Gladstone Investment Corporation 5.00% Notes Due 2026 (GAINN) Q2 2013 Earnings Report, Transcript and Summary

Good morning and welcome to the Gladstone Investment Corporation Third Quarter Ended September 30, 2013 Shareholders Conference Call. [Operator Instructions]. After today's presentation there will be an opportunity to ask questions. [Operator Instructions]. Please note that this event is being recorded. Now I would like to turn the conference over to David Gladstone. Mr. Gladstone, please go ahead.

All right, thank you, Keith for that nice introduction and hello and good morning. This is David Gladstone, The Chairman and this is the quarterly earnings conference call for shareholders and analysts of Gladstone Investment. Common stock is traded on NASDAQ under the GAIN and the preferred stock is trading under GAINP for preferred. Again thank you all for calling in, we love these times with shareholders to get some good questions and those kind of things and all of you take the opportunity to visit the website at www.gladstoneinvestment.com where you can sign up for email notices, so you can receive information about us in the timely fashion. And please remember that if you are ever in the Washington D.C. area, you have an open invitation to visit us here in McLean, Virginia. Please stop try and say hello. You'll see some of the finest people in the business. Now, let me read the statement about forward-looking statements. This conference call may include statements that may constitute forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934 including statements with regard to the future performance of the company. These forward-looking statements inherently involve certain risks and uncertainties and other factors even though they are based on our current plans and we believe those plans to be reasonable. Many of these forward-looking statements can be identified by the use of words such as anticipate, believes, expects, intends, will, should, may, all of those and similar expressions. There are many factors that may cause our actual results to be materially different from any future results that are expressed or implied by these forward-looking statements including the factors listed under the caption Risk Factors that are seen in our 10-K and 10-Q filings and in our registration statement that’s filed with the Securities and Exchange Commission. All of those can be found on our website at www.gladstoneinvestment.com or on the SEC website at www.sec.gov. Company undertakes no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise after the date of this conference call. Please note that past performance or market information is not a guarantee of future results. Now we will hear from Dave Dullum. He is President and a Board member of the company. He will cover a lot of ground including views of the future of this fund. Dave, take it away.

