Stellus Capital Investment Corporation Reports Results for its third fiscal quarter ended September 30, 2016
Freitag, 04.11.2016 11:05 von PR Newswire
PR Newswire
HOUSTON, Nov. 4, 2016
HOUSTON, Nov. 4, 2016 /PRNewswire/ -- Stellus Capital Investment Corporation (NYSE:SCM) ("Stellus" or "the Company") today announced financial results for its third fiscal quarter ended September 30, 2016.
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HIGHLIGHTS |
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($ in millions, except data relating to per share amounts and number of portfolio companies) |
|||
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As of |
|||
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Portfolio results |
September 30, |
||
|
Total assets |
$369.2 |
||
|
Investment portfolio, at fair value |
$352.7 |
||
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Net assets |
$169.4 |
||
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Weighted average yield on debt investments on accrual |
11.1% |
||
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Net asset value per share |
$13.57 |
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Quarter |
Quarter | ||
|
ended |
ended | ||
|
September 30, |
September 30, | ||
|
Portfolio activity |
|||
|
Total investments made, at par |
$19.9 |
$25.5 | |
|
Number of new investments |
7 |
5 | |
|
Repayments and sale of investments, including amortization |
$24.4 |
$22.5 | |
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Number of portfolio companies at end of period |
43 |
35 | |
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Operating results |
|||
|
Total investment income |
$10.2 |
$8.6 | |
|
Net investment income |
$4.6 |
$3.8 | |
|
Net investment income per share |
$0.37 |
$0.31 | |
|
Realized gain (loss) per share |
($0.07) |
$0.00 | |
|
Regular dividends declared per share |
$0.34 |
$0.34 | |
|
Net increase in net assets from operations |
$9.9 |
($0.6) | |
|
Net increase in net assets from operations per share |
$0.80 |
($0.05) | |
"During the third quarter, our net investment income exceeded dividends paid by $.03 per share," said Robert T. Ladd, Chief Executive Officer of Stellus. "Net asset value of the Company increased during the quarter from $13.12 to $13.57 per share. We continue to experience loan repayments which have resulted in additional fee income. Also, consistent with the first two quarters of 2016, we have been able to substantially replace loan repayments with new investments."
Portfolio and Investment Activity
We completed the third quarter of 2016 with a portfolio of $352.7 million, at fair value, invested in 43 companies. As of September 30, 2016, our portfolio included approximately 32% of first lien debt, 43% of second lien debt, 20% of mezzanine debt and 5% of equity investments at fair value. Our debt portfolio consisted of 76% floating rate investments (subject to interest rate floors) and 24% fixed rate investments. The average size of our portfolio company investments was $8.2 million and our largest portfolio company investment was approximately $22.6 million, at fair value. The weighted average yield on all of our debt investments that were on accrual status as of September 30, 2016 was approximately 11.1%.
During the three months ended September 30, 2016, we made $19.9 million of investments in three new and four existing portfolio companies and received $19.9 million from amortization and repayments of certain other investments. Additionally, we sold a $4.5 million investment for proceeds of $3.6 million, which is booked as a receivable at September 30, 2016.
This compares to the portfolio as of December 31, 2015, which had $349.0 million at fair value, invested in 39 companies comprised of 38% of first lien debt, 38% of second lien debt, 20% of mezzanine debt and 4% of equity investments at fair value. The weighted average yield on all of our debt investments that were on accrual status as of December 31, 2015 was approximately 11.1%. The debt portfolio consisted of 75% floating rate investments (subject to interest rate floors) and 25% fixed rate investments.
Results of Operations
Investment income for the three months ended September 30, 2016 and 2015 totaled $10.2 million and $8.6 million, respectively, most of which was interest income from portfolio investments.
Operating expenses for the three months ended September 30, 2016 and 2015, totaled $5.6 million and $4.8 million, respectively. For the same respective periods, base management fees totaled $1.6 million and $1.5 million, incentive fees totaled $1.1 million and $1.0 million, fees and expenses related to our borrowings totaled $2.0 million and $1.6 million (including interest and amortization of deferred financing costs), administrative expenses totaled $0.2 million for both periods and other expenses totaled $0.7 million and $0.5 million.
