UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________
Form 10-Q
_______________________________
|
S |
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
|||
|
For the Quarterly Period Ended August 31, 2020 |
||||
|
£ |
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
|||
Commission File No. 814-00732
_______________________________
SARATOGA INVESTMENT CORP.
(Exact name of registrant as specified in its charter)
_______________________________
|
Maryland |
20-8700615 |
|
|
(State or other jurisdiction of |
(I.R.S. Employer |
535 Madison Avenue
New York, New York 10022
(Address of principal executive offices)
(212) 906-7800
(Registrant’s telephone number, including area code)
_______________________________
Securities registered pursuant to Section 12(b) of the Act:
|
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
||
|
Common Stock, par value $0.001 per share |
SAR |
The New York Stock Exchange |
||
|
6.25% Notes due 2025 |
SAF |
The New York Stock Exchange |
||
|
7.25% Notes due 2025 |
SAK |
The New York Stock Exchange |
_______________________________
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes S No £
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes £ No £
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|
Large accelerated filer |
£ |
Accelerated filer |
S |
|||||
|
Non-accelerated filer |
£ |
Smaller reporting company |
£ |
|||||
|
Emerging growth company |
£ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act £
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes £ No S
The number of outstanding common shares of the registrant as of October 7, 2020 was 11,174,322.
________________________
TABLE OF CONTENTS
________________________
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Page |
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PART I. |
1 |
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Item 1. |
1 |
|||
|
1 |
||||
|
2 |
||||
|
3 |
||||
|
4 |
||||
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Consolidated Schedules of Investments as of August 31, 2020 (unaudited) and February 29, 2020 |
5 |
|||
|
Notes to Consolidated Financial Statements as of August 31, 2020 (unaudited) |
20 |
|||
|
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
84 |
||
|
Item 3. |
119 |
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Item 4. |
120 |
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PART II. |
121 |
|||
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Item 1. |
121 |
|||
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Item 1A. |
121 |
|||
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Item 2. |
122 |
|||
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Item 3. |
122 |
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Item 4. |
122 |
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Item 5. |
122 |
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Item 6. |
123 |
|||
|
126 |
||||
i
Item 1. Consolidated Financial Statements
Consolidated Statements of Assets and Liabilities
|
August 31, |
February 29, |
|||||||
|
(unaudited) |
||||||||
|
ASSETS |
|
|
|
|
||||
|
Investments at fair value |
|
|
|
|
||||
|
Non-control/Non-affiliate investments (amortized cost of $452,233,107 and $418,006,725, respectively) |
$ |
440,847,945 |
|
$ |
420,442,928 |
|
||
|
Affiliate investments (amortized cost of $26,051,719 and $23,998,917, respectively) |
|
18,731,636 |
|
|
18,485,854 |
|
||
|
Control investments (amortized cost of $45,869,421 and $44,293,619, respectively) |
|
48,537,411 |
|
|
46,703,192 |
|
||
|
Total investments at fair value (amortized cost of $524,154,247 and $486,299,261, respectively) |
|
508,116,992 |
|
|
485,631,974 |
|
||
|
Cash and cash equivalents |
|
39,052,320 |
|
|
24,598,905 |
|
||
|
Cash and cash equivalents, reserve accounts |
|
26,342,863 |
|
|
14,851,447 |
|
||
|
Interest receivable (net of reserve of $1,729,764 and $1,238,049, respectively) |
|
4,396,518 |
|
|
4,810,456 |
|
||
|
Management fee receivable |
|
284,122 |
|
|
272,207 |
|
||
|
Other assets |
|
619,543 |
|
|
701,007 |
|
||
|
Total assets |
$ |
578,812,358 |
|
$ |
530,865,996 |
|
||
|
|
|
|
|
|||||
|
LIABILITIES |
|
|
|
|
||||
|
Revolving credit facility |
$ |
— |
|
$ |
— |
|
||
|
Deferred debt financing costs, revolving credit facility |
|
(466,094 |
) |
|
(512,628 |
) |
||
|
SBA debentures payable |
|
170,000,000 |
|
|
150,000,000 |
|
||
|
Deferred debt financing costs, SBA debentures payable |
|
(2,729,422 |
) |
|
(2,561,495 |
) |
||
|
6.25% Notes Payable 2025 |
|
60,000,000 |
|
|
60,000,000 |
|
||
|
Deferred debt financing costs, 6.25% notes payable 2025 |
|
(1,859,372 |
) |
|
(2,046,735 |
) |
||
|
7.25% Notes Payable 2025 |
|
43,125,000 |
|
|
— |
|
||
|
Deferred debt financing costs, 7.25% notes payable 2025 |
|
(1,561,533 |
) |
|
— |
|
||
|
7.75% Notes Payable 2025 |
|
5,000,000 |
|
|
— |
|
||
|
Deferred debt financing costs, 7.75% notes payable 2025 |
|
(266,420 |
) |
|
— |
|
||
|
Base management and incentive fees payable |
|
3,738,729 |
|
|
15,800,097 |
|
||
|
Deferred tax liability |
|
1,194,700 |
|
|
1,347,363 |
|
||
|
Accounts payable and accrued expenses |
|
1,816,618 |
|
|
1,713,157 |
|
||
|
Interest and debt fees payable |
|
2,287,313 |
|
|
2,234,042 |
|
||
|
Directors fees payable |
|
59,500 |
|
|
61,500 |
|
||
|
Due to manager |
|
295,981 |
|
|
543,842 |
|
||
|
Total liabilities |
|
280,635,000 |
|
|
226,579,143 |
|
||
|
|
|
|
|
|||||
|
Commitments and contingencies (See Note 8) |
|
|
|
|
||||
|
NET ASSETS |
|
|
|
|
||||
|
Common stock, par value $0.001, 100,000,000 common shares authorized, 11,174,322 and 11,217,545 common shares issued and outstanding, respectively |
|
11,174 |
|
|
11,218 |
|
||
|
Capital in excess of par value |
|
288,699,868 |
|
|
289,476,991 |
|
||
|
Total distributable earnings |
|
9,466,316 |
|
|
14,798,644 |
|
||
|
Total net assets |
|
298,177,358 |
|
|
304,286,853 |
|
||
|
Total liabilities and net assets |
$ |
578,812,358 |
|
$ |
530,865,996 |
|
||
|
NET ASSET VALUE PER SHARE |
$ |
26.68 |
|
$ |
27.13 |
|
||
See accompanying notes to consolidated financial statements.
