BlackRock Capital Investment Corporation Reports Financial Results for the Quarter and Year Ended December 31, 2017, Declares First Quarter 2018 Distribution of $0.18 per Share

March 7, 2018 4:02 PM

NEW YORK--(BUSINESS WIRE)-- BlackRock Capital Investment Corporation (NASDAQ: BKCC) (“BCIC” or the “Company,” “we,” “us” or “our”) announced today that its Board of Directors declared a quarterly distribution of $0.18 per share, payable on April 2, 2018 to stockholders of record at the close of business on March 19, 2018.

“Our NII covered the distribution for the fourth quarter by 110% as total investment income increased $1.6 million compared to the third quarter driven by increased fee income in the quarter. Additionally, the reduction in NAV that we experienced was mainly due to a net markdown in certain legacy portfolio investments. We partially exited one such legacy investment in the quarter which settled during the first quarter of 2018. Our goal continues to be to rotate out of certain legacy investments, but we do not have visibility into additional exits at this point,” commented Michael J. Zugay, CEO of BlackRock Capital Investment Corporation.

“Generally speaking, the loan market remains issuer friendly with tighter spreads, higher leverage levels and weaker structures, which is a continuation of market conditions over the last 12 months. As such, we continue to be highly selective in new investment opportunities and focused on opportunities with strong underlying credit metrics. Additionally, we continue to pursue exposure to first lien assets through our investments in BCIC Senior Loan Partners (“Senior Loan Partners”) and Gordon Brothers Finance Company, both of which have underlying investments in diversified pools of primarily first lien loans.

“After the repayment in full of our remaining 5.50% convertible notes in February 2018, we have no debt maturing until 2022. Additionally, $365 million of available liquidity provides us with significant operating flexibility and deployment capacity.”

Financial Highlights

Q4 2017 Q3 2017 Q4 2016
Total Per Total Per Total Per
($'s in millions, except per share data) Amount Share Amount Share Amount Share
Net Investment Income/(loss) $ 14.5 $ 0.20 $ 12.1 $ 0.17 $ 17.1 $ 0.24
Net realized and unrealized gains/(losses) $ (16.4 ) $ (0.22 ) $ (19.3 ) $ (0.27 ) $ (14.6 ) $ (0.20 )
Deferred taxes $ 5.3 $ 0.07 $ (5.3 ) $ (0.07 )
Realized losses on extinguishment of debt $ (1.3 ) $ (0.02 )
Basic earnings/(loss) $ 3.3 $ 0.05 $ (13.8 ) $ (0.19 ) $ 2.5 $ 0.03
Distributions declared $ 13.2 $ 0.18 $ 13.1 $ 0.18 $ 15.3 $ 0.21
Net Investment Income/(loss), as adjusted1 $ 14.5 $ 0.20 $ 12.1 $ 0.17 $ 17.1 $ 0.24

Basic earnings/(loss), as adjusted1

$ 3.3 $ 0.05 $ (13.8 ) $ (0.19 ) $ 2.5 $ 0.03
2017 Totals 2016 Totals
Total Per Total Per
($'s in millions, except per share data) Amount Share Amount Share
Net Investment Income/(loss) $ 55.1 $ 0.75 $ 54.0 $ 0.74
Net realized and unrealized gains/(losses) $ (32.9 ) $ (0.44 ) $ (138.3 ) $ (1.90 )
Realized losses on extinguishment of debt $ (1.3 ) $ (0.02 )
Basic earnings/(loss) $ 20.9 $ 0.29 $ (84.3 ) $ (1.16 )
Distributions declared $ 52.5 $ 0.72 $ 61.0 $ 0.84
Net Investment Income/(loss), as adjusted1 $ 55.1 $ 0.75 $ 54.0 $ 0.74
Basic earnings/(loss), as adjusted1 $ 20.9 $ 0.29 $ (84.3 ) $ (1.16 )
As of As of As of
December 31, September 30, December 31,
($'s in millions, except per share data) 2017 2017 2016
Total assets $ 799.9 $ 855.0 $ 957.1
Investment portfolio, at fair market value $ 757.9 $ 833.9 $ 931.1
Debt outstanding $ 206.7 $ 246.1 $ 335.7
Total net assets $ 571.1 $ 581.5 $ 596.3
Net asset value per share $ 7.83 $ 7.96 $ 8.21

Net leverage ratio2

0.32x 0.42x 0.55x

1Non-GAAP basis financial measure. See Supplemental Information on page 8.

