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CAPITAL SOUTHWEST CORP - 10-K - Management's Discussion and Analysis of Financial Condition and Results of Operations(Edgar Glimpses Via Acquire Media NewsEdge) The following discussion should be read in conjunction with our financial statements and the notes thereto included elsewhere in this Annual Report on Form 10-K. Statements we make in the following discussion which express a belief, expectation or intention, as well as those that are not historical fact, are forward-looking statements that are subject to risks, uncertainties and assumptions. Our actual results, performance or achievements, or industry results, could differ materially from those we express in the following discussion as a result of a variety of factors, including the risks and uncertainties we have referred to under the headings "Cautionary Statement Concerning Forward-Looking Statements" and "Risk Factors" in Part I of this report. General On June 17, 2013, Joseph B. Armes joined our Company as President and Chief Executive Officer as well as a director of the Corporation. Mr. Armes has served as president and chief executive officer of JBA Investment Partners, a family investment vehicle, since 2010. From 2005 to 2010, Mr. Armes served as chief operating officer of Hicks Holdings LLC. Mr. Armes earned a BBA in Finance and a MBA from Baylor University, and a JD from Southern Methodist University. On July 15, 2013, our shareholders approved a four-for-one split. The stock split was payable on August 15, 2013 to shareholders of record at the close of business July 31, 2013. Our common stock began trading at the split-adjusted price on August 16, 2013. All share numbers and per share amounts presented herein reflect the stock split. On November 20, 2013, Kelly Tacke was appointed as the Company's Senior Vice President, Chief Financial Officer, Chief Compliance Officer, Secretary and Treasurer, effective November 18, 2013. Ms. Tacke was with Palm Harbor Homes, Inc., a publicly traded manufacturer and marketer of factory-built homes for 18 years, where she served as Executive Vice President, Chief Financial Officer and Corporate Secretary. The Company was a long-time investor in Palm Harbor Homes. Ms. Tacke began her career with PricewaterhouseCoopers, where she was a Senior Audit Manager. She holds a Bachelors of Business Administration degree from the University of Texas at Austin and is a Certified Public Accountant. Ms. Tacke replaced Tracy Morris, who resigned as the Company's Chief Financial Officer, Chief Operating Officer and Secretary, effective November 15, 2013, to pursue other opportunities. 21 -------------------------------------------------------------------------------- Table of Contents On January 20, 2014, the Board of Directors of the Company elected Joseph B. Armes as Chairman of the Board and appointed David R. Brooks and William R. Thomas, III to the Board. The Board increased its size from six to seven members and appointed Messrs. Brooks and Thomas to fill the vacancies created by the resignation of Richard F. Strup in November 2013 and the increase in the size of the Board. Mr. Brooks has been the Chairman of the Board and Chief Executive Officer of Independent Bank Group, Inc., a publicly-traded bank holding company with approximately $3.0 billion in assets, since its founding in 2002. Mr. Thomas is a private investor and has served as the President of the Thomas Heritage Foundation, a non-profit grant-making corporation, since 2008. Mr. Thomas worked for the Company from July 2006 to September 2012, most recently as a Vice President. In addition, Mr. Thomas along with Thomas Heritage Partners, Ltd., is one of the largest shareholders of our Company, representing 4.79% voting power at March 31, 2014. Mr. Thomas currently serves as a director of Encore Wire Corporation. On March 17, 2014, Bowen S. Diehl joined our Company as Senior Vice President and Chief Investment Officer. Mr. Diehl brings almost 20 years of experience in sourcing, structuring, and managing investments in a variety of industries. Prior to Capital Southwest, Mr. Diehl was a Managing Director at American Capital, Ltd. During his tenure at American Capital, he has closed investments in 15 platform companies and numerous add-on acquisitions, representing over $1.1 billion of invested capital. Mr. Diehl's investments have been in a variety of industries including industrial manufacturing, healthcare, business services, and consumer finance. Prior to American Capital, Mr. Diehl was a Vice President in Investment Banking at Merrill Lynch where he gained experience working with companies in the exploration and production, oilfield services, natural gas pipeline, natural gas gathering and processing, homebuilding and semiconductor sectors. Prior to joining