Gladstone Capital Corp. Reports Results for the Second Quarter Ended March 31, 2006.MCLEAN McLean, city (1990 pop. 38,168), Fairfax co., N Va., a suburb of Washington, D.C. Manufacturing includes foods, satellite components, and computer and telecommunications equipment. , Va. -- Gladstone Gladstone, city (1990 pop. 26,243), Clay co., W Mo., a suburb surrounded by Kansas City; founded c.1878, inc. 1952. The city has diverse light industries. Capital Corp. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :GLAD): --Net Investment Income was $5.2 million or $0.45 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. common share --Net Increase in Net Assets Net assets The difference between total assets on the one hand and current liabilities and noncapitalized long-term liabilities on the other hand. net assets See owners' equity. was $5.6 million or $0.48 per diluted common share Gladstone Capital Corp. (NASDAQ:GLAD) (the "Company") today announced earnings for the second quarter and six months ended March 31, 2006. All per share references are based on fully diluted weighted average common shares outstanding, unless otherwise noted. Net Investment Income for the second quarter ended March 31, 2006 was $5,203,816, or $0.45 per share, as compared to $4,431,258 or $0.38 per share for the second quarter ended March 31, 2005, an increase of 18% per share. Net Investment Income for the six months ended March 31, 2006 was $9,646,230, or $0.83 per share, as compared to $9,108,662 or $0.78 per share for the six months ended March 31, 2005, an increase of 6% per share. Net Increase in Net Assets Resulting from Operations for the second quarter ended March 31, 2006 was $5,590,381, or $0.48 per share, as compared to $4,275,378 or $0.37 per share for the same period one year ago, an increase of 30% per share. Net Increase in Net Assets Resulting from Operations for the six months ended March 31, 2006 was $13,823,730, or $1.20 per share, as compared to $9,220,326 or $0.79 per share for the same period one year ago, an increase of 52% per share. The Company also recorded net unrealized depreciation on its investments of $15,593 for the second quarter ended March 31, 2006, as compared to net unrealized depreciation of $191,728 for the second quarter ended March 31, 2005. For the six months ended March 31, 2006, the Company recorded net unrealized appreciation on its investments of $4,956,829 as compared to net unrealized appreciation of $90,877 for the six months ended March 31, 2005. Total assets were $217,725,319 at March 31, 2006, as compared to $205,793,094 at September September: see month. 30, 2005. Net asset value was $13.84 per actual common share outstanding, at March 31, 2006, as compared to $13.41 per actual common share outstanding, at September 30, 2005. The annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. weighted average yield on the Company's portfolio for the three months ended March 31, 2006 was 12.7% (without giving effect to paid in kind interest) and 12.7% (after giving effect to paid in kind interest) as compared to 11.6% and 13.5%, respectively, for the same quarter one year ago. Beginning April 1, 2006 the Company has no investments with paid in kind interest. On October October: see month. 1, 2005 the Company began recording stock option expense for stock-based awards, in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with Statement of Financial Accounting Standards No. 123R Share-Based Payment. Accordingly, the Company recorded $34,065 in stock option expense for the quarter ended March 31, 2006 and $77,322 for the six months ending March 31, 2006. Second quarter highlights: --New investments of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $38.5 million; --Principal repayments of $24.8 million, which included scheduled principal repayments; --Success fee of approximately $556,000; --Gain of approximately $378,000 on the sale of a loan investment; and --Prepayment penalties of approximately $14,000. At March 31, 2006, the Company had 28 private company investments in debt and equity securities with an aggregate cost balance of $206.0 million and a fair value of $206.5 million. "Our strong second quarter earnings results included reporting an 18% increase in net investment income, partially driven by a success fee of nearly $556,000. During the quarter we placed several new loans into the portfolio, although we continue to experience additional loan prepayments Prepayments Payments made in excess of scheduled mortgage principal repayments. ," said Chip Stelljes, President and Chief Investment Officer. "We are seeing a steady flow of investment opportunities and expect to post positive results for the second half of 2006." Subsequent event highlights: --Purchase of three syndication See syndication format. loans for $10.0 million; --Receipt of three full investment repayments for $24.9 million; and --Declared monthly cash dividends of $0.135 per common share for each of the months of April, May and June June: see month. 