UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): November 6, 2017
CAPITAL SOUTHWEST CORPORATION
(Exact Name Of Registrant As Specified In Charter)
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Texas |
814-00061 |
75-1072796 |
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(State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
5400 Lyndon B. Johnson Freeway, Suite 1300
Dallas, Texas 75240
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including area code: (214) 238-5700
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On November 6, 2017, Capital Southwest Corporation (the “Company”) issued a press release, a copy of which has been furnished as Exhibit 99.1 hereto.
The information furnished in this Current Report on Form 8-K under Item 2.02, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1934, except as shall be expressly set forth by reference in a future filing.
Item 7.01 Regulation FD Disclosure.
The Company expects to hold a conference call with analysts and investors on November 7, 2017. A copy of the investor presentation slides to be used by the Company on such conference call is furnished as Exhibit 99.2 to this Form 8-K and incorporated herein by reference.
The information set forth under this Item 7.01, including Exhibit 99.2, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
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Exhibit No. |
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Description |
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99.1 |
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Press release issued by Capital Southwest Corporation on November 6, 2017 |
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99.2 |
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Investor presentation slides |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: November 6, 2017
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By: |
/s/ Bowen S. Diehl |
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Name: Bowen S. Diehl |
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Title: Chief Executive Officer and President |
EXHIBIT INDEX
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Exhibit No. |
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Description |
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Press release issued by Capital Southwest Corporation on November 6, 2017 |
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Investor presentation slides |
Exhibit 99.1
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Lincoln Centre Tower I 5400 Lyndon B. Johnson Freeway, Suite 1300 Dallas, Texas 75240 T 214.238.5700 F 214.238.5701 |
Capital Southwest Announces Financial Results for Second Fiscal Quarter Ended September 30, 2017
CSWC Reports Pre-Tax Net Investment Income of $0.25 Per Share and Net Asset Value of $18.26 Per Share
Dallas, Texas – November 6, 2017 – Capital Southwest Corporation (“Capital Southwest” or the “Company”; Nasdaq: CSWC), an internally managed Business Development Company, today announced its financial results for the second fiscal quarter ended September 30, 2017.
Second Quarter Fiscal Year 2018 Financial Highlights
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Total Investment Portfolio increased to $321.9 million during the quarter |
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No investments currently on non-accrual |
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Total Credit Portfolio increased to $187.3 million during the quarter |
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$28.1 million in new committed credit investments |
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$17.1 million in prepayments and amortization on credit investments |
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Total CSWC investment in I-45 SLF - $67.4 million |
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I-45 SLF portfolio increased to $223.8 million during the quarter |
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$28.3 million in new committed credit investments |
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$14.2 million in prepayments and amortization on credit investments |
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I-45 SLF portfolio consists of 46 issuers: 94% 1st Lien Debt and 6% 2nd Lien Debt |
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Total Equity Portfolio, excluding investment in I-45 SLF, increased to $67.1 million during the quarter |
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$4.4 million in new equity investments during the quarter, consisting of co-investments alongside two new credit investments |
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Pre-Tax Net Investment Income of $4.1 million, or $0.25 per weighted average diluted share |
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Declared and Paid Quarterly Dividend of $0.24 per share |
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Net Realized and Unrealized Gains on Investments: $4.7 million |
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Total Cash and Cash Equivalents: $33.3 million |
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Total Net Assets: $292.5 million |
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Net Asset Value per Share: $18.26 |
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Weighted Average Yield on Debt Investments: 10.71% |
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Weighted Average Yield on all Portfolio Investments: 10.65% |
In commenting on the Company's results, Bowen Diehl, President and Chief Executive Officer, stated, “We are pleased with the further progress we made this quarter towards building a fully-invested credit portfolio. Deal flow in the Lower Middle Market was strong during the quarter, with several deals in late stage diligence and documentation carrying over into the current quarter. Heavy prepayments continue in the Upper Middle Market with value on new deals in the Upper Middle Market increasingly difficult to find. Our portfolio evolution continues with an increasing portion being represented by first lien senior secured loans to Lower Middle Market companies. Finally, with our shelf registration now effective, we are able to consider capital markets alternatives as we design our capitalization strategy going forward.”
