PHILADELPHIA, Nov. 7, 2018 /PRNewswire/ -- FS Investment Corporation FSIC, a publicly traded business development company focused on providing customized credit solutions to private middle market U.S. companies, announced its operating results for the quarter ended September 30, 2018, and that its board of directors has declared a special distribution and its fourth quarter 2018 regular distribution.
Financial Highlights for the Quarter Ended September 30, 20181
- Net investment income of $0.23 per share, compared to $0.21 per share for the quarter ended September 30, 2017
- Adjusted net investment income of $0.24 per share, compared to $0.21 per share for the quarter ended September 30, 20172
- Total net realized gain of $0.12 per share and total net change in unrealized depreciation of $0.41 per share, compared to a total net realized loss of $0.07 per share and a total net change in unrealized appreciation of $0.21 per share for the quarter ended September 30, 2017
- Paid cash distributions to stockholders totaling $0.19 per share3
- Total purchases of $184.5 million versus $223.4 million of sales and repayments
- Net asset value of $8.64 per share, compared to $8.87 per share as of June 30, 2018
"We are pleased with the origination opportunities the FS/KKR partnership has produced and the credit discipline we've exhibited in the current lending environment," said Michael Forman, Chairman and Chief Executive Officer of FSIC. "We remain focused on successfully completing the merger with Corporate Capital Trust before year-end and positioning the company for long-term success."
Declaration of Special and Regular Distributions for Fourth Quarter 2018
FSIC's board of directors has declared a special cash distribution of $0.09 per share and a regular cash distribution for the fourth quarter of $0.19 per share. The special cash distribution will be paid on or about December 3, 2018 to stockholders of record as of the close of business on November 19, 2018. The regular cash distribution will be paid on or about January 2, 2019 to stockholders of record as of the close of business on December 12, 2018.
Summary Consolidated Results | |||||
Three Months Ended | |||||
(dollars in thousands, except per share data) | September 30, 2018 | June 30, 2018 | September 30, 2017 | ||
Total investment income | $94,519 | $95,575 | $103,691 | ||
Net investment income | 56,082 | 45,955 | 50,648 | ||
Net increase (decrease) in net assets resulting from operations | (11,340) | (31,338) | 85,398 | ||
Net investment income per share | $0.23 | $0.19 | $0.21 | ||
Adjusted net investment income per share2 | $0.24 | $0.19 | $0.21 | ||
Total net realized and unrealized gain (loss) per share | $(0.28) | $(0.32) | $0.14 | ||
Net increase (decrease) in net assets resulting from operations | $(0.05) | $(0.13) | $0.35 | ||
Stockholder distributions per share3 | $0.19000 | $0.19000 | $0.22275 | ||
Net asset value per share at period end | $8.64 | $8.87 | $9.43 | ||
Weighted average shares outstanding | 239,495,341 | 242,801,446 | 245,678,745 | ||
Shares outstanding, end of period | 239,154,069 | 240,602,753 | 245,725,416 | ||
(dollar amounts in thousands) | As of | As of | |||
Total fair value of investments | $3,537,252 | $3,926,234 | |||
Total assets | 3,698,713 | 4,104,275 | |||
Total stockholders' equity | 2,066,861 | 2,284,723 | |||
Portfolio Highlights as of September 30, 2018
- Total fair value of investments was $3.5 billion.
- Core investment strategies4 represented approximately 100% of the portfolio by fair value as of September 30, 2018, including 93% from direct originations and 7% from opportunistic investments. Broadly syndicated/other investments represented less than 1% of the portfolio by fair value.
- Gross portfolio yield prior to leverage (based on amortized cost and excluding non-income producing assets)5 was 11.1%, compared to 11.1% as of June 30, 2018.
- Total commitments to direct originations (including unfunded commitments) made during the third quarter of 2018 was $250.6 million in 9 companies, 6 of which were existing portfolio companies.
