Gladstone Capital Corp (GLAD) 2010 Q3 法說會逐字稿

Greetings, and welcome to the Gladstone Capital third-quarter 2010 earnings conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. David Gladstone, Chairman and CEO for Gladstone Capital. Thank you. Mr. Gladstone, you may begin.

Good morning, and thank you, Jackie. Thank you all for calling in. This is David Gladstone, Chairman, and this is the quarterly conference call for shareholders and analysts for Gladstone Capital; NASDAQ trading symbol GLAD. And again, thank you all for calling in. We're always so happy to speak with shareholders about our Company and wish we could do this more often. Once a month would be fine, but I guess nobody would call in once a month.

What hope you all take the opportunity to visit our website, www.GladstoneCapital.com, where you can sign up for e-mail notices so you can receive information about the timely information about our Company. And please remember that if you are in the Washington, DC area, you have an open invitation to stop by here in McLean, Virginia and visit us and say hello. This is some of the finest people in the business.

Now I need to read that all-important 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 future performance of the Company. These forward-looking statements inherently involve certain risks and uncertainties and even though they are based on our current plans and we do believe those plans to be reasonable.

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 those factors listed under the caption "Risk Factors" in our 10-Ks and 10-Qs and in our prospectus as filed with the Securities and Exchange Commission and can be found on our website at www.GladstoneCapital.com and at the SEC website.

The Company undertakes no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events, or otherwise.

Well, we are much better off than we were in the past, and we feel pretty good about it. And we'll start off with our President, Chip Stelljes. Chip is the Chief Investment Officer of all the Gladstone Companies, and he'll cover a lot of ground for Gladstone Capital. Chip, take it away.

Thanks, David, and good morning. As most of you know, the difficult economic and small business lending climate continues. It is getting better. We are seeing new investment opportunities and have a number of proposals [about] the Company, so we hope to be telling you about some new investments soon.

We closed one new investment during the quarter ended June 30 for a total commitment of $2 million, of which $400,000 was funded at closing. In addition, we funded $1.8 million in the existing portfolio companies in the form of additional investments or draws on revolver facilities for a total funding of $2.2 million.

During the quarter, we received repayments of approximately $18.5 million due to loan sale payoffs, normal amortization and paydowns of revolvers. So in total, we had a net production decrease in our portfolio of about $16.3 million for the quarter, and the net proceeds were used to pay down our line of credit.

Since the end of the quarter, we made about $2.4 million in additional investments in existing portfolio companies. Additionally, after the end of the quarter, we received $8.7 million in repayments. Currently the amount we owe on our new two-year line of credit is $18.2 million.

We continue to see new investment opportunities with pricing and structures that are attractive. We now have the availability on our line of credit and are actively seeking to make new investments. We continue to explore ways to increase the yield on our existing investment portfolio by refinancing our lower-yielding senior loans with third-party lenders while trying to maintain the higher-yielding junior debt.

This next year should see an increase in the assets we expect to have on our books. At the end of the June quarter, our investment portfolio was valued at approximately $270 million versus a cost basis of $310 million. So, approximately 87% of cost. And although the values did not change materially this quarter, we continue to monitor our portfolio companies' revenues and backlogs to judge where we think the underlying companies are headed.

At the end of the quarter, we had loans with six companies on nonaccrual and a number of other companies experiencing problems that may prevent them from making timely payments in the future. We have taken operating control of all but one of these companies and are working hard to fix the problems and improve their profitability.

On a dollar basis, the loans classified as non-accruing had a cost basis of $29.4 million or about 9.5% of the cost basis of all loans in the portfolio. On a fair value basis, the nonaccruals represent 3.8%.

We continue to have a high concentration of variable-rate loans so that we should participate when rates begin to increase. While our rates are variable, they often have a minimum interest rate or a floor so that declining interest rates are mitigated. Approximately 83% of our loans have floors. However, 8% do not have floors at all. And the short-term rate -- floating rates at all-time lows were generating less income. The remaining 9% of our loans have fixed rates.

The quality of our assets can be measured by our average loan rating for the quarter that just ended. Our risk rating system attempts to measure the probability of default to the portfolio by using a 0 to 10 scale. Zero represents a high probability of default and 10 represents a low probability. Our risk rating system for our non-syndicated loans showed an average rating of 6.5 at June 30, 2010 compared to 7.1 at September 30, 2009.