Merrill Lynch, Mr. Diehl was a Vice President in the Global Oil and Gas Group at Chase Securities Inc., in New York, NY and then in Houston, TX, completing numerous transactions in the upstream and midstream oil and gas sectors. Controlled Affiliates Three of our controlled affiliates represent 57.3% of our total investment value and consist mainly of The RectorSeal Corporation, along with its subsidiaries Jet-Lube, Inc. and Smoke Guard, Inc., The Whitmore Manufacturing Company, and Media Recovery, Inc. The RectorSeal Corporation The RectorSeal Corporation ("RectorSeal") currently consists of RectorSeal, separately; its wholly-owned subsidiaries Jet-Lube, Inc., and Smoke Guard, Inc.; and its 20% equity interest in The Whitmore Manufacturing Company. RectorSeal manufactures specialty chemical products and control devices for plumbing, HVAC, electrical and industrial applications. Jet-Lube, Inc. manufactures specialty lubricants and other products used in oil field and industrial applications. Smoke Guard, Inc. produces systems for containing smoke from building fires. During the fiscal year ended March 31, 2014, RectorSeal completed the acquisition of Resource Conservation, Inc., a company that manufactures condensate cutoff switches and overflow pans, to expand its development of HVAC products and market penetration. At March, 31, 2014, RectorSeal was valued at $275,800,000, which includes RectorSeal, Jet-Lube Inc., Smoke Guard, Inc. and RectorSeal's 20% interest in Whitmore Manufacturing Company. Below are certain key financial data for RectorSeal (including Smoke Guard, Inc. and excluding Jet Lube, Inc.) as well as our valuation at March 31, 2014, 2013 and 2012. Our valuation is based primarily on adjusted EBITDA, which may reflect certain adjustments to the reported EBITDA for non-recurring, unusual or infrequent items or other items to normalize current earnings. 22-------------------------------------------------------------------------------- Table of Contents For the Fiscal Year Ended March 31,(in thousands) 2014 2013 2012 Cash & Temporary Investments $ 3,660 $ 4,586 $ 2,843 Total Assets 133,229 107,475 98,501 Capital Expenditures 2,196 1,219 809 Total Debt 20,600 7,500 6,100 Revenues 109,311 90,339 91,685 Net Income 12,101 8,777 7,255 EBITDA 24,579 19,183 14,581 CSWC Valuation $ 171,500 $ 150,100 $ 89,900 Jet-Lube, Inc. Jet-Lube, Inc. is RectorSeal's largest subsidiary. During the fiscal year ended March 31, 2014, Jet-Lube Inc. completed the acquisition of Design Water Technologies, a chemical company that solves water well contamination problems, to expand its water well division product line. Below are certain key financial data for Jet-Lube, Inc. as well as our valuation at March 31, 2014, 2013 and 2012. Our valuation is based primarily on adjusted EBITDA, which may reflect certain adjustments to the reported EBITDA for non-recurring, unusual or infrequent items or other items to normalize current earnings. For the Fiscal Year Ended March 31, (in thousands) 2014 2013 2012 Cash & Temporary Investments $ 20,949 $ 21,177 $ 20,351 Total Assets 53,682 50,395 47,495 Capital Expenditures 2,162 1,451 938 Total Debt - - - Revenues 51,060 48,048 45,867 Net Income 6,344 5,146 4,742 EBITDA 9,592 7,438 7,050 CSWC Valuation $ 82,200 $ 68,700 $ 59,600 The Whitmore Manufacturing Company The Whitmore Manufacturing Company ("Whitmore") manufactures high performance, specialty lubricants for heavy equipment used in surface mining, railroads and other industries, lubrication equipment specifically for rail applications and lubrication-centric reliability solutions for a wide variety of industries. Whitmore also produces water-based coatings for the automotive and primary metals industries. During the fiscal year ended March 31, 2014, Whitmore completed the acquisition of Fluid Defense, a manufacturer of lubricant storage, filtration and handling products, to expand its presence in the reliability market. Below are certain key financial data for Whitmore as well as our valuation at March 31, 2014, 2013 and 2012. Our valuation is based primarily on adjusted EBITDA, which may reflect certain adjustments to the reported EBITDA for non-recurring, unusual or infrequent items or other items to normalize current earnings. In addition, our valuation for Whitmore also includes the fair market value of non-operating real estate assets held for investment purposes. 