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Item 5. Market for Registrant’s Common Equity

2021-05-26 compared with 2020-06-02 · 64 added, 43 removed, 147 unchanged (42% of the section changed)

2 unchanged sentences

Information about our senior securities is shown in the following table for the years ended March 31, 2021, 2020, 2019 2018 and 2017.

The Company did not have any senior securities outstanding prior to the year ended March 31, 2017.

The report of RSM US LLP, our independent registered public accountants for the fiscal years ended March 31, 2021, 2020 and 2019, on the senior securities table as of March 31, 2021, 2020 and 2019, is attached as an exhibit to this Annual Report on Form 10-K.

Class and Year

Total Amount Outstanding Exclusive of Treasury Securities (1)

Asset Coverage per Unit (2)

Involuntary Liquidating Preference per Unit (3)

Average Market Value per Unit (4)

Class and Year Total Amount Outstanding Exclusive of Treasury Securities (1) Asset Coverage per Unit (2) Involuntary Liquidating Preference per Unit (3) Average Market Value per Unit (4)

(dollars in thousands)

Credit Facility

2021 $ 120,000 1.87 — N/A

2020 154,000 1.89 — N/A

2019 141,000 2.49 — N/A

2018 40,000 4.16 — N/A

2017 25,000 12.40 — N/A

December 2022 Notes

2021 $ — — — $ —

2020 77,136 1.89 — 22.01

2019 77,136 2.49 — 25.50

2018 57,500 4.16 — 25.40

2017 — — — N/A

October 2024 Notes

2021 $ 125,000 1.87 — N/A

2020 75,000 1.89 — N/A

2019 — — — N/A

2018 — — — N/A

2017 — — — N/A

January 2026 Notes

2021 $ 140,000 1.87 — N/A

2020 — — — N/A

2019 — — — N/A

2018 — — — N/A

2017 — — — N/A

(1) Total amount of each class of senior securities outstanding at the end of the period presented.

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The “-” indicates information which the SEC expressly does not required to be disclosed for certain types of senior securities.

Average market value per unit for our Credit Facility and October 2024 Notes is not applicable because these are not registered for public trading.

(4) Average market value per unit for our Credit Facility, October 2024 Notes and January 2026 Notes is not applicable because these are not registered for public trading.

PRICE RANGE OF COMMON STOCK AND HOLDERS

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Our common stock is traded on the Nasdaq Global Select Market under the symbol “CSWC.”

The following table sets forth, for each fiscal quarter within the two most recent fiscal years, the range of high and low selling prices of our common stock as reported on the Nasdaq Global Select Market, as applicable, and the sales price as a percentage of the NAV per share of our common stock.

Premium (Discount) of High Sales Price to NAV (2)

Premium (Discount) of Low Sales Price to NAV (2)

The following table sets forth, for each fiscal quarter within the two most recent fiscal years and the current fiscal year to date, the range of high and low selling prices of our common stock as reported on the Nasdaq Global Select Market, as applicable, and the sales price as a percentage of the NAV per share of our common stock.

NAV (1) High Low Premium (Discount) of High Sales Price to NAV (2) Premium (Discount) of Low Sales Price to NAV (2)

Year ending March 31, 2022

First Quarter (through May 25, 2021) * $ 26.95 $ 22.16 * *

Year ended March 31, 2021

Fourth Quarter $ 16.01 $ 22.75 $ 17.55 42.10 % 9.62 %

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First Quarter 14.95 16.02 8.76 7.16 (41.40)

Year ending March 31, 2019

Year ended March 31, 2020

Fourth Quarter $ 15.13 $ 21.71 $ 7.39 43.49 % (51.16) %

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(2) Calculated as the respective high or low share price divided by NAV and subtracting 1.

* Not determinable at the time of filing.

Our common stock is traded on The Nasdaq Global Select Market under the symbol “CSWC.” On May 24, 2021, there were approximately 359 holders of record of our common stock, which did not include shareholders for whom shares are held in "nominee" or "street name."

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The payment dates and amounts of cash dividends per share for the past three fiscal years are as follows:

Cash Dividend

Payment Date Cash Dividend

Fiscal Year 2021

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Fiscal Year 2020

July 2, 2018 3

June 28, 2019 1

September 30, 2019 1

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Fiscal Year 2019

October 2, 2017

January 2, 2018

April 2, 2018

July 2, 2018 3

September 28, 2018 1

December 31, 2018 1

March 29, 2019 1

1 On each of these dates, the cash dividend paid included a supplemental dividend of $0.10 per share.

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The payment date for the dividend is June 30, 2021.

