What changed in this filing

/stocks — the workspaceLOADING

Item 5. Market for Registrant’s Common Equity

2021-03-05 compared with 2020-03-13 · 173 added, 47 removed, 191 unchanged (54% of the section changed)

8 unchanged sentences

NAV Per Share (1)

Premium (Discount) of High Sales Price to NAV

Premium (Discount) of Low Sales Price to NAV

Cash Distribution per Share (2)

Price Range Premium (Discount) of High Sales Price to NAV Premium (Discount) of Low Sales Price to NAV Cash Distribution per Share (2)

Period High Low

First Quarter (3)

* $ 7.92 $ 6.82 * * $ 0.20

Fourth Quarter $ 11.85 $ 7.58 $ 3.97 -36.0 % -66.5 % $ 0.18

Third Quarter

$ 11.18 $ 5.08 $ 4.04 -54.6 % -63.9 % $ 0.17

Second Quarter $ 10.10 $ 5.70 $ 3.52 -43.6 % -65.1 % $ 0.17

2 unchanged sentences

Third Quarter

$ 12.74 $ 12.27 $ 10.98 -3.7 % -13.8 % $ 0.34

Second Quarter $ 12.95 $ 12.80 $ 11.85 -1.2 % -8.5 % $ 0.34

4 unchanged sentences

(3) Period from January 1, 2021 through March 1, 2021.

Includes a special dividend of $0.37 per share representing undistributed net long-term capital gains realized by the Company in 2017.

* Not determinable at the time of filing.

Issuer Purchases of Equity Securities

On May 22, 2018, the Board authorized us to initiate a stock repurchase program under which the we may acquire up to $10.0 million of its outstanding common stock (the "Stock Repurchase Program").

Under the Stock Repurchase Program, we are authorized to repurchase shares in open-market transactions, including through block purchases, depending on prevailing market conditions and other factors.

The Stock Repurchase Program may be extended, modified or discontinued at any time for any reason.

On May 22, 2018, the Board authorized the Stock Repurchase Program under which we could acquire up to $10.0 million of our outstanding common stock through the two-year period ending May 22, 2020.

On May 4, 2020, the Board extended the Stock Repurchase Program for an additional two-year period.

Under the extended Stock Repurchase Program, we are authorized to repurchase shares in open-market transactions, including through block purchases, depending on prevailing market conditions and other factors.

We expect the Stock Repurchase Program to be in place through May 22, 2022, or until the approved dollar amount has been used to repurchase shares.

The Stock Repurchase Program does not obligate us to acquire any specific number of shares, and all repurchases will be made in accordance with SEC Rule 10b-18, which sets certain restrictions on the method, timing, price and volume of stock repurchases.

The Stock Repurchase Program may be extended, modified or discontinued at any time for any reason.

We have provided our stockholders with notice of our intention to repurchase shares of our common stock in accordance with 1940 Act requirements.

We retire all shares of common stock that we purchased in connection with the Stock Repurchase Program.

The following table summarizes the shares of common stock that we repurchased under the Stock Repurchase Program during the years ended December 31, 2020, 2019 and 2018 (amount in thousands except shares).

Total Number of Shares Purchased

Average Price Paid Per Share

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

Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet be Purchased Under the Plans or Programs

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

May 22, 2018 through December 31, 2018 300 $ 10.29 300 $ 9,997

January 1, 2019 through December 31, 2019 — — — —

January 1, 2020 through December 31, 2020 — — — —

Total 300 $ 10.29 300 $ 9,997

Sales of Unregistered Securities

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The graph measures total stockholder return, which takes into account changes in stock price and assumes reinvestment of all dividends and distributions prior to any tax effect.

December 31, 2014

December 31, 2015

December 31, 2016

December 31, 2017

December 31, 2018

December 31, 2019

December 31, 2016 December 31, 2017 December 31, 2018 December 31, 2019 December 31, 2020

OFS Capital Corporation 133.2 127.3 131.1 154.8 118.3

S&P 500 112.0 136.4 130.4 171.5 203.0

RICs 123.7 137.1 131.5 161.9 135.1

Russell 1000 112.1 136.4 129.8 170.6 206.4

The graph and other information under the heading "Stock Performance Graph" in Part II Item 5 of this Annual Report on Form 10-K is "furnished" and 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 and shall not be deemed incorporated by reference in any filing under the Exchange Act.

