HOUSTON, May 10, 2019 /PRNewswire/ -- Stellus Capital Investment Corporation SCM ("Stellus" or the "Company") today announced financial results for its first fiscal quarter ended March 31, 2019.
HIGHLIGHTS | |||
($ in millions, except data relating to per share amounts and number of portfolio companies) | |||
As of | |||
Portfolio results | March 31, 2019 | ||
Total assets | $545.2 | ||
Investment portfolio, at fair value | $517.4 | ||
Net assets | $267.8 | ||
Weighted average yield on debt investments | 10.7% | ||
Net asset value per share | $14.32 | ||
Quarter | Quarter | ||
ended | ended | ||
March 31, 2019 | March 31, 2018 | ||
Portfolio activity | |||
Total investments made, at par | $29.0 | $73.2 | |
Number of new investments(1) | 1 | 4 | |
Repayments and sale of investments, including amortization | $21.8 | $15.6 | |
Number of portfolio companies at end of period | 55 | 52 | |
Operating results | |||
Total investment income | $13.8 | $10.9 | |
Net investment income | $4.3 | $4.5 | |
Net investment income per share | $0.27 | $0.28 | |
Core net investment income(2) | $5.5 | $4.5 | |
Core net investment income per share(2) | $0.34 | $0.28 | |
Realized Gains per share | $0.63 | $0.08 | |
Distributions per share | $0.34 | $0.34 | |
Net increase in net assets from operations | $10.1 | $7.3 | |
Net increase in net assets from operations per share | $0.62 | $0.46 | |
Weighted average shares outstanding during the period | 16,351,032 | 15,952,841 | |
(1) | For the three months endend March 31, 2019, we made investments in one new portfolio company and four existing portfolio companies. For the three months ended March 31, 2018, we made investments in four new portfolio companies and four existing portfolio companies. |
(2) | Core net investment income, as presented, excludes the impact of capital gains incentive fees. The Company believes presenting core net investment income and the related per share amount is a useful supplemental disclosure for analyzing its financial performance. However, core net investment income is a non-U.S GAAP measure and should not be considered as a replacement for net investment income and other earnings measures presented in accordance with U.S GAAP. A reconciliation of net investment income in accordance with U.S GAAP to core net investment income is presented in the table below the financial statements. |
"We are pleased to report a strong quarter where core net investment income covered our $0.34 per share dividend and we generated $10.2 million of realized gains. We completed a secondary offering resulting in approximately $38.5 million of net proceeds in the first quarter and an additional $2.8 million in the second quarter, that provides us with additional capacity to grow," said Robert T. Ladd, the Company's Chief Executive Officer.
Portfolio and Investment Activity
We completed the first quarter of 2019 with a portfolio of $517.4 million (at fair value) invested in 55 companies. As of March 31, 2019, our portfolio included approximately 61% of first lien debt, 28% of second lien debt, 5% of unsecured debt and 6% of equity investments at fair value. Our debt portfolio consisted of 91% floating rate investments (subject to interest rate floors) and 9% fixed rate investments. The average size of our portfolio company investments was $9.4 million and our largest portfolio company investment was approximately $22.6 million, both at fair value. The weighted average yield on all of our debt investments as of March 31, 2019 was approximately 10.7%.
During the three months ended March 31, 2019, we made $29.0 million of investments in one new and four existing portfolio companies at par and received $21.8 million from amortization and repayments of certain other investments.
This compares to the portfolio as of December 31, 2018, which had a fair value of $504.5 million invested in 57 companies, comprised of 58% of first lien debt, 30% of second lien debt, 5% of unsecured debt and 7% of equity investments at fair value. The weighted average yield on all of our debt investments as of December 31, 2018 was approximately 10.9%. The debt portfolio consisted of 91% floating rate investments (subject to interest rate floors) and 9% fixed rate investments.
Results of Operations
Investment income for the three months ended March 31, 2019 and 2018 totaled $13.8 million and $10.9 million, respectively, most of which was interest income from portfolio investments.
