Oxford Square Capital Corp. Announces Results of Operations for the Quarter Ended March 31, 2018 and Announces Quarterly Dist...
May 02 2018 - 9:12AM
Oxford Square Capital Corp. (NasdaqGS:OXSQ) (“OXSQ,” the “Company,”
“we,” “us” or “our”) announced today its financial results for the
quarter ended March 31, 2018, and announced a distribution of $0.20
per share for the quarter ending June 30, 2018.
- As of March 31, 2018, net asset value per share was $7.60
compared with the net asset value per share as of December 31, 2017
of $7.55.
- For the quarter ended March 31, 2018 we recorded net investment
income of approximately $8.7 million, or approximately $0.17 per
share. We recorded net realized gains of approximately $0.3
million, and net unrealized appreciation of approximately $2.5
million for the quarter ended March 31, 2018. In total, we had a
net increase in net assets from operations of approximately $11.5
million, or approximately $0.22 per share, for the quarter ended
March 31, 2018.
- Our core net investment income (“Core NII”) for the quarter
ended March 31, 2018 was $7.6 million, or approximately $0.15 per
share.
- Core NII represents net investment income adjusted for
additional cash distributions received, or entitled to be received
(if any, in either case), on our collateralized loan obligation
(“CLO”) equity investments and also excludes any capital gains
incentive fees we recognize but have no obligation to pay in any
period. See additional information under “Supplemental
Information Regarding Core Net Investment Income”
below.
- While our experience has been that cash flow distributions have
historically represented useful indicators of our CLO equity
investments’ annual taxable income during certain periods, we
believe that current and future cash flow distributions may
represent less accurate indicators of taxable income with respect
to our CLO equity investments than they have in the past.
Accordingly, our taxable income may be materially different than
either GAAP NII or Core NII.
- Total investment income for the first quarter of 2018 amounted
to approximately $13.3 million, which represents a decrease of
approximately $0.1 million from the fourth quarter of 2017.
- For the quarter ended March 31, 2018, we recorded investment
income from our portfolio as follows:
- approximately $5.9 million from our debt investments,
- approximately $6.8 million from our CLO equity investments,
and
- approximately $0.6 million from all other sources.
- Our total expenses for the quarter ended March 31, 2018 were
approximately $4.6 million, down by approximately $1.2 million
compared to the fourth quarter of 2017. This decrease is primarily
attributable to lower interest expense and professional fees.
- During the first quarter of 2018:
- We made investments of approximately $24.7 million in corporate
loan investments. We received proceeds of approximately $0.2
million and $2.9 million from sales of our CLO equity investments
and debt investments, respectively.
- We received or were entitled to receive proceeds of
approximately $24.9 million from repayments and amortization
payments on our debt investments.
- As of March 31, 2018, the weighted average yield of our debt
investments at current cost was approximately 9.9%, compared with
9.7% as of December 31, 2017.
- As of March 31, 2018, the weighted average effective yield of
our CLO equity investments at current cost was approximately 15.9%,
compared with 15.6% as of December 31, 2017.
- As of March 31, 2018, the weighted average cash distribution
yield of our CLO equity investments at current cost was
approximately 15.5%, compared with 20.2% as of December 31,
2017.
- Our weighted average credit rating on a fair value basis was
2.1 at the end of the first quarter of 2018 (compared to 2.2 at the
end of the fourth quarter of 2017).
- As of March 31, 2018, we had no investments on non-accrual
status.
- On April 24, 2018, our board of directors declared the
following distribution on our common stock:
Quarter Ending |
Record Date |
Payment Date |
Amount Per Share |
June 30, 2018 |
June 15, 2018 |
June 29, 2018 |
$ |
0.20 |
- On February 5, 2018, the Board of Directors authorized a stock
repurchase program of $25 million. During the quarter we
repurchased 990,260 shares of our common stock at a weighted
average price of $6.01 per share, producing accretion of
approximately $0.03 per share.
Supplemental Information Regarding Core
Net Investment Income
On a supplemental basis, we provide information relating to core
net investment income, which is a non-GAAP measure. This measure is
provided in addition to, but not as a substitute for, net
investment income determined in accordance with GAAP. Our non-GAAP
measures may differ from similar measures by other companies, even
if similar terms are used to identify such measures. Core net
investment income represents net investment income adjusted for
additional cash distributions received, or entitled to be received
(if any, in either case), on our CLO equity investments (excluding
those cash distributions believed to represent a return of capital)
and also excludes any capital gains incentive fees we recognize but
have no obligation to pay in any period. The Company did not
recognize any capital gains incentive fees for the quarter ended
March 31, 2018.