Net investment income was $4.6 million and $3.8 million, or $0.37 and $0.31 per common share based on weighted average common shares outstanding for the three months ended September 30, 2016 and 2015, respectively.
The Company's investment portfolio had a net change in unrealized appreciation (depreciation) for the three months ended September 30, 2016 and 2015, of $6.2 million and $(4.6) million, respectively. For the three months ended September 30, 2016 and 2015, the Company had a realized loss of $0.9 million and a realized gain of $2.1 thousand, respectively.
Our net increase (decrease) in net assets resulting from operations totaled $9.9 million and $(0.6) million, or $0.80 and $(0.5) per common share based on weighted average common shares outstanding for the three months ended September 30, 2016 and 2015, respectively.
Liquidity and Capital Resources
As of September 30, 2016 and 2015, our credit facility provided for borrowings in an aggregate amount up to $120 million on a committed basis. As of September 30, 2016, our credit facility had an accordion feature which allowed for potential future expansion of the facility size to $195 million. As of September 30, 2016 and December 31, 2015, we had $107.5 million and $109.5 million in outstanding borrowings under the credit facility, respectively.
For the nine months ended September 30, 2016, our operating activities provided cash of $12.5 million primarily in connection with cash interest received and repayments of our investments, which was slightly offset by the purchase and origination of portfolio investments. For the same period, our financing activities used cash of $14.7 million, due to distributions to stockholders paid during the period.
For the nine months ended September 30, 2015 our operating activities provided cash of $3.3 million, primarily in connection with cash interest received and repayments of our investments, and our financing activities provided cash of $0.7 million, primarily related to the issuance of SBA debentures, which increased from $16 million to $26 million during the quarter.
Distributions
During the three months ended September 30, 2016 and 2015, we declared aggregate distributions of $0.34 per share ($4.2 million) for each quarter. Tax characteristics of all distributions will be reported to stockholders on Form 1099-DIV after the end of the calendar year. None of these dividends are expected to include a return of capital.
Recent Portfolio Activity
New investment transactions and repayments which occurred during the three months ended September 30, 2016 are summarized as follows:
- On July 15, 2016, we made a $2.6 million investment in the first lien term loan of Good Source Solutions, Inc. Additionally, we invested $0.1 million in the equity of the company.
- On August 12, 2016, we received full repayment of the first lien term loan of PE II Apex Environmental, LLC at par plus a 3% prepayment premium for total proceeds of $10.8 million. We also invested an additional $0.2 million in the equity of the company.
- On September 15, 2016, we invested an additional $0.6 million in the first lien term loan of Momentum Telecom, Inc.
- On September 16, 2016, we sold our first lien term loan and equity position in Blackhawk Mining, LLC, for total proceeds of $3.6 million, which is booked at a receivable at September 30, 2016, resulting in a loss of $0.9 million.
- On September 28, 2016, we received full repayment of the first lien term loans in T2 Systems, Inc. and T2 Systems Canada, Inc. at par for total proceeds of $7.3 million.
- On September 29, 2016, we made a $5.3 million investment in the first lien term loan of Energy Labs, Inc. Additionally, we invested $0.5 million in the equity of the company.
- On September 30, 2016, we made a $9.2 million investment in the second lien term loan of KidKraft, Inc.
- On September 30, 2016, we invested an additional $0.9 million in the first lien term loan of Vision Media Management & Fulfillment, LLC.
- Throughout the quarter, Huf Worldwide, LLC drew down $0.4 million on the first lien revolver loan.
Events Subsequent to September 30, 2016
Investment Portfolio
On October 11, 2016, we received full repayment on the second lien and unsecured term loans of NetMotion Wireless, Inc. at par plus a 1% prepayment premium for proceeds of $10.2 million. Additionally, we received proceeds of $1.0 million for the equity in Endpoint Security Holdings, LLC.
On October 21, 2016, we made a $5.9 million investment in the second lien term loan of T.F. Hudgins, Inc. Additionally, we invested $0.25 million in the equity of the company.
On October 24, 2016, the Company received $3.5 million from the sale of Blackhawk Mining, LLC, which was sold during the quarter ended September 30, 2016.
On November 1, 2016, we made a $9.0 million investment in the second lien term loan of Mobileum, Inc. Additionally, we invested $0.75 million in the equity of the company.
