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 12, 2014
KCAP Financial, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 814-00735 | 20-5951150 |
| (State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
| 295 MADISON AVENUE NEW YORK, NY |
10017 |
| (Address of principal executive offices) | (Zip Code) |
Registrant's telephone number, including area code: (212) 455-8300
Kohlberg Capital Corporation
(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 12, 2014 the Registrant issued a press release, a copy of which is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
Exhibit 99.1. Press release dated March 12, 2014
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 hereunto duly authorized.
| KCAP Financial, Inc.
(Registrant) |
||
| March 12, 2014
(Date) |
/s/ EDWARD U. GILPIN
Edward U. Gilpin Chief Financial Officer |
| Exhibit Index | ||
| 99.1 | Press release dated March 12, 2014 | |
EXHIBIT 99.1
KCAP Financial, Inc. Announces Fourth Quarter and Full Year 2013 Financial Results
NEW YORK, March 12, 2014 (GLOBE NEWSWIRE) -- KCAP Financial, Inc. (Nasdaq:KCAP) announces its fourth quarter and full year 2013 financial results.
Financial Highlights
-
Net investment income for the fourth quarter ended December 31, 2013 was approximately $7.9 million, or $0.24 per basic share. Net investment income for the year ended December 31, 2013 was approximately $29.0 million, or $0.90 per basic share, compared with $24.1 million, or $0.93 per basic share in 2012.
-
KCAP Financial, Inc. declared a fourth quarter shareholder distribution of $0.25 per share.
-
At December 31, 2013, the fair value of KCAP's investments totaled approximately $441 million, an increase of 41% from $312 million at December 31, 2012.
- Net asset value per share of $7.51 as of December 31, 2013, compared with $7.85 at December 31, 2012.
Dayl Pearson, President and Chief Executive Officer of KCAP Financial, Inc., noted, "I am pleased with the continued improvement in our results, in part attributable to our focus on direct originations, executing our strategy of rotation into higher yielding assets, and the continued strong performance of our Asset Manager Affiliates."
Operating Results
For the year ended December 31, 2013, we reported total investment income of approximately $48.3 million as compared to approximately $38.6 million in the prior year, an increase of 25%. Investment income from debt securities increased 12% to approximately $14 million from approximately $12.5 million. Dividends from investments in CLO fund securities in 2013 were essentially unchanged from 2012, and dividends from our Asset Manager Affiliates increased 171% from $4.7 million to $12.8 million. The increase in dividends from the Asset Manager Affiliates is primarily attributable to greater incentive fees.
For the year ended December 31, 2013, total expenses were higher by approximately $4.8 million as compared to the same period in 2012, primarily attributable to the increase in interest expense related to the average outstanding principal balance on our borrowings as well as increased operating expenses.
Net investment income for the years ended 2013 and 2012 was approximately $29.0 million and $24.1 million, or $0.90 and $0.93 per share, respectively. Net realized and unrealized depreciation on investments for the year ended 2013 was approximately $11.2 million, as compared to net realized and unrealized appreciation on investments of $2.0 million for the same period in 2012.
