BUFFALO, NY -- (Marketwired) -- 03/10/16 -- Rand Capital Corporation (NASDAQ: RAND)
- Net asset value per share of $5.35 at year end, up 5% over prior year end
- Total portfolio value of $36.8 million, up 22% over 2014 year end
- Cash proceeds of approximately $14 million from sale of Gemcor, Rand's largest portfolio company, anticipated to occur in the first quarter of 2016
- 10-year compound annual growth in net asset value per share of 13.5% through year-end 2015
Rand Capital Corporation (NASDAQ: RAND) ("Rand"), a venture capital company that makes primarily equity investments in companies with emerging product, service or technology concepts, announced its results for the 2015 fourth quarter and full year ended December 31, 2015.
Allen F. ("Pete") Grum, President and Chief Executive Officer of Rand Capital, commented, "2015 was an exciting year for Rand on several fronts. First, we invested a record-breaking $7.0 million in promising opportunities, expanding our portfolio and offering equity appreciation potential. Second, we achieved record-breaking investment income of $2.8 million driven by the strong financial performance of our largest portfolio company, Gemcor. Third, we reached a record level of net asset value. Finally, subsequent to year end, we signed an agreement for the sale of Gemcor, one of our most successful portfolio companies to date, with the transaction expected to close in the first quarter of 2016. While we are pleased with these results, we are even more excited about the potential inherent in our existing portfolio and future investments as we effectively put additional capital to work."
Fourth Quarter and Full Year 2015 Financial Highlights
- Achieved $5.35 net asset value (NAV) per share at December 31, 2015, up $0.24 per share, or 5%, over December 31, 2014
- Invested $200,000 during the quarter with a follow-on investment in BeetNPath, LLC
- Completed 23 financing transactions across 16 portfolio companies totaling $7.0 million in 2015
- Increased investment portfolio fair value by 22% over prior year end, to $36.8 million at 2015 year end
- Announced expected sale of Gemcor in first quarter of 2016
Strong Fourth Quarter Results in Record Year-end Net Asset Value
- Rand recorded $4.1 million of pretax unrealized gain relating to its investment in Gemcor II, LLC (www.gemcor.com), a Buffalo-area based, global leader in the development and manufacture of automated fastening systems used by virtually every airframe manufacturer throughout the world. The gain was based on the signed agreement for the sale of Gemcor, announced on January 5, 2016. Rand made its initial investment in Gemcor in 2004. Its equity cost basis is currently $625,000 and it expects to receive gross cash proceeds of approximately $14 million upon completion of the Gemcor sale, anticipated in the first quarter of 2016. At December 31, 2015, Gemcor represented approximately 38% of Rand's total portfolio, with a fair value of $13.8 million.
- In the fourth quarter, Rand made a $200,000 follow-on investment in BeetNPath, LLC (www.grainful.com), an Ithaca, NY-based creator of frozen entrees and side dishes made from 100% whole grain steel cut oats. This investment took the form of Series A-2 Preferred Shares, following Rand's initial investment in 2014.
- In accordance with its valuation policy, Rand also recorded unrealized market value net write-downs of $2.5 million in the fourth quarter of 2015. This included write-downs of $0.6 million for both Intrinsiq Materials, Inc. (www.intrinsiqmaterials.com) and First WaveProducts Group, LLC (www.firstwaveproducts.com) as well as $0.5 million for SciAps, Inc. (www.sciaps.com). The Company determines the fair value of each of its investments in good faith, based on the specific facts and circumstances of each portfolio company, while applying a consistent valuation process. If the factors which led to the reductions in valuation are overcome in future periods, the valuations may be restored.
As of December 31, 2015, Rand's portfolio was valued at $36.8 million and consisted of 31 businesses. A diversified group of investments, the portfolio includes approximately 50% in manufacturing, 22% in software, 14% in healthcare and 14% in a diverse group of other industry categories. The portfolio is comprised of approximately 85% in equity investments and 15% in debt investments.
Liquidity and Capital Resources
Rand is focused on increasing net asset value through capital appreciation and maintaining sufficient cash flow to drive operational leverage.