Operating expenses for the three months ended March 31, 2019 and 2018, totaled $9.5 million and $6.4 million, respectively. For the same respective periods, base management fees totaled $2.2 million and $1.7 million, income incentive fees totaled $1.4 million and $1.0 million, capital gains incentive fees totaled $1.2 million and $0, fees and expenses related to our borrowings totaled $3.7 million and $2.5 million (including interest and amortization of deferred financing costs), administrative expenses totaled $0.4 million for both periods, and other expenses totaled $0.6 million and $0.8 million, respectively.
Net investment income was $4.3 million and $4.5 million, or $0.27 and $0.28 per share of common stock, based on weighted average common stock outstanding for the three months ended March 31, 2019 and 2018 of 16,351,032 and 15,952,841, respectively.
The capital gains incentive fee of $1.2 million for the three months ended March 31, 2019 was accrued for GAAP purposes due to the increase in realized and unrealized gains over the quarter. There can be no assurance that unrealized appreciation or depreciation will be realized in the future. Accordingly, such fees, as calculated and accrued, would not necessarily be payable under the investment advisory agreement, and may never be paid based upon the computation of incentive fees in subsequent periods. Excluding this accrual, net investment income for the three months ended March 31, 2019 would be $5.5 million, or $0.34 per share. There was no such fee accrued for the three months ended March 31, 2018.
The Company's investment portfolio had a net change in unrealized appreciation (depreciation) for the three months ended March 31, 2019 and 2018, of ($4.4) million and $1.5 million, respectively. For the three months ended March 31, 2019 and 2018, the Company had realized gains of $10.2 million and $1.3 million, respectively.
Net increase in net assets resulting from operations totaled $10.1 million and $7.3 million, or $0.62 and $0.46 per share of common stock based on weighted average common stock outstanding for the three months ended March 31, 2019 and 2018 of 16,351,032 and 15,952,841, respectively.
Liquidity and Capital Resources
As of March 31, 2019 and 2018, our credit facilities provided for borrowings in an aggregate amount up to $180.0 and $140.0 million, respectively, on a committed basis. As of March 31, 2019, our credit facility had an accordion feature which allowed for potential future expansion of the facility size to $195.0 million. As of March 31, 2019 and December 31, 2018, we had $76.1 million and $99.6 million in outstanding borrowings under the credit facility, respectively.
For the three months ended March 31, 2019, the Company issued 2,750,000 of additional shares of common stock in connection with a secondary offering. Gross proceeds resulting from the issuance totaled $39.7 million, and underwriting and other expenses related to the offering totaled $1.1 million. For the three months ended March 31, 2019, our operating activities used cash of $3.3 million primarily in connection with purchases and origination of portfolio investments, which was offset by repayments of our investments. For the same period, our financing activities provided cash of $9.6 million, due to the capital raise during the quarter, offset by repayments on our credit facility.
For the three months ended March 31, 2018, our operating activities used cash of $51.8 million, primarily in connection with the purchase and origination of portfolio investments, which was slightly offset by repayments of our investments, and our financing activities provided cash of $72.2 million, due to net borrowings under credit facility.
Distributions
During the three months ended March 31, 2019 and 2018, we declared aggregate distributions of $0.34 per share ($5.7 million and $5.4 million, respectively) 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
On January 4, 2019 we received full repayment on the first lien term loan of EOS Fitness OPCO Holdings, LLC for total proceeds of $3.1 million. We also received a distribution related to our equity of $0.1 million.
On January 7, 2019 we received $0.3 million in full realization on the equity of OGS Holdings, Inc., resulting in a realized gain of $0.2 million.
On February 4, 2019 we invested $8.5 million in the first lien term loan of ASC Communications, LLC, an existing portfolio company.
