Harvest Capital Credit Corporation (the “Company,” “we,” or
“our”) (NASDAQ: HCAP) announced financial results for its fiscal
year and fourth quarter ended December 31, 2020.
FINANCIAL HIGHLIGHTS
Q4-20
Q4-19
FY-20
FY-19
Amount
Per
share
Amount
Per
share
Amount
Per
share
Amount
Per
share
Net investment income (loss)
($382,537
)
($0.06
)
$1,153,280
$0.19
$1,664,179
$0.28
$3,828,786
$0.63
Core net investment income (loss)
(1)
(382,537
)
(0.06
)
1,153,280
0.19
1,664,179
0.28
3,828,786
0.63
Net realized losses on investments
(2,908,762
)
(0.49
)
(2,333,549
)
(0.39
)
(4,923,171
)
(0.83
)
(2,363,853
)
(0.38
)
Net change in unrealized appreciation
(depreciation) on investments
7,012,964
1.18
869,874
0.15
2,160,547
0.36
(2,671,388
)
(0.44
)
Provision for taxes on unrealized gains on
investments
(1,236,329
)
(0.21
)
—
—
(1,236,329
)
(0.21
)
—
—
Net income (loss)
$2,485,336
$0.42
($310,395
)
($0.05
)
($2,334,774
)
($0.39
)
($1,206,455
)
($0.20
)
Weighted average shares outstanding (basic
and diluted)
5,958,799
5,944,914
5,956,339
6,114,474
(1)
Core net investment income and core net
investment income per share are non-GAAP financial measures. For
each of the fiscal years and quarters ended December 31, 2020 and
2019, there were no adjustments to GAAP net investment income and
GAAP net investment income per share to arrive at core net
investment income and core net investment income per share.
PORTFOLIO ACTIVITY
December 31,
2020
December 31,
2019
Portfolio investments at fair value
$
89,554,573
$
116,809,390
Total assets
$
129,944,513
$
140,059,736
Net assets
$
62,216,521
$
66,781,482
Shares outstanding
5,968,296
5,945,854
Net asset value per share
$
10.42
$
11.23
Q4-20
Q4-19
FY-20
FY-19
Portfolio activity during the period:
New debt investments
$
—
$
4,426,801
$
2,219,812
$
55,322,156
New equity investments
193,367
10,637
425,099
3,747,775
Exits of debt investments
(8,285,151
)
—
(25,338,310
)
(21,438,058
)
Exits of equity investments
—
—
(289,391
)
(206,435
)
Principal repayments
(602,315
)
(1,890,347
)
(4,263,595
)
(8,073,409
)
Net activity
$
(8,694,099
)
$
2,547,091
$
(27,246,385
)
$
29,352,029
December 31,
2020
December 31,
2019
Number of portfolio company
investments
21
25
Number of debt investments
14
20
Weighted average yield of debt and other
income producing investments (1):
Cash
9.0
%
12.0
%
PIK
2.6
%
1.1
%
Fee amortization
0.3
%
0.9
%
Total
11.9
%
14.0
%
Weighted average yield on total
investments (2):
Cash
6.9
%
9.7
%
PIK
2.0
%
0.9
%
Fee amortization
0.2
%
0.7
%
Total
9.1
%
11.3
%
(1)
The dollar-weighted average annualized
effective yield is computed using the effective interest rates for
our debt investments and other income producing investments,
including cash and PIK interest as well as the accretion of
deferred fees. The individual investment yields are then weighted
by the respective fair values of the investments (as of the date
presented) in calculating the weighted average effective yield of
the portfolio as a percentage of our debt and other income
producing investments. The dollar-weighted average annualized yield
on the Company’s investments for a given period will generally be
higher than what investors in our common stock would realize in a
return over the same period because the dollar-weighted average
annualized yield does not reflect the Company’s expenses or any
sales load that may be paid by investors. GK Holdings, Inc. and
ProAir Holdings Corporation were excluded from the calculation as
of December 31, 2020 and Infinite Care, LLC and CP Holding Co.,
Inc. were excluded from the calculation as of December 31, 2019
because they were on non-accrual status on such dates.
(2)
The dollar-weighted average yield on total
investments takes the same yields but weights them to determine the
weighted average effective yield as a percentage of the Company's
total investments. The dollar-weighted average annualized yield on
the Company's investments for a given period will generally be
higher than what investors in our common stock would realize in a
return over the same period because the dollar-weighted average
annualized yield does not reflect the Company's expenses or any
sales load that may be paid by investors.
