GLADSTONE CAPITAL CORPORATION 
By MCLEAN, Va., Jan. 31, 2012 /PRNewswire/ -- Gladstone Capital Corporation (NASDAQ: GLAD) (the "Company") today announced earnings for the quarter ended December 31, 2011. All per share references are per basic and diluted weighted average common share outstanding, unless noted otherwise.
(Logo: http://photos.prnewswire.com/prnh/20101005/GLADSTONECAPITAL )
Net Investment Income for three months: Net Investment Income for the quarter ended December 31, 2011 was $4.4 million, or $0.21 per share, as compared to $4.6 million, or $0.22 per share, for the prior year period, a decrease in Net Investment Income of 4.7%. The decrease in net investment income was largely due to an increase in interest and dividend expense for the three months ended December 31, 2011 of a combined $1.7 million, partially offset by an increase in interest income of $1.5 million compared to the first quarter of fiscal 2011. Interest expense increased during the quarter ended December 31, 2011 compared to the prior year quarter due to increased borrowings, which we used to make new investments during fiscal year 2011. The Company paid dividends on its newly issued 7.125% Series 2016 Term Preferred Stock ("Term Preferred Stock") for the first time in December 2011, which totaled $0.4 million of dividends expense. Interest income on investments increased by 19.7%, primarily due to an increase in the weighted average principal balance of the Company's interest-bearing investments by $69.3 million (or 25.8%) to $337.9 million as of December 31, 2011, which primarily resulted from the purchase of syndicated loans during the second half of fiscal year 2011. Partially offsetting this increase was a decrease in the annualized weighted average yield on the Company's interest bearing investments by 0.5% during the quarter ended December 31, 2011 compared to the prior year quarter.
Net (Decrease) Increase in Net Assets Resulting from Operations for three months: Net (Decrease) Increase in Net Assets Resulting from Operations for the quarter ended December 31, 2011 was a decrease of $(1.3) million, or $(0.06) per share, as compared to an increase of $2.1 million or $0.10 per share, for the prior year period. In addition to the changes in net investment income described above, the decrease in Net (Decrease) Increase in Net Assets Resulting from Operations from the prior year was primarily driven by $9.3 million in net unrealized depreciation on the existing investment portfolio, due primarily to decreased performance of certain of the Company's portfolio companies during the quarter ended December 31, 2011. Partially offsetting this decrease, was the reversal of unrealized depreciation of $11.6 million associated with the exits of two investments during the quarter ended December 31, 2011. In addition, the Company recognized $8.4 million in realized losses related to these exits.
Investment Portfolio Fair Value: As of December 31, 2011, the Company's entire portfolio was fair valued at 79.0% of cost, as compared to 79.1% as of September 30, 2011.
Net Asset Value: Net asset value was $9.90 per share as of December 31, 2011, as compared to $10.16 per share as of September 30, 2011.
Asset Characteristics: Total assets were $308.1 million at December 31, 2011, as compared to $317.6 million at September 30, 2011. At December 31, 2011, the Company had investments in 57 portfolio companies, with an aggregate cost basis of $370.5 million and an aggregate fair value of $292.8 million. At September 30, 2011, the Company had investments in 59 portfolio companies, with an aggregate cost basis of $382.8 million and an aggregate fair value of $302.9 million. As of December 31, 2011, the Company's investment portfolio at fair value was comprised of 95.9% in debt securities and 4.1% in equity securities. Syndicated investments comprised 30.5% of the Company's investment portfolio at fair value as of December 31, 2011, compared to 29.9% as of September 30, 2011.
Investment Yield: The annualized weighted average yield on the Company's interest-bearing investments was 10.9% for the quarter ended December 31, 2011, as compared to 11.4% for the prior year period. The decrease in the weighted average yield for the quarter ended December 31, 2011, primarily resulted from the purchase of syndicated loans during fiscal year 2011, which generally bear lower interest rates than the Company's proprietary debt investments, as well as the restructure of the Company's debt investments in Sunshine Media Holdings ("Sunshine") into lower interest rates. 87.2% of the Company's debt investment portfolio as of December 31, 2011 consisted of variable rate loans with floors, as compared to 84.7% as of December 31, 2010.
Highlights for the Quarter: For the quarter ended December 31, 2011, the following significant events occurred:
-- New Investment Activity: The Company invested $1.6 million in one new
portfolio company and $9.7 million of investments in existing portfolio
companies through revolver draws, the addition of new term notes or
additional equity, for an aggregate of $11.3 million in new investments.
-- Principal Repayments: The Company received aggregate repayments of $10.8
million, which includes various scheduled and unscheduled principal
repayments, including an early payoff, at par, for $6.1 million in net
proceeds.
