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Section 1: 8-K (8-K)

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 27, 2018

 

TICC CAPITAL CORP.

(Exact name of registrant as specified in its charter)

 

Maryland 000-50398 20-0188736
(State or other jurisdiction (Commission File Number) (I.R.S. Employer Identification No.)
of incorporation)    

 

8 Sound Shore Drive, Suite 255

Greenwich, CT 06830

(Address of principal executive offices and zip code)

 

Registrant’s telephone number, including area code: (203) 983-5275

 

 

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))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

 

 

Item 2.02Results of Operations and Financial Condition

 

On February 27, 2018, TICC Capital Corp. (the “Company”) issued a press release announcing its financial results for the quarter ended December 31, 2017. The text of the press release is included as an exhibit to this Form 8-K. Additionally, on February 27, 2018, the Company made available on its website, www.ticc.com, supplemental investor information with respect to the earnings release.

The information in this Current Report, including the Exhibit, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in this Current Report shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, unless it is specifically incorporated by reference therein.

 

Item 9.01Financial Statements and Exhibits.

 

(a)Not applicable.

 

(b)Not applicable.

 

(c)Not applicable.

 

(d)Exhibits.

 

  Exhibit No. Description
     
  99.1 Press release dated February 27, 2018

 

 

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 27, 2018 TICC CAPITAL CORP.
       
    By: /s/ Saul B. Rosenthal
      Saul B. Rosenthal
      President

 

 

 

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Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit 99.1

 

TICC Announces Results of Operations for the Quarter Ended December 31, 2017 and

 

Announces Quarterly Distribution of $0.20 per Share

 

GREENWICH, CT – 02/27/2018 – TICC Capital Corp. (NasdaqGS: TICC) (“TICC,” the “Company,” “we,” “us” or “our”) announced today its financial results for the quarter ended December 31, 2017, and announced a distribution of $0.20 per share for the quarter ending March 31, 2018.

 

As of December 31, 2017, net asset value per share was $7.55 compared with the net asset value per share as of September 30, 2017 of $7.43.

 

For the quarter ended December 31, 2017 we recorded net investment income of approximately $7.6 million, or approximately $0.15 per share. In the fourth quarter, we recorded net realized losses of approximately $1.0 million, and net unrealized appreciation of approximately $9.8 million. In total we had a net increase in net assets from operations of approximately $16.4 million, or approximately $0.32 per share.

 

Our core net investment income (“Core NII”) for the quarter ended December 31, 2017 was $9.0 million, or approximately $0.17 per share.

 

oCore NII represents net investment income adjusted for additional cash distributions received, or entitled to be received (if any, in either case), on our collateralized loan obligation (“CLO”) equity investments and also excludes any capital gains incentive fees we recognize but have no obligation to pay in any period. (See additional information under “Supplemental Information Regarding Core Net Investment Income” below).

 

oWhile our experience has been that cash flow distributions have historically represented useful indicators of our CLO equity investments’ annual taxable income during certain periods, we believe that current and future cash flow distributions may represent less accurate indicators of taxable income with respect to our CLO equity investments than they have in the past. Accordingly, our taxable income may be materially different than either GAAP NII or Core NII.

 

Total investment income for the fourth quarter of 2017 amounted to approximately $13.4 million, which represents a decrease of approximately $1.1 million from the third quarter of 2017.

 

oFor the quarter ended December 31, 2017, we recorded investment income from our portfolio as follows:

 

approximately $5.6 million from our debt investments,

 

approximately $7.2 million from our CLO equity investments, and

 

approximately $0.6 million from all other sources.

 

Our total expenses for the quarter ended December 31, 2017 were approximately $5.8 million, down by approximately $1.9 million compared to the third quarter of 2017. The primary driver of that decrease was lower interest expense for the quarter on our outstanding debt.

 

During the fourth quarter of 2017:

 

oWe made investments of approximately $40.7 million in corporate loan investments. We received proceeds of approximately $15.2 million and $2.0 million from sales of our CLO equity investments and corporate loan investments, respectively.

 

oWe received or were entitled to receive proceeds of approximately $30.2 million from repayments, sales and amortization payments on our corporate loan investments.

 

As of December 31, 2017, the weighted average yield of our debt investments at current cost was approximately 9.7%, compared with 9.5% as of September 30, 2017.

 

As of December 31, 2017, the weighted average effective yield of our CLO equity investments at current cost was approximately 15.6%, compared with 15.9% as of September 30, 2017.

 

As of December 31, 2017, the weighted average cash distribution yield of our CLO equity investments at current cost was approximately 20.2%, compared with 17.5% as of September 30, 2017.

