(NYSE:KED) Kayne Anderson Energy Development Company (the “Company”) today announced its financial results for the quarter and fiscal year ended November 30, 2013.
HIGHLIGHTS
• Net asset value: $29.96 per share; up 26.2% during fiscal 2013
• Distribution of $0.50 per share for the fourth quarter; increased 16.3% in fiscal 2013
• Net investment loss for fiscal 2013: $1.5 million
• Net realized gains for fiscal 2013: $3.9 million
• Net unrealized gains for fiscal 2013: $80.9 million
RESULTS OF OPERATIONS – QUARTER ENDED NOVEMBER 30, 2013
Investment income totaled $2.9 million for the quarter and consisted primarily of net dividends and distributions. The Company received $8.7 million of dividends and distributions during the quarter, of which $5.9 million was treated as a return of capital. Interest and other income was $0.1 million. The Company received $0.2 million of paid-in-kind dividends during the quarter, which are not included in investment income, but are reflected as an unrealized gain.
Operating expenses totaled $2.7 million, including $1.8 million of net 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 offering costs. KA Fund Advisors, LLC, the Company’s investment adviser, agreed to waive 0.25% of its 1.75% management fee for a one-year period effective October 3, 2013.
The Company’s net investment income totaled $0.1 million and included a current income tax expense of $0.5 million and a deferred income tax benefit of $0.5 million.
The Company had net realized gains from investments of $1.6 million after taking into account a current income tax benefit of $1.1 million and a deferred income tax expense of $2.1 million.
The Company had a net increase in unrealized gains of $25.2 million. The net increase consisted of $40.1 million of unrealized gains from investments and a deferred income tax expense of $14.9 million.
The Company had an increase in net assets resulting from operations of $26.9 million. This increase was comprised of net investment income of $0.1 million, net realized gains of $1.6 million and net unrealized gains of $25.2 million, as noted above.
RESULTS OF OPERATIONS – YEAR ENDED NOVEMBER 30, 2013
Investment income totaled $8.0 million and consisted primarily of net dividends and distributions and interest income on the Company’s debt investments. The Company received $27.2 million of dividends and distributions, of which $21.6 million was treated as a return of capital during the year. During the third quarter of 2013, the Company received 2012 tax reporting information that was used to increase its prior year return of capital estimate by a total of $0.3 million. During the year, the Company received $2.4 million of interest income, of which $0.4 million was paid-in-kind interest. The Company also received $0.9 million of paid-in-kind dividends, which are not included in investment income, but are reflected as an unrealized gain.
Operating expenses totaled $10.5 million, including $6.8 million of net investment management fees, $2.3 million of interest expense and $1.4 million of other operating expenses. Interest expense included $0.4 million of amortization of debt offering costs.
The Company’s net investment loss totaled $1.5 million and included a current income tax expense of $0.4 million and a deferred income tax benefit of $1.4 million.
The Company had net realized gains from investments of $3.9 million, after taking into account a current income tax benefit of $0.9 million and a deferred income tax expense of $3.2 million.
The Company had a net increase in unrealized gains of $80.9 million. The net increase consisted of $128.3 million of unrealized gains from investments and a deferred income tax expense of $47.4 million.
The Company had an increase in net assets resulting from operations of $83.3 million. This increase is composed of a net investment loss of $1.5 million, net realized gains of $3.9 million and net unrealized gains of $80.9 million, as noted above.
NET ASSET VALUE
As of November 30, 2013, the Company’s net asset value was $313.4 million or $29.96 per share.
PORTFOLIO
As of November 30, 2013, the Company had long-term investments of $470.6 million, of which approximately 94% were public MLPs and other public equity securities and 6% were private MLPs. The Company’s long-term investments consisted of 54 portfolio companies.
UPDATES ON PRIVATE PORTFOLIO COMPANIES
Updates on the Company’s private portfolio companies are available on the Company’s website at www.kaynefunds.com/ked/portfolio-companies/.
