x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the transition period from | to |
CAPITAL SOUTHWEST CORPORATION
|
(Exact name of registrant as specified in its charter)
|
Texas
|
75-1072796
|
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
12900 Preston Road, Suite 700, Dallas, Texas
|
75230
|
|
(Address of principal executive offices)
|
(Zip Code)
|
Large accelerated filer o
|
Accelerated filer x
|
Non-accelerated filer o
|
Smaller reporting company o
|
PART I
|
FINANCIAL INFORMATION
|
Page
|
Item 1.
|
||
3
|
||
4
|
||
5
|
||
6
|
||
7
|
||
19
|
||
Item 2.
|
32
|
|
Item 3.
|
36
|
|
Item 4.
|
36
|
|
PART II
|
OTHER INFORMATION
|
|
Item 1.
|
37
|
|
Item 1A.
|
37
|
|
Item 6.
|
37
|
|
38
|
Item 1.
|
Consolidated Financial Statements
|
December 31
2012
|
March 31
2012
|
|||||||
Assets
|
(Unaudited)
|
|||||||
Investments at market or fair value
|
||||||||
Companies more than 25% owned (Cost: December 31, 2012 - $12,814, March 31, 2012 - $14,870)
|
$ | 346,595 | $ | 283,575 | ||||
Companies 5% to 25% owned (Cost: December 31, 2012 - $15,594, March 31, 2012 - $14,003)
|
135,011 | 209,222 | ||||||
Companies less than 5% owned (Cost: December 31, 2012 -$59,220, March 31, 2012 - $60,120)
|
69,672 | 65,749 | ||||||
Total investments (Cost: December 31, 2012 - $87,628, March 31, 2012 - $88,993)
|
551,278 | 558,546 | ||||||
Cash and cash equivalents
|
67,623 | 64,895 | ||||||
Receivables
|
||||||||
Dividends and interest
|
8,203 | 1,741 | ||||||
Affiliates
|
438 | 220 | ||||||
Pension assets
|
7,490 | 7,349 | ||||||
Other assets
|
180 | 238 | ||||||
Total assets
|
$ | 635,212 | $ | 632,989 | ||||
Liabilities
|
||||||||
Other liabilities
|
$ | 2,278 | $ | 688 | ||||
Income tax payable
|
1,125 | – | ||||||
Accrued pension cost
|
1,684 | 1,568 | ||||||
Deferred income taxes
|
2,036 | 2,027 | ||||||
Total liabilities
|
7,123 | 4,283 | ||||||
Net Assets
|
||||||||
Common stock, $1 par value: authorized, 5,000,000 shares; issued, 4,383,271 shares at December 31, 2012 and 4,339,416 at March 31, 2012
|
4,383 | 4,339 | ||||||
Additional capital
|
182,566 | 177,841 | ||||||
Accumulated net investment income
|
1,427 | 412 | ||||||
Accumulated net realized gain
|
– | 498 | ||||||
Unrealized appreciation of investments
|
463,650 | 469,553 | ||||||
Treasury stock - at cost on 584,878 shares
|
(23,937 | ) | (23,937 | ) | ||||
Total net assets
|
628,089 | 628,706 | ||||||
Total liabilities and net assets
|
$ | 635,212 | $ | 632,989 | ||||
Net asset value per share (on the 3,798,393 shares outstanding at December 31, 2012 and 3,754,538 at March 31, 2012)
|
$ | 165.36 | $ | 167.45 |
Three Months Ended
December 31
|
Nine Months Ended
December 31
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
Investment income:
|
||||||||||||||||
Interest
|
$ | 518 | $ | 506 | $ | 1,696 | $ | 1,444 | ||||||||
Dividends
|
6,308 | 4,955 | 7,548 | 6,148 | ||||||||||||
Management and other income
|
146 | 163 | 523 | 486 | ||||||||||||
6,972 | 5,624 | 9,767 | 8,078 | |||||||||||||
Operating expenses:
|
||||||||||||||||
Salaries
|
2,357 | 588 | 3,720 | 1,571 | ||||||||||||
Stock option expense
|
62 | 253 | 334 | 757 | ||||||||||||
Net pension benefit
|
(9 | ) | (75 | ) | (26 | ) | (225 | ) | ||||||||
Professional fees
|
191 | 202 | 767 | 741 | ||||||||||||
Other operating expenses
|
272 | 244 | 935 | 739 | ||||||||||||
2,873 | 1,212 | 5,730 | 3,583 | |||||||||||||
Income before income taxes
|
4,099 | 4,412 | 4,037 | 4,495 | ||||||||||||
Income tax expense/(benefit)
|
(43 | ) | 27 | (3 | ) | 74 | ||||||||||
Net investment income
|
$ | 4,142 | $ | 4,385 | $ | 4,040 | $ | 4,421 | ||||||||
Proceeds from disposition of investments
|
$ | 11,023 | $ | 13,417 | $ | 78,528 | $ | 31,956 | ||||||||
Cost of investments sold
|
9,258 | 14,528 | 9,882 | 20,628 | ||||||||||||
Realized gain (loss) on investments before income tax
|
1,765 | (1,111 | ) | 68,646 | 11,328 | |||||||||||
Income tax expense
|
1,125 | 1,249 | 1,125 | 1,249 | ||||||||||||
Net realized gain (loss) on investments
|
640 | (2,360 | ) | 67,521 | 10,079 | |||||||||||
Net increase (decrease) in unrealized appreciation of investments
|
22,296 | 48,798 | (5,904 | ) | 165 | |||||||||||
Net realized and unrealized gain on investments
|
$ | 22,936 | $ | 46,438 | $ | 61,617 | $ | 10,244 | ||||||||
Increase in net assets from operations
|
$ | 27,078 | $ | 50,823 | $ | 65,657 | $ | 14,665 |
Nine Months
Ended
December 31, 2012
|
Nine Months
Ended
December 31, 2011
|
|||||||
Operations:
|
||||||||
Net investment income
|
$ | 4,040 | $ | 4,421 | ||||
Net realized gain on investments
|
67,521 | 10,079 | ||||||
Net increase (decrease) in unrealized appreciation of investments
|
(5,904 | ) | 165 | |||||
Increase in net assets from operations
|
65,657 | 14,665 | ||||||
Distributions from:
|
||||||||
Undistributed net investment income
|
(3,025 | ) | (3,003 | ) | ||||
Net realized gain distribution
|
(66,826 | ) | - | |||||
Net realized gains deemed distributed to shareholders
|
(1,194 | ) | (3,216 | ) | ||||
Capital share transactions:
|
||||||||
Allocated increase in share value for deemed distribution
|
1,194 | 3,216 | ||||||
Exercise of employee stock options
|
3,243 | 98 | ||||||
Stock option expense
|
334 | 757 | ||||||
Increase/(decrease) in net assets
|
(617 | ) | 12,517 | |||||
Net assets, beginning of period
|
628,706 | 539,233 | ||||||
Net assets, end of period
|
$ | 628,089 | $ | 551,750 |
Three Months Ended
December 31
|
Nine Months Ended
December 31
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
Cash flows from operating activities
|
||||||||||||||||
Increase in net assets from operations
