Capital Southwest Corporation
CAPITAL SOUTHWEST CORP (Form: 10-Q, Received: 08/08/2017 17:20:52)

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 

(Mark One)

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended  June 30, 2017

 

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: 814-00061

 

CAPITAL SOUTHWEST CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

 

Texas

 

75-1072796

(State or other jurisdiction of incorporation
or organization)

 

(I.R.S. 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

 

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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such filings).  Yes   _       No       

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer x

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

 

(Do not check if a smaller reporting company)

 

 

 

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.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes        No X  

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

16,006,296 shares of Common Stock, $0.25 value per share, as of August 4, 2017.

 

 


 

Table of Contents

TABLE OF CONTENTS

 

 

 

 

 

 

 

    

 

    

Page

PART I  

 

FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1.  

 

Consolidated Financial Statements

 

3

 

 

Consolidated Statements of Assets and Liabilities as of June 30, 2017 (Unaudited) and March 31, 2017

 

3

 

 

Consolidated Statements of Operations (Unaudited) for the three months ended June 30, 2017 and 2016

 

4

 

 

Consolidated Statements of Changes in Net Assets (Unaudited) for the three months ended June 30, 2017 and 2016  

 

5

 

 

Consolidated Statements of Cash Flows (Unaudited) for the three months ended June 30, 2017 and 2016  

 

6

 

 

Consolidated Schedule of Investments as of June 30, 2017 (Unaudited) and March 31, 2017

 

7

 

 

Notes to Consolidated Financial Statements (Unaudited)  

 

13

 

 

Consolidated Schedule of Investments in and Advances to Affiliates (Unaudited) for the three months ended June 30, 2017

 

44

Item 2.  

 

Management's Discussion and Analysis of Financial Condition and Results of Operations

 

45

Item 3.  

 

Quantitative and Qualitative Disclosures About Market Risk

 

54

Item 4.  

 

Controls and Procedures

 

54

 

 

 

 

 

PART II  

 

OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.  

 

Legal Proceedings

 

55

Item 1A.  

 

Risk Factors

 

55

Item 6.  

 

Exhibits

 

56

 

 

 

 

 

Signatures  

 

 

 

57

 

 

2


 

Table of Contents

PART I – FINANCIAL INFORMATION

 

Item 1. Consolidated Financial Statements

 

CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

(In thousands, except shares and per share data)

 

 

 

 

 

 

 

 

 

 

    

June 30, 

    

March 31, 

 

 

 

2017

 

2017

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

 

Investments at fair value:

 

 

 

 

 

 

 

Non-control/Non-affiliate investments (Cost: $186,795 and $172,437, respectively)

 

$

187,670

 

$

175,731

 

Affiliate investments (Cost: $5,929 and $5,925, respectively)

 

 

6,810

 

 

7,138

 

Control investments (Cost: $76,219 and $72,178, respectively)

 

 

112,102

 

 

104,011

 

Total investments (Cost: $268,943 and $250,540, respectively)

 

 

306,582

 

 

286,880

 

Cash and cash equivalents

 

 

12,359

 

 

22,386

 

Receivables:

 

 

 

 

 

 

 

Dividends and interest

 

 

3,417

 

 

3,137

 

Escrow

 

 

545

 

 

545

 

Other

 

 

406

 

 

626

 

Deferred tax asset

 

 

1,858

 

 

2,017

 

Debt issuance costs (net of accumulated amortization of $523 and $366, respectively)

 

 

1,980

 

 

2,137

 

Other assets

 

 

4,043

 

 

8,024

 

Total assets

 

$

331,190

 

$

325,752

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

Credit facility

 

$

25,000

 

$

25,000

 

Other liabilities

 

 

3,761

 

 

5,996

 

Payable for unsettled transactions

 

 

9,263

 

 

-

 

Dividends payable

 

 

3,355

 

 

7,191

 

Accrued restoration plan liability

 

 

2,146

 

 

2,170

 

Deferred income taxes

 

 

238

 

 

323

 

Total liabilities

 

 

43,763

 

 

40,680

 

 

 

 

 

 

 

 

 

Net Assets

 

 

 

 

 

 

 

Common stock, $0.25 par value: authorized, 25,000,000 shares; issued, 18,345,808 shares at June 30, 2017 and 18,350,808 shares at March 31, 2017

 

 

