KCAP Financial, Inc. (Nasdaq GS: KCAP) (the “Company”) announces
its third quarter 2018 financial results.
Financial Highlights
- Net investment income for the third quarter ended September 30,
2018 was approximately $3.0 million, or $0.08 per basic share,
compared with approximately $2.5 million, or $0.07 per basic share
in the quarter ended September 30, 2017.
- Net investment income for the nine months ended September 30,
2018 was $0.21 per basic share, while estimated taxable
distributable income for the nine months of 2018 was $0.24 per
basic share.
- The Company declared a third quarter shareholder distribution
of $0.10 per share.
- At September 30, 2018, the fair value of KCAP's investments
totaled approximately $273 million.
- Net asset value per share of $4.66 as of September 30, 2018,
compared with $4.87 at December 31, 2017.
Dayl Pearson, President and Chief Executive Officer of KCAP
Financial, Inc., noted, “We are pleased with our progress in the
third quarter as we continue to execute on our strategy and
position the Company for growth.”
Operating Results
For the three months ended September 30, 2018, we reported total
investment income of approximately $7.2 million as compared to
approximately $6.3 million in the same period last year. Investment
income from debt securities increased to approximately $4.8 million
from approximately $2.4 million in the third quarter of 2017.
Investment income on CLO fund securities in the third quarter of
2018 decreased to approximately $1.3 million from approximately
$2.8 million for the same period in 2017. We received distributions
from our Asset Manager Affiliates of $300,000 in the third quarter
of 2018. The Asset Manager Affiliates distributed $880,000 in the
third quarter of 2017, of which $700,000 was a return of
capital.
For the three months ended September 30, 2018,
total expenses increased by approximately $480,000 as compared to
the same period in 2017, primarily attributable to an increase in
interest expense.
Net investment income for the third quarter of 2018 and 2017 was
approximately $3.0 million and $2.5 million, respectively, or $0.08
and $0.07 per basic share, respectively. Net realized and
unrealized losses on investments for the three months ended
September 30, 2018 was approximately $1.6 million, compared to net
realized and unrealized gains on investments of approximately
$816,000 for the same period in 2017.
Portfolio and Investment
Activity
The fair value of our investment portfolio was
approximately $273 million as of September 30, 2018. The
composition of our investment portfolio at September 30, 2018 and
December 31, 2017, at cost and fair value, was as
follows:
|
|
|
September 30, 2018
(unaudited) |
|
|
December 31,
2017 |
|
|
Security Type |
|
Cost/AmortizedCost |
|
Fair Value |
|
%¹ |
|
Cost/AmortizedCost |
|
Fair Value |
|
%¹ |
| Short-term
investments² |
|
$ |
24,431,512 |
|
$ |
24,431,512 |
|
9 |
|
|
$ |
77,300,320 |
|
$ |
77,300,320 |
|
26 |
|
|
Senior Secured Loan |
|
|
66,465,014 |
|
|
62,292,361 |
|
23 |
|
|
|
48,337,900 |
|
|
44,960,146 |
|
14 |
|
|
Junior Secured Loan |
|
|
76,396,298 |
|
|
71,229,383 |
|
26 |
|
|
|
62,561,913 |
|
|
58,941,300 |
|
19 |
|
|
Senior Unsecured Loan |
|
|
6,277,283 |
|
|
6,277,283 |
|
2 |
|
|
|
12,777,283 |
|
|
12,777,283 |
|
4 |
|
|
Senior Secured Bond |
|
|
— |
|
|
— |
|
- |
|
|
|
1,502,374 |
|
|
1,518,750 |
|
- |
|
|
CLO Fund Securities |
|
|
68,769,245 |
|
|
47,983,931 |
|
18 |
|
|
|
72,339,032 |
|
|
51,678,673 |
|
17 |
|
|
Equity Securities |
|
|
10,571,007 |
|
|
4,079,336 |
|
1 |
|
|
|
10,571,007 |
|
|
4,414,684 |
|
1 |
|
|
Asset Manager Affiliates³ |
|
|
51,591,230 |
|
|
35,818,000 |
|
13 |
|
|
|
52,591,230 |
|
|
38,849,000 |
|
12 |
|
|
Joint Venture |
|
|
24,914,858 |
|
|
21,373,570 |
|
8 |
|
|
|
24,914,858 |
|
|
21,516,000 |
|
7 |
|
|
Total |
|
$ |
329,416,447 |
|
$ |
273,485,375 |
|
100 |
% |
|
$ |
362,895,917 |
|
$ |
311,956,156 |
|
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, 2018, we had unrestricted cash
and money market balances of approximately $26.1 million, total
assets of approximately $280 million and stockholders' equity of
approximately $174 million. Our net asset value per common share
was $4.66. As of September 30, 2018, we had approximately $107.4
million (par value) of borrowings outstanding ($103.7 million net
of capitalized costs) with a weighted average interest rate of
approximately 6.1%.