|
$ | 27,078 | $ | 50,823 | $ | 65,657 | $ | 14,665 | ||||||||
Adjustments to reconcile increase in net assets from operations to net cash provided by operating activities:
|
||||||||||||||||
Net proceeds from disposition of investments
|
11,023 | 13,417 | 78,521 | 31,956 | ||||||||||||
Return of Capital on Investment
|
511 | – | 768 | – | ||||||||||||
Proceeds from repayment of loan securities or investments
|
– | – | – | 2,111 | ||||||||||||
Purchases of securities
|
(2,482 | ) | (1,577 | ) | (9,278 | ) | (13,077 | ) | ||||||||
Depreciation and amortization
|
7 | 6 | 25 | 16 | ||||||||||||
Net pension benefit
|
(9 | ) | (75 | ) | (26 | ) | (225 | ) | ||||||||
Realized (gain) loss on investments before income tax
|
(1,765 | ) | 1,111 | (68,646 | ) | (11,328 | ) | |||||||||
Taxes payable on behalf of shareholders on deemed distribution
|
1,125 | 1,249 | 1,125 | 1,249 | ||||||||||||
Net (increase) decrease in unrealized appreciation of investments
|
(22,296 | ) | (48,798 | ) | 5,904 | (164 | ) | |||||||||
Stock option expense
|
62 | 253 | 334 | 757 | ||||||||||||
Increase in dividend and interest receivable
|
(5,586 | ) | (5,031 | ) | (6,462 | ) | (5,468 | ) | ||||||||
Decrease (increase) in receivables from affiliates
|
(104 | ) | (5 | ) | (218 | ) | 50 | |||||||||
Decrease in other assets
|
22 | – | 32 | 4 | ||||||||||||
Increase (decrease) in other liabilities
|
1,687 | (5 | ) | 1,591 | (5 | ) | ||||||||||
Increase in deferred income taxes
|
(43 | ) | 27 | 9 | 81 | |||||||||||
Net cash provided by operating activities
|
9,230 | 11,395 | 69,336 | 20,622 | ||||||||||||
Cash flows from financing activities
|
||||||||||||||||
Distributions from undistributed net investment income
|
(1,520 | ) | (1,502 | ) | (3,025 | ) | (3,003 | ) | ||||||||
Dividend paid from capital gain
|
– | (66,826 | ) | – | ||||||||||||
Proceeds from exercise of employee stock options
|
226 | – | 3,243 | 98 | ||||||||||||
Net cash used in financing activities
|
(1,294 | ) | (1,502 | ) | (66,608 | ) | (2,905 | ) | ||||||||
Net increase in cash and cash equivalents
|
7,936 | 9,893 | 2,728 | 17,717 | ||||||||||||
Cash and cash equivalents at beginning of period
|
59,687 | 53,323 | 64,895 | 45,499 | ||||||||||||
Cash and cash equivalents at end of period
|
$ | 67,623 | $ | 63,216 | $ | 67,623 | $ | 63,216 |
Supplemental disclosure of cash flow information:
|
||||||||||||||||
Income taxes
|
$ | – | $ | – | $ | – | $ | – | ||||||||
Non-cash transaction:
|
a.
|
In December 2012, the $3,200,000 investment in Trax Holdings, Inc. debt security and $800,000 accrued interest were converted into Series B Convertible Preferred Stock. In July 2011, the $1,000,000 investment in iMemories, Inc. debt security was converted into Series C Convertible Preferred Stock. These transactions had the following non-cash effect on the Company’s Consolidated Statements of Assets and Liabilities:
|
Total Investments
|
$ | 4,000 | $ | – | $ | 4,000 | $ | 1,000 |
Company
|
Equity (a)
|
Investment (b)
|
Cost
|
Value (c)
|
|||||||||||
*†ALAMO GROUP INC.
Seguin, Texas
Tractor-mounted mowing and mobile excavation equipment for governmental, industrial and agricultural markets; street-sweeping equipment for municipalities.
|
22.0 | % |
‡2,832,300 shares common stock (acquired 4-1-73 thru 5-09-11)
|
$ | 2,190,937 | $ | 92,397,312 | ||||||||
ATLANTIC CAPITAL BANCSHARES, INC
Atlanta, Georgia
Holding company of Atlantic Capital Bank, a full service commercial bank.
|
1.9 | % |
300,000 shares common stock (acquired 4-10-07)
|
3,000,000 | 2,534,000 | ||||||||||
¥BALCO, INC.
Wichita, Kansas
Specialty architectural products used in the construction and remodeling of commercial and institutional buildings.
|
95.7 | % |
445,000 shares common stock and 60,920 shares Class B non-voting common stock (acquired 10-25-83 and 5-30-02)
|
624,920 | 4,600,000 | ||||||||||
*BOXX TECHNOLOGIES, INC.
Austin, Texas
Workstations for computer graphic imaging and design.
|
14.9 | % |
3,125,354 shares Series B Convertible Preferred Stock, convertible into 3,125,354 shares of common stock at $0.50 per share (acquired 8-20-99 thru 8-8-01)
|
1,500,000 | 1,220,000 | ||||||||||
CINATRA CLEAN TECHNOLOGIES, INC.
Houston, Texas
Cleans above ground oil storage tanks with a patented, automated system.
|
73.4 | % |
12% subordinated secured promissory note, due 5-9-16 (acquired 5-19-10 thru 10-20-10)
|
779,278 | 183,000 | ||||||||||
12% subordinated secured promissory note, due 5-9-17 (acquired 5-9-11 thru 10-26-11)
|
2,285,700 | 537,000 | |||||||||||||
12% subordinated secured promissory note, due 3-31-17 (acquired 9-9-11 and 10-26-11)
|
1,523,800 | 358,000 | |||||||||||||
10% subordinated secured promissory note, due 5-9-17 (acquired 7-14-08 thru 4-28-10)
|
6,200,700 | 1,458,000 | |||||||||||||
12% subordinated secured promissory note, due 10-31-17 (acquired 10-19-12)
|
499,997 | 118,000 | |||||||||||||
3,033,410 shares Series A Convertible Preferred Stock, convertible into 3,033,410 shares common stock at $1.00 per share (acquired 7-14-08 thru 11-18-10)
|
3,033,410 | 1 | |||||||||||||
Warrants to purchase 1,436,499 shares of common stock at $1.00 per share, expiring 10-31-2027 (acquired 5-9-11 thru 10-19-12)
|
– | – | |||||||||||||
14,322,885 | 2,654,001 |
Company
|
Equity (a)
|
Investment (b)
|
Cost
|
Value (c)
|
|||||||||||
*†ENCORE WIRE
CORPORATION
McKinney, Texas
Electric wire and cable for residential, commercial and industrial construction use.
|
6.2 | % |
‡1,312,500 shares common stock (acquired 9-10-92 thru 10-15-98)
|
5,200,000 | 39,768,750 | ||||||||||
¥†HEELYS, INC.
