Kayne Anderson Energy Development (KED) Inactive
Filed: 10 Feb 09, 12:00am
HOUSTON, TX -- (Marketwire - February 09, 2009) - February 9, 2009 - (NYSE: KED) Kayne Anderson Energy Development Company (the "Company") today announced its financial results for the fiscal year ended November 30, 2008.
HIGHLIGHTS
- -- Net asset value: previously disclosed unaudited NAV of $14.87 has been
revised to $16.10 per share
- -- The Company paid its quarterly dividend of $0.35 per share
- -- Net investment loss for fiscal 2008: $3.5 million
- -- Net realized gain for fiscal 2008: $7.5 million
- -- Net unrealized losses for fiscal 2008: $70.8 million
"Fiscal 2008 was a difficult year due to challenges in the financial markets and commodity markets and the onset of a global recession. While we expect that fiscal 2009 will present challenges as well, we are optimistic that our portfolio is well positioned to benefit from an upturn in the financial markets and commodity markets," stated Kevin S. McCarthy, Chairman and CEO of the Company. "In spite of the challenges we faced in 2008, we were pleased to have maintained a strong balance sheet and deliver over $1.60 per share of dividends to our shareholders over the last twelve months."
NET ASSET VALUE
As of November 30, 2008, the Company's NAV was $162.7 million or $16.10 per share. This represents an increase of $1.23 per share compared to the unaudited NAV that the Company announced on January 9, 2009. The principal reason for the increase is a positive adjustment to our valuation allowance for deferred tax assets and a change to the estimated post-closing adjustment related to the sale of Millennium Midstream Partners, L.P. ("Millennium").
In our unaudited NAV that was announced on January 9, 2009, the Company included a valuation allowance of $12.9 million or $1.27 per share on the Company's deferred tax asset. The valuation allowance was based on the amount of deferred tax assets that we estimated could be utilized within three years and our belief that this methodology was consistent with industry practice. During the audit of the Company's financial statements, we were able to demonstrate, after weighing all of the objective evidence, that it was more likely than not that the Company would be able to utilize its entire deferred tax asset prior to its expiration. This threshold is established under the Statement of Financial Accounting Standard No. 109, "Accounting for Income Taxes." As such, we were required to reverse the previously announced valuation allowance.
The Company also changed its estimated post-closing working capital adjustment related to its sale of Millennium, which reduced NAV by $0.4 million or $0.04 per share. This change in estimate is based on information that became available to Millennium in January 2009, and generally accepted accounting principles require that this type of subsequent event be reflected in the financial statements as of November 30, 2008.
PORTFOLIO AND INVESTMENT ACTIVITY
As of November 30, 2008, the Company had long-term investments of $182.3 million. The Company's long-term investments consisted of 57 portfolio companies, which were comprised of approximately 51% in private MLPs, 33% in public MLPs and 16% in fixed income securities.
Our percentage invested in public MLPs at November 30, 2008 is greater than our targeted range because such percentage includes 1.6 million unregistered common units of Eagle Rock Energy Partners, L.P., which were received as partial consideration for the sale of our interest in Millennium. Over time, the Company intends to rotate out of certain public MLPs and into additional private MLPs as attractive investment opportunities arise.
RESULTS OF OPERATIONS - QUARTER ENDED NOVEMBER 30, 2008
Investment income was $1.3 million and consisted primarily of interest income on fixed income investments and short-term investment in repurchase agreements. The Company received $4.2 million of cash dividends and distributions, of which $3.6 million was treated as a return of capital.
Operating expenses were $2.4 million, including $1.1 million of base investment management fees; $0.7 million for interest expense and $0.6 million for other operating expenses. Base investment management fees were equal to an annual rate of 1.75% of average total assets.
Net investment loss was $0.7 million and included $0.5 million of deferred income tax benefit.
Net realized gains were $9.3 million, which consisted of a $16.1 million gain related to the sale of Millennium that was partially offset by net realized losses of $1.3 million and a deferred income tax expense of $5.5 million.
Net unrealized losses were $65.8 million, which consisted of $104.5 million of unrealized losses from investments net of a deferred income tax benefit of $38.7 million.
