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 September 30, 2002
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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
3,829,051 shares of Common Stock, $1 Par Value as of October 31, 2002
PART I. FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements
CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARY
Consolidated Statements of Financial Condition
----------------------------------------------
Assets September 30, 2002 March 31, 2002
------------------ ------------------
(Unaudited)
Investments at market or fair value
Companies more than 25% owned
(Cost: September 30, 2002 - $23,114,865
March 31, 2002 - $23,194,865) $ 195,597,981 $ 243,024,999
Companies 5% to 25% owned
(Cost: September 30, 2002 - $30,120,124
March 31, 2002 - $27,167,649) 23,002,003 34,943,003
Companies less than 5% owned
(Cost: September 30, 2002 - $30,064,877
March 31, 2002 - $31,831,341) 58,002,637 69,513,064
------------------ ------------------
Total investments
(Cost: September 30, 2002- $83,299,866
March 31, 2002 - $82,193,855) 276,602,621 347,481,066
Cash and cash equivalents 1,695,195 1,977,180
Receivables 293,671 1,753,297
Other assets 6,216,235 5,971,361
------------------ ------------------
Totals $ 284,807,722 $ 357,182,904
================== ==================
Liabilities and Shareholders' Equity
Notes payable to bank $ 11,500,000 $ 6,500,000
Notes payable to portfolio company 2,500,000 2,500,000
Accrued interest and other liabilities 1,862,450 2,018,140
Deferred income taxes 65,344,862 90,673,722
Subordinated debenture -- 5,000,000
------------------ ------------------
Total liabilities 81,207,312 106,691,862
------------------ ------------------
Shareholders' equity
Common stock, $1 par value: authorized,
5,000,000 shares; issued, 4,266,416 shares
at September 30, 2002 and March 31, 2002 4,266,416 4,266,416
Additional capital 6,935,497 6,935,497
Undistributed net investment income 3,491,055 3,297,838
Undistributed net realized gain on investments 69,562,987 69,844,380
Unrealized appreciation of investments -
net of deferred income taxes 126,377,757 173,180,213
Treasury stock - at cost (437,365 shares) (7,033,302) (7,033,302)
------------------ ------------------
Net assets at market or fair value, equivalent
to $53.17 per share at September 30, 2002 and
$65.42 per share at March 31, 2002 on the
3,829,051 shares outstanding 203,600,410 250,491,042
------------------ ------------------
Totals $ 284,807,722 $ 357,182,904
================== ==================
(See Notes to Consolidated Financial Statements)
2
CAPITAL SOUTHWEST CORPORATION
AND SUBSIDIARY
Consolidated Statements of Operations
-------------------------------------
(Unaudited)
Three Months Ended Six Months Ended
September 30 September 30
---------------------------- ----------------------------
2002 2001 2002 2001
------------ ------------ ------------ ------------
Investment income:
Interest $ 47,045 $ 81,901 $ 111,720 $ 173,159
Dividends 696,492 705,879 1,405,484 1,411,758
Management and directors' fees 120,350 121,148 251,700 260,248
------------ ------------ ------------ ------------
863,887 908,928 1,768,904 1,845,165
------------ ------------ ------------ ------------
Operating expenses:
Salaries 209,475 206,160 410,225 399,493
Net pension benefit (67,826) (130,728) (193,961) (252,270)
Other operating expenses 121,353 142,026 271,260 262,706
------------ ------------ ------------ ------------
263,002 217,458 487,524 409,929
------------ ------------ ------------ ------------
Income before interest expense and
income taxes 600,885 691,470 1,281,380 1,435,236
Interest expense 93,497 262,418 254,453 534,219
------------ ------------ ------------ ------------
Income before income taxes 507,388 429,052 1,026,927 901,017
Income tax expense 23,700 45,720 67,900 88,320
------------ ------------ ------------ ------------
Net investment income $ 483,688 $ 383,332 $ 959,027 $ 812,697
============ ============ ============ ============
Proceeds from disposition of investments $ 56,678 $ 783,978 $ 1,515,898 $ 783,978
Cost of investments sold -- 1,566,234 2,012,051 1,566,234
------------ ------------ ------------ ------------
Realized gain (loss) on investments
before income taxes 56,678 (782,256) (496,153) (782,256)
Income tax expense (benefit) 19,837 (331,878) (214,760) (331,878)
------------ ------------ ------------ ------------
Net realized gain (loss) on investments 36,841 (450,378) (281,393) (450,378)
------------ ------------ ------------ ------------
Increase (decrease) in unrealized appreciation
of investments before income taxes (49,651,999) (1,795,205) (71,984,456) 21,457,855
Increase (decrease) in deferred income taxes
on appreciation of investments (17,378,000) (656,000) (25,182,000) 7,287,000
------------ ------------ ------------ ------------
Net increase (decrease) in unrealized
appreciation of investments (32,273,999) (1,139,205) (46,802,456) 14,170,855
