Gladstone Capital Corporation Reports Results for the Fourth Quarter and Fiscal Year Ended September 30, 2009
* Net Investment Income for the quarter ended September 30, 2009 was $4.2 million or $0.20 per common share * Net Investment Income for the fiscal year ended September 30, 2009 was $21.0 million or $1.00 per common share
MCLEAN, Va., Nov. 23, 2009 (GLOBE NEWSWIRE) -- Gladstone Capital Corp. (Nasdaq:GLAD) (the "Company") today announced earnings both for the quarter and fiscal year ended September 30, 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 September 30, 2009 was $4.2 million, or $0.20 per share, as compared to $6.1 million, or $0.29 per share, for the prior year, a decrease of 31%. Net Investment Income for the fiscal year ended September 30, 2009 was $21.0 million, or $1.00 per share, as compared to $26.6 million, or $1.35 per share, for the prior year period, a decrease in Net Investment Income of 21% and a decrease of 26% per share. Net Investment Income decreased primarily due to a decline in investment income resulting from the sale of loans, lower transaction fees paid by the portfolio companies (which are credited against base management fees) and the amortization of deferred financing fees incurred in connection with the Company's prior and current credit facility subsequent to September 30, 2008. The per-share results were also adversely impacted by the issuance of additional shares in public offerings during the fiscal year ended September 30, 2008.
Net Increase in Net Assets Resulting from Operations for the quarter ended September 30, 2009 was $3.4 million, or $0.16 per share, as compared to a Net Decrease in Net Assets Resulting from Operations of $14.1 million, or $0.67 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 lower net loss on the Company's investment portfolio. The Company recorded net loss on investments of $0.8 million for the quarter ended September 30, 2009, compared to net loss of $20.2 million for the prior year period.
Net Increase in Net Assets Resulting from Operations for the fiscal year ended September 30, 2009 was $3.8 million, or $0.18 per share, as compared to a Net Decrease in Net Assets Resulting from Operations of $21.3 million, or $1.08 per share, for the prior year. The increase in Net Assets Resulting from Operations from 2008 to 2009 was primarily due to the lower net loss on the Company's investment portfolio. The Company recorded net loss on investments of $17.2 million for the fiscal year ended September 30, 2009, compared to net loss of $47.8 million for the prior year.
The aggregate investment portfolio has appreciated since June 30, 2009. As of September 30, 2009, the entire portfolio was fair valued at 88% of cost. The cumulative unrealized depreciation of the Company's investments does not have an impact on its current ability to pay distributions to stockholders, although it may be an indication of future realized losses, which could ultimately reduce the Company's income available for distribution.
Total assets were $335.9 million at September 30, 2009, as compared to $425.7 million at September 30, 2008. Net asset value was $11.81 per actual common share outstanding at September 30, 2009, as compared to $12.89 per actual common share outstanding at September 30, 2008.
The annualized weighted average yield on the Company's portfolio, excluding cash, was 9.9% for the quarter and fiscal year ended September 30, 2009, as compared to 9.7% and 10.2% for the quarter and fiscal year ended September 30, 2008, respectively. 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 September 30, 2009.
For the fiscal year ended September 30, 2009, the Company reported the following significant activity:
* Funded approximately $26.4 million of additional investments to existing portfolio companies; * Received principal repayments of approximately $47.5 million, which included scheduled principal payments and full repayments; * Received aggregate net proceeds of approximately $49.2 million from the sale/exit of non-syndicated and syndicated loans; * Received approximately $0.4 million in success fees in connection with two investment refinancings and one amendment; * Converted three non-performing Non-Control/Non-Affiliate investments with an aggregate cost basis of approximately $37.0 million into Control investments; * Repaid in full the previous credit facility with Deutsche Bank, A.G. and entered into a new credit facility with Key Equipment Finance Inc. and Branch Bank and Trust Company for a $127.0 million line of credit, which matures on May 14, 2010, with a one year amortization period; * Renewed its advisory agreement with Gladstone Management Corporation and administration agreement with Gladstone Administration, LLC through August 31, 2010; and * Paid monthly cash distributions of $0.14 per share for each of the months of October 2008 through March 2009 and $0.07 per share for each of the months of April through September 2009.
At September 30, 2009, the Company had investments in 48 private companies with an aggregate cost basis of $364.4 million and an aggregate fair value of $321.0 million, as noted in the following table.
