Stellus Capital Investment Corporation Reports Results from Inception (May 18, 2012) through Decembe

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Stellus Capital Investment Corporation Reports Results from Inception (May 18, 2012) through December 31, 2012

Declares a dividend of $0.34 per share for the first quarter of 2013

HOUSTON--(BUSINESS WIRE)-- Stellus Capital Investment Corporation (NYS: SCM) ("Stellus" or "the Company") today announced financial results for the period from May 18, 2012 ("Inception") through December 31, 2012. Additionally, on March 7, 2013, Stellus announced that its Board of Directors has declared a first quarter 2013 dividend of $0.34 per share payable on March 28, 2013 to shareholders of record as of March 21, 2013.

  

HIGHLIGHTS

($ in millions, except data relating to per share amounts and number of portfolio companies)
 
Portfolio results  As of December
31, 2012
Total assets$262.5
Investment portfolio, at fair value$195.5
Net assets$173.8
Weighted average yield on debt investments12.5%
Net asset value per share$14.45
   For the period Inception

(May 18, 2012) through
December 31, 2012

Portfolio activity

Total investments made, at cost$261.9
Number of new portfolio companies18
Number of portfolio companies at

end of period

15

Operating results

Total investment income$3.7
Net investment income$1.3
Adjusted net investment income*$2.4
Net increase in net assets from operations$1.3
Net investment income per share$0.11
Adjusted net investment income per share*$0.20
Dividends declared per share  $0.18 

* Adjusted net investment income and adjusted net investment income per share are non-GAAP measures that are calculated by excluding non-recurring expenses of $1.1 million, or $0.09 per common share, related to the Company's initial public offering from the GAAP reported amounts. See discussion below under "Results of Operations" for more information.

"We are pleased to have completed our initial public offering in November 2012 and report that we have declared a dividend of $0.34 per share for the first quarter of 2013 which equates to a 9% annualized return to our shareholders based on the IPO price of $15 per share," said Robert T. Ladd, Chief Executive Officer of Stellus. "We are active in the marketplace and we have been able to further diversify our portfolio since the close of our initial public offering."

Portfolio and Investment Activity

We completed 2012 with a portfolio of $195.5 million (at fair value) invested in 15 companies. As of December 31, 2012, our portfolio included approximately 22% of first lien debt, 20% of second lien debt, 57% of mezzanine debt and 1% of equity investments at fair value. Our debt portfolio consisted of 60% fixed rate investments and 40% floating rate (subject to interest rate floors), such as LIBOR. The average size of our portfolio company investments was approximately $13 million and our largest portfolio company investment was approximately $33.7 million. The weighted average yield on all of our debt investments as of December 31, 2012 was approximately 12.5%.

During the period from November 7, 2012 (the date of our initial public offering) through December 31, 2012, we made $67.5 million of investments in seven new portfolio companies. Repayments of investments during the period totaled $66.5 million from three portfolio companies.

Results of Operations

Set forth below are our results of operations for the period from Inception (May 18, 2012) through December 31, 2012.

Investment income totaled $3.7 million, most of which was interest on portfolio investments.

Operating expenses totaled $2.4 million for the period and consisted of base management fees of $0.5 million, professional fees of $0.8 million, fees and expenses related to our credit facilities of $0.6 million, including interest and amortization of deferred financing costs and administrative expenses of $0.5 million. Of the $2.4 million of total expenses, approximately $1.1 million were related to the completion of our initial public offering and the closing of the bridge facility used to acquire our initial portfolio and are non-recurring in nature.

Net investment income was $1.3 million, or $0.11 per common share (based on 12,035,023 common shares outstanding at December 31, 2012). Adjusted net investment income was $2.4 million, or $0.20 per common share (based on 12,035,023 common shares outstanding at December 31, 2012). Adjusted net investment income and adjusted net investment income per share are non-GAAP measures that are calculated by excluding non-recurring expenses of $1.1 million, or $0.09 per common share, related to the Company's initial public offering from the GAAP reported amounts. While these offering-related expenses are expensed for GAAP purposes, they are capitalized and expensed over time for tax purposes. The Company believes that providing these non-GAAP measures is important because the Company is required to pay out substantially all of its taxable income to qualify for pass-through tax treatment as a regulated investment company.

We did not recognize any realized gains or losses on our investments during the period.

Our net increase in net assets resulting from operations totaled $1.3 million, or $0.11 per common share (based on 12,035,023 common shares outstanding at December 31, 2012).

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 public and private offerings of securities to finance our investment activities.

Our credit facility provides for borrowings in an aggregate amount up to $115 million on a committed basis and has an accordion feature which allows for potential future expansion of the facility size to $150 million. The exercise of the accordion will require sufficient borrowing base and additional commitments from the existing lender group and/or new lenders. As of December 31, 2012 we had $38 million in outstanding borrowings under the credit facility.

Our operating activities used cash of $164.4 million for the period from Inception through December 31, 2012, primarily in connection with the purchase of investments, including the initial investment portfolio we acquired immediately prior to our initial public offering. Our financing activities provided cash of $226.5 million primarily from our initial public offering and debt financings.

Distributions

On December 7, 2012, we declared an initial dividend of $0.18 per share. The amount of the initial distribution equated to an annualized dividend yield of 9.0% based on its $15.00 per share initial public offering price.

On March 7, 2013, the Company's Board of Directors declared a first quarter 2013 dividend of $0.34 per share, payable on March 28, 2013 to shareholders of record as of March 21, 2013. Unless a stockholder elects to receive its distributions in cash, the Company intends to make such distributions in additional shares of the Company's common stock under the Company's dividend reinvestment plan.