 

 

 

 

Our weighted average credit rating on a fair value basis was 2.2 at the end of the fourth quarter of 2017 (compared to 2.2 at the end of the third quarter of 2017).

 

At December 31, 2017, we had no investments on non-accrual status.

 

Our board of directors has declared the following distribution on our common stock:

 

Quarter Ending Record Date Payment Date Amount Per Share
March 31, 2018 March 16, 2018 March 30, 2018 $0.20

 

On February 5, 2018, the Board of Directors authorized a new program for the purpose of repurchasing up to $25.0 million worth of the Company’s common stock.

 

Supplemental Information Regarding Core Net Investment Income

 

On a supplemental basis, we provide information relating to core net investment income, which is a non-GAAP measure. This measure is provided in addition to, but not as a substitute for, net investment income determined in accordance with GAAP. Our non-GAAP measures may differ from similar measures by other companies, even if similar terms are used to identify such measures. Core net investment income represents net investment income adjusted for additional cash distributions received, or entitled to be received (if any, in either case), on our CLO equity investments (excluding those cash distributions believed to represent a return of capital) and also excludes any capital gains incentive fees we recognize but have no obligation to pay in any period. The Company did not recognize any capital gains incentive fees for the quarter ended December 31, 2017.

 

Income from investments in the “equity” class securities of CLO vehicles, for GAAP purposes, is recorded using the effective interest method based upon an effective yield to the expected redemption utilizing estimated cash flows compared to the cost, resulting in an effective yield for the investment; the difference between the actual cash received or distributions entitled to be received and the effective yield calculation is an adjustment to cost. Accordingly, investment income recognized on CLO equity securities in the GAAP statement of operations differs from the cash distributions actually received by us during the period (referred to below as “CLO equity additional distributions”).

 

Further, in order to continue to qualify to be taxed as a regulated investment company (“RIC”), we are required, among other things, to distribute at least 90% of our investment company taxable income annually. Therefore, core net investment income may provide a better indication of estimated taxable income for a reporting period than does GAAP net investment income, although we can offer no assurance that will be the case as the ultimate tax character of our earnings cannot be determined until tax returns are prepared after the end of a fiscal year. We note that these non-GAAP measures may not be useful indicators of taxable earnings, particularly during periods of market disruption and volatility and our taxable income may differ materially from our core net investment income.

 

The following table provides a reconciliation of net investment income to Core NII for the three months and year ended December 31, 2017:

 

   Three Months Ended
December 31, 2017
   Year Ended
December 31, 2017
 
   Amount   Per Share
Amounts
   Amount   Per Share
Amounts
 
Net investment income   $7,628,828   $0.148   $30,726,730   $0.597 
CLO equity additional distributions    1,347,464    0.026    5,680,872    0.110 
Core net investment income   $8,976,292   $0.174   $36,407,602   $0.707 
                                 

We will host a conference call to discuss our fourth quarter results today, Tuesday, February 27, 2018 at 10:00 AM ET. Please call 1-888-339-0740 to participate. A replay of the conference call will be available for approximately 30 days. The replay number is 1-877-344-7529, and the replay passcode is 10117486.

 

A presentation containing further detail regarding our quarterly results of operations has been posted under the Investor Relations section of our website at www.ticc.com.

 

The following financial statements are unaudited and without footnotes. Readers who would like additional information should obtain our Form 10-K for the period ended December 31, 2017, and subsequent reports on Form 10-Q as they are filed.

 

 

 

 

TICC CAPITAL CORP.
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(unaudited)

 

   December 31,
2017
   December 31,
2016
 
ASSETS        
Non-affiliated/non-control investments (cost: $418,990,080 @ 12/31/17; $616,542,612 @ 12/31/16)  $400,223,439   $578,297,069 
Affiliated investments (cost: $10,528,740 @ 12/31/17; $7,497,229 @ 12/31/16)   18,218,787    11,626,007 
Cash and cash equivalents   30,013,842    8,261,698 
Restricted cash       3,451,636 
Interest and distributions receivable   5,085,494    9,682,672 
Securities sold not settled       7,406 
Other assets   579,694    1,130,018 
Total assets  $454,121,256   $612,456,506 
LIABILITIES          
Notes payable – 6.50% Unsecured Notes, net of deferred issuance costs  $62,340,159   $ 
Base management fee and net investment income incentive fee payable to affiliate   2,706,099    3,673,381 
Accrued interest payable   11,621    1,731,111 
Accrued expenses   644,735    1,089,043 
Notes payable – TICC CLO 2012-1 LLC, net of discount and deferred
issuance costs
       125,853,720 
Notes payable – Convertible Notes, net of deferred issuance costs       94,116,753 
Total liabilities   65,702,614    226,464,008 
           
