FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from...............to.................................
Commission File Number: 814-61
CAPITAL SOUTHWEST CORPORATION
(Exact name of registrant as specified in its charter)
Texas 75-1072796
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
12900 Preston Road, Suite 700, Dallas, Texas
75230
(Address of principal executive offices)
(Zip Code)
(972) 233-8242
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act).
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
3,857,051 shares of Common Stock, $1 Par Value as of January 31, 2004
TABLE OF CONTENTS
Page No.
--------
PART I. FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements
Consolidated Statements of Financial Condition
December 31, 2003 (Unaudited) and March 31, 2003.............3
Consolidated Statements of Operations (Unaudited)
For the three and nine months ended December 31, 2003
and December 31, 2002........................................4
Consolidated Statements of Changes in Net Assets
Nine months ended December 31, 2003 (Unaudited) and year
ended March 31, 2003.........................................5
Consolidated Statements of Cash Flows (Unaudited)
For the three and nine months ended December 31, 2003
and December 31, 2002........................................6
Notes to Consolidated Financial Statements........................7
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................8
ITEM 3. Quantitative and Qualitative Disclosure About
Market Risk...........................................11
ITEM 4. Controls and Procedures.......................................11
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K..............................12
Signatures .............................................................13
2
PART I. FINANCIAL INFORMATION
- ------------------------------
Item 1. Consolidated Financial Statements
CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
Consolidated Statements of Financial Condition
----------------------------------------------
Assets December 31, 2003 March 31, 2003
----------------- -----------------
(Unaudited)
Investments at market or fair value
Companies more than 25% owned
(Cost: December 31, 2003 - $23,114,865
March 31, 2003 - $23,114,865) $210,143,981 $202,893,981
Companies 5% to 25% owned
(Cost: December 31, 2003 - $36,431,224
March 31, 2003 - $30,120,124) 42,944,006 18,566,004
Companies less than 5% owned
(Cost: December 31, 2003 - $38,374,041
March 31, 2003 - $38,226,853) 93,306,585 65,600,452
----------------- -----------------
Total investments
(Cost: December 31, 2003- $97,920,130
March 31, 2003 - $91,461,842) 346,394,572 287,060,437
Cash and cash equivalents 2,077,980 4,650,388
Receivables 88,312 297,664
Other assets 6,713,432 6,481,383
----------------- -----------------
Totals $355,274,296 $298,489,872
================= =================
Liabilities and Shareholders' Equity
Note payable to bank $ 15,500,000 $ 15,500,000
Notes payable to portfolio company 7,500,000 7,500,000
Accrued interest and other liabilities 1,906,780 1,868,991
Deferred income taxes 86,158,795 67,153,906
----------------- -----------------
Total liabilities 111,065,575 92,022,897
----------------- -----------------
Shareholders' equity
Common stock, $1 par value: authorized,
5,000,000 shares; issued, 4,294,416 shares
at December 31, 2003 and 4,266,416 shares
at March 31, 2003 4,294,416 4,266,416
Additional capital 7,904,997 6,935,497
Undistributed net investment income 3,269,278 3,299,659
Undistributed net realized gain on investments 73,030,888 71,190,108
Unrealized appreciation of investments -
net of deferred income taxes 162,742,444 127,808,597
Treasury stock - at cost (437,365 shares) (7,033,302) (7,033,302)
----------------- -----------------
Net assets at market or fair value, equivalent
to $63.31 per share on the 3,857,051 shares
outstanding at December 31, 2003, and
$53.92 per share on the 3,829,051 shares
outstanding at March 31, 2003 244,208,721 206,466,975
----------------- -----------------
Totals $355,274,296 $298,489,872
================= =================
(See Notes to Consolidated Financial Statements)
3
CAPITAL SOUTHWEST CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations
-------------------------------------
(Unaudited)
Three Months Ended Nine Months Ended
December 31 December 31
---------------------------- ----------------------------
2003 2002 2003 2002
------------ ------------ ------------ ------------
Investment income:
Interest $ 45,822 $ 47,170 $ 126,491 $ 158,890
