KCAP Financial, Inc. (Nasdaq:KCAP) (the “Company”) announces its
third quarter 2017 financial results.
Financial Highlights
- Net investment income for the third quarter ended September 30,
2017 was approximately $2.5 million, or $0.07 per basic share,
compared with approximately $2.6 million, or $0.07 per basic share
in the quarter ended June 30, 2017.
- Cash distributed by the Asset Manager Affiliates in excess of
taxable earnings was approximately $0.02 per basic share for the
quarter.
- The Company declared a third quarter shareholder distribution
of $0.12 per share.
- At September 30, 2017, the fair value of KCAP's investments
totaled approximately $317 million.
- Net asset value per share of $4.95 as of September 30, 2017,
compared with $5.10 at June 30, 2017.
Dayl Pearson, President and Chief Executive Officer of KCAP
Financial, Inc., noted, "We are taking a series of actions to
extend and increase our assets under management, reduce leverage
and expand our borrowing capacity. We are confident that
utilizing our disciplined investment process to invest our
liquidity, we will over the next few quarters, enhance returns to
our shareholders."
Operating Results
For the three months ended September 30, 2017, we reported total
investment income of approximately $6.3 million as compared to
approximately $7.7 million in the second quarter of 2017.
Investment income from debt securities decreased to approximately
$2.4 million from approximately $4.8 million in the second quarter
of 2017. Investment income on CLO Fund Securities in the third
quarter of 2017 remained flat at $2.8 million compared with the
second quarter of 2017. We received distributions from our Asset
Manager Affiliates of $880,000 in the third quarter of 2017,
$700,000 of which was a return of capital. The Asset Manager
Affiliates distributed $650,000 in the second quarter of 2017, all
of which was a return of capital.
For the three months ended September 30, 2017,
total expenses decreased by approximately $1.3 million as compared
to the second quarter of 2017, primarily attributable to lower
interest expense due to the redemption of the KCAP Senior Funding
debt liabilities in July 2017 and lower professional fees.
Net investment income for the third quarter of
2017 and the second quarter of 2017 was approximately $2.5 million
and $2.6 million, respectively, or $0.07 and $0.07 per basic share,
respectively. Net realized and unrealized gains on investments for
the three months ended September 30, 2017 was approximately
$816,000, compared to net realized and unrealized gains of
approximately $20 thousand for the second quarter of
2017.
Portfolio and Investment
Activity
The fair value of our portfolio was
approximately $317 million as of September 30, 2017. The
composition of our investment portfolio at September 30, 2017 and
December 31, 2016 at cost and fair value was as follows:
|
|
|
|
|
|
|
|
September 30, 2017 (unaudited) |
|
December 31, 2016 |
|
Security
Type |
|
Cost/Amortized
Cost |
|
Fair Value |
|
%¹ |
|
Cost/Amortized
Cost |
|
Fair Value |
|
%¹ |
|
Short-term Investments² |
|
$ |
57,024,828 |
|
$ |
57,024,828 |
|
18 |
|
|
$ |
28,699,269 |
|
$ |
28,699,269 |
|
8 |
|
|
Senior Secured Loan |
|
|
49,982,415 |
|
|
46,124,914 |
|
15 |
|
|
|
207,701,078 |
|
|
200,322,152 |
|
55 |
|
|
Junior Secured Loan |
|
|
59,490,855 |
|
|
58,343,554 |
|
18 |
|
|
|
37,251,776 |
|
|
35,444,440 |
|
10 |
|
|
Senior Unsecured Loan |
|
|
20,000,000 |
|
|
20,000,000 |
|
6 |
|
|
|
- |
|
|
- |
|
- |
|
|
First Lien Bond |
|
|
3,054,337 |
|
|
1,063,762 |
|
- |
|
|
|
3,060,919 |
|
|
1,089,338 |
|
- |
|
|
Senior Secured Bond |
|
|
1,503,404 |
|
|
1,494,600 |
|
- |
|
|
|
1,506,461 |
|
|
1,487,400 |
|
- |
|
|
CLO Fund Securities |
|
|
78,544,739 |
|
|
51,843,344 |
|
16 |
|
|
|
76,851,317 |
|
|
54,174,350 |
|
15 |
|
|
Equity Securities |
|
|
10,389,007 |
|
|
4,450,177 |
|
1 |
|
|
|
10,389,007 |
|
|
5,056,355 |
|
1 |
|
|
Asset Manager Affiliates³ |
|
|
53,341,230 |
|
|
39,679,000 |
|
13 |
|
|
|
55,341,230 |
|
|
40,198,000 |
|
11 |
|
|
Joint Venture |
|
|
36,738,873 |
|
|
36,591,122 |
|
13 |
|
|
|
- |
|
|
- |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
370,069,689 |
|
$ |
316,615,300 |
|
100 |
% |
|
$ |
420,801,057 |
|
$ |
366,471,304 |
