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, 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 October 31, 2003
TABLE OF CONTENTS
Page No.
--------
PART I. FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements
Consolidated Statements of Financial Condition
September 30, 2003 (Unaudited) and March 31, 2003...........3
Consolidated Statements of Operations (Unaudited)
Periods ended September 30, 2003 and September 30, 2002.....4
Consolidated Statements of Changes in Net Assets
Six months ended September 30, 2003 (Unaudited) and year
ended March 31, 2003........................................5
Consolidated Statements of Cash Flows (Unaudited)
Quarters ended September 30, 2003 and September 30, 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................................................10
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 September 30, 2003 March 31, 2003
------------------ ------------------
(Unaudited)
Investments at market or fair value
Companies more than 25% owned
(Cost: September 30, 2003 - $23,114,865,
March 31, 2003 - $23,114,865) $208,726,981 $202,893,981
Companies 5% to 25% owned
(Cost: September 30, 2003 - $36,620,124,
March 31, 2003 - $30,120,124) 32,046,006 18,566,004
Companies less than 5% owned
(Cost: September 30, 2003 - $37,074,060,
March 31, 2003 - $38,226,853) 84,565,927 65,600,452
------------ ------------
Total investments
(Cost: September 30, 2003- $96,809,049,
March 31, 2003 - $91,461,842) 325,338,914 287,060,437
Cash and cash equivalents 3,180,462 4,650,388
Receivables 321,052 297,664
Other assets 6,651,828 6,481,383
------------ ------------
Totals $335,492,256 $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 1,867,309 1,868,991
Deferred income taxes 79,204,573 67,153,906
------------ ------------
Total liabilities 104,071,882 92,022,897
------------ ------------
Shareholders' equity
Common stock, $1 par value: authorized,
5,000,000 shares; issued, 4,294,416 shares
at September 30, 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 3,353,249 3,299,659
Undistributed net realized gain on investments 73,123,147 71,190,108
Unrealized appreciation of investments -
net of deferred income taxes 149,777,867 127,808,597
Treasury stock - at cost (437,365 shares) (7,033,302) (7,033,302)
------------ ------------
Net assets at market or fair value, equivalent
to $60.00 per share on the 3,857,051 shares
outstanding at September 30, 2003, and
$53.92 per share on the 3,829,051 shares
outstanding at March 31, 2003 231,420,374 206,466,975
------------ ------------
Totals $335,492,256 $298,489,872
============ ============
(See Notes to Consolidated Financial Statements)
3
CAPITAL SOUTHWEST CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations
-------------------------------------
(Unaudited)
Three Months Ended Six Months Ended
September 30 September 30
---------------------------- ----------------------------
2003 2002 2003 2002
------------ ------------ ------------ ------------
Investment income:
Interest $ 31,201 $ 47,045 $ 80,669 $ 111,720
Dividends 698,649 696,492 1,395,965 1,405,484
Management and directors' fees 151,249 120,350 321,364 251,700
------------ ------------ ------------ ------------
881,099 863,887 1,797,998 1,768,904
------------ ------------ ------------ ------------
Operating expenses:
Salaries 215,375 209,475 424,850 410,225
Net pension benefit (39,479) (67,826) (136,460) (193,961)
Other operating expenses 173,282 121,353 366,854 271,260
------------ ------------ ------------ ------------
349,178 263,002 655,244 487,524
------------ ------------ ------------ ------------
Income before interest expense and
income taxes 531,921 600,885 1,142,754 1,281,380
Interest expense 135,533 93,497 275,554 254,453
------------ ------------ ------------ ------------
Income before income taxes 396,388 507,388 867,200 1,026,927
Income tax expense 13,800 23,700 47,800 67,900
------------ ------------ ------------ ------------
Net investment income $ 382,588 $ 483,688 $ 819,400 $ 959,027
============ ============ ============ ============
Proceeds from disposition of investments $ 3,654,339 $ 56,678 $ 3,654,339 $ 1,515,898
Cost of investments sold 676,753 -- 680,433 2,012,051
------------ ------------ ------------ ------------
Realized gain (loss) on investments
before income taxes 2,977,586 56,678 2,973,906 (496,153)
Income tax expense (benefit) 1,042,155 19,837 1,040,867 (214,760)
------------ ------------ ------------ ------------
Net realized gain (loss) on investments 1,935,431 36,841 1,933,039 (281,393)
------------ ------------ ------------ ------------