- Approximately 2.7% of investments were on non-accrual based on fair value.6
Total Portfolio Activity | ||||||||
Three Months Ended | ||||||||
(dollar amounts in thousands) | September 30, 2018 | June 30, 2018 | September 30, 2017 | |||||
Purchases | $184,495 | $240,443 | $183,384 | |||||
Sales and redemptions | (223,419) | (350,253) | (255,483) | |||||
Net portfolio activity | $(38,924) | $(109,810) | $(42,099) | |||||
Portfolio Data | As of September 30, 2018 | As of December 31, 2017 | ||||||
Total fair value of investments | $3,537,252 | $3,926,234 | ||||||
Number of Portfolio Companies | 92 | 100 | ||||||
Average Annual EBITDA of Portfolio Companies | $92,500 | $85,700 | ||||||
Weighted Average Purchase Price of Debt Investments | 99.5% | 99.5% | ||||||
% of Investments on Non-Accrual (based on fair value)6 | 2.7% | 0.2% | ||||||
Asset Class (based on fair value) | ||||||||
Senior Secured Loans — First Lien | 70% | 64% | ||||||
Senior Secured Loans — Second Lien | 4% | 5% | ||||||
Senior Secured Bonds | 5% | 4% | ||||||
Subordinated Debt | 10% | 13% | ||||||
Collateralized Securities | 1% | 1% | ||||||
Equity/Other | 10% | 13% | ||||||
Portfolio Composition by Strategy (based on fair value)4 | ||||||||
Direct Originations | 93% | 92% | ||||||
Opportunistic | 7% | 7% | ||||||
Broadly Syndicated/Other | 0% | 1% | ||||||
Interest Rate Type (based on fair value) | ||||||||
% Variable Rate | 72.2% | 69.4% | ||||||
% Fixed Rate | 17.3% | 17.8% | ||||||
% Income Producing Equity/Other Investments | 2.5% | 2.3% | ||||||
% Non-Income Producing Equity/Other Investments | 8.0% | 10.5% | ||||||
Yields (based on amortized cost)5 | ||||||||
Gross Portfolio Yield Prior to Leverage | 9.6% | 9.6% | ||||||
Gross Portfolio Yield Prior to Leverage — Excluding Non-Income | 11.1% | 10.5% | ||||||
Direct Origination Activity | |||||
Three Months Ended | |||||
(dollar amounts in thousands) | September 30, 2018 | June 30, 2018 | September 30, 2017 | ||
Total Commitments (including unfunded commitments) | $250,578 | $163,261 | $199,157 | ||
Exited Investments (including partial paydowns) | (125,119) | (288,451) | (169,035) | ||
Net Direct Originations | $125,459 | $(125,190) | $30,122 | ||
Direct Originations Portfolio Data | As of September 30, 2018 | As of December 31, 2017 | |||
Total Fair Value of Direct Originations | $3,277,054 | $3,606,608 | |||
Number of Portfolio Companies | 73 | 75 | |||
Average Annual EBITDA of Portfolio Companies | $89,500 | $68,600 | |||
Average Leverage Through Tranche of Portfolio Companies — Excluding Equity/Other and Collateralized Securities | 5.7x | 4.9x | |||
% of Investments on Non-Accrual (based on fair value)6 | 2.9% | — | |||
Three Months Ended | |||||
New Direct Originations by Asset Class | September 30, 2018 | June 30, 2018 | September 30, 2017 | ||
Senior Secured Loans — First Lien | 85% | 92% | 85% | ||
Senior Secured Loans — Second Lien | 15% | — | 2% | ||
Senior Secured Bonds | — | — | — | ||
Subordinated Debt | — | — | 13% | ||
Collateralized Securities | — | — | — | ||
Equity/Other | — | 8% | — | ||
Average New Direct Origination Commitment | $27,842 | $14,842 | $49,789 | ||
Weighted Average Maturity for New Direct | 3/19/2024 | 7/16/2024 | 5/5/2023 | ||
Gross Portfolio Yield Prior to Leverage (based on | 9.6% | 11.5% | 9.6% | ||
Gross Portfolio Yield Prior to Leverage (based on Excluding Non-Income Producing Assets5 | 9.6% | 11.5% | 9.6% | ||
Gross Portfolio Yield Prior to Leverage (based on | 10.2% | 10.5% | 12.0% | ||
Leverage and Liquidity as of September 30, 2018
- Debt to equity ratio of 75%, based on $1.56 billion in total debt outstanding and stockholders' equity of $2.07 billion. FSIC's weighted average effective interest rate (including the effect of non-usage fees) was 4.59%
