FS KKR CAPITAL CORP. PHILADELPHIA, Aug. 9, 2017 /PRNewswire/ -- FS Investment Corporation (NYSE: FSIC), a publicly traded business development company focused on providing customized credit solutions to private middle market U.S. companies, announced its operating results for the quarter ended June 30, 2017, that its board of directors has declared its third quarter 2017 regular distribution and that its investment adviser has agreed to a one-year waiver of a portion of the base management fee payable by FSIC commencing on October 1, 2017.
Financial Highlights for the Quarter Ended June 30, 2017(1)
-- Net investment income of $0.19 per share, compared to $0.23 per share
for the quarter ended June 30, 2016
-- Adjusted net investment income of $0.19 per share, compared to $0.24 per
share for the quarter ended June 30, 2016(2)
-- Total net realized loss of $0.06 per share and total net change in
unrealized depreciation of $0.05 per share, compared to a total net
realized loss of $0.03 per share and a total net change in unrealized
appreciation of $0.37 per share for the quarter ended June 30, 2016
-- Paid cash distributions to stockholders totaling $0.22275 per share(3)
-- Total purchases of $298.7 million versus $310.6 million of sales and
repayments
-- Net asset value of $9.30 per share, compared to $9.45 per share as of
March 31, 2017
"FSIC's recent performance is not reflective of our high standards," said Michael C. Forman, Chairman and Chief Executive Officer of FSIC. "As we work to improve performance for our investors amid a persistent issuer-friendly environment, we're committed to taking actions that we believe will position FSIC for future success."
Declaration of Regular Distribution for Third Quarter 2017
FSIC's board of directors has declared a regular cash distribution for the third quarter of $0.22275 per share, which will be paid on or about October 3, 2017 to stockholders of record as of the close of business on September 20, 2017. Subject to market conditions, FSIC's board of directors also currently intends to reduce the regular cash distribution for the fourth quarter and subsequent quarters to $0.19 per share and to make a special distribution in the fourth quarter of 2018 that equates to the cumulative amount, if any, of net investment income earned during the twelve months following October 1, 2017 that is in excess of $0.76 per share.
Base Management Fee Waiver
FB Income Advisor, LLC, the investment adviser to FSIC ("FB Advisor"), has agreed, effective October 1, 2017 and through September 30, 2018, to waive a portion of the base management fee to which it is entitled under the amended and restated investment advisory agreement between FB Advisor and FSIC, dated as of July 17, 2014, so that the fee received equals 1.50% of the average value of FSIC's gross assets.
Summary Consolidated Results
Three Months Ended
(dollars in thousands, except per share data) June 30, 2017 March 31, 2017 June 30, 2016
(all per share amounts are basic and diluted)(1)
-----------------------------------------------
Total investment income $98,695 $106,064 $110,211
----------------------- ------- -------- --------
Net investment income 46,460 52,590 56,840
--------------------- ------ ------ ------
Net increase (decrease) in net assets resulting from operations 18,442 63,393 140,157
--------------------------------------------------------------- ------ ------ -------
Net investment income per share $0.19 $0.22 $0.23
------------------------------- ----- ----- -----
Adjusted net investment income per share(2) $0.19 $0.22 $0.24
------------------------------------------ ----- ----- -----
Total net realized and unrealized gain (loss) per share $(0.11) $0.04 $0.34
------------------------------------------------------- ------ ----- -----
Net increase (decrease) in net assets resulting from operations (Earnings per Share) $0.08 $0.26 $0.58
----------------------------------------------------------------------------------- ----- ----- -----
Stockholder distributions per share(3) $0.22275 $0.22275 $0.22275
------------------------------------- -------- -------- --------
Net asset value per share at period end $9.30 $9.45 $9.18
--------------------------------------- ----- ----- -----
Weighted average shares outstanding 245,107,405 244,554,969 243,435,681
----------------------------------- ----------- ----------- -----------
Shares outstanding, end of period 245,153,010 244,599,661 243,488,590
--------------------------------- ----------- ----------- -----------
(dollar amounts in thousands) As of As of
June 30, 2017 December 31, 2016
--- ------------- -----------------
Total fair value of investments $3,899,777 $3,726,816
------------------------------- ---------- ----------
Total assets 4,110,120 4,110,071
------------ --------- ---------
Total stockholders' equity 2,280,704 2,297,377
-------------------------- --------- ---------
Portfolio Highlights as of June 30, 2017
-- Total fair value of investments was $3.9 billion.
