Triangle Capital's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Triangle Capital Corporation (TCAP)

Q2 2012 Earnings Call

August 2, 2012 9:00 AM ET

Executives

Garland Tucker – Chairman, President and CEO

Sheri Colquitt – VP, IR

Steven Lily – CFO and Secretary, Treasurer

Analysts

Robert Dodd – Raymond James

Mickey Schleien – Ladenburg Thalmann & Co.

John Heck – Stevens

Greg Mason – Stifel Nicolaus

Vernon Plack – BB&T Capital Markets

John Ellis – Private Investor

Bob Martin – Individual Investor

Presentation

Operator

At this time, I would like to welcome everyone to the Triangle Capital Corporation’s conference call for the quarter ended June 30th, 2012. All participants are in a listen-only mode.

A question-and-answer session will follow the company’s formal remarks. Today’s call is being recorded and the replay will be available approximately two hours after the conclusion of the call on the company’s website at www.tcap.com under the Investor Relations section.

The hosts for today’s call are Triangle Capital Corporation’s President and Chief Executive Officer, Garland Tucker and Chief Financial Officer, Steven Lily.

I would not like to turn the call over to Mr. Garland Tucker.

Garland Tucker

Good morning, everyone and thank you for joining us for joining us for our second quarter 2012 earnings call. Before we begin, I would like to ask Sheri Colquitt, our Vice President of Investor Relations to provide the necessary safe harbor disclosures. Sheri?

Sheri Colquitt

Thank you, Garland. Good morning. Triangle Capital Corporation issues a press release yesterday afternoon with details of the company’s quarterly financial and operating results. A copy of the press release is available on our website.

Please note that this call contains forward-looking statements that provide other than historical information including statements regarding our goals, [inaudible], strategies, future operating results and cash flows.

Although we believe these statements are reasonable, actual results could different materially from those projected in forward-looking statements. These statements are based on various underlying assumptions and are subject to numerous uncertainties and risks including those disclosed under our section titled, "Risk Factors and Forward-Looking Statements" and our annual report on Form 10K for the fiscal year ended December 31, 2011 and quarterly report on Form 10Q for the quarter ended June 30, 2012. These are filed with the Securities and Exchange Commission.

TCAP undertakes no obligation to update or revise any forward-looking statements. And now, I’ll turn the call back over to Garland.

Garland Tucker

Okay, thank you, Sheri. And again welcome to everyone for today’s call. We are very pleased once again to have strong quarterly results to discuss with you. Before we get into the substance of today’s calls, I’d like to note that Brent Burgess, our Chief Investment Officer is unable to be with us as he’s traveling.

Aside from Brent’s absence, we will follow our customary format which is for me to discuss some highlights for the quarter and then for Steven to provide more detailed information about our financial results and liquidity, our capital market’s activity and our investment activity during the quarter.

At the conclusion of these prepared remarks, Steven and I will be happy to answer any questions that you may have.

First, most of you probably saw that we increased our quarterly dividend to $0.50 in June which was a year-over-year increase of $0.06 per share or 13.6% over the second quarter of 2011.

Obviously, we were very pleased with such a meaningful dividend increase and we’re equally pleased that our net investment income of $0.52 per share was once again comfortably in excess of our dividend.

As you know, one of our fundamental operating strategies is to earn the dividend. And by that we mean our net investment income needs to exceed our dividend on a long-term basis.

As of June 30, 2012, our accumulative dividends paid on a per share basis since our IPO totaled $8.48 and our accumulative net investment income per share for the same period totaled $8.77. These results indicate continuing success in achieving this important dividend coverage ratio.

Another very significant operating metric is our efficiency ratio which we calculate as SG&A expenses as a percentage of total investment income. For the quarter ended June 30, 2012, our efficiency ratio was 17.2%. TCAP continues to have one of the very best efficiency ratios in the BDC industry. As internally managed BDC, we have demonstrated that as our company grows, a greater percentage of each incremental dollar of revenue can fall to the bottom line as dividends.

In addition, our low efficiency ratio demonstrates our commitment to operating in the most cost effective manner possible. From a macro basis, we believe the BDC business model is continuing to earn a reputation as a yield oriented, investor friendly vehicle which can provide investors with the certainty of current income and the potential for long-term capital depreciation.

Like other yield driven industries which developed over multiple market cycles, most notably [inaudible] and MLPs, we believe that well-managed BDCs can provide investors an excellent return over a long period of time.

Turning briefly to our operating highlights from an investment perspective, the second quarter was very active for us. We closed seven-year portfolio company investments totaling $112.5 million and we have announced five-year investments subsequent to quarter ending totaling $42 million.

Our portfolio continues to perform well with an average debt yield of 15% and with $3.6 million in realized long-term gains during the quarter bringing our total net long-term gains since IPO to $10.4 million.

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