Saratoga Investment Corp. (NYSE:SAR) (“Saratoga Investment” or “the
Company”), a business development company (“BDC”), today announced
financial results for its 2021 fiscal first quarter.
Summary Financial Information
The Company’s summarized financial information
is as follows:
|
For the quarterended and as ofMay 31, 2020 |
For the quarterended and as ofFebruary 29,
2020 |
For the quarterended and as ofMay 31, 2019 |
|
($ in thousands except per share) |
|
AUM |
482,947 |
|
485,632 |
|
409,451 |
|
NAV |
281,631 |
|
304,287 |
|
186,784 |
|
NAV per share |
25.11 |
|
27.13 |
|
24.06 |
|
Investment Income |
13,297 |
|
17,613 |
|
12,751 |
|
Net Investment Income per share |
0.80 |
|
0.01 |
|
0.48 |
|
Adjusted Net Investment Income per share |
0.51 |
|
0.61 |
|
0.60 |
|
Earnings per share |
(2.02 |
) |
2.39 |
|
0.99 |
|
Dividends per share (declared) |
0.40 |
|
0.00 |
|
0.55 |
|
Return on Equity – last twelve months |
9.9 |
% |
23.6 |
% |
11.7 |
% |
– annualized quarter |
(30.9 |
)% |
36.5 |
% |
16.6 |
% |
Originations |
38,999 |
|
43,971 |
|
27,369 |
|
Repayments |
9,350 |
|
70,100 |
|
26,917 |
|
|
|
|
|
|
|
|
|
“Coming off one of the most challenging quarters
in our experience, we believe Saratoga is in a strong position to
weather the increased economic challenges presented by COVID-19,”
said Christian L. Oberbeck, Chairman and Chief Executive Officer of
Saratoga Investment. “We believe our performance for the fiscal
first quarter 2021 reflected the market’s economic difficulties,
particularly widening spreads, and importantly the underlying
strength of our financial position and ability to withstand the
early stages of this crisis. Our quarterly metrics include LTM
return on equity of 9.9%, adjusted NII per share of $0.51 per share
and adjusted NII yield of 7.9%. As we look ahead to the numerous
challenges that the COVID-19 pandemic presents to the economy and
particularly small businesses, balance sheet strength, liquidity
and NAV preservation are paramount, both for our portfolio
companies and ourselves. Our current capital structure at
quarter-end was strong, with $282 million of equity supporting $60
million of long-term covenant-free non-SBIC debt. Our quarter-end
regulatory leverage of 569% substantially exceeds our 150%
requirement. And recently, we further increased our capital and
liquidity by raising a new $43.1 million public baby bond, the
first BDC issuing public debt since the pandemic began. This
increases our quarter-end BDC cash and our available liquidity to
support our existing portfolio companies, and we also have $155
million of available SBIC II facilities which can be used to
finance new opportunities. We had $9 million of committed undrawn
lending commitments as of year-end.
Following our recent baby bond raise and
considering the current resiliency of our portfolio, the Board of
Directors decided to declare a $0.40c per share dividend for the
quarter ended May 31, 2020. This dividend has been calibrated at
this level relative to the most recent $0.56c per share dividend to
reflect, on the one hand our relatively strong quarterly results
and recently improved liquidity profile, and on the other the lack
of short- and long-term visibility of portfolio company and general
fundamental economic earnings levels. We will continue to reassess
the amount of our dividends on at least a quarterly basis as we
gain better visibility on the economy and business performance. As
discussed on our May call, we have historically conservatively
managed our RIC compliance obligations, such that we have no
ordinary income spillover obligations and therefore substantial
spillover flexibility and consequent liquidity. Payment of this
dividend further preserves our spillover liquidity position.”
Michael J. Grisius, President and Chief
Investment Officer, added, “Portfolio management has become a
significant part of our daily life. The bar for all investments has
been significantly raised in this environment. Despite the current
economic volatility, we continued to bring new platform investments
into the portfolio, with two investments in new companies added
this quarter, in addition to the success we continue to have with
follow-ons in existing borrowers with strong business models and
balance sheets, totaling $39.0 million invested in the fiscal
quarter. We believe the quality of our asset base remains high,
with our end of May valuations reflecting quarter-end market
spreads and individual COVID-19 impacts, resulting in a 6%
reduction in the fair value of our overall portfolio. Our credit
quality remained at a high level at quarter-end, with over 90% of
credits rated in our highest category, putting our portfolio in a
strong position from which to face the volatility and uncertainty
ahead. With 73.4% of our investments at year-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 remain confident thus far in the durability
of our portfolio in these uncertain times. However, we do recognize
that there is still a lot of uncertainty in the economy that is
impacting small businesses. We have confidence in our experienced
management team, high underwriting standards and time-tested
investment strategy and believe we have the resources to weather
the economic challenges ahead, and that once these volatile
conditions subside and uncertainty is reduced, that our team will
be able to continue to steadily grow portfolio size and maintain
quality over the long-term.”