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
$0.10 per share during the quarter ended September 30, 2018. The
record date for this distribution was October 9, 2018 and the
distribution was paid on October 29, 2018. 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 2017 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 Wednesday,
November 7, 2018 at 9:00 am Eastern Time to discuss our third
quarter 2018 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 on November 7, 2018 after 7:00 p.m.
Eastern Time for approximately 90 days.
A replay of this conference call will be
available from 12:00 p.m. on November 7, 2018 until 12:00 p.m. on
November 15, 2018. The dial in number for the replay is (855)
859-2056 and the conference ID is 8885087.
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. and Katonah Debt Advisors, 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 ofSeptember 30,
2018 |
|
As ofDecember 31,
2017 |
| |
|
|
(unaudited) |
|
|
|
|
ASSETS |
|
|
|
|
|
|
| Investments at fair
value: |
|
|
|
|
|
|
| Short-term investments
(cost: 2018 - $24,431,512; 2017 - $77,300,320) |
|
$ |
24,431,512 |
|
|
$ |
77,300,320 |
|
| Debt securities
(amortized cost: 2018 - $149,138,595; 2017 - $125,179,470) |
|
|
139,799,027 |
|
|
|
118,197,479 |
|
| CLO Fund Securities
managed by affiliates (amortized cost: 2018 - $63,580,483; 2017 -
$67,212,139) |
|
|
45,531,058 |
|
|
|
49,488,393 |
|
| CLO Fund Securities
managed by non-affiliates (amortized cost: 2018 - $5,188,762; 2017
- $5,126,893) |
|
|
2,452,873 |
|
|
|
2,190,280 |
|
| Equity securities
(cost: 2018 - $10,571,007; 2017 - $10,571,007) |
|
|
4,079,336 |
|
|
|
4,414,684 |
|
| Asset Manager
Affiliates (cost: 2018 - $51,591,230; 2017 - $52,591,230) |
|
|
35,818,000 |
|
|
|
38,849,000 |
|
| Joint Venture (cost:
2018 - $24,914,858; 2017 - $24,914,858) |
|
|
21,373,570 |
|
|
|
21,516,000 |
|
| |
|
|
|
|
|
|
|
|
| Total Investments at
Fair Value (cost: 2018 - $329,416,447; 2017 - $362,895,917) |
|
|
273,485,375 |
|
|
|
311,956,156 |
|
| Cash |
|
|
1,713,906 |
|
|
|
2,034,095 |
|
| Restricted cash |
|
|
987,818 |
|
|
|
— |
|
| Interest
receivable |
|
|
2,276,162 |
|
|
|
1,051,271 |
|
| Receivable for open
trades |
|
|
— |
|
|
|
2,993,750 |
|
| Due from
affiliates |
|
|
935,120 |
|
|
|
1,243,493 |
|
| Other assets |
|
|
340,472 |
|
|
|
530,209 |
|
| |
|
|
|
|
|
|
|
|
| Total Assets |
|
$ |
279,738,854 |
|
|
$ |
319,808,974 |
|
| |
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
| 6.125% Notes Due 2022
(net of offering costs of: 2018 - $2,341,686; 2017 -
$2,734,248) |
|
$ |
75,065,514 |
|
|
$ |
74,672,952 |
|
| 7.375% Notes Due 2019
(net of offering costs of: 2018 - $31,173; 2017 - $259,635) |
|
|
6,968,827 |
|
|
|
26,740,365 |
|
| KCAP Funding I, LLC
Revolving Credit Facility (net of offering costs of: 2018 -
$1,246,998) |
|
|
21,701,195 |
|
|
|
— |
|
| Payable for open
trades |
|
|
— |
|
|
|
34,215,195 |
|
