,653
|
$
|
(465,320
|
)1
|
$
|
30,333
|
|||||
Companies 5% to 25% owned
|
5,961
|
-
|
5,961
|
|||||||||
Companies less than 5% owned
|
45,791
|
-
|
45,791
|
|||||||||
Total investments
|
547,405
|
(465,320
|
)
|
82,085
|
||||||||
Cash and cash equivalents
|
212,623
|
(15,055
|
)2
|
197,568
|
||||||||
Receivables
|
||||||||||||
Dividends and interest
|
95
|
-
|
95
|
|||||||||
Other
|
4,176
|
-
|
4,176
|
|||||||||
Income tax receivable
|
684
|
-
|
684
|
|||||||||
Deferred income tax assets
|
-
|
1,488
|
3
|
1,488
|
||||||||
Net pension assets
|
10,412
|
(10,412
|
)4
|
-
|
||||||||
Other assets
|
742
|
-
|
742
|
|||||||||
Total assets
|
$
|
776,137
|
$
|
(489,299
|
)
|
$
|
286,838
|
|||||
Liabilities
|
||||||||||||
Other liabilities*
|
$
|
2,212
|
$
|
2,549
|
5
|
$
|
4,761
|
|||||
Accrued restoration plan liability
|
3,109
|
(65
|
)6
|
3,044
|
||||||||
Deferred income tax liabilities
|
2,030
|
(2,030
|
)3
|
-
|
||||||||
Total liabilities
|
7,351
|
454
|
7,805
|
|||||||||
Net Assets
|
||||||||||||
Common stock, $0.25 par value: authorized, 25,000,000 shares; issued, 17,922,844 shares at June 30, 2015
|
4,481
|
-
|
4,481
|
|||||||||
Additional capital
|
299,079
|
(26,396
|
)7
|
272,683
|
||||||||
Accumulated net investment loss
|
(8,762
|
)
|
(5,018
|
) 2 5
|
(13,780
|
)
|
||||||
Accumulated net realized gain
|
23,104
|
-
|
23,104
|
|||||||||
Unrealized appreciation of investments
|
474,821
|
(458,339
|
)1
|
16,482
|
||||||||
Treasury stock - at cost, 2,339,512 shares
|
(23,937
|
)
|
-
|
(23,937
|
)
|
|||||||
Total net assets
|
768,786
|
(489,753
|
)
|
279,033
|
||||||||
Total liabilities and net assets
|
$
|
776,137
|
$
|
(489,299
|
)
|
$
|
286,838
|
|||||
Net asset value per share (15,583,332 shares outstanding at June 30, 2015)
|
$
|
49.33
|
$
|
31.43
|
$
|
17.90
|
(1) | Represents the elimination the fair market value of the CSWI Businesses as of June 30, 2015 as if the Share Distribution took place on June 30, 2015. The elimination of the combined fair market value of these entities was $465,320,000 at June 30, 2015, which includes a cost basis of $6,981,139 and an unrealized gain of $458,338,861. |
(2) | Represents cash adjustments as if the Share Distribution took place on June 30, 2015. These adjustments include (a) the contribution of $13,000,000 of cash from the Company to CSWI; and (b) the estimated additional spin-off professional fees of $2,054,527 incurred between June 30, 2015 and September 30, 2015, which reduce net investment income. |
(3) | Represents adjustments for deferred income tax assets and liabilities (assuming a tax rate of 35%) due to changes in temporary differences, which included (a) CSWI’s assumption of CSWC’s Qualified Retirement Plan, which resulted in a deferred tax asset of $3,644,215; (b) CSWI’s assumption of its transferred employees’ Restoration Plan, which resulted in a deferred tax liability of $22,695; (c) CSWI’s assumption of its transferred employees’ individual incentive award liabilities, which resulted in a deferred tax liability of $108,875; (d) one-third of the cash component of the Executive Compensation Plan liabilities, which resulted in a deferred tax asset of $158,589; and (e) CSWI’s assumption of a CSWC insurance program, which resulted in a deferred tax liability of $153,012. |
(4) | Represents CSWI’s assumption of CSWC’s Qualified Retirement Plan, which resulted in a transfer of $10,412,043 of net pension assets from the Company to CSWI. |
(5) | Represents accrued liabilities adjustments as if the Share Distribution took place on June 30, 2015, which included (a) $2,406,744 of financial advisory fees; (b) one-third of the cash component of the Executive Compensation Plan estimated to be $453,110 based on a stock price of $46.87 per share; and (c) CSWI’s assumption of its transferred employees’ individual incentive award liabilities of $311,071. Accrued liabilities adjustments (a) and (b) also reduce net investment income. |
(6) | Represents CSWI’s assumption of its transferred employees’ Restoration Plan liabilities of $64,843. |
(7) | Represents additional capital adjustments as if the Share Distribution took place on June 30, 2015, which included (a) the contribution of $13,000,000 of cash from the Company to CSWI; (b) CSWI’s assumption of CSWC’s Qualified Retirement Plan, net of a deferred tax impact of 35%, estimated to be $6,767,828; (c) the investment cost of the CSWI Businesses at $6,981,139, offset by (d) CSWI’s assumption of its transferred employees’ Restoration Plan liabilities, net of a deferred tax impact of 35%, estimated to be $42,148, and CSWI’s assumption of its transferred employees’ individual incentive award liabilities of $311,071. |
*
|
The actual cash outlay and stock based compensation expense for the Executive Compensation Plan may differ from our projections. The actual cash component and stock based compensation expense will be computed based on the actual weighted average share price of both of the Company's stock and the CSWI's stock for the last 20 trading days of December 2015.
