CHARLOTTE, N.C., May 11, 2015 (GLOBE NEWSWIRE) -- Capitala Finance Corp. (Nasdaq:CPTA) ("Capitala" or the "Company") today announced its financial results for first quarter ended March 31, 2015.
First Quarter Highlights
- Originated $67.2 million of gross investments during the quarter. Of this amount, $57.2 million was debt, of which 61% was senior secured. The weighted average yield on newly originated first quarter debt investments was 13.3%. Net debt deployments for the quarter were $44.6 million
- Investments appreciated approximately $3.3 million on a net basis, excluding the reversal of net unrealized appreciation from repayments/sales of investments
- Net asset value as of March 31, 2015 was $238.2 million, or $18.35 per common share
- NAV was reduced by $0.97 during the period related to distributions declared. We paid $0.52 per common share during the period, with $0.45 to be paid monthly at $0.05 per common share over the remainder of 2015
- Net investment income of $4.8 million, or $0.37 per common share
- Net realized capital gains of $9.3 million, or $0.72 per common share
- Net increase in net assets resulting from operations of $9.9 million, or $0.76 per common share
In describing the Company's first quarter activities, Joseph B. Alala, III, Chairman and Chief Executive Officer, stated, "We are pleased with our results from the first quarter, most importantly with the investment activity coupled with the $0.72 per common share of realized gains earned during the period. In addition, subsequent to quarter-end, we successfully completed an underwritten offering of 3.5 million shares, providing the Company with gross proceeds of approximately $64.1 million. We remain focused on investing in small businesses in both the lower middle market and the traditional middle market, building out the liquid credit platform, and providing full distribution coverage from net investment income."
First Quarter 2015 Investment Activity
During the first quarter of 2015, the Company originated approximately $67.2 million of new investments, and received approximately $34.6 million of repayments.
- Weighted average leverage on new debt deployments was 1.8x
- Weighted average yield of 13.3% for first quarter deployments, compared to 10.5% in the prior quarter
- Of the $34.6 million in repayments, $22.0 million related to equity investment exits that resulted in $12.7 million in gross realized gains
Lower Middle Market Activity (Companies less than $30 million in EBITDA)
During the first quarter of 2015, the Company originated two lower middle market portfolio investments totaling $35.0 million and invested $3.1 million in two follow-on investments. The weighted average yield on lower middle market deployments in the first quarter of 2015 was 13.1%. During the quarter, the Company received approximately $34.4 million of repayments, resulting in a net realized gain of $9.3 million, or $0.72 per share.
Middle Market Activity (Companies greater than $30 million in EBITDA)
During the first quarter of 2015, the Company originated middle market portfolio investments totaling approximately $15.0 million in one new portfolio company and invested $4.2 million in one follow-on investment. The weighted average yield on middle market investments in the first quarter of 2015 was 13.6%. During the quarter, the Company received approximately $0.2 million of repayments.
Liquid Credit Investments
During the first quarter of 2015, the Company invested $10.0 in Capitala Senior Liquid Loan Fund I, LLC. As previously announced, Capitala Senior Liquid Loan Fund I, LLC is a joint venture with Kemper Corporation, and will invest primarily in senior secured loans to middle market companies.
First Quarter 2015 Financial Results
Total investment income was $14.0 million for the first quarter of 2015, compared to $12.4 million for the same period in 2014, an increase of $1.6 million. Total interest, fee, and payment-in-kind ("PIK") income was $5.1 million higher in the first quarter of 2015 compared to 2014, but was partially offset by $3.4 million less dividend income for the first quarter of 2015 compared to 2014.
Total expenses for the first quarter of 2015 were $9.2 million, compared to $6.7 million for the comparable period in 2014. The increase is primarily attributable to (1) an increase in interest and financing expenses of $2.4 million, (2) an increase of $0.5 million in management fees, net of the waiver, and (3) and a decrease of $0.3 million related to lower incentives fees earned during the first quarter of 2015 as compared to 2014.
Net investment income for the first quarter of 2015 was $4.8 million, or $0.37 per share, compared to $5.7 million, or $0.44 per share, for the same period in 2014. The decrease in net investment income relates primarily to a $2.5 million increase in total expenses as detailed above, partially offset by $1.6 million increase in total investment income.
