Exhibit 99.1
GLADSTONE CAPITAL REPORTS FIRST QUARTER OF FISCAL YEAR 2005 RESULTS:
NET INCREASE IN STOCKHOLDERS' EQUITY RESULTING FROM OPERATIONS WAS
$4,944,948, OR $0.43 PER DILUTED WEIGHTED AVERAGE COMMON SHARE. NET
INVESTMENT INCOME WAS $4,677,404, OR $0.40 PER DILUTED
WEIGHTED AVERAGE COMMON SHARE.
MCLEAN, Va., Feb. 9 /PRNewswire-FirstCall/ -- Gladstone Capital Corp.
(Nasdaq: GLAD) (the "Company") today announced earnings for the first quarter
ended December 31, 2004 of the fiscal year ending September 30, 2005. Net
Increase in Stockholders' Equity Resulting from Operations was $4,944,948, or
$0.43 per diluted weighted average common share for the first quarter ended
December 31, 2004. This represents a $3,563,874 or $0.30 per common share
increase from $1,381,074, or $0.13 per diluted weighted average common share for
the quarter ended December 31, 2003. Unless otherwise noted, per share amounts
presented in this earnings release are on a diluted basis and are based on
weighted average common equivalent shares outstanding.
Total assets were $194,085,591 at December 31, 2004, a decrease of
$21,248,136 from $215,333,727 at September 30, 2004. The decrease was mainly
attributable to the Company not borrowing money to buy short term securities at
December 31, 2004 as it has in the past.
Net Investment Income for the quarter ended December 31, 2004 was
$4,677,404, or $0.40 per share, compared to the quarter ended December 31, 2003
of $2,938,636, or $0.28 per share. This shows a 59% increase, or a 43% per share
increase, over the same period of the prior year.
During the quarter, the Company extended loans to Global Materials
Technology, Inc. for $5.5 million and to Santana Products, Inc. for $7.95
million, and purchased loans in Valor Telecommunications of $10.0 million, Tech
Lighting, Inc. of $9.0 million, Polar Corporation of $3.0 million, and Regency
Gas Services of $2.0 million. The Company also sold its $975,000 loan in Burt's
Bees Inc. for a gain of $9,750 and received loan repayments ahead of contractual
maturity from A and G, Inc. of $12.25 million and America's Water Heater Rentals
("AWHR") of $12.0 million, for an aggregate return of capital of approximately
$25.3 million. AWHR also remitted approximately $1.4 million of prepayment and
success fees with its final payment.
Effective October 1, 2004, the start of the 2005 fiscal year, the Company
externalized its management to its investment adviser, Gladstone Management
Corporation ("Gladstone Management"), an unconsolidated affiliate. As
compensation for the services of Gladstone Management, the Company pays
Gladstone Management an annual fee of 2.0% (0.50% quarterly) of total assets as
reduced by cash and cash equivalents pledged to creditors. The annual 2.0% fee
represents an annual advisory fee of 1.25% (0.3125% quarterly) of total assets
as reduced by cash and cash equivalents pledged to creditors, and an annual
administrative fee of 0.75% (0.1875% quarterly) of total assets, as reduced by
cash and cash equivalents pledged to creditors. The Company receives a credit
for loan servicing fees paid to Gladstone Management and for fees collected by
Gladstone Management directly from the Company's portfolio companies. During the
three months ended December 31, 2004, the Company recorded management fee
expense of $327,302, after the credit for loan servicing fees of $530,952 but
prior to the credit for other fees of $286,500 as received by Gladstone
Management from the Company's portfolio companies. After the credit for these
other fees, the Company recorded a net management fee expense of $40,802.
At December 31, 2004, the Company had investments in debt securities in 21
private companies having a cost balance of $170.3 million and a fair value of
$167.8 million.
Subsequent to December 31, 2004, one loan repaid in full and one was sold
at a gain of $20,000, for an aggregate return of capital of approximately $4.3
million. In January 2005, the Company also purchased additional loans in Regency
Gas Services of $1.0 million, and Polar Corporation of $2.5 million, as well as
the purchase of a new loan in John Henry Inc. of $5.5 million.
"Overall, the management team is pleased with the performance of the
Company for the first quarter of the fiscal year ending September 30, 2005. The
team continues to stay focused on meeting our commitment to shareholders by
growing the dividend," commented a spokesperson for the Company.
