WhiteHorse Finance, Inc. Announces Third Quarter 2017 Earnings Results

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November 7, 2017 8:01 AM EST

NEW YORK, Nov. 7, 2017 /PRNewswire/ -- WhiteHorse Finance, Inc. ("WhiteHorse Finance" or the "Company") (NASDAQ: WHF) today announced its financial results for the quarter ended September 30, 2017.

Third Quarter 2017 Summary Highlights

  • New investments of $8.3 million
  • Net investment income of $5.9 million
  • Third quarter net investment income of $0.290 per share
  • Third quarter distribution of $0.355 per share

Stuart Aronson, WhiteHorse Finance's Chief Executive Officer commented, "Our third quarter results reflect a commitment to the conservative, disciplined and diverse investment strategy that our high-quality, high-yield portfolio is built on. While these principles restricted us from completing select transactions during the quarter, which impacted our net investment income, this was done with the long-term interests of our business and our shareholders in mind. Our overall performance was still strong, as we saw an increase in NAV, and our portfolio yield held constant. We remain confident in our ability to source high-quality originations that will unlock additional growth, protect NAV, work to earn our yearly dividend, and ultimately maximize long-term shareholder value.

Portfolio and Investment Activity

As of September 30, 2017, the fair value of WhiteHorse Finance's investment portfolio was $435.3 million, compared with $437.9 million as of June 30, 2017. The portfolio at September 30, 2017 consisted of 38 positions across 31 companies with an average investment size of $11.5 million and a weighted average effective yield of 11.9%, remaining relatively flat as compared to last quarter.  The majority of the portfolio was comprised of senior secured loans, and these loans were substantially all variable-rate investments (primarily indexed to LIBOR), which should continue to position the portfolio well for a potential rising interest rate environment.

During the three months ended September 30, 2017, WhiteHorse Finance made investments in one new portfolio company totaling $8.3 million. Gross proceeds from sales and repayments totaled $14.8 million for the quarter. The Company continued to be highly selective in deploying new investments.

Results of Operations

For the three months ended September 30, 2017, net investment income was approximately $5.9 million, compared with approximately $7.3 million for the same period in the prior year, representing a decrease of 19.2%. The decrease in net investment income was primarily attributable to a decrease of investment income due to lower fee income and an increase in interest expense resulting from higher interest rates and higher borrowing balances on the Company's line of credit facility as compared to the same period in the prior year. Since 2015, cumulative core net investment income, a non-GAAP financial measure, has exceeded distributions to stockholders for the last 11 quarters.(1)

For the three months ended September 30, 2017, WhiteHorse Finance reported realized and unrealized gains on investments of $3.1 million. This compares with realized and unrealized gains on investments of $1.3 million for the three months ended September 30, 2016. The increase in realized and unrealized gains on investments was primarily attributable to favorable fair value adjustments on an aggregate basis.

WhiteHorse Finance reported a net increase in net assets resulting from operations of approximately $9.1 million for the three months ended September 30, 2017, which compares with a net increase of $8.6 million for the three months ended September 30, 2016.

WhiteHorse Finance's NAV was $285.5 million, or $13.92 per share, as of September  30, 2017, as compared with $283.8 million, or $13.83 per share, reported as of June 30, 2017.

Liquidity and Capital Resources

As of September 30, 2017, WhiteHorse Finance had cash and cash equivalents of $41.9 million, as compared with $43.7 million as of June 30, 2017, inclusive of restricted cash.  As of September 30, 2017, the Company also had $45.0 million of undrawn capacity under its revolving credit facility.

Distributions

On September 6, 2017, the Company declared a distribution of $0.355 per share for the quarter ended September  30, 2017, consistent for the twentieth consecutive quarter since the Company's IPO. The distribution was paid on October 3, 2017 to shareholders of record as of September 18, 2017.

Distributions are paid from taxable earnings and may include return of capital and/or capital gains.  The specific tax characteristics of the distributions will be reported to stockholders on Form 1099-DIV after the end of the calendar year and in the Company's periodic reports filed with the Securities and Exchange Commission.

