8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): March 8, 2017

 

 

BLACKROCK CAPITAL INVESTMENT CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   814-00712   20-2725151

(State or other jurisdiction of

incorporation or organization)

 

(Commission

File Number)

 

(IRS Employer

Identification Number)

40 East 52nd Street

New York, NY 10022

(Address of principal executive offices)

(212) 810-5800

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

On March 8, 2017, the Registrant issued a press release announcing its financial results for the fourth quarter ended December 31, 2016. The text of the press release is included as Exhibit 99.1 to this Form 8-K.

The information disclosed under this Item 2.02, including Exhibit 99.1 hereto, is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 and shall not be deemed incorporated by reference into any filing made under the Securities Act of 1933, except as expressly set forth by specific reference in such filing.

 

ITEM 7.01. REGULATION FD DISCLOSURE.

The Registrant issued a press release, filed herewith as Exhibit 99.1, and by this reference incorporated herein, on March 8, 2017 announcing the declaration of a quarterly dividend of $0.18 per share. The dividend is payable on April 3, 2017 to stockholders of record as of March 20, 2017.

The information disclosed under this Item 7.01, including Exhibit 99.1 hereto, is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 and shall not be deemed incorporated by reference into any filing made under the Securities Act of 1933, except as expressly set forth by specific reference in such filing.

 

ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.

(d) Exhibits.

 

Exhibit

Number

  

Description

99.1    Press Release, dated as of March 8, 2017


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

    BLACKROCK CAPITAL INVESTMENT CORPORATION
Date: March 8, 2017     By:  

/s/ Donna M. Milia

      Name: Donna M. Milia
      Title: Chief Financial Officer and Treasurer


EXHIBIT INDEX

 

Exhibit

Number

  

Description

99.1    Press Release, dated as of March 8, 2017
EX-99.1

Exhibit 99.1

 

LOGO

 

Investor Contact:    Press Contact:

Nik Singhal

   Brian Beades

212.810.5427

   212.810.5596

BlackRock Capital Investment Corporation Reports Financial Results for the Quarter and Year Ended December 31, 2016, Declares First Quarter 2017 Distribution of $0.18 per Share, and Announces Waiver of Incentive Fees based on Income

 

   

GAAP net investment income of $0.24 per share, or $0.22 per share excluding an insurance reimbursement payment related to a previously announced legal settlement, providing fourth quarter distribution coverage of 112% and 105%, respectively.

 

   

NAV declined 2.0% to $8.21 per share during the quarter, primarily resulting from net unrealized depreciation on legacy assets

 

   

Net leverage and total liquidity relatively unchanged quarter-over-quarter, at 0.55x and $261 million, respectively

 

   

Non-accrual rate declined from 11.1% to 5.4% of our debt investments at amortized cost or from 4.0% to 0.7% at fair market value

New York, March 8, 2017 – BlackRock Capital Investment Corporation (NASDAQ:BKCC) (“BCIC” or the “Company,” “we,” “us” or “our”) announced today that its Board of Directors declared a quarterly distribution of $0.18 per share, payable on April 3, 2017 to stockholders of record as of March 20, 2017. Additionally, BlackRock Advisors, LLC, the Company’s investment adviser, in consultation with the Company’s Board of Directors, has agreed to waive incentive fees based on income from March 7, 2017 to December 31, 2018 or approximately 21 months. The start date of the fee waiver coincides with the change to the fee calculation that was previously approved by stockholders on February 18, 2015.

“Over the past year, the earnings capability of the portfolio has been reduced due to underperformance of certain legacy investments including several oil and gas and oilfield services related investments, leading to inadequate distribution coverage at its prior level. We are committed to creating long-term shareholder value and believe that aligning the distribution with the earnings power of the portfolio will provide our shareholders with more stable and consistent returns. Also, we believe that waiving 100% of the incentive fees based on income for this significant time period will allow us to create immediate shareholder value as we seek to rotate out of the remaining legacy equity positions and reinvest the proceeds into income generating assets,” commented Michael J. Zugay, CEO of BlackRock Capital Investment Corporation.