-- Investment Restructure: Effective October 2011, the Company
restructured its investments in Sunshine by reducing the interest rates
on its line of credit, senior term debt and last-out tranche senior term
debt to preserve Sunshine's capital to enable Sunshine to invest in new
and existing initiatives. The Company also invested $0.6 million in
preferred equity in Sunshine during the three months ended December 31,
2011.
-- Investment Exit: In December 2011, the Company sold its investments in
Newhall Holdings Inc. ("Newhall") for net proceeds of $3.3 million,
which resulted in a realized loss of $7.4 million recorded in the three
months ended December 31, 2011. The Company's debt investments in
Newhall had previously been on non-accrual status.
-- Term Preferred Stock: In November, 2011, the Company completed a public
offering of 1.5 million shares of Term Preferred Stock for gross
proceeds of $38.5 million and net proceeds, after deducting underwriting
discounts and offering expenses borne by the Company, of $36.4 million
which the Company used to repay a portion of the outstanding borrowings
under its credit facility.
-- Distributions: The Company paid monthly cash distributions to
stockholders of $0.07 per common share for each of October, November and
December 2011. The Company also made its first Term Preferred Stock
distribution of $0.28203125 per preferred share in December 2011,
including the prorated November and full December monthly dividend
amounts.
Comments from the Company's President, Chip Stelljes: "During the first quarter of fiscal 2012, we continued to focus on managing our existing portfolio, with limited new investments. During the quarter, we were able to restructure one non-accrual investment into an accrual investment and we also exited a non-accrual investment. We are pleased that we were able to raise long term capital through our Term Preferred Stock offering and to extend our line of credit by three years. We expect that this capital will enable us to grow the portfolio and increase our net investment income over the long term."
Subsequent Events: After December 31, 2011, the following events occurred:
-- Amendment of the Credit Facility: On January 19, 2012, the Company
entered into an agreement on its $137.0 million line of credit ("Amended
Credit Facility") to extend the maturity date three years to January 18,
2015 (the "Maturity Date"). The Amended Credit Facility was arranged by
Key Equipment Finance Inc., as administrative agent, with Branch Banking
and Trust Company and ING Capital LLC also joining the Amended Credit
Facility as committed lenders. The Amended Credit Facility may be
expanded to a maximum of $237.0 million through the addition of other
committed lenders to the facility. If the Amended Credit Facility is not
renewed or extended by the Maturity Date, all principal and interest
will be due and payable on or before January 18, 2016. The interest
rates on advances under the Amended Credit Facility remained unchanged
at 30-day LIBOR, subject to a minimum rate of 1.5%, plus 3.75% per
annum.
-- Investment Activity: Subsequent to December 31, 2011, the Company
extended an aggregate amount of approximately $3.1 million to 8 existing
portfolio companies in revolver draws and received scheduled repayments
of $0.5 million from 9 portfolio companies. Additionally, Global
Materials Technologies, Inc. made an early payoff at par of $2.4 million
in January 2012, and paid $1.0 million in success fees to the Company.
-- Distributions Declared: The Company's board of directors declared the
following monthly distributions to stockholders:
Distribution
Record Date Payment Date Distribution per
----------- ------------ ------------ ------------
Term
per Common Preferred
---------- ----------
Share Share
----- -----
January 23, 2012 January 31, 2012 $0.07 $0.1484375
February 21, February 29,
2012 2012 0.07 0.1484375
March 22, 2012 March 30, 2012 0.07 0.1484375
---- ---------
Total for the
Quarter $0.21 $0.4453125
Summary Information: The following chart is a summary of some of the information reported above (dollars in thousands, except per share data) (unaudited):
December 31, December 31,
2011 2010
------------- -------------
For the Three Months Ended:
Net investment income $4,418 $4,637
Net (decrease) increase in net assets
resulting from operations (1,289) 2,132
Average yield on interest-bearing
investments 10.9% 11.4%
Total dollars invested $11,251 $11,794
Total dollars repaid 10,780 13,208
December 31, September 30,
2011 2011
------------- --------------
As of:
Fair value as a percent of cost 79.0% 79.1%
Net asset value per share $9.90 $10.16
Number of portfolio companies 57 59
Total assets at fair value $308,116 $317,624
Conference Call for Stockholders: The Company will hold a conference call on Wednesday, February 1, 2012, at 8:30 a.m. EST. Please call (800) 860-2442 to enter the conference. An operator will monitor the call and set a queue for questions. A replay of the conference call will be available from the date of the call through March 2, 2012. To hear the replay, please dial (877) 344-7529 and use conference passcode number 10008736. The replay will be available beginning approximately one hour after the call concludes.
The live audio broadcast of the Company's quarterly conference call will also be available online at www.GladstoneCapital.com. The event will be archived and available for replay on the Company's website from the date of the call through April 2, 2012.