The Company's net decrease in net assets resulting from operations for the period was $57.3 million. This decrease is composed of the net unrealized losses of $65.8 million; net realized gains of $9.3 million and a net investment loss of $0.7 million as noted above.
RESULTS OF OPERATIONS - YEAR ENDED NOVEMBER 30, 2008
Investment income was $7.0 million and consisted primarily of interest income on fixed income investments and short-term investments in repurchase agreements. The Company received $18.5 million of cash dividends and distributions, of which $16.4 million was treated as a return of capital.
Total operating expenses were $12.6 million, including $5.1 million of base investment management fees; $4.3 million for interest expense and $2.4 million for other operating expenses. Base investment management fees were equal to an annual rate of 1.75% of average total assets.
Net investment loss was $3.5 million and included $2.2 million of deferred income tax benefit.
Net realized gains were $7.5 million, which consisted of a $16.1 million gain related to the sale of Millennium that was partially offset by net realized losses of $4.2 million and a deferred income tax expense of $4.4 million.
Net unrealized losses were $70.8 million, which consisted of $106.4 million of unrealized losses from investments net of a deferred income tax benefit of $39.4 million; and a deferred income tax expense of $3.8 million relating to the Company's conversion from a regulated investment company, or RIC, to a taxable corporation, effective December 1, 2007.
LIQUIDITY AND CAPITAL RESOURCES
As of November 30, 2008, the Company had approximately $6.3 million invested in short-term repurchase agreements. The repurchase agreements are collateralized by U.S. Treasury notes.
As of November 30, 2008, the Company had $57.0 million borrowed under its senior secured credit facility at an interest rate of 4.25% and, as of that date, had a borrowing base of $71.1 million. The maximum amount that the Company can borrow under its credit facility is limited to the lesser of the commitment amount of $100 million or its borrowing base. As of February 5, 2009, the Company had $57.0 million of borrowings at an interest rate of 1.66% and its borrowing base was $69.2 million.
DIVIDENDS/DISTRIBUTIONS
On January 29, 2009, the Company paid its dividend/distribution of $0.35 per share for the quarter ended November 30, 2008.
GUIDANCE
Based on the Company's portfolio of investments and average yields on those investments as of November 30, 2008, we estimate dividends, distributions, and interest income will be approximately $5.6 million per quarter. Such estimate does not reflect any changes in cash distributions made by MLPs or changes in interest rates based on the movement in LIBOR rates since November 30, 2008.
Amount Average
Invested Annual
Portfolio Category ($ in millions) Yield(1)(2)
-------------- -------------
Private MLPs $ 92.1 10.7%
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Public MLPs and MLP Affiliates $ 60.9 16.2%
-------------- -------------
Fixed Income(3) $ 20.0 13.4%
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Repurchase Agreements(4) $ 2.8 0.3%
-------------- -------------
(1) Average yields include return of capital distributions. Return of
capital distributions are reported as a reduction to gross dividends
and distributions to arrive at net investment income reported under
generally accepted accounting principles.
(2) Average yields for Public MLPs and MLP Affiliates are based on the most
recently declared distributions as of November 30, 2008. Amount
invested and average yields for Private MLPs are based on
November 30, 2008 valuations and distribution rates.
(3) The amount invested and average yield excludes the Company's ProPetro
investment (the Company does not anticipate receiving cash interest
payments during fiscal 2009 on this investment). The average yield
includes amortization of the purchase price discount, as reported on
the Company's income statement.
(4) Includes repurchase agreements at November 30, 2008 less Q4 2008
dividend/distribution of $3.5 million.
Base Management Fees and Other Operating Expenses -- Base management fees are estimated to be approximately $0.8 million per quarter. Other operating expenses are estimated to be approximately $0.6 million a quarter.
Interest Expense -- Based on $57.0 million borrowed under the Company's senior secured credit facility as of November 30, 2008, interest expense is estimated to be approximately $0.5 million per quarter assuming a LIBOR rate of 1.90%.
The Company does not provide guidance on realized gains or incentive management fees.
