Gladstone Capital Corporation Reports Results for the Second Quarter Ended March 31, 2011
Net Investment Income for the three and six months ended March 31, 2011 was $4.4 million and $9.1 million, or $0.21 and $0.43 per share, respectively.
Net Decrease in Net Assets Resulting from Operations for the three and six months ended March 31, 2011 was $8.4 million and $6.3 million, or $0.40 and $0.30 per share, respectively.
MCLEAN, Va., May 3, 2011 /PRNewswire/ -- Gladstone Capital Corporation (Nasdaq: GLAD) (the "Company") today announced earnings for the second quarter ended March 31, 2011. All per share references are per basic and diluted weighted average common shares outstanding, unless noted otherwise.
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Net Investment Income for 3 Months: Net Investment Income for the quarter ended March 31, 2011 was $4.4 million, or $0.21 per share, as compared to $4.5 million, or $0.21 per share, for the prior year period, a decrease in Net Investment Income of 1.0%. Net Investment Income decreased primarily due to lower interest income, partially offset by decreased interest expense and other costs. The lower interest income was due to a decrease in the weighted average cost basis of our interest-bearing investments, which primarily resulted from increased principal repayments and limited new investment activity subsequent to March 31, 2010. The decreased interest expense was primarily due to lower average borrowings outstanding in the three months ended March 31, 2011, which were 76.3% less than the prior year period.
Net Investment Income for 6 Months: Net Investment Income for the six months ended March 31, 2011 was $9.1 million, or $0.43 per share, as compared to $8.9 million, or $0.42 per share, for the prior year period, an increase in Net Investment Income of 1.8%. Net Investment Income increased primarily due to lower interest expenses resulting from lower average borrowings outstanding and the reversal of related fees during the six months ended March 31, 2011, partially offset by decreased investment income. The average borrowings outstanding during the six months ended March 31, 2011 was $17.2 million, as compared to $70.0 million in the prior year period, a decrease of 75.4%. Interest income from investments in debt securities decreased for the six months ended March 31, 2011, due to a decrease in the average cost basis of our interest-bearing investment portfolio, which primarily resulted from increased principal repayments and limited new investment activity subsequent to March 31, 2010.
Net (Decrease) Increase in Net Assets Resulting from Operations for 3 Months: Net (Decrease) Increase in Net Assets Resulting from Operations for the quarter ended March 31, 2011 was ($8.4 million), or ($0.40) per share, as compared to an increase of $8.0 million, or $0.38 per share, for the prior year period. The decrease in Net (Decrease) Increase in Net Assets Resulting from Operations from the prior year was primarily driven by net unrealized depreciation of the Company's investment portfolio of $13.1 million for the quarter ended March 31, 2011, compared to net unrealized appreciation of $2.5 million for the prior year period.
Net (Decrease) Increase in Net Assets Resulting from Operations for 6 Months: Net (Decrease) Increase in Net Assets Resulting from Operations for the six months ended March 31, 2011 was ($6.3 million), or ($0.30) per share, as compared to $14.3 million, or $0.68 per share, for the prior year period. The decrease in the Net (Decrease) Increase in Net Assets Resulting from Operations from the prior year period was primarily driven by net unrealized depreciation of the Company's investment portfolio of $16.0 million for the six months ended March 31, 2011, compared to net unrealized appreciation of $5.1 million for the prior year period.
Investment Portfolio Fair Value: The Company's aggregate investment portfolio depreciated during the quarter ended March 31, 2011, primarily due to depreciation in the debt of Sunshine Media Holdings and certain other proprietary investments. As of March 31, 2011, the entire portfolio was fair valued at 82% of cost, which was a decrease of 4.0% from September 30, 2010.
Net Asset Value: Net asset value was $11.18 per share as of March 31, 2011, as compared to $11.85 per share as of September 30, 2010.
Asset Characteristics: Total assets were $272.5 million as of March 31, 2011, as compared to $270.5 million as of September 30, 2010. At March 31, 2011, the Company had investments in 45 portfolio companies with an aggregate cost basis of $314.2 million and an aggregate fair value of $257.1 million. As of March 31, 2011, the Company's investment portfolio at fair value was comprised of 97.3% in debt securities and 2.7% in equity securities.
Investment Yield: The annualized weighted average yield on the Company's interest-bearing portfolio, excluding cash and cash equivalents, was 11.32% for the quarter ended March 31, 2011, as compared to 10.98% for the prior year period. The increase in the weighted average yield for the quarter ended March 31, 2011 resulted primarily from the repayment of loans with lower stated interest rates subsequent to March 31, 2010.
Highlights for Quarter: For the quarter ended March 31, 2011, the Company reported the following significant activity:
-- New Investment Activity: Funded $35.2 million to six new portfolio companies and $3.6 million of investments to existing portfolio companies, through revolver draws or addition of new term notes, for an aggregate of $38.8 million.
-- Principal Repayments: Received repayments of $22.0 million, which included two full payoffs and scheduled principal repayments.
-- Distributions: Paid monthly cash distributions of $0.07 per share for each of January, February and March 2011.
