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): August 7, 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 August 7, 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 August 8, 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 August 7, 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: August 7, 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 August 7, 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 First Fiscal Quarter Ended June 30, 2017
CSWC Reports Pre-Tax Net Investment Income of $0.22 Per Share
Dallas, Texas – August 7, 2017 – Capital Southwest Corporation (“Capital Southwest” or the “Company”; Nasdaq: CSWC) today announced its financial results for the first fiscal quarter ended June 30, 2017.
First Quarter Fiscal Year 2018 Financial Highlights
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Total Investment Portfolio increased to $306.6 million from $286.9 million during the quarter |
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No investments currently on non-accrual |
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Total Credit Portfolio increased to $181.7 million from $167.4 million during the quarter |
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$38.4 million in new credit investments |
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$24.1 million in prepayments and amortization on credit investments |
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Total CSWC investment in I-45 SLF increased to $67.5 million from $63.4 million during the quarter |
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I-45 SLF portfolio increased to $209.9 million from $200.2 million during the quarter |
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$54.7 million in new credit investments |
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$42.9 million in prepayments |
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I-45 SLF portfolio consists of 46 issuers: 93% 1st Lien Debt and 7% 2nd Lien Debt |
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Total Equity Portfolio, excluding investment in I-45 SLF, increased to $57.3 million from $56.0 million during the quarter |
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$1.0 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 $3.6 million, or $0.22 per weighted average diluted share |
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Grew recurring interest income $0.4 million or $0.03 per share over prior quarter |
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Declared and Paid Quarterly Dividend of $0.21 per share |
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Net Realized and Unrealized Gains on Investments: $2.0 million |
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Total Cash: $12.4 million |
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Total Net Assets: $287.4 million |
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Net Asset Value per Share: $17.96 |
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Weighted Average Yield on Debt Investments: 10.5% |
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Weighted Average Yield on all Portfolio Investments: 10.4% |
In commenting on the Company's results, Bowen Diehl, President and Chief Executive Officer, stated, “This quarter we continued to execute on our strategy of building out a middle market credit portfolio that is well positioned for the late innings of the economic cycle, with our originations concentrated in first lien, floating rate securities. A continuation of the prepayment cycle, driven by the robust credit markets, resulted in heavy prepayments during the quarter in our Upper Middle Market portfolio. We experienced strong origination volume in our core Lower Middle Market platform, further advancing the rotation of our portfolio from syndicated loans in the Upper Middle Market to the Lower Middle Market. Our growing middle market credit portfolio has continued to drive steady increases in both our recurring interest income and quarterly dividend yield. Finally, with the availability on our credit facilities and our low regulatory leverage of only 0.1 to 1, we are in a strong financial position to fund future portfolio growth.”
First Quarter Fiscal Year Portfolio and Investment Activities
During the quarter ended June 30, 2017, the Company originated four new investments and one follow-on investment totaling $38.4 million. New investment transactions which occurred during the quarter ended June 30, 2017 are summarized as follows:
Lighting Retrofit International, $4.8 million add-on to 1st Lien Senior Secured Debt, $0.5 million in Preferred Stock: Lighting Retrofit International is a leading provider of design-build energy efficiency services.
Wastewater Specialties, $11.0 million 1st Lien Senior Secured Debt: Wastewater Specialties is a provider of industrial cleaning services.
RJO Holdings Corp., $7.5 million 1st Lien Senior Secured Debt: RJO Holdings Corp. is an independent Futures Commission Merchant and global broker of agricultural-related transactions.
Tax Advisors Group, $4.6 million Senior Subordinated Debt and $0.5 million in Common Stock: Tax Advisors Group is a provider of Business Personal Property (“BPP”) tax consulting.
AAC Holdings, $9.5 million in 1st Lien Senior Secured Debt: AAC Holdings is a provider of substance abuse treatment services.
During the quarter ended June 30, 2017, the Company received full prepayments on four investments totaling $19.2 million. The Company received a full prepayment on the following investments:
Infogroup, Inc.: Proceeds of $4.9 million, generating an IRR of 11.0%.
LTI Holdings, Inc.: Proceeds of $7.0 million, resulting in an IRR of 12.9%.