FOURTH QUARTER AND YEAR TO DATE 2020 OPERATING
RESULTS
For the three months ended December 31, 2020, the Company
recorded net income of $2.5 million, as compared to a net loss of
$0.3 million in the quarter ended December 31, 2019. The increase
in net income principally resulted from the Company recording a
higher net change in unrealized appreciation on investments offset
by a lower investment income as a result of a lower
weighted-average effective yield on the Company's investment
portfolio, lower prepayment and other non-recurring fees, the
addition of GK Holdings, Inc. and ProAir Holdings Corporation to
non-accrual status during 2020 and an increase in realized losses.
During the fourth quarter of 2020, Infinite Care, LLC was removed
from non-accrual status. Per share earnings (loss) were $0.42 and
($0.05) per share for the three months ended December 31, 2020 and
2019, respectively.
Net investment loss and core net investment loss was $0.4
million, or $0.06 per share, for the quarter ended December 31,
2020, compared to net investment income and core net investment
income of $1.2 million, or $0.19 per share, for the quarter ended
December 31, 2019, a decrease of $1.6 million in the fourth quarter
of 2020 compared to 2019. The decrease in net investment income
during the 2020 fourth quarter as compared to the 2019 fourth
quarter primarily resulted from an increase in operating expenses
between periods. The Company incurred approximately $1.0 million in
expenses relating to the previously announced proposed merger with
Portman Ridge Finance Corporation. In addition, investment income
decreased by approximately $0.5 million between periods due to a
lower weighted-average effective yield on the Company's
income-earning portfolio and the reduced size of the income-earning
portfolio between periods.
For the year ended December 31, 2020, the Company recorded a net
loss of $2.3 million, an increase in loss of $1.1 million from a
net loss of $1.2 million during the year ended December 31, 2019.
The $1.1 million loss increase was primarily attributable to a $1.1
million decrease in investment income, a $1.1 million increase in
operating expenses, and an increase of $2.6 million in realized
losses, partially offset by a $3.6 million change between periods
in net unrealized appreciation/depreciation on investments, net of
provision for taxes. Per share losses were $0.39 and $0.20 per
share for the years ended December 31, 2020 and 2019,
respectively.
Net investment income was $1.7 million, or $0.28 per share, for
the year ended December 31, 2020, compared to net investment income
of $3.8 million, or $0.63 per share, for the year ended December
31, 2019, a decrease of $2.1 million in the 2020 fiscal year as
compared to 2019. The decrease in net investment income during the
2020 year as compared to 2019, was primarily the result of a
decrease in investment income and an increase in operating
expenses, primarily relating to the previously announced proposed
merger with Portman Ridge Finance Corporation.
As of December 31, 2020, our total portfolio investments at fair
value and total assets were $89.6 million and $129.9 million,
respectively, compared to $116.8 million and $140.0 million at
December 31, 2019. Net asset value per share was $10.42 at December
31, 2020, compared to $11.23 at December 31, 2019.
During the fourth quarter of 2020, the Company made two
additional equity investments in existing portfolio companies. The
Company had one payoff during the three months ended December 31,
2020. The significant investment activity for the quarter ended
December 31, 2020 was as follows:
New and Incremental Investments
On October 28, 2020, the Company increased
its equity investment in Slappey Communications, LLC with a $0.1
million add-on funding to purchase preferred equity units.
On December 24, 2020, the Company increased
its equity investment in Surge Hippodrome Partners LP with a $0.1
million add-on funding to purchase common equity units.
Investment Sales and Payoffs
On October 30, 2020, the Company received a
$7.8 million repayment, at par plus a 2.0% prepayment premium, on
its senior secured debt investment in Slappey Communications, LLC.
The original par value of the debt investment was $7.9 million. The
Company generated an internal rate of return (IRR*) of 17.81% on
its investment.
* IRR is the rate of return that makes the net present value of
all cash flows into or from the investment equal to zero, and is
calculated based on the amount of each cash flow received or
invested by the Company and the day it was received or
invested.