Payment of future dividends/distributions is subject to approval by the Company's Board of Directors, as well as meeting the covenants of the Company's revolving credit facility. Should market conditions deteriorate further and/or interest income or distributions from the Company's investments be less than expectations, the Company will determine the appropriate dividend/distribution rate at that time.
CONFERENCE CALL
The Company will host a conference call at 4 p.m., Central time, on Monday, February 9, 2009 to discuss its results. All interested parties are welcome to participate. You can access the conference call by dialing (877) 563-8315 approximately 5-10 minutes prior to the call. International callers should dial (706) 679-4383. All callers should reference "Conference ID # 82200729." For the convenience of the Company's stockholders, an archived replay of the call will be available on the Company's website (http://www.kaynefunds.com/webcasts.htm).
AVAILABLE INFORMATION
The Company's filings with the Securities and Exchange Commission, press releases and other financial information are available on the Company's website at www.kaynefunds.com.
KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES
(amounts in 000's, except share and per share amounts)
November 30, November 30,
2008 2007
----------- -----------
ASSETS
Investments, at fair value:
Non-affiliated (Cost -- $188,740 and $188,941,
respectively) $ 110,635 $ 198,811
Affiliated (Cost -- $83,351 and $121,172,
respectively) 71,649 127,891
U.S. Treasury Bills, at fair value (Cost -- $0
and $14,251, respectively) -- 14,250
Repurchase agreements (Cost -- $6,325 and
$10,769, respectively) 6,325 10,769
----------- -----------
Total investments (Cost -- $278,416 and
$335,133, respectively) 188,609 351,721
Deposits with brokers 123 121
Deferred income tax asset 31,370 --
Receivable for securities sold 688 766
Interest, dividends and distributions
receivable, net 403 1,515
Debt issuance costs, prepaid expenses and other
assets 981 1,264
----------- -----------
Total Assets 222,174 355,387
----------- -----------
LIABILITIES
Senior secured revolving credit facility 57,000 85,000
Treasury secured revolving credit facility -- 14,000
Payable for securities purchased 60 6,967
Investment management fee payable 1,074 1,355
Current income tax payable 100 --
Accrued directors’ fees and expenses 76 78
Accrued expenses and other liabilities 1,177 863
Deferred tax liability -- 1,991
----------- -----------
Total Liabilities 59,487 110,254
----------- -----------
NET ASSETS $ 162,687 $ 245,133
=========== ===========
NET ASSETS CONSIST OF
Common stock, $0.001 par value (200,000,000
shares authorized at November 30, 2008 and
2007; 10,102,986 and 10,050,446 shares issued
and outstanding at November 30, 2008 and
November 30, 2007, respectively) $ 10 $ 10
Paid-in capital 215,953 231,535
Accumulated net investment loss, net of income
taxes, less dividends (3,942) (409)
Accumulated net realized gains (losses) on
investments, net of income taxes 7,464 (19)
Net unrealized gains (losses) on investments,
net of income taxes (56,798) 14,016
----------- -----------
NET ASSETS $ 162,687 $ 245,133
=========== ===========
NET ASSET VALUE PER SHARE $ 16.10 $ 24.39
=========== ===========
KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
(amounts in 000’s)
For the Three Months For the Year Ended
Ended November 30, November 30,
-------------------- --------------------
2008 2007 2008 2007
--------- --------- --------- ---------
INVESTMENT INCOME
Income
Dividends and Distributions:
Non-affiliated investments $ 1,798 $ 1,770 $ 8,274 $ 4,306
Affiliated investments 2,365 2,264 10,197 4,879
--------- --------- --------- ---------
Total dividends and
distributions 4,163 4,034 18,471 9,185
Return of capital (3,566) (4,086) (16,410) (8,711)
--------- --------- --------- ---------
Net dividends and
distributions 597 (52) 2,061 474
--------- --------- --------- ---------
Interest:
Non-affiliated investments 657 2,567 4,539 10,251
Affiliated investments -- 363 373 771
--------- --------- --------- ---------
Total interest 657 2,930 4,912 11,022
--------- --------- --------- ---------
Total investment income 1,254 2,878 6,973 11,496
--------- --------- --------- ---------
Expenses
Base investment management
fees 1,074 1,411 5,126 4,839
Incentive investment
management fees -- 59 -- 59
Bad debt expense -- -- 830 --
Professional fees 266 321 985 1,028
Directors’ fees 76 76 316 286
Administration fees 59 57 261 230
