Saratoga Investment Corp. (NYSE:SAR) (“Saratoga Investment” or “the
Company”), a business development company, today announced
financial results for its 2021 fiscal year-end and fourth quarter.
Summary Financial Information
The Company’s summarized financial information
is as follows:
|
For the year ended and as of February 28,
2021 |
For the year ended and as of February 29,
2020 |
For the year ended and as of February 28,
2019 |
|
($ thousands except per share) |
AUM |
554,313 |
|
485,632 |
|
402,020 |
|
NAV |
304,186 |
|
304,287 |
|
180,875 |
|
NAV per share |
27.25 |
|
27.13 |
|
23.62 |
|
Investment Income |
57,650 |
|
58,448 |
|
47,708 |
|
Net Investment Income per share |
2.07 |
|
1.59 |
|
2.60 |
|
Adjusted Net Investment Income per share |
2.02 |
|
2.49 |
|
2.63 |
|
Earnings per share |
1.32 |
|
5.98 |
|
2.63 |
|
Dividends per share (record date) |
1.23 |
|
2.21 |
|
2.06 |
|
Return on Equity – last twelve months |
5.0 |
% |
23.6 |
% |
10.6 |
% |
Originations |
202,261 |
|
204,643 |
|
187,708 |
|
Repayments**Includes $42.9 million net realized gain for the year
ended February 29, 2020 |
130,259 |
|
167,253 |
|
135,265 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended and as of February 28,
2021 |
For the three months ended and as of November 30,
2020 |
For the three months ended and as of February 29,
2020 |
|
($ in thousands except per share) |
AUM |
554,313 |
|
546,944 |
|
485,632 |
|
NAV |
304,186 |
|
299,853 |
|
304,287 |
|
NAV per share |
27.25 |
|
26.84 |
|
27.13 |
|
Investment Income |
16,215 |
|
14,283 |
|
17,613 |
|
Net Investment Income per share |
0.38 |
|
0.40 |
|
0.15 |
|
Adjusted Net Investment Income per share |
0.52 |
|
0.50 |
|
0.61 |
|
Earnings per share |
0.83 |
|
0.57 |
|
2.39 |
|
Dividends per share (most recent) |
0.43 |
|
0.42 |
|
0.56 |
|
Return on Equity – last twelve months |
5.0 |
% |
11.0 |
% |
23.6 |
% |
– annualized quarter |
12.3 |
% |
8.5 |
% |
36.5 |
% |
Originations |
80,233 |
|
51,320 |
|
43,971 |
|
Repayments* |
79,330 |
|
18,296 |
|
70,100 |
|
*Includes $30.3 million net realized gain for the quarter ended
February 29, 2020 |
|
|
|
“Our fiscal 2021 year represents a full twelve
months of unprecedented times. Our company and industry has proven
resilient as we and our portfolio companies managed through these
challenges. We continue to believe Saratoga is well positioned for
potential future economic opportunities and challenges,” said
Christian L. Oberbeck, Chairman and Chief Executive Officer of
Saratoga Investment. “Our results throughout the pandemic highlight
the strength of our financial position and portfolio performance.
Our annual metrics include LTM return on equity of 5.0%, adjusted
NII per share of $2.02 and NAV per share growth of 12c over this
past year, or 0.4%, one of only a handful of BDC’s to grow this
metric over this period. Our year-end NAV per share of $27.15
represents our highest level yet. In these times of continued
uncertainty and recovery presented by the COVID-19 pandemic,
balance sheet strength, liquidity and NAV preservation continues to
be paramount, both for our portfolio companies and our BDC. Our
current capital structure at quarter-end was strong, with $304
million of equity supporting $123 million of long-term
covenant-free non-SBIC debt and $158 million of long-term covenant
free SBIC debentures. Our quarter-end regulatory leverage of 347%
provides substantial cushion above our 150% requirement, and in
addition to our undrawn Madison revolving credit facility, we have
$30 million of quarter-end cash to support our existing portfolio
companies, and $141 million of available SBIC II facilities to
finance new opportunities, all of which are expected to be highly
accretive to earnings. In addition, in March we issued $50 million
of new unsecured bonds at 4.375%, both adding new liquidity and
reducing our existing cost of capital. And also in March and
reflecting our current strong portfolio performance, the Board of
Directors decided to increase our quarterly dividends by a further
$1c per share and declare a $43c per share dividend for the quarter
ended February 28, 2021.”
“Portfolio management continues to be critically
important, and we remain highly discerning in the current
environment. We continue to bring new platform investments into the
portfolio, with investments in two new companies added this
calendar quarter, in addition to the success we continue to have
with follow-ons in existing borrowers with strong business models
and balance sheets, all totaling $202 million invested in the
fiscal year, outpacing repayments of $130 million. Our credit
quality remained at a high level at year-end, with 93% of credits
rated in our highest category and only two remaining non-accruals.
We have recovered over 95% of last year’s Q1 unrealized
depreciation on the overall portfolio. With 80% of our investments
at quarter-end in first lien debt and generally supported by strong
enterprise values and balance sheets in industries that have
historically performed well in stressed situations, we believe our
portfolio is well structured for these uncertain times. We remain
confident in our experienced management team, high underwriting
standards and time-tested investment strategy. We believe our team
will be able to continue to steadily grow portfolio size and
maintain quality and investment performance over the
long-term.”
