CHARLOTTE, N.C., Nov. 04, 2019 (GLOBE NEWSWIRE) -- Capitala Finance Corp. (Nasdaq:CPTA) ("Capitala", the “Company”, “we”, “us”, or “our”) today announced its financial results for the third quarter of 2019.
Third Quarter Highlights
- Deployed $13.9 million during the quarter, consisting of $13.2 million in first lien debt and $0.7 million second lien debt. The weighted average yield on debt investments during the period was 10.6%
- Closed credit facility for Capitala Senior Loan Fund II, LLC, enhancing our ability to originate unitranche debt investments across the Capitala platform, including Capitala Finance Corp.
Management Commentary
In describing the Company’s third quarter activities, Joseph B. Alala, III, Chairman and Chief Executive Officer, stated, “During the third quarter of 2019, we earned a 4.5% return on equity. We anticipate closing several new investments prior to year-end, providing support to net investment income after two quarters of net repayments. Platform liquidity will allow us to remain active investors in the lower middle market. Our investment adviser’s recently announced partnership with Mitsui USA is expected to provide the Capitala platform, including Capitala Finance Corp., with additional resources for the growth of our credit and equity strategies focused on investing in small businesses located across North America.”
Third Quarter 2019 Financial Results
During the third quarter of 2019, the Company originated $13.9 million of new investments, and received $33.2 million of repayments. First lien investments totaled $13.2 million, while second lien investments totaled $0.7 million. The weighted average yield on third quarter investments was 10.6%.
Total investment income was $10.1 million for the third quarter of 2019, compared to $11.5 million in the third quarter of 2018. Interest and fee income was $2.2 million lower in third quarter of 2019 as compared to 2018, partially offset by an increase of $1.1 million in dividend income for the comparable periods. Dividend income for the third quarter of 2019 included $0.8 million from Micro Precision, LLC and $0.3 million from Capitala Senior Loan Fund II, LLC.
Total expenses for the third quarter of 2019 were $7.1 million, compared to $7.7 million for the comparable period in 2018. Interest and financing expenses were $0.2 million lower in the third quarter of 2019 as compared to 2018, while base management fees decreased by $0.3 million for the comparable periods.
Net investment income for the third quarter of 2019 was $3.0 million, or $0.18 per share, compared to $3.9 million, or $0.24 per share, for the same period in 2018.
Net realized gains were $12 thousand for the third quarter of 2019, compared to $6.3 million of net realized gains for the third quarter of 2018.
Net unrealized depreciation totaled $1.3 million, or $0.08 per share, for the third quarter of 2019, compared to depreciation of $22.0 million for the third quarter of 2018.
The net increase in net assets resulting from operations was $1.7 million for the third quarter of 2019, or $0.11 per share, compared to a net decrease of $11.9 million, or $0.74 per share, for the same period in 2018.
Investment Portfolio
As of September 30, 2019, our portfolio consisted of 40 companies with a fair market value of $371.4 million and a cost basis of $359.6 million. First lien debt investments represented 59.3% of the portfolio, second lien and subordinated debt investments collectively represented 16.0% of the portfolio, equity/warrant investments represented 21.0% of the portfolio, and our investment in Capitala Senior Loan Fund II, LLC represented 3.7% of the portfolio, based on fair values at September 30, 2019. The weighted average yield on our debt portfolio was 11.5% at September 30, 2019.
At September 30, 2019, non-accrual balances totaled $25.8 million and $15.8 million, on a cost basis and fair value basis, respectively. Non-accrual loans, on a cost basis and fair value basis, represented 7.2% and 4.3%, respectively, of the portfolio at September 30, 2019, compared to 4.9% and 2.1%, respectively, at December 31, 2018.
Liquidity and Capital Resources
At September 30, 2019, the Company had $62.8 million in cash and cash equivalents. In addition, the Company had SBA debentures outstanding totaling $150.0 million with an annual weighted average interest rate of 3.16%, $75.0 million of fixed rate notes bearing an interest rate of 6.00%, and $52.1 million of convertible notes bearing an interest rate of 5.75%. At September 30, 2019, the Company had no outstanding balance and $114.5 million available under its senior secured revolving credit facility, which is priced at LIBOR plus 3.0%.
Third Quarter 2019 Financial Results Conference Call
Management will host a conference call to discuss the operating and financial results at 8:30 a.m. on Tuesday, November 5, 2019. To participate in the conference call, please dial 1-877-312-5507 approximately 10 minutes prior to the call. A live webcast of the conference will be available at http://investor.CapitalaGroup.com.
