XNAS:FDUS Fidus Investment Corp Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

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Form 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

 

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2012

OR

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number 814-00861

 

 

Fidus Investment Corporation

(Exact Name of Registrant as Specified in its Charter)

 

 

 

Maryland   27-5017321

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

1603 Orrington Avenue, Suite 820

Evanston, Illinois

  60201
(Address of Principal Executive Offices)   (Zip Code)

(847) 859-3940

(Registrant’s telephone number, including area code)

 

 

n/a

(Former name, former address and former fiscal year, if changed since last report)

 

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer   ¨    Accelerated filer   ¨
Non-accelerated filer   þ  (Do not check if a smaller reporting company)    Smaller reporting company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  þ

As of August 2, 2012, the Registrant had outstanding 9,427,021 shares of common stock, $0.001 par value.

 

 

 


Table of Contents

FIDUS INVESTMENT CORPORATION

TABLE OF CONTENTS

QUARTERLY REPORT ON FORM 10-Q

 

     PART I — FINANCIAL INFORMATION       

Item 1.

  

Financial Statements.

     3   
  

Consolidated Statements of Assets and Liabilities — June 30, 2012 (unaudited) and December 31, 2011

     3   
  

Consolidated Statements of Operations — Three and Six Months Ended June 30, 2012 (unaudited) and 2011 (unaudited)

     4   
  

Consolidated Statements of Changes in Net Assets — Three and Six Months Ended June 30, 2012 (unaudited) and 2011 (unaudited)

     5   
  

Consolidated Statements of Cash Flows — Three and Six Months Ended June 30, 2012 (unaudited) and 2011 (unaudited)

     6   
  

Consolidated Schedule of Investments — June 30, 2012 (unaudited) and December 31, 2011

     7   
  

Notes to Consolidated Financial Statements (unaudited)

     13   

Item 2.

  

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

     25   

Item 3.

  

Quantitative and Qualitative Disclosures About Market Risk.

     37   

Item 4.

  

Controls and Procedures.

     37   
   PART II — OTHER INFORMATION   

Item 1.

  

Legal Proceedings.

     38   

Item 1A.

  

Risk Factors.

     38   

Item 2.

  

Unregistered Sales of Equity Securities and Use of Proceeds.

     42   

Item 3.

  

Defaults Upon Senior Securities.

     42   

Item 4.

  

Mine Safety Disclosures.

     42   

Item 5.

  

Other Information.

     42   

Item 6.

  

Exhibits.

     43   

Signatures

     44   

Exhibit Index

     45   

 

2


Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

FIDUS INVESTMENT CORPORATION

Consolidated Statements of Assets and Liabilities

 

     June  30,
2012
(unaudited)
    December 31,
2011
 
ASSETS     

Investments, at fair value

    

Control investments (cost: $20,420,177 and $19,916,617, respectively)

   $ 29,844,891      $ 28,598,962   

Affiliate investments (cost: $51,531,946 and $49,913,338, respectively)

     50,132,504        50,058,243   

Non-control/non-affiliate investments (cost: $149,151,373 and $122,709,976, respectively)

     154,077,960        126,088,167   
  

 

 

   

 

 

 

Total investments, at fair value (cost: $221,103,496 and $192,539,931, respectively)

     234,055,355        204,745,372   

Cash and cash equivalents

     27,630,427        39,058,516   

Interest receivable

     2,057,290        1,686,851   

Deferred financing costs (net of accumulated amortization of $1,346,073 and $1,134,767, respectively)

     3,094,240        2,687,233   

Prepaid expenses and other assets

     667,818        465,171   
  

 

 

   

 

 

 

Total assets

     267,505,130        248,643,143   
  

 

 

   

 

 

 
LIABILITIES     

SBA debentures

     121,250,000        104,000,000   

Accrued interest payable

     1,918,767        1,718,989   

Due to affiliates

     2,441,474        2,162,160   

Accounts payable and other liabilities

     293,671        279,849   
  

 

 

   

 

 

 

Total liabilities

     125,903,912        108,160,998   
  

 

 

   

 

 

 

Net assets

   $ 141,601,218      $ 140,482,145   
  

 

 

   

 

 

 
ANALYSIS OF NET ASSETS     

Common stock, $0.001 par value (100,000,000 shares authorized, 9,427,021 shares issued and outstanding)

   $ 9,427      $ 9,427   

Additional paid-in capital

     138,648,226        138,648,226   

Undistributed net investment income

     794,702        422,049   

Accumulated net realized loss on investments

     (481,937     (481,937

Accumulated net unrealized appreciation on investments

     2,630,800        1,884,380   
  

 

 

   

 

 

 

Total net assets

   $ 141,601,218      $ 140,482,145   
  

 

 

   

 

 

 

Net asset value per share

   $ 15.02      $ 14.90   
  

 

 

   

 

 

 

See Notes to Consolidated Financial Statements (unaudited).

