Item 5. Market for Registrant’s Common Equity
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
SENIOR SECURITIES
Information about our senior securities is shown in the following table for the years ended March 31, 2021, 2020, 2019 2018 and 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)
(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.
(2) Asset coverage per unit is the ratio of the carrying value of our total consolidated assets, less all liabilities and indebtedness not represented by senior securities, to the aggregate amount of senior securities representing indebtedness. Asset coverage per unit is expressed in terms of dollar amounts per $1,000 of indebtedness.
(3) The amount to which such class of senior security would be entitled upon the involuntary liquidation of the issuer in preference to any security junior to it. The “-” indicates information which the SEC expressly does not required to be disclosed for certain types of senior securities.
(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
Market Information
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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 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.
Price Range
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 %
Third Quarter 15.74 17.98 12.63 14.23 (19.76)
Second Quarter 15.36 15.20 12.32 (1.04) (19.79)
First Quarter 14.95 16.02 8.76 7.16 (41.40)
Year ended March 31, 2020
Fourth Quarter $ 15.13 $ 21.71 $ 7.39 43.49 % (51.16) %
Third Quarter 16.74 22.56 20.60 34.77 23.06
Second Quarter 18.30 22.90 20.57 25.14 12.40
First Quarter 18.58 22.49 20.86 21.04 12.27
(1) NAV per share, is determined as of the last day in the relevant quarter and therefore may not reflect the NAV per share on the date of the high and low sales prices. The NAVs shown are based on outstanding shares at the end of each period.
(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."
Shares of BDCs may trade at a market price that is less than the value of the net assets attributable to those shares. The possibility that our shares of common stock will trade at a discount from net asset value per share or at premiums that are unsustainable over the long term are separate and distinct from the risk that our net asset value per share will decrease. It is not possible to predict whether our common stock will trade at, above, or below net asset value per share.
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DISTRIBUTIONS
We intend to make distributions on a quarterly basis to our shareholders of substantially all of our taxable income. In lieu of cash, we may make deemed distributions of certain net capital gains to our shareholders.
The payment dates and amounts of cash dividends per share for the past three fiscal years are as follows:
Payment Date Cash Dividend
Fiscal Year 2021
June 30, 2020 1
$ 0.51
September 30, 2020 1
0.51
December 31, 2020 1
0.51
March 31, 2021 1
0.52
$ 2.05
Fiscal Year 2020
June 28, 2019 1
$ 0.49
September 30, 2019 1
0.50
December 31, 2019 2
1.25
March 31, 2020 1
0.51
$ 2.75
Fiscal Year 2019
July 2, 2018 3
$ 0.89
September 28, 2018 1
0.44
December 31, 2018 1
0.46
March 29, 2019 1
0.48
$ 2.27
1 On each of these dates, the cash dividend paid included a supplemental dividend of $0.10 per share.
2 On December 31, 2019, CSWC paid a regular dividend of $0.40 per share, a supplemental dividend of $0.10 per share and a special dividend of $0.75 per share.
3 On July 2, 2018, CSWC paid a regular dividend of $0.29 per share and a supplemental dividend of $0.60 per share.
On April 21, 2021, the Company’s Board of Directors declared a total dividend of $0.53 per share, comprised of a regular dividend of $0.43 and a supplemental dividend of $0.10, for the quarter ended June 30, 2021. The record date for the dividend is June 15, 2021. The payment date for the dividend is June 30, 2021.
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.
Distribution Policy
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 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). In order to obtain the tax benefits applicable to RICs, we will be required to distribute to our shareholders with respect to each taxable year at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses. 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. 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.
We may retain for investment realized net long-term capital gains in excess of realized net short-term capital losses. We may make deemed distributions to our shareholders of any retained net capital gains. If this happens, our shareholders will
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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. Please refer to “Business —Material U.S. Federal Income Tax Considerations” included in Item 1 of Part I of this Annual Report for further information regarding the consequences of our retention of net capital gains. 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 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.
We have adopted a DRIP which provides for reinvestment of our distributions on behalf of our common shareholders if opted into by a common shareholder. See “Business — Dividend Reinvestment Plan” included in Item I of Part I of this Annual Report on Form 10-K.
