NEW YORK, Jan. 08, 2020 (GLOBE NEWSWIRE) -- Saratoga Investment Corp. (NYSE:SAR) (“Saratoga Investment” or “the Company”), a business development company, today announced financial results for its 2020 fiscal third quarter. In addition, the Company announced that its Board of Directors has declared a dividend of $0.56 per share for the fiscal quarter ended November 30, 2019, payable on February 6, 2020, to all stockholders of record at the close of business on January 24, 2020.
Summary Financial Information
The Company’s summarized financial information is as follows:
| For the three months ended and as of November 30, 2019 | For the three months ended and as of August 31, 2019 | For the three months ended and as of November 30, 2018 | ||||
| ($ in thousands except per share) | ||||||
| AUM | 487,031 | 486,880 | 443,812 | |||
| NAV | 282,180 | 224,337 | 173,269 | |||
| NAV per share | 25.30 | 24.47 | 23.13 | |||
| Investment Income | 14,196 | 13,888 | 12,833 | |||
| Net Investment Income per share | 0.46 | 0.59 | 0.69 | |||
| Adjusted Net Investment Income per share | 0.61 | 0.68 | 0.65 | |||
| Earnings per share | 1.37 | 0.91 | 0.49 | |||
| Dividends per share (declared) | 0.56 | 0.56 | 0.53 | |||
| Return on Equity – last twelve months | 17.6 | % | 14.3 | % | 10.1 | % |
| – annualized quarter | 21.7 | % | 14.7 | % | 8.5 | % |
| Originations | 40,766 | 93,194 | 73,732 | |||
| Repayments | 51,230 | 19,004 | 23,365 | |||
“Our third quarter quarterly performance metrics were remarkably strong with LTM return on equity of 17.6%, adjusted NII per share of $0.61 per share, earnings per share of $1.37, and an additional increase in NAV per share this quarter of $0.83, or 3.4%, to $25.30. This quarter included another significant realized gain, with our Censis equity investment recognizing an $11 million gain through a sale,” said Christian L. Oberbeck, Chairman and Chief Executive Officer of Saratoga Investment. “Our continued strong price and volume stock market performance also enabled us to issue a further $49.4 million of equity accretively under our existing ATM program this quarter, essentially fully funding the equity requirement for our second SBIC license. Drawing down debt under our second SBIC license at the 2-to-1 leverage ratio, our approximate all-in 3% cost-of-debt would be highly accretive to earnings and drive future earnings growth when invested consistent with our current portfolio. Today we also announced a $0.56 per share dividend for the quarter ended November 30, 2019, unchanged from the prior quarter. Our liquidity is robust, providing us the ability to grow our AUM by a further 52% utilizing the current liquidity and committed credit facilities at our disposal and following the $50.0 million baby bond repayment in December.
In addition, subsequent to quarter-end, our entire investment in Easy Ice was repaid in a change of control transaction, resulting in more than $35 million of proceeds, interest and fees, as well as a repayment of our $28 million second lien term loans and $11 million preferred equity. These proceeds are currently estimated to result in at least a $17 million, or $1.51 per share increase in NAV, with the exact amounts and characterization to be finally determined after completion of the full fourth quarter and incorporating overall operating results.”
Michael J. Grisius, President and Chief Investment Officer, added, “This fiscal quarter has again demonstrated how the long-term measured growth of our AUM in strong portfolio companies can result in outsized equity returns, with our $1.0 million equity investment in Censis resulting in a $11.3 million total realized gain. The quality of our asset base remains exceptionally high, with 99% of credits rated in our highest category. We’ve maintained our forward momentum in the face of macroeconomic conditions and lending dynamics that continue to provide headwinds, with LIBOR again decreasing this quarter. We also continue to bring new platform investments into the portfolio, with another investment in a new company added this quarter, in addition to the success we continue to have with follow-ons in existing portfolio companies. We remain confident that our experienced origination team, exceptional underwriting standards and tested investment strategy and focus will continue to steadily grow portfolio size and maintain quality over the long-term.”
