Stellus Capital Investment Corporation Reports Results for Its Second Fiscal Quarter Ended June 30, 2015
HOUSTON, TX -- (Marketwired) -- 08/07/15 -- Stellus Capital Investment Corporation (NYSE: SCM) ("Stellus" or "the Company") today announced financial results for its second fiscal quarter ended June 30, 2015.
HIGHLIGHTS
($ in millions, except data relating to per share amounts and
number of portfolio companies)
As of
Portfolio results June 30, 2015
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Total assets $338.5
Investment portfolio, at fair value $324.4
Net assets $174.9
Weighted average yield on debt investments 10.7%
Net asset value per share $14.01
Quarter Quarter
ended ended
June 30, 2015 June 30, 2014
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Portfolio activity
Total investments made, at par $38.9 $11.0
Number of new investments 6 5
Repayments of investments, including
amortization $36.6 $25.9
Number of portfolio companies at
end of period 35 27
Operating results
Total investment income $8.7 $8.0
Net investment income $4.0 $3.7
Net investment income per share $0.32 $0.31
Realized Gains per share $0.02 $0.03
Regular dividends declared per share $0.34 $0.34
Net increase in net assets from operations $4.0 $2.7
Net increase in net assets from operations per
share $0.32 $0.22
"In the second quarter we covered our dividend through earnings of $0.34 per share. Our originations of $39 million exceeded the payoffs during the quarter, which were greater than normal," said Robert T. Ladd, Chief Executive Officer of the Company.
Portfolio and Investment Activity
We completed the second quarter of 2015 with a portfolio of $324.4 million (at fair value) invested in 35 companies. As of June 30, 2015, our portfolio included approximately 26% of first lien debt, 43% of second lien debt, 27% of mezzanine debt and 4% of equity investments at fair value. Our debt portfolio consisted of 68% floating rate investments (subject to interest rate floors) and 32% 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 at fair value. The weighted average yield on all of our debt investments as of June 30, 2015 was approximately 10.7%.
During the three months ended June 30, 2015, we made $38.9 million of investments in four new portfolio companies and two existing portfolio companies and received $36.6 million of proceeds from the repayment or sale of investments, including $2.2 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 June 30, 2015 and 2014 totaled $8.7 million and $8.0 million, respectively, most of which was interest income from portfolio investments.
Operating expenses for the three months ended June 30, 2015 and 2014, totaled $4.7 million and $4.3 million, respectively. For the same respective periods, base management fees totaled $1.4 million and $1.3 million, incentive fees totaled $1.0 million and $0.9 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 $0.3 million and $0.3 million and other expenses totaled $0.5 million and $0.4 million.
Net investment income was $4.0 million and $3.7 million, or $0.32 and $0.31 per common share based on weighted average common shares outstanding for the three months ended June 30, 2015 and 2014, respectively.
The Company's investment portfolio had a net change in unrealized depreciation for the three months ended June 30, 2015 and 2014, of $0.2 million and $1.3 million, respectively. For the three months ended June 30, 2015 and 2014 the Company had realized gains of $0.3 million and $0.3 million, respectively.
Our net increase in net assets resulting from operations totaled $4.0 million and $2.7 million, or $0.32 and $0.22 per common share based on weighted average common shares outstanding for the three months ended June 30, 2015 and 2014, respectively.
Liquidity and Capital Resources
As of June 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 June 30, 2015, our credit facility had an accordion feature which allowed for potential future expansion of the facility size to $195 million. As of June 30, 2015 and December 31, 2014, we had $107.0 million and $106.5 million, respectively, in outstanding borrowings under the credit facility.
For the six months ended June 30, 2015, our operating activities provided cash of $2.6 million primarily in connection with cash interest received and repayments of our investments. For the same period, our financing activities provided cash of $1.2 million, primarily related to the issuance of SBA debentures, which increased from $16 million to $26 million during the quarter.
For the six months ended June 30, 2014 our operating activities provided cash of $4.8 million primarily in connection with cash interest received and repayments of our investments, and our financing activities used cash of $8.3 million, primarily due to repayments on the credit facility.
Distributions
During the three months ended June 30, 2015 and 2014, we declared distributions of $0.34 per share ($4.2 million and $4.1 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
New investment transactions and repayments which occurred during the three months ended June 30, 2015 are summarized as follows:
- On May 22, 2015, we received a paydown of $2.5 million from Huf Worldwide, LLC and reduced our unfunded revolver commitment from $1.75 million to $1.25 million. We made an additional $56 thousand equity investment in Huf Holdings, LLC.
- On May 29, 2015, we received full repayment on the unsecured senior subordinated note of Woodstream Corporation at par, resulting in total proceeds of $9.1 million. We also received full repayment on the unsecured senior subordinated note of Woodstream Group at par, resulting in total proceeds of $0.9 million.
- On June 8, 2015, we made a $4.5 million investment in the second lien term loan of U.S. Auto Sales, Inc., a leading integrated used car retailer and subprime auto finance company. We also invested $0.5 million in the equity of the company.
