Kayne Anderson Energy Development Company Announces Results for the Quarter Ended August 31, 2012
(NYSE: KED) Kayne Anderson Energy Development Company (the “Company”) today announced its financial results for the quarter ended August 31, 2012.
- Net asset value: $23.90 per share; up $1.22 per share for the quarter (5.4% increase)
- The Company increased its distribution to $0.43 per share (4.9% increase over prior quarter)
- Net investment loss: $0.4 million
- Net realized gains: $1.3 million
- Net unrealized gains: $16.0 million
RESULTS OF OPERATIONS – QUARTER ENDED AUGUST 31, 2012
Investment income totaled $1.8 million for the quarter and consisted primarily of net dividends and distributions and interest income. The Company received $5.1 million of cash dividends and distributions, of which $4.9 million was treated as a return of capital during the period. Return of capital was increased by $1.5 million during the quarter due to 2011 tax reporting information that was received in fiscal 2012. Of this amount, $1.0 million related to the Company's private investments, and $0.5 million related to its public investments. During the quarter, the Company received $1.6 million of interest income, of which $0.4 million was paid-in-kind interest from ProPetro Services, Inc. (“ProPetro”). The Company also received $0.6 million of paid-in-kind distributions, of which $0.3 million was from VantaCore Partners LP (“VantaCore”). These paid-in-kind distributions are not included in investment income, but are reflected as an unrealized gain.
Operating expenses totaled $2.4 million, including $1.5 million of investment management fees; $0.6 million of interest expense and $0.3 million of other operating expenses. Interest expense included $0.1 million of amortization of debt issuance costs. Investment management fees were equal to an annual rate of 1.75% of average total assets.
The Company's net investment loss totaled $0.4 million and included a deferred income tax benefit of $0.3 million and current income tax expense of $0.02 million.
The Company had net realized gains from investments of $1.3 million, after taking into account a deferred income tax benefit of $0.1 million and a current income tax expense of $0.7 million.
The Company had a net change in unrealized gains of $16.0 million. The net change consisted of $25.2 million of unrealized gains and a deferred income tax expense of $9.2 million.
The Company had an increase in net assets resulting from operations of $16.9 million. This increase was comprised of net investment loss of $0.4 million; net realized gains of $1.3 million; and net unrealized gains of $16.0 million, as noted above.
NET ASSET VALUE
As of August 31, 2012, the Company's net asset value was $248.4 million or $23.90 per share. This represents an increase of $1.22 per share or 5.4% for the quarter.
As of August 31, 2012, the Company had long-term investments of $343.1 million, of which approximately 55% were public MLPs and other public equity securities, 28% were private MLPs and other private equity securities and 17% were debt securities. The Company's long-term investments consisted of 46 portfolio companies.
UPDATES ON PRIVATE PORTFOLIO COMPANIES
The Company will provide updates on its private portfolio companies on its website at www.kaynefunds.com/ked/portfolio-companies/ in lieu of a quarterly earnings conference call.
LIQUIDITY AND CAPITAL RESOURCES
As of August 31, 2012, the Company had $77.0 million of borrowings under its credit facility (at an interest rate of 2.24%), which represented 59.6% of its borrowing base of $129.2 million (66.1% of its borrowing base attributable to quoted securities). At the same date, the Company's asset coverage ratio under the Investment Company Act of 1940 was 423%. The maximum amount that the Company can borrow under its credit facility is limited to the lesser of the commitment amount of $85.0 million or its borrowing base. As of October 25, 2012, the Company had $75.0 million borrowed under its credit facility and had $7.9 million in cash. Outstanding borrowings represented 54.3% of the borrowing base of $138.2 million (60.1% of its borrowing base attributable to quoted securities).
On September 28, 2012, the Company declared a distribution of $0.43 per share for the quarter ended August 31, 2012, which was paid on October 26, 2012 to stockholders. This distribution represents an increase of 4.9% from the prior quarter distribution ($0.41 per share) and an increase of 13.2% from the distribution for the quarter ended August 31, 2011.
