GlobeNewswire Inc | Mar 8, 2021 04:30PM EST

March 08, 2021

CHARLOTTE, N.C., March 08, 2021 (GLOBE NEWSWIRE) -- Capitala Finance Corp. (Nasdaq:CPTA) ("Capitala", the Company, we, us, or our) today announced its financial results for the fourth quarter and full year ended December 31, 2020.

Fourth Quarter Highlights

-- Net asset value per share of $40.19 at December 31, 2020, compared to $39.99 at September 30, 2020 -- Closed $25.0 million senior secured credit facility with KeyBank, N.A. -- Cash balances of $49.9 million at December 31, 2020 will allow for further reductions in the Companys debt-to-equity ratio and will allow us to evaluate investment opportunities

Full Year Highlights

-- Increase of approximately 7% in net asset value per share since the onset of the COVID-19 pandemic (March 31, 2020) -- Total debt-to-equity ratio decreased to 1.98:1 at December 31, 2020, compared to 2.72:1 at March 31, 2020

Management Commentary

In describing the Companys fourth quarter and full year activities, Joseph B. Alala, III, Chairman and Chief Executive Officer, stated, Entering 2020, the Company was well positioned, with no non-accrual investments and a robust pipeline of active investment opportunities. Due to the impact the COVID-19 pandemic had on lower middle market small businesses, we were forced to focus on liquidity, reducing the debt-to-equity ratio of the Company, and stabilizing our net asset value.

Fourth Quarter 2020 Financial Results

Total investment income was $5.7 million for the fourth quarter of 2020, compared to $9.6 million in the fourth quarter of 2019. The decline was attributable to lower interest and fee income, resulting primarily from a decrease in our debt portfolio.

Total expenses for the fourth quarter of 2020 were $5.7 million, compared to $7.7 million for the fourth quarter of 2019. Interest and financing expenses declined by $1.4 million, resulting from the $59.0 million repayment of SBA-guaranteed debentures and $2.2 million of bond repurchases of our 2022 Notes during the third quarter of 2020. Management fees decreased by $0.5 million due to a decline in total assets.

Net realized gains totaled $0.6 million, or $0.23 per share, for the fourth quarter of 2020, compared to net realized gains of $1.2 million, for the same period in 2019.

There was net unrealized depreciation of $12 thousand for the fourth quarter of 2020, compared to net unrealized depreciation of $3.1 million for the fourth quarter of 2019.

The net increase in net assets resulting from operations was $0.5 million for the fourth quarter of 2020, or $0.20 per share, compared to a net decrease of $0.1 million, or $0.03 per share, for the same period in 2019.

Full Year 2020 Financial Results

Total investment income was $26.4 million for the year ended December 31, 2020, compared to $44.0 million for the same period in 2019. Interest and fee income collectively declined $13.1 million, driven by a decrease in debt balances outstanding during the year. Dividend income declined by $3.3 million due to $1.0 million in dividends received from Capitala Senior Loan Fund II, LLC, which was wound down during 2020, and several other one-time dividends received from portfolio companies during 2019. PIK income decreased by $1.0 million year-over-year due to a decline in investments with a contractual PIK rate.

Total expenses for the year ended December 31, 2020 were $26.4 million, a decrease of $4.6 million from the comparable period in 2019. Significant variances included (1) $2.0 million decrease in interest and financing expenses, (2) a $1.5 million decrease in base management fees, and (3) a $1.2 million decrease in incentive fees, net of the waiver.

Net realized losses totaled $24.0 million, or $8.88 per share, for the year ended December 31, 2020, compared to net realized losses of $19.8 million, or $7.35 per share, for the same period in 2019.

Net unrealized depreciation totaled $11.6 million, or $4.29 per share, for the year ended December 31, 2020, compared to net unrealized depreciation of $20.3 million, or $7.56 per share, for the same period in 2019.

The net decrease in net assets resulting from operations was $35.4 million, or $13.08 per share, for the year ended December 31, 2020, compared to a net decrease in net assets resulting from operations of $27.6 million, or $10.29 per share, for the same period in 2019.

Net assets at December 31, 2020 were $108.9 million, or $40.19 per share, compared to $148.1 million, or $54.84 per share, at December 31, 2019.

Investment Portfolio

As of December 31, 2020, our portfolio consisted of 36 companies with a fair market value of $274.7 million and a cost basis of $277.7 million. First lien debt investments represented 60.9% of the portfolio, second lien debt investments represented 14.3% of the portfolio, and equity/warrant investments represented 24.8% of the portfolio, based on fair values at December 31, 2020.

At December 31, 2020, the Company had four debt investments on non-accrual status, with a cost basis and fair market value of $37.5 million and $20.8 million, respectively. There were no non-accrual debt investments at December 31, 2019.