Well, thank you David, and good morning all shareholders. As you know Gladstone Investment provides capital where businesses are being purchased by management team and other equity investors and these are used in companies with annual sales between $20 million to $100 million. And we provide a subordinated debt and the equity and occasionally some senior debt in these transactions. So this combination really produces a mix of assets for Gladstone Investment, your company, which is the basis of this strategy. Our debt investments provide income to pay our dividends while we expect the equity to appreciate, build shareholder value, provide capital gains and overtime collectively grow our dividend. This is a bit different from other public BDCs that are predominately debt focused. So please keep in mind that the equity portions of our assets are important to the overall value of your company. For example, in August we sold Venyu Solutions, Inc. a company that we purchased with its management team in late 2010. The equity portion of this investment generated cash proceeds of approximately $32.2 million resulting in a realized capital gain of approximately $24.8 million and the dividend income along the way of about $1.4 million. So in addition, we received a full repayment of our debt investment of $19 million and an additional $1.9 million in success fee income. Therefore our original $6 million equity investment, generated approximately a 5.5x return on that equity and this is including the dividends that we have received. So it’s representative of what we try to do here and hopefully we can continue making these types of investments. So state of Venyu is actually the fourth exit of our management supported buyout investments since June of 2010. These 4 investment events over the years have generated about $54.5 million in realized gains and about $13.1 million in other income so total increase to net assets of about $67.6 million. So it is important to note that these transactions have helped to put us in an accumulated net realized gain position over the life of the fund. So, we have been able to preserve shareholder capital on a realized basis, since inception and through a major recession. So from a strategic tax standpoint, we have also been able to utilize all remaining past tax losses and increased shareholder capital. Now as a reminder these tax losses we remember incurred in 2008 and 2009, when a former lender had required us to sell a number of performing syndicated loans at a substantial realized loss and then to pay off their loan and this was during the recession period. So, with a continuing growth in operating income and these recent gains, this has allowed our Board yesterday actually to declare a special onetime dividend of $0.05 per common share, which is payable in late November to shareholders and to increase our monthly dividend amount by 20% to $0.06 per share and this occurred of course and has been announced at our recent Board meeting which was in the October. So, turning the balance of the portfolio; at September 30 on a cost basis, 74% of our assets consisted of debt investments of approximately $263 million and 26% or roughly $92 million were equity type securities, which we hope and look forward to of course producing these capital gains. And as I have mentioned in previous calls, there are a number of factors at any time that could effect this ratio of debt to equity which includes loan payoffs and if whether or not we have converted a loan to equity or vice versa. For this September quarter, our total interest-bearing debt portfolio produced a 12.6% cash yield which is up slightly from 12.5% in the prior quarter. Interest-bearing debt is our primary source of cash to pay our dividends. Additionally we often have success fees of the component of our debt instruments. Success fees I have mentioned before are contractually due upon a sale of a portfolio company although the portfolio company may pay it early. During this quarter we recognized $2.2 million in success fees and as mentioned earlier in this call $1.9 million was from the Venyu sale. So as of September 30, approximately 72% of our interest-bearing debt has associated success fees, which has it roughly at average contractual rate of about 3.2% per annum. Currently the success fees owed to us aggregate approximately $15.1 million which is roughly $0.57 per share. So generally we do not accrue these success fees on our balance sheet though we do report on them in the written part of our report to shareholders and there is no guarantee of course that we will be able to collect all the success fees or have any control over their timing. Now one of the equity securities we own are generally not producing current cash income on a regular basis. We do expect that equity to appreciate over time and therefore add to the shareholder value. As noted earlier our 4 portfolio companies sales have generated about $54.5 million in realized gains and $13.1 million in other income for total increase to our net assets of about $67.6 million. So as our portfolio builds, our goal is to continue increasing the interest and the dividend income from our investments and increase the dividend payout to our shareholders. At the same time we hope that our assets will appreciate through growth in the equity value of the stocks that we own. So into this end we do continue to actively monitor and manage our portfolio which helps us keep the companies operationally sound and preserve and increase shareholder capital. Just turning to how we go about finding of course these opportunities and generally we obtain these opportunities by partnering with the management teams, other sponsors in the purchase of a business. Our ability to provide this combination of debt and equity is a competitive advantage and gives the seller a high degree of comfort that the purchase will happen. The sources we do concentrate on for these buyout opportunities are generally independent sponsors, middle market investment bankers and middle market private equity firms. In addition, we may find opportunities from time-to-time, where we provide capital to a business owner, who is not seeking to sale the company outright, but may sell a portion of the company and then use additional capital to grow the business. In terms of the actual fund for the quarter ending September 30th, we've closed an one new investment, this was in August, when we invested $20 million in Schilling, Inc. through a combination again of the debt and equity securities. Schilling which is originated about 30 years ago as a premier provider of high quality specialty toys and this indeed is a company we purchased with an independent sponsor. Subsequent to the quarter end though we invested $16.3 million and the company called Alloy Die Casting, again through a combination of debt and equity. Alloy Die Casting is a manufacturer of high quality, finished aluminum and zinc castings for aerospace, defense, aftermarket automotive and industrial applications. In this case, our affiliated fund Gladstone Capital Corporation participated as a co-investor by providing $7 million of the same debt and equity financing and on the same terms as Gladstone Investment. Further we receive full repayment of our debt investments in Channel Technologies Group, LLC in an aggregate amount of $16.2 million. This triggered a success fee payment, which was in the amount of roughly $800,000. Simultaneously we invested $1.3 million in additional preferred and common equities securities in Channel. So at this point our investment in Channel is represented as equity and our debt has been paid down. In addition we sold the stock in a one portfolio company, Auto Safety House, otherwise known as ASH to certain members of its management team. This sale resulted in a realized loss of approximately $11.4 million and we received a modest cash amount in the transaction, however we did retain a $5 million accruing revolving credit facility which indeed paying currently. So at the end of the quarter with all of this activity we had, we were left with $354 million invested in portfolio companies at cost. The pipeline for new transactions is very good and that we are active with our marketing and our deal generating activity. We are finding many opportunities that will fit our investment parameters and these are where valuations relative to earnings before interest, tax, depreciation and amortization are at multiples of roughly 6x to 6.5x. We obviously do see higher multiple valuations but we try to tend to avoid these and we do believe that our marketing efforts and our presence in the marketplace will allow us to continue on the growth trend that we have been exhibiting over the last few years. So in summary, our goal for this fund is to maximize distribution to shareholders while achieving the solid growth of both equity values and the income producing assets in the portfolio through investments in the lower middle market company buyout arena. And David that concludes my part of the presentation.