On February 8, 2019 we invested $12.3 million in the first lien term loan, $1.5 million in the unfunded revolver, and $4.0 million in the unfunded delayed draw term loan of Exacta Land Surveyors LLC, a provider of land surveys and field management services used to facilitate the purchasing, selling, and development of residential real estate in the U.S. Additionally, we invested $1.0 million in the equity of the company.
On February 15, 2019 we received $0.05 million in full realization on the equity of Glori Energy Production, LLC.
On February 28, 2019 we invested an additional $1.4 million in the first lien term loan of Convergence Technologies, Inc., an existing portfolio company. Additionally, we funded $5.4 million under the existing delayed draw term loan and an additional $0.1 million in the equity of the company.
On March 7, 2019 we received $1.4 million in full realization on the equity of Resolute Industrial, LLC, resulting in a realized gain of $0.6 million.
On March 28, 2019 we received full repayment on the second lien term loan of Beneplace, LLC for total proceeds of $5 million.
On March 29, 2019 we received $9.4 million in full realization on the equity of MTC Parent, L.P., resulting in a realized gain of $9.4 million.
Events Subsequent to March 31, 2019
Exercise of Underwriter's Option
On April 11, 2019, we issued 202,149 shares of common stock through the underwriter's partial exercise of their option to purchase additional shares subsequent to our secondary offering. Gross proceeds totaled $2.9 million and underwriting and other expenses totaled $0.1 million. The Company used the net proceeds to pay off a portion of outstanding borrowings under the credit facility.
Portfolio Activity
On April 11, 2019, we invested $8.0 million in the first lien term loan of Munch's Supply LLC, a wholesale distributor of HVAC equipment, parts, and supplies primarily to dealers and contractors. Additionally, we committed $2.2 million in the unfunded delayed draw term loan, and we invested $0.5 million in the equity of the company.
On April 17, 2019, we received full repayment on the second lien term loan of U.S. Auto Sales, Inc. for total proceeds of $4.5 million.
On April 26, 2019, we invested $10.0 million in the first lien term loan of Whisps Brands, an importer of Italian cheese and a leading cheese manufacturer. Additionally, we invested $0.5 million in the equity of the company.
On April 30, 2019, we received full repayment on the second lien term loan of Livingston International, Inc. for total proceeds of $6.8 million.
On May 1, 2019, we invested $4.8 million in the first lien term loan of Exacta Land Surveyors, LLC, an existing portfolio company. Additionally, we invested $0.2 million in the equity of the company.
On May 2, 2019, we received full repayment on the second lien term loan of Magdata Intermediate Holdings, LLC for total proceeds of $15.1 million, including a $0.3 million prepayment fee.
On May 6, 2019, we invested $7.6 million in NS412, LLC, a provider of online curricula for health with a focus on weight loss. Additionally, we invested $0.8 million in the equity of the company.
Credit Facility
The outstanding balance under the credit facility as of May 6, 2019 was $56.8 million.
Dividend Declared
On April 11, 2019, the Company's board of directors declared a regular monthly dividend for each of April, May and June 2019 as follows:
Declared | Ex-Dividend Date | Record Date | Payment Date | Amount per Share | |||||
4/11/2019 | 4/29/2019 | 4/30/2019 | 5/15/2019 | $ | 0.1133 | ||||
4/11/2019 | 5/30/2019 | 5/31/2019 | 6/14/2019 | $ | 0.1133 | ||||
4/11/2019 | 6/27/2019 | 6/28/2019 | 7/15/2019 | $ | 0.1133 | ||||
Conference Call Information
Stellus Capital Investment Corporation will host a conference call to discuss these results on Friday, May 10, 2019 at 10:00 AM, Central 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 855-719-5012 (domestic). Use passcode 8305783. Starting approximately twenty-four hours after the conclusion of the call, a replay will be available through Saturday, May 18, 2019 by dialing (888) 203-1112 and entering passcode 8305783. The replay will also be available on the company's website.