4,586

 

 

4,588

 

Additional paid-in capital

 

 

261,740

 

 

261,472

 

Accumulated net investment loss

 

 

(1,377)

 

 

(1,457)

 

Accumulated net realized gain

 

 

9,014

 

 

8,390

 

Unrealized appreciation of investments, net of income taxes

 

 

37,401

 

 

36,016

 

Treasury stock - at cost, 2,339,512 shares

 

 

(23,937)

 

 

(23,937)

 

Total net assets

 

 

287,427

 

 

285,072

 

Total liabilities and net assets

 

$

331,190

 

$

325,752

 

Net asset value per share (16,006,296 shares outstanding at June 30, 2017 and 16,011,296 shares outstanding at March 31, 2017)

 

$

17.96

 

$

17.80

 

 

The accompanying Notes are an integral part of these Consolidated Financial Statements.

3


 

Table of Contents

CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except shares and per share data)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

 

June 30, 

 

 

 

2017

 

2016

 

Investment income:

 

 

 

 

 

 

 

Interest income:

 

 

 

 

 

 

 

Non-control/Non-affiliate investments

 

$

4,332

 

$

2,082

 

Affiliate investments

 

 

140

 

 

140

 

Control investments

 

 

41

 

 

-

 

Dividend income:

 

 

 

 

 

 

 

Control investments

 

 

3,004

 

 

1,769

 

Interest income from cash and cash equivalents

 

 

 7

 

 

70

 

Fees and other income

 

 

200

 

 

96

 

Total investment income

 

 

7,724

 

 

4,157

 

Operating expenses:

 

 

 

 

 

 

 

Compensation

 

 

1,638

 

 

1,582

 

Spin-off compensation plan

 

 

172

 

 

172

 

Share-based compensation

 

 

368

 

 

239

 

Interest

 

 

738

 

 

-

 

Professional fees

 

 

479

 

 

518

 

Net pension expense

 

 

40

 

 

43

 

General and administrative

 

 

709

 

 

685

 

Total operating expenses

 

 

4,144

 

 

3,239

 

Income before taxes

 

 

3,580

 

 

918

 

Income tax expense

 

 

144

 

 

547

 

Net investment income

 

$

3,436

 

$

371

 

 

 

 

 

 

 

 

 

Realized gain

 

 

 

 

 

 

 

Non-control/Non-affiliate investments

 

$

624

 

$

199

 

Total net realized gain on investments before income tax

 

 

624

 

 

199

 

 

 

 

 

 

 

 

 

Unrealized appreciation of investments

 

 

 

 

 

 

 

Non-control/Non-affiliate investments

 

 

 (2,419)

 

 

1,353

 

Affiliate investments

 

 

(332)

 

 

506

 

Control investments

 

 

4,050

 

 

790

 

Income tax benefit (provision)

 

 

85

 

 

(522)

 

Total net increase in unrealized appreciation of investments, net of tax

 

 

1,384

 

 

2,127

 

 

 

 

 

 

 

 

 

Net realized and unrealized gain on investments

 

$

2,008

 

$

2,326

 

 

 

 

 

 

 

 

 

Net increase in net assets from operations

 

$

5,444

 

$

2,697

 

 

 

 

 

 

 

 

 

Pre-tax net investment income per share - basic and diluted

 

$

0.22

 

$

0.06

 

Net investment income per share – basic and diluted

 

$

0.21

 

$

0.02

 

Net increase in net assets from operations – basic and diluted

 

$

0.34

 

$

0.17

 

Weighted average shares outstanding – basic

 

 

16,009,703

 

 

15,724,620

 

Weighted average shares outstanding – diluted

 

 

16,072,463

 

 

15,791,299

 

 

The accompanying Notes are an integral part of these Consolidated Financial Statements.