22 unchanged sentences

There will be no brokerage charges or other charges to stockholders who participate in the plan except that, if a participant elects by written notice to the plan administrator to have the plan administrator sell part or all of the shares held by the plan administrator in the participant’s account and remit the proceeds to the participant, the plan administrator is authorized to deduct a $15.00 transaction fee plus a $0.10 per share brokerage commission from the proceeds.

Our base management fee is 1.75% of the average value of our total assets (other than cash and cash equivalents, and the intangible asset and goodwill resulting from the SBIC Acquisitions;

(3) Our base management fee is 1.75% of the average value of our total assets (other than cash and cash equivalents, and the intangible assets resulting from the SBIC Acquisitions;

but including assets purchased with borrowed amounts, and including assets owned by any consolidated entity).

This item represents projected base management fees for the the next twelve month assuming no additional leverage is incurred.

We increased our leverage to a level below a 200% asset coverage ratio, as permitted under the SBCAA.

We increased our leverage to a level below a 200% asset coverage ratio, as permitted under Section 61(a)(2) of the 1940 Act.

As discussed in footnote (8), below, OFS Advisor agreed to reduce a portion of its base management fee on certain assets associated with the increase in leverage;

17 unchanged sentences

See “Management and Other Agreements — Investment Advisory Agreement.”

The borrowing costs included in the table above are based on our December 31, 2019 balance sheet (which could be subject to change) at a level equivalent to a debt-to-equity ratio of up to 2.16 x (equivalent to $2.16 of debt outstanding for each $1 of equity) which is also equivalent to having an asset coverage ratio of 180% (which excludes the SBA debentures as a result of exemptive relief granted to us by the SEC) as permitted under the SBCAA, and assuming a weighted average interest rate for total outstanding debt of 5.06% .

(5) The borrowing costs included in the table above are based on our proforma debt balances as of February 2021, see “Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations — Recent Developments”, (which could be subject to change) at a level equivalent to a debt-to-equity ratio of up to 2.08x (equivalent to $2.08 of debt outstanding for each $1 of equity) which is also equivalent to having an asset coverage ratio of 176% (which excludes the SBA debentures as a result of exemptive relief granted to us by the SEC) as permitted under Section 61(a)(2) of the 1940 Act, and assuming a weighted average interest rate for total outstanding debt of 5.10%.

We may borrow additional funds from time to time to make investments to the extent we determine that the economic situation is conducive to doing so.

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The base management fee reduction will be renewable on an annual basis and the amount of the base management fee reduction with respect to the OFSCC-FS Assets shall not be subject to recoupment by OFS Advisor.

(9) Estimated.

The following example demonstrates the projected dollar amount of total cumulative expenses over various periods with respect to a hypothetical investment in our common stock.

8 unchanged sentences

For example, if we assumed that we received our 5.0% annual return completely in the form of net realized capital gains on our investments, computed net of all cumulative unrealized depreciation on our investments, the projected dollar amount of total cumulative expenses set forth in the above illustration would be as follows:

1 Year 3 Years 5 Years 10 Years

You would pay the following expenses on a $1,000 investment, assuming a 5.0% annual return

$160 $416 $604 $887

While the examples assume reinvestment of all distributions at net asset value, participants in our dividend reinvestment plan will receive a number of shares of our common stock determined by dividing the total dollar amount of the distribution payable to a participant by the market price per share of our common stock at the close of trading on the dividend payment date.

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Information about our senior securities (including preferred stock, debt securities and other indebtedness) is shown in the following tables for the years ended December 31, 2020, 2019, 2018, 2017, 2016, 2015, 2014, 2013 and 2012.

The senior securities table as of December 31, 2019 was audited by KPMG LLP and the senior securities table as of December 31, 2018, 2017, 2016, 2015, 2014, 2013, and 2012 were audited by our former independent registered public accounting firm.

Information as of December 31, 2013 and 2012 was audited by our previous independent registered public accounting firm.

The senior securities table as of December 31, 2020 and 2019 was audited by KPMG LLP and the senior securities table as of December 31, 2018, 2017, 2016, 2015, 2014, 2013, and 2012 were audited by our former independent registered public accounting firms.

The “ — ” indicates information that the SEC expressly does not require to be disclosed for certain types of senior securities.