Carrollton, Texas
Heelys stealth skate shoes, equipment and apparel sold through sporting goods chains, department stores and footwear retailers.
|
31.1 | % |
‡9,317,310 shares common stock (acquired 5-26-00)
|
102,490 | 20,684,428 | ||||||||||
†HOLOGIC, INC.
Bedford, Massachusetts
Medical instruments including bone densitometers, mammography devices and digital radiography systems.
|
< 1%
|
‡582,820 shares common stock (acquired 8-27-99)
|
202,529 | 11,662,286 | |||||||||||
iMEMORIES, INC.
Scottsdale, Arizona
Enables online video and photo sharing and DVD creation for home movies recorded in analog and new digital format.
|
23 | % |
17,391,304 shares Series B Convertible Preferred Stock, convertible into 19,891,304 shares of common stock at $0.23 per share (acquired 7-10-09)
|
4,000,000 | 4,000,000 | ||||||||||
4,684,967 shares Series C Convertible Preferred Stock, convertible into 4,684,967 shares of common stock at $0.23 per share (acquired 7-20-11)
|
1,078,479 | 1,078,479 | |||||||||||||
Warrants to purchase 2,500,000 shares of common stock at $0.12 per share, expiring 1-21-21(acquired 9-13-10 thru 1-21-11)
|
– | – | |||||||||||||
10% convertible notes, $308,000 principal due 7-31-2014 (acquired 9-7-12)
|
308,000 | 308,000 | |||||||||||||
5,386,479 | 5,386,479 | ||||||||||||||
INSTAWARES HOLDING COMPANY, LLC
Atlanta, Georgia
Provides services to the restaurant industry via its five subsidiary companies.
|
4.5 | % |
3,846,154 Class D shares (acquired 5-20-11)
|
5,000,000 | 5,829,000 | ||||||||||
KBI BIOPHARMA, INC.
Durham, North Carolina
Provides fully-integrated, outsourced drug development and bio-manufacturing services.
|
17.1 | % |
7,142,857 shares Series B-2 Convertible Preferred Stock, convertible into 7,142,857 shares of common stock at $0.49 per share (acquired 9-08-09)
|
5,000,000 | 5,400,000 | ||||||||||
Warrants to purchase 63,007 shares of preferred stock at $ 0.70 per share, acquired 1-26-2012
|
- | - | |||||||||||||
5,000,000 | 5,400,000 |
Company
|
Equity (a)
|
Investment (b)
|
Cost
|
Value (c)
|
|||||||||||
¥MEDIA RECOVERY, INC.
Dallas, Texas
Computer datacenter and office automation supplies and accessories; impact, tilt monitoring and temperature sensing devices to detect mishandling shipments; dunnage for protecting shipments.
|
97.9 | % |
800,000 shares Series A Convertible Preferred Stock, convertible into 800,000 shares of common stock at $1.00 per share (acquired 11-4-97)
|
800,000 | 2,200,000 | ||||||||||
4,000,002 shares common stock (acquired 11-4-97)
|
4,615,000 | 11,100,000 | |||||||||||||
5,415,000 | 13,300,000 | ||||||||||||||
*PALLETONE, INC.
Bartow, Florida
Manufacturer of wooden pallets and pressure-treated lumber.
|
7.7 | % |
12.3% senior subordinated notes, $2,000,000 principal due 12-18-2015 (acquired 9-25-06)
|
1,553,150 | 1,600,000 | ||||||||||
150,000 shares common stock (acquired 10-18-01)
|
150,000 | 2 | |||||||||||||
1,703,150 | 1,600,002 | ||||||||||||||
¥THE RECTORSEAL CORPORATION
Houston, Texas
Specialty chemicals for plumbing, HVAC, electrical, construction, industrial, oil field and automotive applications; smoke containment systems for building fires; also owns 20% of The Whitmore Manufacturing Company.
|
100.0 | % |
27,907 shares common stock (acquired 1-5-73 and 3-31-73)
|
52,600 | 229,600,000 | ||||||||||
TCI HOLDINGS, INC.
Denver, Colorado
Cable television systems and microwave relay systems.
|
– |
21 shares 12% Series C Cumulative Compounding Preferred Stock (acquired 1-30-90)
|
– | 779,000 | |||||||||||
TITANLINER, INC.
Midland, Texas
Manufactures, installs and rents spill containment system for oilfield applications.
|
29.9 | % |
217,038 shares Series A Convertible Preferred Stock convertible into 217,038 shares of Series A preferred stock at $12.65 per share (acquired 6-29-12)
|
3,203,000 | 3,203,000 | ||||||||||
7% senior subordinated secured promissory note, due 6-30-17 (acquired 6-29-12)
|
2,747,000 | 2,747,000 | |||||||||||||
Warrants to purchase 122,239 shares of Series A preferred stock at $ 0.01 per share, expiring 1-26-12
|
- | - | |||||||||||||
5,950,000 | 5,950,000 |
Company
|
Equity (a)
|
Investment (b)
|
Cost
|
Value (c)
|
|||||||||||
TRAX HOLDINGS, INC.
Scottsdale, Arizona
Provides a comprehensive set of solutions to improve the transportation validation, accounting, payment and information management process.
|
25.4 | % |
475,430 shares Series B convertible Preferred Stock convertible into 475,430 common stock at $8.41 per share(acquired 12-5-12)
|
4,000,000 | 7,000,000 | ||||||||||
1,061,279 shares Series A Convertible Preferred Stock, convertible into 1,061,279 common stock at $4.64 per share (acquired 12-8-08 and 2-17-09)
|
5,000,000 | 12,400,000 | |||||||||||||
9,000,000 | 19,400,000 | ||||||||||||||
*WELLOGIX, INC.
Houston, Texas
Developer and supporter of software used by the oil and gas industry.
|
19.1 | % |
4,788,371 shares Series A-1 Convertible Participating Preferred Stock, convertible into 4,788,371 shares of common stock at $1.0441 per share (acquired 8-19-05 thru 6-15-08)
|
5,000,000 | 25,000 | ||||||||||
¥THE WHITMORE MANUFACTURING COMPANY
Rockwall, Texas
Specialized surface mining, railroad and industrial lubricants; coatings for automobiles and primary metals; fluid contamination control devices.
|
80.0 | % |
80 shares common stock (acquired 8-31-79)
|
1,600,000 | 71,400,000 | ||||||||||
MISCELLANEOUS
|
– |
Ballast Point Ventures II, L.P.
2.2% limited partnership interest (acquired 8-4-08 thru 6-18-10)
|
1,359,790 | 1,359,000 | |||||||||||
– |
BankCap Partners Fund I, L.P.
5.5% limited partnership interest (acquired 7-14-06 thru 11-30-11)
|
5,897,276 | 5,016,000 | ||||||||||||
– |
CapitalSouth Partners Fund III, L.P.