1
Consolidated Statements of Operations
(unaudited)
|
For the three months ended |
For the six months ended |
|||||||||||||||
|
August 31, |
August 31, |
August 31, |
August 31, |
|||||||||||||
|
INVESTMENT INCOME |
|
|
|
|
|
|
|
|
||||||||
|
Interest from investments |
|
|
|
|
|
|
|
|
||||||||
|
Interest income: |
|
|
|
|
|
|
|
|
||||||||
|
Non-control/Non-affiliate investments |
$ |
10,207,720 |
|
$ |
8,585,609 |
|
$ |
20,163,282 |
|
$ |
17,113,349 |
|
||||
|
Affiliate investments |
|
388,052 |
|
|
267,533 |
|
|
786,422 |
|
|
516,858 |
|
||||
|
Control investments |
|
1,249,972 |
|
|
1,678,326 |
|
|
2,383,556 |
|
|
3,326,472 |
|
||||
|
Payment-in-kind interest income: |
|
|
|
|
|
|
|
|
||||||||
|
Non-control/Non-affiliate investments |
|
328,938 |
|
|
179,847 |
|
|
910,884 |
|
|
331,744 |
|
||||
|
Affiliate investments |
|
48,018 |
|
|
41,265 |
|
|
94,241 |
|
|
81,415 |
|
||||
|
Control investments |
|
37,771 |
|
|
989,367 |
|
|
72,553 |
|
|
1,975,236 |
|
||||
|
Total interest from investments |
|
12,260,471 |
|
|
11,741,947 |
|
|
24,410,938 |
|
|
23,345,074 |
|
||||
|
Interest from cash and cash equivalents |
|
1,610 |
|
|
145,793 |
|
|
13,406 |
|
|
197,152 |
|
||||
|
Management fee income |
|
625,436 |
|
|
629,745 |
|
|
1,260,008 |
|
|
1,259,261 |
|
||||
|
Structuring and advisory fee income* |
|
940,000 |
|
|
1,047,350 |
|
|
1,253,306 |
|
|
1,363,725 |
|
||||
|
Other income* |
|
28,060 |
|
|
323,378 |
|
|
215,060 |
|
|
474,185 |
|
||||
|
Total investment income |
|
13,855,577 |
|
|
13,888,213 |
|
|
27,152,718 |
|
|
26,639,397 |
|
||||
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
||||||||
|
Interest and debt financing expenses |
|
3,328,447 |
|
|
3,866,722 |
|
|
5,892,323 |
|
|
7,731,298 |
|
||||
|
Base management fees |
|
2,209,052 |
|
|
1,997,240 |
|
|
4,369,580 |
|
|
3,809,409 |
|
||||
|
Incentive management fees expense (benefit) |
|
1,529,677 |
|
|
2,085,486 |
|
|
(328,633 |
) |
|
4,198,655 |
|
||||
|
Professional fees |
|
367,553 |
|
|
384,874 |
|
|
754,441 |
|
|
780,000 |
|
||||
|
Administrator expenses |
|
602,083 |
|
|
518,750 |
|
|
1,158,333 |
|
|
1,018,750 |
|
||||
|
Insurance |
|
67,727 |
|
|
64,619 |
|
|
135,453 |
|
|
129,238 |
|
||||
|
Directors fees and expenses |
|
75,000 |
|
|
97,500 |
|
|
135,000 |
|
|
157,500 |
|
||||
|
General & administrative |
|
333,824 |
|
|
382,873 |
|
|
684,638 |
|
|
641,474 |
|
||||
|
Income tax expense (benefit) |
|
7,501 |
|
|
(465,925 |
) |
|
(1,444 |
) |
|
(463,789 |
) |
||||
|
Total operating expenses |
|
8,520,864 |
|
|
8,932,139 |
|
|
12,799,691 |
|
|
18,002,535 |
|
||||
|
NET INVESTMENT INCOME |
|
5,334,713 |
|
|
4,956,074 |
|
|
14,353,027 |
|
|
8,636,862 |
|
||||
|
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS |
|
|
|
|
|
|
|
|
||||||||
|
Net realized gain (loss) from investments: |
|
|
|
|
|
|
|
|
||||||||
|
Non-control/Non-affiliate investments |
|
11,929 |
|
|
1,870,089 |
|
|
20,409 |
|
|
1,870,089 |
|
||||
|
Net realized gain (loss) from investments |
|
11,929 |
|
|
1,870,089 |
|
|
20,409 |
|
|
1,870,089 |