2006. Also subsequent to March 31, 2006, the Board of Directors approved an offer to the executive officers and directors of the Company and the employees of the Company's external investment adviser, Gladstone Management Corporation, who hold stock options (the "Optionees"), to amend the terms of all stock options currently outstanding (the "Options") under the Company's Amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. and Restated 2001 Equity Incentive Plan, as amended, to accelerate the expiration date Expiration Date The day on which an options or futures contract is no longer valid and, therefore, ceases to exist. Notes: The expiration date for all listed stock options in the U.S. of the Options to September 30, 2006. The offer is conditioned upon its acceptance by all of the Optionees, so that if the offer is accepted 100% of the outstanding Options will be amended to expire expire /ex·pire/ (ek-spi´er) 1. to exhale. 2. to die. ex·pire v. 1. To breathe one's last breath; die. 2. To exhale. on September 30, 2006. The offer to amend the Options is currently scheduled to expire at 5:00 p.m., Eastern Time, on May 31, 2006. The Company filed a Schedule TO and related documentation regarding the offer with the Securities and Exchange Commission on April 12, 2006. The financial statements below are without footnotes. We have filed a Form 10-Q Form 10-Q See 10-Q. today for the second quarter ended March 31, 2006 with the Securities and Exchange Commission (the "SEC"), which can be retrieved from the SEC's website at www.SEC.gov See .gov and GovNet. (networking) gov - The top-level domain for US government bodies. or from the Company's web site at www.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 Thursday Thursday: see week. , May 4, 2006 at 9:30 am EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT to discuss second quarter earnings. Please call (877) 407-9205 to enter the conference. An operator will monitor the call and set a queue Pronounced "Q." A temporary holding place for data. See queuing, message queue and print queue. (programming) queue - A first-in first-out data structure used to sequence objects. Objects are added to the tail of the queue ("enqueued") and taken off the head ("dequeued"). for the questions. The conference call replay will be available approximately two hours after the call and will be available through June 3, 2006. To hear the replay, please dial (877) 660-6853, access playback Playback could mean:
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. For further information contact our Investor Relations Investor relations The process by which the corporation communicates with its investors. Manager, Kelly Kel·ly , Ellsworth Born 1923. American abstract painter and sculptor whose works are characterized by flat color areas with sharply defined edges. Kelly, Emmett 1898-1979. Sargent at 703-287-5835. This press release may include statements that may constitute "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " 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 Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. by such forward-looking statements include, among others, those factors listed under the caption "Risk factors" of the Company's Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the fiscal year ended September 30, 2005, as filed with the Securities and Exchange Commission ("SEC") on December December: see month. 13, 2005 and as listed in the Form 10-Q for the quarter ended March 31, 2006, as filed with the SEC today. 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 STATEMENTS OF ASSETS & LIABILITIES
(Unaudited)
March 31, September 30,
2006 2005
------------- -------------
ASSETS
Investments at fair value (Cost 3/31/2006:
$206,033,242; 9/30/2005: $205,375,554) $206,461,282 $200,846,763
Cash and cash equivalents 311,090 503,776
Interest receivable - investments in debt
securities 1,063,698 1,406,212
Interest receivable - officers 13,015 27,067
Due from custodian 9,251,975 2,624,074
Due from Adviser 320,621 -
Deferred financing fees 23,536 70,000
Prepaid assets 145,036 177,848
