Good day, ladies and gentlemen. Welcome to the Gladstone Capital Corporation's Fourth Quarter and Year Ended 9/30/2014 Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, today's conference is being recorded. I would now like to introduce your host for this conference call, Mr. David Gladstone. You may begin, sir.

All right. Thank you, Kevin. Nice introduction. Hello and good morning to everyone this morning. This is David Gladstone, Chairman. This is the fourth quarter and fiscal end earnings conference call and we that for shareholders analysts for Gladstone Capital. Common stock is traded on a symbol GLAD and our preferred stock is traded under the symbol GLADO. Thank you all for calling in. We are always happy to talk to shareholders and analysts and wish we do this more often, but it is once a quarter. We like giving updates on our company, our portfolio and the business environment. As always, you have an open invitation visit us here in McLean, Virginia, which is outside of Washington D.C., and please stop by and say hello. You will see some of the team, about 60 people and I think they are the finest in the business. Now, we will hear from our General Counsel and Secretary, Michael LiCalsi. He is also the President of our Administrator and he will make some statements regarding forward-looking statements. Michael?

Good morning, everyone. This conference call may include 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, which we believe to be reasonable. Many of these forward-looking statements can be identified by the use of certain words such as anticipates, believes, expects, intends, will, should, may 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 those factors listed under the caption, Risk Factors, in our 10-K filing and our registration statement as filed with the SEC, all of which can be found on our website at www.gladstonecapital.com or the SEC's website at www.sec.gov. 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, after the date of this conference call, except as required by law. Please note that past performance or market information is not a guarantee of future results. Please take the opportunity to visit our website and sign up for email notification service. We don't send our junk mails, just timely news on your company. You could also find us on Facebook, keyword, The Gladstone Company and follow us on Twitter at Gladstone Comps. I hope our listeners will read our press release issued yesterday and also review our Form 10-K for our year ended September 30, 2014, which we filed yesterday with the SEC. You could access the press release and 10-K on our website at gladstonecapital.com and also on the SEC's website. An audio presentation of this call is also available on our website. Now, we will begin by hearing from Gladstone Capital's President, Bob Marcotte.

Good morning, everyone. Before we get into the performance review of our fourth quarter and fiscal year ended September 30, I would like to provide a short overview of Gladstone Capital. As many of you know, Gladstone Capital is a lending fund of the Gladstone Companies'. We provide loans to privately held U.S.-based businesses in target companies in the lower middle market, which we define as $20 million to $200 million in revenue and $3 million to $15 million in earnings before interest and taxes or EBITDA. We lend the businesses to fund private equity buyouts, make acquisitions, meet growth capital needs or recapitalize or refinance their existing capital structure. We invest in companies with profitable operations, sustainable competitive position in cash flows and experienced management teams. Gladstone Capital is of one of the few firms exclusively focused on cash flow lending to the lower-middle market, and we typically compete on the basis of our experience and ability to reflex our investments to fit the needs and objectives of the business and not rate. We invest in the combination of senior and subordinated securities and sometimes make a small equity co-investment and target to make investments of $8 million to $20 million, but will consider smaller positions in broadly syndicated loans from time-to-time. Our investment focus is to make prudent investments where, which provide accretive returns to our shareholders and support our commitment to maintain our longstanding track record of shareholder distributions. Having set the stage for our business strategy, let's get into the results for the quarter and fiscal year ended September 30, in terms of investment activity, movement in the portfolio credit quality, net investment income and then we will conclude with an update on the market in which we operate. During the quarter ended September 30, 2014,…

Thank you, Bob. Good morning, everyone. I will now review GLAD's financial results and overall portfolio statistics for the quarter and fiscal year end. Starting with the statement of operations for our fourth fiscal quarter of 2014 ended September 30th as compared to our third fiscal quarter ended June 30, 2014. Net investment income was $4.4 million or $0.21 per share, which is a decrease of 12.9% when compared to the prior quarter of $5.1 million or $0.24 per share. Investment income decreased quarter-over-quarter about 14.7%, primarily due to the decrease in other income of $900,000 from higher dividend income and a litigation settlement received in the prior quarter. During the quarter ended September 30, we received $800,000 in success fees as a result of our earlier sale of substantially all of the assets and one large acquisition resulting from escrow proceeds during the 2014 fiscal year. Interest income on debt investments decreased by 6.8% quarter-over-quarter, primarily due to Midwest Metals being on non-accrual, the entire quarter, the five early pay-offs we had during the quarter and reserves placed on interest receivables for certain portfolio of companies. Offsetting the decrease in investment income for the fourth quarter was a decrease in operating expenses of 16.5% as compared to the prior quarter, primarily due to the lower incentive fee and higher incentive fee credit in the current quarter. Of note, we did receive interest payments from ever $700,000 from two of our non-accrual medical companies during our September 30 end. These receipts were not recognized on the income statement, but as a cost basis reduction consistent with our non-accrual policy. Based on our commitment to sustaining shareholder returns, we did credit the incentive fee in our fourth quarter ended September 30 in order to ensure that distributions to stockholders were covered…