4


 

Table of Contents

CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(Unaudited)

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

June 30, 

 

 

    

2017

 

2016

 

Operations:

 

 

 

 

 

 

 

Net investment income

 

$

3,436

 

$

371

 

Net realized gain on investments

 

 

624

 

 

199

 

Net increase in unrealized appreciation of investments, net of tax

 

 

1,384

 

 

2,127

 

Net increase in net assets from operations

 

 

5,444

 

 

2,697

 

Distributions from:

 

 

 

 

 

 

 

  Undistributed net investment income

 

 

(3,355)

 

 

(939)

 

Distributions of CSW Industrials, Inc.:

 

 

 

 

 

 

 

Spin-Off Compensation Plan distribution, net of tax of $59 and $ - , respectively

 

 

(114)

 

 

(1,348)

 

Capital share transactions:

 

 

 

 

 

 

 

Change in pension plan funded status

 

 

12

 

 

-

 

Share-based compensation expense

 

 

368

 

 

239

 

Increase (decrease) in net assets

 

 

2,355

 

 

649

 

Net assets, beginning of period

 

 

285,072

 

 

272,635

 

Net assets, end of period

 

$

287,427

 

$

273,284

 

 

The accompanying Notes are an integral part of these Consolidated Financial Statements.

5


 

Table of Contents

CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

June 30, 

 

 

    

2017

    

2016

 

Cash flows from operating activities

 

 

 

 

 

 

 

Net increase in net assets from operations

 

$

5,444

 

$

2,697

 

Adjustments to reconcile net increase in net assets from operations to net cash (used in) provided by operating activities:

 

 

 

 

 

 

 

Purchases and originations of investments

 

 

(41,662)

 

 

(5,836)

 

Proceeds from sales and repayments of debt investments in portfolio companies

 

 

23,515

 

 

11,253

 

Proceeds from sales and return of capital of equity investments in portfolio companies

 

 

15

 

 

-

 

Payment of accreted original issue discounts

 

 

609

 

 

27

 

Depreciation and amortization

 

 

181

 

 

23

 

Net pension benefit

 

 

(12)

 

 

(7)

 

Realized gain on investments before income tax

 

 

(624)

 

 

(199)

 

Net increase in unrealized appreciation of investments

 

 

(1,299)

 

 

(2,127)

 

Accretion of discounts on investments

 

 

(183)

 

 

(75)

 

Payment-in-kind interest

 

 

(73)

 

 

-

 

Stock option and restricted awards expense

 

 

368

 

 

239

 

Deferred income tax expense

 

 

(155)

 

 

547

 

Changes in other assets and liabilities:

 

 

 

 

 

 

 

(Increase) decrease in dividend and interest receivable

 

 

(281)

 

 

368

 

Increase in escrow receivables

 

 

-

 

 

1,600

 

Decrease (increase) in other receivables

 

 

220

 

 

(60)

 

Decrease (increase) in other assets

 

 

3,957

 

 

(295)

 

Decrease in other liabilities

 

 

(2,119)

 

 

(1,257)

 

Increase (decrease) in payable for unsettled transaction

 

 

9,263

 

 

(3,940)

 

Net cash (used in) provided by operating activities

 

 

(2,836)

 

 

2,958

 

Cash flows from financing activities

 

 

 

 

 

 

 

Dividends to shareholders

 

 

(7,191)

 

 

(625)

 

Spin-off Compensation Plan distribution

 

 

-

 

 

(1,345)

 

Net cash used in financing activities

 

 

(7,191)

 

 

(1,970)

 

Net (decrease) increase in cash and cash equivalents

 

 

(10,027)

 

 

988

 

Cash and cash equivalents at beginning of period

 

 

22,386

 

 

95,969

 

Cash and cash equivalents at end of period

 

$

12,359

 

$

96,957

 

Supplemental cash flow disclosures:

 

 

 

 

 

 

 

Cash paid for income taxes

 

$

214

 

$

-

 

Cash paid for interest

 

 

611

 

 

-

 

Supplemental disclosure of noncash financing activities:

 

 

 

 

 

 

 

Dividend declared, not yet paid

 

 

3,355

 

 

939

 

Spin-off Compensation Plan distribution accrued, not yet paid

 

 

172

 

 

-

 

 

 

 

 

 

 

 

 

 

The accompanying Notes are an integral part of these Consolidated Financial Statements.