Income from investments in the “equity” class securities of CLO
vehicles, for GAAP purposes, is recorded using the effective
interest method based upon an effective yield to the expected
redemption utilizing estimated cash flows compared to the cost,
resulting in an effective yield for the investment; the difference
between the actual cash received or distributions entitled to be
received and the effective yield calculation is an adjustment to
cost. Accordingly, investment income recognized on CLO equity
securities in the GAAP statement of operations differs from the
cash distributions actually received by us during the period
(referred to below as “CLO equity adjustments”).
Further, in order to continue to qualify to be taxed as a
regulated investment company (“RIC”), we are required, among other
things, to distribute at least 90% of our investment company
taxable income annually. Therefore, core net investment income may
provide a better indication of estimated taxable income for a
reporting period than does GAAP net investment income, although we
can offer no assurance that will be the case as the ultimate tax
character of our earnings cannot be determined until tax returns
are prepared after the end of a fiscal year. We note that these
non-GAAP measures may not be useful indicators of taxable earnings,
particularly during periods of market disruption and volatility and
our taxable income may differ materially from our core net
investment income.
The following table provides a reconciliation of net investment
income to core net investment income for the three months ended
March 31, 2018 and March 31, 2017:
|
|
March 31, 2018 |
|
March 31, 2017 |
|
|
Amount |
|
Per Share Amounts |
|
Amount |
|
Per Share Amounts |
Net investment
income |
|
$ |
8,723,096 |
|
|
|
$ |
0.170 |
|
|
|
$ |
8,283,242 |
|
|
$ |
0.161 |
|
CLO equity
adjustments |
|
|
(1,115,601 |
) |
|
|
|
(0.022 |
) |
|
|
|
2,547,993 |
|
|
|
0.049 |
|
Core net investment
income |
|
$ |
7,607,495 |
|
|
|
$ |
0.148 |
|
|
|
$ |
10,831,235 |
|
|
$ |
0.210 |
|
We will host a conference call to discuss our first quarter
results today, Tuesday, May 1, 2018 at 10:00 AM ET. Please call
1-888-339-0740 to participate. A replay of the conference call will
be available for approximately 30 days. The replay number is
1-877-344-7529, and the replay passcode is 10119902.
A presentation containing further detail regarding our quarterly
results of operations has been posted under the Investor Relations
section of our website at www.oxfordsquarecapital.com.
The following financial statements are unaudited and without
footnotes. Readers who would like additional information
should obtain our Form 10-Q for the period ended March 31, 2018,
and subsequent reports on Form 10-Q as they are filed.
OXFORD SQUARE CAPITAL CORP. CONSOLIDATED
STATEMENTS OF ASSETS AND LIABILITIES (unaudited) |
|
|
March 31, 2018 |
December 31,
2017 |
ASSETS |
|
|
Non-affiliated/non-control investments (cost: $412,283,070 @
3/31/18; $418,990,080 @12/31/17) |
$ |
396,868,031 |
|
$ |
400,223,439 |
|
Affiliated investments (cost: $10,561,529 @ 3/31/18; $10,528,740 @
12/31/17) |
|
17,378,006 |
|
|
18,218,787 |
|
Cash and
cash equivalents |
|
48,805,440 |
|
|
30,013,842 |
|
Interest
and distributions receivable |
|
2,769,831 |
|
|
5,085,494 |
|
Securities sold not settled |
|
1,656,745 |
|
|
— |
|
Other
assets |
|
574,128 |
|
|
579,694 |
|
Total
assets |
$ |
468,052,181 |
|
$ |
454,121,256 |
|
LIABILITIES |
|
|
Notes
payable – 6.50% Unsecured Notes, net of deferred issuance
costs |
$ |
62,420,223 |
|
$ |
62,340,159 |
|
Securities purchased not settled |
|
18,611,209 |
|
|
— |
|
Base
management fee and net investment income incentive fee payable to
affiliate |
|
2,680,046 |
|
|
2,706,099 |
|
Accrued
interest payable |
|
11,621 |
|
|
11,621 |
|
Accrued
expenses |
|
519,872 |
|
|
644,735 |
|
Total
liabilities |
|
84,242,971 |
|
|
65,702,614 |
|
|
|
|
NET
ASSETS |
|
|
Common
