Business & Finance
Wed, May 2, 2012 
NEW YORK--([ BUSINESS WIRE ])--Solar Capital Ltd (NASDAQ: SLRC), today reported earnings of $46.2 million, or $1.26 per share, and net investment income of $21.1 million, or $0.58 per share, for the quarter ended March 31, 2012. Net asset value (NAV) per share was $22.68, a 3% increase from December 31, 2011. Solar Capital also announced that its Board of Directors has declared a second quarter dividend of $0.60 per share, payable on July 3, 2012 to stockholders of record on June 19, 2012. The Company expects the dividend to be paid from taxable earnings with specific tax characteristics reported to stockholders after the end of the 2012 calendar year.
"In the first quarter, we experienced high repayment and moderate origination activity. For the second quarter we expect this trend to reverse. We are pleased with the financial performance of our underlying portfolio companies and are encouraged by our current pipeline of new investments, which offer compelling risk-reward characteristics."
| Balance Sheet Highlights | ||||||
| ($ in millions, except per share amounts) | ||||||
| March 31, | December 31, | |||||
| 2012 | 2011 | |||||
| Investment Portfolio | $ | 1,008.5 | $ | 1,045.0 | ||
| Total Assets | $ | 1,059.8 | $ | 1,079.4 | ||
| Net Assets | $ | 830.1 | $ | 805.9 | ||
| NAV per share | $ | 22.68 | $ | 22.02 | ||
| Investment Portfolio Composition: | ||||||
| Senior Secured Loans | $ | 407.9 | $ | 412.4 | ||
| Subordinated Debt | $ | 528.3 | $ | 546.9 | ||
| Equity Investments | $ | 72.3 | $ | 85.8 | ||
| Weighted Average Portfolio Statistics: | ||||||
| Yield on Fair Value | 14.3% | 14.2% | ||||
| Yield on Cost | 13.5% | 13.2% | ||||
| Income Highlights | ||||||
| ($ in millions) | ||||||
Three Months ended | Three Months ended | |||||
| Investment Income | $ | 36.3 | $ | 32.3 | ||
| Net Investment Income (NII) | $ | 21.1 | $ | 19.2 | ||
| Net Realized and Unrealized Gain (Loss) | 25.1 | 29.9 | ||||
| Net Income | $ | 46.2 | $ | 49.0 | ||
| NII per share | $ | 0.58 | $ | 0.53 | ||
aOur 3% increase in NAV was driven by gains on realizations, as well as the strong financial performance of our portfolio companies,a said Michael Gross, Chairman and CEO of Solar Capital Ltd. aIn the first quarter, we experienced high repayment and moderate origination activity. For the second quarter we expect this trend to reverse. We are pleased with the financial performance of our underlying portfolio companies and are encouraged by our current pipeline of new investments, which offer compelling risk-reward characteristics.a
Portfolio and Investment Activity
During the quarter ended March31, 2012, we invested approximately $62million across five existing portfolio companies. We received proceeds of approximately $106million from principal repayments and approximately $29 million from sales of equity securities during the first quarter of 2012.
As of March31, 2012, the fair value weighted average yield on income producing investments in our portfolio was approximately 14.3%, compared to 14.2% and 13.9% at December 31, 2011 and March 31, 2011, respectively.
The portfolio was comprised of 41% senior secured loans, 52% subordinated debt and 7% equity, as of March31, 2012. Performing loans comprised 99.5% of the fair value of the debt portfolio at the end of the first quarter of 2012. There was one asset on non-accrual status with a total market value of approximately $4.4 million.
Results of Operations
Investment income was $36.3 million and $32.3 million for the three months ended March 31, 2012 and 2011, respectively. Investment income was higher for the first quarter of 2012 primarily due to increased interest income on a higher average balance of earning assets and higher income related to loan repayments. Net investment income was $21.1 million or $0.58 per share and $19.2 million or $0.53 per share for the three months ended March 31, 2012 and 2011, respectively. For the quarter, increased investment income was partially offset by higher interest expense, fees and operating expenses.
The net realized and unrealized gain of $25.1 million for the three months ended March 31, 2012 was primarily due to an increase in the fair value of our portfolio due to improved market conditions and realizations above prior period marks.
Conference Call and Webcast
We will host an earnings conference call and audio webcast at 10:00 a.m. (Eastern Time) on Wednesday, May 2, 2012. All interested parties may participate in the conference call by dialing 866-825-3209 approximately 5-10 minutes prior to the call; international callers should dial 617-213-8061. Participants should reference Solar Capital Ltd. and the participant passcode of 34105775 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 Capitalas 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.
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.
FORWARD-LOOKING STATEMENTS
Statements included herein may constitute aforward-looking statements,a 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.
Financial Statements and Tables
| SOLAR CAPITAL LTD. CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES (in thousands, except per share amounts) | ||||||||
March 31, | December 31, | |||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Investments at value: | ||||||||
| Companies more than 25% owned (cost: $36,058 and $47,910, respectively) | $ | 36,031 | $ | 53,454 | ||||
| Companies 5% to 25% owned (cost: $44,698 and $41,819, respectively) | 36,540 | 35,820 | ||||||
| Companies less than 5% owned (cost: $1,016,455 and $1,062,844 respectively) | 935,944 | 955,769 | ||||||
| Total investments (cost: $1,097,211 and $1,152,573, respectively) | 1,008,515 | 1,045,043 | ||||||
| Cash and cash equivalents | 10,363 | 11,787 | ||||||
| Interest and dividends receivable | 11,542 | 9,763 | ||||||
| Receivable for investments sold | 21,099 | 3,225 | ||||||
| Fee revenue receivable | 3,948 | 4,379 | ||||||
| Deferred credit facility costs | 3,060 | 3,635 | ||||||
| Derivative assets | 294 | 649 | ||||||
| Deferred offering costs | 575 | 469 | ||||||
| Prepaid expenses and other receivables | 411 | 481 | ||||||
| Total Assets | 1,059,807 | 1,079,431 | ||||||
| Liabilities | ||||||||
| Credit facilities payable | 128,643 | 201,355 | ||||||
| Term Loan | 35,000 | 35,000 | ||||||
| Payable for investments purchased | 29,273 | 22,443 | ||||||
| Dividend payable | 21,965 | a" | ||||||
| Due to Solar Capital Partners LLC: | ||||||||
| Investment advisory and management fee payable | 5,278 | 5,277 | ||||||
| Performance-based incentive fee payable | 5,275 | 5,203 | ||||||
| Interest payable | 961 | 1,063 | ||||||
| Derivative liabilities | 1,080 | - | ||||||
| Due to Solar Capital Management LLC | 638 | 1,069 | ||||||
| Income taxes payable | 1,035 | 720 | ||||||
| Deferred fee revenue | 83 | 318 | ||||||
| Other accrued expenses and payables | 442 | 1,042 | ||||||
| Total Liabilities | 229,673 | 273,490 | ||||||
| Net Assets | ||||||||
| Common stock, par value $0.01 per share 36,608,038 shares issued and outstanding, 200,000,000 authorized | 366 | 366 | ||||||
| Paid-in capital in excess of par | 928,180 | 928,180 | ||||||
| Underdistributed net investment income | 1,379 | 2,245 | ||||||
| Accumulated net realized losses | (9,213 | ) | (18,379 | ) | ||||
| Net unrealized depreciation | (90,578 | ) | (106,471 | ) | ||||
| Total Net Assets | $ | 830,134 | $ | 805,941 | ||||
| Number of shares outstanding | 36,608,038 | 36,608,038 | ||||||
| Net Asset Value Per Share | $ | 22.68 | $ | 22.02 | ||||
| SOLAR CAPITAL LTD. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) | ||||||||
Three months ended | Three months ended | |||||||
| (unaudited) | (unaudited) | |||||||
| INVESTMENT INCOME: | ||||||||
| Interest and dividends: | ||||||||
| Companies more than 25% owned | $ | 1,082 | $ | 695 | ||||
| Other interest and dividend income | 35,227 | 31,599 | ||||||
| Total interest and dividends | 36,309 | 32,294 | ||||||
| Total investment income | 36,309 | 32,294 | ||||||
| EXPENSES: | ||||||||
| Investment advisory and management fees | 5,278 | 4,987 | ||||||
| Performance-based incentive fee | 5,275 | 4,788 | ||||||
| Interest and other credit facility expenses | 2,695 | 2,037 | ||||||
| Administrative service fee | 696 | 438 | ||||||
| Other general and administrative expenses | 1,009 | 894 | ||||||
| Total operating expenses | 14,953 | 13,144 | ||||||
| Net investment income before income tax expense | 21,356 | 19,150 | ||||||
| Income tax expense | 257 | a" | ||||||
| Net investment income | 21,099 | 19,150 | ||||||
| REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, DERIVATIVES AND FOREIGN CURRENCIES: | ||||||||
| Net realized gain (loss): | ||||||||
| Investments: | ||||||||
| Companies more than 25% owned | 11,002 | a" | ||||||
| Companies less than 5% owned | (725 | ) | 2,802 | |||||
| Net realized gain on investments | 10,277 | 2,802 | ||||||
| Derivatives | (944 | ) | (4,363 | ) | ||||
| Foreign currency exchange | 618 | (72 | ) | |||||
| Net realized gain (loss) before income taxes | 9,951 | (1,633 | ) | |||||
| Income tax expense | 785 | - | ||||||
| Net realized gain (loss) | 9,166 | (1,633 | ) | |||||
| Net change in unrealized gain: | ||||||||
| Investments: | ||||||||
| Companies more than 25% owned | (5,571 | ) | 1,625 | |||||
| Companies 5% to 25% owned | (2,159 | ) | (260 | ) | ||||
| Companies less than 5% owned | 26,564 | 30,867 | ||||||
| Net change in unrealized gain on investments | 18,834 | 32,232 | ||||||
| Derivatives | (1,435 | ) | (259 | ) | ||||
| Foreign currency exchange | (1,506 | ) | (472 | ) | ||||
| Net change in unrealized gain | 15,893 | 31,501 | ||||||
| Net realized and unrealized gain on investments, derivatives and foreign currencies | 25,059 | 29,868 | ||||||
| Net Increase in Net Assets Resulting from Operations | $ | 46,158 | $ | 49,018 | ||||
| Earnings per share | $ | 1.26 | $ | 1.35 | ||||