 

 

6


 

Table of Contents

 CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES

 

CONSOLIDATED SCHEDULE OF INVESTMENTS

(Unaudited)

June 30, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

Current

    

 

    

 

 

    

 

 

    

 

 

 

 

 

Type of

 

 

 

Interest

 

 

 

 

 

 

 

 

 

Fair

 

Portfolio Company 1

 

Investment 2

 

Industry

 

Rate 3

 

Maturity

 

Principal

 

Cost

 

Value 4

 

Non-control/Non-affiliate Investments 5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AAC HOLDINGS

 

First Lien

 

Healthcare services

 

L+6.75%
(Floor 1.00%)

 

6/28/2023

 

$

9,500,000

 

$

9,262,500

 

$

9,381,250

 

AG KINGS HOLDINGS 8

 

First Lien

 

Food, agriculture & beverage

 

L+8.50%
(Floor 1.00%)

 

8/8/2021

 

 

9,850,000

 

 

9,679,554

 

 

9,850,000

 

AMERICAN TELECONFERENCING

 

First Lien

 

Telecommunications

 

L+6.50%
(Floor 1.00%)

 

12/8/2021

 

 

6,644,670

 

 

6,477,514

 

 

6,640,550

 

 

 

Second Lien

 

 

 

L+9.50%
(Floor 1.00%)

 

6/6/2022

 

 

2,005,714

 

 

1,932,383

 

 

1,986,910

 

AMWARE FULFILLMENT

 

First Lien

 

Distribution

 

L+9.50%
(Floor 1.00%)

 

5/21/2019

 

 

12,897,500

 

 

12,713,209

 

 

12,897,500

 

ARGON MEDICAL DEVICES

 

Second Lien

 

Healthcare products

 

L+9.50%
(Floor 1.00%)

 

6/23/2022

 

 

5,000,000

 

 

4,875,571

 

 

5,000,000

 

BINSWANGER CORP.

 

First Lien

 

Consumer products & retail

 

L+8.00%
(Floor 1.00%)

 

3/9/2022

 

 

13,251,760

 

 

12,999,838

 

 

12,999,838

 

 

 

900,000 shares of common stock

 

 

 

-

 

-

 

 

-

 

 

900,000

 

 

762,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13,899,838

 

 

13,761,838

 

CALIFORNIA PIZZA KITCHEN

 

First Lien

 

Restaurants

 

L+6.00%
(Floor 1.00%)

 

8/23/2022

 

 

4,962,500

 

 

4,918,439

 

 

4,969,746

 

CAST AND CREW PAYROLL, LLC

 

Second Lien

 

Media, marketing & entertainment

 

L+7.75%
(Floor 1.00%)

 

8/12/2023

 

 

3,705,263

 

 

3,686,111

 

 

3,631,158

 


DEEPWATER CORROSION SERVICES, INC.

 

127,004 shares of Series A convertible preferred stock

 

Energy services (upstream)

 

-

 

-

 

 

-

 

 

8,000,000

 

 

5,825,000

 

DIGITAL RIVER, INC.

 

First Lien

 

Software & IT services

 

L+6.50%
(Floor 1.00%)

 

2/12/2021

 

 

7,032,285

 

 

7,003,283

 

 

7,067,446

 

DIGITAL ROOM INC.

 

Second Lien

 

Paper & forest products

 

L+10.00%
(Floor 1.00%)

 

5/21/2023

 

 

7,000,000

 

 

6,868,326

 

 

6,872,622

 

DUNN PAPER, INC.

 

Second Lien

 

Paper & forest products

 

L+8.75%
(Floor 1.00%)

 

8/26/2023

 

 

3,000,000

 

 

2,944,563

 

 

2,970,000

 

ELITE SEM, INC. 8

 

First Lien

 

Media, marketing & entertainment

 

L+8.50%
(Floor 1.00%)

 

2/1/2022

 

 

12,150,000

 

 

11,875,016

 

 

12,150,000

 

 

 

1,000 shares of common stock

 

 

 

12% PIK

 

-

 

 

-

 

 

1,049,667

 

 

1,383,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,924,683

 

 

13,533,000

 

LIGHTING RETROFIT INTERNATIONAL 13

 

First Lien

 

Environmental services

 

L+9.25%
(Floor 1.00%)

 

6/30/2022

 

 

15,000,000

 

 

14,748,115

 

 

14,748,115

 

 

 

396,825 shares of Series B preferred stock

 

 

 

-

 

-

 

 

-

 

 

500,000

 

 

500,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15,248,115

 

 

15,248,115

 

PREPAID LEGAL SERVICES, INC.