-- Core investment strategies(4) represented 98% of the portfolio by fair
value as of June 30, 2017, including 88% from direct originations and
10% from opportunistic investments. Broadly syndicated/other investments
represented the remaining 2% of the portfolio by fair value.
-- Gross portfolio yield prior to leverage (based on amortized cost and
excluding non-income producing assets)(5) was 10.4%, compared to 10.2%
as of March 31, 2017.
-- Total commitments to direct originations (including unfunded
commitments) made during the second quarter of 2017 was $197.1 million
in 13 companies, 10 of which were existing portfolio companies.
-- Approximately 0.0% of investments were on non-accrual based on fair
value.(6)
Total Portfolio Activity
Three Months Ended
------------------
(dollar amounts in thousands) June 30, 2017 March 31, 2017 June 30, 2016
---------------------------- ------------- -------------- -------------
Purchases $298,682 $539,689 $389,802
--------- -------- -------- --------
Sales and redemptions (310,569) (364,308) (413,039)
--------------------- -------- -------- --------
Net portfolio activity $(11,887) $175,381 $(23,237)
---------------------- -------- -------- --------
Portfolio Data As of June 30, 2017 As of December, 2016
-------------- ------------------- --------------------
Total fair value of investments $3,899,777 $3,726,816
------------------------------- ---------- ----------
Number of Portfolio Companies 107 102
----------------------------- --- ---
Average Annual EBITDA of Portfolio Companies $88,600 $100,000
-------------------------------------------- ------- --------
Weighted Average Purchase Price of Debt Investments 97.2% 98.6%
(as a % of par)
--------------
% of Investments on Non-Accrual 0.0% 0.2%
(based on fair value)6
----------------------
Asset Class (based on fair value)
Senior Secured Loans - First Lien 60% 52%
--------------------------------- --- ---
Senior Secured Loans - Second Lien 7% 16%
---------------------------------- --- ---
Senior Secured Bonds 4% 4%
-------------------- --- ---
Subordinated Debt 15% 12%
----------------- --- ---
Collateralized Securities 1% 2%
------------------------- --- ---
Equity/Other 13% 14%
------------ --- ---
Portfolio Composition by Strategy (based on fair value)4
Direct Originations 88% 88%
------------------- --- ---
Opportunistic 10% 9%
------------- --- ---
Broadly Syndicated/Other 2% 3%
------------------------ --- ---
Interest Rate Type (based on fair value)
% Variable Rate 66.5% 67.0%
--------------- ---- ----
% Fixed Rate 20.6% 19.4%
------------ ---- ----
% Income Producing Equity/Other Investments 2.5% 2.7%
------------------------------------------- --- ---
% Non-Income Producing Equity/Other Investments 10.4% 10.9%
----------------------------------------------- ---- ----
Yields (based on amortized cost)5
Gross Portfolio Yield Prior to Leverage 9.4% 9.1%
--------------------------------------- --- ---
Gross Portfolio Yield Prior to Leverage - Excluding Non-Income Producing Assets 10.4% 10.1%
------------------------------------------------------------------------------- ---- ----
Direct Origination Activity
Three Months Ended
------------------
(dollar amounts in thousands) June 30, 2017 March 31, 2017 June 30, 2016
---------------------------- ------------- -------------- -------------
$197,084 $429,407 $398,896
Total Commitments
(including unfunded commitments)
-------------------------------
Exited Investments (including partial paydowns) (218,280) (322,068) (386,600)
---------------------------------------------- -------- -------- --------
Net Direct Originations $(21,196) $107,339 $12,296
----------------------- -------- -------- -------
As of June 30, 2017 As of December 31, 2016
Direct Originations Portfolio Data
----------------------------------
Total Fair Value of Direct Originations $3,443,288 $3,264,395
--------------------------------------- ---------- ----------
Number of Portfolio Companies 74 67
----------------------------- --- ---
Average Annual EBITDA of Portfolio Companies $68,800 $64,600
-------------------------------------------- ------- -------
Average Leverage Through Tranche of Portfolio Companies - 4.7x 4.8x
Excluding Equity/Other and Collateralized Securities
----------------------------------------------------
