Board Promotes Richard P. Buckanavage to
President of the Company
Harvest Capital Credit Corporation (the “Company,” “we,” or
“our”) (NASDAQ: HCAP) announced financial results for its fiscal
year and fourth quarter ended December 31, 2019 and that its Board
of Directors declared distributions of $0.08 per share for each of
the months of February, March, and April of 2020. The February
distribution is payable on March 30, 2020 to shareholders of record
on March 23, 2020. The March distribution is payable on April 30,
2020 to shareholders of record on April 23, 2020. The April
distribution is payable on May 28, 2020 to shareholders of record
on May 21, 2020.*
*-Distributions may include net investment income, capital gains
and/or return of capital. The tax status of distributions will be
determined at the end of the taxable year.
FINANCIAL HIGHLIGHTS
Q4-19
Q4-18
FY-19
FY-18
Amount
Per share
Amount
Per share
Amount
Per share
Amount
Per share
Net investment income
$1,153,280
$0.19
$1,575,141
$0.25
$3,828,786
$0.63
$5,982,399
$0.93
Core net investment income (1)
1,153,280
0.19
1,575,141
0.25
3,828,786
0.63
5,982,399
0.93
Net realized gains (losses) on
investments
(2,333,549)
(0.39)
122,440
0.02
(2,363,853)
(0.39)
(486,680)
(0.07)
Net change in unrealized depreciation on
investments
869,874
0.15
(164,944)
(0.03)
(2,671,388)
(0.44)
(428,921)
(0.07)
Benefit for taxes on unrealized losses on
investments
—
—
15,584
—
(2)
—
—
—
—
Net income (loss)
($310,395)
($0.05)
$1,548,221
$0.24
($1,206,455)
($0.20)
$5,066,798
$0.79
Weighted average shares outstanding (basic
and diluted)
5,944,914
6,401,887
6,114,474
6,406,869
(1) Core net investment income and core net
investment income per share are non-GAAP financial measures. For
each of the fiscal years and quarters ended December 31, 2019 and
2018, there were no adjustments to GAAP net investment income and
GAAP net investment income per share to arrive at core net
investment income and core net investment income per share. (2)
Rounds to less than $0.01 per share.
PORTFOLIO ACTIVITY
December 31, 2019
December 31, 2018
Portfolio investments at fair value
$
116,809,390
$
94,913,862
Total assets
$
140,059,736
$
125,319,701
Net assets
$
66,781,482
$
78,395,964
Shares outstanding
5,945,854
6,372,581
Net asset value per share
$
11.23
$
12.30
Q4-19
Q4-18
FY-19
FY-18
Portfolio activity during the period:
New debt investments
$
4,426,801
$
567,000
$
55,322,156
$
19,179,500
New equity investments
10,637
718,000
3,747,775
1,559,899
Exits of debt investments
—
(18,552,045
)
(21,438,058
)
(37,478,412
)
Exits of equity investments
—
(12,500
)
(206,435
)
(1,591,091
)
Principal repayments
(1,890,347
)
(1,035,336
)
(8,073,409
)
(5,480,533
)
Net activity
$
2,547,091
$
(18,314,881
)
$
29,352,029
$
(23,810,637
)
December 31, 2019
December 31, 2018
Number of portfolio company
investments
25
24
Number of debt investments
20
17
Weighted average yield of debt and other
income producing investments (1):
Cash
12.0
%
12.5
%
PIK
1.1
%
1.0
%
Fee amortization
0.9
%
1.3
%
Total
14.0
%
14.8
%
Weighted average yield on total
investments (2):
Cash
9.7
%
10.7
%
PIK
0.9
%
0.9
%
Fee amortization
0.7
%
1.1
%
Total
11.3
%
12.7
%
(1) The dollar-weighted average annualized
effective yield is computed using the effective interest rates for
our debt investments and other income producing investments,
including cash and PIK interest as well as the accretion of
deferred fees. The individual investment yields are then weighted
by the respective fair values of the investments (as of the date
presented) in calculating the weighted average effective yield of
the portfolio as a percentage of our debt and other income
producing investments. The dollar-weighted average annualized yield
on the Company’s investments for a given period will generally be
higher than what investors in our common stock would realize in a
return over the same period because the dollar-weighted average
annualized yield does not reflect the Company’s expenses or any
sales load that may be paid by investors. Infinite Care, LLC was
excluded from the calculation as of December 31, 2019 and December
31, 2018, and CP Holding Co., Inc. was excluded from the
calculation as of December 31, 2019 because they were on
non-accrual status on such dates.
