BlackRock Kelso Capital Corporation Declares Regular Quarterly Distribution of $0.26 per Share, Announces Financial Results for the Quarter and Year Ended December 31, 2013
HIGHLIGHTS:
Operating Results for the Quarter Ended December 31, 2013: |
Net investment income per share: $0.06 |
Distributions declared per share: $0.26 |
Earnings per share: $0.42 |
Net asset value per share: $9.54 |
Net investment income: $4.6 million |
Net realized and unrealized gains: $26.7 million |
Net increase in net assets from operations: $31.3 million |
Net investment income per share, as adjusted1: $0.22 |
Net investment income, as adjusted1: $16.5 million |
Earnings per share, as adjusted1: $0.58 |
Net increase in net assets from operations, as adjusted1: $43.3 million |
Operating Results for the Year Ended December 31, 2013: |
Net investment income per share: $0.64 |
Distributions declared per share: $1.04 |
Earnings per share: $1.25 |
Net investment income: $47.6 million |
Net realized and unrealized gains: $45.4 million |
Net increase in net assets from operations: $93.0 million |
Net investment income per share, as adjusted1: $0.92 |
Net investment income, as adjusted1: $67.9 million |
Earnings per share, as adjusted1: $1.53 |
Net increase in net assets from operations, as adjusted1: $113.2 million |
A few investments during the quarter were as follows:
-
$40.0 million in theQuality Home Brands Holdings LLC , et. al. (“QHB”) second lien term loan and$20.0 million in the QHB holdco term loan, with$1.8 million in capital structuring fees earned. QHB is a leading designer, manufacturer and supplier of decorative, functional and specialty lighting products and ceiling fans. -
$25.0 million of senior subordinated notes of Automobile Protection Corporation-APCO, a marketer and administrator of vehicle service contracts. -
$21.0 million in a senior secured first lien term loan toAccriva Diagnostics, Inc. with$0.4 million in capital structuring fees earned. Accriva is a medical device manufacturer which sells point-of-care diagnostic devices to hospitals and physician offices. -
$15.8 million of additional subordinated notes toHigginbotham Insurance Holdings, Inc. .
Portfolio and Investment Activity (dollar amounts in millions) |
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Three months
ended |
Three months
ended |
Year ended December 31, 2013 |
Year ended December 31, 2012 |
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Gross commitments | $ | 168.8 | $ | 78.6 | $ | 533.7 | $ | 317.1 | ||||||||
Exits of commitments | 123.3 | 111.3 | 442.6 | 314.8 | ||||||||||||
Number of portfolio company investments | ||||||||||||||||
at end of period | 51 | 47 | ||||||||||||||
Weighted average (“WA”) yield of debt and |
||||||||||||||||
income producing equity securities, at cost |
12.0 | % | 12.2 | % | ||||||||||||
WA yield of senior secured loans, at cost | 11.4 | % | 11.4 | % | ||||||||||||
WA yield of other debt securities, at cost | 13.0 | % | 13.5 | % | ||||||||||||
Average investment by portfolio company, at amortized cost (excluding those below $5.0 million) |
$ | 26.0 | $ | 26.9 | ||||||||||||
-
Approximately 80 potential transactions were reviewed during the
quarter, resulting in investments in nine new portfolio companies.
Sales, repayments and other exits during the quarter generated
prepayment fees of
$1.6 million , bringing our total fees earned in conjunction with exits to$8.1 million for 2013. - As compared to the prior quarter, the composition of our portfolio invested in senior secured loans decreased 5% to 43% while our unsecured or subordinated debt securities increased 5% to 16%. Our equity investments climbed 1% to 22% at quarter end resulting primarily from continued appreciation in our existing investments. This is a further climb in our non-income producing securities from 13% at last year end, driving the 20 basis point decrease in our total portfolio yield for the year.