stock, $0.01 par value, 100,000,000 shares authorized; 50,489,149
and 51,479,409 shares issued and outstanding, respectively |
|
504,891 |
|
|
514,794 |
|
Capital
in excess of par value |
|
523,360,162 |
|
|
529,297,749 |
|
Distributions in excess of net investment income |
|
(26,501,171 |
) |
|
(25,072,262 |
) |
Net
unrealized depreciation on investments |
|
(8,598,562 |
) |
|
(11,076,594 |
) |
Accumulated net realized losses on investments |
|
(99,718,994 |
) |
|
(100,007,929 |
) |
Accumulated realized losses on extinguishment of debt |
|
(5,237,116 |
) |
|
(5,237,116 |
) |
Total net
assets |
|
383,809,210 |
|
|
388,418,642 |
|
Total
liabilities and net assets |
$ |
468,052,181 |
|
$ |
454,121,256 |
|
Net asset value per
common share |
$ |
7.60 |
|
$ |
7.55 |
|
OXFORD SQUARE CAPITAL CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited) |
|
|
|
|
Three Months Ended
March 31, 2018 |
Three Months Ended
March 31, 2017 |
INVESTMENT
INCOME |
|
|
From non-affiliated
investments: |
|
|
Interest
income – debt investments |
$ |
5,821,737 |
|
$ |
7,072,207 |
|
Income
from securitization vehicles and investments |
|
6,802,864 |
|
|
8,569,603 |
|
Other
income |
|
621,983 |
|
|
741,489 |
|
Total
investment income from non-affiliated investments |
|
13,246,584 |
|
|
16,383,299 |
|
From affiliated
investments: |
|
|
Interest
income – debt investments |
|
100,216 |
|
|
82,181 |
|
Total
investment income from affiliated investments |
|
100,216 |
|
|
82,181 |
|
Total
investment income |
|
13,346,800 |
|
|
16,465,480 |
|
EXPENSES |
|
|
Base
management fees |
|
1,679,814 |
|
|
2,270,002 |
|
Interest
expense |
|
1,126,080 |
|
|
3,305,583 |
|
Compensation expense |
|
260,089 |
|
|
235,034 |
|
Professional fees |
|
156,918 |
|
|
752,393 |
|
General
and administrative |
|
400,571 |
|
|
565,746 |
|
Total
expenses before incentive fees |
|
3,623,472 |
|
|
7,128,758 |
|
Net
investment income incentive fees |
|
1,000,232 |
|
|
1,053,480 |
|
Capital
gains incentive fees |
|
— |
|
|
— |
|
Total
incentive fees |
|
1,000,232 |
|
|
1,053,480 |
|
Total
expenses |
|
4,623,704 |
|
|
8,182,238 |
|
Net investment
income |
|
8,723,096 |
|
|
8,283,242 |
|
Net change in
unrealized appreciation/depreciation on investments |
|
|
Non-Affiliate investments |
|
3,351,602 |
|
|
9,259,285 |
|
Affiliated investments |
|
(873,570 |
) |
|
388,773 |
|
Total net
change in unrealized appreciation/depreciation on investments |
|
2,478,032 |
|
|
9,648,058 |
|
Net realized
gains/(losses) |
|
|
Non-Affiliated investments |
|
288,935 |
|
|
(5,468,671 |
) |
Extinguishment of debt |
|
— |
|
|
(408,670 |
) |
Total net
realized gains/(losses) |
|
288,935 |
|
|
(5,877,341 |
) |
Net increase in net
assets resulting from operations |
$ |
11,490,063 |
|
$ |
12,053,959 |
|
Net increase in net
assets resulting from net investment income per common share (Basic
and Diluted) |
$ |
0.17 |
|
$ |
0.16 |
|
Net increase in net
assets resulting from operations per common share (Basic and
Diluted) |
$ |
0.22 |
|
$ |
0.23 |
|
Weighted average shares
of common stock outstanding: |
|
|
Basic |
|
51,200,060 |
|
|
51,479,409 |
|
Diluted |
|
51,200,060 |
|
|
59,727,707 |
|
Distributions per
share |
$ |
0.20 |
|
$ |
0.20 |
|
OXFORD SQUARE CAPITAL CORP. FINANCIAL
HIGHLIGHTS - UNAUDITED Financial highlights for the
three months ended March 31, 2018 and 2017, respectively, are as
follows:
Per
Share Data |
|
Three Months Ended
March 31, 2018 |
|
Three Months Ended March 31,
2017 |
Net asset value as of
beginning of period |
|
$ |
7.55 |
|
|
|
$ |
7.50 |
|
|
Net investment
income(1) |
|
|
0.17 |
|
|
|
0.16 |
|
|
Net realized and
unrealized gains(2) |
|
|
0.05 |
|
|
|
0.07 |
|
|
Net change in net asset
value from operations(2) |
|
|
0.22 |
|
|
|
|
0.23 |
|
|
Distributions per share
from net investment income |
|
|
(0.20 |
) |
|
|
|
(0.20 |
) |
|
Distributions based on
weighted average share impact |
|
|
— |
|
|
|
|
— |
|
|
Total
distributions(3) |
|
|
(0.20 |
) |
|
|
|
(0.20 |
) |
|
