EX-99.1 2 ex99_1.htm EXHIBIT 99.1

Exhibit 99.1
Acquisition of Strathmore Products, Inc.Investor Presentation 5400 Lyndon B. Johnson Freeway, Suite 1300 | Dallas, Texas 75240 | 972.233.8242 | capitalsouthwest.com May 2015

Page * This investor presentation contains forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995 relating to, among other things, CSWC’s future acquisition plans and strategies, barriers to entry into Strathmore’s businesses, future market demand, the manner, tax-free nature and expected benefits associated with the proposed spin-off of certain of CSWC’s control assets into a new, independent, publicly traded company (“Industrial Co.”), the expected timing of the completion of the transaction and the business, financial condition and results of operations of CSWC, including the businesses of Industrial Co. Any statements preceded or followed by or that include the words "believe," "expect," "intend," "plan," "should" or words, phrases or similar expressions or the negative thereof, are intended to identify forward-looking statements. These statements are made on the basis of the current beliefs, expectations and assumptions of the management of CSWC. There are a number of risks and uncertainties that could cause CSWC’s actual results to differ materially from the forward-looking statements included in this communication. These risks and uncertainties include, but are not limited to, risks relating to CSWC’s ability to obtain all necessary approvals to complete, and to otherwise complete, the proposed spin-off transaction and to achieve the expected benefits therefrom.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 communication. Other unknown or unpredictable factors could also have a material adverse effect on CSWC’s actual future results, performance, or achievements. For a further discussion of these and other risks and uncertainties applicable to CSWC and its business, see CSWC’s Annual Report on Form 10-K for the fiscal year ended March 31, 2014 and subsequent filings with the Securities and Exchange Commission (the “SEC”). 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 communication. CSWC does not assume any obligation to update these forward-looking statements to reflect any new information, subsequent events or circumstances, or otherwise, except as may be required by law. Safe Harbor Provision

Page * In addition to the financial information presented in accordance with U.S. GAAP, Capital Southwest Corporation (“CSWC”) uses “adjusted EBITDA,” a non-GAAP financial measure. CSWC presents non-GAAP financial information to enable investors to see its portfolio companies through the eyes of management and to provide better insight into financial performance. CSWC uses adjusted EBITDA to provide meaningful supplemental information regarding operating performance and profitability by excluding from EBITDA certain items that CSWC believes are not indicative of ongoing operating results or will not impact future operating cash flows.A reconciliation of adjusted EBITDA to net income is include at the end of this presentation. Adjusted EBITDA is not a recognized financial measure under U.S. GAAP, and does not purport to be an alternative to net income or an indicator of operating performance. Adjusted EBITDA is presented to enhance an understanding of operating results and is not intended to represent cash flows or results of operations.Adjusted EBITDA has certain material limitations, primarily due to the exclusion of certain amounts that are material to each company’s consolidated results of operations, such as interest expense, income tax expense, and depreciation and amortization. In addition, adjusted EBITDA may differ from the adjusted EBITDA calculations reported by other companies in the industry, limiting its usefulness as a comparative measure. Use of Non-GAAP Financial Measures

Page * Founded in 1942 (multi-generational family business)Headquartered in Syracuse, NY (significant operations in TX)Strathmore manufactures specialty industrial coatingsUrethanes (solvent and latex-based, single and two-part), epoxies (single and two-part), acrylics (solvent and latex-based), alkyds (solvent and water-based) as well as other types of industrial coatingsProven acquisition platform (five acquisitions successfully completed in Strathmore’s history)1993 acquired Allerton Chemical; 1998 acquired Polymetrics; 2003 acquired Potter Paints; 2008 acquired C.A. Reeves; 2014 acquired American CoatingsStrong historical revenue growth5-Year compound annual growth rate of 28.8% (23.5% organic growth)114 total employees and independent contractorsDirect sales model with 20+ person sales team Overview of Strathmore Products

Page * Strathmore Products, Inc. (“Strathmore” or the “Company”) is a leading formulator, developer and manufacturer of industrial coatings for use by certain OEM’s and maintenance providersStrathmore enjoys a leading market position in select end marketsPrimary markets include rail car, locomotive, power generation, oil & gas and industrialEnterprise value of $69.2 million (7.04x adjusted 2014 EBITDA)Additional contingent consideration based on the future performance of the CompanyStrathmore assets acquired through The Whitmore Manufacturing Company (CSWC subsidiary) with proceeds from a $70.0 million term loan (Lenders: JPMorgan Chase Bank, N.A., SunTrust Bank, Comerica Bank, Amegy Bank, N.A.)Strathmore represents an ideal fit with CSWC’s acquisition strategyIndustrial coatings acquisition platform presents opportunity for further add-onsStrong niche position in attractive end marketsLongstanding customer relationships with marquee companiesSolid coatings technology portfolio with a track record of innovationHigh free cash flow conversion over the long-term Transaction Overview Strathmore Overview Transaction Structure Transaction Rationale

Page * Strathmore will serve as the primary growth and acquisition platform for CSWC in the industrial coatings sectorSolid organic growth potential based on strong fundamentals in key end markets and opportunities for further penetration of existing customer relationshipsStrathmore’s primary market segments have relatively high barriers to entry and are specification driven which require lengthy commercialization cycles of 3 to 5 yearStrathmore has a broad technology portfolio with applicability in multiple end-marketsCSWC brings internal coatings expertise, synergistic domestic and international customer relationships in key markets and a strong balance sheet to support growth Transaction Rationale

Page * Geographic Footprint

Page * Diverse Application Mix

Page * Market Overview 2014 Revenue by End Market $63.2MM 2014 Addressable Market $3.5BN SOURCE: ChemQuest

Page * Strong Historical Revenue Growth 28.8% CAGR ($’s in millions) NOTE: Organic compound annual growth rate of 23.5%

Page * Non-GAAP Reconciliation ($’s in thousands)