“Our investment strategy is aimed at dampening volatility in the overall portfolio. As such, our new deployments are focused on (i) 1st lien senior secured investments through BCIC Senior Loan Partners (“Senior Loan Partners”), which was formed in Q2 2016, (ii) Gordon Brothers Finance Company (“GBFC”), wherein the underlying risk to our investment is derived from a diversified pool of primarily first lien, asset-based investments, and (iii) opportunistic junior capital into companies with strong credit profiles backed by strong sponsors and talented management teams. During the fourth quarter of 2016, we continued to ramp up our investment in Senior Loan Partners, which added three first lien loans to its portfolio. Due to timing of repayments and deployments, we did not make net incremental investments into GBFC, but we expect to do so in the future as GBFC continues to execute its business plan. We also added 2nd lien exposure in a new portfolio company as we continue to see junior debt investment opportunities from our sponsor relationships.


“During the quarter, we successfully restructured our investment in Vertellus Specialties Inc. (“Vertellus”), bringing it off non-accrual status and taking down the overall non-accruals in the portfolio. Our team has worked diligently to restructure challenged credits to allow these companies to focus on growth. BCIC continues to have a favorable financial position with moderate net leverage at 0.55x and ample liquidity of $261 million. This provides us the financial flexibility to focus on the remaining challenges in the legacy portfolio and to prudently deploy net new capital.”

Financial Highlights

 

     Q4 2016     Q3 2016     Q4 2015  
     Total     Per     Total     Per     Total     Per  

($’s in millions, except per share data)

   Amount     Share     Amount     Share     Amount     Share  

Net Investment Income/(loss)

   $ 17.1     $ 0.24     $ (2.1   $ (0.03   $ 18.5     $ 0.25  

Net realized and unrealized gains/(losses)

   $ (14.6   $ (0.20   $ (36.9   $ (0.51   $ (39.0   $ (0.53

Basic earnings/(loss) per share

   $ 2.5     $ 0.03     $ (39.1   $ (0.54   $ (20.5   $ (0.28

Distributions declared

   $ 15.3     $ 0.21     $ 15.2     $ 0.21     $ 15.6     $ 0.21  

Net Investment Income/(loss), as adjusted1

   $ 17.1     $ 0.24     $ (2.1   $ (0.03   $ 21.7     $ 0.29  

Basic earnings/(loss) per share, as adjusted1

   $ 2.5     $ 0.03     $ (39.1   $ (0.54   $ (17.3   $ (0.23

 

     2016 Totals      2015 Totals  
     Total      Per      Total      Per  

($’s in millions, except per share data)

   Amount      Share      Amount      Share  

Net Investment Income/(loss)

   $ 54.0      $ 0.74      $ 75.2      $ 1.01  

Net realized and unrealized gains/(losses)

   $ (138.3    $ (1.90    $ (36.6    $ (0.49

Basic earnings/(loss) per share

   $ (84.3    $ (1.16    $ 38.6      $ 0.52  

Distributions declared

   $ 61.0      $ 0.84      $ 62.6      $ 0.84  

Net Investment Income/(loss), as adjusted1

   $ 54.0      $ 0.74      $ 72.0      $ 0.97  

Basic earnings/(loss) per share, as adjusted1

   $ (84.3    $ (1.16    $ 35.4      $ 0.48  

 

     As of      As of      As of  
     December 31,      September 30,      December 31,  

($’s in millions, except per share data)

   2016      2016      2015  

Total assets

   $ 957.1      $ 971.3      $ 1,148.4  

Investment portfolio, at fair market value

   $ 931.1      $ 946.6      $ 1,117.0  

Debt outstanding

   $ 335.7      $ 321.4      $ 362.6  

Total net assets

   $ 596.3      $ 608.1      $ 753.8  

Net asset value per share

   $ 8.21      $ 8.38      $ 10.17  

Net leverage ratio2

     0.55x        0.55x        0.47x  

Business Updates

 

   

Vertellus, which filed its U.S. operations for Chapter 11 bankruptcy protection on May 31, 2016, emerged from bankruptcy on October 31, 2016. Post-emergence, we own 12.1% of the common equity in addition to cash paying restructured 1st and 2nd lien debt securities.

