HOUSTON, May 12, 2020 /PRNewswire/ -- Stellus Capital Investment Corporation (NYSE:SCM) ("Stellus" or "the Company") today announced financial results for its first fiscal quarter ended March 31, 2020.
"First of all, I am pleased to report that our team is healthy and has been working remotely since mid-March with no disruption to our operations. With respect to our results, realized income in the first quarter of $0.39 per share, which included a realized gain of $0.07 per share, more than covered our dividend for the quarter of $0.34. However, with the economic impact from the onset of the COVID-19 pandemic, credit spreads widened in March, leading, in part, to unrealized losses in the quarter of $2.65 per share", reported Robert T. Ladd, Chief Executive Officer of Stellus Capital.
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FINANCIAL HIGHLIGHTS
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($ in millions, except data relating to per share amounts and shares outstanding)
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Quarter Ended
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Quarter Ended
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Q1-20
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Q1-19
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Amount
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Per Share
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Amount
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Per Share
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Net investment income
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$6.24
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$0.32
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$4.33
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$0.27
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Core net investment income (1)
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5.56
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0.29
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5.51
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0.34
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Net realized gains on investments
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1.30
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0.07
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10.25
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0.63
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Total realized income(2)
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7.54
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0.39
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14.58
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0.90
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Distributions
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(6.62)
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(0.34)
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(5.73)
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(0.34)
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Net unrealized depreciation on investments
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(51.50)
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(2.65)
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(4.42)
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(0.28)
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Benefit (provision) for taxes on unrealized gains on investments in taxable subsidiaries
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0.03
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0.00
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(0.01)
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(0.00)
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Net increase in net assets resulting from operations
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(43.94)
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(2.26)
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10.14
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0.62
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Weighted average shares outstanding
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19,429,480
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16,351,032
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(1)
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Core net investment income, as presented, excludes the impact of capital gains incentive fees and income taxes, the majority of which are excise taxes. The Company believes presenting core net investment income and the related per share amount is a useful supplemental disclosure for analyzing its financial performance. However, core net investment income is a non-U.S. GAAP measure and should not be considered as a replacement for net investment income and other earnings measures presented in accordance with U.S. GAAP. A reconciliation of net investment income in accordance with U.S. GAAP to core net investment income is presented in the table below the financial statements.
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(2)
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Total realized income is the sum of net investment income and net realized gains on investments; both U.S. GAAP measures.
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PORTFOLIO ACTIVITY
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($ in millions, except data relating to per share amounts and number of portfolio companies)
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As of
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As of
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March 31,
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December 31,
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2020
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2019
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Investments at fair value
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$609.5
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$628.9
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Total assets
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$649.1
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$648.5
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Net assets
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$224.9
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$270.6
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Shares outstanding
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19,474,247
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19,131,746
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Net asset value per share
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$11.55
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$14.14
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Quarter Ended
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Quarter Ended
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March 31,
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March 31,
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2020
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2019
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New investments
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$61.5
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$28.6
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Repayments of investments
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(31.8)
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(21.8)
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Net activity
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$29.7
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$6.8
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As of
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As of
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March 31,
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December 31,
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2020
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2019
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Number of portfolio company investments
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65
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63
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Number of debt investments
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51
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51
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Weight average yield of debt and other income producing investments (1)
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Cash
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7.9%
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8.7%
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Fee amortization
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0.5%
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0.5%
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Total
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8.4%
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9.2%
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Weighted average yield on total investments (2)
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Cash
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7.6%
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8.3%
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Fee amortization
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0.4%
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0.5%
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Total
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8.0%
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8.8%
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(1)
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The dollar-weighted average annualized effective yield is computed using the effective interest rate for our debt investments and other income producing investments, including cash and PIK interest, as well as the accretion of deferred fees. The individual investment yields are then weighted by the respective cost of the investments (as of the date presented) in calculating the weighted average effective yield of the portfolio. The dollar-weighted average annualized yield on the Company's investments for a given period will generally be higher than what investors of our common stock would realize in a return over the same period because the dollar-weighted average annualized yield does not reflect the Company's expense or any sales load that may be paid by investors.
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(2)
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The dollar weighted average yield on total investments takes the same yields as calculated in the footnote above, but weights them to determine the weighted average effective yield as a percentage of the Company's total investments, including non-income producing loans and equity.
