HOUSTON, TX--(Marketwired - August 05, 2016) - Stellus Capital Investment Corporation (
| HIGHLIGHTS | |||||
| ($ in millions, except data relating to per share amounts and number of portfolio companies) | |||||
| As of | |||||
| Portfolio results | June 30, 2016 | ||||
| Total assets | $366.1 | ||||
| Investment portfolio, at fair value | $350.8 | ||||
| Net assets | $163.7 | ||||
| Weighted average yield on debt investments | 10.7 | % | |||
| Net asset value per share | $13.12 | ||||
| Quarter | Quarter | ||||
| ended | ended | ||||
| June 30, 2016 | June 30, 2015 | ||||
| Portfolio activity | |||||
| Total investments made, at par | $12.8 | $38.9 | |||
| Number of new investments | 3 | 6 | |||
| Repayments of investments, including amortization | $15.6 | $36.6 | |||
| Number of portfolio companies at | |||||
| end of period | 42 | 35 | |||
| Operating results | |||||
| Total investment income | $9.6 | $8.7 | |||
| Net investment income | $3.9 | $4.0 | |||
| Net investment income per share | $0.32 | $0.32 | |||
| Realized Gains per share | $0.00 | $0.02 | |||
| Regular dividends declared per share | $0.34 | $0.34 | |||
| Net increase in net assets from operations | $5.0 | $4.0 | |||
| Net increase in net assets from operations per share | $0.41 | $0.32 | |||
"During the second quarter, we were able to substantially replace repayments with new investments", said Robert T. Ladd, Chief Executive Officer of Stellus. "The Company's investment adviser has informed the Company that it will waive incentive fees for the fiscal year ending December 31, 2016 to the extent necessary for the earnings of the Company to support dividends paid for the year".
Portfolio and Investment Activity
We completed the second quarter of 2016 with a portfolio of $350.8 million (at fair value) invested in 42 companies. As of June 30, 2016, our portfolio included approximately 36% of first lien debt, 40% of second lien debt, 20% of mezzanine debt and 4% of equity investments at fair value. Our debt portfolio consisted of 78% floating rate investments (subject to interest rate floors) and 22% fixed rate investments. The average size of our portfolio company investments was $8.4 million and our largest portfolio company investment was approximately $21.8 million at fair value. The weighted average yield on all of our debt investments as of June 30, 2016 was approximately 10.7%.
During the three months ended June 30, 2016, we made $12.8 million of investments in three new portfolio companies and received $15.6 million from payoffs and amortization of certain other investments.
This compares to the portfolio as of December 31, 2015, which had a fair value of $349.0 million invested in 39 companies comprising 38% of first lien debt, 38% of second lien debt, 20% of mezzanine debt and 4% of equity investments at fair value. As of December 31, 2015, our debt investments had a weighted average yield of 10.6% and consisted of 75% floating rate investments (subject to interest rate floors) and 25% fixed rate investments.
Results of Operations
Investment income for the three months ended June 30, 2016 and 2015 totaled $9.6 million and $8.7 million, respectively, most of which was interest income from portfolio investments.
Operating expenses for the three months ended June 30, 2016 and 2015, totaled $5.7 million and $4.7 million, respectively. For the same respective periods, base management fees totaled $1.6 million and $1.4 million, incentive fees totaled $1.0 million for both periods, fees and expenses related to our borrowings totaled $2.0 million and $1.5 million (including interest and amortization of deferred financing costs), administrative expenses totaled $0.3 million for both periods and other expenses totaled $0.5 million for both periods. Lastly, operating expenses for the three months ended June 30, 2016 included a one-time expense related to previously capitalized deferred offering costs of $0.3 million.
Net investment income was $3.9 million and $4.0 million, or $0.32 and $0.32 per common share based on weighted average common shares outstanding for the three months ended June 30, 2016 and 2015, respectively.
The Company's investment portfolio had a net change in unrealized depreciation for the three months ended June 30, 2016 and 2015, of $0.9 million and ($0.2) million, respectively. For the three months ended June 30, 2016 and 2015 the Company had realized gains of $1.5 thousand and $289.5 thousand, respectively.
Our net increase in net assets resulting from operations totaled $5.0 million and $4.0 million, or $0.41 and $0.32 per common share based on weighted average common shares outstanding for the three months ended June 30, 2016 and 2015, respectively.
Liquidity and Capital Resources
As of June 30, 2016 and 2015, our credit facility provided for borrowings in an aggregate amount up to $120 million on a committed basis. As of June 30, 2016, our credit facility had an accordion feature which allowed for potential future expansion of the facility size to $195 million. As of June 30, 2016 and December 31, 2015, we had $110.0 million and $109.5 million in outstanding borrowings under the credit facility, respectively.
