8-7-13 6:00 AM EDT | Email Article

Stellus Capital Investment Corporation (NYSE:SCM) (“Stellus” or “the Company”) today announced financial results for its second fiscal quarter ended June 30, 2013.

HIGHLIGHTS
($ in millions, except data relating to per share amounts and number of portfolio companies)
 
Portfolio results   As of June
30, 2013
Total assets $279.2
Investment portfolio, at fair value $262.2
Net assets $176.1
Weighted average yield on debt investments 11.7%
Net asset value per share $14.60
    Quarter
ended June 30, 2013

Portfolio activity

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

25

Operating results

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.

Distributions

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:

  • $16.7 million investment in the second lien loan of Atkins Nutritionals, Inc., a leading weight management brand in the U.S.
  • $12.8 million investment in the first lien loan of ConvergeOne Holdings Corp., a leading independent integrator of voice communications and collaboration solutions.
  • $12.2 million investment in the Senior Secured loan of Colford Capital Holdings, LLC, a specialty finance holding company focused on asset-based lending.
  • $10 million investment in the last-out, first lien loan of ProPetro Services, Inc. a private oil field services company that provides a broad range of drilling and production-related services to oil and natural gas exploration and production companies.
  • $7.9 million investment in the second lien loan of Telecommunications Management, LLC, an operator of cable systems in small and mid-size communities in Missouri, Arkansas, Indiana and Illinois.
  • $7.4 million investment in the second lien loan of Tellular Corporation, which provides machine-to-machine monitoring solutions that enable data connectivity over cellular and satellite networks to track, monitor and manage remote assets.
  • $6.9 million investment in the second lien loan of Livingston International, Inc., North America’s largest non-asset based customs broker.
  • $6.9 million investment in the second lien loan of Securus Technologies, Inc., a leading independent provider of inmate telecommunications in North America.

Our repayments were:

  • Full repayment on our second lien term loan to Securus Technologies, Inc. at par plus a 3% prepayment premium resulting in total proceeds of $12.4 million.
  • Full repayment on our second lien term loan to SourceHOV at par plus a 1% prepayment premium resulting in total proceeds of $10.1 million.

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 17, 2013, we made a $14.8 million investment in the second lien loan of Help/Systems, LLC, which is a leading provider of system and network management, business intelligence, and security and compliance software solutions.
  • On August 1, 2013, we received full repayment on our second lien term loan to Baja Broadband, LLC at par resulting in total proceeds of $15 million.

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
(Unaudited)
 

December 31, 2012

ASSETS

Non-controlled, non-affiliated investments, at fair value (amortized cost of $260,614,004 and $195,455,671, respectively)

$ 262,185,828 $ 195,451,256
Cash and cash equivalents 10,982,998 62,131,686
Interest receivable 4,110,605 2,573,831
Prepaid loan structure fees 1,716,629 1,947,820
Prepaid expenses 183,491 438,384
Total Assets 279,179,551 262,542,977
LIABILITIES
Payable for investments purchased 4,750,000
Credit facility payable 91,000,000 38,000,000
Short-term loan 8,999,899 45,000,943
Base management fees payable 1,041,199 527,034
Incentive fees payable 1,250,375
Accrued offering costs 147,123
Interest payable 197,081 66,477
Directors' fees payable 89,000 29,452
Other accrued expenses and liabilities 495,440 175,993
Total Liabilities 103,072,994 88,697,022
Net Assets $ 176,106,557 $ 173,845,955
NET ASSETS
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)
$ 12,066 $ 12,035
Paid-in capital 175,154,696 174,714,838
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)
Net Assets $ 176,106,557 $ 173,845,955
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
months ended
June 30, 2013
(Unaudited)

For the period
from inception
(May 18, 2012)
through June, 30
2012
(Unaudited)

For the six
months ended
June 30, 2013
(Unaudited)

For the period
from inception
(May 18, 2012)
through June, 30
2012
(Unaudited)

INVESTMENT INCOME
Interest income $ 6,710,905 $  

$

13,035,629

$  
Other income   630,322   752,038  
Total Investment Income   7,341,227       13,787,667    
OPERATING EXPENSES
Management fees $ 1,041,199 $ $ 1,925,202 $
Valuation fees 113,710 203,710
Administrative services expenses 228,535 399,576
Incentive fees 867,096 1,550,236
Professional fees 107,516 126,628 223,462 126,628
Directors' fees 89,000 178,000
Insurance expense 118,268 235,238
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
ended June 30, 2013
(Unaudited)

For the Period from
inception (May 18, 2012)
through June 30, 2012
(Unaudited)

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 )
 
Stockholder distributions
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
months ended
June 30, 2013
(Unaudited)

 

For the Period
from Inception
(May 18, 2012)
through June 30,
2012
(Unaudited)

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
Non-cash items
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.

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.