| Accounts payable and
accrued expenses |
|
|
2,008,553 |
|
|
|
2,350,803 |
|
| Accrued interest
payable |
|
|
86,133 |
|
|
|
— |
|
| Due to affiliates |
|
|
127 |
|
|
|
25,083 |
|
| Total Liabilities |
|
|
105,830,349 |
|
|
|
138,004,398 |
|
| |
|
|
|
|
|
|
| COMMITMENTS AND
CONTINGENCIES |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| STOCKHOLDERS'
EQUITY |
|
|
|
|
|
|
| Common stock, par value
$0.01 per share, 100,000,000 common shares authorized; 37,544,083
issued, and 37,349,224 outstanding at September 30, 2018, and
37,507,402 issued, and 37,339,224 outstanding at December 31,
2017 |
|
|
373,492 |
|
|
|
373,392 |
|
| Capital in excess of
par value |
|
|
330,404,400 |
|
|
|
329,789,716 |
|
| Excess distribution of
net investment income |
|
|
(13,201,062 |
) |
|
|
(9,987,928 |
) |
| Accumulated net
realized losses |
|
|
(86,338,209 |
) |
|
|
(86,031,799 |
) |
| Net unrealized
depreciation on investments |
|
|
(57,330,116 |
) |
|
|
(52,338,805 |
) |
| |
|
|
|
|
|
|
| Total Stockholders'
Equity |
|
|
173,908,505 |
|
|
|
181,804,576 |
|
| |
|
|
|
|
|
|
| Total Liabilities and
Stockholders' Equity |
|
$ |
279,738,854 |
|
|
$ |
319,808,974 |
|
| |
|
|
|
|
|
|
| NET ASSET VALUE PER
COMMON SHARE |
|
$ |
4.66 |
|
|
$ |
4.87 |
|
| |
|
|
|
|
|
|
| |
| KCAP FINANCIAL, INC. |
| CONSOLIDATED STATEMENTS OF
OPERATIONS |
| (unaudited) |
| |
| |
|
Three Months Ended |
|
Nine Months Ended |
| |
September 30, |
|
September 30, |
| |
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
| |
|
|
|
|
|
|
|
|
|
|
Investment Income: |
|
|
|
|
|
|
|
|
|
|
| |
Interest from
investments in debt securities |
$ |
4,487,575 |
|
|
$ |
2,033,813 |
|
|
$ |
11,796,245 |
|
|
$ |
10,934,928 |
|
| |
Payment-in-kind
investment income |
329,365 |
|
|
|
405,858 |
|
|
|
1,061,419 |
|
|
|
829,773 |
|
| |
Interest from
cash and time deposits |
9,767 |
|
|
|
21,043 |
|
|
|
71,183 |
|
|
|
51,250 |
|
| |
Investment income on
CLO Fund Securities managed by affiliates |
1,179,463 |
|
|
|
2,693,547 |
|
|
|
4,428,032 |
|
|
|
8,378,785 |
|
| |
Investment income on
CLO Fund Securities managed by non-affiliates |
94,992 |
|
|
|
99,578 |
|
|
|
292,694 |
|
|
|
329,108 |
|
| |
Dividends from Asset
Manager Affiliates |
300,000 |
|
|
|
180,000 |
|
|
|
920,000 |
|
|
|
180,000 |
|
| |
Investment income -
Joint Venture |
750,000 |
|
|
|
685,000 |
|
|
|
2,150,000 |
|
|
|
685,000 |
|
| |
Capital structuring
service fees |
7,588 |
|
|
|
134,504 |
|
|
|
114,097 |
|
|
|
298,628 |
|
| |
Total investment
income |
7,158,750 |
|
|
|
6,253,343 |
|
|
|
20,833,670 |
|
|
|
21,687,473 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
| |
Interest and
amortization of debt issuance costs |
1,871,187 |
|
|
|
1,371,953 |
|
|
|
5,582,467 |
|
|
|
5,790,242 |
|
| |
Compensation |
1,004,323 |
|
|
|
1,072,812 |
|
|
|
3,216,710 |
|
|
|
3,473,841 |
|
| |
Professional fees |
867,724 |
|
|
|
802,507 |
|
|
|
2,489,098 |
|
|
|
2,545,195 |
|
| |
Insurance |
