Capital Southwest(US:CSWC)2024-01-29 16:00Investment Portfolio - As of December 31, 2023, the investment portfolio at fair value represented approximately 95.5% of total assets, compared to 95.9% as of March 31, 2023[458]. - The total value of the investment portfolio increased to $1,365.0 million as of December 31, 2023, up from $1,206.4 million as of March 31, 2023[493]. - The company had investments in 96 portfolio companies with an aggregate cost of $1,369.9 million as of December 31, 2023, compared to 86 companies with a cost of $1,220.2 million as of March 31, 2023[493]. - The total debt investments at fair value as of December 31, 2023, amounted to $1,181.736 million, with 15.4% rated as Investment Rating 1, indicating low risk[470]. - The company received proceeds from sales of debt and equity investments totaling $18.0 million during the nine months ended December 31, 2023[471]. Investment Income - Net investment income increased by $9.4 million, or 48.6%, to $28.9 million for the three months ended December 31, 2023, driven by a $15.8 million increase in total investment income[480]. - Total investment income for the three months ended December 31, 2023, was $48.6 million, an increase of 48.2% from $32.8 million in the same period of 2022[504]. - Total investment income for the nine months ended December 31, 2023, was $131.7 million, a 60.4% increase from $82.1 million in the same period of 2022[511]. - Net investment income rose to $80.6 million, a 74.1% increase compared to $46.3 million for the nine months ended December 31, 2022[515]. Debt Investments - New debt investments totaled $192.1 million, follow-on debt investments were $84.7 million, and equity investments amounted to $13.6 million during the nine months ended December 31, 2023[471]. - The weighted average contractual minimum interest rate for the debt investment portfolio was 1.28% as of December 31, 2023, compared to 1.15% as of March 31, 2023[463]. - Approximately $1,147.7 million, or 97.1%, of the debt investment portfolio bore interest at floating rates as of December 31, 2023[463]. - The weighted average annual effective yield on debt investments rose to 13.5% as of December 31, 2023, compared to 12.8% as of March 31, 2023[495]. - The cost basis of debt investments increased from $1,013.4 million to $1,198.5 million year-over-year, reflecting an 18.3% rise, alongside an increase in the weighted average yield due to rising benchmark interest rates[527]. Non-Accrual Investments - Investments on non-accrual status represented approximately 2.2% of the total investment portfolio's fair value and 2.8% of its cost as of December 31, 2023, up from 0.3% and 1.3% respectively as of March 31, 2023[461]. - Investments on non-accrual status represented approximately 2.2% of the total investment portfolio's fair value as of December 31, 2023, compared to 0.3% as of March 31, 2023[495]. Market Conditions - The company is closely monitoring market volatility and its potential impact on portfolio companies, particularly in light of supply chain disruptions and geopolitical instability[469]. - The company anticipates that the new FASB guidance on fair value measurement will not have a material impact on its consolidated financial statements[462]. Expenses and Leverage - The ratio of last twelve months (LTM) operating expenses, excluding interest expense, as a percentage of LTM average total assets was 1.84% for the nine months ended December 31, 2023, compared to 1.89% for the same period in 2022[486]. - The weighted average leverage through CSWC security was 3.6x as of December 31, 2023, down from 4.0x as of March 31, 2023[495]. - Interest expense increased to $31.6 million for the nine months ended December 31, 2023, up 57.8% from $20.1 million in the prior year[513]. - Total employee compensation expense increased by $2.1 million, or 20.9%, due to higher accrued bonus compensation based on projected performance[514]. - The weighted average interest rate on total debt increased from 4.05% to 5.40% year-over-year[513]. Cash Flow and Financing - For the nine months ended December 31, 2023, the company experienced a net increase in cash and cash equivalents of $2.0 million, with operating activities using $86.4 million in cash[545]. - Financing activities provided cash of $88.4 million, primarily from net proceeds of $69.7 million from the issuance of August 2028 Notes and $132.9 million from the Equity ATM Program[545]. - The Company entered into an Incremental Commitment and Assumption Agreement, increasing total commitments under the Credit Agreement by $25 million, raising the total from $435 million to $460 million[523]. - The Company entered into a Credit Agreement on August 2, 2023, increasing commitments from $400 million to $435 million, with an accordion feature allowing for maximum commitments up to $750 million[547]. Shareholder Actions - The Company increased the amount of authorized shares of common stock from 40,000,000 to 75,000,000 on October 11, 2023[561]. - The Company approved the cancellation of 2,339,512 shares of treasury stock on April 26, 2023, increasing authorized and unissued shares[564]. - The Company established an at-the-market offering program with a maximum amount of shares to be sold increased to $650.0 million[562]. - The Company has not repurchased any shares under its share repurchase program during the three and nine months ended December 31, 2023 and 2022[592]. Regulatory and Capital - As of December 31, 2023, the company's asset coverage ratio was 253%, exceeding the regulatory requirement of 150%[546]. - As of December 31, 2023, the Company had regulatory capital of $87.5 million and leverageable capital of $87.5 million[586]. - SBIC I has a total leverage commitment from the SBA amounting to $175.0 million, with $45.0 million remaining unused as of December 31, 2023[586].