Capital Southwest Earnings 2019-06-30

CSWC 10Q Quarterly Report

Balance Sheet	Income Statement	Cash Flow

10-Q 1 cswc6301910q.htm 10-Q Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(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, 2019

[ ] 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: 814-00061

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.)



5400 Lyndon B Johnson Freeway, Suite 1300, Dallas, Texas		75240
(Address of principal executive offices)		(Zip Code)

Registrant's telephone number, including area code: (214) 238-5700



Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, $0.25 par value per share	CSWC	The Nasdaq Global Select Market
5.95% Notes due 2022	CSWCL	The Nasdaq Global Select Market

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 has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	¨	Accelerated filer	x	Non-accelerated filer	¨	Smaller reporting company	¨	Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No X

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

17,697,057 shares of Common Stock, $0.25 value per share, as of August 2, 2019.

TABLE OF CONTENTS



		Page
PART I	FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements	3
	Consolidated Statements of Assets and Liabilities as of June 30, 2019 (Unaudited) and March 31, 2019	3
	Consolidated Statements of Operations (Unaudited) for the three months ended June 30, 2019 and 2018	4
	Consolidated Statements of Changes in Net Assets (Unaudited) for the three months ended June 30, 2019 and 2018	5
	Consolidated Statements of Cash Flows (Unaudited) for the three months ended June 30, 2019 and 2018	6
	Consolidated Schedule of Investments as of June 30, 2019 (Unaudited) and March 31, 2019	7
	Notes to Consolidated Financial Statements (Unaudited)	22
	Consolidated Schedule of Investments in and Advances to Affiliates (Unaudited) for the three months ended June 30, 2019	60
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	62
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	75
Item 4.	Controls and Procedures	77

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	78
Item1A.	Risk Factors	78
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	78
Item 3.	Defaults Upon Senior Securities	78
Item 4.	Mine Safety Disclosures	78
Item 5.	Other Information	78
Item 6.	Exhibits	79

Signatures		80

PART I – FINANCIAL INFORMATION

Item 1.
Consolidated Financial Statements



CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(In thousands, except shares and per share data)

	June 30,			March 31,
	2019			2019
	(Unaudited)
Assets
Investments at fair value:
Non-control/Non-affiliate investments (Cost: $334,669 and $305,596, respectively)	$	331,045		$	304,663
Affiliate investments (Cost: $80,790 and $79,277, respectively)	83,625			80,905
Control investments (Cost: $73,415 and $93,182, respectively)	118,821			138,503
Total investments (Cost: $488,874 and $478,055, respectively)	533,491			524,071
Cash and cash equivalents	11,969			9,924
Receivables:
Dividends and interest	10,105			9,252
Escrow	418			370
Other	1,099			1,244
Income tax receivable	143			183
Deferred tax asset	1,672			1,807
Debt issuance costs (net of accumulated amortization of $1,998 and $1,814, respectively)	3,401			3,364
Other assets	1,878			1,628
Total assets	$	564,176		$	551,843

Liabilities
Notes (Par value: $77,136 and $77,136, respectively)	$	75,440		$	75,099
Credit facility	151,000			141,000
Other liabilities	5,688			6,708
Accrued restoration plan liability	3,048			3,073
Deferred tax liability	186			—
Total liabilities	235,362			225,880

Commitments and contingencies (Note 10)

Net Assets
Common stock, $0.25 par value: authorized, 25,000,000 shares; issued, 20,036,569 shares at June 30, 2019 and 19,842,528 shares at March 31, 2019	5,009			4,961
Additional paid-in capital	285,925			281,205
Total distributable earnings	61,817			63,734
Treasury stock - at cost, 2,339,512 shares	(23,937		)	(23,937		)
Total net assets	328,814			325,963
Total liabilities and net assets	$	564,176		$	551,843
Net asset value per share (17,697,057 shares outstanding at June 30, 2019 and 17,503,016 shares outstanding at March 31, 2019)	$	18.58		$	18.62

The accompanying Notes are an integral part of these Consolidated Financial Statements.



CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except shares and per share data)

	Three Months Ended
	June 30,
	2019			2018
Investment income:
Interest income:
Non-control/Non-affiliate investments	$	9,031		$	6,032
Affiliate investments	2,050			1,452
Control investments	265			159
Dividend income:
Non-control/Non-affiliate investments	87			23
Affiliate investments	19			38
Control investments	3,913			3,014
Interest income from cash and cash equivalents	16			4
Fees and other income	418			385
Total investment income	15,799			11,107
Operating expenses:
Compensation	2,021			1,910
Share-based compensation	837			475
Interest	3,806			2,373
Professional fees	626			488
Net pension expense	36			40
General and administrative	789			825
Total operating expenses	8,115			6,111
Income before taxes	7,684			4,996
Income tax expense	324			379
Net investment income	$	7,360		$	4,617

Realized gain
Non-control/Non-affiliate investments	$	1,049		$	200
Affiliate investments	1			—
Control investments	167			18,619
Total net realized gain on investments before income tax	1,217			18,819

Net unrealized (depreciation) appreciation on investments
Non-control/Non-affiliate investments	(2,972		)	4,532
Affiliate investments	1,206			(671		)
Control investments	85			(15,963		)
Income tax (provision) benefit	(183		)	319
Total net unrealized (depreciation) appreciation on investments, net of tax	(1,864		)	(11,783		)

Net realized and unrealized (losses) gains on investments	$	(647	)	$	7,036

Net increase in net assets from operations	$	6,713		$	11,653

Pre-tax net investment income per share - basic and diluted	$	0.44		$	0.31
Net investment income per share – basic and diluted	$	0.42		$	0.29
Net increase in net assets from operations – basic and diluted	$	0.38		$	0.72
Weighted average shares outstanding – basic	17,535,924			16,180,291
Weighted average shares outstanding – diluted	17,535,924			16,201,443

The accompanying Notes are an integral part of these Consolidated Financial Statements.



CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(Unaudited)
(In thousands)

	2019			2018

Net assets, March 31	$	325,963		$	308,288
Operations:
Net investment income	7,360			4,617
Net realized gain on investments	1,217			18,819
Net unrealized depreciation on investments, net of tax	(1,864		)	(11,783		)
Net increase in net assets from operations	6,713			11,653
Dividends to shareholders ($0.49 and $0.89 per share, respectively)	(8,629		)	(14,503		)
Capital share transactions:
Change in restoration plan liability	7			11
Issuance of common stock	3,972			—
Exercise of employee stock options	—			1,457
Share-based compensation expense	837			475
Common stock withheld for payroll taxes upon vesting of restricted stock	(49		)	—
Increase (decrease) in net assets	2,851			(907		)
Net assets, June 30	$	328,814		$	307,381

The accompanying Notes are an integral part of these Consolidated Financial Statements.

Table of Contents



CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)

	Three Months Ended
	June 30,
	2019			2018
Cash flows from operating activities
Net increase in net assets from operations	$	6,713		$	11,653
Adjustments to reconcile net increase in net assets from operations to net cash used in operating activities:
Purchases and originations of investments	(35,170		)	(77,864		)
Proceeds from sales and repayments of debt investments in portfolio companies	19,669			41,757
Proceeds from sales and return of capital of equity investments in portfolio companies	6,539			24,885
Payment of accreted original issue discounts	288			212
Depreciation and amortization	500			344
Net pension benefit	(17		)	(12		)
Realized gain on investments before income tax	(1,217		)	(18,819		)
Net unrealized depreciation (appreciation) on investments	1,399			12,102
Accretion of discounts on investments	(472		)	(312		)
Payment-in-kind interest and dividends	(696		)	(79		)
Stock option and restricted awards expense	837			475
Deferred income taxes	321			50
Changes in other assets and liabilities:
Increase in dividend and interest receivable	(555		)	(452		)
Increase in escrow receivables	(48		)	(203		)
Decrease in tax receivable	40			—
Decrease (increase) in other receivables	144			(112		)
Increase in other assets	(275		)	(9,785		)
Increase in taxes payable	186			—
Decrease in other liabilities	(226		)	(2,067		)
Decrease in payable for unsettled transaction	(1,040		)	—
Net cash used in operating activities	(3,080		)	(18,227		)
Cash flows from financing activities
Proceeds from common stock offering	4,129			—
Equity offering costs paid	(105		)	—
Borrowings under credit facility	30,000			55,000
Repayments of credit facility	(20,000		)	(30,000		)
Debt issuance costs paid	(221		)	(459		)
Proceeds from notes	—			1,379
Dividends to shareholders	(8,629		)	(4,525		)
Proceeds from exercise of employee stock options	—			1,422
Common stock withheld for payroll taxes upon vesting of restricted stock	(49		)	35
Net cash provided by financing activities	5,125			22,852
Net increase in cash and cash equivalents	2,045			4,625
Cash and cash equivalents at beginning of period	9,924			7,907
Cash and cash equivalents at end of period	$	11,969		$	12,532
Supplemental cash flow disclosures:
Cash paid for income taxes	$	—		$	11
Cash paid for interest	2,721			1,990
Supplemental disclosure of noncash financing activities:
Dividend declared, not yet paid	$	—		$	14,503

The accompanying Notes are an integral part of these Consolidated Financial Statements.

