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Saratoga Investment Corp$24.90$.12.48%

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 Saratoga Investment Corp. Announces Fiscal Year End and Fourth Quarter 2019 Financial Results
   Wednesday, May 08, 2019 4:00:00 PM ET

NEW YORK, May 08, 2019 (GLOBE NEWSWIRE) -- Saratoga Investment Corp. (NYSE:SAR) (“Saratoga Investment” or “the Company”), a business development company, today announced financial results for its 2019 fiscal year end and fourth quarter.

Summary Financial Information

The Company’s summarized financial information is as follows:

  For the year ended and as of February 28,
2019
  For the year ended and as of February 28,
2018
  For the year ended and as of February 28,
2017
 
  ($ thousands except per share) 
AUM  402,020   342,694   292,661 
NAV  180,875   143,691   127,295 
NAV per share  23.62   22.96   21.97 
Investment Income  47,708   38,615   33,157 
Net Investment Income per share  2.60   2.11   1.68 
Adjusted Net Investment Income per share  2.63   2.27   2.01 
Earnings per share  2.63   2.93   1.98 
Dividends per share (declared)  2.10   1.94   1.78 
Return on Equity – last twelve months  10.6%  13.2%  9.0%
Originations  187,708   107,698   126,935 
Repayments  135,265   66,320   121,159 


  

  For the quarter ended February 28,
2019
  For the quarter ended November 30,
2018
  For the quarter ended February 28,
2018
 
  ($ thousands except per share) 
AUM  402,020   443,812   342,694 
NAV  180,875   173,269   143,691 
NAV per share  23.62   23.13   22.96 
Investment Income  12,984   12,833   10,128 
Net Investment Income per share  0.54   0.69   0.53 
Adjusted Net Investment Income per share  0.66   0.65   0.60 
Earnings per share  1.04   0.49   0.89 
Dividends per share (declared)  0.54   0.53   0.50 
Return on Equity – last twelve months  10.6%  10.1%  13.2%
 – annualized quarter  17.7%  8.5%  15.7%
Originations  29,340   73,732   20,820 
Repayments  77,042   23,365   20,742 

“Fiscal year 2019 continued the strong performance trend for Saratoga Investment Corp. with significant strengthening of our organizational and capital foundation,” said Christian L. Oberbeck, Chairman and Chief Executive Officer of Saratoga Investment. “We continued to make steady progress growing our high quality asset base while maintaining our industry leadership in key performance metrics and credit quality. We also took important steps to expand our capitalization and liquidity through equity and long-term debt issuances, raising over $90 million in the public capital markets. We increased our quarterly dividend for the 18th consecutive quarter to $0.54 per share, reflecting a 2% year-over-year increase while still overearning the dividend. Year-over-year, NAV grew by 26% and NAV per share by 3%. Our LTM ROE for the year was 10.6% is in the top tier of the BDC industry.”

Michael J. Grisius, President and Chief Investment Officer, added, “In this fiscal year, our organization originated $167.7 million of new investments, excluding the CLO warehouse – a record amount for us. We continue to see steady year-over-year asset base expansion, with an increase in our investments at fair value of 17% compared to last year, despite some significant repayments in Q4 of $57.0 million, excluding the CLO warehouse. Furthermore, market headwinds have not impaired our exceptional underwriting standards and consistent ability to deploy capital in high quality credits. This continued post quarter-end as we closed investments in three new platforms. 99% of our investments continue to hold our highest quality rating. Our belief remains that successful investing rests on sound judgment and steady, continuous discipline, taken one decision at a time. It is our conviction that our commitment to a long-term strategy and focus on quality will continue to reap positive rewards.” 

As of February 28, 2019, Saratoga Investment increased its assets under management (“AUM”) to $402.0 million, an increase of 17.3% from $342.7 million as of February 28, 2018, and a decrease of 9.4% from $443.8 million as of November 30, 2018. The annual increase reflects originations of $187.7 million new investments during the year ended February 28, 2019, offset by repayments and amortizations of $135.7 million. These investments and repayments for the year are inclusive of the $29.3 million in originations and $77.0 million in repayments during the quarter ended February 28, 2019. Since Saratoga management has taken over the management of the BDC, $357.8 million of repayments and sales of investments originated by Saratoga have generated a gross unlevered IRR of 13.8%. Saratoga Investment’s portfolio has remained strong, with a continued high level of investment quality in loan investments, with 98.6% of its loans at its highest internal rating for this quarter.

As a result, both the year and quarter ended February 28, 2019 benefitted from higher investment income as compared to the prior-year period – investment income increased to $47.7 million for the year ended February 28, 2019, up 23.5% from $38.6 million for the year ended February 28, 2018, and up to $13.0 million from $10.1 million for the same quarterly periods, a 28.2% increase. This increased investment income was generated from an investment base that has grown by 17.3% since last year, partially offset by the weighted average current yield decreasing from 11.1% to 10.7%. In addition, this quarter’s investment income was also up 1.2% from $12.8 million for the quarter ended November 30, 2018.

As compared to the year ended February 28, 2018, the investment income increase was offset by (i) increased debt and financing expenses, as the growth in AUM this year was partially financed from increased SBA debentures and the $60.0 million baby bond issuance, (ii) increased base and incentive management fees generated from the management of this larger pool of investments, and (iii) increased total expenses, excluding interest and debt financing expenses, base management fees and incentive fees and income tax benefit, reflecting primarily higher administrator expenses, higher directors fees and expenses and higher professional and general and administrative expenses, partially due to increased Sarbanes-Oxley (“SOX”) activities now that the Company has qualified as an accelerated filer. The increased expenses were offset by the recognition of a $1.0 million income tax benefit generated from net operating losses in Saratoga Investment’s blocker subsidiaries. 

Net investment income on a weighted average per share basis was $2.60 and $0.54 for the year and quarter ended February 28, 2019, respectively. Adjusted for the incentive fee accrual related to net unrealized capital gains, the net investment income on a weighted average per share basis was $2.63 and $0.66, respectively. This compares to adjusted net investment income per share of $2.27 and $0.60 for the year and quarter ended February 28, 2018, reflecting an increase of $0.36 and $0.06 per share, respectively. This also compares to adjusted net investment income of $0.65 per share for the quarter ended November 30, 2018, an increase of $0.01 per share.

Net investment income yield as a percentage of average net asset value (“Net Investment Income Yield”) was 10.5% and 9.2% for the year and quarter ended February 28, 2019, respectively. Adjusted for the incentive fee accrual related to net unrealized capital gains, the Net Investment Income Yield was 10.6% and 11.2%, respectively. In comparison, adjusted Net Investment Income Yield was 10.2% for the year ended February 28, 2018, and 11.2% and 10.7% for the quarters ended November 30, 2018, and February 28, 2018, respectively.

