SOURCE: TICC Capital Corp.

March 02, 2017 08:00 ET

TICC Announces Results of Operations for the Quarter Ended December 31, 2016 and Announces Quarterly Distributions of $0.20 per Share for Each of the Quarters Ending March 31, 2017, June 30, 2017, and September 30, 2017

GREENWICH, CT--(Marketwired - Mar 2, 2017) - TICC Capital Corp. (NASDAQ: TICC) ("TICC," the "Company," "we," "us" or "our") announced today its financial results for the quarter ended December 31, 2016, and announced distributions of $0.20 per share for each of the first, second, and third quarters of 2017.

HIGHLIGHTS

  • As of December 31, 2016, net asset value per share stood at $7.50 compared with a net asset value per share as of September 30, 2016 of $7.08. 

  • For the quarter ended December 31, 2016, we recorded net investment income of approximately $7.3 million, or approximately $0.14 per share. In the fourth quarter, we also recorded net unrealized appreciation of approximately $30.1 million and net realized capital losses of approximately $1.1 million. Our collateralized loan obligation ("CLO") positions represented approximately $20.7 million of the net unrealized appreciation for the quarter. In total, we had a net increase in net assets from operations of approximately $36.3 million, or approximately $0.71 per share.

  • Our core net investment income ("Core NII"), which is a non-GAAP measure, for the quarter ended December 31, 2016 was approximately $11.2 million, or approximately $0.22 per share. The increase in loan prices over the last year (which has led to higher CLO net asset values) has also resulted in tighter loan credit spreads. Combined with an increase in 3-month LIBOR, these tighter loan credit spreads have produced lower current and projected cash distribution payments from many of our CLO equity tranche investments, reducing Core NII.

    • Core NII represents net investment income adjusted for additional cash distributions received, or entitled to be received (if any, in either case), on our CLO equity investments and also excludes any capital gains incentive fees we recognize but have no obligation to pay in any period. (See additional information under "Supplemental Information Regarding Core Net Investment Income" below).

  • Total investment income for the fourth quarter of 2016 amounted to approximately $18.9 million, which represented an increase of approximately $0.8 million from the third quarter of 2016.

    • For the quarter ended December 31, 2016, we recorded investment income from our portfolio as follows:

      • approximately $8.3 million from our debt investments,

      • approximately $10.0 million from our CLO equity investments, and

      • approximately $0.6 million from all other sources.

    • While our experience has been that cash flow distributions have historically represented useful indicators of our CLO equity investments' annual taxable income, we now believe that current and future cash flow distributions may provide less useful indications as to the final determination of taxable income with respect to our CLO equity investments. In general, we currently expect our annual taxable income to be higher than our GAAP earnings for the current fiscal year.

  • Our weighted average credit rating on a fair value basis was 2.2 at the end of the fourth quarter of 2016 (compared to 2.2 at the end of the third quarter of 2016).

  • Our total expenses for the quarter ended December 31, 2016 were approximately $11.6 million, down by approximately $0.6 million compared to the third quarter of 2016.

  • Our Board of Directors has declared the following distributions on our common stock:

Quarter Ending   Record Date   Payment Date   Amount Per Share
March 31, 2017   March 16, 2017   March 31, 2017   $0.20
June 30, 2017   June 16, 2017   June 30, 2017   $0.20
September 30, 2017   September 15, 2017   September 29, 2017   $0.20
  • With the recent rise in 3-month LIBOR (and the corresponding loss of the benefit from the LIBOR floors), and with the recent compression in corporate loan spreads leading to lower projected taxable income, the change to the current distribution level is intended to allow us to retain and compound returns on our capital over longer timeframes. We note that this change is not related to any current or projected cash flow diversions from our CLO equity portfolio, and that all of our CLO equity positions made full distributions during the quarter ended December 31, 2016. Going forward, we intend to declare and pay special distributions to our shareholders on an as-needed basis, in order to comply with our income distribution requirements as a regulated investment company for tax purposes.

  • During the fourth quarter of 2016:

    • We made investments of approximately $27.0 million, consisting of approximately $16.6 million in corporate loan investments and approximately $10.4 million in CLO equity, as we continued our rotation of those portfolios. We received proceeds of approximately $21.4 million from sales of our CLO investments.

