PNNT_6.30.2011_8K_Form_10_Q



UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549




FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
 Securities Exchange Act of 1934

Date of Report: August 3, 2011
 (Date of earliest event reported)

PennantPark Investment Corporation
 (Exact name of registrant as specified in its charter)

 
Maryland
 (State or other jurisdiction
 of incorporation)
814-00736
 (Commission File Number)
20-8250744
 (IRS Employer
 Identification Number)

 
590 Madison Avenue, 15th Floor, New York, NY
 (Address of principal executive offices)
 
10022
 (Zip Code)

212-905-1000
 (Registrant's telephone number, including area code)

 
Not Applicable
 (Former Name or Former Address, if changed since last report)


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


















Item 2.02. Results of Operations and Financial Condition

On August 3, 2011, PennantPark Investment Corporation issued a press release announcing its financial results for the quarter ended June 30, 2011. A copy of the press release is furnished as exhibit 99.1 to this report pursuant to Item 2.02 on Form 8-K and Regulation FD.

The information in this report on Form 8-K, including Exhibit 99.1 furnished herewith, is being furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of such section. The information in this report on Form 8-K shall not be deemed incorporated by reference in any filling under the Securities Exchange Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.


Item 9.01. Financial Statements and Exhibits


(a) Financial statements:
             None
(b) Pro forma financial information:
             None
(c) Shell company transactions:
             None
(d) Exhibits
             99.1      Press Release of PennantPark Investment Corporation dated August 3, 2011





SIGNATURE

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.

Dated: August 3, 2011
PENNANTPARK INVESTMENT CORPORATION

By:  /s/ Aviv Efrat                    
      Aviv Efrat
      Chief Financial Officer & Treasurer




Exhibit Index
Exhibit No.
Description
99.1
Press Release of PennantPark Investment Corporation dated
August 3, 2011



PNNT_6.30.2011_8K_Form_10_Q_Exhibits




PennantPark Investment Corporation Announces Financial Results for the Quarter Ended June 30, 2011

NEW YORK, NY - (Marketwire - August 3, 2011) - PennantPark Investment Corporation (NASDAQ: PNNT) or “we,” “our,” “us” or “Company” today announces financial results for its third fiscal quarter ended June 30, 2011.

HIGHLIGHTS
Quarter Ended June 30, 2011
($ in millions, except per share amounts)

Assets and Liabilities:
 
Investment portfolio
$
778.9

Net assets
$
504.9

Net asset value per share
$
11.08


Credit facility (cost $157.7)
$
155.6

SBA debentures
$
75.0


Yield on debt investments at period-end
 
 
13.1

%

Operating Results:
 
Net investment income
$
13.2

Net investment income per share
$
0.29

Distribution declared per share
$
0.27

 
 

Portfolio Activity:
 

Purchases of long term investments
$
145.5

Sales and repayments of long term investments
$
119.3

 
 

Number of new portfolio companies invested
3

Number of existing portfolio companies invested
4

Number of portfolio companies at end of period
47


CONFERENCE CALL AT 10:00 A.M. ET ON AUGUST 4, 2011

The Company will host a conference call at 10:00 a.m. (Eastern Time) on Thursday, August 4, 2011 to discuss the quarterly





financial results. All interested parties are welcome to participate. You can access the conference call by dialing (877) 874-1586 approximately 5-10 minutes prior to the call. International callers should dial (719) 325-4908. All callers should reference PennantPark Investment Corporation. An archived replay of the call will be available through August 18, 2011 by calling (888) 203-1112. International callers please dial (719) 457-0820. For all phone replays, please reference conference ID #6451939.






PORTFOLIO AND INVESTMENT ACTIVITY

As of June 30, 2011, our portfolio totaled $778.9 million and consisted of $299.0 million of senior secured loans, $127.3 million of second lien secured debt, $284.5 million of subordinated debt and $68.1 million of preferred and common equity investments. This compares to our portfolio as of September 30, 2010, which totaled $664.7 million and consisted of $234.6 million of senior secured loans, $156.7 million of second lien secured debt, $223.9 million of subordinated debt and $49.5 million of preferred and common equity investments.