About Capitala Finance Corp.
Capitala Finance Corp. is a business development company that invests primarily in first and second lien loans, subordinated debt and, to a lesser extent, equity securities issued by lower middle market companies. The Company is managed by Capitala Investment Advisors, LLC. For more information on Capitala, or to automatically receive email notifications of Company financial information, press releases, stock alerts, or other corporate filings, please visit the Investor Relations section of our website.
About Capitala Group
Capitala Group is a $3.0 billion asset management firm that has been providing capital to lower middle market companies throughout North America for twenty years. Since its inception in 1998, Capitala Group has invested in over 150 companies and seeks to partner with strong management teams to create value and generate superior risk-adjusted returns for its individual and institutional investors. For more information, visit Capitala Group’s website at www.CapitalaGroup.com.
Forward-Looking Statements
This press release contains certain forward-looking statements. Words such as “believes,” “intends,” “expects,” “projects,” “anticipates,” and “future” or similar expressions are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance, condition or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in the Company’s filings with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law.
SOURCE: Capitala Finance Corp.
Capitala Finance Corp.
Stephen Arnall, Chief Financial Officer
704-376-5502
sarnall@capitalagroup.com
| Capitala Finance Corp. | |||||||||
| Consolidated Statements of Assets and Liabilities | |||||||||
| (in thousands, except share and per share data) | |||||||||
| As of | |||||||||
| September 30, 2019 | December 31, 2018 | ||||||||
| (unaudited) | |||||||||
| ASSETS | |||||||||
| Investments at fair value | |||||||||
| Non-control/non-affiliate investments (amortized cost of $248,479 and $280,114, respectively) | $ | 259,747 | $ | 286,843 | |||||
| Affiliate investments (amortized cost of $74,435 and $72,300, respectively) | 91,355 | 92,939 | |||||||
| Control investments (amortized cost of $36,659 and $67,556, respectively) | 20,249 | 69,145 | |||||||
| Total investments at fair value (amortized cost of $359,573 and $419,970, respectively) | 371,351 | 448,927 | |||||||
| Cash and cash equivalents | 62,776 | 39,295 | |||||||
| Interest and dividend receivable | 1,572 | 3,778 | |||||||
| Prepaid expenses | 117 | 454 | |||||||
| Deferred tax asset, net | - | 628 | |||||||
| Other assets | 114 | 83 | |||||||
| Total assets | $ | 435,930 | $ | 493,165 | |||||
| LIABILITIES | |||||||||
| SBA debentures (net of deferred financing costs of $1,129 and $1,688, respectively) | $ | 148,871 | $ | 164,012 | |||||
| 2022 Notes (net of deferred financing costs of $1,585 and $1,987, respectively) | 73,415 | 73,013 | |||||||
| 2022 Convertible Notes (net of deferred financing costs of $1,003 and $1,259, respectively) | 51,085 | 50,829 | |||||||
| Credit Facility (net of deferred financing costs of $727 and $983, respectively) | (727 | ) | 9,017 | ||||||
| Management and incentive fees payable | 3,509 | 2,487 | |||||||
| Interest and financing fees payable | 1,440 | 3,063 | |||||||
| Trade settlement payable | 6,442 | - | |||||||
| Accounts payable and accrued expenses | 14 | 100 | |||||||
| Total liabilities | $ | 284,049 | $ | 302,521 | |||||
| NET ASSETS | |||||||||
| Common stock, par value $0.01, 100,000,000 common shares authorized, 16,161,075 and 16,051,547 common shares | |||||||||
| issued and outstanding, respectively | $ | 162 | $ | 161 | |||||
| Additional paid in capital | 242,639 | 241,757 | |||||||
| Total distributable loss | (90,920 | ) | (51,274 | ) | |||||
| Total net assets | $ | 151,881 | $ | 190,644 | |||||
| Total liabilities and net assets | $ | 435,930 | $ | 493,165 | |||||
| Net asset value per share | $ | 9.40 | $ | 11.88 | |||||
| Capitala Finance Corp. | |||||||||||||||||
