Oxford Square Capital Corp. Announces Results of Operations for the Quarter Ended June 30, 2018 and Announces Quarterly Dist...
July 31 2018 - 7:00AM
Oxford Square Capital Corp. (NasdaqGS: OXSQ) (NasdaqGS:OXSQL)
(“OXSQ,” the “Company,” “we,” “us” or “our”) announced today its
financial results for the quarter ended June 30, 2018, and
announced a distribution of $0.20 per share for the quarter ending
September 30, 2018.
- As of June 30, 2018, net asset value per share was $7.56
compared with the net asset value per share as of March 31, 2018 of
$7.60, and a net asset value per share as of December 31, 2017 of
$7.55.
- For the quarter ended June 30, 2018 we recorded net investment
income of approximately $7.7 million, or $0.15 per share compared
with approximately $8.7 million or $0.17 per share for the quarter
ended March 31, 2018. We recorded net realized losses of
approximately $1.0 million, and net unrealized appreciation of
approximately $0.3 million for the quarter ended June 30, 2018. In
total, we had a net increase in net assets from operations of
approximately $6.9 million, or approximately $0.14 per share, for
the quarter ended June 30, 2018 compared with approximately $11.5
million, or $0.22 per share for the quarter ended March 31,
2018.
- Our core net investment income (“Core NII”) for the quarter
ended June 30, 2018 was $9.1 million, or approximately $0.18 per
share compared with approximately $7.6 million or $0.15 per share
for the quarter ended March 31, 2018.
- Core 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.
- While 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 second quarter of 2018 amounted
to approximately $12.5 million, which represents a decrease of
approximately $0.8 million from the first quarter of 2018.
- For the quarter ended June 30, 2018, we recorded investment
income from our portfolio as follows:
- approximately $5.9 million from our debt investments,
- approximately $6.1 million from our CLO equity investments,
and
- approximately $0.5 million from all other sources.
- Our total expenses for the quarter ended June 30, 2018 were
approximately $4.8 million, up by approximately $0.2 million
compared to the first quarter of 2018. This increase is primarily
attributable to higher professional fees.
- During the second quarter of 2018:
- We made investments of approximately $87.9 million in corporate
loan investments and $0.9 million in CLO debt investments.
- We received or were entitled to receive proceeds of
approximately $43.7 million from repayments and amortization
payments on our debt investments, and $0.2 million from sales of
our CLO equity investments.
- As of June 30, 2018, the following metrics applied (note that
none of these values represent a total return to shareholders):
- The weighted average yield of our debt investments was
approximately 9.7% at current cost, compared with 9.9% as of March
31, 2018.
- The weighted average effective yield of our CLO equity
investments at current cost was approximately 14.5%, compared with
15.9% as of March 31, 2018.
- The weighted average cash distribution yield of our CLO equity
investments at current cost was approximately 18.0%, compared with
15.5% as of March 31, 2018.
- Our weighted average credit rating on a fair value basis was
2.0 at the end of the second quarter of 2018 (compared to 2.1 at
the end of the first quarter of 2018).
- As of June 30, 2018, we had no investments on non-accrual
status.
- On July 26, 2018, our board of directors declared the following
distribution on our common stock:
Quarter Ending |
Record Date |
Payment Date |
Amount Per Share |
September 30, 2018 |
September 14, 2018 |
September 28, 2018 |
$0.20 |
- On February 5, 2018, the Board of Directors authorized a stock
repurchase program of $25 million. Since inception of the program
through June 30, 2018 we repurchased approximately 2.1 million
shares of our common stock at a weighted average share price of
$6.41 per share totaling approximately $13.3 million. Through June
30, 2018, our stock repurchase program has produced an accretion of
approximately $0.05 per share.
