UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 2006
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 814-00237
GLADSTONE CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
|
MARYLAND |
|
54-2040781 |
|
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
1521 WESTBRANCH DRIVE, SUITE 200
MCLEAN, VIRGINIA 22102
(Address of principal executive office)
(703) 287-5800
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes x No o.
Indicate by check mark whether the registrant is large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12 b-2 of the Exchange Act. (Check One):
Large accelerated filer o Accelerated filer x Non-accelerated filer o.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x.
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. The number of shares of the issuer’s Common Stock, $0.001 par value, outstanding as of July 28, 2006 was 11,422,345.
GLADSTONE CAPITAL CORPORATION
TABLE OF CONTENTS
GLADSTONE CAPITAL
CORPORATION
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(Unaudited)
|
|
|
June 30, |
|
September 30, |
|
||
|
|
|
|
|
|
|
||
|
ASSETS |
|
|
|
|
|
||
|
Investments at fair value (Cost 6/30/2006: $201,465,621; 9/30/2005: $205,375,554) |
|
$ |
202,706,650 |
|
$ |
200,846,763 |
|
|
Cash and cash equivalents |
|
456,314 |
|
503,776 |
|
||
|
Interest receivable — investments in debt securities |
|
1,132,213 |
|
1,406,212 |
|
||
|
Interest receivable — officers |
|
24,836 |
|
27,067 |
|
||
|
Due from custodian |
|
2,493,924 |
|
2,624,074 |
|
||
|
Due from Adviser |
|
207,960 |
|
— |
|
||
|
Deferred financing fees |
|
148,762 |
|
70,000 |
|
||
|
Prepaid assets |
|
71,946 |
|
177,848 |
|
||
|
Other assets |
|
230,450 |
|
137,354 |
|
||
|
TOTAL ASSETS |
|
$ |
207,473,055 |
|
$ |
205,793,094 |
|
|
|
|
|
|
|
|
||
|
LIABILITIES |
|
|
|
|
|
||
|
Accounts payable |
|
$ |
45,342 |
|
$ |
21,893 |
|
|
Interest payable |
|
188,392 |
|
183,707 |
|
||
|
Fees due to Adviser |
|
181,398 |
|
391,322 |
|
||
|
Borrowings under lines of credit |
|
47,846,000 |
|
53,034,064 |
|
||
|
Accrued expenses and deferred liabilities |
|
225,367 |
|
350,665 |
|
||
|
Funds held in escrow |
|
200,800 |
|
200,760 |
|
||
|
TOTAL LIABILITIES |
|
48,687,299 |
|
54,182,411 |
|
||
|
NET ASSETS |
|
$ |
158,785,756 |
|
$ |
151,610,683 |
|
|
|
|
|
|
|
|
||
|
ANALYSIS OF NET ASSETS |
|
|
|
|
|
||
|
Common stock, $0.001 par value, 50,000,000 shares authorized and 11,384,363 and 11,303,510 shares issued and outstanding, respectively |
|
$ |
11,385 |
|
$ |
11,304 |
|
|
Capital in excess of par value |
|
166,240,635 |
|
164,610,873 |
|
||
|
Notes receivable — employees |
|
(8,815,818 |
) |
(8,745,781 |
) |
||
|
Net unrealized appreciation (depreciation) on investments |
|
1,241,029 |
|
(4,528,791 |
) |
||
|
Unrealized depreciation on derivative |
|
(188,495 |
) |
(253,747 |
) |
||
|
Realized (loss) gain on sale of investments |
|
(861,695 |
) |
42,250 |
|
||
|
Distributions less than net investment income |
|
1,158,715 |
|
474,575 |
|
||
|
TOTAL NET ASSETS |
|
$ |
158,785,756 |
|
$ |
151,610,683 |
|
|
NET ASSETS PER SHARE |
|
$ |
13.95 |
|
$ |
13.41 |
|
|
|
|
|
|
|
|
||
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
2
GLADSTONE CAPITAL
CORPORATION
CONSOLIDATED SCHEDULE OF INVESTMENTS
AS OF JUNE 30, 2006
(UNAUDITED)
|
Company (1) |
|
Industry |
|
Investment (2) |
|
Cost |
|
Fair Value |
|
||
|
Advanced Homecare Management, Inc. |
|
Home health nursing services |
|
Senior Subordinated Term Debt (5)(6) |
|
$ |
7,500,000 |
|
$ |
7,500,000 |
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Allied Extruders, LLC |
|
Polyethylene film manufacturer |
|
Senior Real Estate Term Debt |
|
1,000,000 |
|
1,000,000 |
|
||
|
P&O Packaging Acquisition LLC |
|
|
|
(9.6%, Due 3/2011) |
|
|
|
|
|
||
|
|
|
|
|
Senior Term Debt (3) (5) |
|
8,000,000 |
|
8,030,000 |
|
||
|
|
|
|
|
(11.3%, Due 3/2011) |
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
Badanco Acquisition Corp. |
|
Manufacturing-luggage |
|
Senior Term Debt (5) |
|
5,512,519 |
|
5,519,409 |
|
||
|
|
|
|
|
(10.6%, Due 2/2010) |
|
|
|
|
|
||
|
|
|
|
|
Senior Term Debt (3) (5) |
|
8,617,563 |
|
8,649,878 |
|
||
|
|
|
|
|
(13.6%, Due 2/2010) |
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
Benetech, Inc. |
|
Dust management systems |
|
Senior Term Debt (5) |
|
2,275,000 |
|
2,303,438 |
|
||
|
|
|
for the coal and electric utility industries |
|
(10.1%, Due 5/2009) |
|
|
|
|
|
||
|
|
|
|
|
Senior Term Debt (3) (5) |
|
3,087,500 |
|
3,141,531 |
|
||
|
|
|
|
|
(13.1%, Due 5/2009) |
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
Bresnan Communications, LLC |
|
Service-telecommunications |
|
Senior Term Debt (6) |
|
1,000,000 |
|
1,000,000 |
|
||
|
|
|
|
|
(9.6%, Due 3/2014) |
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
Consolidated Bedding, Inc. |
|
Manufacturing-mattresses |
|
