Solar Capital Ltd (NASDAQ: SLRC), today reported earnings of $1.42 per share and net investment income of $20.7 million, or $0.57 per share, for the quarter ended December 31, 2011. At year end, net asset value (NAV) per share was $22.02, a 4% increase from September 30, 2011. Solar Capital also announced that its Board of Directors has declared a first quarter dividend of $0.60 per share, payable on April 3, 2012 to stockholders of record on March 20, 2012. The Company expects the dividend to be paid from taxable earnings with specific tax characteristics reported to stockholders after the end of the 2012 calendar year.
|Year-End Balance Sheet Highlights|
|($ in millions, except per share amounts)|
|NAV per share||$||22.02||$||22.73|
|Investment Portfolio Composition:|
|Senior Secured Loans||$||412.4||$||247.1|
|Weighted Average Portfolio Statistics:|
|Yield on Fair Value||14.2||%||14.3||%|
|Yield on Cost||13.2||%||13.8||%|
|Income Highlights for the Quarter and Year|
|($ in millions)|
|Net Investment Income (NII)||$||20.7||$||17.4||$||81.9||$||69.2|
|Net Realized and Unrealized Gain (Loss)||31.2||25.0||(20.6||)||72.7|
|NII per share||$||0.57||$||0.51||$||2.25||$||2.08|
“We are very pleased with our performance for 2011,” said Michael Gross, Chairman and CEO. “Our originations of approximately $400 million have resulted in a portfolio with over 70% of its fair value in assets underwritten post the 2008 credit correction. We view these post-2008 vintage assets as having highly attractive risk-reward characteristics. We are well positioned to further expand our portfolio to drive increases in earnings through the deployment of our $300 million of uninvested capital. During 2011, we increased our borrowing capacity to $540 million and obtained investment grade ratings from Standard & Poor’s and Fitch, further enhancing our funding options.”
Portfolio and Investment Activity
During the quarter ended December 31, 2011, we invested approximately $75.5 million across two new and two existing portfolio companies. We received proceeds of approximately $92.9 million from principal repayments and sales of securities during the fourth quarter.
During the year ended December 31, 2011, we invested approximately $395.6 million across 13 new and six existing portfolio companies. We received proceeds of approximately $338.2 million from principal repayments and sales of securities during the year.
As of December 31, 2011, the fair value weighted average yield on income producing investments in our portfolio was approximately 14.2%, compared to 14.6% and 14.3% at September 30, 2011 and December 31, 2010, respectively.
The portfolio was comprised of 40% senior secured loans, 52% subordinated debt, and 8% equity. As of December 31, there was one asset on non-accrual status with a total market value of approximately $5.9 million. Performing loans comprised 99.4% of the fair value of the debt portfolio.
As of December 31, 2011, the weighted average investment rating on the fair market value of our portfolio was 2.
Results of Operations
Investment income was $36.0 million and $31.6 million for the three months ended December 31, 2011 and 2010, respectively. The fourth quarter 2011 investment income was higher due to increased interest income on a higher average invested balance. Net investment income was $20.7 million or $0.57 per share and $17.4 million or $0.51 per share for the three months ended December 31, 2011 and 2010, respectively. For the quarter, increased investment income and lower interest expenses were partially offset by higher management and incentive fees, on a larger portfolio, and higher operating expenses.
The net realized and unrealized gain of $31.2 million for the three months ended December 31, 2011 was primarily due to an increase in the fair value of our portfolio during the period due to improved market trends and realizations above prior period marks.
For the years ended December 31, 2011 and 2010, investment income totaled $138.9 million and $124.6 million, respectively. Investment income was higher for 2011 primarily due to higher interest and dividend income on a larger average invested balance. Net investment income of $81.9 million for the year ended December 31, 2011 was $12.7 million higher than in 2010. During 2011, increased investment income and lower interest expenses were partially offset by higher management and incentive fees, on a larger portfolio, and higher operating expenses.
The net realized and unrealized loss of $20.6 million for the year ended December 31, 2011 was primarily attributable to a decrease in the fair value of our portfolio assets during the second half of the year primarily due to market technicals.
Conference Call and Webcast
We will host an earnings conference call and audio webcast at 10:00 a.m. (Eastern Time) on Thursday, February 23, 2012. All interested parties may participate in the conference call by dialing 866-314-4865 approximately 5-10 minutes prior to the call, international callers should dial 617-213-8050. Participants should reference Solar Capital Ltd. and the participant passcode of 70624245 when prompted. Following the call you may access a replay of the event via audio webcast. This conference call will be broadcast live over the Internet and can be accessed by all interested parties through Solar Capital’s website, http://www.solarcapltd.com/. To listen to the live call, please go to the Company's website at least 15 minutes prior to the start of the call to register and download any necessary audio software. For those who are not able to listen to the live broadcast, a replay will be available shortly after the call on the Solar Capital website.
