Solar Capital Ltd. (NASDAQ:SLRC), today reported earnings
of $28.9 million, or $0.65 per share for the quarter ended
December 31, 2013 and $75.3 million, or $1.69 per share,
for the fiscal year ended December 31, 2013. Net investment income
was $18.5 million, or $0.42 per share, for the fourth quarter
and $84.9 million, or $1.91 per share, for the fiscal
year. Net asset value (NAV) per share was $22.50 at December 31,
2013, up from $22.25 at September 30, 2013.
The Company also announced that its Board of Directors has
declared a quarterly dividend of $0.40 per share
for its first fiscal quarter of 2014, which will be payable
on April 1, 2014 to stockholders of record on March
20, 2014. The specific tax characteristics will be reported to
stockholders on Form 1099 after the end of the calendar year.
HIGHLIGHTS:
At December 31, 2013:
Investment Portfolio: $1.1 billionNumber of
Portfolio Companies: 40Net Assets: $1.0 billionNet Asset Value per
share: $22.50
Operating Results for the Quarter Ended December 31,
2013:
Net investment income: $18.5 millionNet
realized and unrealized gains: $10.4 millionNet increase in net
assets from operations: $28.9 millionNet investment income per
share: $0.42
Operating Results for the Fiscal Year Ended December 31,
2013:
Net investment income: $84.9 millionNet
realized and unrealized loss: $9.6 millionNet increase in net
assets from operations: $75.3 millionNet investment income per
share: $1.91
“During 2013, a year of issuer-friendly market conditions, we
focused our origination efforts on finding higher quality
investments, rather than lowering our credit standards to achieve
portfolio growth that we believe wouldn’t deliver long-term
shareholder value. The vast majority of our originations during the
year were in floating rate, senior secured loans, which
meaningfully enhanced the composition of our portfolio,” said
Michael Gross, Chairman & CEO of Solar Capital Ltd. “In the
third quarter, the monetizations of our two largest legacy
investments, DS Waters and MidCap Financial, increased our
diversification, reduced our exposure to fixed-rate and
subordinated debt, and significantly reduced our payment-in-kind
interest income. Additionally, we’ve benefitted from our strategic
ownership of Crystal Financial, whose 100% performing portfolio of
senior secured loans has resulted in an 11.5% cash yield to us,
based on cost, for the full year. For 2014, we are focused on
deploying our available capital primarily into senior secured
loans.”
Conference Call and
Webcast
The company will host an earnings conference call and audio
webcast at 10:00 a.m. (Eastern Time) on Wednesday, February 26,
2014.
All interested parties may participate in the conference call by
dialing (877) 474-9502 approximately 5-10 minutes prior to the
call. International callers should dial (857) 244-7555.
Participants should reference Solar Capital Ltd. and the
participant passcode of 83124313 when prompted. This conference
call also can be accessed by all interested parties through Solar
Capital’s website, www.solarcapltd.com. Additionally, a replay
dial-in will be available until March 12, 2014 and can be
accessed by dialing (888) 286-8010 and using the passcode 98180172.
International callers should dial (617) 801-6888 to listen to the
replay.
Portfolio and Investment
Activity
During the year ended December 31, 2013, we originated
approximately $330 million of investments in 19 portfolio
companies. Including Crystal Capital Financial Holdings LLC
(“Crystal Financial”), our originations totaled $724 million for
2013. Proceeds realized from our two largest legacy investments, DS
Waters and Midcap Financial, totaled $237 million. Additional
investments sold or prepaid during the fiscal year ended
December 31, 2013 totaled $421 million. Including Crystal
Financial, investments sold or repaid during 2013 totaled
approximately $925 million.
At December 31, 2013, our investment portfolio consisted of 40
portfolio companies and was invested 40.8% in senior secured loans,
28.0% in Crystal Financial, 23.4% in subordinated debt, 2.4% in
preferred equity, and 5.4% in common equity and warrants excluding
Crystal Financial, measured at fair value. Crystal Financial had 27
funded senior secured commitments to 23 different borrowers with a
total par value of $465.5 million and an average exposure per
issuer of $20.2 million.