NET ASSETS          
Total net assets   388,418,642    385,992,498 
Total liabilities and net assets  $454,121,256   $612,456,506 
Net asset value per common share  $7.55   $7.50 
Common stock shares issued and outstanding   51,479,409    51,479,409 

 

 

 

 

TICC CAPITAL CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

 

   Year Ended
December 31, 2017
   Year Ended
December 31, 2016
   Year Ended
December 31, 2015
 
INVESTMENT INCOME               
From non-affiliated/non-control investments:               
Interest income – debt investments  $24,561,956   $33,649,267   $48,556,075 
Income from securitization vehicles and investments   33,274,392    32,503,279    34,901,766 
Other income   3,198,469    2,228,877    2,332,680 
Total investment income from non-affiliated/non-control investments   61,034,817    68,381,423    85,790,521 
From affiliated investments:               
Interest income – debt investments   382,200    331,404    300,544 
Total investment income from affiliated investments   382,200    331,404    300,544 
From control investments:               
Interest income – debt investments       567,219    1,371,874 
Total investment income from control investments       567,219    1,371,874 
Total investment income   61,417,017    69,280,046    87,462,939 
EXPENSES               
Interest expense   12,898,815    17,202,851    19,889,147 
Base management fees   8,140,010    11,292,395    19,770,170 
Professional fees   2,799,113    6,393,812    5,690,799 
Compensation expense   901,472    837,343    1,158,622 
Director’s Fees   584,580    642,000    514,501 
Insurance   256,956    159,573    68,679 
Transfer agent and custodian fees   244,115    316,577    332,796 
General and administrative   1,014,580    2,861,803    1,340,326 
Total expenses before incentive fees   26,839,641    39,706,354    48,765,040 
Net investment income incentive fees   3,850,646    2,795,399    (929,933)
Capital gains incentive fees            
Total incentive fees   3,850,646    2,795,399    (929,933)
Total expenses   30,690,287    42,501,753    47,835,107 
Net investment income   30,726,730    26,778,293    39,627,832 
Net change in unrealized appreciation/depreciation on investments               
Non-Affiliate/non-control investments   19,478,902    90,159,779    (101,525,472)
Affiliated investments   3,561,269    4,695,861    7,057,989 
Control investments       5,750,000    (3,910,000)
Total net change in unrealized appreciation/depreciation on investments   23,040,171    100,605,640    (98,377,483)
Net realized (losses) gains               
Non-Affiliated/non-control investments   (7,007,892)   (11,262,943)   425,240 
Affiliated investments           (6,762,328)
Control investments       (3,000,000)    
Extinguishment of debt   (3,149,338)   (2,759,227)   (1,046,910)
Total net realized losses   (10,157,230)   (17,022,170)   (7,383,998)
Net increase/(decrease) in net assets resulting from operations  $43,609,671   $110,361,763   $(66,133,649)
Net increase in net assets resulting from net investment income per common share:               
Basic  $0.60   $0.52   $0.66 
Diluted  $0.60   $0.52   $0.66 
Net increase/(decrease) in net assets resulting from operations per common share:               
Basic  $0.85   $2.13   $(1.11)
Diluted  $0.83   $1.90   $(1.11)
Weighted average shares of common stock outstanding:               
Basic   51,479,409    51,858,313    59,752,896 
Diluted   58,208,185    61,773,392    69,786,048 
Distributions per share   0.80   $1.16   $1.14 

 

 

 

 

TICC CAPITAL CORP.

 

FINANCIAL HIGHLIGHTS - UNAUDITED

 

Financial highlights for the years ended December 31, 2017, 2016, 2015, 2014 and 2013 are as follows:

 

   Year Ended
December 31,
2017
   Year Ended
December 31,
2016
   Year Ended
December 31,
2015
   Year Ended
December 31,
2014
   Year Ended
December 31,
2013
 
Per Share Data                    
Net asset value at beginning of period  $7.50   $6.40   $8.64   $9.85   $9.90 
Net investment income(1)(3)   0.60    0.52    0.66    1.17    1.09 
Net realized and unrealized capital (losses) gains(2)(3)   0.25    1.62    (1.85)   (1.20)   0.06 
Net change in net asset value from operations   0.85    2.14    (1.19)   (0.03)   1.15 
Distributions per share from net investment income   (0.66)   (1.06)   (1.14)   (1.00)   (1.16)
Distributions based on weighted average share impact       0.01    0.01    (0.03)   (0.04)
Tax return of capital distributions   (0.14)   (0.10)       (0.16)    
Total distributions(4)   (0.80)   (1.15)   (1.13)   (1.19)   (1.20)
Effect of shares issued, net of offering expenses                    
Effect of shares repurchased, gross       0.11    0.08    0.01     
Net asset value at end of period  $7.55   $7.50   $6.40   $8.64   $9.85 
Per share market value at beginning of period  $6.61   $6.08   $7.53   $10.34   $10.12 
Per share market value at end of period  $5.74   $6.61   $6.08   $7.53   $10.34 
Total return(5)   (2.01)%   33.29%   (4.35)%   (17.22)%   14.68%
Shares outstanding at end of period   51,479,409    51,479,409    56,396,435    60,303,769    53,400,745 
Ratios/Supplemental Data(7)                         
Net assets at end of period (000’s)   388,419    385,992    360,935    520,813    526,242 
Average net assets (000’s)   385,947    343,328    487,894    560,169    506,093 
Ratio of expenses to average net assets   7.95%   12.38%   9.80%   8.70%   9.74%
Ratio of net investment income to average net assets   7.96%   7.80%   8.12%   12.24%   11.02%
Portfolio turnover rate(6)   43.02%   25.73%   24.96%   45.91%   38.22%

 

 

(1)Represents per share net investment income for the period, based upon weighted average shares outstanding.

 

(2)Net realized and unrealized capital gains include rounding adjustments to reconcile change in net asset value per share.

 

(3)During the first quarter of 2015, the Company identified a non-material error in its accounting for income from CLO equity investments — refer to “Note 2. Change of Accounting for Collateralized Loan Obligation Equity Income.” Prospectively as of January 1, 2015, the Company records income from its CLO equity investments using the effective yield method in accordance with the accounting guidance in ASC 325-40, Beneficial Interests in Securitized Financial Assets, based upon an estimation of an effective yield to maturity utilizing assumed cash flows. An out-of-period adjustment to net investment income incentive fees, in the amount of $2.4 million, or $0.04 per share, is reflected in the year ended December 31, 2015. Prior period amounts are not materially affected.

 

During the quarter ended September 30, 2015, the Company recorded an out of period adjustment related to a miscalculation of discount accretion which increased interest income and increased investment cost, by approximately $1.4 million. For the year ended December 31, 2015, approximately $1.1 million, or $0.02 per share, of the adjustment related to prior years. The increase in the investment cost has a corresponding effect on the investment’s unrealized depreciation of the same amount. Management concluded the adjustment was not material to previously filed financial statements.

 

 

 

 

(4)Management monitors available taxable earnings, including net investment income and realized capital gains, to determine if a tax return of capital may occur for the year. To the extent the Company’s taxable earnings fall below the total amount of the Company’s distributions for that fiscal year, a portion of those distributions may be deemed a tax return of capital to the Company’s stockholders. The ultimate tax character of the Company’s earnings cannot be determined until tax returns are prepared after the end of the fiscal year.

 

(5)Total return equals the increase or decrease of ending market value over beginning market value, plus distributions, divided by the beginning market value per share, assuming distribution reinvestment prices obtained under the Company’s distribution reinvestment plan, excluding any discounts.

 

(6)Portfolio turnover rate is calculated using the lesser of the annual cash investment sales and debt repayments or annual cash investment purchases over the average of the total investments at fair value.

 

(7)The following table provides supplemental performance ratios measured for the years ended December 31, 2017, 2016, 2015, 2014 and 2013:

 

   Year Ended
December 31,
2017
   Year Ended
December 31,
2016
   Year Ended
December 31,
2015
   Year Ended
December 31,
2014
   Year Ended
December 31,
2013
 
Ratio of expenses to average net assets:                         
Expenses before incentive fees   6.95%   11.57%   10.00%   8.39%   8.68%
Net investment income incentive fees   1.00%   0.81%   (0.19)%   1.00%   1.30%
Capital gains incentive fees   —%    —%    —%    (0.69)%   (0.24)%
Ratio of expenses, excluding interest expense, to average net assets   4.61%   7.37%   5.73%   5.17%   6.00%

 

 

 

 

About TICC Capital Corp.

TICC Capital Corp. is a publicly-traded business development company principally investing in syndicated bank loans and debt and equity tranches of collateralized loan obligation (“CLO”) vehicles. CLO investments may also include warehouse facilities, which are financing structures intended to aggregate loans that may be used to form the basis of a CLO vehicle.

 

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 statements 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.

 

Contact:

Bruce Rubin

203-983-5280

 

 

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