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 period from November 7, 2012 (the date of our initial public offering) through December 31, 2012, we made $67.5 million of investments in seven new portfolio companies. During the same period the Company received three repayments of investments totaling $66.5 million.

New investment transactions which occurred during the period are summarized as follows:

  • $18.4 million investment in the unsecured loan of Eating Recovery Center, a nationally recognized 'Center of Excellence' for treatment of eating disorders and $1.5 million of the company's equity
  • $12.5 million investment in the first lien loan of Holley, a leading designer, manufacturer and marketer of high performance automotive aftermarket parts
  • $12 million investment in the second lien loan of Securus, a provider of telecommunications services to the correctional services industry
  • $10 million investment in the first lien term loan of Sportsman's Warehouse, a sporting goods retailer
  • $7.5 million investment in the first lien loan of Sightpath, a provider of access to state-of-the-art ophthalmic surgical solutions to hospitals and medical facilities
  • $5 million investment in the first lien loan of Blackhawk Mining, which owns and operates a number of coal mines in Kentucky
  • $1.5 million investment in the second lien loan of Aderant, the world's largest independent provider of enterprise software solutions to law firms and other professional services organizations

Our repayments were:

  • $28.5 million first lien loan to Vivint, a full-service provider of home security systems and alarm monitoring services
  • $15.4 million Term A first lien loan and $9.2 million Term B first lien loan to T&D Solutions, a provider of emergency response services for electric transmission and distribution lines
  • $13.4 million unsecured loan to Precision Dynamics, a manufacturer of hospital wristbands and specialty labels

Events Subsequent to December 31, 2013

Since December 31, 2012, we made investments totaling $21.4 million in three new portfolio companies which brings the investment portfolio to $217 million and the average investment per company to $12 million. The outstanding balance under our credit facility as of March 5, 2013 was $46 million due to additional borrowings subsequent to year end in order to fund new investments.

Conference Call Information

Stellus Capital Investment Corporation will host a conference call to discuss these results on March 12, 2013, 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 (800) 231-9012 (domestic). Use passcode 4144359. Starting approximately two hours after the conclusion of the call, a replay will be available through March 19, 2013 by dialing (888) 203-1112 and entering passcode 4144359. The replay will also be available on the company's website.

Financial Statements

 
STELLUS CAPITAL INVESTMENT CORPORATION
 
STATEMENT OF ASSETS AND LIABILITIES  
 
December 31, 2012
ASSETS
Investments, at fair value (amortized cost of $195,455,671)$195,451,256
Cash and cash equivalents62,131,686
Interest receivable2,573,831
Prepaid loan structure fees1,947,820
Prepaid expenses 438,384 
Total Assets 262,542,977 
LIABILITIES
Payable for investments purchased4,750,000
Credit facility payable38,000,000
Short-term loan45,000,943
Base Management fees payable527,034
Accrued offering costs147,123
Interest payable66,477
Other accrued expenses and liabilities 205,445 
Total Liabilities 88,697,022 
 
Net Assets$173,845,955 
 
NET ASSETS

Common Stock, par value $0.001 per share
  (100,000,000 shares authorized, 12,035,023 shares issued and outstanding)

$12,035
Paid-in capital174,714,838
Distributions in excess of net investment income(874,986)
Unrealized depreciation on investments and cash equivalents (5,932)
Net Assets$173,845,955 
Total Liabilities and Net Assets$262,542,977 
Net Asset Value Per Share$14.45 
 

STELLUS CAPITAL INVESTMENT CORPORATION

 
STATEMENT OF OPERATIONS
 

For the Period Inception
(May 18, 2012) to
December 31, 2012

INVESTMENT INCOME
Interest income$3,696,432
 
Total Investment Income 3,696,432
 
OPERATING EXPENSES
Management fees527,034
Valuation fees184,500
Administrative services expenses103,482
Professional fees734,365
Directors' fees109,439
Insurance expense79,279
Interest expense and other fees282,629
Credit facility fees317,594
Other general and administrative expenses 53,754
Total Operating Expenses 2,392,076
Net Investment Income 1,304,356
Net Change in Unrealized Depreciation on Investments and cash equivalents (5,932)
Net Increase in Net Assets Resulting from Operations$1,298,424
Net Investment Income Per Share$0.11
Net Increase in Net Assets Resulting from Operations Per Share$0.11
Shares of Common Stock Outstanding 12,035,023
 
STELLUS CAPITAL INVESTMENT CORPORATION
 
STATEMENT OF CHANGES IN NET ASSETS
 

For the period
Inception (May 18,
2012) to December 31,
2012

Increase in Net Assets Resulting from Operations
Net investment income$1,304,356
Net change in unrealized depreciation on investments and cash equivalents(5,932)
Net Increase in Net Assets Resulting from Operations1,298,424 
 
Stockholder distributions
Distributions from net investment income(2,179,342)
 
Capital share transactions
Issuance of common stock180,409,145
Reinvestments of stockholder distributions112,948
Sales load(4,959,720)
Offering costs(835,500)
Net increase in net assets resulting from capital share transactions174,726,873 
Total increase in net assets173,845,955
Net assets at beginning of period 
Net assets at end of period$173,845,955 

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, often with a corresponding equity investment. 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 including the final prospectus that will be filed 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, 212-209-3844
Kelly.holman@backbaycommunications.com

KEYWORDS:   United States  North America  Texas

INDUSTRY KEYWORDS:

The article Stellus Capital Investment Corporation Reports Results from Inception (May 18, 2012) through December 31, 2012 originally appeared on Fool.com.

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