Stellus Capital Investment Corporation Reports Results for Its Third Fiscal Quarter Ended September 30, 2015
/EINPresswire.com/ -- HOUSTON, TX--(Marketwired - November 06, 2015) - Stellus Capital Investment Corporation (NYSE: SCM) ("Stellus" or "the Company") today announced financial results for its third fiscal quarter ended September 30, 2015.
HIGHLIGHTS
($in millions, except data relating to per share amounts and number of
portfolio companies)
As of
September 30,
Portfolio results 2015
----------------------------------------------------------------------------
Total assets $337.0
Investment portfolio, at fair value $323.0
Net assets $170.0 $170.0
Weighted average yield on debt investments 10.6%
Net asset value per share $13.62
Quarter Quarter
ended ended
September 30, September 30,
2015 2014
----------------------------------------------------------------------------
Portfolio activity
Total investments made, at par $25.5 $7.0
Number of new investments 5 3
Repayments of investments, including
amortization $22.5 $1.2
Number of portfolio companies at end of period 35 28
Operating results
Total investment income $8.6 $7.8
Net investment income $3.8 $5.3
Net investment income per share $0.31 $0.42
Regular dividends declared per share $0.34 $0.34
Net increase (decrease) in net assets from
operations ($0.6) $2.1
Net increase (decrease) in net assets from
operations per share ($0.05) $0.17
"We are pleased to report that our originations exceeded payoffs during the third quarter. We are seeing a number of interesting opportunities and we are continuing to access SBA-guaranteed debentures," said Robert T. Ladd, Chief Executive Officer of Stellus.
Portfolio and Investment Activity
We completed the third quarter of 2015 with a portfolio of $323.0 million (at fair value) invested in 35 companies. As of September 30, 2015, our portfolio included approximately 30% of first lien debt, 44% of second lien debt, 23% of mezzanine debt and 3% of equity investments at fair value. Our debt portfolio consisted of 27% fixed rate investments and 73% floating rate investments (subject to interest rate floors). The average size of our portfolio company investments was $9.2 million and our largest portfolio company investment was approximately $21.6 million at fair value. The weighted average yield on all of our debt investments as of September 30, 2015 was approximately 10.6%.
During the three months ended September 30, 2015, we made $25.5 million of investments in two new portfolio companies and three existing portfolio companies and received $22.5 million of proceeds from the repayment of investments, including $1.3 million from amortization of certain other investments.
This compares to the portfolio as of December 31, 2014, which had a fair value of $316.0 million invested in 32 companies comprising 24% of first lien debt, 32% of second lien debt, 41% of mezzanine debt and 3% of equity investments at fair value. As of December 31, 2014, our debt investments had a weighted average yield of 10.9% and consisted of 44% fixed rate investments and 56% floating rate investments (subject to interest rate floors).
Results of Operations
Investment income for the three months ended September 30, 2015 and 2014 totaled $8.6 million and $7.8 million, respectively, most of which was interest income from portfolio investments.
Operating expenses, net of fee waiver for the three months ended September 30, 2015 and 2014, totaled $4.8 million and $2.6 million, respectively. For the same respective periods, base management fees totaled $1.5 million and $1.3 million, incentive fees totaled $1.0 million and $0.4 million, fees and expenses related to our borrowings totaled $1.5 million and $1.4 million (including interest and amortization of deferred financing costs), administrative expenses totaled $0.2 million and $0.3 million and other expenses totaled $0.6 million and $0.6. The Advisor waived no incentive fees for the three months ended September 30, 2015. The Advisor voluntarily waived incentive fees of $1.4 million during the three months ended September 30, 2014.
Net investment income was $3.8 million and $5.3 million, or $0.31 and $0.42 per common share based on weighted average common shares outstanding for the three months ended September 30, 2015 and 2014.
The Company's investment portfolio had a net change in unrealized depreciation for the three months ended September 30, 2015 and 2014, of $4.6 million and $3.0 million, respectively. For the three months ended September 30, 2015 and 2014 the Company had realized gains of $2 thousand and $4 thousand, respectively.
Our net increase (decrease) in net assets resulting from operations totaled ($0.6) million and $2.1 million, or ($0.05) and $0.17 per common share based on weighted average common shares outstanding for the three months ended September 30, 2015 and 2014, respectively.