Portfolio and Investment Activity
The fair value of our portfolio was approximately $441 million as of December 31, 2013. The composition of our investment portfolio at December 31, 2013 and December 31, 2012 at cost and fair value was as follows:
| December 31, 2013 | December 31, 2012 | |||||
| Security Type | Cost | Fair Value | %¹ | Cost | Fair Value | %¹ |
| Time Deposits | $ -- | $ -- | --% | $ 1,942,834 | $ 1,942,834 | 1% |
| Money Market Account | 7,112,949 | 7,112,949 | 3 | 30,543,824 | 30,543,824 | 15 |
| Senior Secured Loan | 175,021,272 | 168,188,453 | 67 | 67,874,565 | 60,258,885 | 29 |
| Junior Secured Loan | 50,831,407 | 48,443,384 | 19 | 49,646,273 | 33,486,956 | 17 |
| Senior Unsecured Loan | 23,000,000 | 23,000,000 | 9 | -- | -- | -- |
| First Lien Bond | 2,948,332 | 2,546,400 | 2 | 2,928,762 | 3,000,000 | 1 |
| Senior Subordinated Bond | 1,037,707 | 1,051,540 | -- | 2,729,088 | 2,735,881 | 1 |
| Senior Secured Bond | 1,519,072 | 1,619,550 | 1 | -- | -- | -- |
| Senior Unsecured Bond | 10,855,804 | 11,381,100 | 5 | 10,798,463 | 11,185,000 | 5 |
| CLO Fund Securities | 101,696,950 | 79,452,220 | 32 | 90,146,410 | 83,257,507 | 40 |
| Equity Securities | 18,755,684 | 11,006,398 | 4 | 18,375,588 | 8,020,716 | 4 |
| Preferred Stock | 10,000,000 | 10,600,000 | 4 | 400,000 | 371,160 | -- |
| Asset Manager Affiliates | 83,378,741 | 76,148,000 | 30 | 83,161,529 | 77,242,000 | 37 |
| Total | $ 486,157,918 | $ 440,549,994 | 176% | $ 358,547,336 | $ 312,044,763 | 150% |
| ¹ Calculated as a percentage of net asset value. | ||||||
Liquidity and Capital Resources
At December 31, 2013, we had unrestricted cash and money market balances of approximately $10.5 million, total assets of approximately $459.2 million and stockholders' equity of approximately $250.4 million. Our net asset value per common share was $7.51. As of December 31, 2013, we had $195.7 million of borrowings outstanding ($192.5 million net of discount) with a weighted average interest rate of approximately 5.1%.
Subject to prevailing market conditions, we intend to grow our portfolio of assets by raising additional capital, including through the prudent use of leverage available to us. As a result, we may seek to enter into new agreements with other lenders or into other financing arrangements as market conditions permit. Such financing arrangements may include a new secured and/or unsecured credit facility or the issuance of unsecured debt or preferred stock.
Distributions
Generally, we seek to fund distributions to shareholders from current distributable earnings, primarily from net interest and dividend income generated by our investment portfolio and any distributions from our Asset Manager Affiliates (Trimaran Advisors and Katonah Debt Advisors). However, a portion of distributions paid to shareholders may be a return of capital. We announced a regular quarterly distribution of $0.25 per share for the quarter ended December 31, 2013. The record date for this distribution was December 27, 2013 and the distribution was paid on January 27, 2014. Tax characteristics of all distributions paid by us in 2013 have been reported to stockholders on Form 1099-DIV after the end of the calendar year.
We have adopted a dividend reinvestment plan that provides for reinvestment of distributions in shares of our common stock, unless a stockholder elects to receive cash. As a result, if we declare a cash distribution, shareholders who have not "opted out" of our dividend reinvestment plan will have their cash distributions automatically reinvested in additional shares of our common stock, rather than receiving cash. Please contact your broker or other financial intermediary for more information regarding the dividend reinvestment plan.
Conference Call and Webcast
We will hold a conference call on Thursday, March 13, 2014 at 4:00 p.m. Eastern Daylight Time to discuss our fourth quarter 2013 financial results. Shareholders, prospective shareholders and analysts are welcome to listen to the call or attend the webcast.
The conference call dial-in number is (866) 757-5630. No password is required. A live audio webcast of the conference call can be accessed via the Internet, on a listen-only basis on our Company's website www.kcapfinancial.com in the Investor Relations section under Events. The online archive of the webcast will be available after 7:00 p.m. Eastern Daylight Time for approximately 90 days.
A replay of this conference call will be available from 7:00 p.m. on March 13, 2014 until 11:59 p.m. on March 20, 2014. The dial in number for the replay is (800) 585-8367 and the conference ID is 9735357.
About KCAP Financial, Inc.