    • We received proceeds of approximately $32.1 million from repayments, sales and amortization payments on our corporate loan investments. $23.4 million of those proceeds along with a portion of prior quarter repayments, sales and amortization payments were applied towards a $74.7 million partial redemption of the TICC CLO 2012-1 LLC Class A-1 Notes.

  • As of December 31, 2016, the weighted average yield of our debt investments at current cost was approximately 8.3%, compared with approximately 8.0% as of September 30, 2016.

  • As of December 31, 2016, the weighted average effective yield of our CLO equity investments at current cost was approximately 17.0%, compared with approximately 14.0% as of September 30, 2016.

  • As of December 31, 2016, the weighted average cash distribution yield of our CLO equity investments at current cost was approximately 23.8%, compared with approximately 28.9% as of September 30, 2016.

  • At December 31, 2016, we had no investments on non-accrual status.

  • We ended 2016 with approximately $8.3 million of cash on our balance sheet, after the repurchase of $20.5 million of our outstanding convertible notes in December 2016, and we expect that cash on our balance sheet will increase during 2017 in anticipation of the maturity of the remaining $94.5 million of our outstanding convertible notes on November 1, 2017. As of February 28, 2017, we estimate cash on our balance sheet to be approximately $64.9 million.

  • In late February 2017, SourceHOV LLC ("SourceHOV"), Novitex Holdings Inc. ("Novitex"), and Quinpario Acquisition Corp. 2 publicly announced that they would combine to form Exela Technologies (a NASDAQ listed provider of business process outsourcing services). TICC has debt investments in both SourceHOV and Novitex. If this proposed combination is completed, then all of TICC's existing 1st and 2nd Lien debt at SourceHOV and 1st Lien debt at Novitex would be repaid in full at par plus any applicable call premium. Pending the successful closing of this transaction (which is expected in the second quarter of 2017, subject to regulatory approval), TICC would receive a payment of 102% of par on its $15 million face value investment in the SourceHOV 2nd lien tranche. We note that, as of December 31, 2016, we ascribed a fair value to this investment equal to approximately 65% of par, which was determined based on available information prior to the notification of the proposed transaction.

Supplemental Information Regarding Core Net Investment Income

On a supplemental basis, we provide information relating to core net investment income, which is a non-GAAP measure. This measure is provided in addition to, but not as a substitute for, net investment income determined in accordance with GAAP. Our non-GAAP measures may differ from similar measures by other companies, even if similar terms are used to identify such measures. Core net investment income represents net investment income adjusted for additional cash distributions received, or entitled to be received (if any, in either case), on our CLO equity investments and also excludes any capital gains incentive fees we recognize but have no obligation to pay in any period. The Company did not recognize any capital gains incentive fees for the quarter ended December 31, 2016.

Income from investments in the "equity" class securities of CLO vehicles, for GAAP purposes, is recorded using the effective interest method based upon an effective yield to the expected redemption utilizing estimated cash flows, compared to the cost resulting in an effective yield for the investment; the difference between the actual cash received or distributions entitled to be received and the effective yield calculation is an adjustment to cost. Accordingly, investment income recognized on CLO equity securities in the GAAP statement of operations differs from the cash distributions actually received by us during the period, (referred to below as "CLO equity additional distributions").

Further, in order to continue to qualify to be taxed as a regulated investment company ("RIC"), we are required, among other things, to distribute at least 90% of our investment company taxable income annually. Therefore, core net investment income may provide a better indication of estimated taxable income for a reporting period than does GAAP net investment income. Although we can offer no assurance that will be the case as the ultimate tax character of our earnings cannot be determined until tax returns are prepared after the end of a fiscal year. We note that these non-GAAP measures may not be useful indicators of taxable earnings, particularly during periods of market disruption and volatility. 