TaxAct, Inc.: Proceeds of $2.4 million, resulting in an IRR of 9.9%.
Imagine! Print Solutions, Inc.: Proceeds of $4.9 million, resulting in an IRR of 9.0%
First Fiscal Quarter 2018 Operating Results
For the quarter ended June 30, 2017, Capital Southwest reported total investment income of $7.7 million, compared to $7.7 million in the prior quarter. Recurring interest income grew by $0.4 million over the prior quarter while one-time prepayment fees decreased $0.4 million compared to the prior quarter.
For the quarter ended June 30, 2017, total operating expenses (excluding tax and interest expense) were $3.4 million, compared to $3.6 million in the prior quarter. The decrease in operating expenses was due primarily to a decrease in the year-end bonus accrual and legal fees related to corporate matters incurred in the prior quarter.
For the quarter ended June 30, 2017, there was interest expense of $0.7 million, compared to $0.5 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 June 30, 2017, total pre-tax net investment income was $3.6 million, compared to $3.6 million in the prior quarter.
For the quarter ended June 30, 2017, we incurred tax expense of $0.1 million, compared to $0.3 million in the prior quarter.
During the quarter ended June 30, 2017, Capital Southwest recorded total realized and unrealized gains on investments of $2.0 million, compared to $2.7 million in the prior quarter. The net increase in net assets resulting from operations was $5.4 million for the quarter, compared to $6.0 million in the prior quarter.
The Company’s net asset value, or NAV, at June 30, 2017 was $17.96 per share, as compared to $17.80 at March 31, 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 June 30, 2017 Capital Southwest had unrestricted cash and money market balances of approximately $12.4 million and borrowing capacity on our credit facility of $75.0 million. Regulatory leverage at the end of the quarter was 0.1 to 1.
In August 2016, the Company entered into a credit facility to provide additional liquidity to support its investment and operational activities. The facility includes total commitments of $100.0 million, with an accordion for an additional $50.0 million, from a diversified group of five lenders. The credit facility is scheduled to mature on August 30, 2020. As of June 30, 2017, Capital Southwest had $25.0 million in borrowings outstanding under the credit facility.
Additionally, I-45 SLF has total commitments outstanding of $165.0 million from a diversified group of four lenders on its credit facility, which is scheduled to mature in November 2022. As of June 30, 2017, I-45 SLF had $132.0 million in borrowings outstanding under its credit facility.
Share Repurchase Program
On January 25, 2016, Capital Southwest announced that its Board of Directors authorized the repurchase of up to $10.0 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 June 30, 2017, no shares have been purchased under the plan.
First Quarter 2018 Earnings Results Conference Call and Webcast
Capital Southwest has scheduled a conference call on Tuesday, August 8, 2017, at 11:00 a.m. Eastern Time to discuss the first quarter 2018 financial results. You may access the call by dialing 1-866-502-8274 and using the Conference ID 53131500 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 http://edge.media-server.com/m/p/f6zubqe9.