- Cash and foreign currency of approximately $100.0 million and availability under its financing arrangements of $633.0 million, subject to borrowing base and other limitations
- Seventeen unfunded debt investments with aggregate unfunded commitments of $178.4 million and one unfunded equity commitment with an unfunded commitment of $71 thousand
Conference Call Information
FSIC will host a conference call at 10:00 a.m. (Eastern Time) on Thursday, November 8, 2018, to discuss its third quarter financial results. All interested parties are welcome to participate. You can access the conference call by dialing (877) 472-8671 and using the conference ID 8464429 approximately 10 minutes prior to the call. The conference call will also be webcast, which can be accessed from the Investor Relations section of FSIC's website at www.fsinvestmentcorp.com under Presentations and Reports.
A replay of the call will be available for a period of 30 days following the call by visiting the Investor Relations section of FSIC's website at www.fsinvestmentcorp.com under Presentations and Reports.
Supplemental Information
An investor presentation of financial information will be made available prior to the call in the Investor Relations section of FSIC's website at www.fsinvestmentcorp.com under Presentations and Reports.
About FS Investment Corporation
FS Investment Corporation FSIC is a publicly traded business development company ("BDC") focused on providing customized credit solutions to private middle market U.S. companies. FSIC seeks to invest primarily in the senior secured debt and, to a lesser extent, the subordinated debt of private middle market companies to achieve the best risk-adjusted returns for its investors. FSIC is advised by FS/KKR Advisor, LLC. For more information, please visit www.fsinvestmentcorp.com.
About FS/KKR Advisor, LLC
FS/KKR Advisor, LLC ("FS/KKR") is a partnership between FS Investments and KKR Credit that serves as the investment adviser to six BDCs, including FS Investment Corporation, FS Investment Corporation II, FS Investment Corporation III, FS Investment Corporation IV, Corporate Capital Trust, Inc. and Corporate Capital Trust II.
FS/KKR seeks to leverage the size of its platform, differentiated origination capabilities and expertise in capital markets to maximize returns and preserve capital for investors.
FS Investments is a leading asset manager dedicated to helping individuals, financial professionals and institutions design better portfolios. The firm provides access to alternative sources of income and growth and focuses on setting industry standards for investor protection, education and transparency. FS Investments is headquartered in Philadelphia, PA with offices in New York, NY, Orlando, FL and Washington, DC. Visit www.fsinvestments.com to learn more.
KKR Credit is a subsidiary of KKR & Co. Inc., a leading global investment firm that manages multiple alternative asset classes, including private equity, energy, infrastructure, real estate and credit, with strategic manager partnerships that manage hedge funds. KKR aims to generate attractive investment returns for its fund investors by following a patient and disciplined investment approach, employing world-class people, and driving growth and value creation with KKR portfolio companies. KKR invests its own capital alongside the capital it manages for fund investors and provides financing solutions and investment opportunities through its capital markets business. References to KKR's investments may include the activities of its sponsored funds. For additional information about KKR & Co. Inc. KKR, please visit KKR's website at www.kkr.com and on Twitter @KKR_Co.