(2) The dollar-weighted average yield on
total investments takes the same yields but weights them to
determine the weighted average effective yield as a percentage of
the Company's total investments. The dollar-weighted average
annualized yield on the Company's investments for a given period
will generally be higher than what investors in our common stock
would realize in a return over the same period because the
dollar-weighted average annualized yield does not reflect the
Company's expenses or any sales load that may be paid by
investors.
FOURTH QUARTER AND YEAR TO DATE 2019 OPERATING
RESULTS
For the three months ended December 31, 2019, the Company
recorded a net loss of $0.3 million, as compared to net income of
$1.5 million in the quarter ended December 31, 2018. The decrease
in net income principally resulted from the Company recording lower
investment income as a result of a lower weighted average effective
yield, lower prepayment and other non-recurring fees, the addition
of CP Holding Co., Inc. to non-accrual status during 2019, and an
increase in realized losses, offset by an increase in unrealized
appreciation and lower operating expenses. Per share earnings
(loss) were ($0.05) and $0.24 per share for the three months ended
December 31, 2019 and 2018, respectively.
Net investment income and core net investment income was $1.2
million, or $0.19 per share, for the quarter ended December 31,
2019, compared to net investment income and core net investment
income of $1.6 million, or $0.25 per share, for the quarter ended
December 31, 2018, a decrease of $0.4 million in the fourth quarter
of 2019 compared to 2018. The decrease in net investment income
during the 2019 fourth quarter as compared to the 2018 fourth
quarter, primarily resulted from a decrease of $0.7 million in
investment income between periods, offset by the Company realizing
lower expenses of $0.3 million during the three months ended
December 31, 2019 as compared to the three months ended December
31, 2018.
For the year ended December 31, 2019, the Company recorded a net
loss of $1.2 million, a decrease of $6.3 million from $5.1 million
of net income in the year ended December 31, 2018. The $6.3 million
decrease was primarily attributable to a $3.5 million decrease in
investment income, a $1.9 million increase in realized losses, and
a $2.3 million increase in the change in unrealized depreciation,
partially offset by a decrease in expenses (net of reimbursements)
of $1.4 million. Per share earnings (loss) were ($0.20) and $0.79
per share for the years ended December 31, 2019 and 2018,
respectively.
Net investment income was $3.8 million, or $0.63 per share, for
the year ended December 31, 2019, compared to net investment income
of $6.0 million, or $0.93 per share, for the year ended December
31, 2018, a decrease of $2.2 million in the 2019 fiscal year as
compared to 2018. The decrease in net investment income during the
2019 year as compared to 2018, was primarily the result of a
decrease in investment income, offset by lower operating expenses
during the year ended December 31, 2019.
As of December 31, 2019, our total portfolio investments at fair
value and total assets were $116.8 million and $140.1 million,
respectively, compared to $94.9 million and $125.3 million at
December 31, 2018. Net asset value per share was $11.23 at December
31, 2019, compared to $12.30 at December 31, 2018.
During the fourth quarter of 2019, the Company made investments
in six companies totaling $4.4 million. All six were additional
investments in existing portfolio companies. The Company had one
investment sale during the three months ended December 31, 2019.
The significant investment activity for the quarter ended December
31, 2019 was as follows:
New and Incremental Investments
On October 31, 2019, the Company increased
its debt investment in Northeast Metal Works LLC with a $1.7
million increase in its senior secured term loan.
In November 2019, the Company increased its
senior secured debt investment in Infinite Care, LLC, with a $0.3
million increase in its senior secured revolving credit
facility.
On December 30, 2019, the Company increased
its debt commitment in National Program Management and Project
Controls with a new $0.1 million delayed draw term loan which has
the same economics as the existing senior secured term loan and is
fully unfunded.
