Stellus Capital Investment Corporation (NYSE:SCM) (“Stellus” or “the Company”) today announced financial results for its second fiscal quarter ended June 30, 2013.
|($ in millions, except data relating to per share amounts and number of portfolio companies)|
As of June|
|Investment portfolio, at fair value||$262.2|
|Weighted average yield on debt investments||11.7%|
|Net asset value per share||$14.60|
ended June 30, 2013
|Total investments made, at cost||$80.8|
|Number of new investments||8|
|Repayments of investments, excluding amortization||$22.5|
Number of portfolio companies at
end of period
|Total investment income||$7.3|
|Net investment income||$4.0|
|Net investment income per share||$0.33|
|Adjusted net investment income*||$4.1|
|Adjusted net investment income per share*||$0.34|
|Dividends declared per share||$0.34|
|Net increase in net assets from operations||$4.5|
|Net increase in net assets from operations per share||$0.37|
|Weighted average shares outstanding during the quarter||12,050,618|
* Adjusted net investment income and adjusted net investment income per share are non-GAAP measures that are calculated by excluding the incremental accrual during the quarter of capital gains incentive fees of $0.1 million ($0.01 per share) that are included in net investment income for GAAP purposes. Such accrued fees are related to both realized and unrealized gains as of June 30, 2013. The capital gains incentive fee is determined and paid annually with respect to realized capital gains (but not unrealized capital gains) to the extent such realized capital gains exceed realized and unrealized capital losses for such year. As a result, the capital gains incentive fee that will be paid by the Company for its 2013 fiscal year cannot be determined prior to the end of the year and will only be paid with respect to excess, if any, of the Company’s realized capital gains through December 31, 2013, over all realized and unrealized capital losses and previously paid capital gains incentive fees through December 31, 2013.
“We are pleased with our progress as we continue to build the portfolio in a diversified manner,” said Robert T. Ladd, Chief Executive Officer of Stellus. “We have also taken steps to create additional capacity for growth by exercising part of the accordion on our credit facility.”
Portfolio and Investment Activity
We completed the second quarter of 2013 with a portfolio of $262.2 million (at fair value) invested in 25 companies. As of June 30, 2013, our portfolio included approximately 31% of first lien debt, 30% of second lien debt, 38% of mezzanine debt and 1% of equity investments at fair value. Our debt portfolio consisted of 45% fixed rate investments and 55% floating rate (subject to interest rate floors), such as LIBOR. The average size of our portfolio company investments was $10.5 million and our largest portfolio company investment was approximately $21 million. The weighted average yield on all of our debt investments as of June 30, 2013 was approximately 11.7%.
During the three months ended June 30, 2013, we made $80.8 million of investments in seven new portfolio companies and one to an existing portfolio company and had repayments of two investments during the period that totaled $22.5 million.
This compares to the portfolio as of December 31, 2012, which had a fair value of $195.5 million invested in 15 companies comprising 22% first lien debt, 20% second lien debt, 57% subordinated debt and 1% equity. As of December 31, 2012, our debt investments had a weighted average yield of 12.5% and consisted of 60% fixed rate investments and 40% floating rate (subject to interest rate floors), such as LIBOR.
Results of Operations
Investment income for the three and six months ended June 30, 2013 totaled $7.3 million and $13.8 million, respectively, most of which was interest income from portfolio investments.
Operating expenses for the three and six months ended June 30, 2013 totaled $3.3 million and $6.1 million, respectively. For the same respective periods, base management fees totaled $1.0 million and $1.9 million, incentive fees totaled $0.9 million and $1.5 million, fees and expenses related to our credit facility totaled $0.7 million and $1.3 million (including interest and amortization of deferred financing costs), administrative expenses totaled $0.2 million and $0.4 million and other expenses totaled $0.5 million and $1.0 million.
Net investment income was $4.0 million, or $0.33 per common share (based on weighted average common shares of 12,050,618 at June 30, 2013). Adjusted net investment income was $4.1 million, or $0.34 per common share (based on weighted average common shares of 12,050,618 at June 30, 2013). Adjusted net investment income and adjusted net investment income per share are non-GAAP measures that are calculated by excluding $0.1 million, or $0.01 per common share, of capital gains incentive fee accrual during the quarter that are included in net investment income for GAAP purposes. Such accrued fees are related to both realized and unrealized gains as of June 30, 2013.* For the six months ended June 30, 2013, net investment income was $7.7 million, or $0.64 per share (based on weighted average common shares of 12,043,117 at June 30, 2013), and $8.1 million, or $0.68 per share on an adjusted basis.
The Company’s investment portfolio had unrealized appreciation for the three and six months ended June 30, 2013, of $0.4 million and $1.3 million, respectively.