------------ ------------ ------------ ------------
Net realized and unrealized gain (loss)
on investments $(32,237,158) $ (1,589,583) $(47,083,849) $ 13,720,477
============ ============ ============ ============
Increase (decrease) in net assets
from operations $(31,753,470) $ (1,206,251) $(46,124,822) $ 14,533,174
============ ============ ============ ============
(See Notes to Consolidated Financial Statements)
3
CAPITAL SOUTHWEST CORPORATION
AND SUBSIDIARY
Consolidated Statements of Changes in Net Assets
------------------------------------------------
Six Months Ended Year Ended
September 30, 2002 March 31, 2002
------------------ ------------------
(Unaudited)
Operations
Net investment income $ 959,027 $ 2,041,896
Net realized loss on investments (281,393) (537,934)
Net increase (decrease) in unrealized
appreciation of investments (46,802,456) 24,174,348
------------------ ------------------
Increase (decrease) in net assets from operations (46,124,822) 25,678,310
Distributions from:
Undistributed net investment income (765,810) (2,294,631)
Capital share transactions
Exercise of employee stock options -- 498,750
------------------ ------------------
Increase (decrease) in net assets (46,890,632) 23,882,429
Net assets, beginning of period 250,491,042 226,608,613
------------------ ------------------
Net assets, end of period $ 203,600,410 $ 250,491,042
================== ==================
(See Notes to Consolidated Financial Statements)
4
CAPITAL SOUTHWEST CORPORATION
AND SUBSIDIARY
Consolidated Statements of Cash Flows
-------------------------------------
(Unaudited)
Three Months Ended Six Months Ended
September 30 September 30
---------------------------- ----------------------------
2002 2001 2002 2001
------------ ------------ ------------ ------------
Cash flows from operating activities
Increase (decrease) in net assets from
operations $(31,753,470) $ (1,206,251) $(46,124,822) $ 14,533,174
Adjustments to reconcile increase (decrease)
in net assets from operations to net cash
provided by (used in) operating activities:
Depreciation and amortization 3,878 5,999 9,277 11,820
Net pension benefit (67,826) (130,728) (193,961) (252,270)
Net realized and unrealized (gain) loss
on investments 32,237,158 1,589,583 47,083,849 (13,720,477)
(Increase) decrease in receivables (158,613) (673,782) 1,459,626 (544,996)
(Increase) decrease in other assets 13,604 12,806 (3,026) (2,298)
Increase (decrease) in accrued interest
and other liabilities (9,038) 86,386 (129,213) (53,106)
Decrease in accrued pension cost (41,820) (52,486) (83,640) (104,973)
Deferred income taxes 23,700 45,720 67,900 88,320
------------ ------------ ------------ ------------
Net cash provided by (used in)
operating activities 247,573 (322,753) 2,085,990 (44,806)
------------ ------------ ------------ ------------
Cash flows from investing activities
Proceeds from disposition of investments 56,678 783,978 1,515,898 783,978
Purchases of securities (3,157,830) (1,282,929) (3,198,063) (1,780,858)
Maturities of securities -- -- 80,000 150,000
------------ ------------ ------------ ------------
Net cash used in investing activities (3,101,152) (498,951) (1,602,165) (846,880)
------------ ------------ ------------ ------------
Cash flows from financing activities
Increase (decrease) in notes payable to bank (62,000,000) (60,000,000) 5,000,000 1,500,000
Increase in notes payable to portfolio company -- 500,000 -- 500,000
Decrease in subordinated debenture -- -- (5,000,000) --
Distributions from undistributed net
investment income -- -- (765,810) (763,010)
Proceeds from exercise of employee stock
options -- 498,750 -- 498,750
------------ ------------ ------------ ------------
Net cash provided by (used in) financing
activities (62,000,000) (59,001,250) (765,810) 1,735,740
------------ ------------ ------------ ------------
Net increase (decrease) in cash and cash
equivalents (64,853,579) (59,822,954) (281,985) 844,054
Cash and cash equivalents at beginning
of period 66,548,774 61,804,775 1,977,180 1,137,767
------------ ------------ ------------ ------------
Cash and cash equivalents at end of period $ 1,695,195 $ 1,981,821 $ 1,695,195 $ 1,981,821
============ ============ ============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 108,507 $ 176,452 $ 384,571 $ 530,326
Income taxes $ -- $ -- $ -- $ --
(See Notes to Consolidated Financial Statements)
5
CAPITAL SOUTHWEST CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
------------------------------------------
(Unaudited)
1. Basis of Presentation
The accompanying consolidated financial statements, which include the
accounts of Capital Southwest Corporation and its wholly-owned small business
investment company subsidiary (the "Company"), have been prepared on the fair
value basis in accordance with accounting principles generally accepted in the
United States of America for investment companies. All significant intercompany
accounts and transactions have been eliminated in consolidation.