79,152 |
|
|
|
80,794 |
|
|
|
236,900 |
|
|
|
256,473 |
|
| |
Administrative and
other |
381,835 |
|
|
|
395,782 |
|
|
|
1,364,302 |
|
|
|
1,265,317 |
|
| |
Total
expenses |
4,204,221 |
|
|
|
3,723,848 |
|
|
|
12,889,477 |
|
|
|
13,331,068 |
|
| Net
Investment Income |
2,954,529 |
|
|
|
2,529,495 |
|
|
|
7,944,193 |
|
|
|
8,356,404 |
|
|
Realized And Unrealized Gains (Losses) On
Investments: |
|
|
|
|
|
|
|
|
|
|
| |
Net realized losses
from investment transactions |
(136,766 |
) |
|
|
(1,906,537 |
) |
|
|
(137,336 |
) |
|
|
(2,871,941 |
) |
| |
Net change in
unrealized (depreciation) appreciation on: |
|
|
|
|
|
|
|
|
|
|
| |
Debt
securities |
(1,232,216 |
) |
|
|
1,759,152 |
|
|
|
(2,357,578 |
) |
|
|
4,172,723 |
|
| |
Equity
securities |
(171,775 |
) |
|
|
(186,368 |
) |
|
|
(335,348 |
) |
|
|
(606,179 |
) |
| |
CLO Fund
Securities managed by affiliates |
682,574 |
|
|
|
(1,590,062 |
) |
|
|
(325,678 |
) |
|
|
(3,695,876 |
) |
| |
CLO Fund
Securities managed by non-affiliates |
5,427 |
|
|
|
(34,655 |
) |
|
|
200,723 |
|
|
|
(328,552 |
) |
| |
Asset Manager
Affiliates investments |
(1,035,000 |
) |
|
|
2,922,000 |
|
|
|
(2,031,000 |
) |
|
|
1,481,000 |
|
| |
Joint Venture
Investment |
282,076 |
|
|
|
(147,751 |
) |
|
|
(142,430 |
) |
|
|
(147,751 |
) |
| |
Total net change
in unrealized appreciation (depreciation) |
(1,468,914 |
) |
|
|
2,722,316 |
|
|
|
(4,991,311 |
) |
|
|
875,365 |
|
| |
Net realized and
unrealized appreciation (depreciation) on investments |
(1,605,680 |
) |
|
|
815,779 |
|
|
|
(5,128,647 |
) |
|
|
(1,996,576 |
) |
| Realized
losses on extinguishments of Debt |
— |
|
|
|
(4,014,723 |
) |
|
|
(169,074 |
) |
|
|
(4,121,998 |
) |
| Net
Increase (Decrease )In Stockholders’ Equity Resulting From
Operations |
$ |
1,348,849 |
|
|
$ |
(669,449 |
) |
|
$ |
2,646,472 |
|
|
$ |
2,237,830 |
|
| |
Net Increase (Decrease)
In Stockholders' Equity Resulting from Operations per Common
Share: |
|
|
|
|
|
|
|
|
|
|
| |
Basic: |
$ |
0.04 |
|
|
$ |
(0.02 |
) |
|
$ |
0.07 |
|
|
$ |
0.06 |
|
| |
Diluted: |
$ |
0.04 |
|
|
$ |
(0.02 |
) |
|
$ |
0.07 |
|
|
$ |
0.06 |
|
| |
Net Investment Income
Per Common Share: |
|
|
|
|
|
|
|
|
|
|
| |
Basic: |
$ |
0.08 |
|
|
$ |
0.07 |
|
|
$ |
0.21 |
|
|
$ |
0.23 |
|
| |
Diluted: |
$ |
0.08 |
|
|
$ |
0.07 |
|
|
$ |
0.21 |
|
|
$ |
0.23 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Weighted Average Shares
of Common Stock Outstanding—Basic |
37,349,904 |
|
|
|
37,196,621 |
|
|
|
37,354,449 |
|
|
|
37,202,011 |
|
| |
Weighted Average Shares
of Common Stock Outstanding—Diluted |
37,349,904 |
|
|
|
37,196,621 |
|
|
|
37,354,449 |
|
|
|
37,202,011 |
|
| |
|
|
|
|
|
KCAP-G
Ted Gilpingilpin@kcapinc.com(212) 455-8300
Source: KCAP Financial, Inc. News Provided by Acquire Media
Kcap Financial, Inc. (NASDAQ:KCAP)
Historical Stock Chart
From Dec 2024 to Jan 2025
Kcap Financial, Inc. (NASDAQ:KCAP)
Historical Stock Chart
From Jan 2024 to Jan 2025