LIQUIDITY AND CAPITAL RESOURCES
As of November 30, 2013, the Company had $85.0 million of borrowings under its credit facility (at an interest rate of 2.17%), which represented 47.0% of its borrowing base of $181.0 million (47.1% 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 469%.
On January 28, 2014, the Company renewed its credit facility with a syndicate of lenders. The new credit facility has a three-year commitment, maturing on January 28, 2017, and a total commitment amount of $120.0 million, which is an increase of $25.0 million from the prior credit facility. The interest rate on the facility is LIBOR plus 1.60% (prior to the renewal, the interest rate was LIBOR plus 2.00%). If borrowings exceed the borrowing base attributable to “quoted” securities, the interest rate will increase to LIBOR plus 3.00%. The Company pays a commitment fee of 0.30% per annum on any unused amounts of the credit facility (the fee was 0.50% per annum prior to the renewal).
The maximum amount that the Company can borrow under the credit facility is limited to the lesser of its commitment amount of $120.0 million and its borrowing base. The Company’s borrowing base, subject to certain limitations, is generally calculated by multiplying the fair value of each of the Company’s investments by an advance rate. The total contribution to the Company’s borrowing base from private MLPs is limited to no more than 25% of the total borrowing base, and there is a $12.0 million limit on the borrowing base contribution from any single issuer.
As of January 28, 2014, the Company had $2.0 million of cash and $84.0 million of borrowings under its credit facility (at an interest rate of 1.77%), which represented 40.9% of its borrowing base of $205.5 million (41.0% 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 479%.
QUARTERLY DISTRIBUTION
On January 16, 2014, the Company declared a distribution of $0.50 per share for the quarter ended November 30, 2013, which will be paid on January 31, 2014 to stockholders of record as of January 27, 2014.
GUIDANCE
As a result of significant changes in the portfolio since November 30, 2013, the Company’s guidance is based on its portfolio as of January 24, 2014. The yield information in the table below reflects the distributions paid in the prior quarter, with the exception of Emerge Energy Services LP (“Emerge”), which is based on its fourth quarter distribution of $1.00 per unit, and VantaCore Partners LP (“VantaCore”), which is based on distributions of $0.975 million. Distributions from VantaCore are based on only the cash distributions the Company expects to receive, on average, over the next four quarters of $0.35 per common unit and preferred A unit and $0.3825 per preferred B unit. The Company’s guidance does not include $0.32 million of non-cash distributions that the Company expects to receive on VantaCore’s common and preferred A units. The Company’s guidance does not reflect changes in cash distributions made by MLPs since November 30, 2013 (except the distribution from Emerge as noted above).
| Portfolio Category |
Amount Invested |
Average Annual | ||||||
| Public MLPs and Other Public Equity | $ | 456 | 6.3 | % | ||||
| Private MLP (VantaCore) | 29 | 13.3 | ||||||
| (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 paid distributions for the third calendar quarter of 2013, other than Emerge. Amount invested and average yield for VantaCore are based on November 30, 2013 valuations. | ||
Management Fees and Other Operating Expenses – Management fees are estimated to be approximately $1.80 - $1.85 million for the quarter. Based on total assets as of January 24th, the management fee would equal $1.82 million. Actual management fees will vary based on average total assets during the period. Other operating expenses are estimated to be approximately $0.33 million per quarter.
Interest Expense – Interest expense is estimated to be $0.43 - $0.46 million for the quarter, based on the average balance of $82 million through January 24th (at a spread of 2.0%) and an estimated balance of $90 million for the remainder of the quarter (at a spread of 1.6%).
Based on the foregoing assumptions, the Company expects to generate net distributable income (“NDI”) per share of $0.53 to $0.54 in the first quarter of fiscal 2014. The Company’s guidance incorporates a distribution of $1.00 per unit from Emerge, which is KED’s largest portfolio investment. Emerge is a variable rate MLP that pays quarterly distributions based on the amount of cash flow generated in such quarter. As a result, the Company’s NDI will vary based on quarterly distributions paid by Emerge.
