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FSIC Reports Third Quarter 2017 Financial Results and Declares Regular Distribution for Fourth Quarter

PHILADELPHIA, Nov. 9, 2017 /PRNewswire/ -- FS Investment Corporation (NYSE: FSIC), a publicly traded business development company focused on providing customized credit solutions to private middle market U.S. companies, announced its operating results for the quarter ended September 30, 2017, and that its board of directors has declared its fourth quarter 2017 regular distribution.

Financial Highlights for the Quarter Ended September 30, 20171

  • Net investment income of $0.21 per share, compared to $0.20 per share for the quarter ended September 30, 2016
  • Adjusted net investment income of $0.21 per share, compared to $0.20 per share for the quarter ended September 30, 20162
  • Total net realized loss of $0.07 per share and total net change in unrealized appreciation of $0.21 per share, compared to a total net realized gain of $0.01 per share and a total net change in unrealized appreciation of $0.26 per share for the quarter ended September 30, 2016
  • Paid cash distributions to stockholders totaling $0.22275 per share3
  • Total purchases of $183.4 million versus $225.5 million of sales and repayments
  • Net asset value of $9.43 per share, compared to $9.30 per share as of June 30, 2017

"As we've seen in prior quarters, the credit markets continue to be very competitive," said Michael C. Forman, Chairman and Chief Executive Officer of FSIC. "With first lien senior secured loans representing 98% of purchases in the quarter, we remain disciplined in our approach with an emphasis on investing at the top of the capital structure."

Declaration of Regular Distribution for Fourth Quarter 2017

FSIC's board of directors has declared a regular cash distribution for the fourth quarter of $0.19 per share, which will be paid on or about January 3, 2018 to stockholders of record as of the close of business on December 20, 2017.

Summary Consolidated Results


Three Months Ended

(dollars in thousands, except per share data)
(all per share amounts are basic and diluted)1

September 30, 2017

June 30, 2017

September 30, 2016

Total investment income

$103,691

$98,695

$100,557

Net investment income

50,648

46,460

49,003

Net increase (decrease) in net assets resulting from operations

85,398

18,442

114,369





Net investment income per share

$0.21

$0.19

$0.20

Adjusted net investment income per share2

$0.21

$0.19

$0.20

Total net realized and unrealized gain (loss) per share

$0.14

$(0.11)

$0.27

Net increase (decrease) in net assets resulting from operations (Earnings per Share)

$0.35

$0.08

$0.47

Stockholder distributions per share3

$0.22275

$0.22275

$0.22275

Net asset value per share at period end

$9.43

$9.30

$9.42

Weighted average shares outstanding

245,678,745

245,107,405

243,488,590

Shares outstanding, end of period

245,725,416

245,153,010

243,488,590



As of

As of

(dollar amounts in thousands)


September 30, 2017

December 31, 2016

Total fair value of investments


$3,911,399

$3,726,816

Total assets


4,135,463

4,110,071

Total stockholders' equity


2,316,693

2,297,377

Portfolio Highlights as of September 30, 2017

  • Total fair value of investments was $3.9 billion.
  • Core investment strategies4 represented 99% of the portfolio by fair value as of September 30, 2017, including 90% from direct originations and 9% from opportunistic investments. Broadly syndicated/other investments represented the remaining 1% of the portfolio by fair value.
  • Gross portfolio yield prior to leverage (based on amortized cost and excluding non-income producing assets)5 was 10.3%, compared to 10.4% as of June 30, 2017.
  • Total commitments to direct originations (including unfunded commitments) made during the third quarter of 2017 was $199.2 million in 4 companies, 2 of which were existing portfolio companies.
  • Approximately 0.3% of investments were on non-accrual based on fair value.6

Total Portfolio Activity


Three Months Ended


(dollar amounts in thousands)

September 30, 2017

June 30, 2017

September 30, 2016


Purchases

$183,384

$298,682

$217,337


Sales and redemptions

(255,483)

(310,569)

(290,764)


Net portfolio activity

$(42,099)

$(11,887)

$(73,427)




Portfolio Data

As of September 30, 2017

As of December, 2016


Total fair value of investments

$3,911,399

$3,726,816


Number of Portfolio Companies

104

102


Average Annual EBITDA of Portfolio Companies

$91,700

$100,000


Weighted Average Purchase Price of Debt Investments

(as a % of par)