Second Quarter Fiscal Year Portfolio and Investment Activities
During the quarter ended September 30, 2017, the Company originated two new investments totaling $32.5 million. New investment transactions which occurred during the quarter ended September 30, 2017 are summarized as follows:
Zenfolio Inc., $13.5 million 1st Lien Senior Secured Debt, $1.9 million in Common Stock, $2.5 million Delayed Draw Term Loan, $2.0 million Revolving Loan: Zenfolio Inc. is a SaaS platform for professional and amateur photographers.
Alliance Sports Group, L.P., $10.1 million Senior Subordinated Debt, $2.5 million membership interest: Alliance Sports Group, through its robust sourcing and distribution platform, designs, sources, sells, and distributes a broad range of branded consumer products through unique point of purchase displays.
During the quarter ended September 30, 2017, the Company received full prepayments on three investments totaling $16.1 million. The Company received a full prepayment on the following investments:
Winzer Corporation, Senior Subordinated Debt: Proceeds of $8.1 million, resulting in an IRR of 12.7%.
Water Pik, Inc., 2nd Lien Senior Secured Debt: Proceeds of $4.3 million, resulting in an IRR of 12.1%.
Cast and Crew Payroll, LLC, 2nd Lien Senior Secured Debt: Proceeds of $3.7 million, resulting in an IRR of 9.8%.
Second Fiscal Quarter 2018 Operating Results
For the quarter ended September 30, 2017, Capital Southwest reported total investment income of $8.5 million, compared to $7.7 million in the prior quarter. Interest income grew by $0.8 million over the prior quarter, driven by net portfolio growth.
For the quarter ended September 30, 2017, total operating expenses (excluding tax and interest expense) were $3.5 million, compared to $3.4 million in the prior quarter. The increase in operating expenses was due to an increase in non-recurring employee recruitment expenses, due to the hiring of a new Principal on the investment team.
For the quarter ended September 30, 2017, total interest expense was $0.9 million, compared to $0.7 million in the prior quarter. The increase in interest expense was due to increased average debt outstanding on the revolving credit facility during the quarter.
For the quarter ended September 30, 2017, total pre-tax net investment income was $4.1 million, compared to $3.6 million in the prior quarter.
For the quarter ended September 30, 2017, we incurred tax expense of $0.1 million, which remained flat compared to the prior quarter.
During the quarter ended September 30, 2017, Capital Southwest recorded total realized and unrealized gains on investments of $4.7 million, compared to $2.0 million in the prior quarter, primarily driven by strong portfolio company performance. The net increase in net assets resulting from operations was $8.6 million for the quarter, compared to $5.4 million in the prior quarter.
The Company’s net asset value, or NAV, at September 30, 2017 was $18.26 per share, compared to $17.96 at June 30, 2017. The increase in NAV from the prior quarter is primarily due to an increase in net realized and unrealized gains in the current quarter.
Liquidity and Capital Resources
At September 30, 2017, Capital Southwest had unrestricted cash and money market balances of approximately $33.3 million.
In August 2016, the Company entered into a credit facility to provide additional liquidity to support its investment and operational activities, which included total commitments of $100 million, with an accordion for an additional $50 million, from a group of five bank lenders. In August 2017, Capital Southwest increased the total commitments by $15 million to $115 million total, adding an additional lender using the accordion feature. The credit facility is scheduled to mature on August 30, 2020. As of September 30, 2017, Capital Southwest had $56 million in borrowings outstanding under the credit facility. Regulatory leverage at the end of the quarter was 0.2 to 1.
Additionally, I-45 SLF has total commitments outstanding of $165 million from a group of four bank lenders in its Deutsche Bank led credit facility, which is scheduled to mature in July 2022. As of September 30, 2017, I-45 SLF had $139 million in borrowings outstanding under its credit facility. During the quarter, the Company amended the Deutsche Bank credit facility to lower the spread, extend the tenor, and modestly enhance the advance rates.
Share Repurchase Program
On January 25, 2016, Capital Southwest announced that its Board of Directors authorized the repurchase of up to $10 million of its common stock at prices significantly below the Company’s net asset value per share as reported in its most recent financial statements. The Board authorized the plan because it believes that the Company’s common stock may be undervalued from time to time due to market volatility. As of September 30, 2017, no shares had been purchased under the plan.