Discussion of Financial Results for the Year and
Quarter ended February 28, 2021:
As of February 28, 2021, Saratoga Investment
increased its assets under management (“AUM”) to $554.3 million, an
increase of 14.1% from $485.6 million as of February 29, 2020, and
a 1.3% increase from $546.9 million as of November 30, 2020. The
annual increase reflects originations of $202.3 million investments
during the year ended February 28, 2021, offset by repayments and
amortizations of $130.3 million. This past quarter, $80.2 million
in originations was offset by repayments and amortizations of $79.3
million, with this quarter including the impact of the refinancing
of the CLO at quarter-end. Additional capital in the CLO this
quarter consisted of $14.0 million of additional equity and $17.9
million invested in a new F-note, with full repayment of Saratoga
Investment’s existing CLO warehouse loan of $25.0 million, G-note
of $2.5 million and F-note of $7.5 million. Saratoga Investment’s
portfolio remains strong, with 79.5% of the portfolio in first
liens, and a continued high level of investment quality in loan
investments, with 93.3% of its loans this quarter at its highest
internal rating. This quarter’s originations include two
investments in new platforms, and eleven follow-ons in existing
portfolio companies. Since Saratoga Investment took over the
management of the BDC, $560.5 million of repayments and sales of
investments originated by Saratoga Investment have generated a
gross unlevered IRR of 16.5%.
For the year ended February 28, 2021, total
investment income decreased by $0.7 million to $57.7 million, down
1.4% from $58.4 million for the year ended February 29, 2020. For
the three months ended February 28, 2021, total investment income
of $16.2 million decreased by $1.4 million, or 8.0%, from $17.6
million as compared to the three months ended February 29, 2020,
but increased sequentially by $1.9 million, or 13.5%, compared to
$14.3 million for the three months ended November 30, 2020. In the
year-over-year comparisons, the decreased investment income was
generated from an investment base that has grown by 14.1% since
last year, with the impact of the AUM increase more than offset by
(i) last year’s fourth quarter including $4.4 million of
non-recurring advisory fee income and prepayment premiums related
to the Easy ice realization, and (ii) the weighted average current
coupon on non-CLO BDC investments decreasing to 9.6% this quarter
from 9.8% last year. The total investment income increase of 13.5%
compared to last sequential quarter reflects the full-period impact
of the originations last quarter, the increase in current coupon
from 9.5% last quarter, and the recognition of $0.9 million
interest income previously reserved and related to the Roscoe
Medical investment that returned to accrual status this
quarter.
The reduction in adjusted net investment income
this year as compared to the year ended February 29, 2020 also
reflects increased base management fees generated from the
management of this larger pool of investments, offset by decreased
debt and financing expenses, as this year benefitted from the
extinguishment of the higher cost $74.5 million 2023 notes towards
the end of last year. As compared to the quarters ended February
29, 2020 and November 30, 2020, this quarter also included higher
base management fees reflecting higher AUM, as well as the accrual
of $0.7 million excise tax related to undistributable taxable
income as of December 31, 2020.
Saratoga Investment recognized a $0.1 million
realized loss on extinguishment this quarter related to the
repayment of SBA debentures in its first SBIC license.
Net investment income on a weighted average per
share basis was $2.07 and $0.38 for the year and quarter ended
February 28, 2021, respectively. Adjusted for the incentive fee
accrual related to net capital gains, the net investment income on
a weighted average per share basis was $2.02 and $0.52,
respectively. This compares to adjusted net investment income per
share of $2.49 and $0.61 for the year and quarter ended February
29, 2020, and $0.50 per share for the quarter ended November 30,
2020. The weighted average common shares outstanding increased from
9.3 million shares to 11.2 million shares for the years ended
February 29, 2020 and February 28, 2021, respectively, but remained
unchanged at 11.2 million shares for all three quarters. The
increase reflects the weighted share impact of the accretive
At-the-Market (“ATM”) equity offering program completed last
year.
Net investment income yield as a percentage of
average net asset value (“Net Investment Income Yield”) was 7.8%
and 5.7% for the year and quarter ended February 28, 2021,
respectively. Adjusted for the incentive fee accrual related to net
capital gains, the Net Investment Income Yield was 7.6% and 7.7%,
respectively. In comparison, adjusted Net Investment Income Yield
was 9.9% and 9.3% for the year and quarter ended February 29, 2020,
respectively, and 7.4% for the quarter ended November 30, 2020.
NAV was $304.2 million as of February 28, 2021,
an increase of $4.3 million from $299.9 million as of November 30,
2020, and a slight decrease of $0.1 million from $304.3 million as
of February 29, 2020.
- For the twelve months ended February 28, 2021, there were $23.1
million of net investment income and $5.0 million in net unrealized
appreciation on investments earned, partially offset by $8.7
million of net realized loss from investments, $3.9 million federal
tax paid on net capital gains realized in fiscal 2020, $0.6 million
deferred tax expense on net unrealized appreciation, $0.1 million
realized loss on extinguishment of debt and $13.7 million of
dividends declared. In addition, $2.4 million of stock dividend
distributions were made through the Company’s dividend reinvestment
plan (“DRIP”), and 190,321 shares were repurchased during the
twelve months, at a cost of $3.6 million and an average price of
$18.96 per share. For the year ended February 28, 2021, there was
no activity related to the ATM offerings.
- During the quarter ended February 28, 2021, the Company
repurchased 50,000 shares at a cost of $1.1 million and an average
price of $22.88 per share.
NAV per share was $27.25 as of February 28,
2021, compared to $26.84 as of November 30, 2020 and $27.13 as of
February 29, 2020.