September 30, 2009
-----------------------
Cost Fair Value
---------- ----------
(in thousands)
Senior Term Debt $ 240,172 $ 212,290
Senior Subordinated Term Debt 118,743 105,794
Preferred Equity Securities 2,028 --
Common Equity Securities 3,450 2,885
---------- ----------
Total Investments $ 364,393 $ 320,969
========== ==========
"Times remain difficult given the economy and 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 significant discounts to original cost. Even though the values generally remained stable this quarter, we still believe the valuations are primarily more reflective of the overall poor market for loans rather than the performance of our specific portfolio."
Subsequent to September 30, 2009, the Company:
* Funded approximately $1.6 million of additional investments to existing portfolio companies; * Received approximately $7.8 million of repayments, including scheduled amortizations and repayments and syndicated loan sales; * Reduced the size of its credit facility by $20.0 million from $127.0 million to $107.0 million, which did not affect the Company's availability; * Filed a registration statement on Form N-2 with the Securities and Exchange Commission (the "SEC") on October 20, 2009. If and when it is declared effective, it 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 October, November and December 2009.
The financial statements below are without footnotes so readers should obtain and carefully review the Company's Form 10-K for the fiscal year ended September 30, 2009, including the footnotes to the financial statements contained therein. The Company has filed the Form 10-K today with the SEC, which can be retrieved from the SEC's website at www.sec.gov or from the Company's website at www.GlastoneCapital.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, November 24, 2009 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 December 24, 2009. To hear the replay, please dial (877) 660-6853, access playback account 286 and use ID code 334833. 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 www.GladstoneCapital.com and www.investorcalendar.com. The event will be archived and available for replay on the Company's website through February 24, 2010.
For further information contact Investor Relations at 703-287-5839.
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)
Sept. 30, Sept. 30,
2009 2008
--------- ---------
ASSETS
Non-Control/Non-Affiliate investments (Cost 9/30
/09: $312,043; 9/30/08: $448,356) $ 286,997 $ 407,153
Control investments (Cost 9/30/09: $52,350;
9/30/08: $12,514) 33,972 780
--------- ---------
Total investments at fair value (Cost 9/30/09:
$364,393; 9/30/08 $460,870) 320,969 407,933
Cash 5,276 6,493
Interest receivable - investments in debt
securities 3,048 3,588
Interest receivable - employees 85 91
Due from custodian 3,059 4,544
Due from Adviser 69 --
Deferred financing fees 1,230 1,905
Prepaid assets 341 306
Other assets 1,833 838
--------- ---------
TOTAL ASSETS $ 335,910 $ 425,698
========= =========
LIABILITIES
Accounts payable $ 67 $ 8
Interest payable 378 646
Fee due to Administrator 216 247
Due to Adviser 834 457
Borrowings under line of credit (Cost 9/30/09:
$83,000; 9/30/08: $151,030) 83,350 151,030
Accrued expenses and deferred liabilities 1,800 1,328
Funds held in escrow 189 234
--------- ---------
TOTAL LIABILITIES 86,834 153,950
--------- ---------
NET ASSETS $ 249,076 $ 271,748
========= =========
ANALYSIS OF NET ASSETS
Common stock, $0.001 par value, 50,000,000
shares authorized and 21,087,574 shares issued
and outstanding at September 30, 2009 and
September 30, 2008, respectively $ 21 $ 21
Capital in excess of par value 328,203 334,143
Notes receivable - employees (9,019) (9,175)
Net unrealized depreciation on investments (43,425) (52,937)
Net unrealized depreciation on derivative -- (304)
Net unrealized appreciation on borrowings under
line of credit (350) --
Accumulated Net Realized Losses (26,354) --
--------- ---------
TOTAL NET ASSETS $ 249,076 $ 271,748
========= =========
NET ASSETS PER SHARE $ 11.81 $ 12.89
========= =========
GLADSTONE CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three months ended
September 30
------------------------
2009 2008
----------- -----------
INVESTMENT INCOME
Interest income - non control/non affiliate
investments $ 9,038 $ 11,279
Interest income - control investments 57 19
Interest income - cash -- 50
Interest income - notes receivable from
employees 116 117
Prepayment fees and other income 72 88
----------- -----------
Total investment income 9,283 11,553
----------- -----------
EXPENSES
Interest expense 1,661 2,302
Loan servicing fee 1,061 1,576
Base management fee 631 548
Incentive fee -- 1,222
Administration fee 216 248
Professional fees 802 205
Amortization of deferred financing fees 531 704
Stockholder related costs 98 151
Directors' fees 46 57
Insurance expense 49 57
Other expenses 42 62
----------- -----------
Expenses before credit from Adviser 5,137 7,132
Credit to base management and incentive
fees from Adviser (13) (1,689)
----------- -----------
Total expenses net of credit to base
management and incentive fees 5,124 5,443
