HIGHLIGHTS Quarter Ended June 30, 2009 ($ in millions, except per share amounts) Investment portfolio $ 393.1 Net assets $ 247.0 Net asset value per share $ 11.72 Credit Facility (Cost $187.3) $ 134.1 Investment portfolio composition and yield: Senior secured debt, subordinated debt, second lien secured debt, and equity (core) $ 346.3 Senior secured debt (non-core) $ 46.8 Weighted average yield on debt 10.4% Weighted average yield on core investments 11.6% Weighted average yield on non-core investments 3.3% Operating Results: Net investment income $ 5.7 Net investment income per share $ 0.27 Distributions declared per share $ 0.24 Portfolio Activity: Purchase of long term investments $ 32.6 Sales and repayments of long term investments $ 7.3 Number of new portfolio companies invested 5 Number of existing portfolio companies invested 2 Number of portfolio companies at end of period 37CONFERENCE CALL AT 10:00 A.M. ET ON AUGUST 6, 2009 The Company will also host a conference call at 10:00 a.m. (Eastern Time) on Thursday, August 6, 2009 to discuss the quarterly results. All interested parties are welcome to participate. You can access the conference call by dialing (877) 591-4949 approximately 5-10 minutes prior to the call. International callers should dial (719) 325-4868. All callers should reference PennantPark Investment Corporation. An archived replay of the call will be available through August 24, 2009 by calling (888) 203-1112. International callers please dial (719) 457-0820. For all replays, please reference conference ID #3432040. PORTFOLIO AND INVESTMENT ACTIVITY As of June 30, 2009, our portfolio totaled $393.1 million and consisted of $98.8 million of senior secured loans, $111.2 million of second lien secured debt, $156.0 million of subordinated debt, $10.3 million of preferred equity and $16.8 million of common equity investments. This compares to our portfolio as of September 30, 2008, which totaled $372.1 million and consisted of $78.8 million of senior secured loans, $104.2 million of second lien secured debt, $166.2 million of subordinated debt, $9.3 million of preferred equity and $13.6 million of common equity investments. Our core assets totaled $346.3 million and consisted of investments in twenty-five different companies with an average investment size of $13.9 million per company and a weighted average yield of 11.6% on debt investments as of June 30, 2009. This compares to our core assets as of September 30, 2008, which totaled $305.5 million and consisted of investments in nineteen different companies with an average investment size of $16.1 million per company and a weighted average yield of 12.5% on debt investments. As of June 30, 2009, our non-core senior secured loan portfolio totaled $46.8 million and consisted of thirteen different companies (including one company also in our core portfolio) with an average investment size of $3.6 million and a weighted average yield of 3.3% on debt investments. This compares to our non-core assets as of September 30, 2008, which totaled $66.6 million and consisted of nineteen different companies (including one company also in our core portfolio) with an average investment size of $3.5 million and a weighted average yield of 5.2% on debt investments. Our overall portfolio consisted of thirty-seven companies with an average investment size of $10.6 million and a weighted average yield on debt investments of 10.4%. The portfolio was invested 25% in senior secured loans, 28% in second lien secured debt, 40% in subordinated debt, 3% in preferred equity and 4% in common equity investments as of June 30, 2009. This compares to our overall portfolio as of September 30, 2008, which consisted of thirty-seven companies with an average investment size of $10.1 million and a weighted average yield on debt investments of 11.1%, and was invested 21% in senior secured loans, 28% in second lien secured debt, 45% in subordinated debt, 2% in preferred equity and 4% in common equity. For the three months ending June 30, 2009 and 2008, our portfolio had unrealized appreciation of $27.4 million and $11.7 million, respectively. For the three months ended June 30, 2009, we invested $32.6 million, in five new and two existing portfolio companies, with an average yield of 14.0% on debt investments. Sales and repayments of long-term investments totaled $7.3 million for the same period. This compares to the three months ended June 30, 2008, in which we invested $46.8 million in two new and three existing portfolio companies with an average yield of 14.5% on debt