Capital Southwest Corporation · NASDAQ:CSWC
Capital Southwest — Merger or Acquisition (September 2015)
33 slides from Capital Southwest's merger presentation, Sep 16, 2015
Slide 1: Company Presentation September 16, 2015
Company Presentation September 16, 2015
Slide 2: Forward-Looking Statements
* 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 manner, tax-free nature and expected benefits associated with the proposed spin-off of certain control as
Slide 3: Pro-Forma and Non-GAAP Financial Information
* Pro-Forma and Non-GAAP Financial Information The pro forma financial data in this presentation as of and for the fiscal year ended March 31, 2015 has been adjusted (a) to include the acquisition of substantially all the assets of Strathmore Products, Inc. and (b) to give effect to the proposed spi
Slide 4: Transaction Overview
* Transaction Overview Structured as a tax-free spin transactionForm 10 Registration Statement for CSWI initially filed with the SEC on June 16, 2015; Amendment No.4 to Form 10 filed on September 9, 2015; Registration statement declared effective on September 14, 2015 The separation is designed to u
Slide 5: Experienced Management Team
* Experienced Management Team Management team including subsidiary company executives averages 25 years of experience in the industrial manufacturing and specialty chemicals industries Executive Officers Board of Directors Michael GambrellFormer Executive Vice President of The Dow Chemical Company L
Slide 6: I. Company Overview
I. Company Overview
Slide 7: Investment Highlights
* Investment Highlights Broad Portfolio of Leading Industrial Brands and SolutionsSustainable Organic Revenue Growth and Operating PerformanceStable Platform for Acquisitions with Proven Track RecordCulture of Product Enhancement and Customer Centric SolutionsDiverse Sales and Distribution Channels
Slide 8: CSWI Overview
* CSWI Overview A diversified industrial growth company with well-established, scalable platformsDeep domain expertise across three segments:Industrial ProductsCoatings, Sealants & AdhesivesSpecialty ChemicalsPF(1) 2015 Net Revenues: $325.0mm, PF(1) 2015 EBITDA: $60.1mmPF(2) 2016Q1 Net Revenues: $88
Slide 9: CSWI Corporate Culture
* CSWI’s corporate culture will SHAPE and GUIDE our company by helping each team member understand how to make his/her contribution to the company we serve. Our culture manifests the OBSERVED BEHAVIORS, the NORMS, and the DOMINANT VALUES of the company. Our culture should be effective in REINFORCING
Slide 10: CSWI Corporate Culture (Cont'd)
* Our corporate culture will be based on our core values:IntegrityRespectExcellenceStewardshipCitizenshipAccountabilityTeamwork CSWI Corporate Culture (Cont’d)
Slide 11: CSWI Business Segments
* CSWI Business Segments IndustrialProducts SpecialtyChemicals Coatings, Sealants & Adhesives Business Segment Legal Entity IndustrialBrands
Slide 12: History of CSWI Businesses
* History of CSWI Businesses 2015 1961 1969 CSWC founded in Dallas, TX 1937 founded in Houston, TX 1949founded in Glendale, CA 1973 CSWC acquires RectorSeal CSWC acquires Jet-Lube 1991 founded in Boise, ID 2005 CSWC acquires SmokeGuard 1979 1989 1893founded in Cleveland, OH CSWC acquires Whitmore 19
Slide 13: CSW Industrials employs individuals worldwide
* CSW Industrials employs over 750 individuals worldwide Headquarters Manufacturing Research Sales Offices Warehouses
Slide 14: CSWI Business Segments
* CSWI Business Segments Well-balanced portfolio of businesses with strong organic growth profiles and numerous product line and strategic acquisition opportunities in each segment PF2015 Net Revenues (1) PF2015 EBITDA (1)(2) Total Net Revenues: $325.0mm Total EBITDA: $60.1mm PF2015 includes Strathm
Slide 15: CSWI Key Growth Drivers
* CSWI Key Growth Drivers Benefits resulting from the Share Distribution and Related Reorganization Leverage Existing Customer Relationships, Brands and Solutions Focused Acquisitions that Leverage our Distribution Channels Operational Excellence
Slide 16: II. Key Growth Drivers
II. Key Growth Drivers
Slide 17: Benefits from Reorganization
* Benefits from Reorganization Post Spin-Off Structure Shareholders Nasdaq-Listed Expected to be Listed on Nasdaq CSWI Businesses (*) 100% As an independent, publicly traded company, CSWI will have greater focus on its core businesses and greater flexibility to pursue growth opportunities including
Slide 18: Leverage Existing Relationships and Products