 

   

Senior Loan Partners, our joint venture with Windward Investments LLC, made investments into three new portfolio companies during the quarter, bringing committed and outstanding amounts to $55.2 million and $53.7 million, respectively. The three new investments at par are (i) a $9.0 million first lien term loan to Dunn Paper, Inc., a manufacturer and provider of high-performance paper materials in the lightweight food packaging segment, (ii) a $10.0 million first lien term loan to O2 Partners, LLC, a producer of open-cell foam insoles for leading shoe brands and (iii) a $10.0 million first lien term loan to Digital Room LLC, an e-commerce focused B2B printer of a variety of marketing related products.

 

 

1 

Non-GAAP basis financial measure. See Supplemental Information on page 8.

2 

Calculated less available cash and receivable for investments sold, plus payable for investments purchased, unamortized debt issuance costs and legal settlement payable, if any.

 

-2-


   

During the quarter, we received a $1.1 million, or $0.02 per share, insurance reimbursement payment connected to our previously disclosed legal settlement relating to the AL Solutions matter.

 

   

For the year ended December 31, 2016, we repurchased a total of 1.9 million shares of our common stock on the open market for $16.1 million, including brokerage commissions, at an average price of $8.45 per share. There were no share repurchases during the fourth quarter. Since the inception of our share repurchase program through December 31, 2016, we have purchased 4.6 million shares at an average price of $7.98 per share, including brokerage commissions, for a total of $36.3 million. The cumulative repurchases since BlackRock entered into the investment management agreement with the Company totaled approximately 2.8 million shares for $24.0 million, representing 66% of total share repurchase activity, on a dollar basis, since inception. As of December 31, 2016, the Company had approximately 1.2 million additional shares authorized for repurchase.

Portfolio and Investment Activity*

($’s in millions)

 

     Three months      Three months               
   ended      ended      Year ended     Year ended  
   December 31, 2016      December 31, 2015      December 31, 2016     December 31, 2015  

Commitments

   $ 107.8      $ 98.3      $ 325.4     $ 311.8  

Investment exits

   $ 109.2      $ 93.4      $ 377.2     $ 417.7  

Number of portfolio company investments at the end of period

           38       45  

Weighted average yield of debt and income producing equity securities, at fair market value

           11.7     11.6

% of Portfolio invested in Secured debt, at fair market value

           66     74

% of Portfolio invested in Unsecured debt, at fair market value

           17     15

% of Portfolio invested in Equity, at fair market value

           17     11

Average investment by portfolio company, at amortized cost (excluding investments below $5.0 million)

         $ 31.8     $ 32.5  

 

* balance sheet amounts above are as of period end

 

   

We invested $107.8 million during the quarter, while sales, repayments and other exits of investments totaled $109.2 million, resulting in a $1.4 million net decrease in our portfolio due to investment activity. Excluding the impact of the Vertellus restructuring, commitments and exits were $58.3 million and $59.7 million, respectively. Nearly 70% of our deployments during the quarter were represented by two portfolio companies: (i) $20.0 million of L + 1,000 second lien debt to Paragon Films, Inc. and (ii) $20.2 million of incremental equity to Senior Loan Partners. Approximately 90% of our proceeds from exits during the quarter were also represented by two transactions: (i) a repayment at par of our $35.1 million investment in BPA Laboratories Inc. and (ii) a $20.0 million reduction in our position in Sur La Table, Inc.

 

   

Our non-accrual rate further improved compared to the prior three quarters as a result of the aforementioned Vertellus restructuring. As of December 31, 2016, our non-accruals were 0.7% of our total debt investments at fair market value, and 5.4% at amortized cost, compared with 4.0% and 11.1%, respectively, as of the prior quarter-end. Our average internal investment rating at fair market value at year-end was 1.35 as compared to 1.40 as of the prior quarter end.

