HOUSTON, TX -- (Marketwired) -- 05/06/16 -- Stellus Capital Investment Corporation (NYSE: SCM) ("Stellus" or "the Company") today announced financial results for its first fiscal quarter ended March 31, 2016.

HIGHLIGHTS
($ in millions, except data relating to per share amounts and number of portfolio companies) 

	As of
Portfolio results	March 31, 2016
Total assets	$	364.3
Investment portfolio, at fair value	$	352.5
Net assets	$	162.9
Weighted average yield on debt investments		10.6	%
Net asset value per share	$	13.06

		Quarter		Quarter
		ended		ended
		March 31, 2016		March 31, 2015
Portfolio activity
Total investments made, at par		$	5.6	$	22.2
Number of new investments			3		4
Repayments of investments, including amortization		$	0.5	$	17.3
Number of portfolio companies at
end of period			40		33
Operating results
Total investment income		$	9.5	$	8.7
Net investment income		$	4.1	$	3.8
Net investment income per share		$	0.33	$	0.31
Regular dividends declared per share		$	0.34	$	0.34
Net increase in net assets from operations		$	2.5	$	5.4
Net increase in net assets from operations per share		$	0.20	$	0.43

"During the first quarter, our investment portfolio increased slightly with no pay-offs received," said Robert T. Ladd, Chief Executive Officer of Stellus.

Portfolio and Investment Activity

We completed the first quarter of 2016 with a portfolio of $352.5 million (at fair value) invested in 40 companies. As of March 31, 2016, our portfolio included approximately 37% of first lien debt, 39% of second lien debt, 20% of mezzanine debt and 4% of equity investments at fair value. Our debt portfolio consisted of 76% floating rate investments (subject to interest rate floors) and 24% fixed rate investments. The average size of our portfolio company investments was $8.8 million and our largest portfolio company investment was approximately $21.7 million at fair value. The weighted average yield on all of our debt investments as of March 31, 2016 was approximately 10.6%.

During the three months ended March 31, 2016, we made $5.6 million of investments (at par) in one new portfolio company and two existing portfolio companies and received $0.5 million from amortization of certain other investments.

This compares to the portfolio as of December 31, 2015, which had a fair value of $349.0 million invested in 39 companies comprising 38% of first lien debt, 38% of second lien debt, 20% of mezzanine debt and 4% of equity investments at fair value. As of December 31, 2015, our debt investments had a weighted average yield of 10.6% and consisted of 75% floating rate investments (subject to interest rate floors) and 25% fixed rate investments.

Results of Operations

Investment income for the three months ended March 31, 2016 and 2015 totaled $9.5 million and $8.7 million, respectively, most of which was interest income from portfolio investments.

Operating expenses for the three months ended March 31, 2016 and 2015, totaled $5.4 million and $4.9 million, respectively. For the same respective periods, base management fees totaled $1.5 million and $1.4 million, incentive fees totaled $1.0 million and $1.0 million, fees and expenses related to our borrowings totaled $1.9 million and $1.5 million (including interest and amortization of deferred financing costs), administrative expenses totaled $0.3 million and $0.3 million and other expenses totaled $0.7 million and $0.7 million.

Net investment income was $4.1 million and $3.8 million, or $0.33 and $0.31 per common share based on weighted average common shares outstanding for the three months ended March 31, 2016 and 2015.

The Company's investment portfolio had a net change in unrealized appreciation (depreciation) for the three months ended March 31, 2016 and 2015, of ($1.7) million and $1.6 million, respectively. For the three months ended March 31, 2016 and 2015 the Company had realized gains of $0.9 thousand and $3.2 thousand, respectively.

Our net increase in net assets resulting from operations totaled $2.5 million and $5.4 million, or $0.20 and $0.43 per common share based on weighted average common shares outstanding for the three months ended March 31, 2016 and 2015, respectively.

Liquidity and Capital Resources

As of March 31, 2016 and 2015, our credit facility provided for borrowings in an aggregate amount up to $120 million on a committed basis. As of both March 31, 2016 and December 31, 2015, we had $109.5 million in outstanding borrowings under the credit facility.

For the three months ended March 31, 2016, our operating activities used cash of $0.1 million primarily due to the purchase of new investments offset by cash interest received. For the same period, our financing activities used cash of $4.2 million, due to distributions to stockholders during the period.

For the three months ended March 31, 2015 our operating activities used cash of $0.3 million, primarily in connection with the payment of operating expenses, and our financing activities used cash of $0.5 million, primarily related to distributions to stockholders and offset by net borrowings under the credit facility.