Alright. Good report, that was a great quarter. We are excited about the future of this company. Now let’s hear from the CFO and Treasurer, David Watson on the fund’s financial performance for this quarter. David?

Thanks David. Good morning everyone. As Dave Dullum noted, we had a big win with the sale of Venyu. This transaction generated approximately $24.8 million in realized gains along with $3.2 million in fee and dividend income which helped enable us to have a really strong quarter. However, I think it’s important to note, that if one excludes the impact of the Venyu sale from our financials, we still had a solid quarter with 5.2% net investment income growth quarter-over-quarter. So with these overriding thoughts in mind, I will get into the details. Regarding our balance sheet, at the end of the September quarter we had $347 million in assets consisting of $287 million in investments at fair value, $47 million in cash and cash equivalents and $13 million in other assets. Included in the cash and cash equivalents is $25 million U.S. treasury securities purchased through the use of borrowed funds at quarter end to satisfy our assets diversification requirements. The amount of these T-bills that we have had to purchase has generally been coming down consistently over the past year. And I am happy to report that we would have passed the diversification requirements this quarter without purchasing any T-bills. However we will continue to utilize the purchase of T-bills until we are 100% confident with our margins of error on the test. So moving to our liabilities, we had $106 million, consisting of $40 million in terms preferred stock, $34 million in borrowings outstanding on our 3 year credit facility, $5 million in secured borrowings, $22 million borrowed with a short term loan and $5 million in other liabilities. In all as of September 30, 2013 we had $241 million in net assets or $9.12 per common share. So we are less than 1 to 1 leverage on our senior secured borrowings. Also mentioned in previous calls, in June we increased the commitment amount on our line of credit from $70 million to $105 million and extended the maturity approximately 6 months to April 30, 2016. So between the extension and expansion on our line of credit and the significant proceeds from the Venyu sale, we feel we are well capitalized for the rest of fiscal year to continue making successful investments for our shareholders. Currently, we have investments at fair value of $288 million, cash of $8.5 million, $17 million in borrowings on our $105 million credit facility and $5 million in secured borrowings. We believe this to be a safe balance sheet for a company like ours and we do believe that our overall risk profile is low. As for the income statement, for the September quarter end total investment income was $11.4 million versus $7.4 million in the prior quarter, total expenses including credits were $5.1 million versus $3.3 million in the prior quarter leaving net investment income of $6.2 million versus $4 million for the prior quarter an increase of 54.4%. This was primarily due to the $1.9 million of success fees and $1.4 million in dividend income related to the sale of Venyu which was partially offset by an increase of the incentive fee expense by $1.4 million compared to last quarter. However as discussed early, it is important to note that excluding the impact of the Venyu sale, net investment income increased approximately 5.2% quarter over quarter and including an increase in interest income of 7.3% quarter over quarter. In total, our net investment income which was $0.24 per common share increased 60% over the prior quarter of $0.15 per common share. As I have mentioned in prior calls, we think it is important to take a moment to touch on the significant steady growth that we have had in our portfolio in the income since we restarted our origination efforts in late 2010. The year-over-year net growth rate since the time in the size of our weighted average interest bearing assets has been 25.5%. The year over year net growth rate over the same period in the amount of cash interest income recorded has been 30.1%. In addition our weighted average yield on interest-bearing debt investments has increased to 12.6% in the current quarter, up from 11.3% in late 2010. We believe this positive growth in debt investments alone has positioned this company well for the future and, in part, has enabled us to increase our dividend rate on our common stock by 50% over the same period. Let's turn to realized and unrealized changes in our assets. Realized gains and losses come from actual sales or