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 June 30, 2004
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 July 31, 2004
TABLE OF CONTENTS
Page No.
--------
PART I. FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements
Consolidated Statements of Financial Condition
June 30, 2004 (Unaudited) and March 31, 2004.................3
Consolidated Statements of Operations (Unaudited)
For the three months ended June 30, 2004 and June 30, 2003...4
Consolidated Statements of Changes in Net Assets
For the three months ended June 30, 2004 (Unaudited) and year
ended March 31, 2004.........................................5
Consolidated Statements of Cash Flows (Unaudited)
For the three months ended June 30, 2004 and
June 30, 2003..............................................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................................11
Signatures ................................................................12
PART I. FINANCIAL INFORMATION
- ------------------------------
Item 1. Consolidated Financial Statements
CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
Consolidated Statements of Financial Condition
----------------------------------------------
Assets June 30, 2004 March 31, 2004
-------------- --------------
(Unaudited)
Investments at market or fair value
Companies more than 25% owned
(Cost: June 30, 2004 - $23,114,865
March 31, 2004 - $23,114,865) $ 244,991,981 $ 237,095,981
Companies 5% to 25% owned
(Cost: June 30, 2004 - $27,831,224
March 31, 2004 - $30,431,224) 57,574,504 70,189,005
Companies less than 5% owned
(Cost: June 30, 2004 - $43,736,560
March 31, 2004 - $43,736,560) 98,101,073 99,663,833
-------------- --------------
Total investments
(Cost: June 30, 2004- $94,682,649
March 31, 2004 - $97,282,649) 400,667,558 406,948,819
Cash and cash equivalents 2,377,367 10,150,796
Receivables 89,203 76,477
Other assets 6,919,840 6,802,767
-------------- --------------
Totals $ 410,053,968 $ 423,978,859
============== ==============
Liabilities and Shareholders' Equity
Note payable to bank $ 8,000,000 $ 15,500,000
Note payable to portfolio company 5,000,000 5,000,000
Accrued interest and other liabilities 1,724,077 1,815,996
Income taxes payable 1,889,496 2,726,850
Deferred income taxes 107,047,184 108,312,663
-------------- --------------
Total liabilities 123,660,757 133,355,509
-------------- --------------
Shareholders' equity
Common stock, $1 par value: authorized,
5,000,000 shares; issued, 4,294,416 shares
at June 30, 2004 and March 31, 2004 4,294,416 4,294,416
Additional capital 7,904,997 7,904,997
Undistributed net investment income 3,296,185 3,578,088
Undistributed net realized gain on investments 77,826,005 79,381,980
Unrealized appreciation of investments -
net of deferred income taxes 200,104,910 202,497,171
Treasury stock - at cost (437,365 shares) (7,033,302) (7,033,302)
-------------- --------------
Net assets at market or fair value, equivalent
to $74.25 per share at June 30, 2004 and
$75.35 per share at March 31, 2004 on the
3,857,051 shares outstanding 286,393,211 290,623,350
-------------- --------------
Totals $ 410,053,968 $ 423,978,859
============== ==============
(See Notes to Consolidated Financial Statements)
3
CAPITAL SOUTHWEST CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations
-------------------------------------
(Unaudited)
Three Months Ended
June 30,
2004 2003
------------ ------------
Investment income:
Interest $ 93,282 $ 49,468
Dividends 702,207 697,316
Management and directors' fees 169,250 170,115
------------ ------------
964,739 916,899
------------ ------------
Operating expenses:
Salaries 230,375 209,475
Net pension benefit (68,226) (96,981)
Other operating expenses 173,697 193,572
------------ ------------
335,846 306,066
------------ ------------
Income before interest expense and income taxes 628,893 610,833
Interest expense 115,386 140,021
------------ ------------
Income before income taxes 513,507 470,812
Income tax expense 24,000 34,000
------------ ------------
Net investment income $ 489,507 $ 436,812
============ ============
Proceeds from disposition of investments $ 608,517 $ --
Cost of investments sold 3,002,325 3,680
------------ ------------
Realized loss on investments before income taxes (2,393,808) (3,680)
Income tax benefit (837,833) (1,288)
------------ ------------
Net realized loss on investments (1,555,975) (2,392)
------------ ------------
Increase (decrease) in unrealized appreciation of
investments before income taxes (3,681,261) 13,470,960
Increase (decrease) in deferred income taxes on
appreciation of investments (1,289,000) 4,715,000
------------ ------------
Net increase (decrease) in unrealized appreciation
of investments (2,392,261) 8,755,960
------------ ------------
Net realized and unrealized gain (loss)
on investments $ (3,948,236) $ 8,753,568
============ ============
Increase (decrease) in net assets from operations $ (3,458,729) $ 9,190,380
============ ============
(See Notes to Consolidated Financial Statements)
4
CAPITAL SOUTHWEST CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Changes in Net Assets
------------------------------------------------