Business Update:
Saratoga Investment remains focused on ensuring
the safety of its employees and the employees of its portfolio
companies, while also managing its ongoing business
activities. The Company continues to work collaboratively
with its employees and portfolio companies to navigate the
significant challenges created by the novel coronavirus
(“COVID-19”) pandemic.
Saratoga Investment continues to take the
necessary steps to ensure that its personnel can effectively
operate remotely, and its senior management team and staff remain
fully engaged. Thus far, the Company has not experienced any
significant operational limitations, and has been capable of
providing the necessary support or service that its portfolio
companies have required.
Saratoga Investment has been actively engaged
with its portfolio companies and continues to be pleased with the
diligent and proactive actions taken by the portfolio company
management teams and their ability to respond effectively to the
continuing challenges in the current environment. The Company
stands ready to assist them as they manage their respective
businesses. While virtually every business has had some level
of impact in the near-term, the ultimate impact of COVID-19 on any
individual business remains unknown. Notwithstanding these
uncertainties, based on the information we have in hand, the
Company believes that its portfolio companies are generally taking
the right steps to help mitigate both the near and long-term effect
of COVID-19 on their businesses.
Saratoga Investment believes that its
historically conservative approaches to investing, leverage
utilization and maintaining solid levels of liquidity, put it in a
position of strength going into this uncertain and challenging
time. While no business can anticipate with clarity how long
the displacement in the market and global economy will last, the
Company believes that Saratoga Investment’s capital structure,
liquidity and management experience will enable it to effectively
navigate the challenges presented by COVID-19.
The outbreak of COVID-19 has severely impacted
global economic activity and caused significant volatility and
negative pressure in financial markets. The global impact of the
outbreak has been rapidly evolving and many countries, including
the United States, have reacted by instituting quarantines,
mandating business and school closures and restricting travel. Such
actions are creating disruption in global supply chains and
adversely impacting a number of industries. The continued
development and fluidity of this situation precludes any prediction
as to the ultimate adverse impact of COVID-19. Nevertheless,
COVID-19 presents material uncertainty and risks with respect to
the underlying value of the Company’s portfolio companies, the
Company’s business, financial condition, results of operations and
cash flows, such as the potential negative impact to financing
arrangements, Company decisions to delay, defer and/or modify the
character of dividends in order to preserve liquidity, increased
costs of operations, changes in law and/or regulation, and
uncertainty regarding government and regulatory policy.
Discussion of Financial Results for the Quarter
ended May 31, 2020:
As of May 31, 2020, Saratoga Investment’s assets
under management (“AUM”) was $482.9 million, an increase of 17.9%
from $409.5 million as of May 31, 2019, and a decrease of 0.6% from
$485.6 million as of February 29, 2020. This past quarter, $39.0
million in originations was offset by $9.4m of repayments and
amortizations, as well as $32.0 million unrealized depreciation
reflecting the impact of changes to market spreads, EBITDA
multiples and/or revised portfolio company performance on the
quarter-end valuations. This reduction in fair values reflects a
6.1% impact to the overall portfolio. Saratoga Investment’s
portfolio remains strong, with 73.4% of the portfolio in first
liens, and a continued high level of investment quality in loan
investments, with 90.4% of its loans this quarter at its highest
internal rating. This quarter’s originations include two
investments in new platforms, and ten follow-ons in existing
portfolio companies, including drawdowns on committed facilities.
Since Saratoga Investment took over the management of the BDC,
$483.0 million of repayments and sales of investments originated by
Saratoga Investment have generated a gross unlevered IRR of
16.7%.