Conference Call

WhiteHorse Finance will host a conference call to discuss its third quarter results at 11:00 am ET on Tuesday, November 7, 2017. To access the teleconference, please dial 706-758-9224 (domestic and international) approximately 10 minutes before the teleconference's scheduled start time and reference ID #4498809. Investors may also access the call on the investor relations portion of the Company's website at www.whitehorsefinance.com.

If you are unable to access the live teleconference, a replay will be available beginning approximately two hours after the call's completion through November 14, 2017. The teleconference replay can be accessed by dialing 404-537-3406 (domestic and international) and entering ID #4498809. A webcast replay will also be available on the investor relations portion of the Company's website at www.whitehorsefinance.com.

About WhiteHorse Finance, Inc.

WhiteHorse Finance is a business development company that originates and invests in loans to privately held lower mid-cap companies across a broad range of industries.  The Company's investment activities are managed by H.I.G. WhiteHorse Advisers, LLC, an affiliate of H.I.G. Capital, LLC, ("H.I.G. Capital"). H.I.G. Capital is a leading global alternative asset manager with $24 billion of capital under management(2) across a number of funds focused on the small and mid-cap markets. For more information about H.I.G. Capital, please visit http://www.higcapital.com.  For more information about the Company, please visit http://www.whitehorsefinance.com.

Forward-Looking Statements

This press release may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. 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 risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in filings 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.

 

(1) Net investment income and core net investment income during the three months ended December 31, 2015 were $0.237 per share and $0.352 per share, respectively. Net investment income was equal to core net investment income for every other quarter since the Company's initial public offering. Core net investment income is a non-GAAP financial measure. The Company believes that core net investment income provides useful information to investors and management because it reflects the Company's financial performance excluding the net impact of costs associated with the refinancing of the Company's revolving credit facility. The presentation of this additional information is not meant to be considered in isolation or as a substitute for financial results prepared in accordance with GAAP.

(2) Based on total capital commitments managed by H.I.G. Capital and affiliates.

 

 

WhiteHorse Finance, Inc.

Consolidated Statements of Assets and Liabilities

(in thousands, except share and per share data)

September 30, 2017

December 31, 2016

(Unaudited)

Assets

Investments, at fair value

Non-controlled/non-affiliate company investments

$

404,752

$

385,216

Non-controlled affiliate company investments

30,571

26,498

Total investments, at fair value (amortized cost $444,896 and $427,689, respectively)

435,323

411,714

Cash and cash equivalents

37,103

17,036

Restricted cash and cash equivalents

4,808

11,858

Receivables from investments sold

1,562

881

Interest receivable

4,538

3,891

Prepaid expenses and other receivables

36

854

Total assets

$

483,370

$

446,234

Liabilities

Debt

$

181,928

$

182,338

Distributions payable

7,284

6,498

Management fees payable

6,518

5,476

Payables for investments purchased

—

995

Accounts payable and accrued expenses

1,604

1,058

Interest payable

488

480

Total liabilities

197,822

196,845

Commitments and contingencies

Net assets

Common stock, 20,518,104 and 18,303,890 shares issued and outstanding, par value $0.001 per share, respectively, and 100,000,000 authorized

20

18

Paid-in capital in excess of par

302,724

272,242

Accumulated overdistributed net investment income

(6,300)

(5,423)

Accumulated realized losses on investments

(686)

(842)

Accumulated unrealized depreciation on investments

(10,210)

(16,606)

Total net assets

285,548

249,389

Total liabilities and total net assets

$

483,370

$

446,234

Number of shares outstanding

20,518,104

18,303,890

Net asset value per share

$

13.92

$

13.63

 

 

WhiteHorse Finance, Inc.