23-------------------------------------------------------------------------------- Table of Contents For the Fiscal Year Ended March 31, (in thousands) 2014 2013 2012 Cash & Temporary Investments $ 2,661 $ 7,102 $ 2,498 Total Assets 84,163 69,665 42,928 Capital Expenditures 10,334 12,681 2,561 Total Debt 24,497 15,848 - Revenues 57,784 48,481 43,620 Net Income 6,132 7,273 6,281 EBITDA 13,000 11,814 10,181 Total CSWC Valuation 110,600 100,600 84,000 RectorSeal's 20% Interest 22,100 20,100 16,800 CSWC's 80% Interest $ 88,500 $ 80,500 $ 67,200 Media Recovery, Inc. Media Recovery, Inc. (MRI) is the holding company of DataSpan, ShockWatch and Damage Prevention Company ("DPC"). DataSpan provides datacenter supplies and services to corporate customers through a direct sales force. ShockWatch manufactures and distributes devices used to prevent damage and manage inventory in transit. DPC manufactures dunnage products used to secure loads during long-haul transport. The assets of DPC were sold in November 2013. In addition, MRI also acquired Shocklog, a company that manufactures impact and environmental recording devices on December 31, 2013. Below are certain key financial data for MRI for the fiscal years ended September 30, 2013, 2012 and 2011 and our valuation at March 31, 2014, 2013 and 2012. Our valuation is based primarily on adjusted EBITDA, which may reflect certain adjustments to the reported EBITDA of for non-recurring, unusual or infrequent items or other items to normalize current earnings. For the Fiscal Year Ended September 30, (in thousands) 2013 2012 2011 Cash $ 5 $ 185 $ 361 Total Assets 43,284 46,624 44,584 Capital Expenditures 538 726 593 Total Debt - 2,556 - Revenues 92,926 104,632 111,254 Net Income 1,405 842 614 EBITDA 3,248 3,062 5,253 CSWC Valuation* $ 23,900 $ 11,900 $ 18,700 *Reflects our valuation at March 31, 2014, 2013 and 2012. Results of Operations The composite measure of our financial performance in the Consolidated Statements of Operations is captioned "Increase in net assets from operations" and consists of three elements. The first is "Net investment income," which is the difference between income from interest, dividends and fees and our combined operating and interest expenses, net of applicable income taxes. The second element is "Net realized gain on investments," which is the difference between the proceeds received from the disposition of portfolio securities and their stated cost, net of applicable income tax expense based on our tax year. The third element is the "Net increase in unrealized appreciation of investments," which is the net change in the market or fair value of our investment portfolio, compared with stated cost. It should be noted that the "Net realized gain on investments" and "Net increase in unrealized appreciation of investments" are directly related in that when an appreciated portfolio security is sold to realize a gain, a corresponding decrease in net unrealized appreciation occurs by transferring the gain associated with the transaction from being "unrealized" to being "realized." Conversely, when a loss is realized on a depreciated portfolio security, an increase in net unrealized appreciation occurs. 24 -------------------------------------------------------------------------------- Table of Contents Net Investment Income For the year ended March 31, 2014, total investment income was $12,606,546, a $1,771,285, or 16.3%, increase over total investment income of $10,835,261 for the year ended March 31, 2013. This increase was primarily attributable to a $3,312,075, or 40.9%, increase in dividend income from The Rectorseal Corporation, Whitmore Manufacturing Company and Wellogix, Inc. and offset by a $1,496,562 or 74.6%, decrease in interest income (due to a reserve against Cinatra Clean Technologies Inc.'s interest income). For the year ended March 31, 2013, total investment income was $10,835,261, a $1,501,025, or 16.08%, increase over total investment income of $9,334,236 for the year ended March 31, 2012. This increase was primarily attributable to a $1,372,250, or 20.4%, increase in dividend income and a $79,047, or 4.1%, increase in interest income. Our principal objective is to achieve capital appreciation. Therefore, a significant portion of the investment portfolio is structured to maximize the potential return from equity participation and, therefore, provides minimal current yield in the form of interest or dividends. We also earn interest income from the short-term investment of cash funds, and the annual amount of such income varies based upon the average level of funds invested during the year and fluctuations in short-term interest rates. During the three years ended March 31, 2014, we had interest income from temporary cash investments of $66,949 in 2014, $71,136 in 2013 and $52,477 in 2012. We also receive management fees primarily from our controlled affiliated investments which aggregated $559,800 in 2014, $591,300 in 2013 and $564,050 in 2012. As compared to the fiscal year ended March 31, 2013, management fees for the year ended March 31, 2014 decreased by $31,500 or 5.3% as Trax Holdings, Inc. management fees ceased pursuant to the terms of its Series B financing. As compared to the fiscal year ended March 31, 