- On June 21, 2018, we announced that Oxford Square Funding 2018,
LLC, a special purpose vehicle that is a wholly-owned subsidiary of
the Company, entered into a credit facility (the “Facility”) with
Citibank. Pricing under the Facility is based on 3-month LIBOR plus
2.25% per year. Pursuant to the terms of the credit agreement
governing the Facility, we have borrowed approximately $95.2
million. The Facility will mature on June 21, 2020.
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
June 30, 2018.
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 adjustments”).
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 net investment income for the three months ended
June 30, 2018 and June 30, 2017:
|
|
June 30, 2018 |
|
June 30, 2017 |
|
|
Amount |
|
Per Share Amounts |
|
Amount |
|
Per Share Amounts |
Net
investment income |
|
$ |
7,688,011 |
|
|
$ |
0.154 |
|
|
$ |
8,046,907 |
|
|
$ |
0.156 |
|
CLO equity
adjustments |
|
|
1,413,926 |
|
|
|
0.028 |
|
|
|
1,737,958 |
|
|
|
0.034 |
|
Core net
investment income |
|
$ |
9,101,937 |
|
|
$ |
0.182 |
|
|
$ |
9,784,865 |
|
|
$ |
0.190 |
|
We will host a conference call to discuss our second quarter
results today, Tuesday, July 31, 2018 at 09:00 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 10122752.
A presentation containing further detail regarding our quarterly
results of operations has been posted under the Investor Relations
section of our website at www.oxfordsquarecapital.com.
The following financial statements are unaudited and without
footnotes. Readers who would like additional information
should obtain our Form 10-Q for the period ended June 30, 2018, and
subsequent reports on Form 10-Q as they are filed.
OXFORD SQUARE CAPITAL
CORP. |
CONSOLIDATED STATEMENTS OF ASSETS
AND LIABILITIES |
(unaudited) |
|
|
|
June 30, 2018 |
|
|
December 31, 2017 |
|
|
|
(unaudited) |
|
|
|
|
ASSETS |
|
|
|
|
|
|
Non-affiliated/non-control investments (cost: $450,822,337 @
6/30/18; $418,990,080 @ 12/31/17) |
|
$ |
432,929,878 |
|
|
$ |
400,223,439 |
|
Affiliated investments (cost: $10,450,787 @ 6/30/18;
$10,528,740 @ 12/31/17) |
|
|
20,004,363 |
|
|
|
18,218,787 |
|
Cash equivalents |
|
|
124,238,303 |
|
|
|
30,013,842 |
|
Restricted cash |
|
|
1,856,479 |
|
|
|
— |
|
Interest and distributions receivable |
|
|
3,757,276 |
|
|
|
5,085,494 |
|
Other assets |
|
|
758,301 |
|
|
|
579,694 |
|
Total assets |
|
$ |
583,544,600 |
|
|
$ |
454,121,256 |
|
LIABILITIES |
|
|
|
|
|
|
|
|
Notes payable – Credit Facility, net of deferred issuance
costs |
|
$ |
94,983,678 |
|
|
$ |
— |
|
Notes payable – 6.50% Unsecured Notes, net of deferred
issuance costs |
|
|
62,501,177 |
|
|
|
62,340,159 |
|
Securities purchased not settled |
|
|
49,359,978 |
|
|
|
— |
|
Base management fee and net investment income incentive fee
payable to affiliate |
|
|
2,582,101 |
|
|
|
2,706,099 |
|
Accrued interest payable |
|
|
132,735 |
|
|
|
11,621 |
|
Accrued expenses |
|
|
577,207 |
|
|
|
644,735 |
|
Total liabilities |
|
|
210,136,876 |
|
|
|
65,702,614 |
|
|
|
|
|
|
|
|
|
|
NET
ASSETS |
|
|
|
|
|
|
|
|
Common stock, $0.01 par value, 100,000,000 shares authorized;
49,407,609 and 51,479,409 shares issued and outstanding,
