UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
FORM 8-K CURRENT REPORT
Pursuant to Section 13 or 15(d) of the |
Date of Report: November 10, 2015
(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))
- o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Item 2.02. Results of Operations and Financial Condition On November 10, 2015, PennantPark Investment Corporation issued a press release announcing financial results for the fourth quarter and fiscal year ended September 30, 2015. 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, or 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 filing under the Securities Act of 1933, as amended, or the Securities Act, or under the Exchange Act, except as shall be expressly set forth by specific reference in such filing. Forward-Looking Statements This report on Form 8-K, including Exhibit 99.1 furnished herewith, 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 and Section 21E(b)(2)(B) of 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 PennantPark Investment Corporation files 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 Securities and Exchange Commission. PennantPark Investment Corporation 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. PennantPark Investment Corporation 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 its historical experience and present expectations.
Item 9.01. Financial Statements and Exhibits
(a) Financial statements:
Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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Dated: November 10, 2015 |
PENNANTPARK INVESTMENT CORPORATION
By: /s/ Aviv Efrat |
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| Exhibit No. | Description |
| 99.1 | Press Release of PennantPark Investment Corporation dated November 10, 2015 |
Exhibit 99.1
PennantPark Investment Corporation Announces Financial Results for the Fourth Quarter and Fiscal Year Ended September 30, 2015NEW YORK, NY -- (Marketwired - November 10, 2015) - PennantPark Investment Corporation (NASDAQ: PNNT) announced today financial results for the fourth quarter and fiscal year ended September 30, 2015.
HIGHLIGHTS
Quarter ended September 30, 2015
($ in millions, except per share amounts)
Assets and Liabilities:
Investment portfolio $ 1,299.0
Net assets $ 716.6
Net asset value per share $ 9.82
Credit Facility $ 132.4
2019 Notes $ 253.1
SBA debentures $ 150.0
2025 Notes $ 71.1
Yield on debt investments at quarter-end 12.1%
Operating Results: Quarter
Year Ended Ended
------------ ------------
Net investment income $ 82.3 $ 20.0
Net investment income per share $ 1.10 $ 0.27
Distributions declared per share $ 1.12 $ 0.28
Portfolio Activity:
Purchases of investments $ 461.3 $ 116.5
Sales and repayments of investments $ 390.5 $ 100.9
Number of new portfolio companies invested 11 3
Number of existing portfolio companies invested 30 8
Number of ending portfolio companies 61 61
CONFERENCE CALL AT 10:00 A.M. ET ON NOVEMBER 11, 2015
PennantPark Investment Corporation ("we," "our," "us" or "Company") will host a conference call at 10:00 a.m. (Eastern Time) on Wednesday, November 11, 2015 to discuss its financial results. All interested parties are welcome to participate. You can access the conference call by dialing (877) 604-9673 approximately 5-10 minutes prior to the call. International callers should dial (719) 325-4878. All callers should reference PennantPark Investment Corporation. An archived replay of the call will be available through November 25, 2015 by calling (888) 203-1112. International callers please dial (719) 457-0820. For all phone replays, please reference conference ID #801561.
PORTFOLIO AND INVESTMENT ACTIVITY
As of September 30, 2015, our portfolio totaled $1,299.0 million and consisted of $399.2 million of senior secured debt, $612.5 million of second lien secured debt, $182.5 million of subordinated debt and $104.8 million of preferred and common equity. Our debt portfolio consisted of 71% variable-rate investments (including 65% with a London Interbank Offered Rate, or LIBOR, or prime floor) and 29% fixed-rate investments. As of September 30, 2015, we had four companies on non-accrual, representing 9.4% and 5.5% of our overall portfolio on a cost and fair value basis, respectively. Our overall portfolio consisted of 61 companies with an average investment size of $21.3 million, had a weighted average yield on debt investments of 12.1% and was invested 31% in senior secured debt, 47% in second lien secured debt, 14% in subordinated debt and 8% in preferred and common equity.
As of September 30, 2014, our portfolio totaled $1,318.1 million and consisted of $465.6 million of senior secured debt, $493.4 million of second lien secured debt, $247.1 million of subordinated debt and $112.0 million of preferred and common equity. Our debt portfolio consisted of 67% variable-rate investments (including 61% with a LIBOR or prime floor) and 33% fixed-rate investments. As of September 30, 2014, we had one company on non-accrual, representing 0.3% and 0.9% of our overall portfolio on a cost and fair value basis, respectively. Our overall portfolio consisted of 67 companies with an average investment size of $19.7 million, had a weighted average yield on debt investments of 12.5% and was invested 35% in senior secured debt, 37% in second lien secured debt, 19% in subordinated debt and 9% in preferred and common equity.
