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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
FORM 8-K CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
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Prospect Capital announces...
Item 9.01. Financial Statements and Exhibits
(a) Financial statements:
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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Dated: February 10, 2009
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PROSPECT CAPITAL CORPORATION
By:
/s/ John F. Barry
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| Exhibit No. | Description |
| 99.1 | Press Release of Prospect Capital Corporation dated February 10, 2009 |
Prospect Capital Announces Results for Quarter Ended December 31, 2008
NEW YORK, NY -- (Marketwire - February 10, 2009) - Prospect Capital Corporation (NASDAQ: PSEC) ("Company" or "Prospect") today announced financial results for its second fiscal quarter and the six months ended December 31, 2008.
For the six months ended December 31, 2008, our net investment income was $35.5 million, or $1.20 per share, an increase of $16.9 million, or $0.34 per share, from the results for the six months ended December 31, 2007. For the quarter ended December 31, 2008, our net investment income was $12.0 million, or $0.40 per share, an increase of $1.3 million from the same quarter in the prior year. Our second quarter results included the accrual of an excise tax of $533 thousand due to underdistributing our dividends relative to net investment income for calendar year 2008. Excluding this non-recurring item, our net investment income would have been $0.42 per share.
Our net asset value per share on December 31, 2008 equaled $14.43 per share, a decrease of $0.12 per share compared to $14.55 at June 30, 2008.
We estimate that our net investment income for the current third fiscal quarter ended March 31, 2009 will be $0.40 to $0.45 per share. We expect to announce our third fiscal quarter dividend next month. Our business objective continues to be to generate long-term dividend growth, as we have delivered to date with 17 consecutive quarterly dividend increases.
OPERATING RESULTS
HIGHLIGHTS
Equity Values: Net assets as of December 31, 2008: $427.80 million Net asset value per share as of December 31, 2008: $14.43 Second Fiscal Quarter Operating Results: Net investment income: $11.96 million Net investment income per share: $0.40 Net investment income per share excluding non-recurring items*: $0.42 Net increase in net assets resulting from operations: $6.52 million Dividends to shareholders per share: $0.40375 Second Fiscal Quarter Portfolio Summary: Total portfolio investments at cost: $571.5 million Number of portfolio companies at end of period: 31 *See Supplemental Financial Information
PORTFOLIO AND INVESTMENT ACTIVITY
On December 31, 2008, the fair value of our portfolio of 31 long-term investments was approximately $555.7 million.
As of December 31, 2008, our portfolio generated a current yield of approximately 16.0% across all our long-term debt and equity investments. This current yield includes interest from all our long-term investments as well as dividends from certain portfolio companies. During the quarter ended December 31, 2008, due to the market dislocation and the slowdown of market transaction activity, we did not complete any new investments, but continued to evaluate a number of new investments in the primary and secondary market.
On January 20, Diamondback Operating, LP ("Diamondback") repaid Prospect's $9.2 million loan in full from the sale of 65% of Diamondbank's Rock Springs oil and gas property interests. Prospect has realized an approximate 17% cash on cash internal rate of return ("IRR") on the Diamondback investment. Prospect continues to hold the right to receive 15% of any future Diamondback equity distributions.
During the past year, we have been in discussions with multiple purchasers for Gas Solutions but have not entered into a binding agreement. While we wish to liquify the value we see in Gas Solutions, we do not wish to enter into any agreement at any time that does not recognize the long term value we see in Gas Solutions. As a hedged midstream asset generating significant cash flows to us, Gas Solutions is a valuable asset that we wish to sell at a value-maximizing price, or not at all. We continue discussions with interested parties, but have a patient approach toward the process. The multi-year puts purchased by Gas Solutions earlier in 2008 are substantially in the money, providing downside protection against commodity price declines. Gas Solutions has generated approximately $21.2 million of EBITDA during the ten month period ended October 31, 2008. On an annualized basis this represents an increase of 73.7% over the 2007 results.
LIQUIDITY AND FINANCIAL RESULTS
At December 31, 2008, borrowings under our credit facility stood at approximately $138.7 million.
We are currently seeking to increase our revolving credit facility from its present size of $200 million. Over the past few months we have worked with rating agencies to structure an expanded facility. We have not yet embarked upon a formal syndication process for this facility due to the current credit environment, but we expect to initiate such activities in the future. The closing of the facility is subject to lender syndication and other conditions customary for a transaction of this type.