respectively |
|
|
494,076 |
|
|
|
514,794 |
|
Capital in excess of par value |
|
|
516,037,155 |
|
|
|
529,297,749 |
|
Distributions in excess of net investment income |
|
|
(28,782,735 |
) |
|
|
(25,072,262 |
) |
Net unrealized depreciation on investments |
|
|
(8,338,923 |
) |
|
|
(11,076,594 |
) |
Accumulated net realized losses on investments |
|
|
(100,764,733 |
) |
|
|
(100,007,929 |
) |
Accumulated realized losses on extinguishment of
debt |
|
|
(5,237,116 |
) |
|
|
(5,237,116 |
) |
Total net assets |
|
|
373,407,724 |
|
|
|
388,418,642 |
|
Total liabilities and net assets |
|
$ |
583,544,600 |
|
|
$ |
454,121,256 |
|
Net asset value per common share |
|
$ |
7.56 |
|
|
$ |
7.55 |
|
OXFORD SQUARE CAPITAL
CORP. |
CONSOLIDATED STATEMENTS OF
OPERATIONS |
(unaudited) |
|
|
|
Three Months Ended June 30,
2018 |
|
Three Months Ended June 30,
2017 |
|
Six Months Ended June 30,
2018 |
|
Six Months Ended June 30,
2017 |
INVESTMENT INCOME |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From
non-affiliated investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income – debt investments |
|
$ |
5,851,355 |
|
|
$ |
6,717,197 |
|
|
$ |
11,673,092 |
|
|
$ |
13,789,404 |
|
Income from securitization vehicles and
investments |
|
|
6,100,764 |
|
|
|
9,426,014 |
|
|
|
12,903,628 |
|
|
|
17,995,617 |
|
Other income |
|
|
465,203 |
|
|
|
768,682 |
|
|
|
1,087,186 |
|
|
|
1,510,171 |
|
Total investment income from non-affiliated
investments |
|
|
12,417,322 |
|
|
|
16,911,893 |
|
|
|
25,663,906 |
|
|
|
33,295,192 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From
affiliated investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income – debt investments |
|
|
101,400 |
|
|
|
100,260 |
|
|
|
201,616 |
|
|
|
182,441 |
|
Total investment income from affiliated investments |
|
|
101,400 |
|
|
|
100,260 |
|
|
|
201,616 |
|
|
|
182,441 |
|
Total investment income |
|
|
12,518,722 |
|
|
|
17,012,153 |
|
|
|
25,865,522 |
|
|
|
33,477,633 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base management fee |
|
|
1,742,391 |
|
|
|
2,182,173 |
|
|
|
3,422,205 |
|
|
|
4,452,175 |
|
Interest expense |
|
|
1,250,694 |
|
|
|
4,128,335 |
|
|
|
2,376,774 |
|
|
|
7,433,918 |
|
Professional fees |
|
|
348,159 |
|
|
|
589,841 |
|
|
|
505,077 |
|
|
|
1,342,234 |
|
Compensation expense |
|
|
216,133 |
|
|
|
203,339 |
|
|
|
476,222 |
|
|
|
438,373 |
|
General and administrative |
|
|
433,624 |
|
|
|
651,417 |
|
|
|
834,195 |
|
|
|
1,217,163 |
|
Total expenses before incentive fee |
|
|
3,991,001 |
|
|
|
7,755,105 |
|
|
|
7,614,473 |
|
|
|
14,883,863 |
|
Net investment income incentive fee |
|
|
839,710 |
|
|
|
1,210,141 |
|
|
|
1,839,942 |
|
|
|
2,263,621 |
|
Capital gains incentive fee |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total incentive fees |
|
|
839,710 |
|
|
|
1,210,141 |
|
|
|
1,839,942 |
|
|
|
2,263,621 |
|
Total expenses |
|
|
4,830,711 |
|
|
|
8,965,246 |
|
|
|
9,454,415 |
|
|
|
17,147,484 |
|
Net
investment income |
|
|
7,688,011 |
|
|
|
8,046,907 |
|
|
|
16,411,107 |
|
|
|
16,330,149 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change
in unrealized appreciation/depreciation on investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Affiliated investments |