The weighted average yield on our portfolio of income-producing
investments, at fair value, was 11.3% at December 31, 2013.
At December 31, 2013, 64.5% or $663.8 million of our
income-producing investment portfolio* is floating rate and 35.5%
or $366.0 million is fixed rate, measured at fair value.
As of December 31, 2013, we had no investments on non-accrual
status.
Solar Capital Ltd. and its predecessor companies have invested
approximately $3.3 billion in 99 portfolio companies. Over the same
period, Solar Capital Ltd. has completed transactions with more
than 75 different financial sponsors.
* We have included Crystal Financial as 100% floating rate.
Results of Operations for the Twelve
Months Ended December 31, 2013 compared to the Twelve Months Ended
December 31, 2012
Investment Income
For the fiscal years ended December 31, 2013 and 2012, gross
investment income totaled $163.6 million and $153.3 million,
respectively. The increase in gross investment income for the
fiscal year was primarily due to an increase in income from our
investment in Crystal Financial, offset by modest portfolio yield
compression and the net effect of portfolio repayments.
Expenses
Net expenses totaled $78.7 million and $71.3 million,
respectively, for the fiscal years ended December 31, 2013 and
2012. The increase in expenses from 2012 to 2013 was primarily due
to an increase in management and performance-based incentive fees
on higher investment income year over year and a larger portfolio
size, increases in credit expenses due to our Unsecured Notes
outstanding for the full fiscal year, and expenses associated with
the retirement of a $100 million revolving credit facility and the
amendment of our Credit Facility, which lowered our interest rate
and extended the maturity by two years to 2018.
Net Investment Income
The Company’s net investment income totaled $84.9 million and
$81.9 million, or $1.91 and $2.20 on a per average share basis,
respectively, for the fiscal years ended December 31, 2013 and
2012.
Net Realized and Unrealized Loss / Gain
Net realized and unrealized losses for the fiscal year ended
December 31, 2013 totaled $9.6 million. Net realized and
unrealized gains for the fiscal year ended December 31, 2012
totaled $33.8 million.
Net Increase in Net Assets Resulting From Operations
For the fiscal years ended December 31, 2013 and 2012, the
Company had a net increase in net assets resulting from operations
of $75.3 million and $115.8 million, respectively. For the years
ended December 31, 2013 and 2012, earnings per average share were
$1.69 and $3.11, respectively.
Liquidity and Capital Resources
As of December 31, 2013, we had $137.0 million of cash and a
total of $490.0 million of unused borrowing capacity under our
Credit Facility, subject to borrowing base limits.
On July 31, 2013, the Company’s board of directors authorized a
$100.0 million common stock repurchase program. During the year
ended December 31, 2013, the Company repurchased 796,418 shares at
an average price of approximately $21.98 per share, inclusive of
commissions. This represents a discount of approximately 2.3% of
the net asset value per share at December 31, 2013. The total
dollar amount of shares repurchased in this period is $17.5
million. Subsequent to 2013 year end, the Company has repurchased
an additional $6.5 million shares, leaving $76.0 million of
remaining capacity.