-
We were positively impacted by the portfolio’s unrealized appreciation
of
$109.7 million during the current year, helping to drive our net asset value per share up another$0.16 for the quarter to$9.54 per share atDecember 31, 2013 . This was a further increase over our$9.31 net asset value per share at last year end. The$130.5 million of unrealized appreciation in our portfolio at year end marks the highest levels experienced since the Company’s inception. -
For the year, fee income earned due to capital structuring,
commitment, administration and amendment fees, as well as prepayment
penalties and fees earned in connection with the early repayment of
certain investments totaled
$15.0 million , or$0.20 per share, as compared to$20.7 million , or$0.28 per share for 2012. Although there were more exits during the current year, fewer of these exits were in their call period and accompanied by prepayment fees. Furthermore, a certain portfolio company exit during 2012 generated a prepayment premium of$6.7 million . -
Incentive management fees for the year were
$31.1 million , consisting of$10.9 million of incentive management fees based on income and$20.3 million of incentive management fees based on gains. The income based fees declined from$17.0 million for 2012 primarily due to the composition of non-income producing equity securities in the current portfolio. However, those same non-income producing equity securities had substantial unrealized appreciation this year, driving the large gains based fee for the year. A hypothetical liquidation is performed each quarter end possibly resulting in an additional accrual if there is further unrealized appreciation. The 2012 unrealized appreciation in the portfolio of$20.8 million resulted in a capital gains based fee of$5.5 million , as compared to$20.3 million this year. -
Our leverage stood at 0.67 times at year end providing us with
available debt capacity under our asset coverage requirements of
$223.6 million and$171.0 million available under our senior secured, revolving credit facility. -
During 2013, our average debt outstanding was
$359.5 million at a weighted average cost of debt of 5.5%. We are currently in the process of amending our senior secured revolving credit facility on more favorable terms than our existing facility. -
Our year end stock price of
$9.33 per share provides shareholders a current dividend yield of 11.1%. -
We continue to remain focused on our dividend coverage, although
challenging in today’s environment. For the year, our net investment
income, as adjusted, was
$0.92 per share, relative to distributions declared of$1.04 per share, resulting in net investment income dividend coverage of 88%. -
Tax characteristics of all 2013 distributions were reported to
stockholders on Form 1099 after the end of the calendar year. Our 2013
distributions of
$1.04 per share were comprised of ordinary income of$0.60 and a$0.44 return of capital. A large portion of our return of capital was driven by the$20.3 million incentive management fee based on gains that we are required to accrue under GAAP, although it is not due and payable at this time, if at all. On a pre-incentive fee basis, however, we earned$1.06 per share for 2013. For more information on our GAAP distributions, please refer to the Section 19 Notice that will be posted within the Distribution History section of our website. - We intend to continue to make timely distributions sufficient to satisfy the annual distribution requirements to maintain our qualification as a RIC. We also intend to make distributions of net realized capital gains, if any, at least annually. We may, at our discretion, carry forward taxable income in excess of calendar year distributions and pay a 4% excise tax on this income. We will accrue excise tax on estimated undistributed taxable income as required. There was no undistributed taxable income carried forward from 2013.
Liquidity and Capital Resources
At
Recent Developments
During 2014, we exercised two tranches of our