All right, thank you so much, Melissa, Bob, Michael, Those were all good reports, I would like to see four more quarters of good reports like that. For quarter ending September 30, 2014, in summary, we had invested about $8.8 million in new oil and gas company and we are excited about that company another $7.1 million in existing oil and gas company. We delivered solid exits above par and recognized other income, realized gains on these exits and with our income totaling about $1 million and we have also maintained a strong portfolio yield of 11.6% quarter-over-quarter. In addition, we have more investments that are in line of getting closed, hopefully some of those will make it by December 31, 2014. We will be report on those of course, but the others that are in the pipeline, I just want to say this company continues to fix the last two problem loan it has. I think the turnaround is coming on strong. I think we will be over it soon and let me ask a question of all of those who follow the business development companies, you know there are many BDCs out there and would you rather have a stock in a BDC like GLAD that is trading below net asset value and every quarter continues to make strong upside potential possible or would you rather have the stock look BDC that is trading above net asset value, has exhausted all its low-cost money from the FDA and is growing in size, so that now has to invest in very large companies and compete with hundreds of other investors not for those flattish deals. I ask you to take a close look at this fund. I think it is on the way to be a very good, strong…

Our first question comes from Greg Mason with KBW.

Great. Good morning, guys, and thanks for that comprehensive overview. I wanted to talk about oil and gas underwriting. You did a couple new deal. Obviously, you like that. Just curious of your thoughts with the recent kind of decline in oil, how you think that impacts your portfolio and how you have underwritten for potential volatility in oil prices?

Both of the investments that we described this quarter, majority of them are in the services end. In the case the SPL, it is much like the deal we closed earlier in the year. It evolved in the measurement and the tracking of oil and gas, which is undoubtedly up and focused on the Permian Basin in the Gulf Coast. Clearly, when you look at both, the drilling activity that has happened and the production outlook under any scenario, there was going to be a lot more out there to track measure and validate, so we view that investment as very much in the back end on production side of curve, and I think that is likely to continue. In the case of one of the other investments, there is one in Francis and that is probably more on the drilling side. A couple of things to note there, that is a very large scale company. There has been a lot of additional strategic investments in that company and it has both, diversified the field that is covered, the services it provides and the customers that it has in its existing portfolio. Order of magnitude, that company is relatively under leveraged and very, very large. It is probably on average three times or four times the typical size we have been doing our business, so the combination of the size, scale, strategic acquisitions and breadth of the operations, they are really diversified out away from what would otherwise be the risk profile of smaller oil and gas company.

That is great. Two more questions on the portfolio. It looks like one of your controlled investments Defiance; the equity increased another $1 million in fair value. It is up like $5 million this year. Can you just give us thoughts on what is going on there and potential for harvesting that gain or do want to keep holding it?

Defiance is performing remarkably. It is continuing to book business since it was taken over at the low end of the cycle. It has the unique set of assets and capabilities; it is serving industrial, manufacturing and industrial production in the Midwest. In fact, it is all EBITDA-driven. Their performance has gone up; their debt has been relatively unchanged since it was taken on. In that particular situation, they have fully exhausted the capacity of their plant. There is no more business that they can logically take on and the nature their plan, which I dates back about 85 years, is such that it is not optimal to achieve the harvesting that you are referring to at the moment. We are in the process of moving that into a new facility, with tremendous streamline efficiencies and growth opportunity and once that is completed, we will entertain pursuing alternative courses for that particular investment.

That's great. Then one last one, it looks like Saunders took a bit of a hit this quarter. Do you think that is temporary in nature or any updates you are willing to give on Saunders?

Saunders, I would say continues to maintain the intellectual property and technical capabilities that are unique in the global providers for the crystal technologies that they can deliver. The challenge has been that has been a lumpy business. If you were to think about it, that is a little bit like a semiconductor equipment manufacturer. It goes through cycles. We, along with our whole lender in that transaction are performing a bottoms up review of the industry and opportunities to try apply better alternative to scale, which something that is essentially a very good technologically-driven business, but yet not generating the growth and revenue momentum that it needs, so our view of that is we are taking some of strategic analysis and we will find alternatives to try to better utilize that technology in the industries that it serves. We feel it is still solid. We just need to us to retool it to better utilize the assets it represents.

Great, guys, thank you for your comments.

Okay. Next question?

[Operator Instructions] I am not showing any further questions at this time.

All right. Thank you very much. We appreciate all of you calling in and that is the end of this call.