The Company estimates its portfolio will generate dividends, distributions, and interest income of approximately $7.1 million in the next quarter. This estimate includes cash distributions of $1.2 million per quarter for Direct Fuels, which is pro forma for the October 23, 2012 redemption of the Preferred D units. The Company has assumed that the proceeds from this redemption will be reinvested at an average yield of 8.5%. The estimate also includes distributions of $0.9 million per quarter from VantaCore, which is based on only the cash distributions the Company expects to receive, on average, over the next four quarters of $0.343 per common and preferred A unit and $0.383 per preferred B unit. The Company's guidance does not include payment-in-kind distributions that the Company expects to receive on VantaCore's common and preferred A units. The Company's guidance does not reflect any changes in cash distributions made by MLPs or changes in interest rates based on the movement in LIBOR rates since August 31, 2012.
($ in millions)
|Public MLPs and Other Public Equity||
(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 Other Public Equity are based on the most recently declared distributions as of August 31, 2012. Amounts invested for Private MLPs are based on August 31, 2012 valuations.
(3) The amount invested excludes the Company's equity investment in ProPetro (valued at $8.9 million as of August 31, 2012), which does not pay a dividend.
(4) Reflects the redemption of the Direct Fuels' Preferred D units at the liquidation preference ($6.5 million) plus accrued dividends. Assumes the $6.5 million is reinvested at an average yield of 8.5%.
(5) The average yield includes straight-line amortization of the purchase price discounts/premiums through the expected maturity.
(6) The amount invested includes the Company's $13.2 million debt investment in ProPetro. This investment pays paid-in-kind interest at an annual rate of 13.0%.
Management Fees and Other Operating Expenses – Management fees are estimated to be approximately $1.53 million per quarter. Other operating expenses are estimated to be approximately $0.40 million per quarter.
Interest Expense – Interest expense is estimated to be approximately $0.46 million per quarter based on $81.4 million borrowed under the Company's credit facility, assuming a 30-day LIBOR rate of 0.23% and a spread of 2.00%.
Based on the foregoing assumptions, the Company is expected to generate net distributable income (“NDI”) per share of $0.445 to $0.455 in the fourth quarter of fiscal 2012.
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
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 2012
(amounts in 000's, except share and per share amounts)
|Investments, at fair value:|
|Non-affiliated (Cost — $169,433)||
|Affiliated (Cost — $139,206)||141,189|
|Total investments (Cost — $308,639)||343,141|
|Receivable for securities sold||27|
|Interest, dividends and distributions receivable||752|
|Debt issuance costs, prepaid expenses and other assets||899|
|Current income tax liability||232|
|Deferred income tax liability||24,206|
|Investment management fee payable||1,494|
|Accrued directors' fees and expenses||74|
|Accrued expenses and other liabilities||565|
|NET ASSETS CONSIST OF|
Common stock, $0.001 par value (200,000,000 shares authorized; 10,391,595 shares issued
|Accumulated net investment loss, net of income taxes, less dividends||(33,500||)|
|Accumulated net realized gains on investments, net of income taxes||59,770|
|Net unrealized gains on investments, net of income taxes||21,536|
|NET ASSET VALUE PER SHARE||$||23.90|
KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED AUGUST 31, 2012
(amounts in 000's)
|Dividends and distributions:|
|Total dividends and distributions||5,129|
|Return of capital||(4,882||)|
|Net dividends and distributions||247|
|Interest and other income — non-affiliated investments||1,097|
|Interest — affiliated investments||457|
|Total investment income||1,801|
|Investment management fees||1,493|
|Directors' fees and expenses||77|
|Total expenses — before interest expense||1,871|
|Net Investment Income (Loss) — Before Income Taxes||(647||)|
|Current income tax expense||(23||)|
|Deferred income tax benefit (expense)||268|
|Net Investment Income (Loss)||(402||)|
|REALIZED AND UNREALIZED GAINS|
|Net Realized Gains|
|Investments — non-affiliated||855|
|Investments — affiliated||1,089|
|Current income tax expense||(726||)|
|Deferred income tax benefit||99|
|Net Realized Gains||1,317|
|Net Change in Unrealized Gains|
|Investments — non-affiliated||14,814|
|Investments — affiliated||10,394|
|Deferred income tax expense||(9,177||)|
|Net Change in Unrealized Gains||16,031|
|Net Realized and Unrealized Gains||17,348|
|NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS||$||16,946|
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.
KA Fund Advisors, LLC
Monique Vo, 877-657-3863