Average risk rating for the unrated syndicated loans was 7.0 at June 30, 2010, which was unchanged from September 30, 2009. Our rated syndicated loans had an average rating of B2 at June 30, 2010 compared to triple C+ or Caa1 at September 30, 2009.

We believe most of the change in the nonsyndicated loan risk rating resulted from the fact that during the March quarter, we modified our risk rating model to incorporate some additional factors in our qualitative and quantitative analysis. And while the overall process didn't change, we picked the additional factors, enhanced the quality of the risk ratings and reflected our historical experience. So no adjustments were made to prior-period risk ratings as a result of this modification.

While we believe risk ratings are useful, we're always evaluating whether we see changes that might not be picked up by our risk rating system.

In addition to quality of assets, quality of income continues to be good. As discussed before, we don't intend to generate substantial income from paid in kind or original issue discount structures. These generate non-cash income, which is to be accrued for book impact but is not received until much later or, as we all know, sometimes not at all. This income is subject to our 90% payout requirement, so the Company does not receive the cash but has to pay out the income.

As for the marketplace, the second -- senior and second-lien debt marketplace for larger middle market companies continues to improve. At June 30, we had a cost basis of about $9.5 million in these type loans. As I stated earlier, we sold the majority of this portfolio since the middle of 2009.

The market for loans to companies at the lower end of the middle market where we invest most of our capital is seeing some more competition, but not really from banks. Most banks continue a policy of tightened credit standards, especially for companies at the lower end of the middle market. And currently, most of the banks that we talk with are really only willing to make asset based loans to that business segment, although we are seeing increased non-bank lending. Net-net, we still feel we have a great market opportunity.

Loan request pipeline is still good and improving. And now that we have capital, we should be able to show you some good investments over the next six months. Our goal, again, is to be a strong, profitable company rather than the largest company. And with that I'll turn it back over to David.

Okay. Thank you, Chip. That was a good report. I'm glad to see things are turning to the positive, and we all feel much more comfortable today than we did a year ago. And now we will turn from Chip to Gresford Gray, our Chief Financial Officer. Gresford, go ahead.

Thanks, David, and good morning. Before I go through the financials, I would like to highlight a few key points for the quarter.

First, as of June 30, we had investments in 40 companies, which decreased from 41 companies as of March 31. During the quarter, we made one new investment and exited from two investments, of which one was a payoff and the other was a balance write-off.

Second, we entered into an equity distribution agreement with our agent, BB&T Capital Markets, under which we made issuance out to 2 million shares of our common stock.

And third, at the time of this call, we have $18.2 million borrowed on our line, so the availability on our line of credit, coupled with the equity distribution agreement, gives us the ability and the flexibility to deploy more capital for the right opportunities. Now for the detail, I'll start with the balance sheet.

At the end of the March quarter, we had about $284 million in assets, consisting of $270 million in investments at fair value and $14 million in cash and other assets. We borrowed about $29 million cost basis on our line of credit and had about $248 million in net assets. Therefore, we're less than 1 to 1 leverage, and this is a very conservative balance sheet for finance companies, which are usually leveraged much higher. We believe our overall risk profile is very low.

Now turning to the income statement, for the June quarter, net investment income was about $4.4 million versus $5.4 million for the same quarter last year, a decrease of about 19%. The decrease was primarily due to a decline in investment income resulting from the cumulative sale and repayment of loans since June 30 of last year, and lower transaction fees paid by the portfolio companies, which are credited against our base management fees.

Since June 30, 2009, we've had a number of sales and repayments which have not yet been offset by new investments. However, we are seeking new investment opportunities with pricing and structures that are attractive, especially with the capital on our line of credit.

On a per-share basis, net investment income for the quarter was at $0.21 per share as compared to $0.26 per share for the same quarter last year. This was a per-share decrease of about 19%, which, again, were caused by the changes in our balance sheet.

Let's turn to realized and unrealized gains and losses. First, realized gains and losses come from actual sales or disposals of investments. And unrealized appreciation and depreciation come from our requirements to mark our investment to fair value on our balance sheet. With the change in fair value from one period to the next getting recognized in our statement of operations, unrealized appreciation and depreciation is a non-cash event.

For the quarter ended June 30, we had a realized loss of $2.9 million, primarily due to the write-off of one investment, Western Directories.

We had unrealized depreciation of $1.6 million over our entire portfolio, which included the reversal of $2.9 million in unrealized depreciation related to the investment write-off. Excluding reversals, we had $4.4 million in unrealized depreciation for the current quarter, primarily from our control investments.

