HOUSTON, TX -- (Marketwired) -- 05/08/15 -- Stellus Capital Investment Corporation(NYSE: SCM) ("Stellus" or "the Company") today announced financial results for its first fiscal quarter ended March 31, 2015.

HIGHLIGHTS
($ in millions, except data relating to per share amounts and number of portfolio companies)
Portfolio results		As of March 31, 2015
Total assets		$332.2
Investment portfolio, at fair value		$322.3
Net assets		$175.1
Weighted average yield on debt investments		10.9%
Net asset value per share		$14.03
		Quarter ended March 31, 2015		Quarter ended March 31, 2014
Portfolio activity
Total investments made, at cost		$21.7		$40.6
Number of new investments		4		5
Repayments of investments, including amortization		$17.3		$22.4
Number of portfolio companies at end of period		33		28
Operating results
Total investment income		$8.7		$7.8
Net investment income		$3.8		$3.8
Net investment income per share		$0.31		$0.31
Regular dividends declared per share		$0.34		$0.34
Net increase in net assets from operations		$5.4		$4.3
Net increase in net assets from operations per share		$0.43		$0.36
Weighted average shares outstanding during the period		12,479,962		12,103,986

Portfolio and Investment Activity

We completed the first quarter of 2015 with a portfolio of $322.3 million (at fair value) invested in 33 companies. As of March 31, 2015, our portfolio included approximately 26% of first lien debt, 36% of second lien debt, 35% of mezzanine debt and 3% of equity investments at fair value. Our debt portfolio consisted of 40% fixed rate investments and 60% floating rate investments (subject to interest rate floors). The average size of our portfolio company investments was $9.8 million and our largest portfolio company investment was approximately $23.1 million at fair value. The weighted average yield on all of our debt investments as of March 31, 2015 was approximately 10.9%. 

During the three months ended March 31, 2015, we made $21.7 million of investments in two new portfolio companies and two existing portfolio companies and received $17.3 million of proceeds principally from the repayment of one investment, including $0.4 million from amortization of certain other investments.

This compares to the portfolio as of March 31, 2014, which had a fair value of $296.6 million invested in 28 companies comprising 25% of first lien debt, 35% of second lien debt, 38% of mezzanine debt and 2% of equity investments at fair value. As of March 31, 2014, our debt investments had a weighted average yield of 10.7% and consisted of 43% fixed rate investments and 57% floating rate investments (subject to interest rate floors).

Results of Operations

Investment income for the three months ended March 31, 2015 and 2014 totaled $8.7 million and $7.8 million, respectively, most of which was interest income from portfolio investments.

Operating expenses for the three months ended three months ended March 31, 2015 and 2014, totaled $4.9 million and $4.1 million, respectively. For the same respective periods, base management fees totaled $1.4 million and $1.2 million, incentive fees totaled $1.0 million and $0.8 million, fees and expenses related to our borrowings totaled $1.5 million and $1.1 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 for both periods. 

Net investment income was $3.8 million, or $0.31 per common share based on weighted average common shares outstanding for the three months ended March 31, 2015 and 2014. 

The Company's investment portfolio had a net change in unrealized appreciation for the three months ended March 31, 2015 and 2014, of $1.6 million and $0.5 million, respectively. For the three months ended March 31, 2015 and 2014 the Company had realized gains of an immaterial amount and $0.1 million, respectively.

Our net increase in net assets resulting from operations totaled $5.4 million and $4.3 million, or $0.43 and $0.36 per common share based on weighted average common shares outstanding, for the three months ended March 31, 2015 and 2014, respectively. 

Liquidity and Capital Resources

Our liquidity and capital resources are derived from our committed credit facility and cash flows from operations, including investment sales and repayments, and 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 dividends 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.

As of March 31, 2015 and 2014, our credit facility provided for borrowings in an aggregate amount up to $120 million and $135 million, respectively, on a committed basis. As of March 31, 2015, our credit facility had an accordion feature which allowed for potential future expansion of the facility size to $195 million. As of March 31, 2015 and 2014, we had $110.3 million and $110.0 million, respectively, in outstanding borrowings under the credit facility. 

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. For the same period, our financing activities used net cash of $0.5 million, primarily related to distributions to stockholders offset by net borrowings under the credit facility.

For the three months ended March 31, 2014 our operating activities used cash of $14.6 million primarily in connection with the acquisition of new investments, and our financing activities provided cash of $7.6 million, primarily from net borrowings under the credit facility. 

Distributions

During the three months ended March 31, 2015 and 2014, we declared distributions of $0.34 per share ($4.2 million and $4.1 million, respectively) for each quarter. Separately, we paid a special dividend of $0.065 ($0.8 million) in January 2014. 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, 2015 are summarized as follows:

• On February 6, 2015, we made a $5.0 million investment in the second lien loan of Global Knowledge, LLC, a provider of IT and business skills training. 
• On February 12, 2015, we received full repayment on the unsecured term loan of the Studer Group, LLC at par, resulting in total proceeds of $16.9 million.
• On February 19, 2015, we made a $10.0 million investment in the second lien loan of NetMotion Wireless, Inc., a provider of wireless software solutions. We also invested $1.0 million in the company's equity.
• On March 4, 2015, we made an additional $0.2 million equity investment in Skopos Financial Group, LLC.
• On March 4, 2015, we invested $4.5 million in the debtor-in-posession financing of Binder & Binder; and we invested an additional $1.5 million on March 24, 2015.