1.9% limited partnership interest (acquired 1-22-08 and 11-16-11)
|
1,331,256 | 1,816,000 | ||||||||||||
100.0 | % |
¥CapStar Holdings Corporation
500 shares common stock (acquired 6-10-10); 1,000,000 shares preferred stock (acquired 12-17-12)
|
4,703,619 | 6,674,000 |
Company
|
Equity (a)
|
Investment (b)
|
Cost
|
Value (c)
|
|||||||||||
Miscellaneous (continued)
|
– |
Diamond State Ventures, L.P.
1.4% limited partnership interest (acquired 10-12-99 thru 8-26-05)
|
- | 96,000 | |||||||||||
– |
¥Discovery Alliance, LLC
90.0% limited liability company (acquired 9-12-08 thru 10-20-11)
|
1,315,000 | 1,167,000 | ||||||||||||
– |
First Capital Group of Texas III, L.P.
3.0% limited partnership interest (acquired 12-26-00 thru 8-12-05)
|
778,895 | 164,000 | ||||||||||||
100 | % |
¥Humac Company
1,041,000 shares common stock (acquired 1-31-75 and 12-31-75)
|
– | 169,000 | |||||||||||
– |
†North American Energy Partners, Inc.
77,194 shares common stock (acquired 8-20-12)
|
236,986 | 262,460 | ||||||||||||
– |
STARTech Seed Fund II
3.2% limited partnership interest (acquired 4-28-00 thru 2-23-05)
|
754,327 | 364,000 | ||||||||||||
TOTAL INVESTMENTS
|
$ | 87,628,139 | $ | 551,277,718 |
Company
|
Equity (a)
|
Investment (b)
|
Cost
|
Value (c)
|
|||||||||||
*†ALAMO GROUP INC.
Seguin, Texas
Tractor-mounted mowing and mobile excavation equipment for governmental, industrial and agricultural markets; street-sweeping equipment for municipalities.
|
22.0 | % |
‡2,832,300 shares common stock (acquired 4-1-73 thru 5-09-11)
|
$ | 2,190,937 | $ | 85,138,938 | ||||||||
ATLANTIC CAPITAL BANCSHARES, INC
Atlanta, Georgia
Holding company of Atlantic Capital Bank, a full service commercial bank.
|
1.9 | % |
300,000 shares common stock (acquired 4-10-07)
|
3,000,000 | 2,299,000 | ||||||||||
¥BALCO, INC.
Wichita, Kansas
Specialty architectural products used in the construction and remodeling of commercial and institutional buildings.
|
95.7 | % |
445,000 shares common stock and 60,920 shares Class B non-voting common stock (acquired 10-25-83 and 5-30-02)
|
624,920 | 4,100,000 | ||||||||||
*BOXX TECHNOLOGIES, INC.
Austin, Texas
Workstations for computer graphic imaging and design.
|
14.9 | % |
3,125,354 shares Series B Convertible Preferred Stock, convertible into 3,125,354 shares of common stock at $0.50 per share (acquired 8-20-99 thru 8-8-01)
|
1,500,000 | 600,000 | ||||||||||
CINATRA CLEAN TECHNOLOGIES, INC.
Houston, Texas
Cleans above ground oil storage tanks with a patented, automated system.
|
73.4 | % |
12% subordinated secured promissory note, due 5-9-16 (acquired 5-19-10 thru 10-20-10)
|
779,278 | 444,189 | ||||||||||
12% subordinated secured promissory note, due 5-9-17 (acquired 5-9-11 thru 10-26-11)
|
2,285,700 | 1,302,849 | |||||||||||||
12% subordinated secured promissory note, due 8-31-16 (acquired 9-9-11 and 10-26-11)
|
1,264,754 | 720,910 | |||||||||||||
10% subordinated secured promissory note, due 5-9-17 (acquired 7-14-08 thru 4-28-10)
|
6,200,700 | 3,534,399 | |||||||||||||
3,033,410 shares Series A Convertible Preferred Stock, convertible into 3,033,410 shares common stock at $1.00 per share (acquired 7-14-08 thru 11-18-10)
|
3,033,410 | 1 | |||||||||||||
Warrants to purchase 1,269,833 shares of common stock at $1.00 per share, expiring 8-31-2021 (acquired 5-9-11 thru 8-31-11)
|
– | – | |||||||||||||
13,563,842 | 6,002,348 |
*†ENCORE WIRE
CORPORATION
McKinney, Texas
Electric wire and cable for residential, commercial and industrial construction use.
|
16.9 | % |
‡4,086,750 shares common stock (acquired 7-16-92 thru 10-7-98)
|
5,800,000 | 121,458,210 |
Company
|
Equity (a)
|
Investment (b)
|
Cost
|
Value (c)
|
|||||||||||
EXTREME INTERNATIONAL, INC.
Sugar Land, Texas
Owns Bill Young Productions, Texas Video and Post, and Extreme and television commercials and corporate communications videos.
|
53.6 | % |
13,035 shares Series A Common Stock (acquired 9-26-08 and 12-18-08)
|
325,875 | 714,000 | ||||||||||
39,359.18 shares Series C Convertible Preferred Stock, convertible into 157,437.72 shares of common stock at $25.00 per share (acquired 9-30-03)
|
2,625,000 | 8,626,000 | |||||||||||||
3,750 shares 8% Series A Convertible Preferred Stock, convertible into 15,000 shares of common stock at $25.00 per share (acquired 9-30-03)
|
375,000 | 822,000 | |||||||||||||
3,325,875 | 10,162,000 | ||||||||||||||
¥†HEELYS, INC.
Carrollton, Texas
Heelys stealth skate shoes, equipment and apparel sold through sporting goods chains, department stores and footwear retailers.
|
31.1 | % |
‡9,317,310 shares common stock (acquired 5-26-00)
|
102,490 | 20,498,082 | ||||||||||
†HOLOGIC, INC.
Bedford, Massachusetts
Medical instruments including bone densitometers, mammography devices and digital radiography systems.
|
< 1
|
% |
‡632,820 shares common stock (acquired 8-27-99)
|
220,000 | 13,637,271 | ||||||||||
iMEMORIES, INC.
Scottsdale, Arizona
Enables online video and photo sharing and DVD creation for home movies recorded in analog and new digital format.
|
25.3 | % |
17,391,304 shares Series B Convertible Preferred Stock, convertible into 19,891,304 shares of common stock at $0.23 per share (acquired 7-10-09)
|
4,000,000 | 4,000,000 | ||||||||||
4,684,967 shares Series C Convertible Preferred Stock, convertible into 4,684,967 shares of common stock at $0.23 per share (acquired 7-20-11)
|
1,078,479 | 1,078,479 | |||||||||||||
Warrants to purchase 2,500,000 shares of common stock at $0.12 per share, expiring 1-21-21(acquired 9-13-10 thru 1-21-11)
|
– | – | |||||||||||||
5,078,479 | 5,078,479 | ||||||||||||||
INSTAWARES HOLDING COMPANY, LLC
Atlanta, Georgia
Provides services to the restaurant industry via its five subsidiary companies.
|
4.5 | % |
3,846,154 Class D shares (acquired 5-20-11)
|
5,000,000 | 5,000,000 | ||||||||||
KBI BIOPHARMA, INC.
