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KCAP Financial, Inc. Announces Full Year 2015 Financial Results

NEW YORK, March 09, 2016 (GLOBE NEWSWIRE) -- KCAP Financial, Inc. (Nasdaq:KCAP) (the "Company") announces its full year 2015 financial results.

Financial Highlights


Operating Results

For the year ended December 31, 2015, we reported total investment income of approximately $45.5 million as compared to approximately $41.2 million in the prior year, an increase of 10%. Investment income from debt securities increased 13% to approximately $24.1 million from approximately $21.4 million. Investment income on CLO Fund Securities in 2015 increased 17% to $15.7 million from $13.4 million in 2014, and dividends from our Asset Manager Affiliates decreased slightly from $5.5 million to $5.3 million.

For the year ended December 31, 2015, total expenses were essentially flat as compared to 2014.  Lower compensation-related expenses in 2015 were offset by increases in professional fees and overhead expenses.

Net investment income for the years ended 2015 and 2014 was approximately $24.2 million and $20.1 million, or $0.65 and $0.59 per share, respectively. Net realized and unrealized depreciation on investments for the year ended 2015 was approximately $42.4 million, as compared to net realized and unrealized depreciation on investments of $4.3 million for the same period in 2014.

Portfolio and Investment Activity

The fair value of our portfolio was approximately $409.6 million as of December 31, 2015. The composition of our investment portfolio at December 31, 2015 and December 31, 2014 at cost and fair value was as follows:

  December 31, 2015  December 31, 2014 
Security Type Cost Fair Value   Cost Fair Value  
Money Market Accounts³ $2,129,381 $2,129,381 1  $1,602,741 $1,602,741 -%
Senior Secured Loan  203,819,074  194,123,223 46    220,965,922  218,329,859 46 
Junior Secured Loan  40,221,557  37,591,900  9   38,664,199  38,569,006 8 
Senior Unsecured Loan  23,000,000  23,000,000 6   33,066,984  33,066,984 7 
First Lien Bond  3,000,000  2,216,700 1   2,962,507   2,580,000 1 
Senior Subordinated Bond  4,466,793  4,615,569 1   4,295,544  4,240,301 1 
Senior Unsecured Bond  11,879,187  10,551,724 3   11,208,178  11,386,218 2 
Senior Secured Bond  1,510,560   1,503,755 -   1,515,584  1,552,500 - 
CLO Fund Securities  83,214,947  55,872,382 14   90,889,190  77,514,902 16 
Equity Securities  10,467,787  9,548,488 2    8,828,812  8,119,681 2 
Preferred Securities  10,411,673  11,036,373 3   10,206,016  10,418,302 2 
Asset Manager Affiliates²  56,591,230  57,381,000 14   60,292,677  72,326,000  15 
                   
Total $450,712,189 $409,570,495 100% $484,498,354 $479,706,494 100%
                   
¹  Represents percentage of of total portfolio at fair value.
²  Represents the equity investment in the Asset Manager Affiliates. 
³  Includes restricted cash held under employee benefit plans. 
  

Liquidity and Capital Resources

At December 31, 2015, we had unrestricted cash and money market balances of approximately $2.1 million, total assets of approximately $425.2 million and stockholders' equity of approximately $216.1 million. Our net asset value per common share was $5.82. As of December 31, 2015, we had $208.0 million of borrowings outstanding ($205.1 million net of discount) with a weighted average interest rate of approximately 4.08%.

As of December 31, 2015, there was approximately $19.3 million par value of Convertible Notes outstanding with a maturity date of March 15, 2016.  In early March 2016, the Company had sufficient liquid resources available to satisfy its obligations under the Convertible Notes due March 15, 2016.

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 $0.15 per share for the quarter ended December 31, 2015. The record date for this distribution was January 6, 2016 and the distribution was paid on January 28, 2016. Tax characteristics of all distributions paid by us in 2015 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.