A telephonic replay will be available through August 15, 2017 by dialing 1-855-859-2056 and using the Conference ID 53131500. 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 June 30, 2017 to be filed with the Securities and Exchange Commission and Capital Southwest’s First 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 $287.4 million in net assets as of June 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," "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 Q1 2018 Earnings Presentation 5400 Lyndon B. Johnson Freeway, Suite 1300 Dallas, Texas 75240 214.238.5700 capitalsouthwest.com August 8, 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 preceded by, followed by, or include the words "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 16 employees based in Dallas, Texas Total Balance Sheet Assets of $331 MM as of June 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 Q1 2018 Pre-Tax NII of $3.6 MM or $0.22 per share Paid Quarterly Dividend of $0.21 per share Increased Investment Portfolio to $307 MM from $287 MM at fair value $38 MM deployed in four new originations and one add-on $19 MM proceeds received from four portfolio exits $75 MM available on Credit Facility and $12.4 MM in cash available to fund investment activity as of quarter end Increased I-45 SLF investment portfolio to $210 MM from $200 MM I-45 distributed $2.3 MM dividend to CSWC $55 MM deployed in 12 new originations and one add-on $43 MM proceeds received in ten portfolio exits Q1 2018 Highlights |
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Balance Sheet Credit Portfolio Growth Credit portfolio has grown to $182 MM at 6/30/17 from $84 MM at 6/30/16 Debt Portfolio (Fair Value) 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 (In Millions) 9/30/2016 12/31/2016 3/31/2017 6/30/2017 Debt Investments at Fair Value Beginning Total Debt Portfolio (FV) $83.7 $137.6 $151.4 $167.4 New Originations (1) $53.8 $26.6 $37.1 $36.8 Repayments & Exits (2) ($0.9) ($13.2) ($23.0) ($24.1) Appreciation / (Depreciation) $1.0 $0.4 $1.9 $1.6 Change in Debt Investments (FV) $53.9 $13.8 $16.0 $14.3 Ending Total Debt Portfolio (FV) $137.6 $151.4 $167.4 $181.7 |
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Lower Middle Market (“LMM”): CSWC led or Club Deals Companies with EBITDA greater than $3 MM Typically 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 Typically 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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Q1 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”) Q1 2018 Portfolio Exits Name Industry Type Market Proceeds Realized Gain IRR Infogroup Inc. Software & IT Services 1st Lien UMM $4,895 $72 11.0% LTI Holdings, Inc. Industrial Products 2nd Lien UMM $7,000 $144 12.9% TaxAct, Inc. Financial Services 1st Lien UMM $2,450 $43 9.9% Imagine! Print Solutions, Inc. Media, Marketing, & Entertainment 1st Lien UMM $4,853 $52 9.0% Total / Wtd. Avg. $19,198 $311 11.1% |
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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 16 employees based in Dallas, Texas Total Balance Sheet Assets of $331 MM as of June 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 Q1 2018 Pre-Tax NII of $3.6 MM or $0.22 per share Paid Quarterly Dividend of $0.21 per share Increased Investment Portfolio to $307 MM from $287 MM at fair value $38 MM deployed in four new originations and one add-on $19 MM proceeds received from four portfolio exits $75 MM available on Credit Facility and $12.4 MM in cash available to fund investment activity as of quarter end Increased I-45 SLF investment portfolio to $210 MM from $200 MM I-45 distributed $2.3 MM dividend to CSWC $55 MM deployed in 12 new originations and one add-on $43 MM proceeds received in ten portfolio exits Q1 2018 Highlights |