Senior Subordinated Term Debt (5) |
|
2,466,864 |
|
2,344,186 |
|
||
|
|
|
|
|
(13.9%, Due 3/2009) |
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
Country Road Communications LLC |
|
Service-telecommunications |
|
Senior Subordinated Term Debt (5) (6) |
|
5,960,181 |
|
6,060,000 |
|
||
|
Country Road Management, Inc. |
|
|
|
(12.6%, Due 7/2013) |
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
Defiance Stamping Company |
|
Manufacturing-trucking parts |
|
Senior Term Debt (3) (5) |
|
6,325,000 |
|
6,325,000 |
|
||
|
|
|
|
|
(13.1%, Due 4/2010) |
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
Doe & Ingalls Management LLC |
|
Distributor-specialty chemicals |
|
Senior Term Debt (5) |
|
4,900,000 |
|
4,918,375 |
|
||
|
Doe & Ingalls of North Carolina |
|
|
|
(9.6%, Due 11/2010) |
|
|
|
|
|
||
|
Operating LLC |
|
|
|
Senior Term Debt (3) (5) |
|
4,500,000 |
|
4,511,250 |
|
||
|
Doe & Ingalls of Florida |
|
|
|
(13.1%, Due 11/2010) |
|
|
|
|
|
||
|
Operating LLC |
|
|
|
|
|
|
|
|
|
||
|
Doe & Ingalls of Virginia |
|
|
|
|
|
|
|
|
|
||
|
Operating LLC |
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
Express Courier International, Inc. |
|
Service-ground delivery and logistics |
|
Line of Credit (7) (8) |
|
— |
|
— |
|
||
|
|
|
|
|
(9.4%, Due 6/2009) |
|
|
|
|
|
||
|
|
|
|
|
Senior Term Debt (7) |
|
4,700,000 |
|
4,700,000 |
|
||
|
|
|
|
|
(9.4%, Due 6/2011) |
|
|
|
|
|
||
|
|
|
|
|
Senior Term Debt (3) (7) |
|
3,950,000 |
|
3,950,000 |
|
||
|
|
|
|
|
(11.6%, Due 6/2011) |
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
Finn Corporation |
|
Manufacturing-landscape equipment |
|
Common Stock Warrants |
|
37,000 |
|
1,047,778 |
|
||
|
|
|
|
|
|
|
|
|
|
|
||
3
GLADSTONE CAPITAL
CORPORATION
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
AS OF JUNE 30, 2006
|
Company (1) |
|
Industry |
|
Investment (2) |
|
Cost |
|
Fair Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gammill, Inc. |
|
Designer and assembler of quilting |
|
Senior Term Debt (5) |
|
1,643,479 |
|
1,643,479 |
|
|
|
|
machines and accessories |
|
(9.5%, Due 12/2008) |
|
|
|
|
|
|
|
|
|
|
Senior Term Debt (3) (5) (17) |
|
4,571,875 |
|
4,807,418 |
|
|
|
|
|
|
(12.0%, Due 12/2008) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global Materials |
|
Manufacturing-steel wool |
|
Senior Term Debt (3) (5) |
|
5,350,000 |
|
5,316,563 |
|
|
Technologies, Inc. |
|
products and metal fibers |
|
(14.1%, Due 11/2009) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
It’s Just Lunch International, LLC |
|
Service-dating service |
|
Line of Credit (7) (13) |
|
200,000 |
|
200,000 |
|
|
|
|
|
|
Senior Term Debt (7) (14) |
|
3,000,000 |
|
3,000,000 |
|
|
|
|
|
|
Senior Term Debt (3) (15) |
|
— |
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
John Henry Holdings, Inc. |
|
Manufacturing-packaging products |
|
Senior Subordinated Term Debt (5) (6) |
|
8,000,000 |
|
8,000,000 |
|
|
Multi Packaging Solutions, Inc. |
|
|
|
(12.02%, Due 6/2011) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LocalTel, Inc. |
|
Service-Yellow Pages publishing |
|
Line of Credit (16) |
|
— |
|
— |
|
|
|
|
|
|
Senior Term Debt (7)| |
|
2,750,000 |
|
2,750,000 |
|
|
|
|
|
|
Senior Term Debt (3) (7) |
|
2,750,000 |
|
2,750,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Mistras Holdings Corp. |
|
Nondestructive testing instruments, |
|
Senior Term Debt (3) (5) |
|
9,666,666 |
|
9,461,249 |
|
|
|
|
|
|
Senior Term Debt (4) (5) |
|
5,333,334 |
|
5,206,667 |
|
|
|
|
|
|
(12.5%, Due 8/2008) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Network Solutions LLC |
|
|
Senior Term Debt (6) |
|
4,475,518 |
|
4,511,081 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Northern Contours |
|
Manufacturing-veneer and |
|
Senior Subordinated Term Debt (5) |
|
7,000,000 |
|
7,008,750 |
|
|
Northern Contours of Kentucky, Inc. |
|
laminate components |
|
(12.1%, Due 5/2010) |
|
|
|
|
|
|
Norcon Holding LLC |
|
|
|
|
|
|
|
|
|
|
Norcon Lewis LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Puerto Rico Cable |
|
Service-telecommunications |
|
Senior Subordinated Term Debt (5) (6) |
|
7,816,958 |
|
7,833,206 |
|
|
Acquisition Company, Inc. |
|
|
|
(11.8%, Due 1/2012) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
QCE, LLC (d/b/a Quiznos Corp.) |
|
Service-restaurant franchisor |
|
Senior Term Debt (6) |
|
3,018,897 |
|
2,992,580 |
|
|
|
|
|
|
Senior Term Debt (3) (6) |
|
3,047,171 |
|
3,037,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
RCS Management Holding Co. |
|
Service-healthcare supplies |
|
Senior Term Debt (3) (5) |
|
3,000,000 |
|
3,003,750 |
|
|
|
|
|
|
Senior
Term Debt (4) (5) |
|
3,000,000 |
|
3,003,750 |
|
4
GLADSTONE CAPITAL CORPORATION
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
AS OF JUNE 30, 2006
|
Company (1) |
|
Industry |
|
Investment (2) |
|
Cost |
|
Fair Value |