Second Quarter 2018 Earnings Results Conference Call and Webcast
Capital Southwest has scheduled a conference call on Tuesday, November 7, 2017, at 11:00 a.m. Eastern Time to discuss the second quarter 2018 financial results. You may access the call by dialing 1-866-502-8274 and using the Conference ID 96686873 at least 10 minutes before the call. The call can also be accessed using the Investor Relations section of Capital Southwest's website at www.capitalsouthwest.com, or by using https://edge.media-server.com/m6/p/h2ri2jhw.
A telephonic replay will be available through November 14, 2017 by dialing 1-855-859-2056 and using the Conference ID 96686873. An audio archive of the conference call will also be available on the Investor Relations section of Capital Southwest’s website.
For a more detailed discussion of the financial and other information included in this press release, please refer to the Capital Southwest Form 10-Q for the period ended September 30, 2017 to be filed with the Securities and Exchange Commission and Capital Southwest’s Second Fiscal Quarter 2018 Earnings Presentation to be posted on the Investor Relations section of Capital Southwest’s website at www.capitalsouthwest.com.
About Capital Southwest
Capital Southwest Corporation (Nasdaq: CSWC) is a Dallas, Texas-based, internally managed Business Development Company, with approximately $293 million in net assets as of September 30, 2017. Capital Southwest is a middle-market lending firm focused on supporting the acquisition and growth of middle market businesses. Capital Southwest makes investments ranging from $5 to $20 million in securities across the capital structure, including first lien, unitranche, second lien, subordinated debt and non-control equity co-investments. As a public company with a permanent capital base, Capital Southwest has the flexibility to be creative in its financing solutions and to invest to support the growth of its portfolio companies over long periods of time.
Forward-Looking Statements
This press release contains historical information and forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995 with respect to the business and investments of Capital Southwest. Forward-looking statements are statements that are not historical statements and can often be identified by words such as “will, “ “may,” “could,” “believe, ““expect“ and similar expressions and variations or negatives of these words. These statements are based on management's current expectations, assumptions and beliefs. They are not guarantees of future results and are subject to numerous risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed in any forward-looking statement. These risks include risks related to changes in the markets in which Capital Southwest invests, changes in the financial and lending markets, regulatory changes, tax treatment and general economic and business conditions.
Readers should not place undue reliance on any forward-looking statements and are encouraged to review Capital Southwest's Annual Report on Form 10-K for the year ended March 31, 2017 and subsequent filings with the Securities and Exchange Commission for a more complete discussion of the risks and other factors that could affect any forward-looking statements. Except as required by the federal securities laws, Capital Southwest does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changing circumstances or any other reason after the date of this press release.
Investor Relations Contact:
Michael S. Sarner, Chief Financial Officer
214-884-3829
Exhibit 99.2
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Capital Southwest Corporation Q2 2018 Earnings Presentation 5400 Lyndon B. Johnson Freeway, Suite 1300 Dallas, Texas 75240 214.238.5700 capitalsouthwest.com November 7, 2017 |
