Gladstone Capital Reports Results for the Third Quarter Ended June 30, 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 $4.79 million or $0.41 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 $5.54 million or $0.48 per diluted common share Gladstone Capital Corp. (NASDAQ:GLAD) (the "Company") today announced earnings for the third quarter and nine months ended June June: see month. 30, 2006. All per share references are based on fully diluted weighted average common shares outstanding, unless otherwise noted. Net Investment Income for the third quarter ended June 30, 2006 was $4,788,082 or $0.41 per share, as compared to $4,372,426 or $0.38 per share for the third quarter ended June 30, 2005, an increase of 7.9% per share. Net Investment Income for the nine months ended June 30, 2006 was $14,434,312 or $1.25 per share, as compared to $13,481,088 or $1.16 per share for the nine months ended June 30, 2005, an increase of 7.8% per share. Net Increase in Net Assets Resulting from Operations for the third quarter ended June 30, 2006 was $5,543,076, or $0.48 per share, as compared to $3,934,153 or $0.34 per share for the same period one year ago, an increase of 41.2% per share. Net Increase in Net Assets Resulting from Operations for the nine months ended June 30, 2006 was $19,366,806, or $1.68 per share, as compared to $13,154,479 or $1.13 per share for the same period one year ago, an increase of 48.7% per share. The Company also recorded net unrealized appreciation on its investments of $812,991 for the third quarter ended June 30, 2006, as compared to net unrealized depreciation of $389,229 for the third quarter ended September September: see month. 30, 2005. For the nine months ended June 30, 2006, the Company recorded net unrealized appreciation on its investments of $5,769,820 as compared to net unrealized depreciation of $298,352 for the nine months ended June 30, 2005. Total assets were $207.5 million at June 30, 2006, as compared to $205.8 million at September 30, 2005. Net asset value was $13.95 per actual common share outstanding at June 30, 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 June 30, 2006 was 11.7%; there was no paid in kind interest during the three months. The annualized weighted average yield on the portfolio for the three months ended June 30, 2005 was 11.4% (without giving effect to paid in kind interest) and 11.8% (after giving effect to paid in kind interest). 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. 123(R) Share-Based Payment. Accordingly, the Company recorded $202,296 in stock option expense for the quarter ended June 30, 2006 and $279,618 for the nine months ending June 30, 2006. Third quarter highlights: --Closed approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $39.9 million of new investments; --Received principal repayments of $44.4 million, which included scheduled principal repayments; and --Received prepayment penalties Prepayment penalty A fee a borrower pays a lender when the borrower repays a loan before its scheduled time of maturity. and other income of $630,000. At June 30, 2006, the Company had 29 private company investments in debt and equity securities with an aggregate cost balance of $201.5 million and a fair value of $202.7 million. "Our strong third quarter earnings results included a 7.9 % per share increase in net investment income and an increase of 41.2% per share for net increase in net assets. Our results were driven by the continued portfolio strength and our ability to post positive results, despite additional loan prepayments Prepayments Payments made in excess of scheduled mortgage principal repayments. ," said Chip Stelljes, President and Chief Investment Officer. "We continue to see a steady flow of investment opportunities and expect to post positive results for our September 30, 2006 fiscal year end." Subsequent event highlights: --Purchased two syndicated loans Syndicated Loan A very large loan in which a group of banks work together to provide funds for one borrower. There is usually one lead bank that takes a small percentage of the loan and syndicates the rest to other banks. Notes: Also known as a "syndicated bank facility. for $6.5 million; --Extended one loan origination The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. for $5.7 million; --Received one full investment repayment Repayment The act of paying back a debt. Notes: Everyone has to repay their debts eventually. See also: Debt, Defeasance, Loan for $7.5 million; and --Declared monthly cash dividends of $0.14 per common share for each of the months of July July: see month. , August and September 2006. The financial statements below are without footnotes. We have filed a Form 10-Q Form 10-Q See 10-Q. today for the third quarter ended June 30, 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 Wednesday Wednesday: see week. , August 2, 2006 at 9:30 am ET to discuss third 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 two hours after the call and will be available through September 2, 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 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 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 June 30, 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)
June 30, September 30,
2006 2005
------------- -------------
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
============= =============
GLADSTONE CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) Three Months Three Months
Ended Ended
June 30, 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 693,965 687,971
Management fee 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 (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
GLADSTONE CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) Nine Months Nine Months
Ended Ended
June 30, 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 2,144,024 1,804,465
Management fee 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 (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
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 derivatives (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%
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
derivatives (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
Offering costs - (0.01)
Dilutive effect of share issuance (0.06) (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 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.
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