As of June 30, our entire portfolio is fair valued at 87% of our cost basis. The cumulative unrealized appreciation of our investment does not have an impact on our current ability to pay distributions to stockholders. However, it may be an indication of future realized losses. This could ultimately reduce our income available for distribution.

During the quarter, we had another component of unrealized appreciation or depreciation which related to our credit facility. For the quarter ended June 30, we recorded an unrealized appreciation of $1.8 million based on estimates of value provided by an independent third party.

Now let's turn to net increase/decrease and net assets resulting from operations. Please note that we are talking about weighted average, fully diluted common shares when we use per-share numbers.

For the June quarter, we had net decrease in net assets resulted from operations of $1.8 million versus a net decrease of $0.8 million in the prior year period. This was a negative $0.08 per share for the current quarter versus a negative $0.04 per share for the prior-year quarter. With the continued uncertainty in the current economy and credit market, investors should continue -- expect continued volatility in the aggregate value of our portfolio. And now I'll turn it back over to David.

Okay, Gresford. That was a good presentation. For more details of course, on these financials, I hope the listeners will read our press release. Also, obtain a copy of the quarterly report called a 10-Q, which was filed yesterday at the SEC. You can access the press release and the 10-Q at GladstoneCapital.com, or on the SEC website as far as the 10-Q is concerned.

I think the big news this quarter that we are really back from all the destructive action of the recession. We're actively looking for new investments. I feel and I think the whole team feels very confident, enough to begin putting a lot of new investments on our books and building our income so that we can look forward to increasing our dividend. Of course, we have no guarantee that we're going to be able to do that, but we do have a nice-looking backlog and I think we have an opportunity to increase the asset base that we have today.

We have plenty of room on our line of credit to make new loans with our three lenders. We feel confident that they are behind us. We're going to go out and put some new deals on the books.

Also, we continue to make progress with our portfolio companies as they continue to work their way out of this difficult recession. And I'm much more optimistic today for this Company than I have been in the past two years, maybe even three years now. Our goal for the fiscal year that ends September 30, 2011, is to have a good increase in the dividend. Again, no guarantee, but that's what we're pushing for, is to make the year ending 2011 be a great one for this Company.

Even though we have a nice new line of credit, it's still short-term. It's only two years with a one-year extension. We will eventually need to find long-term credit as well, and to that end, we've been talking to some long-term credit providers and think that in the next six months, the market could provide us with some long-term debt. We would be very excited if we could find a five- or six-year term debt to put on the books as well. Obviously, we need to stock up a lot of the short-term capital first and then replace it with long-term capital.

For our portfolio companies, we still worry that they're not going to be able to get lines of credit or term loans that they need. There are a fair number of regional banks that are making new loans based primarily on assets of the business, the revolving lines of credit that Chip mentioned a little while ago. These are asset-based lenders. They're much more plentiful today than they were in the past. And we were hoping that banks will turn to finance lines of credit as well as term debt for our portfolio company.

Most of the banks, though, are currently only doing short-term, and this is a two-edged sword. It sort of hurts our small business concerns because it can't get cheap long-term debt, but it also gives us an opportunity to lend long-term to these small businesses at a little higher rate than the banks are charged. But we would like to know that during the next six to 12 months, that the marketplace will come back for senior term debt. That is more reasonable.

And I do believe the next six months, things will change, and we will see much more long-term credit be available to our Company as well as our portfolio companies.

We still worry about the normal things. We worry about the oil prices. Oil prices probably will go up as the economy continues to get stronger. We worry about inflation. The decision-makers in Washington, DC keep borrowing and spending, and I would see that as a devaluation of the dollar. Inflation is another way of saying it.

Spending by the federal government is still off the charts. And I don't know, we keep looking at these stimulus packages and see them filled with goodies for many of the supporters of the legislators and not a lot of help for small businesses.

The federal and state levels haven't really helped small businesses at all, and this is a real shame because these small businesses create 80% of the new jobs. So if you were trying to wipe out all of the unemployment, the first place to start would be to help small businesses get the money they need and growth, and they would take care of that problem.

We also see the money spent in Iraq and Afghanistan as hurting the economy. We are all in favor of supporting our troops. They are the true heroes of this period in history. They lay down their lives every day for us, and we wish they would all come home safely.