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Results of Operations
Investment income for the three months ended March 31, 2020 and 2019 totaled $15.3 million and $13.8 million, respectively, mostly from interest income on portfolio investments.
Operating expenses for the three months ended March 31, 2020 and 2019, totaled $9.0 million and $9.5 million, respectively. For the same respective periods, base management fees totaled $2.7 million and $2.2 million, income incentive fees totaled $1.3 million and $1.4 million, capital gains incentive fees totaled ($0.9) million and $1.2, fees and expenses related to our borrowings totaled $4.3 million and $3.7 million (including interest and amortization of deferred financing costs), administrative expenses totaled $0.5 million and $0.4 million, income tax totaled $0.2 million and $0.0 million, and other expenses totaled $0.9 million and $0.6 million, respectively.
Net investment income was $6.2 million and $4.3 million, or $0.32 and $0.27 per common share, based on weighted average common shares outstanding for the three months ended March 31, 2020 and 2019 of 19,429,480 and 16,351,032, respectively.
During the three months ended March 31, 2020, our operating results were impacted by the uncertainty surrounding the impact of the COVID-19 pandemic, which has caused disruptions in the global economy and negatively impacted the fair value and performance of our investment portfolio as a whole, as well as the performance of many companies in our investment portfolio. Unrealized losses from a decrease in fair value were ($32.2) million primarily due to widening credits spreads due to increased uncertainty caused by the COVID-19 pandemic. Additional portfolio company-specific depreciation of ($17.2) million and ($2.1) million of accounting reversals resulted in a net change in unrealized depreciation for the three months ended March 31, 2020 of ($51.5) million. For the three months ended March 31, 2019, the net depreciation was ($4.4) million. The capital gains incentive fee reversal of ($0.9) million for the three months ended March 31, 2020 was accrued for U.S. GAAP purposes due to the increase in realized and unrealized losses over the quarter. For information concerning the COVID-19 pandemic and its impact and potential impact on our business and our operating results, see our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.
For the three months ended March 31, 2020 and 2019, the Company had realized gains of $1.3 million and $10.2 million, respectively.
Net (decrease) increase in net assets resulting from operations totaled ($43.9) million and $10.1 million, or ($2.26) and $0.62 per common share based on weighted average common shares outstanding for the three months ended March 31, 2020 and 2019 of 19,429,480 and 16,351,032, respectively.
Liquidity and Capital Resources
As of March 31, 2020 and 2019, our credit facilities provided for borrowings in an aggregate amount of up to $220.0 million and $180.0 million, respectively, on a committed basis. As of March 31, 2020, our credit facility contained an accordion feature which allowed for potential future expansion of the facility size to $250.0 million. As of March 31, 2020 and December 31, 2019, we had $210.0 million and $161.6 million in outstanding borrowings under the credit facility, respectively.
For the three months ended March 31, 2020, our operating activities used cash of $27.9 million, primarily in connection with purchases and origination of portfolio investments, which was slightly offset by repayments of our investments. For the same period, our financing activities provided cash of $46.8 million, due to borrowings under our credit facility, offset by repayments on our credit facility.
For the three months ended March 31, 2019, our operating activities used cash of $3.3 million, primarily in connection with the purchase and origination of portfolio investments, which was slightly offset by repayments of our investments, and our financing activities provided cash of $9.6 million, due to a secondary offering, offset by repayments on our credit facility.
Distributions
During the three months ended March 31, 2020 and 2019, we declared aggregate distributions of $0.34 per share ($6.6 million and $5.7 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 is expected to include a return of capital.
Recent Portfolio Activity
On January 3, 2020 we received full repayment on the first lien term loan of APG Intermediate Sub 2 Corp. for total proceeds of $10 million, including a $0.1 million prepayment fee. We also received $2.4 million in full realization on the equity of the company, resulting in a $1.3 million gain.
On January 7, 2020, we invested $14.4 million in the first lien term loan Sales Benchmark, LLC, $1.3 million in the unfunded revolver, and $3.3 million in the unfunded delayed draw term loan of Sales Benchmark, LLC, a provider of revenue growth management consulting services for private equity-owned and large enterprise clients. Additionally, we invested $0.7 million in the preferred equity of the company.
On January 15, 2020, Apex Environmental Resources Holdings, LLC merged with a provider of non-hazardous waste management, collection, and recycling services, creating Interstate Waste Services, Inc. Our common and preferred ownership positions in Apex Environmental Resources Holdings, LLC were rolled into the combined entity.