disposals of investments. Unrealized appreciation and depreciation comes from our requirement to mark our investments to fair value on our balance sheet with the change in fair value from one period to the next recognized in our income statement. Unrealized appreciation and depreciation is a non-cash event. Regarding our realized activity during the 3 months ended September 30, 2013, we recorded a realized gain of $24.8 million associated with the aforementioned sale of Venyu. There was no realized activity in the prior quarter. As for our unrealized activity, the net unrealized depreciation of our entire portfolio for the quarter ended September 30, 2013, was approximately $15.7 million. This included the reversal of $17.4 million in aggregate unrealized appreciation related to the Venyu sale. Excluding the reversal we had $1.7 million in net unrealized appreciation for the 3 months ended September 30, 2013. This unrealized appreciation was primarily due to increased equity valuations in several of our portfolio companies because of increased portfolio company performance and increases in certain comparable multiple views to estimate the fair value of our investments. Last quarter, we experienced $11.4 million in depreciation primarily due to decreased equity valuations in several of our portfolio companies because of decreased portfolio company performances and decreases in certain comparable multiples used to estimate the fair value of our investments. So our entire existing portfolio has had its fair value as a percentage of cost decreased over the quarter due to the sale of Venyu which had a significant amount of unrealized appreciation as of June 30, 2013. For the September quarter-end, our entire remaining portfolio with fair value at 81.1% of cost, down from 85.7% of cost at last quarter. Now let’s turn to net increase, decrease and net assets from operations. This term is a combination of net investment income, unrealized net appreciation or depreciation and realized gains and losses. For the September 2013 quarter-end, this number was an increase of $14.9 million or $0.57 per share versus a decrease of $6.5 million or $0.25 per share in the June quarter. The quarter-over-quarter change is primarily due to the realized gain and related reversal or previously recorded unrealized appreciation upon realization recognized as part of the Venyu sale. All of our portfolio companies are current in payment except for one which continues to remain on non-accrual. As Dave previously mentioned, subsequent to quarter-end we sold ASH to its management team which should result in the remaining $5 million debt investment to go on accrual status in the quarter ending December 31, 2013. Regarding interest rate risk, approximately 82% of our loans have variable rates, but they all have a minimum or floor in the rate charge due to the low interest rates that we have experienced over the last several years these floors have minimized the negative impact on our ability to make distributions. The weighted average floor on our variable rate loans is 2.8% with an average margin of 9.7% resulting in an all-in average rate of 12.5%. The remaining 18% of our loans are fixed with an average rate of 12.6%. One final note on taxes and our distributions before I turn the call over to David. Over the last 3.5 years our net investment income per share has been $2.42 which has outpaced the distributions that we have made to our common shareholders by $0.43 per share or 21%. This has largely been driven by income generated by our equity investments. Our Board has maintained and continues to maintain a conservative distribution policy where we want to ensure we earn our dividend. Given that RICs generally have to distribute at least 90% of the taxable ordinary and capital gains we have utilized in the past and will continue to do so for the foreseeable future Section A55A of the IRS code which allows us in effect to carry forward a reasonable portion of our income. This balance as of March 31, 2013 was $3.1 million and it has increased significantly since then given our increased performance into the new sales during the first 6 months of fiscal year ending March 31, 2014. So with this as a backdrop, our desire to be tax efficient and a steady increase in our performance, the board not only increased our monthly sustainable distribution rate by 20% to $0.06 per common share a month, but also declared a one-time special distribution of $0.05 per share payable in November. We look forward to maintaining all this momentum and increasing shareholder value. And now I will turn the call back over to David.

