Gladstone Capital Corporation Reports Results for the First Quarter Ended December 31, 2009
-- Net Investment Income was $4.4 million or $0.21 per common share
-- Net Increase in Net Assets Resulting from Operations was $6.3 million or
$0.30 per common share
MCLEAN, Va., Feb. 1, 2010 (GLOBE NEWSWIRE) -- Gladstone Capital Corp. (Nasdaq:GLAD) (the "Company") today announced earnings for the first quarter ended December 31, 2009. All per share references are per basic and diluted weighted average common shares outstanding, unless otherwise noted.
Net Investment Income for the quarter ended December 31, 2009 was $4.4 million, or $0.21 per share, as compared to $5.9 million, or $0.28 per share, for the prior year period, a decrease in Net Investment Income of 25% and a decrease of 25% per share. Net Investment Income decreased primarily due to a decline in investment income resulting from the repayment and sale of loans subsequent to December 31, 2008 and lower transaction fees paid by portfolio companies since there were fewer transactions in the current year period than during the prior year period.
Net Increase in Net Assets Resulting from Operations for the quarter ended December 31, 2009 was $6.3 million, or $0.30 per share, as compared to a Net Decrease in Net Assets Resulting from Operations of $9.1 million, or $0.43 per share, for the prior year period. The improvement in Net Increase in Net Assets Resulting from Operations between the current and prior year periods was primarily due to the net gain on the Company's investment portfolio. The Company recorded net gain on investments of $1.9 million for the three months ended December 31, 2009, compared to net loss of $15.0 million for the prior year period.
The aggregate investment portfolio has appreciated during the three months ended December 31, 2009. As of December 31, 2009, the entire portfolio was fair valued at 88% of cost, which was unchanged from September 30, 2009.
Total assets were $328.5 million at December 31, 2009, as compared to $335.9 million at September 30, 2009. Net asset value was $11.92 per actual common share outstanding at December 31, 2009, as compared to $11.81 per actual common share outstanding at September 30, 2009.
The annualized weighted average yield on the Company's portfolio, excluding cash and cash equivalents, was 10.6% for the quarter ended December 31, 2009, as compared to 9.8% 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 current quarter results primarily from the Company's sale of lower interest-bearing senior syndicated loans. 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 December 31, 2009.
For the quarter ended December 31, 2009, the Company reported the following significant activity:
-- Funded approximately $0.2 million of a new investment and approximately
$2.0 million of additional investments to existing portfolio companies,
for an aggregate of $2.2 million;
-- Received principal repayments of approximately $15.4 million, which
included scheduled principal payments and one full repayment;
-- Received proceeds of approximately $2.8 million from the sale of 2
syndicated loans (which resulted in the Company's exit from 2 portfolio
companies) and recorded a corresponding realized net loss of
approximately $0.9 million;
-- Received approximately $538,000 in success fees in connection with the
refinancing and amendment of two investments;
-- Reduced the size of its credit facility by $25.0 million from $127.0
million to $102.0 million, which did not affect the Company's available
borrowing capacity;
-- Filed a registration statement on Form N-2 (the "Registration
Statement") with the Securities and Exchange Commission (the "SEC") on
October 20, 2009; and
-- Paid monthly cash distributions of $0.07 per share for each of the
months of October, November and December 2009.
At December 31, 2009, the Company had investments in 46 private companies with an aggregate cost basis of $347.5 million and an aggregate fair value of $306.6 million, as noted in the following table.
December 31, 2009
---------------------
Fair
Cost Value
---------- ---------
(in thousands)
Senior Term Debt $224,663 $198,577
Senior Subordinated Term Debt 117,323 106,609
Preferred Equity Securities 2,028 --
Common Equity Securities 3,450 1,452
---------- ---------
Total Investments $347,464 $306,638
========== =========
"The difficult economic climate continues and is compounded by a still difficult lending environment," said Chip Stelljes, President and Chief Investment Officer. "We expect the majority of the portfolio to continue paying as agreed, although we are working hard with our portfolio companies on their performance as we move through this difficult economic and financial cycle. We are seeing some strengthening in the secondary loan market although loans continue to trade at discounts to original cost. While the values did not change materially this quarter, we are not seeing resurgence in valuations and still believe the valuations are more reflective of the overall market for loans, rather than the performance of our specific portfolio."
Subsequent to December 31, 2009, the Company:
-- Funded approximately $2.7 million of additional investments to existing
portfolio companies;
-- Received approximately $6.8 million of repayments, including scheduled
amortizations and a repayment from one company;
-- Received notice on January 28, 2010 that the SEC declared effective its
Registration Statement, which was filed on October 20, 2009. 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; and
-- Declared monthly cash distributions of $0.07 per common share for each
of the months of January, February and March 2010.
The financial statements below are without footnotes so readers should obtain and carefully review the Company's Form 10-Q for the quarter ended December 31, 2009, 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.
The Company will hold a conference call Tuesday, February 2, 2010 at 8:30 am EST. 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 March 2, 2010. To hear the replay, please dial (877) 660-6853, access playback account 286 and use ID code 342050. 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 June 2, 2010.