|
||||
|
Net change in unrealized appreciation (depreciation) on investments: |
|
|
|
|
|
|
|
|
||||||||
|
Non-control/Non-affiliate investments |
|
10,601,529 |
|
|
365,541 |
|
|
(13,821,365 |
) |
|
2,758,732 |
|
||||
|
Affiliate investments |
|
637,232 |
|
|
731,304 |
|
|
(1,807,020 |
) |
|
901,248 |
|
||||
|
Control investments |
|
5,341,640 |
|
|
361,027 |
|
|
258,417 |
|
|
1,787,022 |
|
||||
|
Net change in unrealized appreciation (depreciation) on investments |
|
16,580,401 |
|
|
1,457,872 |
|
|
(15,369,968 |
) |
|
5,447,002 |
|
||||
|
Net change in provision for deferred taxes on unrealized (appreciation) depreciation on investments |
|
(116,521 |
) |
|
(704,263 |
) |
|
151,219 |
|
|
(725,193 |
) |
||||
|
Net realized and unrealized gain (loss) on investments |
|
16,475,809 |
|
|
2,623,698 |
|
|
(15,198,340 |
) |
|
6,591,898 |
|
||||
|
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
$ |
21,810,522 |
|
$ |
7,579,772 |
|
$ |
(845,313 |
) |
$ |
15,228,760 |
|
||||
|
WEIGHTED AVERAGE – BASIC AND DILUTED EARNINGS (LOSS) PER COMMON SHARE |
$ |
1.95 |
|
$ |
0.91 |
|
$ |
(0.08 |
) |
$ |
1.89 |
|
||||
|
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING – BASIC AND DILUTED |
|
11,207,142 |
|
|
8,333,570 |
|
|
11,212,315 |
|
|
8,041,365 |
|
||||
____________
* Certain prior period amounts have been reclassified to conform to current period presentation.
See accompanying notes to consolidated financial statements.
2
Consolidated Statements of Changes in Net Assets
(unaudited)
|
For the six months ended |
||||||||
|
August 31, |
August 31, |
|||||||
|
INCREASE (DECREASE) FROM OPERATIONS: |
|
|
|
|
||||
|
Net investment income |
$ |
14,353,027 |
|
$ |
8,636,862 |
|
||
|
Net realized gain from investments |
|
20,409 |
|
|
1,870,089 |
|
||
|
Net change in unrealized appreciation (depreciation) on investments |
|
(15,369,968 |
) |
|
5,447,002 |
|
||
|
Net change in provision for deferred taxes on unrealized (appreciation) depreciation on investments |
|
151,219 |
|
|
(725,193 |
) |
||
|
Net increase (decrease) in net assets resulting from operations |
|
(845,313 |
) |
|
15,228,760 |
|
||
|
|
|
|
|
|||||
|
DECREASE FROM SHAREHOLDER DISTRIBUTIONS: |
|
|
|
|
||||
|
Total distributions to shareholders |
|
(4,487,015 |
) |
|
(8,512,358 |
) |
||
|
Net decrease in net assets from shareholder distributions |
|
(4,487,015 |
) |
|
(8,512,358 |
) |
||
|
|
|
|
|
|||||
|
CAPITAL SHARE TRANSACTIONS: |
|
|
|
|
||||
|
Proceeds from issuance of common stock |
|
— |
|
|
35,875,017 |
|
||
|
Stock dividend distribution |
|
774,990 |
|
|
1,381,918 |
|
||
|
Repurchases of common stock |
|
(1,550,417 |
) |
|
— |
|
||
|
Repurchase fees |
|
(1,740 |
) |
|
|
|||
|
Offering costs |
|
— |
|
|
(511,957 |
) |
||
|
Net increase in net assets from capital share transactions |
|
(777,167 |
) |
|
36,744,978 |
|
||
|
Total increase (decrease) in net assets |
|
(6,109,495 |
) |
|
43,461,380 |
|
||
|
Net assets at beginning of period |
|
304,286,853 |
|
|
180,875,187 |
|
||
|
Net assets at end of period |
$ |
|||||||