The financial statements included herein have been prepared in
accordance with accounting principles generally accepted in the United States of
America 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, 2002. Certain information and footnotes normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America 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. Summary of Per Share Information
Three Months Ended Six Months Ended
September 30 September 30
---------------------- ----------------------
2002 2001 2002 2001
--------- --------- --------- ---------
Investment income $ .23 $ .24 $ .46 $ .48
Operating expenses (.07) (.06) (.13) (.11)
Interest expense (.02) (.07) (.06) (.14)
Income taxes (.01) (.01) (.02) (.02)
--------- --------- --------- ---------
Net investment income .13 .10 .25 .21
Distributions from undistributed
net investment income -- -- (.20) (.20)
Net realized loss on investments -- (.12) (.08) (.12)
Net increase (decrease) in unrealized appreciation
of investments after deferred taxes (8.43) (.31) (12.22) 3.70
Exercise of employee stock options (1) -- (.08) -- (.08)
--------- --------- --------- ---------
Increase (decrease) in net asset value (8.30) (.41) (12.25) 3.51
Net asset value:
Beginning of period 61.47 63.32 65.42 59.40
--------- --------- --------- ---------
End of period $ 53.17 $ 62.91 $ 53.17 $ 62.91
========= ========= ========= =========
Increase (decrease) in deferred taxes on
unrealized appreciation $ (4.54) $ (.25) $ (6.57) $ 1.83
Deferred taxes on unrealized appreciation:
Beginning of period 22.02 22.87 24.05 20.79
--------- --------- --------- ---------
End of period $ 17.48 $ 22.62 $ 17.48 $ 22.62
========= ========= ========= =========
Shares outstanding at end of period
(000s omitted) 3,829 3,829 3,829 3,829
(1) Net decrease is due to the exercise of employee stock options at prices
less than beginning of period net asset value.
6
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Net asset value at September 30, 2002 was $203,600,410, equivalent to
$53.17 per share after deducting an allowance of $17.48 per share for deferred
taxes on unrealized appreciation of investments. Assuming reinvestment of
dividends, this represents a decrease of 13.3% during the past quarter, 18.5%
during the first half of the current fiscal year and 14.7% during the past
twelve months.
September 30, September 30,
2002 2001
------------- -------------
Net assets $ 203,600,410 $ 240,877,527
Shares outstanding 3,829,051 3,829,051
Net assets per share $53.17 $62.91
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 incease (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 by transferring the gain associated with the
transaction from being "unrealized" to being "realized." 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 six months ended September 30, 2002 decreased
from the year-ago period primarily because of a decrease in loans to portfolio
companies. During the six months ended September 30, 2002 and 2001, the Company
recorded dividend income from the following sources:
Six Months Ended
September 30
-----------------------
2002 2001
---------- ----------
AT&T Corp. $ 9,993 $ 9,993
Alamo Group Inc. 338,556 338,556
Dennis Tool Company 12,500 24,999
Kimberly-Clark Corporation 46,308 43,221
The RectorSeal Corporation 480,000 480,000
Skylawn Corporation 300,000 300,000
TCI Holdings, Inc 40,635 40,635
Texas Shredder, Inc. 28,322 20,230
The Whitmore Manufacturing Company 120,000 120,000
Other 29,170 34,124
---------- ----------
$1,405,484 $1,411,758
========== ==========
7
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Interest expense in the six months ended September 30, 2002 decreased
from the year-ago period primarily due to a decrease in interest rates.
