|Operating Results for the Quarter Ended December 31, 2013:|
|Net investment income per share: $0.06|
|Distributions declared per share: $0.26|
|Earnings per share: $0.42|
|Net asset value per share: $9.54|
|Net investment income: $4.6 million|
|Net realized and unrealized gains: $26.7 million|
|Net increase in net assets from operations: $31.3 million|
|Net investment income per share, as adjusted 1: $0.22|
|Net investment income, as adjusted 1: $16.5 million|
|Earnings per share, as adjusted 1: $0.58|
|Net increase in net assets from operations, as adjusted 1: $43.3 million|
|Operating Results for the Year Ended December 31, 2013:|
|Net investment income per share: $0.64|
|Distributions declared per share: $1.04|
|Earnings per share: $1.25|
|Net investment income: $47.6 million|
|Net realized and unrealized gains: $45.4 million|
|Net increase in net assets from operations: $93.0 million|
|Net investment income per share, as adjusted 1: $0.92|
|Net investment income, as adjusted 1: $67.9 million|
|Earnings per share, as adjusted 1: $1.53|
|Net increase in net assets from operations, as adjusted 1: $113.2 million|
- $40.0 million in the Quality Home Brands Holdings LLC, et. al. (“QHB”) second lien term loan and $20.0 million in the QHB holdco term loan, with $1.8 million in capital structuring fees earned. QHB is a leading designer, manufacturer and supplier of decorative, functional and specialty lighting products and ceiling fans.
- $25.0 million of senior subordinated notes of Automobile Protection Corporation-APCO, a marketer and administrator of vehicle service contracts.
- $21.0 million in a senior secured first lien term loan to Accriva Diagnostics, Inc. with $0.4 million in capital structuring fees earned. Accriva is a medical device manufacturer which sells point-of-care diagnostic devices to hospitals and physician offices.
- $15.8 million of additional subordinated notes to Higginbotham Insurance Holdings, Inc..
|Portfolio and Investment Activity (dollar amounts in millions)|
|Three months ended December 31, 2013||Three months ended December 31, 2012||Year ended December 31, 2013||Year ended December 31, 2012|
|Exits of commitments||123.3||111.3||442.6||314.8|
|Number of portfolio company investments|
|at end of period||51||47|
|Weighted average (“WA”) yield of debt and|
|income producing equity securities, at cost||12.0||%||12.2||%|
|WA yield of senior secured loans, at cost||11.4||%||11.4||%|
|WA yield of other debt securities, at cost||13.0||%||13.5||%|
|Average investment by portfolio company, at amortized cost (excluding those below $5.0 million)||$||26.0||$||26.9|
- Approximately 80 potential transactions were reviewed during the quarter, resulting in investments in nine new portfolio companies. Sales, repayments and other exits during the quarter generated prepayment fees of $1.6 million, bringing our total fees earned in conjunction with exits to $8.1 million for 2013.
- As compared to the prior quarter, the composition of our portfolio invested in senior secured loans decreased 5% to 43% while our unsecured or subordinated debt securities increased 5% to 16%. Our equity investments climbed 1% to 22% at quarter end resulting primarily from continued appreciation in our existing investments. This is a further climb in our non-income producing securities from 13% at last year end, driving the 20 basis point decrease in our total portfolio yield for the year.
- We were positively impacted by the portfolio’s unrealized appreciation of $109.7 million during the current year, helping to drive our net asset value per share up another $0.16 for the quarter to $9.54 per share at December 31, 2013. This was a further increase over our $9.31 net asset value per share at last year end. The $130.5 million of unrealized appreciation in our portfolio at year end marks the highest levels experienced since the Company’s inception.
- For the year, fee income earned due to capital structuring, commitment, administration and amendment fees, as well as prepayment penalties and fees earned in connection with the early repayment of certain investments totaled $15.0 million, or $0.20 per share, as compared to $20.7 million, or $0.28 per share for 2012. Although there were more exits during the current year, fewer of these exits were in their call period and accompanied by prepayment fees. Furthermore, a certain portfolio company exit during 2012 generated a prepayment premium of $6.7 million.
- Incentive management fees for the year were $31.1 million, consisting of $10.9 million of incentive management fees based on income and $20.3 million of incentive management fees based on gains. The income based fees declined from $17.0 million for 2012 primarily due to the composition of non-income producing equity securities in the current portfolio. However, those same non-income producing equity securities had substantial unrealized appreciation this year, driving the large gains based fee for the year. A hypothetical liquidation is performed each quarter end possibly resulting in an additional accrual if there is further unrealized appreciation. The 2012 unrealized appreciation in the portfolio of $20.8 million resulted in a capital gains based fee of $5.5 million, as compared to $20.3 million this year.
- Our leverage stood at 0.67 times at year end providing us with available debt capacity under our asset coverage requirements of $223.6 million and $171.0 million available under our senior secured, revolving credit facility.
- During 2013, our average debt outstanding was $359.5 million at a weighted average cost of debt of 5.5%. We are currently in the process of amending our senior secured revolving credit facility on more favorable terms than our existing facility.
- Our year end stock price of $9.33 per share provides shareholders a current dividend yield of 11.1%.
- We continue to remain focused on our dividend coverage, although challenging in today’s environment. For the year, our net investment income, as adjusted, was $0.92 per share, relative to distributions declared of $1.04 per share, resulting in net investment income dividend coverage of 88%.
- Tax characteristics of all 2013 distributions were reported to stockholders on Form 1099 after the end of the calendar year. Our 2013 distributions of $1.04 per share were comprised of ordinary income of $0.60 and a $0.44 return of capital. A large portion of our return of capital was driven by the $20.3 million incentive management fee based on gains that we are required to accrue under GAAP, although it is not due and payable at this time, if at all. On a pre-incentive fee basis, however, we earned $1.06 per share for 2013. For more information on our GAAP distributions, please refer to the Section 19 Notice that will be posted within the Distribution History section of our website.
- We intend to continue to make timely distributions sufficient to satisfy the annual distribution requirements to maintain our qualification as a RIC. We also intend to make distributions of net realized capital gains, if any, at least annually. We may, at our discretion, carry forward taxable income in excess of calendar year distributions and pay a 4% excise tax on this income. We will accrue excise tax on estimated undistributed taxable income as required. There was no undistributed taxable income carried forward from 2013.