In the second quarter we announced the authorization by our board of directors to repurchase up to $20 million of our outstanding stock. To date, we have not made any such repurchases, but we have now made the required notification to shareholders of our flexibility to make such repurchases.
CONFERENCE CALL
The Company will host a conference call on Tuesday, February 10, 2009, at 11:00 a.m. Eastern Time. The conference call dial-in number will be 800-860-2442. A recording of the conference call will be available for approximately 30 days. To hear a replay, call 877-344-7529 and use passcode 427191.
PROSPECT CAPITAL CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES December 31, 2008 and June 30, 2008 (in thousands, except share and per share data) December 31, June 30, 2008 2008 (Unaudited) (Audited) ------------ ------------ Assets Investments at fair value (cost of $571,537 and $496,805, respectively) Control investments (cost of $216,242 and $203,661, respectively) $ 216,448 $ 205,827 Affiliate investments (cost of $33,496 and $5,609, respectively) 31,721 6,043 Non-control/Non-affiliate investments (cost of $321,799 and $287,535, respectively) 307,492 285,660 ------------ ------------ Total investments at fair value 555,661 497,530 ------------ ------------ Investments in money market funds 22,606 33,000 Cash 2,438 555 Receivables for: Interest 4,430 4,094 Dividends 19 4,248 Loan principal -- 71 Managerial assistance 405 380 Prepaid prospective deal expenses 86 -- Other 204 187 Prepaid expenses 778 273 Deferred financing costs 1,350 1,440 ------------ ------------ Total Assets 587,977 541,778 ------------ ------------ Liabilities Credit facility payable 138,667 91,167 Dividends payable 11,966 11,845 Due to Prospect Administration 683 695 Due to Prospect Capital Management 5,629 5,946 Accrued expenses 2,101 1,104 Other liabilities 1,128 1,398 ------------ ------------ Total Liabilities 160,174 112,155 ------------ ------------ Net Assets $ 427,803 $ 429,623 ============ ============ Components of Net Assets Common stock, par value $0.001 per share (100,000,000 and 100,000,000 common shares authorized, respectively; 29,637,928 and 29,520,379 issued and outstanding, respectively) $ 30 $ 30 Paid-in capital in excess of par 442,838 441,332 Undistributed net investment income 13,122 1,508 Accumulated realized losses on investments (12,311) (13,972) Unrealized (depreciation) appreciation on investments (15,876) 725 ------------ ------------ Net Assets $ 427,803 $ 429,623 ============ ============ Net Asset Value Per Share $ 14.43 $ 14.55 ============ ============ PROSPECT CAPITAL CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS For The Three and Six Months Ended December 31, 2008 and 2007 (in thousands, except share and per share data) (Unaudited) For The Three Months For The Six Months Ended Ended December 31, December 31, -------------------- -------------------- 2008 2007 2008 2007 --------- --------- --------- --------- Investment Income Interest Income Control investments (Net of foreign withholding tax of $62, $69, $109, and $158, respectively) $ 5,075 $ 5,285 $ 11,797 $ 10,348 Affiliate investments (Net of foreign withholding tax of $0, $35, $0, and $70, respectively) 1,075 655 1,635 1,322 Non-control/Non-affiliate investments 11,091 8,876 21,365 15,978 --------- --------- --------- --------- Total interest income 17,241 14,816 34,797 27,648 --------- --------- --------- --------- Dividend income Control investments 4,584 2,200 9,168 3,650 Money market funds 81 266 220 434 --------- --------- --------- --------- Total dividend income 4,665 2,466 9,388 4,084 --------- --------- --------- --------- Other income: Control/Affiliate investments 87 -- 831 10 Non-control/Non-affiliate investments 220 1,281 12,996 2,212 --------- --------- --------- --------- Total other income 307 1,281 13,827 2,222 --------- --------- --------- --------- Total Investment Income 22,213 18,563 58,012 33,954 --------- --------- --------- --------- Operating Expenses Investment advisory fees: Base management fee 2,940 2,112 5,763 3,978 Income incentive fee 2,990 2,665 8,865 4,631 --------- --------- --------- --------- Total investment advisory fees 5,930 4,777 14,628 8,609 Interest and credit facility expenses 1,965 1,618 3,483 2,856 Sub-administration fees (including former Chief Financial Officer and Chief Compliance Officer) 217 206 467 392 Legal fees 184 569 483 