2 unchanged sentences

Class and Year (8)

Total Amount Outstanding Excluding Treasury Securities (1)

Total Amount Outstanding (1)

Asset Coverage Per Unit (2)

1 unchanged sentence

Average Market Value Per Unit (4)

December 31, 2019

6.25% Notes due 2023

3 unchanged sentences

December 31, 2019 $ 50,000 $ 7,519 — 25.30

6.375% Notes due 2025

December 31, 2018 $ 50,000 $ 5,645 — 24.84

December 31, 2018

PWB Credit Facility

6.50% Notes due 2025 (9)

December 31, 2020 $ 48,525 $ 7,601 — $22.80

1 unchanged sentence

December 31, 2018 $ 48,525 $ 5,817 — 24.43

5.95% Notes due 2026

December 31, 2020 $ 54,325 $ 6,790 — $21.89

December 31, 2019 $ 54,325 $ 6,920 — 24.75

December 31, 2020 $ 31,450 $ 11,728 — N/A

December 31, 2019 $ 56,450 $ 6,659 — N/A

PWB Credit Facility

December 31, 2020 $ 600 $ 614,760 — N/A

December 31, 2019 $ — $ — — N/A

December 31, 2018 $ 12,000 $ 23,521 — N/A

December 31, 2017 $ 17,600 $ 11,540 — N/A

December 31, 2016 $ 9,500 $ 15,821 — N/A

December 31, 2015 $ — $ — — N/A

WM Credit Facility (6)

December 31, 2014

December 31, 2013

December 31, 2012

December 31, 2014 $ 72,612 $ 2,847 — N/A

December 31, 2013 $ 108,955 $ 2,256 — N/A

December 31, 2012 $ 99,224 $ 2,429 — N/A

SBA debentures (SBIC I LP) (5)

December 31, 2019

December 31, 2018

December 31, 2017

December 31, 2016

December 31, 2015

December 31, 2014

December 31, 2013

December 31, 2012

December 31, 2020 $ 105,270 $ — — N/A

December 31, 2019 $ 149,880 $ — — N/A

December 31, 2018 $ 149,880 $ — — N/A

(dollar amounts in thousands, except per unit data)

Class and Year (8)

Total Amount Outstanding Excluding Treasury Securities (1)

Total Amount Outstanding (1)

Asset Coverage Per Unit (2)

1 unchanged sentence

Average Market Value Per Unit (4)

December 31, 2017 $ 149,880 $ — — N/A

December 31, 2016 $ 149,880 $ — — N/A

December 31, 2015 $ 149,880 $ — — N/A

December 31, 2014 $ 127,295 $ — — N/A

December 31, 2013 $ 26,000 $ — — N/A

December 31, 2012 $ — $ — — N/A

Total Senior Securities (7)

December 31, 2019

December 31, 2018

December 31, 2017

December 31, 2016

December 31, 2015

December 31, 2014

December 31, 2013

December 31, 2012

December 31, 2020 $ 315,170 $ 1,757 — N/A

December 31, 2019 $ 359,180 $ 1,796 — N/A

December 31, 2018 $ 260,405 $ 2,554 — N/A

December 31, 2017 $ 167,480 $ 11,540 — N/A

December 31, 2016 $ 159,380 $ 15,821 — N/A

December 31, 2015 $ 149,880 $ — — N/A

December 31, 2014 $ 199,907 $ 2,847 — N/A

December 31, 2013 $ 134,955 $ 2,256 — N/A

December 31, 2012 $ 99,224 $ 2,429 — N/A

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

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(7) The Asset Coverage Per Unit does not include the SBA debentures as described in footnote 5 above.

(8) Does not include the Unsecured Notes Due February 2026.

See Recent Developments for additional information.

(9) On February 10, 2021, a redemption notice was issued.

See Recent Developments for additional information.

FINANCIAL HIGHLIGHTS

The following is a schedule of financial highlights for the each year in the ten-year period ended December 31, 2020.

The financial highlights as of December 31, 2020 and 2019 were audited by KPMG LLP and the financial highlights for each of the eight years in the period ended December 31, 2018 were audited by our former independent registered public accounting firms.