On December 31, 2019, the Company increased
its debt investment in Surge Busy Bee Holdings LLC with a $1.4
million increase in its senior secured term loan B.
On December 31, 2019, the Company increased
its debt investment in ProAir Holdings Corporation with a $1.0
million increase in its junior secured term loan.
Investment Sales and Payoffs
On November 4, 2019, Company, received cash
proceeds and shares of Europcar Mobility Group in exchange for its
warrant holdings in Fox Rent-a-Car. The Europcar Mobility Group
equity was liquidated. The Company generated an internal rate of
return (IRR*) of 17.8% on its investment.
Restructuring
On November 6, 2019, Deluxe Entertainment
Services Group. Inc. emerged from bankruptcy and the Company
received a $0.5 million junior secured term loan and 0.63% of
common equity ownership in a newly formed holding company,
converted from its $5.4 million of pre-bankruptcy term loans.
* IRR is the rate of return that makes the net present value of
all cash flows into or from the investment equal to zero, and is
calculated based on the amount of each cash flow received or
invested by the Company and the day it was received or
invested.
"We continue to make progress towards achieving our 2020 goals
of leveraging our existing capital to grow to a roughly $150
million investment portfolio and returning $10.2 million of
non-accrual loans to interest earning status," said Joseph Jolson,
Chairman and CEO. "We currently have $14.1 million of mandates that
we expect could close in the next few months. We continue to work
hard on our problem assets, which have shown underlying
improvements in the past few quarters. We look forward to updating
everyone on our progress in early May," concluded Mr. Jolson.
CREDIT QUALITY
The Company employs various risk management and monitoring tools
to categorize and assess its investments. No less frequently than
quarterly, the Company applies an investment risk rating system
which uses a five-level numeric scale. In determining an investment
rating, Company management takes into account various aspects of a
company's performance during the measurement period and assigns an
investment rating to each aspect, which are then averaged. Such
averages may inform, but do not necessarily determine, the
investment rating assigned to a company. The following is a
description of the conditions associated with each investment
rating:
- Investment Rating 1 is used for investments that are performing
above expectations, and whose risks remain favorable compared to
the expected risk at the time of the original investment.
- Investment Rating 2 is used for investments that are performing
within expectations and whose risks remain neutral compared to the
expected risk at the time of the original investment. All new loans
are initially rated 2.
- Investment Rating 3 is used for investments that are performing
below expectations and that require closer monitoring, but where no
loss of return or principal is expected. Portfolio companies with a
rating of 3 may be out of compliance with financial covenants.
- Investment Rating 4 is used for investments that are performing
substantially below expectations and whose risks have increased
substantially since the original investment. These investments are
often in workout. Investments with a rating of 4 are those for
which there is an increased possibility of loss of return, but no
loss of principal is expected.
- Investment Rating 5 is used for investments that are performing
substantially below expectations and whose risks have increased
substantially since the original investment. These investments are
almost always in workout. Investments with a rating of 5 are those
for which loss of return and principal is expected.
As of December 31, 2019, the weighted average risk rating of the
debt investments in the Company's portfolio improved slightly to
2.43 from 2.51 in the previous quarter. Also, as of December 31,
2019, three of the Company’s twenty debt investments were rated 1,
thirteen investments were rated 2, one investment was rated 3, two
investments were rated 4, and one investment was rated 5. As of
December 31, 2019, two investments with a combined fair value of
$10.2 million were on non-accrual status.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2019, the Company had $21.8 million of cash
and restricted cash and $1.2 million of undrawn capacity on its
$55.0 million senior secured revolving credit facility. The credit
facility is secured by all of the Company’s assets and has an
accordion feature that allows the size of the facility to increase
up to $85.0 million.
SIGNIFICANT DEVELOPMENTS SUBSEQUENT TO DECEMBER 31,
2019
On January 21, 2020, the Company originated an add-on senior
secured term loan to Slappey Communications, LLC for $1.1
million.
On January 31, 2020, the Company made a $0.2 million equity
contribution to KC Engineering & Construction Services,
LLC.