As of June 30, 2011, our overall portfolio consisted of 47 companies with an average investment size of $16.6 million and a weighted average yield on debt investments of 13.1%, and was invested 38% in senior secured loans, 16% in second lien secured debt, 37% in subordinated debt and 9% in preferred and common equity investments. This compares to our portfolio as of September 30, 2010, which consisted of 43 companies with an average investment size of $15.5 million, and a weighted average yield on debt investments of 12.7%, and was invested 35% in senior secured loans, 24% in second lien secured debt, 34% in subordinated debt and 7% in preferred and common equity investments.
For the three months ended June 30, 2011, we invested $145.5 million in three new and four existing portfolio companies with a weighted average yield on debt investments of 13.5%. Sales and repayments of long-term investments for the three months ended June 30, 2011 totaled $119.3 million. This compares to the three months ended June 30, 2010, in which we invested $93.8 million in three new and four existing portfolio companies with a weighted average yield on debt investments of 14.5%. Sales and repayments of long term investments for the three months ended June 30, 2010 totaled $59.2 million.

RESULTS OF OPERATIONS
Set forth below are the results of operations for the three and nine months ended June 30, 2011 and 2010.
Investment Income
Investment income for the three and nine months ended June 30, 2011 was $22.9 million and $65.6 million, respectively, and was primarily attributable to $7.7 million and $22.8 million from senior secured loans, $3.5 million and $9.5 million from second lien secured debt investments, and $8.5 million and $24.8 million from subordinated debt investments, respectively. This compares to investment income for the three and nine months ended June 30, 2010, which was $16.3 million and $43.4 million, respectively, and was primarily attributable to $4.7 million and $11.4 million from senior secured loans, $3.3 million and $9.8 million from second lien secured debt investments and $6.6 million and $17.9 million from subordinated debt investments, respectively. The increase in investment income compared with the same periods in the prior year is due to the growth of our portfolio and rotation out of our lower yielding investments.

Expenses
Expenses for the three and nine months ended June 30, 2011, totaled $9.7 million and $28.1 million, respectively. Base management fee for the same respective periods totaled $3.8 million and $10.9 million, performance-based incentive fees totaled $3.3 million and $9.4 million, credit facility and Small Business Administration (“SBA”) debentures expenses totaled $1.3 million and $3.6 million, general and administrative expenses totaled $1.3 million and $4.0 million, respectively, and excise tax for the nine months ended June 30, 2011 totaled $0.2 million. This compares to expenses for the three and nine months ended June 30, 2010, which totaled $7.5 million and $20.3 million, respectively. Base management fee for the same respective periods totaled $3.0 million and $8.3 million, performance-based incentive fees totaled $2.2 million and $5.8 million, credit facility expenses totaled $1.0 million and $2.6 million, general and administrative expenses totaled $1.3 million and $3.5 million, respectively, and excise tax for the nine months ended June 30, 2010 totaled $0.1 million. The increase in expenses is due to growth of both the portfolio and net investment income.

Net Investment Income
Net investment income totaled $13.2 million and $37.5 million, or $0.29 and $0.92 per share, for the three and nine months ended June 30, 2011, respectively. For the same respective periods in the prior year, net investment income totaled $8.8 million and $23.1 million, or $0.28 and $0.82 per share.












Net Realized Gains or Losses
Sales and repayments of long-term investments for the three and nine months ended June 30, 2011 totaled $119.3 million and $256.4 million and realized gains totaled $6.2 million and $8.7 million, respectively, due to sales and refinancing of our debt investments. Sales and repayments of long-term investments for the three and nine months ended June 30, 2010 totaled $59.2 million and $82.7 million and realized gains (losses) totaled $0.1 million and $(16.6) million, respectively, due to sales and repayments of our debt investments.

Net Change in Unrealized Appreciation or Depreciation on Investments and Credit Facility
For the three and nine months ended June 30, 2011, our investments had a net change in unrealized (depreciation) appreciation of $(16.5) million and $7.1 million, respectively. For the three and nine months ended June 30, 2010, our investments had a net change in unrealized (depreciation) appreciation of $(1.5) million and $32.3 million, respectively. The decrease in the net change in unrealized appreciation on our investments compared to the prior year is the result of changes in the leveraged credit markets over the comparable periods. On June 30, 2011 and September 30, 2010, net unrealized appreciation on investments totaled $15.1 million and $8.0 million, respectively.
For the three and nine months ended June 30, 2011, our credit facility had a net change in unrealized appreciation of $0.6 million and $11.9 million, respectively. For the three and nine months ended June 30, 2010, our long-term credit facility had a net change in unrealized appreciation of $3.2 million and $28.9 million, respectively. The net change in unrealized appreciation on our credit facility over the prior year is the result of it approaching maturity and the reduced borrowings outstanding over comparable periods. On June 30, 2011 and September 30, 2010, net unrealized depreciation on our long-term credit facility totaled $2.1 million and $14.0 million, respectively.