Stellus Capital Investment Corporation
W. Todd Huskinson, 713-292-5414
Chief Financial Officer
thuskinson@stelluscapital.com
or
BackBay Communications
Kelly Holman, 212-520-1385
Kelly.holman@backbaycommunications.com

Copyright Business Wire 2013
Add a Comment

News   More...

Securities related to this article
Sacre-Coeur Minerals Ltd. View scm Stock Quote
 
Start Premium Trial Register For Free

P F Fund Financial Data (13,000+ funds)
P F Stock Financial Data (7,000+ stocks)
P F Stock and Fund Screeners (basic)
P F Investing Articles and Market Commentary
P F Articles Archive (>30 days)
P F Discuss (dozens of stock, fund, bond, and general bulletin boards)
P F Portfolio Manager (basic)
P F Morningstar Investment Classroom
P F Access Your Portfolio Anytime, Anywhere via Your Mobile Device
P   Morningstar Fund Analyst Reports (full research on 1,700 funds, ETFs, and CEFs)
P   Morningstar Stock Analyst Reports (full research on more than 1,100 stocks)
P   Portfolio Manager (advanced with 10 X-Ray analyses, including recommendations)
P   Portfolio Monitor (monthly and on-demand personalized portfolio statements)
P   Morningstar Proprietary Stock Information (stock star ratings, buy/sell prices, economic moat ratings, and more)
P   Morningstar 5-Star Stock and Fund Favorites & Red Flags eNewsletters
P   Premium Stock and Fund Screeners (advanced with nearly infinite ways to find the best securities for you)
P   Discounts on Morningstar newsletters, books, seminars, and more

Sign-up to Morningstar


Basic Access

Articles and Videos
Morningstar video reports, articles, data, and tools. Dig into our lineup of e-newsletters and investing classroom courses outlining sensible strategies for maximizing your investments.
Morningstar Discuss
Follow the buzz on individual stocks or fund families. Plus, read the latest posts from Morningstar members and analysts.
Portfolio Manager
Track your investments and watch lists with our Portfolio Manager. Customize your view with our comprehensive stock, fund, and ETF data.

Access these features and more when you sign up for Free Membership.
Join Morningstar today. It's Free.

Unlimited Access

Analyst Research
Gather in-depth, actionable insight on over 3,700 stock and mutual funds covered by Morningstar analysts. View our mutual fund Analyst Reports favored by professionals, savvy experienced investors, and new investors researching options for retirement savings, college plans, or other investment needs.
Portfolio X-Ray®
Ensure your portfolio is positioned exactly how you want with Morningstar's X-Ray Interpreter and Stock Intersection tools. A Barron's "Best of the Web" award winner for five years running, X-Ray Interpreter goes under the hood of your portfolio to provide a useful allocation, sector, and geographic analysis. And you can discover how much of a stock you really own, individually and through mutual funds, with Stock Intersection.
Investment Picks
Find new 5-star stocks (greatly undervalued companies) to consider daily. Our 5-star stock rating is a proven winner, consistently beating benchmarks like the S&P 500. Plus, browse our Fund Analyst Picks and Stewardship Grades to find shareholder-friendly mutual funds that are poised for outperformance.
Portfolio Monitor
Get a clear view of your investments with personalized reports about your portfolio. Receive monthly statements and generate reports on-demand to help you stay on track to meet your investment goals.

Access these features and more when you sign up for Premium Membership.
Start your free 14-day trial today online
Your subscription may be tax deductible. Please contact your tax advisor.

Content Partners
Morningstar - - Stellus Capital Investment Corporation Reports Results for its second fiscal quarter ended June 30, 2013
Name |  Ticker |  Star Rating |  Market Cap |  Stock Type |  Sector |  Industry Star Rating |  Investment Style |  Total Assets |  Category |  Top Holdings |  Top Sectors |  Symbol |  Title Star Rating |  Category |  Total Assets |  Top Holdings |  Top Sectors |  Symbol |  Name Topic |  Sector |  Key Indicators |  User Interest |  Market Cap |  Industry Name |  Ticker |  Star Rating |  Market Cap |  Stock Type |  Sector |  Industry Star Rating |  Investment Style |  Total Assets |  Category |  Top Holdings |  Top Sectors |  Symbol / Ticker |  Title Star Rating |  Category |  Total Assets |  Symbol / Ticker |  Name Title |  Date |  Author |  Collection |  Popularity |  Interest Title |  Date |  Company |  Symbol |  Interest |  Popularity Title |  Date |  Company |  Symbol |  Interest |  Popularity Title |  Date |  Author |  Collection |  Interest |  Popularity

Previous: Stellus Capital Investment Corporation Makes Replay of the Conference Call Discussing Its Third Quarter 2013 Financial Results Available  |  Next: Stellus Capital Investment Corporation Reports Results for its third fiscal quarter ended September 30, 2013