For the three months ended May 31, 2020, total
investment income of $13.3 million increased by $0.5 million, or
4.3%, compared to $12.8 million for the three months ended May 31,
2019. This increased investment income was generated from an
investment base that has grown by 17.9% since last year. This was
offset by lower interest rates, with the weighted average current
coupon on non-CLO BDC investments decreasing from 10.8% to 9.5%
year-over-year, and the weighted average rate on CLO interest
income decreasing from 16.0% to 11.7%. In addition, this quarter’s
investment income was down 24.5% on a quarter-on-quarter basis from
$17.6 million for the quarter ended February 29, 2020, primarily
due to the non-recurrence of both advisory fees and prepayment
premiums related to the Easy Ice sale last quarter.
As compared to the three months ended May 31,
2019, in addition to the investment income increase of $0.5
million, net investment income increased further with reduced debt
and financing expenses, as the sales proceeds received from recent
realizations were used to repay the $74.5 million baby bond last
quarter. This increase was offset by (i) increased base and
incentive management fees generated from the management of this
larger pool of investments, and (ii) increased total expenses,
excluding interest and debt financing expenses, base management
fees and incentive fees and income tax benefit, that increased from
$1.3 million for the three months ended May 31, 2019, to $1.4
million for the three months ended May 31, 2020.
Net investment income on a weighted average per
share basis was $0.80 for the quarter ended May 31, 2020. Adjusted
for the incentive fee accrual related to net capital gains, the net
investment income on a weighted average per share basis was $0.51.
This compares to adjusted net investment income per share of $0.61
for the quarter ended February 29, 2020, and $0.60 for the quarter
ended May 31, 2019, reflecting decreases of $0.10 per share and
$0.09 per share, respectively. During these periods, weighted
average common shares outstanding increased from 7.7 million shares
for the three months ended May 31, 2019, to 11.2 million shares for
both the three months ended February 29, 2020, and May 31,
2020.
Net investment income yield as a percentage of
average net asset value (“Net Investment Income Yield”) was 12.3%
for the quarter ended May 31, 2020. Adjusted for the incentive fee
accrual related to net capital gains, the Net Investment Income
Yield was 7.9%. In comparison, adjusted Net Investment Income Yield
was 9.3% and 10.1% for the quarters ended February 29, 2020, and
May 31, 2019, respectively.
Net Asset Value (“NAV”) was $281.6 million as of
May 31, 2020, a decrease of $22.7 million from $304.3 million as of
February 29, 2020, but an increase of $94.8 million from $186.8
million as of May 31, 2019.
- For the three months ended May 31,
2020, $9.0 million of net investment income and $0.3 million
deferred tax benefit on net unrealized depreciation were earned,
partially offset by $32.0 million of net unrealized depreciation on
investments. There were no distributions to shareholders during the
quarter and no activity related to the Company’s At-the-Market
(“ATM”) equity offering or share repurchase plan.
NAV per share was $25.11 as of May 31, 2020,
compared to $27.13 as of February 29, 2020, and $24.06 as of May
31, 2019.
- For the three months ended May 31,
2020, NAV per share decreased by $2.02 per share, reflecting the
$31.7 million, or $2.82 net realized and unrealized loss on
investments, offset by the $9.0 million, or $0.80 net investment
income.
Return on equity for the last twelve months
ended May 31, 2020, was 9.9%, compared to 11.7% for the comparable
period last year.
Earnings per share for the quarter ended May 31,
2020, was ($2.02), compared to earnings per share of $2.39 for the
quarter ended February 29, 2020, and $0.99 for the quarter ended
May 31, 2019.
Investment portfolio activity for the quarter
ended May 31, 2020:
- Cost of investments made during the period: $39.0 million,
including investments in two new portfolio companies.
- Principal repayments during the period: $9.4 million.
Additional Financial Information
For the fiscal quarter ended May 31, 2020,
Saratoga Investment reported net investment income of $9.0 million,
or $0.80 on a weighted average per share basis, and a net realized
and unrealized loss on investments of $31.7 million, or $2.82 on a
weighted average per share basis, resulting in a net decrease in
net assets from operations of $22.7 million, or $2.02 on a weighted
average per share basis. The $31.7 million net loss on investments
was comprised of $32.0 million in net unrealized depreciation on
investments, offset by $0.3 million of net change in provision for
deferred taxes on unrealized depreciation on investments. The $32.0
million unrealized depreciation reflects a 6.1% reduction in the
total value of the portfolio, primarily related to the impact of
Covid-19 that resulted in changes to market spreads, EBITDA
multiples and/or revised portfolio company performance, following
the events since March 2020. This is compared to the fiscal quarter
ended May 31, 2019, with net investment income of $3.7 million, or
$0.48 on a weighted average per share basis, and a net realized and
unrealized gain on investments of $4.0 million, or $0.51 on a
weighted average per share basis, resulting in a net increase in
net assets from operations of $7.6 million, or $0.99 on a weighted
average per share basis. The $4.0 million net gain on investments
consisted of $4.0 million in net unrealized appreciation, offset by
$0.02 million in net deferred tax expense on unrealized gains in
Saratoga Investment’s blocker subsidiaries.