2012, management fees for the year ended March 31, 2013 increased by $27,250, or 4.8%, primarily due to management fees received from TitanLiner, Inc. During the three years ended March 31 2014, the Company recorded dividend income from the following sources: Year Ended March 31, 2014 2013 2012 Alamo Group, Inc. $ 793,192 $ 708,075 $ 679,632 Capital South Partners Fund III - 198,647 79,459 CapStar Holdings Corporation 350,000 - - Capitala Finance Corporation 101,619 - - Encore Wire Corporation 131,250 160,485 326,940 The RectorSeal Corporation 6,920,000 5,555,372 4,442,512 TCI Holdings, Inc. 78,110 81,270 81,270 Wellogix. Inc. 1,650,596 - - The Whitmore Manufacturing Company 1,380,000 1,388,842 1,110,628 $ 11,404,767 $ 8,092,691 $ 6,720,441 25-------------------------------------------------------------------------------- Table of Contents Due to the nature of our business, the majority of our operating expenses are related to employees' and directors' compensation, office expenses, legal, professional and accounting fees and pension expense. Total operating expenses increased by $113,206, or 1.36% during the year ended March 31, 2014 as compared to the year ended March 31, 2013. The increase in 2014 is due to an increase of approximately $1 million in compensation expense associated with certain staffing changes incurred during the year as well as a slight increase in employee compensation and an increase of approximately $200,000 in pension expense. This increase was offset by a decrease in stock option expense of $1.1 million caused by stock option forfeitures during the year. Total operating expenses increased by $1,666,280 or 24.97%, during the year ended March 31, 2013 as compared to the year ended March 31, 2012. The increase in 2013 is due primarily to compensation, accrued phantom stock liabilities, increase in advertising and promotion fees, other professional fees, rent increase and insurance expenses. Net Realized Gain on Investments During the fiscal year ended March 31, 2014, we had realized gains of $12,604,987 from the sale of Hologic, Inc.'s common stock, $677,250 from the redemption of TCI Holdings Inc.'s preferred stock, and $746,850 from the sale of PalletOne. Our total realized gain on investments for fiscal year 2014 was $14,084,087 as compared to a gain of $12,257,100(net of capital gain distribution) during fiscal 2013 and a gain of $11,826,876 during fiscal 2012. During the fiscal year ended March 31, 2013, we sold 2,774,250 shares of common stock in Encore Wire Corporation, which generated a capital gain of $66,037,485. We also sold 50,000 shares of common stock of Hologic, Inc., which resulted in a capital gain of $850,548. In addition, we sold our ownership in Extreme International, Inc. for cash proceeds of $10,926,000 and a realized gain of $7,600,125. We also sold our ownership in Heelys, Inc., which generated cash proceeds of $20,963,948 and a capital gain of $20,861,458. These gains were offset by a $4,926,289 realized loss from the sale of VIA Holdings, Inc., a $760,742 realized loss related to liquidation of Sterling Group Partners, L.P., and a $150,594 realized loss related to liquidation of StarTech Seed Fund I, L.P. During the fiscal year ended March 31, 2012, we sold Phi Health, Inc. on June 29, 2011 for $38,959, resulting in a realized loss of $5,910,655. On September 9, 2011, All Components was sold for $18,000,000, resulting in a realized gain of $17,850,000. We also sold all of our shares of common stock of Texas Capital Bancshares, Inc. in November 2011, resulting in a realized gain of $9,866,335. On December 5, 2011, Palm Harbor Homes Inc. filed Chapter 11 bankruptcy in state of Delaware; therefore, we subsequently wrote off our investment in this portfolio company of $10,931,955. Management does not attempt to maintain a consistent level of realized gains from year to year, but instead focuses on maximizing total investment portfolio appreciation. This strategy often results in the long-term holding of portfolio securities in pursuit of increased values and increased unrealized appreciation, but may at opportune times, result in realizing gains or losses through the disposition of certain portfolio investments. Net Increase/(Decrease) in Unrealized Appreciation of Investments For the fiscal year ended March 31, 2014, we had an increase in unrealized appreciation of investments of $93,032,228. Our increase in unrealized appreciation of investments in fiscal year 2013 was $16,367,413. 