Table of Contents



CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
(Unaudited)
June 30, 2019

Portfolio Company¹	Type of Investment^{2, 14}	Industry	Current Interest Rate³	Maturity	Principal		Cost		Fair Value⁴
Non-control/Non-affiliate Investments⁵
AAC HOLDINGS, INC.	First Lien	Healthcare services	L+6.75% (Floor 1.00%)/Q, 4.00% PIK, Current Coupon 13.33%	6/30/2023	$	9,079	$	8,916	$	8,171
	First Lien	Healthcare services	L+11.00% (Floor 1.00%)/Q, Current Coupon 13.59%	3/31/2020	1,170		1,161		1,182
							10,077		9,353
ACE GATHERING, INC.	Second Lien¹⁵	Energy services (midstream)	L+8.50% (Floor 2.00%)/Q, Current Coupon 10.82%	12/13/2023	9,875		9,693		9,747
ADAMS PUBLISHING GROUP, LLC	First Lien	Media, marketing & entertainment	L+7.50% (Floor 1.00%)/Q, Current Coupon 10.08%	7/2/2023	12,427		12,207		12,209
	Delayed Draw Term Loan¹⁰		L+7.50% (Floor 1.00%)/Q, Current Coupon 9.85%	7/2/2023	392		365		385
							12,572		12,594
AG KINGS HOLDINGS INC.^8,16	First Lien	Food, agriculture & beverage	L+10.02% (Floor 1.00%)/M, Current Coupon 12.69%	8/8/2021	9,308		9,194		7,874
ALLIANCE SPORTS GROUP, L.P.	Senior subordinated debt	Consumer products & retail	11.00%	2/1/2023	10,100		9,954		9,807
	3.88% preferred membership interest		—	—	—		2,500		2,500
							12,454		12,307
AMERICAN NUTS OPERATIONS LLC¹³	First Lien - Term Loan	Food, agriculture and beverage	L+9.50% (Floor 1.00%)/Q, Current Coupon 12.09%	4/10/2023	17,325		17,046		15,991
	First Lien - Term Loan C¹⁰		L+9.50% (Floor 1.00%)/Q, Current Coupon 12.09%	4/10/2023	1,804		1,778		1,665
	3,000,000 units of Class A common stock⁹		—	—	—		3,000		733
							21,824		18,389

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CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
(Unaudited)
June 30, 2019

Portfolio Company¹	Type of Investment^{2, 14}	Industry	Current Interest Rate³	Maturity	Principal	Cost		Fair Value⁴
AMERICAN TELECONFERENCING SERVICES, LTD.	First Lien	Telecommunications	L+6.50% (Floor 1.00%)/Q, Current Coupon 9.06%	12/8/2021	5,934	5,844		3,486
	Second Lien		L+9.50% (Floor 1.00%)/Q, Current Coupon 12.08%	6/6/2022	2,006	1,957		1,103
						7,801		4,589
AMWARE FULFILLMENT LLC	First Lien	Distribution	L+9.00% (Floor 1.00%)/M, Current Coupon 11.32%	12/31/2020	12,571	12,496		12,571
ASC ORTHO MANAGEMENT COMPANY, LLC¹³	Revolving Loan¹⁰	Healthcare services	L+7.50% (Floor 1.00%)	8/31/2023	—	(25	)	—
	First Lien		L+7.50% (Floor 1.00%)/Q, Current Coupon 10.09%	8/31/2023	9,203	9,044		9,044
	Second Lien		13.25% PIK	12/1/2023	3,356	3,287		3,287
	2,042 Common Units⁹		—	—	—	750		750
						13,056		13,081
BINSWANGER HOLDING CORP.	First Lien	Distribution	L+8.00% (Floor 1.00%)/M, Current Coupon 10.32%	3/9/2022	11,853	11,710		11,521
	900,000 shares of common stock		—	—	—	900		786
						12,610		12,307
BLASCHAK COAL CORP.	Second Lien¹⁵	Commodities & mining	L+10.00%/Q, 1.00% PIK, Current Coupon 13.60%	7/30/2023	8,558	8,411		8,498
CALIFORNIA PIZZA KITCHEN, INC.	First Lien	Restaurants	L+6.00% (Floor 1.00%)/M, Current Coupon 8.53%	8/23/2022	4,863	4,834		4,765
CAPITAL PAWN HOLDINGS, LLC	First Lien	Consumer products & retail	L+9.50%/Q, Current Coupon 12.09%	7/8/2020	11,448	11,340		11,340