Liquidity and Capital Resources
As of September 30, 2015 and 2014, our credit facility provided for borrowings in an aggregate amount up to $120 million and $150 million, respectively, on a committed basis. As of September 30, 2015, our credit facility had an accordion feature which allowed for potential future expansion of the facility size to $195 million. As of September 30, 2015 and December 31, 2014, we had $110.8 million and $106.5 million, respectively, in outstanding borrowings under the credit facility.
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. For the same period, our financing activities provided cash of $0.7 million, primarily related to the issuance of SBA debentures.
For the nine months ended September 30, 2014 our operating activities provided cash of $2.1 million primarily in connection with cash interest received and repayments of our investments, and our financing activities used cash of $11.6 million, primarily due to repayments on the credit facility.
Distributions
During the three months ended September 30, 2015 and 2014, we declared 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, 2015 are summarized as follows:
- On July 8, 2015, we received full repayment on our second lien term loan of Telular Corp. at par plus a 1% prepayment premium, resulting in total proceeds of $7.6 million.
- On August 6, 2015, we made a $12.5 million investment in the first lien loan of Catapult Learning, LLC, a leading provider of specialized education services.
- On August 10, 2015, we funded $2.4 million under the delay draw term loan of Software Paradigms International, reducing our unfunded commitment to $0.4 million.
- On August 17, 2015, we received full repayment on the unsecured term loan of Snowman Holdings, LLC at par, resulting in proceeds of $11.2 million.
- On August 20, 2015, we made a $0.6 million equity investment in an existing portfolio company, Colford Capital Holdings, LLC.
- On August 27, 2015, we received a partial repayment on the second lien term loan of Calero Software LLC resulting in proceeds of $2.5 million, and made an additional equity investment of $25.0 thousand.
- On September 24, 2015, we made a $10.0 million investment in the second lien term loan of Sitel Worldwide Corporation, a leading outsourced provider of marketing services, with a focus on the technology, e-commerce, insurance, and consumer goods markets.
Events Subsequent to September 30, 2015
On October 9, 2015, we received full repayment on our second lien term loan of Help/Systems Holding Inc. at par, resulting in total proceeds of $15.0 million.
On October 29, 2015, we invested $10.5 million in the first lien debt and $0.3 million in the equity of Apex Environmental, LLC.
Credit Facility
The outstanding balance under our credit facility as of November 3, 2015 was $94.5 million.
Conference Call Information
Stellus Capital Investment Corporation will host a conference call to discuss these results on November 6, 2015, at 10:00 a.m. Central Standard 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) 417-8533 (domestic). Use passcode 2970643. Starting approximately twenty-four hours after the conclusion of the call, a replay will be available through November 14, 2015 by dialing (888) 203-1112 and entering passcode 2970643. 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
September 30,
2015 December 31,
(Unaudited) 2014
---------------- ----------------
ASSETS
Non-controlled, non-affiliated
investments, at fair value
(amortized cost of $332,172,782 and
$321,955,480, respectively) $ 322,966,189 $ 315,965,434
Cash and cash equivalents 6,079,062 2,046,563
Interest receivable 4,346,553 5,082,665
Deferred offering costs 261,761 261,761
Deferred financing costs 665,337 828,956
Accounts receivable 7,684 696
Prepaid loan fees on SBA debentures 1,106,738 681,947
Prepaid loan structure fees 1,382,333 1,774,630
Prepaid expenses 140,504 419,283
---------------------------------
Total Assets $ 336,956,161 $ 327,061,935
---------------------------------
LIABILITIES
Notes Payable $ 25,000,000 $ 25,000,000
Credit facility payable 110,750,000 106,500,000
SBA Debentures 26,000,000 16,250,000
Dividends payable 1,413,982 1,413,983
Base management fees payable 1,462,024 1,360,019
Incentive fees payable 1,129,318 1,121,556
Interest payable 325,931 346,204
Unearned revenue 40,534 157,403
Administrative services payable 380,240 591,744
Deferred tax liability 254,941 288,122
Other accrued expenses and liabilities 206,525 83,452
---------------------------------
Total Liabilities $ 166,963,495 $ 153,112,483
---------------------------------
Commitments and contingencies (Note 7)
Net Assets $ 169,992,666 $ 173,949,452
=================================
NET ASSETS
Common Stock, par value $0.001 per share
