News Column

Stellus Capital Investment Corporation Reports Results for Its Second Fiscal Quarter Ended June 30, 2014

August 11, 2014

HOUSTON--(BUSINESS WIRE)-- Stellus Capital Investment Corporation (NYSE:SCM) (“Stellus” or “the Company”) today announced financial results for its second fiscal quarter ended June 30, 2014.

 
HIGHLIGHTS
($ in millions, except data relating to per share amounts and number of portfolio companies)
 
Portfolio results     As of June 30, 2014      
Total assets     $299.3    
Investment portfolio, at fair value $281.0
Net assets $177.4
Weighted average yield on debt investments 10.9%
Net asset value per share $14.37
      Quarter

ended

June 30, 2014

    Quarter

ended

June 30, 2013

 

Portfolio activity

 

Total investments made, at cost $11.0$80.8
Number of new investments 5 8
Repayments of investments, including amortization $25.9$22.5
Number of portfolio companies at

end of period

27 25

Operating results

Total investment income $8.0$7.3
Net investment income $3.7$4.0
Net investment income per share $0.31$0.33
Regular dividends declared per share $0.34$0.34
Net increase in net assets from operations $2.7$4.5
Net increase in net assets from operations per share $0.22$0.37
Weighted average shares outstanding during the period     12,132,851     12,050,618
 


“We had a productive second quarter in which we received approval for our SBIC license, issued $25 million of unsecured bonds, upsized our bank credit facility, and issued equity through our ATM program,” said Robert T. Ladd, Chief Executive Officer of Stellus.

Portfolio and Investment Activity

We completed the second quarter of 2014 with a portfolio of $281.0 million (at fair value) invested in 27 companies. As of June 30, 2014, our portfolio included approximately 18% of first lien debt, 36% of second lien debt, 43% of mezzanine debt and 3% of equity investments at fair value. Our debt portfolio consisted of 47% fixed rate investments and 53% floating rate (subject to interest rate floors), such as LIBOR. The average size of our portfolio company investments was $10.4 million and our largest portfolio company investment was approximately $22.4 million (at fair value). The weighted average yield on all of our debt investments as of June 30, 2014 was approximately 10.9%.

During the three months ended June 30, 2014, we made $11.0 million of investments in one new portfolio company and four existing companies and received $25.9 million of proceeds from the repayment or sale of investments, including $0.3 million from amortization of certain other investments.

This compares to the portfolio as of December 31, 2013, which had a fair value of $277.5 million invested in 26 companies comprising 17% first lien debt, 43% second lien debt, 38% mezzanine debt and 2% equity. As of December 31, 2013, our debt investments had a weighted average yield of 11.4% and consisted of 42% fixed rate investments and 58% floating rate (subject to interest rate floors), such as LIBOR.

Results of Operations

Investment income for the three months ended June 30, 2014 and 2013 totaled $8.0 million and $7.3 million, respectively, most of which was interest income from portfolio investments.

Operating expenses for the three months ended June 30, 2014 totaled $4.3 million. For the three months ended June 30, 2013, operating expenses, net of incentive fee waiver totaled $3.4 million. For the three months ended June 30, 2014 and 2013, base management fees totaled $1.3 million and $1.0 million, incentive fees totaled $0.9 million and $0.9 million (net of $0.2 million of fees waived by the manager), fees and expenses related to our borrowings totaled $1.4 million and $0.7 million (including commitment and other loan fees), administrative expenses totaled $0.3 million and $0.2 million and other expenses totaled $0.4 million and $0.5 million, all respectively.

Net investment income was $3.7 million and $4.0 million, or $0.31 and $0.33 per common share based on weighted average common shares outstanding for the three months ended June 30, 2014 and 2013, respectively.

The Company’s investment portfolio had a net change in unrealized appreciation (depreciation) for the three months ended June 30, 2014 and 2013, of ($1.3) million and $0.4 million, respectively. For the three months ended June 30, 2014 and 2013, the Company had realized gains of $0.3 million and $0.1 million, respectively.

Our net increase in net assets resulting from operations totaled $2.7 million and $4.5 million, or $0.22 and $0.37 per common share based on weighted average common shares outstanding for the three months ended June 30, 2014 and 2013, respectively.