Dividends 1,755,515 1,258,565 3,151,480 2,664,049
Management and directors' fees 154,750 122,350 476,114 374,050
------------ ------------ ------------ ------------
1,956,087 1,428,085 3,754,085 3,196,989
------------ ------------ ------------ ------------
Operating expenses:
Salaries 240,854 233,971 665,704 644,196
Net pension benefit (68,226) (96,981) (204,686) (290,942)
Other operating expenses 169,527 170,479 536,381 441,739
------------ ------------ ------------ ------------
342,155 307,469 997,399 794,993
------------ ------------ ------------ ------------
Income before interest expense and
income taxes 1,613,932 1,120,616 2,756,686 2,401,996
Interest expense 131,182 103,002 406,736 357,455
------------ ------------ ------------ ------------
Income before income taxes 1,482,750 1,017,614 2,349,950 2,044,541
Income tax expense 23,900 33,713 71,700 101,613
------------ ------------ ------------ ------------
Net investment income $ 1,458,850 $ 983,901 $ 2,278,250 $ 1,942,928
============ ============ ============ ============
Proceeds from disposition of investments $ 51,245 $ 349,880 $ 3,705,584 $ 1,865,778
Cost of investments sold 193,182 329,600 873,615 2,341,651
------------ ------------ ------------ ------------
Realized gain (loss) on investments
before income taxes (141,937) 20,280 2,831,969 (475,873)
Income tax expense (benefit) (49,678) 7,099 991,189 (207,661)
------------ ------------ ------------ ------------
Net realized gain (loss) on investments (92,259) 13,181 1,840,780 (268,212)
------------ ------------ ------------ ------------
Increase (decrease) in unrealized appreciation
of investments before income taxes 19,944,577 5,350,451 52,875,847 (66,634,005)
Increase (decrease) in deferred income taxes
on appreciation of investments 6,980,000 1,872,000 17,942,000 (23,310,000)
------------ ------------ ------------ ------------
Net increase (decrease) in unrealized
appreciation of investments 12,964,577 3,478,451 34,933,847 (43,324,005)
------------ ------------ ------------ ------------
Net realized and unrealized gain (loss)
on investments $12,872,318 $3,491,632 $36,774,627 $(43,592,217)
============ ============ ============ ============
Increase (decrease) in net assets
from operations $14,331,168 $4,475,533 $39,052,877 $(41,649,289)
============ ============ ============ ============
(See Notes to Consolidated Financial Statements)
4
CAPITAL SOUTHWEST CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Changes in Net Assets
------------------------------------------------
Nine Months Ended Year Ended
December 31, 2003 March 31, 2003
----------------- -----------------
(Unaudited)
Operations
Net investment income $ 2,278,250 $ 2,299,252
Net realized gain on investments 1,840,780 1,345,728
Net increase (decrease) in unrealized
appreciation of investments 34,933,847 (45,371,616)
----------------- -----------------
Increase (decrease) in net assets from operations 39,052,877 (41,726,636)
Distributions from:
Undistributed net investment income (2,308,631) (2,297,431)
Capital share transactions
Exercise of employee stock options 997,500 --
----------------- -----------------
Increase (decrease) in net assets 37,741,746 (44,024,067)
Net assets, beginning of period 206,466,975 250,491,042
----------------- -----------------
Net assets, end of period $244,208,721 $206,466,975
================= =================
(See Notes to Consolidated Financial Statements)
5
CAPITAL SOUTHWEST CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
-------------------------------------
(Unaudited)
Three Months Ended Nine Months Ended
December 31 December 31
---------------------------- ----------------------------
2003 2002 2003 2002
------------ ------------ ------------ ------------
Cash flows from operating activities
Increase (decrease) in net assets from
operations $ 14,331,168 $ 4,475,533 $ 39,052,877 $(41,649,289)
Adjustments to reconcile increase (decrease)
in net assets from operations to net cash
provided by (used in) operating activities:
Proceeds from disposition of investments 51,245 349,880 3,705,584 1,865,778
Purchases of securities (2,204,263) (317,659) (9,131,903) (3,515,722)
Maturities of securities 900,000 -- 1,800,000 80,000
Depreciation and amortization 4,776 5,358 14,313 14,635
Net pension benefit (68,226) (96,981) (204,686) (290,942)
Net realized and unrealized (gain) loss
on investments (12,872,318) (3,491,632) (36,774,627) 43,592,217
(Increase) decrease in receivables 232,740 (10,087) 209,352 1,449,539
(Increase) decrease in other assets 19,993 (1,926) 12,761 (4,952)
Increase (decrease) in accrued interest