% of Investments on Non-Accrual (based on fair value)6 - 0.1%
------------------------------------------------------ --- ---
Three Months Ended
------------------
New Direct Originations by Asset Class (including unfunded commitments) June 30, 2017 March 31, 2017 June 30, 2016
---------------------------------------------------------------------- ------------- -------------- -------------
Senior Secured Loans - First Lien 97% 81% 76%
--------------------------------- --- --- ---
Senior Secured Loans - Second Lien - 1% 6%
---------------------------------- --- --- ---
Senior Secured Bonds 1% 2% 2%
-------------------- --- --- ---
Subordinated Debt - 15% 3%
----------------- --- --- ---
Collateralized Securities - - -
------------------------- --- --- ---
Equity/Other 2% 1% 13%
------------ --- --- ---
$15,160 $35,784 $49,862
Average New Direct Origination Commitment Amount
------------------------------------------------
Weighted Average Maturity for New Direct Originations 12/17/2022 3/2/2023 7/21/2020
----------------------------------------------------- ---------- -------- ---------
Gross Portfolio Yield Prior to Leverage (based on amortized cost) of New Direct Originations Funded during Period5 9.6% 9.8% 9.1%
------------------------------------------------------------------------------------------------------------------ --- --- ---
Gross Portfolio Yield Prior to Leverage (based on amortized cost) of New Direct Originations Funded during Period - 9.7% 10.0% 10.8%
Excluding Non-Income Producing Assets5
--------------------------------------
Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Direct Originations Exited during Period5 9.9% 9.1% 10.3%
-------------------------------------------------------------------------------------------------------------- --- --- ----
Leverage and Liquidity as of June 30, 2017
-- Debt to equity ratio of 75%, based on $1.72 billion in total debt
outstanding and stockholders' equity of $2.28 billion. FSIC's weighted
average effective interest rate (including the effect of non-usage fees)
was 4.18%
-- Cash and foreign currency of approximately $142.7 million and
availability under its financing arrangements of $267.6 million, subject
to borrowing base and other limitations
-- Twenty unfunded debt investments with aggregate unfunded commitments of
$166.8 million and two unfunded equity commitments with aggregate
unfunded commitments of $311 thousand
Conference Call Information
FSIC will host a conference call at 10:00 a.m. (Eastern Time) on Thursday, August 10, 2017, to discuss its second quarter financial results. All interested parties are welcome to participate. You can access the conference call by dialing (877) 443-2408 and using the conference ID 44291376 approximately 10 minutes prior to the call. The conference call will also be webcast, which can be accessed from the Investor Relations section of FSIC's website at www.fsinvestmentcorp.com under Presentations and Reports.
A replay of the call will be available for a period of 30 days following the call by visiting the Investor Relations section of FSIC's website at www.fsinvestmentcorp.com under Presentations and Reports.
Supplemental Information
An investor presentation of financial information will be made available prior to the call in the Investor Relations section of FSIC's website at www.fsinvestmentcorp.com under Presentations and Reports.
About FS Investment Corporation
FS Investment Corporation (NYSE: FSIC) is a publicly traded business development company ("BDC") focused on providing customized credit solutions to private middle market U.S. companies. FSIC seeks to invest primarily in the senior secured debt and, to a lesser extent, the subordinated debt of private middle market companies to achieve the best risk-adjusted returns for its investors. In connection with its debt investments, FSIC may receive equity interests such as warrants or options.
FSIC is advised by FB Income Advisor, LLC, an affiliate of FS Investments, and is sub-advised by GSO / Blackstone Debt Funds Management LLC, an affiliate of GSO Capital Partners ("GSO"). GSO, with approximately $94.5 billion in assets under management as of June 30, 2017, is the credit platform of Blackstone, one of the world's leading managers of alternative investments. For more information, please visit www.fsinvestmentcorp.com.