On January 31, 2020, we invested $18.9 million in the first lien term loan and $2.7 million in the unfunded revolver of Elliott Aviation, LLC, a provider of maintenance, repair, and overhaul and fixed-base operator services to the business aviation sector. Additionally, we invested $0.9 million in the preferred equity of the company. We funded $1.4 million in aggregate revolver advances throughout the quarter.
On March 2, 2020, we received full repayment on the second lien term loan of Abrasive Products and Equipment, LLC for total proceeds of $5.8 million.
On March 6, 2020, we received full repayment on the second lien term loan of VRI Intermediate Holdings, LLC for total proceeds of $9.0 million.
On March 13, 2020, we invested $13.3 million in the first lien term loan, $2.2 million in the unfunded revolver, and $4.4 million in the unfunded delayed draw term loan of Venbrook Buyer, LLC, an independent insurance services broker with a diversified property and casualty ("P&C") policy distribution offering focused on middle market corporate clients. Additionally, we invested $0.5 million in the equity of the company.
On March 13, 2020, we funded $1.0 million in the revolver of Advanced Barrier Extrusions, LLC, an existing portfolio company.
On March 17, 2020, we funded $0.7 million in the revolver of ASC Communications, LLC, an existing portfolio company.
On March 17, 2020, we funded $1.5 million in the revolver of Price for Profit, LLC, an existing portfolio company.
On March 18, 2020, we funded $1.0 million in the revolver of Lynx FBO Operating, LLC, an existing portfolio company.
On March 18, 2020, we funded $0.5 million in the revolver of Nutritional Medicinals, LLC, an existing portfolio company.
On March 19, 2020, we funded $0.7 million in the revolver of DRS Holdings III, Inc., an existing portfolio company.
On March 19, 2020, we funded $1.5 million in the revolver of Exacta Land Surveyors, LLC, an existing portfolio company.
On March 24, 2020, we funded $0.9 million in the revolver of Naumann/Hobbs Material Handling Corporation II, Inc., an existing portfolio company.
On March 31, 2020, we funded $1.0 million of the delayed draw term loan commitment to PCS Software, Inc., an existing portfolio company. In addition, $2.5 million of the unfunded delayed draw term loan commitment and $0.2 million of the unfunded revolver commitment were assigned to a third party fund.
During the three months ended March 31, 2020, we funded a total of $0.5 million in the revolver of BFC Solmetex, LLC, an existing portfolio company.
During the three months ended March 31, 2020, we funded $3.1 million in aggregate revolver advances to GS HVAM Intermediate, LLC, an existing portfolio company.
Events Subsequent to March 31, 2020
On April 1, 2020, we invested $0.9 million in the revolver of Elliott Aviation, LLC, an existing portfolio company.
On April 1, 2020, we invested $1.3 million in the revolver of Sales Benchmark Index, LLC, an existing portfolio company.
On April 1, 2020 we invested $0.9 million in the revolver of Lynx FBO Operating, LLC, an existing portfolio company. A subsequent paydown of $0.8 million was received by the Company on April 22, 2020.
On April 1, 2020 our investments in Furniture Factory Outlet, LLC and Furniture Factory Holdings, LLC were placed on non-accrual.
On April 2, 2020, our $1.6 million commitment in the delayed draw term loan of GS HVAM Intermediate expired.
On April 2, 2020, our existing second lien investment of $9.5 million in KidKraft was terminated in exchange for a $1.5 million last out term loan and $4.0 million of preferred equity.
On April 3, 2020, we invested $0.6 million in the revolver of Integrated Oncology Network, LLC, an existing portfolio company.
On April 10, 2020, we invested $0.7 million in the delayed draw term loan of Munch's Supply, LLC, an existing portfolio company.
On April 14, 2020, we invested $1.1 million in the revolver of Venbrook Buyer, LLC, an existing portfolio company.
On April 24, 2020 our delayed draw term loan commitment of $4.4 million for Venbrook Buyer, LLC was amended so that the borrower may not borrow the delayed draw term loan before July 15, 2020.
On April 28, 2020, our delayed draw term loan commitment of $4.0 million to Exacta Land Surveyors, LLC, was amended to provide fundings under the delayed draw term loan commitment to be at our option.
On April 29, 2020, our $1.7 million commitment in the delayed draw term loan of BFC Solmetex, LLC was extinguished.