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, 2014, our credit facility provided for borrowings in an aggregate amount up to $150 million on a committed basis. As of June 30, 2014 and December 31, 2013, we had $91 million and $110 million, respectively, in outstanding borrowings under the credit facility

On May 5, 2014, the Company closed a public offering of $25.0 million in aggregate principal amount of 6.50% bonds. The net proceeds to the Company from the sales of the bonds, after underwriting discounts and offering expenses, were approximately $24.1 million. The Company used all of the net proceeds from this offering to pay down the credit facility. As of June 30, 2014 the carrying amount of the notes was $25.0 million.

On June 5, 2014 we established an at-the-market program through which we may sell, from time to time, and at our sole discretion up to $50 million of our common stock. During the quarter ended June 30, 2014, we issued approximately $3.3 million in common stock, net of 1.5% commission to the broker-dealer on shares sold and offering costs.

For the six months ended June 30, 2014 our operating activities provided cash of $4.8 million primarily in connection with the net repayments of investments and our financing activities used cash of $8.3 million, primarily from repayments under the credit facility. For the six months ended June 30, 2013 our operating activities used cash of $60.2 million primarily from the purchases of investments and our financing activities provided cash of $9.1 million, primarily from the issuance of $25 million in unsecured bonds offset by repayments under the credit facility.

Distributions

During the three months ended June 30, 2014 and 2013, we declared distributions of $0.34 per share ($4.1 million) and $0.34 per share ($4.1 million), respectively. Tax characteristics of all distributions made in the current year 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

During the three months ended June 30, 2014, we made $11.0 million of investments in one new portfolio company and four existing portfolio companies. During the same period the Company received $25.9 million from repayments and sales of investments, of which $0.3 million represents amortization on existing loans. New investment transactions and repayments which occurred during the three months ended June 30, 2014 are summarized as follows:

  • On each of April 3, 2014 and April 11, 2014 we invested $33,333 in the equity of Skopos Financial, LLC. We invested an additional $66,667 in equity on April 30, 2014. On June 12, 2014, we made an additional $5.9 million investment in the unsecured term loan of Skopos Financial, LLC.
  • On April 4, 2014 we sold $1.9 million of the unfunded revolver of Momentum Telecom, Inc. to a third party and retained a portion of the economics of the revolver.
  • On April 14, 2014 we invested $27,514 in the equity of ERC Group Holdings, LLC.
  • On April 22, 2014, we realized $4.0 of our $17.0 million investment in the second lien term loan of Atkins Nutritional, Inc. at 100.5% of par, resulting in proceeds of $4.0 million.
  • On April 22, 2014, we made a $3.9 million investment in the subordinated term loan of OG Systems, LLC. We also invested $50,000 in the company’s equity.
  • On May 21, 2014, we received full repayment Varel International Energy Funding Corp. at 103% of par, resulting in total proceeds of $9.6 million.
  • On June 7, 2014, the unfunded commitment of $12.5 million to Colford Capital Holdings, LLC expired. On June 9, 2014 we made a $5 million commitment in a new delayed draw term loan of Colford, of which we funded $1.0 million on June 30, 2014.
  • On June 17, 2014, we received full repayment on our first lien loan of ConvergeOne Holdings Corp. at par, resulting in total proceeds of $12.1 million.

    Events Subsequent to June 30, 2014

    Since June 30, 2014, we made one follow-on investment of $2.1 million in one company which brings the investment portfolio to approximately $283 million (at estimated fair value) and the average investment per company to $10.5 million as of August 1, 2014.

  • On July 31, 2014, we invested $2 million in the mezzanine debt and $137,000 in the common stock of SQAD, LLC.

    Dividends

    On July 7, 2014, the Company’s board of directors declared a regular monthly dividend of $0.1133 per share for the months of July 2014, August 2014 and September 2014.

    Credit Facility

    The outstanding balance under the Credit Facility as of August 1, 2014 was $87 million.

    Equity Raised

    During the period from July 1, 2014 to August 1, 2014, we sold 24,245 shares of our common stock at an average price of $14.76 per share and raised $357,893 of gross proceeds under the at-the-market program. Net proceeds were $350,619 after payment of 1.5% commission to the broker-dealer on shares sold and offering costs.

    Conference Call Information

    Stellus Capital Investment Corporation will host a conference call to discuss these results on August 12, 2014, 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) 466-4462 (domestic). Use passcode 3297895. Starting approximately twenty-four hours after the conclusion of the call, a replay will be available through August 20, 2014 by dialing (888) 203-1112 and entering passcode 3297895. The replay will also be available on the company’s website.