and other liabilities 63,145 47,928 108,813 (81,285)
Decrease in accrued pension cost (41,821) (41,820) (125,461) (125,460)
Deferred income taxes 23,900 34,000 71,700 101,900
------------ ------------ ------------ ------------
Net cash provided by (used in) operating
activities 440,339 952,594 (1,261,277) 1,436,419
------------ ------------ ------------ ------------
Cash flows from financing activities
Increase in notes payable to bank -- 1,000,000 -- 6,000,000
Decrease in subordinated debenture -- -- -- (5,000,000)
Distributions from undistributed net
investment income (1,542,821) (1,531,621) (2,308,631) (2,297,431)
Proceeds from exercise of employee stock
options -- -- 997,500 --
------------ ------------ ------------ ------------
Net cash used in financing activities (1,542,821) (531,621) (1,311,131) (1,297,431)
------------ ------------ ------------ ------------
Net increase (decrease) in cash and cash
equivalents (1,102,482) 420,973 (2,572,408) 138,988
Cash and cash equivalents at beginning
of period 3,180,462 1,695,195 4,650,388 1,977,180
------------ ------------ ------------ ------------
Cash and cash equivalents at end of period $ 2,077,980 $ 2,116,168 $ 2,077,980 $ 2,116,168
============ ============ ============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $131,182 $103,800 $406,639 $488,371
Income taxes $ -- $ -- $ -- $ --
(See Notes to Consolidated Financial Statements)
6
CAPITAL SOUTHWEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
------------------------------------------
(Unaudited)
1. Basis of Presentation
The accompanying consolidated financial statements, which include the
accounts of Capital Southwest Corporation, its wholly-owned small business
investment company subsidiary and its wholly-owned management company (the
"Company"), have been prepared on the fair value basis in accordance with
accounting principles generally accepted in the United States for investment
companies. All significant intercompany accounts and transactions have been
eliminated in consolidation. Certain reclassifications have been made to the
2002 balances to conform with the 2003 financial statement presentation.
The financial statements included herein have been prepared in
accordance with accounting principles generally accepted in the United States
for interim financial information and the instructions to Form 10-Q and Article
6 of Regulation S-X. The financial statements should be read in conjunction with
the consolidated financial statements and notes thereto included in the
Company's annual report on Form 10-K for the year ended March 31, 2003. Certain
information and footnotes normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States
have been condensed or omitted, although the Company believes that the
disclosures are adequate for a fair presentation. The information reflects all
adjustments (consisting of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair presentation of the results of
operations for the interim periods.
2. Stock-Based Compensation
Effective April 1, 2003, the Company adopted the fair value method of
recording compensation expense related to all stock options granted after March
31, 2003, in accordance with Statement of Financial Accounting Standards Nos.
123 and 148. No stock options have been granted since March 31, 2003; therefore,
under the prospective method of adoption selected by the Company, no stock-based
compensation has been recognized in the consolidated financial statements.
The following table illustrates the effect on net asset value and net
asset value per share as if the fair value method had been applied to all
outstanding options granted since January 1, 1995 in each period.
Nine Months Ended December 31
2003 2002
------------- -------------
Net asset value, as reported $244,208,721 $206,544,322
Deduct: Total fair value computed
stock-based compensation 134,580 134,580
------------- -------------
Pro forma net asset value $244,074,141 $206,409,742
============= =============
Net asset value per share:
Basic - as reported $63.31 $53.94
====== ======
Basic - pro forma $63.28 $53.91
====== ======
Diluted - pro forma $63.28 $53.77
====== ======
The diluted net asset value per share calculation assumes all vested
outstanding options for which the market price exceeds the exercise price have
been exercised.
7
Notes to Consolidated Financial Statements
(continued)
Under the 1984 Incentive Stock Option Plan, options to purchase 28,000
shares of common stock at $35.625 per share (the market price at the time of
grant) were exercised in July 2003.