Our net increase in net assets resulting from operations totaled $4.5 million, or $0.37 per common share (based on weighted average common shares of 12,050,618 at June 30, 2013). For the six months ended June 30, 2013, our net increase in net assets resulting from operations totaled $10 million, or $0.83 per common share (based on weighted average common shares of 12,043,117 at June 30, 2013).
* The capital gains incentive fee is determined and paid annually with respect to realized capital gains (but not unrealized capital gains) to the extent such realized capital gains exceed realized and unrealized capital losses for such year. As a result, the capital gains incentive fee that will be paid by the Company for its 2013 fiscal year cannot be determined until the end of the year and will only be paid with respect to excess, if any, of the Company’s realized capital gains through December 31, 2013, over all realized and unrealized capital losses through December 31, 2013. The Company believes that providing these non-GAAP measures is useful supplemental disclosure for analyzing its financial performance given that the accrued capital gains incentive fees will not actually be paid by the Company to its investment adviser unless the circumstances set forth above are satisfied at December 31, 2013.
Liquidity and Capital Resources
Our liquidity and capital resources are derived from our committed credit facility and cash flows from operations, including investment sales and repayments, and income earned. Our primary use of funds from operations includes investments in portfolio companies and other operating expenses we incur, as well as the payment of dividends to the holders of our common stock. We used, and expect to continue to use, these capital resources as well as proceeds from any future public and private offerings of securities to finance our investment activities.
As of June 30, 2013, our credit facility provided for borrowings in an aggregate amount up to $115 million on a committed basis and had an accordion feature which allowed for potential future expansion of the facility size to $150 million. As of June 30, 2013 and December 31, 2012, we had $91 million and $38 million, respectively, in outstanding borrowings under the credit facility. On July 30, 2013, we exercised a portion of the accordion on the facility and increased the committed amount to $135 million.
Our operating activities used cash of $60.2 million for the six months ended June 30, 2013, primarily in connection with the acquisition of new investments. Our financing activities provided net cash of $9.1 million, which included $53 million of net borrowings under the credit facility.
During the three and six months ended June 30, 2013, we declared distributions of $0.34 and $0.68 per share, respectively, for total distributions of $4.1 million and $8.2 million, respectively. Tax characteristics of all distributions will be reported to stockholders on Form 1099-DIV after the end of the calendar year.
Recent Portfolio Activity
During the three months ended June 30, 2013, we made $80.8 million of investments in seven new portfolio companies and one to an existing portfolio company. During the same period the Company received repayments of two investments totaling $22.5 million and an additional $1.3 million of amortization of existing loans.
New investment transactions which occurred during the period are summarized as follows:
Our repayments were:
Events Subsequent to June 30, 2013
Since June 30, 2013, we made one new investment totaling $14.8 million and received one repayment of $15 million which brings the investment portfolio to approximately $262 million (at fair value) and the average investment per company to $10.5 million as of August 6, 2013.
On July 30, 2013, we exercised a portion of our credit facility’s accordion and received additional commitments from certain members of the existing bank group in the amount of $20 million, which increased the total commitments to $135 million under the facility.
Conference Call Information
Stellus Capital Investment Corporation will host a conference call to discuss these results on Wednesday August 7, 2013, at 11:00 a.m. Eastern Daylight Time. The conference call will be led by Robert T. Ladd, chief executive officer, and W. Todd Huskinson, chief financial officer, chief compliance officer, treasurer, and secretary.
For those wishing to participate by telephone, please dial (800) 768-6544 (domestic). Use passcode 9357073. Starting approximately two hours after the conclusion of the call, a replay will be available through August 16, 2013 by dialing (888) 203-1112 and entering passcode 9357073. The replay will also be available on the company’s website.