* Ability to leverage customer base and cross-sell products across three segments Leverage Existing Relationships and Products Key End Use Markets(1) Industrial Products Coatings, Sealants & Adhesives Specialty Chemicals Plumbing Industrial HVAC Energy Rail Architecturall
Slide 19: Focused Acquisitions
* Focused Acquisitions There are further attractive synergistic acquisitions available to achieve higher growth and profitability Capital Invested for Acquisitions ($mm) Strategy & Execution Plan Identify and execute acquisitions that will broaden our portfolio of industrial brands and products, and
Slide 20: Operational Excellence
* Focus on operational excellence in all aspects of CSWI’s business, leading to improved efficiencies and increased profitabilityExamples of achieving savings through operational excellence:CSWI is consolidating the manufacturing of all lubricant and grease products currently manufactured in a Houst
Slide 21: III. Financial Overview
III. Financial Overview
Slide 22: Combined Financials – Net Revenues
* Combined Financials – Net Revenues Net Revenues ($mm, %) Highlights Consistent mid double-digit net revenue growth (16.4%, 16.4% and 13.0% in FY2013, FY2014 and FY2015, respectively) supported by industry leading products in high growth end markets with a diversified customer baseNet revenue growt
Slide 23: Strong Organic & Acquisition Growth
* Strong Organic & Acquisition Growth Net Revenues ($mm, %)(1) Highlights 15.3% total net revenue CAGR over the last three fiscal yearsStrong compounded organic net revenue growth of 7.0% as a result of CSWI’s focus on end markets with attractive growth trends Additional 8.1% contribution to total n
Slide 24: Combined Financials – Margins
* Combined Financials – Margins Operating Income ($mm, %) Highlights Attractive operating and EBITDA margins with potential improvement from integration of businesses and shared best practicesEBITDA margins higher than those of peers, partly due to CSWI’s loyal and diverse customer base that recogni
Slide 25: Combined Financials – Capital Investment & ROIC
* Combined Financials – Capital Investment & ROIC Capital Expenditures ($mm, %) Highlights Historical capital expenditures to net revenue ratio averaged 5.7% in the last three yearsCapital expenditures declined in PF2015 and PF2016Q1 primarily due to completion of facility expansion project for Whit
Slide 26: Segment Financials – Net Revenues
* Segment Financials – Net Revenues Net Revenues ($mm) Highlights 27.8% net revenue CAGR over the last two fiscal years, including StrathmoreRecent growth primarily attributable to an increase in sales volumes in the Industrial Products segment and in the Coatings, Sealants & Adhesives segmentNet re
Slide 27: Segment Financials – Margins
* Segment Financials – Margins Operating Income ($mm) Highlights Many products enjoy strong margin profiles due to high performance and quality and loyal customer basesMargin expansion driven by targeted investments to further improve manufacturing processes, including:Lower manufacturing costsIncre
Slide 28: Strong Balance Sheet
* Strong Balance Sheet (PF as of June 30, 2015) Total Capitalization Highlights PF2015 EBITDA represents 12 months ending March 31, 2015 and includes Strathmore FY2014 results and other pro forma adjustments; Strathmore fiscal year ends December 31Excludes restricted cash and bank time deposits Stro
Slide 29: CSWI vs. Industrial Goods Peers
* CSWI vs. Industrial Goods Peers 2011–2014 Net Revenue CAGR 2014 EBITDA Margin Note: Net revenue growth and margins based on calendarized financials, revenue growth figure is a 3-year CAGR (1) Median excludes CSWI and CSWI segments (1) (1)
Slide 30: CSWI vs. Specialty Chemicals Peers
* CSWI vs. Specialty Chemicals Peers 2011–2014 Net Revenue CAGR 2014 EBITDA Margin Note: Net revenue growth and margins based on calendarized financials, revenue growth figure is a 3-year CAGRMedian excludes CSWI and CSWI segments (1) (1)
Slide 31: Appendix
Appendix
Slide 32: EBITDA Reconciliation
* EBITDA Reconciliation Strathmore D&A includes $1.8mm of additional D&A as a result of application of acquisition method of accounting Other pro forma adjustments include incremental expenses related to operating as a stand alone independent company, net of $2.3mm and $1.5mm of nonrecurring charges
Slide 33: Historical and Pro Forma Financial Results
* Historical and Pro Forma Financial Results Related to rental income from CapStar, a real estate holding companyOther pro forma adjustments include incremental expenses related to operating as a stand alone independent company, net of $1.5mm of non-recurring charges related to the Jet-Lube integrat
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