NEW YORK, Nov. 8, 2012 (GLOBE NEWSWIRE) -- KCAP Financial, Inc. (Nasdaq:KCAP) announced its third quarter 2012 financial results.
Financial Highlights
- Net investment income for the three months ended September 30, 2012 and September 30, 2011 was approximately $7.1 million and $4.1 million, respectively, or $0.27 and $0.18 per share.
- For the third quarter of 2012, KCAP Financial declared a dividend of $0.24 per share.
- At September 30, 2012, the fair value of KCAP Financial's investments totaled approximately $290 million.
- Net asset value per share of $7.82 as of September 30, 2012.
Dayl Pearson, President and Chief Executive Officer, noted, "We are pleased with the continuing improvement in our profitability, and are confident in our strategy of growing both our asset management affiliate's assets under management and our middle market loan portfolio."
Operating Results
For the three months ended September 30, 2012, we reported total investment income of approximately $10.4 million, as compared to approximately $7.3 million for the three months ended September 30, 2011. Investment income from debt securities increased 26% to $3.6 million as a result of the continued growth in our debt securities portfolio, and our redeployment of lower yielding investments to higher yielding securities. Our debt securities portfolio was $135.5 million at September 30, 2012, as compared to $114.7 million at December 31, 2011. Investment income from the subordinated debt we held in various collateralized loan obligation funds increased 49% (approximately $1.9 million) to approximately $5.8 million from approximately $3.9 million in the prior year period. This increase is attributable to the four subordinated debt positions in collateralized loan obligation funds managed by Trimaran Advisors, L.L.C. that we acquired in connection with our acquisition of Trimaran Advisors in February 2012. Dividends from our wholly owned asset manager affiliates (Trimaran Advisors L.L.C. and Katonah Debt Advisors, L.L.C.) in the third quarter of 2012 were $925,000, as compared to $510,000 in the third quarter of 2011. The increase was a result of our acquisition of Trimaran Advisors.
Expenses for the third quarter of 2012 and 2011 remained relatively flat at $3.2 million.
Net investment income in the third quarter of 2012 and 2011 was approximately $7.1 million and $4.1 million, or $0.27 and $0.18 per share, respectively. Net realized and unrealized gains for the third quarter of 2012 were approximately $2.2 million, as compared to net realized and unrealized losses of $5.6 million in the third quarter of 2011.
Portfolio and Investment Activity
The fair value of our portfolio was approximately $290 million as of September 30, 2012.
| September 30, 2012 (unaudited) | December 31, 2011 | |||||
| Security Type | Cost | Fair Value | %¹ | Cost | Fair Value | %¹ |
| Time Deposits | $ 501,475 | $ 501,475 | --% | $ 229,152 | $ 229,152 | --% |
| Money Market Account | 4,850,220 | 4,850,220 | 2 | 31,622,134 | 31,622,134 | 13 |
| Senior Secured Loan | 73,626,439 | 65,868,804 | 23 | 54,045,184 | 45,259,328 | 19 |
| Junior Secured Loan | 53,570,960 | 37,237,835 | 13 | 58,936,728 | 47,300,172 | 20 |
| Mezzanine Investment | 8,518,913 | 9,401,536 | 3 | 10,931,428 | 11,588,115 | 5 |
| Senior Subordinated Bond | 21,846,118 | 22,577,830 | 8 | 9,997,898 | 10,125,891 | 4 |
| CLO Fund Securities | 85,506,168 | 67,784,447 | 23 | 66,528,482 | 48,438,317 | 20 |
| Equity Securities | 17,012,236 | 6,911,736 | 2 | 16,559,610 | 6,040,895 | 2 |
| Preferred | 400,000 | 391,760 | -- | 400,000 | 400,000 | -- |
| Asset Manager Affiliates | 83,203,884 | 73,989,000 | 26 | 44,338,301 | 40,814,000 | 17 |
| Total | $ 349,036,413 | $ 289,514,643 | 100% | $ 293,588,917 | $ 241,818,004 | 100% |
| ¹ Calculated as a percentage of fair value. | ||||||
During the quarter ended September 30, 2012, we closed approximately $8 million of investments in 5 new portfolio companies.