26 -------------------------------------------------------------------------------- Table of Contents As explained in the first paragraph of "Results of Operations", the realization of gains or losses results in a corresponding decrease or increase in unrealized appreciation of investments. Set forth in the following table are the significant increases and decreases in unrealized appreciation. Years Ended March 31 2014 2013 2012 Alamo Group, Inc. $ 45,546,429 $ 23,139,162 $ 22,872,338 Encore Wire Corporation 17,640,000 (74,907,585 )* 39,723,210 Hologic, Inc. (12,963,375 )* (453,896 ) (405,005 ) Media Recovery 12,000,000 (6,800,000 ) 600,000The Whitmore Manufacturing Company 8,000,000 13,300,000 11,600,000 The RectorSeal Corporation 36,900,000 72,600,000 21,600,000 *These investments were sold during each respective year. A description of the investments listed above and other material components of the investment portfolio are included elsewhere in this report under the caption "Consolidated Schedule of Investments - March 31, 2014 and 2013" in Item 8 "Financial Statements and Supplemental Data." During the fiscal year ended March 31, 2014, we recognized a $93,032,228 increase in net change in unrealized appreciation of investments. The increases in unrealized appreciation are attributable to Alamo Group, Inc. and Encore Wire Corporation, which increased by $45,546,429 and $17,640,000, respectively, due to increases in their stock price, while The Rectorseal Corporation increased by $36,900,000; The Whitmore Manufacturing Company increased by $8,000,000; and Media Recovery, Inc. increased by $12,000,000 due to increases in each entity's respective earnings, several add-on acquisitions and increases in valuation multiples based on market changes. Offsetting these increases were Cinatra Clean Technologies, Inc., TitanLiner Inc., and iMemories, Inc., which decreased by $4,060,293, $4,430,999, and $4,084,477, respectively, due to each entity's under performance in their respective markets. In addition, CapitalSouth Partners Fund III, L.P. decreased by $2,833,201; during the fiscal year ended March 31, 2014 due to a distribution of 108,105 shares of Capitala Finance Corporation (CPTA) valued at $2,083,183 at March 31, 2014, which represented 71% of our interest in Capital South Partners Fund III, L.P. During the fiscal year ended March 31, 2013, we recognized significant increases and decreases in several of our large investments. The largest increases in unrealized appreciation were attributable to The Rectorseal Corporation, which increased by $72,600,000 due to multiple acquisitions during the year and improved earnings; Alamo Group, Inc., a publicly traded company, which increased $23,139,162 due to an increase in the stock price; Whitmore Manufacturing Company, which increased by $13,300,000 due to an acquisition in May 2012, facility expansion in Rockwall and increased value in its real estate investment; Trax Holdings, which increased by $8,800,000 due to its recent series B equity financing. Offsetting these decreases were Encore Wire Corporation, which decreased $74,907,585 primarily due to our recent sale of CSVC's interest in Encore Wire Corporation; Heelys, Inc. decreased $20,395,592 due to the sale of all shares of its common stock; Media Recovery, Inc. decreased $6,800,000; and Cinatra Clean Technologies, Inc. decreased $5,590,390 due to decreases in the entities' respective earnings during FY 2013. Excluding the sales of all shares of common stock of Heelys, Inc. and partial sale of 2,774,250 shares of Encore Wire Corporation, net unrealized appreciation of investments for the year ended March 31, 2013 increased by $118,613,715. 27 -------------------------------------------------------------------------------- Table of Contents The largest increases in unrealized appreciation for the fiscal year ended March 31, 2012 are attributable to Encore Wire Corporation, which increased $39,723,210 and Alamo Group, which increased $22,872,338. In March 2012, Form S-3 registration statements of Alamo Group, Inc. (NYSE: ALG), Encore Wire Corporation (NASDAQ: WIRE), and Heelys Inc. (NASDAQ: HLYS) were filed with the Securities and Exchange Commission ("SEC"). As a result of these registrations, restrictions of the common stock of these companies imposed by Rule 144 of the Securities Exchange Act of 1933 were lifted, and discounts on these common stocks were subsequently removed. As a result, Encore Wire Corporation, Alamo Group Inc. and Heelys Inc. common stock were transferred from Level 3 to Level 1 under the fair value hierarchy of ASC 820. On March 13, 2012, Encore's registration statement became effective. As a result, Encore's fair value is equivalent to the company's closing bid price of $29.72 per share on March 31, 2012. Alamo's registration statement became effective March 28, 2012. As a result, Alamo's fair value is equivalent to the company's closing bid price of $30.06 per share on March 31, 2012. In addition, unrealized appreciation in RectorSeal Corporation and Whitmore Manufacturing Company increased $21,600,000 and $11,600,000, respectively, due to improved earnings; Heelys, Inc. increased $1,304,723 