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This presentation contains forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995 relating to, among other things, the business, financial condition and results of operations of Capital Southwest, the anticipated investment strategies and investments of Capital Southwest, and future market demand. Any statements that are not statements of historical fact are forward-looking statements. Forward-looking statements are often, but not always, preceded by, followed by, or include words such as "believe," "expect," "intend," "plan," "should" or similar words, phrases or expressions or the negative thereof. These statements are made on the basis of the current beliefs, expectations and assumptions of the management of Capital Southwest and speak only as of the date of this presentation. There are a number of risks and uncertainties that could cause Capital Southwest’s actual results to differ materially from the forward-looking statements included in this presentation. For a further discussion of some of the risks and uncertainties applicable to Capital Southwest and its business, see Capital Southwest’s Annual Report on Form 10-K for the fiscal year ended March 31, 2017 and its subsequent filings with the Securities and Exchange Commission. Other unknown or unpredictable factors could also have a material adverse effect on Capital Southwest’s actual future results, performance, or financial condition. As a result of the foregoing, readers are cautioned not to place undue reliance on these forward-looking statements. Capital Southwest does not assume any obligation to revise or to update these forward-looking statements, whether as a result of new information, subsequent events or circumstances, or otherwise, except as may be required by law. Forward-Looking Statements |
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Bowen S. Diehl President and Chief Executive Officer Michael S. Sarner Chief Financial Officer Chris Rehberger VP Finance / Treasurer Conference Call Participants |
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CSWC is a middle-market lending firm focused on supporting the acquisition and growth of middle-market companies across the capital structure CSWC was formed in 1961, and became a BDC in 1988 Publicly-traded on Nasdaq under CSWC ticker Internally Managed BDC with RIC status for tax purposes December 2014 announced intent to spin-off of industrial growth company (“CSW Industrials”; Nasdaq: CSWI) tax free January 2015 launched credit investment strategy September 2015 completed tax free spin off of CSWI 17 employees based in Dallas, Texas Total Balance Sheet Assets of $369 MM as of September 30, 2017 Manage I-45 Senior Loan Fund (“SLF”) in partnership with Main Street Capital (Nasdaq: MAIN) CSWC Company Overview |
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Financial Highlights Q2 2018 Pre-Tax Net Investment Income (“NII”) of $4.1 MM or $0.25 per share Paid Quarterly Dividend of $0.24 per share NAV per share increased to $18.26 from $17.96 Increased Investment Portfolio to $322 MM from $307 MM at fair value $32.5 MM committed in two new originations $16 MM proceeds received from three portfolio exits $59 MM available on Credit Facility and $33 MM in cash and cash equivalents as of quarter end Increased I-45 SLF investment portfolio to $224 MM from $210 MM I-45 distributed $2.2 MM dividend to CSWC $28 MM deployed in six new originations and five add-ons $12 MM proceeds received in six portfolio credit exits Q2 2018 Highlights |
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1.2 % 1.8 % 3.0 % 4.2 % 4.5 %1 5.2 % 5.6 % Over the past four quarters, CSWC has generated $0.90 per share in Pre-Tax NII and paid out $0.81 per share in regular dividends LTM dividend coverage of 111% of Pre-Tax NII In addition, paid out a Special Dividend of $0.26 in Q4 2017 generated primarily from realized gains earned over prior 12 months Dividend Yield increased to 5.6% at 9/30/17 from 1.2% at 3/31/16 NAV has increased to $18.26 per share at 9/30/17 from $17.34 per share at 3/31/16 Evolution of CSWC Generating Consistent Dividend and NAV Growth Dividend Yield – Annualized Quarterly Dividend / CSWC Share Price at Qtr. End (1) The Special Dividend of $0.26 is not included in the Dividend Yield calculation. |