Unfunded Commitments
As of May 8, 2020, we had unfunded commitments of $22.7 million, including unfunded delayed draw term loan commitments of $12.1 million.
Credit Facility
The outstanding balance under the credit facility as of May 8, 2020 was $205.0 million. We are in the process of working with our bank group to amend the Credit Facility and extend the revolving period. We expect to have this accomplished within the next few weeks, subject to negotiation and agreement among the parties.
SBA-guaranteed Debentures
The total balance of SBA-guaranteed debentures outstanding as of May 8, 2020 was $161.0 million.
Dividend Declared
In light of the uncertainty surrounding the ultimate impact of the COVID-19 pandemic on the global financial markets and our portfolio specifically, on April 20, 2020, we announced that we will change our dividend payment schedule from monthly to quarterly beginning with the quarter ended June 30, 2020. This change will better match the dividend with the timing of income we receive. Upon approval by the Board of Directors, we will announce the details of a dividend for the second quarter of 2020 at a later date.
Director Retirement and Changes to Board Composition
On May 5, 2020, the Board received notice that Paul Keglevic intends to retire from service as a member of the Board, effective May 15, 2020. Further, on May 8, 2020, the Board received notice that Joshua T. Davis intends to resign from service as a member of the Board, effective May 15, 2020 for the Company to maintain a Board with a majority of independent directors as required by the 1940 Act. Mr. Keglevic's retirement and Mr. Davis's resignation from service as members of the Board are amicable and without conflict, and were not a result of any disagreement on any matter relating to the Company's operations, policies or practices. Mr. Davis will continue as a partner and co-head of Stellus Capital's Private Credit strategy and on its investment committee. As a result of his resignation, Mr. Davis will not stand for reelection at the upcoming annual meeting of stockholders.
In connection with the retirement of Mr. Keglevic and the resignation of Mr. Davis, the Board has determined to reduce its size from 7 directors to 5 directors, effective as of May 15, 2020. As a result, the Board is composed of two interested directors (Robert T. Ladd and Dean D'Angelo), and three independent directors (J. Tim Arnoult, Bruce R. Bilger, and William C. Repko), effective as of May 15, 2020.
In connection with Mr. Keglevic's retirement, the Board appointed J. Tim Arnoult as chair of the Board's Audit Committee, effective May 15, 2020. The Board has also designated Mr. Arnoult an "audit committee financial expert," as that term is defined in Item 407 of Regulation S-K under the Exchange Act. Effective May 15, 2020, the members of the audit committee will be Mr. Arnoult, Bruce R. Bilger and William C. Repko, each of whom meets the independence standards established by the SEC and the New York Stock Exchange (the "NYSE") for audit committees, and each of whom is independent for purposes of the 1940 Act.
In addition, effective May 15, 2020, Mr. Bilger was appointed chair of the Nominating and Corporate Governance Committee. Effective May 15, 2020, the Board appointed Messrs. Bilger, Arnoult, and Repko, each of whom is independent for purposes of the 1940 Act and the NYSE corporate governance regulations, as the members of the Nominating and Corporate Governance Committee.
Conference Call Information
Stellus Capital Investment Corporation will host a conference call to discuss these results on Tuesday, May 12, 2020 at 10:00 AM, CDT. 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) 394-8218 (domestic). Use passcode 6708983. Starting approximately twenty-four hours after the conclusion of the call, a replay will be available through Wednesday, May 20, 2020 by dialing (888) 203-1112 and entering passcode 6708983. The replay will also be available on the Company's website.
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, as amended. 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 (including unitranche), second lien and unsecured debt financing, with corresponding equity co-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 "Public Investors" tab.
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, including statements about COVID-19 and its impacts, 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 including the final prospectus that will be filed 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.