As of November 30, 2019, Saratoga Investment increased its assets under management (“AUM”) to $487.0 million, an increase of 0.03% from $486.9 million as of August 31, 2019, and an increase of 9.7% from $443.8 million as of November 30, 2018. The increase this quarter consists of $40.8 million in originations, offset by repayments and amortizations of $51.2 million, reflecting net repayments and amortizations of $10.4 million. Repayments includes the sale of our Censis equity that generated an $11.3 million realized gain on a $1.0 million cost basis. Saratoga Investment’s portfolio remains strong, with a continued high level of investment quality in loan investments, with 99.0% of its loans this quarter at its highest internal rating. This quarter’s originations include one investment in a new platform, and three follow-ons in existing portfolio companies. Since Saratoga Investment took over the management of the BDC, $435.4 million of repayments and sales of investments originated by Saratoga Investment have generated a gross unlevered IRR of 14.8%.
For the three months ended November 30, 2019, total investment income of $14.2 million increased by $1.4 million, or 10.6%, compared to $12.8 million for the three months ended November 30, 2018, and by 2.2% on a quarter-on-quarter basis from $13.9 million for the three months ended August 31, 2019. This increased investment income was generated from an investment base that has grown by 9.7% since last year and was relatively unchanged from last quarter. In addition, these increases were achieved despite the weighted average current coupon on non-CLO BDC investments decreasing to 10.1% this quarter from 11.3% last year and 10.4% last quarter. The decrease in the current coupon is primarily due to the reductions in LIBOR over these periods.
As compared to the three months ended November 30, 2018, the investment income increase of $1.4 million was offset by: (i) increased debt and financing expenses, as the growth in AUM this year was partially financed from the $20.0 million baby bond follow-on issuance last year; and (ii) increased base and incentive management fees generated from the management of this larger pool of investments. Total expenses, excluding interest and debt financing expenses, base management fees, incentive fees and income tax benefit, increased from $1.4 million for the three months ended November 30, 2018, to $1.5 million for the three months ended November 30, 2019.
Net investment income on a weighted average per share basis was $0.46 for the three months ended November 30, 2019. Adjusted for the incentive fee accrual related to net unrealized capital gains, the net investment income on a weighted average per share basis was $0.61. This compares to adjusted net investment income per share of $0.68 for the three months ended August 31, 2019, and $0.65 for the three months ended November 30, 2018. During these periods, weighted average common shares outstanding increased from 7.5 million shares for the three months ended November 30, 2018, to 8.3 million shares and 10.0 million shares for the three months ended August 31, 2019, and November 30, 2019, respectively. These share increases primarily reflect the 1.4 million shares issued last quarter and the 2.0 million shares issued this quarter pursuant to the At-the-Market (“ATM”) equity offering program, both of which were accretive to net asset value (“NAV”) per share.
Net investment income yield as a percentage of average NAV (“Net Investment Income Yield”) was 7.2% for the three months ended November 30, 2019. Adjusted for the incentive fee accrual related to net unrealized capital gains, the Net Investment Income Yield was 9.7%. In comparison, adjusted Net Investment Income Yield was 11.0% and 11.2% for the three months ended August 31, 2019, and November 30, 2018, respectively.
NAV was $282.2 million as of November 30, 2019, an increase of $57.9 million from $224.3 million as of August 31, 2019, an increase of $101.3 million from $180.9 million as of February 28, 2019, and an increase of $108.9 million from $173.3 million as of November 30, 2018.
- For the nine months ended November 30, 2019, $13.2 million of net investment income, $12.6 million in net realized gain from investments and $4.9 million of net unrealized appreciation were earned, partially offset by $1.8 million deferred tax expense on net unrealized gains in Saratoga Investment’s blocker subsidiaries and $13.8 million of dividends declared. In addition, $2.2 million of stock dividend distributions were made through the Company’s dividend reinvestment plan (“DRIP”), and 3,400,481 shares were sold through the ATM equity offering during the nine months, for net proceeds of $84.0 million.
NAV per share was $25.30 as of November 30, 2019, compared to $24.47 as of August 31, 2019, $23.62 as of February 28, 2019, and $23.13 as of November 30, 2018.