Durham, North Carolina
Provides fully-integrated, outsourced drug development and bio-manufacturing services.
|
17.1 | % |
7,142,857 shares Series B-2 Convertible Preferred Stock, convertible into 10,204,082 shares of common stock at $0.49 per share (acquired 9-08-09)
|
5,000,000 | 3,200,000 |
Company
|
Equity (a)
|
Investment (b)
|
Cost
|
Value (c)
|
|||||||||||
¥MEDIA RECOVERY, INC.
Dallas, Texas
Computer datacenter and office automation supplies and accessories; impact, tilt monitoring and temperature sensing devices to detect mishandling shipments; dunnage for protecting shipments.
|
97.9 | % |
800,000 shares Series A Convertible Preferred Stock, convertible into 800,000 shares of common stock at $1.00 per share (acquired 11-4-97)
|
800,000 | 3,100,000 | ||||||||||
4,000,002 shares common stock (acquired 11-4-97)
|
4,615,000 | 15,600,000 | |||||||||||||
5,415,000 | 18,700,000 | ||||||||||||||
*PALLETONE, INC.
Bartow, Florida
Manufacturer of wooden pallets and pressure-treated lumber.
|
7.7 | % |
12.3% senior subordinated notes, $2,000,000 principal due 12-18-15 (acquired 9-25-06)
|
1,553,150 | 2,000,000 | ||||||||||
150,000 shares common stock (acquired 10-18-01)
|
150,000 | 2 | |||||||||||||
1,703,150 | 2,000,002 | ||||||||||||||
¥THE RECTORSEAL CORPORATION
Houston, Texas
Specialty chemicals for plumbing, HVAC, electrical, construction, industrial, oil field and automotive applications; smoke containment systems for building fires; also owns 20% of The Whitmore Manufacturing Company.
|
100.0 | % |
27,907 shares common stock (acquired 1-5-73 and 3-31-73)
|
52,600 | 166,300,000 | ||||||||||
TCI HOLDINGS, INC.
Denver, Colorado
Cable television systems and microwave relay systems.
|
– |
21 shares 12% Series C Cumulative Compounding Preferred Stock (acquired 1-30-90)
|
– | 802,000 | |||||||||||
TRAX HOLDINGS, INC.
Scottsdale, Arizona
Provides a comprehensive set of solutions to improve the transportation validation, accounting, payment and information management process.
|
29.4 | % |
18% convertible promissory note, $3,200,000 principal due 9-17-2012 (acquired 4-6-11 thru 11-10-11)
|
3,200,000 | 3,200,000 | ||||||||||
1,061,279 shares Series A Convertible Preferred Stock, convertible into 1,061,279 common stock at $4.64 per share (acquired 12-8-08 and 2-17-09)
|
5,000,000 | 6,600,000 | |||||||||||||
8,200,000 | 9,800,000 | ||||||||||||||
VIA HOLDINGS, INC.
Sparks, Nevada
Designer, manufacturer and distributor of high-quality office seating.
|
3.2 | % |
12,686 shares common stock (acquired 3-4-11 and 3-25-11)
|
4,926,290 | 2 | ||||||||||
*WELLOGIX, INC.
Houston, Texas
Developer and supporter of software used by the oil and gas industry.
|
19.1 | % |
4,788,371 shares Series A-1 Convertible Participating Preferred Stock, convertible into 4,788,371 shares of common stock at $1.0441 per share (acquired 8-19-05 thru 6-15-08)
|
5,000,000 | 25,000 |
Company
|
Equity (a)
|
Investment (b)
|
Cost
|
Value (c)
|
|||||||||||
¥THE WHITMORE MANUFACTURING COMPANY
Rockwall, Texas
Specialized surface mining, railroad and industrial lubricants; coatings for automobiles and primary metals; fluid contamination control devices.
|
80.0 | % |
80 shares common stock (acquired 8-31-79)
|
1,600,000 | 67,200,000 | ||||||||||
MISCELLANEOUS
|
– |
Ballast Point Ventures II, L.P.
2.2% limited partnership interest (acquired 8-4-08 thru 6-18-10)
|
1,725,000 | 1,551,000 | |||||||||||
– |
BankCap Partners Fund I, L.P.
5.5% limited partnership interest (acquired 7-14-06 thru 11-30-11)
|
5,808,470 | 5,012,000 | ||||||||||||
– |
CapitalSouth Partners Fund III, L.P.
1.9% limited partnership interest (acquired 1-22-08 and 11-16-11)
|
1,331,256 | 1,438,000 | ||||||||||||
100.0 | % |
¥CapStar Holdings Corporation
500 shares common stock (acquired 6-10-10)
|
3,703,619 | 5,338,000 | |||||||||||
– |
Diamond State Ventures, L.P.
1.4% limited partnership interest (acquired 10-12-99 thru 8-26-05)
|
76,000 | 184,000 | ||||||||||||
– |
¥Discovery Alliance, LLC
90.0% limited liability company (acquired 9-12-08 thru 10-20-11)
|
1,180,000 | 1,280,000 | ||||||||||||
– |
First Capital Group of Texas III, L.P.
3.0% limited partnership interest (acquired 12-26-00 thru 8-12-05)
|
778,895 | 662,000 | ||||||||||||
100 | % |
¥Humac Company
1,041,000 shares common stock (acquired 1-31-75 and 12-31-75)
|
– | 159,000 | |||||||||||
– |
STARTech Seed Fund I
12.1% limited partnership interest (acquired 4-17-98 thru 1-5-00)
|
178,066 | 39,000 |
Company
|
Equity (a)
|
Investment (b)
|
Cost
|
Value (c)
|
|||||||||||
Miscellaneous (continued) | – |
STARTech Seed Fund II
3.2% limited partnership interest (acquired 4-28-00 thru 2-23-05)
|
843,891 | 371,000 | |||||||||||
– |
Sterling Group Partners I, L.P.