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 LIABILITIES | |||||
NOVEMBER 30, 2013 | |||||
(amounts in 000’s, except share and per share amounts) | |||||
| ASSETS | |||||
| Investments, at fair value: | |||||
| Non-affiliated (Cost — $244,811) | $ | 326,845 | |||
| Affiliated (Cost — $67,599) | 143,736 | ||||
| Total investments (Cost — $312,410) | 470,581 | ||||
| Cash | 1,468 | ||||
| Receivable for securities sold | 1,933 | ||||
| Interest, dividends and distributions receivable | 293 | ||||
| Debt offering costs, prepaid expenses and other assets | 397 | ||||
| Deferred income tax asset | 1,971 | ||||
| Income tax receivable | 594 | ||||
| Total Assets | 477,237 | ||||
| LIABILITIES | |||||
| Payable for securities purchased | 382 | ||||
| Investment management fee payable | 1,790 | ||||
| Accrued directors’ fees and expenses | 84 | ||||
| Accrued expenses and other liabilities | 557 | ||||
| Deferred income tax liability | 76,020 | ||||
| Credit facility | 85,000 | ||||
| Total Liabilities | 163,833 | ||||
| NET ASSETS | $ | 313,404 | |||
| NET ASSETS CONSIST OF | |||||
| Common stock, $0.001 par value (200,000,000 shares authorized; 10,459,911 shares issued and outstanding) | $ | 10 | |||
| Paid-in capital | 202,316 | ||||
| Accumulated net investment loss, net of income taxes, less dividends | (55,894 | ) | |||
| Accumulated net realized gains on investments, net of income taxes | 67,462 | ||||
| Net unrealized gains on investments, net of income taxes | 99,510 | ||||
| NET ASSETS | $ | 313,404 | |||
| NET ASSET VALUE PER SHARE | $ | 29.96 | |||
KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY | |||||
STATEMENT OF OPERATIONS | |||||
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 2013 | |||||
(amounts in 000’s) | |||||
| INVESTMENT INCOME | |||||
| Income | |||||
| Dividends and distributions: | |||||
| Non-affiliated investments | $ | 16,627 | |||
| Affiliated investments | 10,588 | ||||
| Total dividends and distributions | 27,215 | ||||
| Return of capital | (21,583 | ) | |||
| Net dividends and distributions | 5,632 | ||||
| Interest and other income — non-affiliated investments | 1,966 | ||||
| Interest — affiliated investments | 448 | ||||
| Total Investment Income | 8,046 | ||||
| Expenses | |||||
| Investment management fees, before investment management fee waiver | 6,963 | ||||
| Professional fees | 512 | ||||
| Directors’ fees and expenses | 326 | ||||
| Administration fees | 88 | ||||
| Insurance | 68 | ||||
| Other expenses | 454 | ||||
| Total Expenses — before waiver and interest expense | 8,411 | ||||
| Investment management fee waiver | (183 | ) | |||
| Interest expense and amortization of offering costs | 2,309 | ||||
| Total Expenses | 10,537 | ||||
| Net Investment Loss — Before Income Taxes | (2,491 | ) | |||
| Current income tax expense | (380 | ) | |||
| Deferred income tax benefit | 1,367 | ||||
| Net Investment Loss | (1,504 | ) | |||
| REALIZED AND UNREALIZED GAINS (LOSSES) | |||||
| Net Realized Gains | |||||
| Investments — non-affiliated | 17,738 | ||||
| Investments — affiliated | (11,568 | ) | |||
| Current income tax benefit | 879 | ||||
| Deferred income tax expense | (3,158 | ) | |||
| Net Realized Gains | 3,891 | ||||
| Net Change in Unrealized Gains | |||||
| Investments — non-affiliated | 48,252 | ||||
| Investments — affiliated | 80,086 | ||||
| Deferred income tax expense | (47,403 | ) | |||
| Net Change in Unrealized Gains | 80,935 | ||||
| Net Realized and Unrealized Gains | 84,826 | ||||
| NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 83,322 | |||
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.
Contacts:
Monique Vo, 877-657-3863
http://www.kaynefunds.com/