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
¹
Represents percentage of total portfolio at fair value. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
²
Includes money market accounts and U.S. treasury bills. |
|
|
|
|
|
|
|
|
|
|
|
|
|
³
Represents the equity investment in the Asset Manager
Affiliates. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidity and Capital
Resources
At September 30, 2017, we had unrestricted cash
and short-term investments of approximately $59.0 million, total
assets of approximately $322.8 million and stockholders' equity of
approximately $184.8 million. Our net asset value per common share
was $4.95. As of September 30, 2017, we had approximately $104.4
million (par value) of borrowings outstanding ($101.3 million net
of discount and capitalized costs) with a weighted average interest
rate of approximately 6.4%.
Subject to prevailing market conditions, we
intend to grow our portfolio of assets by raising additional
capital, including through the prudent use of leverage available to
us. As a result, we may seek to enter into new agreements with
other lenders or into other financing arrangements as market
conditions permit. Such financing arrangements may include a new
secured and/or unsecured credit facility or the issuance of
unsecured debt or preferred stock.
Distributions
Generally, we seek to fund distributions to
shareholders from current distributable earnings, primarily from
net interest and dividend income generated by our investment
portfolio and any distributions from our Asset Manager Affiliates.
However, a portion of distributions paid to shareholders may be a
return of capital. We announced a regular quarterly distribution of
$0.12 per share for the quarter ended September 30, 2017. The
record date for this distribution was October 10, 2017 and the
distribution was paid on October 26, 2017. An estimate of the tax
attributes of distributions made on a quarterly basis may not be
representative of the actual tax attributes of distributions for a
full year. Tax characteristics of all distributions will be
reported to stockholders on Form 1099-DIV after the end of the
calendar year.
We have adopted a dividend reinvestment plan
that provides for reinvestment of distributions in shares of our
common stock, unless a stockholder elects to receive cash. As a
result, if we declare a cash distribution, shareholders who have
not "opted out" of our dividend reinvestment plan will have their
cash distributions automatically reinvested in additional shares of
our common stock, rather than receiving cash. For more information
regarding our distributions, please refer to our 2016 annual
financial report. Please contact your broker or other financial
intermediary for more information regarding the dividend
reinvestment plan.
Conference Call and Webcast
We will hold a conference call on Tuesday,
November 7, 2017 at 4:00 p.m. Eastern Time to discuss our third
quarter 2017 financial results. Shareholders, prospective
shareholders and analysts are welcome to listen to the call or
attend the webcast.
The conference call dial-in number is (866)
757-5630. No password is required. A live audio webcast of the
conference call can be accessed via the Internet, on a listen-only
basis on our Company's website www.kcapfinancial.com in the
Investor Relations section under Events. The online archive of the
webcast will be available after 7:00 p.m. Eastern Time for
approximately 90 days.
A replay of this conference call will be
available from 7:00 p.m. on November 7, 2017 until 7:00 p.m. on
November 15, 2017. The dial in number for the replay is (855)
859-2056 and the conference ID is 1989878.
About KCAP Financial, Inc.
KCAP Financial, Inc. is a publicly traded,
internally managed business development company. The Company's
middle market investment business originates, structures, finances
and manages a portfolio of term loans, mezzanine investments and
selected equity securities in middle market companies. The
Company's wholly owned portfolio companies, Trimaran Advisors,
L.L.C., Katonah Debt Advisors, L.L.C., and KCAP Management, L.L.C.
manage collateralized debt obligation funds that invest in broadly
syndicated corporate term loans, high-yield bonds and other credit
instruments.