Supplemental Information: Analysis of Shareholder Distributions

On a supplemental basis, we are providing information relating to our shareholder distributions. The Company believes that taxable distributable income as reported in our financial statement footnotes is an important measure for investors. The Company may not distribute all of its taxable distributable income, or may over-distribute during any period.

The following table¹ depicts the composition of shareholder distributions on a per share basis for the year ended December 31, 2015 and 2014:

   Year Ended December 31,
   2015¹  2014¹
Net investment income $ 0.65   $ 0.59 
Tax Accounting Difference on CLO Equity Investments   (0.03)     0.18 
Other tax accounting differences    -     0.02 
Taxable distributable income   0.63     0.78 
Cash distributed to the Company by Asset Manager Affiliates in excess of their taxable earnings   0.10     0.19 
Available for distribution²   0.73     0.97 
Distributed $ 0.63   $ 1.00 
Difference $ 0.10   $ (0.03)
         
¹Table may not foot due to rounding.       
²The "Available for distribution" financial measure is a non-GAAP financial measure that is calculated by including the cash distributed to the Company by the Asset Manager Affiliates in excess of their taxable earnings to the Company's taxable distributable income, which is the most directly comparable GAAP financial measure.  In order to reconcile the "Available for distribution financial measure to taxable distributable income per share in accordance with GAAP, the $0.10 and $0.19 per share of cash distributed to the Company by the Asset Manager Affiliates in excess of their taxable earnings is subtracted from the "Available for distribution" financial measure for the year-ended December 31, 2015 and 2014, respectively.  The Company's management believes that the presentation of the non-GAAP "Available for distribution" financial measure provides useful information to investors.
 
 
 
 

Conference Call and Webcast

We will hold a conference call on Thursday, March 10, 2016 at 9:00 a.m. Eastern Time to discuss our full year 2015 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 Time for approximately 90 days.

A replay of this conference call will be available from 12:00 p.m. on March 10, 2016 until 12:00 p.m. Eastern Time on March 17, 2016.  The dial in number for the replay is 855-859-2056 and the conference ID is 65843232.

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.
CONSOLIDATED BALANCE SHEETS
        
   As of
December 31, 2015
 As of
December 31, 2014
        
ASSETS      
Investments at fair value:      
 Money market accounts (cost: 2015 - $2,129,381; 2014 - $1,602,741) $ 2,129,381  $ 1,602,741 
 Debt securities (amortized cost: 2015 - $298,308,845; 2014 - $322,884,934)   284,639,244    320,143,170 
 CLO Fund Securities managed by affiliates (amortized cost: 2015 - $77,764,568; 2014 - $85,355,897)   53,557,570    74,139,696 
  CLO Fund Securities managed by non-affiliates (amortized cost: 2015 - $5,450,379; 2014 - $5,533,293)   2,314,812    3,375,206 
 Equity securities (cost: 2015 - $10,467,786; 2014 - $8,828,812)   9,548,488    8,119,681 
            
 Asset Manager Affiliates (cost: 2015 - $56,591,230; 2014 - $60,292,677)   57,381,000     72,326,000 
Total Investments at Fair Value (cost: 2015 - $450,712,189; 2014 - $484,498,354)   409,570,495    479,706,494 
Cash       1,220,798 
Restricted cash   7,138,272    19,325,550 
Interest receivable   1,812,624    1,748,821 
Due from affiliates   2,117,095    3,027,409 
Other assets   4,603,855    5,417,725 
       
Total Assets $  425,242,341  $ 510,446,797 
       
LIABILITIES      
Convertible Notes $ 19,299,000  $ 38,647,000 
7.375% Notes Due 2019   41,400,000    41,400,000 
Notes issued by KCAP Senior Funding I, LLC (net of discount: 2015 - $2,907,595; 2014 - $3,512,407)   144,442,405    143,837,593 
Payable for open trades       18,293,725 
Accounts payable and accrued expenses    2,218,065    2,274,150 
Accrued interest payable   1,228,068    1,566,255 
Due to affiliates   554,333    31,000 
Dividend payable       9,080,373 
       