Another one of our larger equity investments is currently being marketed for sale at price ranges that would produce significant gains to us, and further proceeds in which to deploy in income producing assets.
From
Conference Call
Prior to the webcast/teleconference, an investor presentation that
complements the earnings conference call will be posted to
BlackRock Kelso Capital Corporation Consolidated Statements of Assets and Liabilities (Unaudited) |
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|
December 31, |
December 31, |
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Assets | |||||||||||
Investments at fair value: | |||||||||||
Non-controlled, non-affiliated investments (cost of $854,947,802 and $849,028,227) | $ | 881,305,181 | $ | 850,511,125 | |||||||
Non-controlled, affiliated investments (cost of $75,514,208 and $50,983,674) | 134,096,291 | 67,750,172 | |||||||||
Controlled investments (cost of $154,038,211 and $137,337,392) | 202,570,992 | 143,336,244 | |||||||||
Total investments at fair value (cost of $1,084,500,221 and $1,037,349,293) | 1,217,972,464 | 1,061,597,541 | |||||||||
Cash and cash equivalents | 18,474,784 | 9,122,141 | |||||||||
Unrealized appreciation on forward foreign currency contracts | — | 369,417 | |||||||||
Receivable for investments sold | 22,756,286 | 504,996 | |||||||||
Interest receivable | 11,033,061 | 14,048,248 | |||||||||
Prepaid expenses and other assets | 11,410,320 | 4,375,527 | |||||||||
Total Assets | $ | 1,281,646,915 | $ | 1,090,017,870 | |||||||
Liabilities | |||||||||||
Payable for investments purchased | $ | 21,000,000 | $ | 440,243 | |||||||
Debt | 477,981,494 | 346,850,000 | |||||||||
Interest payable | 7,896,016 | 5,277,132 | |||||||||
Distributions payable | 19,344,682 | 19,196,418 | |||||||||
Base management fees payable | 5,803,497 | 5,626,893 | |||||||||
Incentive management fees payable | 34,725,204 | 20,277,930 | |||||||||
Accrued administrative services | 270,000 | 277,000 | |||||||||
Other accrued expenses and payables | 4,921,681 | 4,692,562 | |||||||||
Total Liabilities | 571,942,574 | 402,638,178 | |||||||||
Net Assets | |||||||||||
Common stock, par value $.001 per share, 200,000,000 common shares authorized, |
|||||||||||
75,827,692 and 75,257,888 issued and 74,402,185 and 73,832,381 outstanding |
75,828 | 75,258 | |||||||||
Paid-in capital in excess of par | 894,649,992 | 917,534,577 | |||||||||
Distributions in excess of taxable net investment income | (19,373,748 | ) | (22,291,022 | ) | |||||||
Accumulated net realized loss | (286,693,363 | ) | (219,270,607 | ) | |||||||
Net unrealized appreciation | 130,522,308 | 20,808,162 | |||||||||
Treasury stock at cost, 1,425,507 and 1,425,507 shares held | (9,476,676 | ) | (9,476,676 | ) | |||||||
Total Net Assets | 709,704,341 | 687,379,692 | |||||||||
Total Liabilities and Net Assets | $ | 1,281,646,915 | $ | 1,090,017,870 | |||||||
Net Asset Value Per Share | $ | 9.54 | $ | 9.31 | |||||||
BlackRock Kelso Capital Corporation Consolidated Statement of Operations (Unaudited) |
Three months
ended |
Three months
ended |
Year ended December 31, 2013 |
Year ended December 31, 2012 |
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Investment Income: | ||||||||||||||||||||
Interest income: | ||||||||||||||||||||
Non-controlled, non-affiliated investments |
$ |
23,172,191 |
$ | 26,994,492 | $ | 96,289,228 | $ | 108,797,089 | ||||||||||||
Non-controlled, affiliated investments | 1,071,707 | 911,860 | 7,030,676 | 4,965,190 | ||||||||||||||||
Controlled investments | 2,977,830 | 3,065,887 | 10,619,305 | 9,567,654 | ||||||||||||||||
Total interest income | 27,221,728 | 30,972,239 | 113,939,209 | 123,329,933 | ||||||||||||||||
Fee income: | ||||||||||||||||||||
Non-controlled, non-affiliated investments | 4,705,841 | 4,337,447 | 12,284,535 | 19,794,762 | ||||||||||||||||
Non-controlled, affiliated investments | — | — | — | 735,708 | ||||||||||||||||
Controlled investments | 100,000 | 57,522 | 2,738,680 | 193,692 | ||||||||||||||||
Total fee income | 4,805,841 | 4,394,969 | 15,023,215 | 20,724,162 | ||||||||||||||||
Dividend income: | ||||||||||||||||||||
Non-controlled, non-affiliated investments | 435,797 | 30,344 | 1,662,145 | 736,501 | ||||||||||||||||