Distributions

During the three months ended March 31, 2016 and 2015, we declared distributions of $0.34 per share ($4.2 million) for each quarter. Tax characteristics of all distributions will be reported to stockholders on Form 1099-DIV after the end of the calendar year. None of these dividends are expected to include a return of capital.

Recent Portfolio Activity

New investment transactions and repayments which occurred during the three months ended March 31, 2016 are summarized as follows:

• On January 26, 2016, we made a $3.8 million follow-on investment in the second lien loan of Stratose Intermediate Holdings, II, LLC. We also made an additional $0.3 million equity investment.
• On January 27, 2016, we made a $0.7 million investment in the first lien loan of Vision Media Management & Fulfillment, LLC, a leading provider of logistics, fulfillment, and storage services for the media and entertainment industry.
• On March 23, 2016, we made a $0.8 million follow-on investment in the second lien loan of Abrasive Products & Equipment, LLC.

Events Subsequent to March 31, 2016

During the month of April 2016, we received $2.5 million of principal repayments on our first lien debtor-in-possession loan of Binder & Binder National Social Security and Disability Advocates, LLC.

Credit Facility

The outstanding balance under our credit facility as of May 5, 2016 was $109.5 million.

Conference Call Information

Stellus Capital Investment Corporation will host a conference call to discuss these results on May 6, 2016, at 10:00 a.m. Central Standard Time. The conference call will be led by Robert T. Ladd, chief executive officer, and W. Todd Huskinson, chief financial officer, chief compliance officer, treasurer, and secretary.

For those wishing to participate by telephone, please dial 888-364-3109 (domestic). Use passcode 5115564. Starting approximately twenty-four hours after the conclusion of the call, a replay will be available through May 14, 2016 by dialing (888) 203-1112 and entering passcode 5115564. The replay will also be available on the company's website.

PART I - FINANCIAL INFORMATION
STELLUS CAPITAL INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES  (unaudited)
			March 31,		December 31,
			2016		2015
ASSETS
	Non-controlled, non-affiliated investments, at fair value
	(amortized cost of $369,410,970 and $364,212,459, respectively)		$	352,472,534	$	349,017,697
	Cash and cash equivalents			6,524,058		10,875,790
	Receivable for sales and repayments of investments			11,187		10,000
	Interest receivable			4,612,009		4,720,031
	Deferred offering costs			261,761		261,761
	Accounts receivable			-		7,684
	Prepaid expenses			462,863		475,449
		Total Assets	$	364,344,412	$	365,368,412
LIABILITIES
	Notes Payable, net of deferred financing costs		$	24,428,292	$	24,381,108
	Credit facility payable, net of prepaid loan structure fees			108,327,796		108,197,373
	SBA Debentures, net of prepaid loan fees			63,096,947		63,015,846
	Dividends payable			1,413,982		1,413,982
	Base management fees payable			1,548,373		1,518,779
	Incentive fees payable			1,231,235		607,956
	Interest payable			370,393		570,189
	Unearned revenue			33,259		36,877
	Administrative services payable			469,224		397,799
	Deferred tax liability			214,384		381,723
	Other accrued expenses and liabilities			278,017		195,676
		Total Liabilities	$	201,411,902	$	200,717,308
Commitments and contingencies (Note 5)
Net Assets			$	162,932,510	$	164,651,104
NET ASSETS
	Common Stock, par value $0.001 per share (100,000,000 shares authorized, 12,479,960 and 12,479,962 shares issued and outstanding, respectively)		$	12,480	$	12,480
	Paid-in capital			180,994,752		180,994,752
	Accumulated undistributed net realized gain			894		-
	Distributions in excess of net investment income			(922,796)		(779,643)
	Net unrealized depreciation on investments and cash equivalents, net of provision for taxes of $214,385 and $381,723, respectively.			(17,152,820)		(15,576,485)
Net Assets			$	162,932,510	$	164,651,104
	Total Liabilities and Net Assets		$	364,344,412	$	365,368,412
	Net Asset Value Per Share		$	13.06	$	13.19