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
SCPH Holdings, Inc. |
|
Manufacturing-underwater |
|
Credit Facility (5) (7) (9) |
|
500,000 |
|
500,000 |
|
||
|
Sea Con Phoenix, Inc. |
|
and harsh environment |
|
(9.6%, Due 2/2007) |
|
|
|
|
|
||
|
Phoenix Optix, Inc. |
|
components |
|
Senior Term Debt (5) |
|
2,800,000 |
|
2,807,000 |
|
||
|
|
|
|
|
(10.1%, Due 2/2010) |
|
|
|
|
|
||
|
|
|
|
|
Senior Term Debt (3) (5) |
|
2,925,000 |
|
2,932,313 |
|
||
|
|
|
|
|
(13.1%, Due 2/2010) |
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
SCS Acquisition Corp. |
|
Service-chemically treated |
|
Senior Term Debt (3) (5) (10) |
|
6,375,000 |
|
6,382,969 |
|
||
|
|
|
equipment distribution |
|
(9.1%, Due 12/2011) |
|
|
|
|
|
||
|
|
|
|
|
Senior Term Debt (3) (5) (11) |
|
6,587,500 |
|
6,595,734 |
|
||
|
|
|
|
|
(11.1%, Due 12/2011) |
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
Thibaut Acquisition Co. |
|
Design and disbtribution-wall coverings |
|
Credit Facility (5) (12) |
|
225,000 |
|
224,719 |
|
||
|
|
|
|
|
(9.6%, Due 1/2011) |
|
|
|
|
|
||
|
|
|
|
|
Senior Term Debt (5) |
|
3,412,500 |
|
3,412,500 |
|
||
|
|
|
|
|
(9.6%, Due 1/2011) |
|
|
|
|
|
||
|
|
|
|
|
Senior Term Debt (3) (5) |
|
3,000,000 |
|
3,000,000 |
|
||
|
|
|
|
|
(12.1%, Due 1/2011) |
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
Visual Edge Technology, Inc. |
|
Service-office supplies distribution |
|
Senior Subordinated Term Debt (5) (18) |
|
5,000,000 |
|
5,133,000 |
|
||
|
Graphic Enterprises, Inc. |
|
|
|
(13.1%, Due 8/2011) |
|
|
|
|
|
||
|
Copeco, Inc. |
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
Westlake Hardware, Inc. |
|
Retail-hardware and variety |
|
Senior Subordinated Term Debt (5) |
|
15,000,000 |
|
15,000,000 |
|
||
|
WHI Holding Corp. |
|
|
|
(12.4%, Due 1/2011) |
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
Winchester Electronics |
|
Manufacturing-high bandwidth |
|
Senior Term Debt (3) (7) |
|
6,000,000 |
|
6,000,000 |
|
||
|
|
|
connectors and cables |
|
(12.1%, Due 6/2012) |
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
Xspedius Communications LLC |
|
Service-telecommunications |
|
Senior Subordinated Term Debt (5) |
|
5,185,096 |
|
5,191,577 |
|
||
|
|
|
|
|
(15.8%, Due 3/2010) |
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
Total: |
|
|
|
|
|
$ |
201,465,621 |
|
$ |
202,706,650 |
|
|
|
|
|
|
|
|
|
|
|
|
||
(1) We do not “Control,” and are not an “Affiliate” of, any of our portfolio companies, each as defined in the Investment Company Act of 1940, as amended (the “1940 Act”). In general, under the 1940 Act, we would “Control” a portfolio company if we owned 25% or more of its voting securities and would be an “Affiliate” of a portfolio company if we owned 5% or more of its voting securities.
(2) Percentage represents interest rates in effect at June 30, 2006 and due date represents the contractual maturity date.
(3) Last Out Tranche of senior debt, meaning if the company is liquidated then the holder of the Last Out Tranche is paid after the senior debt.
(4) Last Out Tranche of senior debt, meaning if the company is liquidated then the holder of the Last Out Tranche is paid after the senior debt, however the debt is junior to another Last Out Tranche.
(5) Fair value was based on valuation prepared and provided by Standard & Poor’s Loan Evaluation Services.
(6) Marketable securities, such as syndicated loans, are valued based on the indicative bid price, as of June 30, 2006, from the respective originating syndication agent’s trading desk.
(7) Investment valued at cost due to recent acquisition.
(8) Availability under the credit facility totals $1,500,000. There were no borrowings outstanding at June 30, 2006.
(9) Availability under the credit facility totals $500,000. The credit facility was fully drawn at June 30, 2006.
(10) Availability under the debt facility totals $7,500,000. The outstanding balance of the debt facility was $6,375,000 at June 30, 2006.
(11) Availability under the debt facility totals $7,500,000. The outstanding balance of the debt facility was $6,587,500 at June 30, 2006.
5
(12) Availability under the credit facility totals $1,000,000. Borrowings of $225,000 were outstanding at June 30, 2006.
(13) Availability under the credit facility totals $750,000. Borrowings of $200,000 were outstanding at June 30, 2006.
(14) The Company may borrow an additional $500,000 of the Senior Term Debt facility, subject to certain conditions including Gladstone Capital’s approval.
(15) The Company may borrow an additional $2,250,000 of the Senior Term Debt facility, subject to certain conditions including Gladstone Capital’s approval.
(16) Availability under the credit facility totals $3,000,000. There were no borrowings outstanding at June 30, 2006.
(17) Includes a success fee with a $252,688 fair value and no cost basis.