 

   

The portion of our portfolio invested in equity securities increased during the quarter to 17% at year end, primarily due to the deployment of $20.2 million of equity capital into Senior Loan Partners. Our portfolio composition of secured debt, at fair market value, decreased to 66% at year end, primarily resulting from the repayment of BPA Laboratories, Inc. during the quarter. Unsecured debt increased to 17% due to net depreciation in our total portfolio resulting in a smaller overall portfolio at fair market value. Total portfolio yield increased 30 basis points sequentially from 11.4% as of last quarter-end to 11.7%, largely a result of the Vertellus restructuring removing the investment from non-accrual status.

 

   

Net unrealized depreciation decreased $12.5 million during the current quarter, bringing total balance sheet unrealized depreciation to $92.3 million. During the period, gross unrealized depreciation of $17.2 million primarily from legacy assets was partially offset by $3.2 million of gross unrealized appreciation. Further, there was $26.4 million of unrealized appreciation during the quarter due primarily to the reversal of previously recognized unrealized depreciation on the Vertellus restructuring.

 

-3-


   

Fee income earned on capital structuring, prepayments, commitment, administration and amendments during the current quarter totaled $2.6 million, as compared to $0.5 million earned during the preceding quarter, and $1.5 million earned during the prior year quarter. Current quarter investment income also includes a $1.1 million insurance reimbursement received in connection with the previously disclosed AL Solutions legal settlement during the quarter. Excluding fee income and the insurance reimbursement, investment income decreased approximately 5% compared to the prior quarter, and 20% as compared to this quarter one year ago. The decreases were a result of a net reduction in overall income producing assets over the year, as well as certain investments on non-accrual status through the course of 2016.

Fourth Quarter and Full Year Financial Updates

 

   

Both GAAP net investment income (“NII”), and NII, as adjusted, were $17.1 million, or $0.24 per share, and $54.0 million, or $0.74 per share, respectively, for the three months and year ended December 31, 2016. Relative to 2016 distributions declared of $0.84 per share, our GAAP NII distribution coverage was 89% for the year, and 115% excluding the $16.4 million net expense resulting from the previously disclosed legal settlement, net of the current quarter insurance reimbursement.

 

   

During the quarter, there was no accrual for incentive management fees based on gains due largely to the net unrealized depreciation in the portfolio as of December 31, 2016. A hypothetical liquidation is performed each quarter end resulting in an additional accrual if the amount is positive or a reversal to the existing accrual if the amount is negative. However, the resulting fee accrual is not due and payable until June 30, if at all. There is currently no balance accrued for incentive management fees based on gains as of the measurement period ending December 31, 2016. Furthermore, no incentive management fees based on income were earned and payable for the quarter, as the distributable income amount was reduced below the hurdle by the net realized and unrealized losses in the portfolio for the trailing four quarter period. As a result, there were no pro-forma incentive management fees based on income for the quarter causing our NII, as adjusted, to equal our GAAP NII of $0.24 per share. We estimate that the waiver of the incentive management fees based on income will add approximately $0.03-$0.04 per share per quarter to NII based on the current earnings run-rate of the Company.

 

   

Our 2016 weighted average cost of debt decreased 141 basis points to 4.37%, as compared to 2015. This was primarily driven by (i) refinancing our $158 million 6.5% senior secured notes with proceeds from our revolving credit facility and (ii) the subsequent lowering of the interest rate margin on the credit facility pursuant to the amendment and restatement earlier in the year. Our 2016 borrowing costs, on a dollar basis, are more than 30% lower than the prior year, and we realized an annual savings in financing costs of $0.10 per share.

 

   

Tax characteristics of all 2016 distributions were reported to stockholders on Form 1099 after the end of the calendar year. Our 2016 tax distributions of $0.73 per share were comprised of ordinary income. Our return of capital distributions since inception totaled $1.96 per share. At our discretion, we may 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 2016. For more information on our GAAP distributions, please refer to the Section 19 Notice that may be posted within the Distribution History section of our website.

Liquidity and Capital Resources

 

   

At December 31, 2016, we had total liquidity of $260.7 million, consisting of $10.7 million in cash and cash equivalents and $250.0 million of availability under our credit facility, subject to leverage and borrowing base restrictions. The credit facility was amended and extended during the first quarter of 2016 to a February 2021 maturity.