Consolidated Statements of Operations (Unaudited)

(in thousands, except share and per share data)

Three months ended September 30,

Nine months ended September 30,

2017

2016

2017

2016

Investment income

From non-controlled/non-affiliate company investments

Interest income

$

12,235

$

12,507

$

36,830

$

36,633

Fee income

161

683

1,986

1,615

From non-controlled affiliate company investments

Dividend income

628

840

2,068

2,243

Total investment income

13,024

14,030

40,884

40,491

Expenses

Interest expense

2,379

2,050

7,382

5,917

Base management fees

2,481

2,250

7,133

6,749

Performance-based incentive fees

1,487

1,817

4,852

5,116

Administrative service fees

246

134

538

550

General and administrative expenses

481

511

1,571

1,700

Total expenses

7,074

6,762

21,476

20,032

Net investment income

5,950

7,268

19,408

20,459

Realized and unrealized gains (losses) on investments

Net realized gains (losses)

Non-controlled/non-affiliate company investments

133

660

156

(478)

       Net realized gains (losses)

133

660

156

(478)

Net change in unrealized appreciation (depreciation)

  Non-controlled/non-affiliate company investments

1,390

1,856

2,323

3,466

  Non-controlled affiliate company investments

1,583

(1,190)

4,073

(1,190)

       Net change in unrealized appreciation

2,973

666

6,396

2,276

Net realized and unrealized gains on investments

3,106

1,326

6,552

1,798

Net increase in net assets resulting from operations

$

9,056

$

8,594

$

25,960

$

22,257

Per Common Share Data

Basic and diluted earnings per common share

$

0.45

$

0.47

$

1.36

$

1.22

Dividends and distributions declared per common share

$

0.36

$

0.36

$

1.07

$

1.07

Basic and diluted weighted average common shares outstanding

20,518,104

18,303,890

19,062,764

18,303,890

 

 

WhiteHorse Finance, Inc.

Consolidated Schedule of Investments (Unaudited)

September 30, 2017

(in thousands) 

Investment Type(1)

SpreadAboveIndex(2)

InterestRate(3)

MaturityDate

Principal/ShareAmount

AmortizedCost

FairValue(7)

Fair ValueAs APercentageof NetAssets

North America

Debt Investments

Advertising

Fluent, LLC (f/k/a Fluent     Acquisition II, LLC)

   First Lien Secured Term        Loan

L+ 11.50% (0.50% Floor)

12.74%(1.00% PIK)

12/08/20

$

25,971

$

25,644

$

25,971

$

9.10

%

Intersection Acquisition, LLC

   First Lien Secured Term         Loan

L+ 12.25% (1.00% Floor)

13.58% (2.25% PIK)

09/15/20

15,202

15,113

15,050

5.27

Outcome Health

   First Lien Secured Term         Loan

L+ 6.50% (1.00% Floor)

7.75%

12/22/21

16,241

14,887

16,079

5.63

57,414

55,644

57,100

20.00

Application Software

Intermedia Holdings, Inc.

   Second Lien Secured Term        Loan

L+ 9.50% (1.00% Floor)

10.81%

02/03/25

18,000

17,668

17,759

6.22

Auto Parts & Equipment

Crowne Group, LLC

   First Lien Secured Term        Loan

L+ 9.25% (1.00% Floor)

10.57%

05/26/21

12,125

11,818

12,121

4.24

Broadcasting

Multicultural Radio        Broadcasting, Inc.

   First Lien Secured Term        Loan

L+ 10.50% (1.00% Floor)

11.74%

06/27/19

13,820

13,820

13,752

4.82

Data Processing & Outsourced Services

FPT Operating Company, LLC/

      TLabs Operating Company,          LLC

    First Lien Secured Term        Loan

L+ 8.25% (1.00% Floor)

9.49%

12/23/21

23,453

23,100

23,336

8.17

Department Stores

Mills Fleet Farm Group, LLC

    Second Lien Secured Term         Loan

L+ 9.75% (1.00% Floor)

10.99%

02/26/23

7,146

7,033

7,145

2.50

Diversified Support Services

Account Control Technology     Holdings, Inc.

    First Lien Secured Term         Loan

L+ 8.50% (1.00% Floor)

9.81%

04/28/22

17,575

17,111

17,089

5.98

Climate Pros, Inc.

    First Lien Secured Term        Loan

L+ 10.00% (1.00% Floor)

11.32% (1.00% PIK)

02/28/22

3,985

3,915

3,985

1.40

Sitel Worldwide Corporation

   Second Lien Secured Term        Loan

L+ 9.50% (1.00% Floor)

10.81%

09/18/22

8,670

8,547

8,651

3.03

30,230

29,573

29,725

10.41

Environmental & Facilities Services

Montrose Environmental     Group, Inc.