investments. Sales and repayments of long-term investments for the three months ended June 30, 2008 totaled $9.2 million. "We had an active quarter and our activity level has continued since quarter end. We invested approximately $33 million during the quarter in primarily senior secured debt with expected internal rates of return in the mid-teens," said Arthur Penn, Chairman and Chief Executive Officer. "We also selectively pruned the portfolio and exited several investments that were higher risk. As a result of these efforts, we have a safer portfolio with substantially better credit statistics. Additionally, we are seeing an increasing number of attractive opportunities, which can help us grow income." RESULTS OF OPERATIONS Set forth below are the results of operations for the three and nine months ended June 30, 2009 and 2008. Investment Income Investment income, for the three months ended June 30, 2009 and 2008, was $10.8 million and $9.7 million, respectively. Investment income, for the three months ended June 30, 2009, was primarily attributed to $4.3 million from senior secured loan investments, $3.3 million from second lien secured debt investments, and $2.4 million from subordinated debt investments. Investment income, for the three months ended June 30, 2008, was primarily attributed to $3.7 million from to senior secured loan investments, $3.7 million from second lien secured debt investments, and $1.7 million from subordinated debt investments. The remaining investment income, of $0.8 million and $0.6 million, for the same periods respectively, was primarily attributed to interest income from short-term investments and to net accretion of discount and amortization of premium. Investment income, for the nine months ended June 30, 2009 and 2008, was $33.3 million and $28.4 million, respectively. Investment income, for the nine months ended June 30, 2009, was primarily attributed to $13.6 million from senior secured loan investments, $10.6 million from second lien secured debt investments, and $7.4 million from subordinated debt investments. Investment income, for the nine months ended June 30, 2008, was primarily attributed to $11.6 million from senior secured loan investments, $10.5 million from second lien secured debt investments, and $5.1 million from subordinated debt investments. The remaining investment income, of $1.7 million and $1.2 million, for the same periods respectively, was primarily attributed to interest income from short-term investments and to net accretion of discount and amortization of premium. Expenses Expenses, for the three months ended June 30, 2009 and 2008, totaled $5.1 million and $5.7 million, respectively. Of these totals, $1.9 million and $1.8 million were attributable to base management fees, $1.4 million and $1.0 million were attributable to performance-based incentive fees, $0.8 million and $1.7 million were attributable to credit facility related expenses, and $1.0 million and $1.2 million were attributable to general and administrative expenses, respectively. Expenses, for the nine months ended June 30, 2009 and 2008, totaled $16.6 million and $15.2 million, respectively. Of these totals, $5.5 million and $4.8 million were attributable to net base management fees, $4.2 million and $2.4 million were attributable to performance-based incentive fees, $3.8 million and $4.4 million were attributable to credit facility related expenses, and $3.1 million and $3.6 million were attributable to general and administrative expenses, respectively. Net Investment Income Net investment income totaled $5.7 million and $16.7 million, or $0.27 and $0.79 per share, for the three and nine months ended June 30, 2009, respectively. Net investment income totaled $3.9 million and $13.1 million, or $0.19 and $0.62 per share, respectively, for the three and nine months ended June 30, 2008, respectively. Net Realized Loss Sales and repayments of long-term investments, for the three and nine months ended June 30, 2009, totaled $7.3 million and $12.9 million, respectively, and realized losses totaled $24.7 million and $30.8 million, respectively, due to the sale of senior secured loans and subordinated debt. Sales and repayments of long-term investments, for the three and nine months ended June 30, 2008, totaled $9.2 million and $14.4 million, respectively, and realized losses totaled approximately $0.4 million and $0.6 million, respectively, due to the sale of senior secured loans. Net Unrealized Appreciation / Depreciation on Investments, cash equivalents and credit facility For