3. Summary of Per Share Information
Three Months Ended Nine Months Ended
December 31 December 31
---------------------- ----------------------
2003 2002 2003 2002
--------- --------- --------- ---------
Investment income $ .51 $ .37 $ .97 $ .83
Operating expenses (.09) (.08) (.26) (.21)
Interest expense (.03) (.03) (.10) (.09)
Income taxes (.01) (.01) (.02) (.03)
--------- --------- --------- ---------
Net investment income .38 .25 .59 .50
Distributions from undistributed
net investment income (.40) (.40) (.60) (.60)
Net realized gain (loss) on investments (.02) .01 .48 (.07)
Net increase (decrease) in unrealized appreciation
of investments after deferred taxes 3.35 .91 9.06 (11.31)
Exercise of employee stock options (1) -- -- (.14) --
--------- --------- --------- ---------
Increase (decrease) in net asset value 3.31 .77 9.39 (11.48)
Net asset value:
Beginning of period 60.00 53.17 53.92 65.42
--------- --------- --------- ---------
End of period $63.31 $53.94 $63.31 $53.94
========= ========= ========= =========
Increase (decrease) in deferred taxes on
unrealized appreciation $ 1.81 $ .49 $ 4.53 $(6.08)
Deferred taxes on unrealized appreciation:
Beginning of period 20.42 17.48 17.70 24.05
--------- --------- --------- ---------
End of period $22.23 $17.97 $22.23 $17.97
========= ========= ========= =========
Shares outstanding at end of period
(000s omitted) 3,857 3,829 3,857 3,829
(1) Net decrease is due to the exercise of employee stock options at prices less
than beginning of period net asset value.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Net asset value at December 31, 2003 was $244,208,721, equivalent to
$63.31 per share after deducting an allowance of $22.23 per share for deferred
taxes on net unrealized appreciation of investments. Assuming reinvestment of
all dividends, the December 31, 2003 net asset value reflects an increase of
6.2% during the preceding three months and increases of 18.6% during both the
nine months of the current fiscal year and the past twelve months.
December 31, December 31,
2003 2002
------------ ------------
Net assets $244,208,721 $206,544,322
Shares outstanding 3,857,051 3,829,051
Net assets per share $63.31 $53.94
8
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Results of Operations
The composite measure of the Company's financial performance in the
Consolidated Statements of Operations is captioned "Increase (decrease) in net
assets from operations" and consists of three elements. The first is "Net
investment income", which is the difference between the Company's income from
interest, dividends and fees and its combined operating and interest expenses,
net of applicable income taxes. The second element is "Net realized gain (loss)
on investments", which is the difference between the proceeds received from
disposition of portfolio securities and their stated cost, net of applicable
income tax expense. The third element is the "Net increase (decrease) in
unrealized appreciation of investments", which is the net change in the market
or fair value of the Company's investment portfolio, compared with stated cost,
net of an increase or decrease in deferred income taxes which would become
payable if the unrealized appreciation were realized through the sale or other
disposition of the investment portfolio. It should be noted that the "Net
realized gain (loss) on investments" and "Net increase (decrease) in unrealized
appreciation of investments" are directly related in that when an appreciated
portfolio security is sold to realize a gain, a corresponding decrease in net
unrealized appreciation occurs. Conversely, when a loss is realized on a
depreciated portfolio security, an increase in net unrealized appreciation
occurs.
Net Investment Income
Interest income in the nine months ended December 31, 2003 decreased
from the corresponding period ended December 31, 2002 primarily because of a
decrease in loans to portfolio companies. During the nine months ended December
31, 2003 and 2002, the Company recorded dividend income from the following
sources:
Nine Months Ended
December 31
-----------------------
2003 2002
---------- ----------
AT&T Corp. $ 17,655 $ 14,990
Alamo Group Inc. 507,834 507,834
Balco, Inc. 252,960 --
Dennis Tool Company 37,499 37,499
Kimberly-Clark Corporation 78,723 69,462
The RectorSeal Corporation 1,167,729 720,000
Skylawn Corporation 800,000 996,659
TCI Holdings, Inc 60,953 60,953
Texas Shredder, Inc. 5,625 32,167
The Whitmore Manufacturing Company 180,000 180,000
Other 42,502 44,485
---------- ----------
$3,151,480 $2,664,049
========== ==========
Interest expense in the nine months ended December 31, 2003 increased
from the corresponding period ended December 31, 2002 primarily due to an
increase in borrowings offset by a decrease in interest rates and the repayment
of the subordinated debenture on June 3, 2002.