Net Asset Value (“NAV”) was $180.9 million as of February 28, 2019, an increase of $37.2 million from $143.7 million as of February 28, 2018, and an increase of $7.6 million from $173.3 million as of November 30, 2018

  • For the year ended February 28, 2019, $18.3 million of net investment income and $2.0 million of net realized and unrealized gains were earned, offset by $1.8 million of deferred tax expense on net unrealized gains in Saratoga Investment’s blocker subsidiaries, and $14.2 million of dividends declared. In addition, $30.8 million of common stock was issued, net of offering costs and $2.2 million of stock dividend distributions were made through the Company’s dividend reinvestment plan (“DRIP”). 146,549 shares were sold through the Company’s At-the-Market (“ATM”) equity offering during the year.   

NAV per share was $23.62 as of February 28, 2019, compared to $22.96 as of February 28, 2018, and $23.13 as of November 30, 2018

  • During the past twelve months, NAV per share increased by $0.66 per share, primarily reflecting (i) the $4.3 million, or $0.57 per share increase in net assets resulting from operations (net of the $2.06 per share dividend paid during fiscal 2019) and (ii) the $0.09 accretive impact of the year’s 1,400,127 share issuances, including the equity offering, the ATM and the DRIP. The Company made no purchases of common stock in the open market during the year.  

Return on equity for the year ended February 28, 2019, was 10.6%, compared to 13.2% for the comparable period last year.

Earnings per share for the year and quarter ended February 28, 2019, was $2.63 per share and $1.04 per share, respectively, compared to earnings per share of $2.93 per share and $0.89 per share for the year and quarter ended February 28, 2018, respectively, and $0.49 per share for the quarter ended November 30, 2018.

Investment portfolio activity for the year ended February 28, 2019:

  • Cost of investments made during the period: $187.7 million
  • Principal repayments and amortizations during the period: $135.7 million  

Investment portfolio activity for the quarter ended February 28, 2019:

  • Cost of investments made during the period: $29.3 million
  • Principal repayments and amortizations during the period: $77.0 million 

Additional Financial Information

For the fiscal year ended February 28, 2019, Saratoga Investment reported net investment income of $18.3 million, or $2.60 on a weighted average per share basis, and a net gain on investments of $0.2 million, or $0.03 on a weighted average per share basis, resulting in a net increase in net assets from operations of $18.5 million, or $2.63 on a weighted average per share basis. The $0.2 million net gain on investments was comprised of $4.9 million in net realized gain on investments offset by $2.9 million in net unrealized depreciation on investments and $1.8 million of net deferred tax expense on unrealized appreciation on investments in Saratoga Investment’s blocker subsidiaries. The net realized gain primarily relates to the $4.7 million gain on the Company’s Health Media Network investment realized in the fourth quarter. The $2.9 million unrealized depreciation primarily reflects (i) a reversal of the previously recognized appreciation following the realization of the Company’s Health Media Network investment, (ii) $1.4 million unrealized depreciation on the Company’s My Alarm Center investment, (iii) $1.6 million unrealized depreciation on the Company’s legacy Elyria investment and (iv) $1.8 million unrealized depreciation on the Company’s Roscoe Medical investment. These unrealized depreciations were partially offset by (i) $1.8 million unrealized appreciation on the Company’s Easy Ice investment, most notably the participating preferred equity, (ii) $2.1 million unrealized appreciation on the Company’s Netreo Holdings investment, and (iii) approximately $1.0 million of unrealized appreciation on each of the Company’s Grey Heller, Censis and Vector investments. This compared to the fiscal year ended February 28, 2018, with net investment income of $12.7 million, or $2.11 on a weighted average per share basis, and a net gain on investments of $4.9 million, or $0.82 on a weighted average per share basis, resulting in a net increase in net assets from operations of $17.7 million, or $2.93 on a weighted average per share basis. The $4.9 million net gain on investments consisted of $5.9 million in net realized loss on investments offset by $10.8 million unrealized appreciation.

Adjusted for the incentive fee accrual related to net unrealized capital gains, the net investment income was $18.6 million and $13.7 million for the years ended February 28, 2019, and February 28, 2018, respectively – this is an increase of $4.9 million year-over-year, or 35.9%. 

For the quarter ended February 28, 2019, Saratoga Investment reported net investment income of $4.1 million, or $0.54 on a weighted average per share basis, and a net gain on investments of $3.8 million, or $0.50 on a weighted average per share basis, resulting in a net increase in net assets from operations of $7.9 million, or $1.04 on a weighted average per share basis. The $3.8 million net gain on investments was comprised of $4.7 million in net realized gain on investments offset by $0.4 million in net unrealized depreciation on investments and $0.6 million of net deferred tax expense on unrealized appreciation on investments in Saratoga Investment’s blocker subsidiaries. The net realized gain relates to the $4.7 million gain on the Company’s Health Media Network investment discussed above. The $0.4 million unrealized depreciation primarily reflects (i) a reversal of the previously recognized appreciation following the realization of the Company’s Health Media Network investment, and (ii) $1.1 million unrealized depreciation on the Company’s Roscoe Medical investment. These unrealized depreciations were partially offset by (i) $1.4 million unrealized appreciation on the Company’s Netreo Holdings investment, (ii) $0.6 million unrealized appreciation on the Company’s Ohio Medical investment, (iii) $0.6 million unrealized appreciation on Saratoga Investment’s CLO equity investment, reflecting fourth quarter performance exceeding projections, and (iv) numerous smaller unrealized appreciations across the portfolio on various investments. This compared to the quarter ended February 28, 2018, with net investment income of $3.3 million, or $0.53 on a weighted average per share basis, and a net gain on investments of $2.2 million, or $0.36 on a weighted average per share basis, resulting in a net increase in net assets from operations of $5.5 million, or $0.89 on a weighted average per share basis. The $2.2 million net gain on investments consisted of $2.4 million unrealized appreciation offset by $0.2 million in net realized loss on investments.

Adjusted for the incentive fee accrual related to net unrealized capital gains, the net investment income was $4.9 million and $3.8 million for the quarters ended February 28, 2019, and February 28, 2018, respectively – this is an increase of $1.2 million year-over-year, or 31.1%.