Non-controlled, affiliated investments | 514,123 | 2,500,000 | 1,001,264 | 2,500,000 | ||||||||||||||||
Controlled investments | — | — | — | — | ||||||||||||||||
Total dividend income | 949,920 | 2,530,344 | 2,663,409 | 3,236,501 | ||||||||||||||||
Total investment income | 32,977,489 | 37,897,552 | 131,625,833 | 147,290,596 | ||||||||||||||||
Expenses: | ||||||||||||||||||||
Incentive management fees | 14,456,193 | 17,314,127 | 31,148,437 | 22,491,789 | ||||||||||||||||
Base management fees | 5,803,497 | 5,626,892 | 21,629,665 | 22,504,433 | ||||||||||||||||
Interest and credit facility fees | 5,785,463 | 4,689,102 | 20,913,520 | 19,606,951 | ||||||||||||||||
Professional fees | 566,038 | 148,427 | 2,213,638 | 1,229,009 | ||||||||||||||||
Investment advisor expenses | 546,023 | 626,996 | 2,066,737 | 1,991,416 | ||||||||||||||||
Amortization of debt issuance costs | 554,008 | 634,679 | 1,985,234 | 2,524,915 | ||||||||||||||||
Administrative services | 168,214 | 111,951 | 775,643 | 528,559 | ||||||||||||||||
Director fees | 179,807 | 120,500 | 653,807 | 467,563 | ||||||||||||||||
Other | 337,764 | 309,067 | 2,601,077 | 2,284,429 | ||||||||||||||||
Total expenses | 28,397,007 | 29,581,741 | 83,987,758 | 73,629,064 | ||||||||||||||||
Net Investment Income | 4,580,482 | 8,315,811 | 47,638,075 | 73,661,532 | ||||||||||||||||
Realized and Unrealized Gain (Loss): | ||||||||||||||||||||
Net realized gain (loss): | ||||||||||||||||||||
Non-controlled, non-affiliated investments | (6,327,166 | ) | 3,547 | (32,307,657 | ) | (75,336,460 | ) | |||||||||||||
Non-controlled, affiliated investments | — | 99,525 | 21 | 2,223,371 | ||||||||||||||||
Controlled investments | 1,708 | (14,819,901 | ) | (31,888,848 | ) | (14,819,901 | ) | |||||||||||||
Foreign currency | — | (967,726 | ) | (166,934 | ) | (1,185,429 | ) | |||||||||||||
Net realized gain (loss) | (6,325,458 | ) | (15,684,555 | ) | (64,363,418 | ) | (89,118,419 | ) | ||||||||||||
Net change in unrealized appreciation or depreciation: | ||||||||||||||||||||
Non-controlled, non-affiliated investments | 14,265,302 | (4,342,245 | ) | 35,861,087 | 72,727,614 | |||||||||||||||
Non-controlled, affiliated investments | 13,193,589 | 3,280,090 | 41,815,585 | 9,580,694 | ||||||||||||||||
Controlled investments | 5,879,923 | 9,031,808 | 32,568,273 | (10,972,967 | ) | |||||||||||||||
Foreign currency translation | (269,314 | ) | 1,140,833 | (530,799 | ) | 1,472,779 | ||||||||||||||
Net change in unrealized appreciation or depreciation | 33,069,500 | 9,110,486 | 109,714,146 | 72,808,120 | ||||||||||||||||
Net realized and unrealized gain (loss) | 26,744,042 | (6,574,069 | ) | 45,350,728 | (16,310,299 | ) | ||||||||||||||
Net Increase in Net Assets Resulting from Operations | $ | 31,324,524 | $ | 1,741,742 | $ | 92,988,803 | $ | 57,351,233 | ||||||||||||
Net Investment Income Per Share - basic | $ | 0.06 | $ | 0.11 | $ | 0.64 | $ | 1.00 | ||||||||||||
Earnings Per Share – basic | $ | 0.42 | $ | 0.02 | $ | 1.25 | $ | 0.78 | ||||||||||||
Average Shares Outstanding - basic | 74,398,692 | 73,829,397 | 74,174,560 | 73,623,983 | ||||||||||||||||
Net Investment Income Per Share - diluted | $ | 0.07 | $ | 0.11 | $ | 0.64 | $ | 1.00 | ||||||||||||
Earnings Per Share – diluted | $ | 0.39 | $ | 0.02 | $ | 1.19 | $ | 0.78 | ||||||||||||
Average Shares Outstanding - diluted | 84,295,419 | 73,829,397 | 82,715,571 | 73,623,983 | ||||||||||||||||
Distributions Declared Per Share | $ | 0.26 | $ | 0.26 | $ | 1.04 | $ | 1.04 | ||||||||||||
The Company reports its financial results on a GAAP basis; however, management believes that evaluating the Company’s ongoing operating results may be enhanced if investors have additional non-GAAP basis financial measures. Management reviews non-GAAP financial measures to assess ongoing operations and, for the reasons described below, considers them to be effective indicators, for both management and investors, of the Company’s financial performance over time. The Company’s management does not advocate that investors consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.