Adjusted for the incentive fee accrual related
to net capital gains, the net investment income was $5.8 million
and $4.6 million for the quarters ended May 31, 2020, and May 31,
2019, respectively – an increase of $1.1 million year-over-year, or
24.5%.
Total expenses, excluding interest and debt
financing expenses, base management fees and incentive management
fees, increased from $1.3 million for the quarter ended May 31,
2019, to $1.4 million for the quarter ended May 31, 2020, but
remained unchanged at 1.1% of average total assets.
Portfolio and Investment Activity
As of May 31, 2020, the fair value of Saratoga
Investment’s portfolio was $482.9 million (excluding $25.8 million
in cash and cash equivalents), principally invested in 36 portfolio
companies and one collateralized loan obligation fund (“CLO”). The
overall portfolio composition consisted of 73.4% of first lien term
loans, 14.4% of second lien term loans, 1.2% of unsecured term
loans, 5.6% of subordinated notes in a CLO and 5.4% of common
equity.
For the fiscal quarter ended May 31, 2020,
Saratoga Investment invested $39.0 million in two new and ten
existing portfolio companies and had $9.4 million in aggregate
amount of exits and repayments, resulting in net investments of
$29.6 million for the quarter.
As of May 31, 2020, the weighted average current
yield on Saratoga Investment’s portfolio based on fair values for
the twelve months ended was 9.6%, which was comprised of a weighted
average current yield of 9.9% on first lien term loans, 11.1% on
second lien term loans, 6.7% on unsecured term loans, 11.7% on CLO
subordinated notes and 0.0% on equity interests.
Liquidity and Capital Resources
As of May 31, 2020, Saratoga Investment had no
outstanding borrowings under its $45 million senior secured
revolving credit facility with Madison Capital Funding LLC. At
the same time, Saratoga Investment had $150.0 million SBA
debentures in its SBIC I license outstanding, $20.0 million in SBA
debentures in its SBIC II license outstanding, $60.0 million of
baby bonds (fair value of $56.5 million) issued and an aggregate of
$25.8 million in cash and cash equivalents.
With $45.0 million available under the credit
facility and the $25.8 million of cash and cash equivalents as of
May 31, 2020, Saratoga Investment has a total of $70.8 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 $155.0 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 quarter-end, Saratoga Investment
had $9.1 million of committed undrawn lending commitments and $40.2
million of discretionary funding commitments.
On June 24, 2020, the Company issued $37.5
million in aggregate principal amount of 7.25% fixed-rate notes due
2025 (the “Second 2025 Notes”) for net proceeds of $36.3 million
after deducting underwriting commissions of approximately $1.2
million. Offering costs incurred were approximately $0.2 million.
The Company also granted the underwriters an option to purchase up
to an additional $5.625 million in aggregate principal amount
of Notes within 30 days, which they fully exercised on July 6, 2020
for additional net proceeds of $5.4 million after deducting
additional underwriting commissions of approximately $0.2 million.
Interest on the Second 2025 Notes is paid quarterly in arrears on
February 28, May 31, August 31 and November 30, at a rate of 7.25%
per year, beginning August 31, 2020. The Second 2025 Notes mature
on June 30, 2025 and commencing June 24, 2022, may be redeemed in
whole or in part at any time or from time to time at our option.
The net proceeds from the offering will be used for general
corporate purposes in accordance with the Company’s investment
objective and strategies. The Second 2025 Notes are expected
to be listed on the New York Stock Exchange and to trade thereon
within 30 days of the original issue date under the trading symbol
“SAK”. The Company has received an investment grade private rating
of “BBB” from Egan-Jones Ratings Company, an independent,
unaffiliated rating agency.
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 May 31, 2020, 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 three months ended May 31, 2020,
there was no activity related to the ATM offering.