Subsequent Events: Subsequent to March 31, 2011, the Company:
-- Additional Investments: Funded $17.3 million of new investments and $0.5 million of additional investments to existing portfolio companies.
-- Principal Repayments: Received scheduled repayments of $1.5 million.
-- Distributions Declared:
Declaration Date Ex-Dividend Date Record Date Payment Date Cash Distribution April 12 April 19 April 22 April 29 $ 0.07 April 12 May 18 May 20 May 31 0.07 April 12 June 16 June 20 June 30 0.07 Total for the Quarter: $ 0.21
Summary Information: The following chart is a summary of some of the unaudited information reported above (dollars in thousands, except per share data):
March 31, 2011 March 31, 2010 For quarter ended: Net investment income $ 4,428 $ 4,474 Net (decrease) increase in results of operations (8,381) 7,980 Weighted average cost basis of interest-bearing investments 256,900 309,600 Average yield on interest-bearing investments 11.32% 10.98% Total dollars invested $ 40,614 $ 4,903 Total dollars repaid 22,760 23,402 Average borrowings outstanding 14,500 61,000 For 6 months ended: Net investment income $ 9,066 $ 8,902 Net (decrease) increase in results of operations (6,250) 14,306 Weighted average cost basis of interest-bearing investments 262,700 311,200 Average yield on interest-bearing investments 11.37% 11.29% Total dollars invested $ 52,408 $ 6,967 Total dollars repaid 36,004 41,588 Average borrowings outstanding 17,200 70,000 As of: March 31, 2011 September 30, 2010 Fair value as a percent of cost 82% 86% Net asset value per share $ 11.18 $ 11.85 Number of portfolio companies 45 39 Total assets $ 272,536 $ 270,518
Comments from President Chip Stelljes: "During the quarter, we invested $35.2 million in six new portfolio companies and an additional $17.3 million after quarter end in three additional portfolio companies. We are pleased with our increased new investment activity, and with a current outstanding balance of $47.2 million on our $127.0 million line of credit, we are actively reviewing new investment opportunities and believe that we will be able to continue our increased new investment activity over the next twelve months."
Conference Call for Stockholders: The Company will hold a conference call on May 4, 2011 at 8:30 am EDT. 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 through June 6, 2011. To hear the replay, please dial (877) 344-7529 and use conference number 449393. The replay will be available approximately one hour after the call concludes.
The live audio broadcast of the Company's quarterly conference call will be available online at www.GladstoneCapital.com. The event will be archived and available for replay on the Company's website through July 5, 2011.
Warning: The financial statements below are without footnotes so readers should obtain and carefully review the Company's Form 10-Q for the quarter ended March 31, 2011, including the footnotes to the financial statements contained therein. The Company has filed the Form 10-Q today with the 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 us, please contact us at 1521 Westbranch Drive, Suite 200, McLean, VA 22102.
Who we are: Gladstone Capital Corporation is a specialty finance company that invests in debt securities consisting primarily of senior term loans, second term lien loans, and senior subordinated term loans in small and medium-sized businesses. Information on the business activities of the Gladstone family of funds can be found at www.gladstonecompanies.com.
For Investor Relations inquiries related to any of the monthly dividend paying Gladstone family of funds, please visit www.gladstone.com.
The statements in this press release regarding the timing and the Company's ability to increase new investment activity 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 its portfolio companies and on the senior loan market, and those factors listed under the caption "Risk Factors" of the post-effective amendment of the Company's registration statement on Form N-2 (File No. 333-162592), filed by the Company with the SEC on April 7, 2011 (the "Form N-2"). The risk factors set forth in the Form N-2 under the caption "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 CONDENSED CONSOLIDATED STATEMENTS OF ASSETS & LIABILITIES (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) March 31, September 30, 2011 2010 ASSETS Cash $ 8,871 $ 7,734 Investments at fair value Non-Control/Non-Affiliate investments (Cost of $229,517 and $244,140, respectively) 208,461 223,737 Control investments (Cost of $84,718 and $54,076, respectively) 48,652 33,372 Total investments at fair value (Cost of $314,235 and $298,216, respectively) 257,113 257,109 Interest receivable – investments in debt securities 2,379 2,648 Interest receivable – employees 122 104 Due from custodian 1,279 255 Deferred financing fees 1,361 1,266 Prepaid assets 744 799 Other assets 667 603 TOTAL ASSETS $ 272,536 $ 270,518 LIABILITIES Borrowings at fair value (Cost of $33,200 and $16,800, respectively) $ 33,646 $ 17,940 Accounts payable and accrued expenses 456 752 Interest payable 120 693 Fee due to Administrator 175 267 Fees due to Adviser 1,791 673 Other liabilities 1,133 947 TOTAL LIABILITIES 37,321 21,272 NET ASSETS $ 235,215 $ 249,246 ANALYSIS OF NET ASSETS Common stock, $0.001 par value, 50,000,000 shares authorized and 21,039,242 shares issued and outstanding at March 31, 2011 and September 30, 2010 $ 21 $ 21 Capital in excess of par value 326,935 326,935 Notes receivable – employees (6,049) (7,103) Net unrealized depreciation on investments (57,121) (41,108) Net unrealized appreciation on borrowings (446) (1,140) Overdistributed net investment income — (1,103) Accumulated net realized losses (28,125) (27,256) TOTAL NET ASSETS $ 235,215 $ 249,246 NET ASSETS PER SHARE $ 11.18 $ 11.85