The following table provides a reconciliation of net investment income to core net investment income for the three months and year ended December 31, 2016:

                         
                         
    Three Months Ended
December 31, 2016
  Year Ended
December 31, 2016
    Amount   Per Share
Amounts (basic)
  Per Share
Amounts (diluted)
  Amount   Per Share
Amounts (basic)
  Per Share
Amounts (diluted)
Net investment income   $ 7,284,568   $ 0.142   $ 0.142   $ 24,019,066   $ 0.460   $ 0.460
CLO equity additional distributions     3,876,444     0.075     0.075     34,165,951     0.659     0.659
Core net investment income   $ 11,161,012   $ 0.217   $ 0.217   $ 58,185,017   $ 1.119   $ 1.119
                                     
                                     

We will host a conference call to discuss our fourth quarter results today, Thursday, March 2, 2017 at 10:00 AM ET. Please call 1-888-339-0740 to participate. A replay of the conference call will be available for approximately 30 days. The replay number is 1-877-344-7529, and the replay passcode is 10102454.

A presentation containing further detail regarding our quarterly results of operations has been posted under the Investor Relations section of our website at www.ticc.com.

The following financial statements are unaudited and without footnotes. Readers who would like additional information should obtain our Form 10-K for the period ended December 31, 2016, and subsequent reports on Form 10-Q as they are filed.

   
   
TICC CAPITAL CORP.  
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES  
(unaudited)  
             
             
    December 31, 2016     December 31, 2015  
             
ASSETS                
                 
  Non-affiliated/non-control investments (cost: $616,542,612 @ 12/31/16; $767,295,604 @ 12/31/15)   $ 578,297,069     $ 638,890,282  
  Affiliated investments (cost: $7,497,229 @ 12/31/16; $7,392,352 @ 12/31/15)     11,626,007       6,825,269  
  Control investments (cost: $0 @ 12/31/16; $16,750,000 @ 12/31/15)     -       11,000,000  
    Total investments at fair value (cost: $624,039,841 @ 12/31/16; $791,437,956 @ 12/31/15)     589,923,076       656,715,551  
  Cash and cash equivalents     8,261,698       23,181,677  
  Restricted cash     3,451,636       17,965,232  
  Interest and distributions receivable     9,682,672       12,268,997  
  Securities sold not settled     7,406       7,845,706  
  Other assets     1,130,018       321,044  
      Total assets   $ 612,456,506     $ 718,298,207  
                 
LIABILITIES                
                 
  Accrued interest payable   $ 1,731,111     $ 2,139,866  
  Investment advisory fee and net investment income incentive fee payable to affiliate     3,673,381       4,195,901  
  Accrued expenses     1,089,043       3,278,587  
  Notes payable - TICC CLO 2012-1 LLC, net of discount and deferred issuance costs     125,853,720       233,887,130  
  Convertible senior notes payable, net of deferred issuance costs     94,116,753       113,862,012  
      Total liabilities     226,464,008       357,363,496  
                 
                 
                 
NET ASSETS                
  Common stock, $0.01 par value, 100,000,000 share authorized; 51,479,409 and 56,396,435 shares issued and outstanding, respectively     514,794       563,965  
  Capital in excess of par value     558,822,643       594,047,019  
  Net unrealized depreciation on investments     (34,116,765 )     (134,722,405 )
  Accumulated net realized losses on investments     (95,605,057 )     (68,772,889 )
  Distributions in excess of net investment income     (43,623,117 )     (30,180,979 )
      Total net assets     385,992,498       360,934,711  
      Total liabilities and net assets   $ 612,456,506     $ 718,298,207  
Net asset value per common share   $ 7.50     $ 6.40  
                 
                 
   
   
TICC CAPITAL CORP.  
CONSOLIDATED STATEMENTS OF OPERATIONS  
(unaudited)  
   
    Year Ended
December 31, 2016
    Year Ended
December 31, 2015
    Year Ended
December 31, 2014
 