- For the nine months ended November 30, 2019, NAV per share increased by $1.68 per share, reflecting the $15.1 million, or $1.68 per share increase in net assets (net of the $1.65 dividend paid during the first three quarters). In addition, there was a $0.02 net accretive impact in this quarter resulting from this quarter’s 1,986,942 share issuances from the DRIP and ATM programs. The Company made no repurchases of common stock in the open market during this period.
Return on equity for the last twelve months ended November 30, 2019 was 17.6%, compared to 10.1% for the comparable period last year.
Earnings per share for the three months ended November 30, 2019, was $1.37, compared to earnings per share of $0.91 for the three months ended August 31, 2019, and $0.49 for the three months ended November 30, 2018.
Investment portfolio activity for the three months ended November 30, 2019:
- Cost of investments made during the period: $40.8 million
- Principal repayments during the period: $51.2 million
Additional Financial Information
For the fiscal quarter ended November 30, 2019, Saratoga Investment reported net investment income of $4.6 million, or $0.46 on a weighted average per share basis, and a net realized and unrealized gain on investments of $9.1 million, or $0.91 on a weighted average per share basis, resulting in a net increase in net assets from operations of $13.7 million, or $1.37 on a weighted average per share basis. The $9.1 million net gain on investments was comprised of $10.7 million in net realized gain on investments, offset by $0.5 million in net unrealized depreciation on investments and $1.1 million of net deferred tax expense on unrealized gains in Saratoga Investment’s blocker subsidiaries.
The $10.7 million net realized gain reflects the gain from the realization of the Company’s Censis Technologies investment during the quarter.
The $0.5 million net unrealized depreciation primarily reflects the $4.3 million reversal of previously recognized appreciation following the realization of the Company’s Censis Technologies investment, offset by $3.7 million unrealized appreciation on the Company’s Easy Ice investment.
This is compared to the fiscal quarter ended November 30, 2018, with net investment income of $5.1 million, or $0.69 on a weighted average per share basis, and a net realized and unrealized loss on investments of $1.5 million, or $0.20 on a weighted average per share basis, resulting in a net increase in net assets from operations of $3.7 million, or $0.49 on a weighted average per share basis. The $1.5 million net loss on investments consisted of $0.07 million in net realized loss, $1.0 million in net unrealized depreciation on investments, and $0.4 million in net deferred tax expense on unrealized gains in Saratoga Investment’s blocker subsidiaries.
Adjusted for the incentive fee accrual related to net unrealized capital gains, net investment income was $6.1 million and $4.8 million for the three months ended November 30, 2019 and 2018, respectively – an increase of $1.3 million year-over-year, or 26.6%.
Total expenses, excluding interest and debt financing expenses, base management fees and incentive management fees, decreased from $1.3 million for the three months ended November 30, 2018, to $0.5 million for the three months ended November 30, 2019, decreasing from 1.2% to 0.8% of average total assets. The decrease was primarily due to the deferred tax benefit of $1.0 million recognized in the quarter related to the Easy Ice blocker subsidiary.
Portfolio and Investment Activity
As of November 30, 2019, the fair value of Saratoga Investment’s portfolio was $487.0 million (excluding $81.1 million in cash and cash equivalents), principally invested in 38 portfolio companies and one collateralized loan obligation fund (“CLO”). The overall portfolio composition consisted of 62.2% of first lien term loans, 20.8% of second lien term loans, 0.4% of unsecured term loans, 7.0% of subordinated notes in a CLO and 9.6% of common equity.
For the fiscal quarter ended November 30, 2019, Saratoga Investment invested $40.8 million in new or existing portfolio companies and had $51.2 million in aggregate amount of exits and repayments, resulting in net exits and repayments of $10.4 million for the quarter.
As of November, 2019, the weighted average current yield on Saratoga Investment’s total portfolio for the twelve months ended was 9.8%, which was comprised of a weighted average current yield of 10.0% on first lien term loans, 11.4% on second lien term loans, 0.0% on unsecured term loans, 14.9% on CLO subordinated notes and 2.2% on equity interests.