GLADSTONE CAPITAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) Three Months Ended March 31, Six Months Ended March 31, 2011 2010 2011 2010 INVESTMENT INCOME Interest income Non-Control/Non-Affiliate investments $ 6,055 $ 7,675 $ 12,651 $ 16,045 Control investments 1,113 709 2,240 1,477 Notes receivable from employees 122 108 244 221 Total interest income 7,290 8,492 15,135 17,743 Other income 1,108 1,322 1,270 1,875 Total investment income 8,398 9,814 16,405 19,618 EXPENSES Loan servicing fee 757 852 1,599 1,781 Base management fee 608 739 1,113 1,459 Incentive fee 1,102 1,072 2,261 1,447 Administration fee 175 176 361 354 Interest expense 478 1,136 358 2,671 Amortization of deferred financing fees 368 449 664 943 Professional fees 201 219 534 1,131 Other expenses 383 703 603 965 Expenses before credits from Adviser 4,072 5,346 7,493 10,751 Credits to fees from Adviser (102) (6) (154) (35) Total expenses net of credits to fees 3,970 5,340 7,339 10,716 NET INVESTMENT INCOME 4,428 4,474 9,066 8,902 REALIZED AND UNREALIZED (LOSS) GAIN ON: Net realized gain (loss) on investments 5 892 5 (28) Net unrealized (depreciation) appreciation on investments (13,069) 2,483 (16,014) 5,082 Net unrealized depreciation on borrowings 255 131 693 350 Net (loss) gain on investments and borrowings (12,809) 3,506 (15,316) 5,404 NET (DECREASE) INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (8,381) $ 7,980 $ (6,250) $ 14,306 NET (DECREASE) INCREASE IN NET ASSETS RESULTING FROM OPERATIONS PER SHARE: Basic and Diluted $ (0.40) $ 0.38 $ (0.30) $0.68 WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING: Basic and Diluted 21,039,242 21,075,445 21,039,242 21,081,576
GLADSTONE CAPITAL CORPORATION FINANCIAL HIGHLIGHTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT DATA) (UNAUDITED) Three Months Ended March 31, Six Months Ended March 31 2011 2010 2011 2010 Per Share Data(1) Net asset value at beginning of period $ 11.74 $ 11.92 $ 11.85 $ 11.81 Income from investment operations: Net investment income (2) 0.21 0.21 0.43 0.42 Net realized gain on investments(2) — 0.04 — — Net unrealized (depreciation) appreciation on investments(2) (0.62) 0.12 (0.76) 0.24 Net unrealized appreciation on borrowings(2) 0.01 0.01 0.03 0.02 Total from investment operations (0.40) 0.38 (0.30) 0.68 Distributions to stockholders(3) (0.21) (0.21) (0.42) (0.42) Conversion of former employee stock option loans from recourse to non-recourse — (0.02) — (0.02) Reclassification of principal on employee note — — — 0.02 Repayment of principal on employee note 0.05 — 0.05 — Anti-dilutive effect from retirement of employee loan shares — 0.03 — 0.03 Net asset value at end of period $ 11.18 $ 12.10 $ 11.18 $ 12.10 Per share market value at beginning of period $ 11.52 $ 7.96 $ 11.27 $ 8.93 Per share market value at end of period 11.31 11.80 11.31 11.80 Total return(4)(5) 1.86% 56.94% 4.12% 38.77% Shares outstanding at end of period 21,039,242 21,039,242 21,039,242 21,039,242 Statement of Assets and Liabilities Data: Net assets at end of period $ 235,215 $ 254,549 $ 235,215 $254,549 Average net assets(6) 252,457 251,111 249,985 249,993 Senior Securities Data: Total borrowings 33,646 53,000 33,646 53,000 Asset coverage ratio(7) (8) 797% 575% 797% 575% Asset coverage per unit (8) $ 7,966 $ 5,754 $ 7,966 $ 5,754 Ratios/Supplemental Data: Ratio of expenses to average net assets-annualized(9) 6.43% 8.52% 6.00% 8.60% Ratio of net expenses to average net assets-annualized(10) 6.27 8.51 5.87 8.57 Ratio of net investment income to average net assets-annualized 7.04 7.13 7.25 7.12
(1) Based on actual shares outstanding at the end of the corresponding period.
(2) Based on weighted average basic per share data.
(3) 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 United States of America.
(4) 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.
(5) Amounts were not annualized.
(6) Average net assets are computed using the average of the balance of net assets at the end of each month of the reporting period.
(7) 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.
(8) 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.
(9) Ratio of expenses to average net assets is computed using expenses before credits from our Adviser to the base management and incentive fees but includes income tax expense.
(10) Ratio of net expenses to average net assets is computed using total expenses net of credits from our Adviser to the base management and incentive fees but includes income tax expense.
SOURCE Gladstone Capital Corporation
Released May 3, 2011