Forward-Looking Statements and Important Disclosure Notice
This announcement may contain certain forward-looking statements, including statements with regard to future events or the future performance or operations of FSIC. Words such as "believes," "expects," "projects," and "future" or similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors could cause actual results to differ materially from those projected in these forward-looking statements. Factors that could cause actual results to differ materially include changes in the economy, risks associated with possible disruption in FSIC's operations or the economy generally due to terrorism or natural disasters, future changes in laws or regulations and conditions in FSIC's operating area, and the price at which shares of FSIC's common stock trade on the New York Stock Exchange. Some of these factors are enumerated in the filings FSIC makes with the SEC. FSIC undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
The press release above contains summaries of certain financial and statistical information about FSIC. The information contained in this press release is summary information that is intended to be considered in the context of FSIC's SEC filings and other public announcements that FSIC may make, by press release or otherwise, from time to time. FSIC undertakes no duty or obligation to update or revise the information contained in this press release. In addition, information related to past performance, while helpful as an evaluative tool, is not necessarily indicative of future results, the achievement of which cannot be assured. Investors should not view the past performance of FSIC, or information about the market, as indicative of FSIC's future results.
Other Information
The information in this press release is summary information only and should be read in conjunction with FSIC's quarterly report on Form 10-Q for the quarterly period ended September 30, 2018, which FSIC filed with the U.S. Securities and Exchange Commission (the "SEC") on November 7, 2018, as well as FSIC's other reports filed with the SEC. A copy of FSIC's quarterly report on Form 10-Q for the quarterly period ended September 30, 2018 and FSIC's other reports filed with the SEC can be found on FSIC's website at www.fsinvestmentcorp.com and the SEC's website at www.sec.gov.
Certain Information About Distributions
The determination of the tax attributes of FSIC's distributions is made annually as of the end of its fiscal year based upon its taxable income and distributions paid, in each case, for the full year. Therefore, a determination as to the tax attributes of the distributions made on a quarterly basis may not be representative of the actual tax attributes for a full year. FSIC intends to update stockholders quarterly with an estimated percentage of its distributions that resulted from taxable ordinary income. The actual tax characteristics of distributions to stockholders will be reported to stockholders annually on Form 1099-DIV.
The timing and amount of any future distributions on FSIC's shares of common stock are subject to applicable legal restrictions and the sole discretion of its board of directors. There can be no assurance as to the amount or timing of any such future distributions, including the special distribution referenced herein.
FSIC may fund its cash distributions to stockholders from any sources of funds legally available to it, including proceeds from the sale of shares of FSIC's common stock, borrowings, net investment income from operations, capital gains proceeds from the sale of assets, non-capital gains proceeds from the sale of assets and dividends or other distributions paid to it on account of preferred and common equity investments in portfolio companies. FSIC has not established limits on the amount of funds it may use from available sources to make distributions. There can be no assurance that FSIC will be able to pay distributions at a specific rate or at all.
Contact Information:
Investor Relations Contact
Marc Yaklofsky
