Gladstone Capital Corporation Reports Results for the Second Quarter Ended March 31, 2010
MCLEAN, Va., May 4, 2010 (GLOBE NEWSWIRE) --
-- Net Investment Income was $4.5 Million or $0.21 Per Common Share
-- Net Increase in Net Assets Resulting From Operations was $8.0 Million or
$0.38 Per Common Share
Gladstone Capital Corporation (Nasdaq:GLAD) (the "Company") today announced earnings for the second quarter ended March 31, 2010. All per share references are per basic and diluted weighted average common shares outstanding, unless otherwise noted.
Net Investment Income for 3 Months: Net Investment Income for the quarter ended March 31, 2010 was $4.5 million, or $0.21 per share, as compared to $5.6 million, or $0.26 per share, for the prior year period, a decrease in Net Investment Income of 20% and a decrease of 19% per share. Net Investment Income decreased primarily due to a decline in investment income resulting from the repayment and sale of loans, incentive fees accrued and lower transaction fees received in the three months ended March 31, 2010 than during the prior year period.
Net Investment Income for 6 Months: Net Investment Income for the six months ended March 31, 2010 was $8.9 million, or $0.42 per share, as compared to $11.4 million, or $0.54 per share, for the prior year period, a decrease in Net Investment Income of 22% and a decrease of 22% per share. Net Investment Income decreased primarily due to a decline in investment income resulting from the repayment and sale of loans, incentive fees accrued and lower transaction fees received in the six months ended March 31, 2010 than during the prior year period.
Net Increase in Net Assets Resulting from Operations for 3 Months: Net Increase in Net Assets Resulting from Operations for the quarter ended March 31, 2010 was $8.0 million, or $0.38 per share, as compared to a Net Increase in Net Assets Resulting from Operations of $10.3 million, or $0.48 per share, for the prior year period. The decrease in the Net Increase in Net Assets Resulting from Operations between the three months ended March 31, 2010 and the prior year period was primarily due to the lower net gain on the Company's investment portfolio. The Company recorded a net gain on investments, derivatives and line of credit of $3.5 million for the three months ended March 31, 2010, compared to a net gain of $4.7 million for the prior year period.
Net Increase in Net Assets Resulting from Operations for 6 Months: Net Increase in Net Assets Resulting from Operations for the six months ended March 31, 2010 was $14.3 million, or $0.68 per share, as compared to a Net Increase in Net Assets Resulting from Operations of $1.2 million, or $0.05 per share, for the prior year period. The increase in the Net Increase in Net Assets Resulting from Operations between the six months ended March 31, 2010 and the prior year period was primarily due to the net gain on the Company's investment portfolio. The Company recorded a net gain on investments, derivatives and line of credit of $5.4 million for the six months ended March 31, 2010, compared to a net loss of $10.3 million for the prior year period.
Estimated Fair Value: The aggregate investment portfolio appreciated during the three months ended March 31, 2010. As of March 31, 2010, the entire portfolio was fair valued at 88% of cost, which was unchanged from September 30, 2009.
Asset Characteristics: Total assets were $311.6 million at March 31, 2010, as compared to $335.9 million at September 30, 2009. Net asset value was $12.10 per actual common share outstanding at March 31, 2010, as compared to $11.81 per actual common share outstanding at September 30, 2009. At March 31, 2010, the Company had investments in 41 private companies with an aggregate cost basis of $330.1 million and an aggregate fair value of $291.8 million. Average asset risk rating for the non-syndicated loans in the Company's portfolio at March 31, 2010 was 6.3 on a ten point scale as compared to 7.1 at September 30, 2009.
Annualized Yield: The annualized weighted average yield on the Company's portfolio, excluding cash and cash equivalents, was 10.9% for the quarter ended March 31, 2010, as compared to 9.7% for the prior year period. The weighted average yield varies from period to period based on the current stated interest rate on interest-bearing investments and the amounts of loans for which interest is not accruing. The increase in the weighted average yield for the quarter ended March 31, 2010 resulted primarily from the Company's sale of lower interest-bearing senior syndicated loans subsequent to March 31, 2009. The effect of continuing reductions in LIBOR has been mitigated by the presence of a rate floor or fixed rate on most of the non-syndicated loans held in the Company's portfolio as of March 31, 2010.