 

Second Lien

 

Consumer services

 

L+9.00%
(Floor 1.25%)

 

7/1/2020

 

 

5,000,000

 

 

4,958,420

 

 

5,040,625

 

REDBOX AUTOMATED RETAIL

 

First Lien

 

Gaming & leisure

 

L+7.50%
(Floor 1.00%)

 

9/27/2021

 

 

7,437,500

 

 

7,231,067

 

 

7,480,862

 

RESEARCH NOW GROUP, INC.

 

Second Lien

 

Business services

 

L+8.75%
(Floor 1.00%)

 

3/18/2022

 

 

7,000,000

 

 

6,921,461

 

 

6,965,000

 

RESTAURANT TECHNOLOGIES, INC.

 

Second Lien

 

Restaurants

 

L+8.75%
(Floor 1.00%)

 

11/23/2023

 

 

3,500,000

 

 

3,450,606

 

 

3,482,500

 

7


 

Table of Contents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

Current

    

 

    

 

 

    

 

 

    

 

 

 

 

 

Type of

 

 

 

Interest

 

 

 

 

 

 

 

 

 

Fair

 

Portfolio Company 1

 

Investment 2

 

Industry

 

Rate 3

 

Maturity

 

Principal

 

Cost

 

Value 4

 

RJO HOLDINGS CORP. 14

 

First Lien

 

Financial services

 

L+9.50%
(Floor 1.00%)

 

5/5/2022

 

 

7,500,000

 

 

7,426,849

 

 

7,426,849

 

TAX ADVISORS GROUP 13

 

Senior subordinated debt

 

Consumer services

 

10.00% / 2.00% PIK

 

12/23/2022

 

 

4,601,533

 

 

4,509,739

 

 

4,509,739

 

 

 

143.3 Class A units

 

 

 

-

 

-

 

 

-

 

 

541,176

 

 

541,176

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,050,915

 

 

5,050,915

 

VISTAR MEDIA INC.

 

First Lien

 

Media, marketing & entertainment

 

L+10.00%
(Floor 1.00%)

 

2/16/2022

 

 

8,250,000

 

 

7,464,254

 

 

8,105,625

 

 

 

Warrants

 

 

 

-

 

-

 

 

-

 

 

886,000

 

 

1,362,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,350,254

 

 

9,467,625

 

WASTEWATER SPECIALTIES

 

First Lien

 

Business services

 

L+8.75%
(Floor 1.00%)

 

4/18/2022

 

 

11,000,000

 

 

10,813,640

 

 

10,813,640

 

WATER PIK, INC.

 

Second Lien

 

Consumer products & retail

 

L+8.75%
(Floor 1.00%)

 

1/8/2021

 

 

4,254,386

 

 

4,175,679

 

 

4,275,658

 


WINZER CORPORATION

 

Senior subordinated debt

 

Distribution

 

11.00%

 

6/1/2021

 

 

8,100,000

 

 

7,982,208

 

 

8,031,150

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Non-control/Non-affiliate Investments

 

 

 

 

 

 

 

 

 

 

 

 

$

186,795,188

 

$

187,669,959

 

Affiliate Investments 6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CHANDLER SIGNS, LP 13

 

Senior subordinated debt

 

Business services

 

12.00%

 

7/4/2021

 

$

4,500,000

 

$

4,428,684

 

$

4,428,684

 

 

 

1,500,000 units of Class A-1 common stock

 

 

 

-

 

-

 

 

-

 

 

1,500,000

 

 

2,381,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,928,684

 

 

6,809,684

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Affiliate Investments

 

 

 

 

 

 

 

 

 

 

 

 

$

5,928,684

 

$

6,809,684

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Control Investments 7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

I-45 SLF LLC 9, 10, 11

 

80% LLC equity interest

 

Multi-sector holdings

 

-

 

-

 

 

-

 

$

64,800,000

 

$

67,535,416

 

MEDIA RECOVERY, INC. 11

 

800,000 shares of Series A convertible preferred stock

 

Industrial products

 

-

 

-

 

 

-

 

 

800,000

 

 

5,277,488

 

 

 

4,000,002 shares of common stock

 

 

 

-

 

-

 

 

-

 

 

4,615,000

 

 

30,444,512

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,415,000

 

 

35,722,000

 


TITANLINER, INC.