Portfolio Update:
Subsequent to quarter-end, Saratoga Investment’s second lien term loans in Easy Ice, LLC and Easy Ice Masters, LLC were repaid at par, and its preferred equity was sold in a change of control transaction. In addition to the second lien term loans of $27.9 million and the preferred equity of $10.7 million being repaid in full including all accrued interest, Saratoga Investment also received approximately $35.6 million of additional proceeds, interest and fees.
The estimated impact of the Easy Ice sale transaction, on a pro forma basis, would be to increase our existing quarter-end NAV by at least $17.0 million, or $1.51 per share, to a pro forma NAV per share as of November 30, 2019 of at least $26.81 per share. The above pro forma balances are estimates and do not take into consideration Saratoga Investments ongoing business nor does it reflect any other potential transactional impacts that could be the result of other unrelated or unforeseen events. The actual impact of the Easy Ice sale transaction on Saratoga Investment’s Net Investment Income and NAV will be reflected in its financial statements for the quarter and fiscal year ending February 29, 2020.
Liquidity and Capital Resources
As of November 30, 2019, 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 outstanding, $134.5 million of baby bonds (fair value of $138.1 million) issued and an aggregate of $81.1 million in cash and cash equivalents.
With $45.0 million available under the credit facility, the $81.1 million of cash and cash equivalents and $175.0 million in undrawn SBA debentures from the newly approved second SBIC license, Saratoga Investment has a total of $301.1 million of undrawn borrowing capacity and cash and cash equivalents available as of November 30, 2019. Following the $50.0 million baby bond repayment subsequent to quarter-end and noted below, the $251.1 million pro forma undrawn borrowing capacity allows Saratoga Investment to grow current AUM by 52% without any new external financing. The net proceeds from the DRIP and ATM equity programs totaled $50.2 million of equity issuances for the three months ended November 30, 2019. Saratoga Investment also has the ability to issue additional equity or baby bonds through the existing shelf registration statement.
On November 15, 2019, the Company caused notices to be issued to the holders of its 6.75% 2023 baby bonds regarding the Company’s exercise of its option to redeem, in part, the issued and outstanding 2023 baby bonds. The Company redeemed $50.0 million in aggregate principal amount of the $74.5 million in aggregate principal amount of issued and outstanding 2023 baby bonds on December 21, 2019 (the “Redemption Date”). The baby bonds were redeemed at 100% of their principal amount ($25 per baby bond), plus the accrued and unpaid interest thereon from September 30, 2019, through, but excluding, the Redemption Date.
On January 8, 2020, the Company caused notices to be issued to the remaining holders of its 6.75% 2023 baby bonds regarding the Company’s exercise of its option to redeem the remaining $24.45 million in aggregate principal amount of issued and outstanding 2023 baby bonds. The Company will redeem this remaining amount of issued and outstanding 2023 baby bonds on February 7, 2020 (the “second Redemption Date”). These baby bonds will also be redeemed at 100% of their principal amount ($25 per baby bond), plus the accrued and unpaid interest thereon from December 31, 2019, through, but excluding, the Second Redemption Date.
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 November 30, 2019, the Company sold 3,895,153 shares for gross proceeds of $96.5 million at an average price of $24.77 for aggregate net proceeds of $95.2 million (net of transaction costs).
Dividend
Today, Saratoga Investment announced a dividend of $0.56 per share for the fiscal quarter ended November 30, 2019, payable on February 6, 2020, to all stockholders of record at the close of business on January 24, 2020. In fiscal year 2020, the Company has paid a quarterly dividend of $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 $2.10 per share and $1.94 per share, respectively.
Shareholders have the option to receive payment of the dividend 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. As of November 30, 2019, 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 three months ended November 30, 2019.