"We made good progress in migrating away from assets rated lower
on our internal investment rating scale and increasing our
liquidity in the fourth quarter of 2020. At year end, non-accrual
loans had been reduced to $5.6 million (at fair value), including
$1.6 million that was under contract for sale to close in the
second quarter of 2021. Recently, one large credit in our portfolio
paid off its loan as a result of a sale transaction, and we
utilized a portion of the proceeds to pay down our bank line of
credit and currently have $18.8 million in cash," said Joseph
Jolson, Chairman and CEO. "Despite absorbing $0.17 per share in
merger-related costs in the fourth quarter of 2020, our NAV rose
9.9% on an annualized basis to $10.42 per share, as a result of
improving fundamentals at our portfolio companies, the expected
exit of selected credits at higher valuations than their September
2020 fair values, and tightening credit spreads overall in the
lower middle market. Our merger with Portman Ridge Finance
Corporation is expected to close in the second quarter of 2021 and
our shareholders will have an opportunity to elect to receive cash
or stock consideration prior to closing, subject to a maximum
amount of approximately 15 million shares of Portman Ridge's common
stock being issued," concluded Mr. Jolson.
CREDIT QUALITY
The Company employs various risk management and monitoring tools
to categorize and assess its investments. No less frequently than
quarterly, the Company applies an investment risk rating system
which uses a five-level numeric scale. In determining an investment
rating, Company management takes into account various aspects of a
company's performance during the measurement period and assigns an
investment rating to each aspect, which are then averaged. Such
averages may inform, but do not necessarily determine, the
investment rating assigned to a company. The following is a
description of the conditions associated with each investment
rating:
- Investment Rating 1 is used for investments that are performing
above expectations, and whose risks remain favorable compared to
the expected risk at the time of the original investment.
- Investment Rating 2 is used for investments that are performing
within expectations and whose risks remain neutral compared to the
expected risk at the time of the original investment. All new loans
are initially rated 2.
- Investment Rating 3 is used for investments that are performing
below expectations and that require closer monitoring, but where no
loss of return or principal is expected. Portfolio companies with a
rating of 3 may be out of compliance with financial covenants.
- Investment Rating 4 is used for investments that are performing
substantially below expectations and whose risks have increased
substantially since the original investment. These investments are
often in workout. Investments with a rating of 4 are those for
which there is an increased possibility of loss of return, but no
loss of principal is expected.
- Investment Rating 5 is used for investments that are performing
substantially below expectations and whose risks have increased
substantially since the original investment. These investments are
almost always in workout. Investments with a rating of 5 are those
for which loss of return and principal is expected.
As of December 31, 2020, the weighted average risk rating of the
debt investments in the Company's portfolio improved slightly to
2.74 from 2.80 in the previous quarter. Also, as of December 31,
2020, three of the Company’s fourteen debt investments were rated
1, four investments were rated 2, three investment were rated 3,
four investments were rated 4, and no investments were rated 5. As
of December 31, 2020, two investments with a combined fair value of
$5.6 million were on non-accrual status.
LIQUIDITY AND CAPITAL RESOURCES
Our liquidity and capital resources are derived from our senior
secured revolving credit facility, proceeds received from offerings
of our securities, if any, such as the 2022 Notes in August 2017,
cash flows from operations, including investment sales and
repayments, and cash income earned. Our primary use of funds from
operations includes investments in portfolio companies and other
operating expenses we incur, as well as the payment of
distributions to the holders of our common stock. We used, and
expect to continue to use, these capital resources as well as
proceeds from any future public and private offerings of securities
to finance our investment activities. To the extent the proposed
merger with Portman Ridge Finance Corporation does not close, we
may amend or refinance our leverage facilities and borrowings, in
order to, among other things, modify covenants or the interest
rates payable and extend the reinvestment period or maturity
date.
As of December 31, 2020, the Company had $7.9 million of
unrestricted cash and $31.5 million of restricted cash and had
$35.6 million outstanding under its senior secured revolving credit
facility. On January 4, 2021, the Company repaid $30.0 million on
the senior secured revolving credit facility. As of March 12, 2021,
the Company fully repaid the balance on its senior secured
revolving credit facility. The revolving period under the credit
facility was scheduled to end on January 31, 2021. However, on
January 22, 2021, the Company amended the credit facility to, among
other things, extend the revolving period to June 30, 2021, until
which date the Company may receive additional advances at the
discretion of the lenders. Please see the Company's Annual Report
on Form 10-K for the year ended December 31, 2020, as filed with
the Securities and Exchange Commission on March 12, 2021, for more
information.