Total expenses, excluding interest and debt financing expenses, base management fees and incentive management fees, decreased from $4.8 million for the year ended February 28, 2018 to $4.5 million for the year ended February 28, 2019, and decreased from 1.2% to 1.1% of average total assets. For the quarters ended February 28, 2019, and February 28, 2018, these total expenses decreased from $1.2 million to $1.0 million

Portfolio and Investment Activity

As of February 28, 2019, the fair value of Saratoga Investment’s portfolio was $402.0 million (excluding $62.1 million in cash and cash equivalents), principally invested in 31 portfolio companies and one collateralized loan obligation fund (“CLO”). The overall portfolio composition consisted of 50.5% of first lien term loans, 31.3% of second lien term loans, 8.8% of CLO subordinated notes, 0.5% of unsecured term loans, and 8.9% of equity interests.

For the fiscal year ended February 28, 2019, Saratoga Investment invested $187.7 million in new or existing portfolio companies and had $135.7 million in aggregate amount of exits and repayments, resulting in net investments of $52.0 million for the year. For the quarter ended February 28, 2019, Saratoga Investment invested $29.3 million in new or existing portfolio companies, and had $77.0 million in aggregate amount of exits and repayments, resulting in $47.7 million of net exits and repayments for the quarter.

As of February 28, 2019, the weighted average current yield on Saratoga Investment’s portfolio for the twelve months ended was 10.7%, which was comprised of a weighted average current yield of 10.9% on first lien term loans, 11.7% on second lien term loans, 14.6% on CLO subordinated notes, and 3.1% on equity interests.

As of February 28, 2019, 83.7% of Saratoga Investment’s portfolio is in floating rate debt, with many of these investments having floors. For all of these investments, the relevant 1-month or 3-month LIBOR rate is currently above the floors. Saratoga Investment has analyzed the potential impact of changes in interest rates on interest income from investments, and assuming that the investments as of February 28, 2019, were to remain constant for a full fiscal year and no actions were taken to alter the existing interest rate terms, a hypothetical change of 1.0% in interest rates would cause a corresponding increase of approximately $2.8 million to interest income. 
  

Liquidity and Capital Resources

As of February 28, 2019, Saratoga Investment had $0.0 million in outstanding borrowings under its $45 million senior secured revolving credit facility with Madison Capital Funding LLC. At the same time, Saratoga Investment had $150.0 million outstanding of SBA debentures, $134.5 million of Baby Bonds (fair value of $136.3 million) and an aggregate of $62.1 million in cash and cash equivalents.

With the $45.0 million credit facility and the $62.1 million of cash and cash equivalents, Saratoga Investment has a total of $107.1 million of undrawn borrowing capacity and cash and cash equivalents available as of February 28, 2019. The net proceeds from the DRIP and ATM equity program totaled $32.9 million and $3.7 million of equity issuances for the year and quarter ended February 28, 2019, respectively. Saratoga Investment also has the ability to issue additional Baby Bonds through the existing shelf registration statement.

On March 16, 2017, we entered into an equity distribution agreement with Ladenburg Thalmann & Co. Inc., through which Saratoga may offer for sale, from time to time, up to $30.0 million of its common stock through an ATM offering. As of February 28, 2019, the Company sold 494,672 shares for gross proceeds of $11.2 million at an average price of $22.72 for aggregate net proceeds of $11.1 million (net of transaction costs).

On July 13, 2018, Saratoga Investment issued 1,150,000 shares of its common stock priced at $25.00 per share (par value $0.001 per share) at an aggregate total of $28.75 million. The net proceeds, after deducting underwriting commissions of $1.15 million and offering costs of approximately $0.2 million, amounted to approximately $27.4 million. The Company also granted the underwriters a 30-day option to purchase up to an additional 172,500 shares of its common stock, which was not exercised. 

On August 28, 2018, Saratoga Investment issued $40.0 million in aggregate principal amount of 6.25% fixed-rate notes due 2025 (the “2025 Notes”) for net proceeds of $38.7 million after deducting underwriting commissions of approximately $1.25 million and offering costs of approximately $0.3 million. The issuance included the full exercise of the underwriters’ option to purchase an additional $5.0 million aggregate principal amount of 2025 Notes within 30 days. Interest on the 2025 Notes is paid quarterly in arrears on February 28, May 31, August 31 and November 30, at a rate of 6.25% per year, beginning November 30, 2018. The 2025 Notes mature on August 31, 2025, and commencing August 28, 2021, may be redeemed in whole or in part, at any time or from time to time, at its option. The 2025 Notes are listed on the NYSE under the trading symbol “SAF” with a par value of $25.00 per share.

On February 5, 2019, Saratoga Investment completed a re-opening and up-sizing of its existing 2025 Notes by issuing an additional $20.0 million in aggregate principal amount for net proceeds of $19.2 million after deducting underwriting commissions of approximately $0.6 million and discount of $0.2 million. Offering costs incurred were approximately $0.2 million. The issuance included the full exercise of the underwriters’ option to purchase an additional $2.5 million aggregate principal amount of 2025 Notes within 30 days. Interest rate, interest payment dates and maturity remain unchanged from the existing 2025 Notes issued in August 2018.

On September 27, 2018, the SBA issued a “green light” letter inviting Saratoga Investment to file a formal license application for a second SBIC license. If approved, the additional SBIC license would provide the Company with an incremental source of long-term capital by permitting us to issue, subject to SBA approval, up to $175.0 million of additional SBA-guaranteed debentures in addition to the $150.0 million already approved under the Company’s first license. Receipt of a green light letter from the SBA does not assure an applicant that the SBA will ultimately issue an SBIC license and the Company has received no assurance or indication from the SBA that it will receive an additional SBIC license, or of the timeframe in which it would receive an additional license, should one ultimately be granted. 

Dividend

During fiscal year 2019, Saratoga Investment declared and paid quarterly cash dividends of $2.06 per share, including $0.50 per share for the quarter ended February 28, 2018, $0.51 per share for the quarter ended May 31, 2018, $0.52 per share for the quarter ended August 31, 2018 and $0.53 per share for the quarter ended November 30, 2018.

On February 26, 2019, our board of directors declared a dividend of $0.54 per share for the quarter ended February 28, 2019, which was paid on March 28, 2019. Shareholders have the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant the Company’s DRIP.

Share Repurchase Plan

In fiscal year 2015, the Company announced the approval of an open market share repurchase plan that allows it to repurchase up to 200,000 shares of its common stock at prices below its NAV as reported in its then most recently published financial statements. During fiscal year 2018, the share repurchase plan was increased to 600,000 shares of common stock, and during fiscal year 2019, this share repurchase plan was extended for another year, through January 2020, at the same level of approval. As of February 28, 2019, the Company purchased 218,491 shares of common stock, at the average price of $16.87 for approximately $3.7 million pursuant to this repurchase plan.

We made no purchases of common stock in the open market during the year ended February 28, 2019.