----------- -----------
NET INVESTMENT INCOME 4,159 6,110
----------- -----------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS,
DERIVATIVE AND BORROWINGS UNDER LINE OF
CREDIT:
Net realized loss on investments (12,086) (701)
Realized gain on settlement of derivative -- 1
Net unrealized appreciation (depreciation)
on investments 11,671 (19,478)
Net unrealized appreciation on borrowings
under line of credit (350) --
----------- -----------
Net loss on investments, derivative and
borrowings under line of credit (765) (20,178)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 3,394 $ (14,068)
=========== ===========
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS PER COMMON SHARE:
Basic and Diluted $ 0.16 $ (0.67)
=========== ===========
WEIGHTED AVERAGE SHARES OF COMMON STOCK
OUTSTANDING:
Basic and Diluted 21,087,574 21,087,574
GLADSTONE CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Year Ended September 30,
-------------------------------------
2009 2008 2007
----------- ----------- -----------
INVESTMENT INCOME
Interest income - non
control/non affiliate
investments $ 41,134 $ 44,733 $ 35,413
Interest income - control
investments 933 64 --
Interest income - cash 11 335 256
Interest income - notes
receivable from employees 468 471 526
Prepayment fees and other
income 72 122 492
----------- ----------- -----------
Total investment income 42,618 45,725 36,687
----------- ----------- -----------
EXPENSES
Interest expense 7,949 8,284 7,226
Loan servicing fee 5,620 6,117 3,624
Base management fee 2,005 2,212 2,402
Incentive fee 3,326 5,311 4,608
Administration fee 872 985 719
Professional fees 1,586 911 523
Amortization of deferred
financing fees 2,778 1,534 267
Stockholder related costs 415 443 217
Directors' fees 197 220 234
Insurance expense 241 227 249
Other expenses 278 325 328
----------- ----------- -----------
Expenses before credit from
Adviser 25,267 26,569 20,397
Credit to base management
and incentive fees from
Adviser (3,680) (7,397) (5,971)
----------- ----------- -----------
Total expenses net of
credit to base management
and incentive fees 21,587 19,172 14,426
----------- ----------- -----------
NET INVESTMENT INCOME 21,031 26,553 22,261
----------- ----------- -----------
REALIZED AND UNREALIZED LOSS
ON INVESTMENTS, DERIVATIVE
AND BORROWINGS UNDER LINE OF
CREDIT:
Net realized (loss) gain on
investments (26,411) (787) 44
Realized (loss) gain on
settlement of derivative (304) 7 39
Net unrealized appreciation
(depreciation) on
derivative 304 (12) (38)
Net unrealized appreciation
(depreciation) on
investments 9,513 (47,023) (7,354)
Net unrealized appreciation
on borrowings under line of
credit (350) -- --
----------- ----------- -----------
Net loss on investments,
derivative and borrowings
under line of credit (17,248) (47,815) (7,309)
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS $ 3,783 $ (21,262) $ 14,952
=========== =========== ===========
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS PER COMMON SHARE:
Basic and Diluted $ 0.18 $ (1.08) $ 1.13
=========== =========== ===========
WEIGHTED AVERAGE SHARES OF
COMMON STOCK OUTSTANDING:
Basic and Diluted 21,087,574 19,699,796 13,173,822
GLADSTONE CAPITAL CORPORATION
FINANCIAL HIGHLIGHTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT DATA)
(UNAUDITED)
Three months ended
September 30,
2009 2008
----------- -----------
Per Share Data: (1)
--------------
Net asset value at beginning of period $ 11.86 $ 13.97
----------- -----------
Income from investment operations (2)
Net investment income 0.20 0.29
Net realized loss on the sale of
investments (0.57) (0.03)
Net unrealized (depreciation)
appreciation on investments 0.55 (0.93)
Net unrealized appreciation on
borrowings under line of credit (0.02) --
----------- -----------
Total from investment operations 0.16 (0.67)
----------- -----------
Distributions to stockholders from (2)(3) (0.21) (0.42)
Capital share transactions:
Issuance of common stock under shelf
offering -- 0.01
----------- -----------
Total from capital share transactions -- 0.01
----------- -----------
Net asset value at end of period $ 11.81 $ 12.89
=========== ===========
Per share market value at beginning of
period $ 7.53 $ 19.52
Per share market value at end of period $ 8.93 $ 15.24
Total return (4) (21.48)% (13.90)%
Shares outstanding at end of period 21,087,574 21,087,574
Statement of Assets and Liabilities
Data:
-----------------------------------
Net assets at end of period $ 249,076 $ 271,748
Average net assets(5) $ 248,606 $ 284,304
Senior Securities Data:
-----------------------
Borrowing under line of credit $ 83,350 $ 151,030
Asset coverage ratio (6)(7) 399% 286%
Average coverage per unit (7) $ 3,988 $ 2,860
Ratios/Supplemental Data:
-------------------------
Ratio of expenses to average net
assets (8) 8.27% 10.07%
Ratio of net expenses to average net
assets (9) 8.24% 7.69%
Ratio of net investment income to
average net assets 6.69% 8.63%
-----------------------
(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) Average net assets are computed using the average of the balance
of net assets at the end of each month of the reporting period.