SIGNIFICANT PORTFOLIO DEVELOPMENTS SUBSEQUENT TO DECEMBER 31,
2020
On March 1, 2021, the Company received $5.5 million from
National Program Management & Project Controls, LLC ("NPMPC")
representing full payoffs at par for both of the senior secured
term loan and the senior secured delayed draw term loan and
received a prepayment fee of $0.1 million. In addition, the Company
received proceeds of $9.0 million for the sale of its class A
membership interest in NPMPC. An additional $0.1 million is held in
escrow and will be released to the Company at a later date.
ABOUT HARVEST CAPITAL CREDIT CORPORATION
Harvest Capital Credit Corporation (NASDAQ: HCAP) provides
customized financing solutions to privately held small and
mid-sized companies in the U.S., generally targeting companies with
annual revenues of less than $100 million and annual EBITDA of less
than $15 million. The Company’s investment objective is to generate
both current income and capital appreciation primarily by making
direct investments in the form of senior debt, subordinated debt
and, to a lesser extent, minority equity investments. Harvest
Capital Credit Corporation is externally managed and has elected to
be treated as a business development company under the Investment
Company Act of 1940. For more information about Harvest Capital
Credit Corporation, visit www.harvestcapitalcredit.com. However,
the contents of such website are not and should not be deemed to be
incorporated by reference herein.
Forward-Looking Statements
This press release contains forward-looking statements subject
to the inherent uncertainties in predicting future events, results
and conditions. Any statements that are not 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 events, results and conditions,
including those relating to the timing or likelihood of the closing
of the proposed merger with Portman Ridge Finance Corporation, to
differ materially from those discussed or projected in these
forward-looking statements, including, without limitation, the
failure to secure the shareholder approval required for the
consummation of the merger with Portman Ridge Finance Corporation,
the failure to fulfill all of the other various conditions to the
consummation of the merger, changes in our relationships and
contractual arrangements with lenders and our portfolio companies
and changes in economic, market or other conditions, including with
respect to the impact of the COVID-19 pandemic and its effects on
the Company and its portfolio companies' results of operations and
financial condition. These factors are identified from time to time
in our filings with the Securities and Exchange Commission,
including our annual report on Form 10-K and our quarterly reports
on Form 10-Q. We undertake no obligation to update such statements
to reflect subsequent events, except as may be required by law.
Harvest Capital Credit
Corporation
Consolidated Statements of Assets
and Liabilities
December 31,
December 31,
2020
2019
ASSETS:
Non-affiliated/non-control investments, at
fair value (cost of $45,081,806 at 12/31/20 and $61,379,670 at
12/31/19)
$
43,075,802
$
60,973,556
Affiliated investments, at fair value
(cost of $34,972,335 at 12/31/20 and $48,111,833 at 12/31/19)
35,563,428
47,431,234
Control investments, at fair value (cost
of $13,980,200 at 12/31/20 and $13,958,202 at 12/31/19)
10,915,343
8,404,600
Cash
7,905,299
11,199,083
Restricted cash
31,478,661
10,648,199
Interest receivable
545,330
663,191
Accounts receivable – other
106,415
184,804
Deferred financing costs
205,630
425,379
Other assets
148,605
129,690
Total assets
$
129,944,513
$
140,059,736
LIABILITIES:
Revolving line of credit
$
35,591,406
$
43,700,000
2022 Notes (net of deferred offering costs
of $410,330 at 12/31/20 and $623,276 at 12/31/19)
28,339,670
28,126,724
Accrued interest payable
114,367
152,544
Accounts payable - base management
fees
474,217
593,266
Accounts payable - administrative services
expenses
350,000
350,000
Accounts payable - accrued expenses
1,622,003
355,720
Deferred tax liability
1,236,329
—
Total liabilities
67,727,992
73,278,254
Commitments and contingencies
NET ASSETS:
Common stock, $0.001 par value,
100,000,000 shares authorized, 6,610,261 issued and 5,968,296
outstanding at 12/31/20 and 6,587,819 issued and 5,945,854
outstanding at 12/31/19
6,610
6,588
Capital in excess of common stock
89,578,243
90,876,759
Treasury shares at cost 641,965 shares at
each of 12/31/20 and 12/31/19
(6,723,505
)
(6,723,505
)
Accumulated over distributed earnings
(20,644,827
)
(17,378,360
)
Total net assets
62,216,521
66,781,482
Total liabilities and net
assets
$
129,944,513
$
140,059,736
Common stock outstanding
5,968,296
5,945,854
Net asset value per common share
$
10.42
$
11.23
Harvest Capital Credit
Corporation
Consolidated Statements of
Operations
Three Months Ended December
31,
Year Ended December
31,
2020
(Unaudited)
2019
(Unaudited)
2020
2019
Investment Income:
Interest:
Cash - non-affiliated/non-control
investments
$
981,641
$
1,693,943
$
4,580,619
$
5,941,454
Cash - affiliated investments
623,874
1,224,324
4,114,144
4,718,181
Cash - control investments
98,633
—
98,633
—
PIK - non-affiliated/non-control
investments
177,453
85,904
553,774
135,140
PIK - affiliated investments
210,436
157,246
646,817
726,693
PIK - control investments
98,633
—
98,633
—
Amortization of fees, discounts and
premiums, net:
Non-affiliated/non-control investments
89,672
94,216
338,136
642,433
Affiliated investments
167,778
53,547
759,743
171,672
Total interest income
2,448,120
3,309,180
11,190,499
12,335,573
Other income
195,000
46,357
357,317
334,811
Total investment income
2,643,120
3,355,537
11,547,816
12,670,384
Expenses:
Interest expense – revolving line of
credit
146,455
312,626
1,158,910
640,119
Interest expense - unused line of
credit
44,185
59,406
159,237
327,876
Interest expense - deferred financing
costs
61,337
57,780
301,582
226,678
Interest expense - unsecured notes
440,235
440,235
1,760,940
1,760,940
Interest expense - deferred offering
costs
54,637
50,956
212,948
198,602
Total interest expense
746,849
921,003
3,593,617
3,154,215
Professional fees
990,411
82,835
1,598,981
1,099,075
General and administrative
364,181
255,154
1,073,803
982,003
Base management fees
474,216
593,265
2,117,236
2,206,305
Investment banking fees
100,000
—
100,000
—
Administrative services expense
350,000
350,000
1,400,000
1,400,000
Total expenses
3,025,657
2,202,257
9,883,637
8,841,598
Net Investment Income (Loss)
(382,537
)
1,153,280
1,664,179
3,828,786
Net realized gains (losses):
Non-Affiliated / Non-Control
investments
(2,843,176
)
(2,165,243
)
(5,019,378
)
(2,112,792
)
Affiliated investments
(39,587
)
—
208,707
20,750
Control investments
(25,999
)
(168,306
)
(112,500
)
(271,811
)
Net realized losses
(2,908,762
)
(2,333,549
)
(4,923,171
)
(2,363,853
)
Net change in unrealized appreciation
(depreciation) on investments:
Non-Affiliated / Non-Control
investments
3,023,037
973,998
(1,599,890
)
(2,474,585
)
Affiliated investments
1,845,082
(390,254
)
1,271,692
275,097
Control investments
2,144,845
286,130
2,488,745
(471,900
)
Net change in unrealized appreciation
(depreciation) on investments
7,012,964
869,874
2,160,547
(2,671,388
)
Total net unrealized and realized gains
(losses) on investments
4,104,202
(1,463,675
)
(2,762,624
)
(5,035,241
)
Provision for taxes on unrealized gains on
investments
(1,236,329
)
—
(1,236,329
)
—
Net increase (decrease) in net assets
resulting from operations
$
2,485,336
$
(310,395
)
$
(2,334,774
)
$
(1,206,455
)
Net investment income (loss) per share
($0.06
)
$0.19
$0.28
$0.63
Net increase (decrease) in net assets
resulting from operations per share
$0.42
($0.05
)
($0.39
)
($0.20
)
Weighted average shares outstanding (basic
and diluted)
5,958,799
5,944,914
5,956,339
6,114,474
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210312005524/en/
Investor & Media Relations Contacts Harvest Capital
Credit Corporation Joseph Jolson Chairman & Chief Executive
Officer (415) 835-8970 jjolson@harvestcaps.com William E. Alvarez,
Jr Chief Financial Officer (212) 906-3589
balvarez@harvestcaps.com
Harvest Capital Credit (NASDAQ:HCAP)
Gráfica de Acción Histórica
De Ago 2024 a Sep 2024
Harvest Capital Credit (NASDAQ:HCAP)
Gráfica de Acción Histórica
De Sep 2023 a Sep 2024