2019 Fiscal Year End and Fourth Quarter Conference Call/Webcast Information

When:     Thursday, May 9, 2018, 10:00 a.m. Eastern Daylight Time (EDT) 

Call:     Interested parties may participate by dialing (877) 312-9208 (U.S. and Canada) or (678) 224-7872 (outside U.S. and Canada). 

A replay of the call will be available from 1:00 p.m. EDT on Thursday, May 9, 2019, through 1:00 p.m. ET on Thursday, May 16, 2019, by dialing (855) 859-2056 (U.S. and Canada) or (404) 537-3406 (outside U.S. and Canada), passcode for both replay numbers: 3985768. 

Webcast:     Interested parties may access a simultaneous webcast of the call and find the FY and Q4 2019 presentation by going to the ?Events & Presentations? section of Saratoga Investment Corp.?s investor relations website, http://ir.saratogainvestmentcorp.com/events-presentations

About Saratoga Investment Corp.

Saratoga Investment is a specialty finance company that provides customized financing solutions to U.S. middle-market businesses. The Company invests primarily in senior and unitranche leveraged loans and mezzanine debt, and, to a lesser extent, equity to provide financing for change of ownership transactions, strategic acquisitions, recapitalizations and growth initiatives in partnership with business owners, management teams and financial sponsors.  Saratoga Investment’s objective is to create attractive risk-adjusted returns by generating current income and long-term capital appreciation from its debt and equity investments.  Saratoga Investment has elected to be regulated as a business development company under the Investment Company Act of 1940 and is externally-managed by Saratoga Investment Advisors, LLC, an SEC-registered investment advisor focusing on credit-driven strategies.  Saratoga Investment owns an SBIC-licensed subsidiary and manages a $500 million collateralized loan obligation (“CLO”) fund.  It also owns 100% of the Class F-R-2, G-R-2 and subordinated notes of the CLO.  The Company’s diverse funding sources, combined with a permanent capital base, enable Saratoga Investment to provide a broad range of financing solutions.

Forward-Looking Statements

This press release contains certain forward-looking statements. These forward-looking statements are subject to risks and uncertainties and other factors enumerated in this press release that could cause our actual results to differ materially from those expressed or implied in such statements. Additional information is contained in the filings Saratoga Investment Corp. makes with the SEC. Saratoga Investment Corp. undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. 
  

Financials

Saratoga Investment Corp.
Consolidated Statements of Assets and Liabilities

  February 28,
2019
  February 28,
2018
 
       
ASSETS      
Investments at fair value      
Non-control/Non-affiliate investments (amortized cost of $307,136,188 and $281,534,277, respectively) $306,511,427  $286,061,722 
Affiliate investments (amortized cost of $18,514,716 and $18,358,611, respectively)  11,463,081   12,160,564 
Control investments (amortized cost of $76,265,189 and $39,797,229, respectively)  84,045,212   44,471,767 
Total investments at fair value (amortized cost of $401,916,093 and $339,690,117, respectively)  402,019,720   342,694,053 
Cash and cash equivalents  30,799,068   3,927,579 
Cash and cash equivalents, reserve accounts  31,295,326   9,849,912 
Interest receivable (net of reserve of $647,210 and $1,768,021, respectively)  3,746,604   3,047,125 
Due from affiliate  1,673,747   - 
Management and incentive fee receivable  542,094   233,024 
Other assets  595,543   584,668 
Total assets $470,672,102  $360,336,361 
         
LIABILITIES        
Revolving credit facility $-  $- 
Deferred debt financing costs, revolving credit facility  (605,189)  (697,497)
SBA debentures payable  150,000,000   137,660,000 
Deferred debt financing costs, SBA debentures payable  (2,396,931)  (2,611,120)
2023 Notes payable  74,450,500   74,450,500 
Deferred debt financing costs, 2023 notes payable  (1,919,620)  (2,316,370)
2025 Notes payable  60,000,000   - 
Deferred debt financing costs, 2025 notes payable  (2,377,551)  - 
Base management and incentive fees payable  6,684,785   5,776,944 
Deferred tax liability  739,716   - 
Accounts payable and accrued expenses  1,615,443   924,312 
Interest and debt fees payable  3,224,671   3,004,354 
Directors fees payable  62,000   43,500 
Due to manager  319,091   410,371 
Total liabilities $289,796,915  $216,644,994 
         
Commitments and contingencies (See Note 8)        
         
NET ASSETS        
Common stock, par value $.001, 100,000,000 common shares authorized, 7,657,156 and 6,257,029 common shares issued and outstanding, respectively $7,657  $6,257 
Capital in excess of par value  203,552,800   188,975,590 
Total distributable earnings (loss)  (22,685,270)  (45,290,480)
Total net assets  180,875,187   143,691,367 
Total liabilities and net assets $470,672,102  $360,336,361 
         
NET ASSET VALUE PER SHARE $23.62  $22.96 
         
Asset Coverage Ratio  234.5%  293.0%

Certain prior year numbers have been adjusted to conform with the SEC final rules on disclosure updates and simplification effective November 5, 2018

Saratoga Investment Corp.
Consolidated Statements of Operations

  For the year ended 
  February 28,
2019
  February 28,
2018
  February 28,
2017
 
INVESTMENT INCOME         
Interest from investments         
Interest income:         
Non-control/Non-affiliate investments $33,329,539  $26,648,380  $26,167,951 
Affiliate investments  963,289   886,948   246,035 
Control investments  4,785,044   4,768,534   2,281,397 
Payment-in-kind interest income:            
Non-control/Non-affiliate investments  780,112   984,305   652,847 
Affiliate investments  150,284   80,460   - 
Control investments  3,288,902   1,741,334   - 
Total interest from investments  43,297,170   35,109,961   29,348,230 
Interest from cash and cash equivalents  64,024   27,495   31,151 
Management fee income  1,722,180   1,509,317   1,499,001 
Incentive fee income  633,232   591,368   - 
Other income  1,991,357   1,376,837   2,278,770 
Total investment income  47,707,963   38,614,978   33,157,152 
             
OPERATING EXPENSES            
Interest and debt financing expenses  13,125,718   10,938,654   9,888,127 
Base management fees  6,879,324   5,846,400   4,898,657 
Incentive management fees  4,891,004   4,333,983   2,947,543 
Professional fees  1,849,424   1,590,798   1,243,400 
Administrator expenses  1,895,833   1,645,833   1,366,667 
Insurance  253,141   259,571   275,787 
Directors fees and expenses  290,500   197,500   235,422 
General & administrative  1,224,462   1,058,009   1,121,594 
Income tax benefit  (1,027,118)  -   - 
Excise tax expense (credit)  -   (14,738)  44,770 
Other expense  23,466   27,310   19,780 
Total operating expenses  29,405,754   25,883,320   22,041,747 
Loss on extinguishment of debt  -   -   1,454,595 
NET INVESTMENT INCOME  18,302,209   12,731,658   9,660,810 
             