On March 5, 2020, the Company declared monthly distributions of
$0.08 per share payable on March 30, 2020 (record date March 23,
2020), April 30, 2020 (record date April 23, 2020) and May 28, 2020
(record date May 21, 2020).
On March 5, 2020, HCAP Advisors agreed to a new cap with the
Company on amounts payable by the Company under the administration
agreement during the 2020 fiscal year. This cap sets the maximum
amount payable by the Company under the administration agreement to
$1.4 million for the 2020 fiscal year.
On March 6, 2020, the Company's board of directors appointed and
promoted Richard P. Buckanavage to serve as President of the
Company, from his current position as Managing Director - Head of
Business Development, effective immediately.
CONFERENCE CALL
The Company will host a conference call on Friday, March 13,
2020 at 11:00 a.m. Eastern Time to discuss its fourth quarter
results. All interested parties are invited to participate in the
conference call by dialing (888) 566-6060 (domestic) or (973)
200-3100 (international). Participants should enter the Conference
ID 7007379 when prompted.
ABOUT HARVEST CAPITAL CREDIT CORPORATION
Harvest Capital Credit Corporation (NASDAQ: HCAP) provides
customized financing solutions to privately held small and
mid-sized companies in the U.S., generally targeting companies with
annual revenues of less than $100 million and annual EBITDA of less
than $15 million. The Company’s investment objective is to generate
both current income and capital appreciation primarily by making
direct investments in the form of senior debt, subordinated debt
and, to a lesser extent, minority equity investments. Harvest
Capital Credit Corporation is externally managed and has elected to
be treated as a business development company under the Investment
Company Act of 1940. For more information about Harvest Capital
Credit Corporation, visit www.harvestcapitalcredit.com. However,
the contents of such website are not and should not be deemed to be
incorporated by reference herein.
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 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.
Harvest Capital Credit
Corporation
Consolidated Statements of Assets
and Liabilities
December 31,
December 31,
2019
2018
ASSETS:
Non-affiliated/non-control investments, at
fair value (cost of $61,379,670 at 12/31/19 and $59,603,853 at
12/31/18)
$
60,973,556
$
61,919,954
Affiliated investments, at fair value
(cost of $48,111,833 at 12/30/19 and $25,848,928 at 12/31/18)
47,431,234
24,645,597
Control investments, at fair value (cost
of $13,958,202 at 12/31/19 and $13,430,013 at 12/31/18)
8,404,600
8,348,311
Cash
11,199,083
26,963,310
Restricted cash
10,648,199
1,812,238
Interest receivable
663,191
721,195
Accounts receivable – other
184,804
178,883
Deferred financing costs
425,379
623,442
Other assets
129,690
106,771
Total assets
$
140,059,736
$
125,319,701
LIABILITIES:
Revolving line of credit
$
43,700,000
$
17,000,000
2022 Notes (net of deferred offering costs
of $623,276 at 12/31/19 and $821,879 at 12/31/18)
28,126,724
27,928,121
Accrued interest payable
152,544
115,919
Accounts payable - base management
fees
593,266
531,628
Accounts payable - incentive management
fees
—
361,090
Accounts payable - administrative
services
350,000
366,667
Accounts payable - accrued expenses
355,720
620,312
Total liabilities
73,278,254
46,923,737
Commitments and contingencies (Note 8)
NET ASSETS:
Common stock, $0.001 par value,
100,000,000 shares authorized, 6,587,819 issued and 5,945,854
outstanding at 12/31/19 and 6,554,010 issued and 6,372,581
outstanding at 12/31/18
6,588
6,554
Capital in excess of common stock
90,876,759
92,270,273
Treasury shares, at cost, 641,965 and
181,429 shares at 12/31/19 and 12/31/18, respectively
(6,723,505)
(1,956,055)
Accumulated over distributed earnings
(17,378,360)
(11,924,808)
