FSIC Reports Second Quarter 2018 Financial Results and Declares Regular Distribution for Third Quarter – iCrowdNewswire
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Aug 10, 2018 7:25 AM ET

Subject to Terms of Use.

FSIC Reports Second Quarter 2018 Financial Results and Declares Regular Distribution for Third Quarter

Disclosure NewswireTM

iCrowdNewswire - Aug 10, 2018

PHILADELPHIA, — 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, 2018, and that its board of directors has declared its third quarter 2018 regular distribution.

Financial Highlights for the Quarter Ended June 30, 20181

  • Net investment income of $0.19 per share, compared to $0.19 per share for the quarter ended June 30, 2017
  • Adjusted net investment income of $0.19 per share, compared to $0.19 per share for the quarter ended June 30, 20172
  • Total net realized gain of $0.13 per share and total net change in unrealized depreciation of $0.44 per share, compared to a total net realized loss of $0.06 per share and a total net change in unrealized depreciation of $0.05 per share for the quarter ended June 30, 2017
  • Paid cash distributions to stockholders totaling $0.19 per share3
  • Total purchases of $240.4 million versus $350.3 million of sales and repayments
  • Net asset value of $8.87 per share, compared to $9.16 per share as of March 31, 2018

“We are pleased with the progress we’ve made since announcing the formation of the partnership between FS Investments and KKR,” said Michael Forman, Chairman and Chief Executive Officer of FSIC.  “Completing the merger with Corporate Capital Trust, efficiently leveraging our new, lower cost revolving credit facility and maintaining a strong origination pipeline will position us well to deliver consistent long-term performance and drive value for our investors.”

Declaration of Regular Distribution for Third Quarter 2018

FSIC’s board of directors has declared a regular cash distribution for the third quarter of $0.19 per share, which will be paid on or about October 2, 2018 to stockholders of record as of the close of business on September 19, 2018.

Summary Consolidated Results

 

Three Months Ended

(dollars in thousands, except per share data)

 

(all per share amounts are basic and diluted)1

 

 

 

 

June 30, 2018

March 31, 2018

June 30, 2017

Total investment income

$95,575

$101,018

$98,695

Net investment income

45,955

50,547

46,460

Net increase (decrease) in net assets resulting from operations

(31,338)

12,925

18,442

    

Net investment income per share

$0.19

$0.21

$0.19

Adjusted net investment income per share2

$0.19

$0.21

$0.19

Total net realized and unrealized gain (loss) per share

$(0.32)

$(0.15)

$(0.11)

Net increase (decrease) in net assets resulting from operations 

(Earnings per Share)

$(0.13)

$0.05

$0.08

Stockholder distributions per share3

$0.19000

$0.19000

$0.22275

Net asset value per share at period end

$8.87

$9.16

$9.30

Weighted average shares outstanding

242,801,446

245,713,188

245,107,405

Shares outstanding, end of period

240,602,753

245,587,856

245,153,010

    
    

(dollar amounts in thousands)

 

As of 

June 30, 2018

As of 

December 31, 2017

Total fair value of investments

 

$3,626,901

$3,926,234

Total assets

 

3,882,958

4,104,275

Total stockholders’ equity

 

2,134,778

2,284,723

Portfolio Highlights as of June 30, 2018

  • Total fair value of investments was $3.6 billion.
  • Core investment strategies4 represented 99% of the portfolio by fair value as of June 30, 2018, including 90% from direct originations and 9% from opportunistic investments. Broadly syndicated/other investments represented the remaining 1% of the portfolio by fair value.
  • Gross portfolio yield prior to leverage (based on amortized cost and excluding non-income producing assets)5 was 11.1%, compared to 10.9% as of March 31, 2018.
  • Total commitments to direct originations (including unfunded commitments) made during the second quarter of 2018 was $163.3 million in 11 companies, 5 of which were existing portfolio companies.
  • Approximately 0.2% of investments were on non-accrual based on fair value.6

Total Portfolio Activity

 

Three Months Ended

(dollar amounts in thousands)

June 30, 2018

March 31, 2018

June 30, 2017

Purchases

$240,443

$115,990

$298,682

Sales and redemptions

(350,253)

(215,945)

(310,569)

Net portfolio activity

$(109,810)