due to recent Form S-3 registration statement filed with the SEC. On April 17, 2012, Heelys' registration statement became effective. As a result, Heelys' fair value is equivalent to the company's closing bid price of $2.20 per share. Portfolio Investments During fiscal years ended March 31, 2014, March 31, 2013 and March 31, 2012, we invested a total of $12,607,024, $9,780,849 and $13,377,408, respectively. Financial Liquidity and Capital Resources At March 31, 2014, we had cash and cash equivalents of approximately $88.2 million. With the exception of two capital gain distributions made in the form of cash dividend during fiscal year ended March 31, 2013 and a capital gain distribution made in the form of a distribution of the stock of a portfolio company in the fiscal year ended March 31, 1996, we have historically elected to retain all gains realized during our more than 50 years of operation. Retention of future gains is viewed as an important source of funds to sustain our investment activity. At March 31, 2014, approximately $220 million of our investment portfolio is represented by unrestricted publicly traded securities and represents a source of liquidity. Funds for operating or investment purposes may be transferred in the form of dividends or management fees from The Rectorseal Corporation and The Whitmore Manufacturing Company, controlled affiliates of the Company, to the extent of their available cash reserves and borrowing capacities. Management believes that our cash and cash equivalents and funds available from other sources described above are adequate to meet our expected cash requirements. The disposition of investments from time to time may also be a source of funds for future investment activities. Contractual Obligations As shown below, we had the following contractual obligations as of March 31, 2014. For information on our capital commitments, see Note 9 of the Notes to Consolidated Financial Statements. 28-------------------------------------------------------------------------------- Table of Contents Payments Due By Period (In thousands) Contractual Obligations Total 1 Year 2-3 Years More Than 3 Years Operating lease obligations $ 1,792 $ 85 $ 449 $ 1,258 Critical Accounting Policies Valuation of Investments In accordance with the Investment Company Act of 1940, investments in unrestricted securities (freely marketable securities having readily available market quotations) are valued at market, and investments in restricted securities (securities subject to one or more resale restrictions) are valued at fair value determined in good faith by our Board of Directors. Under our valuation policy, unrestricted securities are valued at the closing sale price for NYSE listed securities and at the lower of the closing bid price or the last sale price for NASDAQ securities on the valuation date. Among the factors considered by our Board of Directors in determining the fair value of restricted securities are the financial condition and operating results of the issuer, the long-term potential of the business of the issuer, the market for and recent sales prices of the issuer's securities, the values of similar securities issued by companies in similar businesses, the proportion of the issuer's securities owned by us. Valuations as of any particular date, however, are not necessarily indicative of amounts which may ultimately be realized as a result of future sales or other dispositions of securities. Impact of Inflation We do not believe that our business is materially affected by inflation, other than the impact which inflation may have on the securities markets, the valuations of business enterprises and the relationship of such valuations to underlying earnings. Portfolio Changes during the Year Ended March 31, 2014 New Investment and Additions to Previous Investments New Investment Purchase Amount Deepwater Corrosion Services, Inc. $ 8,000,000 Additions to Previous Investments Purchase Amount Ballast Point Ventures II, L.P. $ 675,000 BankCap Partners Fund I, L.P. 102,724 Capital South Partners 500,000 Cinatra Clean Technologies, Inc. 2,889,300 * iMemories, Inc. 440,000 $ 12,607,024 *During the fiscal year ended March 31, 2014, the $5,279,112 investment in debt securities of Cinatra Clean Technologies, Inc. and $1,579,056 accrued interest were converted into Convertible Preferred Stock. 29 -------------------------------------------------------------------------------- Table of Contents Dispositions Proceeds Cost Realized gain/(loss) Hologic, Inc. $ 12,807,516 $ 202,529 $ 12,604,987 PalletOne, Inc. 2,450,000 1,703,150 746,850 TCI Holdings, Inc. 677,250 - 677,250 Diamond State Ventures 55,000 - 55,000 $ 15,989,766 $ 1,905,679 $ 14,084,087 Cash distributions from net realized gain - Undistributed realized gain before income taxes $ 14,084,087 |