(18) Includes a success fee with a $58,000 fair value and no cost basis.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
6
GLADSTONE CAPITAL
CORPORATION
CONSOLIDATED SCHEDULE OF INVESTMENTS
AS OF SEPTEMBER 30, 2005
|
Company (1) |
|
Industry |
|
Investment (2) |
|
Cost |
|
Fair Value |
|
|
|
|
|
|
|
|
|
|
|
Advanced Homecare Management, Inc. |
|
Home health nursing services |
|
Senior Subordinated Term Debt (6) |
|
$7,500,000 |
|
$7,500,000 |
|
|
|
|
|
(12.6%, Due 12/2010) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allied Extruders, Inc. |
|
Polyethylene film manufacturer |
|
Senior Term Debt (3) |
|
3,950,000 |
|
3,964,813 |
|
|
|
|
|
(12.3%, Due 7/2009) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARI Holdings, Inc. (11) (12) |
|
Manufacturing-auto parts |
|
Senior Term Debt |
|
3,933,939 |
|
2,880,000 |
|
|
|
|
|
(12.8%, Due 2/2008) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Badanco Acquisition Corp. |
|
Manufacturing-luggage |
|
Senior Term Debt (6) |
|
6,615,019 |
|
6,615,019 |
|
|
|
|
|
(9.2%, Due 2/2010) |
|
|
|
|
|
|
|
|
|
Senior Term Debt (3) (6) |
|
8,650,000 |
|
8,650,000 |
|
|
|
|
|
(12.2%, Due 2/2010) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benetech, Inc. |
|
Dust management systems for the coal and electric |
|
Senior Term Debt (6) |
|
2,762,500 |
|
2,783,219 |
|
|
|
utility industries |
|
Senior Term Debt (3) (6) |
|
3,209,375 |
|
3,249,492 |
|
|
|
|
|
(11.7%, Due 5/2009) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Bedding, Inc. |
|
Manufacturing-mattresses |
|
Senior Subordinated Term Debt (6) |
|
2,927,382 |
|
2,898,968 |
|
|
|
|
|
(13.0%, Due 3/2009) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Country Road |
|
Service-telecommunications |
|
Senior Subordinated Term Debt |
|
5,955,942 |
|
6,060,000 |
|
Communications LLC |
|
|
|
(11.6%, Due 7/2013) |
|
|
|
|
|
Country Road Management, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coyne International |
|
Industrial services |
|
Senior Term Debt (3) (5) (6) |
|
6,375,052 |
|
6,367,083 |
|
Enterprises |
|
|
|
(13.0%, PIK 2%, Due 7/2007) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defiance Stamping |
|
Manufacturing-trucking parts |
|
Senior Term Debt (3) |
|
6,325,000 |
|
6,332,906 |
|
Company |
|
|
|
(11.7%, Due 4/2010) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finn Corporation |
|
Manufacturing-landscape equipment |
|
Senior Subordinated Term
Debt (6) |
|
10,500,000 |
|
7,350,000 |
|
|
|
|
|
Common Stock Warrants |
|
37,000 |
|
682,114 |
|
|
|
|
|
|
|
|
|
|
|
Gammill, Inc. |
|
Designer and assembler of quilting machines and accessories |
|
Senior Term Debt (6) |
|
3,771,427 |
|
3,771,427 |
|
|
|
|
|
Senior Term Debt (3) (6) |
|
4,690,625 |
|
4,667,172 |
|
|
|
|
|
(12.0%, Due 12/2008) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global Materials |
|
Manufacturing-steel wool |
|
Senior Term Debt (3) (6) |
|
5,500,000 |
|
5,486,250 |
|
Technologies, Inc. |
|
products and metal fibers |
|
(13.0%, Due 11/2009) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Infor Global Solutions Ltd. |
|
Enterprise application solutions |
|
Senior Subordinated Term Debt (7) |
|
6,821,250 |
|
7,070,000 |
|
|
|
|
|
(11.0%, Due 4/2012) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Henry Holdings, Inc. |
|
Manufacturing-packaging products |
|
Senior Subordinated Term
Debt(6) |
|
7,067,923 |
|
7,064,500 |
|
|
|
|
|
|
|
|
|
|
7
GLADSTONE CAPITAL
CORPORATION
CONSOLIDATED SCHEDULE OF INVESTMENTS
AS OF SEPTEMBER 30, 2005
|
Company (1) |
|
Industry |
|
Investment (2) |
|
Cost |
|
Fair Value |
|
|
|
|
|
|
|
|
|
|
|
Marcal Paper Mills, Inc. (12) |
|
Manufacturing-paper products |
|
Senior Subordinated Term Debt (6) |
|
$6,275,000 |
|
$6,149,500 |
|
|
|
|
|
(13.0%, Due 12/2006) |
|
|
|
|
|
|
|
|
|
First Mortgage Loan (5) |
|
9,277,877 |
|
9,277,877 |
|
|
|
|
|
(16%, PIK 1%, Due 12/2006) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mistras Holdings Corp. |
|
Nondestructive testing |
|
Senior Term Debt (3) (6) |
|
9,666,666 |
|
9,461,249 |
|
|
|
instruments, systems |
|
(10.5%, Due 8/2008) |
|
|
|
|
|
|
|
and services |
|
Senior Term Debt (3) (6) |
|
4,833,334 |
|
4,724,584 |
|
|
|
|
|
(12.5%, Due 8/2008) |
|
|
|
|
|
|
|
|
|
Senior Term Debt (3) (6) |
|
1,000,000 |
|
982,500 |
|
|
|
|
|
(13.5%, Due 8/2008) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Northern Contours |
|
Manufacturing-veneer and |
|
Senior Subordinated Term |
|
7,000,000 |
|
7,000,000 |
|
Northern Contours |
|
laminate components |
|
Debt (8) |
|
|
|
|
|
of Kentucky, Inc. |
|
|
|
(10.7%, Due 5/2010) |
|
|
|
|
|
Norcon Holding LLC |
|
|
|
|
|
|
|
|
|
Norcon Lewis LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Penn Engineering & |
|
Manufacturing-fractional |
|
Senior Subordinated Term |
|
5,009,524 |
|
5,050,000 |
|
Manufacturing Corp. |
|
horsepower engines |
|
Debt (8) |
|
|
|
|
|
PN Merger Sub Inc. |
|
|
|
(10.0%, Due 5/2012) |
|
|
|
|
|
PEM Holding Co. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Polar Corporation |
|
Manufacturing-trailer parts |
|
Senior Subordinated Term |
|
8,609,566 |
|
8,627,500 |
|
|
|
|
|
Debt (6) |
|
|
|
|
|
|
|
|
|
(10.3%, Due 6/2010) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Puerto Rico Cable |
|
Service-telecommunications |
|
Senior Subordinated Term Debt |
|
5,050,182 |
|
5,075,000 |
|
Acquisition Company, Inc. |
|
|
|
(10.3%, Due 1/2012) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regency Gas Services LLC |