marc.yaklofsky@fsinvestments.com
FS Investments Media Team
Marc Yaklofsky
media@fsinvestments.com
Income Statement | Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Investment income | ||||||||||||||||
Interest income | $ | 73,344 | $ | 82,349 | $ | 226,071 | $ | 230,115 | ||||||||
Paid-in-kind interest income | 9,940 | 8,430 | 27,092 | 22,899 | ||||||||||||
Fee income | 4,342 | 5,005 | 9,788 | 34,081 | ||||||||||||
Dividend income | 345 | 21 | 7,700 | 21 | ||||||||||||
From non-controlled/affiliated investments: | ||||||||||||||||
Interest income | 898 | 3,448 | 4,549 | 10,485 | ||||||||||||
Paid-in-kind interest income | 1,353 | 550 | 5,226 | 1,855 | ||||||||||||
Fee income | 20 | 1,232 | 20 | 1,263 | ||||||||||||
From controlled/affiliated investments: | ||||||||||||||||
Interest income | 1,273 | 966 | 3,797 | 3,407 | ||||||||||||
Paid-in-kind interest income | 3,004 | 1,690 | 6,869 | 4,324 | ||||||||||||
Total investment income | 94,519 | 103,691 | 291,112 | 308,450 | ||||||||||||
Operating expenses | ||||||||||||||||
Management fees | 14,259 | 18,038 | 47,426 | 54,772 | ||||||||||||
Subordinated income incentive fees | — | 12,662 | 22,905 | 37,426 | ||||||||||||
Administrative services expenses | 1,125 | 750 | 2,601 | 2,226 | ||||||||||||
Accounting and administrative fees | 210 | 254 | 713 | 774 | ||||||||||||
Interest expense | 20,671 | 19,885 | 61,506 | 58,941 | ||||||||||||
Directors' fees | 227 | 277 | 997 | 822 | ||||||||||||
Other general and administrative expenses | 1,945 | 1,177 | 5,156 | 3,791 | ||||||||||||
Total operating expenses | 38,437 | 53,043 | 141,304 | 158,752 | ||||||||||||
Management fee waiver | — | — | (2,776) | — | ||||||||||||
Net expenses | 38,437 | 53,043 | 138,528 | 158,752 | ||||||||||||
Net investment income | 56,082 | 50,648 | 152,584 | 149,698 | ||||||||||||
Realized and unrealized gain/loss | ||||||||||||||||
Net realized gain (loss) on investments: | ||||||||||||||||
Non-controlled/unaffiliated investments | 23,888 | (24,767) | 60,273 | (87,361) | ||||||||||||
Non-controlled/affiliated investments | 7 | 6,551 | (10,068) | 6,856 | ||||||||||||
Controlled/affiliated investments | — | — | 12 | (52,879) | ||||||||||||
Net realized gain (loss) on foreign currency | 5,993 | (19) | 6,090 | 165 | ||||||||||||
Net change in unrealized appreciation (depreciation) on | ||||||||||||||||
Non-controlled/unaffiliated investments | (104,254) | 29,820 | (203,228) | 149,622 | ||||||||||||
Non-controlled/affiliated investments | 7,610 | 16,951 | (18,993) | (979) | ||||||||||||
Controlled/affiliated investments | 5,753 | 7,408 | (11,940) | 7,041 | ||||||||||||
Net change in unrealized appreciation (depreciation) on secured | — | 3 | — | (7) | ||||||||||||
Net change in unrealized gain (loss) on foreign currency | (6,419) | (1,197) | (4,483) | (4,923) | ||||||||||||
Total net realized and unrealized gain (loss) | (67,422) | 34,750 | (182,337) | 17,535 | ||||||||||||
Net increase (decrease) in net assets resulting from | $ | (11,340) | $ | 85,398 | $ | (29,753) | $ | 167,233 | ||||||||
Per share information—basic and diluted | ||||||||||||||||
Net increase (decrease) in net assets resulting from operations | $ | (0.05) | $ | 0.35 | $ | (0.12) | $ | 0.68 | ||||||||
Weighted average shares outstanding | 239,495,341 | 245,678,745 | 242,647,216 | 245,117,823 | ||||||||||||
Balance Sheet | September 30, 2018 | |||||||
(Unaudited) | December 31, 2017 | |||||||
Assets | ||||||||
Investments, at fair value | ||||||||
Non-controlled/unaffiliated investments (amortized cost—$3,352,266 and $3,532,517, respectively) | $ | 3,217,432 | $ | 3,600,911 | ||||
Non-controlled/affiliated investments (amortized cost—$200,981 and $197,468, respectively) | 214,575 | 230,055 | ||||||
Controlled/affiliated investments (amortized cost—$108,778 and $86,861, respectively) | 105,245 | 95,268 | ||||||
Total investments, at fair value (amortized cost—$3,662,025 and $3,816,846, respectively) | 3,537,252 | 3,926,234 | ||||||
Cash | 98,535 | 134,932 | ||||||
Foreign currency, at fair value (cost—$1,411 and $3,685, respectively) | 1,430 | 3,810 | ||||||
