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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For the Fiscal Year Ended March 31, 1996 Commission File Number: 811-1056
CAPITAL SOUTHWEST CORPORATION
(Exact name of registrant as specified in its charter)
Texas 75-1072796
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(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
12900 Preston Road, Suite 700, Dallas, Texas 75230
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(Address of principal executive offices including zip code)
(214) 233-8242
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(Registrant's telephone number including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.00 par value
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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of May 1, 1996 was $123,639,354, based on the last sale price of
such stock as quoted by Nasdaq on such date (officers, directors and 5%
shareholders are considered affiliates for purposes of this calculation).
The number of shares of common stock outstanding as of May 1, 1996 was
3,767,051:
Documents Incorporated by Reference Part of Form 10-K
(1) Annual Report to Shareholders for the Year Ended Parts I and II; and
March 31, 1996 Part IV, Item 14(a)(1)
and (2)
(2) Proxy Statement for Annual Meeting of Shareholders Part III
to be held July 15, 1996
TABLE OF CONTENTS
Page
PART I
Item 1. Business......................................................1
Item 2. Properties....................................................1
Item 3. Legal Proceedings.............................................1
Item 4. Submission of Matters to a Vote of Security Holders...........1
Executive Officers of the Registrant..................................2
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters...........................................2
Item 6. Selected Financial Data.......................................2
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations...........................2
Item 8. Financial Statements and Supplementary Data...................3
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure...........................3
PART III
Item 10.Directors and Executive Officers of the Registrant............3
Item 11.Executive Compensation........................................4
Item 12.Security Ownership of Certain Beneficial
Owners and Management.........................................4
Item 13.Certain Relationships and Related Transactions................4
PART IV
Item 14.Exhibits, Financial Statement Schedules,
and Reports on Form 8-K ......................................4
Signatures ....................................................................6
Exhibit Index .................................................................7
PART I
ITEM 1. BUSINESS
Capital Southwest Corporation (the "Company") was organized as a Texas
corporation on April 19, 1961. Until September 1969, the Company operated as a
licensee under the Small Business Investment Act of 1958. At that time, the
Company transferred to its wholly-owned subsidiary, Capital Southwest Venture
Corporation ("CSVC"), certain of its assets and its license as a small business
investment company ("SBIC"). CSVC is a closed-end, non-diversified investment
company of the management type. Prior to March 30, 1988, the Company was
registered as a closed-end, non-diversified investment company under the
Investment Company Act of 1940 (the "1940 Act"). On that date, the Company
elected to become a business development company subject to the provisions of
Sections 55 through 65 of the 1940 Act, as amended by the Small Business
Incentive Act of 1980.
The Company is a venture capital investment company whose objective is to
achieve capital appreciation through long-term investments in businesses
believed to have favorable growth potential. The Company participates in
start-up and early-stage financings, expansion financings and leveraged buyout
financings in a broad range of industry segments. The Company's portfolio is a
composite of investments in several companies in which the Company has major
interests as well as a number of developing companies and marketable securities
of established publicly-owned companies. The Company makes available significant
managerial assistance to the companies in which it invests and believes that
providing material assistance to such investee companies is critical to its
business development activities.
The twelve largest investments of the Company had a combined cost of
$40,271,590 and a value of $232,906,947, representing 90.6% of the value of the
Company's consolidated investment portfolio at March 31, 1996. For a narrative
description of the twelve largest investments, see "Twelve Largest Investments -
March 31, 1996" on pages 5 through 7 of the Company's Annual Report to
Shareholders for the Year Ended March 31, 1996 (the "1996 Annual Report") which
is herein incorporated by reference. Certain of the information presented on the
twelve largest investments has been obtained from the respective companies and,
in certain cases, from public filings of such companies. The financial
information presented on each of the respective companies is from such
companies' financial statements, which in some instances are unaudited.
The Company competes for attractive investment opportunities with venture
capital partnerships and corporations, venture capital affiliates of industrial
and financial companies, other SBICs and wealthy individuals.
The number of persons employed by the Company at March 31, 1996 was eight.
ITEM 2. PROPERTIES
The Company maintains its offices at 12900 Preston Road, Suite 700, Dallas,
Texas, 75230, where it rents approximately 3,200 square feet of office space
pursuant to a lease agreement expiring in February 1998. The Company believes
that its offices are adequate to meet its current and expected future needs.
ITEM 3. LEGAL PROCEEDINGS
The Company has no material pending legal proceedings to which it is a
party or to which any of its property is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the quarter
ended March 31, 1996.