- For the twelve months ended February 28, 2021, NAV per share
increased by $0.12 per share, primarily reflecting the $1.0
million, or $0.10 per share increase in net assets (net of the
$1.23 dividend paid during the year). The $0.02 difference is the
net accretive impact of the share repurchase plan partially offset
by the DRIP share issuance.
- This is the highest level of NAV per share since Saratoga took
over the management of the Company
Return on equity for the last twelve months
ended February 28, 2021, was 5.0%, compared to 23.6% for the
comparable period last year.
Earnings per share for the year and quarter
ended February 28, 2021, was $1.32 per share and 0.83 per share,
respectively, compared to earnings per share of $5.98 per share and
$2.39 per share for the year and quarter ended February 29, 2020,
respectively, and $0.57 per share for the quarter ended November
30, 2020.
Investment portfolio activity for the year ended
February 28, 2021:
-
Cost of investments made during the period: $202.3 million
-
Principal repayments and amortizations during the period: $130.3
million
Investment portfolio activity for the three
months ended February 28, 2021:
-
Cost of investments made during the period: $80.2 million
-
Principal repayments during the period: $79.3 million
Additional Financial Information
For the fiscal year ended February 28, 2021,
Saratoga Investment reported net investment income of $23.1
million, or $2.07 on a weighted average per share basis, a net
realized and unrealized loss on investments of $8.2 million, or
$0.74 on a weighted average per share basis, and a realized loss on
extinguishment of debt of $0.1 million, or $0.01 on a weighted
average per share basis, resulting in a net increase in net assets
from operations of $14.8 million, or $1.32 on a weighted average
per share basis. The $8.2 million net loss on investments was
comprised of $8.7 million in net realized loss on investments, $0.6
million of net deferred tax expense on unrealized appreciation on
investments in Saratoga Investment’s blocker subsidiaries and $3.9
million of income tax provision from realized gain on investments,
offset by $5.0 million in net unrealized appreciation. The net
realized loss primarily relates to the sale of the Company’s Elyria
equity investment, the last remaining investment that dates back to
before Saratoga took over management of the BDC in 2010. The $5.0
million unrealized appreciation primarily reflects a reversal of
the previously recognized $7.7 million depreciation following the
realization of the Company’s Elyria equity investment, offset by
the net remaining impact of the past year’s Covid-19 volatility on
multiple investments. This compared to the fiscal year ended
February 29, 2020, with net investment income of $14.9 million, or
$1.59 on a weighted average per share basis, a net gain on
investments of $42.5 million, or $4.56 on a weighted average per
share basis, and a realized loss on extinguishment of $1.6 million,
or $0.17 on a weighted average share basis, resulting in a net
increase in net assets from operations of $55.7 million, or $5.98
on a weighted average per share basis.
Adjusted for the incentive fee accrual related
to net capital gains, the net investment income was $22.6 million
and $23.2 million for the years ended February 28, 2021, and
February 29, 2020, respectively – this is a decrease of $0.7
million year-over-year, or 3.0%.
For the fiscal quarter ended February 28, 2021,
Saratoga Investment reported net investment income of $4.3 million,
or $0.38 on a weighted average per share basis, net realized and
unrealized gain on investments of $5.1 million, or $0.46 on a
weighted average per share basis, and realized loss on
extinguishment of debt of $0.1 million, or $0.01 on a weighted
average per share basis, resulting in a net increase in net assets
from operations of $9.3 million, or $0.83 on a weighted average per
share basis. The $5.1 million net gain on investments was comprised
of $14.3 million in net unrealized appreciation on investments,
offset by $8.7 million in net realized loss and $0.5 million of net
deferred tax expense on unrealized appreciation in Saratoga
Investment’s blocker subsidiaries.
The $8.7 million net realized loss reflects the
Elyria equity investment sale noted above. The $14.3 million net
unrealized appreciation primarily reflects (i) the $8.7 million
reversal of previously recognized depreciation following the
realization of the Company’s Elyria equity investment and (ii) a
1.0% increase in the total value of the remaining portfolio,
primarily related to improvements in market spreads, EBITDA
multiples and/or revised portfolio company performance – therefore,
all but $1.4 million, or 95% of the net reduction in the value of
the non-CLO portfolio in the first quarter has been reversed
since May 31, 2020.
This is compared to the fiscal quarter ended
February 29, 2020, with net investment income of $1.7 million, or
$0.15 on a weighted average per share basis, net realized and
unrealized gain on investments of $26.7 million, or $2.39 on a
weighted average per share basis and realized loss on
extinguishment of debt of $1.6 million, or $0.14 on a weighted
average per share basis, resulting in a net increase in net assets
from operations of $26.8 million, or $2.39 on a weighted average
per share basis.
Adjusted for the incentive fee accrual related
to net capital gains, net investment income was $5.8 million and
$6.8 million for the three months ended February 28, 2021, and
February 29, 2020, respectively – a decrease of $1.0 million
year-over-year, or 15.1%.
Total expenses, excluding interest and debt
financing expenses, base management fees, incentive fees, income
tax benefit and excise tax expense, increased from $5.7 million for
the year ended February 29, 20 to $6.3 million for the year ended
February 28, 2021, remaining at 1.1% of average assets over both
periods. For the quarters ended February 28, 2021 and February 29,
2020, these expenses increased from $1.5 million to $1.8
million.