Other assets 135,066 137,354
------------- -------------
TOTAL ASSETS $217,725,319 $205,793,094
============= =============
LIABILITIES
Accounts payable $ 4,589 $ 21,893
Interest payable 278,951 183,707
Fees due to Adviser 230,182 391,322
Borrowings under lines of credit 60,300,000 53,034,064
Accrued expenses and deferred liabilities 249,286 350,665
Funds held in escrow 200,800 200,760
------------- -------------
Total Liabilities 61,263,808 54,182,411
------------- -------------
Net Assets $156,461,511 $151,610,683
============= =============
ANALYSIS OF NET ASSETS
Common stock, $0.001 par value,
50,000,000 shares authorized and
11,308,510 and 11,303,510 shares issued
and outstanding, respectively $ 11,309 $ 11,304
Capital in excess of par value 164,774,090 164,610,873
Notes receivable - employees (8,722,687) (8,745,781)
Net unrealized appreciation/(depreciation)
on investments 428,038 (4,528,791)
Unrealized depreciation on derivative (229,981) (253,747)
Realized (loss)/gain on sale of
investments (760,845) 42,250
Distributions less than net investment
income 961,587 474,575
------------- -------------
Total Net Assets $156,461,511 $151,610,683
============= =============
Net Assets Per Share $ 13.84 $ 13.41
============= =============
GLADSTONE CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Three Months
Ended Ended
March 31, March 31,
2006 2005
------------ ------------
INVESTMENT INCOME
Interest income - investments $ 6,875,264 $ 5,198,180
Interest income - cash and cash
equivalents 4,624 5,130
Interest income - notes receivable from
employees 107,033 113,599
Prepayment fees and other income 13,779 569,620
------------ ------------
Total investment income 7,000,700 5,886,529
------------ ------------
EXPENSES
Loan servicing 734,644 585,542
Management fee 352,379 390,007
Professional fees 110,887 156,383
Amortization of deferred financing fees 32,286 91,912
Interest expense 948,166 439,521
Stockholder related costs 115,864 104,541
Directors fees 30,212 24,000
Insurance expense 50,590 43,890
Stock option compensation 34,065 -
General and administrative expenses 60,791 69,475
------------ ------------
Expenses before credit from
Gladstone Management 2,469,884 1,905,271
------------ ------------
Credit to management fee for fees collected
by Gladstone Management (673,000) (450,000)
------------ ------------
Total expenses net of credit to
management fee 1,796,884 1,455,271
------------ ------------
NET INVESTMENT INCOME BEFORE INCOME TAXES 5,203,816 4,431,258
------------ ------------
Income tax expense - -
------------ ------------
NET INVESTMENT INCOME 5,203,816 4,431,258
------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Realized gain on sale of investments 377,500 20,000
Unrealized appreciation on derivative 24,658 15,848
Net unrealized depreciation on investments (15,593) (191,728)
------------ ------------
Net unrealized gain (loss) on
investments 386,565 (155,880)
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 5,590,381 $ 4,275,378
============ ============
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS PER COMMON SHARE:
Basic $ 0.49 $ 0.38
============ ============
Diluted $ 0.48 $ 0.37
============ ============
WEIGHTED AVERAGE SHARES OF COMMON STOCK
OUTSTANDING:
Basic 11,308,510 11,288,833
Diluted 11,536,360 11,620,603
GLADSTONE CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Six Months Six Months
Ended Ended
March 31, March 31,
2006 2005
------------ ------------
INVESTMENT INCOME
Interest income - investments $12,722,371 $10,905,523
Interest income - cash and cash equivalents 13,536 21,470
Interest income - notes receivable from
employees 214,126 228,317
Prepayment fees and other income 80,986 809,620
------------ ------------
Total investment income 13,031,019 11,964,930
------------ ------------
EXPENSES
Loan servicing 1,450,059 1,116,494
Management fee 621,080 717,309
Professional fees 233,353 395,105
Amortization of deferred financing fees 58,536 183,824
Interest expense 1,600,244 611,251
Stockholder related costs 244,799 176,310
Directors fees 54,212 51,000
Insurance expense 101,367 90,162
Stock option compensation 77,322 -
General and administrative expenses 116,580 112,635
------------ ------------
Expenses before credit from
Gladstone Management 4,557,552 3,454,090
------------ ------------
Credit to management fee for fees collected
by Gladstone Management (1,223,000) (736,500)
------------ ------------
Total expenses net of credit to
management fee 3,334,552 2,717,590
------------ ------------