PART I — FINANCIAL INFORMATION | |||||||
STELLUS CAPITAL INVESTMENT CORPORATION | |||||||
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES | |||||||
March 31, | |||||||
2019 | December 31, | ||||||
(Unaudited) | 2018 | ||||||
ASSETS | |||||||
Non-controlled, affiliated investments, at fair value (amortized cost of $0 and $52,185, respectively) | $ | — | $ | 50,000 | |||
Non-controlled, non-affiliated investments, at fair value (amortized cost of $520,096,508 and $502,691,464, respectively) | 517,411,814 | 504,433,668 | |||||
Cash and cash equivalents | 23,843,646 | 17,467,146 | |||||
Receivable for sales and repayments of investments | 212,822 | 99,213 | |||||
Interest receivable | 3,317,929 | 3,788,684 | |||||
Other receivables | 61,551 | 85,246 | |||||
Deferred offering costs | 7,609 | 18,673 | |||||
Prepaid expenses | 346,519 | 344,621 | |||||
Total Assets | $ | 545,201,890 | $ | 526,287,251 | |||
LIABILITIES | |||||||
Notes payable | $ | 47,723,760 | $ | 47,641,797 | |||
Credit facility payable | 74,861,034 | 98,237,227 | |||||
SBA-guaranteed debentures | 146,536,821 | 146,387,802 | |||||
Dividends payable | 2,119,145 | 1,807,570 | |||||
Management fees payable | 972,645 | 2,183,975 | |||||
Income incentive fees payable | 1,634,588 | 1,936,538 | |||||
Capital gains incentive fees payable | 1,242,795 | 81,038 | |||||
Interest payable | 866,559 | 1,863,566 | |||||
Unearned revenue | 394,746 | 410,593 | |||||
Administrative services payable | 442,132 | 392,191 | |||||
Deferred tax liability | 80,554 | 67,953 | |||||
Income tax payable | 51,034 | 316,092 | |||||
Other accrued expenses and liabilities | 476,833 | 115,902 | |||||
Total Liabilities | $ | 277,402,646 | $ | 301,442,244 | |||
Commitments and contingencies (Note 7) | |||||||
Net Assets | $ | 267,799,244 | $ | 224,845,007 | |||
NET ASSETS | |||||||
Common stock, par value $0.001 per share (200,000,000 shares authorized; 18,703,810 and 15,953,810 issued and outstanding, respectively) | $ | 18,704 | $ | 15,954 | |||
Paid-in capital | 266,703,785 | 228,160,491 | |||||
Distributable earnings | 1,076,755 | (3,331,438) | |||||
Net Assets | $ | 267,799,244 | $ | 224,845,007 | |||
Total Liabilities and Net Assets | $ | 545,201,890 | $ | 526,287,251 | |||
Net Asset Value Per Share | $ | 14.32 | $ | 14.09 | |||
STELLUS CAPITAL INVESTMENT CORPORATION | ||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) | ||||||||
For the | For the | |||||||
three | three | |||||||
months ended | months ended | |||||||
March 31, | March 31, | |||||||
2019 | 2018 | |||||||
INVESTMENT INCOME | ||||||||
Interest income | $ | 13,625,399 | $ | 10,730,748 | ||||
Other income | 209,530 | 181,033 | ||||||
Total Investment Income | $ | 13,834,929 | $ | 10,911,781 | ||||
OPERATING EXPENSES | ||||||||
Management fees | $ | 2,222,645 | $ | 1,748,896 | ||||
Valuation fees | 107,322 | 134,410 | ||||||
Administrative services expenses | 405,399 | 351,229 | ||||||
Income incentive fees | 1,373,854 | 968,826 | ||||||
Capital gains incentive fees | 1,161,757 | — | ||||||
Professional fees | 344,340 | 469,138 | ||||||
Directors' fees | 104,000 | 92,000 | ||||||
Insurance expense | 85,697 | 85,697 | ||||||
Interest expense and other fees | 3,674,787 | 2,464,980 | ||||||
Income tax expense | 12,744 | — | ||||||
Other general and administrative expenses | 8,725 | 121,226 | ||||||
Total Operating Expenses | $ | 9,501,270 | $ | 6,436,402 | ||||
Net Investment Income | $ | 4,333,659 | $ | 4,475,379 | ||||