Shareholders who receive dividends in the form of stock generally are subject to the same federal, state and local tax consequences as are shareholders who elect to receive their dividends in cash. A shareholder’s basis for determining gain or loss upon the sale of stock received in a dividend from us will be equal to the total dollar amount of the dividend payable to the shareholder. Any stock received in a dividend will have a holding period for tax purposes commencing on the day following the day on which the shares are credited to the U.S. shareholder’s account.
RECENT SALES OF UNREGISTERED EQUITY SECURITIES
We did not sell any securities during the period covered by this Annual Report that were not registered under the Securities Act of 1933.
ISSUER PURCHASES OF EQUITY SECURITIES
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 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.
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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 — $ — — $ —
May 1 through May 31, 2020 — — — —
June 1 through June 30, 2020 (1) 204 14.72 — —
July 1 through July 31, 2020 — — — —
August 1 through August 31, 2020 — — — —
September 1 through September 30, 2020 — — — —
October 1 through October 31, 2020 — — — —
November 1 through November 30, 2020 (1) 15,105 15.63 — —
December 1 through December 31, 2020 — — — —
January 1 through January 31, 2021 — — — —
February 1 through February 28, 2021 — — — —
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. 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.
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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 Russell 2000 Total Return Index, the S&P BDC Index and the KBW Regional Bank Total Return Index. 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. The graph measures total shareholder return, which takes into account both changes in stock price and distributions. It assumes that distributions paid are invested in like securities.
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. The stock price performance included in the above graph is not necessarily indicative of future stock performance.
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Item 6. Selected Financial Data
The following table provides selected financial data relating to our historical financial condition and results of operations as of and for each of the years ended March 31, 2017 through 2021. This data should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes.
Selected Consolidated Financial Data
(In thousands except per share data)
Year ended March 31,
2021 2020 2019 2018 2017
Income statement data:
Investment income:
Interest and dividends $ 64,686 $ 59,361 $ 50,192 $ 34,233 $ 22,324
Interest income from cash and cash equivalents 9 73 36 21 166
Fees and other income 3,367 2,605 1,653 872 984
Total investment income 68,062 62,039 51,881 35,126 23,474
Operating expenses:
Compensation-related expenses 10,700 10,163 9,986 9,238 8,217
Interest expense 17,941 15,836 12,178 4,875 989
General, administrative and other 5,308 5,746 4,959 4,585 4,601
Total operating expenses 33,949 31,745 27,123 18,698 13,807
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
Affiliate investments (1,628) 57 77 90 3,876
Control investments — 44,300 18,653 — 28
Taxes on deemed distribution of long-term capital gains — (3,461) — — —
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 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 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
Net asset value per common share $ 16.01 $ 15.13 $ 18.62 $ 19.08 $ 17.80
Total dividends/distributions declared per common share $ 2.05 $ 2.75 $ 2.27 $ 0.99 $ 0.79
Weighted average number of shares outstanding – basic 19,060 18,000 16,727 16,074 15,825
Weighted average number of shares outstanding – diluted 19,060 18,000 16,734 16,139 15,877
1 “Net realized earnings per share – basic and diluted” is calculated as the sum of “Net investment income (loss)” and “Net realized gain (loss) on investments” divided by weighted average shares outstanding – basic and diluted.
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Year ended March 31,
2021 2020 2019 2018 2017
Balance sheet data:
Assets:
Investments at fair value $ 688,432 $ 553,072 $ 524,071 $ 393,095 $ 286,880
Cash and cash equivalents 31,613 13,744 9,924 7,907 22,386
Interest, escrow and other receivables 12,009 12,230 11,049 5,894 4,308
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
Liabilities:
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
Other liabilities 11,655 4,883 6,516 6,142 5,523
Dividends payable — — — 4,525 7,191
Accrued restoration plan liability 2,979 3,082 3,073 2,937 2,170
Income taxes payable 50 513 192 103 473
Deferred income taxes 3,345 963 — 190 323
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
Other data:
Number of portfolio companies 55 46 37 30 28
Weighted average yield on debt investments at end of period 10.76 % 10.50 % 11.58 % 11.46 % 10.28 %
Weighted average yield on total investments at end of period 10.22 % 10.63 % 10.96 % 10.48 % 10.49 %
Expense ratios (as percentage of average net assets):
Total expenses, excluding interest expense 5.43 % 4.94 % 4.75 % 4.70 % 4.59 %