Patriot Capital Funding Reports 2006 Fourth Quarter and Year-End Results
WESTPORT, CT – March 5, 2007 — Patriot Capital Funding, Inc. (NasdaqGS: PCAP) (“Patriot Capital Funding” or “the Company”), a specialty finance company primarily providing financing solutions to small- to mid-sized companies in transactions initiated by private equity sponsors, today announced results for the fourth quarter and twelve-month periods ended December 31, 2006.
2006 Fourth Quarter Summary
-
Total investment income of $7.6 million
-
Net investment income of $4.1 million, or $0.26 per basic and diluted share
-
Net income of $4.5 million, or $0.29 per basic and $0.28 per diluted share
-
Originated $47.9 million in investment commitments
-
Net asset value per share of common stock at December 31, 2006 was $10.37
Portfolio Activity
During the 2006 fourth quarter, the following investment commitments were originated:
-
$25.5 million “one-stop” financing, comprised of senior and subordinated debt as well as an equity co-investment, in support of the recapitalization, by North Castle Partners, of Caleel + Hayden LLC, a provider of proprietary, branded professional skincare and cosmetic products to the physician and spa communities.
-
$9.9 million incremental financing, comprised of junior secured debt and senior subordinated debt, to support the recapitalization of Prince Minerals, Inc. (“Prince”), a Palladium Equity Partners II, L.P. portfolio company. The financing increased Patriot Capital Funding’s total investment in Prince to $23.3 million. Prince is a producer of mineral-based colorants and additives supplying a wide variety of industries throughout North America and Europe.
-
$9.0 million participation in a syndicated junior secured term loan investment to fund Tata Coffee Limited’s acquisition of Eight O’Clock Coffee, the nation’s best selling whole bean coffee.
-
$3.0 million participation in a syndicated junior secured term loan investment in temporary staffing service provider EmployBridge Holding Company.
-
$0.5 million participation in a syndicated junior secured term loan investment in Stolle Machinery Company, LLC, a provider of capital equipment used in the production of aluminum and steel beverage and food cans.
During the 2006 fourth quarter, the Company received gross proceeds of $1.0 million in conjunction with the full repayment of its junior secured term loan to Bare Escentuals Beauty, Inc.
Subsequent to the 2006 fourth quarter,
-
the Company priced an offering of 2.37 million shares of common stock at $14.20 per share, raising approximately $31.7 million in net proceeds, including a partial exercise of the over-allotment by the underwriter, Ferris, Baker, Watts Incorporated.
-
the Company closed a $28.2 million “one-stop” financing, comprised of senior and subordinated debt, in support of Century Park Capital Partners’ acquisition of ROM Corporation (“ROM”), from Hampshire Equity Partners. This investment represented a net $12.4 million increase in Patriot Capital Funding’s commitment to ROM, a designer, manufacturer and supplier of products used in the transportation and trucking industries.
-
the Company closed a $22.5 million “one-stop” financing, comprised of senior and subordinated debt as well as an equity co-investment, in support of the acquisition of Aylward Enterprises LLC (“Aylward”) by Charter Oak Equity and Mid Oaks Investments LLC. Aylward is a leading packaging equipment manufacturer for the pharmaceutical, over the counter products and nutraceuticals industries.
-
the Company received gross proceeds of approximately $9.4 million in conjunction with the full repayment of its senior secured term loan and subordinated debt investment in Robert Rothschild Farm, Inc. (“Robert Rothschild”). Proceeds received included approximately $500,000 of accrued payment-in-kind interest and a prepayment fee.
-
the Company closed an incremental $3.9 million in financing to support the recapitalization of Fairchild Industrial Products Co. (“Fairchild”), a designer and manufacturer of industrial control products. Fairchild is an existing portfolio company of Hampshire Equity Partners. The incremental investment was comprised of senior and subordinated debt. In conjunction with this investment, Patriot Capital Funding received $98,000 to redeem certain shares of Fairchild’s preferred stock held by the Company, including accrued dividends. The Company’s total investment commitment in Fairchild is now $24.3 million.
Patriot Capital Funding President and Chief Executive Officer Richard Buckanavage stated, “We completed our first full year as a public company with a strong fourth quarter highlighted by five transactions with an aggregate of $47.9 million in investment commitments. Our full year investment commitments of $168.4 million were well above our target of $130-$140 million for 2006. We started 2007 off well, completing an equity offering that raised approximately $32 million in net proceeds – including the over-allotment – and also closed three additional transactions representing approximately $39 million in investment commitments. Subsequent to year-end, Patriot Capital Funding also received repayment of its $9.4 million investment in Robert Rothschild, earning the Company more than 20 percent on its subordinated debt investment, and a blended internal rate of return in excess of 15 percent on our entire investment. The 2007 transactions added approximately $30 million in net year-to-date commitments.”