| Consolidated Statements of Operations | |||||||||||||||||
| (in thousands, except share and per share data) | |||||||||||||||||
| (unaudited) | |||||||||||||||||
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||||
| INVESTMENT INCOME | |||||||||||||||||
| Interest and fee income: | |||||||||||||||||
| Non-control/non-affiliate investments | $ | 6,270 | $ | 6,692 | $ | 21,096 | $ | 20,915 | |||||||||
| Affiliate investments | 1,898 | 1,852 | 6,578 | 5,870 | |||||||||||||
| Control investments | 115 | 1,898 | 1,421 | 5,585 | |||||||||||||
| Total interest and fee income | 8,283 | 10,442 | 29,095 | 32,370 | |||||||||||||
| Payment-in-kind interest income: | |||||||||||||||||
| Non-control/non-affiliate investments | 388 | 350 | 1,283 | 1,482 | |||||||||||||
| Affiliate investments | 235 | 343 | 611 | 1,118 | |||||||||||||
| Control investments | - | 295 | 372 | 715 | |||||||||||||
| Total payment-in-kind interest income | 623 | 988 | 2,266 | 3,315 | |||||||||||||
| Dividend income: | |||||||||||||||||
| Non-control/non-affiliate investments | - | - | 1,281 | 59 | |||||||||||||
| Affiliate investments | 25 | 29 | 25 | 87 | |||||||||||||
| Control investments | 1,134 | 25 | 1,584 | 75 | |||||||||||||
| Total dividend income | 1,159 | 54 | 2,890 | 221 | |||||||||||||
| Interest income from cash and cash equivalents | 61 | 46 | 149 | 78 | |||||||||||||
| Total investment income | 10,126 | 11,530 | 34,400 | 35,984 | |||||||||||||
| EXPENSES | |||||||||||||||||
| Interest and financing expenses | 4,110 | 4,320 | 12,751 | 13,015 | |||||||||||||
| Base management fee | 1,925 | 2,254 | 6,063 | 6,871 | |||||||||||||
| Incentive fees | - | - | 1,497 | 244 | |||||||||||||
| General and administrative expenses | 1,107 | 1,105 | 3,236 | 3,334 | |||||||||||||
| Expenses before incentive fee waiver | 7,142 | 7,679 | 23,547 | 23,464 | |||||||||||||
| Incentive fee waiver | - | - | (288 | ) | - | ||||||||||||
| Total expenses, net of incentive fee waiver | 7,142 | 7,679 | 23,259 | 23,464 | |||||||||||||
| NET INVESTMENT INCOME | 2,984 | 3,851 | 11,141 | 12,520 | |||||||||||||
| REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND WRITTEN CALL OPTION: | |||||||||||||||||
| Net realized gain (loss) on investments: | |||||||||||||||||
| Non-control/non-affiliate investments | - | 9,874 | (3,544 | ) | (15,820 | ) | |||||||||||
| Affiliate investments | 12 | 93 | 2,288 | 956 | |||||||||||||
| Control investments | - | (3,669 | ) | (19,656 | ) | (5,315 | ) | ||||||||||
| Net realized gain (loss) on investments | 12 | 6,298 | (20,912 | ) | (20,179 | ) | |||||||||||
| Net unrealized appreciation (depreciation) on investments: | |||||||||||||||||
| Non-control/non-affiliate investments | 1,518 | (8,380 | ) | 4,539 | 18,847 | ||||||||||||
| Affiliate investments | 1,218 | 11,730 | (3,719 | ) | 5,727 | ||||||||||||
| Control investments | (4,015 | ) | (32,100 | ) | (17,999 | ) | (31,722 | ) | |||||||||
| Net unrealized depreciation on investments | (1,279 | ) | (28,750 | ) | (17,179 | ) | (7,148 | ) | |||||||||
| Net unrealized appreciation on written call option | - | 6,795 | - | 6,795 | |||||||||||||
| Net realized and unrealized loss on investments and written call option | (1,267 | ) | (15,657 | ) | (38,091 | ) | (20,532 | ) | |||||||||
| Tax benefit (provision) | - | (110 | ) | (628 | ) | 1,185 | |||||||||||
| Total net realized and unrealized loss on investments and written call option, net of taxes | (1,267 | ) | (15,767 | ) | (38,719 | ) | (19,347 | ) | |||||||||
| NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 1,717 | $ | (11,916 | ) | $ | (27,578 | ) | $ | (6,827 | ) | ||||||
| NET INCREASE (DECREASE) IN NET ASSETS PER SHARE RESULTING FROM OPERATIONS – BASIC AND DILUTED | $ | 0.11 | $ | (0.74 | ) | $ | (1.71 | ) | $ | (0.43 | ) | ||||||
| WEIGHTED AVERAGE COMMON STOCK OUTSTANDING – BASIC AND DILUTED | 16,133,365 | 16,001,919 | 16,097,908 | 15,981,154 | |||||||||||||
| DISTRIBUTIONS PAID PER SHARE | $ | 0.25 | $ | 0.25 | $ | 0.75 | $ | 0.75 | |||||||||