$(99,955)

$(11,887)

    

Portfolio Data

 

 As of June 30, 2018

 As of December 31, 2017

Total fair value of investments

 

$3,626,901

$3,926,234

Number of Portfolio Companies

 

109

100

Average Annual EBITDA of Portfolio Companies

 

$107,700

$85,700

Weighted Average Purchase Price of Debt Investments 

(as a % of par)

 

99.5%

99.5%

% of Investments on Non-Accrual 

(based on fair value)6

 

0.2%

0.2%

    

Asset Class (based on fair value)

   

Senior Secured Loans — First Lien

 

67%

64%

Senior Secured Loans — Second Lien

 

4%

5%

Senior Secured Bonds

 

5%

4%

Subordinated Debt

 

12%

13%

Collateralized Securities

 

1%

1%

Equity/Other

 

11%

13%

    

Portfolio Composition by Strategy (based on fair value)4

   

Direct Originations

 

90%

92%

Opportunistic

 

9%

7%

Broadly Syndicated/Other

 

1%

1%

    

Interest Rate Type (based on fair value)

   

% Variable Rate

 

69.8%

69.4%

% Fixed Rate

 

19.6%

17.8%

% Income Producing Equity/Other Investments

 

2.2%

2.3%

% Non-Income Producing Equity/Other Investments

 

8.4%

10.5%

    

Yields (based on amortized cost)5

   

Gross Portfolio Yield Prior to Leverage

 

10.2%

9.6%

Gross Portfolio Yield Prior to Leverage — Excluding Non-Income 

Producing Assets

 

11.1%

10.5%

Direct Origination Activity

 

Three Months Ended

(dollar amounts in thousands)

June 30, 2018

March 31, 2018

June 30, 2017

 

Total Commitments

(including unfunded commitments)

$163,261

$79,590

$197,084

Exited Investments (including partial paydowns)

(288,451)

(186,236)

(218,280)

Net Direct Originations

$(125,190)

$(106,646)

$(21,196)

 

Direct Originations Portfolio Data

 

As of June 30, 2018

As of December 31, 2017

Total Fair Value of Direct Originations

 

$3,277,882

$3,606,608

Number of Portfolio Companies

 

72

75

Average Annual EBITDA of Portfolio Companies

 

$73,300

$68,600

Average Leverage Through Tranche of Portfolio Companies —

Excluding Equity/Other and Collateralized Securities

 

5.6x

4.9x

% of Investments on Non-Accrual (based on fair value)6

 

0.2%

    
    
 

Three Months Ended

New Direct Originations by Asset Class (including unfunded commitments)

June 30, 2018

March 31, 2018

June 30, 2017

Senior Secured Loans — First Lien

92%

90%

97%

Senior Secured Loans — Second Lien

5%

Senior Secured Bonds

1%

Subordinated Debt

1%

Collateralized Securities

Equity/Other

8%

4%

2%

 

Average New Direct Origination Commitment Amount

$14,842

$13,265

$15,160

Weighted Average Maturity for New Direct Originations

7/16/2024

9/15/2023

12/17/2022

Gross Portfolio Yield Prior to Leverage (based on amortized cost) of New Direct Originations Funded during Period5

11.5%

10.9%

9.6%

Gross Portfolio Yield Prior to Leverage (based on amortized cost) of New Direct Originations Funded during Period —

Excluding Non-Income Producing Assets5

11.5%

10.9%

9.7%

Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Direct Originations Exited during Period5

10.5%

10.6%

9.9%

Leverage and Liquidity as of June 30, 2018

  • Debt to equity ratio of 77%, based on $1.64 billion in total debt outstanding and stockholders’ equity of $2.13 billion. FSIC’s weighted average effective interest rate (including the effect of non-usage fees) was 4.64%
  • Cash and foreign currency of approximately $200.8 million and availability under its financing arrangements of $346.2 million, subject to borrowing base and other limitations
  • Twenty-two unfunded debt investments with aggregate unfunded commitments of $127.0 million and one unfunded equity commitment with an unfunded commitment of $112 thousand

Conference Call Information

FSIC will host a conference call at 10:00 a.m. (Eastern Time) on Friday, August 10, 2018, to discuss its second quarter financial results. All interested parties are welcome to participate. You can access the conference call by dialing (877) 472-8671 and using the conference ID 3745405 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.comunder 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. FSIC is advised by FS/KKR Advisor, LLC.  For more information, please visit www.fsinvestmentcorp.com.