     
    STELLUS CAPITAL INVESTMENT CORPORATION
     
    CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
     

     

    June 30, 2014

    (Unaudited)

       

     

    December 31, 2013

    ASSETS
    Non-controlled, non-affiliated investments, at fair value (amortized cost of $281,326,930 and $277,004,466, respectively) $ 280,978,839     $ 277,504,510
    Cash and cash equivalents 10,165,883 13,663,542
    Receivable for sales and repayments of investments 38,021
    Receivable for Fund shares sold 226,451
    Interest receivable 5,176,226 4,713,912
    Deferred offering costs 241,617 205,165
    Deferred financing costs 886,012
    Accounts receivable 31,013
    Receivable for affiliated transaction 43,450
    Prepaid loan structure fees 1,367,982 1,586,405
    Prepaid expenses 193,004 411,321
    Total Assets $ 299,305,048 $ 298,128,305
     
    LIABILITIES
    Notes Payable 25,000,000
    Credit facility payable 91,000,000 110,000,000
    Short-term loan 9,000,000
    Dividends payable 1,396,677
    Base management fees payable 1,293,336 1,176,730
    Incentive fees payable 2,179,258 1,056,942
    Accrued offering costs 172,289
    Interest payable 397,508 234,051
    Directors' fees payable 96,000
    Unearned revenue 135,396 146,965
    Administrative services payable 275,019 263,226
    Other accrued expenses and liabilities 96,137 262,877
    Total Liabilities 121,945,620 122,236,791
     
    Commitments and contingencies (Note 7)    
     
    Net Assets $ 177,359,428 $ 175,891,514
     
    NET ASSETS
    Common Stock, par value $0.001 per share

    (100,000,000 shares authorized, 12,342,825 and 12,099,022 shares issued and outstanding, respectively)
    $ 12,343 $ 12,099
    Paid-in capital 179,068,976 175,614,738
    Accumulated undistributed net realized gain 678,413 1,027,392
    Distributions in excess of net investment income (2,052,213) (1,262,659)
    Unrealized appreciation (depreciation) on investments and cash equivalents (348,091) 499,944
     
    Net Assets $ 177,359,428 $ 175,891,514
     
    Total Liabilities and Net Assets $ 299,305,048 $ 298,128,305
     
    Net Asset Value Per Share $ 14.37 $ 14.54
     
     
    STELLUS CAPITAL INVESTMENT CORPORATION
     
    CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
     
        Three Months Ended

    June 30
      Six Months Ended

    June 30
    2014201320142013
    INVESTMENT INCOME
    Interest income $ 7,672,379   $ 6,710,905   $ 15,359,713   $ 13,035,629
    Other income   340,330   630,322   502,242   752,038
    Total Investment Income   8,012,709   7,341,227   15,861,955   13,787,667
     
    OPERATING EXPENSES
    Management fees $ 1,293,336 $ 1,041,199 $ 2,561,740 $ 1,925,202
    Valuation fees 64,498 113,710 216,137 203,710
    Administrative services expenses 275,167 228,535 543,934 399,576
    Incentive fees 934,740 1,068,939 1,763,832 2,055,443
    Professional fees 66,038 107,516 284,027 223,462
    Directors' fees 118,000 89,000 204,000 178,000
    Insurance expense 120,407 118,268 239,490 235,238
    Interest expense and other fees 1,352,967 718,219 2,431,922 1,284,759
    Other general and administrative expenses   82,694   85,026   150,967   127,444
    Total Operating Expenses $ 4,307,847 $ 3,570,412 $ 8,396,049 $ 6,632,834
    Waiver of Incentive Fees     (201,843)     (505,207)
    Total expenses, net of fees waivers   4,307,847   3,368,569   8,396,049   6,127,627
    Net Investment Income $ 3,704,862 $ 3,972,658 $ 7,465,906 $ 7,660,040

    Net Realized Gain on Investments and Cash

    Equivalents

    $ 325,385 $ 99,995 $ 437,457 $ 1,002,917

    Net Change in Unrealized Appreciation

    (Depreciation) on Investments and Cash

    Equivalents

    $ (1,318,680) $ 404,942 $ (848,035) $ 1,346,756

    Net Increase in Net Assets Resulting from

    Operations

    $ 2,711,567 $ 4,477,595 $ 7,055,328 $ 10,009,713
    Net Investment Income Per Share $ 0.31 $ 0.33 $ 0.62 $ 0.64