About FS Investments
FS Investments is a leading asset manager dedicated to helping individuals, financial professionals and institutions design better portfolios. The firm provides access to alternative sources of income and growth and focuses on setting industry standards for investor protection, education and transparency.
FS Investments is headquartered in Philadelphia, PA with offices in Orlando, FL and Washington, DC. The firm had more than $20 billion in assets under management as of June 30, 2017.
Visit www.fsinvestments.com to learn more.
Forward-Looking Statements and Important Disclosure Notice
This announcement may contain certain forward-looking statements, including statements with regard to future events or the future performance or operations of FSIC. Words such as "believes," "expects," "projects," and "future" or similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors could cause actual results to differ materially from those projected in these forward-looking statements. Factors that could cause actual results to differ materially include changes in the economy, risks associated with possible disruption in FSIC's operations or the economy generally due to terrorism or natural disasters, future changes in laws or regulations and conditions in FSIC's operating area, and the price at which shares of FSIC's common stock trade on the New York Stock Exchange. Some of these factors are enumerated in the filings FSIC makes with the SEC. FSIC undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
The press release above contains summaries of certain financial and statistical information about FSIC. The information contained in this press release is summary information that is intended to be considered in the context of FSIC's SEC filings and other public announcements that FSIC may make, by press release or otherwise, from time to time. FSIC undertakes no duty or obligation to update or revise the information contained in this press release. In addition, information related to past performance, while helpful as an evaluative tool, is not necessarily indicative of future results, the achievement of which cannot be assured. Investors should not view the past performance of FSIC, or information about the market, as indicative of FSIC's future results.
Individual investors and endowments may have different investment horizons, liquidity needs and risk tolerances. In addition, fees that may be incurred by an investor in a fund sponsored by FS Investments may be different than fees incurred by an endowment investing in similar assets as those in which the funds invest.
Other Information
The information in this press release is summary information only and should be read in conjunction with FSIC's quarterly report on Form 10-Q for the quarterly period ended June 30, 2017, which FSIC filed with the U.S. Securities and Exchange Commission (the "SEC") on August 9, 2017, as well as FSIC's other reports filed with the SEC. A copy of FSIC's quarterly report on Form 10-Q for the quarterly period ended June 30, 2017 and FSIC's other reports filed with the SEC can be found on FSIC's website at www.fsinvestmentcorp.com and the SEC's website at www.sec.gov.
Certain Information About Distributions
The determination of the tax attributes of FSIC's distributions is made annually as of the end of its fiscal year based upon its taxable income and distributions paid, in each case, for the full year. Therefore, a determination as to the tax attributes of the distributions made on a quarterly basis may not be representative of the actual tax attributes for a full year. FSIC intends to update stockholders quarterly with an estimated percentage of its distributions that resulted from taxable ordinary income. The actual tax characteristics of distributions to stockholders will be reported to stockholders annually on Form 1099-DIV.
The timing and amount of any future distributions on FSIC's shares of common stock are subject to applicable legal restrictions and the sole discretion of its board of directors. There can be no assurance as to the amount or timing of any such future distributions, including the special distribution referenced herein.
FSIC may fund its cash distributions to stockholders from any sources of funds legally available to it, including proceeds from the sale of shares of FSIC's common stock, borrowings, net investment income from operations, capital gains proceeds from the sale of assets, non-capital gains proceeds from the sale of assets and dividends or other distributions paid to it on account of preferred and common equity investments in portfolio companies. FSIC has not established limits on the amount of funds it may use from available sources to make distributions. There can be no assurance that FSIC will be able to pay distributions at a specific rate or at all.