The KCAP Financial, Inc. logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=3121
Forward Looking Statements
This press release contains forward-looking
statements. The matters discussed in this press release that are
forward-looking statements are based on current management
expectations that involve substantial risks and uncertainties which
could cause actual results to differ materially from the results
expressed in, or implied by, these forward-looking statements.
Forward-looking statements relate to future events or our future
financial performance. We generally identify forward-looking
statements by terminology such as "may,'' "will,'' "should,''
"expects,'' "plans,'' "anticipates,'' "could,'' "intends,''
"target,'' "projects,'' "contemplates,'' "believes,'' "estimates,''
"predicts,'' "potential'' or "continue'' or the negative of these
terms or other similar words. Further information about factors
that could affect our financial and other results is included in
our filings with the Securities and Exchange Commission. We do not
undertake to publicly update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise, except as required to be reported under the rules and
regulations of the Securities and Exchange Commission.
|
KCAP FINANCIAL, INC. |
CONSOLIDATED BALANCE SHEETS |
|
|
|
|
|
|
|
|
|
|
As of September 30,
2017 |
|
As of December 31,
2016 |
|
|
|
(unaudited) |
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
Investments
at fair value: |
|
|
|
|
|
|
|
Short-term investments (cost: 2017 - $57,024,828; 2016 -
$28,699,269) |
|
$ |
57,024,828 |
|
|
$ |
28,699,269 |
|
|
Debt securities (cost: 2017 - $134,031,011; 2016 -
$249,520,234) |
|
|
127,026,829 |
|
|
|
238,343,330 |
|
|
CLO Fund securities managed by affiliates (cost: 2017 -
$73,495,563; 2016 - $71,734,809) |
|
|
49,973,662 |
|
|
|
51,908,784 |
|
|
CLO Fund securities managed by non-affiliates (cost: 2017 -
$5,049,176; 2016 - $5,116,508) |
|
|
1,869,682 |
|
|
|
2,265,566 |
|
|
Equity securities (cost: 2017 - $10,389,008; 2016 -
$10,389,007) |
|
|
4,450,177 |
|
|
|
5,056,355 |
|
|
Asset Manager Affiliates (cost: 2017 - $53,341,230; 2016 -
$55,341,230) |
|
|
39,679,000 |
|
|
|
40,198,000 |
|
|
Joint Venture (cost: 2017 - $36,738,873; 2016 - $0) |
|
|
36,591,122 |
|
|
|
— |
|
|
Total
Investments at Fair Value (cost: 2017 - $370,069,689; 2016 -
$420,801,057) |
|
|
316,615,300 |
|
|
|
366,471,304 |
|
|
Cash |
|
|
1,936,300 |
|
|
|
1,307,257 |
|
|
Restricted
cash |
|
|
— |
|
|
|
8,528,298 |
|
|
Interest
receivable |
|
|
923,344 |
|
|
|
1,033,917 |
|
|
Receivable
for open trades |
|
|
— |
|
|
|
2,950,658 |
|
|
Accounts
receivable |
|
|
2,000,021 |
|
|
|
— |
|
|
Due from
affiliates |
|
|
1,159,759 |
|
|
|
612,854 |
|
|
Other
assets |
|
|
173,185 |
|
|
|
467,695 |
|
|
|
|
|
|
|
|
|
|
Total
Assets |
|
$ |
322,807,909 |
|
|
$ |
381,371,983 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
Notes
issued by KCAP Senior Funding I, LLC (net of discount and offering
costs of: 2016 - $2,286,425 and $2,459,156, respectively) |
|
$ |
— |
|
|
$ |
142,604,419 |
|
|
7.375%
Notes due 2019 (net of offering costs of: 2017 - $306,073; 2016 -
$550,774) |
|
|
26,693,927 |
|
|
|
32,980,151 |
|
|
6.125%