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS            
Net realized gain (loss) from investments:            
Non-control/Non-affiliate investments  4,874,305   (5,877,734)  12,368,115 
Control investments  -   166   - 
Net realized gain (loss) from investments  4,874,305   (5,877,568)  12,368,115 
Net change in unrealized appreciation (depreciation) on investments:            
Non-control/Non-affiliate investments  (5,152,206)  6,178,457   (11,687,337)
Affiliate investments  (853,588)  818,323   (3,141)
Control investments  3,105,485   3,828,275   1,049,034 
Net change in unrealized appreciation (depreciation) on investments  (2,900,309)  10,825,055   (10,641,444)
Net change in provision for deferred taxes on unrealized (appreciation) depreciation on investments  (1,766,835)  -   - 
Net realized and unrealized gain (loss) on investments  207,161   4,947,487   1,726,671 
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $18,509,370  $17,679,145  $11,387,481 
             
WEIGHTED AVERAGE - BASIC AND DILUTED EARNINGS PER COMMON SHARE $2.63  $2.93  $1.98 
             
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC AND DILUTED  7,046,686   6,024,040   5,740,450 

Saratoga Investment Corp.
Consolidated Statements of Operations

  For the three months ended 
  February 28,
2019
  February 28,
2018
 
INVESTMENT INCOME      
Interest from investments      
Interest income:      
Non-control/Non-affiliate investments $8,628,236  $7,168,988 
Affiliate investments  242,551   223,833 
Control investments  1,444,864   919,247 
Payment-in-kind interest income:        
Non-control/Non-affiliate investments  158,650   210,723 
Affiliate investments  39,386   32,173 
Control investments  1,017,543   736,570 
Total interest from investments  11,531,230   9,291,534 
Interest from cash and cash equivalents  22,619   7,144 
Management fee income  592,259   381,233 
Incentive fee income  139,386   114,281 
Other income  698,664   333,942 
Total investment income  12,984,158   10,128,134 
         
OPERATING EXPENSES        
Interest and debt financing expenses  3,922,981   2,693,304 
Base management fees  1,851,983   1,488,170 
Incentive management fees  2,087,220   1,393,633 
Professional fees  430,952   410,885 
Administrator expenses  500,000   437,500 
Insurance  63,225   62,664 
Directors fees and expenses  60,000   43,500 
General & administrative  316,288   273,938 
Income tax benefit  (342,598)  - 
Excise tax expense (credit)  270   - 
Other expense  2,445   3,893 
Total operating expenses  8,892,766   6,807,487 
NET INVESTMENT INCOME  4,091,392   3,320,647 
         
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS        
Net realized gain (loss) from investments:        
Non-control/Non-affiliate investments  4,729,298   (155,685)
Affiliate investments  -   - 
Control investments  -   (63,554)
Net realized gain (loss) from investments  4,729,298   (219,239)
Net change in unrealized appreciation (depreciation) on investments:        
Non-control/Non-affiliate investments  (2,724,083)  1,401,934 
Affiliate investments  271,652   877,612 
Control investments  2,094,551   151,255 
Net change in unrealized appreciation (depreciation) on investments  (357,880)  2,430,801 
Net change in provision for deferred taxes on unrealized (appreciation) depreciation on investments  (607,254)  - 
Net realized and unrealized gain (loss) on investments  3,764,164   2,211,562 
         
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $7,855,556  $5,532,209 
         
WEIGHTED AVERAGE - BASIC AND DILUTED EARNINGS PER COMMON SHARE $1.04  $0.89 
         
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC AND DILUTED  7,534,235   6,243,896 

  

Saratoga Investment Corp.

Consolidated Schedule of Investments

February 28, 2019

Company Industry Investment Interest Rate/ Maturity Original Acquisition Date Principal/ Number of Shares  Cost  Fair Value (c)  % of Net Assets 
Non-control/Non-affiliate investments - 169.5% (b)                  
Apex Holdings Software Technologies, LLC Business Services First Lien Term Loan (3M USD LIBOR+8.00%), 10.62% Cash, 9/21/2021 9/21/2016 $18,000,000  $17,922,851  $18,000,000   10.0%
Apex Holdings Software Technologies, LLC Business Services Delayed Draw Term Loan  (3M USD LIBOR+8.00%), 10.62% Cash, 9/21/2021 10/1/2018 $1,000,000   992,183   1,000,000   0.6%
Avionte Holdings, LLC (h) Business Services Class A Units 1/8/2014  100,000   100,000   635,781   0.4%
CLEO Communications Holding, LLC Business Services First Lien Term Loan (3M USD LIBOR+8.00%), 10.62% Cash/2.00% PIK, 3/31/2022 3/31/2017 $13,514,320   13,437,153   13,514,320   7.5%
CLEO Communications Holding, LLC Business Services Delayed Draw Term Loan (3M USD LIBOR+8.00%), 10.62% Cash/2.00% PIK, 3/31/2022 3/31/2017 $12,142,015   12,040,280   12,142,015   6.7%
Destiny Solutions Inc. (a) Business Services First Lien Term Loan (3M USD LIBOR+7.00%), 9.62% Cash, 5/16/2023 5/16/2018 $8,500,000   8,426,441   8,489,800   4.7%
Destiny Solutions Inc. (a), (j) Business Services Delayed Draw Term Loan (3M USD LIBOR+7.00%), 9.62% Cash, 5/16/2023 5/16/2018 $-   -   -   0.0%
Destiny Solutions Inc. (a), (h), (i) Business Services Limited Partner Interests 5/16/2018  999,000   999,000   1,062,440   0.6%
Emily Street Enterprises, L.L.C. Business Services Senior Secured Note (3M USD LIBOR+8.50%), 11.12% Cash, 1/23/2020 12/28/2012 $3,300,000   3,299,122   3,314,520   1.8%
Emily Street Enterprises, L.L.C. (h) Business Services Warrant Membership Interests Expires 12/28/2022 12/28/2012  49,318   400,000   505,509   0.3%
Erwin, Inc. (d) Business Services Second Lien Term Loan (3M USD LIBOR+11.50%), 14.12% Cash/1.00% PIK, 8/28/2021 2/29/2016 $15,888,102   15,796,316   15,888,102   8.8%
FMG Suite Holdings, LLC (d) Business Services Second Lien Term Loan (1M USD LIBOR+8.00%), 10.49% Cash, 11/16/2023 5/16/2018 $23,000,000   22,844,123   23,000,000   12.7%
GDS Holdings US, LLC (d) Business Services First Lien Term Loan (3M USD LIBOR+7.00%), 9.62% Cash, 8/23/2023 8/23/2018 $7,500,000   7,430,649   7,495,500   4.0%
GDS Holdings US, LLC (j) Business Services Delayed Draw Term Loan (3M USD LIBOR+7.00%), 9.62% Cash, 8/23/2023 8/23/2018 $-   -   -   0.0%
GDS Software Holdings, LLC (h) Business Services Common Stock Class A Units 8/23/2018  250,000   250,000   277,139   0.2%
Identity Automation Systems (h) Business Services Common Stock Class A Units 8/25/2014  232,616   232,616   629,555   0.3%
Identity Automation Systems (d) Business Services First Lien Term Loan (3M USD LIBOR+9.00%), 11.62% Cash, 3/31/2021 8/25/2014 $24,100,000   23,991,294   24,100,000   13.3%
Knowland Group, LLC Business Services Second Lien Term Loan (3M USD LIBOR+8.00%), 10.62% Cash, 5/9/2024 11/9/2018 $15,000,000   15,000,000   15,000,000   8.3%
Microsystems Company Business Services Second Lien Term Loan  (3M USD LIBOR+8.25%), 10.87% Cash, 7/1/2022 7/1/2016 $18,000,000   17,889,554   17,881,200   9.9%
National Waste Partners (d) Business Services Second Lien Term Loan 10.00% Cash, 2/13/2022 2/13/2017 $9,000,000   8,942,155   8,864,100   4.9%
Omatic Software, LLC Business Services First Lien Term Loan (3M USD LIBOR+8.00%), 10.62% Cash, 5/29/2023 5/29/2018 $5,500,000   5,451,758   5,537,400   3.1%
Omatic Software, LLC (j) Business Services Delayed Draw Term Loan  (3M USD LIBOR+8.00%), 10.62% Cash, 5/29/2023 5/29/2018 $-   -   -   0.0%
Passageways, Inc. Business Services First Lien Term Loan (3M USD LIBOR+7.75%), 10.37% Cash, 7/5/2023 7/5/2018 $5,000,000   4,955,204   5,063,500   2.8%
Passageways, Inc. (h) Business Services Series A Preferred Stock 7/5/2018  2,027,205   1,000,000   1,339,705   0.7%