At September 30, 2012, our portfolio consisted of investments in 56 companies, including 12 in the subordinated debt of collateralized loan obligation funds. At fair value, 60% of our portfolio consisted of debt investments (loans, bonds and subordinated debt in collateralized loan obligation funds), of which 32% were first lien debt, 34% were second lien debt and 33% were subordinated debt.
Liquidity and Capital Resources
At September 30, 2012, we had unrestricted cash and time deposits of approximately $5.4 million, total assets of approximately $303 million and stockholders' equity of approximately $207 million. Our net asset value per common share was $7.82. As of September 30, 2012, we had $60 million of outstanding borrowings at a fixed rate of interest of 8.75% and $28 million of outstanding borrowings at a floating rate of LIBOR plus 3.00%.
Subject to prevailing market conditions, we intend to grow our portfolio of assets by raising additional capital, including through the prudent use of leverage available to us. As a result, we may seek to enter into new agreements with other lenders or into other financing arrangements as market conditions permit. Such financing arrangements may include a new secured and/or unsecured credit facility or the issuance of unsecured debt or preferred stock. In October 2012, the Company successfully completed a seven year, 7.375% bond offering in the aggregate amount of $41,400,000.
Dividend
Generally, we seek to fund dividends to shareholders from current and distributable earnings, primarily from net interest and dividend income generated by our investment portfolio and any distributions from our asset manager affiliates (Trimaran Advisors and Katonah Debt Advisors). We announced a regular quarterly dividend of $0.24 per share for the quarter ended September 30, 2012. This dividend was fully supported by our net investment income for the quarter of $0.27 per share. The record date for this dividend was October 10, 2012 and the dividend was paid on October 29, 2012. Tax characteristics of all dividends will be reported to stockholders on Form 1099-DIV after the end of the calendar year.
We have adopted a dividend reinvestment plan that provides for reinvestment of dividends in shares of our common stock, unless a stockholder elects to receive cash. As a result, if we declare a cash dividend, shareholders who have not "opted out" of our dividend reinvestment plan will have their cash dividends automatically reinvested in additional shares of our common stock, rather than receiving the cash dividends. Please contact your broker or other financial intermediary for more information regarding the dividend reinvestment plan.
Conference Call and Webcast
We will hold a conference call on Friday, November 9, 2012 at 8:30 a.m. Eastern Standard Time to discuss our third quarter 2012 financial results. Shareholders, prospective shareholders and analysts are welcome to listen to the call or attend the webcast.
The conference call dial-in number is (866) 757-5630. No password is required. A live audio webcast of the conference call can be accessed via the Internet, on a listen-only basis on our Company's website www.kcapfinancial.com in the Investor Relations section under Events. The online archive of the webcast will be available after 7pm Eastern Standard Time for approximately 90 days.
A replay of this conference call will be available from 12:00 p.m. Eastern Standard Time on November 9, 2012 until 11:59 p.m. Eastern Standard Time on November 16, 2012. The dial in number for the replay is 800-585-8367 and the conference ID is 64979585.
About KCAP Financial, Inc.:
KCAP Financial, Inc. is a publicly traded, internally managed business development company. The Company's middle market investment business originates, structures, finances and manages a portfolio of term loans, mezzanine investments and selected equity securities in middle market companies. The Company's wholly owned portfolio companies, Katonah Debt Advisors, L.L.C. and Trimaran Advisors, L.L.C., manage collateralized debt obligation funds that invest in broadly syndicated corporate term loans, high-yield bonds and other credit instruments.