Three Months Ended Year Ended
June 30, 2004 March 31, 2004
-------------- --------------
(Unaudited)
Operations
Net investment income $ 489,507 $ 2,587,060
Net realized gain (loss) on investments (1,555,975) 8,191,872
Net increase (decrease) in unrealized appreciation
of investments (2,392,261) 74,688,574
-------------- --------------
Increase (decrease) in net assets from operations (3,458,729) 85,467,506
Distributions from:
Undistributed net investment income (771,410) (2,308,631)
Capital share transactions
Exercise of employee stock options -- 997,500
-------------- --------------
Increase (decrease) in net assets (4,230,139) 84,156,375
Net assets, beginning of period 290,623,350 206,466,975
-------------- --------------
Net assets, end of period $ 286,393,211 $ 290,623,350
============== ==============
(See Notes to Consolidated Financial Statements)
5
CAPITAL SOUTHWEST CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
-------------------------------------
(Unaudited)
Three Months Ended
June 30,
--------
2004 2003
------------ ------------
Cash flows from operating activities
Increase (decrease) in net assets from operations $ (3,458,729) $ 9,190,380
Adjustments to reconcile increase (decrease) in net
assets from operations to net cash provided by (used
in) operating activities:
Proceeds from disposition of investments 608,517 --
Purchases of securities (402,325) (1,003,680)
Depreciation and amortization 3,629 4,765
Net pension benefit (68,226) (96,981)
Net realized and unrealized (gain) loss
on investments 3,948,236 (8,753,568)
(Increase) decrease in receivables (12,726) 203,738
Increase in other assets (34,329) (18,046)
Decrease in accrued interest
and other liabilities (68,246) (1,370)
Decrease in accrued pension cost (41,820) (41,820)
Deferred income taxes 24,000 34,000
------------ ------------
Net cash provided by (used in) operating activities 497,981 (482,582)
------------ ------------
Cash flows from financing activities
Decrease in notes payable to bank (7,500,000) --
Distributions from undistributed net investment income (771,410) (765,810)
------------ ------------
Net cash used in financing activities (8,271,410) (765,810)
------------ ------------
Net decrease in cash and cash equivalents (7,773,429) (1,248,392)
Cash and cash equivalents at beginning
of period 10,150,796 4,650,388
------------ ------------
Cash and cash equivalents at end of period $ 2,377,367 $ 3,401,996
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $115,814 $140,022
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 our
accounts and the accounts of our wholly-owned small business investment company
subsidiary and our wholly-owned management company, have been prepared on the
value method of accounting in accordance with accounting principles generally
accepted in the United States for investment companies. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Certain reclassifications have been made to the 2003 balances to conform with
the 2004 financial statement presentation.
The financial statements included herein have been prepared in
accordance with accounting principles generally accepted in the United States
for interim financial information and the instructions to Form 10-Q and Article
6 of Regulation S-X. The financial statements should be read in conjunction with
the consolidated financial statements and notes thereto included in our annual
report on Form 10-K for the year ended March 31, 2004. 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 we believe 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. Indemnification
We enter into agreements that contain customary indemnification
provisions. The maximum exposure under these indemnification agreements is
unknown, but we have had no previous claims or losses and expect the risk of
losses to be remote.
3. Stock-Based Compensation
Effective April 1, 2003, we adopted the fair value method of recording
compensation expense related to all stock options granted after March 31, 2003,
in accordance with FASB Statement Nos. 123 and 148. Accordingly, the fair value
of stock options as determined on the date of grant using the Black-Scholes
pricing model will be expensed over the vesting period of the related stock
options. No stock options have been granted since March 31, 2003.
The following table illustrates the effect on net asset value and net
asset value per share if we had applied the fair value recognition provisions of
FASB Statement No. 123 to stock-based compensation.
Three Months Ended June 30
2004 2003
------------ ------------
Net asset value, as reported $286,393,211 $214,891,545
Deduct: Total fair value computed
stock-based compensation 40,191 44,860
------------ ------------
Pro forma net asset value $286,353,020 $214,846,685
============ ============
Net asset value per share:
Basic - as reported $74.25 $ 56.12
====== =======
Basic - pro forma $74.24 $ 56.11
====== =======
Diluted - as reported $74.22 $ 55.97
====== =======
Diluted - pro forma $74.21 $ 55.96
====== =======
7
Notes to Consolidated Financial Statements
(continued)
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.