For the three months ended September 30, 2015, we invested $116.5 million of investments in three new and eight existing portfolio companies with a weighted average yield on debt investments of 12.2%. Sales and repayments of investments for the same period totaled $100.9 million. This compares to the three months ended September 30, 2014, in which we invested $233.3 million in five new and eight existing portfolio companies with a weighted average yield on debt investments of 13.0%. Sales and repayments of investments for the same period totaled $91.2 million.
For the fiscal year ended September 30, 2015, we invested $461.3 million of investments in 11 new and 30 existing portfolio companies with a weighted average yield on debt investments of 12.1%. Sales and repayments of investments for the same period totaled $390.5 million. This compares to the fiscal year ended September 30, 2014, in which we invested $795.1 million in 21 new and 30 existing portfolio companies with a weighted average yield on debt investments of 12.4%. Sales and repayments of investments for the same period totaled $625.6 million.
RESULTS OF OPERATIONS
Set forth below are the results of operations for the three month periods and fiscal years ended September 30, 2015 and 2014.
Investment Income
Investment income for the three months ended September 30, 2015 and 2014 was $39.1 million and $40.1 million, respectively, and was primarily attributable to $11.8 million and $13.1 million from senior secured debt, $17.0 million and $15.2 million from second lien secured debt, and $6.3 million and $10.7 million from subordinated debt and $4.0 million and $1.1 million from preferred and common equity, respectively.
Investment income for the fiscal years ended September 30, 2015 and 2014 was $161.6 million and $147.9 million, respectively, and was attributable to $54.3 million and $43.0 million from senior secured debt, $71.1 million and $55.2 million from second lien secured debt, and $29.8 million and $46.4 million from subordinated debt and $6.4 million and $3.3 million from preferred and common equity, respectively. The increase in investment income over the prior year was primarily due to the growth of our portfolio at cost.
Expenses
Expenses for the three months ended September 30, 2015 and 2014 totaled $19.1 million and $20.0 million, respectively. Base management fee totaled $6.6 million and $6.4 million, incentive fee totaled $5.0 million and $3.0 million (after the reversal of $1.7 million on net unrealized gains accrued but not payable), debt related interest and expenses totaled $6.7 million and $10.0 million (including $4.5 million associated with the 4.50% senior notes due 2019, or 2019 Notes), general and administrative expenses totaled $0.8 million and $0.6 million and taxes totaled zero and less than $0.1 million, respectively, for the same periods.
Expenses for the fiscal years ended September 30, 2015 and 2014 totaled $79.4 million and $76.6 million, respectively. Base management fee totaled $26.7 million and $24.3 million, incentive fee totaled $20.6 million and $17.8 million, debt related interest and expenses totaled $26.4 million and $28.6 million (including $8.3 million associated with the 2019 Notes and expansion of our multi-currency, senior secured revolving credit facility, as amended and restated, or the Credit Facility), general and administrative expenses totaled $5.7 million and $5.8 million and taxes totaled zero and $0.1 million, respectively, for the same periods. The increase in expenses over the prior year was primarily due to increased borrowing costs, base management fee and incentive fee as a result from the growth of our portfolio at cost.
Net Investment Income
Net investment income totaled $20.0 million and $20.1 million, or $0.27 and $0.29 per share, for the three months ended September 30, 2015 and 2014, respectively.
Net investment income totaled $82.3 million and $71.3 million, or $1.10 and $1.06 per share, for the fiscal years ended September 30, 2015 and 2014, respectively. The increase in net investment income over the prior year was due to the growth of our portfolio offset by higher asset based related expenses.
Net Realized Gains or Losses
Sales and repayments of investments for the three months ended September 30, 2015 and 2014 totaled $100.9 million and $91.2 million, respectively, and net realized (losses) gains totaled $(1.8) million and $1.3 million, respectively, for the same periods.
Sales and repayments of investments for the fiscal years ended September 30, 2015 and 2014 totaled $390.5 million and $625.6 million, respectively, and net realized gains totaled $30.1 million and $30.2 million, respectively, for the same periods. Net realized gains remained fairly consistent when comparing the current year to the prior year.
