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Gladstone Capital Corp. Reports Operating Results (10-Q)

February 07, 2011 | About:
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Gladstone Capital Corp. (GLAD) filed Quarterly Report for the period ended 2010-12-31.

Gladstone Capital Corp. has a market cap of $232.48 million; its shares were traded at around $10.8 with a P/E ratio of 13.15 and P/S ratio of 6.54. The dividend yield of Gladstone Capital Corp. stocks is 7.6%.Hedge Fund Gurus that owns GLAD: Jim Simons of Renaissance Technologies LLC. Mutual Fund and Other Gurus that owns GLAD: Chuck Royce of Royce& Associates.
This is the annual revenues and earnings per share of GLAD over the last 10 years. For detailed 10-year financial data and charts, go to 10-Year Financials of GLAD.


Highlight of Business Operations:

Purchases: During the three months ended December 31, 2010, we extended $9.0 million of investments to five new portfolio companies and $2.8 million of investments to existing portfolio companies through revolver draws or the additions of new term notes, for total investments of $11.8 million.

Repayments: During the three months ended December 31, 2010, two borrowers made unscheduled payoffs in the aggregate amount of $9.5 million, and we experienced contractual amortization, revolver repayments and some principal payments received ahead of schedule in the aggregate amount of $3.7 million, for total principal repayments of $13.2 million.

Interest income from our investments in debt securities decreased for the three months ended December 31, 2010, as compared to the three months ended December 31, 2009, for several reasons. The level of interest income from investments is directly related to the balance, at cost, of the interest-bearing investment portfolio outstanding during the period multiplied by the weighted average yield. The weighted average cost basis of our interest-bearing investment portfolio during the quarter ended December 31, 2010 was approximately $269.4 million, compared to approximately $336.1 million for the prior year quarter, due primarily to increased principal repayments, limited new investment activity and an increased number of investments placed on non-accrual subsequent to December 31, 2009. The annualized weighted average yield on our interest-bearing investment portfolio for the three months ended December 31, 2010 was 11.37%, compared to 10.79% for the prior year period. The weighted average yield varies from period to period based on the current stated interest rate on interest-bearing investments and the amounts of loans for which interest is not accruing. The increase in the weighted average yield on our portfolio for the quarter ended December 31, 2010 resulted primarily from the repayment of loans with lower stated interest rates and the placement of loans with lower stated interest rates on non-accrual. During the three months ended December 31, 2010, six investments were on non-accrual, for an aggregate of approximately $30.4 million at cost, or 10.3% of the aggregate cost of our investment portfolio, and during the prior year period, six investments were on non-accrual, for an aggregate of approximately $19.9 million at cost, or 5.7% of the aggregate cost of our investment portfolio.

Other income decreased for the three months ended December 31, 2010, as compared to the prior year period, primarily due to success fees earned in the prior year period. We received $0.3 million in prepaid success fees from Doe & Ingalls Management LLC and $0.3 million in success fees from our exit in Tulsa Welding School during the three months ended December 31, 2009. The decrease in Other income was partially offset by the receipt of $0.1 million in success fees from our exit in Interfilm Holdings, Inc. during the three months ended December 31, 2010.

Interest expense decreased for the three months ended December 31, 2010, as compared to the prior year period due primarily to decreased borrowings under our Credit Facility and the reversal of $0.6 million minimum earnings shortfall fee during the three months ended December 31, 2010. The weighted average balance outstanding on our Credit Facility during the quarter ended December 31, 2010 was approximately $19.8 million, as compared to $78.8 million in the prior year period, a decrease of 74.8%. On November 22, 2010, we amended our Credit Facility such that advances bear interest at LIBOR subject to a minimum rate of 1.5%, plus 3.75% per annum. For the three months ended December 31, 2009, under our prior credit facility, advances generally bore interest at LIBOR subject to a minimum rate of 2.0%, plus 4.0% per annum. In addition to the lower interest rate, the amendment removed the annual minimum earnings shortfall fee to the committed lenders. As such, we reversed $0.6 million during the three months ended December 31, 2010 that we had accrued through September 30, 2010 for a projected minimum earnings shortfall fee, as it is no longer applicable.

Net unrealized (depreciation) appreciation on investments is the net change in the fair value of our investment portfolio during the reporting period, including the reversal of previously-recorded unrealized appreciation or depreciation when gains and losses are actually realized. During the quarter ended December 31, 2010, we recorded net unrealized depreciation on investments in the aggregate amount of $2.9 million. During the prior year period, we recorded net unrealized appreciation on investments in the aggregate amount of $2.6 million, which included the reversal of $0.9 million in unrealized depreciation related to two syndicated loan sales. Excluding reversals, we had $1.7 million in net unrealized appreciation for the three months ended December 30, 2009. The net unrealized (depreciation) appreciation across our investments for the three months ended December 31, 2010 was as follows:

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