For the six months ended June 30, 2016, our operating activities provided cash of $7.9 million primarily in connection with cash interest received and repayments of our investments, which was offset by the purchase and origination of portfolio investments. For the same period, our financing activities used cash of $8.0 million, due to distributions to stockholders paid during the period.
For the six months ended June 30, 2015 our operating activities provided cash of $2.6 million, primarily in connection with cash interest received and repayments of our investments, and our financing activities provided cash of $1.2 million, primarily related to the issuance of SBA debentures.
Distributions
During the three months ended June 30, 2016 and 2015, we declared distributions of $0.34 per share ($4.2 million) for each quarter. Tax characteristics of all distributions will be reported to stockholders on Form 1099-DIV after the end of the calendar year. None of these dividends are expected to include a return of capital.
Recent Portfolio Activity
New investment transactions and repayments which occurred during the three months ended June 30, 2016 are summarized as follows:
- Throughout the quarter, we received a total of $4.5 million in full repayment of the debtor-in-possession loan of Binder & Binder National Security and Disability Advocates, LLC.
- On May 23, 2016, we received full repayment of both the first lien and delayed draw term loans of Software Paradigms International Group, LLC at par plus a 2% prepayment premium for total proceeds of $9.8 million.
- On June 10, 2016, we made a $10.0 million investment in the first lien term loan of Furniture Factory Outlet, LLC. We invested an additional $0.1 million in the unsecured term loan and $0.1 million in the equity of the company as well.
- On June 30, 2016, we made a $1.25 million investment in the second lien term loan of Keais Records Service, LLC.
- On June 30, 2016, we made a $1.25 million investment in the unsecured term loan of Wise Holding Corporation. In addition, we invested $0.1 million in the equity of the company.
Events Subsequent to June 30, 2016
Investment Portfolio
On July 5, 2016 and July 19, 2016, we funded $0.3 million and $0.1 million, respectively, of the revolver of HUF Worldwide, LLC.
On July 15, 2016, we made a $2.6 million investment in the first lien term loan of Good Source Solutions, Inc. Additionally, we invested $0.2 million in the company's equity.
Credit Facility
The outstanding balance under the Credit Facility as of August 3, 2016 was $103.0 million.
Conference Call Information
Stellus Capital Investment Corporation will host a conference call to discuss these results on August 5, 2016, at 10:00 a.m. Central 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 888-359-3624 (domestic). Use passcode 3493477. Starting approximately twenty-four hours after the conclusion of the call, a replay will be available through August 13, 2016 by dialing (888) 203-1112 and entering passcode 3493477. The replay will also be available on the company's website.
| PART I - FINANCIAL INFORMATION | ||||||||||
| STELLUS CAPITAL INVESTMENT CORPORATION | ||||||||||
| CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES (unaudited) | ||||||||||
| June 30, 2016 | December 31, 2015 | |||||||||
| ASSETS | ||||||||||
| Non-controlled, non-affiliated investments, at fair value (amortized cost of $366,819,533 and $364,212,459, respectively) | $ | 350,809,617 | $ | 349,017,697 | ||||||
| Cash and cash equivalents | 10,834,194 | 10,875,790 | ||||||||
| Receivable for sales and repayments of investments | - | 10,000 | ||||||||
| Interest receivable | 4,197,307 | 4,720,031 | ||||||||
| Deferred offering costs | - | 261,761 | ||||||||
| Accounts receivable | - | 7,684 | ||||||||
| Prepaid expenses | 297,699 | 475,449 | ||||||||
| Total Assets | $ | 366,138,817 | $ | 365,368,412 | ||||||
| LIABILITIES | ||||||||||
| Notes Payable, net of deferred financing costs | $ | 24,469,817 | $ | 24,381,108 | ||||||
| Credit facility payable, net of prepaid loan structure fees | 108,958,219 | 108,197,373 | ||||||||
| SBA Debentures, net of prepaid loan fees | 63,178,049 | 63,015,846 | ||||||||
| Dividends payable | 1,413,982 | 1,413,982 | ||||||||
| Base management fees payable | 1,550,841 | 1,518,779 | ||||||||