|
Midstream gas gathering and |
|
Senior Subordinated Term |
|
5,029,188 |
|
5,037,500 |
|
|
|
processing |
|
Debt (7) |
|
|
|
|
|
|
|
|
|
(9.9%, Due 12/2010) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Santana Plastics |
|
Manufacturing-polyethylene |
|
Senior Term Debt (3) (6) |
|
6,000,000 |
|
6,007,500 |
|
|
|
bathroom partitions |
|
(11.7%, Due 11/2009) |
|
|
|
|
|
|
|
|
|
Senior Term Debt (4) (6) |
|
1,950,000 |
|
1,952,438 |
|
|
|
|
|
(13.0%, Due 11/2009) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SCPH Holdings, Inc. |
|
Manufacturing-underwater |
|
Credit Facility (9) |
|
— |
|
— |
|
Sea Con Phoenix, Inc. |
|
and harsh environment |
|
(8.0%, Due 3/2006) |
|
|
|
|
|
Phoenix Optix, Inc. |
|
components |
|
Senior Term Debt (3) (6) |
|
3,237,500 |
|
3,241,547 |
|
|
|
|
|
(8.7%, Due 2/2010) |
|
|
|
|
|
|
|
|
|
Senior Term Debt (6) |
|
3,000,000 |
|
3,003,750 |
|
|
|
|
|
(12.0%, Due 2/2010) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Survey Sampling |
|
Service-telecommunications |
|
Senior Subordinated Term |
|
4,514,105 |
|
4,539,375 |
|
|
|
|
|
(11.0%, Due 5/2012) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tech Lighting LLC |
|
Manufacturing-low voltage |
|
Senior Subordinated Term Debt (6) |
|
9,012,452 |
|
9,067,500 |
|
|
|
|
|
(10.4%, Due 10/2010) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Visual Edge Technology, Inc. |
|
Service-office supplies |
|
Senior Subordinated Term Debt |
|
5,000,000 |
|
5,000,000 |
|
Graphic Enterprises, Inc. |
|
distribution |
|
(11.7%, Due 8/2011) |
|
|
|
|
|
Copeco, Inc. |
|
|
|
|
|
|
|
|
8
GLADSTONE CAPITAL
CORPORATION
CONSOLIDATED SCHEDULE OF INVESTMENTS
AS OF SEPTEMBER 30, 2005
|
Company (1) |
|
Industry |
|
Investment (2) |
|
Cost |
|
Fair Value |
|
|
|
|
|
|
|
|
|
|
|
Woven Electronics |
|
Custom electrical cable |
|
Senior Term Debt (4) (6) (10) |
|
$8,344,999 |
|
$8,776,435 |
|
Corporation |
|
assemblies |
|
(11.5%, Due 3/2009) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Xspedius Communications LLC |
|
Service-telecommunications |
|
Senior Subordinated Term Debt (6) |
|
5,972,727 |
|
4,479,545 |
|
|
|
|
|
(14.3%, Due 3/2010) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
|
|
|
|
$205,375,554 |
|
$200,846,763 |
(1) We do not “Control,” and are not an “Affiliate” of, any of our portfolio companies, each as defined in the Investment Company Act of 1940, as amended (the “1940 Act”). In general, under the 1940 Act, we would “Control” a portfolio company if we owned 25% or more of its voting securities and would be an “Affiliate” of a portfolio company if we owned 5% or more of its voting securities.
(2) Percentage represents interest rates in effect at September 30, 2005 and due date represents the contractual maturity date.
(3) Last Out Tranche of senior debt, meaning if the company is liquidated then the holder of the Last Out Tranche is paid after the senior debt.
(4) Last Out Tranche of senior debt, meaning if the company is liquidated then the holder of the Last Out Tranche is paid after the senior debt, however the debt is junior to another Last Out Tranche.
(5) Has some paid in kind (PIK) interest. Refer to Note 2 “Summary of Significant Accounting Policies” of the Company’s Form 10-K for the fiscal year ended September 30, 2005.
(6) Fair value was based on valuation prepared and provided by Standard & Poor’s Loan Evaluation Services.
(7) Marketable securities, such as syndicated loans, are valued based on the indicative bid price, as of September 30, 2005, from the respective originating syndication agent’s trading desk.
(8) Investment was valued at cost due to recent acquisition.
(9) Availability under the credit facility totals $500,000. There were no borrowings outstanding at September 30, 2005.
(10) Includes a success fee with a $347,986 fair value and no cost basis.
(11) Non-income producing at September 30, 2005.
(12) Subsequent to September 30, 2005, the entire investment in the portfolio company was sold at the fair value reflected herein.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
9
GLADSTONE CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
|
|
|
Three Months Ended June 30, |
|
||||
|
|
|
2006 |
|
2005 |
|
||
|
INVESTMENT INCOME |
|
|
|
|
|
||
|
Interest income — investments |
|
$ |
5,775,522 |
|
$ |
5,766,233 |
|
|
Interest income — cash and cash equivalents |
|
8,178 |
|
7,631 |
|
||
|
Interest income — notes receivable from employees |
|
108,877 |
|
108,065 |
|
||
|
Prepayment fees and other income |
|
630,239 |
|
245,297 |
|
||
|
Total investment income |
|
6,522,816 |
|
6,127,226 |
|
||
|
|
|
|
|
|
|
||
|
EXPENSES |
|
|
|
|
|
||
|
Loan servicing (Refer to Note 12) |
|
693,965 |
|
687,971 |
|
||
|
Management fee (Refer to Notes 12 and 15) |
|
331,040 |
|
358,631 |
|
||
|
Professional fees |
|
166,405 |
|
133,505 |
|
||
|
Amortization of deferred financing fees |
|
36,036 |
|
100,663 |
|
||
|
Interest expense |
|
702,449 |
|
563,336 |
|
||
|
Stockholder related costs |
|
28,371 |
|
16,475 |
|
||
|
Directors fees |
|
27,500 |
|
26,624 |
|
||
|
Insurance expense |
|
50,589 |
|
43,891 |
|
||
|
Stock option compensation |
|
202,296 |
|
— |
|
||
|
Other expenses |
|
35,083 |
|
64,304 |
|
||
|
Expenses before credit from Gladstone Management |
|
2,273,734 |
|
1,995,400 |
|
||
|
Credit to management fee for fees collected by Gladstone Management (Refer to Note 15) |
|
(539,000 |
) |
(240,600 |
) |
||
|
Total expenses net of credit to management fee |