- On June 12, 2015, we received full repayment on the unsecured term loan of ATX Networks Holding Intermediate Corp at par, resulting in total proceeds of $21.9 million.
- On June 23, 2015, we made a $7.1 million investment in the first lien loan of Software Paradigms International, Inc., a leading provider of outsourced IT and merchandise planning software and services, with a $2.8 million unfunded revolver commitment.
- On June 23, 2015, we funded $0.5 million of the Huf Worldwide, LLC revolver.
- On June 25, 2015, we made an additional $5.0 million term loan in an existing portfolio company, Colford Capital Holdings, LLC.
- On June 30, 2015, we made a $9.0 million investment in the second lien term loan of Douglas Products and Packaging Company, LLC, a leading manufacturer of specialty chemicals. We also invested $0.25 million in the equity of the company.
- On June 30, 2015, we made an $11.25 million investment in the second lien loan of Stratose Intermediate Holdings II, LLC, a leading provider of out-of-network claims cost management solutions. We also invested $0.75 million in the equity of the company.
Events Subsequent to June 30, 2015
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 term loan of Catapult Learning, LLC.
Credit Facility
The outstanding balance under the Credit Facility as of August 6, 2015 was $108.3 million.
Conference Call Information
Stellus Capital Investment Corporation will host a conference call to discuss these results on August 7, 2015, at 10:00 a.m. Central Daylight 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) 427-9411 (domestic). Use passcode 6337121. Starting approximately twenty-four hours after the conclusion of the call, a replay will be available through August 15, 2015 by dialing (888) 203-1112 and entering passcode 6337121. 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
June 30,
2015 December 31,
(Unaudited) 2014
------------- -------------
ASSETS
Non-controlled, non-affiliated investments,
at fair value (amortized cost of
$329,007,464 and $321,955,480,
respectively) $ 324,394,424 $ 315,965,434
Cash and cash equivalents 5,829,698 2,046,563
Receivable for sales and repayments of
investments 75,358 -
Interest receivable 4,093,194 5,082,665
Deferred offering costs 261,761 261,761
Deferred financing costs 711,783 828,956
Accounts receivable 186,032 696
Prepaid loan fees on SBA debentures 1,165,534 681,947
Prepaid loan structure fees 1,514,536 1,774,630
Prepaid expenses 283,114 419,283
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Total Assets $ 338,515,434 $ 327,061,935
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LIABILITIES
Notes Payable $ 25,000,000 $ 25,000,000
Credit facility payable 107,000,000 106,500,000
SBA Debentures 26,000,000 16,250,000
Dividends payable 1,413,983 1,413,983
Base management fees payable 1,446,330 1,360,019
Incentive fees payable 1,228,851 1,121,556
Interest payable 389,431 346,204
Directors' fees payable 184,000 -
Unearned revenue 44,190 157,403
Administrative services payable 371,327 591,744
Deferred Tax Liability 402,379 288,122
Other accrued expenses and liabilities 175,637 83,452
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Total Liabilities $ 163,656,128 $ 153,112,483
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Commitments and contingencies
Net Assets $ 174,859,306 $ 173,949,452
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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 292,717 -
Distributions in excess of net investment
income (1,425,235) (779,643)
Net Unrealized depreciation on investments
and cash equivalents, net of provision for
taxes of $402,379 and $288,122,
respectively. (5,015,420) (6,278,168)
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Net Assets $ 174,859,306 $ 173,949,452
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Total Liabilities and Net Assets $ 338,515,434 $ 327,061,935
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Net Asset Value Per Share $ 14.01 $ 13.94
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STELLUS CAPITAL INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
For the For the For the For the
three months three months six months six months
ended ended ended ended
June 30, June 30, June 30, June 30,
2015 2014 2015 2014
------------ ------------ ----------- -----------
INVESTMENT INCOME
Interest income $ 8,635,047 $ 7,672,379 $17,266,343 $15,359,713
Other income 55,415 340,330 138,210 502,242
------------ ------------ ----------- -----------
Total Investment
Income 8,690,462 8,012,709 17,404,553 15,861,955
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OPERATING EXPENSES
Management fees $ 1,446,330 $ 1,293,336 $ 2,860,464 $ 2,561,740
Valuation fees 41,324 64,498 188,799 216,137
Administrative
services expenses 296,827 275,167 576,027 543,934
Incentive fees 998,871 934,740 1,959,725 1,763,832
Professional fees 67,794 66,038 362,355 284,027
Directors' fees 95,000 118,000 184,000 204,000
Insurance expense 118,242 120,407 235,186 239,490
Interest expense and
other fees 1,514,055 1,352,967 2,964,547 2,431,922
Other general and
administrative
expenses 116,532 82,694 234,548 150,967
------------ ------------ ----------- -----------
Total Operating
Expenses $ 4,694,975 $ 4,307,847 $ 9,565,651 $ 8,396,049
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Net Investment
Income $ 3,995,487 $ 3,704,862 $ 7,838,902 $ 7,465,906
------------ ------------ ----------- -----------
Net Realized Gain
on Investments
and Cash
Equivalents $ 289,548 $ 325,385 $ 292,717 $ 437,457
------------ ------------ ----------- -----------
Net Change in
Unrealized
Appreciation
(Depreciation)
