Results of Operations
Results comparisons are for the three and six months ended June 30, 2013 and 2012.
For the three and six months ended June 30, 2013, our portfolio generated investment income of $36.1 million and $67.3 million, respectively. Of these totals, $5.1 million and $7.8 million, respectively, was fee income earned due to capital structuring, commitment and amendment fees, as well as prepayment penalties and fees earned in connection with the early repayment of certain investments. Remaining investment income, net of fees earned, was $31.0 million and $59.5 million for the respective periods, an increase of $2.7 million over the pre-fee levels earned during the first quarter of 2013. Although there was a 0.3% decline in the weighted average yields of our income producing securities over the prior quarter, there was still an increase in pre-fee investment income due to the exits of certain of our higher yielding assets occurring late in the quarter. Our current portfolio provides us with a stable base of net investment income regardless of new investment activity and associated fee income. Fee income also tends to be relatively consistent for our business on an annual basis, although at times it may be somewhat lumpy from quarter to quarter.Expenses Total expenses for the three and six months ended June 30, 2013 were $14.9 million and $33.1 million, respectively, versus $13.1 million and $27.3 million for the three and six months ended June 30, 2012. Of these totals, for the three and six months ended June 30, 2013, $5.2 million and $10.5 million, respectively, were base management fees, versus $5.5 million and $10.9 million for the three and six months ended June 30, 2012. Incentive management fees for the three and six months ended June 30, 2013 were $2.1 million and $7.3 million, respectively, as compared to zero and $2.2 million for the three and six months ended June 30, 2012. With respect to incentive management fees based on income, $0.4 million and $1.9 million were earned for the three and six months ended June 30, 2013, as compared to zero and $2.2 million for the three and six months ended June 30, 2012. Although a larger amount of net investment income was generated for the current trailing four-fiscal quarter period, a proportionately larger amount of the income based incentive management fee earned was already paid during the prior periods, resulting in the smaller amount due and payable for the current trailing four-fiscal quarter period. The remainder of the 2013 amount is $5.4 million in incentive management fees accrued based on a hypothetical capital gains calculation, as required by GAAP. A hypothetical liquidation is performed each quarter possibly resulting in an incentive management fee accrual if the amount is positive. It should be noted, however, that a fee so calculated and accrued is not due and payable, if at all, until the end of each measurement period, or every June 30. As of the current June 30 measurement period end, no gains based incentive management fee is due and payable. However, the increase in the accrual for the current period is the result of $86.6 million of net unrealized appreciation on the balance sheet as of quarter end.
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