Stellus Capital Investment Corporation Reports Results for its second fiscal quarter ended June 30, 2019

HOUSTON, Aug. 9, 2019 /PRNewswire/ -- Stellus Capital Investment Corporation SCM ("Stellus" or "the Company") today announced financial results for its second fiscal quarter ended June 30, 2019.

"During the second quarter, we generated realized income of $8.1 million, including a $2.7 million gain, or $0.43 per share compared to our dividend of $0.34 per share. Core and GAAP net investment income were both $0.29 per share.  Year to date we have generated realized income of $22.7 million, including gains of $12.9 million, or $1.29 per share compared to our distributions of $0.68 per share.  Our portfolio, at fair value, increased $13.7 million to $531.1 million which included fundings of $50.4 million and repayments of $37 million," said Robert T. Ladd, Chief Executive Officer of Stellus Capital.

Portfolio and Investment Activity

We completed the second quarter of 2019 with a portfolio of $531.1 million (at fair value) invested in 57 companies.  As of June 30, 2019, our portfolio included approximately 65% of first lien debt, 24% 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 $9.3 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 June 30, 2019 was approximately 9.9%. 

During the three months ended June 30, 2019, we made $50.4 million of investments in four new and three existing portfolio companies at par and received $37.0 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 and 91% floating rate investments (subject to interest rate floors) and 9% fixed rate investments.

Results of Operations

Investment income for the three months ended June 30, 2019 and 2018 totaled $14.2 million and $12.6 million, respectively, most of which was interest income from portfolio investments. 

Operating expenses for the three months ended June 30, 2019 and 2018, totaled $8.8 million and $7.9 million, respectively. For the same respective periods, base management fees totaled $2.3 million and $2.0 million, income incentive fees totaled $1.4 million and $1.3 million, capital gains incentive fees totaled $0.1 million and $0.5 million, fees and expenses related to our borrowings totaled $3.4 million and $3.0 million (including interest and amortization of deferred financing costs), administrative expenses totaled $0.4 million and $0.3 million, income tax totaled $0.3 million and $0.0 million, and other expenses totaled $0.9 million and $0.8 million, respectively.

For the three months ended June 30, 2019 and 2018, net investment income was $5.4 million and $4.7 million, or $0.29 and $0.30 per common share based on weighted average common shares outstanding of 18,883,745 and 15,953,810, respectively.

During the second quarter we generated $2.7 million of realized gains, or $0.14 per share, resulting in total realized gains year to date of $12.9 million, or $0.73 per share.

The capital gains incentive fee of $0.1 million and $0.5 million for the three months ended June 30, 2019 and 2018, respectively, was accrued for GAAP purposes due to the increase in realized and unrealized gains over the quarters.  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 June 30, 2019 would be $5.5 million, or $0.29 per share.  For the three months ended June 30, 2018, net investment income would be $5.2 million, or $ 0.33 per share excluding this accrual.

The Company's investment portfolio had a net change in unrealized appreciation (depreciation) for the three months ended June 30, 2019 and 2018, of ($2.1) million and $1.8 million, respectively.  For the three months ended June 30, 2019 and 2018, the Company had realized gains of $2.7 million and $1.1 million, respectively. 

For the three months ended June 30, 2019 and 2018, net increase in net assets resulting from operations totaled $6.0 million and $7.6 million, or $0.32 per common share and $0.48 per common share, based on weighted average common shares outstanding of 18,883,745 and 15,953,810, respectively. 

Liquidity and Capital Resources

As of June 30, 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 June 30, 2019, our credit facility had an accordion feature which allowed for potential future expansion of the facility size to $195.0 million. As of June 30, 2019 and December 31, 2018, we had $78.8 million and $99.6 million in outstanding borrowings under the credit facility, respectively.

For the six months ended June 30, 2019, our operating activities used cash of $7.9 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 $8.7 million, due to a secondary offering during the period, offset by repayments on our credit facility.

For the six months ended June 30, 2018, our operating activities used cash of $110.4 million, primarily in connection with the purchase and origination of portfolio investments, which was offset by repayments of our investments, and our financing activities provided cash of $106.2 million, due to net borrowings under credit facility and proceeds from the issuance of SBA-guaranteed debentures.

Distributions

During the three months ended June 30, 2019 and 2018, we declared aggregate distributions of $0.34 per share ($6.4 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 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.

On May 15, 2019, we invested $16.3 million in the first lien term loan of Data Centrum Communications, Inc., a provider of point-of-care patient engagement and marketing solutions for pharmaceutical companies. Additionally, we invested $1.0 million in the equity of the company.

On May 15, 2019, we received full repayment on the revolver of Furniture Factory Outlet, LLC, for total proceeds of $2.5 million.

Events Subsequent to June 30, 2019

On July 1, 2019, we invested $17.3 million in the first lien term loan of PCS Software, Inc., a provider of integrated transportation management software for the inland trucking industry. Additionally, we committed $3.8 million in the unfunded delayed draw term loan and $1.5 million in the unfunded revolver. We also invested $0.3 million in the equity of the company.

On July 17, 2019, we invested $16.7 million in the first lien term loan of Integrated Oncology Network, LLC, a provider of radiation oncology center management services. Additionally, we committed $2.8 million in the unfunded delayed draw term loan and $0.6 million in the unfunded revolver.

On July 23, 2019, we invested $0.1 million in the equity of J.R. Watkins Holding, Inc., an existing portfolio company.

Credit Facility

The outstanding balance under the credit facility as of August 7, 2019 was $103.1 million.

Corporate Governance

At our 2019 annual stockholders meeting on July 22, 2019, our stockholders approved a proposal authorizing us to sell shares of our common stock equal to up to 25% of our outstanding common stock at a price below the then current net asset value per share of our common stock in one or more offerings. This authorization will expire on the earlier of our 2020 annual stockholder meeting or July 22, 2020, the one year anniversary of our 2019 annual stockholders meeting. We will need similar future approval from our stockholders to issue shares below the then current net asset value per share any time after the expiration of the current approval. 

Dividend Declared

On July 3, 2019, the Company's board of directors declared a regular monthly dividend for each of July, August, and September 2019 as follows:

Conference Call Information

Stellus Capital Investment Corporation will host a conference call to discuss these results on Friday, August 9, 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 888-254-3590 (domestic).  Use passcode 7207121.  Starting approximately twenty-four hours after the conclusion of the call, a replay will be available through Saturday, August 17, 2019 by dialing (888) 203-1112 and entering passcode 7207121. The replay will also be available on the company's website.

FORWARD-LOOKING STATEMENTS

Statements included herein may contain "forward-looking statements" which relate to future performance or financial condition. Statements other than statements of historical facts included in this press release may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of assumptions, risks and uncertainties, which change over time. Actual results may differ materially from those anticipated in any forward-looking statements as a result of a number of factors, including those described from time to time in filings by the Company with the Securities and Exchange Commission including the final prospectus that will be filed with the Securities and Exchange Commission. The Company undertakes no duty to update any forward-looking statement made herein. All forward-looking statements speak only as of the date of this press release.

 

 

 

 

 

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