97.5%

98.6%


% of Investments on Non-Accrual

(based on fair value)6

0.3%

0.2%





Asset Class (based on fair value)



Senior Secured Loans — First Lien

61%

52%


Senior Secured Loans — Second Lien

5%

16%


Senior Secured Bonds

5%

4%


Subordinated Debt

14%

12%


Collateralized Securities

1%

2%


Equity/Other

14%

14%





Portfolio Composition by Strategy (based on fair value)4



Direct Originations

90%

88%


Opportunistic

9%

9%


Broadly Syndicated/Other

1%

3%





Interest Rate Type (based on fair value)



% Variable Rate

65.3%

67.0%


% Fixed Rate

21.0%

19.4%


% Income Producing Equity/Other Investments

2.7%

2.7%


% Non-Income Producing Equity/Other Investments

11.0%

10.9%





Yields (based on amortized cost)5



Gross Portfolio Yield Prior to Leverage

9.4%

9.1%


Gross Portfolio Yield Prior to Leverage — Excluding Non-Income Producing Assets

10.3%

10.1%









Direct Origination Activity


Three Months Ended

(dollar amounts in thousands)

September 30, 2017

June 30, 2017

September 30, 2016

Total Commitments

(including unfunded commitments)

$199,157

$197,084

$144,226

Exited Investments (including partial paydowns)

(169,035)

(218,280)

(198,010)

Net Direct Originations

$30,122

$(21,196)

$(53,784)

Direct Originations Portfolio Data

As of September 30, 2017

As of December 31, 2016

Total Fair Value of Direct Originations

$3,507,097

$3,264,395

Number of Portfolio Companies

74

67

Average Annual EBITDA of Portfolio Companies

$70,700

$64,600

Average Leverage Through Tranche of Portfolio Companies —

Excluding Equity/Other and Collateralized Securities

4.8x

4.8x

% of Investments on Non-Accrual (based on fair value)6

0.1%







Three Months Ended


New Direct Originations by Asset Class (including unfunded commitments)

September 30, 2017

June 30, 2017

September 30, 2016


Senior Secured Loans — First Lien

85%

97%

94%


Senior Secured Loans — Second Lien

2%

5%


Senior Secured Bonds

1%


Subordinated Debt

13%


Collateralized Securities


Equity/Other

2%

1%


Average New Direct Origination Commitment Amount

$49,789

$15,160

$20,604


Weighted Average Maturity for New Direct Originations

5/5/2023

12/17/2022

12/11/2021


Gross Portfolio Yield Prior to Leverage (based on amortized cost) of New Direct Originations Funded during Period5

9.6%

9.6%

9.3%


Gross Portfolio Yield Prior to Leverage (based on amortized cost) of New Direct Originations Funded during Period —

Excluding Non-Income Producing Assets5

9.6%

9.7%

9.3%


Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Direct Originations Exited during Period5

12.0%

9.9%

8.6%








Leverage and Liquidity as of September 30, 2017

  • Debt to equity ratio of 74%, based on $1.72 billion in total debt outstanding and stockholders' equity of $2.32 billion. FSIC's weighted average effective interest rate (including the effect of non-usage fees) was 4.21%
  • Cash and foreign currency of approximately $179.0 million and availability under its financing arrangements of $261.4 million, subject to borrowing base and other limitations
  • Twenty unfunded debt investments with aggregate unfunded commitments of $176.5 million and two unfunded equity commitments with aggregate unfunded commitments of $311 thousand

Conference Call Information
FSIC will host a conference call at 10:00 a.m. (Eastern Time) on Friday, November 10, 2017, to discuss its third quarter financial results. All interested parties are welcome to participate. You can access the conference call by dialing (877) 443-2408 and using the conference ID 9799008 approximately 10 minutes prior to the call. The conference call will also be webcast, which can be accessed from the Investor Relations section of FSIC's website at www.fsinvestmentcorp.com under Presentations and Reports.

A replay of the call will be available for a period of 30 days following the call by visiting the Investor Relations section of FSIC's website at www.fsinvestmentcorp.com under Presentations and Reports.