2Calculated less available cash and receivable for investments sold, plus payable for investments purchased and unamortized debt issuance costs.

Business Updates

Portfolio and Investment Activity*

($’s in millions)

Three months Three months
ended ended Year ended Year ended

December 31,2017

December 31,2016

December 31,2017

December 31,2016

Investment deployments $ 63.3 $ 107.8 $ 243.4 $ 325.4
Investment exits $ 124.3 $ 109.2 $ 386.4 $ 377.2
Number of portfolio company investments at the end of period 30 38
Weighted average yield of debt and income producing equity securities, at fair market value 10.8% 11.7%
% of Portfolio invested in Secured debt, at fair market value 56% 66%
% of Portfolio invested in Unsecured debt, at fair market value 17% 17%
% of Portfolio invested in Equity, at fair market value 27% 17%
Average investment by portfolio company, at amortized cost (excluding investments below $5.0 million) $ 33.0 $ 31.8

*balance sheet amounts above are as of period end

Fourth Quarter Financial Updates

Liquidity and Capital Resources

Conference Call

BlackRock Capital Investment Corporation will host a webcast/teleconference at 10:00 a.m. (Eastern Time) on Thursday, March 8, 2018, to discuss its fourth quarter 2017 financial results. All interested parties are welcome to participate. You can access the teleconference by dialing, from the United States, (888) 300-2343, or from outside the United States, (719) 325-4770, shortly before 10:00 a.m. and referencing the BlackRock Capital Investment Corporation Conference Call (ID Number 8472973). A live, listen-only webcast will also be available via the Investor Relations section of www.blackrockbkcc.com. Both the teleconference and webcast will be available for replay by 1:00 p.m. on Thursday, March 8, 2018 and ending at 1:00 p.m. on Thursday, March 22, 2018. To access the replay of the teleconference, callers from the United States should dial (888) 203-1112 and callers from outside the United States should dial (719) 457-0820 and enter the Conference ID Number 8472973.

Prior to the webcast/teleconference, an investor presentation that complements the earnings conference call will be posted to BlackRock Capital Investment Corporation’s website within the Presentations section of the Investors page (http://www.blackrockbkcc.com/news-and-events/disclaimer).

About BlackRock Capital Investment Corporation

BlackRock Capital Investment Corporation is a business development company that provides debt and equity capital to middle-market companies.

The Company's investment objective is to generate both current income and capital appreciation through debt and equity investments. The Company invests primarily in middle-market companies in the form of senior and junior secured and unsecured debt securities and loans, each of which may include an equity component, and by making direct preferred, common and other equity investments in such companies.

BlackRock Capital Investment Corporation

Consolidated Statements of Assets and Liabilities

December 31,

2017

December 31,

2016

Assets
Investments at fair value:
Non-controlled, non-affiliated investments (cost of $311,938,762 and $586,176,755) $ 261,683,202 $ 512,308,390
Non-controlled, affiliated investments (cost of $195,354,637 and $112,640,458) 215,779,077 109,342,171
Controlled investments (cost of $321,999,526 and $322,768,014) 280,478,528 309,472,929
Total investments at fair value (cost of $829,292,925 and $1,021,585,227) 757,940,807 931,123,490
Cash and cash equivalents 29,014,645 10,707,834
Receivable for investments sold 1,344,918 449,578
Interest, dividends and fees receivable 8,342,780 10,750,723
Prepaid expenses and other assets 3,236,819 4,035,866
Total Assets $ 799,879,969 $ 957,067,491
Liabilities
Debt (net of deferred financing costs of $4,209,445 and $1,054,266) $ 206,661,272 $ 335,667,906
Interest and credit facility fee payable 1,820,971 3,280,961
Distributions payable 13,152,924 15,262,010
Base management fees payable 3,734,655 4,860,614
Payable for investments purchased 479,297
Accrued administrative services 114,995
Other accrued expenses and payables 2,815,923 1,675,631
Total Liabilities 228,780,037 360,747,122
Net Assets
Common stock, par value $.001 per share, 200,000,000 common shares authorized, 77,723,764 and 77,228,207 issued and 72,946,910 and 72,676,242 outstanding 77,723 77,228
Paid-in capital in excess of par 858,087,822 877,300,709
Undistributed / (Distributions in excess of) net investment income (13,918,838 ) (7,965,655 )
Accumulated net realized loss on investments and extinguishment of debt (162,723,790 ) (144,527,577 )
Net unrealized (depreciation), net of tax (72,688.483 ) (92,261,515 )
Treasury stock at cost, 4,776,854 and 4,551,965 shares held (37,734,502 ) (36,302,821 )
Total Net Assets 571,099,932 596,320,369
Total Liabilities and Net Assets $ 799,879,969 $ 957,067,491
Net Asset Value Per Share $ 7.83 $ 8.21