Notes due 2022 (net of offering costs of: 2017 - $2,757,357) |
|
|
74,649,843 |
|
|
|
— |
|
|
Payable for
open trades |
|
|
34,950,728 |
|
|
|
7,884,943 |
|
|
Accounts
payable and accrued expenses |
|
|
1,649,529 |
|
|
|
2,047,405 |
|
|
Accrued
interest payable |
|
|
— |
|
|
|
930,086 |
|
|
Due to
affiliates |
|
|
78,438 |
|
|
|
54 |
|
|
|
|
|
|
|
|
|
|
Total
Liabilities |
|
|
138,022,465 |
|
|
|
186,447,058 |
|
|
COMMITMENTS AND CONTINGENCIES (Note 8) |
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
Common
stock, par value $0.01 per share, 100,000,000 common shares
authorized; 37,485,993 issued, and 37,317,815 outstanding at
September 30, 2017, and 37,282,296 issued, and 37,178,294
outstanding at December 31, 2016 |
|
|
373,178 |
|
|
|
371,783 |
|
|
Capital in
excess of par value |
|
|
354,341,009 |
|
|
|
353,404,155 |
|
|
Excess
distribution of net investment income |
|
|
(19,589,473 |
) |
|
|
(14,630,319 |
) |
|
Accumulated
net realized losses |
|
|
(95,485,836 |
) |
|
|
(88,491,896 |
) |
|
Net
unrealized depreciation on investments |
|
|
(54,853,434 |
) |
|
|
(55,728,798 |
) |
|
|
|
|
|
|
|
|
|
|
Total
Stockholders' Equity |
|
|
184,785,444 |
|
|
|
194,924,925 |
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Stockholders' Equity |
|
$ |
322,807,909 |
|
|
$ |
381,371,983 |
|
|
|
|
|
|
|
|
|
|
|
NET ASSET
VALUE PER COMMON SHARE |
|
$ |
4.95 |
|
|
$ |
5.24 |
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial
statements. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KCAP FINANCIAL, INC. |
CONSOLIDATED STATEMENTS OF
OPERATIONS |
(unaudited) |
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
September 30, |
|
September 30, |
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
from investments in debt securities |
$ |
2,439,671 |
|
|
|
$ |
5,186,745 |
|
|
|
$ |
11,764,702 |
|
|
|
$ |
16,106,654 |
|
|
Interest
from cash and short-term investments |
|
21,043 |
|
|
|
|
7,168 |
|
|
|
|
51,250 |
|
|
|
|
21,521 |
|
|
Investment income on CLO Fund Securities managed by affiliates |
|
2,693,547 |
|
|
|
|
3,307,950 |
|
|
|
|
8,378,785 |
|
|
|
|
9,595,522 |
|
|
Investment income on CLO Fund Securities managed by
non-affiliates |
|
99,578 |
|
|
|
|
195,182 |
|
|
|
|
329,108 |
|
|
|
|
503,358 |
|
|
Dividends
from Asset Manager Affiliates |
|
180,000 |
|
|
|
|
— |
|
|
|
|
180,000 |
|
|
|
|
1,400,000 |
|
|
Investment income - Joint Venture |
|
685,000 |
|
|
|
|
— |
|
|
|
|
685,000 |
|
|
|
|
— |
|
|
Capital
structuring service fees |
|
134,504 |
|
|
|
|
321,744 |
|
|
|
|
298,629 |
|
|
|
|
481,456 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
investment income |
|
6,253,343 |
|
|
|
|
9,018,789 |
|
|
|
|
21,687,474 |
|
|
|
|
28,108,510 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
and amortization of debt issuance costs |
|
1,371,953 |
|
|
|
|
2,122,325 |
|
|
|
|
5,790,242 |
|
|
|
|
6,960,355 |
|
|
Compensation |
|
1,072,812 |
|
|
|
|
1,199,412 |
|
|
|
|
3,473,841 |
|
|
|
|
3,212,886 |
|
|
Professional fees |
|
802,507 |
|
|
|
|
699,607 |
|
|
|
|
2,545,195 |
|
|
|
|
1,913,722 |
|
|
Insurance |
|
80,794 |
|
|
|
|
102,254 |
|
|
|
|
256,473 |
|
|
|
|
315,307 |
|
|
Administrative and other |
|
395,783 |
|
|
|
|
372,164 |
|
|
|
|
1,265,317 |
|
|
|
|
