What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2022-05-24 compared with 2021-05-26 · 20 added, 102 removed, 109 unchanged (53% of the section changed)

11 unchanged sentences

2018 40,000 4.16 — N/A

2017 25,000 12.40 — N/A

December 2022 Notes

10 unchanged sentences

2018 — — — N/A

2017 — — — N/A

January 2026 Notes

4 unchanged sentences

2018 — — — N/A

2017 — — — N/A

October 2026 Notes

2022 $ 150,000 1.93 — N/A

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

1 unchanged sentence

Asset coverage per unit is expressed in terms of dollar amounts per $1,000 of indebtedness.

On August 11, 2021, we received an exemptive order from the SEC to permit us to exclude the senior

securities issued by SBIC I or any future SBIC subsidiary of CSWC from the definition of senior securities in the asset coverage requirement applicable to CSWC under the 1940 Act.

(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.

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

PRICE RANGE OF COMMON STOCK AND HOLDERS

23 unchanged sentences

It is not possible to predict whether our common stock will trade at, above, or below net asset value per share.

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

September 30, 2020 1

December 31, 2020 1

March 31, 2021 1

Fiscal Year 2020

June 28, 2019 1

September 30, 2019 1

December 31, 2019 2

March 31, 2020 1

Fiscal Year 2019

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.

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

8 unchanged sentences

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.

2 unchanged sentences

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.

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

10 unchanged sentences

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.

On July 28, 2021, the Company’s Board of Directors approved a share repurchase program authorizing the Company to repurchase up to $20 million of its outstanding shares of 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 Exchange Act.

On August 31, 2021, the Company entered into a share repurchase agreement, which became effective immediately, and the Company will cease purchasing its common stock under the share repurchase program upon the earlier of, among other things:

(1) the date on which the aggregate purchase price for all shares equals $20 million including, without limitation, all applicable fees, costs and expenses;

or (2) upon written notice by the Company to the broker that the share repurchase agreement is

During the year ended March 31, 2022, the Company did not repurchase any shares under the share repurchase program.

The following table provides information regarding purchases of our common stock during the year ended March 31, 2022.

14 unchanged sentences

(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.

(2) On July 28, 2021, the Company’s Board of Directors approved a share repurchase program authorizing the Company to repurchase up to $20 million of its outstanding shares of 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 Exchange Act.

On August 31, 2021 the Company entered into a share repurchase agreement, which became effective immediately, and the Company shall cease purchasing its common stock under the share repurchase program upon the earlier of, among other things:

(1) the date on which the aggregate purchase price for all shares equals $20 million including, without limitation, all applicable fees, costs and expenses;

or (2) upon written notice by the Company to the broker that the share repurchase agreement is terminated.

During the year ended March 31, 2022, the Company did not repurchase any shares under the share repurchase program.

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, 2017 and reinvestment of dividends.

3 unchanged sentences

The stock price performance included in the above graph is not necessarily indicative of future stock performance.

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.

Year ended March 31,

2021 2020 2019 2018 2017

Balance sheet data:

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

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

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 %

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