BlackRock Capital Investment Corporation

Consolidated Statements of Operations

Three

months

Threemonths

ended ended Year ended Year ended
12/31/17

(Unaudited)

12/31/16

(Unaudited)

12/31/17 12/31/16
Investment Income:
Non-controlled, non-affiliated investments:
Cash interest income $ 9,751,698 $ 12,594,087 $ 42,597,334 $ 67,604,463
PIK interest income 202,494 3,103,433 3,340,360 8,712,063
Cash dividend income 404,780
PIK dividend income 188,017 65,944 774,235
Fee income 2,708,371 2,559,512 3,213,513 7,780,567
Total investment income from non-controlled, non-affiliated investments 12,662,563 18,445,049 49,621,931 84,871,328
Non-controlled, affiliated investments:
Cash interest income 2,954,495 2,060,394 10,540,239 5,946,132
PIK interest income 986,653 4,054,626
PIK dividend income 917,861 178,425 2,997,385 1,869,769
Fee income 156,716 506,632
Total investment income from non-controlled, affiliated investments 5,015,725 2,238,819 18,098,882 7,815,901
Controlled investments:
Cash interest income 4,119,450 5,381,222 18,714,928 19,769,917
PIK interest income 143,484 24,885 1,463,401 24,885
Cash dividend income 2,456,399 790,382 8,814,639 2,944,334
PIK dividend income 621,650
Fee income 25,000 25,000 262,372
Total investment income from controlled investments 6,719,333 6,221,489 29,017,968 23,623,158
Other income 1,100,000 590,429 1,100,000
Total investment income 24,397,621 28,005,357 97,329,210 117,410,387
Expenses:
Base management fees 3,734,655 4,860,615 16,391,532 21,460,909
Legal settlement 17,500,000
Incentive management fees 2,903,436 7,980,098
Interest and credit facility fees 4,149,211 4,020,290 18,205,912 16,661,674
Professional fees 1,026,921 865,235 2,708,262 2,544,235
Administrative services 114,995 267,134 1,039,221 1,304,172
Director fees 193,250 184,750 668,500 706,500
Investment advisor expenses 87,500 87,504 350,004 350,004
Other 573,908 637,466 2,874,087 2,846,328
Total expenses, before incentive management fee waiver 12,783,876 10,922,994 50,217,616 63,373,822
Incentive management fee waiver (2,903,436 ) (7,980,098 )
Expenses, net of incentive management fee waiver 9,880,440 10,922,994 42,237,518 63,373,822
Net Investment Income 14,517,181 17,082,363 55,091,692 54,036,565
Realized and Unrealized Gain (Loss):
Net realized gain (loss):
Non-controlled, non-affiliated investments (859,750 ) (27,049,481 ) (54,814,358 ) (83,048,145 )
Non-controlled, affiliated investments
Controlled investments 2,375,534 (1,532,024 )
Net realized gain (loss) (859,750 ) (27,049,481 ) (52,438,824 ) (84,580,169 )
Net change in unrealized appreciation (depreciation) on:
Non-controlled, non-affiliated investments (8,065,434 ) 27,925,028 23,612,802 (25,979,691 )
Non-controlled, affiliated investments 346,794 (3,740,774 ) 23,722,730 (6,008,885 )
Controlled investments (7,814,577 ) (11,554,566 ) (28,225,914 ) (21,967,719 )
Foreign currency translation (23,380 ) (152,457 ) 463,413 207,975
Net change in unrealized appreciation (depreciation) (15,556,597 ) 12,477,231 19,573,031 (53,748,320 )
Deferred Taxes 5,257,916
Net realized and unrealized gain (loss) (11,158,431 ) (14,572,250 ) (32,865,793 ) (138,328,48 )
Realized losses on extinguishment of debt (10,723 ) (1,323,442 )
Net Increase (Decrease) in Net Assets Resulting from Operations $ 3,348,027 $ 2,510,113 $ 20,902,457 $ (84,291,92 )
Net Investment Income Per Share—basic $ 0.20 $ 0.24 $ 0.75 $ 0.74
Earnings (Loss) Per Share—basic $ 0.05 $ 0.03 $ 0.29 $ (1.16 )
Average Shares Outstanding—basic 73,145,321 72,673,587 72,983,354 72,757,978
Net Investment Income Per Share—diluted $ 0.19 $ 0.24 $ 0.73 $ 0.74
Earnings (Loss) Per Share—diluted $ 0.05 $ 0.03 $ 0.29 $ (1.16 )
Average Shares Outstanding—diluted (NII only) 94,875,804 72,673,587 90,927,689 82,654,705
Distributions Declared Per Share $ 0.18 $ 0.21 $ 0.72 $ 0.84