  

Saratoga Investment Corp.
Consolidated Schedule of Investments
February 28, 2019

Company Industry Investment Interest Rate/ Maturity Original Acquisition Date Principal/ Number of Shares  Cost  Fair Value (c)  % of Net Assets 
Vector Controls Holding Co., LLC (d) Business Services First Lien Term Loan  11.50% (9.75% Cash/1.75% PIK), 3/6/2022 3/6/2013 $9,311,956   9,310,703   9,371,929   5.2%
Vector Controls Holding Co., LLC (h) Business Services Warrants to Purchase Limited Liability Company Interests, Expires 11/30/2027 5/31/2015  343   -   2,210,149   1.2%
    Total Business Services        190,711,402   195,322,664   108.0%
Targus Holdings, Inc. (h) Consumer Products Common Stock 12/31/2009  210,456   1,713,605   505,094   0.3%
    Total Consumer Products        1,713,605   505,094   0.3%
My Alarm Center, LLC (k) Consumer Services Preferred Equity Class A Units 8.00% PIK 7/14/2017  2,227   2,357,879   1,112,543   0.6%
My Alarm Center, LLC (h) Consumer Services Preferred Equity Class B Units 7/14/2017  1,797   1,796,880   -   0.0%
My Alarm Center, LLC Consumer Services Preferred Equity Class Z Units 25.00% PIK 9/12/2018  676   655,987   2,053,514   1.1%
My Alarm Center, LLC (h) Consumer Services Common Stock 7/14/2017  96,224   -   -   0.0%
    Total Consumer Services        4,810,746   3,166,057   1.7%
C2 Educational Systems (d) Education First Lien Term Loan (3M USD LIBOR+7.00%), 9.62% Cash, 5/31/2020 5/31/2017 $16,000,000   15,929,485   16,032,000   8.9%
Kev Software Inc. (a), Education First Lien Term Loan (1M USD LIBOR+8.63%), 11.12% Cash, 9/13/2023 9/13/2018 $21,446,929   21,273,211   21,438,351   11.9%
M/C Acquisition Corp., L.L.C. (h) Education Class A Common Stock 6/22/2009  544,761   30,241   -   0.0%
M/C Acquisition Corp., L.L.C. (k) Education First Lien Term Loan 1.00% Cash, 3/31/2020 8/10/2004 $2,315,090   1,189,177   6,260   0.0%
Texas Teachers of Tomorrow, LLC (h), (i) Education Common Stock 12/2/2015  750,000   750,000   792,165   0.4%
Texas Teachers of Tomorrow, LLC Education Second Lien Term Loan (3M USD LIBOR+9.75%), 12.37% Cash, 6/2/2021 12/2/2015 $10,000,000   9,952,251   9,807,000   5.4%
    Total Education        49,124,365   48,075,776   26.6%
TMAC Acquisition Co., LLC (k) Food and Beverage Unsecured Term Loan 8.00% PIK, 9/01/2023 3/1/2018 $2,216,427   2,216,427   2,100,286   1.2%
    Total Food and Beverage        2,216,427   2,100,286   1.2%
Axiom Parent Holdings, LLC (h) Healthcare Services Common Stock Class A Units 6/19/2018  400,000   400,000   402,990   0.2%
Axiom Purchaser, Inc. (d) Healthcare Services First Lien Term Loan (3M USD LIBOR+6.00%), 8.62% Cash, 6/19/2023 6/19/2018 $10,000,000   9,923,962   10,020,000   5.5%
Axiom Purchaser, Inc. (j) Healthcare Services Delayed Draw Term Loan (3M USD LIBOR+6.00%), 8.62% Cash, 6/19/2023 6/19/2018 $-   -   -   0.0%
Censis Technologies, Inc. Healthcare Services First Lien Term Loan B (1M USD LIBOR+8.30%), 10.79% Cash, 9/27/2023 7/25/2014 $19,950,000   19,877,861   19,991,895   11.1%
Censis Technologies, Inc. (h), (i) Healthcare Services Limited Partner Interests 7/25/2014  999   999,000   2,387,705   1.3%
ComForCare Health Care Healthcare Services First Lien Term Loan (3M USD LIBOR+7.50%), 10.12% Cash, 1/31/2022 1/31/2017 $15,000,000   14,898,535   15,096,000   8.3%
Ohio Medical, LLC (h) Healthcare Services Common Stock 1/15/2016  5,000   500,000   208,250   0.1%
Ohio Medical, LLC Healthcare Services Senior Subordinated Note 12.00% Cash, 7/15/2021 1/15/2016 $7,300,000   7,263,114   6,735,710   3.8%
Roscoe Medical, Inc. (h) Healthcare Services Common Stock 3/26/2014  5,081   508,077   -   0.0%
Roscoe Medical, Inc. (k) Healthcare Services Second Lien Term Loan 11.25% Cash, 3/28/2021 3/26/2014 $4,200,000   4,189,094   2,499,000   1.4%
    Total Healthcare Services        58,559,643   57,341,550   31.7%
Sub Total Non-control/Non-affiliate investments            307,136,188   306,511,427   169.5%