Alright. That was a great report David Watson and I hope each of our listeners will read our press release and also obtain a copy of the quarterly report called a 10-Q which has been filed with the SEC and can be accessed on our website at www.gladestoneinvestment.com it’s also on the SEC website. With our quarter ending September 30, the major news for the quarter was the sale Venyu which has been touched on several times now. And the continued investment in new portfolio companies that we think for the rest of the fiscal year will continue to be a good time to invest. Given the liquidity generated from the Venyu sale and the expansion of our line of credit from $70 million to $105 million this year and with the addition of 2 new lenders, we have room to borrow under the line. So we are looking for new investment opportunities and continue to move forward. This is really a fabulous time right now and has a great opportunity for the future. On the other hand as we always mention people ask us about what’s going on in the business world and we are still worried about the economy, it’s not growing, I think there is still hope. And here is the problem that we are in today, difficult times to invest because there is so many externalities as they're called, external things that are in the mix. We ask questions about these things every time before we invest and unfortunately we don’t have a good answer for any of them because they are beyond our control. We are still worried that oil prices could spike, they are in great shape now. We had a lot of excess oil being recovered and the natural gas supply is increasing as well, so hopefully that one's out of the way for a while. And there are massive oil and gas reserves in the US, but we worry that the US government will not let businesses develop them. High gas prices for our cars and trucks and every business in the United States. So we have that one in the back of our mind, we don’t worry about it quite as much as we use to. We are still worried about inflation, the decision by Congress and the President of the United States to continue to spend more than we collect in money, will ultimately cause serious inflation. It is just a bad idea to say that we can borrow and spend our way into prosperity. That socialistic theory has been disproven here in the United States over many years in the past and hundreds of other countries over a long period of time. Also note that the spending by the federal government is still out of control, the government cannot continue to borrow and spend as much money as they're doing today. We are now borrowing about $0.43 of every dollar that they spend and it maybe in 2013 when we finally tally it up maybe as much as 50%. The amount of money being spent on the war of Afghanistan obviously is coming down, it hurts our economy, but hopefully we'll be out of that place in 2014. And the terrible news is that some parts of the government want to raise taxes of all kinds. And as we all know that middle class pays the bulk of the taxes and they will be hit with additional taxes that takes money away from them to spend and that hurts the economy. I'm just hopeful that Congress will not raise taxes again as they did last year. Trade deficit with China, I keep mentioning this every time, because it's just terrible. China continues to subsidize their industries to the disadvantage of our businesses and this means our companies can’t compete with them on a level plain field and we must have somebody in the government that will stand up to China and keep them from continuing to cheat in the way that they are doing it. The stagnation in the housing industry may be coming to an end, it looks pretty good, although I guess it's not growing as much as it was in the beginning of the year. At the end of the day, at this point it's a lot of the increase in housing buying is from those funds that have been set up to buy houses and rent them out. And now they seem to be even building houses for the rental marketplace. I'm not sure how this will work out, but it's good to see houses taken off the sale side of the market. We see the economic problems in the eurozone, thank goodness we don't have a lot of investments. Our investments aren't selling into the Europe. So we have good news there. We are not getting hurt by that. They seem to be coming back and some of the countries seem to be struggling, but still coming back and that's good news for the world economy. I’m worried about the unemployment in the United States, it's far too high. Numbers used by the government and reported in the popular press don’t really include all of those who are working part-time, but are seeking full-time work nor does it include those that have stopped looking for work. More realistically the unemployment rate in the U.S. is probably around 15% which is just way too high. Despite of all these negatives the small business based in the United States today is not a disaster zone as it was 2 or 3 years ago. However the number of -- one statistic that is very troublesome is the number of new small businesses that are starting up is the lowest in about 20 years and this will hurt us in the long-term because those businesses won’t be around to grow. The lingering recession is having an impact on a few of our portfolio companies, but like most companies in the U.S. some of our portfolio companies have not seen an increase in revenue or backlog, however there is a whole lot of them that are seeing good increases and a few others that are seeing great increases. It’s a very uneven economy out there today. Let’s turn to something that’s much more fun to talk about, the monthly distributions declared by the Board of Directors of $0.06 per month for October, November and December of 2013. This is a run rate of about $0.72 a year which is 20% increase over the prior quarter. Also in October 2013 the distribution was bit of a milestone for us and that it was our 100th consecutive monthly common distribution that we've made since our initial public offering. Lastly the Board of course declared that special bonus dividend of $0.05 per common share. I don’t know how that will factor into the price. Right now it seems not to be doing too much. The Board will meet in January to consider and vote upon a dividend for January, February and March of 2014. Current distribution rate for our common stock with the common stock price at about $7.14 is about 10% yield now. So pretty much the stock has not performed even though we've increased the dividend and that’s a bit worrisome because we are just paying a 10% dividend rather than an 8% dividend. Our monthly distribution of $7.125 for our term preferred stock which translates into about $1.78 annually. The term preferred stock has a closing marketplace of about $26.20 or yield about 6.9%. Folks please go to the website and sign-up for email notification service. We don’t send out junk mail just news on your company. So go to www.gladstoneinvestment.com, that's the site. You can also follow us on Twitter using the name Gladstonecomps and find us on Facebook under the keyword, the Gladstone Companies. And now folks as far as we can see and we only can see about 6 months out everything look great right now for this company. The economy is not strong, but we’re continuing to pick up good investments. Those new investments now we hope will come out, as well as Venyu and some of our other triggers and wins. And before I turn to questions just want to let you know that some of the folks around the office keep talking about buying some shares in this company. So we may watch for that as we go forward. And now Keith would you come on and let’s hear some questions from our analysts and some of our loyal shareholders.