 

   

Our net leverage, adjusted for available cash, receivables for investments sold, payables for investments purchased and unamortized debt issuance, stood at 0.55x at year-end, and our 275% asset coverage ratio provided the Company with available debt capacity under its asset coverage requirements of $256.3 million. Further, as of quarter-end, 86% of our portfolio was invested in qualifying assets, exceeding the 70% regulatory requirement of a business development company.

 

-4-


Conference Call

 

   

BlackRock Capital Investment Corporation will host a webcast/teleconference at 10:00 a.m. (Eastern Time) on Thursday, March 9, 2017, to discuss its fourth quarter 2016 financial results. All interested parties are welcome to participate. You can access the teleconference by dialing, from the United States, (888) 710-3981, or from outside the United States, (913) 312-0934, shortly before 10:00 a.m. and referencing the BlackRock Capital Investment Corporation Conference Call (ID Number 3210745). A live, listen-only webcast will also be available via the investor relations section of www.blackrockbkcc.com. Both the teleconference and webcast will be available for replay by 1:00 p.m. on Thursday, March 9, 2017 and ending at 1:00 p.m. on Thursday, March 23, 2017. To access the replay of the teleconference, callers from the United States should dial (888) 203-1112 and callers from outside the United States should dial (719) 457-0820 and enter the Conference ID Number 3210745.

 

   

Prior to the webcast/teleconference, an investor presentation that complements the earnings conference call will be posted to BlackRock Capital Investment Corporation’s website within the presentations section of the investor relations page (http://www.blackrockbkcc.com/InvestorRelations/Presentations/index.htm).

 

-5-


BlackRock Capital Investment Corporation

Consolidated Statements of Assets and Liabilities

(Unaudited)

 

     December 31,
2016
    December 31,
2015
 

Assets

    

Investments at fair value:

    

Non-controlled, non-affiliated investments (cost of $586,176,755 and $876,732,386)

   $ 512,308,390     $ 826,766,931  

Non-controlled, affiliated investments (cost of $112,640,458 and $62,003,676)

     109,342,171       67,163,896  

Controlled investments (cost of $322,768,014 and $214,393,103)

     309,472,929       223,065,737  
  

 

 

   

 

 

 

Total investments at fair value (cost of $1,021,585,227 and $1,153,129,165)

     931,123,490       1,116,996,564  

Cash and cash equivalents

     10,707,834       12,414,200  

Receivable for investments sold

     449,578       1,408,841  

Interest and fees receivable

     10,750,723       13,531,749  

Prepaid expenses and other assets

     4,035,866       4,040,147  
  

 

 

   

 

 

 

Total Assets

   $ 957,067,491     $ 1,148,391,501  
  

 

 

   

 

 

 

Liabilities

    

Debt

     335,667,906       362,551,503  

Interest payable

     3,041,680       7,826,690  

Distributions payable

     15,262,010       15,560,829  

Base management fees payable

     4,860,614       5,986,455  

Accrued administrative services

     —         219,917  

Other accrued expenses and payables

     1,914,912       2,493,492  
  

 

 

   

 

 

 

Total Liabilities

     360,747,122       394,638,886  
  

 

 

   

 

 

 

Net Assets

    

Common stock, par value $.001 per share, 200,000,000 common shares authorized, 77,228,207 and 76,747,083 issued and 72,676,242 and 74,099,182 outstanding

     77,228       76,747  

Paid-in capital in excess of par

     877,300,709       873,338,049  

Undistributed / (Distributions in excess of) net investment income

     (7,965,655     (17,112

Accumulated net realized loss

     (144,527,577     (60,922,258

Net unrealized (depreciation)

     (92,261,515     (38,513,195

Treasury stock at cost, 4,551,965 and 2,647,901 shares held

     (36,302,821     (20,209,616
  

 

 

   

 

 

 

Total Net Assets

     596,320,369       753,752,615  
  

 

 

   

 

 

 

Total Liabilities and Net Assets

   $ 957,067,491     $ 1,148,391,501  
  

 

