Kayne Anderson Energy Development Company Announces Results For The Quarter And Fiscal Year Ended November 30, 2011

(NYSE:KED) Kayne Anderson Energy Development Company (the “Company”) today announced its financial results for the quarter ended November 30, 2011.

HIGHLIGHTS
  • Net asset value: $23.01 per share; up 4.5% for the quarter and 11.9% for fiscal 2011
  • Increased distribution by 2.6% to $0.39 per share in the fourth quarter; increased 30% in fiscal 2011
  • Net investment income for fiscal 2011: $2.6 million
  • Net realized gains for fiscal 2011: $49.4 million
  • Net change in unrealized losses for fiscal 2011: $12.3 million

RESULTS OF OPERATIONS – QUARTER ENDED NOVEMBER 30, 2011

Investment income totaled $3.3 million and consisted primarily of net dividends and distributions and interest income. The Company received $4.8 million of cash dividends and distributions, of which $2.9 million was treated as a return of capital during the period. During the quarter, the Company received $1.4 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 $0.4 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 $2.2 million, including $1.4 million of investment management fees; $0.5 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 income totaled $0.6 million and included a current income tax expense of $0.3 million and a deferred income tax expense of $0.2 million.

The Company had net realized losses from investments of $1.3 million, after taking into account a current income tax benefit of $0.3 million and a deferred income tax expense of $1.2 million.

The Company had a net change in unrealized gains from investments of $15.0 million. The net change consisted of $22.9 million of unrealized gains from investments and a deferred income tax expense of $7.9 million.

The Company had an increase in net assets resulting from operations of $14.3 million. This increase was composed of net investment income of $0.6 million; net realized losses of $1.3 million; and net unrealized gains of $15.0 million, as noted above.

RESULTS OF OPERATIONS – FISCAL YEAR ENDED NOVEMBER 30, 2011

Investment income totaled $13.1 million and consisted primarily of net dividends and distributions and interest income. The Company received $15.9 million of cash dividends and distributions, of which $8.2 million was treated as a return of capital during the period. During the third quarter of 2011, we received 2010 tax reporting information that was used to decrease our prior year return of capital estimate by a total of $1.1 million. During the year, the Company received $5.4 million of interest income, of which $1.4 million was paid-in-kind interest from ProPetro. The Company also received $4.1 million of paid-in-kind distributions, of which $2.2 million was from VantaCore and $1.4 million was from Direct Fuels Partners, L.P. (“Direct Fuels”). These paid-in-kind distributions are not included in investment income, but are reflected as an unrealized gain.

Operating expenses totaled $9.0 million, including $5.4 million of investment management fees; $1.9 million of interest expense and $1.7 million of other operating expenses. Interest expense included $0.4 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 income totaled $2.6 million and included a current income tax expense of $1.0 million and a deferred income tax expense of $0.5 million.

The Company had net realized gains from investments of $49.4 million, after taking into account a current income tax expense of $20.1 million and a deferred income tax expense of $8.8 million.

The Company had a net change in unrealized losses of $12.3 million. The net change consisted of $19.5 million of unrealized losses from investments and a deferred tax benefit of $7.2 million. Approximately $59.6 million of these unrealized losses were a result of the reversal of the unrealized gain attributable to International Resource Partners LP (“IRP”) which was realized upon the sale of our investment during the second quarter of fiscal 2011.

The Company had an increase in net assets resulting from operations of $39.7 million. This increase was composed of net investment income of $2.6 million; net realized gains of $49.4 million; and net unrealized losses of $12.3 million, as noted above.

NET ASSET VALUE

As of November 30, 2011, the Company’s net asset value was $238.0 million or $23.01 per share. This represents an increase of $1.00 per share (4.5%) for the quarter and $2.45 (11.9%) for fiscal 2012.

PORTFOLIO

As of November 30, 2011, the Company had long-term investments of $319.8 million, consisting of 46 portfolio companies, of which approximately 57% were public MLPs and other public equity securities, 26% were private MLPs and other private equity securities and 17% were debt securities.

LIQUIDITY AND CAPITAL RESOURCES

On November 14, 2011, the Company amended its credit facility to increase the total commitment amount from $70.0 million to $85.0 million and to extend the maturity date by one year to March 30, 2014.

As of November 30, 2011, the Company had $77.0 million of borrowings under its credit facility (at an interest rate of 2.26%), which represented 59.9% of its borrowing base of $128.5 million (66.8% 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 409%. 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 January 31, 2012, the Company had $82.0 million borrowed under its credit facility and had $5.1 million in cash. Outstanding borrowings represented 57.8% of the borrowing base of $141.9 million (63.9% of its borrowing base attributable to quoted securities).

GUIDANCE

The Company estimates its portfolio will generate dividends, distributions, and interest income of approximately $6.9 million in the next quarter. This estimate includes a cash distribution of $1.5 million per quarter ($0.45 per quarter per common unit) for Direct Fuels and assumes $0.8 million per quarter ($0.475 per quarter per common and Class A preferred unit) from VantaCore. The Company expects that approximately 70% of the VantaCore distribution will be in the form of additional preferred units during the Company’s first fiscal quarter of fiscal 2012. 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 November 30, 2011.
                               