Contacts
Stellus Capital Investment Corporation
W. Todd Huskinson, (713) 292-5414
Chief Financial Officer
thuskinson@stelluscapital.com
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PART I — FINANCIAL INFORMATION
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STELLUS CAPITAL INVESTMENT CORPORATION
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CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
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March 31,
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2020
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December 31,
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(Unaudited)
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2019
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ASSETS
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Non-controlled, non-affiliated investments, at fair value (amortized cost of $674,809,012 and $642,707,824, respectively)
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$
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609,544,320
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$
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628,948,077
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Cash and cash equivalents
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35,025,246
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16,133,315
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Receivable for sales and repayments of investments
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164,034
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123,409
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Interest receivable
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3,972,924
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2,914,710
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Other receivables
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25,495
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25,495
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Prepaid expenses
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324,298
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368,221
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Total Assets
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$
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649,056,317
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$
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648,513,227
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LIABILITIES
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Notes payable
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$
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48,057,076
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$
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47,974,202
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Credit facility payable
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209,110,611
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160,510,633
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SBA-guaranteed debentures
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157,715,128
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157,543,853
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Dividends payable
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2,206,435
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2,167,630
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Management fees payable
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2,719,054
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2,695,780
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Income incentive fees payable
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1,492,113
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1,618,509
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Capital gains incentive fees payable
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—
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880,913
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Interest payable
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917,016
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2,322,314
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Unearned revenue
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714,159
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559,768
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Administrative services payable
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432,227
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413,278