The Company records its liability for incentive management fees based on
income as it becomes legally obligated to pay them, based on a
hypothetical liquidation at the end of each reporting period. The
Company’s obligation to pay incentive management fees with respect to
any fiscal quarter is based on a formula that reflects the Company’s
results over a trailing four-fiscal quarter period ending with the
current fiscal quarter. The Company is legally obligated to pay the
amount resulting from the formula less any cash payments of incentive
management fees during the prior three quarters. The formula’s
requirement to reduce the incentive management fee by amounts paid with
respect to such fees in the prior three quarters has caused the
Company’s incentive management fee expense to become, and currently is
expected to be, concentrated in the fourth quarter of each year.
Management believes that reflecting incentive management fees throughout
the year, as the related investment income is earned, is an effective
measure of the Company’s profitability and financial performance that
facilitates comparison of current results with historical results and
with those of the Company’s peers. The Company’s “as adjusted” results
reflect incentive management fees based on the formula the Company
utilizes for each trailing four-fiscal quarter period, with the formula
applied to the current quarter’s incremental earnings and without any
reduction for incentive management fees paid during the prior three
quarters. The resulting amount represents an upper limit of each
quarter’s incremental incentive management fees that the Company may
become legally obligated to pay at the end of the year. Prior year
amounts are estimated in the same manner. These estimates represent
upper limits because, in any calendar year, subsequent quarters’
investment underperformance could reduce the incentive management fees
payable by the Company with respect to prior quarters’ operating
results. Similarly, the Company records its liability for incentive
management fees based on capital gains by performing a hypothetical
liquidation at the end of each reporting period. The accrual of this
hypothetical capital gains incentive management fee is required by GAAP,
but it should be noted that a fee so calculated and accrued is not due
and payable until the end of the measurement period, or every
Computations for the periods below are derived from the Company's financial statements as follows:
Three months
ended |
Three months
ended |
Year ended December 31, 2013 |
Year ended December 31, 2012 |
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GAAP Basis: | |||||||||||||
Net Investment Income | $ | 4,580,482 | $ | 8,315,811 | $ | 47,638,075 | $ | 73,661,532 | |||||
Net Investment Income per share | 0.06 | 0.11 | 0.64 | 1.00 | |||||||||
Addback: GAAP incentive management fee expense based on Gains | 5,485,073 | 2,530,932 | 20,259,349 | 5,494,735 | |||||||||
Addback: GAAP incentive management fee expense based on Income | 8,971,120 | 14,783,195 | 10,889,088 | 16,997,054 | |||||||||
Pre-Incentive Fee2: | |||||||||||||
Net Investment Income | $ | 19,036,675 | $ | 25,629,938 | $ | 78,786,512 | $ | 96,153,321 | |||||
Net Investment Income per share | 0.26 | 0.35 | 1.06 | 1.31 | |||||||||
Less: Incremental incentive management fee expense based on Income | 2,498,105 | 5,571,252 | 10,889,088 | 16,997,054 | |||||||||
As Adjusted1: | |||||||||||||
Net Investment Income | $ | 16,538,570 | $ | 20,058,686 | $ | 67,897,424 | $ | 79,156,267 | |||||
Net Investment Income per share | 0.22 | 0.27 | 0.92 | 1.08 | |||||||||
As Adjusted1: Amounts are adjusted to remove the incentive management fee expense based on Gains, as required by GAAP, and to include only the incremental incentive management fee expense based on Income. The incremental incentive management fee is based on each trailing four-fiscal quarter period, applied to the current quarter's incremental earnings, and without any reduction for incentive management fees paid during the prior three quarters. Amounts reflect the Company's ongoing operating results and reflect the Company's financial performance over time.
Pre-Incentive Fee2: Amounts are adjusted to remove all incentive management fees. Such fees are calculated but not necessarily due and payable at this time.
About
The Company's investment objective is to generate both current income and capital appreciation through debt and equity investments. The Company invests primarily in middle-market companies in the form of senior and junior secured and unsecured debt securities and loans, each of which may include an equity component, and by making direct preferred, common and other equity investments in such companies.
Forward-Looking Statements
This press release, and other statements that
In addition to factors previously disclosed in
BlackRock Kelso Capital’s Annual Report on Form 10-K for the year ended
Available Information
BlackRock Kelso Capital’s filings with the
1 Non-GAAP basis financial measure. See Supplemental Information on page 7.
Source:
BlackRock Kelso Capital Corporation
Investors:
Corinne
Pankovci, 212-810-5798
or
Press:
Brian Beades,
212-810-5596