|
1,734,734 |
|
1,754,800 |
|
||
|
|
|
|
|
|
|
||
|
NET INVESTMENT INCOME BEFORE INCOME TAXES |
|
4,788,082 |
|
4,372,426 |
|
||
|
Income tax expense |
|
— |
|
— |
|
||
|
NET INVESTMENT INCOME |
|
4,788,082 |
|
4,372,426 |
|
||
|
|
|
|
|
|
|
||
|
REALIZED AND UNREALIZED GAIN (LOSS) ON |
|
|
|
|
|
||
|
INVESTMENTS: |
|
|
|
|
|
||
|
Realized loss on sale of investments |
|
(100,850 |
) |
— |
|
||
|
Realized gain on settlement of derivative |
|
1,367 |
|
— |
|
||
|
Unrealized appreciation (depreciation) on derivative |
|
41,486 |
|
(49,044 |
) |
||
|
Net unrealized appreciation (depreciation) on investments |
|
812,991 |
|
(389,229 |
) |
||
|
Net gain (loss) on investments |
|
754,994 |
|
(438,273 |
) |
||
|
|
|
|
|
|
|
||
|
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS |
|
$ |
5,543,076 |
|
$ |
3,934,153 |
|
|
|
|
|
|
|
|
||
|
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS PER COMMON SHARE: |
|
|
|
|
|
||
|
Basic |
|
$ |
0.49 |
|
$ |
0.35 |
|
|
Diluted |
|
$ |
0.48 |
|
$ |
0.34 |
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING: |
|
|
|
|
|
|
Basic |
|
11,337,291 |
|
11,299,010 |
|
|
Diluted |
|
11,570,425 |
|
11,578,637 |
|
|
|
|
|
|
|
|
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
10
GLADSTONE CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
|
|
|
Nine Months Ended June 30, |
|
||||
|
|
|
2006 |
|
2005 |
|
||
|
INVESTMENT INCOME |
|
|
|
|
|
||
|
Interest income — investments |
|
$ |
18,497,893 |
|
$ |
16,671,756 |
|
|
Interest income — cash and cash equivalents |
|
21,714 |
|
29,101 |
|
||
|
Interest income — notes receivable from employees |
|
323,003 |
|
336,382 |
|
||
|
Prepayment fees and other income |
|
711,225 |
|
1,054,917 |
|
||
|
Total investment income |
|
19,553,835 |
|
18,092,156 |
|
||
|
|
|
|
|
|
|
||
|
EXPENSES |
|
|
|
|
|
||
|
Loan servicing (Refer to Note 12) |
|
2,144,024 |
|
1,804,465 |
|
||
|
Management fee (Refer to Notes 12 and 15) |
|
952,120 |
|
1,075,940 |
|
||
|
Professional fees |
|
399,758 |
|
528,610 |
|
||
|
Amortization of deferred financing fees |
|
94,572 |
|
284,487 |
|
||
|
Interest expense |
|
2,302,693 |
|
1,174,587 |
|
||
|
Stockholder related costs |
|
273,170 |
|
192,785 |
|
||
|
Directors fees |
|
81,712 |
|
77,624 |
|
||
|
Insurance expense |
|
151,956 |
|
134,053 |
|
||
|
Stock option compensation |
|
279,618 |
|
— |
|
||
|
Other expenses |
|
151,663 |
|
176,939 |
|
||
|
Expenses before credit from Gladstone Management |
|
6,831,286 |
|
5,449,490 |
|
||
|
Credit to management fee for fees collected by Gladstone Management (Refer to Note 15) |
|
(1,762,000 |
) |
(977,100 |
) |
||
|
Total expenses net of credit to management fee |
|
5,069,286 |
|
4,472,390 |
|
||
|
|
|
|
|
|
|
||
|
NET INVESTMENT INCOME BEFORE INCOME TAXES |
|
14,484,549 |
|
13,619,766 |
|
||
|
Income tax expense |
|
50,237 |
|
138,678 |
|
||
|
NET INVESTMENT INCOME |
|
14,434,312 |
|
13,481,088 |
|
||
|
|
|
|
|
|
|
||
|
REALIZED AND UNREALIZED GAIN (LOSS) ON |
|
|
|
|
|
||
|
INVESTMENTS: |
|
|
|
|
|
||
|
Net realized (loss) gain on sale of investments |
|
(903,945 |
) |
29,750 |
|
||
|
Realized gain on settlement of derivative |
|
1,367 |
|
— |
|
||
|
Unrealized appreciation (depreciation) on derivative |
|
65,252 |
|
(58,007 |
) |
||
|
Net unrealized appreciation (depreciation) on investments |
|
5,769,820 |
|
(298,352 |
) |
||
|
Net gain (loss) on investments |
|
4,932,494 |
|
(326,609 |
) |
||
|
|
|
|
|
|
|
||
|
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS |
|
$ |
19,366,806 |
|
$ |
13,154,479 |
|
|
|
|
|
|
|
|
||
|
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS PER COMMON SHARE: |
|
|
|
|
|
||
|
Basic |
|
$ |
1.71 |
|
$ |
1.17 |
|
|
Diluted |
|
$ |
1.68 |
|
$ |
1.13 |
|
|
|
|
|
|
|
|
||
|
WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING: |
|
|
|
|
|
||
|
Basic |
|
11,317,437 |
|
11,288,784 |
|
||
|
Diluted |
|
11,549,054 |
|
11,602,986 |
|
||
|
|
|
|
|
|
|
||
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
11
GLADSTONE CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
|
|
|
Nine Months Ended June 30, |
|
||||
|
|
|
2006 |
|
2005 |
|
||
|
Operations: |
|
|
|
|
|
||
|
Net investment income |
|
$ |
14,434,312 |
|
$ |
13,481,088 |
|
|
Net realized (loss) gain on sale of investments |
|
(903,945 |
) |
29,750 |
|
||
|
Realized gain on settlement of derivative |
|
1,367 |
|
— |
|
||
|
Unrealized appreciation (depreciation) on derivative |
|
65,252 |
|
(58,007 |
) |
||
|
Net unrealized appreciation (depreciation) on investments |
|
5,769,820 |
|
(298,352 |
) |
||
|
Net increase in net assets from operations |
|
19,366,806 |
|
13,154,479 |
|
||
|
|
|
|
|
|
|
||
|
Capital transactions: |
|
|
|
|
|
||
|
Distributions to stockholders |
|
(13,751,539 |
) |
(12,531,746 |
) |
||
|
Stock option compensation |
|
279,618 |
|
— |
|
||
|
Issuance of common stock under stock option plan |
|
1,150,245 |
|
270,250 |
|
||
|
Repayment of principal on employee notes |
|
129,943 |
|
797,429 |
|
||
|
Shelf offering costs |
|
— |
|
(111,233 |
) |
||
|
Decrease in net assets from capital share transactions |
|
(12,191,733 |
) |
(11,575,300 |
) |
||
|
|
|
|
|
|
|
||
|
Total increase in net assets |
|
7,175,073 |
|
1,579,179 |
|
||
|
Net assets at beginning of year |
|
151,610,683 |
|
152,226,655 |
|
||
|
Net assets at end of period |
|
$ |
158,785,756 |
|
$ |
153,805,834 |
|
|
|
|
|
|
|
|
||
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
12
GLADSTONE CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