(100,000,000 shares authorized,
12,479,962 and 12,479,962 shares issued
and outstanding, respectively) $ 12,480 $ 12,480
Paid-in capital 180,994,764 180,994,783
Accumulated undistributed net realized
gain 294,863 -
Distributions in excess of net investment
income (1,847,907) (779,643)
Net unrealized depreciation on
investments and cash equivalents, net of
provision for taxes of $254,941 and
$288,122, respectively. (9,461,534) (6,278,168)
---------------- ----------------
Net Assets $ 169,992,666 $ 173,949,452
---------------------------------
Total Liabilities and Net Assets $ 336,956,161 $ 327,061,935
=================================
Net Asset Value Per Share $ 13.62 $ 13.94
=================================
STELLUS CAPITAL INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
For the For the For the For the
three three
months months nine months nine months
ended ended ended ended
September September September September
30, 30, 30, 30,
2015 2014 2015 2014
------------------------- -------------------------
INVESTMENT INCOME
Interest income $ 8,509,804 $ 7,766,986 $25,776,147 $23,126,699
Other income 93,009 55,511 231,219 557,753
------------------------- -------------------------
Total Investment
Income $ 8,602,813 $ 7,822,497 $26,007,366 $23,684,452
------------------------- -------------------------
OPERATING EXPENSES
Management fees $ 1,462,024 $ 1,281,231 $ 4,322,488 $ 3,842,971
Valuation fees 139,266 128,815 328,065 344,952
Administrative
services expenses 224,836 312,870 800,863 856,804
Incentive fees 954,908 410,134 2,914,633 2,173,966
Professional fees 92,320 115,463 454,675 399,490
Directors' fees 76,000 86,000 260,000 290,000
Insurance expense 119,417 121,730 354,603 361,220
Interest expense
and other fees 1,557,629 1,409,565 4,522,176 3,841,487
Other general and
administrative
expenses 156,782 105,418 391,330 256,385
------------------------- -------------------------
Total Operating
Expenses $ 4,783,182 $ 3,971,226 $14,348,833 $12,367,275
Waiver of
Incentive Fee - (1,399,226) - (1,399,226)
------------------------- -------------------------
Total Operating
Expenses, net
of fee waivers $ 4,783,182 $ 2,572,000 $14,348,833 $10,968,049
------------------------- -------------------------
Net Investment
Income $ 3,819,631 $ 5,250,497 $11,658,533 $12,716,403
------------------------- -------------------------
Net Realized
Gain on
Investments and
Cash
Equivalents $ 2,146 $ 3,907 $ 294,863 $ 441,364
------------------------- -------------------------
Net Change in
Unrealized
Depreciation on
Investments and
Cash
Equivalents $(4,593,553) $(2,955,085) $(3,216,547) $(3,803,120)
------------------------- -------------------------
Benefit
(provision) for
taxes on
unrealized gain
on investments $ 147,439 $ (185,888) $ 33,181 $ (185,888)
------------------------- -------------------------
Net Increase
(Decrease) in
Net Assets
Resulting from
Operations $ (624,337) $ 2,113,431 $ 8,770,030 $ 9,168,759
========================= =========================
Net Investment
Income Per
Share $ 0.31 $ 0.42 $ 0.93 $ 1.04
========================= =========================
Net Increase
(Decrease) in
Net Assets
Resulting from
Operations Per
Share $ (0.05) $ 0.17 $ 0.70 $ 0.75
========================= =========================
Weighted Average
Shares of
Common Stock
Outstanding 12,479,962 12,404,485 12,479,962 12,214,875
------------------------- -------------------------
Distributions
Per Share $ 0.34 $ 0.34 $ 1.02 $ 1.09
========================= =========================
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,
2015 2014
-------------- --------------
Increase in Net Assets Resulting from
Operations
Net investment income $ 11,658,533 $ 12,716,403
Net realized gain on investments and cash
equivalents 294,863 441,364
Net change in unrealized depreciation on
investments and cash equivalents (3,216,547) (3,803,120)
Benefit (provision) for taxes on unrealized
appreciation on investments 33,181 (185,888)
-------------- --------------
Net Increase in Net Assets Resulting from
Operations $ 8,770,030 $ 9,168,759
Stockholder distributions
Net investment income (12,726,816) (12,473,610)
Net realized capital gains - (786,436)
-------------- -------------
Total Distributions $ (12,726,816) $ (13,260,046)
Capital share transactions
Issuance of common stock - 5,087,335
Reinvestments of stockholder distributions - 313,113
Sales load - (75,510)
Offering costs - (29,904)
-------------- --------------
Net increase in net assets resulting from
capital share transactions $ - $ 5,295,034
-------------- --------------
Total increase (decrease) in net assets $ (3,956,786) $ 1,203,747
-------------- --------------
Net assets at beginning of period $ 173,949,452 $ 175,891,514