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:
Three Months Ended Six Months Ended
September 30 September 30
------------------------- -------------------------
2002 2001 2002 2001
---------- ---------- ---------- ----------
Alamo Group Inc (5,642,000) -- (5,642,000) --
All Components, Inc. -- (1,750,000) -- (1,750,000)
Balco, Inc. -- 1,482,240 2,000,000 1,482,240
Concert Industries Ltd. (2,781,000) 902,000 (4,967,000) 2,332,000
Encore Wire Corporation (5,449,000) 1,363,000 (8,174,000) 5,449,000
Liberty Media Corporation (formerly
AT&T Corp.-Liberty Media Group) (1,910,302) (3,244,804) (3,698,670) (880,636)
Mail-Well, Inc. (3,270,548) (524,000) (4,633,548) (1,572,000)
Organized Living, Inc. (1,800,000) -- (1,800,000) (2,500,000)
Palm Harbor Homes, Inc. (27,492,000) -- (43,202,000) 15,710,000
PETsMART, Inc. 844,850 307,482 1,925,892 1,975,744
The RectorSeal Corporation -- -- -- 2,500,000
VocalData, Inc. -- (749,998) -- (1,489,803)
As reflected in the above table, at September 30, 2002, the value of
our investment in Palm Harbor Homes, Inc. was reduced to reflect Palm Harbor's
vulnerability to the increasingly unfavorable condition of the manufactured
housing industry as the availability of floor plan financing for retailers has
declined and more and more lenders have chosen to withdraw from manufactured
housing mortgage financing for retail purchasers. The unfavorable industry
climate has created intense price competition and reduced sales volume,
adversely affecting Palm Harbor's earnings since its fiscal year ended March 31,
2000 and particularly during the first half of the current fiscal year.
Portfolio Investments
During the quarter ended September 30, 2002, the Company made new
investments of $3,000,000 and additional investments of $157,830 in existing
portfolio companies.
The Company has commitments, subject to certain conditions, to invest
up to $2,905,346 in five portfolio companies.
Financial Liquidity and Capital Resources
At September 30, 2002, the Company had cash and cash equivalents of
approximately $1.7 million. Pursuant to Small Business Administration ("SBA")
regulations, cash and cash equivalents of $0.7 million 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
$20.0 million revolving line of credit from a commercial bank, of which $8.5
million was available at September 30, 2002. 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 34 years. Retention of future gains is
8
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
viewed as an important source of funds to sustain the Company's investment
activity. Approximately $26.4 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.
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.
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 Disclosure 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 affected by foreign currency fluctuations.
The Company's investment in portfolio securities consists of fixed rate
debt securities which totaled $2,800,000 at September 30, 2002, equivalent to
1.0% 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 and
warrants to purchase 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 issuer, 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
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 Chief Executive Officer and Chief Financial Officer 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 Chief Executive Officer and Chief Financial Officer 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.
9
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.
PART II. OTHER INFORMATION
--------------------------
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Stockholders was held on July 15, 2002, with the
following results of elections and approval:
Votes Cast
-----------------------------------------
Against/ Abstentions/
For Withheld Non-Votes
a. The following Directors were elected to serve until --------- --------- ------------
the next Annual Meeting of Stockholders:
Graeme W. Henderson 3,440,681 28,769 359,601
Gary L. Martin 3,440,681 28,769 359,601
James M. Nolan 3,440,681 28,769 359,601
William R. Thomas 3,440,681 28,769 359,601
John H. Wilson 3,440,681 28,769 359,601
b. KPMG LLP was approved as the Company's
auditors for the 2003 fiscal year. 3,452,226 6,214 370,611
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 99.1-Certification Pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 of the Chief Executive Officer of the Corporation.
Exhibit 99.2-Certification Pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 of the Chief Financial Officer 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.
10
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: November 8, 2002 By: /s/ William R. Thomas
------------------------- --------------------------
William R. Thomas
President
Date: November 8, 2002 By: /s/ Susan K. Hodgson
------------------------- -------------------------
Susan K. Hodgson
Secretary-Treasurer
11
FORM OF SARBANES-OXLEY SECTION 302(a) CERTIFICATION
I, William R. Thomas, Chief Executive Officer 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 function):
a) all significant deficiencies in the design or operation of
internal controls which could aversely 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: November 8, 2002 By: /s/ William R. Thomas
---------------- ------------------------------------------
William R. Thomas, Chief Executive Officer
12
FORM OF SARBANES-OXLEY SECTION 302(a) CERTIFICATION
I, Susan K. Hodgson, Chief Financial Officer 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 function):
a) all significant deficiencies in the design or operation of
internal controls which could aversely 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: November 8, 2002 By: /s/ Susan K. Hodgson
---------------- -----------------------------------------
Susan K. Hodgson, Chief Financial Officer
13
Exhibit 99.1
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 September 30, 2002 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, William R. Thomas, Chief Executive Officer 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: November 8, 2002 By: /s/ William R. Thomas
---------------- ------------------------------------------
William R. Thomas, Chief Executive Officer
Exhibit 99.2
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 September 30, 2002 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, Susan K. Hodgson, Chief Financial Officer 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: November 8, 2002 By:/s/ Susan K. Hodgson
---------------- -----------------------------------------
Susan K. Hodgson, Chief Financial Officer