Unrealized Appreciation or Depreciation on Investments, Credit Facility, 2019 Notes and 2025 Notes
For the three months ended September 30, 2015 and 2014, net unrealized depreciation on investment totaled $16.2 million and $24.9 million, respectively. Net unrealized depreciation (appreciation) on our Credit Facility, 2019 Notes and our 6.25% senior notes due 2025, or 2025 Notes, totaled $0.6 million and $(2.4) million, respectively, for the same periods.
For the fiscal years ended September 30, 2015 and 2014, net unrealized (depreciation) appreciation on investments totaled $(124.3) million and $12.5 million, respectively. Net unrealized depreciation (appreciation) on our Credit Facility, 2019 Notes and 2025 Notes totaled $1.7 million and $(3.0) million, respectively, for the same periods. The net change in unrealized appreciation on our investments was driven primarily by changes in the capital market conditions, financial performance of certain portfolio companies, and the reversal of unrealized depreciation (appreciation) of investments liquidated. The change in unrealized appreciation on the Credit Facility and our Notes over the prior year was due to the fluctuating interest rate environment.
Net Change in Net Assets Resulting from Operations
Net change in net assets resulting from operations totaled $1.4 million and $(1.1) million, or $0.02 and $(0.02) per share, for the three months ended September 30, 2015 and 2014, respectively.
Net change in net assets resulting from operations totaled $(10.2) million and $111.0 million, or $(0.14) and $1.66 per share, for the fiscal years ended September 30, 2015 and 2014, respectively. The decrease compared to the prior year was due to the change in portfolio investment values offset by higher net investment income.
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 and proceeds from the rotation of our portfolio and proceeds from public and private offerings of securities to finance our investment objectives.
As of September 30, 2015 and 2014, there was $136.9 million (including a temporary draw of $30.0 million) and $55.2 million, respectively, in outstanding borrowings under the Credit Facility. The Credit Facility had a weighted average interest rate at the time of 3.07% and 2.80%, respectively, exclusive of the fee on undrawn commitments, as of September 30, 2015 and 2014. The annualized weighted average cost of debt for the years ended September 30, 2015 and 2014, inclusive of the fee on the undrawn commitment on the Credit Facility and upfront fees on SBA debentures, was 4.54% and 3.85%, respectively. As of September 30, 2015 and 2014, we had $408.1 million and $489.8 million of unused borrowing capacity under our Credit Facility, respectively, subject to the regulatory restrictions that the 1940 Act imposes on us as a business development company.
As of September 30, 2015 and 2014, we had $250.0 million and $71.3 million in aggregate principal amount of 2019 Notes and 2025 Notes, respectively, with a fixed interest rate of 4.50% and 6.25% per year, respectively. As of September 30, 2015 and 2014, we had $225.0 million in SBA debt commitments through certain of our consolidated subsidiaries and $150.0 million was drawn for each period.
On September 30, 2015 and 2014, we had cash and cash equivalents of $49.6 million and $66.5 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 provided cash of $3.0 million for the fiscal year ended September 30, 2015, and our financing activities used cash proceeds of $20.1 million for the same period. Our operating activities provided cash primarily from sales and repayments on our investments and our financing activities used cash primarily for our stock repurchase program and to repay certain amounts under our Credit Facility.
Our operating activities used cash of $172.5 million for the fiscal year ended September 30, 2014, and our financing activities provided cash proceeds of $180.9 million for the same period. Our operating activities used cash primarily for our investment activities and our financing activities provided cash primarily from the issuance of the 2019 Notes, our equity offering and net draws under the Credit Facility.
STOCK REPURCHASE PROGRAM
On May 6, 2015, we announced a share repurchase plan which allows us to repurchase up to $35 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 6, 2016 and the repurchase of $35 million of common stock. During the fiscal year ended September 30, 2015, we repurchased 2,126,868 shares of common stock in open market transactions for an aggregate cost (including transaction costs) of $17.9 million. During the fiscal year ended September 30, 2014, we did not make any repurchases of our common stock.
DISTRIBUTIONS
During the three months ended September 30, 2015 and 2014, we declared distributions of $0.28 per share for each period for total distributions of $20.4 million and $21.0 million, respectively. During the fiscal years ended September 30, 2015 and 2014, we declared distributions of $1.12 per share each year for total distributions of $83.3 million and $76.9 million, respectively. We monitor available net investment income to determine if a return of capital for taxation 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, a portion of those distributions may be deemed to be a return of capital to our common stockholders. Tax characteristics of all distributions will be reported to stockholders on Form 1099-DIV after the end of the calendar year and in our periodic reports filed with the Securities and Exchange Commission, or the SEC.