    Second Lien Secured Term        Loan

L+ 9.50%

10.74%

09/30/20

8,500

8,330

8,330

2.92

 

 

WhiteHorse Finance, Inc.

Consolidated Schedule of Investments (Unaudited) - (continued)

September 30, 2017

 (in thousands)

Investment Type(1)

SpreadAboveIndex(2)

InterestRate(3)

MaturityDate

Principal/ShareAmount

AmortizedCost

FairValue(7)

Fair ValueAs APercentageof NetAssets

Food Retail

AG Kings Holdings, Inc.

     First Lien Secured Term            Loan

L+ 9.95% (1.00% Floor)

11.28%

08/10/21

$

13,720

$

13,262

$

13,583

4.76

%

Crews of California, Inc.

      First Lien Secured Term             Loan                 

L+ 11.00% (1.00% Floor)

12.23% (1.00% PIK)

11/20/19

17,025

16,886

16,944

5.93

       First Lien Secured

           Revolving  Loan

L+ 11.00% (1.00% Floor)

12.23% (1.00% PIK)

11/20/19

5,107

5,051

5,082

1.78

        First Lien Secured Delayed

           Draw Loan

L+ 11.00% (1.00% Floor)

12.23% (1.00% PIK)

11/20/19

4,934

4,883

4,910

1.72

40,786

40,082

40,519

14.19

Health Care Facilities

Grupo HIMA San Pablo, Inc.

  First Lien Secured Term      Loan

L+ 9.00% (1.50% Floor)

10.50%

01/31/18

14,300

14,280

12,474

4.37

   Second Lien Secured Term        Loan

N/A

15.75% (2.00% PIK)

07/31/18

1,027

1,020

240

0.08

15,327

15,300

12,714

4.45

Internet Retail

Clarus Commerce, LLC

    First Lien Secured Term       Loan

L+ 10.17% (1.00% Floor)

11.41%

03/17/21

6,000

5,917

6,000

2.10

Internet Software & Services

StackPath, LLC & Highwinds     Capital, Inc.

   Second Lien Secured Term       Loan

L+ 9.50% (1.00% Floor)

10.81%

02/02/24

18,000

17,592

17,667

6.19

Investment Banking and Brokerage

JVMC Holdings Corp.     (f/k/a RJO Holdings Corp)

    First Lien First Out Secured Term        Loan

L+ 8.02% (1.00% Floor)

9.26%

05/05/22

13,331

13,055

13,198

4.62

     First Lien Last Out Secured Term        Loan

L+ 12.00% (1.00% Floor)

13.24%

05/05/22

4,938

4,835

4,888

1.71

18,269

17,890

18,086

6.33

IT Consulting & Other Services

AST-Applications Software     Technology LLC

    First Lien Secured Term        Loan

L+ 9.00% (1.00% Floor)

10.24% (2.00% PIK)

01/10/23

4,919

4,817

4,526

1.59

Office Services & Supplies

Katun Corporation

     Second Lien Secured Term         Loan

L+ 11.25% (1.00% Floor)

12.49%

01/25/21

4,422

4,400

4,390

1.54

Oil & Gas Exploration & Production

Caelus Energy Alaska O3, LLC

     Second Lien Secured Term         Loan

L+ 7.50% (1.25% Floor)

8.82%

04/15/20

13,000

12,921

10,737

3.76

Other Diversified Financial Services

Sigue Corporation(4)

    Second Lien Secured Term         Loan

L+ 11.50% (1.00% Floor)

12.83%

12/27/18

25,000

24,876

24,395

8.54

The Pay-O-Matic Corp.

   First Lien Secured Term         Loan

L+ 11.00% (1.00% Floor)

12.23%

04/02/18

12,259

12,175

12,222

4.28

37,259

37,051

36,617

12.82

 

 

WhiteHorse Finance, Inc.

