Stellus Capital Investment Corporation Reports Results for its third fiscal quarter ended September 30, 2018

HIGHLIGHTS 

($ in millions, except data relating to per share amounts and number of portfolio companies)

As of

Portfolio results

Total assets

$511.4

Investment portfolio, at fair value

$478.0

Net assets

$227.9

Weighted average yield on debt investments

Net asset value per share

$14.29

Quarter

Quarter

ended

ended

September 30,
2018

September 30,
2017

Portfolio activity

Total investments made, at par

$31.9

$71.4

Number of new investments

3

4

Repayments and sale of investments, including amortization

$57.0

$53.4

Number of portfolio companies at

end of period

53

46

Operating results

Total investment income

$14.5

$10.0

Net investment income

$5.6

$4.5

Net investment income per share

$0.35

$0.29

Core net investment income⁽¹⁾

$6.3

$4.5

Core net investment income per share⁽¹⁾

$0.39

$0.29

Realized Gains per share

$0.17

$0.33

Distributions per share

$0.34

$0.34

Net increase in net assets from operations

$8.9

$5.6

Net increase in net assets from operations per share

$0.56

$0.36

Weighted average shares outstanding during the period

15,953,810

15,668,415

(1)

Core net investment income, as presented, excludes the impact of capital gains incentive fees.  The company believes presenting core net investment income and the related per share amount is a useful supplemental disclosure for analyzing its financial performance.  However, core net investment income is a non-U.S GAAP measure and should not be considered as a replacement for net investment income and other earnings measures presented in accordance with U.S GAAP.  A reconciliation of net investment income in accordance with U.S GAAP to core net investment income is presented in the table below the financial statements.

PART I — FINANCIAL INFORMATION

STELLUS CAPITAL INVESTMENT CORPORATION

 CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

September 30,

2018

December 31,

(Unaudited)

ASSETS

Non-controlled, affiliated investments, at fair value

(amortized cost of $52,184 and $1,052,185, respectively)

$

55,000

$

990,000

Non-controlled, non-affiliated investments, at fair value

(amortized cost of $470,695,036 and $367,401,021,

respectively)

477,949,195

370,849,772

Cash and cash equivalents

29,882,423

25,110,718

Receivable for sales and repayments of investments

81,683

26,891

Interest receivable

3,110,008

2,922,204

Other receivables

135,246

—

Deferred offering costs

17,898

—

Prepaid expenses

125,970

361,270

Total Assets

$

511,357,423

$

400,260,855

LIABILITIES

Notes payable

$

47,558,013

$

47,306,488

Credit facility payable

81,901,962

39,332,479

SBA-guaranteed debentures

146,235,472

87,818,813

Dividends payable

1,807,570

1,806,671

Management fees payable

1,422,948

1,621,592

Income incentive fees payable

1,795,933

371,647

Capital gains incentive fees payable

1,173,250

—

Interest payable

679,293

1,021,173

Unearned revenue

304,061

139,304

Administrative services payable

385,417

327,033

Deferred tax liability

34,353

—

Other accrued expenses and liabilities

154,067

268,413

Total Liabilities

$

283,452,339

$

180,013,613

Commitments and contingencies (Note 7)

Net Assets

$

227,905,084

$

220,247,242

NET ASSETS

Common Stock, par value $0.001 per share (200,000,000 shares

and 100,000,000 shares authorized; 15,953,810 and 15,945,879

 issued and outstanding, respectively)

$

15,954

$

15,946

Paid-in capital

228,160,772

228,066,762

Accumulated net realized loss from investments, net of

cumulative dividends of $4,246,819 for both periods

(5,603,190)

(10,786,240)

Distributions in excess of net investment income

(1,891,073)

(435,794)