Increase (decrease) in unrealized appreciation
of investments before income taxes 19,460,310 (49,651,999) 32,931,270 (71,984,456)
Increase (decrease) in deferred income taxes
on appreciation of investments 6,247,000 (17,378,000) 10,962,000 (25,182,000)
------------ ------------ ------------ ------------
Net increase (decrease) in unrealized
appreciation of investments 13,213,310 (32,273,999) 21,969,270 (46,802,456)
------------ ------------ ------------ ------------
Net realized and unrealized gain (loss)
on investments $ 15,148,741 $(32,237,158) $ 23,902,309 $(47,083,849)
============ ============ ============ ============
Increase (decrease) in net assets
from operations $ 15,531,329 $(31,753,470) $ 24,721,709 $(46,124,822)
============ ============ ============ ============
(See Notes to Consolidated Financial Statements)
4
CAPITAL SOUTHWEST CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Changes in Net Assets
------------------------------------------------
Six Months Ended Year Ended
September 30, 2003 March 31, 2003
------------------ ------------------
(Unaudited)
Operations
Net investment income $ 819,400 $ 2,299,252
Net realized gain on investments 1,933,039 1,345,728
Net increase (decrease) in unrealized
appreciation of investments 21,969,270 (45,371,616)
------------ ------------
Increase (decrease) in net assets from operations 24,721,709 (41,726,636)
Distributions from:
Undistributed net investment income (765,810) (2,297,431)
Capital share transactions
Exercise of employee stock options 997,500 --
------------ ------------
Increase (decrease) in net assets 24,953,399 (44,024,067)
Net assets, beginning of period 206,466,975 250,491,042
------------ ------------
Net assets, end of period $231,420,374 $206,466,975
============ ============
(See Notes to Consolidated Financial Statements)
5
CAPITAL SOUTHWEST CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
-------------------------------------
(Unaudited)
Three Months Ended Six Months Ended
September 30 September 30
---------------------------- ----------------------------
2003 2002 2003 2002
------------ ------------ ------------ ------------
Cash flows from operating activities
Increase (decrease) in net assets from
operations $ 15,531,329 $(31,753,470) $ 24,721,709 $(46,124,822)
Adjustments to reconcile increase (decrease)
in net assets from operations to net cash
provided by operating activities:
Depreciation and amortization 4,772 3,878 9,537 9,277
Net pension benefit (39,479) (67,826) (136,460) (193,961)
Net realized and unrealized (gain) loss
on investments (15,148,741) 32,237,158 (23,902,309) 47,083,849
(Increase) decrease in receivables (227,126) (158,613) (23,388) 1,459,626
(Increase) decrease in other assets 10,814 13,604 (7,232) (3,026)
Increase (decrease) in accrued interest
and other liabilities 47,038 (9,038) 45,668 (129,213)
Decrease in accrued pension cost (41,820) (41,820) (83,640) (83,640)
Deferred income taxes 13,800 23,700 47,800 67,900
------------ ------------ ------------ ------------
Net cash provided by operating activities 150,587 247,573 671,685 2,085,990
------------ ------------ ------------ ------------
Cash flows from investing activities
Proceeds from disposition of investments 3,654,339 56,678 3,654,339 1,515,898
Purchases of securities (5,923,960) (3,157,830) (6,927,640) (3,198,063)
Maturities of securities 900,000 -- 900,000 80,000
------------ ------------ ------------ ------------
Net cash used in investing activities (1,369,621) (3,101,152) (2,373,301) (1,602,165)
------------ ------------ ------------ ------------
Cash flows from financing activities
Increase (decrease) in notes payable to bank -- (62,000,000) -- 5,000,000
Decrease in subordinated debenture -- -- -- (5,000,000)
Distributions from undistributed net
investment income -- -- (765,810) (765,810)
Proceeds from exercise of employee stock
options 997,500 -- 997,500 --
------------ ------------ ------------ ------------
Net cash provided by (used in) financing
activities 997,500 (62,000,000) 231,690 (765,810)
------------ ------------ ------------ ------------
Net decrease in cash and cash equivalents (221,534) (64,853,579) (1,469,926) (281,985)
Cash and cash equivalents at beginning
of period 3,401,996 66,548,774 4,650,388 1,977,180
------------ ------------ ------------ ------------
Cash and cash equivalents at end of period $ 3,180,462 $ 1,695,195 $ 3,180,462 $ 1,695,195
============ ============ ============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $135,435 $108,507 $275,457 $384,571
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.