Net Increase in Net Assets Resulting from Operations
Net increase in net assets resulting from operations totaled $2.3 million and $41.4 million, respectively, or $0.05 per share and $1.01 per share, respectively, for the three and nine months ended June 30, 2011. This compares to a net increase in net assets resulting from operations which totaled $4.3 million and $9.9 million, respectively, or $0.13 per share or $0.35 per share, for the three and nine months ended June 30, 2010. This change in net assets from operations is due to the continued growth in net investment income primarily as a result of growing our portfolio, offset by the appreciation in the value of our long-term credit facility as it approaches maturity in June 2012.

LIQUIDITY AND CAPITAL RESOURCES
Our liquidity and capital resources are derived from our credit facility, SBA debentures 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 other operating expenses we incur. We used, and expect to continue to use, these capital resources as well as proceeds from rotation within our portfolio and from public and private offerings of securities to finance our investment objectives.
As of June 30, 2011, we had $157.7 million (including a $21.0 million temporary draw) in outstanding borrowings on our credit facility, with a fair market value of $155.6 million and a weighted average interest rate at that time of 1.49%, exclusive of the fee on the undrawn commitment of 0.20%. Our senior secured revolving credit facility, which matures in June 2012, had $157.3 million of remaining unused borrowing capacity as of June 30, 2011.

As of June 30, 2011, we had committed to SBIC LP $75.0 million ($50.0 million funded), had SBA debentures outstanding of $75.0 million with a weighted average interest rate of 3.14%, exclusive of 3.43% of upfront fees. The SBA debentures had $25.0 million remaining unused borrowing capacity subject to customary regulatory requirements. Of the $75.0 million of SBA debentures outstanding, $45.0 million is fixed for 10 years with a weighted average rate of 4.45%, inclusive of the SBA annual fee, and $30.0 million is temporary financing currently bearing a weighted average rate of 1.18% that will reset to a market-driven rate in September 2011 and will remain fixed thereafter for 10 years.
On June 1, 2011, we received an exemptive relief from the SEC allowing us to modify the asset coverage requirement to exclude the SBA debentures from the calculation. Accordingly, our ratio of total assets on a consolidated basis to outstanding indebtedness may be less than 200%, which while providing increased investment flexibility, would also increase our exposure to risks associated with leverage.
As of June 30, 2011, we had approximately $57.8 million of assets bearing a coupon of 9% or lower. We intend to seek to rotate





these into new, higher yielding investments over time.



During the nine months ended June 30, 2011, we generated operating cash flows primarily from interest earned on debt investments and sales and repayments of investments. Our primary use of funds from operations during the same period consisted of investments in portfolio companies, payments of fees, and other operating expenses we incurred. Our operating activities used cash of $35.8 million for the nine months ended June 30, 2011, and our financing activities provided cash of $62.8 million for the same period, primarily from net repayments under our credit facility, SBA debentures issued, and our common stock offering.
During the nine months ended June 30, 2010, we generated operating cash flows primarily from interest earned on debt investments, and our primary use of funds from operations during the same period consisted of investments in portfolio companies, payments of fees and other operating expenses we incurred. Our operating activities used cash of $101.6 million for the nine months ended June 30, 2010, and our financing activities provided cash of $69.6 million for the same period, primarily from our common stock offering.

DISTRIBUTIONS
During the three and nine months ended June 30, 2011, we declared distributions of $0.27 and $0.80 per share, respectively, for total distributions of $12.3 million and $34.0 million, respectively. For the same periods in the prior year, we declared distributions of $0.26 and $0.77 per share, respectively, for total distributions of $8.2 million and $22.9 million, respectively. Distributions are paid from taxable earnings and may include a return of capital and/or capital gains. The specific tax characteristics of the distributions will be reported to stockholders on Form 1099-DIV after the end of the calendar year and in its periodic report filed with the Securities and Exchange Commission.
RECENT DEVELOPMENTS
On July 22, 2011, SBIC LP received a debt commitment from the SBA for an additional $50.0 million, bringing its total debt commitment from the SBA to $150.0 million.

