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) |
| | | |
| Portfolio results | As of September 30, 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, 2015 | September 30, 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 months |
| | three months |
| | nine months |
| | nine months |
|
| |
| ended |
| | ended |
| | ended |
| | ended |
|
| |
| September 30, |
| | September 30, |
| | September 30, |
| | September 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, 2015 |
| September 30, 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.