Receivable for investments sold and repaid | 27,681 | 3,477 | ||||||
Income receivable | 23,380 | 30,668 | ||||||
Deferred financing costs | 6,213 | 3,459 | ||||||
Deferred merger costs | 3,422 | — | ||||||
Prepaid expenses and other assets | 758 | 1,695 | ||||||
Total assets | $ | 3,698,671 | $ | 4,104,275 | ||||
Liabilities | ||||||||
Payable for investments purchased | $ | 1,447 | $ | 1,978 | ||||
Credit facilities payable (net of deferred financing costs of $2,341 and $3,179, respectively) | 474,700 | 638,571 | ||||||
Unsecured notes payable (net of deferred financing costs of $925 and $1,402, respectively) | 1,075,615 | 1,073,445 | ||||||
Stockholder distributions payable | 45,481 | 46,704 | ||||||
Management fees payable | 14,259 | 15,450 | ||||||
Subordinated income incentive fees payable | — | 12,871 | ||||||
Administrative services expense payable | 817 | 294 | ||||||
Interest payable | 17,667 | 22,851 | ||||||
Directors' fees payable | 268 | 276 | ||||||
Other accrued expenses and liabilities | 1,556 | 7,112 | ||||||
Total liabilities | 1,631,810 | 1,819,552 | ||||||
Commitments and contingencies | — | — | ||||||
Stockholders' equity | ||||||||
Preferred stock, $0.001 par value, 50,000,000 shares authorized, none issued and outstanding | — | — | ||||||
Common stock, $0.001 par value, 450,000,000 shares authorized, 239,154,069 and 245,725,416 shares | 239 | 246 | ||||||
Capital in excess of par value | 2,222,598 | 2,272,591 | ||||||
Retained earnings | (155,976) | 11,886 | ||||||
Total stockholders' equity | 2,066,861 | 2,284,723 | ||||||
Total liabilities and stockholders' equity | $ | 3,698,671 | $ | 4,104,275 | ||||
Net asset value per share of common stock at period end | $ | 8.64 | $ | 9.30 | ||||
Non-GAAP Financial Measures
This press release contains certain financial measures that have not been prepared in accordance with generally accepted accounting principles in the United States ("GAAP"). FSIC uses these non-GAAP financial measures internally in analyzing financial results and believes that the use of these non-GAAP financial measures is useful to investors as an additional tool to evaluate ongoing results and trends and in comparing FSIC's financial results with other BDCs.
Non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures, and should be read only in conjunction with FSIC's consolidated financial statements prepared in accordance with GAAP. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures has been provided in this press release, and investors are encouraged to review the reconciliation.
Reconciliation of Non-GAAP Financial Measures1 | |||
Three Months Ended | |||
September 30, 2018 | June 30, 2018 | September 30, 2017 | |
GAAP net investment income per share | $0.23 | $0.19 | $0.21 |
Plus capital gains incentive fees per share | — | — | — |
Plus excise taxes per share | — | — | — |
Plus one-time expenses per share7 | 0.01 | — | — |
Adjusted net investment income per share2 | $0.24 | $0.19 | $0.21 |
1) | Per share data was derived by using the weighted average shares of FSIC's common stock outstanding during the applicable
|
2) | Adjusted net investment income is a non-GAAP financial measure. Adjusted net investment income is presented for all
|
3) | The per share data for distributions reflects the amount of distributions paid per share of our common stock to stockholders of
|
4) | See FSIC's quarterly report on Form 10-Q for the three months ended September 30, 2018 for a description of FSIC's
|
5) | Gross portfolio yield represents the expected annualized yield of FSIC's investment portfolio based on the composition of the
|
6)
| Interest income is recorded on an accrual basis. See FSIC's quarterly report on Form 10-Q for the three months ended
|
7) | FSIC's one-time expenses for the three months ended September 30, 2018 were $1,297 resulting from the acceleration of the |
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SOURCE FS Investment Corporation
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