Portfolio and Investment Activity
As of February 28, 2021, the fair value of
Saratoga Investment’s portfolio was $554.3 million (excluding $29.9
million in cash and cash equivalents), principally invested in 40
portfolio companies and one collateralized loan obligation fund
(“CLO”). The overall portfolio composition consisted of 79.5% of
first lien term loans, 4.4% of second lien term loans, 0.4% of
unsecured term loans, 9.0% of subordinated notes in the CLO and
6.7% of common equity.
For the fiscal year ended February 28, 2021,
Saratoga Investment invested $202.3 million in new or existing
portfolio companies and had $130.3 million in aggregate amount of
exits and repayments, resulting in net investments of $72.0 million
for the year. For the quarter ended February 28, 2021, Saratoga
Investment invested $80.2 million in two new and ten existing
portfolio companies (including the CLO), and had $79.3 million in
aggregate amount of exits and repayments, resulting in $0.9 million
of net investments for the quarter.
As of February 28, 2021, the weighted average
current yield on Saratoga Investment’s total portfolio as of
year-end is 9.1%, which was comprised of a weighted average current
yield of 9.5% on first lien term loans, 12.3% on second lien term
loans, 0.0% on unsecured term loans, 11.6% on CLO subordinated
notes and 0.0% on equity interests.
Liquidity and Capital Resources
As of February 28, 2021, Saratoga Investment had
no outstanding borrowings under its $45.0 million senior secured
revolving credit facility with Madison Capital Funding LLC. At the
same time, Saratoga Investment had $124.0 million SBA debentures
outstanding in its SBIC I license, $34.0 million SBA debentures
outstanding in its SBIC II license, $123.1 million of baby bonds
issued, including two listed issuances of $60.0 million and $43.1
million, respectively, and two unlisted issuances of $5.0 million
and $15.0 million, respectively, and an aggregate of $29.9 million
in cash and cash equivalents.
With $45.0 million available under the credit
facility and the $29.9 million of cash and cash equivalents as of
February 28, 2021, Saratoga Investment has a total of $74.9 million
of undrawn borrowing capacity and cash and cash equivalents for new
investments or to support its existing portfolio companies. In
addition, Saratoga Investment has $141.0 million in undrawn SBA
debentures from the most recently approved SBIC II license to
finance new SBIC-eligible portfolio companies. It should be noted
that, depending on portfolio company performance, availability
under the Madison credit facility might be reduced. In addition,
certain follow-on investments in SBIC I and the BDC will not
qualify for SBIC II funding. As of year-end, Saratoga Investment
had $13.0 million of committed undrawn lending commitments and
$45.8 million of discretionary funding commitments.
The Company announced on March 10, 2021 that it
has closed a public offering of $50.0 million aggregate principal
amount of its 4.375% notes due 2026 (the “Notes”), which resulted
in net proceeds to the Company of approximately $48.8 million based
on a public offering price of 100% of the aggregate principal
amount of the Notes, after deducting payment of underwriting
discounts and commissions and estimated offering expenses payable
by the Company. This liquidity is accretive to the year-end
Saratoga Investment available liquidity.
On March 16, 2017, Saratoga Investment entered
into an equity distribution agreement with Ladenburg Thalmann &
Co. Inc., through which Saratoga may offer for sale, from
time-to-time, up to $30.0 million of its common stock through an
ATM offering. Subsequent to this, BB&T Capital Markets and B.
Riley FBR, Inc. were also added to the agreement. On July 11, 2019,
the amount of common stock to be offered through this offering was
increased to $70.0 million, and on October 8, 2019, the amount of
common stock to be offered through this offering was further
increased to $130.0 million. As of February 28, 2021, the Company
sold 3,992,018 shares for gross proceeds of $97.1 million at an
average price of $24.77 for aggregate net proceeds of $95.9 million
(net of transaction costs). During the twelve months ended February
28, 2021, there was no activity related to the ATM offering.
On February 26, 2021, the Company completed the
fourth refinancing of the Saratoga CLO. This refinancing, among
other things, extended the Saratoga CLO reinvestment period to
April 2024, and extended its legal maturity to April 2033. A
non-call period ending February 2022 was also added. In addition,
and as part of the refinancing, the Saratoga CLO has also been
upsized from $500 million in assets to approximately $650 million.
As part of this refinancing and upsizing, the Company invested an
additional $14.0 million in all of the newly issued subordinated
notes of the Saratoga CLO, and purchased $17.9 million in aggregate
principal amount of the Class F-R-3 Notes tranche at par.
Concurrently, the existing $2.5 million of Class F-R-2 Notes, $7.5
million of Class G-R-2 Notes and $25.0 million CLO 2013-1 Warehouse
2 Loan were repaid. The Company also paid $2.6 million of
transaction costs related to the refinancing and upsizing on behalf
of the Saratoga CLO, to be reimbursed from future equity
distributions. As of February 28, 2021, the full amount is
reflected as an outstanding receivable which is presented as due
from affiliate on the Company’s consolidated statement of assets
and liabilities.
Dividend
Saratoga Investment’s Board of Directors paid a
$0.40 per share dividend for the quarter ended May 31, 2020, a
$0.41 per share dividend for the quarter ended August 31, 2020 and
a $0.42 per share dividend for the quarter ended November 30, 2020.