Credit Facility
The outstanding balance under the Credit Facility as of November 2, 2016 was $100.3 million.
Conference Call Information
Stellus Capital Investment Corporation will host a conference call to discuss these results on November 4, 2016, at 10:00 a.m. Central Daylight Time. The conference call will be led by Robert T. Ladd, chief executive officer, and W. Todd Huskinson, chief financial officer, chief compliance officer, treasurer, and secretary.
For those wishing to participate by telephone, please dial 888-684-1282 (domestic). Use passcode 8288965. Starting approximately twenty-four hours after the conclusion of the call, a replay will be available through November 12, 2016 by dialing (888) 203-1112 and entering passcode 8288965. The replay will also be available on the company's website.
Contact
Stellus Capital Investment Corporation
W. Todd Huskinson, (713) 292-5414
Chief Financial Officer
thuskinson@stelluscapital.com
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PART I — FINANCIAL INFORMATION | |||||||
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STELLUS CAPITAL INVESTMENT CORPORATION | |||||||
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CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES (unaudited) | |||||||
|
September 30, |
December 31, | ||||||
|
2016 |
2015 | ||||||
|
ASSETS |
|||||||
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Non-controlled, non-affiliated investments, at fair value |
|||||||
|
(amortized cost of $362,534,225 and $364,212,459, respectively) |
$ |
352,701,256 |
$ |
349,017,697 | |||
|
Cash and cash equivalents |
8,640,005 |
10,875,790 | |||||
|
Receivable for sales and repayments of investments |
3,561,582 |
10,000 | |||||
|
Interest receivable |
4,158,012 |
4,720,031 | |||||
|
Deferred offering costs |
— |
261,761 | |||||
|
Accounts receivable |
— |
7,684 | |||||
|
Prepaid expenses |
147,344 |
475,449 | |||||
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Total Assets |
$ |
369,208,199 |
$ |
365,368,412 | |||
|
LIABILITIES |
|||||||
|
Notes Payable, net of deferred financing costs |
$ |
24,518,185 |
$ |
24,381,108 | |||
|
Credit facility payable, net of prepaid loan structure fees |
106,590,075 |
108,197,373 | |||||
|
SBA Debentures, net of prepaid loan fees |
63,260,043 |
63,015,846 | |||||
|
Dividends payable |
1,413,982 |
1,413,982 | |||||
|
Base management fees payable |
1,574,354 |
1,518,779 | |||||
|
Incentive fees payable |
1,437,030 |
607,956 | |||||
|
Interest payable |
408,237 |
570,189 | |||||
|
Unearned revenue |
21,773 |
36,877 | |||||
|
Administrative services payable |
239,576 |
397,799 | |||||
|
Deferred tax liability |
19,607 |
381,723 | |||||
|
Other accrued expenses and liabilities |
319,301 |
195,676 | |||||
|
Total Liabilities |
$ |
199,802,163 |
$ |
200,717,308 | |||
|
Commitments and contingencies (Note 5) |
|||||||
|
Net Assets |
$ |
169,406,036 |
$ |
164,651,104 | |||
|
NET ASSETS |
|||||||
|
Common Stock, par value $0.001 per share (100,000,000 issued and outstanding, respectively) |
$ |
12,480 |
$ |
12,480 | |||
|
Paid-in capital |
180,994,732 |
180,994,752 | |||||
|
Accumulated undistributed net realized loss |
(895,809) |
— | |||||
|
Distributions in excess of net investment income |
(852,791) |
(779,643) | |||||
|
Net unrealized depreciation on investments and cash |
(9,852,576) |
(15,576,485) | |||||
|
Net Assets |
$ |
169,406,036 |
$ |
164,651,104 | |||
|
Total Liabilities and Net Assets |
$ |
369,208,199 |
$ |
365,368,412 | |||
|
Net Asset Value Per Share |
$ |
13.57 |
$ |
13.19 | |||