On April 24, 2020, we entered into a fourth amendment to the
Credit Facility with Madison Capital Funding LLC to, among other
things:
- Permit certain amendments related to the Paycheck Protection
Program (“Permitted PPP Amendment”) to Loan Asset Documents;
- Exclude certain debt and interest amounts allowed by the
Permitted PPP Amendments from certain calculations related to Net
Leverage Ratio, Interest Coverage Ratio and EBITDA; and
- Exclude such Permitted PPP Amendments from constituting a
Material Modification.
Dividend
Saratoga Investment has raised its dividend for
the past five years. In light of the dramatic uncertainties
currently present in the economy, and to ensure we retain liquidity
to not only support our current portfolio companies during these
challenged times, but to also create new, important relationships
through the provision of critically crucial liquidity in new
situations, Saratoga Investment’s Board of Directors (the “Board of
Directors”) deferred its dividend last quarter.
Furthermore, while many BDCs have spillover
obligations from prior years, representing taxable income from past
obligations yet to be distributed, Saratoga Investment has
historically managed its distributions conservatively so it is
current with all spillover obligations, other than those related to
our Easy Ice and Censis long-term net capital gains. This therefore
means that Saratoga Investment is not obligated to pay current
dividends related to historical earnings and enabling preservation
of precious liquidity in this challenging market environment.
Following Saratoga Investment’s recent baby bond
raise and the current resiliency of its portfolio, the Board of
Directors declared a $0.40c per share dividend for the quarter
ended May 31, 2020. This dividend has been calibrated at this level
relative to the most recent $0.56c per share dividend to reflect,
on the one hand our relatively strong quarterly results and
recently improved liquidity profile, and on the other the lack of
short- and long-term visibility of portfolio company performance
and the general fundamental economic earnings levels. The Board of
Directors will continue to reassess this on at least a quarterly
basis as better visibility is gained on the economy and business
performance. An important consideration for this decision arises
from Saratoga Investment’s historically conservative management of
its RIC compliance obligations, such that it has no ordinary income
spillover obligations and therefore substantial spillover
flexibility and consequent liquidity.
The Board of Directors declared this dividend on
July 7, 2020 and is payable on August 12, 2020, to common
stockholders of record on July 27, 2020. Shareholders have the
option to receive payment of the dividend in cash, or receive
shares of common stock pursuant to the Company’s DRIP.
In fiscal year 2020, the Company declared a
quarterly dividend of $0.56 per share for the quarter ended
November 30, 2019, $0.56 per share for the quarter ended August 31,
2019, $0.55 per share for the quarter ended May 31, 2019, and $0.54
per share for the quarter ended February 28, 2019. Total dividends
declared for the fiscal years ended February 28, 2019, and 2018,
were $2.06 per share and $1.90 per share, respectively.
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 May 31, 2020, the Company purchased 218,491 shares of common
stock, at the average price of $16.87 for approximately $3.7
million pursuant to this repurchase plan.
Saratoga Investment made no purchases of common
stock in the open market during the current fiscal year.
|
2021 Fiscal First Quarter Conference Call/Webcast Information |
|
|
When: |
Thursday, July 9, 2020, 10:00 a.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 1:00 p.m. ET on