4. Summary of Per Share Information
Three Months Ended
June 30
-------
2004 2003
------ ------
Investment income $ .25 $ .24
Operating expenses (.09) (.08)
Interest expense (.03) (.04)
Income taxes (.01) (.01)
------ ------
Net investment income .12 .11
Distributions from undistributed
net investment income (.20) (.20)
Net realized loss on investments (.40) --
Net increase (decrease) in unrealized appreciation
of investments after deferred taxes (.62) 2.29
------ ------
Increase (decrease) in net asset value (1.10) 2.20
Net asset value:
Beginning of period 75.35 53.92
------ ------
End of period $74.25 $56.12
====== ======
Increase (decrease) in deferred taxes on unrealized
appreciation $(0.34) $ 1.24
Deferred taxes on unrealized appreciation:
Beginning of period 27.79 17.70
------ ------
End of period $27.45 $18.94
====== ======
Shares outstanding at end of period
(000s omitted) 3,857 3,829
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Net asset value at June 30, 2004 was $286,393,211, equivalent to $74.25
per share after deducting an allowance of $27.45 per share for deferred taxes on
net unrealized appreciation of investments. Assuming reinvestment of dividends,
the June 30, 2004 net asset value reflects an increase of 33.5% during the past
twelve months.
June 30, June 30,
2004 2003
------------ ------------
Net assets $286,393,211 $214,891,545
Shares outstanding 3,857,051 3,829,051
Net assets per share $74.25 $56.12
Results of Operations
The composite measure of our 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 our income from interest, dividends and
fees and our combined operating and interest expenses, net of applicable income
taxes. The second element is "Net realized gain (loss) on investments", which is
the difference between the proceeds received from disposition of portfolio
securities and their stated cost, net of applicable income tax expense. The
third element is the "Net increase (decrease) in unrealized appreciation of
investments", which is the net change in the market or fair value of our
8
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
(continued)
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 three months ended June 30, 2004 increased from
the year-ago period primarily because of an increase in loans to portfolio
companies. During the three months ended June 30, 2004 and 2003, we recorded
dividend income from the following sources:
Three Months Ended
June 30
-------------------
2004 2003
-------- --------
Alamo Group Inc. $169,278 $169,278
Dennis Tool Company -- 12,500
Kimberly-Clark Corporation 30,872 26,241
The RectorSeal Corporation 240,000 240,000
Skylawn Corporation 150,000 150,000
Sprint Corporation 11,250 9,000
TCI Holdings, Inc. 20,318 20,318
Texas Shredder, Inc. 1,875 1,875
The Whitmore Manufacturing Company 60,000 60,000
Other 18,614 8,104
-------- --------
$702,207 $697,316
======== ========
Interest expense in the three months ended June 30, 2004 decreased from
the corresponding period ended June 30, 2003 primarily due to a decrease in
notes payable.
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
income taxes and excluding the effect of gains or losses realized during the
periods) by portfolio company:
Three Months Ended
June 30
----------------------------
2004 2003
------------ ------------
All Components, Inc. $ -- $ 2,900,000
Cenveo, Inc. (formerly Mail-Well, Inc.) (3,228,745) 1,027,328
CMI Holding Company, Inc. (3,000,000) --
Encore Wire Corporation (10,898,000) 2,724,000
Extreme International, Inc. 375,000 2,216,000
The RectorSeal Corporation 4,000,000 --
The Whitmore Manufacturing Company 2,400,000 --
9
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
(continued)
As reflected in the above table, at June 30, 2004, the value of our
investment in Encore Wire Corporation was decreased by $10,898,000 due to the
cyclical nature of Encore's profit margins and the probable effect of lower
copper prices on Encore's earnings in its second quarter ended June 30, 2004. In
the same period a year ago, we increased our value by $2,724,000 reflecting an
increase in Encore's sales and earnings which stemmed partly from higher copper
prices.
Portfolio Investments
During the quarter ended June 30, 2004, we made additional investments
of $402,325 in existing portfolio companies.
We have agreed, subject to certain conditions, to invest up to
$2,300,025 in six portfolio companies.
Financial Liquidity and Capital Resources
At June 30, 2004, we had cash and cash equivalents of approximately
$2.4 million. Pursuant to Small Business Administration (SBA) regulations, cash
and cash equivalents of $42,502 held by Capital Southwest Venture Corporation
(CSVC) may not be transferred or advanced to us 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 $64.5 million. We also have
an unsecured $25.0 million revolving line of credit from a commercial bank, of
which $17.0 million was available at June 30, 2004. 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, we have elected to
retain all gains realized during the past 36 years. Retention of future gains is
viewed as an important source of funds to sustain our investment activity.
Approximately $48.5 million of our investment portfolio is represented by
unrestricted publicly-traded securities, which have an ascertainable market
value and represent a source of liquidity.
Funds to be used by us 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, to the extent of their available cash reserves
and borrowing capacities. At June 30, 2004, we owed $5,000,000 to Skylawn
Corporation.