AVAILABLE INFORMATION
The Company makes available on its website its report on Form 10-K 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
September 30, September 30,
2015 2014
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Assets
Investments at fair value
Non-controlled, non-affiliated investments
(cost - $1,138,155,969 and
$1,171,573,359, respectively) $1,096,719,079 $1,212,515,400
Non-controlled, affiliated investments
(cost - $133,693,295 and $108,572,406,
respectively) 95,503,104 67,847,521
Controlled, affiliated investments (cost -
$152,387,898 and $38,708,555,
respectively) 106,825,650 37,691,845
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Total of investments (cost -
$1,424,237,162 and $1,318,854,320,
respectively) 1,299,047,833 1,318,054,766
Cash and cash equivalents (cost -
$49,637,415 and $66,600,195, respectively) 49,619,256 66,518,682
Interest receivable 7,590,197 13,703,525
Deferred financing costs and other assets 12,520,987 13,550,224
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Total assets 1,368,778,273 1,411,827,197
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Liabilities
Distributions payable 20,430,492 21,026,015
Payable for investments purchased 3,591,177 4,432,500
Unfunded investments - 15,607,059
Credit Facility payable (cost - $136,864,300
and $55,226,300, respectively) 132,356,860 53,497,620
2019 Notes payable (cost - $250,000,000) 253,102,500 251,350,250
SBA debentures payable (cost - $150,000,000) 150,000,000 150,000,000
2025 Notes payable (cost - $71,250,000) 71,136,000 71,820,000
Management fee payable 6,602,029 6,385,103
Performance-based incentive fee payable 5,007,792 4,622,754
Interest payable on debt 7,638,514 1,962,264
Accrued other expenses 2,322,367 3,113,683
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Total liabilities 652,187,731 583,817,248
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Commitments and contingencies
Net assets
Common stock, 72,966,043 and 75,092,911
shares issued and outstanding,
respectively. Par value $0.001 per share
and 100,000,000 shares authorized. 72,966 75,093
Paid-in capital in excess of par value 834,711,229 852,465,375
Distributions in excess of net investment
income (13,424,886) (11,802,580)
Accumulated net realized gain (loss) on
investments 18,919,305 (11,655,302)
Net unrealized depreciation on investments (125,207,012) (881,067)
Net unrealized depreciation (appreciation)
on debt 1,518,940 (191,570)
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Total net assets $ 716,590,542 $ 828,009,949
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Total liabilities and net assets $1,368,778,273 $1,411,827,197
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Net asset value per share $ 9.82 $ 11.03
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PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended September 30,
----------------------------
2015 2014
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Investment income:
From non-controlled, non-affiliated
investments:
Interest $ 130,647,588 $ 124,850,558
Other income 9,644,816 9,692,254
From non-controlled, affiliated investments:
Interest 11,694,525 5,656,300
Other income 175,937 -
From controlled, affiliated investments:
Interest 5,366,425 7,278,060
Other income 4,100,000 459,166
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Total investment income 161,629,291 147,936,338
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Expenses:
Base management fee 26,695,653 24,291,420
Performance-based incentive fee 20,564,559 17,832,129
Interest and expenses on debt 26,355,081 20,260,652
Administrative services expenses 2,686,765 2,953,423
Other general and administrative expenses 3,069,144 2,860,094
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Expenses before taxes and debt issuance
costs 79,371,202 68,197,718
Tax expense (benefit) - 72,603
Debt issuance costs - 8,337,500
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Total expenses 79,371,202 76,607,821
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Net investment income 82,258,089 71,328,517
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Realized and unrealized (loss) gain on
investments, cash and debt:
Net realized gain on investments 30,111,694 30,235,265
Net change in unrealized (depreciation)
appreciation on:
Non-controlled, non-affiliated investments (113,376,060) 468,076
Non-controlled and controlled, affiliated
investments (10,949,885) 11,993,189
Debt depreciation (appreciation) 1,710,510 (3,041,570)
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Net change in unrealized (depreciation)
appreciation on investments and debt (122,615,435) 9,419,695
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Net realized and unrealized (loss) gain from
investments and debt (92,503,741) 39,654,960
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Net (decrease) increase in net assets
resulting from operations $ (10,245,652) $ 110,983,477
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Net (decrease) increase in net assets
resulting from operations per common share $ (0.14) $ 1.66
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Net investment income per common share $ 1.10 $ 1.06
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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. 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 Reception: (212) 905-1000 www.pennantpark.com