Furthermore, on March 22, 2021, the Board of Directors declared a
$0.43 per share dividend for this quarter ended February 28, 2021,
increasing last quarter’s dividend by $0.01 per share. This
dividend was payable on April 22, 2021, to common stockholders of
record on April 8, 2021, and was the first dividend declared for
fiscal year 2022. Total dividends for fiscal year 2021 is $1.23 per
share. Total dividends declared for the fiscal years ended February
29, 2020 and February 28, 2019, were $2.21 per share and $2.06 per
share, respectively.
Shareholders have the option to receive payment
of dividends in cash or receive shares of common stock, pursuant to
the Company’s DRIP.
Share Repurchase Plan
In fiscal year 2015, the Company announced the
approval of an open market share repurchase plan that allows it to
repurchase up to 200,000 shares of its common stock at prices below
its NAV as reported in its then most recently published financial
statements. During fiscal year 2017, the share repurchase plan was
increased to 600,000 shares of common stock, and during fiscal
years 2018, 2019 and 2020, this share repurchase plan was extended
for another year at the same level of approval, currently through
January 15, 2021. On May 4, 2020, the Board of Directors increased
the share repurchase plan to 1.3 million shares of common stock. As
of February 28, 2021, the Company purchased 408,812 shares of
common stock, at the average price of $17.84 for approximately $7.3
million pursuant to the Share Repurchase Plan.
During the year ended February 28, 2021 the
Company purchased 190,321 shares of common stock, at the average
price $18.96 for approximately $3.6 million pursuant to the Share
Repurchase Plan.
During the quarter ended February 28, 2021 the
Company purchased 50,000 shares of common stock, at the average
price $22.88 for approximately $1.1 million pursuant to the Share
Repurchase Plan.
2021 Fiscal Fourth Quarter and Year End
Conference Call/Webcast Information
When: |
Thursday, May 6, 2021, 1:00 p.m. Eastern Time (ET) |
|
|
Call: |
Interested parties may participate by dialing (877) 312-9208 (U.S.
and Canada) or (678) 224-7872 (outside U.S. and Canada).A replay of
the call will be available from 4:00 p.m. ET on Thursday, May 6,
2021, through 4:00 p.m. ET on Thursday, May 13, 2021, by dialing
(855) 859-2056 (U.S. and Canada) or (404) 537-3406 (outside U.S.
and Canada), passcode for both replay numbers: 7175278. |
|
|
Webcast: |
Interested parties may access a simultaneous webcast of the call
and find the Q4 and FY 2021 presentation by going to the “Events
& Presentations” section of Saratoga Investment Corp.’s
investor relations website,
http://ir.saratogainvestmentcorp.com/events-presentations |
About Saratoga Investment Corp.
Saratoga Investment is a specialty finance
company that provides customized financing solutions
to U.S. middle-market businesses. The Company invests
primarily in senior and unitranche leveraged loans and mezzanine
debt, and, to a lesser extent, equity to provide financing for
change of ownership transactions, strategic acquisitions,
recapitalizations and growth initiatives in partnership with
business owners, management teams and financial sponsors. Saratoga
Investment’s objective is to create attractive risk-adjusted
returns by generating current income and long-term capital
appreciation from its debt and equity investments. Saratoga
Investment has elected to be regulated as a business
development company under the Investment Company Act of 1940 and is
externally-managed by Saratoga Investment Advisors, LLC,
an SEC-registered investment advisor focusing on credit-driven
strategies. Saratoga Investment owns two SBIC-licensed
subsidiaries and manages a $650 million collateralized
loan obligation (“CLO”) fund. It also owns 100% of the Class
F-R-3 and subordinated notes of the CLO. The Company’s diverse
funding sources, combined with a permanent capital base,
enable Saratoga Investment to provide a broad range of
financing solutions.
Forward Looking Statements
Statements included herein contain certain
“forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995, which relate to future
events or our future performance or financial condition.
Forward-looking statements can be identified by the use of forward
looking words such as “outlook,” “believes,” “expects,”
“potential,” “continues,” “may,” “will,” “should,” “seeks,”
“approximately,” “predicts,” “intends,” “plans,” “estimates,”
“anticipates” or negative versions of those words, other comparable
words or other statements that do not relate to historical or
factual matters. The forward-looking statements are based on our
beliefs, assumptions and expectations of our future performance,
taking into account all information currently available to us.