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Lower Middle Market (“LMM”): CSWC led or Club Deals Companies with EBITDA between $3 MM and $15 MM Typical leverage of 2x – 4x Debt to EBITDA through CSWC debt Commitment size up to $20 MM with hold sizes generally $10 to $15 MM Both Sponsored and Non-sponsored deals Securities include first lien, unitranche, second lien and subordinated debt Frequently make equity co-investments alongside CSWC debt Upper Middle Market (“UMM”): Syndicated or Club, First and Second Lien Companies typically have in excess of $50 MM in EBITDA Typical leverage of 3x – 5.5x Debt to EBITDA through CSWC debt position Hold sizes generally $5 to $10 MM Floating Rate First and Second Lien debt securities More liquid assets relative to Lower Middle Market investments Provides flexibility to invest/divest opportunistically based on market conditions and liquidity position Two Pronged Investment Strategy |
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Q2 2018 Portfolio Originations $32.5 MM in new committed Lower Middle Market investments during the quarter ($23 MM funded debt) at a weighted average debt YTM of 11.5% 1. At close, $2.0 MM Revolver and $2.5 MM Delayed Draw Term Loan were unfunded Note: Market Segment refers to Upper Middle Market (“UMM”) and Lower Middle Market (“LMM”) Q2 2018 Portfolio Originations Name Industry Type Market Total Commitment (in $000s) Debt Coupon Debt Yield to Maturity Zenfolio, Inc. (1) Business Services Revolver / 1st Lien / Equity LMM $19,900 L + 9.0% 11.2% Alliance Sports Group Consumer Products & Retail Sub Debt / Equity LMM $12,600 11.0% 12.0% Total $32,500 11.5% |
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Q2 2018 Portfolio Prepayments Prepayments continue to demonstrate our track record of generating attractive risk adjusted returns on shareholders’ capital Note: Market Segment refers to Upper Middle Market (“UMM”) and Lower Middle Market (“LMM”) Q2 2018 Portfolio Exits Name Industry Type Market Proceeds (in $000s) Realized Gain (in $000s) IRR Water Pik Consumer Products & Retail 2nd Lien UMM $4,254 $77 12.1% Cast & Crew Media, Marketing, & Entertainment 2nd Lien UMM $3,705 $19 9.8% Winzer Corporation Distribution Sub Debt LMM $8,100 $114 12.7% Total / Wtd. Avg. $16,060 $210 11.9% |
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Balance Sheet Credit Portfolio Mix Credit portfolio has grown to $187 MM and 73% first lien exposure at 9/30/17 Credit Portfolio (Fair Value) |
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Portfolio Statistics by Investment Strategy Portfolio statistics illustrate CSWC’s prudent investment underwriting Note: All metrics above exclude the I-45 Senior Loan Fund At September 30, 2017, we had equity ownership in approximately 84.6% of our LMM investments. The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost as of September 30, 2017, including accretion of original issue discount but excluding fees payable upon repayment of the debt instruments and any debt investments on non-accrual status. As of September 30, 2017, there were no investments on non-accrual status. Weighted-average annual effective yield is higher than what an investor in shares in our common stock will realize on its investment because it does not reflect our expenses or any sales load paid by an investor. Weighted average metrics are calculated using investment cost basis weighting. Includes CSWC debt investments only. Calculated as the amount of each portfolio company’s debt (including CSWC’s position and debt senior or pari passu to CSWC’s position, but excluding debt subordinated to CSWC’s position) in the capital structure divided by each portfolio company’s adjusted EBITDA. Management uses this metric as a guide to evaluate relative risk of its position in each portfolio debt investment Investment Portfolio - Statistics at 9/30/17 US$ in 000s Lower Middle Market (1) Upper Middle Market Number of Portfolio Companies 13 13 Total Cost $131,762 $83,283 Total Fair Value $170,139 $84,320 Average Hold Size (at Cost) $10,136 $6,406 % First Lien Investments (at Cost) 63.5% 61.6% % Second Lien Investments (at Cost) 0.0% 38.4% % Subordinated Debt Investments (at Cost) 14.3% 0.0% % Equity (at Cost) 22.2% 0.0% Wtd. Avg. Yield (2)(3) 11.4% 9.9% Wtd. Avg. EBITDA of Issuer ($MM's) (3) $9.1 $93.8 Wtd. Avg. Leverage through CSWC Security (3) (4) 3.5x 3.7x |
