Capital Southwest Corporation (“Capital Southwest” or the
“Company”) (Nasdaq:CSWC) today announced its financial results for
the fourth fiscal quarter ended March 31, 2016.
Financial Highlights
- Total Investment Portfolio: $178.4 million
- Total Credit Portfolio: $92.8 million
- Total Equity Portfolio: $49.3 million
- Total Investment in I-45 Senior Loan Fund (“I-45 SLF”): $36.3
million
- I-45 SLF portfolio grew to $100 million invested in 24 credits,
predominantly 1st Lien
- Invested $17 million in 5 credits within I-45 during Fourth
Quarter Fiscal Year 2016
- Fourth Quarter Fiscal Year 2016 Pre-Tax Net Investment Income
of $0.7 million, or $0.04 per weighted average diluted share
- Fourth Quarter Fiscal Year 2016 Dividend of $0.04 per
share
- Total Cash: $96.0 million
- Total Net Assets: $272.6 million
- Net Asset Value per Share: $17.34
- Weighted Average Yield on Debt Investments: 10.7%
- No investment assets currently on non-accrual
- Subsequent to quarter end the loan to Freedom Truck Finance
prepaid; proceeds to Capital Southwest totaling $6.0 MM realizing
an IRR of 14.3%
- Subsequent to quarter end, increased Deutsche Bank led I-45
Senior Loan Fund Credit facility from $75 million to $100
million
- On June 7, 2016, the Company's Board of Directors declared a
First Quarter Fiscal Year 2017 Dividend of $0.06 per share
In commenting on the Company's results, Bowen
Diehl, President and Chief Executive Officer, stated, "During the
fourth quarter, we continued to build out a diverse credit
investment portfolio across the middle market. We originated
transactions in the syndicated and club markets within the upper
middle market as well as the directly originated lower middle
market. We continue to grow our net investment income both by
thoughtfully deploying capital and by effectively managing
operating expenses.”
Portfolio and Investment
Activities
During the quarter ended March 31, 2016, the
Company originated six investments totaling $34.6 million.
Subsequent to quarter end, the company received $6 million in
proceeds related to the repayment of the senior loan to Freedom
Truck Finance, generating an IRR of 14.3%. New investment
transactions which occurred during the quarter ended March 31, 2016
are summarized as follows:
Chandler Signs, L.P., $6.0 million
Senior Secured Subordinated Debt and Equity: Chandler
Signs is a national, vertically integrated provider of exterior
on-premise signs for multi-site companies in a wide variety of end
markets.
TaxAct, Inc., $5.0 million 1st Lien
Senior Secured Debt: TaxAct, Inc. is a US provider of
internet-enabled tax solutions for consumers, tax professionals,
and small business owners.
Digital River Inc., $4.6 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.
Hygea Holdings Corp., $8.0 million 1st
Lien Senior Secured Debt and Equity Warrants: Hygea
is a diversified healthcare company that owns physician practices,
ancillary services companies, independent physician associations,
and other medical service entities.
Vivid Seats LLC, $7.0 million 1st Lien
Senior Secured Debt: Vivid Seats is an independent
full-service provider of an online secondary ticket marketplace for
a broad range of sporting, music and other events.
Imagine! Print Solutions, Inc., $4.0
million 1st Lien Senior Secured Debt: Imagine! is
the leading provider of in-store marketing solutions in North
America.
Fourth Fiscal Quarter 2016 Operating
Results
For the quarter ended March 31, 2016, Capital
Southwest reported total investment income of $3.8 million,
compared to $3.3 million in the prior quarter. The increase
in investment income was attributable to an increase in debt
investments outstanding.
For the quarter ended March 31, 2016, total
expenses (excluding tax expense) were $3.1 million, compared to
$3.9 million in the prior quarter. The decrease in expenses
was primarily due to one-time expenses related to the spin-off of
CSW Industrials, Inc. (Nasdaq:CSWI) in the prior quarter.