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.
Six Months Ended September 30
2003 2002
------------- -------------
Net asset value, as reported $ 231,420,374 $ 203,600,410
Deduct: Total fair value computed
stock-based compensation 89,720 89,720
------------- -------------
Pro forma net asset value $ 231,330,654 $ 203,510,690
============= =============
Net asset value per share:
Basic - as reported $60.00 $53.17
====== ======
Basic - pro forma $59.98 $53.15
====== ======
Diluted - pro forma $59.98 $53.02
====== ======
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.
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.
7
Notes to Consolidated Financial Statements
(continued)
3. Summary of Per Share Information
Three Months Ended Six Months Ended
September 30 September 30
---------------------- ----------------------
2003 2002 2003 2002
------- ------- ------- -------
Investment income $ .22 $ .23 $ .46 $ .46
Operating expenses (.09) (.07) (.17) (.13)
Interest expense (.03) (.02) (.07) (.06)
Income taxes -- (.01) (.01) (.02)
------- ------- ------- -------
Net investment income .10 .13 .21 .25
Distributions from undistributed
net investment income -- -- (.20) (.20)
Net realized gain (loss) on investments .50 -- .50 (.08)
Net increase (decrease) in unrealized appreciation
of investments after deferred taxes 3.42 (8.43) 5.71 (12.22)
Exercise of employee stock options (1) (.14) -- (.14) --
------- ------- ------- -------
Increase (decrease) in net asset value 3.88 (8.30) 6.08 (12.25)
Net asset value:
Beginning of period 56.12 61.47 53.92 65.42
------- ------- ------- -------
End of period $ 60.00 $ 53.17 $ 60.00 $ 53.17
======= ======= ======= =======
Increase (decrease) in deferred taxes on
unrealized appreciation $ 1.48 $ (4.54) $ 2.72 $ (6.57)
Deferred taxes on unrealized appreciation:
Beginning of period 18.94 22.02 17.70 24.05
------- ------- ------- -------
End of period $ 20.42 $ 17.48 $ 20.42 17.48
======= ======= ======= =======
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 September 30, 2003 was $231,420,374 equivalent to
$60.00 per share after deducting an allowance of $20.42 per share for deferred
taxes on unrealized appreciation of investments. Assuming reinvestment of all
dividends, the September 30, 2003 net asset value relects an increase of 14.1%
during the past twelve months and 11.7% during the first half of the current
fiscal year.