The financial statements below are without footnotes. We have filed a Form
10-Q for the quarter ended December 31, 2004 with the Securities and Exchange
Commission (the "SEC") and that form can be retrieved from the SEC website at
http://www.SEC.gov or from the Company's web site at
http://www.GladstoneCapital.com. A paper copy can be obtained by writing to us
at 1616 Anderson Road, McLean, VA 22102.
The Company will hold a conference call Thursday, February 10, 2005, at
9:30am EST. Please call 866-244-4526 and use the ID code 641046 to enter the
conference. An operator will monitor the call and set a queue for the questions.
The replay number will be available for approximately 30 days. To hear the
replay, please dial 888-266-2081 and use the ID code 641046 to listen to the
call.
In addition, at the annual meeting of stockholders held earlier today,
February 9, 2005, all items listed in the proxy were approved by shareholders.
For further information contact Harry Brill, CFO at 703-286-7000.
This press release may include statements that may constitute "forward-
looking statements" within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, including statements with regard to the future performance of the
Company. Words such as "should," "believes," "feel," "expects," "projects,"
"goals," and "future" or similar expressions are intended to identify 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, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by such
forward-looking statements include, among others, those factors listed under the
caption "Risk factors" of the Company's Form 10-K for the Fiscal Year Ended
September 30, 2004, as filed with the Securities and Exchange Commission on
December 14, 2004. The Company undertakes no obligation to publicly update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise.
GLADSTONE CAPITAL CORPORATION
CONSOLIDATED BALANCE SHEETS (Unaudited)
December 31, September 30,
2004 2004
-------------- --------------
ASSETS
Investments at fair value (Cost
12/31/04 $170,302,735; Cost 9/30/04:
$149,189,306) $ 167,842,273 $ 146,446,240
Cash and cash equivalents 23,383,544 15,969,890
Cash and cash equivalents pledged to
creditors - 49,984,950
Interest receivable -- investments in
debt securities 979,666 837,336
Interest receivable -- employees 38,012 112,960
Due from custodian 1,171,809 1,203,079
Due from affiliate 79,238 109,639
Deferred financing fees 258,824 350,737
Prepaid assets 189,718 191,676
Other assets 142,507 127,220
TOTAL ASSETS $ 194,085,591 $ 215,333,727
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable $ 220,844 $ 105,921
Fees due to affiliate 149,911 113,511
Borrowings under lines of credit 40,400,000 40,743,547
Accrued expenses and deferred
liabilities 164,729 798,096
Repurchase agreement - 21,345,997
Total Liabilities $ 40,935,484 $ 63,107,072
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value,
50,000,000 shares authorized and
11,278,510 shares issued and
outstanding $ 11,279 $ 11,279
Capital in excess of par value 164,183,548 165,501,924
Notes receivable -- employees (9,282,678) (9,432,678)
Net unrealized depreciation on
investments (2,460,461) (2,743,066)
Unrealized depreciation on derivative (239,070) (214,259)
Distributions less than net
investment income 937,489 (896,545)
Total Stockholders' Equity $ 153,150,107 $ 152,226,655
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 194,085,591 $ 215,333,727
GLADSTONE CAPITAL CORPORATION
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 2004 (Unaudited)
Company(1) Industry Investment(2) Cost Fair Value
- ------------ --------------- -------------- ------------- -------------
Advanced Home health Senior $ 7,500,000 $ 7,500,000
Homecare nursing Subordinated
Management services Term Debt(7)
Inc. (13.3%, Due
12/2010)
Allied Polyethylene Senior Term 4,000,000 4,005,000
Extruders, film Debt(3)
Inc. manufacturer (12.3%, Due
7/2009)
ARI Manufacturing Senior Term 1,190,141 1,184,190
Holdings, -auto parts Debt(6)
Inc. (10.0%, Due
6/2008)
Senior 3,694,750 3,653,184
Subordinated
Term Debt
(5)(6)
(11.3%, PIK
4%, Due
12/2008)
Bear Creek Premium Senior 6,000,000 6,090,000
Corporation horticultural Subordinated
and food Term Debt
products (7)(9.9%,
Due 6/2010)
Benetech, Dust Senior Term 3,087,500 3,091,359
Inc. management Debt(6)
systems for (8.5%, Due
the coal 5/2009)
and electric Senior Term 3,250,000 3,262,188
utility Debt (3)(6)
industries (11.5%, Due
5/2009)
Coyne Industrial Senior Term 15,742,507 15,506,369
Inter- Services Debt(3)(5)
national (6)
Enterprises (13.0%, PIK
2%, Due
7/2007)
Finn Manufac- Senior 10,500,000 7,612,500
Corporation turing - subordinated
landscape Term Debt(6)
equipment (13.0%, Due
2/2006)
Common Stock 37,000 569,535
Warrants
Gammill, Designer and Senior Term 4,580,769 4,580,769
Inc. assembler of Debt(6)
quilting (9.5%, Due
machines and 12/2008)
accessories Senior Term 4,750,000 4,750,000
Debt(3)(6)
(12.0%, Due
12/2008)
Global Manufac- Senior Term 5,500,000 5,500,000
Materials turing - Debt(3)
Technol- steel wool (13.0%, Due
ogies, products and 11/2009)
Inc. metal fibers
Inca Metal Material Senior Term 2,316,525 2,108,038
Products handling and Debt(3)(6)
Corpora- storage (5.2%, Due
tion products 9/2006)
Kingway
Acquisition,
Inc.