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Portfolio Mix as of 9/30/17 at Fair Value Current Investment Portfolio (By Type) Current Investment Portfolio (By Industry) Current Portfolio of $322 MM continues to be granular, diverse, and focused on income generating securities |
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Interest Rate Sensitivity Fixed vs. Floating Portfolio Composition (1) Debt Portfolio Exposure at 9/30/17 Well-Positioned for Changes to Base Interest Rates Note: Illustrative change in NII is based on a projection of CSWC’s existing debt investments as of 9/30/17, adjusted only for changes in Base Rates. The results of this analysis include the I-45 Senior Loan Fund, which is comprised of 100% floating rate assets and liabilities. (1) Portfolio Composition includes I-45 assets pro rata as a % of CSWC’s equity investment in the fund 5% 95% Fixed Floating Change in Base Interest Rates Illustrative NII Change ($'s) Illustrative NII Change (Per Share) (50bps) ($311,322) ($0.02) 50 bps $901,016 $0.06 100bps $1,802,031 $0.11 150bps $2,703,047 $0.17 200bps $3,604,063 $0.22 |
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I-45 Portfolio Overview Current I-45 Portfolio (By Industry) I-45 portfolio grew to $224 MM while average investment size remained at 2.2% (1) Through I-45 Security Telecommunications Retail Capital Equipment Media: Advertising, Printing & Pub. Healthcare & Pharmaceuticals Current I-45 Portfolio (By Type) 12/31/2016 3/31/2017 6/30/2017 9/30/2017 Total Debt Investments at Fair Value $186,643 $200,243 $209,863 $223,807 Number of Issuers 41 43 46 46 Wtd. Avg. Issuer EBITDA $88,970 $81,417 $80,909 $79,009 Avg. Investment Size as a % of Portfolio 2.4% 2.3% 2.2% 2.2% Wtd. Avg. Net Leverage on Investments (1) 3.2x 3.0x 3.5x 3.5x Wtd. Avg. Yield 8.0% 7.9% 7.9% 7.7% Wtd. Avg. Duration (Yrs) 4.4 4.3 4.9 4.8 I-45 Portfolio Statistics |
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Income Statement (In Thousands, except per share amounts) Quarter Ended 12/31/16 Quarter Ended 3/31/17 Quarter Ended 6/30/17 Quarter Ended 9/30/17 Investment Income Interest Income $3,611 $4,113 $4,520 $5,282 Dividend Income $3,078 $3,002 $3,004 $3,088 Fees and Other Income $176 $611 $200 $139 Total Investment Income $6,865 $7,726 $7,724 $8,509 Expenses Cash Compensation $1,476 $1,704 $1,638 $1,606 Share Based Compensation $321 $382 $368 $384 General & Administrative $1,144 $1,360 $1,228 $1,364 Spin-off Related Expenses $172 $172 $172 $173 Total Expenses (excluding Interest) $3,113 $3,618 $3,406 $3,527 Interest Expense $343 $543 $738 $911 Pre-Tax Net Investment Income $3,409 $3,565 $3,580 $4,071 Taxes and Gain / (Loss) Income Tax Benefit (Expense) ($536) ($284) ($144) ($134) Net realized gain (loss) on investments $72 $4,098 $624 $210 Net increase (decrease) in unrealized appreciation of investments $4,940 ($1,402) $1,384 $4,496 Net increase (decrease) in net assets resulting from operations $7,885 $5,977 $5,444 $8,643 Weighted Average Diluted Shares Outstanding 15,932 16,044 16,072 16,078 Pre-Tax Net Investment Income Per Dil. Weighted Average Share $0.21 $0.22 $0.22 $0.25 Quarterly Dividends per Share $0.17 $0.19 $0.21 $0.24 |
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Balance Sheet (In Thousands, except per share amounts) Quarter Ended 12/31/2016 Quarter Ended 3/31/2017 Quarter Ended 6/30/2017 Quarter Ended 9/30/2017 Assets Portfolio Investments $267,131 $286,880 $306,582 $321,860 Cash & Cash Equivalents $32,671 $22,386 $12,359 $33,329 Deferred Tax Asset $1,940 $2,017 $1,858 $1,846 Other Assets $10,592 $14,469 $10,391 $11,635 Total Assets $312,334 $325,752 $331,190 $368,670 Liabilities Credit Facility $15,000 $25,000 $25,000 $56,000 Payable for Unsettled Transaction $0 $0 $9,263 $0 Other Liabilities $11,890 $15,680 $9,500 $20,156 Total Liabilities $26,890 $40,680 $43,763 $76,156 Shareholders Equity Net Asset Value $285,444 $285,072 $287,427 $292,514 NAV per Share $17.88 $17.80 $17.96 $18.26 Debt to Equity 0.1x 0.1x 0.1x 0.2x Shares Outstanding at Period End 15,965 16,011 16,006 16,019 |