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STELLUS CAPITAL INVESTMENT CORPORATION | ||||||||||||
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CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) | ||||||||||||
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For the |
For the |
For the |
For the | |||||||||
|
three months |
three months |
nine months |
nine months | |||||||||
|
ended |
ended |
ended |
ended | |||||||||
|
September 30, |
September 30, |
September 30, |
September 30, | |||||||||
|
2016 |
2015 |
2016 |
2015 | |||||||||
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INVESTMENT INCOME |
||||||||||||
|
Interest income |
$ |
9,773,863 |
$ |
8,509,804 |
$ |
28,477,016 |
$ |
25,776,147 | ||||
|
Other income |
428,890 |
93,009 |
816,739 |
231,219 | ||||||||
|
Total Investment Income |
$ |
10,202,753 |
$ |
8,602,813 |
$ |
29,293,755 |
$ |
26,007,366 | ||||
|
OPERATING EXPENSES |
||||||||||||
|
Management fees |
$ |
1,574,354 |
$ |
1,462,024 |
$ |
4,673,568 |
$ |
4,322,488 | ||||
|
Valuation fees |
157,179 |
139,266 |
357,346 |
328,065 | ||||||||
|
Administrative services expenses |
244,303 |
224,836 |
782,230 |
800,863 | ||||||||
|
Incentive fees |
1,110,297 |
954,908 |
3,121,395 |
2,914,633 | ||||||||
|
Professional fees |
177,410 |
92,320 |
564,724 |
454,675 | ||||||||
|
Directors' fees |
73,000 |
76,000 |
251,000 |
260,000 | ||||||||
|
Insurance expense |
119,323 |
119,417 |
355,376 |
354,603 | ||||||||
|
Interest expense and other fees |
2,037,782 |
1,557,629 |
5,932,814 |
4,522,176 | ||||||||
|
Deferred offering costs |
— |
— |
261,761 |
— | ||||||||
|
Other general and administrative expenses |
100,362 |
156,782 |
340,406 |
391,330 | ||||||||
|
Total Operating Expenses |
$ |
5,594,010 |
$ |
4,783,182 |
$ |
16,640,620 |
$ |
14,348,833 | ||||
|
Net Investment Income |
$ |
4,608,743 |
$ |
3,819,631 |
$ |
12,653,135 |
$ |
11,658,533 | ||||
|
Net Realized Gain (Loss) on Investments and Cash Equivalents |
$ |
(898,189) |
$ |
2,146 |
$ |
(895,809) |
$ |
294,863 | ||||
|
Net Change in Unrealized Appreciation (Depreciation) on Investments and Cash Equivalents |
$ |
6,176,947 |
$ |
(4,593,553) |
$ |
5,361,794 |
$ |
(3,216,547) | ||||
|
Net Tax Benefit for Unrealized Appreciation/ Depreciation on investments |
$ |
39,965 |
$ |
147,439 |
$ |
362,116 |
$ |
33,181 | ||||
|
Net Increase (Decrease) in Net Assets Resulting from Operations |
$ |
9,927,466 |
$ |
(624,337) |
$ |
17,481,236 |
$ |
8,770,030 | ||||
|
Net Investment Income Per Share |
$ |
0.37 |
$ |
0.31 |
$ |
1.01 |
$ |
0.93 | ||||
|
Net Increase (Decrease) in Net Assets Resulting from Operations Per Share |
$ |
0.80 |
$ |
(0.05) |
$ |
1.40 |
$ |
0.70 | ||||
|
Weighted Average Shares of Common Stock Outstanding |
12,479,958 |
12,479,962 |
12,479,959 |
12,479,962 | ||||||||
|
Distributions Per Share |
$ |
0.34 |
$ |
0.34 |
$ |
1.02 |
$ |
1.02 | ||||
|
STELLUS CAPITAL INVESTMENT CORPORATION | ||||||
|
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (unaudited) | ||||||
|
For the |
For the | |||||
|
nine months |
nine months | |||||
|
ended |
ended | |||||
|
September 30, |
September 30, | |||||
|
2016 |
2015 | |||||
|
Increase in Net Assets Resulting from Operations |
||||||
|
Net investment income |
$ |
12,653,135 |
$ |
11,658,533 | ||
|
Net realized gain (loss) on investments and cash equivalents |
(895,809) |
294,863 | ||||
|
Net change in unrealized appreciation (depreciation) on investments and cash equivalents |
5,361,794 |
(3,216,547) | ||||
|
Net tax benefit for unrealized appreciation/depreciation on investments |
362,116 |
33,181 | ||||
|
Net Increase in Net Assets Resulting from Operations |