KCAP Financial, Inc. is a publicly traded, internally managed business development company. The Company's middle market investment business originates, structures, finances and manages a portfolio of term loans, mezzanine investments and selected equity securities in middle market companies. The Company's wholly owned portfolio companies, Trimaran Advisors, L.L.C. and Katonah Debt Advisors, L.L.C. , manage collateralized debt obligation funds that invest in broadly syndicated corporate term loans, high-yield bonds and other credit instruments.
The KCAP Financial, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=3121
Forward Looking Statements
This press release contains forward-looking statements. The matters discussed in this press release that are forward-looking statements are based on current management expectations that involve substantial risks and uncertainties which could cause actual results to differ materially from the results expressed in, or implied by, these forward-looking statements. Forward-looking statements relate to future events or our future financial performance. We generally identify forward-looking statements by terminology such as "may,'' "will,'' "should,'' "expects,'' "plans,'' "anticipates,'' "could,'' "intends,'' "target,'' "projects,'' "contemplates,'' "believes,'' "estimates,'' "predicts,'' "potential'' or "continue'' or the negative of these terms or other similar words. Further information about factors that could affect our financial and other results is included in our filings with the Securities and Exchange Commission. We do not undertake to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required to be reported under the rules and regulations of the Securities and Exchange Commission.
| KCAP FINANCIAL, INC. | ||
| BALANCE SHEETS | ||
|
As of December 31, 2013 |
As of December 31, 2012 |
|
| ASSETS | ||
| Investments at fair value: | ||
| Time deposit (cost: 2013 - $0; 2012 - $1,942,834) | $ — | $ 1,942,834 |
| Money market accounts (cost: 2013 - $7,112,949; 2012 - $30,543,824) | 7,112,949 | 30,543,824 |
| Debt securities (cost: 2013 - $275,213,594; 2012 - $134,377,151) | 266,830,427 | 111,037,882 |
| CLO Fund Securities managed by affiliates (cost: 2013 - $88,979,585; 2012 - $79,659,387) | 75,100,306 | 79,531,583 |
| CLO Fund Securities managed by non-affiliates (cost: 2013 - $12,717,365; 2012 - $10,487,023) | 4,351,914 | 3,725,924 |
| Equity securities (cost: 2013 - $18,755,684; 2012 - $18,375,588) | 11,006,398 | 8,020,716 |
| Asset Manager Affiliates (cost: 2013 - $83,378,741; 2012 - $83,161,529) | 76,148,000 | 77,242,000 |
| Total Investments at Fair Value (cost: 2013 - $486,157,918; 2012 - $358,547,336) | 440,549,994 | 312,044,763 |
| Cash | 3,433,675 | 738,756 |
| Restricted cash | 4,078,939 | — |
| Interest receivable | 2,032,559 | 697,349 |
| Accounts receivable | 3,125,259 | 2,210,869 |
| Other assets | 5,951,963 | 3,568,736 |
| Total Assets | $ 459,172,388 | $ 319,260,473 |
| LIABILITIES | ||
| Convertible Notes | $ 49,008,000 | $ 60,000,000 |
| 7.375% Notes Due 2019 | 41,400,000 | 41,400,000 |
| Notes issued by KCAP Senior Funding I, LLC (net of discount: $3,065,627) | 102,184,373 | — |
| Payable for open trades | 3,980,000 | — |
| Accounts payable and accrued expenses | 3,897,291 | 2,581,432 |
| Dividend payable | 8,333,031 | 7,403,382 |
| Total Liabilities | 208,802,695 | 111,384,814 |
| STOCKHOLDERS' EQUITY | ||
| Common stock, par value $0.01 per share, 100,000,000 common shares authorized; 33,332,123 and 26,470,408 common shares issued and outstanding at December 31, 2013 and December 31, 2012, respectively | 333,472 | 264,382 |