| Incentive fees payable | 1,319,029 | 607,956 | ||||||||
| Interest payable | 842,369 | 570,189 | ||||||||
| Directors' fees payable | 86,000 | - | ||||||||
| Unearned revenue | 23,593 | 36,877 | ||||||||
| Administrative services payable | 234,248 | 397,799 | ||||||||
| Deferred tax liability | 59,572 | 381,723 | ||||||||
| Other accrued expenses and liabilities | 282,597 | 195,676 | ||||||||
| Total Liabilities | $ | 202,418,316 | $ | 200,717,308 | ||||||
| Commitments and contingencies (Note 5) | ||||||||||
| Net Assets | $ | 163,720,501 | $ | 164,651,104 | ||||||
| NET ASSETS | ||||||||||
| Common Stock, par value $0.001 per share (100,000,000 shares authorized, 12,479,959 and 12,479,960 shares issued and outstanding, respectively) | $ | 12,480 | $ | 12,480 | ||||||
| Paid-in capital | 180,994,749 | 180,994,752 | ||||||||
| Accumulated undistributed net realized gain | 2,380 | - | ||||||||
| Distributions in excess of net investment income | (1,219,620 | ) | (779,643 | ) | ||||||
| Net unrealized depreciation on investments and cash equivalents, net of provision for taxes of $59,572 and $381,723, respectively. | (16,069,488 | ) | (15,576,485 | ) | ||||||
| Net Assets | $ | 163,720,501 | $ | 164,651,104 | ||||||
| Total Liabilities and Net Assets | $ | 366,138,817 | $ | 365,368,412 | ||||||
| Net Asset Value Per Share | $ | 13.12 | $ | 13.19 | ||||||
| STELLUS CAPITAL INVESTMENT CORPORATION | |||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) | |||||||||||||||||
| For the three months ended June 30, 2016 | For the three months ended June 30, 2015 | For the six months ended June 30, 2016 | For the six months ended June 30, 2015 | ||||||||||||||
| INVESTMENT INCOME | |||||||||||||||||
| Interest income | $ | 9,328,416 | $ | 8,635,047 | $ | 18,703,153 | $ | 17,266,343 | |||||||||
| Other income | 294,753 | 55,415 | 387,849 | 138,210 | |||||||||||||
| Total Investment Income | $ | 9,623,169 | $ | 8,690,462 | $ | 19,091,002 | $ | 17,404,553 | |||||||||
| OPERATING EXPENSES | |||||||||||||||||
| Management fees | $ | 1,550,841 | $ | 1,446,330 | $ | 3,099,214 | $ | 2,860,464 | |||||||||
| Valuation fees | 67,701 | 41,324 | 200,167 | 188,799 | |||||||||||||
| Administrative services expenses | 250,627 | 296,827 | 537,927 | 576,027 | |||||||||||||
| Incentive fees | 986,276 | 998,871 | 2,011,098 | 1,959,725 | |||||||||||||
| Professional fees | 195,203 | 67,794 | 387,314 | 362,355 | |||||||||||||
| Directors' fees | 86,000 | 95,000 | 178,000 | 184,000 | |||||||||||||
| Insurance expense | 118,027 | 118,242 | 236,053 | 235,186 | |||||||||||||
| Interest expense and other fees | 2,015,189 | 1,514,055 | 3,895,032 | 2,964,547 | |||||||||||||
| Deferred offering costs | 261,761 | - | 261,761 | - | |||||||||||||
| Other general and administrative expenses | 146,442 | 116,532 | 240,044 | 234,548 | |||||||||||||
| Total Operating Expenses | $ | 5,678,067 | $ | 4,694,975 | $ | 11,046,610 | $ | 9,565,651 | |||||||||
| Net Investment Income | $ | 3,945,102 | $ | 3,995,487 | $ | 8,044,392 | $ | 7,838,902 | |||||||||
| Net Realized Gain on Investments and Cash Equivalents | $ | 1,486 | $ | 289,548 | $ | 2,380 | $ | 292,717 | |||||||||
| Net Change in Unrealized Appreciation (Depreciation) on Investments and Cash Equivalents | $ | 928,520 | $ | (236,062 | ) | $ | (815,154 | ) | $ | 1,377,006 | |||||||
| Benefit (provision) for taxes on unrealized gain on investments | $ | 154,812 | $ | (47,980 | ) | $ | 322,151 | $ | (114,258 | ) | |||||||
| Net Increase in Net Assets Resulting from Operations | $ | 5,029,920 | $ | 4,000,993 | $ | 7,553,769 | $ | 9,394,367 | |||||||||
| Net Investment Income Per Share | $ | 0.32 | $ | 0.32 | $ | 0.64 | $ | 0.63 | |||||||||
| Net Increase (Decrease) in Net Assets Resulting from Operations Per Share | $ | 0.41 | $ | 0.32 | $ | 0.61 | $ | 0.75 | |||||||||
| Weighted Average Shares of Common Stock Outstanding | 12,479,959 | 12,479,962 | 12,479,959 | 12,479,962 | |||||||||||||
| Distributions Per Share | $ | 0.34 | $ | 0.34 | $ | 0.68 | $ | 0.68 | |||||||||
| STELLUS CAPITAL INVESTMENT CORPORATION | |||||||||
| CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (unaudited) | |||||||||
| For the | For the | ||||||||
| six months | six months | ||||||||
| ended | ended | ||||||||
| June 30, | June 30, | ||||||||
| 2016 | 2015 | ||||||||
| Increase in Net Assets Resulting from Operations | |||||||||