Financial Statements and Tables
SOLAR CAPITAL LTD.
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(in thousands, except per share amounts)
|December 31,||December 31,|
|Investments at fair value:|
|Companies more than 25% owned (cost: $47,910 and $20,511, respectively)||$||53,454||$||20,508|
|Companies 5% to 25% owned (cost: $41,819 and $34,806, respectively)||35,820||29,235|
|Companies less than 5% owned (cost: $1,062,844 and $1,008,244, respectively)||955,769||926,478|
|Total investments (cost: $1,152,573 and $1,063,561, respectively)||1,045,043||976,221|
|Cash and cash equivalents||11,787||288,732|
|Interest and dividends receivable||9,763||5,592|
|Deferred credit facility costs||3,635||5,904|
|Fee revenue receivable||4,379||3,935|
Derivative assets (cost $2,938 and $0, respectively)
|Receivable for investments sold||3,225||10,560|
|Deferred offering costs||469||—|
|Prepaid expenses and other receivables||481||243|
|Credit facilities payable||201,355||400,000|
|Payable for investments purchased||22,443||14,625|
|Due to Solar Capital Partners LLC:|
|Investment advisory and management fee payable||5,277||4,892|
|Performance-based incentive fee payable||5,203||4,347|
|Deferred fee revenue||318||1,242|
|Due to Solar Capital Management LLC||1,069||773|
|Income taxes payable||720||329|
|Other accrued expenses and payables||1,042||1,453|
|Common stock, par value $0.01 per share 36,608,038 and 36,383,158 shares issued and outstanding, respectively, 200,000,000 shares authorized||366||364|
|Paid-in capital in excess of par||928,180||926,991|
|Under (over) distributed net investment income||2,245||(1,545||)|
|Accumulated net realized losses||(18,379||)||(10,541||)|
|Net unrealized depreciation||(106,471||)||(88,275||)|
|Total Net Assets||$||805,941||$||826,994|
|Number of shares outstanding||36,608,038||36,383,158|
|Net Asset Value Per Share||$||22.02||$||22.73|
SOLAR CAPITAL LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
December 31, 2011
December 31, 2010
December 31, 2009
|Interest and dividends:|
|Companies more than 25% owned||$||6,963||$||670||$||—|
|Companies 5% to 25% owned||—||7,673||9,190|
|Other interest and dividend income||131,937||116,298||100,480|
|Total investment income||138,900||124,641||109,670|
|Investment advisory and management fees||20,596||18,296||16,738|
|Performance-based incentive fee||20,476||17,305||16,815|
|Interest and other credit facility expenses||9,212||14,276||2,636|
|Administrative service fee||1,638||1,294||2,020|
|Other general and administrative expenses||4,326||3,930||3,971|
|Total operating expenses||56,248||55,101||42,180|
|Net investment income before income tax expense||82,652||69,540||67,490|
|Income tax expense||748||328||228|
|Net investment income||81,904||69,212||67,262|
|REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, DERIVATIVES AND FOREIGN CURRENCIES:|
|Net realized gain (loss):|
|Companies more than 25% owned||—||—||(30||)|
|Companies 5% to 25% owned||784||16,397||—|
|Companies less than 5% owned||3,092||(55,762||)||(253,364||)|
|Net realized gain (loss) on investments||3,876||(39,365||)||(253,394||)|
|Foreign currency exchange||(418||)||3,521||1,104|
|Net realized loss before income taxes||(2,162||)||(38,968||)||(264,898||)|
|Income tax expense||231||-||-|
|Net realized loss||(2,393||)||(38,968||)||(264,898||)|
|Net change in unrealized gain (loss):|
|Companies more than 25% owned||5,547||997||(3,900||)|
|Companies 5% to 25% owned||(428||)||(13,892||)||3,823|
|Companies less than 5% owned||(25,309||)||126,403||287,748|
|Net unrealized gain (loss) on investments||(20,190||)||113,508||287,671|
|Foreign currency exchange||3,348||(663||)||(516||)|
|Net change in unrealized gain (loss)||(18,196||)||111,641||284,572|
|Net realized and unrealized gain (loss) on investments, derivatives and foreign currencies||(20,589||)||72,673||19,674|
|Net increase in net assets resulting from operations||$||61,315||$||141,885||$||86,936|
|Earnings per share||$||1.68||$||4.27||$||2.65|
ABOUT SOLAR CAPITAL LTD.
Solar Capital Ltd. is a closed-end investment company that has elected to be treated as a business development company under the Investment Company Act of 1940. The Company invests primarily in leveraged, middle market companies in the form of senior secured loans, mezzanine loans, and equity securities.
Statements included herein may constitute “forward-looking statements,” which relate to future events or our future performance or financial condition. These statements are not guarantees of future performance, condition or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in our filings with the Securities and Exchange Commission. Solar Capital Ltd. undertakes no duty to update any forward-looking statements made herein.