on Investments and
Cash Equivalents $ (236,062) $ (1,318,680) $ 1,377,006 $ (848,035)
------------ ------------ ----------- -----------
Provision for
taxes on
unrealized gain
on investments $ (47,980) $ - $ (114,258) $ -
------------ ------------ ----------- -----------
Net Increase in
Net Assets
Resulting from
Operations $ 4,000,993 $ 2,711,567 $ 9,394,367 $ 7,055,328
============ ============ =========== ===========
Net Investment
Income Per Share $ 0.32 $ 0.31 $ 0.63 $ 0.62
============ ============ =========== ===========
Net Increase in
Net Assets
Resulting from
Operations
Per Share $ 0.32 $ 0.22 $ 0.75 $ 0.58
============ ============ =========== ===========
Weighted Average
Shares of Common
Stock Outstanding 12,479,962 12,132,851 12,479,962 12,118,498
------------ ------------ ----------- -----------
Distributions Per
Share $ 0.34 $ 0.34 $ 0.68 $ 0.74
============ ============ =========== ===========
STELLUS CAPITAL INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (unaudited)
For the For the
six months six months
ended ended
June 30, June 30,
2015 2014
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Increase in Net Assets Resulting from
Operations
Net investment income $ 7,838,902 $ 7,465,906
Net realized gain on investments and cash
equivalents 292,717 437,457
Net change in unrealized appreciation on
investments and cash equivalents 1,377,006 (848,035)
Provision for taxes on unrealized appreciation
on investments (114,258) -
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Net Increase in Net Assets Resulting from
Operations 9,394,367 7,055,328
Stockholder distributions
Net investment income (8,484,513) (8,255,460)
Net realized capital gains - (786,436)
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Total Distributions (8,484,513) (9,041,896)
Capital share transactions
Issuance of common stock - 3,334,474
Reinvestments of stockholder distributions - 187,492
Sales load - (50,017)
Offering costs - (17,467)
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Net increase in net assets resulting from
capital share transactions - 3,454,482
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Total increase in net assets 909,854 1,467,914
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Net assets at beginning of period 173,949,452 175,891,514
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Net assets at end of period (includes
$1,425,235 and $2,052,213 of distributions in
excess of net investment income) $ 174,859,306 $ 177,359,428
STELLUS CAPITAL INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
For the For the
six months six months
ended ended
June 30, 2015 June 30, 2014
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Cash flows from operating activities
Net increase in net assets resulting from
operations $ 9,394,367 $ 7,055,328
Adjustments to reconcile net increase in net
assets resulting
from operations to net cash used in operating
activities:
Purchases of investments (59,970,381) (51,538,484)
Proceeds from sales and repayments of
investments 53,942,696 48,302,237
Net change in unrealized (appreciation)
depreciation on investments (1,377,006) 848,135
Deferred tax provision 114,258 -
Increase in investments due to PIK (337,295) (363,565)
Amortization of premium and accretion of
discount, net (469,646) (318,341)
Amortization of loan structure fees 260,094 296,169
Amortization of deferred financing costs 117,173 28,558
Amortization of loan fees on SBIC
debentures 77,851 -
Net realized gain on investments (292,717) (442,332)
Changes in other assets and liabilities
Decrease (increase) in interest
receivable 989,471 (462,314)
Decrease in receivable for affiliated
transaction - 43,450
Increase in accounts receivable (185,336) (31,013)
Decrease in prepaid expenses and fees 136,169 218,317
Increase in management fees payable 86,311 116,606
Increase (decrease) in directors' fees
payable 184,000 (96,000)
Increase in incentive fees payable 107,295 1,122,316
Increase (decrease) in administrative
services payable (220,417) 11,793
Increase in interest payable 43,227 163,457
Decrease in unearned revenue (113,213) (11,569)
Increase (decrease) in other accrued
expenses and liabilities 92,185 (97,025)
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Net cash provided by operating activities 2,579,086 4,845,723
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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 - (889,742)
Financing costs paid on SBA Debentures (561,438) -
Proceeds from the issuance of common stock - 3,125,288
Sales load for common stock issued - (50,017)
Offering costs paid for common stock issued - (71,184)
Stockholder distributions paid (8,484,513) (7,457,727)
Borrowings under credit facility 53,750,000 72,000,000
Repayments of credit facility (53,250,000) (91,000,000)
Repayments of short-term loan - (9,000,000)
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Net cash provided by (used in) financing
activities 1,204,049 (8,343,382)
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Net decrease in cash and cash equivalents 3,783,135 (3,497,659)
Cash and cash equivalents balance at beginning
of period 2,046,563 13,663,542
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Cash and cash equivalents balance at end of
period $ 5,829,698 $ 10,165,883
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Supplemental and non-cash financing activities
Accrued deferred offering costs - 172,289
Shares issued pursuant to Dividend
Reinvestment Plan - 187,492
Interest expense paid 2,461,204 1,941,863
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 [email protected]
Source: Stellus Capital Investment Corporation