STELLUS CAPITAL INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
				For the				For the
				three months				three months
				ended				ended
				March 31,				March 31,
				2016				2015
INVESTMENT INCOME
	Interest income			$	9,374,737			$	8,631,296
	Other income				93,096				82,795
		Total Investment Income			9,467,833				8,714,091
OPERATING EXPENSES
	Management fees			$	1,548,373			$	1,414,134
	Valuation fees				132,466				147,475
	Administrative services expenses				287,300				279,200
	Incentive fees				1,024,822				960,854
	Professional fees				192,111				294,561
	Directors' fees				92,000				89,000
	Insurance expense				118,026				116,944
	Interest expense and other fees				1,879,843				1,450,492
	Other general and administrative expenses				93,602				118,016
		Total Operating Expenses		$	5,368,543			$	4,870,676
		Net Investment Income		$	4,099,290			$	3,843,415
		Net Realized Gain on Investments and Cash  Equivalents		$	894			$	3,169
		Net Change in Unrealized Appreciation (Depreciation) on  Investments and Cash Equivalents		$	(1,743,674	)		$	1,613,068
		Benefit (provision) for taxes on unrealized gain on investments		$	167,339			$	(66,278	)
		Net Increase in Net Assets Resulting from Operations		$	2,523,849			$	5,393,374
		Net Investment Income Per Share		$	0.33			$	0.31
		Net Increase in Net Assets Resulting from Operations  Per Share		$	0.20			$	0.43
		Weighted Average Shares of Common Stock  Outstanding			12,479,960				12,479,962
		Distributions Per Share		$	0.34			$	0.34

STELLUS CAPITAL INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (unaudited)
		For the		For the
		three months		three months
		ended		ended
		March 31,		March 31,
		2016		2015
Increase in Net Assets Resulting from Operations
Net investment income	$	4,099,290	$	3,843,415
Net realized gain on investments and cash equivalents		894		3,169
Net change in unrealized appreciation (depreciation) on investments and cash equivalents		(1,743,674)		1,613,068
Benefit (provision) for taxes on unrealized appreciation (depreciation) on investments		167,339		(66,278	)
Net Increase in Net Assets Resulting from Operations	$	2,523,849	$	5,393,374
Stockholder distributions
Net investment income		(4,242,443)		(4,242,264	)
Total Distributions	$	(4,242,443)	$	(4,242,264	)
Total increase (decrease) in net assets	$	(1,718,594)	$	1,151,110
Net assets at beginning of period	$	164,651,104	$	173,949,452
Net assets at end of period (includes $922,796 and  $1,178,472 of distributions in excess of net investment income, respectively)	$	162,932,510	$	175,100,562

STELLUS CAPITAL INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
						For the				For the
						three months				three months
						ended				ended
						March 31, 2016				March 31, 2015
Cash flows from operating activities
Net increase in net assets resulting from operations					$	2,523,849			$	5,393,374
	Adjustments to reconcile net increase in net assets resultingfrom operations to net cash used in operating activities:
		Purchases of investments				(5,367,633	)			(21,712,544	)
		Proceeds from sales and repayments of investments				513,365				17,342,354
		Net change in unrealized depreciation (appreciation) on investments				1,743,674				(1,613,068	)
		Deferred tax provision (benefit)				(167,339	)			66,278
		Increase in investments due to PIK				(54,729	)			(178,581	)
		Amortization of premium and accretion of discount, net				(289,807	)			(211,463	)
		Amortization of loan structure fees				130,423				129,329
		Amortization of deferred financing costs				81,101				76,232
		Amortization of loan fees on SBIC debentures				47,184				28,690
		Net realized gain on investments				(894	)			(3,169	)
	Changes in other assets and liabilities
			Decrease in interest receivable			108,022				54,545
			Increase in receivable for affiliated transaction			-				(40,000	)
			Decrease in accounts receivable			7,684				-
			Decrease in prepaid expenses and fees			12,586				-
			Increase in payable for investments purchased			-				76,074
			Increase in management fees payable			29,594				54,115
			Increase in directors' fees payable			-				89,000
			Increase in incentive fees payable			623,279				45,277
			Increase in administrative services payable			71,425				50,290
			Decrease in interest payable			(199,796	)			(27,347	)
			Decrease in unearned revenue			(3,618	)			(125,380	)
			Increase in holdback liability			-				110,000
			Increase in other accrued expenses and liabilities			82,341				52,050
Net cash used by operating activities					$	(109,289	)		$	(343,944	)
Cash flows from financing activities
		Stockholder distributions paid				(4,242,443	)			(4,242,264	)
		Borrowings under credit facility				-				22,750,000
		Repayments of credit facility				-				(19,000,000	)
Net cash used in financing activities					$	(4,242,443	)		$	(492,264	)
Net decrease in cash and cash equivalents						(4,351,732	)			(836,208	)
Cash and cash equivalents balance at beginning of period						10,875,790				2,046,563
Cash and cash equivalents balance at end of period					$	6,524,058			$	1,210,355
Supplemental and non-cash financing activities
	Interest expense paid				$	1,820,930			$	1,243,588

Contacts 
Stellus Capital Investment Corporation
W. Todd Huskinson
(713) 292-5414
Chief Financial Officer
thuskinson@stelluscapital.com

Source: Stellus Capital Investment Corporation

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