Warning: The financial statements below are without footnotes, so readers should obtain and carefully review the Company's Form 10-Q for the fiscal quarter ended December 31, 2011, including the footnotes to the financial statements contained therein. The Company has filed the Form 10-Q today with the Securities and Exchange Commission ("SEC"), which can be retrieved from the SEC's website at www.sec.gov or from the Company's website at www.GladstoneCapital.com. To obtain a paper copy from the Company, please contact the Company at 1521 Westbranch Drive, Suite 200, McLean, VA 22102.
Gladstone Capital Corporation is a publicly traded business development company that invests in debt securities consisting primarily of senior term loans, second term lien loans, and senior subordinate term loans in small and medium sized U.S. businesses. The Company has paid 100 consecutive monthly cash distributions on its common stock. Before the Company started paying monthly distributions, the Company paid eight consecutive quarterly cash distributions. Information on the business activities of all the Gladstone funds can be found at www.gladstonecompanies.com.
For Investor Relations inquiries related to any of the monthly dividend paying Gladstone funds, please visit www.gladstone.com.
The statements in this press release regarding the ability of the Company to manage its existing portfolio, grow its portfolio and increase its net investment income over the long term and other such statements are "forward-looking statements." These forward-looking statements inherently involve certain risks and uncertainties, although they are based on the Company's current plans that are believed to be reasonable as of the date of this press release. Factors that may cause the Company's actual results to differ from these forward-looking statements include, among others, the duration and potential future effects of the current economic downturn on the Company's portfolio companies and on the senior loan market, along with those factors listed under the caption "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2011, as filed with the SEC on November 14, 2011. Such "Risk Factors" are specifically incorporated by reference into this press release. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
GLADSTONE CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
December 31, September 30,
2011 2011
---- ----
ASSETS
Investments at fair value
Non-Control/Non-Affiliate
investments (Cost of $273,177
and $288,266, respectively) $248,832 $257,302
Control investments (Cost of
$97,293 and $94,549,
respectively) 44,014 45,645
------ ------
Total investments at fair value
(Cost of $370,470 and
$382,815, respectively) 292,846 302,947
Cash 5,772 6,732
Restricted cash 1,225 -
Interest receivable -
investments in debt securities 2,921 3,066
Interest receivable - employees 13 -
Due from custodian 1,669 2,547
Deferred financing fees 2,261 650
Prepaid assets 825 996
Other assets 584 686
--- ---
TOTAL ASSETS $308,116 $317,624
======== ========
LIABILITIES
Borrowings at fair value (Cost
of $56,900 and $99,400,
respectively) $57,213 $100,012
Mandatorily redeemable
preferred stock, $0.001 per
share par value, $25 per share
liquidation preference;
4,000,000 and no shares
authorized; 1,539,882 and no
shares issued and outstanding
at December 31, 2011 and
September 30, 2011,
respectively 38,497 -
Accounts payable and accrued
expenses 524 513
Interest payable 205 289
Fees due to Adviser 1,414 1,760
Fee due to Administrator 195 194
Other liabilities 2,052 1,135
----- -----
TOTAL LIABILITIES $100,100 $103,903
-------- --------
NET ASSETS $208,016 $213,721
======== ========
ANALYSIS OF NET ASSETS
Common stock, $0.001 par value
per share, 46,000,000 and
50,000,000 shares authorized;
21,019,242 and 21,039,242
shares issued and outstanding
at December 31, 2011 and
September 30, 2011,
respectively $21 $21
Capital in excess of par value 326,756 326,913
Notes receivable - employees (3,699) (3,858)
Cumulative net unrealized
depreciation on investments (77,624) (79,867)
Cumulative net unrealized
appreciation on borrowings (313) (612)
Under distributed net
investment income 108 108
Accumulated net realized losses (37,233) (28,984)
------- -------
TOTAL NET ASSETS $208,016 $213,721
======== ========
NET ASSET VALUE PER COMMON
SHARE AT END OF PERIOD $9.90 $10.16
===== ======
GLADSTONE CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER
SHARE DATA)
(UNAUDITED)
Three Months Ended
------------------
December 31,
------------
2011 2010
---- ----
INVESTMENT INCOME
Interest income
Non-Control/Non-
Affiliate investments $7,889 $6,926
Control investments 1,358 797
Cash 6 -
Notes receivable from
employees 67 122
--- ---
Total interest income 9,320 7,845
Other income
Non-Control/Non-
Affiliate investments - 161
Total other income - 161
Total Investment income 9,320 8,006
----- -----
EXPENSES
Loan servicing fee 959 842
Base management fee 597 505
Incentive fee 1,035 1,159
Administration fee 195 186
Interest expense on
borrowings 1,139 (120)
Dividend expense on
mandatorily redeemable
preferred stock 434 -