NET INVESTMENT INCOME BEFORE INCOME TAXES 9,696,467 9,247,340
------------ ------------
Income tax expense 50,237 138,678
------------ ------------
NET INVESTMENT INCOME 9,646,230 9,108,662
------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Realized (loss) gain on sale of investments (803,095) 29,750
Unrealized appreciation (depreciation) on
derivative 23,766 (8,963)
Net unrealized appreciation on investments 4,956,829 90,877
------------ ------------
Net unrealized gain on investments 4,177,500 111,664
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $13,823,730 $ 9,220,326
============ ============
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS PER COMMON SHARE:
Basic $ 1.22 $ 0.82
============ ============
Diluted $ 1.20 $ 0.79
============ ============
WEIGHTED AVERAGE SHARES OF COMMON STOCK
OUTSTANDING:
Basic 11,307,510 11,283,671
Diluted 11,555,479 11,614,219
GLADSTONE CAPITAL CORPORATION
FINANCIAL HIGHLIGHTS
(Unaudited)
Three Months Ended March 31,
2006 2005
-------------- --------------
Per Share Data (1)
------------------
Net asset value at beginning of period $13.74 $13.58
-------------- --------------
Income from investment operations:
Net investment income (2) 0.46 0.39
Realized gain (loss) on sale of
investments (2) 0.03 -
Net unrealized gain (loss) on
investments (2) - (0.02)
Net unrealized gain on derivatives (2) - -
-------------- --------------
Total from investment operations 0.49 0.37
-------------- --------------
Less distributions:
Distributions from net investment
income (0.41) (0.36)
-------------- --------------
Total distributions (0.41) (0.36)
-------------- --------------
Issuance of common stock under stock
option plan - 0.01
Repayment of principal on notes
receivable - 0.06
Dilutive effect of share issuance - (0.02)
Effect of antidilution(3) 0.02 -
-------------- --------------
Net asset value at end of period $13.84 $13.64
============== ==============
Per share market value at beginning of
period $21.38 $23.70
Per share market value at end of period 21.55 21.22
Total return (4)(5) 2.78% -9.07%
Shares outstanding at end of period 11,308,510 11,298,510
Ratios/Supplemental Data
------------------------
Net assets at end of period $156,461,511 $154,141,310
Average net assets $154,397,504 $152,288,314
Ratio of expenses to average net assets -
annualized (6) 6.40% 5.00%
Ratio of net expenses to average net
assets - annualized (7) 4.66% 3.82%
Ratio of net investment income to average
net assets - annualized 13.48% 11.64%
Six Months Ended March 31,
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) 0.85 0.81
Realized (loss) gain on sale of
investments (2) (0.07) -
Net unrealized gain on investments (2) 0.44 0.01
Net unrealized gain (loss) on
derivatives (2) - -
-------------- --------------
Total from investment operations 1.22 0.82
-------------- --------------
Less distributions:
Distributions from net investment
income (0.81) (0.72)
-------------- --------------
Total distributions (0.81) (0.72)
-------------- --------------
Issuance of common stock under stock
option plan 0.01 0.01
Offering costs - (0.01)
Repayment of principal on notes
receivable - 0.07
Dilutive effect of share issuance - (0.03)
Effect of antidilution(3) 0.01 -
-------------- --------------
Net asset value at end of period $ 13.84 $ 13.64
============== ==============
Per share market value at beginning of
period $ 22.55 $ 22.71
Per share market value at end of period 21.55 21.22
Total return (4)(5) -0.75% -3.66%
Shares outstanding at end of period 11,308,510 11,298,510
Ratios/Supplemental Data
------------------------
Net assets at end of period $156,461,511 $154,141,310
Average net assets $152,679,547 $151,859,115
Ratio of expenses to average net assets -
annualized (6) 6.04% 4.73%
Ratio of net expenses to average net
assets - annualized (7) 4.43% 3.76%
Ratio of net investment income to average
net assets - annualized 12.64% 12.00%
(1) Basic per share data.
(2) Based on weighted average basic per share data.
(3) Represents the antidilutive impact of other components in changes
in net assets and the different share amounts used in calculating
per share data as a result of calculating certain per share data
based upon the weighted average basic shares outstanding during
the period and certain per share data based on the shares
outstanding as of a period end.
(4) 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.
(5) Amounts were not annualized.
(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 to management fee and including
income tax expense.
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