[Operator Instructions]. And the first question comes from the Mickey Schleien with Ladenburg.

Question first for David Gladstone, this year the volume in the middle market loans and debt has been driven to a great extent by refinancings, but I wanted to get your sense of how the M&A market is developing, particularly given that the equity markets are all-time highs and we are seeing expansion of valuation and that may motivate some folks to sell?

Mickey, this comes up a lot around the office in talking. The way I look at the market and I will let David Dullum speak to it in just a minute is that there is anywhere from 200,000 to 250,000 businesses that gets sold every year and half of those are really small businesses that are almost people just buying a job. There is another 50% of that say around a 100,000. Of that 100,000, 20,000 to 25,000 of those are what I call high growth companies that may have a technology component or some kind of great expansion component, those are in very high demand. The LBO funds are all looking for those because they love to buy them in year 1 and sell them in year 3 after they pumped up the growth rate to the next LBO fund or even to a public company. There is a group of maybe 60,000 or so sales every year, some of those are problem situations, but there is a number of those that are good steady growing companies and we love that segment of the marketplace. So we don’t end up competing with the LBO funds that like to go in and out real quick, we end up buying those with management teams and hopefully those are steady growers over a period of time, but that’s sort of an overview the way I see the marketplaces. Dave Dullum, why don’t you speak to that as well.