Highlights for 3 Months: For the quarter ended March 31, 2010, the Company reported the following significant events:
-- Funded approximately $5.2 million of additional investments to existing
portfolio companies;
-- Received principal repayments of approximately $23.1 million, which
included scheduled principal payments and full repayments from four
companies;
-- Received proceeds of approximately $0.3 million from the sale of 1
syndicated loan (which resulted in the Company's exit from 1 portfolio
company) and recorded a corresponding realized net loss of approximately
$0.2 million;
-- Received approximately $0.8 million in success fees in connection with
the payoff and refinancing of three investments;
-- Securities and Exchange Commission declared the Company's registration
statement, which was filed on October 20, 2009, effective on January 28,
2010. This will permit the Company to issue, through one or more
transactions, up to an aggregate of $300 million in securities,
consisting of common stock, senior common stock, preferred stock,
subscription rights, debt securities and warrants to purchase common
stock, or a combination of these securities;
-- Entered into a fourth amended and restated credit facility with Key
Equipment Finance Company Inc., Branch Bank and Trust Company and ING
Capital LLC for a $127 million line of credit, which matures on March
15, 2012, with a one year amortization period; and
-- Paid monthly cash distributions of $0.07 per share for each of the
months of January, February and March 2010.
Comments from President and Chief Investment Officer Chip Stelljes: "During the quarter, we received proceeds from repayments/sales of approximately $23.4 million, including the successful realizations of four investments. This has allowed us to deleverage our company in line with the realities of today's market. With our new two-year, $127 million line of credit and the currently outstanding balance on the line of about $28.4 million, we believe it is time to become more active lenders. We continue to see new investment opportunities with pricing and structures that are attractive and, as a result, we believe that we will be able to increase our investment activity over the next twelve months."
Subsequent to March 31, 2010, the Company:
-- Funded approximately $0.4 million of a new investment and $1.2 million
of additional investments to existing portfolio companies, for an
aggregate of $1.6 million;
-- Received approximately $15.0 million of repayments, including scheduled
amortizations and a repayment from one company; and
-- Declared monthly cash distributions of $0.07 per common share for each
of the months of April, May and June 2010.
Conference Call for Stockholders: The Company will hold a conference call Wednesday, May 5, 2010 at 8:30 am EDT. Please call (877) 407-8031 to enter the conference. An operator will monitor the call and set a queue for the questions. A replay of the conference call will be available through June 5, 2010. To hear the replay, please dial (877) 660-6853, access playback account 286 and use ID code 349212. The replay will be available approximately two hours after the call concludes.
The live audio broadcast of Gladstone Capital's quarterly conference call will be available online at GladstoneCapital.com and investorcalendar.com. The event will be archived and available for replay on the Company's website through August 3, 2010.
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, 2010, 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 sec.gov or from the Company's website at GladstoneCapital.com. A paper copy can be obtained free of charge by writing to us at 1521 Westbranch Drive, Suite 200, McLean, VA 22102.
For further information contact Investor Relations at 703-287-5893.