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Q1 2018 Portfolio Originations Strong Lower Middle Market origination activity with $38 MM in new investments in Q1 2018 at a weighted average YTM of 10.3% Note: Market Segment refers to Upper Middle Market (“UMM”) and Lower Middle Market (“LMM”) Q1 2018 Portfolio Originations Name Industry Type Market Total Commitment Debt Coupon Debt Yield to Maturity Wastewater Speciality Industrial Services 1st Lien LMM $11,000 L + 8.75% (1.0% floor) 10.6% R. J. O'Brien Commodities 1st Lien UMM $7,500 L + 8.00% (1.0% floor) 9.6% Tax Advisors Group Consumer Services Sub-debt and Equity LMM $5,141 10.00% (2.0% PIK) 12.5% Lighting Retrofit International (Add-on) Environmental Services 1st Lien and Equity LMM $5,278 L + 9.25% (1.0% floor) 11.0% AAC Holdings Healthcare Services 1st Lien UMM $9,500 L + 6.75% (1.0% floor) 8.8% Total $38,419 10.3% |
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I-45 Portfolio Overview Current I-45 Portfolio (By Industry) I-45 portfolio grew to $210 MM while average investment size shrunk to 2.2% (1) Through I-45 Security Telecommunications Services: Business Capital Equipment Media: Advertising, Printing & Pub. Healthcare & Pharmaceuticals Current I-45 Portfolio (By Type) 14% 12% 10% 8% 8% 6% 6% 5% 5% 4% 4% 4% 4% 3% 2% 2% 9/30/2016 12/31/2016 3/31/2017 6/30/2017 Total Debt Investments at Fair Value $172,519 $186,643 $200,243 $209,863 Number of Issuers 36 41 43 46 Wtd. Avg. Issuer EBITDA $100,144 $88,970 $81,417 $80,909 Avg. Investment Size as a % of Portfolio 2.8% 2.4% 2.3% 2.2% Wtd. Avg. Net Leverage on Investments (1) 3.3x 3.2x 3.0x 3.5x Wtd. Avg. Yield 8.1% 8.0% 7.9% 7.9% Wtd. Avg. Duration (Yrs) 4.4 4.4 4.3 4.9 I-45 Portfolio Statistics |
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Portfolio Mix as of 6/30/17 at Fair Value Current Investment Portfolio (By Type) Current Investment Portfolio (By Industry) Current Portfolio of $307 MM continues to be granular, diverse, and focused on income generating securities I - 45 SLF 22% Industrial Products 12% Media, Marketing, & Entertainment 9% Distribution 7% Consumer Products and Retail 6% Environmental Services 5% Energy Services (Upstream) 5% Business Services 4% Industrial Services 4% Consumer Services 3% Food, Agriculture & Beverage 3% Paper & Forest Products 3% Healthcare Services 3% Telecommunications 3% Restaurants 3% Gaming & Leisure 2% Commodities 2% Software & IT Services 2% Healthcare Products 2% 1st Lien 41% I - 45 SLF (93% 1st Lien) 22% 2nd Lien 13% Senior Subordinated Debt 6% Yielding Equity 13% Non - Yielding Equity 5% |
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Interest Rate Sensitivity Fixed vs. Floating Portfolio Composition (1) Debt Portfolio Exposure at 6/30/17 Well-Positioned for Changes to Base Interest Rates Note: Illustrative change in NII is based on a projection of CSWC’s existing debt investments as of 6/30/17, adjusted only for changes in Base Rates. The results of this analysis include the I-45 Senior Loan Fund, which is comprised of 100% floating rate assets and liabilities. (1) Portfolio Composition includes I-45 assets pro rata as a % of CSWC’s equity investment in the fund 5% 95% Fixed Floating Change in Base Interest Rates Illustrative NII Change ($'s) Illustrative NII Change (Per Share) (50bps) ($324,142) ($0.02) 50 bps $1,006,719 $0.06 100bps $2,013,438 $0.13 150bps $3,020,157 $0.19 200bps $4,026,876 $0.25 |
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Interest Rate Sensitivity Fixed vs. Floating Portfolio Composition (1) Debt Portfolio Exposure at 6/30/17 Well-Positioned for Changes to Base Interest Rates Note: Illustrative change in NII is based on a projection of CSWC’s existing debt investments as of 6/30/17, adjusted only for changes in Base Rates. The results of this analysis include the I-45 Senior Loan Fund, which is comprised of 100% floating rate assets and liabilities. (1) Portfolio Composition includes I-45 assets pro rata as a % of CSWC’s equity investment in the fund 5% 95% Fixed Floating Change in Base Interest Rates Illustrative NII Change ($'s) Illustrative NII Change (Per Share) (50bps) ($324,142) ($0.02) 50 bps $1,006,719 $0.06 100bps $2,013,438 $0.13 150bps $3,020,157 $0.19 200bps $4,026,876 $0.25 |