| Net investment income | $ | 8,044,392 | $ | 7,838,902 | |||||
| Net realized gain on investments and cash equivalents | 2,380 | 292,717 | |||||||
| Net change in unrealized appreciation (depreciation) on investments and cash equivalents | (815,154 | ) | 1,377,006 | ||||||
| Benefit (provision) for taxes on unrealized appreciation on investments | 322,151 | (114,258 | ) | ||||||
| Net Increase in Net Assets Resulting from Operations | $ | 7,553,769 | $ | 9,394,367 | |||||
| Stockholder distributions from: | |||||||||
| Net investment income | (8,484,372 | ) | (8,484,513 | ) | |||||
| Total Distributions | $ | (8,484,372 | ) | $ | (8,484,513 | ) | |||
| Total increase (decrease) in net assets | $ | (930,603 | ) | $ | 909,854 | ||||
| Net assets at beginning of period | $ | 164,651,104 | $ | 173,949,452 | |||||
| Net assets at end of period (includes $1,219,620 and $1,425,235 of distributions in excess of net investment income, respectively) | $ | 163,720,501 | $ | 174,859,306 | |||||
| STELLUS CAPITAL INVESTMENT CORPORATION | |||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) | |||||||||||
| For the | For the | ||||||||||
| six months | six months | ||||||||||
| ended | ended | ||||||||||
| June 30, 2016 | June 30, 2015 | ||||||||||
| Cash flows from operating activities | |||||||||||
| Net increase in net assets resulting from operations | $ | 7,553,769 | $ | 9,394,367 | |||||||
| Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by operating activities: | |||||||||||
| Purchases of investments | (17,899,868 | ) | (59,970,381 | ) | |||||||
| Proceeds from sales and repayments of investments | 15,972,633 | 53,942,696 | |||||||||
| Net change in unrealized depreciation (appreciation) on investments | 815,154 | (1,377,006 | ) | ||||||||
| Deferred tax provision (benefit) | (322,151 | ) | 114,258 | ||||||||
| Increase in investments due to PIK | (109,619 | ) | (337,295 | ) | |||||||
| Amortization of premium and accretion of discount, net | (557,840 | ) | (469,646 | ) | |||||||
| Amortization of loan structure fees | 260,846 | 260,094 | |||||||||
| Amortization of deferred financing costs | 162,203 | 117,173 | |||||||||
| Amortization of loan fees on SBIC debentures | 88,709 | 77,851 | |||||||||
| Net realized gain on investments | (2,380 | ) | (292,717 | ) | |||||||
| Deferred offering costs | 261,761 | - | |||||||||
| Changes in other assets and liabilities | |||||||||||
| Increase (decrease) in interest receivable | 522,724 | 989,471 | |||||||||
| Increase in accounts receivable | 7,684 | (185,336 | ) | ||||||||
| Decrease in prepaid expenses and fees | 177,750 | 136,169 | |||||||||
| Increase in management fees payable | 32,062 | 86,311 | |||||||||
| Increase in directors' fees payable | 86,000 | 184,000 | |||||||||
| Increase (decrease) in incentive fees payable | 711,073 | 107,295 | |||||||||
| Increase (decrease) in administrative services payable | (163,551 | ) | (220,417 | ) | |||||||
| Increase in interest payable | 272,180 | 43,227 | |||||||||
| Decrease in unearned revenue | (13,284 | ) | (113,213 | ) | |||||||
| Increase (decrease) in other accrued expenses and liabilities | 86,921 | 92,185 | |||||||||
| Net cash provided by operating activities | $ | 7,942,776 | $ | 2,579,086 | |||||||
| Cash flows from financing activities | |||||||||||
| Proceeds from SBA Debentures | - | 9,750,000 | |||||||||
| Financing costs paid on SBA Debentures | - | (561,438 | ) | ||||||||
| Stockholder distributions paid | (8,484,372 | ) | (8,484,513 | ) | |||||||
| Borrowings under credit facility | 18,500,000 | 53,750,000 | |||||||||
| Repayments of credit facility | (18,000,000 | ) | (53,250,000 | ) | |||||||
| Net cash provided (used) by financing activities | $ | (7,984,372 | ) | $ | 1,204,049 | ||||||
| Net increase (decrease) in cash and cash equivalents | (41,596 | ) | 3,783,135 | ||||||||
| Cash and cash equivalents balance at beginning of period | 10,875,790 | 2,046,563 | |||||||||
| Cash and cash equivalents balance at end of period | $ | 10,834,194 | $ | 5,829,698 | |||||||
| Supplemental and non-cash financing activities | |||||||||||
| Interest expense paid | $ | 3,106,094 | $ | 2,461,204 | |||||||
Contact Stellus Capital Investment Corporation W. Todd Huskinson (713) 292-5414 Chief Financial Officer thuskinson@stelluscapital.com
