Solar Capital Ltd. (the “Company”) (NASDAQ:SLRC), today
reported earnings of $13.8 million, or $0.31 per share for the
quarter ended March 31, 2014. Net investment income was $17.4
million, or $0.40 per average share, for the first quarter. At
March 31, 2014, net asset value (NAV) per share was $22.43.
On May 5, 2014 the Company’s Board of Directors also declared a
second quarter distribution of $0.40 per share payable
on July 1, 2014 to stockholders of record on June
19, 2014. The specific tax characteristics will be reported to
stockholders on Form 1099 after the end of the calendar year.
HIGHLIGHTS:
At March 31, 2014:
Investment Portfolio: $1.03 billionNumber of
Portfolio Companies: 43Net Assets: $972.3 millionNet Asset Value
per share: $22.43
Portfolio Activity for the Quarter Ended March 31,
2014:
Investments made during the quarter: $144.8
millionInvestments prepaid and sold during the quarter: $208.3
million
Operating Results for the Quarter Ended March 31,
2014:
Net investment income: $17.4 millionNet
realized and unrealized losses: $3.7 millionNet increase in net
assets from operations: $13.8 millionNet investment income per
share: $0.40
“We are pleased with our strong originations this quarter. With
the portfolio composition at its highest level of senior secured
and floating rate investments, we believe Solar Capital is
defensively positioned to preserve shareholder value while
delivering strong risk-adjusted returns,” said Michael Gross,
Chairman and CEO of Solar Capital Ltd. “Our objective is to grow
our investment income per share by prudently deploying our
substantial available capital into new investments that meet our
strict underwriting criteria.”
Conference Call and
Webcast
The company will host an earnings conference call and audio
webcast at 10:00 a.m. (Eastern Time) on Tuesday, May 6, 2014.
All interested parties may participate in the conference call by
dialing (866) 953-6856 approximately 5-10 minutes prior to the
call. International callers should dial (617) 399-3480.
Participants should reference Solar Capital Ltd. and the
participant passcode of 17500624 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 May 20, 2014 and can be
accessed by dialing (888) 286-8010 and using the passcode 27264588.
International callers should dial (617) 801-6888 to listen to the
replay.
Portfolio and Investment
Activity
During the three months ended March 31, 2014, we invested
$144.8 million across ten portfolio companies. Investments
sold and prepaid during the quarter ended March 31, 2014 totaled
$208.3 million.
At March 31, 2014, our portfolio consisted of 43 portfolio
companies and was invested 47.0% in senior secured loans, 29.4% in
Crystal Financial whose portfolio is 100% comprised of senior
secured loans, 17.5% in subordinated debt, 2.2% in preferred equity
and 3.9% in common equity and warrants excluding Crystal Financial,
measured at fair value.
Crystal Financial’s $442.7 million of funded senior secured
loans is across 25 issuers with an average balance outstanding of
$17.0 million. All of the commitments from Crystal Financial are
floating-rate, senior-secured loans. During the quarter ended March
31, 2014, Crystal Financial funded new loans totaling $55.9 million
and had $77.4 million of funded loans repaid.
The fair value weighted average yield on our portfolio of
income-producing investments was 10.9% at March 31, 2014.
At March 31, 2014, 69.8% or $689.9 million of our income
producing investment portfolio* is floating rate and 30.2% or
$297.9 million of our income producing portfolio is fixed rate,
measured at fair value.
From inception in 2006 through March 31, 2014, Solar Capital
Ltd. and its predecessor companies have invested approximately $3.4
billion in 107 portfolio companies. Over the same period, Solar
Capital Ltd. has completed transactions with more than 80 different
financial sponsors.
* We have included Crystal Financial as 100% floating rate.
Results of Operations for the Three
Months Ended March 31, 2014 compared to the Three Months Ended
March 31, 2013.
Investment Income
For the three months ended March 31, 2014 and 2013, gross
investment income totaled $32.6 million and $46.1 million,
respectively. The decrease in gross investment income year over
year was primarily due to a smaller income producing portfolio from
the net effect of portfolio repayments, as well as portfolio yield
compression.
Expenses
Expenses totaled $15.2 million and $20.6 million, respectively,
for the three months ended March 31, 2014 and 2013. The decrease in
expenses year over year was primarily due to a decrease in
management and performance-based incentive fees on lower investment
income and portfolio size, as well as decreases in debt expenses
due to lower average borrowings.
Net Investment Income
The Company’s net investment income totaled $17.4 million and
$25.5 million, or $0.40 and $0.58 per average share, for the three
months ended March 31, 2014 and 2013, respectively.
Net Realized and Unrealized Gain (Loss)
Net realized and unrealized gain (loss) for the three months
ended March 31, 2014 and 2013 totaled ($3.7) million and $10.3
million, respectively.