|
Nine Months Ended June 30, |
|
||||
|
|
|
2006 |
|
2005 |
|
||
|
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
Net increase in net assets resulting from operations |
|
$ |
19,366,806 |
|
$ |
13,154,479 |
|
|
Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by (used in) operating activities: |
|
|
|
|
|
||
|
Net amortization of premiums and discounts |
|
(144,501 |
) |
(6,949 |
) |
||
|
Amortization of deferred financing fees |
|
94,572 |
|
284,487 |
|
||
|
Stock compensation |
|
279,618 |
|
— |
|
||
|
Realized loss on investments |
|
1,329,458 |
|
— |
|
||
|
Unrealized (appreciation) depreciation on derivative |
|
(65,252 |
) |
58,007 |
|
||
|
Change in net unrealized (appreciation) depreciation on investments |
|
(5,769,820 |
) |
298,352 |
|
||
|
Decrease (increase) in interest receivable |
|
276,230 |
|
(340,303 |
) |
||
|
Decrease (increase) in funds due from custodian |
|
130,150 |
|
(11,027,346 |
) |
||
|
Decrease in prepaid assets |
|
105,902 |
|
120,054 |
|
||
|
(Increase) decrease in due from affiliate |
|
(207,960 |
) |
109,639 |
|
||
|
Increase in other assets |
|
(27,845 |
) |
(11,973 |
) |
||
|
Increase in accounts payable |
|
23,449 |
|
158 |
|
||
|
Increase in interest payable |
|
4,685 |
|
100,320 |
|
||
|
Decrease in accrued expenses and deferred liabilities |
|
(125,298 |
) |
(599,277 |
) |
||
|
(Decrease) increase in fees due to affiliate |
|
(209,924 |
) |
205,900 |
|
||
|
Increase in funds held in escrow |
|
40 |
|
200,000 |
|
||
|
Increase in investment balance due to payment in kind interest |
|
(74,701 |
) |
(348,509 |
) |
||
|
Net cash provided by operating activities |
|
14,985,609 |
|
2,197,039 |
|
||
|
|
|
|
|
|
|
||
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
Purchase of investments |
|
(105,076,400 |
) |
(126,195,458 |
) |
||
|
Principal repayments on investments |
|
107,876,077 |
|
77,990,345 |
|
||
|
Repayment of repurchase agreements |
|
— |
|
(21,345,997 |
) |
||
|
Receipt of principal on notes receivable - employees |
|
129,943 |
|
797,429 |
|
||
|
Net cash provided by (used in) investing activities |
|
2,929,620 |
|
(68,753,681 |
) |
||
|
|
|
|
|
|
|
||
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
Borrowings from the lines of credit |
|
113,090,000 |
|
136,800,000 |
|
||
|
Repayments on the lines of credit |
|
(118,278,064 |
) |
(122,953,547 |
) |
||
|
Distributions paid |
|
(13,751,539 |
) |
(12,531,746 |
) |
||
|
Exercise of employee stock options |
|
1,150,245 |
|
270,250 |
|
||
|
Deferred financing fees |
|
(173,333 |
) |
(105,000 |
) |
||
|
Shelf offering costs |
|
— |
|
(111,233 |
) |
||
|
Net cash (used in) provided by financing activities |
|
(17,962,691 |
) |
1,368,724 |
|
||
|
|
|
|
|
|
|
||
|
NET DECREASE IN CASH AND CASH EQUIVALENTS (1) |
|
(47,462 |
) |
(65,187,918 |
) |
||
|
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
|
503,776 |
|
65,954,840 |
|
||
|
CASH AND CASH EQUIVALENTS, END OF PERIOD |
|
$ |
456,314 |
|
$ |
766,922 |
|
|
CASH PAID DURING PERIOD FOR INTEREST |
|
$ |
2,298,008 |
|
$ |
1,073,417 |
|
|
CASH PAID DURING PERIOD FOR INCOME TAXES |
|
$ |
— |
|
$ |
138,678 |
|
|
NON-CASH FINANCING ACTIVITIES |
|
|
|
|
|
||
|
Notes receivable issued in exchange for common stock associated with the exercise of employee stock options |
|
$ |
199,980 |
|
$ |
157,100 |
|
(1) Cash and cash equivalents consist of demand deposits and highly liquid investments with original maturities of three months or less when purchased.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
13
GLADSTONE CAPITAL
CORPORATION
FINANCIAL HIGHLIGHTS
(UNAUDITED)
|
|
|
Three Months Ended June 30, |
|
||||
|
|
|
2006 |
|
2005 |
|
||
|
Per Share Data (1) |
|
|
|
|
|
||
|
Net asset value at beginning of period |
|
$ |
13.84 |
|
$ |
13.64 |
|
|
Income from investment operations: |
|
|
|
|
|
||
|
Net investment income (2) |
|
0.42 |
|
0.39 |
|
||
|
Realized (loss) gain on sale of investments (2) |
|
(0.01 |
) |
— |
|
||
|
Realized gain on settlement of derivative (2) |
|
— |
|
— |
|
||
|
Net unrealized gain (loss) on investments (2) |
|
0.07 |
|
(0.03 |
) |
||
|
Net unrealized gain on derivative (2) |
|
0.01 |
|
— |
|
||
|
Total from investment operations |
|
0.49 |
|
0.36 |
|
||
|
Less distributions: |
|
|
|
|
|
||
|
Distributions from net investment income |
|
(0.41 |
) |
(0.39 |
) |
||
|
Total distributions |
|
(0.41 |
) |
(0.39 |
) |
||
|
Issuance of common stock under stock option plan |
|
0.10 |
|
— |
|
||
|
Repayment of principal on notes receivable |
|
0.01 |
|
— |
|
||
|
Dilutive effect of share issuance |
|
(0.08 |
) |
— |
|
||
|
Net asset value at end of period |
|
$ |
13.95 |
|
$ |
13.61 |
|
|
|
|
|
|
|
|
||
|
Per share market value at beginning of period |
|
$ |
21.55 |
|
$ |
21.22 |
|
|
Per share market value at end of period |
|
21.39 |
|
23.40 |
|
||
|
Total return (3) (4) |
|
1.11 |
% |
12.19 |
% |
||
|
Shares outstanding at end of period |
|
11,384,363 |
|
11,303,510 |
|
||
|
|
|
|
|
|
|
||
|
Ratios/Supplemental Data |
|
|
|
|
|
||
|
Net assets at end of period |
|
$ |
158,785,756 |
|
$ |
153,805,834 |
|
|
Average net assets (5) |
|
$ |
156,053,816 |
|
$ |
152,484,868 |
|
|
Ratio of expenses to average net assets-annualized (6) |
|
5.83 |
% |
5.23 |
% |
||
|
Ratio of net expenses to average net assets-annualized (7) |
|
4.45 |
% |
4.60 |
% |
||
|
Ratio of net investment income to average net assets-annualized |
|
12.27 |
% |
11.47 |
% |
||
|
|
|
|
|
|
|
||
(1) Basic per share data.