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CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
(Unaudited)
June 30, 2019

Portfolio Company¹	Type of Investment^{2, 14}	Industry	Current Interest Rate³	Maturity	Principal	Cost		Fair Value⁴
CLICKBOOTH.COM, LLC	Revolving Loan¹⁰	Media, marketing & entertainment	L+8.50% (Floor 1.00%)	12/5/2022	—	(14	)	—
	First Lien		L+8.50% (Floor 1.00%)/Q, Current Coupon 11.10%	12/5/2022	15,752	15,515		16,067
						15,501		16,067
DANFORTH ADVISORS, LLC¹³	Revolving Loan¹⁰	Business services	L+7.25% (Floor 2.00%)	9/28/2023	—	(17	)	—
	First Lien		L+7.25% (Floor 2.00%)/Q, Current Coupon 9.84%	9/28/2023	7,250	7,122		7,250
	875 Class A equity units⁹		—	—	—	875		1,058
						7,980		8,308
DELPHI INTERMEDIATE HEALTHCO, LLC	First Lien	Healthcare services	L+7.50% (Floor 1.00%)/Q, 0.50% PIK, Current Coupon 10.69%	10/3/2022	10,592	10,514		10,105
DIGITAL RIVER, INC.	First Lien	Software & IT services	L+6.00% (Floor 1.00%)/Q, Current Coupon 8.43%	2/12/2021	6,273	6,265		6,273
DRIVEN, INC.	First Lien	Business services	L+8.00% (Floor 2.00%)/Q, Current Coupon 10.31%	6/28/2024	12,000	11,760		11,760
DUNN PAPER, INC.	Second Lien	Paper & forest products	L+8.75% (Floor 1.00%)/M, Current Coupon 11.15%	8/25/2023	3,000	2,959		2,931
TINUITI INC.⁸	First Lien	Media, marketing & entertainment	L+8.35% (Floor 1.00%)/M, Current Coupon 10.67%	2/1/2022	14,000	13,740		14,000
	1,443 Investment Units (Preferred)		12.00% PIK	—	—	2,129		4,635
						15,869		18,635
ENVIRONMENTAL PEST SERVICE MANAGEMENT COMPANY, LLC	First Lien	Consumer services	L+7.00%/Q, Current Coupon 9.60%	6/22/2023	16,128	15,892		16,128
	Delayed Draw Term Loan¹⁰		L+7.00%/Q, Current Coupon 9.60%	6/22/2023	6,445	6,340		6,445
						22,232		22,573

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CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
(Unaudited)
June 30, 2019

Portfolio Company¹	Type of Investment^{2, 14}	Industry	Current Interest Rate³	Maturity	Principal	Cost		Fair Value⁴
FAST SANDWICH, LLC	Revolving Loan¹⁰	Restaurants	L+9.00% (Floor 1.00%)	—	—	(54	)	—
	First Lien		L+9.00% (Floor 1.00%)/Q, Current Coupon 11.59%	5/23/2023	3,218	3,173		3,173
						3,119		3,173
IENERGIZER LIMITED⁹	First Lien	Business services	L+6.00% (Floor 1.00%)/M, Current Coupon 8.40%	4/17/2024	14,250	14,111		14,111
JVMC HOLDINGS CORP.	First Lien	Financial services	L+6.50% (Floor 1.00%)/M, Current Coupon 8.90%	2/28/2024	8,755	8,672		8,755
	Delayed Draw Term Loan¹⁰		L+6.50% (Floor 1.00%)	2/28/2024	—	(3	)	—
						8,669		8,755
LGM PHARMA, LLC¹³	First Lien	Healthcare products	L+8.50% (Floor 1.00%)/M, Current Coupon 10.94%	11/15/2022	11,630	11,456		11,456
	110,000 units of Class A common stock⁹		—	—	—	1,100		821
						12,556		12,277
LIGHTING RETROFIT INTERNATIONAL, LLC	First Lien	Environmental services	L+10.25% (Floor 1.00%)/Q, Current Coupon 12.58%	6/30/2022	13,271	13,174		12,262
	25,603 shares of Series C preferred stock		—	—	—	26		29
	396,825 shares of Series B preferred stock		—	—	—	500		306
						13,700		12,597
RESEARCH NOW GROUP, INC.	Second Lien	Business services	L+9.50% (Floor 1.00%)/M, Current Coupon 12.08%	12/20/2025	10,500	9,853		10,343
SCRIP INC.⁸	First Lien	Healthcare products	L+9.99% (Floor 2.00%)/M, Current Coupon 12.38%	3/21/2024	16,750	16,269		16,415
	100 shares of common stock		—	—	—	1,000		1,000
						17,269		17,415