Management believes that our cash and cash equivalents and cash
available from other sources described above are adequate to meet our expected
requirements. Consistent with our long-term strategy, 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
We are subject to financial market risks, including changes in
marketable equity security prices. We do not use derivative financial
instruments to mitigate any of these risks. The return on our investments is not
materially affected by foreign currency fluctuations.
Our investment in portfolio securities consists of fixed rate debt
securities which totaled $5,129,493 at June 30, 2004, equivalent to 1.28% of the
value of our 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 our portfolio and no effect on interest income. Our 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.
10
Item 3. Quantitative and Qualitative Disclosure About Market Risk
(continued)
A portion of our investment portfolio consists of debt and equity
securities of private companies. We anticipate 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 our investment
portfolio also consists of restricted common stock 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 our 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
fair value of our investment in such security.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of June 30, 2004, an evaluation was performed under the supervision
and with the participation of our management, including the President and
Chairman of the Board and Secretary-Treasurer, of the effectiveness of the
design and operation of our disclosure controls and procedures. Based on that
evaluation, our management, including the President and Chairman of the Board
and Secretary-Treasurer concluded that our disclosure controls and procedures
were effective as of June 30, 2004. There have been no significant changes
during the quarter covered by this report in our internal control over financial
reporting or in other factors that could significantly affect internal control
over financial reporting.
PART II. OTHER INFORMATION
- --------------------------
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 31.1- Certification of President and Chairman of the Board
required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), filed
herewith.
Exhibit 31.2- Certification of Secretary-Treasurer required by
Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act, filed
herewith.
Exhibit 32.1- Certification of President and Chairman of the Board
required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act
and Section 1350 of Chapter 63 of Title 18 of the United States
Code, furnished herewith.
Exhibit 32.2- Certification of Secretary-Treasurer required by
Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section
1350 of Chapter 63 of Title 18 of the United States Code,
furnished herewith.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter for
which this report is filed.
11
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: August 6, 2004 By: /s/ William R. Thomas
------------------ -----------------------------------------
William R. Thomas, President and Chairman
of the Board (chief executive officer)
Date: August 6, 2004 By: /s/ Susan K. Hodgson
------------------ -----------------------------------------
Susan K. Hodgson, Secretary-Treasurer
(chief financial/accounting officer)
12
Exhibit 31.1
CERTIFICATIONS
I, William R. Thomas, President and Chairman of the Board of Capital Southwest
Corporation, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Capital Southwest
Corporation (the "registrant");
2. Based on my knowledge, this 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 report;
3. Based on my knowledge, the financial statements, and other financial
information included in this 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 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-15(e) and 15d-15(e)) for the
registrant and have:
a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under
our supervision, 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 report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
c) Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, 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 and material weaknesses in the
design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report
information; and
b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: August 6, 2004 By: /s/ William R. Thomas
-------------- --------------------------------
William R. Thomas, President and
Chairman of the Board
Exhibit 31.2
CERTIFICATIONS
I, Susan K. Hodgson, Secretary-Treasurer of Capital Southwest Corporation,
certify that:
1. I have reviewed this quarterly report on Form 10-Q of Capital Southwest
Corporation (the "registrant");
2. Based on my knowledge, this 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 report;
3. Based on my knowledge, the financial statements, and other financial
information included in this 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 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-15(e) and 15d-15(e)) for the
registrant and have:
a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under
our supervision, 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 report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
c) Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, 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 and material weaknesses in the
design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report
financial information; and
b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: August 6, 2004 By: /s/ Susan K. Hodgson
-------------- -------------------------------------
Susan K. Hodgson, Secretary-Treasurer
Exhibit 32.1
Certification of President and Chairman of the Board
Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code
I, William R. Thomas, President and Chairman of the Board of Capital
Southwest Corporation, certify that, to my knowledge:
1. the Form 10-Q, filed with the Securities and Exchange Commission on
August 6, 2004 ("accompanied 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 accompanied report fairly presents,
in all material respects, the consolidated financial condition and results of
operations of Capital Southwest Corporation.
Date: August 6, 2004 By: /s/ William R. Thomas
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William R. Thomas, President and
Chairman of the Board
Exhibit 32.2
Certification of Secretary-Treasurer
Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code
I, Susan K. Hodgson, Secretary-Treasurer of Capital Southwest
Corporation, certify that, to my knowledge:
1. the Form 10-Q, filed with the Securities and Exchange Commission on
August 6, 2004 ("accompanied 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 accompanied report fairly presents,
in all material respects, the consolidated financial condition and results of
operations of Capital Southwest Corporation.
Date: August 6, 2004 By: /s/ Susan K. Hodgson
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Susan K. Hodgson, Secretary-Treasurer