|
Historical
|
CSWI
Transaction
Adjustments
|
Pro Forma
|
||||||||||
Investment income:
|
||||||||||||
Interest
|
$
|
459
|
$
|
-
|
$
|
459
|
||||||
Dividends
|
300
|
(300
|
)1
|
-
|
||||||||
Management fees and other income
|
205
|
(120
|
)1
|
85
|
||||||||
964
|
(420
|
)
|
544
|
|||||||||
Operating expenses:
|
||||||||||||
Cash-based compensation expense*
|
1,212
|
(78
|
)2
|
1,134
|
||||||||
Share-based compensation expense*
|
359
|
(229
|
)3 |
130
|
||||||||
Net pension benefit
|
(70
|
)
|
-
|
(70
|
)
|
|||||||
Professional fees
|
1,538
|
(1,238
|
)4
|
300
|
||||||||
Other operating expenses
|
725
|
(55
|
)5
|
670
|
||||||||
3,764
|
(1,600
|
)
|
2,164
|
|||||||||
Loss before income taxes
|
(2,800
|
)
|
1,180
|
(1,620
|
)
|
|||||||
Income tax expense
|
30
|
-
|
30
|
|||||||||
Net investment loss
|
$
|
(2,830
|
)
|
$
|
1,180
|
$
|
(1,650
|
)
|
||||
Proceeds from disposition of investments
|
7,894
|
-
|
7,894
|
|||||||||
Cost of investments sold
|
(7,145
|
)
|
-
|
(7,145
|
)
|
|||||||
Net realized gain on investments
|
749
|
-
|
749
|
|||||||||
Net increase in unrealized appreciation of investments
|
4,245
|
(2,149
|
)6
|
2,096
|
||||||||
Net realized and unrealized gain on investments
|
$
|
4,994
|
$
|
( 2,149
|
)
|
$
|
2,845
|
|||||
Increase in net assets from operations
|
$
|
2,164
|
$
|
969
|
$
|
1,195
|
(1) | Represents the elimination of actual dividend income and management fees recognized on the entities that were transferred to CSWI in connection with the Share Distribution. |
(2) | Represents the elimination of actual compensation incurred by former CSWC employees who are now CSWI employees (the “Spin-Off Employees”), offset by quarterly CSWC compensation that would have been incurred by CSWC employees assuming the responsibilities of the Spin-Off Employees had the share distribution took place on March 31, 2015. In addition, this balance includes three months of amortization of the cash component of the Executive Compensation Plan estimated to be $104,564 based on a stock price of $46.87 per share as if the Share Distribution had occurred on March 31, 2015. |
(3)
|
Represents the elimination of actual stock-based compensation expense incurred by former CSWC employess who are now CSWI employees (the “Spin - off Employees”).
|
(4) | Represents the elimination of professional fees and other operating expenses incurred specifically for the Share Distribution. |
(5) | Represents the elimination of CSWI’s portion of rent and office expenses for the three months ended June 30, 2015 as if the Share Distribution had occurred on March 31, 2015. |
(6) | Represents the elimination of unrealized gains recognized on the entities that were transferred to CSWI in connection with the Share Distribution. |
*
|
The actual cash outlay and stock based compensation expense for the Executive Compensation Plan may differ from our projections. The actual cash component and stock based compensation expense will be computed based on the actual weighted average share price of both of the Company's stock and the CSWI's stock for the last 20 trading days of December 2015.