the three and nine months ended June 30, 2009, the Company's investments had a net change in unrealized appreciation of $27.4 million and $12.3 million, respectively. For the three and nine months ended June 30, 2009, the Company's credit facility had a net change in unrealized appreciation of $9.2 million and a net change in unrealized depreciation of $11.4 million, respectively. For the three and nine months ended June 30, 2008, the Company's investments had a net unrealized appreciation of $11.7 million and a net unrealized depreciation of $42.2 million, respectively. On June 30, 2009 and September 30, 2008, net unrealized depreciation on investments and cash equivalents totaled $59.7 million and $72.0 million, respectively, primarily due to a weak economy and credit markets. On June 30, 2009, unrealized depreciation on the credit facility was $53.2 million. Net Increase / Decrease in Net Assets from Operations For the three and nine months ended June 30, 2009, there was a net decrease in net assets resulting from operations of $0.8 million and a net increase of $9.6 million, or $0.04 per share and $0.45 per share, respectively, primarily due to an increase in investment valuations offset by an increase in the liability valuation of our credit facility. For the three and nine months ended June 30, 2008, there was a net increase in net assets resulting from operations of $15.2 million and a net decrease of $29.7 million, or $0.72 per share and $1.41 per share, respectively, primarily due to changes in investment valuations. LIQUIDITY AND CAPITAL RESOURCES Our liquidity and capital resources are generated primarily through our senior secured, multi-currency, $300 million, five-year revolving credit facility maturing in June 2012 as well as from cash flows from operations, investment sales and prepayments, and income earned from investments and cash equivalents. On June 30, 2009, we had $187.3 million in borrowings outstanding with a fair market value under GAAP of $134.1 million, and had cash equivalents of $0.5 million. During the nine months ended June 30, 2009, we generated operating cash flows primarily from interest earned on debt investments, and our primary use of funds for operations during the same period consisted of investments in portfolio companies, payments of fees and other operating expenses. For the three and nine months ended June 30, 2009, our operating activities resulted in net cash outflows of $23.9 million and $9.8 million, respectively, and our financing activities resulted in a net cash outflow of $5.5 million and $29.9 million, respectively, primarily from net repayments under our credit facility and dividends to our stockholders. During the nine months ended June 30, 2008, we generated operating cash flows primarily from interest earned on debt investments, and our primary use of funds during the same period consisted of investments in portfolio companies and payments of fees and other operating expenses. For the three and nine months ended June 30, 2008, our operating activities resulted in a net cash outflow of $45.2 million and $397.1 million, respectively, and our financing activities resulted in a net cash inflow of $5.0 million and $180.2 million for the same periods, primarily from net borrowings under our credit facility and dividends to our stockholders. DISTRIBUTIONS Distributions declared to stockholders, for the three and nine months ended June 30, 2009, totaled $5.1 million and $15.2 million or $0.24 and $0.72 per share, respectively. Distributions declared to stockholders, for the three and nine months ended June 30, 2008, totaled $4.6 million and $13.9 million or $0.22 and $0.66 per share, respectively. Tax characteristics of all dividends will be reported to stockholders on form 1099-DIV after the end of the calendar year.
PENNANTPARK INVESTMENT CORPORATION
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 2009 September 30,
(unaudited) 2008
============= =============
Assets
Investments at fair value
Non-controlled, non-affiliated investments,
at fair value (cost--$435,642,024 and
$427,481,745, respectively) $ 377,382,905 $ 354,261,950
Non-controlled, affiliated investments, at
fair value (cost--$17,200,193 and
$16,692,261, respectively) 15,755,326 17,885,870
------------- -------------
Total investments at fair value 393,138,231 372,147,820
Cash equivalents 541,136 40,249,201
Receivable for investments sold 1,381,011 -
Interest receivable 4,770,692 6,046,199
Prepaid expenses and other assets 1,271,943 1,367,479
------------- -------------