Supplemental Information
An investor presentation of financial information will be made available prior to the call in the Investor Relations section of FSIC's website at www.fsinvestmentcorp.com under Presentations and Reports.

About FS Investment Corporation
FS Investment Corporation (NYSE: FSIC) is a publicly traded business development company ("BDC") focused on providing customized credit solutions to private middle market U.S. companies. FSIC seeks to invest primarily in the senior secured debt and, to a lesser extent, the subordinated debt of private middle market companies to achieve the best risk-adjusted returns for its investors. In connection with its debt investments, FSIC may receive equity interests such as warrants or options.

FSIC is advised by FB Income Advisor, LLC, an affiliate of FS Investments, and is sub-advised by GSO / Blackstone Debt Funds Management LLC, an affiliate of GSO Capital Partners ("GSO"). GSO, with approximately $99.5 billion in assets under management as of September 30, 2017, is the credit platform of Blackstone, one of the world's leading managers of alternative investments. For more information, please visit www.fsinvestmentcorp.com.

About FS Investments
FS Investments is a leading asset manager dedicated to helping individuals, financial professionals and institutions design better portfolios. The firm provides access to alternative sources of income and growth and focuses on setting industry standards for investor protection, education and transparency.

FS Investments is headquartered in Philadelphia, PA with offices in Orlando, FL and Washington, DC. The firm had more than $20 billion in assets under management as of September 30, 2017.

Visit www.fsinvestments.com to learn more.

Forward-Looking Statements and Important Disclosure Notice
This announcement may contain certain forward-looking statements, including statements with regard to future events or the future performance or operations of FSIC. Words such as "believes," "expects," "projects," and "future" or similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors could cause actual results to differ materially from those projected in these forward-looking statements. Factors that could cause actual results to differ materially include changes in the economy, risks associated with possible disruption in FSIC's operations or the economy generally due to terrorism or natural disasters, future changes in laws or regulations and conditions in FSIC's operating area, and the price at which shares of FSIC's common stock trade on the New York Stock Exchange. Some of these factors are enumerated in the filings FSIC makes with the SEC. FSIC undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

The press release above contains summaries of certain financial and statistical information about FSIC. The information contained in this press release is summary information that is intended to be considered in the context of FSIC's SEC filings and other public announcements that FSIC may make, by press release or otherwise, from time to time. FSIC undertakes no duty or obligation to update or revise the information contained in this press release. In addition, information related to past performance, while helpful as an evaluative tool, is not necessarily indicative of future results, the achievement of which cannot be assured. Investors should not view the past performance of FSIC, or information about the market, as indicative of FSIC's future results.

Other Information
The information in this press release is summary information only and should be read in conjunction with FSIC's quarterly report on Form 10-Q for the quarterly period ended September 30, 2017, which FSIC filed with the U.S. Securities and Exchange Commission (the "SEC") on November 9, 2017, as well as FSIC's other reports filed with the SEC. A copy of FSIC's quarterly report on Form 10-Q for the quarterly period ended September 30, 2017 and FSIC's other reports filed with the SEC can be found on FSIC's website at www.fsinvestmentcorp.com and the SEC's website at www.sec.gov.

Certain Information About Distributions
The determination of the tax attributes of FSIC's distributions is made annually as of the end of its fiscal year based upon its taxable income and distributions paid, in each case, for the full year. Therefore, a determination as to the tax attributes of the distributions made on a quarterly basis may not be representative of the actual tax attributes for a full year. FSIC intends to update stockholders quarterly with an estimated percentage of its distributions that resulted from taxable ordinary income. The actual tax characteristics of distributions to stockholders will be reported to stockholders annually on Form 1099-DIV.

The timing and amount of any future distributions on FSIC's shares of common stock are subject to applicable legal restrictions and the sole discretion of its board of directors. There can be no assurance as to the amount or timing of any such future distributions, including the special distribution referenced herein.

FSIC may fund its cash distributions to stockholders from any sources of funds legally available to it, including proceeds from the sale of shares of FSIC's common stock, borrowings, net investment income from operations, capital gains proceeds from the sale of assets, non-capital gains proceeds from the sale of assets and dividends or other distributions paid to it on account of preferred and common equity investments in portfolio companies. FSIC has not established limits on the amount of funds it may use from available sources to make distributions. There can be no assurance that FSIC will be able to pay distributions at a specific rate or at all.