Portfolio Category       Amount Invested($ in millions)       Average AnnualYield(1)(2)
Private MLPs(3)       $ 67         14.2%
Public MLPs, MLP Affiliates and Other Public Equity         183         6.9
Debt Investments(4)(5)         53         10.2
            (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, MLP Affiliates and Other Public Equity are based on the most recently declared distributions as of November 30, 2011. Amounts invested for Private MLPs are based on November 30, 2011 valuations. Average yields reflect quarterly distributions of $0.45 per common unit for Direct Fuels and $0.475 per common and Class A preferred unit for VantaCore.
(3) The amount invested excludes the Company’s equity investment in ProPetro (valued at $16.7 million as of November 30, 2011) which does not pay a dividend.
(4) The average yield includes straight-line amortization of the purchase price discounts/premiums through the expected maturity.
(5) The amount invested includes the Company’s $11.9 million debt investment in ProPetro. This investment pays paid-in-kind interest at an annual rate of 13.0% (amended from an annual rate of 15.0% as of January 31, 2012).
 

Management Fees and Other Operating Expenses – Management fees are estimated to be approximately $1.43 million per quarter. Other operating expenses are estimated to be approximately $0.43 million per quarter.

Interest Expense – Interest expense is estimated to be approximately $0.47 million per quarter based on $82 million borrowed under the Company’s credit facility, assuming a 30-day LIBOR rate of 0.27% and a spread of 2.00%.

Based on the foregoing assumptions, the Company is expected to generate net distributable income (“NDI”) per share of $0.435 to $0.445 in the first quarter of fiscal 2012.

DISTRIBUTION AND DISTRIBUTION GUIDANCE

On January 18, 2012, the Company increased its distribution to $0.39 per share for the quarter ended November 30, 2011 that is payable on February 3, 2012 to stockholders of record on January 30, 2012.

“Our results for fiscal 2011 were very strong. During the year we generated NDI of $1.64 per share, well above the $1.46 per share we paid with respect to fiscal 2011,” said Kevin McCarthy, the Company’s President and CEO. “We believe our current distribution level, $0.39 per share, is sustainable under a variety of different scenarios that could occur at our largest three private investments. As we get more clarity on these investments over the next few quarters, we will reassess our distribution guidance at that time.”

CONFERENCE CALL

The Company will host a conference call at 4 p.m. Central time, on Thursday, February 2, 2012 to discuss its results. All interested parties are welcome to participate. You can access the conference call by dialing (877) 563-8315 approximately 5-10 minutes prior to the call. International callers should dial (706) 679-4383. All callers should reference "Conference ID #46649741". For the convenience of the Company’s stockholders, an archived replay of the call will be available on the Company’s website ( http://www.kaynefunds.com/webcasts.php).

AVAILABLE INFORMATION

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 LIABILITIESNOVEMBER 30, 2011

(amounts in 000’s, except share and per share amounts)
     
ASSETS
Investments, at fair value:
Non-affiliated (Cost — $197,053) $ 217,618
Affiliated (Cost — $112,292)   102,224
Total investments (Cost — $309,345) 319,842
Cash 1,517
Income tax receivable 332
Receivable for securities sold 1,199
Interest, dividends and distributions receivable 1,014
Other receivable 5,030
Debt issuance costs, prepaid expenses and other assets   1,301
Total Assets   330,235
LIABILITIES
Senior secured revolving credit facility 77,000
Deferred income tax liability 12,642
Payable for securities purchased 418
Investment management fee payable 1,386
Accrued directors’ fees and expenses 73
Accrued expenses and other liabilities   686
Total Liabilities   92,205
NET ASSETS $ 238,030
NET ASSETS CONSIST OF
Common stock, $0.001 par value (200,000,000 shares authorized; 10,342,730 shares issued and outstanding) $ 10
Paid-in capital 199,445
Accumulated net investment loss, net of income taxes, less dividends (21,369)
Accumulated net realized gains on investments, net of income taxes 53,686
Net unrealized losses on investments, net of income taxes   6,258
NET ASSETS $ 238,030
NET ASSET VALUE PER SHARE $ 23.01
   
 

KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY

STATEMENT OF OPERATIONSFOR THE YEAR ENDED NOVEMBER 30, 2011

(amounts in 000’s)
     
INVESTMENT INCOME
Income
Dividends and Distributions:
Non-affiliated investments $ 9,129
Affiliated investments   6,802
Total dividends and distributions 15,931
Return of capital   (8,252)
Net dividends and distributions 7,679
Interest and other income — non-affiliated investments 3,971
Interest — affiliated investments   1,423
Total investment income   13,073
Expenses
Investment management fees 5,427
Professional fees 509
Directors’ fees and expenses 288
Administration fees 173
Insurance 133
Custodian fees 53
Other expenses   552
Total expenses — before interest expense 7,135
Interest expense   1,874
Total expenses   9,009
Net Investment Income — Before Income Taxes 4,064
Current income tax expense (1,044)
Deferred income tax expense   (456)
Net Investment Income   2,564
REALIZED AND UNREALIZED GAINS (LOSSES)
Net Realized Gains
Investments — non-affiliated 4,388
Investments — affiliated 73,898
Current income tax expense (20,120)
Deferred income tax expense   (8,777)
Net Realized Gains   49,389
Net Change in Unrealized Gains (Losses)
Investments — non-affiliated 39,985
Investments — affiliated (59,456)
Deferred income tax benefit   7,187
Net Change in Unrealized Losses   (12,284)
Net Realized and Unrealized Gains   37,105
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 39,669
 

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.

Copyright Business Wire 2010

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