Supplemental Information

The Company reports its financial results on a GAAP basis; however, management believes that evaluating the Company’s ongoing operating results may be enhanced if investors have additional non-GAAP basis financial measures. Management reviews non-GAAP financial measures to assess ongoing operations and, for the reasons described below, considers them to be effective indicators, for both management and investors, of the Company’s financial performance over time. The Company’s management does not advocate that investors consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.

Until March 6, 2017, the Company recorded its liability for incentive management fees based on income as it became legally obligated to pay them, based on a hypothetical liquidation at the end of each reporting period. The Company’s obligation to pay incentive management fees with respect to any fiscal quarter until March 6, 2017 was based on a formula that reflects the Company’s results over a trailing four-fiscal quarter period ending with the pro-rated period until March 6, 2017. The Company is legally obligated to pay the amount resulting from the formula less any cash payments of incentive management fees during the prior three quarters. The formula’s requirement to reduce the incentive management fee by amounts paid with respect to such fees in the prior three quarters caused the Company’s incentive management fee expense to become concentrated in the fourth quarter of each year. Management believes that reflecting incentive management fees throughout the year, as the related investment income is earned, is an effective measure of the Company’s profitability and financial performance that facilitates comparison of current results with historical results and with those of the Company’s peers. The Company’s “as adjusted” results reflect incentive management fees based on the formula the Company utilizes for each trailing four-fiscal quarter period until March 6, 2017, with the formula applied to each quarter’s incremental earnings and without any reduction for incentive management fees paid during the prior three quarters. The resulting amount represents an upper limit of each quarter’s incremental incentive management fees that the Company may become legally obligated to pay at the end of the year. Prior year amounts are estimated in the same manner. These estimates represent upper limits because, in any calendar year, subsequent quarters’ investment underperformance could reduce the incentive management fees payable by the Company with respect to prior quarters’ operating results. After March 6, 2017, incentive management fees based on income have been calculated for each calendar quarter and are paid on a quarterly basis if certain thresholds are met. The Company records its liability for incentive management fees based on capital gains by performing a hypothetical liquidation at the end of each reporting period. The accrual of this hypothetical capital gains incentive management fee is required by GAAP, but it should be noted that a fee so calculated and accrued is not due and payable until the end of the measurement period, or every June 30. The incremental incentive management fees disclosed for a given period are not necessarily indicative of actual full year results. Changes in the economic environment, financial markets and other parameters used in determining such estimates could cause actual results to differ and such differences could be material. For a more detailed description of the Company’s incentive management fee, please refer to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2017, on file with the Securities and Exchange Commission ("SEC").