1.7% limited partnership interest (acquired 4-20-01 thru 1-24-05)
|
1,064,042 | 511,000 | ||||||||||||
TOTAL INVESTMENTS
|
$ | 88,992,822 | $ | 558,546,332 |
(a)
|
Equity
|
(b)
|
Investments
|
(c)
|
Value
|
(d)
|
Agreements between Certain Issuers and the Company
|
(e)
|
Descriptions and Ownership Percentages
|
1.
|
ORGANIZATION AND BASIS OF PRESENTATION
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
3.
|
INVESTMENTS
|
|
·
|
Level 1: Investments whose values are based on unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access. We use Level 1 inputs for publicly traded securities. Such investments are valued at the closing price for listed securities and at the lower of the closing bid price or the closing sale price for NASDAQ securities on the valuation date.
|
|
·
|
Level 2: Investments whose values are based on observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument in non-active markets, quoted prices for similar instruments in active markets and similar data. We did not value any of our investments using Level 2 inputs as of December 31, 2012 and 2011.
|
|
·
|
Level 3: Investments whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the investment. We use Level 3 inputs for measuring the fair value of approximately 70.1% of our investments.
|
|
·
|
Financial information obtained from each portfolio company, including audited and unaudited statements of operations and balance sheets for the most recent period available as compared to budgeted numbers;
|
|
·
|
Current and projected financial condition of the portfolio company;
|
|
·
|
Current and projected ability of the portfolio company to service its debt obligations;
|
|
·
|
Projected operating results of the portfolio company;
|
|
·
|
Current information regarding any offers to purchase the investment or recent private sales transactions;
|
|
·
|
Current ability of the portfolio company to raise any additional financing as needed;
|
|
·
|
Change in the economic environment which may have a material impact on the operating results of the portfolio company;
|
|
·
|
Qualitative assessment of key management;
|
|
·
|
Contractual rights, obligations or restrictions associated with the investment; and
|
|
·
|
Other factors deemed relevant.
|
Type
|
Valuation Technique
|
Fair Value
(in millions)
|
Unobservable Input
|
Range
|
Weighted
Average
|
|||||||||
Preferred & Common Equity
|
Market Approach
|
$ | 325.5 |
EBITDA Multiple
|
3.25x - 6.56x | 6.42 | x | |||||||
Market Approach
|
$ | 10.9 |
Revenue Multiple
|
0.30x – 1.70x | 0.95 | x | ||||||||
Market Approach
|
$ | 6.7 |
Cash and Asset Value
|
NA |
NA
|
|||||||||
Discounted Cash Flow
|
$ | 0.8 |
Discount Rate
|
1.81 | % | 1.81 | % | |||||||
Market Approach
|
$ | 2.5 |
Multiple of Tangible Book Value
|
1.05 | x | 1.05 | x | |||||||
Market Approach
|
$ | 22.6 |
Recent Transaction Price
|
NA
|
NA
|
|||||||||
Market Approach
|
$ | 0.2 |
Market Value of Held Securities
|
NA
|
NA
|
|||||||||
$ | 369.2 | |||||||||||||
Warrants
|
Black Scholes Pricing Model
|
$ | 0.0 |
Stock Price and Expected Volatility
|
$ | 0.00 | $ | 0.00 | ||||||
Debt
|
Discounted Cash Flow
|
$ | 4.3 |
Discount Rate
|
10.00 | % | 10.00 | % | ||||||
Recent Transaction Price
|
$ | 3.0 |
Recent Transaction Price
|
NA
|
NA
|
|||||||||
$ | 7.3 | |||||||||||||
Partnership Interests
|
Net Asset Value*
|
$ | 10.0 |
Fund Value
|
NA
|
NA
|
||||||||
Total
|
$ | 386.5 |
*
|
All funds are valued in accordance with ASC 820.
|
Fair Value Measurements
at 12/31/12 Using
|
||||||||||||||||
Asset Category
|
Total
|
Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)
|
Significant Other Observable Inputs
(Level 2)
|
Significant Unobservable Inputs
(Level 3)
|
||||||||||||
Debt
|
$ | 7.3 | $ | − | $ | − | $ | 7.3 | ||||||||
Partnership Interests
|
10.0 | − | − | 10.0 | ||||||||||||
Preferred Equity
|
44.1 | − | − | 44.1 | ||||||||||||
Common Equity
|
489.9 | 164.8 | − | 325.1 | ||||||||||||
Total Investments
|
$ | 551.3 | $ | 164.8 | $ | − | $ | 386.5 |
Fair Value Measurements
at 3/31/12 Using
|
||||||||||||||||
Asset Category
|
Total
|
Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)
|
Significant
Other Observable Inputs
(Level 2)
|
Significant Unobservable Inputs
(Level 3)
|
||||||||||||
Debt
|
$ | 11.2 | $ | − | $ | − | $ | 11.2 | ||||||||
Partnership Interests
|
11.0 | − | − | 11.0 | ||||||||||||
Preferred Equity
|
33.9 | − | − | 33.9 | ||||||||||||
Common Equity
|
502.4 | 240.7 | − | 261.7 | ||||||||||||
Total Investments
|
$ | 558.5 | $ | 240.7 | $ | − | $ | 317.8 |
Fair
Value
3/31/12
|
Net
Unrealized Appreciation (Depreciation)
|
Net
Changes
from
Unrealized
to Realized
|
New /
Add-On
Invest-
ments
|
Conversion of Security from Debt to Equity
|
Fair
Value
12/31/12
|
|||||||||||||||||||
Debt
|
$ | 11.2 | $ | (4.2 | ) | $ | − | $ | 3.5 | $ | (3.2 | ) | $ | 7.3 | ||||||||||
Partnership Interest
|
11.0 | (0.4 | ) | (0.8 | ) | 0.2 | − | 10.0 | ||||||||||||||||
Preferred Equity
|
33.9 | 11.8 | (4.8 | ) | − | 3.2 | 44.1 | |||||||||||||||||
Common Equity
|
261.7 | 64.1 | (0.7 | ) | − | − | 325.1 | |||||||||||||||||
Total Investments
|
$ | 317.8 | $ | 71.3 | $ | (6.3 | ) | $ | 3.7 | $ | − | $ | 386.5 |
4.
|
INCOME TAXES
|
|
·
|
Historically, we have not distributed net capital gains; however, during the nine months ended December 31, 2012, we distributed capital gains dividends in the amount of $17.59 per share to our shareholders. For the tax year ended December 31, 2012, we had net long-term capital gains of $3,214,547 for tax purposes and $2,319,012 for book purposes, which we elected to retain and treat as deemed distributions to our shareholders. For the tax year ended December 31, 2011, we had net long-term capital gains of $3,568,376 for tax purposes and $4,465,088 for book purposes, which we elected to retain and treat as deemed distributions to our shareholders.
|
|
·
|
In order to make the election to retain capital gains, we incurred federal taxes on behalf of our shareholders in the amount of $1,125,092 for the tax year ended December 31, 2012. For the tax year ended December 31, 2011, we incurred federal taxes on behalf of our shareholders in the amount of $1,248,932.
|
5.
|
ACCUMULATED NET REALIZED GAINS (LOSSES) ON INVESTMENTS
|
6.
