Kayne Anderson Energy Development Company Announces Results for the Quarter and Fiscal Year Ended November 30, 2012

HOUSTON--()--(NYSE:KED) Kayne Anderson Energy Development Company (the “Company”) today announced its financial results for the quarter and fiscal year ended November 30, 2012.

HIGHLIGHTS

  • Net asset value: $23.74 per share; up 3.2% for fiscal 2012
  • Distribution of $0.43 per share for the fourth quarter; increased 10.3% in fiscal 2012
  • Net investment income for fiscal 2012: $0.8 million
  • Net realized gains for fiscal 2012: $9.9 million
  • Net unrealized gains for fiscal 2012: $13.6 million

RESULTS OF OPERATIONS – QUARTER ENDED NOVEMBER 30, 2012

Investment income totaled $2.8 million for the quarter and consisted primarily of net dividends and distributions and interest income on our debt investments. The Company received $5.7 million of dividends and distributions, of which $4.4 million was treated as a return of capital during the quarter. Interest income was $1.5 million, of which $0.4 million was paid-in-kind interest from ProPetro Services, Inc. (“ProPetro”). 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 and $0.5 million of non-cash distributions from VantaCore Partners LP (“VantaCore”) that is included in investment income.

Operating expenses totaled $2.3 million, including $1.5 million of investment management fees; $0.6 million of interest expense and $0.2 million of other operating expenses. Interest expense included $0.1 million of amortization of debt issuance costs.

The Company’s net investment income totaled $0.4 million and included a deferred income tax expense of $0.1 million and current income tax expense of $0.05 million.

The Company had net realized gains from investments of $3.8 million, after taking into account a deferred income tax expense of $1.4 million and a current income tax expense of $0.8 million. The realized gains included a $4.5 million gain from the redemption of the Company’s Class D Preferred Unit investment in Direct Fuels Partners, L.P. (“Direct Fuels”).

The Company had a net change in unrealized losses of $1.4 million. The net change consisted of $2.2 million of unrealized losses from investments and a deferred income tax benefit of $0.8 million.

The Company had an increase in net assets resulting from operations of $2.8 million. This increase was comprised of net investment income of $0.4 million; net realized gains of $3.8 million; and net unrealized losses of $1.4 million, as noted above.

RESULTS OF OPERATIONS – FISCAL YEAR ENDED NOVEMBER 30, 2012

Investment income totaled $10.8 million for the fiscal year and consisted primarily of net dividends and distributions and interest income on our debt investments. The Company received $21.8 million of dividends and distributions, of which $17.0 million was treated as a return of capital. Return of capital was increased by $1.5 million during the fiscal year due to 2011 tax reporting information that we received in fiscal 2012. Interest income was $6.0 million, of which $1.7 million was paid-in-kind interest from ProPetro. The Company received $0.9 million of paid-in-kind dividends during the year, which are not included in investment income, but are reflected as an unrealized gain and $1.8 million of non-cash distributions from VantaCore that is included in investment income.

Operating expenses totaled $9.6 million, including $6.0 million of investment management fees; $2.3 million of interest expense and $1.3 million of other operating expenses. Interest expense included $0.4 million of amortization of debt issuance costs.

The Company’s net investment income totaled $0.8 million and included a deferred income tax expense of $0.3 million and current income tax expense of $0.1 million.

The Company had net realized gains from investments of $9.9 million, after taking into account a deferred income tax expense of $4.1 million and a current income tax expense of $1.5 million. The realized gains included a $4.5 million gain from the redemption of the Company’s Class D Preferred Unit investment in Direct Fuels.

The Company had a net change in unrealized gains of $13.6 million. The net change consisted of $21.4 million of unrealized gains from investments and a deferred income tax expense of $7.8 million.

The Company had an increase in net assets resulting from operations of $24.3 million. This increase was comprised of net investment income of $0.8 million; net realized gains of $9.9 million; and net unrealized gains of $13.6 million, as noted above.

NET ASSET VALUE

As of November 30, 2012, the Company’s net asset value was $247.0 million or $23.74 per share.

PORTFOLIO

As of November 30, 2012, the Company had long-term investments of $335.6 million, of which approximately 59% were public MLPs and other public equity securities, 26% were private MLPs and other private equity securities and 15% were debt securities. The Company’s long-term investments consisted of 51 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, 2012, the Company had $72.0 million of borrowings under its credit facility (at an interest rate of 2.21%), which represented 55.1% of its borrowing base of $130.8 million (60.8% 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 443%. 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 24, 2013, the Company had $72.0 million borrowed under its credit facility and had $1.2 million in cash. Outstanding borrowings represented 50.9% of the borrowing base of $141.4 million (56.9% of its borrowing base attributable to quoted securities).