Thursday, July 9, 2020, through 1:00 p.m. ET on Thursday, July 16,
2020, by dialing (855) 859-2056 (U.S. and Canada) or (404) 537-3406
(outside U.S. and Canada), passcode for both replay numbers:
8978338. |
|
|
Webcast: |
Interested parties may access a simultaneous webcast of the call
and find the Q1 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 $500 million collateralized loan obligation (“CLO”)
fund. It also owns 100% of the Class F-R-2, G-R-2 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 |
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May 31, 2020 |
|
February 29, 2020 |
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(unaudited) |
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ASSETS |
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Investments
at fair value |
|
|
|
|
Non-control/Non-affiliate investments (amortized cost of
$442,916,804 and $418,006,725, respectively) |
|
$ |
420,930,113 |
|
|
$ |
420,442,928 |
|
Affiliate investments (amortized cost of $25,998,569 and
$23,998,917, respectively) |
|
|
18,041,254 |
|
|
|
18,485,854 |
|
Control investments (amortized cost of $46,649,515 and $44,293,619,
respectively) |
|
|
43,975,865 |
|
|
|
46,703,192 |
|
Total
investments at fair value (amortized cost of $515,564,888 and
$486,299,261, respectively) |
|
|
482,947,232 |
|
|
|
485,631,974 |
|
Cash and
cash equivalents |
|
|
12,842,608 |
|
|
|
24,598,905 |
|
Cash and
cash equivalents, reserve accounts |
|
|
12,952,393 |
|
|
|
14,851,447 |
|
Interest
receivable (net of reserve of $1,500,123 and $1,238,049,
respectively) |
|
|
4,308,981 |
|
|
|
4,810,456 |
|
Management
fee receivable |
|
|
285,588 |
|
|
|
272,207 |
|
Other
assets |
|
|
660,775 |
|
|
|
701,007 |
|
Total assets |
|
$ |
513,997,577 |
|
|
$ |
530,865,996 |
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
Revolving
credit facility |
|
$ |
- |
|
|
$ |
- |
|
Deferred
debt financing costs, revolving credit facility |
|
|
(489,361 |
) |
|
|
(512,628 |
) |
SBA
debentures payable |
|
|
170,000,000 |
|
|
|
150,000,000 |
|
Deferred
debt financing costs, SBA debentures payable |
|
|
(2,892,760 |
) |
|
|
(2,561,495 |
) |
2025 Notes
payable |
|
|
60,000,000 |
|
|
|
60,000,000 |
|
Deferred
debt financing costs, 2025 notes payable |
|
|
(1,953,054 |
) |
|
|
(2,046,735 |
) |
Base
management and incentive fees payable |
|
|
3,552,457 |
|
|
|
15,800,097 |
|
Deferred tax
liability |
|
|
1,070,678 |
|
|
|
1,347,363 |
|
Accounts
payable and accrued expenses |
|
|
1,580,913 |
|
|
|
1,713,157 |
|
Interest and
debt fees payable |
|
|
994,956 |
|
|
|
2,234,042 |
|
Directors
fees payable |
|
|
63,000 |
|
|
|
61,500 |
|
Due to
manager |
|
|
439,730 |
|
|
|
543,842 |
|
Total liabilities |
|
|
232,366,559 |
|
|
|
226,579,143 |
|
|
|
|
|
|
|
|
|
|
|
NET
ASSETS |
|
|
|
|
Common
stock, par value $0.001, 100,000,000 common shares |
|
|
|
|
authorized, 11,217,545 and 11,217,545 common shares issued and
outstanding, respectively |
|
|
11,218 |
|
|
|
11,218 |
|
Capital in
excess of par value |
|
|
289,476,991 |
|
|
|
289,476,991 |
|
Total
distributable earnings (loss) |
|
|
(7,857,191 |
) |
|
|
14,798,644 |
|
Total net assets |
|
|
281,631,018 |
|
|
|
304,286,853 |
|
Total
liabilities and net assets |
|
$ |
513,997,577 |
|
|
$ |
530,865,996 |
|
NET ASSET
VALUE PER SHARE |
|
$ |
25.11 |
|
|
$ |
27.13 |
|
|
|
|
|
|
Asset
Coverage Ratio |
|
|
569.4 |
% |
|
|
607.1 |
% |
|
|
|
|
|
|
|
|
|
Saratoga
Investment Corp. |
Consolidated
Statements of Operations |
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended |
|
|
May 31, 2020 |
|
May 31, 2019 |
INVESTMENT
INCOME |
|
|
|
|
Interest
from investments |
|
|
|
|
Interest income: |
|
|
|
|
Non-control/Non-affiliate investments |
|
$ |
9,955,562 |
|
|
$ |
8,527,740 |
|