For the quarter ended March 31, 2016, there was
a tax benefit of $0.8 million recorded compared to a benefit of
$0.6 million in the prior quarter. The tax benefit recorded
this quarter was due to a change in the valuation allowance related
to our deferred tax asset at Capital Southwest Management Company,
a wholly-owned management company subsidiary.
For the quarter ended March 31, 2016, total
pre-tax net investment income was $0.7 million compared to a loss
of ($0.6) million in the prior quarter.
During the quarter ended March 31, 2016, Capital
Southwest recorded net realized and unrealized gains on investments
of $1.0 million. The net increase in net assets resulting
from operations was $2.5 million, compared to a decrease of ($1.1)
million in the prior quarter.
The company’s net asset value, or NAV, at March
31, 2016 was $17.34 per share, as compared to $17.22 at December
31, 2015. The increase in NAV was primarily due to
appreciation of $1.0 million in the investment portfolio and an
increase in the deferred tax asset of $0.8 million.
Liquidity and Capital
Resources
At March 31, 2016, Capital Southwest had
unrestricted cash and money market balances of approximately $96.0
million, total assets of approximately $284.5 million, and net
assets of approximately $272.6 million. As of March 31, 2016,
Capital Southwest had no borrowings outstanding on its balance
sheet. Subsequent to quarter end, Capital Southwest increased
its off balance sheet I-45 Senior Loan Fund Credit Facility from
$75 million to $100 million.
Remarking on the Company's liquidity position,
Michael S. Sarner, Chief Financial Officer of the Company, stated,
"We are pleased with the interest we have drawn from financial
institutions interested in joining the I-45 credit facility.
As we continue to originate assets and fund our equity commitment
to I-45, we will look to grow the facility toward our goal of
maintaining two times leverage. From an on balance sheet
perspective, we are currently in negotiations toward originating a
revolving credit facility and hope to have financing in place
sometime this summer.”
First Quarter Fiscal Year 2017 Dividend
of $0.06 Per Share Declared
On June 7, 2016, the Company's Board of
Directors declared a regular quarterly dividend of $0.06 per share
for the first quarter of Fiscal Year 2017 payable on July 1, 2016
to stockholders of record as of June 20, 2016.
When declaring dividends the Board of Directors
reviews estimates of taxable income available for distribution,
which may differ from net investment income under generally
accepted accounting principles. The final determination of taxable
income for each year, as well as the tax attributes for dividends
in such year, will be made after the close of the tax
year.
Capital Southwest maintains a dividend
reinvestment plan ("DRIP") that provides for the reinvestment of
dividends on behalf of its registered stockholders who hold their
shares with Capital Southwest’s transfer agent and registrar,
American Stock Transfer and Trust Company. Under the DRIP, if
the Company declares a dividend, registered stockholders who have
opted in to the DRIP by the dividend record date will have their
dividend automatically reinvested into additional shares of Capital
Southwest common stock.
Share Repurchase Program
On January 25th, 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 March 31, 2016, no
shares have been purchased under the plan.
Fourth Fiscal Quarter 2016 Financial
Results Conference Call and Webcast
Capital Southwest has scheduled a conference
call on Wednesday, June 8, 2016, at 11:00 a.m. Eastern Time to
discuss the fourth fiscal quarter 2016 financial results. You
may access the call by dialing (855)-835-4076 and using the
passcode 20891958 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/jum6awy6.
A telephonic replay will be available through
June 15, 2016 by dialing (855)-859-2056 and using the passcode
20891958. 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-K for the period ended March 31,
2016 to be filed with the Securities and Exchange Commission and
Capital Southwest’s Fourth Fiscal Quarter 2016 Investor
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 $273 million in net assets as of March 31, 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 lender focused on
supporting the acquisition and growth of middle market businesses
with investments from $5 to $20 million 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 Contact:
Michael S. Sarner, Chief Financial Officer
214-884-3829
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