The statements in this press release regarding the timing and ability of the Company to increase its investment activities 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, the Company's ability to access debt and equity capital and those factors listed under the caption "Risk Factors" of the Company's Form 10-K for the fiscal year ended September 30, 2009 and Form 10-Q for the quarter ended March 31, 2010, as filed with the SEC on November 23, 2009 and May 4, 2010, respectively. The risk factors set forth in the Form 10-K and the Form 10-Q 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)
September
March 31, 30,
2010 2009
--------- ---------
ASSETS
Non-Control/Non-Affiliate
investments (Cost 3/31/10:
$274,627; 9/30/09: $312,043) $ 256,227 $ 286,997
Control investments (Cost
3/31/10: $55,467; 9/30/09:
$52,350) 35,524 33,972
--------- ---------
Total investments at fair
value (Cost 3/31/10:
$330,094; 9/30/09: $364,393) 291,751 320,969
Cash 4,261 5,276
Interest receivable --
investments in debt
securities 2,387 3,048
Interest receivable --
employees 91 85
Due from custodian 10,571 3,059
Due from Adviser -- 69
Deferred financing fees 1,610 1,230
Prepaid assets 288 341
Receivable from portfolio
companies, less allowance
for uncollectible
receivables of
$177 and $0 at March 31, 2010
and September 30, 2009,
respectively 367 1,528
Other assets 312 305
--------- ---------
TOTAL ASSETS $ 311,638 $ 335,910
========= =========
LIABILITIES
Accounts payable $ -- $ 67
Interest payable 244 378
Fee due to Administrator 176 216
Due to Adviser 2,365 834
Borrowings under line of
credit at fair value (Cost
3/31/10: $53,000; 9/30/09:
$83,000) 53,000 83,350
Accrued expenses and deferred
liabilities 1,203 1,800
Funds held in escrow 101 189
--------- ---------
TOTAL LIABILITIES 57,089 86,834
--------- ---------
NET ASSETS $ 254,549 $ 249,076
========= =========
ANALYSIS OF NET ASSETS
Common stock, $0.001 par
value, 50,000,000 shares
authorized and 21,039,242
and
21,087,574 shares issued and
outstanding at March 31,
2010 and September 30, 2009,
respectively $ 21 $ 21
Capital in excess of par
value 327,709 328,203
Notes receivable -- employees (8,503) (9,019)
Net unrealized depreciation
on investments (38,343) (43,425)
Net unrealized appreciation
on borrowings under line of
credit -- (350)
Accumulated Net Realized
Losses (26,335) (26,354)
--------- ---------
TOTAL NET ASSETS $ 254,549 $ 249,076
========= =========
NET ASSETS PER SHARE $ 12.10 $ 11.81
========= =========
GLADSTONE CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Ended Six Months Ended
March 31, March 31,
---------------------- ----------------------
2010 2009 2010 2009
---------- ---------- ---------- ----------
INVESTMENT INCOME
Interest income --
Non-Control/Non-Affiliate
investments $ 8,523 $ 10,329 $ 17,432 $ 21,990
Interest income -- Control
investments 709 482 1,477 502
Interest income -- Cash -- 1 -- 11
Interest income -- Notes receivable
from employees 108 117 221 235
Prepayment fees and other income 474 -- 488 --
---------- ---------- ---------- ----------
Total investment income 9,814 10,929 19,618 22,738
---------- ---------- ---------- ----------
EXPENSES
Interest expense 1,136 2,016 2,671 4,478
Loan servicing fee 852 1,526 1,781 3,149
Base management fee 739 484 1,459 917
Incentive fee 1,072 1,089 1,447 2,265
Administration fee 176 211 354 438
Professional fees 219 205 1,131 518
Amortization of deferred financing
fees 449 726 943 1,446
Stockholder related costs 144 196 222 284
Directors fees 48 48 97 97
Insurance expense 79 65 147 122
Compensation expense 245 -- 245 --
Other expenses 187 74 254 140
---------- ---------- ---------- ----------
Expenses before credit from
Adviser 5,346 6,640 10,751 13,854
---------- ---------- ---------- ----------
Credit to base management and
incentive fees
from Adviser (6) (1,266) (35) (2,553)
---------- ---------- ---------- ----------
Total expenses net of credit to
base management and incentive
fees 5,340 5,374 10,716 11,301
---------- ---------- ---------- ----------
NET INVESTMENT INCOME 4,474 5,555 8,902 11,437
---------- ---------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS,