    Net Increase in Net Assets Resulting from

    Operations Per Share

    $ 0.22 $ 0.37 $ 0.58 $ 0.83

    Weighted Average Shares of Common Stock

    Outstanding

      12,132,851   12,050,618   12,118,498   12,043,117
    Distributions Per Share $ 0.34 $ 0.34 $ 0.74 $ 0.68
     
     
    STELLUS CAPITAL INVESTMENT CORPORATION
     
    CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (unaudited)
     
     

    For the six months

    ended June 30, 2014

     

    For the six months

    ended June 30, 2013

    Increase in Net Assets Resulting from Operations
    Net investment income $ 7,465,906   $ 7,660,040
    Net realized gain on investments and cash equivalents 437,457 1,002,917
    Net change in unrealized appreciation (depreciation) on investments and cash equivalents (848,035) 1,346,756
    Net Increase in Net Assets Resulting from Operations 7,055,328 10,009,713
     
    Stockholder distributions (9,041,896) (8,189,000)
     
    Capital share transactions
    Issuance of common stock 3,334,474
    Reinvestments of stockholder distributions 187,492 439,889
    Sales load (50,017)
    Offering costs (17,467)
     
    Net increase in net assets resulting from capital share transactions 3,454,482 439,889
     
    Total increase in net assets 1,467,914 2,260,602
     
    Net assets at beginning of period 175,891,514 173,845,955
     

    Net assets at end of period (includes $2,061,991 and $1,403,946 of distributions

    in excess of net investment income)

    $ 177,359,428 $ 176,106,557
     
    STELLUS CAPITAL INVESTMENT CORPORATION
    CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
     

    For the six months

    ended June 30, 2014

       

    For the six months

    ended June 30, 2013

    Cash flows from operating activities
    Net increase in net assets resulting from operations   $ 7,055,328 $ 10,009,713

    Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by (used in) operating activities:

    Purchases of investments (51,538,484) (112,467,250)
    Proceeds from sales and repayments of investments 48,302,237 48,792,161
    Net change in unrealized (appreciation) depreciation on investments 848,135 (1,345,238)
    Increase in investments due to PIK (363,565) (523,926)
    Amortization of premium and accretion of discount, net (318,341) (184,489)
    Amortization of loan structure fees 296,169
    Net realized gain on investments (442,332) (1,005,830)
    Changes in other assets and liabilities
    Increase in interest receivable (462,314) (1,536,774)
    Amortization of deferred financing costs 28,558
    Decrease in receivable for affiliated transaction 43,450
    Increase in accounts receivable (31,013)
    Decrease in prepaid expenses and fees 218,317 486,084
    Decrease in payable for investments purchased (4,750,000)
    Increase in management fees payable 116,606 514,165
    Increase (decrease) in directors' fees payable (96,000) 59,548
    Increase in incentive fees payable 1,122,316 1,250,375
    Increase in administrative services payable 11,793
    Increase in interest payable 163,457 130,604
    Decrease in unearned revenue (11,569)

    Increase (decrease) in other accrued expenses and liabilities

    (97,025) 319,447
     
    Net cash provided by (used in) operating activities 4,845,723 (60,251,410)
     
    Cash flows from financing activities
    Proceeds from notes issued 25,000,000
    Financing costs paid for notes issued (889,742)
    Proceeds from the issuance of common stock 3,125,288
    Sales load for common stock issued (50,017)
    Offering costs paid for common stock issued (71,184) (147,123)
    Stockholder distributions paid (7,457,727) (7,749,111)
    Borrowings under credit facility 72,000,000 82,000,000
    Repayments of credit facility (91,000,000) (29,000,000)
    Repayments of short-term loan (9,000,000) (72,000,669)
    Borrowings under short-term loan 35,999,625
     
    Net cash provided by (used in) financing activities (8,343,382) 9,102,722
     
    Net decrease in cash and cash equivalents (3,497,659) (51,148,688)
     
    Cash and cash equivalents balance at beginning of period   13,663,542   62,131,686
     
    Cash and cash equivalents balance at end of period $ 10,165,883 $ 10,982,998
     
    Supplemental and non-cash financing activities
    Accrued deferred offering costs 172,289
    Shares issued pursuant to Dividend Reinvestment Plan 187,492 439,889
    Interest expense paid 1,941,863 870,980


    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

    Philip Nunes, 617-556-9982 x227

    phil.nunes@backbaycommunications.com

    Source: Stellus Capital Investment Corporation


  • For more stories on investments and markets, please see HispanicBusiness' Finance Channel



    Source: Business Wire


    Story Tools






    HispanicBusiness.com Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters