NEW YORK, Feb. 07, 2019 (GLOBE NEWSWIRE) -- PennantPark Investment Corporation (NASDAQ: PNNT) announced today
financial results for the first fiscal quarter ended December 31, 2018.
HIGHLIGHTS
Quarter ended December 31, 2018
($ in millions, except per share amounts)
| Assets and Liabilities: |
|
|
|
| Investment portfolio |
$ |
1,191.5 |
|
| Net assets |
$ |
615.9 |
|
| Net asset value per share |
$ |
9.05 |
|
| |
|
|
| Credit Facility |
$ |
167.1 |
|
| 2019 Notes |
$ |
249.4 |
|
| SBA Debentures |
$ |
145.8 |
|
| |
|
|
| Yield on debt investments at quarter-end |
|
10.9% |
|
| Operating Results: |
|
|
|
| Net investment income |
$ |
12.6 |
|
| Net investment income per share |
$ |
0.18 |
|
| Distributions declared per share |
$ |
0.18 |
|
| |
|
|
|
| Portfolio Activity: |
|
|
|
| Purchases of investments |
$ |
194.5 |
|
| Sales and repayments of investments |
$ |
125.8 |
|
| |
|
|
|
| Number of new portfolio companies invested |
|
6 |
|
| Number of existing portfolio companies invested |
|
13 |
|
| Number of ending portfolio companies |
|
56 |
|
CONFERENCE CALL AT 10:00 A.M. ET ON FEBRUARY 8, 2019
PennantPark Investment Corporation (“we,” “our,” “us” or the “Company”) will host a conference call at 10:00
a.m. (Eastern Time) on Friday, February 8, 2019 to discuss its financial results. All interested parties are welcome to
participate. You can access the conference call by dialing toll-free (866) 519-2796 approximately 5-10 minutes prior to the call.
International callers should dial (323) 794-2095. All callers should reference passcode #5543349. An archived replay of the call
will be available through February 22, 2019 by calling toll-free (888) 203-1112. International callers please dial (719) 457-0820.
For all phone replays, please reference passcode #5543349.
PORTFOLIO AND INVESTMENT ACTIVITY
“We are pleased with the progress we are making in several areas. Our activity and selectivity have resulted in
a more senior secured portfolio, which should result in even more steady and stable coverage of our dividend,” said Art Penn,
Chairman and CEO. “Additionally, our earnings stream should improve based on a gradual increase in our debt to equity ratio, while
still maintaining a prudent debt profile.”
As of December 31, 2018, our portfolio totaled $1,191.5 million and consisted of $577.4 million of first lien
secured debt, $403.2 million of second lien secured debt, $48.1 million of subordinated debt and $162.8 million of preferred and
common equity. Our debt portfolio consisted of 90% variable-rate investments and 10% fixed-rate investments. As of December 31,
2018, we had no companies on non-accrual. Overall, the portfolio had net unrealized depreciation of $132.2 million as of December
31, 2018. Our overall portfolio consisted of 56 companies with an average investment size of $21.3 million, had a weighted average
yield on interest bearing debt investments of 10.9% and was invested 48% in first lien secured debt, 34% in second lien secured
debt, 4% in subordinated debt and 14% in preferred and common equity.
As of September 30, 2018, our portfolio totaled $1,132.1 million and consisted of $531.4 million of first lien
secured debt, $391.1 million of second lien secured debt, $48.1 million of subordinated debt and $161.5 million of preferred and
common equity. Our debt portfolio consisted of 90% variable-rate investments and 10% fixed-rate investments. As of September 30,
2018, we had no portfolio companies on non-accrual. Overall, the portfolio had net unrealized depreciation of $111.8 million as of
September 30, 2018. Our overall portfolio consisted of 53 companies with an average investment size of $21.4 million, had a
weighted average yield on interest bearing debt investments of 11.2% and was invested 47% in first lien secured debt, 35% in second
lien secured debt, 4% in subordinated debt and 14% in preferred and common equity.
For the three months ended December 31, 2018, we invested $194.5 million in six new and 13 existing portfolio
companies with a weighted average yield on debt investments of 9.5%. Sales and repayments of investments for the three months ended
December 31, 2018 totaled $125.8 million.
For the three months ended December 31, 2017, we invested $138.4 million in five new and seven existing
portfolio companies with a weighted average yield on debt investments of 10.8%. Sales and repayments of investments for the three
months ended December 31, 2017 totaled $192.3 million.
RESULTS OF OPERATIONS
Set forth below are the results of operations for the three months ended December 31, 2018 and 2017.
Investment Income
Investment income for the three months ended December 31, 2018 was $27.4 million and was attributable to $13.2
million from first lien secured debt, $12.4 million from second lien secured debt and $1.8 million from subordinated debt,
respectively. Investment income for the three months ended December 31, 2017 was $28.7 million and was attributable to $12.7
million from first lien secured debt, $12.9 million from second lien secured debt and $3.1 million from subordinated debt,
respectively. The decrease in investment income compared to the same period in the prior year was primarily due to a decrease in
other income.
Expenses
Expenses for the three months ended December 31, 2018 totaled $14.8 million. Base management fee for the same
period totaled $4.4 million, incentive fee totaled $2.7 million, debt related interest and expenses totaled $6.3 million, general
and administrative expenses totaled $1.1 million and provision for taxes totaled $0.3 million. Net expenses for the three months
ended December 31, 2017 totaled $14.5 million. Base management fee for the same period totaled $4.8 million (after a base
management fee waiver of $0.9 million), incentive fee totaled $2.7 million (after an incentive fee waiver of $0.5 million), debt
related interest and expenses totaled $5.9 million and general and administrative expenses totaled $1.1 million. The increase in
expenses compared to the same period in the prior year was primarily due to an increase in leverage, which resulted in an increased
interest expense.
Net Investment Income
Net investment income totaled $12.6 million, or $0.18 per share, for the three months ended December 31, 2018,
and $14.2 million, or $0.20 per share, for the three months ended December 31, 2017. The decrease in net investment income compared
to the same period in the prior year was primarily due to a decrease in other income and an increase in leverage, which resulted in
an increased interest expense.
Net Realized Gains or Losses
Sales and repayments of investments for the three months ended December 31, 2018 totaled $125.8 million and net
realized gains totaled $8.5 million. Sales and repayments of investments for the three months ended December 31, 2017 totaled
$192.3 million and net realized gains totaled $3.8 million. The change in realized gains/losses was primarily due to changes in the
market conditions of our investments and the values at which they were realized.
Unrealized Appreciation or Depreciation on Investments, the Credit Facility and the 2019
Notes
For the three months ended December 31, 2018 and 2017, we reported net change in unrealized depreciation on
investments of $20.4 million and $6.8 million, respectively. As of December 31, 2018 and September 30, 2018, our net unrealized
depreciation on investments totaled $132.2 million and $111.8 million, respectively. The net change in unrealized
appreciation/depreciation on our investments compared to the same period in the prior year was primarily due to changes in the
capital market conditions, the financial performance of certain portfolio companies and the reversal of unrealized
appreciation/depreciation on investments that were realized.
For the three months ended December 31, 2018 and 2017, our multi-currency, senior secured revolving credit
facility, as amended and restated, or the Credit Facility, and the 4.50% notes due 2019, or 2019 Notes, had a net change in
unrealized depreciation of $6.1 million and $1.1 million, respectively. As of December 31, 2018 and September 30, 2018, the net
unrealized depreciation on the Credit Facility and the 2019 Notes totaled $7.6 million and $1.6 million, respectively. The net
change in net unrealized depreciation compared to the same period in the prior year was primarily due to changes in the capital
markets.
Net Change in Net Assets Resulting from Operations
Net change in net assets resulting from operations totaled $6.8 million, or $0.10 per share, for the three
months ended December 31, 2018. This compares to a net change in net assets resulting from operations of $12.3 million, or $0.18
per share, for the three months ended December 31, 2017. The decrease in the net change in net assets from operations compared to
the same period in the prior year was primarily due to a lower yielding portfolio and depreciation of our investments.
LIQUIDITY AND CAPITAL RESOURCES
Our liquidity and capital resources are derived primarily from proceeds of securities offerings, debt capital
and cash flows from operations, including investment sales and repayments, and income earned. Our primary use of funds from
operations includes investments in portfolio companies and payments of fees and other operating expenses we incur. We have used,
and expect to continue to use, our debt capital, proceeds from the rotation of our portfolio and proceeds from public and private
offerings of securities to finance our investment objectives.
The annualized weighted average cost of debt for the three months ended December 31, 2018 and 2017, inclusive of
the fee on the undrawn commitment and amendment costs on the Credit Facility, amortized upfront fees on Small Business
Administration, or SBA, debentures and debt issuance costs, was 4.71% and 4.32%, respectively.
As of December 31, 2018 and September 30, 2018, we had $174.1 million and $80.5 million (including a $2.0
million temporary draw), respectively, in outstanding borrowings under the Credit Facility. The Credit Facility had a weighted
average interest rate of 4.39% and 3.79%, respectively, exclusive of the fee on undrawn commitments of 0.375%, as of December 31,
2018 and September 30, 2018. As of the same periods, we had $270.9 million and $364.5 million of unused borrowing capacity under
our Credit Facility, respectively, subject to the regulatory restrictions.
As of December 31, 2018 and September 30, 2018, we had $250.0 million in aggregate principal amount of 2019
Notes outstanding with a fixed interest rate of 4.50% per year. As of December 31, 2018 and September 30, 2018, we had $150.0
million and $180.0 million in SBA debentures outstanding, respectively.
As of December 31, 2018 and September 30, 2018, we had cash and cash equivalents of $24.7 million and $19.5
million, respectively, available for investing and general corporate purposes. We believe our liquidity and capital resources are
sufficient to take advantage of market opportunities.
Our operating activities used cash of $38.6 million for the three months ended December 31, 2018, and our
financing activities provided cash of $43.7 million for the same period. Our operating activities used cash primarily for our
investment activities and our financing activities provided cash primarily from net borrowings under the Credit Facility.
Our operating activities provided cash of $62.4 million for the three months ended December 31, 2017, and our
financing activities used cash of $27.8 million for the same period. Our operating activities provided cash from sales and
repayments on our investments and our financing activities used cash primarily to pay distributions to stockholders and repay the
SBA debentures.
STOCK REPURCHASE PROGRAM
On May 9, 2018, we announced a share repurchase program which allows us to repurchase up to $30 million of our
outstanding common stock in the open market at prices below our net asset value as reported in our then most recently published
consolidated financial statements. The shares may be purchased from time to time at prevailing market prices, through open market
transactions, including block transactions. Unless extended by our board of directors, the program, which may be implemented at the
discretion of management, will expire on the earlier of May 9, 2019 and the repurchase of $30 million of common stock. For the
three months ended December 31, 2018 and 2017, we repurchased 1.0 million and zero shares of common stock in open market
transactions for an aggregate cost (including transaction costs) of $7.5 million and zero, respectively.
DISTRIBUTIONS
During both the three months ended December 31, 2018 and 2017, we declared distributions of $0.18 per share, for
total distributions of $12.2 million and $12.8 million, respectively. We monitor available net investment income to determine if a
return of capital for tax purposes may occur for the fiscal year. To the extent our taxable earnings fall below the total amount of
our distributions for any given fiscal year, stockholders will be notified of the portion of those distributions deemed to be a tax
return of capital. Tax characteristics of all distributions will be reported to stockholders subject to information reporting on
Form 1099-DIV after the end of each calendar year and in our periodic reports filed with the Securities and Exchange Commission, or
the SEC.
RECENT DEVELOPMENTS
On February 5, 2019, our stockholders approved the adoption of the modified asset coverage requirements set
forth in Section 61(a)(2) of the 1940 Act, as amended by the Consolidated Appropriations Act of 2018 (which includes the Small
Business Credit Availability Act) as approved by our board of directors on November 13, 2018. As a result, the minimum asset
coverage requirements applicable to us for senior securities has been reduced from 200% to 150%, subject to compliance with certain
disclosure requirements. In connection with this reduction, our annual base management fee has also been reduced from 1.50% to
1.00% on gross assets that exceed 200% of the Company’s total net assets as of the immediately preceding quarter-end.
On January 31, 2019, the Company announced the redemption of $250.0 million outstanding aggregate principal
amount of its 2019 Notes due October 1, 2019. The 2019 Notes will be prepaid at 100% of the principal amount, plus accrued and
unpaid interest through the payment date of March 4, 2019, as well as a make-whole premium.
AVAILABLE INFORMATION
The Company makes available on its website its report on Form 10-Q filed with the SEC and stockholders may find
the report on our website at www.pennantpark.com.
PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
| |
|
December 31, 2018 |
|
|
September 30, 2018 |
|
| |
|
(unaudited) |
|
|
|
|
|
| Assets |
|
|
|
|
|
|
|
|
| Investments at fair value |
|
|
|
|
|
|
|
|
| Non-controlled, non-affiliated investments (cost—$987,929,505 and $896,720,950, respectively) |
|
$ |
989,515,879 |
|
|
$ |
905,271,258 |
|
| Non-controlled, affiliated investments (cost—$74,369,962 and $91,520,908, respectively) |
|
|
49,057,619 |
|
|
|
78,078,331 |
|
| Controlled, affiliated investments (cost—$261,311,677 and $255,574,317, respectively) |
|
|
152,880,313 |
|
|
|
148,735,885 |
|
| Total of investments (cost—$1,323,611,144 and $1,243,816,175, respectively) |
|
|
1,191,453,811 |
|
|
|
1,132,085,474 |
|
| Cash and cash equivalents (cost—$24,657,870 and $19,543,625, respectively) |
|
|
24,653,889 |
|
|
|
19,506,154 |
|
| Interest receivable |
|
|
5,506,564 |
|
|
|
7,606,964 |
|
| Prepaid expenses and other assets |
|
|
152,544 |
|
|
|
920,235 |
|
| Total assets |
|
|
1,221,766,808 |
|
|
|
1,160,118,827 |
|
| Liabilities |
|
|
|
|
|
|
|
|
| Distributions payable |
|
|
12,244,957 |
|
|
|
12,429,712 |
|
| Payable for investments purchased |
|
|
18,172,125 |
|
|
|
— |
|
| Credit Facility payable (cost—$174,136,000 and $80,520,000, respectively) |
|
|
167,088,178 |
|
|
|
77,645,830 |
|
| 2019 Notes payable (par—$250,000,000) |
|
|
249,430,000 |
|
|
|
251,322,500 |
|
| SBA debentures payable, net (par—$150,000,000 and $180,000,000, respectively) |
|
|
145,789,777 |
|
|
|
175,373,229 |
|
| Base management fee payable, net |
|
|
4,419,262 |
|
|
|
4,086,831 |
|
| Performance-based incentive fee payable, net |
|
|
2,667,270 |
|
|
|
2,964,265 |
|
| Interest payable on debt |
|
|
5,007,094 |
|
|
|
6,576,393 |
|
| Accrued other expenses |
|
|
1,007,040 |
|
|
|
818,172 |
|
| Total liabilities |
|
|
605,825,703 |
|
|
|
531,216,932 |
|
| Commitments and contingencies |
|
|
— |
|
|
|
— |
|
| Net assets |
|
|
|
|
|
|
|
|
Common stock, 68,027,537 and 69,053,958 shares issued and outstanding, respectively
Par value $0.001 per share and 100,000,000 shares authorized |
|
|
68,028 |
|
|
|
69,054 |
|
| Paid-in capital in excess of par value |
|
|
796,236,224 |
|
|
|
803,729,220 |
|
| Undistributed net investment income |
|
|
6,333,033 |
|
|
|
6,003,360 |
|
| Accumulated net realized loss on investments |
|
|
(62,157,643 |
) |
|
|
(70,687,629 |
) |
| Net unrealized depreciation on investments |
|
|
(132,156,359 |
) |
|
|
(111,763,780 |
) |
| Net unrealized depreciation on debt |
|
|
7,617,822 |
|
|
|
1,551,670 |
|
| Total net assets |
|
$ |
615,941,105 |
|
|
$ |
628,901,895 |
|
| Total liabilities and net assets |
|
$ |
1,221,766,808 |
|
|
$ |
1,160,118,827 |
|
| Net asset value per share |
|
$ |
9.05 |
|
|
$ |
9.11 |
|
PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| |
|
|
|
| |
|
Three Months Ended December 31, |
|
| |
|
2018 |
|
|
2017 |
|
| Investment income: |
|
|
|
|
|
|
|
|
| From non-controlled, non-affiliated investments: |
|
|
|
|
|
|
|
|
| Interest |
|
$ |
23,508,581 |
|
|
$ |
21,383,219 |
|
| Payment in kind |
|
|
1,246,016 |
|
|
|
1,284,909 |
|
| Other income |
|
|
618,071 |
|
|
|
1,586,642 |
|
| From non-controlled, affiliated investments: |
|
|
|
|
|
|
|
|
| Interest |
|
|
105,105 |
|
|
|
1,215,834 |
|
| Payment in kind |
|
|
108,625 |
|
|
|
1,573,306 |
|
| From controlled, affiliated investments: |
|
|
|
|
|
|
|
|
| Interest |
|
|
1,788,603 |
|
|
|
480,430 |
|
| Payment in kind |
|
|
5,000 |
|
|
|
1,144,085 |
|
| Total investment income |
|
|
27,380,001 |
|
|
|
28,668,425 |
|
| Expenses: |
|
|
|
|
|
|
|
|
| Base management fee |
|
|
4,419,262 |
|
|
|
5,735,137 |
|
| Performance-based incentive fee |
|
|
2,667,270 |
|
|
|
3,185,204 |
|
| Interest and expenses on debt |
|
|
6,278,847 |
|
|
|
5,857,378 |
|
| Administrative services expenses |
|
|
521,625 |
|
|
|
521,625 |
|
| Other general and administrative expenses |
|
|
618,367 |
|
|
|
628,290 |
|
| Expenses before Management Fees waiver and provision for taxes |
|
|
14,505,371 |
|
|
|
15,927,634 |
|
| Management Fees waiver |
|
|
— |
|
|
|
(1,427,253 |
) |
| Provision for taxes |
|
|
300,000 |
|
|
|
— |
|
| Net expenses |
|
|
14,805,371 |
|
|
|
14,500,381 |
|
| Net investment income |
|
|
12,574,630 |
|
|
|
14,168,044 |
|
| Realized and unrealized loss on investments and debt: |
|
|
|
|
|
|
|
|
| Net realized gain on investments on: |
|
|
|
|
|
|
|
|
| Non-controlled, non-affiliated investments |
|
|
3,737,919 |
|
|
|
1,793,043 |
|
| Non-controlled and controlled, affiliated investments |
|
|
4,792,067 |
|
|
|
1,980,440 |
|
| Net realized gain on investments |
|
|
8,529,986 |
|
|
|
3,773,483 |
|
| Net change in unrealized depreciation on: |
|
|
|
|
|
|
|
|
| Non-controlled, non-affiliated investments |
|
|
(6,929,882 |
) |
|
|
1,738,065 |
|
| Non-controlled and controlled, affiliated investments |
|
|
(13,462,697 |
) |
|
|
(8,510,961 |
) |
| Debt depreciation |
|
|
6,066,152 |
|
|
|
1,126,766 |
|
| Net change in unrealized depreciation on investments and debt |
|
|
(14,326,427 |
) |
|
|
(5,646,130 |
) |
| Net realized and unrealized loss from investments and debt |
|
|
(5,796,441 |
) |
|
|
(1,872,647 |
) |
| Net increase in net assets resulting from operations |
|
$ |
6,778,189 |
|
|
$ |
12,295,397 |
|
| Net increase in net assets resulting from operations per common share |
|
$ |
0.10 |
|
|
$ |
0.18 |
|
| Net investment income per common share |
|
$ |
0.18 |
|
|
$ |
0.20 |
|
ABOUT PENNANTPARK INVESTMENT CORPORATION
PennantPark Investment Corporation is a business development company which invests primarily in U.S.
middle-market companies in the form of first lien secured debt, second lien secured debt, subordinated debt and equity investments.
PennantPark Investment Corporation is managed by PennantPark Investment Advisers, LLC.
FORWARD-LOOKING STATEMENTS
This press release may contain “forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995. You should understand that under Section 27A(b)(2)(B) of the Securities Act of 1933, as amended, and
Section 21E(b)(2)(B) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the “safe harbor” provisions of the
Private Securities Litigation Reform Act of 1995 do not apply to forward-looking statements made in periodic reports we file under
the Exchange Act. All statements other than statements of historical facts included in this press release are forward-looking
statements and are not guarantees of future performance 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 those described
from time to time in filings with the SEC. The Company undertakes no duty to update any forward-looking statement made herein. You
should not place undue influence on such forward-looking statements as such statements speak only as of the date on which they are
made.
We may use words such as “anticipates,” “believes,” “expects,” “intends,” “seeks,” “plans,” “estimates” and
similar expressions to identify forward-looking statements. Such statements are based on currently available operating, financial
and competitive information and are subject to various risks and uncertainties that could cause actual results to differ materially
from our historical experience and our present expectations.
CONTACT:
Aviv Efrat
PennantPark Investment Corporation
(212) 905-1000
www.pennantpark.com