|
EMPLOYEE STOCK OPTION PLANS
|
Black-Scholes Pricing Model Assumptions
|
||||||||||||||||||||
Date of Issuance
|
Weighted Average
Fair
Value
|
Expected Dividend
Yield
|
Risk-
Free
Interest
Rate
|
Expected Volatility
|
Expected
Life
(in years)
|
|||||||||||||||
2009 Plan
|
||||||||||||||||||||
July 18, 2011
|
$ | 33.07 | 0.83 | % | 1.45 | % | 40.0 | % | 5 | |||||||||||
July 19, 2010
|
$ | 28.58 | 0.91 | % | 1.73 | % | 37.5 | % | 5 | |||||||||||
March 22, 2010
|
$ | 32.56 | 0.84 | % | 2.43 | % | 37.8 | % | 5 | |||||||||||
October 19, 2009
|
$ | 25.36 | 1.04 | % | 2.36 | % | 37.6 | % | 5 | |||||||||||
1999 Plan
|
||||||||||||||||||||
July 30, 2008
|
$ | 29.93 | 0.62 | % | 3.36 | % | 20.2 | % | 5 | |||||||||||
July 21, 2008
|
$ | 27.35 | 0.67 | % | 3.41 | % | 20.2 | % | 5 | |||||||||||
July 16, 2007
|
$ | 41.78 | 0.39 | % | 4.95 | % | 19.9 | % | 5 | |||||||||||
July 17, 2006
|
$ | 33.05 | 0.61 | % | 5.04 | % | 21.2 | % | 7 | |||||||||||
May 15, 2006
|
$ | 31.28 | 0.64 | % | 5.08 | % | 21.1 | % | 7 |
Number of Shares
|
Weighted Average Exercise
Price
|
|||||||
2009 Plan
|
||||||||
Balance at March 31, 2011
|
73,750 | $ | 84.24 | |||||
Granted
|
10,000 | 96.92 | ||||||
Exercised
|
– | – | ||||||
Canceled / Forfeited
|
– | – | ||||||
Balance at March 31, 2012
|
83,750 | $ | 85.75 | |||||
Granted
|
– | – | ||||||
Exercised
|
(20,100 | ) | 79.91 | |||||
Canceled / Forfeited
|
(14,000 | ) | 98.64 | |||||
Balance at December 31, 2012
|
49,650 | $ | 88.11 | |||||
1999 Plan
|
||||||||
Balance at March 31, 2011
|
96,500 | $ | 114.78 | |||||
Granted
|
– | – | ||||||
Exercised
|
(1,500 | ) | 65.70 | |||||
Canceled / Forfeited
|
– | – | ||||||
Balance at March 31, 2012
|
95,000 | $ | 113.63 | |||||
Granted
|
– | – | ||||||
Exercised
|
(17,105 | ) | 95.55 | |||||
Canceled / Forfeited
|
(14,395 | ) | 111.14 | |||||
Balance at December 31, 2012
|
63,500 | $ | 130.80 | |||||
Combined Balance at December 31, 2012
|
113,150 | $ | 112.06 |
December 31, 2012
|
Weighted Average Aggregate
Intrinsic Remaining Contractual Term
|
Value
|
||||
Outstanding
|
1.5 years
|
$ | 3,534,415 | |||
Exercisable
|
1.0 years
|
$ | 2,263,512 |
Restricted stock available for issuance as of March 31, 2012
|
37,350
|
||
Less restricted stock forfeited during the year
|
(3,000
|
) | |
Restricted stock available for issuance as of December 31, 2012
|
40,350
|
Restricted Stock Awards
|
Number of Shares
|
Weighted Average Fair Value Per
Share
|
Weighted
Average
Remaining
Vesting Term
(in Years)
|
|||||||||
Unvested at March 31, 2012
|
9,650 | $ | 83.60 | 4.8 | ||||||||
Granted
|
− | − | − | |||||||||
Vested
|
− | − | − | |||||||||
Forfeited or expired
|
(3,000 | ) | $ | 83.60 | − | |||||||
Unvested at December 31, 2012
|
6,650 | $ | 83.60 | 4.1 |
Phantom Stock Awards
|
Number of Shares
|
Exercise Price Per Share
|
Weighted
Average
Remaining
Vesting Term
(in Years)
|
|||||||||
Unvested at March 31, 2012
|
26,000 | $ | 146.95 | 4.8 | ||||||||
Granted
|
− | − | − | |||||||||
Vested
|
− | − | − | |||||||||
Forfeited or expired
|
(7,500 | ) | $ | 146.95 | − | |||||||
Unvested at December 31, 2012
|
18,500 | $ | 146.95 | 4.1 |
7.
|
COMMITMENTS
|
8.
|
SUMMARY OF PER SHARE INFORMATION
|
Three Months Ended
December 31
|
Nine Months Ended
December 31
|
|||||||||||||||
Per Share Data
|
2012
|
2011
|
2012
|
2011
|
||||||||||||
Investment income
|
$ | 1.84 | $ | 1.50 | $ | 2.57 | $ | 2.15 | ||||||||
Operating expenses
|
(.74 | ) | (.32 | ) | (1.50 | ) | (.96 | ) | ||||||||
Income taxes
|
(.01 | ) | (.01 | ) | (.01 | ) | (.01 | ) | ||||||||
Net investment income
|
1.09 | 1.17 | 1.06 | 1.18 | ||||||||||||
Distributions from undistributed net investment income
|
(.40 | ) | (.40 | ) | (.80 | ) | (.80 | ) | ||||||||
Net realized gain/(loss) net of tax
|
.17 | (.64 | ) | 17.78 | 2.68 | |||||||||||
Net increase (decrease) in unrealized appreciation of investments
|
5.87 | 13.00 | (1.56 | ) | .04 | |||||||||||
Dividends from capital gains
|
– | (17.59 | ) | |||||||||||||
Exercise of employee stock options
|
(.04 | ) | – | (.76 | ) | (.03 | ) | |||||||||
Stock option expense
|
.02 | .07 | .09 | .20 | ||||||||||||
Other*
|
– | – | (.31 | ) | – | |||||||||||
Increase (decrease) in net asset value
|
6.71 | 13.20 | (2.09 | ) | 3.27 | |||||||||||
Net asset value
|
||||||||||||||||
Beginning of period
|
158.65 | 133.75 | 167.45 | 143.68 | ||||||||||||
End of period
|
$ | 165.36 | $ | 146.95 | $ | 165.36 | $ | 146.95 |
*
|
Reflects impact of the different share amounts as a result of issuance or forfeiture of restricted stock during the period.
|
Item 2.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
Nine Months Ended
December 31,
|
||||||||
2012
|
2011
|
|||||||
Alamo Group, Inc.
|
$ | 509,814 | $ | 509,694 | ||||
CapitalSouth Partners Fund III
|
198,647 | 79,459 | ||||||
Encore Wire Corporation
|
134,235 | 245,205 | ||||||
The RectorSeal Corporation
|
5,315,372 | 4,202,512 | ||||||
TCI Holdings, Inc.
|
60,953 | 60,953 | ||||||
The Whitmore Manufacturing Company
|
1,328,842 | 1,050,628 | ||||||
$ | 7,547,863 | $ | 6,148,451 |
Three Months Ended
December 31,
|
Nine Months Ended
December 31,
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
Alamo Group, Inc.