Amortization of deferred
financing fees 457 297
Professional fees 292 332
Other expenses 244 220
--- ---
Expenses before credits
from Adviser 5,352 3,421
Credits to fees from
Adviser (450) (52)
Total expenses net of
credits to fees 4,902 3,369
----- -----
NET INVESTMENT INCOME 4,418 4,637
----- -----
REALIZED AND UNREALIZED (LOSS) GAIN
ON:
Net realized loss on
investments (8,249) -
Net unrealized
appreciation
(depreciation) on
investments 2,243 (2,944)
Net unrealized
depreciation on
borrowings 299 439
--- ---
Net loss on investments
and borrowings (5,707) (2,505)
NET (DECREASE) INCREASE
IN NET ASSETS RESULTING
FROM OPERATIONS $(1,289) $2,132
======= ======
NET (DECREASE) INCREASE IN NET
ASSETS RESULTING FROM OPERATIONS
PER COMMON SHARE:
Basic and Diluted $(0.06) $0.10
====== =====
WEIGHTED AVERAGE SHARES OF COMMON
STOCK OUTSTANDING:
Basic and Diluted 21,038,590 21,039,242
GLADSTONE CAPITAL CORPORATION
FINANCIAL HIGHLIGHTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA AND PER
UNIT DATA)
(UNAUDITED)
Three Months Ended
------------------
December 31,
------------
2011 2010
---- ----
Per Common Share Data(A)
---------------------------
Net asset value at beginning of
period $10.16 $11.85
------ ------
Income from investment operations (B)
Net investment income 0.21 0.22
Net realized loss on investments (0.39) -
Net unrealized appreciation
(depreciation) on investments 0.11 (0.14)
Net unrealized depreciation on
borrowings 0.01 0.02
Total from investment operations (0.06) 0.10
----- ----
Distributions to common stockholders from
(B)(C)
Net investment income (0.21) (0.21)
----- -----
Total distributions to common
stockholders (0.21) (0.21)
----- -----
Capital Common Share transactions
Repayment of principal on notes
receivables 0.01 -
Stock redemption for repayment on
notes receivables (0.01) -
----- ---
Total from capital common share
transactions - -
Other, net (D) 0.01 -
---- ---
Net asset value at end of period $9.90 $11.74
===== ======
Per common share market value at
beginning of period $6.86 $11.27
Per common share market value at
end of period 7.63 11.52
Total return(E)(F) 14.25% 4.11%
Common shares outstanding at end
of period 21,019,242 21,039,242
Statement of Assets and Liabilities Data:
-----------------------------------------
Net assets at end of period $208,016 $246,960
Average net assets(G) 210,972 247,513
Senior Securities Data:
-----------------------
Borrowings at fair value 57,213 25,301
Mandatorily redeemable preferred
stock 38,497 -
Asset coverage ratio(H)(I) 318% 1,061%
Asset coverage per unit(I) $3,179 $10,612
Ratios/Supplemental Data:
-------------------------
Ratio of expenses to average net
assets-annualized(J) 10.15% 5.53%
Ratio of net expenses to average
net assets-annualized(K) 9.30 5.44
Ratio of net investment income to
average net assets-annualized 8.38 7.49
(A) Based on actual shares outstanding at the end of the
corresponding period.
(B) Based on weighted average basic per share data.
(C) Distributions are determined based on taxable income
calculated in accordance with income tax regulations which
may differ from amounts determined under accounting
principles generally accepted in the U.S.
(D) Represents the impact of the different share amounts
(weighted average shares outstanding during the period and
shares outstanding at the end of the period) in the per
share data calculations and rounding impacts.
(E) Total return equals the change in the ending market
value of the Company's common stock from the beginning of
the period, taking into account distributions reinvested
in accordance with the terms of the Company's dividend
reinvestment plan. Total return does not take into account
distributions that may be characterized as a return of
capital.
(F) Amounts were not annualized.
(G) Average net assets are computed using the average of
the balance of net assets at the end of each month of the
reporting period.
(H) As a Business Development Company, the Company is
generally required to maintain a ratio of at least 200% of
total assets, less all liabilities and indebtedness not
represented by senior securities, to total borrowings and
guaranty commitments. The Company's mandatorily
redeemable preferred stock is characterized as borrowings
for the asset coverage ratio.
(I) Asset coverage ratio is the ratio of the carrying
value of the Company's total consolidated assets, less all
liabilities and indebtedness not represented by senior
securities, to the aggregate amount of senior securities
representing indebtedness (including interest payable and
guarantees). Asset coverage per unit is the asset coverage
ratio expressed in terms of dollar amounts per one
thousand dollars of indebtedness.
(J) Ratio of expenses to average net assets is computed
using expenses before credits, if any, from the Adviser to
the base management and incentive fees and including
income tax expense.
(K) Ratio of net expenses to average net assets is
computed using total expenses net of credits from the
Adviser to the base management and incentive fees and
including income tax expense.
SOURCE Gladstone Capital Corporation