Clymer
Acquisition,
Inc.
Maidenform, Intimate Senior 10,003,437 10,200,000
Inc. apparel Subordinated
Term Debt(7)
(10.2%, Due
5/2011)
Marcal Manufac- Senior 6,800,000 6,494,000
Paper turing Subordinated
Mills, -paper Term Debt(6)
Inc. products (13.0%, Due
12/2006)
First Mortgage 9,277,839 9,277,839
Loan(5)
(16%, PIK 1%,
Due 12/2006)
Marietta Manufac- Senior 2,000,000 2,020,000
Corpor- turing Subordinated
ation -personal Term Debt(7)
care (11.5%, Due
products 6/2010)
MedAssets, Pharmaceu- Senior Term 1,636,973 1,645,488
Inc. ticals and Debt(7)
healthcare (6.7%, Due
GPO 3/2007)
Senior 6,503,047 6,597,500
Subordinated
Term Debt(7)
(12.6%, Due
3/2008)
Mistras Nondestruc- Senior Term 9,666,666 9,569,999
Holdings tive testing Debt(3)(6)
Corp. instruments, (10.5%, Due
systems 8/2008)
and services Senior Term 4,833,334 4,772,917
Debt(3)(6)
(12.5%, Due
8/2008)
Senior Term
Debt(3)(6) 1,000,000 992,500
(13.5%, Due
8/2008)
Polar Manufac- Senior 3,000,000 3,060,000
Corpor- turing Subordinated
ation -trailer Term Debt(7)
parts (8.9%, Due
6/2010)
Regency Midstream Senior 2,000,000 2,040,000
Gas Gas Subordinated
Services gathering Term Debt(7)
LLC and (8.3%, Due
processing 12/2010)
Santana Manufac- Senior Term 6,000,000 6,000,000
turing Debt(3)
-polyethylene (10.5%, Due
bathroom 11/2009)
Plastics Senior Term 1,950,000 1,950,000
partitions Debt(4)
(13.0%, Due
11/2009)
Tech Manufac- Senior 9,014,295 9,045,000
Lighting turing Subordinated
LLC -low voltage Term Debt(7)
lighting (9.3%, Due
systems 10/2010)
Valor Rural Senior 9,985,952 10,300,000
Telcom- telecom- Subordinated
munications munications Term Debt(7)
Inc. (10.1%, Due
11/2011)
Woven Custom Senior Term 2,482,000 2,478,898
Electronics electrical Debt(3)(6)
Corpor- cable (7.3%, Due
ation assemblies 3/2009)
Senior Term
Debt(4)(6) 12,000,000 11,985,000
(11.5%, Due
3/2009)
Total: $ 170,302,735 $ 167,842,273
(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 December 31, 2004 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 7 "Payment in Kind
Interest" of the Company's Form 10-Q for the quarter ended December 31,
2004 and Note 2 "Summary of Significant Accounting Policies" of the
Company's Form 10-K for the fiscal year ended September 30, 2004.
(6) Fair value was based on valuation prepared and provided by Standard &
Poor's Loan Evaluation Services.