Contact Information:
Investors
Chris Condelles
christopher.condelles@fsinvestments.com
267-439-4365
Dominic Mammarella
dominic.mammarella@fsinvestments.com
215-220-4280
Media
Marc Yaklofsky / Kate Beers
media@fsinvestments.com
215-495-1174
Three Months Ended Six Months Ended
Income Statement
June 30, June 30,
2017 2016 2017 2016
---- ---- ---- ----
Investment income
From non-controlled/unaffiliated
investments:
Interest income $82,516 $92,319 $162,235 $191,771
Fee income 9,546 15,335 29,076 16,977
From non-controlled/affiliated
investments:
Interest income 4,052 1,112 8,342 2,079
Fee income 2 633 31 633
Dividend income - - - 224
From controlled/affiliated
investments:
Interest income 2,579 812 5,075 1,590
Total investment income 98,695 110,211 204,759 213,274
------ ------- ------- -------
Operating expenses
Management fees 18,367 17,574 36,734 35,386
Subordinated income incentive fees 11,617 14,210 24,764 26,695
Administrative services expenses 742 900 1,476 2,096
Accounting and administrative fees 255 235 520 463
Interest expense 19,617 18,064 39,056 36,958
Directors' fees 274 274 545 503
Other general and administrative
expenses 1,363 2,114 2,614 4,395
Total operating expenses 52,235 53,371 105,709 106,496
Net investment income 46,460 56,840 99,050 106,778
------ ------ ------ -------
Realized and unrealized gain/loss
Net realized gain (loss) on
investments:
Non-controlled/unaffiliated
investments (14,147) (7,648) (62,594) (21,427)
Non-controlled/affiliated
investments - - 305 -
Controlled/affiliated investments - - (52,879) -
Net realized gain (loss) on foreign
currency 61 94 184 178
Net change in unrealized
appreciation (depreciation) on
investments:
Non-controlled/unaffiliated
investments (9,458) 86,922 119,802 32,219
Non-controlled/affiliated
investments (5,602) 1,919 (17,930) 8,286
Controlled/affiliated investments 4,132 705 (367) 2,338
Net change in unrealized
appreciation (depreciation) on
secured borrowing - - (10) -
Net change in unrealized gain (loss)
on foreign currency (3,004) 1,325 (3,726) (312)
Total net realized and unrealized
gain (loss) (28,018) 83,317 (17,215) 21,282
------- ------
Net increase (decrease) in net
assets resulting from operations $18,442 $140,157 $81,835 $128,060
======= ======== ======= ========
Per share information-basic and
diluted
Net increase (decrease) in net
assets resulting from operations
(Earnings per Share) $0.08 $0.58 $0.33 $0.53
===== ===== ===== =====
Weighted average shares outstanding 245,107,405 243,435,681 244,832,713 243,141,349
=========== =========== =========== ===========
Balance Sheet June 30, 2017
(Unaudited) December 31, 2016
---------- -----------------
Assets
Investments, at fair value
Non-controlled/unaffiliated
investments (amortized cost-$3,468,803
and $3,509,899, respectively) $3,519,657 $3,440,951
Non-controlled/affiliated investments
(amortized cost-$263,084 and $153,167,
respectively) 294,782 202,795
Controlled/affiliated investments
(amortized cost-$83,509 and $80,874,
respectively) 85,338 83,070
------ ------
Total investments, at fair value
(amortized cost-$3,815,396 and
$3,743,940, respectively) 3,899,777 3,726,816
Cash 141,387 264,594
Foreign currency, at fair value (cost-
$1,195 and $4, respectively) 1,321 4
Receivable for investments sold and
repaid 30,555 75,921
Income receivable 28,609 36,106
Deferred financing costs 7,708 5,828
Prepaid expenses and other assets 763 802
---
Total assets $4,110,120 $4,110,071
---------- ----------
Liabilities
Payable for investments purchased $10,800 $5,748
Credit facilities payable 634,914 619,932
Unsecured notes payable (net of deferred
financing costs of $1,724 and $1,884,
respectively) 1,071,983 1,070,701
Secured borrowing, at fair value
(amortized proceeds of $2,834 and
$2,831, respectively) 2,893 2,880
Stockholder distributions payable 54,607 54,364
Management fees payable 18,367 18,022
Subordinated income incentive fees
payable 11,617 12,885
Administrative services expense payable 559 516
Interest payable 22,288 20,144
Directors' fees payable 266 281
Other accrued expenses and liabilities 1,122 7,221
Total liabilities 1,829,416 1,812,694
--------- ---------
Commitments and contingencies - -
Stockholders' equity
Preferred stock, $0.001 par value,
50,000,000 shares authorized, none
issued and outstanding - -
Common stock, $0.001 par value,
450,000,000 shares authorized,
245,153,010 and 244,063,357 shares
issued and outstanding, respectively 245 244
Capital in excess of par value 2,271,623 2,261,040