Total assets 401,103,013 419,810,699
------------- -------------
Liabilities
Distributions payable 5,056,505 5,056,505
Payable for investments purchased 4,183,666 -
Unfunded investments 6,331,385 -
Credit facility payable (fair value:
$134,057,558 and $160,204,000, respectively)
(cost: $187,300,000 and $202,000,000,
respectively) 134,057,558 202,000,000
Interest payable on credit facility 72,308 725,317
Management fee payable 1,928,082 85,896
Performance-based incentive fee payable 1,415,872 123,033
Accrued other expenses 1,080,397 1,091,688
------------- -------------
Total liabilities 154,125,773 209,082,439
------------- -------------
Net Assets
Common stock, par value $0.001 per share,
100,000,000 shares authorized and
21,068,772 shares issued and outstanding 21,069 21,069
Paid-in capital in excess of par 294,586,604 294,586,604
Undistributed (distributions in excess of)
net investment income 928,718 (602,660)
Cumulative effect of adoption of fair value
option on credit facility 41,796,000 -
Accumulated net realized loss on investments
and cash equivalents (42,097,607) (11,250,567)
Net unrealized depreciation on investments (59,703,986) (72,026,186)
Net unrealized depreciation on credit
facility 11,446,442 -
------------- -------------
Total net assets $ 246,977,240 $ 210,728,260
------------- -------------
Total liabilities and net assets $ 401,103,013 $ 419,810,699
------------- -------------
Net asset value per share $ 11.72 $ 10.00
============= =============
PENNANTPARK INVESTMENT CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
June 30, June 30,
======================== ========================
2009 2008 2009 2008
=========== =========== =========== ===========
Investment income:
From non-controlled,
non-affiliated
investments:
Interest $10,347,405 $ 9,212,625 $31,930,815 $27,148,848
Other 123,955 111,924 351,449 167,806
From non-controlled,
affiliated
investments:
Interest 298,349 337,832 988,668 1,063,257
----------- ----------- ----------- -----------
Total investment income 10,769,709 9,662,381 33,270,932 28,379,911
----------- ----------- ----------- -----------
Expenses:
Base management fee 1,928,082 1,829,909 5,495,505 5,195,750
Performance-based
incentive fee 1,412,925 985,287 4,175,224 2,433,394
Interest and other
credit facility
expenses 791,587 1,656,140 3,817,133 4,422,543
Administrative
services expenses 582,177 591,726 1,558,672 1,804,047
Other general and
administrative
expenses 388,507 658,178 1,523,505 1,823,014
----------- ----------- ----------- -----------
Expenses before base
management fee waiver 5,103,278 5,721,240 16,570,039 15,678,748
----------- ----------- ----------- -----------
Base management fee
waiver - - - (420,731)
----------- ----------- ----------- -----------
Net expenses 5,103,278 5,721,240 16,570,039 15,258,017
----------- ----------- ----------- -----------
Net investment income 5,666,431 3,941,141 16,700,893 13,121,894
----------- ----------- ----------- -----------
Realized and unrealized
gain (loss) on
investments, cash
equivalents and credit
facility:
Net realized loss
on investments and
cash equivalents (24,701,776) (401,624) (30,847,040) (620,998)
Net change in
unrealized
appreciation
(depreciation) on:
Non-controlled,
non-affiliated
investments and
cash equivalents 27,736,328 10,700,808 14,960,676 (41,097,670)
Non-controlled,
affiliated
investments (318,107) 964,139 (2,638,476) (1,064,091)
Credit facility (9,202,647) - 11,446,442 -
----------- ----------- ----------- -----------
Net change in
unrealized
appreciation
(depreciation) 18,215,574 11,664,947 23,768,642 (42,161,761)
----------- ----------- ----------- -----------
Net realized and
unrealized gain (loss)
from investments, cash
equivalents, and
credit facility (6,486,202) 11,263,323 (7,078,398) (42,782,759)
----------- ----------- ----------- -----------
Net (decrease) increase
in net assets
resulting from ----------- ----------- ----------- -----------
operations $ (819,771) $15,204,464 $ 9,622,495 $(29,660,865)
=========== =========== =========== ============
Net (decrease) increase
in net assets
resulting from
operations per common
share $ (0.04) $ 0.72 $ 0.45 $ (1.41)
Net investment income
per common share $ 0.27 $ 0.19 $ 0.79 $ 0.62
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
mezzanine debt, senior secured loans 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,"
"will," "should," "may" 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 Information: Contact: Aviv Efrat PennantPark Investment Corporation Reception: (212) 905-1000 Visit us on the web at: www.pennantpark.com