The KCAP Financial, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=3121
Forward Looking Statements
This press release contains forward-looking statements. The matters discussed in this press release, as well as in future oral and written statements by management of KCAP Financial, Inc., that are forward-looking statements are based on current management expectations that involve substantial risks and uncertainties which could cause actual results to differ materially from the results expressed in, or implied by, these forward-looking statements. Forward-looking statements relate to future events or our future financial performance. We generally identify forward-looking statements by terminology such as "may,'' "will,'' "should,'' "expects,'' "plans,'' "anticipates,'' "could,'' "intends,'' "target,'' "projects,'' "contemplates,'' "believes,'' "estimates,'' "predicts,'' "potential'' or "continue'' or the negative of these terms or other similar words. Important assumptions include our ability to originate new investments, achieve certain margins and levels of profitability and the availability of additional capital, and the ability to maintain certain debt to asset ratios. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this press release should not be regarded as a representation by us that our plans or objectives will be achieved. Further information about factors that could affect our financial and other results is included in our filings with the Securities and Exchange Commission. We do not undertake to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required to be reported under the rules and regulations of the Securities and Exchange Commission.
KCAP-G
| KCAP FINANCIAL, INC. | ||||
| BALANCE SHEETS | ||||
|
As of September 30, 2012 |
As of December 31, 2011 |
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|
|
(unaudited) | |||
| ASSETS | ||||
| Investments at fair value: | ||||
| Time deposits (cost: 2012 -- $501,475; 2011 -- $229,152) | $ 501,475 | $ 229,152 | ||
| Money market account (cost: 2012 -- $4,850,220; 2011 -- $31,622,134) | 4,850,220 | 31,622,134 | ||
| Debt securities (cost: 2012 -- $157,962,430; 2011 -- $134,311,238) | 135,477,765 | 114,673,506 | ||
| CLO Fund securities managed by non-affiliates (cost: 2012 -- $12,755,413; 2011 -- $12,756,449) | 4,564,189 | 3,110,367 | ||
| CLO Fund securities managed by affiliates (cost: 2012 -- $72,750,754; 2011 -- $53,772,033) | 63,220,258 | 45,327,950 | ||
| Equity securities (cost: 2012 -- $17,012,237; 2011 -- $16,559,610) | 6,911,736 | 6,040,895 | ||
| Asset manager affiliates (cost: 2012 -- $83,203,884; 2011 -- $44,338,301) | 73,989,000 | 40,814,000 | ||
| Total Investments at fair value (cost: 2012 -- $349,036,413; 2011 -- $293,588,917) | 289,514,643 | 241,818,004 | ||
| Cash | 2,413,104 | 2,555,259 | ||
| Restricted cash | 6,093,126 | — | ||
| Interest receivable | 1,479,571 | 522,578 | ||
| Accounts receivable | 1,226,887 | 859,156 | ||
| Due from affiliates | — | 3,517 | ||
| Other assets | 2,213,921 | 2,375,147 | ||
| Total assets | $ 302,941,252 | $ 248,133,661 | ||
| LIABILITIES | ||||
| Borrowings | $ 28,000,000 | $ — | ||
| Convertible Senior Notes | 60,000,000 | 60,000,000 | ||
| Payable for open trades | 5,955,704 | — | ||
| Accounts payable and accrued expenses | 2,087,299 | 3,527,682 | ||
| Dividend payable | — | 4,080,037 | ||
| Total liabilities | $ 96,043,003 | $ 67,607,719 | ||
| STOCKHOLDERS' EQUITY | ||||
| Common stock, par value $0.01 per share, 100,000,000 common shares authorized; 26,448,313 and 22,992,211 common shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively | $ 264,412 | $ 226,648 | ||