Total net assets
66,781,482
78,395,964
Total liabilities and net
assets
$
140,059,736
$
125,319,701
Common stock outstanding
5,945,854
6,372,581
Net asset value per common share
$
11.23
$
12.30
Harvest Capital Credit
Corporation
Consolidated Statements of
Operations
Three Months Ended December
31,
Year Ended December
31,
2019 (Unaudited)
2018 (Unaudited)
2019 (Audited)
2018 (Audited)
Investment Income:
Interest:
Cash - non-affiliated/non-control
investments
$
1,693,943
$
2,372,856
$
5,941,454
$
9,732,421
Cash - affiliated investments
1,224,324
745,898
4,718,181
3,052,524
Cash - control investments
—
—
—
130,934
PIK - non-affiliated/non-control
investments
85,904
105,814
135,140
590,980
PIK - affiliated investments
157,246
196,094
726,693
739,773
Amortization of fees, discounts and
premiums
Non-affiliated/non-control investments
94,216
287,825
642,433
1,185,784
Affiliated investments
53,547
17,653
171,672
93,248
Total interest income
3,309,180
3,726,140
12,335,573
15,525,664
Other income
46,357
340,104
334,811
658,257
Total investment income
3,355,537
4,066,244
12,670,384
16,183,921
Expenses:
Interest expense – revolving line of
credit
312,626
84,034
640,119
530,474
Interest expense - unused line of
credit
59,406
94,015
327,876
341,476
Interest expense - deferred financing
costs
57,780
56,299
226,678
227,814
Interest expense - 2022 Notes
440,235
440,235
1,760,940
1,760,940
Interest expense - deferred offering
costs
50,956
47,524
198,602
185,068
Total interest expense
921,003
722,107
3,154,215
3,045,772
Professional fees
82,835
359,186
1,099,075
1,965,589
General and administrative
255,154
257,013
982,003
1,071,024
Base management fees
593,265
531,629
2,206,305
2,312,957
Incentive management fees
—
361,090
—
910,755
Administrative services expense
350,000
366,668
1,400,000
1,400,000
Total expenses, before
reimbursement
2,202,257
2,597,693
8,841,598
10,706,097
Less: Professional fees reimbursed by HCAP
Advisors, LLC
—
—
—
(449,835
)
Total expenses, after
reimbursement
2,202,257
2,597,693
8,841,598
10,256,262
Net Investment Income, before
taxes
1,153,280
1,468,551
3,828,786
5,927,659
Excise tax expense
—
—
—
8,825
Current income tax expense
—
(106,590
)
—
(63,565
)
Net Investment Income, after
taxes
1,153,280
1,575,141
3,828,786
5,982,399
Net realized gains (losses):
Non-Affiliated / Non-Control
investments
(2,165,243
)
260,501
(2,112,792
)
225,072
Affiliated investments
—
(15,500
)
20,750
(626,136
)
Control investments
(168,306
)
(122,560
)
(271,811
)
(85,616
)
Net realized gains (losses)
(2,333,549
)
122,441
(2,363,853
)
(486,680
)
Net change in unrealized appreciation
(depreciation) on investments:
Non-Affiliated / Non-Control
investments
973,998
62,084
(2,474,585
)
204,267
Affiliated investments
(390,254
)
(76,240
)
275,097
(821,837
)
Control investments
286,130
(150,787
)
(471,900
)
188,649
Net change in appreciation (unrealized)
depreciation on investments
869,874
(164,943
)
(2,671,388
)
(428,921
)
Total net unrealized and realized
losses on investments
(1,463,675
)
(42,502
)
(5,035,241
)
(915,601
)
Benefit for taxes on unrealized losses on
investments
—
15,584
—
—
Net increase (decrease) in net assets
resulting from operations
$
(310,395
)
$
1,548,223
$
(1,206,455
)
$
5,066,798
Net investment income per share
$0.19
$0.25
$0.63
$0.93
Net increase (decrease) in net assets
resulting from operations per share
($0.05
)
$0.24
($0.20
)
$0.79
Weighted average shares outstanding (basic
and diluted)
5,944,914
6,401,887
6,114,474
6,406,869
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200313005025/en/
Investor & Media Relations Contacts Harvest Capital
Credit Corporation
Joseph Jolson Chairman & Chief Executive Officer (415)
835-8970 jjolson@harvestcaps.com
William E. Alvarez, Jr Chief Financial Officer (212) 906-3589
balvarez@harvestcaps.com
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