| Capital in excess of par value | 370,929,615 | 310,566,503 |
| Accumulated (excess distribution) undistributed net investment income | (6,102,017) | 103,484 |
| Accumulated net realized losses | (68,662,689) | (56,035,375) |
| Net unrealized depreciation on investments | (46,128,688) | (47,023,335) |
| Total Stockholders' Equity | 250,369,693 | 207,875,659 |
| Total Liabilities and Stockholders' Equity | $ 459,172,388 | $ 319,260,473 |
| NET ASSET VALUE PER COMMON SHARE | $ 7.51 | $ 7.85 |
| See accompanying notes to financial statements. | ||
| KCAP FINANCIAL, INC. | |||
| STATEMENTS OF OPERATIONS | |||
| For the Years Ended December 31, | |||
| 2013 | 2012 | 2011 | |
| Investment Income: | |||
| Interest from investments in debt securities | $ 13,967,235 | $ 12,504,569 | $ 9,438,493 |
| Interest from cash and time deposits | 20,656 | 5,741 | 21,938 |
| Dividends from investments in CLO Fund Securities managed by affiliates | 19,902,348 | 19,207,401 | 12,413,797 |
| Dividends from investments in CLO Fund Securities managed by non-affiliates | 1,320,525 | 1,861,263 | 1,949,360 |
| Dividends from Asset Manager Affiliates | 12,750,000 | 4,700,000 | 1,910,000 |
| Capital structuring service fees | 305,376 | 304,882 | 86,057 |
| Other Income | — | — | 2,000,000 |
| Total investment income | 48,266,140 | 38,583,856 | 27,819,645 |
| Expenses: | |||
| Interest and amortization of debt issuance costs | 10,116,271 | 6,976,018 | 4,588,482 |
| Compensation | 4,630,481 | 3,172,814 | 3,907,900 |
| Professional fees | 2,191,305 | 2,453,945 | 2,010,253 |
| Insurance | 552,568 | 546,989 | 493,305 |
| Administrative and other | 1,819,876 | 1,343,677 | 987,381 |
| Total expenses | 19,310,501 | 14,493,443 | 11,987,321 |
| Net Investment Income | 28,955,639 | 24,090,413 | 15,832,324 |
| Realized And Unrealized Gains (Losses) On Investments: | |||
| Net realized loss from investment transactions | (12,090,503) | (3,232,975) | (18,476,608) |
| Net change in unrealized appreciation (depreciation) on: | |||
| Debt securities | 14,956,103 | (3,701,536) | 15,864,850 |
| Equity securities | 2,605,586 | 163,843 | (1,724,319) |
| CLO Fund Securities managed by affiliates | (13,751,478) | 8,316,279 | (4,420,194) |
| CLO Fund Securities managed by non-affiliates | (1,604,352) | 2,884,983 | 1,058,464 |
| Asset Manager Affiliates investments | (1,311,212) | (2,395,228) | (484,973) |
| Total net unrealized gain from investment transactions | 894,647 | 5,268,341 | 10,293,828 |
| Net realized and unrealized appreciation (depreciation) on investments | (11,195,856) | 2,035,366 | (8,182,780) |
| Realized losses on extinguishments of Debt | (536,811) | — | — |
| Net Increase In Stockholders' Equity Resulting From Operations | $ 17,222,972 | $ 26,125,779 | $ 7,649,544 |
| Net Increase in Stockholders' Equity Resulting from Operations per Common Share: | |||
| Basic: | $ 0.53 | $ 1.00 | $ 0.33 |
| Diluted: | $ 0.53 | $ 0.95 | $ 0.33 |
| Net Investment Income Per Common Share: | |||
| Basic: | $ 0.90 | $ 0.93 | $ 0.69 |
| Diluted: | $ 0.86 | $ 0.89 | $ 0.69 |
| Weighted Average Shares of Common Stock Outstanding—Basic | 32,280,160 | 26,011,517 | 22,868,648 |
| Weighted Average Shares of Common Stock Outstanding—Diluted | 32,295,005 | 33,379,594 | 22,880,674 |
| See accompanying notes to financial statements. | |||
KCAP-G
CONTACT: KCAP Financial, Inc.
Investor Relations
Denise Rodriguez
(212) 455-8300
info@kcapfinancial.com