On May 28, 2020, the Board of Directors declared a total dividend of $0.51 per share, comprised of a regular dividend of $0.41 and a supplemental dividend of $0.10, for the quarter ended September 30, 2020 .

The record date for the dividend is September 15, 2020 .

The payment date for the dividend is September 30, 2020 .

The amounts and timing of cash dividend payments have generally been dictated by requirements of the Code regarding the distribution of taxable net investment income (ordinary income) of regulated investment companies.

1 unchanged sentence

We generally intend to make distributions on a quarterly basis to our shareholders of substantially all of our taxable income.

In order to avoid certain excise taxes imposed on RICs, we must distribute during each calendar year an amount at least equal to the sum of (1) 98% of our ordinary income for the calendar year, (2) 98.2% of our capital gains in excess of capital losses for the one year period ended each October 31, and (3) any ordinary income and net capital gains for the preceding year that were not distributed during that year.

In order to avoid certain excise taxes imposed on RICs, we must distribute during each calendar year an amount at least equal to the sum of (1) 98% of our ordinary income for the calendar year, (2) 98.2% of our capital gains in excess of capital losses for the calendar year ended December 31, and (3) any ordinary income and net capital gains for the preceding year that were not distributed during that year.

We will not be subject to excise taxes on amounts on which we are required to pay corporate income tax (such as retained net capital gains).

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Depending on the level of taxable income earned in a tax year, we may choose to carry forward taxable income in excess of current year distributions into the next year and pay a 4% U.S.

excise tax on such income.

federal excise tax on such income.

Any such carryover taxable income must be distributed through a dividend declared prior to filing the final tax return related to the year that generated such taxable income.

1 unchanged sentence

We may make deemed distributions to our shareholders of any retained net capital gains.

If this happens, our shareholders will be treated as if they received an actual distribution of the capital gains we retain and then reinvested the net after-tax proceeds in our common stock.

If this happens, our shareholders will

be treated as if they received an actual distribution of the capital gains we retain and then reinvested the net after-tax proceeds in our common stock.

Our shareholders also may be eligible to claim a tax credit (or, in certain circumstances, a tax refund) equal to their allocable share of the tax we paid on the capital gains deemed distributed to them.

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We may, in the future, make actual distributions to our shareholders of some or all realized net long-term capital gains in excess of realized net short-term capital losses.

Our ability to make distributions in the future may be limited by our Credit Facility, the indenture and related supplements governing our December 2022 Notes and our October 2024 Notes and the 1940 Act.

Our ability to make distributions in the future may be limited by our Credit Facility, the indentures governing each of our October 2024 Notes and our January 2026 Notes and the 1940 Act.

For a more detailed discussion, see “Business — Election to be Regulated as a Business Development Company – Regulation as a Business Development Company,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Note 5” to our consolidated financial statements included in this Annual Report on Form 10-K.

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In January 2016, the Company’s Board of Directors approved a share repurchase program authorizing the Company to repurchase up to $10 million of its outstanding common stock in the open market at certain thresholds below its NAV per share, in accordance with guidelines specified in Rules 10b5-1(c)(1)(i)(B) and 10b-18 under the Securities Exchange Act of 1934.

On March 1, 2016, the Company entered into a share repurchase agreement, which became effective immediately and shall terminate on the earliest of:

(1) the date on which a total of $10 million worth of common shares have been purchased under the plan;

(2) the date on which the terms set forth in the purchase instructions have been met;

or (3) the date that is one trading day after the date on which insider notifies broker in writing that this agreement shall terminate.

The following table provides information for the year ended March 31, 2020 .

Total Number of Shares Purchased

Average Price Paid Per Share

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs

Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (2)

On March 1, 2016, the Company entered into a share repurchase agreement, which became effective immediately and terminated on March 26, 2020 upon the Company's purchase of the aggregate gross dollar amount (inclusive of commission fees) of its common stock under the share repurchase program meeting the threshold set forth in the share repurchase agreement.

The following table provides information regarding purchases of our common stock during the year ended March 31, 2021.

Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (2)

April 1 through April 30, 2020 — $ — — $ —

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March 1 through March 31, 2021 — — — —

Total 15,309 $ 15.62 — $ —

(1) Represents shares of common stock withheld upon vesting of restricted stock to cover withholding tax obligations.

(2) On January 25, 2016, we announced that our Board of Directors authorized us to repurchase an indeterminate number of shares of our common stock at an aggregate market value of up to $10 million.

The repurchase program will be in effect until the approved dollar amount has been used to repurchase shares or the Board amends or discontinues the plan at any time.

Performance Graph

The following graph compares our cumulative total shareholder return during the last five years (based on the market price of our common stock and assuming reinvestment of all dividends, prior to any tax effect) with the Nasdaq Composite Total Return Index, the Russell 2000 Total Return Index and the KBW Regional Bank Total Return Index, as we do not believe that there is an appropriate index of companies with an investment strategy similar to our own with which to compare the return on our common stock.

In the current year, we replaced the Nasdaq Composite Total Return Index with the S&P BDC Index in the graph below, as this index includes companies with an investment strategy similar to our own.

The Nasdaq Composite Total Return over the last five years was 186.6% compared to Capital Southwest's cumulative total shareholder return of 123.6%.

The graph assumes initial investment of $100 on March 31, 2016 and reinvestment of dividends.

1 unchanged sentence

It assumes that distributions paid are invested in like securities.

The value of the CSWI shares distributed in the Share Distribution is reflected in the cumulative total return as a reinvested dividend.

The graph and other information furnished under this Part II Item 5 of this Annual Report on Form 10-K shall not be deemed to be "soliciting material" or to be filed with the SEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Exchange Act.

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Year ended March 31,

2021 2020 2019 2018 2017

Income statement data:

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Total operating expenses 33,949 31,745 27,123 18,698 13,807

Income (loss) before income taxes

Income tax expense (benefit)

Net investment income (loss)

Net realized gains (losses):

Income before income taxes 34,113 30,294 24,758 16,428 9,667

Income tax expense 2,442 2,062 1,048 195 1,779

Net investment income 31,671 28,232 23,710 16,233 7,888

Net realized (losses) gains:

Non-control/Non-affiliate investments (6,908) 1,335 2,124 1,492 3,992

2 unchanged sentences

Taxes on deemed distribution of long-term capital gains — (3,461) — — —

Net realized gains (losses) on investments

Net realized (losses) gains on investments (8,536) 42,231 20,854 1,582 7,896

Net unrealized appreciation (depreciation) on investments 28,755 (92,814) (11,506) 21,492 7,690

Net realized and unrealized (losses) gains on investments

Net realized and unrealized gains (losses) on investments 20,219 (50,583) 9,348 23,074 15,586

Realized losses on extinguishment of debt (1,007) — — — —

Net increase (decrease) in net assets resulting from operations $ 50,883 $ (22,351) $ 33,058 $ 39,307 $ 23,474

Pre-tax net investment income (loss) per share - basic and diluted

Net investment income (loss) per share - basic and diluted

Pre-tax net investment income per share - basic and diluted $ 1.79 $ 1.68 $ 1.48 $ 1.02 $ 0.61

Net investment income per share - basic and diluted $ 1.66 $ 1.57 $ 1.42 $ 1.01 $ 0.50

Net realized earnings per share - basic and diluted 1

$ 1.21 $ 3.91 $ 2.66 $ 1.11 $ 1.00

Net increase (decrease) in net assets from operations - basic and diluted $ 2.67 $ (1.24) $ 1.98 $ 2.45 $ 1.48

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Year ended March 31,

2021 2020 2019 2018 2017

Balance sheet data:

3 unchanged sentences

Deferred tax asset — 1,402 1,807 2,050 2,017

Other assets 3,530 4,511 4,992 8,544 10,161

Total assets $ 735,584 $ 584,959 $ 551,843 $ 417,490 $ 325,752

December 2022 Notes $ — $ 75,812 $ 75,099 $ 55,305 $ —

October 2024 Notes 122,879 73,484 — — —

January 2026 Notes 138,425 — — — —

Credit facility 120,000 154,000 141,000 40,000 25,000

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Total liabilities 399,333 312,737 225,880 109,202 40,680

Net assets 336,251 272,222 325,963 308,288 285,072

Total liabilities and net assets $ 735,584 $ 584,959 $ 551,843 $ 417,490 $ 325,752

5 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity