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): February 25, 2015
SOLAR CAPITAL LTD.
(Exact name of registrant as specified in its charter)
| Maryland | 814-00754 | 26-1381340 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
500 Park Avenue
New York, NY 10022
(Address of principal executive offices and zip code)
Registrant’s telephone number, including area code: (212) 993-1670
Check the appropriate box below if the Form 8-K 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 February 25, 2015 the registrant issued a press release announcing its financial results for the year ended December 31, 2014. 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 “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.
| (a) | Not applicable. |
| (b) | Not applicable. |
| (c) | Not applicable. |
| (d) | Exhibits. |
| Exhibit No. |
Description | |
| 99.1 | Press release, dated February 25, 2015 | |
SIGNATURES
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.
| Date: February 25, 2015 | SOLAR CAPITAL LTD. | |||||
| By: | /s/ Richard L. Peteka | |||||
| Richard L. Peteka | ||||||
| Chief Financial Officer | ||||||
Exhibit 99.1
Solar Capital Ltd. Announces Quarter and Fiscal Year Ended December 31, 2014 Financial Results; Declares Quarterly Dividend of $0.40 per share for First Fiscal Quarter 2015
NEW YORK—(BUSINESS WIRE)—February 25, 2015— Solar Capital Ltd. (NASDAQ: SLRC), today reported net investment income of $16.8 million, or $0.40 per share, for the fourth quarter and $66.7 million, or $1.56 per share, for the fiscal year. Earnings were $4.9 million, or $0.11 per share, for the quarter ended December 31, 2014 and $48.5 million, or $1.13 per share, for the fiscal year ended December 31, 2014. Net asset value (NAV) per share was $22.05 at December 31, 2014.
Solar Capital Ltd. (the “Company”) also announced that its Board of Directors has declared a quarterly dividend of $0.40 per share for its first fiscal quarter of 2015, which will be payable on April 2, 2015 to stockholders of record on March 19, 2015. The specific tax characteristics will be reported to stockholders on Form 1099 after the end of the calendar year.
HIGHLIGHTS:
At December 31, 2014:
Investment portfolio fair value: $1.02 billion
Number of portfolio companies: 43
Net assets: $936.6 million
Net asset value per share: $22.05
Portfolio Activity for the Quarter Ended December 31, 2014:
Investments made during the quarter: $115 million
Investments prepaid and sold during the quarter: $224 million
Portfolio Activity for the Year Ended December 31, 2014:
Investments made during the year: $557 million
Investments prepaid and sold during the year: $626 million
Operating Results for the Quarter Ended December 31, 2014:
Net investment income: $16.8 million
Net realized and unrealized loss: $11.9 million
Net increase in net assets from operations: $4.9 million
Net investment income per share: $0.40
Operating Results for the Year Ended December 31, 2014:
Net investment income: $66.7 million
Net realized and unrealized loss: $18.3 million
Net increase in net assets from operations: $48.5 million
Net investment income per share: $1.56
“Our consistently prudent investment approach, coupled with the strategic initiatives we implemented in 2014, have positioned us well for growth in 2015,” said Michael Gross, Chairman and CEO of Solar
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Capital Ltd. “We view our predominantly senior secured, floating rate investment portfolio, with no direct exposure to the oil and gas industry, as having a highly attractive risk-reward profile. With our substantial available capital and leverage capacity, we expect to increase our net investment income and grow our dividend through new originations in our core middle market lending business, our strategic investment in Crystal Financial, and our new Senior Secured Unitranche Loan Program joint venture with PIMCO.”
Conference Call and Webcast
The Company will host an earnings conference call and audio webcast at 10:00 a.m. (Eastern Time) on Thursday, February 26, 2015.
All interested parties may participate in the conference call by dialing (877) 474-9504 approximately 5-10 minutes prior to the call. International callers should dial (857) 244-7557. Participants should reference Solar Capital Ltd. and the participant passcode of 71422391 when prompted. This conference call also can be accessed by all interested parties through Solar Capital Ltd.’s website, www.solarcapltd.com. Additionally, a replay dial-in will be available until March 12, 2015 and can be accessed by dialing (888) 286-8010 and using the passcode 33069648. International callers should dial (617) 801-6888 to listen to the replay.
Portfolio and Investment Activity
During the quarter ended December 31, 2014, we invested approximately $115 million across eight portfolio companies and had investments prepaid or sold of approximately $224 million over the same period. During the quarter ended December 31, 2014, our portfolio company, Crystal Financial LLC (“Crystal Financial”), invested approximately $104 million and had investments repaid of approximately $36 million.
During the year ended December 31, 2014, we invested approximately $557 million across 30 portfolio companies. This compares to investing approximately $330 million in 19 portfolio companies for the previous fiscal year ended December 31, 2013. Investments sold or prepaid during the fiscal year ended December 31, 2014 totaled approximately $626 million versus approximately $658 million for the fiscal year ended December 31, 2013. During the year ended December 31, 2014, Crystal Financial invested approximately $264 million and had investments repaid or sold of approximately $232 million.
At December 31, 2014, measured at fair value, our portfolio consisted of 43 portfolio companies and was invested 58.8% in senior secured loans, 29.1% in Crystal Financial whose portfolio is 100% comprised of senior secured loans, 7.4% in subordinated debt, 2.3% in preferred equity and 2.4% in common equity and warrants excluding Crystal Financial.
The weighted average yield on our portfolio of income producing investments was 9.9% at December 31, 2014, measured at fair value.
At December 31, 2014, 86.3% or $854.1 million of our income producing investment portfolio* is floating rate and 13.7% or $135.5 million is fixed rate, measured at fair value.
Since inception, we and our predecessor companies have invested approximately $3.9 billion in 123 portfolio companies. Over the same period, we have completed transactions with more than 85 different sponsors.
| * | We have included Crystal Financial as 100% floating rate. |
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Results of Operations for the Fiscal Year Ended December 31, 2014 compared to the Fiscal Year Ended December 31, 2013.
Investment Income
For the fiscal years ended December 31, 2014 and 2013, gross investment income totaled $121.9 million and $163.6 million, respectively. The decrease in gross investment income from 2013 to 2014 was primarily due to a smaller income producing portfolio from the net effect of portfolio repayments, as well as portfolio yield compression.
Expenses
Expenses totaled $55.2 million and $78.7 million, respectively, for the fiscal years ended December 31, 2014 and 2013. The decrease in expenses year over year was primarily due to a decrease in performance-based incentive fees on lower investment income, as well as decreases in debt expenses due to lower average borrowings.
Net Investment Income
The Company’s net investment income totaled $66.7 million and $84.9 million, or $1.56 and $1.91 per average share, for the fiscal years ended December 31, 2014 and 2013, respectively.
Net Realized and Unrealized Loss
Net realized and unrealized loss for the fiscal years ended December 31, 2014 and 2013 totaled approximately $18.3 million and $9.6 million, respectively.
Net Increase in Net Assets Resulting From Operations
For the fiscal years ended December 31, 2014 and 2013, the Company had a net increase in net assets resulting from operations of $48.5 million and $75.3 million, respectively. For the same periods, earnings per average share were $1.13 and $1.69, respectively.
Liquidity and Capital Resources
At December 31, 2014, the Company had approximately $145.3 million of cash and a total of $490 million of unused credit capacity, subject to borrowing base limitations.
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Financial Statements and Tables
SOLAR CAPITAL LTD.
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(in thousands, except share amounts)
| December 31, 2014 | December 31, 2013 | |||||||
| Assets |
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| Investments at fair value: |
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| Companies less than 5% owned (cost: $659,552 and $688,685, respectively) |
$ | 652,288 | $ | 680,720 | ||||
| Companies 5% to 25% owned (cost: $8,511 and $7,789, respectively) |
4,646 | 7,789 | ||||||
| Companies more than 25% owned (cost: $339,380 and $394,285, respectively) |
363,804 | 399,890 | ||||||
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|
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| Total investments (cost: $1,007,443 and $1,090,759, respectively) |
1,020,738 | 1,088,399 | ||||||
| Cash and cash equivalents |
635,075 | 585,278 | ||||||
| Foreign currency (cost: $275 and $1,702, respectively) |
265 | 1,701 | ||||||
| Interest receivable |
4,549 | 5,623 | ||||||
| Dividends receivable |
8,258 | 8,605 | ||||||
| Deferred financing costs |
3,263 | 3,300 | ||||||
| Derivatives |
— | — | ||||||
| Receivable for investments sold |
13,138 | 14,870 | ||||||
| Prepaid expenses and other assets |
1,048 | 666 | ||||||
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| Total assets |
$ | 1,686,334 | $ | 1,708,442 | ||||
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| Liabilities |
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| Revolving credit facilities |
$ | — | $ | — | ||||
| Unsecured senior notes |
100,000 | 100,000 | ||||||
| Senior secured notes |
75,000 | 75,000 | ||||||
| Term loan |
50,000 | 50,000 | ||||||
| Distributions payable |
16,986 | 17,698 | ||||||
| Payable for investments and cash equivalents purchased |
492,475 | 454,887 | ||||||
| Management fee payable |
6,109 | 5,780 | ||||||
| Performance-based incentive fee payable |
4,198 | 4,633 | ||||||
| Administrative services expense payable |
2,427 | 2,085 | ||||||
| Interest payable |
1,504 | 1,499 | ||||||
| Other liabilities and accrued expenses |
1,067 | 1,223 | ||||||
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| Total liabilities |
$ | 749,766 | $ | 712,805 | ||||
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| Net Assets |
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| Common stock, par value $0.01 per share, 200,000,000 and 200,000,000 common shares authorized, respectively, and 42,465,162 and 44,244,195 shares issued and outstanding, respectively |
$ | 425 | $ | 442 | ||||
| Paid-in capital in excess of par |
991,963 | 1,110,545 | ||||||
| Distributions in excess of net investment income |
(8,599 | ) | (17,344 | ) | ||||
| Accumulated net realized loss |
(60,506 | ) | (92,706 | ) | ||||
| Net unrealized appreciation (depreciation) |
13,285 | (5,300 | ) | |||||
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| Total net assets |
$ | 936,568 | $ | 995,637 | ||||
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| Net Asset Value Per Share |
$ | 22.05 | $ | 22.50 | ||||
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SOLAR CAPITAL LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share amounts)
| Year ended December 31, 2014 |
Year ended December 31, 2013 |
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| INVESTMENT INCOME: |
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| Interest: |
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| Companies less than 5% owned |
$ | 84,791 | $ | 106,523 | ||||
| Companies 5% to 25% owned |
564 | 6,333 | ||||||
| Companies more than 25% owned |
3,349 | 10,728 | ||||||
| Dividends: |
||||||||
| Companies 5% to 25% owned |
— | 5,565 | ||||||
| Companies more than 25% owned |
33,233 | 34,444 | ||||||
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| Total investment income |
121,937 | 163,593 | ||||||
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| EXPENSES: |
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| Management fees |
24,651 | 26,794 | ||||||
| Performance-based incentive fees |
7,411 | 21,234 | ||||||
| Interest and other credit facility expenses |
14,448 | 20,051 | ||||||
| Administrative services expense |
5,362 | 4,741 | ||||||
| Other general and administrative expenses |
3,358 | 5,428 | ||||||
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| Total expenses |
55,230 | 78,248 | ||||||
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| Net investment income before income tax expense |
66,707 | 85,345 | ||||||
| Income tax expense |
— | 410 | ||||||
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| Net investment income |
$ | 66,707 | $ | 84,935 | ||||
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| REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, CASH EQUIVALENTS, FOREIGN CURRENCIES AND DERIVATIVES: |
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| Net realized gain (loss) on investments and cash equivalents: |
||||||||
| Companies less than 5% owned |
$ | (6,667 | ) | $ | (31,679 | ) | ||
| Companies 5% to 25% owned |
1,176 | (14,273 | ) | |||||
| Companies more than 25% owned |
(25,337 | ) | 472 | |||||
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| Net realized loss on investments and cash equivalents |
(30,828 | ) | (45,480 | ) | ||||
| Net realized gain (loss) on foreign currencies and derivatives: |
(6,012 | ) | 1,055 | |||||
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| Net realized loss |
(36,840 | ) | (44,425 | ) | ||||
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| Net change in unrealized gain (loss) on investments and cash equivalents |
15,655 | 34,189 | ||||||
| Net change in unrealized gain (loss) on foreign currencies and derivatives |
2,930 | 611 | ||||||
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| Net change in unrealized gain (loss) |
18,585 | 34,800 | ||||||
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| Net realized and unrealized gain (loss) on investments, cash equivalents, foreign currencies and derivatives |
(18,255 | ) | (9,625 | ) | ||||
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| NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS |
$ | 48,452 | $ | 75,310 | ||||
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| EARNINGS PER SHARE |
$ | 1.13 | $ | 1.69 | ||||
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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, unitranche loans, mezzanine loans, and equity securities.
Forward-Looking Statements
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, conditions 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.
Contact
Investor Relations
(646) 308-8770
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