Net Unrealized appreciation on non-controlled, non-affiliated 

investments and cash equivalents, net of provision for

taxes of  $34,353 and $0, respectively

7,219,806

3,448,753

Net Unrealized appreciation (depreciation) on non-controlled,

affiliated investments

2,815

Net Assets

$

227,905,084

$

220,247,242

Total Liabilities and Net Assets

$

511,357,423

$

400,260,855

Net Asset Value Per Share

$

14.29

$

13.81

STELLUS CAPITAL INVESTMENT CORPORATION

 CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

For the

For the

For the

For the

three

three

nine

nine

months ended

months ended

months ended

months ended

September 30,

September 30,

September 30,

September 30,

2018

2017

2018

2017

INVESTMENT INCOME

Interest income

$

13,859,431

$

9,728,749

$

36,804,945

$

28,847,532

Other income

628,192

249,596

1,214,116

1,389,158

Total Investment Income

$

14,487,623

$

9,978,345

$

38,019,061

$

30,236,690

OPERATING EXPENSES

Management fees

$

2,172,948

$

1,546,781

$

5,970,867

$

4,634,318

Valuation fees

132,325

137,445

287,042

326,839

Administrative services expenses

348,901

313,256

1,008,293

933,214

Income incentive fees

1,565,301

462,743

3,846,441

2,718,586

Capital gains incentive fees

651,231

—

1,173,250

—

Professional fees

289,125

356,654

982,384

803,818

Directors' fees

73,000

83,000

244,000

254,000

Insurance expense

87,601

111,680

259,947

331,398

Interest expense and other fees

3,440,115

2,042,608

8,917,739

5,892,047

Other general and administrative expenses

117,102

145,494

516,509

481,700

Total Operating Expenses

$

8,877,649

$

5,199,661

$

23,206,472

$

16,375,920

Loss on extinguishment of debt

—

302,732

—

302,732

Net Investment Income

$

5,609,974

$

4,475,952

$

14,812,589

$

13,558,038

Net Realized Gain on Non-Controlled, Non-Affiliated

Investments and Cash Equivalents

$

2,771,817

$

5,211,960

$

5,183,050

$

4,499,963

Net Change in Unrealized Appreciation (Depreciation) on Non-

Controlled, Non-Affiliated Investments and Cash Equivalents

$

529,552

$

(4,011,314)

$

3,805,406

$

(248,293)

Net Change in Unrealized Appreciation (Depreciation) on Non-

Controlled, Affiliated Investments and Cash Equivalents

(1,667)

(40,000)

65,000

(112,185)

Benefit (provision) for Taxes on Net Unrealized Gain (Loss) on Investments

$

(25,159)

$

-

$

(34,353)

$

8,593

Net Increase in Net Assets Resulting from Operations

$

8,884,517

$

5,636,598

$

23,831,692

$

17,706,116

Net Investment Income Per Share

$

0.35

$

0.29

$

0.93

$

0.93

Net Increase in Net Assets Resulting from Operations Per Share

$

0.56

$

0.36

$

1.49

$

1.22

Weighted Average Shares of Common Stock Outstanding

15,953,810

15,668,415

15,953,491

14,510,408

Distributions Per Share

$

0.34

$

0.34

$

1.02

$

1.02

STELLUS CAPITAL INVESTMENT CORPORATION

 CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (unaudited)

For the

For the

nine

nine

months ended

months ended

September 30,

September 30,

2018

2017

Increase in Net Assets Resulting from Operations

Net investment income

$

14,812,589

$

13,558,038

Net realized gain on investments and cash equivalents

5,183,050

4,499,963

Net change in unrealized appreciation (depreciation) on non-controlled,

non-affiliated investments and cash equivalents

3,805,406

(248,293)

Net change in unrealized appreciation (depreciation) on non-controlled,

affiliated investments and cash equivalents

65,000

(112,185)

Benefit (provision) for taxes on unrealized appreciation on investments

(34,353)

8,593

Net Increase in Net Assets Resulting from Operations

$

23,831,692

$

17,706,116

Stockholder distributions

Net investment income

(16,267,868)

(14,903,394)

Total Distributions

$

(16,267,868)

$

(14,903,394)

Capital share transactions

Issuance of common stock

$

94,788

$

47,491,626

Sales load

—

(1,340,131)

Offering costs

—

(299,960)

Partial Share Redemption

(770)