Net realized gain on non-controlled, non-affiliated investments and cash equivalents | $ | 10,246,098 | $ | 1,335,269 | ||||
Net change in unrealized appreciation (depreciation) on non- controlled, non-affiliated investments and cash equivalents | $ | (4,426,898) | $ | 1,466,614 | ||||
Net change in unrealized appreciation on non- controlled, affiliated investments and cash equivalents | 2,185 | 66,667 | ||||||
Provision for taxes on net unrealized gain on investments | $ | (12,601) | $ | - | ||||
Net Increase in Net Assets Resulting from Operations | $ | 10,142,443 | $ | 7,343,929 | ||||
Net Investment Income Per Share | $ | 0.27 | $ | 0.28 | ||||
Net Increase in Net Assets Resulting from Operations Per Share | $ | 0.62 | $ | 0.46 | ||||
Weighted Average Shares of Common Stock Outstanding | 16,351,032 | 15,952,841 | ||||||
Distributions Per Share | $ | 0.34 | $ | 0.34 | ||||
STELLUS CAPITAL INVESTMENT CORPORATION | |||||||
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (unaudited) | |||||||
For the | For the | ||||||
three | three | ||||||
months ended | months ended | ||||||
March 31, | March 31, | ||||||
2019 | 2018 | ||||||
Increase in Net Assets Resulting from Operations | |||||||
Net investment income | $ | 4,333,659 | $ | 4,475,379 | |||
Net realized gain on investments and cash equivalents | 10,246,098 | 1,335,269 | |||||
Net change in unrealized appreciation (depreciation) on non-controlled, non-affiliated investments and cash equivalents | (4,426,898) | 1,466,614 | |||||
Net change in unrealized appreciation on non-controlled, affiliated investments and cash equivalents | 2,185 | 66,667 | |||||
Provision for taxes on unrealized appreciation on investments | (12,601) | — | |||||
Net Increase in Net Assets Resulting from Operations | $ | 10,142,443 | $ | 7,343,929 | |||
Stockholder distributions | $ | (5,734,250) | $ | (5,422,500) | |||
Capital Share Transactions | |||||||
Issuance of common stock | $ | 39,682,500 | $ | 94,788 | |||
Sales load | (935,000) | — | |||||
Offering costs | (202,891) | — | |||||
Partial share transactions | 1,435 | (327) | |||||
Net Increase in Net Assets Resulting From Capital Share Transactions | $ | 38,546,044 | $ | 94,461 | |||
Total Increase in Net Assets | $ | 42,954,237 | $ | 2,015,890 | |||
Net Assets at Beginning of Period | $ | 224,845,007 | $ | 220,247,242 | |||
Net Assets at End of Period | $ | 267,799,244 | $ | 222,263,132 | |||
STELLUS CAPITAL INVESTMENT CORPORATION | ||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) | ||||||||
For the | For the | |||||||
three | three | |||||||
months ended | months ended | |||||||
March 31, | March 31, | |||||||
2019 | 2018 | |||||||
Cash flows from operating activities | ||||||||
Net Increase in net assets resulting from operations | $ | 10,142,443 | $ | 7,343,929 | ||||
Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by (used in) operating activities: | ||||||||
Purchases of investments | (28,573,192) | (71,713,787) | ||||||
Proceeds from sales and repayments of investments | 21,794,726 | 15,618,134 | ||||||
Net change in unrealized depreciation (appreciation) on investments | 4,424,713 | (1,533,281) | ||||||
Increase in investments due to PIK | (41,841) | (152,006) | ||||||
Amortization of premium and accretion of discount, net | (400,064) | (343,739) | ||||||
Deferred tax provision | 12,601 | — | ||||||
Amortization of loan structure fees | 123,807 | 66,223 | ||||||
Amortization of deferred financing costs | 81,963 | 83,196 | ||||||
Amortization of loan fees on SBA-guaranteed debentures | 149,019 | 100,668 | ||||||