These statements are not guarantees of future performance,
condition or results and involve a number of risks and
uncertainties. Actual results may differ materially from those in
the forward-looking statements as a result of a number of factors,
including but not limited to the impact of the COVID-19 pandemic
and the pandemic's impact on the U.S. and global economy, as well
as those described from time to time in our filings with the
Securities and Exchange Commission. Any forward-looking statement
speaks only as of the date on which it is made. Saratoga Investment
Corp. undertakes no duty to update any forward-looking statements
made herein or on the webcast/conference call, whether as a result
of new information, future developments or otherwise, except as
required by law.Financials
|
Saratoga Investment Corp. |
Consolidated Statements of Assets and
Liabilities |
|
|
|
|
|
February 28, 2021 |
|
February 29, 2020 |
ASSETS |
|
|
|
Investments at fair value |
|
|
|
Non-control/Non-affiliate investments (amortized cost of
$471,328,212 and $418,006,725, respectively) |
$ |
469,946,494 |
|
$ |
420,442,928 |
Affiliate investments (amortized cost of $17,331,707 and
$23,998,917, respectively) |
19,367,740 |
|
18,485,854 |
Control investments (amortized cost of $61,353,761 and $44,293,619,
respectively) |
64,998,481 |
|
46,703,192 |
Total investments at fair
value (amortized cost of $550,013,680 and $486,299,261,
respectively) |
554,312,715 |
|
485,631,974 |
Cash and cash equivalents |
18,828,047 |
|
24,598,905 |
Cash and cash equivalents,
reserve accounts |
11,087,027 |
|
14,851,447 |
Interest receivable (net of
reserve of $1,152,086 and $1,238,049, respectively) |
4,223,630 |
|
4,810,456 |
Due from affiliate |
2,719,000 |
|
- |
Management fee receivable |
34,644 |
|
272,207 |
Other assets |
947,315 |
|
701,007 |
Total assets |
$ |
592,152,378 |
|
$ |
530,865,996 |
|
|
|
|
LIABILITIES |
|
|
|
Revolving credit facility |
$ |
- |
|
$ |
- |
Deferred debt financing costs, revolving credit facility |
(639,982) |
|
(512,628) |
SBA debentures payable |
158,000,000 |
|
150,000,000 |
Deferred debt financing costs, SBA debentures payable |
(2,642,622) |
|
(2,561,495) |
6.25% Notes Payable 2025 |
60,000,000 |
|
60,000,000 |
Deferred debt financing costs, 6.25% notes payable 2025 |
(1,675,064) |
|
(2,046,735) |
7.25% Notes Payable 2025 |
43,125,000 |
|
- |
Deferred debt financing costs, 7.25% notes payable 2025 |
(1,401,307) |
|
- |
7.75% Notes Payable 2025 |
5,000,000 |
|
- |
Deferred debt financing costs, 7.75% notes payable 2025 |
(239,222) |
|
- |
6.25% Notes Payable 2027 |
15,000,000 |
|
- |
Deferred debt financing costs, 6.25% notes payable 2027 |
(476,820) |
|
- |
Base management and incentive
fees payable |
6,556,674 |
|
15,800,097 |
Deferred tax liability |
1,922,664 |
|
1,347,363 |
Accounts payable and accrued
expenses |
1,750,266 |
|
1,713,157 |
Interest and debt fees
payable |
2,645,784 |
|
2,234,042 |
Directors fees payable |
70,500 |
|
61,500 |
Due to manager |
279,065 |
|
543,842 |
Excise tax payable |
691,672 |
|
- |
Total liabilities |
287,966,608 |
|
226,579,143 |
|
|
|
|
Commitments and
contingencies |
|
|
|
|
|
|
|
NET ASSETS |
|
|
|
Common stock, par value
$0.001, 100,000,000 common shares |
|
|
|
authorized, 11,161,416 and 11,217,545 common shares issued and
outstanding, respectively |
11,161 |
|
11,218 |
Capital in excess of par
value |
304,874,957 |
|
289,476,991 |
Total distributable earnings
(deficit) |
(700,348) |
|
14,798,644 |
Total net assets |
304,185,770 |
|
304,286,853 |
Total liabilities and net
assets |
$ |
592,152,378 |
|
$ |
530,865,996 |
NET ASSET VALUE PER SHARE |
$ |
27.25 |
|
$ |
27.13 |
|
|
|
|
Asset Coverage
Ratio |
347.1% |
|
607.1% |
|
|
|
|
Saratoga Investment Corp. |
Consolidated Statements of Operations |
|
|
|
|
|
For the three months ended |
|
February 28, 2021 |
|
February 29, 2020 |
INVESTMENT INCOME |
|
|
|
Interest from investments |
|
|
|
Interest income: |
|
|
|
Non-control/Non-affiliate investments |
$ |
11,036,031 |
|
$ |
9,389,470 |
Affiliate investments |
451,423 |
|
356,762 |
Control investments |
1,811,065 |
|
1,547,725 |
Payment-in-kind interest income: |
|
|
|
Non-control/Non-affiliate investments |
1,126,193 |
|
285,313 |
Affiliate investments |
29,052 |
|
44,024 |
Control investments |
45,209 |
|
179,247 |
Total interest from
investments |
14,498,973 |
|
11,802,541 |
Interest from cash and cash
equivalents |
433 |
|
219,362 |
Management fee income |
623,801 |
|
614,872 |
Incentive fee income |
- |
|
- |
Structuring and advisory fee
income* |
358,745 |
|
3,411,250 |
Other income* |
732,829 |
|
1,565,014 |
Total investment income |
16,214,781 |
|
17,613,039 |
|
|
|
|
OPERATING EXPENSES |
|
|
|
Interest and debt financing
expenses |
4,135,008 |
|
3,054,345 |
Base management fees |
2,404,351 |
|
2,143,372 |
Incentive management fees
expense (benefit) |
2,937,132 |
|
6,862,982 |
Professional fees |
448,522 |
|
503,079 |
Administrator expenses |
693,750 |
|
556,250 |
Insurance |
83,066 |
|
66,807 |