Net Increase (Decrease) in Unrealized Appreciation of Investments
Set forth in the following table are the significant increases and
decreases in unrealized appreciation (before the related change in deferred
taxes and excluding the effect of gains or losses realized during the periods)
by portfolio company:
9
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Three Months Ended Nine Months Ended
December 31 December 31
--------------------------- ----------------------------
2003 2002 2003 2002
------------ ------------ ------------ ------------
Alamo Group Inc. $ 1,410,000 $ -- $ 4,232,000 $ (5,642,000)
All Components, Inc. -- -- 2,900,000 --
Balco, Inc. -- -- -- 2,000,000
Concert Industries Ltd. -- (397,000) (442,998) (5,364,000)
Encore Wire Corporation 10,898,000 (2,724,000) 19,071,000 (10,898,000)
Extreme International Inc. -- -- 4,613,661 --
Liberty Media Corporation 1,353,619 1,273,383 1,522,822 (2,425,287)
Mail-Well, Inc. 2,327,213 3,061,018 5,409,197 (1,572,530)
Media Recovery, Inc. -- -- 3,000,000 --
Palm Harbor Homes, Inc. -- 3,927,000 -- (39,275,000)
PETsMART, Inc. 312,000 (304,328) 3,360,000 1,621,564
Skylawn Corporation -- -- 2,000,000 --
Texas Capital Bancshares, Inc. 1,380,000 -- 3,965,994 --
As reflected in the above table, at December 31, 2003, the value of our
investment in Palm Harbor Homes, Inc. remained unchanged from the March 31, 2003
value, reflecting a continuation of the depressed manufactured housing market.
During the nine months ended December 31, 2002, the value of our investment in
Palm Harbor Homes, Inc. was reduced significantly due to the increasingly
unfavorable outlook for the manufactured housing industry. At December 31, 2003,
the value of our investment in Encore Wire Corporation was increased by
$19,071,000 due to the significant increase in Encore's sales and earnings which
stemmed partly from higher copper prices. In the prior period, we experienced a
significant decline in the value of our investment in Encore Wire Corporation,
which was reduced during the nine months by $10,898,000, as overcapacity in the
electric wire and cable industry led to intense price competition and lower
profit margins.
Portfolio Investments
During the quarter ended December 31, 2003, the Company made additional
investments of $2,204,263 in existing portfolio companies.
The Company has commitments, subject to certain conditions, to invest
up to $3,600,025 in five portfolio companies as requested by management.
Financial Liquidity and Capital Resources
At December 31, 2003, the Company had cash and cash equivalents of
approximately $2.1 million. Pursuant to Small Business Administration ("SBA")
regulations, cash and cash equivalents of $494,000 held by Capital Southwest
Venture Corporation ("CSVC") may not be transferred or advanced to Capital
Southwest Corporation without the consent of the SBA. Under current SBA
regulations and subject to SBA's approval of its credit application, CSVC would
be entitled to borrow up to $63.8 million. The Company also has an unsecured
$25.0 million revolving line of credit from a commercial bank, of which $9.5
million was available at December 31, 2003. With the exception of a capital gain
distribution made in the form of a distribution of the stock of a portfolio
company in the fiscal year ended March 31, 1996, the Company has elected to
retain all gains realized during the past 35 years. Retention of future gains is
viewed as an important source of funds to sustain the Company's investment
activity. Approximately $37.0 million of the Company's investment portfolio is
represented by unrestricted publicly-traded securities, which have an
ascertainable market value and represent a primary source of liquidity.
10
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Funds to be used by the Company for operating or investment purposes
may be transferred in the form of dividends, management fees or loans from
Skylawn Corporation, The RectorSeal Corporation and The Whitmore Manufacturing
Company, wholly-owned portfolio companies of the Company, to the extent of their
available cash reserves and borrowing capacities. At December 31, 2003, the
Company owed $7,500,000 to Skylawn Corporation.
Management believes that the Company's cash and cash equivalents and
cash available from other sources described above are adequate to meet its
expected requirements. Consistent with the long-term strategy of the Company,
the disposition of investments from time to time may also be an important source
of funds for future investment activities.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is subject to financial market risks, including changes in
marketable equity security prices. The Company does not use derivative financial
instruments to mitigate any of these risks. The return on the Company's
investments is not materially affected by foreign currency fluctuations.
The Company's investment in portfolio securities consists of fixed rate
debt securities which totaled $4,016,874 at December 31, 2003, equivalent to
1.2% of the value of the Company's total investments. Since these debt
securities usually have relatively high fixed rates of interest, minor changes
in market yields of publicly-traded debt securities have little or no effect on
the values of debt securities in the Company's portfolio and no effect on
interest income. The Company's investments in debt securities are generally held
to maturity and their fair values are determined on the basis of the terms of
the debt security and the financial condition of the issuer.