Affiliate investments |
|
|
398,370 |
|
|
|
249,325 |
|
Control investments |
|
|
1,133,584 |
|
|
|
1,648,146 |
|
Payment-in-kind interest income: |
|
|
|
|
Non-control/Non-affiliate investments |
|
|
581,946 |
|
|
|
151,897 |
|
Affiliate investments |
|
|
46,223 |
|
|
|
40,150 |
|
Control investments |
|
|
34,782 |
|
|
|
985,869 |
|
Total
interest from investments |
|
|
12,150,467 |
|
|
|
11,603,127 |
|
Interest
from cash and cash equivalents |
|
|
11,796 |
|
|
|
51,359 |
|
Management
fee income |
|
|
634,572 |
|
|
|
629,516 |
|
Structuring
and advisory fee income* |
|
|
313,306 |
|
|
|
316,375 |
|
Other
income* |
|
|
187,000 |
|
|
|
150,807 |
|
Total investment income |
|
|
13,297,141 |
|
|
|
12,751,184 |
|
|
|
|
|
|
OPERATING
EXPENSES |
|
|
|
|
Interest and
debt financing expenses |
|
|
2,563,876 |
|
|
|
3,864,576 |
|
Base
management fees |
|
|
2,160,528 |
|
|
|
1,812,169 |
|
Incentive
management fees expense (benefit) |
|
|
(1,858,310 |
) |
|
|
2,113,169 |
|
Professional
fees |
|
|
386,888 |
|
|
|
395,126 |
|
Administrator expenses |
|
|
556,250 |
|
|
|
500,000 |
|
Insurance |
|
|
67,726 |
|
|
|
64,619 |
|
Directors
fees and expenses |
|
|
60,000 |
|
|
|
60,000 |
|
General
& administrative |
|
|
350,814 |
|
|
|
258,601 |
|
Income tax
expense (benefit) |
|
|
(8,945 |
) |
|
|
2,136 |
|
Total operating expenses |
|
|
4,278,827 |
|
|
|
9,070,396 |
|
NET
INVESTMENT INCOME |
|
|
9,018,314 |
|
|
|
3,680,788 |
|
|
|
|
|
|
REALIZED AND
UNREALIZED GAIN (LOSS) ON INVESTMENTS |
|
|
|
|
Net realized
gain (loss) from investments: |
|
|
|
|
Non-control/Non-affiliate investments |
|
|
8,480 |
|
|
|
- |
|
Net realized
gain (loss) from investments |
|
|
8,480 |
|
|
|
- |
|
Net change
in unrealized appreciation (depreciation) on investments: |
|
|
|
|
Non-control/Non-affiliate investments |
|
|
(24,422,894 |
) |
|
|
2,393,191 |
|
Affiliate investments |
|
|
(2,444,252 |
) |
|
|
169,944 |
|
Control investments |
|
|
(5,083,223 |
) |
|
|
1,425,995 |
|
Net change
in unrealized appreciation (depreciation) on investments |
|
|
(31,950,369 |
) |
|
|
3,989,130 |
|
Net change
in provision for deferred taxes on unrealized (appreciation)
depreciation on investments |
|
|
267,740 |
|
|
|
(20,930 |
) |
Net realized
and unrealized gain (loss) on investments |
|
|
(31,674,149 |
) |
|
|
3,968,200 |
|
NET INCREASE
(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
|
$ |
(22,655,835 |
) |
|
|
$ |
7,648,988 |
|
|
|
|
|
|
WEIGHTED
AVERAGE - BASIC AND DILUTED EARNINGS (LOSS) PER COMMON SHARE |
|
$ |
(2.02 |
) |
|
$ |
0.99 |
|
|
|
|
|
|
WEIGHTED
AVERAGE COMMON SHARES OUTSTANDING - BASIC AND DILUTED |
|
|
11,217,545 |
|
|
|
7,746,187 |
|
|
|
|
|
|
* 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 quarters ended May
31, 2020, and May 31, 2019.
|
|
|
For the three months endedMay
31, |
|
|
2020 |
|
|
|
2019 |
|
|
|
|
|
Net Investment Income |
$ |
9,018,314 |
|
|
$ |
3,680,788 |
|
Changes in accrued capital gains incentive fee
expense/(reversal) |
|
(3,250,239 |
) |
|
|
954,007 |
|
Adjusted net investment income |
|
5,768,075 |
|
|
|
4,634,795 |
|
|
|
|
|
|
|
|
|
Net investment income yield |
|
12.3 |
% |
|
|
8.0 |
% |
Changes in accrued capital gains incentive fee
expense/(reversal) |
|
(4.4 |
%) |
|
|
2.1 |
% |
Adjusted net investment income yield (1) |
|
7.9 |
% |
|
|
10.1 |
% |
Net investment income per share |
$ |
0.80 |
|
|
$ |
0.48 |
|
Changes in accrued capital gains incentive fee
expense/(reversal) |
$ |
(0.29 |
) |
|
$ |
0.12 |
|
Adjusted net investment income per share (2) |
$ |
0.51 |
|
|
$ |
0.60 |
|
|
|
|
|
- Adjusted net investment income yield is calculated as adjusted
net investment income divided by average net asset value.
- 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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