UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 20, 2007
Capital Southwest Corporation
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(Exact name of registrant as specified in its charter)
Texas 811-1056 75-1072796
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
12900 Preston Road, Suite 700, Dallas,Texas 75230
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 972-233-8242
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
As more fully discussed below in Item 4.02, on November 19, 2007 Capital
Southwest Corporation (the "Company") concluded its previously issued audited
financial statements for the fiscal year ended March 31, 2007 and its unaudited
interim financial statements for the quarter ended June 30, 2007 should not be
relied upon and that those financial statements would be restated as to make the
necessary accounting adjustments.
Item 3.01. Notice of Delisting or Failure to Satisfy a Continued Listing Rule or
Standard; Transfer of Listing.
On November 15, 2007, Capital Southwest Corporation (the "Company") received a
NASDAQ Staff Determination letter stating that the Company is not in compliance
with the filing requirements for continued listing set forth in NASDAQ
Marketplace Rule 4310(c)(14) and that its common stock is subject to delisting
from The NASDAQ Stock Market. The notice, which the Company expected, was issued
as a result of the Company's failure to file its semi-annual report on Form 10-Q
for the quarter ended September 30, 2007 with the Securities and Exchange
Commission by the required deadline. The Company had previously filed a Form
12b-25 with the SEC indicating that the Company would be unable to file its Form
10-Q by the original filing deadline of November 9, 2007 due to the Company's
ongoing review of its deferred taxes on unrealized appreciation of investments.
The Company will request a hearing before the NASDAQ Listing Qualifications
Panel to review the Staff Determination letter and request continued listing.
The Company can make no assurances that the NASDAQ Listing Qualifications Panel
will grant the Company's request for continued listing. Under NASDAQ Marketplace
rules, the Company's request for a hearing will automatically stay the delisting
of the Company's common stock pending the issuance of a written determination by
the NASDAQ Listing Qualifications Panel.
The Company plans to file its Form 10-Q for the quarter ended September 30, 2007
as soon as reasonably practicable.
A copy of the press release announcing the receipt of this letter is attached
hereto as Exhibit 99.1 and is incorporated herein by reference.
Item 4.02 Non-Reliance on Previously Issued Financial Statements or Related
Audit Report or Complete Interim Review.
On November 19, 2007, Management and the Audit Committee (the "Committee") of
the Board of Directors of Capital Southwest Corporation (the "Company")
concluded that its long-standing practice of recording deferred taxes on
unrealized appreciation of investments was not in conformity with GAAP and its
previously issued financial statements related to accounting for deferred taxes
on unrealized appreciation of investments requires restatement. Specifically,
the AICPA Audit and Accounting Guide for Investment Companies' paragraph 6.04
requires that Regulated Investment Companies record a deferred tax when it is
probable that the investment company subject to Subchapter M of the IRC will not
qualify under that subchapter for a period longer than one year. Management has
determined that while it was possible that the Company would not maintain its
qualifying status, as a Regulated Investment Company, it was probable that it
would maintain such qualifying status. Thus the deferred tax liability
consistently recorded and disclosed since inception should not have been
recognized. As a result the Company's reported net asset value, as well as its
increase in net assets from operations will increase for each corresponding
period.