(7) Marketable securities are valued based on the bid price, as of December 28,
2004, from the respective originating syndication agent's trading desk.
GLADSTONE CAPITAL CORPORATION
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 2004
Company(1) Industry Investment(2) Cost Fair Value
- ------------ --------------- -------------- ------------- -------------
A and G, Activewear Senior Term $ 12,250,000 $ 12,250,000
Inc. products Debt(3)(6)
(d/b/a (11.0%, Due
Alstyle) 6/2008)
Allied Polyethylene Senior Term 4,000,000 4,000,000
Extruders, film Debt(3)
Inc. manufacturer (12.3%, Due
7/2009)
America's Household Senior Term
Water appliances Debt(4)(6)
Heater rental (8) (12.5%,
Rentals Due 2/2009) 12,000,000 12,840,000
ARI Manufactur- Senior Term 1,190,141 1,188,653
Holdings, ing-auto Debt(6)
Inc. parts (9.75%, Due
6/2008)
Senior 3,657,164 3,634,306
Subordinated
Term Debt
(5)(6)
(11%, PIK 4%,
Due 12/2008)
Bear Creek Premium Senior 6,000,000 6,090,000
Corp- horticul- Subordinated
oration tural and Term Debt(7)
food (9.1%, Due
products 6/2010)
Benetech, Dust manage- Senior Term 3,168,750 3,160,828
systems ment for Debt(6)
Inc. the coal (8.5%, Due
and 5/2009)
electric Senior Term 3,250,000 3,241,875
utility Debt(3)(6)
industries (11.5%, Due
5/2009)
Burt's Personal & Senior Term 975,000 987,188
Bees, Inc. household Debt(7)
products (5.4%, Due
11/2009)
Coyne Industrial Senior Term 15,700,625 15,308,110
Inter- services Debt(3)(5)
national (6) (13.0%,
Enter- PIK 2%, Due
prises 7/2007)
Finn Manufac- Senior 10,500,000 7,612,500
Corp- turing - Subordinated
oration landscape Term Debt(6)
equipment (13.0%, Due
2/2006)
Common Stock 37,000 474,984
Warrants
Gammill, Designer and Senior Term 4,708,013 4,731,553
Inc. assembler Debt(6)
of quilting (9.5%, Due
machines and 12/2008)
accessories Senior Term 4,750,000 4,767,813
Debt(3)(6)
(12.0%, Due
12/2008)
Inca Metal Material Senior Term 2,387,548 2,136,855
Products handling Debt(3)(6)
Corpor- and storage (4.6%, Due
ation products 9/2006)
Kingway
Acquisition,
Inc.
Clymer
Acquisition,
Inc.
Maidenform, Intimate Senior 10,003,571 10,175,000
Inc. apparel Subordinated
Term Debt(7)
(9.4%, Due
5/2011)
Marcal Manufac- Senior 6,800,000 6,188,000
Paper turing - Subordinated
Mills, paper Term Debt(6)
Inc. products (13.0%, Due
12/2006)
First 9,254,715 9,254,715
Mortgage
Loan(5)
(16%, Due
12/2006)
MedAssets, Pharmaceu- Senior Term
Inc. ticals and Debt(7) 1,815,497 1,806,887
healthcare (5.9%, Due
GPO 3/2007)
Senior
Subordinated
Term Debt(7) 6,503,282 6,500,000
(11.2%, Due
3/2008)
Mistras Nondestruc- Senior Term 9,833,333 9,759,583
Holdings tive testing Debt(3)(6)
Corp. instruments, (10.5%, Due
systems 8/2008)
and services Senior Term
Debt(3)(6) 4,916,667 4,867,500
(12.5%, Due
8/2008)
Senior Term
Debt(3)(6) 1,000,000 1,000,000
(13.5%, Due
8/2008)
Woven Custom Senior Term
Electronics electrical Debt(3)(6) 2,488,000 2,484,890
Corporation cable (6.5%, Due
assemblies 3/2009)
Senior Term
Debt(4)(6) 12,000,000 11,985,000
(11.5%, Due
3/2009)
Total: $ 149,189,306 $ 146,446,240
(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, 2004 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 7 "Payment in Kind
Interest" of the Company's Form 10-Q for the quarter ended December 31,
2004 and Note 2 "Summary of Significant Accounting Policies" of the
Company's Form 10-K for the fiscal year ended September 30, 2004.