Total Liabilities    209,141,871    255,130,096 
       
COMMITMENTS AND CONTINGENCIES       
         
STOCKHOLDERS' EQUITY      
Common stock, par value $0.01 per share, 100,000,000 common shares authorized; 37,136,353 issued, and 37,100,005 outstanding at December 31, 2015, and 36,775,127 common shares issued and outstanding at December 31, 2014    371,000    367,751 
Capital in excess of par value    361,962,511    362,411,830 
Excess distribution of net investment income   (21,638,184)   (25,579,865)
Accumulated net realized losses   (82,054,107)   (75,512,134)
Net unrealized depreciation on investments   (42,540,750)   (6,370,881)
        
Total Stockholders' Equity   216,100,470    255,316,701 
        
Total Liabilities and Stockholders' Equity   425,242,341     510,446,797 
        
NET ASSET VALUE PER COMMON SHARE $ 5.82  $ 6.94 


KCAP FINANCIAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
 
   For the Years Ended December 31,
  2015   2014  2013
              
Investment Income:          
 Interest from investments in debt securities$24,101,257   $21,386,432   $13,967,235 
 Interest from cash and time deposits 10,239    3,452    20,656 
 Investment income on CLO Fund Securities managed by affiliates 14,691,428    12,367,581    17,346,770 
 Investment income on CLO Fund Securities managed by non-affiliates 1,008,634    1,045,225    1,809,534 
 Dividends from Asset Manager Affiliates 5,348,554    5,467,914     5,735,045 
 Capital structuring service fees 366,859    934,871    305,376 
             
  Total investment income 45,526,971    41,205,475    39,184,616 
             
Expenses:          
 Interest and amortization of debt issuance costs 11,727,880    11,538,179    10,116,271 
 Compensation 3,843,799    4,951,745    4,630,481 
 Professional fees 3,520,461    2,614,479     2,191,305 
 Insurance 433,561    471,276    552,568 
 Administrative and other 1,818,480    1,509,228    1,819,876 
              
  Total expenses 21,344,181    21,084,907    19,310,501 
              
Net Investment Income 24,182,790    20,120,568    19,874,115 
Realized And Unrealized Gains (Losses) On Investments:          
 Net realized losses from investment transactions (6,202,289)   (10,384,415)   (12,090,503)
 Net change in unrealized (depreciation)/appreciation on:          
  Debt securities (10,748,262)   5,641,403    14,956,103 
  Equity securities (210,167)   7,040,155    2,605,586 
  CLO Fund Securities managed by affiliates (12,990,404)   (11,584,257)   (11,195,901)
  CLO Fund Securities managed by non-affiliates (977,483)   2,884,109    (2,093,360)
  Asset Manager Affiliates investments (11,243,554)   2,064,107    5,703,743 
             
 Total net (depreciation)/appreciation from investment transactions (36,169,870)   6,045,517    9,976,171 
 Net realized and unrealized loss on investments (42,372,159)   (4,338,898)   (2,114,332)
              
 Realized losses on extinguishments of debt (445,189)   (748,076)   (536,811)
             
Net (Decrease)/Increase In Stockholders' Equity Resulting From Operations$(18,634,558)  $15,033,594    $17,222,972 
             
 Net (Decrease)/Increase in Stockholders' Equity Resulting from Operations per Common Share:          
 Basic:$(0.50)  $0.44   $0.53 
 Diluted:$(0.50)  $0.43   $0.53 
 Net Investment Income Per Common Share:          
 Basic:$0.65   $0.59   $0.62 
 Diluted:$0.65   $0.58   $ 0.62 
             
 Weighted Average Shares of Common Stock Outstanding—Basic 36,964,444    34,248,346    32,280,160 
 Weighted Average Shares of Common Stock Outstanding—Diluted 36,964,444    34,259,977    32,295,005 
             

KCAP-G

CONTACT:

Ted Gilpin

gilpin@kcapinc.com

(212) 455-8300

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Source: KCAP Financial, Inc.

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