2020 Fiscal Third Quarter Conference Call/Webcast Information
| When: | Thursday, January 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, January 9, 2020, through 1:00 p.m. ET on Thursday, January 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: 4589559 | ||
| Webcast: | Interested parties may access a simultaneous webcast of the call and find the Q3 2020 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
This press release contains certain forward-looking statements. These forward-looking statements are subject to risks and uncertainties and other factors enumerated in this press release and the filings Saratoga Investment makes with the SEC. Saratoga Investment undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Financials
| Saratoga Investment Corp. | |||||||||
| Consolidated Statements of Assets and Liabilities | |||||||||
| November 30, 2019 | February 28, 2019 | ||||||||
| (unaudited) | |||||||||
| ASSETS | |||||||||
| Investments at fair value | |||||||||
| Non-control/Non-affiliate investments (amortized cost of $377,733,313 and $307,136,188, respectively) | $ | 375,544,979 | $ | 306,511,427 | |||||
| Affiliate investments (amortized cost of $23,949,601 and $18,514,716, respectively) | 17,757,919 | 11,463,081 | |||||||
| Control investments (amortized cost of $80,333,567 and $76,265,189, respectively) | 93,728,061 | 84,045,212 | |||||||
| Total investments at fair value (amortized cost of $482,016,481 and $401,916,093, respectively) | 487,030,959 | 402,019,720 | |||||||
| Cash and cash equivalents | 51,646,844 | 30,799,068 | |||||||
| Cash and cash equivalents, reserve accounts | 29,465,785 | 31,295,326 | |||||||
| Interest receivable (net of reserve of $1,322,308 and $647,210, respectively) | 4,755,846 | 3,746,604 | |||||||
| Due from affiliate | - | 1,673,747 | |||||||
| Management and incentive fee receivable | 286,720 | 542,094 | |||||||
| Other assets | 563,991 | 595,543 | |||||||
| Receivable for shares sold | 1,157,493 | - | |||||||
| Total assets | $ | 574,907,638 | $ | 470,672,102 | |||||
| LIABILITIES | |||||||||
| Revolving credit facility | $ | - | $ | - | |||||
| Deferred debt financing costs, revolving credit facility | (535,641 | ) | (605,189 | ) | |||||
| SBA debentures payable | 150,000,000 | 150,000,000 | |||||||
| Deferred debt financing costs, SBA debentures payable | (2,710,922 | ) | (2,396,931 | ) | |||||
| 2023 Notes payable | 74,450,500 | 74,450,500 | |||||||
| Deferred debt financing costs, 2023 notes payable | (1,620,699 | ) | (1,919,620 | ) | |||||
| 2025 Notes payable | 60,000,000 | 60,000,000 | |||||||
| Deferred debt financing costs, 2025 notes payable | (2,139,398 | ) | (2,377,551 | ) | |||||
| Base management and incentive fees payable | 10,475,895 | 6,684,785 | |||||||
| Deferred tax liability | 1,061,640 | 739,716 | |||||||
| Accounts payable and accrued expenses | 1,453,345 | 1,615,443 | |||||||
| Interest and debt fees payable | 1,910,397 | 3,224,671 | |||||||
| Directors fees payable | 1,500 | 62,000 | |||||||
| Due to manager | 380,671 | 319,091 | |||||||
| Total liabilities | $ | 292,727,288 | $ | 289,796,915 | |||||
| NET ASSETS | |||||||||
| Common stock, par value $.001, 100,000,000 common shares | |||||||||
| authorized, 11,154,998 and 7,657,156 common shares issued and outstanding, respectively | $ | 11,155 | $ | 7,657 | |||||
| Capital in excess of par value | 289,744,224 | 203,552,800 | |||||||
| Total distributable earnings (loss) | (7,575,029 | ) | (22,685,270 | ) | |||||
| Total net assets | 282,180,350 | 180,875,187 | |||||||
| Total liabilities and net assets | $ | 574,907,638 | $ | 470,672,102 | |||||
| NET ASSET VALUE PER SHARE | $ | 25.30 | $ | 23.62 | |||||