About FS/KKR Advisor, LLC

FS/KKR Advisor, LLC (“FS/KKR”) is a partnership between FS Investments and KKR Credit that serves as the investment adviser to six BDCs, including FS Investment Corporation, FS Investment Corporation II, FS Investment Corporation III, FS Investment Corporation IV, Corporate Capital Trust, Inc. and Corporate Capital Trust II.

FS/KKR seeks to leverage the size of its platform, differentiated origination capabilities and expertise in capital markets to maximize returns and preserve capital for investors.

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 New York, NYOrlando, FL and Washington, DC. Visit www.fsinvestments.com to learn more.

KKR Credit is a subsidiary of KKR & Co. Inc., a leading global investment firm that manages multiple alternative asset classes, including private equity, energy, infrastructure, real estate and credit, with strategic manager partnerships that manage hedge funds. KKR aims to generate attractive investment returns for its fund investors by following a patient and disciplined investment approach, employing world-class people, and driving growth and value creation with KKR portfolio companies. KKR invests its own capital alongside the capital it manages for fund investors and provides financing solutions and investment opportunities through its capital markets business. References to KKR’s investments may include the activities of its sponsored funds. For additional information about KKR & Co. Inc. (NYSE: KKR), please visit KKR’s website at www.kkr.com and on Twitter @KKR_Co.

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.

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, 2018, which FSIC filed with the U.S. Securities and Exchange Commission (the “SEC”) on August 9, 2018, 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, 2018 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:

Investor Relations Contact

Marc Yaklofsky 

[email protected]

FS Investments Media Team

Marc Yaklofsky 

[email protected]

Income Statement

 

Three Months Ended

 

Six Months Ended

  

June 30,

 

June 30,

  

2018

 

2017

 

2018

 

2017

Investment income

        

Interest income

 

$

77,458

 

$

74,928

 

$

152,727

 

$

147,766

Paid-in-kind interest income

 

8,704

 

7,588

 

17,152

 

14,469

Fee income

 

2,993

 

9,546

 

5,446

 

29,076

Dividend income

 

 

 

7,355

 

From non-controlled/affiliated investments:

        

Interest income

 

2,223

 

3,353

 

3,651

 

7,037

Paid-in-kind interest income

 

726

 

699

 

3,873

 

1,305

Fee income

 

 

2

 

 

31

From controlled/affiliated investments:

        

Interest income

 

1,404

 

939

 

2,524

 

2,441

Paid-in-kind interest income

 

2,067

 

1,640

 

3,865

 

2,634

     Total investment income

 

95,575

 

98,695

 

196,593

 

204,759

         

Operating expenses

        

Management fees

 

15,313

 

18,367

 

33,167

 

36,734

Subordinated income incentive fees

 

10,906

 

11,617

 

22,905

 

24,764

Administrative services expenses

 

742

 

742

 

1,476

 

1,476

Accounting and administrative fees

 

249

 

255

 

503

 

520

Interest expense

 

20,782

 

19,617

 

40,835

 

39,056

Directors’ fees

 

274

 

274

 

770

 

545

Other general and administrative expenses

 

1,579

 

1,363

 

3,211

 

2,614

     Total operating expenses

 

49,845

 

52,235

 

102,867

 

105,709

     Management fee waiver

 

(225)

 

 

(2,776)

 

     Net expenses

 

49,620

 

52,235

 

100,091

 

105,709

Net investment income

 

45,955

 

46,460

 

96,502

 

99,050

         

Realized and unrealized gain/loss

        

Net realized gain (loss) on investments:

        

Non-controlled/unaffiliated investments

 

40,736

 

(14,147)

 

36,385

 

(62,594)

Non-controlled/affiliated investments

 

(10,083)

 

 

(10,075)

 

305

Controlled/affiliated investments

 

12

 

 

12

 

(52,879)

Net realized gain (loss) on foreign currency

 

36

 

61

 

97

 

184

Net change in unrealized appreciation (depreciation) on 

     investments:

        

Non-controlled/unaffiliated investments

 