1,310,424 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
expenses |
|
3,723,849 |
|
|
|
|
4,495,762 |
|
|
|
|
13,331,068 |
|
|
|
|
13,712,694 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Investment
Income |
|
2,529,495 |
|
|
|
|
4,523,027 |
|
|
|
|
8,356,404 |
|
|
|
|
14,395,816 |
|
|
Realized And
Unrealized Gains (Losses) On Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
realized (losses) gains from investment transactions |
|
(1,906,537 |
) |
|
|
|
4,647,841 |
|
|
|
|
(2,871,941 |
) |
|
|
|
(6,046,199 |
) |
|
Net
change in unrealized appreciation (depreciation) on: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
securities |
|
1,759,152 |
|
|
|
|
456,530 |
|
|
|
|
4,172,723 |
|
|
|
|
2,539,345 |
|
|
Equity
securities |
|
(186,368 |
) |
|
|
|
(4,579,566 |
) |
|
|
|
(606,179 |
) |
|
|
|
(4,896,852 |
) |
|
CLO Fund
securities managed by affiliates |
|
(1,590,062 |
) |
|
|
|
(993,011 |
) |
|
|
|
(3,695,876 |
) |
|
|
|
5,890,984 |
|
|
CLO Fund
securities managed by non-affiliates |
|
(34,655 |
) |
|
|
|
(137,193 |
) |
|
|
|
(328,552 |
) |
|
|
|
(136,490 |
) |
|
Asset
Manager Affiliates investments |
|
2,922,000 |
|
|
|
|
(1,113,000 |
) |
|
|
|
1,481,000 |
|
|
|
|
(12,706,000 |
) |
|
Joint
Venture investment |
|
(147,751 |
) |
|
|
|
— |
|
|
|
|
(147,751 |
) |
|
|
|
— |
|
|
Total net
change in unrealized appreciation (depreciation) |
|
2,722,316 |
|
|
|
|
(6,366,240 |
) |
|
|
|
875,365 |
|
|
|
|
(9,309,013 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
realized and unrealized appreciation (depreciation) on
investments |
|
815,779 |
|
|
|
|
(1,718,399 |
) |
|
|
|
(1,996,576 |
) |
|
|
|
(15,355,212 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized losses
on extinguishments of debt |
|
(4,014,723 |
) |
|
|
|
(88,015 |
) |
|
|
|
(4,121,998 |
) |
|
|
|
(159,206 |
) |
|
Net Increase
(Decrease) In Stockholders’ Equity Resulting From
Operations |
$ |
(669,449 |
) |
|
|
$ |
2,716,613 |
|
|
|
$ |
2,237,830 |
|
|
|
$ |
(1,118,601 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Increase (Decrease) In Stockholders' Equity Resulting from
Operations per Common Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic: |
$ |
(0.02 |
) |
|
|
$ |
0.07 |
|
|
|
$ |
0.06 |
|
|
|
$ |
(0.03 |
) |
|
Diluted: |
$ |
(0.02 |
) |
|
|
$ |
0.07 |
|
|
|
$ |
0.06 |
|
|
|
$ |
(0.03 |
) |
|
Net
Investment Income Per Common Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic: |
$ |
0.07 |
|
|
|
$ |
0.12 |
|
|
|
$ |
0.23 |
|
|
|
$ |
0.39 |
|
|
Diluted: |
$ |
0.07 |
|
|
|
$ |
0.12 |
|
|
|
$ |
0.23 |
|
|
|
$ |
0.39 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average Shares of Common Stock Outstanding—Basic |
|
37,196,621 |
|
|
|
|
37,152,622 |
|
|
|
|
37,202,011 |
|
|
|
|
37,142,002 |
|
|
Weighted
Average Shares of Common Stock Outstanding—Diluted |
|
37,196,621 |
|
|
|
|
37,152,622 |
|
|
|
|
37,202,011 |
|
|
|
|
37,142,002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial
statements. |
|
|
|
|
|
|
|
|
|
KCAP-G
Ted Gilpingilpin@kcapinc.com(212) 455-8300
Kcap Financial, Inc. (NASDAQ:KCAP)
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From Mar 2024 to Apr 2024
Kcap Financial, Inc. (NASDAQ:KCAP)
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From Apr 2023 to Apr 2024