Business Context and Reporting Period
This Form 8-K is filed by Kohlberg Capital Corporation (referred to in metadata as BCP Investment Corp) on December 10, 2009. The filing addresses a critical accounting dispute regarding the valuation of the company's loan portfolio investments under SFAS 157 (Fair Value Measurements) and announces a quarterly dividend.
Key Financial Metrics
The filing does not provide specific revenue, profit, cash flow, or debt figures for the current period. The primary financial disclosure is the declaration of a dividend of $0.20 per share on common stock for the quarter ended December 31, 2009.
Material Changes and Accounting Restatement
The most significant material change is the non-reliance on previously issued financial statements. Deloitte & Touche LLP, the company's independent auditor, advised management that the audit report for the fiscal year ended December 31, 2008, and interim reviews for periods ended March 31, 2009, and June 30, 2009, should no longer be relied upon. Deloitte changed its position regarding the valuation methodology used for the company's investments, concluding that the financial statements contain material misstatements. Consequently, the company has been unable to file its Form 10-Q for the quarter ended September 30, 2009.
Outlook, Risks, and Management Commentary
- Audit Dispute: The company is engaged in ongoing dialogue with Deloitte regarding alternative valuation methodologies. While the company and its third-party valuation firm (Duff & Phelps) believe the original methodology was reasonable, Deloitte now deems it inappropriate under SFAS 157.
- Risk of Restatement: Investors are warned that the financial statements for 2008 and the first two quarters of 2009 should not be relied upon until the valuation issues are resolved.
- Executive Compensation: An amended employment agreement was executed for John M. Stack, setting his annual base salary at $225,000 with a target performance bonus of $175,000.
Investor Verification Checklist
- Verify the status of the ongoing discussions between Kohlberg Capital Corporation and Deloitte regarding SFAS 157 compliance.
- Confirm the timeline for the filing of the delayed Form 10-Q for the quarter ended September 30, 2009.
- Assess the potential magnitude of the "material misstatements" in the 2008 and 2009 financial statements once the new valuation methodology is applied.
- Review the attached press release (Exhibit 99.1) for details on the $0.20 per share dividend declaration.