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Deferred tax liability
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105,754
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134,713
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Income tax payable
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|
169,400
|
|
|
917,000
|
|
Other accrued expenses and liabilities
|
|
498,679
|
|
|
203,461
|
|
|
Total Liabilities
|
$
|
424,137,652
|
|
$
|
377,942,054
|
|
Commitments and contingencies (Note 7)
|
|
|
|
|
|
|
|
Net Assets
|
$
|
224,918,665
|
|
$
|
270,571,173
|
|
NET ASSETS
|
|
|
|
|
|
|
Common stock, par value $0.001 per share (100,000,000 sharesauthorized; 19,474,247 and 19,131,746 issued and outstanding, respectively)
|
$
|
19,474
|
|
$
|
19,132
|
|
Paid-in capital
|
|
277,023,270
|
|
|
272,117,091
|
|
Accumulated undistributed deficit
|
|
(52,124,079)
|
|
|
(1,565,050)
|
|
|
Net Assets
|
$
|
224,918,665
|
|
$
|
270,571,173
|
|
|
Total Liabilities and Net Assets
|
$
|
649,056,317
|
|
$
|
648,513,227
|
|
|
Net Asset Value Per Share
|
$
|
11.55
|
|
$
|
14.14
|
|
STELLUS CAPITAL INVESTMENT CORPORATION
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
For the
|
|
For the
|
|
|
|
three
|
three
|
|
|
|
months ended
|
months ended
|
|
|
|
March 31,
|
March 31,
|
|
|
|
2020
|
2019
|
|
|
|
|
|
|
|
INVESTMENT INCOME
|
|
|
|
|
|
|
Interest income
|
$
|
14,849,588
|
|
$
|
13,625,399
|
|
Other income
|
|
411,457
|
|
|
209,530
|
|
|
Total Investment Income
|
$
|
15,261,045
|
|
$
|
13,834,929
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
Management fees
|
$
|
2,719,054
|
|
$
|
2,222,645
|
|
Valuation fees
|
|
109,833
|
|
|
107,322
|
|
Administrative services expenses
|
|
466,935
|
|
|
405,399
|
|
Income incentive fees
|
|
1,339,637
|
|
|
1,373,854
|
|
Capital gains incentive (reversal) fees
|
|
(880,913)
|
|
|
1,161,757
|
|
Professional fees
|
|
386,714
|
|
|
344,340
|
|
Directors' fees
|
|
132,250
|
|
|
104,000
|
|
Insurance expense
|
|
93,071
|
|
|
85,697
|
|
Interest expense and other fees
|
|
4,292,204
|
|
|
3,674,787
|
|
Income tax expense
|
|
196,795
|
|
|
12,744
|
|
Other general and administrative expenses
|
|
166,003
|
|
|
8,725
|
|
|
Total Operating Expenses
|
$
|
9,021,583
|
|
$
|
9,501,270
|
|
|
Net Investment Income
|
$
|
6,239,462
|
|
$
|
4,333,659
|
|
|
Net realized gain on non-controlled, non-affiliated investments
|
$
|
1,296,793
|
|
$
|
10,246,098
|
|
|
Net change in unrealized depreciation on non-controlled, non-affiliated investments
|
$
|
(51,504,946)
|
|
$
|
(4,424,713)
|
|
|
Benefit (provision) for taxes on net unrealized gain on investments
|
$
|
28,959
|
|
$
|
(12,601)
|
|
|
Net (Decrease) Increase in Net Assets Resulting from Operations
|
$
|
(43,939,732)
|
|
$
|
10,142,443
|
|
|
Net Investment Income Per Share
|
$
|
0.32
|
|
$
|
0.27
|
|
|
Net (Decrease) Increase in Net Assets Resulting from Operations Per Share
|
$
|
(2.26)
|
|
$
|
0.62
|
|
|
Weighted Average Shares of Common Stock Outstanding
|
|
19,429,480
|
|
|
16,351,032
|
|
|
Distributions Per Share
|
$
|
0.34
|
|
$
|
0.34
|
|
STELLUS CAPITAL INVESTMENT CORPORATION
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (unaudited)
|
|
|
|
|
|
|
|
|
|
For the
|
|
For the
|
|
|
|
three
|
three
|
|
|
|
months ended
|
months ended
|
|
|
|
March 31,
|
March 31,
|
|
|
|
2020
|
2019
|
|
Net (Decrease) Increase in Net Assets Resulting from Operations
|
|
|
|
|
|
|
Net investment income
|
$
|
6,239,462
|
|
$
|
4,333,659
|
|
Net realized gain on non-controlled, non-affiliated investments
|
|
1,296,793
|
|
|
10,246,098
|
|
Net change in unrealized depreciation on non-controlled, non-affiliated investments
|
|
(51,504,946)
|
|
|
(4,424,713)
|
|
Benefit (provision) for taxes on unrealized appreciation on investments
|
|
28,959
|
|
|
(12,601)
|
|
Net (Decrease) Increase in Net Assets Resulting from Operations
|
$
|
(43,939,732)
|
|
$
|
10,142,443
|
|
|
Stockholder Distributions From:
|
|
|
|
|
|
|
Net investment income
|
$
|
(6,619,297)
|
|
$
|
(5,734,250)
|
|
Total Distributions
|
$
|
(6,619,297)
|
|
$
|
(5,734,250)
|
|
Capital Share Transactions
|
|
|
|
|
|
|
Issuance of common stock
|
$
|
4,930,467
|
|
$
|
39,682,500
|
|
Sales load
|
|
(5,681)
|
|
|
(935,000)
|
|
Offering costs
|
|
(18,169)
|
|
|
(202,891)
|
|
Partial share transactions
|
|
(96)
|
|
|
1,435
|
|
Net Increase in Net Assets Resulting From
|
|
|
|
|
|
|
Capital Share Transactions
|
$
|
4,906,521
|
|
$
|
38,546,044
|
|
Total (Decrease) Increase in Net Assets
|
$
|
(45,652,508)
|
|
$
|
42,954,237
|
|
Net Assets at Beginning of Period
|
$
|
270,571,173
|
|
$
|
224,845,007
|
|
Net Assets at End of Period
|
$
|
224,918,665
|
|
$
|
267,799,244
|
|
STELLUS CAPITAL INVESTMENT CORPORATION
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