|STELLUS CAPITAL INVESTMENT CORPORATION|
|STATEMENT OF ASSETS AND LIABILITIES|
|June 30, 2013|
December 31, 2012
Non-controlled, non-affiliated investments, at fair value (amortized cost of $260,614,004 and $195,455,671, respectively)
|Cash and cash equivalents||10,982,998||62,131,686|
|Prepaid loan structure fees||1,716,629||1,947,820|
|Payable for investments purchased||—||4,750,000|
|Credit facility payable||91,000,000||38,000,000|
|Base management fees payable||1,041,199||527,034|
|Incentive fees payable||1,250,375||—|
|Accrued offering costs||—||147,123|
|Directors' fees payable||89,000||29,452|
|Other accrued expenses and liabilities||495,440||175,993|
Common Stock, par value $0.001 per share|
(100,000,000 shares authorized, 12,066,019 and 12,035,023 shares issued and outstanding, respectively)
|Accumulated undistributed net realized gain||1,002,917||—|
|Distributions in excess of net investment income||(1,403,946)||(874,986)|
|Unrealized appreciation (depreciation) on investments and cash equivalents||1,340,824||(5,932)|
|Total Liabilities and Net Assets||$||279,179,551||$||262,542,977|
|Net Asset Value Per Share||$||14.60||$||14.45|
|STELLUS CAPITAL INVESTMENT CORPORATION|
|STATEMENTS OF OPERATIONS (unaudited)|
For the three
For the period
For the six
For the period
|Total Investment Income||7,341,227||—||13,787,667||—|
|Administrative services expenses||228,535||—||399,576||—|
|Interest expense and other fees||718,219||—||1,284,759||—|
|Other general and administrative expenses||85,026||—||127,444||—|
|Total Operating Expenses||$||3,368,569||$||126,628||$||6,127,627||$||126,628|
|Net Investment Income (Loss)||$||3,972,658||$||(126,628||)||$||7,660,040||$||(126,628||)|
|Net Realized Gain on Investments and Cash Equivalents||$||99,995||$||—||$||1,002,917||$||—|
|Net Change in Unrealized Appreciation on Investments and Cash Equivalents||$||404,942||$||—||$||1,346,756||$||—|
|Net Increase (Decrease) in Net Assets Resulting from Operations||$||4,477,595||$||(126,628||)||$||10,009,713||$||(126,628||)|
|Net Investment Income Per Share||$||0.33||$||—||$||0.64||$||—|
|Net Increase in Net Assets Resulting from Operations Per Share||$||0.37||$||—||$||0.83||$||—|
|Weighted Average Shares of Common Stock Outstanding||12,050,618||—||12,043,117||—|
|STELLUS CAPITAL INVESTMENT CORPORATION|
|STATEMENT OF CHANGES IN NET ASSETS|
For the six months
For the Period from
|Increase in Net Assets Resulting from Operations|
|Net investment income (loss)||$||7,660,040||$||(126,628||)|
|Net realized gain on investments and cash equivalents||1,002,917||—|
|Net change in unrealized appreciation on investments and cash equivalents||1,346,756||—|
|Net Increase (Decrease) in Net Assets Resulting from Operations||10,009,713||(126,628||)|
|Distributions from net investment income||(8,189,000||)||—|
|Capital share transactions|
|Issuance of common stock||439,889||—|
|Net increase in net assets resulting from capital share transactions||439,889||—|
|Total increase (decrease) in net assets||2,260,602||(126,628||)|
|Net assets at beginning of period||173,845,955||—|
|Net assets at end of period||$||176,106,557||$||(126,628||)|
|STELLUS CAPITAL INVESTMENT CORPORATION|
|STATEMENTS OF CASH FLOWS|
For the six
For the Period
|Cash flows from operating activities|
|Net increase in net assets resulting from operations||$||10,009,713||$||—|
|Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by operating activities:|
|Purchases of investments||(112,467,250||)||—|
|Proceeds from sales and repayments of investments||48,792,161||—|
|Net change in unrealized appreciation on investments||(1,345,238||)||—|
|Increase in investments due to PIK||(523,926||)||—|
|Accretion of discount||(184,489||)||—|
|Net realized gain on investments||(1,005,830||))||—|
|Changes in other assets and liabilities|
|Increase in interest receivable||(1,536,774||)||—|
|Decrease in prepaid expenses and fees||486,084||—|
|Decrease in payable for investments purchased||(4,750,000||)||—|
|Increase in management fees payable||514,165||—|
|Increase in directors' fees payable||59,548||—|
|Increase in incentive fees payable||1,250,375||—|
|Increase in interest payable||130,604||—|
|Increase in other accrued expenses and liabilities||319,447||126,628|
|Net cash (used in) provided by operating activities||$||(60,251,410||)||$||126,628|
|Cash flows from financing activities|
|Offering costs paid||(147,123||)||—|
|Stockholder distributions paid||(7,749,111||)||—|
|Borrowings under credit facility||53,000,000||—|
|Borrowings under short-term loan||(36,001,044||)||—|
|Net cash provided by financing activities||9,102,722||—|
|Net increase (decrease) in cash and cash equivalents||(51,148,688||)||126,628|
|Cash and cash equivalents balance at beginning of period||62,131,686||—|
|Cash and cash equivalents balance at end of period||$||10,982,998||$||126,628|
|Common stock issued in connection with dividend reinvestments||$||439,889||$||—|
About Stellus Capital Investment Corporation
The Company is an externally-managed, closed-end, non-diversified management investment 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.
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.
Stellus Capital Investment Corporation
W. Todd Huskinson, 713-292-5414
Chief Financial Officer
Kelly Holman, 212-520-1385
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