Net realized gains totaled $9.3 million, or $0.72 per share, for the first quarter of 2015, compared to $1.2 million for the same period in 2014. Gross gains of $3.3 million for Boot Barn, Inc. and $9.3 million for KBP Investments, LLC were partially offset by a $3.4 million loss related to Precision Manufacturing, LLC. The net change in unrealized appreciation for the first quarter of 2015 was a decline of $4.3 million, or $0.33 per common share, compared to $5.7 million, or $0.44 per common share, for the same period in 2014. During the first quarter of 2015, the Company had $7.6 million in net unrealized depreciation related to reversal of net unrealized appreciation on realized gains. The remaining portfolio appreciated $3.3 million during the same period.
The net increase in net assets resulting from operations was $9.9 million for the first quarter of 2015, or $0.76 per common share, compared to a net increase of $1.2 million, or $0.09 per common share, for the same period in 2014.
As of March 31, 2015, our portfolio consisted of 54 companies with a fair market value of $518.9 million and a cost basis of $484.0 million. Senior secured debt investments represented 35.0% of the portfolio, subordinated debt investments represented 45.0% of the portfolio, equity/warrant investments represented 18.0% of the portfolio, and senior liquid loan funds represented 2.0% of the portfolio, based on fair values at March 31, 2015. On a cost basis, equity/warrant investments comprise 11.1% of the portfolio at March 31, 2015.
The chart below provides an update on the portfolio at March 31, 2015 and December 31, 2014:
|Total Portfolio as of 3/31/2015||Total Portfolio as of 12/31/2014|
|$ Amount||EBITDA (1)||Yield (2)||Leverage (3)||$ Amount||EBITDA (1)||Yield (2)||Leverage (3)|
|Lower Middle Market||$382,809||$10,537||13.3%||3.5x||$373,752||$10,853||13.3%||3.6x|
|Traditional Middle Market|
|Senior Secured Debt||40,996||83,066||11.0%||4.3x||22,054||81,974||8.8%||4.5x|
|Senior Subordinated Debt / Equity||85,122||107,783||10.5%||4.3x||84,531||104,157||10.6%||4.5x|
|Senior Loan Fund||10,000||N/A||N/A||N/A||--||--||--||--|
|(1) Represents weighted average LTM EBITDA of both debt and equity investments.|
|(2) Represents weighted average yield on debt instruments only; excludes impact of OID and fees.|
|(3) Represents weighted average leverage on debt instruments only.|
We currently have no investments on cash non-accrual status. The Company had debt investments in one portfolio company on PIK non-accrual as of March 31, 2015, with a fair value of $10.5 million and a cost basis of $13.1 million. At December 31, 2014, the Company had one cash non-accrual investment with a fair market value of $0, and a cost basis of $3.4 million. The Company had one debt investment on PIK non-accrual at December 31, 2014 with a fair value of $10.6 million and a cost basis of $13.1 million.
Liquidity and Capital Resources
At March 31, 2015, the Company had $32.0 million in cash and cash equivalents. In addition, the Company had SBA debentures outstanding totaling $192.2 million with an annual weighted average interest rate of 3.51%, and approximately $113.4 million of fixed rate notes bearing an interest rate of 7.125%. At March 31, 2015, the Company had $65.0 million available under its senior secured revolving credit facility, which is priced at LIBOR plus 3.0% and matures on October 17, 2018.
On April 2, 2015, the Company invested $1.0 million in the senior secured term debt of Print Direction, Inc., an existing portfolio company, yielding 10.0% cash interest and 2.0% PIK.
On April 13, 2015, the Company completed an underwritten offering of 3,500,000 shares of its common stock at a public offering price of $18.32 per share for total gross proceeds of approximately $64.1 million.
On April 14, 2015, the Company repaid the full $25.0 million balance on its senior secured credit facility, and accrued interest to date.
On April 17, 2015, the Company committed $4.0 million for Concentra Inc.'s senior unsecured bridge facility, initially yielding LIBOR +7.0% cash interest with 1.0% floor.
On April 20, 2015, the Company received $0.9 million in cash proceeds from our exit of KBP Investments, LLC related to a working capital true-up.
On April 20, 2015, the Company received $10.0 million from TGI Friday's, Inc., representing full repayment of the Company's debt investment, yielding LIBOR + 8.25%. In addition, the Company also received a $0.3 million pre-payment fee.
On April 30, 2015, the Company invested $5.0 million in Burke America Parts Group, LLC senior secured term debt, yielding 9.5% cash interest, plus warrant participation.
First Quarter 2015 Financial Results Conference Call
Management will host a conference call to discuss the operating and financial results at 8:30 a.m. on Tuesday May 12, 2015. 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 traditional mezzanine, senior subordinated and unitranche debt, as well as senior and second-lien loans and, to lesser extent, equity securities issued by lower and traditional middle-market companies. The Company is managed by Capitala Investment Advisors, LLC. For more information about the Company, please visit www.CapitalaGroup.com.
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.
|Capitala Finance Corp.|
|Consolidated Statements of Assets and Liabilities|
|(in thousands, except share and per share data)|
|March 31, 2015||December 31, 2014|
|Investments at fair value|
|Non-control/non-affiliate investments (amortized cost of $256,792 and $219,163, respectively)||$ 278,690||$ 236,804|
|Affiliate investments (amortized cost of $156,307 and $154,552, respectively)||173,585||171,471|
|Control investments (amortized cost of $70,936 and $67,440, respectively)||66,652||72,062|
|Total investments at fair value (amortized cost of $484,035 and $441,155, respectively)||518,927||480,337|
|Cash and cash equivalents||32,007||55,107|
|Interest and dividend receivable||4,929||3,113|
|Due from related parties||518||518|
|Deferred financing fees (net of accumulated amortization of $3,755 and $3,288, respectively)||9,843||10,002|
|Total assets||$ 566,975||$ 549,866|
|SBA debentures||$ 192,200||$ 192,200|
|Revolving credit facility||15,000||--|
|Due to related parties||89||8|
|Management and incentive fee payable||1,183||159|
|Accounts payable and accrued expenses||56||322|
|Total liabilities||$ 328,803||$ 309,029|
|Commitments and contingencies|
|Common stock, par value $.01, 100,000,000 common shares authorized, 12,977,242 and 12,974,420 common shares issued and outstanding, respectively||130||130|
|Additional paid in capital||188,458||188,408|
|Accumulated undistributed net investment income||11,033||12,314|
|Accumulated undistributed net realized gain from investments||3,659||803|
|Net unrealized appreciation on investments||34,892||39,182|
|Total net assets||238,172||240,837|
|Total liabilities and net assets||$ 566,975||$ 549,866|
|Net asset value per share||$ 18.35||$ 18.56|
|Capitala Finance Corp.|
|Consolidated Statements of Operations|
|(in thousands, except share and per share data)|
|For the period ended March 31|
|Interest and fee income:|
|Non-control/Non-affiliate investments||$ 7,675||$ 2,940|
|Total interest and fee income||12,905||8,013|
|Payment-in-kind interest and dividend income:|
|Total payment-in-kind interest and dividend income||769||591|
|Total dividend income||366||3,762|
|Interest income from cash and cash equivalents||1||8|
|Total investment income||14,041||12,374|
|Interest and financing expenses||4,637||2,199|
|Base management fee||2,410||2,018|
|Other operating expenses||722||904|
|Expenses before management fee waiver||9,224||6,777|
|Management fee waiver||--||(124)|
|Total expenses net of management fee waiver||9,224||6,653|
|NET INVESTMENT INCOME||4,817||5,721|
|REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:|
|Net realized gain from investments:|
|Total realized gain from investments||9,340||1,220|
|Net unrealized depreciation on investments||(4,290)||(5,723)|
|Net gain (loss) on investments||5,050||(4,503)|
|NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS||$ 9,867||$ 1,218|
|NET INCREASE IN NET ASSETS PER SHARE RESULTING FROM OPERATIONS – BASIC AND DILUTED||$ 0.76||$ 0.09|
|WEIGHTED AVERAGE COMMON STOCK OUTSTANDING - BASIC AND DILUTED||12,974,483||12,974,420|
|DISTRIBUTIONS DECLARED AND PAID PER SHARE||$ 0.52||$ 0.47|
|DISTRIBUTIONS DECLARED AND PAYABLE PER SHARE||$ 0.45||$ --|
CONTACT: Capitala Finance Corp. Stephen Arnall, Chief Financial Officer 704-376-5502 firstname.lastname@example.org
Source:Capitala Finance Corp.