Years Ended December 31,

2020 2019 2018 2017 2016 2015 2014 2013 2012

Per share operating performance:

Net asset value per share at beginning of year

$ 12.46 $ 13.10 $ 14.12 $ 14.82 $ 14.76 $ 14.24 $ 14.58 $ 14.80 N/A (11)

Net investment income (4)

0.92 1.43 1.38 1.28 1.46 1.39 0.95 0.59 N/A (11)

Net realized gain (loss) on non-control/non-affiliate investments (4)

(0.75) (0.29) (0.37) (0.26) 0.25 (0.31) 0.02 0.01 N/A (11)

Net realized gain on affiliate investments (4)

— — 0.01 0.81 — 0.14 — — N/A (11)

Net realized loss on control investment (4)

— — — — — — (0.37) — N/A (11)

Realized gain from SBIC Acquisition (4)

— — — — — — — 0.29 N/A (11)

Net unrealized depreciation on non-control/non-affiliate investments (4)

(0.82) (0.72) (0.19) (0.78) (0.69) 0.53 0.05 0.04 N/A (11)

Net unrealized appreciation (depreciation) on affiliate investments (4)

0.94 0.40 (0.06) (0.41) 0.33 0.13 0.19 0.05 N/A (11)

Net unrealized appreciation (depreciation) on control investment (4)

0.13 (0.10) (0.06) — 0.07 — 0.18 (0.18) N/A (11)

Loss on extinguishment of debt (4)

(0.06) — — — — — — — N/A (11)

Loss on impairment of goodwill (4)

(0.08) — — — — — — — N/A (11)

Total from operations 0.28 0.72 0.71 0.64 1.42 1.88 1.02 0.80 N/A (11)

Distributions

(0.86) (1.36) (1.73) (1.36) (1.36) (1.36) (1.36) (1.02) N/A (11)

Issuance of common stock (5)

(0.03) — — (0.03) — — — — N/A (11)

— — — 0.05 — — — — N/A (11)

Net asset value per share at end of year $ 11.85 $ 12.46 $ 13.10 $ 14.12 $ 14.82 $ 14.76 $ 14.24 $ 14.58 $ 14.80

Per share market value, end of period

$ 7.15 $ 11.17 $ 10.60 $ 11.90 $ 13.76 $ 11.48 $ 11.78 $ 12.83 $ 13.69

Total return based on market value (1)

(24.0) % 18.3 % 3.5 % (4.7) % 32.3 % 9.0 % 2.4 % 1.3 % (7.6) %

Total return based on net asset value (2)

13.6 % 6.7 % 7.8 % 5.0 % 10.9 % 16.0 % 7.5 % 7.7 % N/M (12)

Shares outstanding at end of period 13,409,559 13,376,836 13,357,337 13,340,217 9,700,297 9,691,170 9,650,834 9,629,797 9,578,691

Weighted average shares outstanding

13,394,005 13,364,244 13,348,203 12,403,706 9,693,801 9,670,153 9,634,471 9,619,723 9,578,691

Ratio/Supplemental Data (in thousands except ratios)

Average net asset value (3)

$ 148,175 $ 171,889 $ 182,468 $ 171,631 $ 142,818 $ 140,002 $ 138,131 $ 141,058 $ 98,164

Net asset value at end of year

$ 158,956 $ 166,627 $ 175,023 $ 188,336 $ 143,778 $ 143,012 $ 137,471 $ 140,378 $ 141,799

Net investment income

$ 12,295 $ 19,098 $ 18,385 $ 15,877 $ 14,145 $ 13,411 $ 9,135 $ 5,718 $ 661

Ratio of total expenses, net to average net assets (8)

22.4 % 19.4 % 13.4 % 10.2 % 11.9 % 13.5 % 9.9 % 8.0 % 13.6% (13)

Ratio of total expenses, net and losses on impairment of goodwill and extinguishment of debt to average net assets (9)

23.7 % — % — % — % — % — % — % — % — %

Ratio of net investment income to average net assets (10)

8.3 % 11.1 % 10.5 % 8.4 % 9.8 % 9.6 % 6.6 % 4.1 % 4.6% (13)

Ratio of goodwill impairment loss to average net assets 0.7 % — % — % — % — % — % — % — % — %

Ratio of loss on extinguishment of debt to average net assets 0.6 % — % — % — % — % — % — % — % — %

Portfolio turnover (7)

28.1 % 21.2 % 41.9 % 50.4 % 18.1 % 44.6 % 34.9 % 19.7 % — %

(1) Calculated as ending market value less beginning market value, adjusted for distributions reinvested at prices based on the Company’s dividend reinvestment plan for the respective distributions.

(2) Calculated as ending net asset value less beginning net asset value, adjusted for distributions reinvested at the Company’s dividend reinvestment plan for the respective distributions.

(3) Based on the average of the net asset value at the beginning of the indicated period and the end of each calendar quarter within the period indicated.