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Income Statement (In Thousands, except per share amounts) Quarter Ended 9/30/16 Quarter Ended 12/31/16 Quarter Ended 3/31/17 Quarter Ended 6/30/17 Investment Income Interest Income $2,630 $3,611 $4,113 $4,520 Dividend Income $1,995 $3,078 $3,002 $3,004 Fees and Other Income $101 $176 $611 $200 Total Investment Income $4,726 $6,865 $7,726 $7,724 Expenses Cash Compensation $1,404 $1,476 $1,704 $1,638 Share Based Compensation $255 $321 $382 $368 General & Administrative $1,015 $1,144 $1,360 $1,228 Spin-off Related Expenses $172 $172 $172 $172 Total Expenses (excluding Interest) $2,846 $3,113 $3,618 $3,406 Interest Expense $103 $343 $543 $738 Pre-Tax Net Investment Income $1,777 $3,409 $3,565 $3,580 Taxes and Gain / (Loss) Income Tax Benefit (Expense) ($412) ($536) ($284) ($144) Net realized gain (loss) on investments $3,527 $72 $4,098 $624 Net increase (decrease) in unrealized appreciation of investments $2,026 $4,940 ($1,402) $1,384 Net increase (decrease) in net assets resulting from operations $6,918 $7,885 $5,977 $5,444 Weighted Average Diluted Shares Outstanding 15,806 15,932 16,044 16,072 Pre-Tax Net Investment Income Per Dil. Weighted Average Share $0.11 $0.21 $0.22 $0.22 |
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Portfolio Mix as of 6/30/17 at Fair Value Current Investment Portfolio (By Type) Current Investment Portfolio (By Industry) Current Portfolio of $307 MM continues to be granular, diverse, and focused on income generating securities I - 45 SLF 22% Industrial Products 12% Media, Marketing, & Entertainment 9% Distribution 7% Consumer Products and Retail 6% Environmental Services 5% Energy Services (Upstream) 5% Business Services 4% Industrial Services 4% Consumer Services 3% Food, Agriculture & Beverage 3% Paper & Forest Products 3% Healthcare Services 3% Telecommunications 3% Restaurants 3% Gaming & Leisure 2% Commodities 2% Software & IT Services 2% Healthcare Products 2% 1st Lien 41% I - 45 SLF (93% 1st Lien) 22% 2nd Lien 13% Senior Subordinated Debt 6% Yielding Equity 13% Non - Yielding Equity 5% |
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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 9/30/2016 Quarter Ended 12/31/2016 Quarter Ended 3/31/2017 Quarter Ended 6/30/2017 Portfolio Statistics Fair Value of Debt Investments $137,586 $151,465 $167,447 $181,725 Average Debt Investment Hold Size $5,982 $5,826 $5,980 $6,731 Fair Value of Debt Investments as a % of Par 98% 98% 99% 99% % of Debt Portfolio on Non-Accrual (at Fair Value) 1.8% 0.0% 0.0% 0.0% Weighted Average Investment Rating (1) 1.9 1.9 1.9 2.0 Weighted Average Yield on Debt Investments 10.00% 10.32% 10.28% 10.51% Total Fair Value of Portfolio Investments $238,319 $267,131 $286,880 $306,582 Weighted Average Yield on all Portfolio Investments (2) 9.23% 10.72% 10.49% 10.43% Investment Mix (Debt vs. Equity) (3) (4) 73% / 27% 73% / 27% 75% / 25% 76% / 24% Investment Mix (Yielding vs. Non-Yielding) (4) 94% / 6% 94% / 6% 95% / 5% 95% / 5% |
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Balance Sheet (In Thousands, except per share amounts) Quarter Ended 9/30/2016 Quarter Ended 12/31/2016 Quarter Ended 3/31/2017 Quarter Ended 6/30/2017 Assets Portfolio Investments $238,319 $267,131 $286,880 $306,582 Cash & Cash Equivalents $57,840 $32,671 $22,386 $12,359 Deferred Tax Asset $1,940 $1,940 $2,017 $1,858 Other Assets $9,176 $10,592 $14,469 $10,391 Total Assets $307,275 $312,334 $325,752 $331,190 Liabilities Credit Facility $0 $15,000 $25,000 $25,000 Payable for Unsettled Transaction $19,361 $0 $0 $9,263 Other Liabilities $8,985 $11,890 $15,680 $9,500 Total Liabilities $28,346 $26,890 $40,680 $43,763 Shareholders Equity Net Asset Value $278,929 $285,444 $285,072 $287,427 NAV per Share $17.74 $17.88 $17.80 $17.96 Debt to Equity 0.0x 0.1x 0.1x 0.1x Shares Outstanding at Period End 15,727 15,965 16,011 16,006 |
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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 RSM Chicago, IL David R. Brooks Michael S. Sarner Jack D. Furst Chief Financial Officer, Secretary & Treasurer John H. Wilson William R. Thomas Corporate Counsel T. Duane Morgan Investor Relations Eversheds Sutherland / Jones Day 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 |