Net Increase in Net Assets Resulting From Operations
For the three months ended March 31, 2014 and 2013, the Company
had a net increase in net assets resulting from operations of $13.8
million and $35.8 million, respectively. For the same periods,
earnings per average share were $0.31 and $0.81, respectively.
Liquidity and Capital Resources
At March 31, 2014, the Company had $198 million of cash and a
total of $490 million of unused credit capacity, subject to
borrowing base limitations.
During the three months ended March 31, 2014, the Company
repurchased $19.6 million of its common stock at an average price
of approximately $22.00 per share, representing a 1.9% discount to
the NAV per share at March 31, 2014. Including additional share
repurchases of $15.6 million since March 31, 2014, the Company has
repurchased a total of $52.7 million out of $100 million authorized
through May 2, 2014.
Financial Statements and
Tables
SOLAR CAPITAL LTD.
CONSOLIDATED STATEMENTS OF ASSETS AND
LIABILITIES
(in thousands, except share
amounts)
March 31, 2014 (unaudited) December 31, 2013
Assets Investments at fair value: Companies less than 5%
owned (cost: $657,796 and $688,685, respectively) $ 647,894 $
680,720 Companies 5% to 25% owned (cost: $8,023 and $7,789,
respectively) 8,023 7,789 Companies more than 25% owned (cost:
$343,525 and $394,285, respectively) 371,848
399,890 Total investments (cost: $1,009,344 and $1,090,759,
respectively) 1,027,765 1,088,399 Cash and cash equivalents 644,890
585,278 Foreign currency (cost: $3,095 and $1,702, respectively)
3,041 1,701 Interest and dividends receivable 14,284 14,228
Deferred financing costs 3,291 3,300 Derivatives — — Receivable for
investments sold 15,531 14,870 Prepaid expenses and other assets
1,207 666
Total assets $
1,710,009 $ 1,708,442
Liabilities
Revolving credit facilities $ — $ — Unsecured senior notes 100,000
100,000 Senior secured notes 75,000 75,000 Term loan 50,000 50,000
Distributions payable 16,662 17,698 Payable for investments and
cash equivalents purchased 479,633 454,887 Management fee payable
6,210 5,780 Performance-based incentive fee payable 3,213 4,633
Payable for common stock repurchased 2,567 — Administrative
services expense payable 552 2,085 Interest payable 2,586 1,499
Other liabilities and accrued expenses 1,257
1,223
Total liabilities $ 737,680 $ 712,805
Net Assets Common stock, par value
$0.01 per share, 200,000,000 and 200,000,000 common shares
authorized, respectively, and 43,354,383 and 44,244,195 shares
issued and outstanding, respectively $ 434 $ 442 Paid-in capital in
excess of par 1,090,979 1,110,545 Distributions in excess of net
investment income (17,404 ) (17,344 ) Accumulated net realized loss
(119,059 ) (92,706 ) Net unrealized appreciation (depreciation)
17,379 (5,300 )
Total net assets $
972,329 $ 995,637
Net Asset Value Per Share $
22.43 $ 22.50
SOLAR CAPITAL LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except share
amounts)
Three months ended March 31, 2014 March 31,
2013 INVESTMENT INCOME: Interest: Companies less than 5%
owned $ 23,015 $ 28,563 Companies 5% to 25% owned 235 7,060
Companies more than 25% owned 964 2,118 Dividends: Companies more
than 25% owned 8,416 8,356 Total
investment income 32,630 46,097
EXPENSES: Management fees $ 6,210 $ 7,134 Performance-based
incentive fees 3,213 6,380 Interest and other credit facility
expenses 3,592 4,823 Administrative services expense 1,169 727
Other general and administrative expenses 1,022
1,514 Total expenses 15,206
20,578 Net investment income $ 17,424 $ 25,519
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, CASH
EQUIVALENTS, FOREIGN CURRENCIES AND DERIVATIVES: Net realized
gain (loss) on investments and cash equivalents: Companies less
than 5% owned $ 8 $ 228 Companies 5% to 25% owned 928 — Companies
more than 25% owned (25,310 ) 472 Net realized
gain (loss) on investments and cash equivalents (24,374 ) 700 Net
realized loss on foreign currencies and derivatives: (1,979
) (11 ) Net realized gain (loss) (26,353 ) 689
Net change in unrealized gain (loss) on investments and cash
equivalents 20,782 8,568 Net change in unrealized gain (loss) on
foreign currencies and derivatives 1,897 1,030
Net change in unrealized gain 22,679
9,598 Net realized and unrealized gain (loss) on
investments, cash equivalents, foreign currencies and derivatives
(3,674 ) 10,287
NET INCREASE IN NET
ASSETS RESULTING FROM OPERATIONS $ 13,750 $ 35,806
EARNINGS PER SHARE $ 0.31 $ 0.81
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.Investor RelationsRichard Pivirotto,
646-308-8770
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