DISTRIBUTION

On January 17, 2013, the Company declared a distribution of $0.43 per share for the quarter ended November 30, 2012, which will be paid on February 1, 2013 to stockholders of record on January 28, 2013.

GUIDANCE

As a result of investment activity after November 30, 2012, the Company’s guidance is based on its portfolio as of January 24, 2013. The Company estimates its portfolio will generate dividends, distributions, and interest income of approximately $7.0 million in the next quarter. The estimate includes distributions of $0.76 million per quarter from VantaCore, which is based on only the cash distributions the Company expects to receive, on average, over the next four quarters of $0.285 per common and preferred A unit and $0.383 per preferred B unit. The Company’s guidance does not include $0.47 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 any changes in cash distributions made by MLPs or changes in interest rates based on the movement in LIBOR rates since November 30, 2012.

             
Portfolio Category    

Amount
Invested
($ in millions)

    Average Annual
Yield(1)(2)
Private MLPs(3)     $ 79     10.6%
Public MLPs and Other Public Equity     234     6.5
Debt Investments(4)(5)     38     11.9
       

(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 declared distributions
as of November 30, 2012. Amounts invested for Private MLPs are based on November 30, 2012 valuations.

 

(3) The amount invested excludes the Company’s equity investment in ProPetro (valued at $7.8 million as of
November 30, 2012), 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 $13.6 million debt investment in ProPetro. This investment pays
paid-in-kind interest at an annual rate of 13.0%.

 

Management Fees and Other Operating Expenses – Management fees are estimated to be approximately $1.59 million per quarter. Other operating expenses are estimated to be approximately $0.37 million per quarter.

Interest Expense – Interest expense is estimated to be approximately $0.45 million per quarter based on $72.0 million borrowed under the Company’s credit facility, assuming a 30-day LIBOR rate of 0.20% 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 2013.

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, 2012

(amounts in 000’s, except share and per share amounts)

 
ASSETS
Investments, at fair value:
Non-affiliated (Cost — $167,453) $   201,347
Affiliated (Cost — $138,306)     134,242
Total investments (Cost — $305,759) 335,589
Cash 1,648
Receivable for securities sold 5,449
Interest, dividends and distributions receivable 632
Other receivable 2,900
Debt issuance costs, prepaid expenses and other assets     838
Total Assets     347,056
LIABILITIES
Payable for securities purchased 559
Investment management fee payable 1,510
Accrued directors’ fees and expenses 78
Accrued expenses and other liabilities 573
Current income tax liability 460
Deferred income tax liability 24,859
Credit facility     72,000
Total Liabilities     100,039
NET ASSETS $   247,017
NET ASSETS CONSIST OF

Common stock, $0.001 par value (200,000,000 shares authorized; 10,405,130 shares issued

 

 

and outstanding)

$

10

Paid-in capital 200,903
Accumulated net investment loss, net of income taxes, less dividends (36,042)
Accumulated net realized gains on investments, net of income taxes 63,571
Net unrealized gains on investments, net of income taxes     18,575
NET ASSETS $   247,017
NET ASSET VALUE PER SHARE $   23.74
 
     

KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY

STATEMENT OF OPERATIONS

FOR THE YEAR ENDED NOVEMBER 30, 2012

(amounts in 000’s)

 
INVESTMENT INCOME
Income
Dividends and distributions:
Non-affiliated investments $ 9,961
Affiliated investments   11,838
Total dividends and distributions 21,799
Return of capital   (16,980)
Net dividends and distributions 4,819
Interest and other income — non-affiliated investments 4,154
Interest — affiliated investments   1,834
Total Investment Income   10,807
Expenses
Investment management fees 5,994
Professional fees 542
Directors’ fees and expenses 300
Insurance 95
Administration fees 89
Other expenses   278
Total expenses — Before Interest Expense 7,298
Interest expense   2,306
Total Expenses   9,604
Net Investment Income — Before Income Taxes 1,203
Current income tax expense (104)
Deferred income tax expense   (291)
Net Investment Income   808
REALIZED AND UNREALIZED GAINS
Net Realized Gains
Investments — non-affiliated 10,772
Investments — affiliated 4,759
Current income tax expense (1,503)
Deferred income tax expense   (4,143)
Net Realized Gains   9,885
Net Change in Unrealized Gains
Investments — non-affiliated 16,244
Investments — affiliated 5,170
Deferred income tax expense   (7,784)
Net Change in Unrealized Gains   13,630
Net Realized and Unrealized Gains   23,515
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 24,323
 

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

KA Fund Advisors, LLC
Monique Vo, 877-657-3863
http://www.kaynefunds.com/

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Contacts

KA Fund Advisors, LLC
Monique Vo, 877-657-3863
http://www.kaynefunds.com/