|
Historical
|
CSWI
Transaction
Adjustments
|
Pro forma
|
||||||||||
Investment income:
|
||||||||||||
Interest
|
$
|
410
|
$
|
-
|
$
|
410
|
||||||
Dividends
|
8,943
|
(8,550
|
)1
|
393
|
||||||||
Management fees and other income
|
595
|
(480
|
)1
|
115
|
||||||||
9,948
|
(9,030
|
)
|
918
|
|||||||||
Operating expenses:
|
||||||||||||
Cash-based compensation expense*
|
5,413
|
158
|
2
|
5,571
|
||||||||
Stock option expense*
|
1,027
|
(609
|
)3 |
418
|
||||||||
Net pension benefit
|
(280
|
)
|
-
|
(280
|
)
|
|||||||
Professional fees
|
3,363
|
(2,159
|
)4
|
1,204
|
||||||||
Other operating expenses
|
2,600
|
(211
|
)5
|
2,389
|
||||||||
12,123
|
(2,821
|
)
|
9,302
|
|||||||||
Income before income taxes
|
(2,175
|
)
|
(6,209
|
)
|
(8,384
|
)
|
||||||
Income tax expense
|
270
|
-
|
270
|
|||||||||
Net investment income
|
$
|
(2,445
|
)
|
$
|
(6,209
|
)
|
$
|
(8,654
|
)
|
|||
Proceeds from disposition of investments
|
205,692
|
-
|
205,692
|
|||||||||
Cost of investments sold
|
41,428
|
-
|
41,428
|
|||||||||
Realized gain on investments before income tax
|
164,264
|
-
|
164,264
|
|||||||||
Net decrease in unrealized appreciation of investments
|
(108,377
|
)
|
(86,857
|
)6
|
(195,234
|
)
|
||||||
Net realized and unrealized gain on investments
|
$
|
55,887
|
$
|
(86,857
|
)
|
$
|
(30,970
|
)
|
||||
Increase in net assets from operations
|
$
|
53,442
|
$
|
(93,821
|
)
|
$
|
(39,624
|
)
|
(1) | Represents the elimination of actual dividend income and management fees recognized on the entities that were transferred to CSWI in connection with the Share Distribution. |
(2) | Represents the elimination of actual compensation incurred by the Spin-Off Employees, offset by annualized CSWC compensation that would have been incurred by CSWC employees assuming the responsibilities of the Spin-Off Employees had the share distribution took place on March 31, 2014. In addition, this balance includes twelve months of amortization of the cash component of the Executive Compensation Plan estimated to be $418,255 based on a stock price of $46.87 per share as if the Share Distribution had occurred on March 31, 2014. |
(3)
|
Represents the elimination of actual stock-based compensation expense incurred by former CSWC employess who are now CSWI employees (the “Spin - off Employees”).
|
(4) | Represents the elimination of professional fees and other operating expenses incurred specifically for the Share Distribution. |
(5) | Represents the elimination of CSWI’s portion of rent and office expenses for the twelve months ended March 31, 2015 as if the Share Distribution occurred on March 31, 2014. |
(6) | Represents the elimination of unrealized gains recognized on the entities that were transferred to CSWI in connection with the Share Distribution. |
*
|
The actual cash outlay and stock based compensation expense for the Executive Compensation Plan may differ from our projections. The actual cash component and stock based compensation expense will be computed based on the actual weighted average share price of both of the Company's stock and the CSWI's stock for the last 20 trading days of December 2015.
|
Pro Forma
|
||||
Company (a)
|
Equity (b)
|
Investment (c)
|
Cost
|
Value (d)
|
‡ATLANTIC CAPITAL BANCSHARES, INC
Atlanta, Georgia
Holding company of Atlantic Capital Bank, a full service commercial bank.
|
1.9%
|
300,000 shares of common stock (acquired 4-10-07)
|
$ 3,000,000
|
$ 3,779,000
|
DEEPWATER CORROSION SERVICES, INC.
Houston, Texas
Full-service corrosion control company providing the oil and gas industry with expertise in cathodic protection and asset integrity management.
|
31.1%
|
127,004 shares of Series A convertible preferred stock, convertible into 127,004 shares of common stock at $1.00 per share (acquired 4-9-13)
|
8,000,000
|
2,532,000
|
iMEMORIES, INC.
Scottsdale, Arizona
Enables online video and photo sharing and DVD creation for home movies recorded in analog and new digital format.
|
24.5%
|
17,391,304 shares of Series B convertible preferred stock, convertible into 19,891,304 shares of common stock at $0.23 per share (acquired 7-10-09)
|
4,000,000
|
–
|
4,684,967 shares of Series C convertible preferred stock, convertible into 4,684,967 shares of common stock at $0.23 per share (acquired 7-20-11)
|
1,078,479
|
–
|
||
Warrants to purchase 2,500,000 shares of common stock at $0.12 per share, expiring 1-21-21 (acquired 9-13-10 through 1-21-11)
|
–
|
–
|
||
Warrants to purchase 616,000 shares of common stock at $0.01 per share, expiring 9-7-22 (acquired 9-7-12)
|
–
|
–
|
||
Warrants to purchase 5,280,000 shares of common stock at $0.01 per share, expiring 3-15-23 (acquired through 3-15-13)
|
–
|
–
|
||
10% convertible notes, $308,000 principal due 7-31-16
(acquired 9-7-12) |
308,000
|
–
|
||
10% convertible notes, $880,000 principal due 7-31-16
(acquired 3-15-13) |
880,000
|
–
|
||
18% notes, $148,507 principal due 7-31-16 (acquired 11-3-14)
|
148,507
|
166,000
|
||
6,414,986
|
166,000
|
|||
*kSEP HOLDINGS, INC.