September 30, September 30,
2003 2002
------------- -------------
Net assets $231,420,374 $203,600,410
Shares outstanding 3,857,051 3,829,051
Net assets per share $60.00 $53.17
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
8
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
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. 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, 2003 decreased
from the corresponding period ended September 30, 2002 primarily because of a
decrease in loans to portfolio companies. During the six months ended September
30, 2003 and 2002, the Company recorded dividend income from the following
sources:
Six Months Ended
September 30
-----------------------
2003 2002
---------- ----------
AT&T Corp. $ 11,326 $ 9,993
Alamo Group Inc. 338,556 338,556
Dennis Tool Company 25,000 12,500
Kimberly-Clark Corporation 52,482 46,308
The RectorSeal Corporation 480,000 480,000
Skylawn Corporation 300,000 300,000
TCI Holdings, Inc 40,635 40,635
Texas Shredder, Inc. 3,750 28,322
The Whitmore Manufacturing Company 120,000 120,000
Other 24,216 29,170
---------- ----------
$1,395,965 $1,405,484
========== ==========
Interest expense in the six months ended September 30, 2003 decreased
from the corresponding period ended September 30, 2002 primarily due to 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:
Three Months Ended Six Months Ended
September 30 September 30
---------------------------- ----------------------------
2003 2002 2003 2002
------------ ------------ ------------ ------------
Alamo Group Inc $ 2,822,000 $(5,642,000) $ 2,822,000 $(5,642,000)
All Components, Inc. -- -- 2,900,000 --
Concert Industries Ltd. -- (2,781,000) (442,998) (4,967,000)
Encore Wire Corporation 5,449,000 (5,449,000) 8,173,000 (8,174,000)
Extreme International, Inc. 2,397,661 -- 4,613,661 --
Liberty Media Corporation (1,120,966) (1,910,302) 169,203 (3,698,670)
Mail-Well, Inc. 2,054,656 (3,270,548) 3,081,984 (4,633,548)
Media Recovery, Inc. 3,000,000 -- 3,000,000 --
Palm Harbor Homes, Inc. -- (27,492,000) -- (43,202,000)
Texas Capital Bancshares, Inc. 2,585,994 -- 2,585,994 --
9
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
As reflected in the above table, at September 30, 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 six months ended September 30, 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.
Portfolio Investments
During the quarter ended September 30, 2003, the Company made a new
investment of $5,500,000 and additional investments of $423,960 in existing
portfolio companies.
The Company has commitments, subject to certain conditions, to invest
up to $5,012,525 in five portfolio companies as requested by management.
Financial Liquidity and Capital Resources
At September 30, 2003, the Company had cash and cash equivalents of
approximately $3.2 million. Pursuant to Small Business Administration ("SBA")
regulations, cash and cash equivalents of $728,000 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 September 30, 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 $31.7 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. At September 30, 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 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 materially affected by foreign currency fluctuations.
The Company's investment in portfolio securities consists of fixed rate
debt securities which totaled $3,129,493 at September 30, 2003, equivalent to 1%
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
10
Item 3. Quantitative and Qualitative Disclosure About Market Risk
(continued)
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.
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 21, 2003, 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 3,534,826 2,700 291,525
Gary L. Martin 3,514,126 23,400 291,525
William R. Thomas 3,513,426 24,100 291,525
John H. Wilson 3,534,826 2,700 291,525
11
Item 4. Submission of Matters to a Vote of Security Holders
(continued)
Votes Cast
------------------------------------
Against/ Abstentions/
For Withheld Non-Votes
b. Ernst & Young, LLP was approved as the Company's --------- -------- -----------
auditors for the 2004 fiscal year. 3,521,887 11,380 295,784
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
On July 8, 2003, the Company filed a Form 8-K reporting the death on
June 30, 2003 of James M. Nolan, a director of the Company since 1980.
The Company filed no other reports on Form 8-K during the three months
ended September 30, 2003.
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: November 14, 2003 By: /s/ William R. Thomas
------------------------ -----------------------------------------
William R. Thomas, President and Chairman
of the Board (chief executive officer)
Date: November 14, 2003 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 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 14, 2003 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 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 14, 2003 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 September 30,
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: November 14, 2003 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 September 30,
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: November 14, 2003 By: /s/ Susan K. Hodgson
---------------------- -------------------------------------
Susan K. Hodgson, Secretary-Treasurer