Cash on hand at December 31, 2015 was $5.8 million. The primary use of cash is for follow-on and new investments to grow the Company's portfolio and net asset value as well as to fund the company's operations.
Strategy Update and Outlook
Rand's strategy has been to expand its net asset value by capitalizing on maturing investments and leveraging the returns to invest in early-stage companies with new or unique products or services that offer competitive advantage and strong growth potential. The Company's unique advantages are its focus on equity appreciation within its portfolio, its ability to provide smaller investments, its network of investment partners and growing opportunities in the undercapitalized, but strengthening markets of upstate New York and surrounding regions.
Mr. Grum concluded, "The 10-year compound annual growth rate of Rand's net asset value per share was 13.5% through the end of 2015. Capitalizing on this success, our growth strategy now entails broadening our network and geographic reach as we evaluate a growing pipeline of investment opportunities. Our goal is to achieve double-digit growth of our net asset value per share on average over the next five to ten years. We are also more committed than ever to being proactive about keeping our investors informed of the progress of our portfolio companies. We continue to be focused on maximizing shareholder value as we drive Rand to the next level."
ABOUT RAND CAPITAL
Rand Capital (NASDAQ: RAND) provides investors the ability to participate in venture capital opportunities through an investment in the Company's stock. Rand is a Business Development Company (BDC), and its wholly-owned subsidiary is licensed by the U.S. Small Business Administration (SBA) as a Small Business Investment Company (SBIC). Rand focuses its investments in early or expansion stage companies with strong leadership that are bringing to market new or unique products, technologies or services that have a high potential for growth. Additional information can be found at the Company's website where it regularly posts information: www.randcapital.com.
Safe Harbor Statement
This news release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements concerning the expected timing and completion of the Gemcor sale transaction, the expected cash proceeds of the transaction to Rand and Rand's plans for those proceeds when and if received. These statements involve known and unknown risks, uncertainties and other factors that could cause the actual results to differ materially from the results expressed or implied by such statements, including general economic and business conditions, the satisfaction or performance by the parties or otherwise of all conditions to closing of the Gemcor sale, and the timing and opportunity for investments of the sale proceeds among others. Consequently, such forward looking statements should be regarded as the Corporation's current plans, estimates and beliefs. The Corporation assumes no obligation to update the forward-looking information contained in this release.
FINANCIAL TABLES FOLLOW
| Rand Capital Corporation and Subsidiary | |||||||||||
| Consolidated Statements of Financial Position | |||||||||||
| December 31, | |||||||||||
| 2015 | 2014 | ||||||||||
| ASSETS | |||||||||||
| Investments at fair value: | |||||||||||
| Control investments (cost of $1,141,472 and $1,347,300, respectively) | $ | 13,916,472 | $ | 10,022,300 | |||||||
| Affiliate investments (cost of $17,663,217 and $15,188,935, respectively) | 14,662,219 | 14,617,378 | |||||||||