All this spending means more taxes. And, quite frankly, I don't know that people can stand more taxes, and more taxes will obviously cause the economy to slow even more.

The trade deficit with China and certain other nations is just terrible today. I read that China is back ballooning up in terms of the amount of goods and services they send our way versus what we send their way. This is terrible because China continues to subsidize their industries to the disadvantage of our businesses. They subsidize, for example, oil prices significantly so that businesses in China pay much less for gas and oil than American companies do. And this just means our companies can't compete with them for jobs, and these jobs just leave the US and go to Asia. It's a sad thing to see.

The downturn in the housing industry and the related disaster in the home mortgage defaults continues to hurt the economy, of course. And no one knows how many home mortgages are going to fail. Ultimately, this will stabilize, and I'm hoping that will be soon. It was, after all, the main cause of the recession that we're all in now.

In spite of all those negatives, the industrial base of the US is not a disaster. It's amazing how strong some of these small businesses are that we're seeing today. Our portfolio companies continued to get better. The recession did have an impact and continues to have an impact on all of these small businesses, including our portfolio companies. But thank goodness it hadn't been the kind of disaster that you see in home mortgages or in the auto business.

Now we are seeing tremendous improvements in some of our companies. Others are continuing to work hard to get away from the problems of the recession. I think the last half of 2010, we'll see a lot more progress, and I think by the time the new year comes, we will see a lot of good strength in the economy.

We believe that the downturn certainly is -- that began in 2008 -- certainly is -- at an end now. However, the economy is on an upswing, but however, it's still true that there's still a lot of problems out there in the marketplace.

I think with the economy turning around, we will now have the best two to three years that we're going to have. This will be a great time for us to put assets on the books for the next two, three, four years, so we're very optimistic and feeling very good about everything that's going on.

We're not considering issuing any common stock at this time because the stock price is still too low. But I expect the stock price to increase as we continue to put assets on the books, and hopefully we can raise the dividend.

Our dividend now is $0.07 per share for each of the months that we just declared, July, August, and September. At that distribution rate, with the stock price at, well it closed yesterday at $11.99, that would give you a yield of about 7%, which is a very strong yield considering how strong this Company is today.

I advise you all to please go to the website, GladstoneCapital.com. Sign up for our e-mail notifications. We don't send out junk mail, just news about the Company. And [here] folks, as far as we can see today, the economic conditions are improving. We're getting better each and every day. We think the economy has certainly bottomed out and gaining some strength now, just don't know how fast it will recover. It's certainly the slowest recovery we've seen in the last 15 years in terms of recessions. But I think these next two quarters will be very telling on how quick things are going to move.

Please remember, we are stewards of your money. We're going to stay the course and continue to be conservative in our investment approach. This next year should be a much better year than it's been in the past few years.

And I just want to say again what a good feeling it is to be back in the making loan business. Life is great really here today. And let's stop here, operator, and open it up for some analysts and shareholders who want to ask some questions.

(Operator Instructions). Troy Ward, Stifel Nicolaus.

This is Jonathan filling in for Troy. David, one quick question. Could you talk about how you envision using the 2 million share after-market offering announced in the 10-Q, particularly when you have some significant investment capacity on your credit facility today?

Yes, we just put that in place in case we use a lot of our credit facility and don't have any long-term debt at the end of that. We obviously won't be selling any shares at this price, and there's no reason; we don't need the cash. So we would use our line of credit, which is about $127 million. We've borrowed $18 million on it, so we have plenty of running room to put three, four, five deals on it before we will need to consider either selling some shares or having some long-term debt in place. So no immediate need to do that. We just always put these things in place in case you do need them somewhere down the road.

Okay, great, thank you. And then could you speak to portfolio growth over the next few quarters? This is certainly important to us and your investors. And where do you envision this really going? And what type of assets are you currently looking at in your investment pipeline today?

Chip, why don't you take that one?

Yes, I think it's always hard to forecast. It's very dependent on what opportunities we see come in that we feel comfortable with. We are interested in situations that again are at the lower end of the middle-market, sub $15 million EBITDA deals that are less competitive than at the larger end. We're going to continue to look at the kind of companies that we've looked at in the past, manufacturing, distribution, business services, etc.

But the pipeline looks pretty good, but the marketplace changes. It's changed a lot in the last six or 12 months as the availability of capital, and so I think we're in a good position. We have our offices open -- our Dallas, Chicago, Atlanta, New York, and then obviously here in Washington. So we've got regional feet on the street, but it's just hard to tell what's going to happen and whether we're going to be able to find all the deals that we would like to find. I feel pretty good about it, but there are no guarantees.