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CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
(Unaudited)
June 30, 2019

Portfolio Company¹	Type of Investment^{2, 14}	Industry	Current Interest Rate³	Maturity	Principal		Cost			Fair Value⁴
TAX ADVISORS GROUP, LLC¹³	143.3 Class A units⁹	Financial services	—	—	—		541			645
VISTAR MEDIA INC.	First Lien	Media, marketing & entertainment	L+10.00% (Floor 1.00%)/M, Current Coupon 12.32%	4/3/2023	14,090		12,915			14,090
	171,617 shares of Series A preferred stock		—	—	—		1,874			2,808
	Warrants (Expiration - April 3, 2029)		—	—	—		620			764
							15,409			17,662

Total Non-control/Non-affiliate Investments							$	334,669		$	331,045

Affiliate Investments⁶
CHANDLER SIGNS, LLC¹³	Senior subordinated debt	Business services	12.00% / 1.00% PIK	7/4/2021	$	4,569	$	4,528		$	4,528
	1,500,000 units of Class A-1 common stock⁹		—	—	—		1,500			2,136
							6,028			6,664
DYNAMIC COMMUNITIES, LLC¹³	Revolving Loan¹⁰	Business services	L+7.50% (Floor 1.00%)	7/17/2023	—		(4		)	—
	First Lien		L+7.50% (Floor 1.00%)/M, Current Coupon 9.90%	7/17/2023	10,990		10,804			10,902
	2,000,000 Preferred Units⁹		—	—	—		2,000			2,849
							12,800			13,751
ITA HOLDINGS GROUP, LLC¹³	Revolving Loan¹⁰	Transportation & logistics	L+9.00% (Floor 1.00%)/Q, 1.00% PIK, Current Coupon 12.18%	2/14/2023	2,700		2,662			2,705
	First Lien - Term Loan		L+8.00% (Floor 1.00%)/Q, 1.00% PIK, Current Coupon 11.60%	2/14/2023	7,659		7,539			7,491
	First Lien - Term B Loan		L+11.00% (Floor 1.00%)/Q, 1.00% PIK, Current Coupon 14.60%	2/14/2023	3,830		3,766			3,948

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CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
(Unaudited)
June 30, 2019

Portfolio Company¹	Type of Investment^{2, 14}	Industry	Current Interest Rate³	Maturity	Principal	Cost			Fair Value⁴
	First Lien - PIK Note A		10.00% PIK	2/14/2023	2,250	1,710			1,978
	First Lien - PIK Note B		10.00% PIK	2/14/2023	89	89			78
	Warrants (Expiration - March 29, 2029)⁹		—	—	—	538			2,291
	9.25% Class A Membership Interest⁹		—	—	—	1,500			1,425
						17,804			19,916
ROSELAND MANAGEMENT, LLC	Revolving Loan¹⁰	Healthcare services	L+7.00% (Floor 2.00%)	11/9/2023	—	(31		)	—
	First Lien		L+7.00% (Floor 2.00%)/Q, Current Coupon 9.59%	11/9/2023	10,448	10,283			10,448
	10,000 Class A Units		—	—	—	1,000			1,487
						11,252			11,935
SIMR, LLC	First Lien	Healthcare services	L+9.00% (Floor 2.00%)/M, Current Coupon 11.50%	9/7/2023	11,353	11,154			11,154
	5,724,000 Class B Common Units		—	—	—	5,724			5,397
						16,878			16,551
ZENFOLIO INC.	Revolving Loan¹⁰	Business services	L+9.00% (Floor 1.00%)	7/17/2022	—	(12		)	—
	First Lien		L+9.00% (Floor 1.00%)/Q, Current Coupon 11.60%	7/17/2022	14,406	14,140			14,262
	190 shares of common stock		—	—	—	1,900			546
						16,028			14,808