Events Subsequent to March 31, 2015

There have been no new investments or material repayments since March 31, 2015.

Credit Facility

The outstanding balance under the Credit Facility as of May 6, 2015 was $108.5 million. 

Conference Call Information

Stellus Capital Investment Corporation will host a conference call to discuss these results on May 8, 2015, at 10:00 a.m. Central Daylight 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) 428-9490 (domestic). Use passcode 8075182. Starting approximately twenty-four hours after the conclusion of the call, a replay will be available through May 16, 2015 by dialing (888) 203-1112 and entering passcode 8075182. The replay will also be available on the company's website.

STELLUS CAPITAL INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
				March 31, 2015 (Unaudited)				December 31, 2014
ASSETS
	Non-controlled, non-affiliated investments, at fair value (amortized cost of $326,643,757 and $321,955,480, respectively)			$	322,266,780			$	315,965,434
	Cash and cash equivalents				1,210,355				2,046,563
	Receivable for sales and repayments of investments				76,042				-
	Interest receivable				5,027,204				5,082,665
	Deferred offering costs				261,761				261,761
	Deferred financing costs				752,724				828,956
	Accounts receivable				40,696				696
	Prepaid loan fees on SBA debentures				653,256				681,947
	Prepaid loan structure fees				1,645,301				1,774,630
	Prepaid expenses				343,208				419,282
	Total Assets			$	332,277,327			$	327,061,934
LIABILITIES
	Notes Payable				25,000,000				25,000,000
	Credit facility payable				110,250,000				106,500,000
	SBA Debentures				16,250,000				16,250,000
	Dividends payable				1,413,983				1,413,983
	Base management fees payable				1,414,134				1,360,019
	Incentive fees payable				1,166,832				1,121,556
	Interest payable				318,858				346,204
	Directors' fees payable				89,000				-
	Unearned revenue				32,022				157,403
	Administrative services payable				642,034				591,744
	Deferred Tax Liability				354,400				288,122
	Holdback liability				110,000				-
	Other accrued expenses and liabilities				135,502				83,452
	Total Liabilities				157,176,765				153,112,482
	Commitments and contingencies (Note 7)
		Net Assets		$	175,100,562			$	173,949,452
NET ASSETS
Common Stock, par value $0.001 per share (100,000,000 shares authorized, 12,479,962 and 12,479,962 shares issued and outstanding, respectively)				$	12,480			$	12,480
	Paid-in capital				180,994,763				180,994,783
	Accumulated undistributed net realized gain				3,169				-
	Distributions in excess of net investment income				(1,178,472	)			(779,644	)
	Net Unrealized depreciation on investments and cash equivalents, net of provision for taxes of $354,400 and $288,122, respectively.				(4,731,378	)			(6,278,167	)
	Net Assets			$	175,100,562			$	173,949,452	)
	Total Liabilities and Net Assets			$	332,277,327			$	327,061,933
Net Asset Value Per Share				$	14.03			$	13.94

STELLUS CAPITAL INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
				For the three months ended March 31, 2015				For the three months ended March 31, 2014
INVESTMENT INCOME
	Interest income			$	8,631,296			$	7,687,334
	Other income				82,795				161,912
		Total Investment Income			8,714,091				7,849,246
OPERATING EXPENSES
	Management fees			$	1,414,134			$	1,268,404
	Valuation fees				147,475				151,639
	Administrative services expenses				279,200				268,767
	Incentive fees				960,854				829,092
	Professional fees				294,561				217,989
	Directors' fees				89,000				86,000
	Insurance expense				116,944				119,083
	Interest expense and other fees				1,450,492				1,078,955
	Other general and administrative expenses				118,016				68,273
		Total Operating Expenses		$	4,870,676			$	4,088,202
		Net Investment Income		$	3,843,415			$	3,761,044
		Net Realized Gain on Investments and Cash Equivalents		$	3,169			$	112,072
		Net Change in Unrealized Appreciation on Investments and Cash Equivalents		$	1,613,068			$	470,645
		Provision for taxes on unrealized gain on investments		$	(66,278	)		$	-
		Net Increase in Net Assets Resulting from Operations		$	5,393,374			$	4,343,761
		Net Investment Income Per Share		$	0.31			$	0.31
		Net Increase in Net Assets Resulting from Operations Per Share		$	0.43			$	0.36
		Weighted Average Shares of Common Stock Outstanding			12,479,962				12,103,986
		Distributions Per Share		$	0.34			$	0.40