| Asset Coverage Ratio | 309.9 | % | 234.5 | % | |||||
| Saratoga Investment Corp. | ||||||||
| Consolidated Statements of Operations | ||||||||
| (unaudited) | ||||||||
| For the three months ended | ||||||||
| November 30, 2019 | November 30, 2018 | |||||||
| INVESTMENT INCOME | ||||||||
| Interest from investments | ||||||||
| Interest income: | ||||||||
| Non-control/Non-affiliate investments | $ | 9,749,294 | $ | 9,248,664 | ||||
| Affiliate investments | 356,958 | 239,781 | ||||||
| Control investments | 1,300,923 | 941,942 | ||||||
| Payment-in-kind interest income: | ||||||||
| Non-control/Non-affiliate investments | 198,984 | 260,440 | ||||||
| Affiliate investments | 42,397 | 41,269 | ||||||
| Control investments | 1,250,824 | 1,112,135 | ||||||
| Total interest from investments | 12,899,380 | 11,844,231 | ||||||
| Interest from cash and cash equivalents | 119,539 | 13,657 | ||||||
| Management fee income | 629,671 | 380,765 | ||||||
| Incentive fee income | - | 147,602 | ||||||
| Other income | 547,165 | 446,758 | ||||||
| Total investment income | 14,195,755 | 12,833,013 | ||||||
| OPERATING EXPENSES | ||||||||
| Interest and debt financing expenses | 3,896,968 | 3,613,531 | ||||||
| Base management fees | 2,146,214 | 1,849,220 | ||||||
| Incentive management fees | 3,102,139 | 923,651 | ||||||
| Professional fees | 401,010 | 407,422 | ||||||
| Administrator expenses | 556,250 | 500,000 | ||||||
| Insurance | 63,936 | 62,197 | ||||||
| Directors fees and expenses | 60,000 | 60,000 | ||||||
| General & administrative | 395,024 | 354,029 | ||||||
| Income tax benefit | (1,001,089 | ) | (75,978 | ) | ||||
| Total operating expenses | 9,620,452 | 7,694,072 | ||||||
| NET INVESTMENT INCOME | 4,575,303 | 5,138,941 | ||||||
| REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | ||||||||
| Net realized gain (loss) from investments: | ||||||||
| Non-control/Non-affiliate investments | 10,739,678 | (67,164 | ) | |||||
| Net realized gain (loss) from investments | 10,739,678 | (67,164 | ) | |||||
| Net change in unrealized appreciation (depreciation) on investments: | ||||||||
| Non-control/Non-affiliate investments | (4,322,305 | ) | (1,645,666 | ) | ||||
| Affiliate investments | (41,295 | ) | 206,064 | |||||
| Control investments | 3,827,449 | 408,489 | ||||||
| Net change in unrealized depreciation on investments | (536,151 | ) | (1,031,113 | ) | ||||
| Net change in provision for deferred taxes on unrealized appreciation on investments | (1,061,608 | ) | (371,581 | ) | ||||
| Net realized and unrealized gain (loss) on investments | 9,141,919 | (1,469,858 | ) | |||||
| NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 13,717,222 | $ | 3,669,083 | ||||
| WEIGHTED AVERAGE - BASIC AND DILUTED EARNINGS PER COMMON SHARE | $ | 1.37 | $ | 0.49 | ||||
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC AND DILUTED | 10,036,086 | 7,480,134 | ||||||
| Saratoga Investment Corp. | ||||||||
| Consolidated Statements of Operations | ||||||||
| (unaudited) | ||||||||
| For the nine months ended | ||||||||
| November 30, 2019 | November 30, 2018 | |||||||
| INVESTMENT INCOME | ||||||||
| Interest from investments | ||||||||
| Interest income: | ||||||||
| Non-control/Non-affiliate investments | $ | 26,862,643 | $ | 24,701,303 | ||||
| Affiliate investments | 873,816 | 720,738 | ||||||
| Control investments | 4,627,395 | 3,340,180 | ||||||
| Payment-in-kind interest income: | ||||||||
| Non-control/Non-affiliate investments | 530,728 | 621,462 | ||||||
| Affiliate investments | 123,812 | 110,898 | ||||||
| Control investments | 3,226,060 | 2,271,359 | ||||||
| Total interest from investments | 36,244,454 | 31,765,940 | ||||||