(2) Based on weighted average basic per share data.
(3) Total return equals the increase of the ending market value over the beginning market value plus monthly dividends divided by the monthly beginning market value, assuming monthly dividend reinvestment.
(4) Amounts were not annualized.
(5) Average net assets are computed by taking the average of the balance of net assets at the end of each month of the reporting period.
(6) Ratio of expenses to average net assets is computed using expenses before credit from Gladstone Management and including income tax expense.
(7) Ratio of net expenses to average net assets is computed using total expenses net of credits from Gladstone Management and including income tax expense.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
14
GLADSTONE CAPITAL
CORPORATION
FINANCIAL HIGHLIGHTS
(UNAUDITED)
|
|
|
Nine Months Ended June 30, |
|
||||
|
|
|
2006 |
|
2005 |
|
||
|
Per Share Data (1) |
|
|
|
|
|
||
|
Net asset value at beginning of period |
|
$ |
13.41 |
|
$ |
13.50 |
|
|
Income from investment operations: |
|
|
|
|
|
||
|
Net investment income (2) |
|
1.28 |
|
1.19 |
|
||
|
Realized (loss) gain on sale of investments (2) |
|
(0.08 |
) |
— |
|
||
|
Realized gain on settlement of derivative (2) |
|
— |
|
— |
|
||
|
Net unrealized gain (loss) on investments (2) |
|
0.51 |
|
(0.03 |
) |
||
|
Net unrealized gain (loss) on derivative (2) |
|
— |
|
(0.01 |
) |
||
|
Total from investment operations |
|
1.71 |
|
1.15 |
|
||
|
Less distributions: |
|
|
|
|
|
||
|
Distributions from net investment income |
|
(1.22 |
) |
(1.11 |
) |
||
|
Total distributions |
|
(1.22 |
) |
(1.11 |
) |
||
|
Issuance of common stock under stock option plan |
|
0.10 |
|
0.02 |
|
||
|
Repayment of principal on notes receivable |
|
0.01 |
|
0.07 |
|
||
|
Dilutive effect of share issuance |
|
(0.06 |
) |
(0.01 |
) |
||
|
Offering costs |
|
— |
|
(0.01 |
) |
||
|
Net asset value at end of period |
|
$ |
13.95 |
|
$ |
13.61 |
|
|
|
|
|
|
|
|
||
|
Per share market value at beginning of period |
|
$ |
22.55 |
|
$ |
22.71 |
|
|
Per share market value at end of period |
|
21.39 |
|
23.40 |
|
||
|
Total return (3)(4) |
|
0.35 |
% |
8.08 |
% |
||
|
Shares outstanding at end of period |
|
11,384,363 |
|
11,303,510 |
|
||
|
|
|
|
|
|
|
||
|
Ratios/Supplemental Data |
|
|
|
|
|
||
|
Net assets at end of period |
|
$ |
158,785,756 |
|
$ |
153,805,834 |
|
|
Average net assets (5) |
|
$ |
153,804,303 |
|
$ |
152,067,700 |
|
|
Ratio of expenses to average net assets-annualized (6) |
|
5.97 |
% |
4.90 |
% |
||
|
Ratio of net expenses to average net assets-annualized (7) |
|
4.44 |
% |
4.04 |
% |
||
|
Ratio of net investment income to average net assets-annualized |
|
12.51 |
% |
11.82 |
% |
||
|
|
|
|
|
|
|
||
(1) Basic per share data.
(2) Based on weighted average basic per share data.
(3) Total return equals the increase of the ending market value over the beginning market value plus monthly dividends divided by the monthly beginning market value, assuming monthly dividend reinvestment.
(4) Amounts were not annualized.
(5) Average net assets are computed by taking the average of the balance of net assets at the end of each month of the reporting period.
(6) Ratio of expenses to average net assets is computed using expenses before credit from Gladstone Management and including income tax expense.
(7) Ratio of net expenses to average net assets is computed using total expenses net of credits from Gladstone Management and including income tax expense.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
15
GLADSTONE CAPITAL
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2006
(UNAUDITED)
NOTE 1. ORGANIZATION
Gladstone Capital Corporation (the “Company”) was incorporated under the General Corporation Laws of the State of Maryland on May 30, 2001 as a closed-end investment company. The Company has elected to be treated as a business development company, or BDC, under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, the Company has elected to be treated for tax purposes as a regulated investment company, or RIC, under the Internal Revenue Code of 1986, as amended (the “Code”). The Company’s investment objectives are to achieve a high level of current income by investing in debt and equity securities of established private businesses.
Gladstone Capital Advisers, Inc. is a wholly-owned subsidiary of the Company. The financial statements of this subsidiary are consolidated with those of the Company.
Gladstone Business Loan LLC, a wholly-owned subsidiary of the Company, was established for the purpose of owning the Company’s portfolio of loan investments. The financial statements of this subsidiary are consolidated with those of the Company.
The Company is externally managed by Gladstone Management Corporation (“Gladstone Management” or the “Adviser”), an unconsolidated affiliate of the Company.
NOTE 2. UNAUDITED INTERIM FINANCIAL STATEMENTS
Interim financial statements of the Company are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain disclosures accompanying annual financial statements prepared in accordance with GAAP are omitted. In the opinion of management, all adjustments, consisting solely of normal recurring accruals, necessary for the fair statement of financial statements for the interim periods have been included. The current period’s results of operations are not necessarily indicative of results that ultimately may be achieved for the year. The interim financial statements and notes thereto should be read in conjunction with the financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended September 30, 2005, as filed with the Securities and Exchange Commission.
Certain amounts in the prior year’s financial statements have been reclassified to conform to the current year presentation with no effect to net increase in net assets resulting from operations.
NOTE 3. RECENT ACCOUNTING PRONOUNCEMENTS