STELLUS CAPITAL INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (unaudited)
		For the three months ended March 31, 2015				For the three months ended March 31, 2014
Increase in Net Assets Resulting from Operations
Net investment income		$	3,843,415			$	3,761,044
Net realized gain on investments and cash equivalents			3,169				112,072
Net change in unrealized appreciation on investments and cash equivalents			1,613,068				470,645
Provision for taxes on unrealized appreciation on investments			(66,278	)			-
Net Increase in Net Assets Resulting from Operations			5,393,374				4,343,761
Stockholder distributions
Net investment income			(4,242,264	)			(4,901,200	)
Total Distributions			(4,242,264	)			(4,901,200	)
Capital share transactions
Reinvestments of stockholder distributions			-				145,973
Net increase in net assets resulting from capital share transactions			-				145,973
Total increase in net assets			1,151,110				(411,466	)
Net assets at beginning of period			173,949,452				175,891,514
Net assets at end of period (includes $1,178,472 and $1,616,379 of distributions in excess of net investment income)		$	175,100,562			$	175,480,048

STELLUS CAPITAL INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
					For the three months ended March 31, 2015				For the three months ended March 31, 2014
Cash flows from operating activities
Net increase in net assets resulting from operations					$	5,393,374			$	4,343,761
	Adjustments to reconcile net increase in net assets resulting from operations to net cash used in operating activities:
		Purchases of investments				(21,712,544	)			(40,550,138	)
		Proceeds from sales and repayments of investments				17,342,354				22,404,877
		Net change in unrealized appreciation on investments				(1,613,068	)			(470,545	)
		Deferred tax provision				66,278				-
		Increase in investments due to PIK				(178,581	)			(215,228	)
		Amortization of premium and accretion of discount, net				(211,463	)			(153,075	)
		Amortization of loan structure fees				129,329				144,924
		Amortization of deferred financing costs				76,232				-
		Amortization of loan fees on SBIC debentures				28,690				-
		Net realized gain on investments				(3,169	)			(112,150	)
	Changes in other assets and liabilities
			Increase (decrease) in interest receivable			54,545				(694,670	)
			Increase in accounts receivable			(40,000	)			-
			Decrease in prepaid expenses and fees			-				87,439
			Increase in payable for investments purchased			76,074				-
			Increase in management fees payable			54,115				91,674
			Increase (decrease) in directors' fees payable			89,000				(10,000	)
			Increase in incentive fees payable			45,277				187,576
			Increase in administrative services payable			50,290				133,597
			Increase (decrease) in interest payable			(27,347	)			26,806
			Decrease (increase) in unearned revenue			(125,380	)			34,268
			Increase in holdback liability			110,000				-
			Increase in other accrued expenses and liabilities			52,050				116,571
Net cash used in operating activities						(343,944	)			(14,634,313	)
Cash flows from financing activities
	Offering costs paid for common stock issued					-				(6,257	)
	Stockholder distributions paid					(4,242,264	)			(3,383,218	)
	Borrowings under credit facility					22,750,000				44,000,000
	Repayments of credit facility					(19,000,000	)			(24,000,000	)
	Repayments of short-term loan					-				(9,000,000	)
Net cash provided by (used in) financing activities						(492,264	)			7,610,525
Net decrease in cash and cash equivalents						(836,208	)			(7,023,788	)
Cash and cash equivalents balance at beginning of period						2,046,563				13,663,542
Cash and cash equivalents balance at end of period					$	1,210,355			$	6,639,754
Supplemental and non-cash financing activities
	Accrued deferred offering costs					-				54,828
	Shares issued pursuant to Dividend Reinvestment Plan					-				145,973
	Interest expense paid					1,243,588				905,350

About Stellus Capital Investment Corporation

The Company is an externally-managed, closed-end, non-diversified investment management company that has elected to be regulated as a business development company under the Investment Company Act of 1940. The Company's investment objective is to maximize the total return to its stockholders in the form of current income and capital appreciation by investing primarily in private middle-market companies (typically those with $5.0 million to $50.0 million of EBITDA (earnings before interest, taxes, depreciation and amortization)) through first lien, second lien, unitranche and mezzanine debt financing, and corresponding equity investments. The Company's investment activities are managed by its investment adviser, Stellus Capital Management. To learn more about Stellus Capital Investment Corporation, visit www.stelluscapital.com under the Stellus Capital Investment Corporation link.

Forward Looking Statements

Statements included herein may contain "forward-looking statements" which relate to future performance or financial condition. Statements other than statements of historical facts included in this press release may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of assumptions, risks and uncertainties, which change over time. Actual results may differ materially from those anticipated in any forward-looking statements as a result of a number of factors, including those described from time to time in filings by the Company with the Securities and Exchange Commission. The Company undertakes no duty to update any forward-looking statement made herein. All forward-looking statements speak only as of the date of this press release.

Available Information

Stellus' filings with the Securities and Exchange Commission, press releases, earnings release, and other financial information are available on its website at www.stelluscapital.com under the Stellus Capital Investment Corporation link.

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

Source: Stellus Capital Investment Corporation

News Provided by Acquire Media