| Interest from cash and cash equivalents | 316,691 | 41,405 | ||||||
| Management fee income | 1,888,932 | 1,129,921 | ||||||
| Incentive fee income | - | 493,846 | ||||||
| Other income | 2,385,075 | 1,292,693 | ||||||
| Total investment income | 40,835,152 | 34,723,805 | ||||||
| OPERATING EXPENSES | ||||||||
| Interest and debt financing expenses | 11,628,266 | 9,202,737 | ||||||
| Base management fees | 5,955,623 | 5,027,341 | ||||||
| Incentive management fees | 7,300,794 | 2,803,784 | ||||||
| Professional fees | 1,181,010 | 1,418,472 | ||||||
| Administrator expenses | 1,575,000 | 1,395,833 | ||||||
| Insurance | 193,174 | 189,916 | ||||||
| Directors fees and expenses | 217,500 | 230,500 | ||||||
| General & administrative | 1,036,498 | 908,174 | ||||||
| Income tax benefit | (1,464,878 | ) | (684,520 | ) | ||||
| Excise tax credit | - | (270 | ) | |||||
| Other expense | - | 21,021 | ||||||
| Total operating expenses | 27,622,987 | 20,512,988 | ||||||
| NET INVESTMENT INCOME | 13,212,165 | 14,210,817 | ||||||
| REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | ||||||||
| Net realized gain from investments: | ||||||||
| Non-control/Non-affiliate investments | 12,609,767 | 145,007 | ||||||
| Net realized gain from investments | 12,609,767 | 145,007 | ||||||
| Net change in unrealized appreciation (depreciation) on investments: | ||||||||
| Non-control/Non-affiliate investments | (1,563,573 | ) | (2,428,123 | ) | ||||
| Affiliate investments | 859,953 | (1,125,240 | ) | |||||
| Control investments | 5,614,471 | 1,010,934 | ||||||
| Net change in unrealized appreciation (depreciation) on investments | 4,910,851 | (2,542,429 | ) | |||||
| Net change in provision for deferred taxes on unrealized appreciation on investments | (1,786,801 | ) | (1,159,581 | ) | ||||
| Net realized and unrealized gain (loss) on investments | 15,733,817 | (3,557,003 | ) | |||||
| NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 28,945,982 | $ | 10,653,814 | ||||
| WEIGHTED AVERAGE - BASIC AND DILUTED EARNINGS PER COMMON SHARE | $ | 3.33 | $ | 1.55 | ||||
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC AND DILUTED | 8,702,190 | 6,887,544 | ||||||
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 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. 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 unrealized 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 three and nine months ended November 30, 2019 and November 30, 2018.
| For the three months ended November 30 | For the nine months ended November 30 | ||||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||
| Net Investment Income | $ | 4,575,303 | $ | 5,138,941 | $ | 13,212,165 | $ | 14,210,817 | |||||||
| Changes in accrued capital gains incentive fee expense/reversal | 1,566,202 | (289,209 | ) | 3,197,010 | (600,061 | ) | |||||||||
| Adjusted net investment income | 6,141,505 | 4,849,732 | 16,409,175 | 13,610,756 | |||||||||||
| Net investment income yield | 7.2 | % | 11.9 | % | 8.1 | % | 11.4 | % | |||||||
| Changes in accrued capital gains incentive fee expense/reversal | 2.5 | % | (0.7 | %) | 1.9 | % | (0.5 | %) | |||||||
| Adjusted net investment income yield (1) | 9.7 | % | 11.2 | % | 10.0 | % | 10.9 | % | |||||||
| Net investment income per share | $0.46 | $0.69 | $1.52 | $2.06 | |||||||||||
| Changes in accrued capital gains incentive fee expense/reversal | $0.15 | ($0.04 | ) | $0.37 | ($0.08 | ) | |||||||||
| Adjusted net investment income per share (2) | $0.61 | $0.65 | $1.89 | $1.98 | |||||||||||
(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 Steenkamp
Saratoga Investment Corp.
212-906-7800
Roland Tomforde
Broadgate Consultants
212-232-2222