$ |
17,481,236 |
$ |
8,770,030 | ||
|
Stockholder distributions from: |
||||||
|
Net investment income |
(12,726,304) |
(12,726,816) | ||||
|
Total Distributions |
$ |
(12,726,304) |
$ |
(12,726,816) | ||
|
Total increase (decrease) in net assets |
$ |
4,754,932 |
$ |
(3,956,786) | ||
|
Net assets at beginning of period |
$ |
164,651,104 |
$ |
173,949,452 | ||
|
Net assets at end of period (includes $852,791 and $1,847,907 of distributions in excess of net investment income, respectively) |
$ |
169,406,036 |
$ |
169,992,666 | ||
|
STELLUS CAPITAL INVESTMENT CORPORATION | ||||||||
|
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) | ||||||||
|
For the |
For the | |||||||
|
nine months |
nine months | |||||||
|
ended |
ended | |||||||
|
September 30, 2016 |
September 30, 2015 | |||||||
|
Cash flows from operating activities |
||||||||
|
Net increase in net assets resulting from operations |
$ |
17,481,236 |
$ |
8,770,030 | ||||
|
Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by operating activities: |
||||||||
|
Purchases of investments |
(37,392,617) |
(85,108,716) | ||||||
|
Proceeds from sales and repayments of investments |
35,618,611 |
76,333,638 | ||||||
|
Net change in unrealized depreciation (appreciation) on investments |
(5,361,794) |
3,216,547 | ||||||
|
Deferred tax benefit |
(362,116) |
(33,181) | ||||||
|
Increase in investments due to PIK |
(165,110) |
(387,975) | ||||||
|
Amortization of premium and accretion of discount, net |
(830,040) |
(759,387) | ||||||
|
Amortization of loan structure fees |
392,702 |
392,297 | ||||||
|
Amortization of deferred financing costs |
244,197 |
163,619 | ||||||
|
Amortization of loan fees on SBIC debentures |
137,077 |
136,646 | ||||||
|
Net realized (gain) loss on investments |
895,809 |
(294,863) | ||||||
|
Deferred offering cost |
261,761 |
— | ||||||
|
Changes in other assets and liabilities |
||||||||
|
Decrease in interest receivable |
562,019 |
736,112 | ||||||
|
Decrease (increase) in accounts receivable |
7,684 |
(6,988) | ||||||
|
Decrease in prepaid expenses and fees |
328,105 |
278,779 | ||||||
|
Increase in management fees payable |
55,575 |
102,005 | ||||||
|
Increase in incentive fees payable |
829,074 |
7,762 | ||||||
|
Decrease in administrative services payable |
(158,223) |
(211,504) | ||||||
|
Decrease in interest payable |
(161,952) |
(20,273) | ||||||
|
Decrease in unearned revenue |
(15,104) |
(116,869) | ||||||
|
Increase in other accrued expenses and liabilities |
123,625 |
123,073 | ||||||
|
Net cash provided by operating activities |
$ |
12,490,519 |
$ |
3,320,752 | ||||
|
Cash flows from financing activities |
||||||||
|
Proceeds from SBA Debentures |
— |
9,750,000 | ||||||
|
Financing costs paid on SBA Debentures |
— |
(561,437) | ||||||
|
Stockholder distributions paid |
(12,726,304) |
(12,726,816) | ||||||
|
Borrowings under credit facility |
28,250,000 |
86,500,000 | ||||||
|
Repayments of credit facility |
(30,250,000) |
(82,250,000) | ||||||
|
Net cash provided (used) by financing activities |
$ |
(14,726,304) |
$ |
711,747 | ||||
|
Net increase (decrease) in cash and cash equivalents |
(2,235,785) |
4,032,499 | ||||||
|
Cash and cash equivalents balance at beginning of period |
10,875,790 |
2,046,563 | ||||||
|
Cash and cash equivalents balance at end of period |
$ |
8,640,005 |
$ |
6,079,062 | ||||
|
Supplemental and non-cash financing activities |
||||||||
|
Interest expense paid |
$ |
5,315,790 |
$ |
3,844,890 | ||||
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SOURCE Stellus Capital Investment Corporation