(4) Calculated on the average share method.

(5) The issuance of common stock on a per share basis reflects the incremental net asset value change as a result of the Offering.

(6) Represents the impact of different share amounts used in calculating per share data as a result of calculating certain per share data based on a weighted average shares outstanding during the period and certain per share data based on the shares outstanding as of a period end or transaction date.

(7) Portfolio turnover rate is calculated using the lesser of year-to-date sales, Structured Finance Note distributions and principal payments or year-to-date purchases over the average of the invested assets at fair value at the beginning of the indicated period and the end of each calendar quarter within the period indicated.

(8) Ratio of total expenses before incentive fee waiver to average net assets was 22.7% and 13.4% for the years ended December 31, 2020 and December 31, 2018, respectively.

(9) Ratio of total expenses before incentive fee waiver and losses on impairment of goodwill and extinguishment of debt to average net assets was 24.0% for the year ended December 31, 2020.

(10) Ratio of net investment income before incentive fee waiver to average net assets was 8.0% and 10.5% for the years ended December 31, 2020 and December 31, 2018, respectively.

(11) Per share data is not provided as the Company did not have shares of common stock outstanding prior to its IPO.

(12) Not meaningful.

(13) Annualized.

Selected Consolidated Financial Data

1 unchanged sentence

For the Years Ended December 31,

2020 2019 2018 2017 2016

Statement of Operations Data:

1 unchanged sentence

Interest income

$ 41,517 $ 48,902 $ 38,607 $ 28,124 $ 26,400

PIK interest income

1,528 926 1,193 1,508 1,194

Dividend income

450 502 315 482 475

Preferred equity PIK dividend income

504 899 906 1,399 1,433

1,476 1,292 1,813 1,913 1,592

Total investment income

45,475 52,521 42,834 33,426 31,094

Management fees

7,605 8,271 6,335 4,999 4,516

Incentive fees, net of waiver

1,584 4,760 4,387 2,962 3,333

Other expenses

23,991 20,439 13,727 9,588 9,100

Total expenses, net

33,180 33,470 24,449 17,549 16,949

Net investment income

12,295 19,098 18,385 15,877 14,145

Net realized gain (loss) on investments

(10,021) (3,900) (4,779) 6,833 2,404

Net unrealized appreciation (depreciation) on investments

3,317 (5,645) (4,034) (14,800) (2,721)

Loss on extinguishment of debt (820) — — — —

Loss on impairment of goodwill (1,077) — — — —

Net increase in net assets resulting from operations

3,694 9,553 9,572 7,910 13,828

Per share data:

Net asset value

$ 11.85 $ 12.46 $ 13.10 $ 14.12 $ 14.82

Net investment income

0.92 1.43 1.38 1.28 1.46

Net realized gain (loss) on investments

(0.75) (0.29) (0.36) 0.55 0.25

Net unrealized appreciation (depreciation) on investments

0.25 (0.42) (0.30) (1.19) (0.29)

Net increase in net assets resulting from operations

0.28 0.71 0.72 0.64 1.43

Distributions declared (1)

0.86 1.36 1.73 1.36 1.36

Total return based on market value (7)

(24.0) % 18.3 % 3.5 % (4.7) % 32.3 %

Balance sheet data at period end:

Investments, at fair value

$ 442,323 $ 516,931 $ 396,797 $ 277,499 $ 281,627

Cash and cash equivalents

37,708 13,447 38,172 72,952 17,659

3,782 7,810 6,452 7,327 5,744

483,813 538,188 441,421 357,778 305,030

Debt 309,185 352,478 254,826 164,823 156,343

Total liabilities

324,857 371,561 266,398 169,442 161,252

Total net assets

158,956 166,627 175,023 188,336 143,778

Other data (unaudited):

Weighted average yield on performing debt and Structured Finance Note investments (3) (6)

10.27 % 10.40 % 11.50 % 12.11 % 12.08 %

Weighted average yield on total debt and Structured Finance Note investments (4) (6)

9.15 % 9.94 % 11.12 % 11.59 % 11.72 %

Weighted average yield on total investments (5) (6)

8.56 % 9.59 % 10.49 % 10.35 % 10.88 %

Number of portfolio companies at end of year

62 85 50 37 41

(1) The return of capital portion of these distributions for the years ended December 31, 2020, 2019, 2018, 2017, 2016, and 2015, was $0, $0 $0, $0, $0.09, and $0.23, respectively.

9 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