Net realized gain on investments | (10,246,098) | (1,335,269) | ||||||
Changes in other assets and liabilities | ||||||||
Decrease (increase) in interest receivable | 470,755 | (864,856) | ||||||
Decrease (increase) in other receivable | 23,695 | (37,647) | ||||||
Decrease (increase) in prepaid expenses | (1,898) | 63,084 | ||||||
Increase in management fees payable | (1,211,330) | (46,226) | ||||||
Increase (decrease) in incentive fees payable | (301,950) | 793,088 | ||||||
Increase in capital gains incentive fees payable | 1,161,757 | — | ||||||
Increase in administrative services payable | 49,941 | 34,694 | ||||||
Decrease in interest payable | (997,007) | (337,193) | ||||||
Increase (decrease) in unearned revenue | (15,847) | 36,685 | ||||||
Decrease in income tax payable | (265,058) | — | ||||||
Increase in other accrued expenses and liabilities | 360,932 | 385,087 | ||||||
Net Cash Used in Operating Activities | $ | (3,257,933) | $ | (51,839,216) | ||||
Cash flows from Financing Activities | ||||||||
Proceeds from the issuance of common stock | $ | 39,682,500 | $ | — | ||||
Sales load for common stock issued | (935,000) | — | ||||||
Offering costs paid for common stock | (191,827) | — | ||||||
Stockholder distributions paid | (5,422,675) | (5,327,712) | ||||||
Borrowings under Credit Facility | 22,250,000 | 86,550,000 | ||||||
Repayments of Credit Facility | (45,750,000) | (9,000,000) | ||||||
Partial share transactions | 1,435 | (327) | ||||||
Net Cash Provided by Financing Activities | $ | 9,634,433 | $ | 72,221,961 | ||||
Net Increase in Cash and Cash Equivalents | $ | 6,376,500 | $ | 20,382,745 | ||||
Cash and cash equivalents balance at beginning of period | 17,467,146 | 25,110,718 | ||||||
Cash and Cash Equivalents Balance at End of Period | $ | 23,843,646 | $ | 45,493,463 | ||||
Supplemental and Non-Cash Activities | ||||||||
Cash paid for interest expense | $ | 4,317,004 | $ | 2,512,086 | ||||
Excise tax paid | 280,000 | 27,717 | ||||||
Shares issued pursuant to Dividend Reinvestment Plan | — | 94,788 | ||||||
Increase in Distribution Payable | 311,575 | 899 | ||||||
Decrease in deferred offering costs | (11,064) | — | ||||||
Reconciliation of Core Net Investment Income | ||||
(Unaudited) | ||||
Quarter | Quarter | |||
ended | ended | |||
March 31, 2019 | March 31, 2018 | |||
Net investment income | $4,333,659 | $4,475,379 | ||
Capital gains incentive fee | $1,161,757 | $- | ||
Core net investment income(2) | $5,495,416 | $4,475,379 | ||
Per share amounts: | ||||
Net investment income per share | $0.27 | $0.28 | ||
Core net investment income per share(2) | $0.34 | $0.28 | ||
(2) | Core net investment income, as presented, excludes the impact of capital gains incentive fees. The Company believes presenting core net investment income and the related per share amount is a useful supplemental disclosure for analyzing its financial performance. However, core net investment income is a non-U.S GAAP measure and should not be considered as a replacement for net investment income and other earnings measures presented in accordance with U.S GAAP. A reconciliation of net investment income in accordance with U.S GAAP to core net investment income is presented in the table below the financial statements. |
Contacts
Stellus Capital Investment Corporation
W. Todd Huskinson, (713) 292-5414
Chief Financial Officer
thuskinson@stelluscapital.com
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SOURCE Stellus Capital Investment Corporation
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