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Portfolio Statistics CSWC utilizes an internal 1 - 4 investment rating system in which 1 represents material outperformance and 4 represents material underperformance. All new investments are initially set to 2. Includes dividends from Media Recovery, Inc. and I-45 Senior Loan Fund. Excludes CSWC equity investment in I-45 Senior Loan Fund. At Fair Value Continuing to build a well performing credit portfolio with no non-accruals Quarter Ended 12/31/2016 Quarter Ended 3/31/2017 Quarter Ended 6/30/2017 Quarter Ended 9/30/2017 Portfolio Statistics Fair Value of Debt Investments $151,465 $167,447 $181,725 $187,316 Average Debt Investment Hold Size $5,826 $5,980 $6,490 $6,938 Fair Value of Debt Investments as a % of Par 98% 99% 99% 99% % of Debt Portfolio on Non-Accrual (at Fair Value) 0.0% 0.0% 0.0% 0.0% Weighted Average Investment Rating (1) 1.9 1.9 2.0 2.0 Weighted Average Yield on Debt Investments 10.3% 10.3% 10.5% 10.7% Total Fair Value of Portfolio Investments $267,131 $286,880 $306,582 $321,860 Weighted Average Yield on all Portfolio Investments (2) 10.7% 10.5% 10.4% 10.7% Investment Mix (Debt vs. Equity) (3) (4) 73% / 27% 75% / 25% 76% / 24% 74% / 26% Investment Mix (Yielding vs. Non-Yielding) (4) 94% / 6% 95% / 5% 95% / 5% 94% / 6% |
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Credit Portfolio Roll Forward Credit portfolio has grown to $187 MM at 9/30/17 from $138 MM at 9/30/16 Includes purchases of new investments, as well as discount accretion on existing investments. Includes conversion of $2.7 million debt security in legacy Titan Liner to equity in 12/31/16 quarter |
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Investment Income Detail Constructing a portfolio of investments with recurring cash yield Non-Recurring income principally made up of acceleration of unamortized OID and prepayment fees Recurring cash interest income continues to grow quarter over quarter Earned less non-recurring prepayment fees in Q2 2018 versus previous quarter PIK income remains a minor portion of NII (In Thousands) Quarter Ended 12/31/16 Quarter Ended 3/31/17 Quarter Ended 6/30/17 Quarter Ended 9/30/17 Investment Income Breakdown Cash Interest $3,490 $3,913 $4,264 $5,082 Cash Dividends $3,078 $3,002 $3,004 $3,018 PIK Income $0 $63 $73 $70 Amortization of purchase discounts and fees $120 $136 $183 $200 Management/Admin Fees $105 $115 $128 $139 Prepayment Fees & Other Income $73 $497 $72 $0 Total Investment Income $6,865 $7,726 $7,724 $8,509 Key Metrics Cash Income as a % of Investment Income 98% 97% 97% 97% % of Total Investment Income that is Recurring (1) 90% 90% 93% 97% |
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Financial Highlights Quarter Ended 12/31/2016 Quarter Ended 3/31/2017 Quarter Ended 6/30/2017 Quarter Ended 9/30/2017 Financial Highlights Pre-Tax Net Investment Income Per Wtd Avg Diluted Share $0.21 $0.22 $0.22 $0.25 Pre-Tax Net Investment Income Return on Equity (ROE) 4.79% 4.99% 4.96% 5.55% Realized Earnings Per Wtd Avg Diluted Share $0.18 $0.46 $0.25 $0.26 Realized Earnings ROE 4.14% 10.33% 5.63% 5.65% Earnings Per Wtd Avg Diluted Share $0.49 $0.37 $0.34 $0.54 Earnings Return on Equity (ROE) 11.07% 8.37% 7.55% 11.77% Quarterly Dividends Per Share $0.17 $0.19 $0.21 $0.24 Special Dividends per Share $0.00 $0.26 $0.00 $0.00 NAV Per Share $17.88 $17.80 $17.96 $18.26 |
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Corporate Information Board of Directors Senior Management Fiscal Year End Inside Directors March 31 Bowen S. Diehl Bowen S. Diehl President & Chief Executive Officer Independent Auditor Independent Directors David R. Brooks Michael S. Sarner Jack D. Furst Chief Financial Officer, Secretary & Treasurer T. Duane Morgan William R. Thomas Corporate Counsel John H. Wilson Investor Relations Michael S. Sarner Capital Southwest Corporate Offices & Website 214-884-3829 5400 LBJ Freeway msarner@capitalsouthwest.com Transfer Agent 13th Floor American Stock Transfer & Trust Company, LLC Dallas, TX 75240 Securities Listing 800-937-5449 http://www.capitalsouthwest.com NASDAQ: CSWC www.amstock.com Contact Information Robert W. Baird & Co. Bryce Rowe, CFA Direct: 804-447-8019 National Securities Corporation Christopher R. Testa Direct: 212-417-7447 Janney Montgomery Scott, LLC Mitchel Penn, CFA Direct: 410-583-5976 Jones Day / Eversheds Sutherland RSM US Chicago, IL Industry Analyst Coverage Firm Analyst |