Total Affiliate Investments						$	80,790		$	83,625

Control Investments⁷
I-45 SLF LLC^9,11	80% LLC equity interest	Multi-sector holdings	—	—	—	$	68,000		$	64,813

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CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
(Unaudited)
June 30, 2019

Portfolio Company¹	Type of Investment^{2, 14}	Industry	Current Interest Rate³	Maturity	Principal	Cost		Fair Value⁴
MEDIA RECOVERY, INC.¹¹	800,000 shares of Series A convertible preferred stock	Industrial products	—	—	—	800		7,979
	4,000,002 shares of common stock		—	—	—	4,615		46,029
						5,415		54,008

Total Control Investments						$	73,415	$	118,821

TOTAL INVESTMENTS¹²						$	488,874	$	533,491


¹	All debt investments are income-producing, unless otherwise noted. Equity investments are non-income producing, unless otherwise noted.


²	All of the Company’s investments, unless otherwise noted, are pledged as collateral for the Company’s senior secured credit facility.

The majority of investments bear interest at a rate that may be determined by reference to London Interbank Offered Rate (“LIBOR” or “L”) or Prime (“P”) and reset daily (D), monthly (M), quarterly (Q), or semiannually (S). For each the Company has provided the spread over LIBOR or Prime and the current contractual interest rate in effect at June 30, 2019. Certain investments are subject to a LIBOR or Prime interest rate floor. Certain investments, as noted, accrue payment-in-kind ("PIK") interest.

⁴

The Company's investment portfolio is comprised entirely of debt and equity securities of privately held companies for which quoted prices falling within the categories of Level 1 and Level 2 inputs are not available. Therefore, the Company values all of its portfolio investments at fair value, as determined in good faith by the Board of Directors, using significant unobservable Level 3 inputs. Refer to Note 4 for further discussion.


⁵	Non-Control/Non-Affiliate investments are generally defined by the Investment Company Act of 1940 (the “1940 Act”) as investments that are neither control investments nor affiliate investments. At June 30, 2019, approximately 62.1% of the Company’s investment assets were non-control/non-affiliate investments. The fair value of these investments as a percent of net assets is 100.7%.


⁶	Affiliate investments are generally defined by the 1940 Act as investments in which between 5% and 25% of the voting securities are owned and the investments are not classified as control investments. At June 30, 2019, approximately 15.7% of the Company’s investment assets were affiliate investments. The fair value of these investments as a percent of net assets is 25.4%.


⁷	Control investments are generally defined by the 1940 Act as investments in which more than 25% of the voting securities are owned. At June 30, 2019, approximately 22.3% of the Company’s investment assets were control investments. The fair value of these investments as a percent of net assets is 36.1%.


⁸	The investment is structured as a first lien last out term loan.

Table of Contents


⁹	Indicates assets that are considered "non-qualifying assets" under section 55(a) of the 1940 Act. Qualifying assets must represent at least 70% of total assets at the time of acquisition of any additional non-qualifying assets. As of June 30, 2019, approximately 16.3% of the Company's assets are non-qualifying assets.


¹⁰	The investment has an unfunded commitment as of June 30, 2019. Refer to Note 10 - Commitments and Contingencies for further discussion.


¹¹	Income producing through dividends or distributions.


¹²	As of June 30, 2019, the cumulative gross unrealized appreciation for U.S. federal income tax purposes is approximately $59.1 million; cumulative gross unrealized depreciation for federal income tax purposes is $15.5 million. Cumulative net unrealized appreciation is $43.6 million, based on a tax cost of $487.6 million.


¹³	ASC Ortho Management Company, LLC common units, Danforth Advisors, LLC common units, American Nuts Operations LLC Class A common stock, LGM Pharma, LLC Class A common stock, Tax Advisors Group, LLC Class A units, Chandler Signs, LP Class A-1 common stock, Dynamic Communities, LLC Preferred units, and ITA Holdings Group, LLC membership interest are held through a wholly-owned taxable subsidiary.


¹⁴	The Company generally acquires its investments in private transactions exempt from registration under the Securities Act of 1933, as amended (the "Securities Act"). These investments are generally subject to certain limitations on resale, and may be deemed "restricted securities" under the Securities Act.