 

   

 

 

 

Net Asset Value Per Share

   $ 8.21     $ 10.17  

 

-6-


     Three months     Three months              

BlackRock Capital Investment Corporation

Consolidated Statements of Operations (Unaudited)

   ended
December 31,
2016
    ended
December 31,
2015
    Year ended
December 31,
2016
    Year ended
December 31,
2015
 

Investment Income:

        

Interest income:

        

Non-controlled, non-affiliated investments

   $ 15,697,518     $ 23,270,640     $ 76,316,526     $ 94,575,801  

Non-controlled, affiliated investments

     2,060,394       1,406,271       5,946,132       5,832,038  

Controlled investments

     5,406,109       4,146,243       19,794,802       17,902,315  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest income

     23,164,021       28,823,154       102,057,460       118,310,154  
  

 

 

   

 

 

   

 

 

   

 

 

 

Fee income:

        

Non-controlled, non-affiliated investments: prepayment fees

     16,609       900,718       3,023,253       2,059,868  

Non-controlled, non-affiliated investments: capital structuring fees

     776,449       —         1,854,018       1,127,140  

Non-controlled, non-affiliated investments: other

     1,766,455       615,966       2,903,296       2,060,700  

Controlled investments

     39,890       25,000       291,640       328,033  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total fee income

     2,599,403       1,541,684       8,072,207       5,575,741  
  

 

 

   

 

 

   

 

 

   

 

 

 

Dividend income:

        

Non-controlled, non-affiliated investments

     188,016       195,919       774,235       1,013,960  

Non-controlled, affiliated investments

     178,425       411,647       1,869,769       1,633,135  

Controlled investments

     790,381       811,102       3,565,984       2,877,617  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total dividend income

     1,156,822       1,418,668       6,209,988       5,524,712  
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income

     1,100,000       —         1,100,000       —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Total investment income

     28,020,246       31,783,506       117,439,655       129,410,607  
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses:

        

Base management fees

     4,860,615       5,986,455       21,460,909       24,678,087  

Legal settlement

     —         —         17,500,000       —    

Incentive management fees

     —         —         —         (3,189,459

Interest and credit facility fees

     4,020,290       5,904,971       16,661,674       24,290,518  

Professional fees

     865,235       355,816       2,544,235       2,081,220  

Administrative services

     282,023       219,917       1,333,440       1,614,561  

Director fees

     184,750       175,000       706,500       698,500  

Investment advisor expenses

     87,504       83,796       350,004       798,139  

Other

     637,466       523,142       2,846,328       3,247,998  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     10,937,883       13,249,097       63,403,090       54,219,564  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Investment Income

     17,082,363       18,534,409       54,036,565       75,191,043  
  

 

 

   

 

 

   

 

 

   

 

 

 

Realized and Unrealized Gain (Loss):

        

Net realized gain (loss):

        

Non-controlled, non-affiliated investments

     (27,049,481     2,273,087       (83,048,145     28,721,448  

Non-controlled, affiliated investments

     —         —         —         121,381,408  

Controlled investments

     —         (9,260,324     (1,532,024     (27,845,330
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     (27,049,481     (6,987,237     (84,580,169     122,257,526  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net change in unrealized appreciation (depreciation) on:

        

Non-controlled, non-affiliated investments

     27,925,028       (38,537,721     (25,979,691     (66,265,415

Non-controlled, affiliated investments

     (3,740,774     3,198,488       (6,008,885     (114,059,303

Controlled investments

     (11,554,566     3,521,361       (21,967,719     22,751,536  

Foreign currency translation

     (152,457     (225,664     207,975       (1,250,303
  

 

 

   

 

 

   

 

 

   

 

 

 

Net change in unrealized appreciation (depreciation)

     12,477,231       (32,043,536     (53,748,320     (158,823,485
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     (14,572,250     (39,030,773     (138,328,489     (36,565,959
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Increase (Decrease) in Net Assets Resulting from Operations

   $ 2,510,113     $ (20,496,364   $ (84,291,924   $ 38,625,084  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Investment Income (Loss) Per Share

