Middle market private companies in the Golub Capital Altman Index increased revenues by 5.33% and earnings (defined as earnings before interest, taxes, depreciation and amortization, or "EBITDA") declined by 2.48% during the first two months of the fourth quarter of 2016. This is compared to increases of 4.62% in revenues and a decline of 0.66% in earnings in the third quarter of 2016.

Lawrence E. Golub, CEO of Golub Capital said, "The Golub Capital Altman Index for the fourth quarter of 2016 indicates that the economy is still growing, though we are seeing continued profit margin pressure. Revenue growth in the Consumer sector is strong at 5.50%, as a result of a more confident consumer with additional purchasing power driven by a strong dollar and payrolls, coupled with the unemployment rate at new lows. Weakness in the restaurant sector is driving a modest decline in Consumer sector profits."

Dr. Altman said, "We are seeing a continued earnings slowdown that we have observed for the last three quarters. The latest quarter's results showed an earnings decline of 2.48%, the second consecutive quarterly negative growth in EBITDA. The two sectors leading the downturn were the Healthcare and Information Technology sectors with declines of 2.56% and 2.48%, respectively. Increases in unit labor costs as wages rise faster than productivity and tougher competition from imports due to the strength of the U.S. dollar contribute to these declines. While earnings growth for the Industrials sector was impressive, this sector had relatively low revenue growth year-over-year in the most recent quarter, indicating significant cost cutting in aggregate expenditures." 

The Golub Capital Altman Index, which is produced by Golub Capital in collaboration with renowned credit expert Dr. Edward I. Altman, is the first and only index based on actual sales and earnings data for middle market companies. It measures median revenue and earnings performance from the data of more than 150 private U.S. companies in the loan portfolio of Golub Capital, a leading middle market lender. Reported shortly before public company quarterly earnings season, the index has served as a reliable indicator of the overall growth rates in revenue and earnings of public companies in market indexes such as the S&P 500 and S&P SmallCap 600, as well as quarterly Gross Domestic Product ("GDP"), according to statistical back-testing dating back to 2012, when data began to be tracked.

We believe the results (1) are representative of the general performance of middle market companies, which are a major contributor to U.S. private sector employment, (2) can be easily compared to the performance of the public companies that make up major stock indexes, (3) are relevant to the aggregate economic performance of the U.S. economy, and (4) provide timely information for the investment community.

Importantly, the size and diversity of the Golub Capital loan portfolio ensures that the confidentiality of all company-specific information used in the report is maintained in both the aggregate and industry segment data.

The companies in the Golub Capital Altman Index operate in a wide range of industries, and aggregate results are provided for the total universe and by industry segment. Given the index's limited exposure to Financials, Utilities, Energy and Materials, calculations are made for the public indexes both including and excluding these sectors (for the latter, see charts marked "S&P 500 Adjusted" and "S&P 600 Adjusted").