Portfolio Yield
The weighted average yield on all of our debt investments for the twelve months ended December 31, 2006 was 13.4 percent.
Portfolio Asset Quality
We utilize the following investment rating system for our entire portfolio of debt investments:
Investment Rating 1 –Investments that exceed expectations and/or a capital gain is expected. Investment Rating 2 –Investments that are generally performing in accordance with expectations. Investment Rating 3 –Investments that require closer monitoring. Investment Rating 4 –Investments performing below expectations where a higher risk of loss exists. Investment Rating 5 –Investments performing significantly below expectations where we expect a loss.
At December 31, 2006, the distribution of our debt investments on the 1 to 5 investment rating scale at fair value was as follows:
Investment Rating 1investments totaled $22.7 million (8.8% of the total portfolio). Investment Rating 2investments totaled $198.1 million (77.1% of the total portfolio). Investment Rating 3investments totaled $36.2 million (14.1% of the total portfolio). Investment Rating 4– no investments were rated 4. Investment Rating 5– no investments were rated 5.
Liquidity and Capital Resources
At December 31, 2006, we had cash and cash equivalents of $4.2 million, total assets of $270.5 million and net assets of $164.1 million. Our net asset value per common share was $10.37 at December 31, 2006, compared to $10.38 at September 30, 2006. We had $98.4 million of borrowings outstanding at December 31, 2006 under our $140.0 million securitization revolving credit facility. In addition, as noted above, we closed a shelf offering in January 2007 and received approximately $31.7 million in net proceeds, which we used to reduce our outstanding borrowings.
Dividend Information
On February 28, 2007, we announced that our board of directors had declared a cash dividend of $0.32 per share for the first quarter of 2007, an increase from the previous $0.31 per share quarterly cash dividend. The dividend is payable as follows:
Record date: March 15, 2007 Payment date: April 18, 2007
Our dividend is paid from taxable income. Our board of directors determines the dividend based on annual estimates of taxable income, which differs from book income due to changes in unrealized appreciation and depreciation of investments and due to temporary and permanent differences in income and expense recognition.
We have adopted a dividend reinvestment plan (“DRIP”) that provides for reinvestment of our dividends on behalf of our stockholders, unless a stockholder elects to receive cash. As a result, if we declare a cash dividend, then our stockholders who have not “opted out” of our dividend reinvestment plan will have their cash dividends automatically reinvested in additional shares of our common stock, rather than receiving the cash dividends. If your shares of our common stock are held through a brokerage firm or other financial intermediary and you wish to participate in the DRIP, please contact your broker or other financial intermediary.
2006 Fourth Quarter Conference Call/Webcast Information
Conference Call:Today – March 5 at 10:00 a.m. ET Dial-in Number:800/263-9162 Call Replay Until:March 7, 2007 at 12:00 p.m. ET Replay Number:800/633-8284 Replay Access Code:21331376 Webcast:www.patcapfunding.com Web Replay:30 days
About Patriot Capital Funding, Inc.
Patriot Capital Funding, Inc. (www.patcapfunding.com) is a specialty finance company primarily providing customized financing solutions to private equity sponsors focused on making investments in small- to mid-sized companies. Patriot Capital Funding typically invests in companies with annual revenues generally ranging from $10 million to $100 million that operate in diverse industry sectors. Investments usually take the form of senior secured loans, junior secured loans, and/or subordinated debt investments – which may contain equity or equity-related instruments. Patriot Capital Funding also offers “one-stop” financing, which typically includes a revolving credit line, one or more senior term loans and a subordinated debt investment. Patriot Capital Funding also makes equity co-investments of up to $2.0 million.