Effect of shares
repurchased, gross |
|
|
0.03 |
|
|
|
|
— |
|
|
Net asset value at end
of period |
|
$ |
7.60 |
|
|
|
$ |
7.53 |
|
|
Per share market value
at beginning of period |
|
$ |
5.74 |
|
|
|
$ |
6.61 |
|
|
Per share market value
at end of period |
|
$ |
6.11 |
|
|
|
$ |
7.38 |
|
|
Total return(4) |
|
|
9.93 |
|
% |
|
|
14.67 |
|
% |
Shares outstanding at
end of period |
|
|
50,489,149 |
|
|
|
|
51,479,409 |
|
|
|
|
|
|
|
|
|
|
|
Ratios/Supplemental Data(7) |
|
|
|
|
|
|
|
|
Net assets at end of
period (000’s) |
|
$ |
383,809 |
|
|
|
$ |
387,751 |
|
|
Average net assets
(000’s) |
|
|
387,442 |
|
|
|
|
386,872 |
|
|
Ratio of operating
expenses to average net assets(5) |
|
|
4.77 |
|
% |
|
|
8.46 |
|
% |
Ratio of net investment
income to average net assets(5) |
|
|
9.01 |
|
% |
|
|
8.56 |
|
% |
Portfolio turnover
rate(6) |
|
|
1.45 |
|
% |
|
|
7.87 |
|
% |
____________(1) Represents per share net
investment income for the period, based upon average shares
outstanding.
(2) Net realized and unrealized gains include rounding
adjustments to reconcile change in net asset value per share.
(3) Management monitors available taxable earnings,
including net investment income and realized capital gains, to
determine if a tax return of capital may occur for the year. To the
extent the Company’s taxable earnings fall below the total amount
of the Company’s distributions for that fiscal year, a portion of
those distributions may be deemed a tax return of capital to the
Company’s stockholders. The ultimate tax character of the Company’s
earnings cannot be determined until tax returns are prepared after
the end of the fiscal year.
(4) Total return equals the increase or decrease of ending
market value over beginning market value, plus distributions,
divided by the beginning market value, assuming distribution
reinvestment prices obtained under the Company’s distribution
reinvestment plan, excluding any discounts. Total return is not
annualized.
(5) Annualized.
(6) Portfolio turnover rate is calculated using the lesser
of the year-to-date cash investment sales and debt repayments or
year-to-date cash investment purchases over the average of the
total investments at fair value.
(7) The following table provides supplemental performance
ratios (annualized) measured for the three months ended March 31,
2018 and 2017:
|
|
Three Months Ended March 31,
2018 |
|
Three Months Ended March 31,
2017 |
|
Ratio of operating
expenses to average net assets: |
|
|
|
|
|
|
|
Operating expenses
before incentive fees |
|
3.74 |
% |
|
7.37 |
% |
|
Net investment income
incentive fees |
|
1.03 |
% |
|
1.09 |
% |
|
Ratio of expenses,
excluding interest expense |
|
3.61 |
% |
|
5.04 |
% |
|
About Oxford Square Capital Corp. Oxford Square
Capital Corp. is a publicly-traded business development company
principally investing in syndicated bank loans and debt and equity
tranches of collateralized loan obligation (“CLO”) vehicles. CLO
investments may also include warehouse facilities, which are
financing structures intended to aggregate loans that may be used
to form the basis of a CLO vehicle.
Forward-Looking Statements This press release
contains forward-looking statements subject to the inherent
uncertainties in predicting future results and conditions. Any
statements that are not statements of historical fact (including
statements containing the words “believes,” “plans,” “anticipates,”
“expects,” “estimates” and similar expressions) should also be
considered to be forward-looking statements. Certain factors could
cause actual results and conditions to differ materially from those
projected in these forward-looking statements. These factors are
identified from time to time in our filings with the Securities and
Exchange Commission. We undertake no obligation to update such
statements to reflect subsequent events, except as may be required
by law.
Contact:Bruce Rubin203-983-5280
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