We're obviously anxious to put the money to work in good, quality deals that won't cause any problems in the future. But we've got proposals out. Probably the best pipeline we've had in nine months and -- or longer, and so we feel pretty good about it. But until we get a couple of signed term sheets, right now, there are just proposals out.

And Chip, maybe, could you quantify the amount of proposals that you've sent out by dollar amount or dollar range?

Yes, I don't have it. I don't know that I'd feel comfortable even telling you exactly what they are, but there's more than seven proposals outstanding now. And I don't know whether any of those will end up being deals for us, but we're out making proposals and visiting companies and meeting management teams.

Okay. And then the last question, and then I will hop back in the queue. I noticed the KMBQ recently was placed on non-accrual. Could you just give us some color on what happened there and what the prospects are going forward?

Yes, KMBQ is a radio station group out in Alaska, and the Company was actually -- just was not performing the way it needed to perform, and they were continuing to have problems in meeting debt service requirements. The business itself is probably a good business, but we needed to take control of that business through receivership which we did, and so we put it on non-accrual. The business, we think, has some pretty easy fixes to it and can be profitable. So I would hope that we can get that one back on accrual fairly quickly. But we need to put it on non-accrual as we put it into receivership and had our receiver appointed by the court.

But the radio stations are operating. We're looking at alternatives to what to do with the assets, and we continue to operate them or sell phone, etc. But that's the reason we did -- we put that one on non-accrual.

All the advertising, Troy -- all the advertising business went through tremendous problems during the recession, obviously. Actually sales are up at this radio station. And we think the turnaround will be complete; by the time the Christmas ads come through, it should perform much better.

Thank you.

(Operator Instructions). Troy Ward, Stifel Nicolaus.

That was quick. This is Troy, actually. I saw in the 10-Q where there was a footnote where a couple of the investments -- they said something along the lines of fair value was based on what looked like to be a pending sale. And I think the $8 million you announced subsequent was one of those two investments. The other one I think would be Doe & Ingalls. Have you -- or do you still expect a repayment of that in the third quarter?

Gresford is going to take that one.

Yes, Troy, we do expect a payment. We actually expected those to come in prior to filing the Q, but we expect them over the next few weeks or at least during the September quarter.

And I assume that the $8 million you have -- was that the first one that did come in?

What's that one you're referring to, please?

I don't member the name offhand, but it was the other one that was -- that had the footnote. There's Doe & Ingalls, and another investment (multiple speakers)

Yes, Antiox and Doe & Ingalls. Yes, it was Anitox and Doe & Ingalls. That's correct.

Did the Anitox already come in?

No.

I'm sorry?

No; those have not come in yet, but we expect the payment to come in shortly.

Okay, so based on that, I mean that could be another call it $15 million of repayments in the quarter. Is it probably from a modeling perspective, thinking that you're going to have negative portfolio growth at least in the third quarter just because of those repayments?

Well, we've got a couple of deals that could close, but it's just at this point in time, it's hard to say.

Okay. Thanks, guys.

J.T. Rogers, Janney Montgomery Scott.

Good morning. Just wanted to get a sense of what kind of yields and internal rates of return you are expecting on the new investments for the several proposals you had out right now?

Chip, why don't you take that?

Yes, the proposals out now are mostly junior debt proposals, which would incorporate our model of continuing to use floating-rate LIBOR-based with floors that are in the 12% type range. We may do something a little lower than that, but that's where we are headed with it with the deferred pieces. As you know, we tend to use [success fee] rather than pick interest, but it generates a fee to pay at the end when the company is sold.

And then we are proposing warrant positions where it's appropriate. And if we can get -- we continue to focus on high teens type returns, it will sort of depend on what our friends in the business decide they want to propose on these deals too as to whether that ends up being reality. But that's where we are today, and that's where we are finding debt management teams and sponsors are saying, okay, we understand.

It depends on the strength of the company too, J.T. If the company is very strong, you're probably looking at a senior debt that's a stretched senior debt piece that incorporates some lower amount that all in, you're probably talking about 10%, 11%. On the other hand, if you're doing mostly junior debt, you're probably talking about a current pay of 12 with some additional on the back end.

Okay, great. There's been a lot of talk about a coming M&A waiver. Are you seeing any of this in terms of your pipeline? If so, do you have any indication about what this might mean for 2011, calendar 2011?