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EXECUTIVE OFFICERS OF THE REGISTRANT
The officers of the Company, together with the offices in the Company
presently held by them, their business experience during the last five years and
their ages are as follows:
D. Scott Collier, age 33, has served as Vice President of the Company
since April 1995 and was an investment associate with the Company from 1991
to 1995. He is a graduate of the University of Texas Graduate School of
Business, which he attended from 1989 to 1991 while he was also employed by
Austin Technology Incubator.
J. Bruce Duty, age 45, has served as Senior Vice President of the
Company since 1993, Vice President of the Company from 1982 to 1993,
Secretary of the Company from 1980 to 1993 and Treasurer of the Company
from 1980 to January 1990.
Patrick F. Hamner, age 40, has served as Vice President of the Company
since 1986 and was an investment associate with the Company from 1982 to
1986.
Gary L. Martin, age 49, has been a director of the Company since July
1988 and has served as Vice President of the Company since 1984. He
previously served as Vice President of the Company from 1978 to 1980. Since
1980, Mr. Martin has served as President of The Whitmore Manufacturing
Company, a wholly-owned subsidiary of the Company.
Tim Smith, age 35, has served as Vice President and Secretary of the
Company since 1993, Treasurer of the Company since January 1990 and was an
investment associate with the Company from July 1989 to January 1990.
William R. Thomas, age 67, has served as Chairman of the Board of
Directors of the Company since 1982 and President of the Company since
1980. In addition, he has been a director of the Company since 1972 and was
previously Senior Vice President of the Company from 1969 to 1980.
No family relationship exists between any of the above-listed officers, and
there are no arrangements or understandings between any of them and any other
person pursuant to which they were selected as an officer. All officers are
elected to hold office for one year and until their successors are elected and
qualify.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Information set forth under the captions "Shareholder Information -
Shareholders, Market Prices and Dividends" on page 31 of the 1996 Annual Report
are herein incorporated by reference.
ITEM 6. SELECTED FINANCIAL DATA
"Selected Consolidated Financial Data" on page 30 of the 1996 Annual Report
is herein incorporated by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Pages 27 through 29 of the Company's 1996 Annual Report are herein
incorporated by reference.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Pages 8 through 26 of the Company's 1996 Annual Report are herein
incorporated by reference. See also Item 14 of this Form 10-K - "Exhibits,
Financial Statement Schedules, and Reports on Form 8-K".
Selected Quarterly Financial Data (Unaudited)
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The following presents a summary of the unaudited quarterly consolidated
financial information for the years ended March 31, 1996 and 1995.
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
------- ------- ------- ------- -----
(In thousands, except per share amounts)
1996
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Net investment income $ 816 $ 633 $ 934 $ 472 $ 2,855
Net realized gain (loss) on investments - - 12,358 (1,184) 11,174
Net increase (decrease) in unrealized
appreciation of investments before
distributions 2,613 27,272 (2,180) 11,041 38,746
Net increase in net assets from operations
before distributions 3,429 27,905 11,112 10,329 52,775
Net increase in net assets from operations
before distributions per share .91 7.41 2.95 2.74 14.01
1995
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Net investment income $ 613 $ 655 $ 637 $ 542 $ 2,447
Net realized gain (loss) on investments 617 (115) (262) (98) 142
Net increase (decrease) in unrealized
appreciation of investments (4,184) 3,682 1,780 12,306 13,584
Net increase (decrease) in net
assets from operations (2,954) 4,222 2,155 12,750 16,173
Net increase (decrease) in net assets
from operations per share (.79) 1.13 .58 3.43 4.35
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth under the captions "Election of Directors" in the
Company's definitive Proxy Statement for Annual Meeting of Shareholders to be
held July 15, 1996, filed pursuant to Regulation 14A under the Securities
Exchange Act of 1934, on or about June 6, 1996 (the "1996 Proxy Statement") is
herein incorporated by reference. See also Part I of this Form 10-K - "Executive
Officers of the Registrant".