As a result of its review, Management and the Committee concluded that
previously issued consolidated financial statements included in the Company's
Annual Report on Form 10-K for the fiscal year ended March 31, 2007, as well as
the Company's quarterly report on Form 10-Q for the period ended June 30, 2007
can no longer be relied upon, as these statements include the balance sheet
presentation of deferred taxes on unrealized appreciation of investments and the
statement of operations presentation of deferred income taxes on appreciation of
investments. In connection with the Company's refiling of its Annual Report on
Form 10-K for the fiscal year ended March 31, 2007 and its Form 10-Q for the
quarter ended June 30, 2007, the Company will be amending and restating its
financial statements. The Company's management and the Committee have discussed
this matter with the Company's current and prior independent registered public
accounting firm.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit
Number Description
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99.1 Press Release, dated November 20, 2007, issued by Capital
Southwest Corporation.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: November 20, 2007
By: /s/ Gary L. Martin
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Name: Gary L. Martin
Title: President and Chief Executive Officer
CAPITAL SOUTHWEST Receives Notice From NASDAQ Due to Delay in Filing of Form
10-Q and Announces Restatement of Previously Issued Audited Financial Statements
Dallas, TX, November 20, 2007 - Capital Southwest Corporation (NASDAQ - CSWC)
On November 15, 2007, Capital Southwest Corporation (the "Company") received a
NASDAQ Staff Determination letter stating that the Company is not in compliance
with the filing requirements for continued listing set forth in NASDAQ
Marketplace Rule 4310(c)(14) and that its common stock is subject to delisting
from The NASDAQ Stock Market. The notice, which the Company expected, was issued
as a result of the Company's failure to file its semi-annual report on Form 10-Q
for the quarter ended September 30, 2007 with the Securities and Exchange
Commission by the required deadline. The Company had previously filed a Form
12b-25 with the SEC indicating that the Company would be unable to file its Form
10-Q by the original filing deadline of November 9, 2007 due to the Company's
ongoing review of its deferred taxes on unrealized appreciation of investments.
The Company will request a hearing before the NASDAQ Listing Qualifications
Panel to review the Staff Determination letter and request continued listing.
The Company can make no assurances that the NASDAQ Listing Qualifications Panel
will grant the Company's request for continued listing. Under NASDAQ Marketplace
rules, the Company's request for a hearing will automatically stay the delisting
of the Company's common stock pending the issuance of a written determination by
the NASDAQ Listing Qualifications Panel.
After reviewing the accounting treatment for deferred taxes on unrealized
appreciation of investments, the company has determined its long-standing policy
of recording deferred taxes on unrealized appreciation of investments was not in
conformity with AICPA Audit and Accounting Guide for Investment Company
standards. Management has determined that while it was possible that the Company
would not maintain its qualifying status, as a Regulated Investment Company, it
was probable that it would maintain such status. Thus the deferred tax liability
consistently recorded and disclosed since inception should not have been
recognized. As a result, the Company will be restating its audited financial
statements for the fiscal year ended March 31, 2007, as well as its unaudited
interim financial statements for the quarter ended June 30, 2007. The
restatement will eliminate the accrual for deferred taxes on unrealized
appreciation of investments, thus increasing the net asset value per share for
the periods to be restated. The Company plans to file its Form 10-K/A for the
fiscal year ended March 31, 2007, Form 10-Q/A for the quarter ended June 30,
2007, and Form 10-Q for the quarter ended September 30, 2007 as soon as
reasonably practicable. Our delay in filing has been a result of our reviewing
the accounting treatment related to deferred taxes.
On October 23, 2007 the Company released its net asset value at September 30,
2007 of $437,546,529, equivalent to $112.50 per share after deducting an
allowance of $169,785,000, equivalent to $43.66 per share for deferred taxes.
The Company now plans to restate its previously reported net asset value at
September 30, 2007 to reflect the following:
o An increase in net assets from operations $169,785,000
o An increase in net asset value per share $43.66
Net Asset Value at September 30, 2007, as previously reported $437,546,529
Add back allowance for deferred taxes 169,785,000
Net asset value at September 30, 2007, as restated $607,331,529
Net asset value per share at September 30, 2007, as restated $156.16
Capital Southwest Corporation, founded in 1961, is a venture capital business
development investment company headquartered in Dallas, Texas.
This press release contains forward-looking statements regarding the Company's
plans to request a hearing with NASDAQ. These forward-looking statements are
subject to risks and uncertainties, and actual results could differ materially
from those projected. These risks and uncertainties include, but are not limited
to, the timing and outcome of the NASDAQ hearing; the impact of any actions
required or taken as a result of such review or the NASDAQ hearing and review
process.
Contact: Gary L. Martin or Tracy L. Morris
972-233-8242
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