I would say that 2011 is going to be one of the strongest years around for M&A for the simple reason that the LBO funds still have an enormous amount of equity capital that they haven't invested in. 2011 is probably one of the last years that some of them will have to deploy the capital, so as a result, they're going to deploy it. They're not going to give it back to their limited partners. So my guess is that 2011 will be one of the strongest M&A years out there.

Now, a lot of those people have had trouble raising new funds, so as a result, 2012 may be a slack year. But it's hard to judge when all of those partnerships are going to have their invest-up period. And a lot of the limiteds are very nice to say why don't you add another year; we know that there's a recession. So it may go a little bit longer than I'm saying now.

But J.T., my guess is that from now until next year, this time and certainly until the end of 2011, there's going to be a very [profited] year for M&A at the middle market and lower middle market.

Okay, great. And then in terms of leverage, I know you have $125 million line of credit right now. If you see more availability on senior debt, what sort of leverage level would you be comfortable with for the portfolio?

Yes; for us, we are not heavy into leverage. As you know, we levered up thinking that we could do securitization and ended up not being able to securitize in time for the recession to pull us all down. So we're not going to go through that method any more.

We are talking with some long-term lenders. And we have gone pretty far along in terms of due diligence with one of them. And my guess is that some time before the end of this year, we will get a proposal from them. As you know, most of the long-term lenders have not been active in the finance area. They have not been financing BDCs or any of the finance companies. They have stayed away from them. Insurance companies, for example, have probably put $6 billion to $8 billion to work in non-finance areas, but they've stayed away from the finance areas. At some point in time, they will come back in. And we are seeing several of the folks that we're talking to being very interested in our Company. It's just a wading back in at a slow pace. My guess is we could probably have $25 million, $35 million, maybe even $50 million worth of long-term debt on the books before next year this time, and have used that money to make new loans.

Okay, great. And then just one last question. In terms of credit trends for the companies we -- that are not on nonaccrual, the companies that are still performing, what kind of risk are you -- what portion of the portfolio would you say is at risk? And for the current nonaccruals, do you see any of them coming back on accruing status, I guess besides KMBQ?

Yes, we do see several of them coming back from nonaccrual. Again, we've had some companies that were in the advertising business such as yellow pages or those kind of things. They're very hard to come back from a recession that's this strong. And they have come back very slow. Each quarter, each year, you get some movement back, but you don't have the huge kind of upturn that you would have say in 2001 when the Internet bubble burst and 18 months later, everybody was back in pretty good shape.

This has been the longest drawn-out recession in my memory. And I remember very well the 2000 -- I'm sorry, the 1990, '91, '92 recession era. And so it's very hard to predict right now what's going to happen. But we do see strength, for example, in some of the other companies that we have that are related to advertising; they have come back very nicely. And as a result, we feel very strong about them. It just takes time.

And sometimes it's management. You got to get a new management group in as we did in KMBQ. We needed somebody in that was much more promotional and sales-oriented rather than day-to-day operations-oriented. And I think that company will come back.

And J.T., I would expect more than half of the companies that are on nonaccrual today to not be on non-accrual in six to nine months. But that's, again, just a guess; there's no guarantee.

Okay, great. Thanks a lot.

David West, Davenport & Company.

Good morning. Just a -- well firstly, a clarification. Earlier you talked about the possibility of this quarter getting some prepayments on Doe & Ingalls and Anitox. Would you expect possibly to get some success fees, recognized success fees in relation to those transactions?

I don't think there's any in there, but there may be a small amount. It's just not something we plan on booking this quarter.

Okay. Very good. And then, when you do get the pipeline more active and start making new loans again, do you plan to make press releases around those events?

Well, we haven't done it in the past, and I know we've been criticized over and over for not doing press releases when we do that, so it's under consideration, Dave. I just -- I hate to get in that mode. I sort of look like some of the other companies in this business that were dropping press releases about everything that went on.

Thanks very much.

Other questions?

(Operator Instructions). Thank you, Mr. Gladstone. There are no further questions. I'd like to hand the floor back over to you.

All right. Thank you all for calling in. Again, the mood is upbeat here, and we're feeling like that going forward, this is going to be a great year for us. And we thank you all for being so patient and letting us get everything back to the way we want it before we kick off everything. That's the end of this conference call, and we will see you next quarter.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you all for your participation.