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ITEM 11. EXECUTIVE COMPENSATION
The information set forth under the caption "Compensation of Directors and
Executive Officers" in the 1996 Proxy Statement is herein incorporated by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the captions "Stock Ownership of Certain
Beneficial Owners" and "Election of Directors" in the 1996 Proxy Statement is
herein incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no relationships or transactions within the meaning of this item
during the fiscal year ended March 31, 1996 or proposed for the fiscal year
ending March 31, 1997.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) The following financial statements included in pages 14 through 26 of the
Company's 1996 Annual Report are herein incorporated by reference:
(A) Consolidated Financial Statements of the Company and Subsidiary
Consolidated Statements of Financial Condition - March 31, 1996 and
1995
Consolidated Statements of Operations - Years Ended March 31, 1996,
1995 and 1994
Consolidated Statements of Changes in Net Assets - Years Ended March
31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows - Years Ended March 31, 1996,
1995 and 1994
(B) Financial Statements of CSVC
Statement of Financial Condition - March 31, 1996
Statement of Operations - Year Ended March 31, 1996
Statements of Changes in Shareholder's Equity - Years ended March 31,
1996 and 1995
Statement of Cash Flows - Year Ended March 31, 1996
(C) Notes to Consolidated Financial Statements
(D) Selected Per Share Data and Ratios
(E) Independent Auditors' Report
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(a)(2) All schedules are omitted because they are not applicable or not
required, or the information is otherwise supplied.
(a)(3) See the Exhibit Index on page 7.
(b) The Company filed no reports on Form 8-K during the three months ended
March 31, 1996.
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SIGNATURES
Pursuant to the requirements of Section 13 or 13(d) 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
By:/s/ William R. Thomas
(William R. Thomas, President
and Chairman of the Board)
Date: June 26, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
Signature Title Date
/s/ William R. Thomas President and Chairman June 26, 1996
(William R. Thomas) of the Board and Director
/s/ Gary L. Martin Director June 26, 1996
(Gary L. Martin)
/s/ Graeme W. Henderson Director June 26, 1996
(Graeme W. Henderson)
/s/ James M. Nolan Director June 26, 1996
(James M. Nolan)
/s/ John H. Wilson Director June 26, 1996
(John H. Wilson)
/s/ Tim Smith Vice President and June 26, 1996
(Tim Smith) Secretary-Treasurer
(Financial and Accounting Officer)
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EXHIBIT INDEX
The following exhibits are filed with this report or are incorporated
herein by reference to a prior filing, in accordance with Rule 12b-32 under the
Securities Exchange Act of 1934. (Asterisk denotes exhibits filed with this
report.)
Exhibit No. Description
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3.1(a) Articles of Incorporation and Articles of Amendment to Articles of
Incorporation, dated June 25, 1969 (filed as Exhibit 1(a) and 1(b) to
Amendment No. 3 to Form N-2 for the fiscal year ended March 31, 1979).
3.1(b) Articles of Amendment to Articles of Incorporation, dated July 20,
1987 (filed as an exhibit to Form N-SAR for the six month period ended
September 30, 1987).
3.2 By-Laws of the Company, as amended (filed as Exhibit 2 to Amendment
No. 11 to Form N-2 for the fiscal year ended March 31, 1987).
4.1 Specimen of Common Stock certificate (filed as Exhibit 4 to Amendment
No. 3 to Form N-2 for the fiscal year ended March 31, 1979).
4.2 Subordinated debentures of CSVC guaranteed by the Small Business
Administration (filed as Exhibit 5 to Amendment No. 11 to Form N-2 for
the fiscal year ended March 31, 1987 and Exhibit 4.3 to Form 10-K for
the fiscal year ended March 31, 1993).
10.1 * The RectorSeal Corporation and Jet-Lube, Inc. Employee Stock
Ownership Plan as revised and restated effective April 1, 1989.
10.3 Retirement Plan for Employees of Capital Southwest Corporation and Its
Affiliates as amended and restated effective April 1, 1989 (filed as
Exhibit 10.3 to Form 10-K for the fiscal year ended March 31, 1995).
10.4 Capital Southwest Corporation and Its Affiliates Restoration of
Retirement Income Plan for certain highly-compensated superseded plan
participants effective April 1, 1993 (filed as Exhibit 10.4 to Form
10-K for the fiscal year ended March 31, 1995).
10.5 Capital Southwest Corporation Retirement Income Restoration Plan as
amended and restated effective April 1, 1989 (filed as Exhibit 10.5 to
Form 10-K for the fiscal year ended March 31, 1995).
10.6 Form of Indemnification Agreement which has been established with all
directors and executive officers of the Company (filed as Exhibit 10.9
to Form 8-K dated February 10, 1994).
10.7 Capital Southwest Corporation 1984 Incentive Stock Option Plan as
amended and restated as of April 20, 1987 (filed as Exhibit 10.10 to
Form 10-K for the fiscal year ended March 31, 1990).
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Exhibit No. Description
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13. * Annual Report to Shareholders for the fiscal year ended March 31,
1996.
21. List of subsidiaries of the Company (filed as Exhibit 22 to Form 10-K
for the fiscal year ended March 31, 1992).
23. * Independent Auditors' Consent.
27. * Financial Data Schedule.
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