(6) 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.
(7) 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 $1,000 of indebtedness.
(8) 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.
(9) 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.
GLADSTONE CAPITAL CORPORATION
FINANCIAL HIGHLIGHTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT DATA)
(UNAUDITED)
Year ended September 30,
---------------------------------------
2009 2008 2007
----------- ----------- -----------
Per Share Data: (1)
--------------
Net asset value at
beginning of period $ 12.89 $ 14.97 $ 14.02
----------- ----------- -----------
Income from investment
operations (2)
Net investment income 1.00 1.35 1.69
Net realized loss on the
sale of investments (1.25) (0.04) --
Realized loss on
settlement of
derivative (0.01) -- --
Net unrealized
appreciation on
derivative 0.01 -- --
Net unrealized
(depreciation)
appreciation on
investments 0.45 (2.39) (0.56)
Net unrealized
appreciation on
borrowings under line
of credit (0.02) -- --
----------- ----------- -----------
Total from investment
operations 0.18 (1.08) 1.13
----------- ----------- -----------
Distributions to
stockholders from (2)(3)
Net investment income (0.99) (1.31) (1.48)
Gains -- (0.01) (0.20)
Tax return on capital (0.27) (0.36) --
----------- ----------- -----------
Total distributions (1.26) (1.68) (1.68)
----------- ----------- -----------
Capital share transactions:
Issuance of common stock
under shelf offering -- 0.72 1.55
Offering costs -- (0.04) (0.05)
Repayment of principal on
notes receivable -- -- 0.06
Stock surrendered to
settle withholding tax
obligation -- -- (0.06)
----------- ----------- -----------
Total from capital
share transactions -- 0.68 1.50
----------- ----------- -----------
Net asset value at end of
period $ 11.81 $ 12.89 $ 14.97
=========== =========== ===========
Per share market value at
beginning of period $ 15.24 $ 19.52 $ 22.01
Per share market value at
end of period $ 8.93 $ 15.24 $ 19.52
Total return (4) (30.94)% (13.90)% (4.40)%
Shares outstanding at end
of period 21,087,574 21,087,574 14,762,574
Statement of Assets and
Liabilities Data:
-----------------------
Net assets at end of
period $ 249,076 $ 271,748 $ 220,959
Average net assets(5) $ 253,316 $ 284,304 $ 189,732
Senior Securities Data:
-----------------------
Borrowing under line of
credit $ 83,350 $ 151,030 $ 144,440
Asset coverage ratio
(6)(7) 399% 286% 259%
Average coverage per unit
(7) $ 3,988 $ 2,860 $ 2,594
Ratios/Supplemental Data:
-------------------------
Ratio of expenses to
average net assets (8) 9.97% 9.34% 10.75%
Ratio of net expenses to
average net assets (9) 8.52% 6.74% 7.60%
Ratio of net investment
income to average net
assets 8.30% 9.34% 11.73%
------------------------
(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) Average net assets are computed using the average of the balance
of net assets at the end of each month of the reporting period.
(6) 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.
(7) 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 $1,000 of indebtedness.
(8) 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.
(9) 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 Corp.
Investor Relations
703-287-5839
Released November 23, 2009