        

Basic

   $ 0.24     $ 0.25     $ 0.74     $ 1.01  
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ 0.26     $ 0.24     $ 0.74     $ 0.97  
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (Loss) Per Share

        

Basic

   $ 0.03     $ (0.28   $ (1.16   $ 0.52  
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ 0.05     $ (0.22   $ (1.16   $ 0.54  
  

 

 

   

 

 

   

 

 

   

 

 

 

Average Shares Outstanding

        

Basic

     72,673,587       74,203,324       72,757,978       74,576,277  
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

     82,570,315       84,100,051       72,757,978       84,473,005  
  

 

 

   

 

 

   

 

 

   

 

 

 

Distributions Declared Per Share

   $ 0.21     $ 0.21     $ 0.84     $ 0.84  

 

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Supplemental Information

The Company reports its financial results on a GAAP basis; however, management believes that evaluating the Company’s ongoing operating results may be enhanced if investors have additional non-GAAP basis financial measures. Management reviews non-GAAP financial measures to assess ongoing operations and, for the reasons described below, considers them to be effective indicators, for both management and investors, of the Company’s financial performance over time. The Company’s management does not advocate that investors consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.

The Company records its liability for incentive management fees based on income as it becomes legally obligated to pay them, based on a hypothetical liquidation at the end of each reporting period. The Company’s obligation to pay incentive management fees with respect to any fiscal quarter is based on a formula that reflects the Company’s results over a trailing four-fiscal quarter period ending with the current fiscal quarter. The Company is legally obligated to pay the amount resulting from the formula less any cash payments of incentive management fees during the prior three quarters. The formula’s requirement to reduce the incentive management fee by amounts paid with respect to such fees in the prior three quarters has caused the Company’s incentive management fee expense to become, and currently is expected to be, concentrated in the fourth quarter of each year. Management believes that reflecting incentive management fees throughout the year, as the related investment income is earned, is an effective measure of the Company’s profitability and financial performance that facilitates comparison of current results with historical results and with those of the Company’s peers. The Company’s “as adjusted” results reflect incentive management fees based on the formula the Company utilizes for each trailing four-fiscal quarter period, with the formula applied to the current quarter’s incremental earnings and without any reduction for incentive management fees paid during the prior three quarters. The resulting amount represents an upper limit of each quarter’s incremental incentive management fees that the Company may become legally obligated to pay at the end of the year. Prior year amounts are estimated in the same manner. These estimates represent upper limits because, in any calendar year, subsequent quarters’ investment underperformance could reduce the incentive management fees payable by the Company with respect to prior quarters’ operating results. Similarly, the Company records its liability for incentive management fees based on capital gains by performing a hypothetical liquidation at the end of each reporting period. The accrual of this hypothetical capital gains incentive management fee is required by GAAP, but it should be noted that a fee so calculated and accrued is not due and payable until the end of the measurement period, or every June 30. The incremental incentive management fees disclosed for a given period are not necessarily indicative of actual full year results. Changes in the economic environment, financial markets and other parameters used in determining such estimates could cause actual results to differ and such differences could be material. For a more detailed description of the Company’s incentive management fee, please refer to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, on file with the Securities and Exchange Commission (“SEC”).

Computations for the periods below are derived from the Company’s financial statements as follows:

 

     Three months
ended
December 31, 2016
     Three months
ended
December 31, 2015
    Year ended
December 31, 2016
     Year ended
December 31, 2015
 

GAAP Basis:

          

Net Investment Income/(Loss)

   $ 17,082,363      $ 18,534,409     $ 54,036,565      $ 75,191,043  

Net Investment Income/(Loss) per share

     0.24        0.25       0.74        1.01  

Addback: GAAP incentive management fee expense based on Gains

     —          —         —          (3,200,520

Addback: GAAP incentive management fee expense based on Income

     —          —         —          11,061  

Pre-Incentive Fee1:

          

Net Investment Income/(Loss)

   $ 17,082,363      $ 18,534,409     $ 54,036,565      $ 72,001,584  

Net Investment Income/(Loss) per share

     0.24        0.25       0.74        0.97  

Less: Incremental incentive management fee expense based on Income

     —          (3,169,395     —          11,061  

As Adjusted2:

          

Net Investment Income/(Loss)

   $ 17,082,363      $ 21,703,804     $ 54,036,565      $ 71,990,523  

Net Investment Income/(Loss) per share

     0.24        0.29       0.74        0. 97  

 

1

Pre-Incentive Fee: Amounts are adjusted to remove all incentive management fees. Such fees are calculated but not necessarily due and payable at this time.