Contact Information:

Investors

Chris Condelles
christopher.condelles@fsinvestments.com
267-439-4365

Dominic Mammarella
dominic.mammarella@fsinvestments.com
215-220-4280

Media

Marc Yaklofsky / Kate Beers
media@fsinvestments.com
215-495-1174


Income Statement


Three Months Ended


Nine Months Ended



September 30,


September 30,



2017


2016


2017


2016

Investment income









From non-controlled/unaffiliated investments:









Interest income


$

82,349



$

86,569



$

230,115



$

264,717


Paid-in-kind interest income


8,430



6,811



22,899



20,434


Fee income


5,005



4,214



34,081



21,191


Dividend income


21





21




From non-controlled/affiliated investments:









Interest income


3,448



1,851



10,485



3,656


Paid-in-kind interest income


550



162



1,855



436


Fee income


1,232





1,263



633


Dividend income








224


From controlled/affiliated investments:









Interest income


966



100



3,407



134


Paid-in-kind interest income


1,690



850



4,324



2,406


Total investment income


103,691



100,557



308,450



313,831











Operating expenses









Management fees


18,038



17,872



54,772



53,258


Subordinated income incentive fees


12,662



12,250



37,426



38,945


Administrative services expenses


750



750



2,226



2,846


Accounting and administrative fees


254



243



774



706


Interest expense


19,885



18,283



58,941



55,241


Directors' fees


277



277



822



780


Other general and administrative expenses


1,177



1,879



3,791



6,274


Total operating expenses


53,043



51,554



158,752



158,050


Net investment income


50,648



49,003



149,698



155,781











Realized and unrealized gain/loss









Net realized gain (loss) on investments:









Non-controlled/unaffiliated investments


(24,767)



2,363



(87,361)



(19,064)


Non-controlled/affiliated investments


6,551





6,856




Controlled/affiliated investments




(26)



(52,879)



(26)


Net realized gain (loss) on foreign currency


(19)



86



165



264


Net change in unrealized appreciation (depreciation) on investments:









Non-controlled/unaffiliated investments


29,820



64,039



149,622



96,258


Non-controlled/affiliated investments


16,951



(4,463)



(979)



3,823


Controlled/affiliated investments


7,408



4,354



7,041



6,692


Net change in unrealized appreciation (depreciation) on secured borrowing


3



(33)



(7)



(33)


Net change in unrealized gain (loss) on foreign currency


$

(1,197)



$

(954)



$

(4,923)



$

(1,266)


Total net realized and unrealized gain (loss)


34,750



65,366



17,535



86,648


Net increase (decrease) in net assets resulting from operations


$

85,398



$

114,369



$

167,233



$

242,429











Per share information—basic and diluted









Net increase (decrease) in net assets resulting from operations (Earnings per Share)


$

0.35



$

0.47



$

0.68



$

1.00


Weighted average shares outstanding


245,678,745



243,488,590



245,117,823



243,257,941



Balance Sheet


September 30, 2017





(Unaudited)


December 31, 2016

Assets





Investments, at fair value





Non-controlled/unaffiliated investments (amortized cost—$3,514,012 and $3,509,899, respectively)


$

3,594,686



$

3,440,951


Non-controlled/affiliated investments (amortized cost—$173,626 and $153,167, respectively)


222,275



202,795


Controlled/affiliated investments (amortized cost—$85,201 and $80,874, respectively)


94,438



83,070


Total investments, at fair value (amortized cost—$3,772,839 and $3,743,940, respectively)


3,911,399



3,726,816


Cash


176,445



264,594


Foreign currency, at fair value (cost—$2,451 and $4, respectively)


2,546



4


Receivable for investments sold and repaid


1,896



75,921


Income receivable


38,811



36,106


Deferred financing costs


3,712



5,828


Prepaid expenses and other assets


654



802


Total assets


$

4,135,463



$

4,110,071







Liabilities





Payable for investments purchased


$

606



$

5,748


Credit facilities payable (net of deferred financing costs of $3,461 and $0, respectively)


637,669



619,932


Unsecured notes payable (net of deferred financing costs of $1,563 and $1,884, respectively)