Accumulated undistributed net realized
gain/loss on investments and gain/
loss on foreign currency (219,258) (104,274)
Accumulated undistributed (distributions
in excess of) net investment income 137,984 148,026
Net unrealized appreciation
(depreciation) on investments and
secured borrowing and unrealized gain/
loss on foreign currency 90,110 (7,659)
------ ------
Total stockholders' equity 2,280,704 2,297,377
--------- ---------
Total liabilities and stockholders'
equity $4,110,120 $4,110,071
---------- ----------
Net asset value per share of common
stock at period end $9.30 $9.41
Non-GAAP Financial Measures
This press release contains certain financial measures that have not been prepared in accordance with generally accepted accounting principles in the United States ("GAAP"). FSIC uses these non-GAAP financial measures internally in analyzing financial results and believes that the use of these non-GAAP financial measures is useful to investors as an additional tool to evaluate ongoing results and trends and in comparing FSIC's financial results with other BDCs.
Non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures, and should be read only in conjunction with FSIC's consolidated financial statements prepared in accordance with GAAP. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures has been provided in this press release, and investors are encouraged to review the reconciliation.
Reconciliation of Non-GAAP Financial Measures(1)
Three Months Ended
June 30, 2017 March 31, 2017 June 30, 2016
GAAP net investment income per share $0.19 $0.22 $0.23
------------------------------------ ----- ----- -----
Plus capital gains incentive fees per share - - -
------------------------------------------- --- --- ---
Plus excise taxes per share - - -
--------------------------- --- --- ---
Plus one-time expenses per share - - 0.00
-------------------------------- --- --- ----
Adjusted net investment income per share(2) $0.19 $0.22 $0.24
------------------------------------------ ----- ----- -----
1) Per share data was derived by using the weighted average shares of FSIC's common stock outstanding during the applicable period. Per share numbers may not sum due to rounding.
2) Adjusted net investment income is a non-GAAP financial measure. Adjusted net investment income is presented for all periods as GAAP net investment income excluding (i) the accrual for the
capital gains incentive fee for realized and unrealized gains; (ii) excise taxes; and (iii) certain non-recurring operating expenses that are one-time in nature and are not representative of
ongoing operating expenses incurred during FSIC's normal course of business (referred to herein as one-time expenses). FSIC uses this non-GAAP financial measure internally in analyzing
financial results and believes that the use of this non-GAAP financial measure is useful to investors as an additional tool to evaluate ongoing results and trends and in comparing its financial
results with other business development companies. The presentation of this additional information is not meant to be considered in isolation or as a substitute for financial results prepared in
accordance with GAAP. A reconciliation of GAAP net investment income to adjusted net investment income can be found above.
3) The per share data for distributions reflects the amount of distributions paid per share of our common stock to stockholders of record during each applicable period.
4) See FSIC's quarterly report on Form 10-Q for the three months ended June 30, 2017 for a description of FSIC's investment strategies.
5) Gross portfolio yield represents the expected annualized yield of FSIC's investment portfolio based on the composition of the portfolio as of the applicable date. FSIC's estimated gross
portfolio yield may be higher than an investor's yield on an investment in shares of FSIC's common stock because it does not reflect sales commissions or charges that may be incurred in
connection with the purchase or sale of such shares, or operating expenses that may be incurred by FSIC. FSIC's estimated gross portfolio yield does not represent an actual investment return to
stockholders, is subject to change and, in the future, may be greater or less than the rates set forth herein.
6) Interest income is recorded on an accrual basis. See FSIC's quarterly report on Form 10-Q for the three months ended June 30, 2017 for a description of FSIC's revenue recognition policy.
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