Computations for the periods below are derived from the Company's financial statements as follows:

Three months

endedDecember 31,2017

Three monthsendedDecember 31,2016

Year endedDecember 31,2017

Year endedDecember 31,2016

GAAP Basis:
Net Investment Income $ 14,517,181 $ 17,082,364 $ 55,091,692 $ 54,036,565
Net Investment Income per share 0.20 0.24 0.75 0.74
Addback: GAAP incentive management fee expense based on Gains
Addback: GAAP incentive management fee expense based on Income
Pre-Incentive Fee1:
Net Investment Income $ 14,517,181 $ 17,082,364 $ 55,091,692 $ 54,036,565
Net Investment Income per share 0.20 0.24 0.75 0.74
Less: Incremental incentive management fee expense based on Income
As Adjusted2:
Net Investment Income $ 14,517,181 $ 17,082,364 $ 55,091,692 $ 54,036,565
Net Investment Income per share 0.20 0.24 0.75 0.74

Note: The Net Investment Income amounts for the three and twelve months ended December 31, 2017 are net of incentive management fees based on income and a corresponding incentive management fee waiver in the amounts of $2,903,436 and $7,980,098, respectively. For the periods shown, there is no difference between the GAAP and as adjusted figures; however, there may be a difference in future periods.

1 Pre-Incentive Fee: Amounts are adjusted to remove all incentive management fees. Such fees are calculated but not necessarily due and payable at this time.

2 As Adjusted: Amounts are adjusted to remove the incentive management fee expense based on gains, as required by GAAP, and to include only the incremental incentive management fee expense based on Income. Until March 6, 2017, the incremental incentive management fee was calculated based on the current quarter's incremental earnings, and without any reduction for incentive management fees paid during the prior calendar quarters. After March 6, 2017, incentive management fee expense based on income has been calculated for each calendar quarter and may be paid on a quarterly basis if certain thresholds are met. Amounts reflect the Company's ongoing operating results and reflect the Company's financial performance over time.

Forward-looking statements

This press release, and other statements that BlackRock Capital Investment Corporation may make, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act, with respect to BlackRock Capital Investment Corporation’s future financial or business performance, strategies or expectations. Forward-looking statements are typically identified by words or phrases such as “trend,” “potential,” “opportunity,” “pipeline,” “believe,” “comfortable,” “expect,” “anticipate,” “current,” “intention,” “estimate,” “position,” “assume,” “outlook,” “continue,” “remain,” “maintain,” “sustain,” “seek,” “achieve,” and similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “may” or similar expressions.

BlackRock Capital Investment Corporation cautions that forward-looking statements are subject to numerous assumptions, risks and uncertainties, which may change over time. Forward-looking statements speak only as of the date they are made, and BlackRock Capital Investment Corporation assumes no duty to and does not undertake to update forward-looking statements. Actual results could differ materially from those anticipated in forward-looking statements and future results could differ materially from historical performance.

In addition to factors previously disclosed in BlackRock Capital Investment Corporation’s SEC reports and those identified elsewhere in this press release, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance: (1) our future operating results; (2) our business prospects and the prospects of our portfolio companies; (3) the impact of investments that we expect to make; (4) our contractual arrangements and relationships with third parties; (5) the dependence of our future success on the general economy and its impact on the industries in which we invest; (6) the financial condition of and ability of our current and prospective portfolio companies to achieve their objectives; (7) our expected financings and investments; (8) the adequacy of our cash resources and working capital, including our ability to obtain continued financing on favorable terms; (9) the timing of cash flows, if any, from the operations of our portfolio companies; (10) the impact of increased competition; (11) the ability of our investment advisor to locate suitable investments for us and to monitor and administer our investments; (12) potential conflicts of interest in the allocation of opportunities between us and other investment funds managed by our investment advisor or its affiliates; (13) the ability of our investment advisor to attract and retain highly talented professionals; (14) changes in law and policy accompanying the new administration and uncertainty pending any such changes; (15) increased geopolitical unrest, terrorist attacks or acts of war, which may adversely affect the general economy, domestic and local financial and capital markets, or the specific industries of our portfolio companies; (16) changes and volatility in political, economic or industry conditions, the interest rate environment, foreign exchange rates or financial and capital markets; (17) the unfavorable resolution of legal proceedings; and (18) the impact of changes to tax legislation and, generally, our tax position.

BlackRock Capital Investment Corporation’s Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC identifies additional factors that can affect forward-looking statements.

Available Information

BlackRock Capital Investment Corporation’s filings with the SEC, press releases, earnings releases and other financial information are available on its website at www.blackrockbkcc.com. The information contained on our website is not a part of this press release.

BlackRock Capital Investment Corporation

Investors:

Nik Singhal, 212-810-5427

or

Press:

Brian Beades, 212-810-5596

Source: BlackRock Capital Investment Corporation

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