The statements in this press release regarding the longer-term prospects of and expected continued current payments from the Company's portfolio companies and the state of the secondary loan markets 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 Company's Form 10-K for the fiscal year ended September 30, 2009, as filed with the SEC on November 23, 2009. The risk factors set forth in the Form 10-K 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)
December September
31, 2009 30, 2009
-------- ---------
ASSETS
Non-Control/Non-Affiliate
investments (Cost 12/31/09:
$293,830; 9/30/09: $312,043) $272,380 $286,997
Control investments (Cost
12/31/09: $53,634; 9/30/09:
$52,350) 34,258 33,972
-------- ---------
Total investments at fair
value (Cost 12/31/09:
$347,464; 9/30/09: $364,393) 306,638 320,969
Cash 6,374 5,276
Interest receivable --
investments in debt
securities 3,159 3,048
Interest receivable --
employees 113 85
Due from custodian 9,770 3,059
Due from Adviser -- 69
Deferred financing fees 640 1,230
Prepaid assets 381 341
Receivable from portfolio
companies, less allowance
for uncollectible
receivables of $32 and $0 at
December 31, 2009 and
September 30, 2009,
respectively 611 1,528
Other assets 828 305
-------- ---------
TOTAL ASSETS $328,514 $335,910
======== =========
LIABILITIES
Accounts payable $-- $67
Interest payable 339 378
Fee due to Administrator 178 216
Due to Adviser 1,285 834
Borrowings under line of
credit at fair value (Cost
12/31/09: $73,400; 9/30/09:
$83,000) 73,531 83,350
Accrued expenses and deferred
liabilities 1,688 1,800
Funds held in escrow 44 189
-------- ---------
TOTAL LIABILITIES 77,065 86,834
-------- ---------
NET ASSETS $251,449 $249,076
======== =========
ANALYSIS OF NET ASSETS
Common stock, $0.001 par
value, 50,000,000 shares
authorized and 21,087,574
shares issued and
outstanding at December 31,
2009 and September 30, 2009 $21 $21
Capital in excess of par
value 328,164 328,203
Notes receivable -- employees (8,504) (9,019)
Net unrealized depreciation
on investments (40,826) (43,425)
Net unrealized appreciation
on borrowings under line of
credit (131) (350)
Accumulated Net Realized
Losses (27,275) (26,354)
-------- ---------
TOTAL NET ASSETS $251,449 $249,076
======== =========
NET ASSETS PER SHARE $11.92 $11.81
======== =========
GLADSTONE CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Ended
December 31,
----------------------
2009 2008
---------- ----------
INVESTMENT INCOME
Interest income --
Non-Control/Non-Affiliate
investments $8,984 $11,661
Interest income -- Control
investments 693 20
Interest income -- Cash -- 10
Interest income -- Notes
receivable from employees 113 117
Prepayment fees and other income 14 --
---------- ----------
Total investment income 9,804 11,808
---------- ----------
EXPENSES
Interest expense 1,535 2,461
Loan servicing fee 929 1,623
Base management fee 721 434
Incentive fee 375 1,176
Administration fee 178 227
Professional fees 912 313
Amortization of deferred
financing fees 494 719
Stockholder related costs 78 89
Directors fees 48 48
Insurance expense 68 57
Other expenses 67 66
---------- ----------
Expenses before credit from
Adviser 5,405 7,213
---------- ----------
Credit to base management and
incentive fees (29) (1,286)
---------- ----------
from Adviser
Total expenses net of credit to
base management
and incentive fees 5,376 5,927
---------- ----------
NET INVESTMENT INCOME 4,428 5,881
---------- ----------
REALIZED AND UNREALIZED GAIN
(LOSS)
ON INVESTMENTS AND DERIVATIVE:
Net realized loss on investments (920) (1,731)
Net unrealized appreciation
(depreciation) on investments 2,599 (13,253)
Net unrealized depreciation on
borrowings under line of credit 219 --
---------- ----------
Net gain (loss) on investments 1,898 (14,984)
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS $6,326 $(9,103)
========== ==========
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS PER
COMMON SHARE:
Basic and Diluted $0.30 $(0.43)
========== ==========
WEIGHTED AVERAGE SHARES OF
COMMON
STOCK OUTSTANDING:
Basic and Diluted 21,087,574 21,087,574
GLADSTONE CAPITAL CORPORATION
FINANCIAL HIGHLIGHTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT DATA)
(UNAUDITED)
Three months ended
December 31,
----------------------
2009 2008
---------- ----------
Per Share Data (1)
-------------------------------------------
Net asset value at beginning of period $11.81 $12.89
---------- ----------
Income from investment operations:
Net investment income (2) 0.21 0.28
Net realized loss on investments (2) (0.04) (0.08)
Net unrealized appreciation
(depreciation) on investments (2) 0.12 (0.63)
Net unrealized depreciation on borrowings
under line of credit (2) 0.01 --
---------- ----------
Total from investment operations 0.30 (0.43)
---------- ----------
Distributions to stockholders (3) (0.21) (0.42)
Reclassification of principal on employee
note (3) 0.02 --
---------- ----------
Net asset value at end of period $11.92 $12.04
========== ==========
Per share market value at beginning of
period $8.93 $15.24
Per share market value at end of period $7.69 $8.09
Total return (4)(5) (11.58)% (44.09)%
Shares outstanding at end of period 21,087,574 21,087,574
Statement of Assets and Liabilities Data:
Net assets at end of period $251,449 $253,790
Average net assets (6) $248,874 $262,001
Senior Securities Data:
Borrowings under line of credit $73,531 $146,470
Asset coverage ratio (7)(8) 442% 273%
Asset coverage per unit (8) $4,420 $2,733
Ratios/Supplemental Data:
Ratio of expenses to average net
assets-annualized (9) 8.69% 11.01%
Ratio of net expenses to average net
assets-annualized(10) 8.64% 9.05%
Ratio of net investment income to average
net assets-annualized 7.12% 8.98%
(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. 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.
CONTACT: Gladstone Capital Corporation
Investor Relations
703-287-5839
Released February 1, 2010