| Capital in excess of par value | 310,404,794 | 284,571,466 | ||
| Accumulated undistributed net investment income | 6,536,811 | 821,904 | ||
| Accumulated net realized losses | (56,265,235) | (52,802,400) | ||
| Net unrealized depreciation on investments | (54,042,533) | (52,291,676) | ||
| Total stockholders' equity | $ 206,898,249 | $ 180,525,942 | ||
| Total liabilities and stockholders' equity | $ 302,941,252 | $ 248,133,661 | ||
| NET ASSET VALUE PER COMMON SHARE | $ 7.82 | $ 7.85 | ||
| KCAP FINANCIAL, INC. | |||||
| STATEMENTS OF OPERATIONS | |||||
| (unaudited) | |||||
| Three Months Ended | Nine Months Ended | ||||
| September 30, | September 30, | ||||
| 2012 | 2011 | 2012 | 2011 | ||
| Investment Income: | |||||
| Interest from investments in debt securities | $ 3,570,141 | $ 2,830,422 | $ 8,743,045 | $ 6,853,370 | |
| Interest from cash and time deposits | 511 | 4,246 | 3,919 | 17,831 | |
| Dividends from investments in CLO Fund securities managed by non-affiliates | 530,420 | 491,965 | 1,408,124 | 1,481,264 | |
| Dividends from investments in CLO Fund securities managed by affiliates | 5,258,554 | 3,435,914 | 13,901,079 | 9,103,652 | |
| Dividends from affiliate asset managers | 925,000 | 510,000 | 2,950,000 | 1,160,000 | |
| Capital structuring service fees | 69,305 | 25,642 | 230,910 | 55,149 | |
| Other Income | — | — | — | 2,000,000 | |
| Total investment income | 10,353,931 | 7,298,189 | 27,237,077 | 20,671,266 | |
| Expenses: | |||||
| Interest and amortization of debt issuance costs | 1,689,908 | 1,430,520 | 4,778,546 | 3,157,750 | |
| Compensation | 385,323 | 985,023 | 2,407,034 | 3,161,592 | |
| Professional fees | 713,784 | 450,156 | 1,876,115 | 1,515,247 | |
| Insurance | 126,761 | 126,006 | 399,040 | 359,241 | |
| Administrative and other | 305,060 | 220,781 | 1,000,145 | 751,020 | |
| Total expenses | 3,220,836 | 3,212,486 | 10,460,880 | 8,944,850 | |
| Net Investment Income | 7,133,095 | 4,085,703 | 16,776,197 | 11,726,416 | |
| Realized And Unrealized Gains (Losses) On Investments: | |||||
| Net realized gains (losses) from investment transactions | (3,767,256) | 93,068 | (3,462,835) | (13,666,746) | |
| Net change in unrealized appreciation (depreciation) on: | |||||
| Debt securities | 2,151,333 | (1,766,660) | (2,846,934) | 11,951,454 | |
| Equity securities | (1,260,133) | (710,600) | 418,214 | (1,395,518) | |
| CLO Fund securities managed by affiliates | 2,281,860 | (3,118,725) | 4,913,588 | (2,603,970) | |
| CLO Fund securities managed by non-affiliates | 1,520,468 | (540,719) | 1,454,857 | 1,651,682 | |
| Affiliate asset manager investments | 1,309,027 | 472,676 | (5,690,582) | 1,329,889 | |
| Net realized and unrealized gains (losses) on investments | 2,235,299 | (5,570,960) | (5,213,692) | (2,733,209) | |
| Net Increase In Net Assets Resulting From Operations | $ 9,368,394 | $ (1,485,257) | $ 11,562,505 | $ 8,993,207 | |
| Net Increase In Net Assets Resulting from Operations per Common Share: | |||||
| Basic: | $ 0.35 | $ (0.06) | $ 0.45 | $ 0.39 | |
| Diluted: | $ 0.32 | $ (0.06) | $ 0.44 | $ 0.39 | |
| Net Investment Income Per Common Share: | |||||
| Basic: | $ 0.27 | $ 0.18 | $ 0.65 | $ 0.51 | |
| Diluted: | $ 0.25 | $ 0.18 | $ 0.64 | $ 0.51 | |
| Weighted Average Shares of Common Stock Outstanding—Basic | 26,668,701 | 22,872,486 | 25,860,510 | 22,830,757 | |
| Weighted Average Shares of Common Stock Outstanding—Diluted | 33,881,913 | 22,872,486 | 25,873,247 | 22,830,757 | |