Rand Capital Achieves Second Consecutive Year of Record Net Asset Value in 2014
March 10 2015 - 6:55AM
- Net asset value per share at year-end was $5.11 per
share, up 17% over the prior year
- Record exit of $10.1 million realized from sale of
portfolio company in fourth quarter
- Invested $350,000 in two new companies in the quarter
and made $610,000 of follow-on investments
- Solid balance sheet for growth: Cash for additional
investments at year-end was $13.2 million, or $2.09 per
share
Rand Capital Corporation (Nasdaq:RAND) ("Rand"), a business
development company that makes venture capital investments in
companies with emerging product, service or technology concepts,
announced its fourth quarter and year-end results for 2014.
Fourth Quarter and Full Year 2014 Financial
Highlights
- Achieved $5.11 net asset value (NAV) per share at year-end
- Increased $0.64 per share, or 14%, over Q3 2014
- Up $0.73 per share, or 17%, over year-end 2013
- Attained record annual net increase in net assets from
operations of $4.5 million, or $0.72 per share, for 2014
- Invested $960,000 in the quarter and $6.3 million for the
year
- Realized gains of $8.3 million during the fourth quarter,
driven by a record portfolio exit
- Investment portfolio fair value increased $1.96 million in 2014
to $30.3 million
- $13.2 million in cash at year-end, a new record; provides
measurable future investment capacity
Allen F. ("Pete") Grum, President and Chief Executive Officer of
Rand Capital, commented, "Our strong fourth quarter performance
contributed to record results for the year. Our portfolio companies
executed well, and we benefitted from the exit of a major portfolio
equity investment. We recorded $10.1 million in proceeds for this
divestiture. Importantly, we ended the year with a substantial
level of cash that we can direct toward future investments."
Portfolio and Investment Activity
At year-end, Rand's portfolio consisted of 29 businesses valued
at $30.3 million, with Gemcor II, LLC being the largest and most
profitable investment valued at $9.9 million. Gemcor designs,
engineers and manufactures aircraft assembly solutions for the
global aerospace industry. Products include automated
fastening and riveting machines.
Total investments in the portfolio at fair value was comprised
of approximately 50% in manufacturing, 19% in software, 10% in
healthcare and 21% in a diverse group of other industry
categories.
The portfolio included approximately 20% in debt investments and
80% in equity investments.
During the quarter ended December 31, 2014, Rand made new
investments of $960,000. This included $350,000 in two new
portfolio companies and $610,000 in four existing portfolio
companies. During the period, Rand had $10.1 million in exit
proceeds from the sale of a portfolio company to a strategic
acquirer. New portfolio companies in the fourth quarter
included:
- OnCore Golf Technology, Inc.: A designer and marketer of
the first USGA conforming, patented, hollow-metal core golf
ball. The proprietary alloy used in the hollow-metal core,
combined with ultra-high performance polymer composite blends in
the mantle layer, shifts the ball's weight to the perimeter, which
increases the moment of inertia and results in reduced
sidespin. Rand acquired 80,000 Series AA Preferred shares of
OnCore for $200,000.
- BeetNPath, LLC: A frozen food manufacturer that produces
entrees made from 100% steel cut oats. The products are
currently being marketed through a leading grocer in the Upstate NY
and other Northeast and Mid-Atlantic markets. Rand invested
$150,000 in a convertible note.
Also in 2014, Rand added five other new companies to its
portfolio: Crashmob, LLC (Statisfy.co), CrowdBouncer, LLC,
Empire Genomics, LLC, Kinex Pharmaceuticals, Inc., and Teleservices
Holdings Solutions, LLC. Rand divested three companies in the
year, including the record fourth quarter exit. Further
information on Rand's portfolio companies can be found at
www.randcapital.com
Liquidity and Capital Resources
Rand's primary objective for growth is focused on increasing net
asset value through capital appreciation. As a result, the
investment portfolio is not structured to provide yield in the form
of dividends or interest payments. The average age of
investments in Rand's portfolio is greater than four years,
indicating an opportunity for exits and incremental capital for
future investments.
Cash on hand at year-end was a record $13.2 million. This
combined with expected investment income provides sufficient
capital to invest in new opportunities to continue to grow the
portfolio while covering operating cash flows.
In 2014, the Corporation repurchased 83,000 of its common shares
at an average price of $3.09, a discount of approximately 40% from
its net asset value at year-end. The shares repurchased in
2014 were acquired primarily during the fourth quarter. Rand
can repurchase up to an additional 465,504 shares under its current
authorization through October 2015.
Strategy and Outlook
Mr. Grum concluded, "This is an exciting time for Rand
Capital. We have had great success with our SBIC investments
generating an average compounded gross return of approximately 20%
over the last decade, and we believe we have effectively reinvested
our gains in the right opportunities to continue expanding our
assets. Our portfolio companies are executing well. As a
result, we expect to accelerate our rate of investment and continue
to build net asset value. Given the improving economic
conditions in the U.S., the quality of our current portfolio
companies and the pipeline of investment opportunities before us,
we expect to continue to demonstrate our capabilities to create
value for our investors."
ABOUT RAND CAPITAL Rand Capital (Nasdaq:RAND)
provides investors the ability to participate in venture capital
opportunities through an investment in the Company's
stock. Rand is a Business Development Company (BDC), and its
wholly-owned subsidiary is licensed by the U.S. Small Business
Administration (SBA) as a Small Business Investment Company
(SBIC). Rand focuses its investments in early or expansion
stage companies with strong leadership that are bringing to market
new or unique products, technologies or services that have a high
potential for growth. Additional information can be found at
the Company's website where it regularly posts
information: www.randcapital.com.
Safe Harbor Statement This news release
contains "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements
include, but are not limited to, statements concerning future
revenue and earnings, involve known and unknown risks,
uncertainties and other factors that could cause the actual results
of the Corporation to differ materially from the results expressed
or implied by such statements, including general economic and
business conditions, conditions affecting the valuation of the
Corporation's portfolio, the timing and opportunity for investments
or divestitures as well as conditions affecting the portfolio
companies' markets, competitor responses, and market acceptance of
their products and services and other factors disclosed in the
Corporation's periodic reports filed with the Securities and
Exchange Commission. Consequently, such forward looking
statements should be regarded as the Corporation's current plans,
estimates and beliefs. The Corporation assumes no obligation
to update the forward-looking information contained in this
release.
FINANCIAL TABLES FOLLOW.
Rand Capital
Corporation and Subsidiary |
Consolidated Statements
of Operations |
|
|
|
For the Year
Ended December 31, |
|
2014 |
2013 |
Investment
income: |
|
|
Interest from portfolio
companies: |
|
|
Control investments |
$112,218 |
$154,695 |
Affiliate investments |
481,649 |
491,339 |
Non-Control/Non-Affiliate
investments |
195,681 |
147,037 |
Total interest from portfolio
companies |
789,548 |
793,071 |
Interest from other
investments: |
|
|
Non-Control/Non-Affiliate
investments |
14,288 |
10,932 |
Total interest from other
investments |
14,288 |
10,932 |
Dividend and other investment
income: |
|
|
Control investments |
1,549,185 |
1,482,202 |
Affiliate investments |
198,723 |
124,761 |
Non-Control/Non-Affiliate
investments |
2,531 |
16,670 |
Total dividend and other
investment income |
1,750,439 |
1,623,633 |
Fee income: |
|
|
Control investments |
12,000 |
14,000 |
Affiliate investments |
8,866 |
4,400 |
Non-Control/Non-Affiliate
investments |
9,334 |
5,000 |
Total fee income |
30,200 |
23,400 |
Total investment income |
2,584,475 |
2,451,036 |
Operating expenses: |
|
|
Salaries |
590,675 |
541,500 |
Bonus and profit sharing |
936,344 |
967,244 |
Employee benefits |
169,808 |
233,967 |
Directors' fees |
112,500 |
101,250 |
Professional fees |
164,740 |
126,612 |
Stockholders and office
operating |
133,505 |
135,483 |
Insurance |
35,709 |
34,304 |
Corporate development |
64,490 |
80,338 |
Other operating |
19,116 |
14,977 |
|
2,226,887 |
2,235,675 |
Interest on SBA
obligations |
266,099 |
188,231 |
Bad debt expense
(recovery) |
6,311 |
(64,654) |
Total expenses |
2,499,297 |
2,359,252 |
Investment gain before income
taxes |
85,178 |
91,784 |
Income tax expense
(benefit) |
63,343 |
(62,694) |
Net investment
gain |
21,835 |
154,478 |
Net realized gain (loss) on
investments: |
|
|
Affiliate investments |
(617,619) |
(1,063,698) |
Non-Control/Non-Affiliate
investments |
7,855,556 |
8,097,878 |
Realized gain on sales and
dispositions, net, before income tax expense |
7,237,937 |
7,034,180 |
Income tax expense |
2,470,453 |
2,659,826 |
Net realized gain on sales and
disposition of investments |
4,767,484 |
4,374,354 |
Net (decrease) increase in unrealized
appreciation on investments: |
|
|
Control investments |
5,336 |
19,178 |
Affiliate investments |
(270,020) |
972,991 |
Non-Control/Non-Affiliate
investments |
(97,160) |
(3,826,153) |
Change in unrealized
appreciation before income taxes |
(361,844) |
(2,833,984) |
Deferred income tax
(benefit) |
(114,006) |
(1,178,509) |
Net decrease in unrealized
appreciation |
(247,838) |
(1,655,475) |
Net realized and unrealized gain on
investments |
4,519,646 |
2,718,879 |
Net increase in net assets from
operations |
$4,541,481 |
$2,873,357 |
Weighted average shares
outstanding |
6,391,175 |
6,513,385 |
Basic and diluted net increase in net
assets from operations per share |
$0.71 |
$0.44 |
|
Rand Capital
Corporation and Subsidiary |
Top Five
Portfolio Companies at December 31, 2014 |
Company |
Industry |
Fair Value |
% of Total
Assets |
Gemcor II, LLC |
Manufacturing – Aerospace Machinery |
$9,922,800 |
22% |
Rheonix, Inc. |
Health Care – Testing Devices |
$2,235,999 |
5% |
Microcision LLC |
Manufacturing – Medical Products |
$1,891,964 |
4% |
Carolina Skiff LLC |
Consumer Products – Boats |
$1,710,000 |
4% |
Chequed.com, Inc. |
Software |
$1,633,222 |
3% |
TOTAL |
|
|
38% |
|
Rand Capital
Corporation and Subsidiary |
Consolidated Statements
of Financial Position |
|
|
|
December
31, |
|
2014 |
2013 |
ASSETS |
|
|
Investments at fair value: |
|
|
Control investments (cost of
$1,347,300 and $1,640,156, respectively) |
$10,022,300 |
$10,309,819 |
Affiliate investments (cost of
$15,188,935 and $12,844,406, respectively) |
14,617,378 |
12,542,869 |
Non-affiliate investments (cost
of $5,677,241 and $5,410,248, respectively) |
5,665,698 |
5,495,865 |
Total investments, at fair
value (cost of $22,213,476 and $19,894,810, respectively) |
30,305,376 |
28,348,553 |
Cash |
13,230,717 |
9,764,810 |
Interest receivable (net of
allowance: 2014: $128,311 and 2013: $122,000) |
165,094 |
58,093 |
Other assets |
1,824,800 |
1,578,914 |
Total assets |
|
|
|
$45,525,987 |
$39,750,370 |
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
(NET ASSETS) |
|
|
Liabilities: |
|
|
Debentures guaranteed by the
SBA |
$8,000,000 |
$7,000,000 |
Income tax payable |
2,065,795 |
1,223,427 |
Deferred tax liability |
1,838,351 |
2,206,808 |
Profit sharing and bonus
payable |
953,490 |
887,244 |
Accounts payable and accrued
expenses |
290,646 |
337,095 |
Deferred revenue |
24,264 |
26,464 |
Total liabilities |
13,172,546 |
11,681,038 |
Commitments and
contingencies |
|
|
|
|
|
Stockholders' equity
(net assets): |
|
|
Common stock, $.10 par; shares
authorized 10,000,000; shares issued 6,863,034; shares
outstanding of 6,328,538 as of 12/31/14 and |
686,304 |
686,304 |
6,411,918 as of
12/31/13 |
|
|
Capital in excess of par
value |
10,581,789 |
10,581,789 |
Accumulated net investment
(loss) |
(867,482) |
(889,317) |
Undistributed net realized gain
on investments |
18,290,374 |
13,522,890 |
Net unrealized appreciation on
investments |
5,109,947 |
5,357,785 |
Treasury stock, at
cost; 534,496 shares as of 12/31/14 and 451,116 shares as of
12/31/13 |
(1,447,491) |
(1,190,119) |
|
|
|
Total stockholders' equity (net
assets) (per share 2014: $5.11 and 2013: $4.38) |
32,353,441 |
28,069,332 |
|
|
|
Total liabilities and
stockholders' equity |
$45,525,987 |
$39,750,370 |
CONTACT: Company:
Allen F. ("Pete") Grum
President and CEO
Phone: 716.853.0802
Email: pgrum@randcapital.com
Investors:
Deborah K. Pawlowski
Kei Advisors LLC
Phone: 716.843.3908
Email: dpawlowski@keiadvisors.com
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