Financial Statements
and Tables
SOLAR CAPITAL LTD.CONSOLIDATED
STATEMENTS OF ASSETS AND LIABILITIES(in thousands, except
share amounts)
December 31, 2013
December 31, 2012 Assets Investments at fair value:
Companies less than 5% owned (cost: $688,685 and $856,134,
respectively) $ 680,720 $ 831,306 Companies 5% to 25% owned (cost:
$7,789 and $167,564, respectively) 7,789 165,406 Companies more
than 25% owned (cost: $394,285 and $408,373, respectively)
399,890 398,810 Total investments (cost:
$1,090,759 and $1,432,071, respectively) 1,088,399 1,395,522 Cash
and cash equivalents 585,278 14,133 Foreign currency (cost: $1,702
and $899, respectively) 1,701 906 Interest and dividends receivable
14,228 15,147 Deferred financing costs 3,300 4,228 Derivatives — 17
Receivable for investments sold 14,870 — Prepaid expenses and other
assets 666 450
Total
assets $ 1,708,442 $ 1,430,403
Liabilities Revolving credit facilities $ — $ 264,452
Unsecured senior notes 100,000 100,000 Senior secured notes 75,000
75,000 Term loan 50,000 50,000 Dividends payable 17,698 23,217
Payable for investments and cash equivalents purchased 454,887
21,756 Management fee payable 5,780 6,612 Performance-based
incentive fee payable 4,633 6,050 Administrative services expense
payable 2,085 1,058 Interest payable 1,499 2,406 Other liabilities
and accrued expenses 1,223 1,579
Total liabilities $ 712,805 $ 552,130
Net Assets
Common stock, par value $0.01 per share,
200,000,000 and 200,000,000 common shares
authorized, respectively, and 44,244,195
and 38,694,060 shares issued and outstanding, respectively
$
442 $ 387 Paid-in capital in excess of par 1,110,545 978,279
Distributions in excess of net investment income (17,344 ) (4,662 )
Accumulated net realized loss (92,706 ) (55,631 ) Net unrealized
depreciation (5,300 ) (40,100 )
Total net
assets $ 995,637 $ 878,273
Net Asset
Value Per Share $ 22.50 $ 22.70
SOLAR CAPITAL LTD.CONSOLIDATED
STATEMENTS OF OPERATIONS(in thousands, except share
amounts)
Year endedDecember 31,
2013
Year endedDecember 31,
2012
INVESTMENT INCOME: Interest and dividends: Companies less
than 5% owned $ 106,523 $ 126,903 Companies 5% to 25% owned 11,898
20,176 Companies more than 25% owned 45,172
6,174 Total investment income 163,593
153,253
EXPENSES: Management fees
26,794 23,647 Performance-based incentive fees 21,234 20,481
Interest and other credit facility expenses 20,051 19,080
Administrative services expense 4,741 3,294 Other general and
administrative expenses 5,428 4,535
Total operating expenses 78,248 71,037
Net investment income before income tax expense
85,345 82,216 Income tax expense 410 289
Net investment income $ 84,935 $ 81,927
REALIZED AND UNREALIZED GAIN (LOSS)
ON
INVESTMENTS, FOREIGN CURRENCIES AND
DERIVATIVES:
Net realized gain (loss) on investments: Companies less than 5%
owned $ (31,679 ) $ (36,864 ) Companies 5% to 25% owned (14,273 ) —
Companies more than 25% owned 472 11,299
Net realized gain (loss) on investments (45,480 )
(25,565 ) Net realized gain (loss) on foreign currencies and
derivatives: 1,055 (6,972 ) Total net
realized loss before income taxes (44,425 ) (32,537 ) Income tax
expense — — Net realized loss
(44,425 ) (32,537 ) Net change in unrealized
gain (loss) on investments 34,189 70,981 Net change in unrealized
gain (loss) on foreign currencies andderivatives 611
(4,610 ) Net change in unrealized gain (loss)
34,800 66,371
Net realized and unrealized gain (loss)
on
investments, foreign currencies
andderivatives
(9,625 ) 33,834
NET INCREASE IN NET ASSETS RESULTING
FROM
OPERATIONS
$ 75,310 $ 115,761
EARNINGS PER SHARE $
1.69 $ 3.11
About Solar Capital Ltd.
Solar Capital Ltd. is a closed-end investment company that has
elected to be treated as a business development company under the
Investment Company Act of 1940. The Company invests primarily in
leveraged, middle market companies in the form of senior secured
loans, mezzanine loans, and equity securities.
Forward-Looking
Statements
Statements included herein may constitute “forward-looking
statements,” which relate to future events or our future
performance or financial condition. These statements are not
guarantees of future performance, conditions or results and involve
a number of risks and uncertainties. Actual results may differ
materially from those in the forward-looking statements as a result
of a number of factors, including those described from time to time
in our filings with the Securities and Exchange Commission. Solar
Capital Ltd. undertakes no duty to update any forward-looking
statements made herein.
Solar Capital Ltd.Richard Pivirotto, 212-994-8543
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