Insurance 38 38 151 155
Custodian fees 20 19 81 72
Other expenses 127 106 568 401
--------- --------- --------- ---------
Total Expenses -- Before
Base Investment Management
Fee Waivers and Interest
Expense 1,660 2,087 8,318 7,070
Base investment management
fee waivers -- (115) -- (1,088)
Interest expense 716 1,545 4,265 2,489
--------- --------- --------- ---------
Total Expenses 2,376 3,517 12,583 8,471
--------- --------- --------- ---------
Net Investment Income
(Loss) -- Before Income
Taxes (1,122) (639) (5,610) 3,025
Current income tax expense (100) -- (100) --
Deferred income tax
benefit 495 250 2,178 581
--------- --------- --------- ---------
Net Investment Income
(Loss) (727) (389) (3,532) 3,606
--------- --------- --------- ---------
REALIZED AND UNREALIZED GAINS
(LOSSES)
Net Realized Gains (Losses)
Investments 14,763 1,979 11,912 5,523
Foreign currency
transactions -- -- (30) --
Deferred income tax expense (5,471) -- (4,399) --
--------- --------- --------- ---------
Net Realized Gains 9,292 1,979 7,483 5,523
--------- --------- --------- ---------
Net Change in Unrealized
Gains (Losses)
Investments (104,543) 1,507 (106,395) 8,823
Foreign currency
translations (7) -- (4) --
Deferred income tax benefit
(expense) 38,707 (1,672) 39,395 (2,572)
Deferred income tax benefit
(expense) -- conversion to
a taxable corporation 18 -- (3,810) --
--------- --------- --------- ---------
Net Change in Unrealized
Gains (Losses) (65,825) 165 (70,814) 6,251
--------- --------- --------- ---------
Net Realized and
Unrealized Gains (Losses) (56,533) 1,814 (63,331) 11,774
--------- --------- --------- ---------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS $ (57,260) $ 1,425 $ (66,863) $ 15,380
========= ========= ========= =========
The Company is a non-diversified, closed-end investment company that elected to be treated as a business development company under the Investment Company Act of 1940. The Company's investment objective is to generate both current income and capital appreciation primarily through equity and debt investments. The Company will seek to achieve this objective by investing at least 80% of its net assets together with the proceeds of any borrowings (its "total assets") in securities of companies that derive the majority of their revenue from activities in the energy industry, including: (a) Midstream Energy Companies, which are businesses that operate assets used to gather, transport, process, treat, terminal and store natural gas, natural gas liquids, propane, crude oil or refined petroleum products; (b) Upstream Energy Companies, which are businesses engaged in the exploration, extraction and production of natural resources, including natural gas, natural gas liquids and crude oil, from onshore and offshore geological reservoirs; and (c) Other Energy Companies, which are businesses engaged in owning, leasing, managing, producing, processing and sale of coal and coal reserves; the marine transportation of crude oil, refined petroleum products, liquefied natural gas, as well as other energy-related natural resources using tank vessels and bulk carriers; and refining, marketing and distributing refined energy products, such as motor gasoline and propane to retail customers and industrial end-users.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS: This press release contains "forward-looking statements" as defined under the U.S. federal securities laws. Generally, the words "believe," "expect," "intend," "estimate," "anticipate," "project," "will" and similar expressions identify forward-looking statements, which generally are not historical in nature. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to materially differ from the Company's historical experience and its present expectations or projections indicated in any forward-looking statement. These risks include, but are not limited to, changes in economic and political conditions; regulatory and legal changes; energy industry risk; commodity pricing risk; leverage risk; valuation risk; non-diversification risk; interest rate risk; tax risk; and other risks discussed in the Company's filings with the SEC. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. The Company undertakes no obligation to publicly update or revise any forward-looking statements made herein. There is no assurance that the Company's investment objectives will be attained.
Contact: KA Fund Advisors, LLC Monique Vo, 877-657-3863 http://www.kaynefunds.com/