OFS Capital Corporation Announces Second Quarter 2013 Financial Results

OFS Capital Corporation (NASDAQ: OFS) (“OFS Capital” or the “Company”) today announced its financial results for the fiscal quarter ended June 30, 2013, OFS Capital’s second full quarter of operations following its initial public offering (“IPO”) in November 2012.

HIGHLIGHTS
($ in millions, except for per share data)

Other Key Data Points

• On July 31, 2013, OFS Capital paid a second quarter 2013 dividend of $0.34 per share to shareholders of record as of July 17, 2013.
• The aggregate fair value of OFS Capital’s investment assets was 99.4% of cost at June 30, 2013.

“We are focused on keeping our OFS Capital WM senior loan subsidiary fully invested in senior secured floating rate assets, which have enhanced the earnings of OFS Capital,” said Glenn Pittson, Chairman and Chief Executive Officer of OFS Capital. “At the same time, and as we announced last week, we are making progress towards our goal of converting our Tamarix Capital Partners, L.P. investment into a drop-down small business investment company fund within OFS Capital.”

PORTFOLIO AND INVESTMENT ACTIVITY

During the second quarter of 2013, OFS Capital closed senior secured debt investments totaling $9.0 million in two new portfolio companies. Tamarix Capital Partners, L.P. (the “SBIC Fund”) closed a first lien debt investment with a face amount of $5.0 million in one new portfolio company, in which it also obtained an equity stake at no cost.

The total fair value of OFS Capital’s investment portfolio was $228.3 million as of June 30, 2013, including $220.0 million in senior secured debt investments in 56 portfolio companies held in the OFS Capital WM, LLC senior loan vehicle (“OFS Capital WM”) (with a 7.23% weighted average yield to fair value) and an equity investment in the SBIC Fund with a fair value of $8.3 million, representing the Company’s 67.5% limited partnership interest in the SBIC Fund.

The SBIC Fund now has investments in five portfolio companies. As of June 30, 2013, the investment portfolio held by the SBIC Fund consisted of outstanding loans with an aggregate principal balance of $26.5 million and equity investments with a fair value of $4.6 million.

RESULTS OF OPERATIONS

Investment income

Total investment income was $4.2 million for the quarter ended June 30, 2013, compared with $4.5 million for the same period in the prior year. The $0.3 million decrease in total investment income was attributable primarily to a $0.6 million reduction in interest income from Tamarix Capital Partners, L.P. as a result of the Company’s deconsolidation of Tamarix Capital Partners, L.P. effective July 27, 2012.

Total expenses

Total expenses were $2.8 million for the quarter ended June 30, 2013, compared with $3.4 million for the same period in the prior year. The $0.6 million decrease in total expenses was attributable primarily to a $0.6 million reduction in interest expense owing to a decrease in revolving credit facility borrowings. Other expense changes relative to the prior comparable period included a $0.3 million reduction in management fees (relating chiefly to $0.5 million in management fees incurred by Tamarix Capital Partners, L.P. for the quarter ended June 30, 2012) and a $0.1 million decrease in general and administrative expenses, offset by a $0.2 million increase in administrative fees (related to costs incurred by the Company under the Administration Agreement entered into in connection with the IPO) and a $0.1 million increase in professional fees.

Net investment income

Based on the foregoing, net investment income was $1.5 million and $1.1 million, respectively, for the quarters ended June 30, 2013 and June 30, 2012, respectively.

Net realized and unrealized gain (loss) on investments

For the quarter ended June 30, 2013, the Company did not recognize any realized gains or losses. Net unrealized gain on investments totaled $1.8 million for the quarter ended June 30, 2013, comprised of $0.9 million of net unrealized gain on non-affiliate investments (i.e., investment assets in OFS Capital WM) and $0.9 million of net unrealized gain on affiliate investments (the Company’s limited partnership interest in the SBIC Fund).

For the quarter ended June 30, 2012, net realized loss on investments totaled $1.2 million, owing to a $1.2 million net realized loss on non-affiliate investments (relating to a debt investment sale by OFS Capital WM). Net unrealized loss on investments totaled $0.9 million for the quarter ended June 30, 2012, consisting of $0.9 million of net unrealized losses on non-affiliate investments (i.e., investment assets in OFS Capital WM).

Net increase (decrease) in net assets resulting from operations

Net increase in net assets resulting from operations was $3.3 million for the quarter ended June 30, 2013, compared with a net decrease in net assets resulting from operations of $0.4 million for the quarter ended June 30, 2012.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2013, OFS Capital had $10.0 million in cash and cash equivalents, $94.2 million in debt outstanding, and $40.0 million in borrowing availability on its revolving credit facility.

The Company intends to continue to use its liquidity to finance its investment objectives.

CONFERENCE CALL

A conference call is scheduled for today at 10:00 a.m. Eastern Time. Glenn Pittson, Chairman & Chief Executive Officer, will host the call along with Robert Palmer, Chief Financial Officer.

Interested parties can listen to the call via the following:

For more detailed discussion of the financial and other information included in this press release, please refer to the Company’s Form 10-Q for the quarter ended June 30, 2013, which is to be filed with the Securities and Exchange Commission.

EXCERPTS FROM OFS CAPITAL’S UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOLLOW

(1) For historical periods that include financial results prior to November 7, 2012, the Company did not have common shares outstanding or an equivalent and, therefore, earnings per share, dividends declared per common shares and weighted average shares outstanding information for periods that include financial results prior to November 7, 2012 are not provided.

ABOUT OFS CAPITAL

OFS Capital Corporation (NASDAQ: OFS) is an externally managed, closed-end, non-diversified management investment company that has elected to be regulated as a business development company. OFS Capital’s investment objective is to provide shareholders with both current income and capital appreciation primarily through debt investments and, to a lesser extent, equity investments. OFS Capital invests primarily in middle-market companies in the United States, generally focusing its investment activities on private companies that are owned by private equity sponsors or owner/operators and have annual EBITDA between $5 million and $50 million. OFS Capital offers flexible solutions through a variety of asset classes including senior secured, unitranche, second-lien and mezzanine loans, and to a lesser extent, equity securities. OFS Capital’s investment activities are managed by OFS Capital Management, LLC, an investment adviser registered under the Investment Advisers Act of 1940 and headquartered in Rolling Meadows, Illinois, with additional offices in New York and Los Angeles.

FORWARD-LOOKING STATEMENTS

Statements made in this press release may contain forward-looking statements that involve substantial risks and uncertainties, some of which are beyond the control of OFS Capital’s management, and are difficult to predict. Such forward-looking statements are not historical facts but, rather, reflect assumptions, estimates, and projections by OFS Capital concerning anticipated results and provide no guarantee of future performance. All forward-looking statements speak only as of the date of this press release, and OFS Capital undertakes no duty to update any forward-looking statements herein made.