 

3


Table of Contents

FIDUS INVESTMENT CORPORATION

Consolidated Statements of Operations (unaudited)

 

     Three Months Ended June 30,     Six Months Ended June 30,  
     2012     2011     2012      2011  

Investment income:

         

Interest and fee income

         

Control investments

   $ 729,586      $ 853,890      $ 1,449,614       $ 1,673,388   

Affiliate investments

     1,779,768        1,057,828        3,561,344         1,924,688   

Non-control/non-affiliate investments

     4,903,174        3,271,050        9,819,658         6,246,134   
  

 

 

   

 

 

   

 

 

    

 

 

 

Total interest and fee income

     7,412,528        5,182,768        14,830,616         9,844,210   

Dividend income

         

Control investments

     —          120,300        —           236,376   

Affiliate investments

     30,454        —          60,858         —     

Non-control/non-affiliate investments

     151,426        —          271,928         —     
  

 

 

   

 

 

   

 

 

    

 

 

 

Total dividend income

     181,880        120,300        332,786         236,376   

Interest on idle funds and other income

     34,130        16,219        61,617         32,464   
  

 

 

   

 

 

   

 

 

    

 

 

 

Total investment income

     7,628,538        5,319,287        15,225,019         10,113,050   
  

 

 

   

 

 

   

 

 

    

 

 

 

Expenses:

         

Interest expense

     1,569,250        1,394,767        3,011,864         2,719,052   

Base management fee

     1,005,306        999,190        1,944,714         2,035,403   

Less: management fee offset

     —          (430,208     —           (430,208

Incentive fee

     1,045,933        —          1,923,416         —     

Administrative service expenses

     223,766        22,173        453,142         22,173   

Professional fees

     156,121        90,677        413,152         170,350   

Other general and administrative expenses

     285,454        82,759        501,817         106,121   
  

 

 

   

 

 

   

 

 

    

 

 

 

Total expenses

     4,285,830        2,159,358        8,248,105         4,622,891   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net investment income before income taxes

     3,342,708        3,159,929        6,976,914         5,490,159   

Income tax expense (benefit)

     (8,275     —          5,346         —     
  

 

 

   

 

 

   

 

 

    

 

 

 

Net investment income

     3,350,983        3,159,929        6,971,568         5,490,159   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net realized and unrealized gains (losses) on investments:

         

Realized loss on non-control/non-affiliate investments

     —          —          —           (7,935,430

Net change in unrealized appreciation on investments

     848,374        1,437,313        746,420         10,385,661   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net gain on investments

     848,374        1,437,313        746,420         2,450,231   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net increase in net assets resulting from operations

   $ 4,199,357      $ 4,597,242      $ 7,717,988       $ 7,940,390   
  

 

 

   

 

 

   

 

 

    

 

 

 

Per common share data:(1)

         

Net investment income per share-basic and diluted

   $ 0.36      $ 0.33      $ 0.74       $ 0.58   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net increase in net assets resulting from operations per share-basic and diluted

   $ 0.45      $ 0.49      $ 0.82       $ 0.84   
  

 

 

   

 

 

   

 

 

    

 

 

 

Dividends paid per share

   $ 0.36        n/a      $ 0.70         n/a   
  

 

 

   

 

 

   

 

 

    

 

 

 

Weighted average number of shares outstanding — basic and diluted

     9,427,021        9,427,021        9,427,021         9,427,021   
  

 

 

   

 

 

   

 

 

    

 

 

 

 

(1) The weighted average shares outstanding for the three and six months ended June 30, 2011, are based on the assumption that the number of shares issued in the Formation Transactions and Offering (including the over-allotment) in June and July 2011 (9,427,021 shares of common stock) had been issued on January 1, 2011.

See Notes to Consolidated Financial Statements (unaudited).

 

4


Table of Contents

FIDUS INVESTMENT CORPORATION

Consolidated Statements of Changes in Net Assets (unaudited)

 

          Common Stock     Additional
Paid in
Capital
    Undistributed
Net Investment
Income
    Accumulated
Net Realized

Loss on
Investments
    Accumulated
Net Unrealized

Appreciation
on Investments
    Total
Net
Assets
 
    Partners’
Capital
    Number
of  Shares
    Par
Value
           

Balances at December 31, 2010

  $ 52,004,664        —        $ —        $ —        $ —        $ —        $ —        $ 52,004,664   

Capital contributions

    7,000,000        —          —          —          —          —          —          7,000,000   

Capital distributions

    (1,500,000                 (1,500,000

Net investment income through June 20, 2011

    5,077,597        —          —          —          —          —          —          5,077,597   

Realized loss on investments through June 20, 2011

    (7,935,430     —          —          —          —          —          —          (7,935,430

Net change in unrealized appreciation on investments through June 20, 2011

    10,385,661        —          —          —          —          —          —          10,385,661   

Formation transactions

    (65,032,492     4,056,521        4,057        65,028,435        —          —          —          —     

Public offering of common stock, net of expenses

    —          4,670,000        4,670        63,909,505        —          —          —          63,914,175   

Net investment income June 21 to June 30, 2011

    —          —          —          —          412,562        —          —          412,562   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at June 30, 2011

  $ —          8,726,521      $ 8,727      $ 128,937,940      $ 412,562      $ —        $ —        $ 129,359,229   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at December 31, 2011

  $ —          9,427,021      $ 9,427      $ 138,648,226      $ 422,049      $ (481,937   $ 1,884,380      $ 140,482,145   

Net increase in net assets resulting from operations

    —          —          —          —          6,971,568        —          746,420        7,717,988   

Dividends paid

    —          —          —          —          (6,598,915     —          —          (6,598,915
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at June 30, 2012

  $ —          9,427,021      $ 9,427      $ 138,648,226      $ 794,702      $ (481,937   $ 2,630,800      $ 141,601,218   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See Notes to Consolidated Financial Statements (unaudited).

 

5


Table of Contents

FIDUS INVESTMENT CORPORATION

Consolidated Statements of Cash Flows (unaudited)

 

     Six Months Ended June 30,  
     2012     2011  

Cash Flows from Operating Activities

    

Net increase in net assets resulting from operations

   $ 7,717,988      $ 7,940,390   

Adjustments to reconcile net increase in net assets resulting from operations to net cash used in operating activities:

    

Net change in unrealized appreciation on investments

     (746,420     (10,385,661

Realized loss on investments

     —          7,935,430   

Interest and dividend income paid-in-kind

     (2,269,572     (2,084,385

Accretion of original issue discount

     (548,425    

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