Directors fees and
expenses |
95,000 |
|
60,000 |
General &
administrative |
464,921 |
|
289,959 |
Income tax expense
(benefit) |
(27,637) |
|
2,426,873 |
Excise tax expense
(credit) |
691,672 |
|
- |
Total operating expenses |
11,925,785 |
|
15,963,667 |
NET INVESTMENT INCOME |
4,288,996 |
|
1,649,372 |
|
|
|
|
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS |
|
|
|
Net realized gain (loss) from
investments: |
|
|
|
Non-control/Non-affiliate investments |
- |
|
(957,777) |
Affiliate investments |
(8,726,013) |
|
- |
Control investments |
- |
|
31,225,165 |
Net realized gain (loss) from
investments |
(8,726,013) |
|
30,267,388 |
Net change in unrealized
appreciation (depreciation) on investments: |
|
|
|
Non-control/Non-affiliate investments |
5,654,556 |
|
4,624,537 |
Affiliate investments |
8,970,702 |
|
678,619 |
Control investments |
(287,798) |
|
(10,984,921) |
Net change in unrealized
appreciation (depreciation) on investments |
14,337,460 |
|
(5,681,765) |
Net change in provision for
deferred taxes on unrealized (appreciation) depreciation on
investments |
(515,796) |
|
2,141,150 |
Net realized and unrealized
gain (loss) on investments |
5,095,651 |
|
26,726,773 |
Realized losses on
extinguishment of debt* |
(128,617) |
|
(1,583,266) |
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS |
$ |
9,256,030 |
|
$ |
26,792,879 |
|
|
|
|
WEIGHTED AVERAGE - BASIC AND
DILUTED EARNINGS (LOSS) PER COMMON SHARE |
$ |
0.83 |
|
$ |
2.39 |
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - BASIC AND DILUTED |
11,159,010 |
|
11,190,152 |
|
|
|
|
* Certain prior
period amounts have been reclassified to conform to current period
presentation. |
|
|
|
|
|
Saratoga Investment Corp. |
Consolidated Statements of Operations |
|
|
|
|
|
|
|
For the year ended |
|
February 28, 2021 |
|
February 29,2020 |
|
February 28, 2019 |
INVESTMENT INCOME |
|
|
|
|
|
Interest from investments |
|
|
|
|
|
Interest income: |
|
|
|
|
|
Non-control/Non-affiliate investments |
$ |
41,621,899 |
|
$ |
36,252,113 |
|
$ |
33,329,539 |
Affiliate investments |
1,656,263 |
|
1,230,578 |
|
963,289 |
Control investments |
5,848,980 |
|
6,175,120 |
|
4,785,044 |
Payment-in-kind interest income: |
|
|
|
|
|
Non-control/Non-affiliate investments |
2,251,499 |
|
816,041 |
|
780,112 |
Affiliate investments |
172,626 |
|
167,836 |
|
150,284 |
Control investments |
162,658 |
|
3,405,307 |
|
3,288,902 |
Total interest from
investments |
51,713,925 |
|
48,046,995 |
|
43,297,170 |
Interest from cash and cash
equivalents |
14,609 |
|
536,053 |
|
64,024 |
Management fee income |
2,507,626 |
|
2,503,804 |
|
1,722,180 |
Incentive fee income |
- |
|
- |
|
633,232 |
Structuring and advisory fee
income* |
2,157,405 |
|
5,286,475 |
|
1,355,393 |
Other income* |
1,256,691 |
|
2,074,864 |
|
635,964 |
Total investment income |
57,650,256 |
|
58,448,191 |
|
47,707,963 |
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
Interest and debt financing
expenses |
13,587,201 |
|
14,682,611 |
|
13,125,718 |
Base management fees |
9,098,495 |
|
8,098,995 |
|
6,879,324 |
Incentive management fees
expense (benefit) |
4,903,499 |
|
14,163,776 |
|
4,891,004 |
Professional fees |
1,705,942 |
|
1,684,089 |
|
1,849,424 |
Administrator expenses |
2,545,833 |
|
2,131,250 |
|
1,895,833 |
Insurance |
285,529 |
|
259,981 |
|
253,141 |
Directors fees and
expenses |
290,000 |
|
277,500 |
|
290,500 |
General &
administrative |
1,428,293 |
|
1,326,457 |
|
1,224,462 |
Income tax expense
(benefit) |
667 |
|
961,995 |
|
(1,027,118) |
Excise tax expense
(credit) |
691,672 |
|
- |
|
- |
Other expense |
- |
|
- |
|
23,466 |
Total operating expenses |
34,537,131 |
|
43,586,654 |
|
29,405,754 |
NET INVESTMENT INCOME |
23,113,125 |
|
14,861,537 |
|
18,302,209 |
|
|
|
|
|
|
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS |
|
|
|
|
|
Net realized gain (loss) from
investments: |
|
|
|
|
|
Non-control/Non-affiliate investments |
22,207 |
|
11,651,990 |
|
4,874,305 |
Affiliate investments |
(8,726,013) |
|
- |
|
- |
Control investments |
- |
|
31,225,165 |
|
- |
Net realized gain (loss) from
investments |
(8,703,806) |
|
42,877,155 |
|
4,874,305 |
Income tax (provision) benefit
from realized gain on investments |
(3,895,354) |
|
- |
|
- |
Net change in unrealized
appreciation (depreciation) on investments: |
|
|
|
|
|
Non-control/Non-affiliate investments |
(3,817,921) |
|
3,060,964 |
|
(5,152,206) |
Affiliate investments |
7,549,096 |
|
1,538,572 |
|
(853,588) |
Control investments |
1,235,147 |
|
(5,370,450) |
|
3,105,485 |
Net change in unrealized
appreciation (depreciation) on investments |
4,966,322 |
|
(770,914) |
|
(2,900,309) |
Net change in provision for
deferred taxes on unrealized (appreciation) depreciation on
investments |
(574,634) |
|
354,349 |
|
(1,766,835) |
Net realized and unrealized
gain (loss) on investments |
(8,207,472) |
|
42,460,590 |
|
207,161 |
Realized losses on
extinguishment of debt* |
(128,617) |
|
(1,583,266) |
|
- |
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS |
$ |
14,777,036 |
|
$ |