|
|
(2,477,460 |
) |
|
|
1,499,946 |
|
|
|
874,142 |
|
|
|
10,759,231 |
|
Affiliated investments |
|
|
2,737,099 |
|
|
|
(466,884 |
) |
|
|
1,863,529 |
|
|
|
(78,111 |
) |
Total net change in unrealized appreciation/depreciation on
investments |
|
|
259,639 |
|
|
|
1,033,062 |
|
|
|
2,737,671 |
|
|
|
10,681,120 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
realized gains/(losses) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Affiliated investments |
|
|
(1,045,739 |
) |
|
|
542,959 |
|
|
|
(756,804 |
) |
|
|
(4,925,712 |
) |
Extinguishment of debt |
|
|
— |
|
|
|
(505,032 |
) |
|
|
— |
|
|
|
(913,702 |
) |
Total net realized gains/(losses) |
|
|
(1,045,739 |
) |
|
|
37,927 |
|
|
|
(756,804 |
) |
|
|
(5,839,414 |
) |
Net
increase in net assets resulting from operations |
|
$ |
6,901,911 |
|
|
$ |
9,117,896 |
|
|
$ |
18,391,974 |
|
|
$ |
21,171,855 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase in net assets resulting from net investment income per
common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Basic and Diluted) |
|
$ |
0.15 |
|
|
$ |
0.16 |
|
|
$ |
0.32 |
|
|
$ |
0.32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase in net assets resulting from operations per common
share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Basic and Diluted) |
|
$ |
0.14 |
|
|
$ |
0.18 |
|
|
$ |
0.36 |
|
|
$ |
0.41 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares of common stock outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
50,086,563 |
|
|
|
51,479,409 |
|
|
|
50,640,236 |
|
|
|
51,479,409 |
|
Diluted |
|
|
50,086,563 |
|
|
|
59,727,707 |
|
|
|
50,640,236 |
|
|
|
59,727,707 |
|
Distributions per share |
|
$ |
0.20 |
|
|
$ |
0.20 |
|
|
$ |
0.40 |
|
|
$ |
0.40 |
|
OXFORD SQUARE CAPITAL CORP.
FINANCIAL HIGHLIGHTS - UNAUDITED
Financial highlights for the three and six months ended June 30,
2018 and June 30, 2017 are as follows:
|
|
Three Months Ended June 30,
2018 |
|
Three Months Ended June 30,
2017 |
|
Six Months Ended June 30,
2018 |
|
Six Months Ended June 30,
2017 |
Per
Share Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset
value as of beginning of period |
|
$ |
7.60 |
|
|
$ |
7.53 |
|
|
$ |
7.55 |
|
|
$ |
7.50 |
|
Net
investment income(1) |
|
|
0.15 |
|
|
|
0.16 |
|
|
|
0.32 |
|
|
|
0.32 |
|
Net
realized and unrealized (losses)/gains(2) |
|
|
(0.01 |
) |
|
|
0.02 |
|
|
|
0.04 |
|
|
|
0.09 |
|
Net change
in net asset value from operations |
|
|
0.14 |
|
|
|
0.18 |
|
|
|
0.36 |
|
|
|
0.41 |
|
Distributions per share from net investment income |
|
|
(0.20 |
) |
|
|
(0.20 |
) |
|
|
(0.40 |
) |
|
|
(0.40 |
) |
Distributions based on weighted average share impact |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total
distributions(3) |
|
|
(0.20 |
) |
|
|
(0.20 |
) |
|
|
(0.40 |
) |
|
|
(0.40 |
) |
Effect of
shares repurchased, gross |
|
|
0.02 |
|
|
|
— |
|
|
|
0.05 |
|
|
|
— |
|
Net asset
value at end of period |
|
$ |
7.56 |
|
|
$ |
7.51 |
|
|
$ |
7.56 |
|
|
$ |
7.51 |
|
Per share
market value at beginning of period |
|
$ |
6.11 |
|
|
$ |
7.38 |
|
|
$ |
5.74 |
|
|
$ |
6.61 |
|
Per share
market value at end of period |
|
$ |