Durham, North Carolina
Provides single-use and scalable bioprocessing solutions in the area of recombinant therapeutics, cell therapy, and vaccine manufacturing.
|
17.1%
|
861,591 shares of common stock (exchanged 03-24-15)
|
443,518
|
1,943,000
|
LTI HOLDINGS, INC.
Modesto, California
Diversified custom components manufacturer that provides highly engineered solutions to OEMs.
|
0.0%
|
LIBOR plus 9.25% (Floor 1.00%), Current coupon: 10.25%; Senior secured debt, due 4-17-23 (acquired 4-17-15)
|
6,826,711
|
6,826,711
|
¥MEDIA RECOVERY, INC.
Dallas, Texas
Computer datacenter and office automation supplies and accessories; impact, tilt monitoring and temperature sensing devices to detect mishandling shipments; dunnage for protecting shipments.
|
97.9%
|
800,000 shares of Series A convertible preferred stock, convertible into 800,000 shares of common stock at $1.00 per share (acquired 11-4-97)
|
800,000
|
5,000,000
|
4,000,002 shares of common stock (acquired 11-4-97)
|
4,615,000
|
25,100,000
|
||
5,415,000
|
30,100,000
|
|||
RESEARCH NOW GROUP, INC.
Plano, Texas
Provides data collection through online and mobile surveys using proprietary consumer and business panels.
|
0.0%
|
LIBOR plus 8.75% (Floor: 1.00%), Current coupon: 9.75%; Senior secured debt, due 3-18-22 (acquired 3-18-15)
|
6,897,874
|
6,897,874
|
TITANLINER, INC.
Midland, Texas
Manufactures, installs and rents spill containment system for oilfield applications.
|
28.7%
|
339,277 shares of Series A convertible preferred stock convertible into 339,277 shares of Series A preferred stock at $14.76 per share (acquired 6-29-12)
|
3,204,222
|
5,948,000
|
7% senior subordinated secured promissory note, due 6-30-17 (acquired 6-29-12)
|
2,747,000
|
2,747,000
|
||
5,951,222
|
8,695,000
|
|||
TRAX DATA REFINERY, INC.
Scottsdale, Arizona
Provides a comprehensive set of solutions to improve the transportation validation, accounting, payment and information management process.
|
2.6%
|
211,368 shares of common stock (exchanged 3-19-15)
|
817,781
|
2,296,000
|
*WELLOGIX, INC.
Houston, Texas
Developer and supporter of software used by the oil and gas industry.
|
18.9%
|
4,788,371 shares of Series A-1 convertible participating preferred stock, convertible into 4,788,371 shares of common stock at $1.04 per share (acquired 8-19-05 through 6-15-08)
|
5,000,000
|
4,018,000
|
WINZER CORPORATION
Plano, Texas
Distributes fasteners, chemicals, tools and a wide variety of other products to customers in the industrial maintenance and repair, and automotive aftermarket sectors.
|
0.0%
|
11% Secured subordinated debt, due 6-1-21 (acquired 6-1-15)
|
7,939,575
|
7,939,575
|
MISCELLANEOUS
|
–
|
‡Ballast Point Ventures II, L.P.
2.1% limited partnership interest (acquired 8-4-08 through 11-6-14)
|
1,989,792
|
2,731,000
|
–
|
‡BankCap Partners Fund I, L.P.
5.5% limited partnership interest (acquired 7-14-06 through 11-16-12)
|
5,071,514
|
3,682,000
|
|
–
|
‡CapitalSouth Partners Fund III, L.P.
1.9% limited partnership interest (acquired 1-22-08 and 11-16-11)
|
433,403
|
231,999
|
|
–
|
‡First Capital Group of Texas III, L.P.
3.0% limited partnership interest (acquired 12-26-00 thru 8-12-05)
|
778,895
|
1
|
|
100%
|
¥‡Humac Company
1,041,000 shares of common stock (acquired 1-31-75 and 12-31-75)
|
–
|
233,000
|
|
–
|
‡STARTech Seed Fund II
3.2% limited partnership interest (acquired 4-28-00 through 2-23-05)
|
622,783
|
14,000
|
|
TOTAL INVESTMENTS
|
$ 65,603,054
|
$ 82,085,160
|
a) | Companies |
b) | Equity |
(c) | Investments |
(d) | Value |