  

Saratoga Investment Corp. 
Consolidated Schedule of Investments 
February 28, 2019

Company Industry Investment Interest Rate/ Maturity Original Acquisition Date Principal/ Number of Shares  Cost  Fair Value (c)  % of Net Assets 
Affiliate investments - 6.4% (b)                  
GreyHeller LLC (f) Business Services First Lien Term Loan (3M USD LIBOR+11.00%), 13.62% Cash, 11/16/2021 11/17/2016 $7,000,000   6,956,976   7,140,000   4.0%
GreyHeller LLC (f), (h) Business Services Series A Preferred Units 11/17/2016  850,000   850,000   1,496,169   0.8%
    Total Business Services        7,806,976   8,636,169   4.8%
Elyria Foundry Company, L.L.C. (f), (h) Metals Common Stock 7/30/2010  60,000   9,685,028   1,804,200   1.0%
Elyria Foundry Company, L.L.C. (d), (f) Metals Second Lien Term Loan 15.00% PIK, 8/10/2022 7/30/2010 $1,022,712   1,022,712   1,022,712   0.6%
    Total Metals        10,707,740   2,826,912   1.6%
Sub Total Affiliate investments            18,514,716   11,463,081   6.4%
                       
Control investments - 46.5% (b)                      
Easy Ice, LLC (g) Business Services Preferred Equity 10.00% PIK 2/3/2017  5,080,000   9,683,612   13,357,444   7.4%
Easy Ice, LLC (d), (g) Business Services Second Lien Term Loan 7.03% Cash/5.97% PIK, 2/28/2023 3/29/2013 $21,184,063   21,126,021   21,268,799   11.8%
Easy Ice Masters, LLC (d), (g) Business Services Second Lien Term Loan 7.03% Cash/5.97% PIK, 2/28/2023 10/31/2018 $3,804,244   3,768,025   3,819,461   2.1%
Netreo Holdings, LLC (g) Business Services First Lien Term Loan (3M USD LIBOR +6.25%), 9.00% Cash/2.00% PIK, 7/3/2023 7/3/2018 $5,067,057   5,021,133   5,092,899   2.8%
Netreo Holdings, LLC (g), (h) Business Services Common Stock Class A Unit 7/3/2018  3,150,000   3,150,000   5,179,101   2.9%
    Total Business Services        42,748,791   48,717,704   27.0%
Saratoga Investment Corp. CLO 2013-1, Ltd. (a), (e), (g) Structured Finance Securities Other/Structured Finance Securities 16.67%, 1/20/2030 1/22/2008 $69,500,000   23,516,398   25,393,508   14.0%
Saratoga Investment Corp. CLO 2013-1, Ltd. Class F-R-2 Note (a), (g) Structured Finance Securities Other/Structured Finance Securities (3M USD LIBOR+8.75%), 11.37%, 1/20/2030 12/14/2018 $2,500,000   2,500,000   2,483,500   1.4%
Saratoga Investment Corp. CLO 2013-1, Ltd. Class G-R-2 Note (a), (g) Structured Finance Securities Other/Structured Finance Securities (3M USD LIBOR+10.00%), 12.62%, 1/20/2030 12/14/2018 $7,500,000   7,500,000   7,450,500   4.1%
    Total Structured Finance Securities        33,516,398   35,327,508   19.5%
Sub Total Control investments            76,265,189   84,045,212   46.5%
TOTAL INVESTMENTS - 222.4% (b)           $401,916,093  $402,019,720   222.4%


  Number of Shares  Cost  Fair Value  % of Net Assets 
Cash and cash equivalents and cash and cash equivalents, reserve accounts - 34.3% (b)            
U.S. Bank Money Market (l)  62,094,394  $62,094,394  $62,094,394   34.3%
Total cash and cash equivalents and cash and cash equivalents, reserve accounts  62,094,394  $62,094,394  $62,094,394   34.3%

(a)       Represents a non-qualifying investment as defined under Section 55(a) of the Investment Company Act of 1940, as amended. As of February 28, 2019, non-qualifying assets represent 16.5% of the Company's portfolio at fair value. As a BDC, the Company can only invest 30% of its portfolio in non-qualifying assets.
(b)       Percentages are based on net assets of $180,875,187 as of February 28, 2019.
(c)       Because there is no readily available market value for these investments, the fair values of these investments were determined using significant unobservable inputs and approved in good faith by our board of directors.  These investments have been included as Level 3 in the Fair Value Hierarchy.
(d)       These securities are either fully or partially pledged as collateral under a senior secured revolving credit facility.
(e)       This investment does not have a stated interest rate that is payable thereon. As a result, the 16.67% interest rate in the table above represents the effective interest rate currently earned on the investment cost and is based on the current cash interest and other income generated by the investment. 
(f)       As defined in the Investment Company Act, this portfolio company is an Affiliate as we own between 5.0% and 25.0% of the voting securities. Transactions during the year ended February 28, 2019 in which the issuer was an Affiliate are as follows: 

Company Purchases  Sales  Total Interest from Investments  Management and Incentive Fee Income  Net Realized  Gain (Loss) from Investments  Net Change in Unrealized Appreciation (Depreciation) 
GreyHeller LLC $ -  $ -  $963,289  $ -  $ -  $776,012 
Elyria Foundry Company, L.L.C.  -   -   150,284   -   -   (1,629,600)
Total $-  $-  $1,113,573  $-  $-  $(853,588)

(g)       As defined in the Investment Company Act, we "Control" this portfolio company because we own more than 25% of the portfolio company's outstanding voting securities. Transactions during the year ended February 28, 2019 in which the issuer was both an Affiliate and a portfolio company that we Control are as follows:

Company Purchases  Sales  Total Interest from Investments  Management and Incentive Fee Income  Net Realized  Gain (Loss) from Investments  Net Change in Unrealized Appreciation (Depreciation) 
Easy Ice, LLC $1,684,448  $-  $3,424,369  $-  $ -  $1,720,004 
Easy Ice Masters, LLC  3,629,682   -   161,468   -   -   51,436 
Netreo Holdings, LLC  8,100,000   -   374,843   -   -   2,100,867 
Saratoga Investment Corp. CLO 2013-1, Ltd.  14,268,609   (48,083)  2,922,372   2,355,412   -   (701,722)
Saratoga Investment Corp. CLO 2013-1, Ltd. Class F Note  -   (4,500,000)  412,069   -   -   900 
Saratoga Investment Corp. CLO 2013-1, Ltd. Class F-R-2 Notes  2,500,000   -   61,761   -   -   (16,500)
Saratoga Investment Corp. CLO 2013-1, Ltd. Class G-R-2 Notes  7,500,000   -   205,333   -   -   (49,500)
Saratoga Investment Corp. CLO 2013-1 Warehouse, Ltd.  20,000,000   (20,000,000)  511,731   -   -   - 
Total $57,682,739  $(24,548,083) $8,073,946  $2,355,412  $-  $3,105,485 

  

(h)       Non-income producing at February 28, 2019.
(i)       Includes securities issued by an affiliate of the Company.
(j)       All or a portion of this investment has an unfunded commitment as of February 28, 2019.
(k)       As of February 28, 2019, the investment was on non-accrual status. The fair value of these investments was approximately $5.7 million, which represented 1.4% of the Company's portfolio.
(l)       Included within cash and cash equivalents and cash and cash equivalents, reserve accounts in the Company's consolidated statements of assets and liabilities as of February 28, 2019

LIBOR - London Interbank Offered Rate

1M USD LIBOR - The 1 month USD LIBOR rate as of February 28, 2019 was 2.49%.
3M USD LIBOR - The 3 month USD LIBOR rate as of February 28, 2019 was 2.62%.
PIK - Payment-in-Kind 

Supplemental Information Regarding Adjusted Net Investment Income, Adjusted Net Investment Income Yield and Adjusted Net Investment Income per share

On a supplemental basis, we provide information relating to adjusted net investment income, adjusted net investment income yield, and adjusted net investment income per share, which are non-GAAP measures. These measures are provided in addition to, but not as a substitute for, net investment income, net investment income yield, and net investment income per share. Adjusted net investment income represents net investment income excluding any capital gains incentive fee expense or reversal attributable to unrealized gains. The management agreement with Saratoga Investment’s advisor provides that a capital gains incentive fee is determined and paid annually with respect to cumulative realized capital gains (but not unrealized capital gains) to the extent such realized capital gains exceed realized and unrealized losses for such year. In addition, we accrue, but do not pay, a capital gains incentive fee in connection with any unrealized capital appreciation, as appropriate. As such, we believe that adjusted net investment income, adjusted net investment income yield, and adjusted net income per share is a useful indicator of operations exclusive of any capital gains incentive fee expense or reversal attributable to unrealized gains. In addition, for fiscal 2017, adjusted net investment income also excludes the loss on extinguishment of Saratoga Investment’s 2020 Notes, and the interest expense related to the 2020 Notes during the call notice period while the 2023 Notes were already issued and outstanding. Both these expenses are directly attributable to the issuance of the 2023 Notes and the subsequent repayment of the 2020 Notes, and are deemed to be non-recurring in nature and not representative of the operations of Saratoga Investment. The presentation of this additional information is not meant to be considered in isolation or as a substitute for financial results prepared in accordance with GAAP. The following table provides a reconciliation of net investment income to adjusted net investment income, net investment income yield to adjusted net investment income yield, and net investment income per share to adjusted net investment income per share for the years and quarters ended February 28, 2019 and February 28, 2018, and the year ended February 28, 2017

  For the years ended
February 28
 
  2019  2018  2017 
          
Net Investment Income $18,302,209  $12,731,658  $9,660,810 
Changes in accrued capital gains incentive fee expense/ reversal  251,090   919,806   133,937 
Loss on extinguishment of debt  -   -   1,454,595 
Interest on 2020 notes during call period(3)  -   -   268,895 
Adjusted net investment income  18,553,299   13,651,464   11,518,237 
             
Net investment income yield  10.5%  9.5%  7.6%
Changes in accrued capital gains incentive fee expense/ reversal  0.1%  0.7%  0.1%
Loss on extinguishment of debt  -   -   1.2%
Interest on 2020 notes during call period(3)  -   -   0.2%
Adjusted net investment income yield (1)  10.6%  10.2%  9.1%
             
Net investment income per share $2.60  $2.11  $1.68 
Changes in accrued capital gains incentive fee expense/ reversal  0.03   0.16   0.03 
Loss on extinguishment of debt  -   -   0.25 
Interest on 2020 notes during call period(3)  -   -   0.05 
Adjusted net investment income per share (2) $2.63  $2.27  $2.01 

  
(1)       Adjusted net investment income is calculated as adjusted net investment income divided by average net asset value.
(2)       Adjusted net investment income per share is calculated as adjusted net investment income divided by weighted average common shares outstanding.
(3)       Interest on 2020 notes during call period is presented net of the incentive fee accrual
   

  For the quarters ended
February 28
 
  2019  2018 
       
Net Investment Income $4,091,392  $3,320,647 
Changes in accrued capital gains incentive fee expense/ reversal  851,151   450,502 
Loss on extinguishment of debt  -   - 
Interest on 2020 notes during call period(3)  -   - 
Adjusted net investment income  4,942,543   3,771,149 
         
Net investment income yield  9.2%  9.4%
Changes in accrued capital gains incentive fee expense/ reversal  2.0%  1.3%
Loss on extinguishment of debt  -   - 
Interest on 2020 notes during call period(3)  -   - 
Adjusted net investment income yield (1)  11.2%  10.7%
         
Net investment income per share $0.54  $0.53 
Changes in accrued capital gains incentive fee expense/ reversal  0.12   0.07 
Loss on extinguishment of debt  -   - 
Interest on 2020 notes during call period(3)  -   - 
Adjusted net investment income per share (2) $0.66  $0.60 

    
(1)       Adjusted net investment income is calculated as adjusted net investment income divided by average net asset value.
(2)       Adjusted net investment income per share is calculated as adjusted net investment income divided by weighted average common shares outstanding.
(3)       Interest on 2020 notes during call period is presented net of the incentive fee accrual

Contact: Henri Steenkamp
Saratoga Investment Corp.
212-906-7800

Roland Tomforde
Broadgate Consultants
212-232-2222

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Source: Saratoga Investment Corp


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