Consolidated Schedule of Investments (Unaudited) - (continued)

September 30, 2017

 (in thousands)

Investment Type(1)

SpreadAboveIndex(2)

InterestRate(3)

MaturityDate

Principal/ShareAmount

AmortizedCost

FairValue(7)

Fair ValueAs APercentageof NetAssets

Research & Consulting Services

Project Time & Cost, LLC

  First Lien Secured Term      Loan

L+ 12.00% (0.50% Floor)

13.24%

10/09/20

$

9,404

$

9,291

$

8,968

3.14

%

Specialized Consumer Services

Pre-Paid Legal Services, Inc.

    Second Lien Secured Term        Loan

L+ 9.00% (1.25% Floor)

10.25%

07/01/20

19,000

18,903

19,144

6.70

Specialized Finance

Golden Pear Funding III, LLC(5)

   Second Lien Secured Term      Loan

L+ 10.25% (1.00% Floor)

11.56%

06/25/20

25,000

24,841

24,797

8.68

   Second Lien Secured       Revolving Loan

L+ 10.25% (1.00% Floor)

11.56%

06/25/20

5,000

4,968

4,959

1.74

Oasis Legal Finance, LLC(5)

     Second Lien Secured Term         Loan

L+ 10.75% (1.00% Floor)

11.99%

03/09/22

20,000

19,677

20,000

7.00

50,000

49,486

49,756

17.42

Trucking

Sunteck / TTS Holdings, LLC

      Second Lien Secured Term           Loan

L+ 9.00% (1.00% Floor)

10.32%

06/15/22

3,500

3,447

3,456

1.21

Total Debt Investments

410,574

404,083

401,848

140.72

Equity Investments

Advertising

Cogint, Inc. (f/k/a IDI, Inc.)    Warrants(4)

N/A

N/A

12/08/25

187

-

243

0.09

Food Retail

Crews of California, Inc.    Warrants (4)

N/A

N/A

12/31/24

-

-

1,544

0.54

Nicholas & Associates, LLC    Warrants(4)

N/A

N/A

12/31/24

3

-

248

0.09

Pinnacle Management Group, LLC    Warrants(4)

N/A

N/A

12/31/24

3

-

551

0.19

RC3 Enterprises, LLC Warrants(4)

N/A

N/A

12/31/24

3

-

138

0.05

9

-

2,481

0.87

Other Diversified Financial Services

Aretec Group, Inc. (4)(5)(6)

N/A

N/A

N/A

536

20,693

12,329

4.32

Specialized Finance

NMFC Senior Loan Program I    LLC Units (4)(5)(6)

N/A

N/A

06/13/20

20,000

20,120

18,242

6.39

Trucking

Fox Rent A Car, Inc. Warrants(4)

N/A

N/A

N/A

-

-

180

0.06

Total Equity Investments

20,732

40,813

33,475

11.73

Total Investments

$

431,306

$

444,896

$

435,323

152.45

 

(1)

Except as otherwise noted, all investments are non-controlled/non-affiliate investments as defined by the Investment Company Act of 1940, as amended (the "1940 Act"), and provide collateral for the Company's credit facility.

(2)

The investments bear interest at a rate that may be determined by reference to the London Interbank Offered Rate ("LIBOR" or "L"), which resets monthly, quarterly or semiannually. The 1, 3 and 6 month LIBOR were 1.2%, 1.3% and 1.5%, respectively, as of September 30, 2017.

(3)

The interest rate is the "all-in-rate" including the current index and spread, the fixed rate, and the payment-in-kind ("PIK") interest rate, as the case may be.

(4)

The investment or a portion of the investment does not provide collateral for the Company's credit facility.

(5)

Not a qualifying asset under Section 55(a) of the 1940 Act. Under the 1940 Act, the Company may not acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of total assets. Qualifying assets represented 83% of total assets as of the date of the consolidated schedule of investments.

(6)

Investment is a non-controlled/affiliate investment as defined by the 1940 Act.

(7)

The fair value of the investment was determined using significant unobservable inputs.

 

View original content:http://www.prnewswire.com/news-releases/whitehorse-finance-inc-announces-third-quarter-2017-earnings-results-300550766.html

SOURCE WhiteHorse Finance, Inc.


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