(81,473)

 

(9,458)

 

(98,974)

 

119,802

Non-controlled/affiliated investments

 

(21,073)

 

(5,602)

 

(26,603)

 

(17,930)

Controlled/affiliated investments

 

(7,986)

 

4,132

 

(17,693)

 

(367)

Net change in unrealized appreciation (depreciation) on secured 

     borrowing

 

 

 

 

(10)

Net change in unrealized gain (loss) on foreign currency

 

2,538

 

(3,004)

 

1,936

 

(3,726)

     Total net realized and unrealized gain (loss)

 

(77,293)

 

(28,018)

 

(114,915)

 

(17,215)

Net increase (decrease) in net assets resulting from 

     operations

 

$

(31,338)

 

$

18,442

 

$

(18,413)

 

$

81,835

         

Per share information—basic and diluted

        

Net increase (decrease) in net assets resulting from operations 

     (Earnings per Share)

 

$

(0.13)

 

$

0.08

 

$

(0.08)

 

$

0.33

Weighted average shares outstanding

 

242,801,446

 

245,107,405

 

244,249,274

 

244,832,713

Balance Sheet

 

June 30, 2018

   
  

(Unaudited)

 

December 31, 2017

Assets

    

Investments, at fair value

    

Non-controlled/unaffiliated investments (amortized cost—$3,359,024 and $3,532,517, respectively)

 

$

3,328,444

 

$

3,600,911

Non-controlled/affiliated investments (amortized cost—$196,144 and $197,468, respectively)

 

202,128

 

230,055

Controlled/affiliated investments (amortized cost—$105,615 and $86,861, respectively)

 

96,329

 

95,268

Total investments, at fair value (amortized cost—$3,660,783 and $3,816,846, respectively)

 

3,626,901

 

3,926,234

Cash

 

194,604

 

134,932

Foreign currency, at fair value (cost—$6,305 and $3,685, respectively)

 

6,174

 

3,810

Receivable for investments sold and repaid

 

19,552

 

3,477

Income receivable

 

32,239

 

30,668

Deferred financing costs

 

2,963

 

3,459

Prepaid expenses and other assets

 

525

 

1,695

       Total assets

 

$

3,882,958

 

$

4,104,275

     

Liabilities

    

Payable for investments purchased

 

$

21,841

 

$

1,978

Credit facilities payable (net of deferred financing costs of $2,624 and $3,179, respectively)

 

553,656

 

638,571

Unsecured notes payable (net of deferred financing costs of $1,086 and $1,402, respectively)

 

1,074,883

 

1,073,445

Stockholder distributions payable

 

46,029

 

46,704

Management fees payable

 

15,088

 

15,450

Subordinated income incentive fees payable

 

10,906

 

12,871

Administrative services expense payable

 

684

 

294

Interest payable

 

23,210

 

22,851

Directors’ fees payable

 

261

 

276

Other accrued expenses and liabilities

 

1,622

 

7,112

       Total liabilities

 

1,748,180

 

1,819,552

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, 240,602,753 and 245,725,416 shares 

     issued and outstanding, respectively

 

241

 

246

Capital in excess of par value

 

2,233,692

 

2,272,591

Accumulated undistributed net realized gain/loss on investments and gain/loss on foreign currency

 

(218,869)

 

(245,288)

Accumulated undistributed (distributions in excess of) net investment income

 

147,936

 

144,062

Net unrealized appreciation (depreciation) on investments and unrealized gain/loss on foreign currency

 

(28,222)

 

113,112

       Total stockholders’ equity

 

2,134,778

 

2,284,723

       Total liabilities and stockholders’ equity

 

$

3,882,958

 

$

4,104,275

Net asset value per share of common stock at period end

 

$

8.87

 

$

9.30

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 Measures1

 

Three Months Ended

 

June 30, 2018

March 31, 2018

June 30, 2017

GAAP net investment income per share

$0.19

$0.21

$0.19

Plus capital gains incentive fees per share

Plus excise taxes per share

Plus one-time expenses per share

Adjusted net investment income per share2

$0.19

$0.21

$0.19

  
  
  

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, 2018 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, 2018 for a description of FSIC’s revenue recognition policy.

Contact Information:

FS Investment Corporation

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