(6) Fair value was based on valuation prepared and provided by Standard &
Poor's Loan Evaluation Services.
(7) Marketable securities are valued based on the bid price, as of September
30, 2004, from the respective originating syndication agent's trading desk.
(8) Includes a success fee with a fair value of $660,000 and no cost basis.
GLADSTONE CAPITAL CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Three Months Ended December 31,
--------------------------------
2004 2003
-------------- --------------
INVESTMENT INCOME
Interest income -- investments $ 5,707,343 $ 3,539,696
Interest income -- cash and cash
equivalents 16,340 48,621
Interest income -- notes receivable
from officers 114,718 108,632
Fee income - 255,000
Other income 240,000 16,000
Total investment income 6,078,401 3,967,949
EXPENSES
Loan servicing 530,952 -
Management fee 327,302 -
Professional fees 238,722 152,771
Amortization of deferred financing fees 91,912 83,551
Interest 171,730 78,200
Stockholder related costs 71,769 52,660
Directors fees 27,000 24,333
Insurance 46,272 74,011
Salaries and benefits - 390,707
Rent - 37,760
General and administrative 43,160 135,320
Total expenses 1,548,819 1,029,313
Credit to management fee for fees
colleted by Gladstone Management (286,500) -
Total expenses net of credit
to management fee 1,262,319 1,029,313
NET INVESTMENT INCOME BEFORE INCOME
TAXES 4,816,082 2,938,636
Income tax expense 138,678 -
NET INVESTMENT INCOME 4,677,404 2,938,636
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Realized gain on sale of investment 9,750 -
Unrealized depreciation on derivative (24,811) -
Net unrealized appreciation
(depreciation) on investments 282,605 (1,557,562)
Net gain (loss) on investments 267,544 (1,557,562)
NET INCREASE IN STOCKHOLDERS' EQUITY
RESULTING FROM OPERATIONS $ 4,944,948 $ 1,381,074
NET INCREASE IN STOCKHOLDERS' EQUITY
RESULTING FROM OPERATIONS PER COMMON
SHARE:
Basic $ 0.44 $ 0.14
Diluted $ 0.43 $ 0.13
WEIGHTED AVERAGE SHARES OF COMMON
STOCK OUTSTANDING:
Basic 11,278,510 10,081,844
Diluted 11,615,796 10,333,529
GLADSTONE CAPITAL CORPORATION
FINANCIAL HIGHLIGHTS
(UNAUDITED)
Three Months Ended December 31,
--------------------------------
2004 2003
-------------- --------------
Per Share Data(1)
Net asset value at beginning of period $ 13.50 $ 12.97
Income from investment operations:
Net investment income(2) 0.41 0.29
Realized gain on sale of investment(2) - -
Net unrealized gain/(loss) on
investments(2) 0.03 (0.15)
Net unrealized (loss) on derivatives(2) - -
Total from investment operations 0.44 0.14
Less distributions:
Distributions from net investment income (0.36) (0.33)
Total distributions (0.36) (0.33)
Offering costs (0.01) -
Repayment of principal on notes receivable 0.01 0.01
Net asset value at end of period $ 13.58 $ 12.79
Per share market value at beginning
of period $ 22.71 $ 19.45
Per share market value at end of period 23.70 22.35
Total Return(3)(4) 5.94% 16.71%
Shares outstanding at end of period 11,278,510 10,081,844
Ratios/Supplemental Data
Net assets at end of period $ 153,150,107 $ 128,959,699
Average net assets $ 151,429,917 $ 129,002,039
Ratio of expenses to average net
assets -- annualized(5) 4.46% 3.19%
Ratio of net expenses to average net
assets -- annualized(6) 3.70% 3.19%
Ratio of net investment income to
average net assets -- annualized 12.36% 9.11%
(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) Ratio of expenses to average net assets is computed using expenses before
credit from Gladstone Management and income tax expense.
(6) Ratio of net expenses to average net assets is computed using total
expenses net of credits to management fee and income tax expense.
SOURCE Gladstone Capital Corp.
-0- 02/09/2005
/CONTACT: Harry Brill, CFO of Gladstone Capital Corp., +1-703-286-7000/
/Web site: http://www.gladstonecapital.com /