1,775 Valuation services 110 120 422 233 Audit, compliance and tax related fees 306 43 629 293 Allocation of overhead from Prospect Administration 588 260 1,176 520 Insurance expense 63 64 124 128 Directors’ fees 62 55 143 110 Other general and administrative expenses 295 191 462 503 Tax expense 533 -- 533 10 --------- --------- --------- --------- Total Operating Expenses 10,253 7,903 22,550 15,429 --------- --------- --------- --------- Net Investment Income 11,960 10,660 35,462 18,525 --------- --------- --------- --------- Net realized gain (loss) on investments 16 (18,610) 1,661 (18,621) Net change in unrealized appreciation/depreciation on investments (5,452) 4,264 (16,601) 4,960 --------- --------- --------- --------- Net Increase (Decrease) in Net Assets Resulting from Operations $ 6,524 $ (3,686) $ 20,522 $ 4,864 ========= ========= ========= ========= Net increase (decrease) in net assets resulting from operations per share: $ 0.22 $ (0.16) $ 0.69 $ 0.23 ========= ========= ========= ========= Dividends declared per share: $ 0.40 $ 0.39 $ 0.80 $ 0.78 ========= ========= ========= ========= PROSPECT CAPITAL CORPORATION AND SUBSIDIARY ROLLFORWARD OF NET ASSET VALUE PER SHARE For The Three and Six Months Ended December 31, 2008 and 2007 (in actual dollars) (Unaudited) For The Three For The Six Months Ended Months Ended --------------------- --------------------- December December December December 31, 2008 31, 2007 31, 2008 31, 2007 ---------- ---------- ---------- ---------- Net asset value at beginning of period $ 14.63 $ 15.08 $ 14.55 $ 15.04 Costs related to the secondary public offering -- (0.02) -- (0.02) Net investment income 0.40 0.46 1.20 0.86 Net realized gain (loss) -- (0.80) 0.06 (0.86) Net unrealized appreciation (depreciation) (0.18) 0.18 (0.56) 0.23 Share issued for dividend reinvestments (0.01) -- (0.01) -- Net increase in net assets as a result of public offering -- 0.07 -- 0.11 Dividends declared (0.40) (0.39) (0.80) (0.78) Difference due to rounding (0.01) -- (0.01) -- ---------- ---------- ---------- ---------- Net asset value at end of period $ 14.43 $ 14.58 $ 14.43 $ 14.58 ========== ========== ========== ==========
SUPPLEMENTAL FINANCIAL INFORMATION (UNAUDITED) (IN THOUSANDS)
Please note that the following supplemental financial information represents a reconciliation of a GAAP measure (Net investment income) to a non-GAAP measure (Adjusted net investment income).
Three months
ended
December 31,
2008
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Total investment income $ 22,213
Total operating expenses 10,253
Net investment income 11,960
Add back non-recurring items 426
Adjusted net investment income $ 12,386
Net investment income per common share $ 0.40
Adjusted net investment income per common share $ 0.42
ABOUT PROSPECT CAPITAL CORPORATION
Prospect Capital Corporation (www.prospectstreet.com) is a closed-end investment company that lends to and invests in private and microcap public businesses. Our investment objective is to generate both current income and long-term capital appreciation through debt and equity investments.
We have elected to be treated as a business development company under the Investment Company Act of 1940 ("1940 Act"). We are required to comply with a series of regulatory requirements under the 1940 Act as well as applicable NASDAQ, federal and state rules and regulations. We have elected to be treated as a regulated investment company under the Internal Revenue Code of 1986. Failure to comply with any of the laws and regulations that apply to us could have an adverse effect on us and our shareholders.
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any such statements, other than statements of historical fact, are highly likely to be affected by other unknowable future events and conditions, including elements of the future that are or are not under our control, and that we may or may not have considered; accordingly, such statements cannot be guarantees or assurances of any aspect of future performance. Actual developments and results are highly likely to vary materially from these estimates and projections of the future. Such statements speak only as of the time when made, and we undertake no obligation to update any such statement now or in the future.
For additional information, contact: Grier Eliasek President and Chief Operating Officer grier@prospectstreet.com Telephone (212) 448-0702