1,072,714



1,070,701


Secured borrowing, at fair value (amortized proceeds of $2,835 and $2,831, respectively)


2,891



2,880


Stockholder distributions payable


54,733



54,364


Management fees payable


18,038



18,022


Subordinated income incentive fees payable


12,662



12,885


Administrative services expense payable


495



516


Interest payable


17,463



20,144


Directors' fees payable


267



281


Other accrued expenses and liabilities


1,232



7,221


Total liabilities


1,818,770



1,812,694


Commitments and contingencies










Stockholders' equity





Preferred stock, $0.001 par value, 50,000,000 shares authorized, none issued and outstanding





Common stock, $0.001 par value, 450,000,000 shares authorized, 245,725,416 and 244,063,357 shares issued and outstanding, respectively


246



244


Capital in excess of par value


2,276,946



2,261,040


Accumulated undistributed net realized gain/loss on investments and gain/loss on foreign currency


(237,493)



(104,274)


Accumulated undistributed (distributions in excess of) net investment income


133,899



148,026


Net unrealized appreciation (depreciation) on investments and secured borrowing and unrealized gain/loss on foreign currency


143,095



(7,659)


Total stockholders' equity


2,316,693



2,297,377


Total liabilities and stockholders' equity


$

4,135,463



$

4,110,071


Net asset value per share of common stock at period end


$

9.43



$

9.41


Non-GAAP Financial Measures

This press release contains certain financial measures that have not been prepared in accordance with generally accepted accounting principles in the United States ("GAAP"). FSIC uses these non-GAAP financial measures internally in analyzing financial results and believes that the use of these non-GAAP financial measures is useful to investors as an additional tool to evaluate ongoing results and trends and in comparing FSIC's financial results with other BDCs.

Non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures, and should be read only in conjunction with FSIC's consolidated financial statements prepared in accordance with GAAP. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures has been provided in this press release, and investors are encouraged to review the reconciliation.

Reconciliation of Non-GAAP Financial Measures1


Three Months Ended


September 30, 2017

June 30, 2017

September 30, 2016

GAAP net investment income per share

$0.21

$0.19

$0.20

Plus capital gains incentive fees per share

Plus excise taxes per share

Plus one-time expenses per share

Adjusted net investment income per share2

$0.21

$0.19

$0.20

1)

Per share data was derived by using the weighted average shares of FSIC's common stock outstanding during the applicable period. Per share numbers may not sum due to rounding.

2)

Adjusted net investment income is a non-GAAP financial measure. Adjusted net investment income is presented for all periods as GAAP net investment income excluding (i) the accrual for the capital gains incentive fee for realized and unrealized gains; (ii) excise taxes; and (iii) certain non-recurring operating expenses that are one-time in nature and are not representative of ongoing operating expenses incurred during FSIC's normal course of business (referred to herein as one-time expenses). FSIC uses this non-GAAP financial measure internally in analyzing financial results and believes that the use of this non-GAAP financial measure is useful to investors as an additional tool to evaluate ongoing results and trends and in comparing its financial results with other business development companies. The presentation of this additional information is not meant to be considered in isolation or as a substitute for financial results prepared in accordance with GAAP. A reconciliation of GAAP net investment income to adjusted net investment income can be found above.

3)

The per share data for distributions reflects the amount of distributions paid per share of our common stock to stockholders of record during each applicable period.



4)

See FSIC's quarterly report on Form 10-Q for the three months ended September 30, 2017 for a description of FSIC's investment strategies.

5)

Gross portfolio yield represents the expected annualized yield of FSIC's investment portfolio based on the composition of the portfolio as of the applicable date. FSIC's estimated gross portfolio yield may be higher than an investor's yield on an investment in shares of FSIC's common stock because it does not reflect sales commissions or charges that may be incurred in connection with the purchase or sale of such shares, or operating expenses that may be incurred by FSIC. FSIC's estimated gross portfolio yield does not represent an actual investment return to stockholders, is subject to change and, in the future, may be greater or less than the rates set forth herein.

6)

Interest income is recorded on an accrual basis. See FSIC's quarterly report on Form 10-Q for the three months ended September 30, 2017 for a description of FSIC's revenue recognition policy.



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SOURCE FS Investment Corporation