| Non-affiliate investments (cost of $8,606,053 and $5,677,241, respectively) | 8,253,709 | 5,665,698 | |||||||||
| Total investments, at fair value (cost of $27,410,742 and $22,213,476,respectively) | 36,832,400 | 30,305,376 | |||||||||
| Cash | 5,844,795 | 13,230,717 | |||||||||
| Interest receivable (net of allowance: 2015: $122,000 and 2014: $128,311) | 215,224 | 165,094 | |||||||||
| Prepaid income taxes | 65,228 | - | |||||||||
| Other assets | 1,804,040 | 1,824,800 | |||||||||
| Total assets | $ | 44,761,687 | $ | 45,525,987 | |||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY (NET ASSETS) | |||||||||||
| Liabilities: | |||||||||||
| Debentures guaranteed by the SBA | $ | 8,000,000 | $ | 8,000,000 | |||||||
| Income tax payable | - | 2,065,795 | |||||||||
| Deferred tax liability | 2,361,186 | 1,838,351 | |||||||||
| Profit sharing and bonus payable | 282,000 | 953,490 | |||||||||
| Accounts payable and accrued expenses | 238,911 | 290,646 | |||||||||
| Deferred revenue | 25,930 | 24,264 | |||||||||
| Total liabilities | 10,908,027 | 13,172,546 | |||||||||
| Stockholders' equity (net assets): | |||||||||||
| Common stock, $.10 par; shares authorized 10,000,000; shares issued6,863,034; shares outstanding of 6,328,538 as of 12/31/15 and 12/31/14 |
686,304 |
686,304 |
|||||||||
| Capital in excess of par value | 10,581,789 | 10,581,789 | |||||||||
| Accumulated net investment gain (loss) | (24,580 | ) | (867,482 | ) | |||||||
| Undistributed net realized gain on investments | 18,262,401 | 18,290,374 | |||||||||
| Net unrealized appreciation on investments | 5,795,237 | 5,109,947 | |||||||||
| Treasury stock, at cost; 534,496 shares as of 12/31/15 and 12/31/14 | (1,447,491 | ) | (1,447,491 | ) | |||||||
| Total stockholders' equity (net assets) (per share: 2015: $5.35, 2014: $5.11) | 33,853,660 | 32,353,441 | |||||||||
| Total liabilities and stockholders' equity | $ | 44,761,687 | $ | 45,525,987 | |||||||
|
Rand Capital Corporation and Subsidiary
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| Consolidated Statements of Operations | |||||||||||||||||||
| For the Quarter Ended December 31, | For the Year Ended December 31, | ||||||||||||||||||
| 2015 | 2014 | 2015 | 2014 | ||||||||||||||||
| Investment income: | |||||||||||||||||||
| Interest from portfolio companies: | |||||||||||||||||||
| Control investments | $ | 16,321 | $ | 23,799 | $ | 77,077 | $ | 112,218 | |||||||||||
| Affiliate investments | 75,806 | 106,163 | 388,135 | 481,649 | |||||||||||||||
| Non-Control/Non-Affiliate investments | 49,363 | 58,761 | 225,897 | 195,681 | |||||||||||||||
| Total interest from portfolio companies | 141,490 | 188,723 | 691,109 | 789,548 | |||||||||||||||
| Interest from other investments: | |||||||||||||||||||
| Non-Control/Non-Affiliate investments | 3,329 | 3,765 | 22,048 | 14,288 | |||||||||||||||
| Total interest from other investments | 3,329 | 3,765 | 22,048 | 14,288 | |||||||||||||||
| Dividend and other investment income: | |||||||||||||||||||
| Control investments | 371,628 | 514,824 | 1,735,934 | 1,549,185 | |||||||||||||||
| Affiliate investments | 221,674 | 108,658 | 345,913 | 198,723 | |||||||||||||||
| Non-Control/Non-Affiliate investments | - | - | - | 2,531 | |||||||||||||||
| Total dividend and other investment income | 593,302 | 623,482 | 2,081,847 | 1,750,439 | |||||||||||||||
| Fee income: | |||||||||||||||||||
| Control investments | 2,000 | 2,000 | 8,000 | 12,000 | |||||||||||||||
| Affiliate investments | 1,416 | 4,399 | 4,666 | 8,866 | |||||||||||||||
| Non-Control/Non-Affiliate investments | 4,250 | 3,251 | 16,667 | 9,334 | |||||||||||||||