¹⁵	The investment is structured as a split lien term loan, which provides the Company with a first lien priority on certain assets of the obligor and a second lien priority on different assets of the obligor.


¹⁶	Investment is on non-accrual status as of June 30, 2019, meaning the Company has ceased to recognize interest income on the investment.

The accompanying Notes are an integral part of these Consolidated Financial Statements.

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CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
(Unaudited)
March 31, 2019

Portfolio Company¹	Type of Investment^{2, 15}	Industry	Current Interest Rate³	Maturity	Principal		Cost			Fair Value⁴
Non-control/Non-affiliate Investments⁵
AAC HOLDINGS, INC.	First Lien	Healthcare services	L+6.75% (Floor 1.00%)/Q, 4.00% PIK, Current Coupon 13.49%	6/30/2023	$	9,084	$	8,912		$	8,403
	First Lien	Healthcare services	L+11.00% (Floor 1.00%)/M	3/31/2020	1,170		1,158			1,182
							10,070			9,585
ACE GATHERING, INC.	Second Lien¹⁵	Energy services (midstream)	L+8.50% (Floor 2.00%)/Q, Current Coupon 11.09%	12/13/2023	9,938		9,747			9,783
ADAMS PUBLISHING GROUP, LLC	First Lien	Media, marketing & entertainment	L+7.50% (Floor 1.00%)/Q, Current Coupon 10.30%	7/2/2023	13,566		13,320			13,308
	Delayed Draw Term Loan¹⁰		L+7.50% (Floor 1.00%)	7/2/2023	—		(29		)	—
							13,291			13,308
AG KINGS HOLDINGS INC.^8,16	First Lien	Food, agriculture & beverage	L+10.02% (Floor 1.00%)/M, Current Coupon 12.69%	8/8/2021	9,308		9,194			8,330
ALLIANCE SPORTS GROUP, L.P.	Senior subordinated debt	Consumer products & retail	11.00%	2/1/2023	10,100		9,946			9,807
	3.88% preferred membership interest		—	—	—		2,500			2,500
							12,446			12,307
AMERICAN NUTS OPERATIONS LLC¹³	First Lien - Term Loan	Food, agriculture and beverage	L+9.50% (Floor 1.00%)/Q, Current Coupon 12.30%	4/10/2023	17,369		17,075			16,822
	First Lien - Term Loan C¹⁰		L+9.50% (Floor 1.00%)/Q, Current Coupon 12.30%	4/10/2023	1,750		1,723			1,695
	3,000,000 units of Class A common stock⁹		—	—	—		3,000			1,505
							21,798			20,022
AMERICAN TELECONFERENCING SERVICES, LTD.	First Lien	Telecommunications	L+6.50% (Floor 1.00%)/Q, Current Coupon 9.24%	12/8/2021	6,023		5,922			3,953
	Second Lien		L+9.50% (Floor 1.00%)/Q, Current Coupon 12.30%	6/6/2022	2,006		1,954			1,103
							7,876			5,056

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CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
(Unaudited)
March 31, 2019

Portfolio Company¹	Type of Investment^{2, 15}	Industry	Current Interest Rate³	Maturity	Principal	Cost		Fair Value⁴
AMWARE FULFILLMENT LLC	First Lien	Distribution	L+9.50% (Floor 1.00%)/M, Current Coupon 12.10%	12/31/2020	12,753	12,666		12,651
ASC ORTHO MANAGEMENT COMPANY, LLC¹³	Revolving Loan¹⁰	Healthcare services	L+7.50% (Floor 1.00%)	8/31/2023	—	(27	)	—
	First Lien		L+7.50% (Floor 1.00%)/Q, Current Coupon 10.30%	8/31/2023	9,261	9,094		9,095
	Second Lien		13.25% PIK	12/1/2023	3,250	3,178		3,178
	2,042 Common Units⁹		—	—	—	750		750
						12,995		13,023
BINSWANGER HOLDING CORP.	First Lien	Distribution	L+8.00% (Floor 1.00%)/M, Current Coupon 10.60%	3/9/2022	12,150	11,992		12,016
	900,000 shares of common stock		—	—	—	900		1,013
						12,892		13,029
BLASCHAK COAL CORP.	Second Lien¹⁵	Commodities & mining	L+10.00%/Q, 1.00% PIK, Current Coupon 13.81%	7/30/2023	8,537	8,383		8,511
CALIFORNIA PIZZA KITCHEN, INC.	First Lien	Restaurants	L+6.00% (Floor 1.00%)/M, Current Coupon 8.50%	8/23/2022	4,875	4,844		4,723
CAPITAL PAWN HOLDINGS, LLC	First Lien	Consumer products & retail	L+9.50%/Q, Current Coupon 12.30%	7/8/2020	11,448	11,315		11,310
CLICKBOOTH.COM, LLC	Revolving Loan¹⁰	Media, marketing & entertainment	L+8.50% (Floor 1.00%)	12/5/2022	—	(15	)