For the
|
|
For the
|
|
|
|
three
|
three
|
|
|
|
months ended
|
months ended
|
|
|
|
March 31,
|
March 31,
|
|
|
|
2020
|
2019
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
Net (decrease) increase in net assets resulting from operations
|
$
|
(43,939,732)
|
|
$
|
10,142,443
|
|
Adjustments to reconcile net (decrease) increase in net assets from operations to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Purchases of investments
|
|
(61,533,313)
|
|
|
(28,573,192)
|
|
|
Proceeds from sales and repayments of investments
|
|
31,763,595
|
|
|
21,794,726
|
|
|
Net change in unrealized depreciation on investments
|
|
51,504,946
|
|
|
4,424,713
|
|
|
Increase in investments due to PIK
|
|
(537,284)
|
|
|
(41,841)
|
|
|
Amortization of premium and accretion of discount, net
|
|
(538,019)
|
|
|
(400,064)
|
|
|
Deferred tax (benefit) provision
|
|
(28,959)
|
|
|
12,601
|
|
|
Amortization of loan structure fees
|
|
149,978
|
|
|
123,807
|
|
|
Amortization of deferred financing costs
|
|
82,874
|
|
|
81,963
|
|
|
Amortization of loan fees on SBA-guaranteed debentures
|
|
171,275
|
|
|
149,019
|
|
|
Net realized gain on investments
|
|
(1,296,793)
|
|
|
(10,246,098)
|
|
Changes in other assets and liabilities
|
|
|
|
|
|
|
|
(Increase) decrease in interest receivable
|
|
(1,058,214)
|
|
|
470,755
|
|
|
Decrease in other receivable
|
|
—
|
|
|
23,695
|
|
|
Decrease (increase) in prepaid expenses
|
|
43,923
|
|
|
(1,898)
|
|
|
(Decrease) increase in management fees payable
|
|
23,274
|
|
|
(1,211,330)
|
|
|
Decrease in incentive fees payable
|
|
(126,396)
|
|
|
(301,950)
|
|
|
(Decrease) increase in capital gains incentive fees payable
|
|
(880,913)
|
|
|
1,161,757
|
|
|
Increase in administrative services payable
|
|
18,949
|
|
|
49,941
|
|
|
Decrease in interest payable
|
|
(1,405,298)
|
|
|
(997,007)
|
|
|
Increase (decrease) in unearned revenue
|
|
154,391
|
|
|
(15,847)
|
|
|
Decrease in income tax payable
|
|
(747,600)
|
|
|
(265,058)
|
|
|
Increase in other accrued expenses and liabilities
|
|
295,218
|
|
|
360,932
|
|
Net Cash Used in Operating Activities
|
$
|
(27,884,098)
|
|
$
|
(3,257,933)
|
|
Cash flows from Financing Activities
|
|
|
|
|
|
|
|
Proceeds from the issuance of common stock
|
$
|
4,794,995
|
|
$
|
39,682,500
|
|
|
Sales load for common stock issued
|
|
(5,681)
|
|
|
(935,000)
|
|
|
Offering costs paid for common stock
|
|
(18,169)
|
|
|
(191,827)
|
|
|
Stockholder distributions paid
|
|
(6,445,020)
|
|
|
(5,422,675)
|
|
|
Borrowings under Credit Facility
|
|
74,450,000
|
|
|
22,250,000
|
|
|
Repayments of Credit Facility
|
|
(26,000,000)
|
|
|
(45,750,000)
|
|
|
Partial share transactions
|
|
(96)
|
|
|
1,435
|
|
Net Cash Provided by Financing Activities
|
$
|
46,776,029
|
|
$
|
9,634,433
|
|
Net Increase in Cash and Cash Equivalents
|
$
|
18,891,931
|
|
$
|
6,376,500
|
|
|
Cash and cash equivalents balance at beginning of period
|
|
16,133,315
|
|
|
17,467,146
|
|
Cash and Cash Equivalents Balance at End of Period
|
$
|
35,025,246
|
|
$
|
23,843,646
|
|
Supplemental and Non-Cash Activities
|
|
|
|
|
|
|
|
Cash paid for interest expense
|
$
|
5,291,684
|
|
$
|
4,317,004
|
|
|
Excise tax paid
|
|
940,000
|
|
|
280,000
|
|
|
Shares issued pursuant to Dividend Reinvestment Plan
|
|
135,472
|
|
|
—
|
|
|
Increase in distribution payable
|
|
38,805
|
|
|
311,575
|
|
|
Decrease in deferred offering costs
|
|
—
|
|
|
(11,604)
|
Core net investment income, as presented, excludes the impact of capital gains incentive fees and income taxes, the majority of which are excise taxes. The company believes presenting core net investment income and the related per share amount is a useful supplemental disclosure for analyzing its financial performance. However, core net investment income is a non-U.S GAAP measure and should not be considered as a replacement for net investment income and other earnings measures presented in accordance with U.S GAAP. A reconciliation of net investment income in accordance with U.S GAAP to core net investment income is presented in the table below the financial statements.
|
Reconciliation of Core Net Investment Income
|
|
(Unaudited)
|
|
|
|
|
Quarter
|
|
Quarter
|
|
|
ended
|
|
ended
|
|
|
March 31, 2020
|
|
March 31, 2019
|
|
Net investment income
|
$6,239,462
|
|
$4,333,659
|
|
Capital gains incentive fee
|
$(880,913)
|
|
$1,161,757
|
|
Income tax expense
|
$196,795
|
|
$12,744
|
|
Core net investment income
|
$5,555,344
|
|
$5,508,160
|
|
|
|
|
|
|
Per share amounts:
|
|
|
|
|
Net investment income per share
|
$0.32
|
|
$0.27
|
|
Core net investment income per share
|
$0.29
|
|
$0.34
|
|
|
|
|
|
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SOURCE Stellus Capital Investment Corporation