Thanks for the question. The way I would respond to that as it relates to GAIN obviously, as I mentioned before we really work hard at trying to find those opportunities where we bring of course the debt and the equity, mainly the sub debt because your point, which I believe and is well taken, is that leverage so to speak is not only somewhat inexpensive but also we are seeing multiples of leverage that are again reaching levels that we saw some years ago in some cases even in excess of 5x. We are going to have a hard time competing in say options where other private equity firms let’s say are able to put equity, get 5x or more of leverage from other funds. But where we do well then and obviously the deals that we have done as you have seen and what we talk about is where we are bringing that leverage along with the equity. And so that is our so to speak advantage, which is why we generally are not going to participate too often in options. We look at them certainly and in fact somebody closed deals there and we will close deals in that regard, but again it’s generally going to be smaller options and where our advantage is at work. But having said that to your point there is a pretty robust market we feel. There is lot of opportunities out there, we just have to keep finding those that fit our profile and that’s what we work hard on. Does that help?

Yes, that’s a very complete answer. David Gladstone, towards the end of your prepared remarks, I think you alluded to a potential share repurchase program, is management going to ask the Board for authorization repurchase shares at the next meeting?

We've talked about it at the Board meeting but didn’t make any decision. The real problem for us is we don’t have a huge amount of cash and so those companies that have lots of cash, example being Apple, for example with its billions of dollars of cash are being pressured to and use that cash to buy back shares and we just don’t have that. So the real problem for us is do you want to borrow short-term to buy back shares, and it’s a pretty difficult decision especially since in our regulatory environment we really need in one respect to make sure that we don’t get near those ratios. The reason for selling shares last year at below net asset value was to make sure that we were getting pretty close, and as you know the volatility that we have on our valuations of these private companies could sink you one quarter, if you remember when Bernanke made the wrong statements and all the marketplaces went down. We for that quarter went down substantially. We could have busted our covenants with the banks. We could have done a lot of things. So for us, the worry is getting too close and when you are in a highly regulated environment as we are both under the 1940 Act as well as under at IRS guidelines and then the bank guidelines, it becomes very difficult to make that decision to raise debt money to buy back equity. But we haven't ruled it out, but we haven't ruled it in either.

Just a couple of housekeeping questions, then I'll get back in the queue. I wanted to understand the impact of ASH this quarter. So it has the cost basis of about $16 million which you’ve written down. So you’re going to reverse that and then recognize on $11 million realized loss. Is that how it's going to work?

Let's have David Watson answer that.

Sure. As a backdrop we sold the ASH to certain members of the existing management team there. And we are going to be recognizing in the December 31 quarter, a realized loss of approximately $11.4 million, but we have retained a $5 million debt revolving note which is now currently paying interest. And as you recall, ASH has been a non-accrual for gosh 4 plus years and its fair value has been at zero for the last several years. So we think now that with the current management team at ASH which is by the way generating positive EBITDA, I think with the ownership change, a reduction in the debt load we're best positioned to ASH for success and best positioned us to be able to at least receive a -- some of our capital back over time from a fully depreciated assets.

And so you’re going to reverse the $16 million unrealized loss that you’ve taken on over the last few years?

Well, the $5 million debt piece will get fair valued at 12/31 and through our evaluation process, we don’t know where that will end up, but yes we will be reversing at least $11.4 million in depreciation.

Okay. And then one last housekeeping question and I apologize just there are so many companies reporting and hard to get through all the numbers, but I am having a hard time footing to your portfolio on a cost basis because you started -- at the end of June you had a portfolio of rounding of $360 million at cost, you made purchases which was Schilling, of $20 million, you sold Venyu for $32 million and then the press release and then cash flow looks like you received principal repayments of $19 million which would leave us at $329 million, but the balance sheet is showing $354 million. Am I missing something here?

I would encourage you to look at page, I believe 44, of the 10-Q, it’s in the liquidity and capital resources section. It provides -- it is for the 6 months ended September 30, ‘13, but provides a roll forward of our investment portfolio from 3/31 through 09/30 and you can see the activity in there.

Did you say page 44?

Yes.

[Operator Instructions]. We have no additional questions at the present time.

All right. Thank you, Keith. And thank you all for calling in. And again, we’ll see you in 3 months. That's the end of this call.

Thank you. That does conclude today’s teleconference. You may now disconnect your phone lines. Thank you for participating and have a nice day.