55,738,861 |
|
$ |
18,509,370 |
|
|
|
|
|
|
WEIGHTED AVERAGE - BASIC AND
DILUTED EARNINGS (LOSS) PER COMMON SHARE |
$ |
1.32 |
|
$ |
5.98 |
|
$ |
2.63 |
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - BASIC AND DILUTED |
11,188,629 |
|
9,319,192 |
|
7,046,686 |
|
|
|
|
|
|
* Certain prior
period amounts have been reclassified to conform to current period
presentation. |
|
|
|
|
|
|
Supplemental Information Regarding Adjusted Net
Investment Income, Adjusted Net Investment Income Yield and
Adjusted Net Investment Income per share
On a supplemental basis, Saratoga Investment
provides information relating to adjusted net investment income,
adjusted net investment income yield and adjusted net investment
income per share, which are non-GAAP measures. These measures are
provided in addition to, but not as a substitute for, net
investment income, net investment income yield and net investment
income per share. Adjusted net investment income represents net
investment income excluding any capital gains incentive fee expense
or reversal attributable to realized and unrealized gains. The
management agreement with the Company’s advisor provides that a
capital gains incentive fee is determined and paid annually with
respect to cumulative realized capital gains (but not unrealized
capital gains) to the extent such realized capital gains exceed
realized and unrealized losses for such year. In addition, Saratoga
Investment accrues, but does not pay, a capital gains incentive fee
in connection with any unrealized capital appreciation, as
appropriate. All capital gains incentive fees are presented within
net investment income within the Consolidated Statements of
Operations, but the associated realized and unrealized gains and
losses that these incentive fees relate to, are excluded. As such,
Saratoga Investment believes that adjusted net investment income,
adjusted net investment income yield and adjusted net investment
income per share is a useful indicator of operations exclusive of
any capital gains incentive fee expense or reversal attributable to
gains. The presentation of this additional information is not meant
to be considered in isolation or as a substitute for financial
results prepared in accordance with GAAP. The following table
provides a reconciliation of net investment income to adjusted net
investment income, net investment income yield to adjusted net
investment income yield and net investment income per share to
adjusted net investment income per share for the years ended
February 28, 2021, February 29, 2020, and February 28, 2019, and
the quarters ended February 28, 2021 and February 29, 2020.
|
|
|
For the Years Ended |
|
February 28, 2021 |
February 29, 2020 |
February 28, 2019 |
|
|
|
|
Net Investment Income |
$ |
23,113,125 |
|
$ |
14,861,537 |
|
$ |
18,302,209 |
|
Changes in accrued capital
gains incentive fee expense/ reversal |
|
(543,735 |
) |
|
8,359,207 |
|
|
251,090 |
|
Adjusted net investment
income |
|
22,569,390 |
|
|
23,220,744 |
|
|
18,553,299 |
|
|
|
|
|
Net investment income
yield |
|
7.8 |
% |
|
6.3 |
% |
|
10.5 |
% |
Changes in accrued capital
gains incentive fee expense/ reversal |
|
(0.2 |
%) |
|
3.6 |
% |
|
0.1 |
% |
Adjusted net investment income
yield (1) |
|
7.6 |
% |
|
9.9 |
% |
|
10.6 |
% |
|
|
|
|
Net investment income per
share |
$ |
2.07 |
|
$ |
1.59 |
|
$ |
2.60 |
|
Changes in accrued capital
gains incentive fee expense/ reversal |
|
(0.05 |
) |
|
0.90 |
|
|
0.03 |
|
Adjusted net investment income
per share (2) |
$ |
2.02 |
|
$ |
2.49 |
|
$ |
2.63 |
|
|
|
|
|
|
|
|
|
|
|
(1) Adjusted net investment income is calculated
as adjusted net investment income divided by average net asset
value.(2) Adjusted net investment income per share is calculated as
adjusted net investment income divided by weighted average common
shares outstanding.
|
|
|
For the Quarters Ended |
|
February 28, 2021 |
|
February 29, 2020 |
|
|
|
|
Net Investment Income |
$ |
4,288,966 |
|
$ |
1,649,372 |
|
Changes in accrued capital gains
incentive fee expense/ reversal |
|
1,491,312 |
|
|
5,162,197 |
|
Adjusted net investment
income |
|
5,780,309 |
|
|
6,811,569 |
|
|
|
|
Net investment income yield |
|
5.7 |
% |
|
2.3 |
% |
Changes in accrued capital gains
incentive fee expense/ reversal |
|
2.0 |
% |
|
7.0 |
% |
Adjusted net investment income
yield (1) |
|
7.7 |
% |
|
9.3 |
% |
|
|
|
Net investment income per
share |
$ |
0.38 |
|
$ |
0.15 |
|
Changes in accrued capital gains
incentive fee expense/ reversal |
|
0.14 |
|
|
0.46 |
|
Adjusted net investment income
per share (2) |
$ |
0.52 |
|
$ |
0.61 |
|
|
|
|
|
|
|
|
(1) Adjusted net investment income yield is
calculated as adjusted net investment income divided by average net
asset value.
(2) Adjusted net investment income per share is
calculated as adjusted net investment income divided by weighted
average common shares outstanding.
Contact: Henri
SteenkampSaratoga Investment Corp.212-906-7800
Roland TomfordeBroadgate
Consultants212-232-2222
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