AVAILABLE INFORMATION
The Company makes available on its website its report on Form 10-Q filed with the Securities Exchange Commission and stockholders may find the report on our website at www.pennantpark.com.






PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
 
 
 
 
 
 
 
 
 
 
 
  
June 30, 2011
 (unaudited)
 
 
September 30, 2010
 
Assets
  
 
 
 
 
 
 
 
Investments at fair value
  
 
 
 
 
 
 
 
Non-controlled, non-affiliated investments, at fair value
  (cost-$734,760,589 and $631,280,755, respectively)
  
$
753,258,773

 
 
$
641,290,626
 
 
Non-controlled, affiliated investments, at fair value
  (cost-$18,116,807 and $17,427,648, respectively)
  
 
14,685,185

 
 
 
15,433,680
 
 
  Controlled, affiliated investments, at fair value
    (cost-$11,000,100 and $8,000,100, respectively)
 
 
11,000,000

 
 
 
8,000,100
 
 
Total of Investments, at fair value
  (cost-$763,877,496 and $656,708,503, respectively)
  
 
778,943,958

 
 
 
664,724,406
 
 
Cash equivalents
  
 
28,808,966

 
 
 
1,814,451
 
 
Interest receivable
  
 
6,258,266

 
 
 
12,814,096
 
 
Receivable for investments sold
  
 

 
 
 
30,254,774
 
 
Prepaid expenses and other assets
  
 
3,581,765

 
 
 
1,886,119
 
 
Total assets
  
 
817,592,955

 
 
 
711,493,846
 
 
Liabilities
  
 
 
 
 
 
 
 
Distributions payable
  
 
12,306,893

 
 
 
9,401,281
 
 
Payable for investments purchased
  
 
42,680,270

 
 
 
52,785,000
 
 
Unfunded investments
  
 
18,633,872

 
 
 
22,203,434
 
 
Credit facility payable (cost-$157,700,000 and $233,100,000, respectively)
  
 
155,649,500

 
 
 
219,141,125
 
 
SBA debentures payable
 
 
75,000,000

 
 
 
14,500,000
 
 
Interest payable on credit facility and SBA debentures
  
 
794,953

 
 
 
215,135
 
 
Management fee payable
  
 
3,805,619

 
 
 
3,286,816
 
 
Performance-based incentive fee payable
  
 
3,295,098

 
 
 
2,239,011
 
 
Accrued other expenses
  
 
487,659

 
 
 
1,146,821
 
 
Total liabilities
  
 
312,653,864

 
 
 
324,918,623
 
 
Net Assets
  
 
 
 
 
 
 
 
Common stock, 45,581,083 and 36,158,772 shares are issued and outstanding, respectively.
  Par value is $0.001 per share and 100,000,000 shares are authorized.
  
 
45,581

 
 
 
36,159
 
 
Paid-in capital in excess of par value
  
 
539,419,632

 
 
 
428,675,184
 
 
Undistributed net investment income
  
 
5,532,780

 
 
 
1,800,646
 
 
Accumulated net realized loss on investments
  
 
(57,175,864
)
 
 
 
(65,911,544
)
 
Net unrealized appreciation on investments
  
 
15,066,462

 
 
 
8,015,903
 
 
Net unrealized depreciation on credit facility
  
 
2,050,500

 
 
 
13,958,875
 
 
Total net assets
  
$
504,939,091

 
 
$
386,575,223
 
 
Total liabilities and net assets
  
$
817,592,955

 
 
$
711,493,846
 
 
Net asset value per share
  
$
11.08

 
 
$
10.69
 
 
 
  
 
 
 
 
 
 
 






PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
Three Months Ended June 30,
 
Nine Months Ended June 30,
 
 
  
 
2011
 
 
 
2010
 
2011
 
 
2010
 
Investment income:
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
From non-controlled, non-affiliated investments:
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest
  
$
21,046,388

 
 