10-Q	2019-06-30	Quarter: 2019-06-30
10-K	2019-03-31	Annual: 2019-03-31
10-Q	2018-12-31	Quarter: 2018-12-31
10-Q	2018-09-30	Quarter: 2018-09-30
10-Q	2018-06-30	Quarter: 2018-06-30
10-K	2018-03-31	Annual: 2018-03-31
10-Q	2017-12-31	Quarter: 2017-12-31
10-Q	2017-09-30	Quarter: 2017-09-30
10-Q	2017-06-30	Quarter: 2017-06-30
10-K	2017-03-31	Annual: 2017-03-31
10-Q	2016-12-31	Quarter: 2016-12-31
10-Q	2016-09-30	Quarter: 2016-09-30
10-Q	2016-06-30	Quarter: 2016-06-30
10-K	2016-03-31	Annual: 2016-03-31
10-Q	2015-12-31	Quarter: 2015-12-31
10-Q	2015-09-30	Quarter: 2015-09-30
10-Q	2015-06-30	Quarter: 2015-06-30
10-K	2015-03-31	Annual: 2015-03-31
10-Q	2014-12-31	Quarter: 2014-12-31
10-Q	2014-09-30	Quarter: 2014-09-30
10-Q	2014-06-30	Quarter: 2014-06-30
10-K	2014-03-31	Annual: 2014-03-31
10-Q	2013-12-31	Quarter: 2013-12-31

8-K	2019-10-08	Off-BS Arrangement, Exhibits
8-K	2019-09-27	Enter Agreement, Off-BS Arrangement, Exhibits
8-K	2019-08-20	Enter Agreement, Exhibits
8-K	2019-08-05	Earnings, Regulation FD, Exhibits
8-K	2019-08-01	Officers, Amend Bylaw, Shareholder Vote, Exhibits
8-K	2019-06-03	Earnings, Regulation FD, Exhibits
8-K	2019-05-23	Enter Agreement, Off-BS Arrangement, Other Events, Exhibits
8-K	2019-04-25	Amend Bylaw, Exhibits
8-K	2019-02-28	Other Events, Exhibits
8-K	2019-02-04	Earnings, Regulation FD, Exhibits
8-K	2019-01-31	Regulation FD, Exhibits
8-K	2018-12-21	Enter Agreement, Off-BS Arrangement, Other Events, Exhibits
8-K	2018-11-27	Other Events, Exhibits
8-K	2018-11-06	Earnings, Regulation FD, Exhibits
8-K	2018-10-04	Other Events, Exhibits
8-K	2018-08-30	Other Events, Exhibits
8-K	2018-08-06	Earnings, Regulation FD, Exhibits
8-K	2018-08-02	Shareholder Vote
8-K	2018-06-07	Other Events, Exhibits
8-K	2018-06-04	Earnings, Regulation FD, Exhibits
8-K	2018-05-14	Enter Agreement, Off-BS Arrangement, Exhibits
8-K	2018-04-30	Other Events, Exhibits
8-K	2018-04-16	Enter Agreement, Off-BS Arrangement, Other Events, Exhibits
8-K	2018-02-28	Other Events, Exhibits
8-K	2018-02-05	Earnings, Regulation FD, Exhibits
8-K	2018-01-31	Regulation FD, Exhibits

HRL	Hormel Foods	23,290
LULU	Lululemon	22,135
JJSF	J&J Snack Foods	3,558
AIN	Albany International	2,579
AGRO	Adecoagro	664
UFI	Unifi	355
CULP	Culp	309
CRWS	Crown Crafts	54
RAND	Rand Capital	0
GLAD	Gladstone Capital	0

EX-31.1	cswc63019ex311.htm
EX-31.2	cswc63019ex312.htm
EX-32.1	cswc63019ex321.htm
EX-32.2	cswc63019ex322.htm