-------------- --------------
Net assets at end of period (includes
$1,847,907 and $1,019,866 of distributions
in excess of net investment income,
respectively) $ 169,992,666 $ 177,095,261
============== ==============
STELLUS CAPITAL INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
For the For the
nine months nine months
ended ended
September 30, September 30,
2015 2014
--------------- ---------------
Cash flows from operating activities
Net increase in net assets resulting from
operations $ 8,770,030 $ 9,168,759
Adjustments to reconcile net increase in
net assets resulting from operations to
net cash used in operating activities:
Purchases of investments (85,108,716) (58,454,022)
Proceeds from sales and repayments of
investments 76,333,638 49,485,710
Net change in unrealized depreciation on
investments 3,216,547 3,803,220
Deferred tax provision (benefit) (33,181) 185,888
Increase in investments due to PIK (387,975) (538,457)
Amortization of premium and accretion of
discount, net (759,387) (488,829)
Amortization of loan structure fees 392,297 452,054
Amortization of deferred financing costs 163,619 74,964
Amortization of loan fees on SBIC
debentures 136,646 -
Net realized gain on investments (294,863) (446,239)
Changes in other assets and liabilities
Decrease (increase) in interest
receivable 736,112 (643,642)
Decrease in receivable for affiliated
transaction - 43,450
Increase in accounts receivable (6,988) (31,013)
Decrease in prepaid expenses and fees 278,779 29,522
Increase in management fees payable 102,005 104,501
Decrease in directors' fees payable - (10,000)
Increase (decrease) in incentive fees
payable 7,762 (841,055)
Increase (decrease) in administrative
services payable (211,504) 288,157
Increase (decrease) in interest
payable (20,273) 102,224
Decrease in unearned revenue (116,869) (17,417)
Increase (decrease) in other accrued
expenses and liabilities 123,073 (161,558)
--------------- ---------------
Net cash provided by operating activities $ 3,320,752 $ 2,106,217
--------------- ---------------
Cash flows from financing activities
Proceeds from notes issued - 25,000,000
Proceeds from SBA Debentures 9,750,000 -
Financing costs paid on notes issued - (997,317)
Financing costs paid on SBA Debentures (561,437) -
Proceeds from the issuance of common
stock - 5,116,989
Sales load for common stock issued - (75,510)
Offering costs paid for common stock
issued - (116,149)
Stockholder distributions paid (12,726,816) (11,533,709)
Borrowings under credit facility 86,500,000 78,000,000
Repayments of credit facility (82,250,000) (98,000,000)
Repayments of short-term loan - (9,000,000)
--------------- ---------------
Net cash provided by (used in) financing
activities $ 711,747 $ (11,605,696)
--------------- ---------------
Net increase (decrease) in cash and cash
equivalents 4,032,499 (9,499,479)
Cash and cash equivalents balance at
beginning of period 2,046,563 13,663,542
--------------- ---------------
Cash and cash equivalents balance at end of
period $ 6,079,062 $ 4,164,063
=============== ===============
Supplemental and non-cash financing
activities
Accrued deferred offering costs $ - $ 4,752
Shares issued pursuant to Dividend
Reinvestment Plan $ - $ 313,113
Interest expense paid $ 3,844,890 $ 3,206,081
About Stellus Capital Investment Corporation
The Company is an externally-managed, closed-end, non-diversified investment management company that has elected to be regulated as a business development company under the Investment Company Act of 1940. The Company's investment objective is to maximize the total return to its stockholders in the form of current income and capital appreciation by investing primarily in private middle-market companies (typically those with $5.0 million to $50.0 million of EBITDA (earnings before interest, taxes, depreciation and amortization)) through first lien, second lien, unitranche and mezzanine debt financing, and corresponding equity investments. The Company's investment activities are managed by its investment adviser, Stellus Capital Management. To learn more about Stellus Capital Investment Corporation, visit www.stelluscapital.com under the Stellus Capital Investment Corporation link.
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. 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.
Available Information
Stellus' filings with the Securities and Exchange Commission, press releases, earnings release, and other financial information are available on its website at www.stelluscapital.com under the Stellus Capital Investment Corporation link.
Contact
Stellus Capital Investment Corporation
W. Todd Huskinson
(713) 292-5414
Chief Financial Officer
thuskinson@stelluscapital.com
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