2

As Adjusted: Amounts are adjusted to remove the incentive management fee expense based on gains, as required by GAAP, and to include only the incremental incentive management fee expense based on Income. The incremental incentive management fee is calculated based on the current quarter’s incremental earnings, and without any reduction for incentive management fees paid during the prior calendar quarters. Amounts reflect the Company’s ongoing operating results and reflect the Company’s financial performance over time.

 

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About BlackRock Capital Investment Corporation

BlackRock Capital Investment Corporation is a business development company that provides debt and equity capital to middle-market companies.

The Company’s investment objective is to generate both current income and capital appreciation through debt and equity investments. The Company invests primarily in middle-market companies in the form of senior and junior secured and unsecured debt securities and loans, each of which may include an equity component, and by making direct preferred, common and other equity investments in such companies.

Forward-looking statements

This press release, and other statements that BlackRock Capital Investment Corporation may make, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act, with respect to BlackRock Capital Investment Corporation’s future financial or business performance, strategies or expectations. Forward-looking statements are typically identified by words or phrases such as “trend,” “potential,” “opportunity,” “pipeline,” “believe,” “comfortable,” “expect,” “anticipate,” “current,” “intention,” “estimate,” “position,” “assume,” “outlook,” “continue,” “remain,” “maintain,” “sustain,” “seek,” “achieve,” and similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “may” or similar expressions.

BlackRock Capital Investment Corporation cautions that forward-looking statements are subject to numerous assumptions, risks and uncertainties, which may change over time. Forward-looking statements speak only as of the date they are made, and BlackRock Capital Investment Corporation assumes no duty to and does not undertake to update forward-looking statements. Actual results could differ materially from those anticipated in forward-looking statements and future results could differ materially from historical performance.

In addition to factors previously disclosed in BlackRock Capital Investment Corporation’s SEC reports and those identified elsewhere in this press release, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance: (1) our future operating results; (2) our business prospects and the prospects of our portfolio companies; (3) the impact of investments that we expect to make; (4) our contractual arrangements and relationships with third parties; (5) the dependence of our future success on the general economy and its impact on the industries in which we invest; (6) the financial condition of and ability of our current and prospective portfolio companies to achieve their objectives; (7) our expected financings and investments; (8) the adequacy of our cash resources and working capital, including our ability to obtain continued financing on favorable terms; (9) the timing of cash flows, if any, from the operations of our portfolio companies; (10) the impact of increased competition; (11) the ability of our investment advisor to locate suitable investments for us and to monitor and administer our investments; (12) potential conflicts of interest in the allocation of opportunities between us and other investment funds managed by our investment advisor or its affiliates; (13) the ability of our investment advisor to attract and retain highly talented professionals; (14) changes in law and policy accompanying the new administration and uncertainty pending any such changes; (15) increased geopolitical unrest, terrorist attacks or acts of war, which may adversely affect the general economy, domestic and local financial and capital markets, or the specific industries of our portfolio companies; (16) changes and volatility in political, economic or industry conditions, the interest rate environment, foreign exchange rates or financial and capital markets; (17) the unfavorable resolution of legal proceedings; and (18) the impact of changes to tax legislation and, generally, our tax position.

BlackRock Capital Investment Corporation’s Annual Report on Form 10-K for the year ended December 31, 2016, filed with the SEC identifies additional factors that can affect forward-looking statements.

Available Information

BlackRock Capital Investment Corporation’s filings with the SEC, press releases, earnings releases and other financial information are available on its website at www.blackrockbkcc.com. The information contained on our website is not a part of this press release.

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