                   
INVESTMENT INCOME                        
From non-affiliated/non-control investments:                        
  Interest income - debt investments   $ 33,649,267     $ 48,556,075     $ 50,855,738  
  Income from securitization vehicles and investments     32,503,279     $ 34,901,766       59,516,739  
  Commitment, amendment fee income and other income     2,228,877       2,332,680       5,451,167  
    Total investment income from non-affiliated/non-control investments     68,381,423       85,790,521       115,823,644  
From affiliated investments:                        
  Interest income - debt investments     331,404       300,544       116,738  
  Total investment income from affiliated investments     331,404       300,544       116,738  
From control investments:                        
  Interest income - debt investments     567,219       1,371,874       1,384,358  
  Total investment income from control investments     567,219       1,371,874       1,384,358  
    Total investment income     69,280,046       87,462,939       117,324,740  
EXPENSES                        
  Compensation expense     837,343       1,158,622       1,860,683  
  Investment advisory fees     11,292,395       19,770,170       21,150,190  
  Professional fees     6,393,812       5,690,799       2,149,699  
  Interest expense     19,962,078       20,936,057       22,907,942  
  Insurance     159,573       68,679       68,638  
  Director's Fees     642,000       514,501       316,500  
  Transfer agent and custodian fees     316,577       332,796       284,212  
  General and administrative     2,861,803       1,340,326       1,398,064  
    Total expenses before incentive fees     42,465,581       49,811,950       50,135,928  
  Net investment income incentive fees     2,795,399       (929,933 )     5,603,821  
  Capital gains incentive fees     -       -       (3,872,853 )
    Total incentive fees     2,795,399       (929,933 )     1,730,968  
    Total expenses     45,260,980       48,882,017       51,866,896  
Net investment income     24,019,066       38,580,922       65,457,844  
                         
Net change in unrealized appreciation/depreciation on investments                        
  Non-Affiliate/non-control investments     90,159,779       (101,525,472 )     (49,550,856 )
  Affiliated investments     4,695,861       7,057,989       1,227,261  
  Control investments     5,750,000       (3,910,000 )     (990,000 )
    Total net change in unrealized appreciation/depreciation on investments     100,605,640       (98,377,483 )     (49,313,595 )
                         
Net realized (losses) gains on investments                        
Non-Affiliated/non-control investments     (11,262,943 )     425,240       (14,788,183 )
Affiliated investments     -       (6,762,328 )     (4,704,466 )
Control investments     (3,000,000 )     -       -  
Total net realized (losses) on investments     (14,262,943 )     (6,337,088 )     (19,492,649 )
                         
Net increase/(decrease) in net assets resulting from operations   $ 110,361,763     $ (66,133,649 )   $ (3,348,400 )
                         
Net increase in net assets resulting from net investment income per common share:                        
      Basic   $ 0.46     $ 0.65     $ 1.11  
      Diluted   $ 0.46     $ 0.65     $ 1.06  
Net increase/(decrease) in net assets resulting from operations per common share:                        
      Basic   $ 2.13     $ (1.11 )   $ (0.06 )
      Diluted   $ 1.92     $ (1.11 )   $ (0.06 )
Weighted average shares of common stock outstanding:                        
      Basic     51,858,313       59,752,896       58,822,732  
      Diluted     61,773,392       69,786,048       68,855,884  
Distributions per share   $ 1.16     $ 1.14     $ 1.16  
                         
                         

TICC CAPITAL CORP.

FINANCIAL HIGHLIGHTS - UNAUDITED

                     
  Year Ended   Year Ended   Year Ended   Year Ended   Year Ended  
  December 31,   December 31,   December 31,   December 31,   December 31,  
  2016   2015   2014   2013   2012  
Per Share Data                              
Net asset value at beginning of period $ 6.40   $ 8.64   $ 9.85   $ 9.90   $ 9.30  
Net investment income(1)(3)   0.46     0.65     1.11     1.09     0.98  
Net realized and unrealized capital (losses) gains(2)(3)   1.68     (1.84 )   (1.14 )   0.06     0.82  
Net change in net asset value from operations   2.14     (1.19 )   (0.03 )   1.15     1.80  
Distributions per share from net investment income   (1.08 )   (1.14 )   (1.00 )   (1.16 )   (1.12 )
Distributions based on weighted average share impact   0.01     0.01     (0.03 )   (0.04 )   (0.04 )
Tax return of capital distributions   (0.08 )   -     (0.16 )   -     -  
Total distributions(4)   (1.15 )   (1.13 )   (1.19 )   (1.20 )   (1.16 )
Effect of shares issued, net of offering expenses   -     -     -     -     (0.04 )
Effect of shares repurchased, gross   0.11     0.08     0.01     -     -  
Net asset value at end of period $ 7.50   $ 6.40   $ 8.64   $ 9.85   $ 9.90  
Per share market value at beginning of period $ 6.08   $ 7.53   $ 10.34   $ 10.12   $ 8.65  
Per share market value at end of period $ 6.61   $ 6.08   $ 7.53   $ 10.34   $ 10.12  
Total return(5)   33.29 %   (4.35 )%   (17.22 )%   14.68 %   30.49 %
Shares outstanding at end of period   51,479,409     56,396,435     60,303,769     53,400,745     41,371,286  
Ratios/Supplemental Data(6)                              
Net assets at end of period (000's)   385,992     360,935     520,813     526,242     409,603  
Average net assets (000's)   343,328     487,894     560,169     506,093     363,584  
Ratio of expenses to average net assets   13.18 %   10.02 %   9.26 %   9.74 %   9.35 %
Ratio of net investment income to average net assets   7.00 %   7.91 %   11.69 %   11.02 %   10.23 %
Portfolio turnover rate   27.60 %   24.96 %   45.91 %   38.22 %   55.42 %
                               