 

1,189,609 shares of Series B convertible preferred stock

 

Energy services (upstream)

 

6% PIK

 

-

 

 

-

 

 

2,799,768

 

 

3,463,000

 

 

 

339,277 shares of Series A convertible preferred stock

 

 

 

-

 

-

 

 

-

 

 

3,204,222

 

 

5,382,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,003,990

 

 

8,845,000

 

Total Control Investments

 

 

 

 

 

 

 

 

 

 

 

 

$

76,218,990

 

$

112,102,416

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL INVESTMENTS 12

 

 

 

 

 

 

 

 

 

 

 

 

$

268,942,862

 

$

306,582,059

 

 


1

All debt investments are income-producing, unless otherwise noted. Equity investments are non-income producing, unless otherwise noted.

2

All of the Company’s investments, unless otherwise noted, are encumbered as security for the Company’s senior secured credit facility.

3

The majority of investments bear interest at a rate that may be determined by reference to London Interbank Offered Rate (“LIBOR” or “L”) or Prime (“P”) and reset daily, monthly, quarterly, or semiannually.  For each the Company has provided the spread over LIBOR or Prime and the current contractual interest rate in effect at June 30,  2017.  Certain investments are subject to a LIBOR or Prime interest rate floor. Certain investments, as noted, accrue payment-in-kind (“PIK”) interest.

4

Investments are carried at fair value in accordance with the Investment Company Act of 1940 (the “1940 Act”) and Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 820, Fair Value Measurements and Disclosures .  We determine in good faith the fair value of our Investment portfolio pursuant to a valuation policy in accordance with ASC 820 and a valuation process approved by our Board of Directors. See Note 4 to the consolidated financial statements.

5

Non-Control/Non-Affiliate investments are generally defined by the 1940 Act as investments that are neither control investments nor affiliate investments. At June 30,  2017, approximately 61.2% of the Company’s investment assets are non-control/non-affiliate investments. The fair value of these investments as a percent of net assets is 65.3%.

6

Affiliate investments are generally defined by the 1940 Act as investments in which between 5% and 25% of the voting securities are owned and the investments are not classified as control investments. At June 30,  2017, approximately 2.2% of the Company’s investment assets are affiliate investments. The fair value of these investments as a percent of net assets is 2.4%.

8


 

Table of Contents

7

Control investments are generally defined by the 1940 Act as investments in which more than 25% of the voting securities are owned or where greater than 50% of the board representation is maintained. At June 30,  2017, approximately 36.6% of the Company’s investment assets are control investments. The fair value of these investments as a percent of net assets is 39.0%.

8

The investment is structured as a first lien last out term loan and earns interest in addition to the stated rate.

9

Indicates assets that are considered “non-qualifying assets” under section 55(a) of the 1940 Act. Qualifying assets must represent at least 70% of total assets at the time of acquisition of any additional non-qualifying assets. 

10

The investment has approximately $3.2 million unfunded commitment as of June 30,  2017.

11

Income producing through dividends on distributions.

12

As of June 30,  2017, the cumulative gross unrealized appreciation for federal income tax purposes is approximately $39.1 million; cumulative gross unrealized depreciation for federal income tax purposes is $2.4 million.  Cumulative net unrealized appreciation is $36.7 million, based on a tax cost of $269.1 million.

13

Lighting Retrofit International Series B preferred stock, Tax Advisors Group Class A units and Chandler Signs, LP Class A-1 common stock are held through a wholly-owned taxable subsidiary. 

14

The investment is structured as a first lien first out term loan and earns less interest than the stated rate.

9


 

Table of Contents

CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES

 

CONSOLIDATED SCHEDULE OF INVESTMENTS

March 31, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Type of

 

 

 

Interest

 

 

 

 

 

 

 

 

 

Fair

 

Portfolio Company 1

    

Investment 2

    

Industry

    

Rate 2

    

Maturity

    

Principal

    

Cost

    

Value 3

 

Non-control/Non-affiliate Investments 4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AG KINGS HOLDINGS 8

 

First Lien

 

Food, agriculture & beverage

 

L+8.50%
(Floor 1.00%)

 

8/10/2021

 

 

9,900,000

 

 

9,720,743

 

 

9,900,000

 

AMERICAN TELECONFERENCING

 

First Lien

 

Telecommunications

 

L+6.50%
(Floor 1.00%)

 

12/8/2021

 

 

6,733,503

 

 

6,559,616

 

 

6,720,709

 

 

 

Second Lien

 

 

 

L+9.50%
(Floor 1.00%)

 

6/6/2022

 

 

2,005,714