Gladstone Capital (

GLAD

)

F4Q2010 Earnings Conference Call

November 23, 2010 8:30 a.m. ET

Executives

David Gladstone – Chairman of the Board & Chief Executive Officer

George Stelljes, III – President, Chief Investment Officer & Director

Gresford Gray – Chief Financial Officer

Analysts

Troy Ward – Stifel Nicolaus

Vernon Plack – BB&T

Presentation

Operator

Compare to:
Previous Statements by GLAD
» Gladstone Capital F3Q10 (Qtr End 06/30/10) Earnings Call Transcript
» Gladstone Capital Corporation F2Q10 (Quarter End 03/31/10) Earnings Call Transcript
» Gladstone Capital Corp. F1Q10 (Qtr End 12/31/09) Earnings Call Transcript
» Gladstone Capital Corporation Q4 2009 Earnings Call Transcript

Good morning and welcome to the Gladstone Capital Corporations fourth quarter and year ending September 30, 2010 shareholders conference call. [Operator instructions.] I would now like to turn the conference over to Mr. David Gladstone. Sir, please go ahead.

David Gladstone

All right. Thank you, Amy for that introduction, and hello and good morning to all of you out there. This is the quarterly conference call for shareholders and analysts for Gladstone Capital, NASDAQ trading symbol GLAD. Again thank you all for calling in. We love these times we have together and we’re so happy to talk to shareholders about the company. We wish we could do it monthly but quarterly is probably enough.

We hope all of you take the opportunity to visit our website, www.GladstoneCapital.com, where you can sign up for email notices and you can receive current information about us in a timely fashion and we promise not to send you out junk email and just send you out stuff about our company.

Please remember that if you’re in the Washington DC area and you have a little time to spare you can come by here in McLean, Virginia, our suburb and come by and say hello to all of us here. You’ll see some of the finest people in the business.

Now, let me read the statement about forward-looking statements. This conference call may include statements that may constitute forward-looking statements within the meaning of the Securities Act of 1933 and Securities Exchange Act of 1934, including statements with regard to the future performance of the company.

These forward-looking statements inherently involve certain risks and uncertainties, even though they are based on our current plans and we believe those plans to be reasonable. There are many factors that may cause our actual results to be materially different from any future results that are expressed or implied by these forward-looking statements, including those factors listed under the caption risk factors in our 10-K and 10-Q filings and our prospectus that’s filed with the Securities & Exchange Commission and those can be found on our web site at www.GladstoneCapital.com, and also on the SEC Web site.

The company undertakes no obligation to publically update or revise any forward-looking statements whether as a result of new information, future events, or otherwise.

Before we start, I want to thank those of you who called in or emailed in to say we had a typo in the press release. We did not put in one of the numbers under other expenses. The total actually added up, it just had a zero in other expenses and that number was left out. It was a dash mark or zero when in reality it should have been about $361,000. Again, the totals were correct and all the rest of it seems to be correct but that was our mistake. We did issue another press release last night and putting it out. Something out this morning. Sorry to confuse you if you were loading your model up last night and found that. We appreciate you calling us and letting us know that it slipped through all of our network of reviewing the press release.

We’ll start the discussion with our president, Chip Stelljes. Chip is the Chief Investment Officer for all of the Gladstone Companies as well as the President of this company and he’ll get us started. Chip?

George Stelljes

Thanks David, and good morning. We'll still finding economic and small business lending climate to be difficult but it is getting better. We're seeing some new investment opportunities, and have a number of proposals out to companies. We hope to be telling you about more new investments soon.

We closed one new investment during the quarter ended September 30 of 10 million. In addition, we funded $4 million to the existing portfolio companies in the form of additional investments or draws on their revolver facilities.

During the same quarter we received repayments of approximately $26 million as a result of loan sales, payoffs, normal amortization, and pay downs of revolvers, including two payoffs of $14 million in total. So in total we had a net decrease of our portfolio of about $12 million for the quarter. We used the net proceeds to pay down our line of credit.

Since the end of the quarter we closed three new investments totaling $7 million and made about $1.4 million in additional investments in existing portfolio companies. Additionally, after the end of the quarter we received $1.8 million in additional repayments. Currently, the amount we owe on our line of credit is $19.6 million.

We continue to see new opportunities. We have availability on our line of credit and are actively seeking to make new investments.

We also continue to explore ways to increase the yield on our existing investment portfolio by refinancing lower yielding senior loans with third-party lenders while trying to maintain a higher yield in junior debt.

At the end of the September quarter our investment portfolio was valued at approximately $257 million versus a cost basis of $298 million. So approximately 86% of cost.

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