DERIVATIVE AND BORROWINGS UNDER LINE
OF CREDIT:
Net realized gain (loss) on
investments 892 (2,000) (28) (3,731)
Realized loss on settlement of
derivative -- (304) -- (304)
Unrealized appreciation on
derivative -- 304 -- 304
Net unrealized appreciation
(depreciation) on investments 2,483 6,725 5,082 (6,528)
Net unrealized depreciation on
borrowings under line of credit 131 -- 350 --
---------- ---------- ---------- ----------
Net gain (loss) on investments,
derivative and borrowings under
line of credit 3,506 4,725 5,404 (10,259)
NET INCREASE IN NET ASSETS RESULTING
FROM
OPERATIONS $ 7,980 $ 10,280 $ 14,306 $ 1,178
========== ========== ========== ==========
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS PER COMMON SHARE:
Basic and Diluted $ 0.38 $ 0.48 $ 0.68 $ 0.05
========== ========== ========== ==========
WEIGHTED AVERAGE SHARES OF COMMON
STOCK OUTSTANDING:
Basic and Diluted 21,075,445 21,087,574 21,081,576 21,087,574
GLADSTONE CAPITAL CORPORATION
FINANCIAL HIGHLIGHTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT DATA)
(UNAUDITED)
Three months ended Six months ended
March 31, March 31,
---------------------- ----------------------
2010 2009 2010 2009
---------- ---------- ---------- ----------
Per Share Data (1)
----------------------------------------------
Net asset value at beginning of period $11.92 $12.04 $11.81 $12.89
---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (2) 0.21 0.26 0.42 0.54
Net realized gain (loss) on investments (2) 0.04 (0.09) -- (0.18)
Realized loss on settlement of derivative
(2) -- (0.01) -- (0.01)
Unrealized appreciation on derivative (2) -- 0.01 -- 0.01
Net unrealized appreciation (depreciation)
on investments (2) 0.12 0.31 0.24 (0.31)
Net unrealized depreciation on borrowings
under line of credit (2) 0.01 -- 0.02 --
---------- ---------- ---------- ----------
Total from investment operations 0.38 0.48 0.68 0.05
---------- ---------- ---------- ----------
Distributions to stockholders (3) (0.21) (0.42) (0.42) (0.84)
Conversion of former employee stock option
loans from recourse to nonrecourse (0.02) -- (0.02) --
Reclassification of principal on employee
note -- -- 0.02 --
Anti-dilutive effect from retirement of
employee loan shares 0.03 -- 0.03 --
---------- ---------- ---------- ----------
Net asset value at end of period $12.10 $12.10 $12.10 $12.10
========== ========== ========== ==========
Per share market value at beginning of period $ 7.69 $ 8.09 $ 8.93 $15.24
Per share market value at end of period $11.80 $ 6.26 $11.80 $ 6.26
Total return (4)(5) 56.94% (17.93)% 38.77% (54.11)%
Shares outstanding at end of period 21,039,242 21,087,574 21,039,242 21,087,574
Statement of Assets and Liabilities Data:
----------------------------------------------
Net assets at end of period $254,549 $255,213 $254,549 $255,213
Average net assets (6) $251,111 $249,526 $251,111 $255,763
Senior Securities Data:
----------------------------------------------
Borrowings under line of credit $ 53,000 $153,370 $ 53,000 $153,370
Asset coverage ratio (7)(8) 575% 266% 575% 266%
Asset coverage per unit (8) $ 5,754 $ 2,659 $ 5,754 $ 2,659
Ratios/Supplemental Data:
----------------------------------------------
Ratio of expenses to average net
assets-annualized (9) 8.52% 10.64% 8.60% 10.83%
Ratio of net expenses to average net
assets-annualized (10) 8.51% 8.61% 8.57% 8.84%
Ratio of net investment income to average net
assets-annualized 7.13% 8.91% 7.12% 8.94%
(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.
(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 $1 thousand of indebtedness.
(9) Ratio of expenses to average net assets is computed using expenses before credits from
Adviser to the base management and incentive fees and including income tax expense.
(10) Ratio of net expenses to average net assets is computed using total expenses net of
credits from Adviser to the base management and incentive fees and including income tax
expense.
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CONTACT: Gladstone Capital Corporation
Investor Relations
703-287-5893
Released May 4, 2010