Forward-Looking Statements
This press release may contain certain forward-looking statements, including statements with regard to the future performance of Patriot Capital Funding. Words such as “believes,” “expects,” “projects,” and “future” or similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors could cause actual results to differ materially from those projected in these forward-looking statements, and some of these factors are enumerated in Patriot Capital Funding’s prospectus supplement, dated January 23, 2007, and prospectus, dated December 15, 2006, and other filings with the Securities and Exchange Commission. Patriot Capital Funding undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
(financial statements follow)
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Financial Statements
Patriot Capital Funding, Inc. Consolidated Balance Sheets (unaudited)
December 31,
December 31,
2006
2005
ASSETS
Investments at fair value:
Non-control/non-affiliate investments (cost of $251,915,921 – 2006, $145,232,150 - 2005)
$
251,933,655
$
141,390,954
Affiliate investments (cost of $8,966,605 – 2006, $0 – 2005)
8,925,605
—
Unearned income
(3,610,884
)
(3,439,295
)
Total investments
257,248,376
137,951,659
Cash and cash equivalents
4,211,643
2,371,841
Restricted cash
5,113,806
7,806,328
Interest receivable
2,221,000
867,475
Other assets
1,727,680
1,658,690
TOTAL ASSETS
$
270,522,505
$
150,655,993
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Borrowings
$
98,380,000
$
21,650,000
Interest payable
523,709
60,334
Dividends payable
4,904,818
—
Accounts payable, accrued expenses and other
2,605,349
1,793,294
TOTAL LIABILITIES
106,413,876
23,503,628
STOCKHOLDERS’ EQUITY
Preferred stock, $.01 par value, 1,000,000 shares authorized;
no shares issued and outstanding
—
--
Common stock, $.01 par value, 49,000,000 shares authorized;
15,821,994 and 12,136,655 shares issued and outstanding
at December 31, 2006 and 2005, respectively
158,220
121,367
Paid-in capital
171,957,327
136,267,552
Accumulated net investment loss
(1,912,061
)
(1,912,061
)
Distributions in excess of net investment income
(2,821,587
)
(3,483,297
)
Net realized loss on investments
(3,262,966
)
—
Net unrealized gain on interest rate swap
12,961
—
Net unrealized depreciation on investments
(23,265
)
(3,841,196
)
TOTAL STOCKHOLDERS’ EQUITY
164,108,629
127,152,365
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$
270,522,505
$
150,655,993
NET ASSET VALUE PER COMMON SHARE
$
10.37
$
10.48
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Patriot Capital Funding, Inc. Consolidated Statements of Operations (unaudited)
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2006
2005
2006
2005
INVESTMENT INCOME
Interest:
Non-control/non-affiliate investments (less than 5% owned)
$
7,226,520
$
4,324,794
$
25,011,993
$
13,035,673
Affiliate investments (5% to 25% owned)
286,986
—
375,716
—
Total interest income
7,513,506
4,324,794
25,387,709
$
13,035,673
Fees:
—
Non-control/non-affiliate investments (less than 5% owned)
74,432
225,686
260,289
366,830
Affiliate investments (5% to 25% owned)
7,610
—
9,887
—
Total fee income
82,042
225,686
270,176
366,830
Other investment income non-affiliate investments (less than 5% owned)
—
—
848,449
46,839
Total Investment Income
7,595,548
4,550,480
26,506,334
13,449,342
EXPENSES
Compensation expense
1,215,442
647,163
3,877,525
2,481,761
Consulting fees
—
—
—
554,796
Interest expense
1,414,311
270,888
4,332,582
3,517,989
Professional fees
267,457
244,923
1,045,613
730,550
Prepayment penalty
—
—
—
3,395,335
General and administrative
578,398
522,156
2,229,970
1,041,030
Total Expenses
3,475,608
1,685,130
11,485,690
11,721,461
Net Investment Income
4,119,940
2,865,350
15,020,644
1,727,881
NET REALIZED AND UNREALIZED GAIN (LOSS)
Realized gain (loss) on investments – Non-control/non-affiliate investments (less than 5% owned)
8,125
—
(3,262,966
)
—
Net unrealized appreciation (depreciation) on investments – Non-control/non-affiliate investments (less than 5% owned)
399,450
115,860
3,858,931
(2,965,175
)
Net unrealized depreciation on investments – Affiliate investments (5% to 25% owned)
(44,300
)
—
(41,000
)
—
Net unrealized gain on interest rate swap
39,170
—
12,961
—
Net realized and unrealized gain (loss)
402,445
115,860
567,926
(2,965,175
)
NET INCOME (LOSS)
$
4,522,385
$
2,981,210
$
15,588,570
$
(1,237,294
)
Earnings (loss) per share, basic
$
0.29
$
0.25
$
1.10
$
(0.17
)
Earnings (loss) per share, diluted
$
0.28
$
0.25
$
1.10
$
(0.17
)
Weighted average shares outstanding, basic
15,815,485
12,119,313
14,145,200
7,253,632
Weighted average shares outstanding, diluted
15,908,237
12,119,313
14,237,952
7,253,632
Note: Certain prior period amounts have been reclassified to conform to the current year presentation.
CONTACTS:
Richard P. Buckanavage President and Chief Executive Officer 203/429-2700
Robert Rinderman or Steven Hecht Jaffoni & Collins Incorporated 212/835-8500 or PCAP@jcir.com
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