A portion of the Company's investment portfolio consists of debt and
equity securities of private companies. The Company anticipates little or no
effect on the values of these investments from modest changes in public market
equity valuations. Should significant changes in market valuations of comparable
publicly-owned companies occur, there may be a corresponding effect on
valuations of private companies, which would affect the value and the amount and
timing of proceeds eventually realized from these investments. A portion of the
Company's investment portfolio also consists of restricted common stocks of
publicly-owned companies. The fair values of these restricted securities are
influenced by the nature of applicable resale restrictions, the underlying
earnings and financial condition of the issuers of such restricted securities
and the market valuations of comparable publicly-owned companies. A portion of
the Company's investment portfolio also consists of unrestricted, freely
marketable common stocks of publicly-owned companies. These freely marketable
investments, which are valued at the public market price, are directly exposed
to equity price risks, in that a change in an issuer's public market equity
price would result in an identical change in the value of the Company's
investment in such security.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our President and Chairman of the Board and Secretary-Treasurer have
reviewed and evaluated the effectiveness of the Company's disclosure controls
and procedures (as defined in Exchange Act Rules 240.13a-14(c) and 15d-14(c) as
of a date within 90 days before the filing date of this quarterly report. Based
on that evaluation, the President and Chairman of the Board and
Secretary-Treasurer have concluded that the Company's current disclosure
controls and procedures are effective and timely, providing all material
information relating to the Company required to be disclosed in reports filed or
submited under the Exchange Act.
11
Item 4. Controls and Procedures
(continued)
Changes in Internal Controls
There have not been any significant changes in the Company's internal
controls or in other factors that could significantly affect these controls
subsequent to the date of their evaluation. We are not aware of any significant
deficiencies or material weaknesses, therefore no corrective actions were taken.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 31.1- Sarbanes-Oxley Section 302(a) Certification of the
President and Chairman of the Board of the Corporation.
Exhibit 31.2- Sarbanes-Oxley Section 302(a) Certification of the
Secretary-Treasurer of the Corporation.
Exhibit 32.1- Certification Pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
of the President and Chairman of the Board of the Corporation.
Exhibit 32.2- Certification Pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
of the Secretary-Treasurer of the Corporation.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter for
which this report is filed.
12
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 thereunto duly authorized.
CAPITAL SOUTHWEST CORPORATION
Date: February 13, 2004 By: /s/ William R. Thomas
----------------------- -----------------------------------------
William R. Thomas, President and Chairman
of the Board (chief executive officer)
Date: February 13, 2004 By: /s/ Susan K. Hodgson
----------------------- -----------------------------------------
Susan K. Hodgson, Secretary-Treasurer
(chief financial/accounting officer)
13
Exhibit 31.1
SARBANES-OXLEY SECTION 302(a) CERTIFICATION
I, William R. Thomas, President and Chairman of the Company, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Capital Southwest
Corporation;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the consolidated financial condition, results of
operations and cash flows of the registrant as of, and for, the periods
presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: February 13, 2004 By: /s/ William R. Thomas
---------------------- --------------------------------
William R. Thomas, President and
Chairman of the Board
Exhibit 31.2
SARBANES-OXLEY SECTION 302(a) CERTIFICATION
I, Susan K. Hodgson, Secretary-Treasurer of the Company, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Capital Southwest
Corporation;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the consolidated financial condition, results of
operations and cash flows of the registrant as of, and for, the periods
presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: February 13, 2004 By: /s/ Susan K. Hodgson
----------------------- -------------------------------------
Susan K. Hodgson, Secretary-Treasurer
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Capital Southwest
Corporation (the "Company") on Form 10-Q for the quarter ended December 31, 2003
as filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, William R. Thomas, President and Chairman of the Board of the
Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906
of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in
all material respects, the consolidated financial condition and results of
operations of the Company.
Date: February 13, 2004 By: /s/ William R. Thomas
----------------------- ----------------------------
William R. Thomas, President
and Chairman of the Board
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Capital Southwest
Corporation (the "Company") on Form 10-Q for the quarter ended December 31, 2003
as filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, Susan K. Hodgson, Secretary-Treasurer of the Company, certify,
pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the
Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in
all material respects, the consolidated financial condition and results of
operations of the Company.
Date: February 13, 2004 By: /s/ Susan K. Hodgson
------------------- -------------------------------------
Susan K. Hodgson, Secretary-Treasurer