|
$ | (3,277,112 | ) | $ | 14,161,500 | $ | 7,258,374 | $ | (664,075 | ) | ||||||
Cinatra Clean Technologies, Inc.
|
(1,720,997 | ) | (3,598,835 | ) | (4,107,390 | ) | (6,192,538 | ) | ||||||||
Encore Wire Corporation
|
1,365,000 | 19,412,063 | (81,089,460 | )* | 13,281,938 | |||||||||||
Hologic, Inc.
|
(122,334 | ) | 1,449,158 | (1,957,514 | ) | (2,967,926 | ) | |||||||||
Instawares Holding Company, LLC
|
94,000 | - | 829,000 | - | ||||||||||||
KBI Biopharma, Inc.
|
- | 300,000 | 2,200,000 | (2,300,000 | ) | |||||||||||
Media Recovery, Inc.
|
1,200,000 | 2,200,000 | (5,400,000 | ) | 500,000 | |||||||||||
The RectorSeal Corporation
|
21,000,000 | 12,400,000 | 63,300,000 | 9,000,000 | ||||||||||||
Trax Holdings, Inc.
|
6,400,000 | - | 8,800,000 | 41,970 | ||||||||||||
Whitmore Manufacturing Company
|
(5,700,000 | ) | 1,400,000 | 4,200,000 | 5,400,000 |
*
|
Gain of $66,037,485 was realized on the sale of 2,774,250 shares of common stock during the nine months ended December 31, 2012.
|
Item 3.
|
Quantitative and Qualitative Disclosures about Market Risk
|
Item 4.
|
Controls and Procedures
|
Item 1.
|
Legal Proceedings
|
Item 1A.
|
Risk Factors
|
Item 6.
|
Exhibits
|
Exhibit No.
|
Description
|
Certification of Chairman of the Board and President required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), filed herewith.
|
|
Certification of Chief Financial Officer required by Rule 13a-14(a) of the Exchange Act, filed herewith.
|
|
Certification of Chairman of the Board and President required by Rule 13a-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code, furnished herewith.
|
|
Certification of Chief Financial Officer required by Rule 13a-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code, furnished herewith.
|
CAPITAL SOUTHWEST CORPORATION
|
||
February 7, 2013
|
By:
|
/s/ Gary L. Martin
|
Date
|
Gary L. Martin
|
|
Chairman of the Board and President
|
||
February 7, 2013
|
By:
|
/s/ Tracy L. Morris
|
Date
|
Tracy L. Morris
|
|
Chief Financial Officer
|
1.
|
I have reviewed this interim 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 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) 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)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c)
|
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
|
|
d)
|
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 the 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: February 7, 2013
|
By:
|
/s/ Gary L. Martin
|
|
Gary L. Martin
|
|||
Chairman of the Board and President
|
1.
|
I have reviewed this interim 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 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) 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)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c)
|
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
|
|
d)
|
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 the 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: February 7, 2013
|
By:
|
/s/ Tracy L. Morris
|
|
Tracy L. Morris
|
|||
Chief Financial Officer
|
|
1.
|
The Form 10-Q for the quarter ended December 31, 2012, filed with the Securities and Exchange Commission on February 7, 2013 (“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: February 7, 2013
|
By:
|
/s/ Gary L. Martin
|
|
Gary L. Martin
|
|||
Chairman of the Board and President
|
|
1.
|
The Form 10-Q for the quarter ended December 31, 2012, filed with the Securities and Exchange Commission on February 7, 2013 (“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: February 7, 2013
|
By:
|
/s/ Tracy L. Morris
|
|
Tracy L. Morris
|
|||
Chief Financial Officer
|
ACCUMULATED NET REALIZED GAINS (Details) (USD $)
|
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Dec. 31, 2012
|
Dec. 31, 2011
|
Dec. 31, 2012
|
Dec. 31, 2011
|
Mar. 31, 2012
|
|
ACCUMULATED NET REALIZED GAINS (LOSSES) ON INVESTMENTS [Abstract] | |||||
Distributed net capital gains | $ 17.59 | ||||
Accumulated long term capital gains | $ 1,820,574 | $ 1,820,574 | $ 498,438 | ||
Long-term capital gains federal taxes | 1,125,000 | 1,249,000 | 1,125,000 | 1,249,000 | |
Net realized gains deemed distributed | $ 1,194,000 | $ 3,216,000 |
ORGANIZATION AND BASIS OF PRESENTATION
|
9 Months Ended | ||
---|---|---|---|
Dec. 31, 2012
|
|||
ORGANIZATION AND BASIS OF PRESENTATION [Abstract] | |||
ORGANIZATION AND BASIS OF PRESENTATION |
Organization Capital Southwest Corporation ("CSW") was organized as a Texas corporation on April 19, 1961. Until September 1969, CSW operated as a licensee under the Small Business Investment Act of 1958. At that time, we transferred to our wholly-owned subsidiary, Capital Southwest Venture Corporation ("CSVC"), certain assets and our license as a small business investment company ("SBIC"). CSVC is a closed-end, non-diversified investment company registered under the Investment Company Act of 1940 (the "1940 Act"). Prior to March 30, 1988, CSW was registered as a closed-end, non-diversified investment company under the 1940 Act. On that date, CSW elected to become a Business Development Company ("BDC") subject to the provisions of the 1940 Act, as amended by the Small Business Incentive Act of 1980. Because CSW wholly owns CSVC, the portfolios of both CSW and CSVC are referred to collectively as "our," "we" and "us." Capital Southwest Management Company ("CSMC"), a wholly-owned subsidiary of CSW, is the management company for CSW and CSVC. CSMC generally incurs all normal operating and administrative expenses, including, but not limited to, salaries and related benefits, rent, equipment and other administrative costs required for its day-to-day operations. Our portfolio is a composite of companies, consisting of companies in which we have controlling interests, developing companies and marketable securities of established publicly traded companies. We make available significant managerial assistance to the companies in which we invest and believe that providing managerial assistance to such investee companies is critical to their business development activities. CSMC receives a monthly fixed fee for management services provided to certain of its control portfolio companies. Basis of Presentation The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). Under rules and regulations applicable to investment companies, we are precluded from consolidating any entity other than another investment company. An exception to this general principle occurs if the investment company has an investment in an operating company that provides services to the investment company. Accordingly, our consolidated financial statements include CSMC, our management company. The financial statements included herein have been prepared in accordance with GAAP 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, 2012 (the "Form 10-K"), as filed with the Securities and Exchange Commission (SEC). Certain information and footnotes normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, although we believe that the disclosures provided in this Form 10-Q 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 period. Portfolio Investment Classification We classify our investments in accordance with the requirements of the 1940 Act. Under the 1940 Act, "Control Investments" are defined as investments in which we own more than 25% of the voting securities or have rights to maintain greater than 50% of the board representation; "Affiliated Investments" are defined as investments in which we own between 5% and 25% of the voting securities; and "Non-Control/Non-Affiliated Investments" are defined as investments that are neither "Control Investments" nor "Affiliated Investments." |