| Total fee income | 7,666 | 9,650 | 29,333 | 30,200 | |||||||||||||||
| Total investment income | 745,787 | 825,620 | 2,824,337 | 2,584,475 | |||||||||||||||
| Operating expenses: | |||||||||||||||||||
| Salaries | 149,555 | 147,669 | 598,220 | 590,675 | |||||||||||||||
| Bonus and profit sharing | 122,500 | 981,979 | 122,500 | 936,344 | |||||||||||||||
| Employee benefits | 30,391 | 80,621 | 117,937 | 169,808 | |||||||||||||||
| Directors' fees | 40,000 | 24,000 | 129,000 | 112,500 | |||||||||||||||
| Professional fees | 74,990 | 38,504 | 202,194 | 164,740 | |||||||||||||||
| Stockholders and office operating | 65,601 | 24,066 | 222,431 | 133,505 | |||||||||||||||
| Insurance | 6,132 | 8,100 | 32,086 | 35,709 | |||||||||||||||
| Corporate development | 14,190 | 22,549 | 62,553 | 64,490 | |||||||||||||||
| Other operating | 14,357 | 13,475 | 23,330 | 19,116 | |||||||||||||||
| 517,716 | 1,340,963 | 1,510,251 | 2,226,887 | ||||||||||||||||
| Interest on SBA obligations | 77,568 | 70,439 | 307,028 | 266,099 | |||||||||||||||
| Bad debt expense | - | - | - | 6,311 | |||||||||||||||
| Total operating expenses | 595,284 | 1,411,402 | 1,817,279 | 2,499,297 | |||||||||||||||
| Net investment gain (loss) before income taxes | 150,503 | (585,782 | ) | 1,007,058 | 85,178 | ||||||||||||||
| Income tax (benefit) expense | (98,129 | ) | (28,738 | ) | 164,156 | 63,343 | |||||||||||||
| Net investment gain (loss) | 248,632 | (557,044 | ) | 842,902 | 21,835 | ||||||||||||||
| Net realized (loss) gain on sales and dispositions of investments: | |||||||||||||||||||
| Affiliate investments | (300,000 | ) | - | (300,000 | ) | (617,619 | ) | ||||||||||||
| Non-Control/Non-Affiliate investments | (5,394 | ) | 8,302,495 | 257,531 | 7,855,556 | ||||||||||||||
| Net realized (loss) gain before income taxes | (305,394 | ) | 8,302,495 | (42,469 | ) | 7,237,937 | |||||||||||||
| Income tax (benefit) expense | (104,238 | ) | 2,833,809 | (14,496 | ) | 2,470,453 | |||||||||||||
| Net realized (loss) gain on sales and dispositions of investments | (201,156 | ) | 5,468,686 | (27,973 | ) | 4,767,484 | |||||||||||||
| Net increase (decrease) in unrealized appreciation on investments: | |||||||||||||||||||
| Control investments | 4,100,000 | - | 4,100,000 | 5,336 | |||||||||||||||
| Affiliate investments | (1,986,004 | ) | (300,000 | ) | (2,429,440 | ) | (270,020 | ) | |||||||||||
| Non-Control/Non-Affiliate investments | (534,373 | ) | (1,138,254 | ) | (340,801 | ) | (97,160 | ) | |||||||||||
| Change in unrealized appreciation before income taxes | 1,579,623 | (1,438,254 | ) | 1,329,759 | (361,844 | ) | |||||||||||||
| Deferred income tax expense (benefit) | 736,021 | (494,488 | ) | 644,469 | (114,006 | ) | |||||||||||||
| Net increase (decrease) in unrealized appreciation on investments | 843,602 | (943,766 | ) | 685,290 | (247,838 | ) | |||||||||||||
| Net realized and unrealized gain on investments | 642,446 | 4,524,920 | 657,317 | 4,519,646 | |||||||||||||||
| Net increase in net assets from operations | $ | 891,078 | $ | 3,967,876 | $ | 1,500,219 | $ | 4,541,481 | |||||||||||
| Weighted average shares outstanding | 6,328,538 | 6,338,411 | 6,328,538 | 6,391,175 | |||||||||||||||
| Basic and diluted net increase in net assets from operations per share | $ | 0.14 | $ | 0.63 | $ | 0.24 | $ | 0.71 | |||||||||||
Contacts:
Company:
Allen F. ("Pete") Grum
President and CEO
Phone: 716.853.0802
Email: pgrum@randcapital.com
Investors:
Deborah K. Pawlowski
Kei Advisors LLC
Phone: 716.843.3908
Email: dpawlowski@keiadvisors.com
Source: Rand Capital Corporation
Released March 10, 2016