—

Net increase in net assets resulting from capital share transactions

$

94,018

$

45,851,535

Total increase in net assets

$

7,657,842

$

48,654,257

Net assets at beginning of period

$

220,247,242

$

170,881,785

Net assets at end of period (includes $1,891,073 and $1,781,150 of

distributions in excess of net investment income, respectively)

$

227,905,084

$

219,536,042

STELLUS CAPITAL INVESTMENT CORPORATION

 CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

For the

For the

nine

nine

months ended

months ended

September 30,

September 30,

2018

2017

(Unaudited)

(Unaudited)

Cash flows from operating activities

Net Increase in net assets resulting from operations

$

23,831,692

17,706,116

Adjustments to reconcile net increase in net assets resulting from

operations to net cash provided by (used in) operating activities:

Purchases of investments

(198,335,218)

(117,683,094)

Proceeds from sales and repayments of investments

102,813,575

133,380,057

Net change in unrealized depreciation (appreciation) on investments

(3,870,406)

360,478

Increase in investments due to PIK

(491,628)

(347,482)

Amortization of premium and accretion of discount, net

(1,152,487)

(881,710)

Deferred tax provision (benefit)

34,353

(8,593)

Amortization of loan structure fees

329,483

372,820

Amortization of deferred financing costs

251,525

165,763

Amortization of loan fees on SBA-guaranteed debentures

471,658

243,306

Net realized gain on investments

(5,183,050)

(4,499,963)

Loss on extinguishment of debt

—

302,732

Changes in other assets and liabilities

Decrease (increase) in interest receivable

(187,804)

457,744

Increase in other receivable

(135,246)

(3,058)

Decrease in prepaid expenses

235,300

318,054

Decrease in management fees payable

(198,644)

(61,514)

Increase (decrease) in incentive fees payable

1,424,286

(733,654)

Increase in capital gains incentive fees payable

1,173,250

—

Increase in directors' fees payable

—

83,000

Increase in administrative services payable

58,384

41,084

Decrease in interest payable

(341,880)

(278,895)

Increase in unearned revenue

164,757

108,139

Decrease in other accrued expenses and liabilities

(114,346)

(37,706)

Net cash provided by (used in) operating activities

$

(79,222,446)

$

29,003,624

Cash flows from financing activities

Proceeds from the issuance of common stock

$

—

$

47,491,626

Sales load for common stock issued

—

(1,340,131)

Offering costs paid for common stock issued

(17,898)

(299,961)

Proceeds from notes issued

—

48,875,000

Financing costs paid for Notes issued

—

(1,688,961)

Repayments on Notes issued

—

(25,000,000)

Stockholder distributions paid

(16,172,181)

(14,521,068)

Proceeds from SBA Debentures

60,000,000

—

Financing costs paid on SBA Debentures

(2,055,000)

—

Borrowings under Credit Facility

188,300,000

116,000,000

Repayments of Credit Facility

(145,750,000)

(196,000,000)

Financing costs paid on Credit facility

(310,000)

(47,453)

Partial Share Redemption

(770)

—

Net cash provided by (used in) financing activities

$

83,994,151

$

(26,530,948)

Net increase in cash and cash equivalents

$

4,771,705

$

2,472,676

Cash and cash equivalents balance at beginning of period

25,110,718

9,194,129

Cash and cash equivalents balance at end of period

$

29,882,423

$

11,666,805

Supplemental and non-cash financing activities

Interest expense paid

$

8,201,952

$

5,384,053

Excise tax paid

27,717

37,648

Shares issued pursuant to Dividend Reinvestment Plan

94,788

—

Conversion from debt to equity

—

864,101

Increase in Distribution Payable

899

382,326

Reconciliation of Core Net Investment Income

(Unaudited)

Quarter

Quarter

ended

ended

September 30,
2018

September 30,
2017

Net investment income

$5,609,974

$4,475,952

Capital gains incentive fee

$651,231

$-

Core net investment income⁽¹⁾

$6,261,205

$4,475,952

Per share amounts:

Net investment income per share

$0.35

$0.29

Core net investment income per share⁽¹⁾

$0.39

$0.29