$
15,404,934

 
$
60,441,750

 
 
$
41,140,098

 
Other
  
 
1,157,228

 
 
 
594,978

 
 
3,237,675

 
 
 
1,327,063

 
From non-controlled, affiliated investments:
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest
  
 
389,709

 
 
 
335,159

 
 
1,134,363

 
 
 
991,388

 
From controlled, affiliated investments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest
 
 
315,000

 
 
 

 
 
785,167

 
 
 

 
      Total investment income
  
 
22,908,325

 
 
 
16,335,071

 
 
65,598,955

 
 
 
43,458,549

 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Expenses:
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Base management fee
  
 
3,803,994

 
 
 
3,035,172

 
 
10,891,930

 
 
 
8,331,957

 
Performance-based incentive fee
  
 
3,256,341

 
 
 
2,205,310

 
 
9,387,769

 
 
 
5,779,297

 
Interest and expenses on the credit facility and SBA debentures
  
 
1,329,441

 
 
 
962,597

 
 
3,551,391

 
 
 
2,619,555

 
Administrative services expenses
  
 
583,215

 
 
 
709,737

 
 
1,812,932

 
 
 
1,806,860

 
Other general and administrative expenses
  
 
680,322

 
 
 
601,011

 
 
2,211,349

 
 
 
1,705,400

 
Expenses before taxes
  
 
9,653,313

 
 
 
7,513,827

 
 
27,855,371

 
 
 
20,243,069

 
Excise tax
  
 
35,000

 
 
 

 
 
193,824

 
 
 
97,890 

 
Total expenses
  
 
9,688,313

 
 
 
7,513,827

 
 
28,049,195

 
 
 
20,340,959

 
      Net investment income
  
 
13,220,012

 
 
 
8,821,244

 
 
37,549,760

 
 
 
23,117,590

 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Realized and unrealized gain (loss) on investments and credit facility:
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net realized gain (loss) on non-controlled, non-affiliated investments
 
 
6,155,867

 
 
 
100,295

 
 
8,735,680

 
 
 
(16,644,556
)
)
Net change in unrealized appreciation (depreciation) on:
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-controlled, non-affiliated investments
  
 
(14,977,901
)
)
 
 
(1,732,131
)
)
 
8,486,459

 
 
 
32,257,205

 
Non-controlled, affiliated investments
  
 
(1,474,634
)
)
 
 
279,017

 
 
(1,435,799
)
)
 
 
74,918

 
       Controlled, affiliated investments
 
 

 
 
 

 
 
(100
)
)
 
 

 
       Credit facility unrealized (appreciation)
  
 
(604,929
)
)
 
 
(3,208,992
)
)
 
(11,908,375
)
)
 
 
(28,900,620
)
)
Net change in unrealized (depreciation) appreciation
  
 
(17,057,464
)
)
 
 
(4,662,106
)
)
 
(4,857,815
)
)
 
 
3,431,503

 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net realized and unrealized gain (loss) from investments and credit facility
  
 
(10,901,597
)
)
 
 
(4,561,811
)
)
 
3,877,865

 
 
 
(13,213,053
)
)
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net increase in net assets resulting from operations
  
$
2,318,415

 
 
$
4,259,433

 
$
41,427,625

 
 
$
9,904,537

 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net increase in net assets resulting from operations per common share
 
$
0.05

 
 
$
0.13

 
$
1.01

 
 
$
0.35

 
Net investment income per common share
  
$
0.29

 
 
$
0.28

 
$
0.92

 
 
$
0.82

 

ABOUT PENNANTPARK INVESTMENT CORPORATION
PennantPark Investment Corporation is a business development company which principally invests in U.S. middle-market private companies in the form of senior secured loans, mezzanine debt and equity investments. From time to time, we may also invest in public companies whose securities are thinly traded. 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. 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 Securities and Exchange Commission. The Company undertakes no duty to update any forward-looking





statement made herein. All forward-looking statements speak only as of the date of this press release.

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. Undue reliance should not be placed on such forward-looking statements as such statements speak only as of the date on which they are made. We do not undertake to update our forward-looking statements unless required by law.

CONTACT:     Aviv Efrat
    PennantPark Investment Corporation
        Reception: (212) 905-1000
        www.pennantpark.com