6.90 |
|
|
$ |
6.34 |
|
|
$ |
6.90 |
|
|
$ |
6.34 |
|
Total
return based on market value(4) |
|
|
16.20 |
% |
|
|
(11.38 |
)% |
|
|
27.74 |
% |
|
|
1.62 |
% |
Total
return based on net asset value(5) |
|
|
2.11 |
% |
|
|
2.34 |
% |
|
|
5.43 |
% |
|
|
5.43 |
% |
Shares
outstanding at end of period |
|
|
49,407,609 |
|
|
|
51,479,409 |
|
|
|
49,407,609 |
|
|
|
51,479,409 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios/Supplemental Data(8) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets
at end of period (000’s) |
|
|
373,408 |
|
|
|
386,573 |
|
|
|
373,408 |
|
|
|
386,573 |
|
Average net
assets (000’s) |
|
|
379,613 |
|
|
|
387,162 |
|
|
|
383,506 |
|
|
|
387,017 |
|
Ratio of
operating expenses to average net assets(6) |
|
|
5.09 |
% |
|
|
9.26 |
% |
|
|
4.93 |
% |
|
|
8.86 |
% |
Ratio of
net investment income to average net assets(6) |
|
|
8.10 |
% |
|
|
8.31 |
% |
|
|
8.56 |
% |
|
|
8.44 |
% |
Portfolio
turnover rate(7) |
|
|
10.73 |
% |
|
|
18.36 |
% |
|
|
15.22 |
% |
|
|
25.23 |
% |
|
(1) |
|
Represents per share
net investment income for the period, based upon average shares
outstanding. |
|
(2) |
|
Net realized and
unrealized gains include rounding adjustments to reconcile change
in net asset value per share. |
|
(3) |
|
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. |
|
(4) |
|
Total return based on
market value equals the increase or decrease of ending market value
over beginning market value, plus distributions, divided by the
beginning market value, assuming distribution reinvestment prices
obtained under the Company’s distribution reinvestment plan,
excluding any discounts. Total return is not annualized. |
|
(5) |
|
Total return based on
net asset value equals the increase or decrease of ending net asset
value over beginning net asset value, plus distributions, divided
by the beginning net asset value. Total return is not
annualized. |
|
(6) |
|
Annualized. |
|
(7) |
|
Portfolio turnover rate
is calculated using the lesser of the year-to-date cash investment
sales and debt repayments or year-to-date cash investment purchases
over the average of the total investments at fair value. |
|
(8) |
|
The following table
provides supplemental performance ratios (annualized) measured for
the three and six months ended June 30, 2018 and June 30,
2017: |
|
|
Three Months Ended June 30,
2018 |
|
Three Months Ended June 30,
2017 |
|
Six Months Ended June 30,
2018 |
|
Six Months Ended June 30,
2017 |
Ratio of expenses to average net assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses before incentive fees |
|
|
4.21 |
% |
|
|
8.01 |
% |
|
|
3.97 |
% |
|
|
7.69 |
% |
Net
investment income incentive fees |
|
|
0.88 |
% |
|
|
1.25 |
% |
|
|
0.96 |
% |
|
|
1.17 |
% |
Ratio of
expenses, excluding interest expense |
|
|
3.77 |
% |
|
|
5.00 |
% |
|
|
3.69 |
% |
|
|
5.02 |
% |
About Oxford Square Capital Corp. Oxford Square
Capital Corp. is a publicly-traded business development company
principally investing in syndicated bank loans and debt and equity
tranches of collateralized loan obligation 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 Rubin203-983-5280
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