(1) Represents per share net investment income for the period, based upon weighted average shares outstanding.
   
(2) Net realized and unrealized capital gains include rounding adjustments to reconcile change in net asset value per share.
   
(3) During the first quarter of 2015, the Company identified a non-material error in its accounting for income from CLO equity investments. Prospectively as of January 1, 2015, the Company records income from its CLO equity investments using the effective yield method in accordance with the accounting guidance in ASC 325-40, Beneficial Interests in Securitized Financial Assets, based upon an estimation of an effective yield to maturity utilizing assumed cash flows. An out-of-period adjustment to net investment income incentive fees, in the amount of $2.4 million, or $0.04 per share, is reflected in the year ended December 31, 2015. Prior period amounts are not materially affected.
   
  During the quarter ended September 30, 2015, the Company recorded an out of period adjustment related to a miscalculation of discount accretion which increased interest income and increased investment cost, by approximately $1.4 million. For the year ended December 31, 2015, approximately $1.1 million, or $0.02 per share, of the adjustment related to prior years. The increase in the investment cost has a corresponding effect on the investment's unrealized depreciation of the same amount. Management concluded the adjustment was not material to previously filed financial statements.
   
(4) Management monitors available taxable earnings, including net investment income and realized capital gains, to determine if a tax return of capital may occur for the year. To the extent the Company's taxable earnings fall below the total amount of the Company's distributions for that fiscal year, a portion of those distributions may be deemed a tax return of capital to the Company's stockholders. The ultimate tax character of the Company's earnings cannot be determined until tax returns are prepared after the end of the fiscal year.
   
(5) Total return equals the increase or decrease of ending market value over beginning market value, plus distributions, divided by the beginning market value per share, assuming distribution reinvestment prices obtained under the Company's distribution reinvestment plan, excluding any discounts.
   
(6) The following table provides supplemental performance ratios measured for the years ended December 31, 2016, 2015, 2014, 2013, and 2012:
                                         
    Year Ended December 31, 2016     Year Ended December 31, 2015     Year Ended December 31, 2014     Year Ended December 31, 2013     Year Ended December 31, 2012  
Ratio of expenses to average net assets:                              
Expenses before incentive fees     12.37 %     10.21 %     8.95 %     8.68 %     6.33 %
Net investment income incentive fees     0.81 %     (0.19 )%     1.00 %     1.30 %     1.50 %
Capital gains incentive fees     - %     - %     (0.69 )%     (0.24 )%     1.52 %
Ratio of expenses, excluding interest expense, to average net assets     7.37 %     5.73 %     5.17 %     6.00 %     7.35 %
                                         
                                         

About TICC Capital Corp.
TICC Capital Corp. is a publicly-traded business development company principally engaged in providing capital to established businesses, investing in syndicated bank loans and purchasing debt and equity tranches of collateralized loan obligation vehicles.

Forward-Looking Statements
This press release contains forward-looking statements subject to the inherent uncertainties in predicting future results and conditions. Any statements that are not statements of historical fact (including statements containing the words "believes," "plans," "anticipates," "expects," "estimates" and similar expressions) should also be considered to be forward-looking statements. Certain factors could cause actual results and conditions to differ materially from those projected in these forward-looking statements. These factors are identified from time to time in our filings with the Securities and Exchange Commission. We undertake no obligation to update such statements to reflect subsequent events, except as may be required by law.

Contact Information

  • Contact:
    Bruce Rubin
    203-983-5280