Liquidity and Capital Resources

At December 31, 2020, the Company had $49.9 million in cash and cash equivalents. In addition, the Company had SBA-guaranteed debentures outstanding totaling $91.0 million with an annual weighted average interest rate of 2.74%, $72.8 million of fixed rate notes bearing an interest rate of 6.00%, and $52.1 million of convertible notes bearing an interest rate of 5.75%. At December 31, 2020, the Company had $0 drawn and $25.0 million available under its senior secured revolving credit facility with KeyBank, N.A.

Recent Developments

On January 28 ,2021, the Companys first lien debt investment in Burgaflex Holdings, LLC was repaid at par.

On February 24, 2021, the Company repaid $20.0 million in outstanding SBA-guaranteed debentures, of which $6.0 million was scheduled to mature on March 1, 2021, and of which $14.0 million was scheduled to mature on March 1, 2022.

Fourth Quarter 2020 Financial Results Conference Call

Management will host a conference call to discuss the operating and financial results at 8:30 a.m. EDT on Tuesday, March 9, 2021. The call will be broadcast live in listen-only mode on the Companys investor relations website at https://investor.capitalagroup.com. To participate in the conference call, please dial (877) 312-5507 approximately 10 minutes prior to the call.

About Capitala Finance Corp.

Capitala Finance Corp. is a business development company that invests primarily in first lien loans and, to a lesser extent, second lien loans and equity securities issued by lower and traditional middle market companies. The Company is managed by Capitala Investment Advisors, LLC. For more information on Capitala, or to automatically receive email notifications of Company financial information, press releases, stock alerts, or other corporate filings, please visit the Investor Relations section of our website.

About Capitala Group

Capitala Group is an asset management firm that has been providing capital to lower middle market companiesthroughout North America for over twenty years. Since our inception in 1998, Capitala Group has invested over $2.0 billion in approximately 171 companies and seeks to partner with strong management teams to create value and aims to generate superior returns for our individual and institutional investors. For more information, definition and details visit our website atwww.CapitalaGroup.com.

Forward-Looking Statements

This press release contains certain forward-looking statements. Words such as believes, intends, expects, projects, anticipates, and future or similar expressions are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance, condition or results and involve a number of risks and uncertainties, including the impact of COVID-19 and related changes in base interest rates and significant volatility on our business, our portfolio companies, our industry and the global economy. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in the Companys filings with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law.

SOURCE: Capitala Finance Corp.

Capitala Finance Corp.Stephen ArnallCFO|COOsarnall@capitalagroup.com



Capitala Finance Corp. Consolidated Statements of Assets and Liabilities(in thousands, except share and per share data) As of December 31, December 31, 2020 2019 ASSETS Investments at fair value: Non-control/non-affiliate investments (amortized cost of $187,744 and $250,433, $ 172,848 $ 241,046 respectively) Affiliate investments (amortized cost of 93,425 98,763 $80,961 and $80,756, respectively) Control investments (amortized cost of 8,419 22,723 $8,947 and $22,692, respectively) Total investments at fair value (amortized 274,692 362,532 cost of $277,652 and $353,881, respectively)Cash and cash equivalents 49,942 62,321 Interest and dividend receivable 2,286 1,745 Prepaid expenses 1,077 624 Other assets - 115 Total assets $ 327,997 $ 427,337 LIABILITIES SBA Debentures (net of deferred financing costs $ 90,515 $ 148,994 of $485 and $1,006, respectively)2022 Notes (net of deferred financing costs of 71,987 73,553 $846 and $1,447, respectively)2022 Convertible Notes (net of deferred 51,536 51,172 financing costs of $552 and $916, respectively)ING Credit Facility (net of deferred financing - (1,165 )costs of $0 and $1,165, respectively)KeyBank Credit Facility (net of deferred (546 ) - financing costs of $546 and $0, respectively)Management and incentive fees payable 3,842 3,713 Interest and financing fees payable 1,688 2,439 Accounts payable and accrued expenses 28 518 Total liabilities $ 219,050 $ 279,224 NET ASSETS Common stock, par value $0.01, 100,000,000common shares authorized, 2,711,068 and 2,700,628 common shares issued and outstanding, respectively ^(1) $ 27 $ 27 Additional paid in capital 229,481 238,021 Total distributable loss (120,561 ) (89,935 ) Total net assets $ 108,947 $ 148,113 Total liabilities and net assets $ 327,997 $ 427,337 Net asset value per share ^(1) $ 40.19 $ 54.84 (1) Authorized, issued and outstanding shares of Capitala Finance Corp.'s (the"Company") common stock and net asset value per share have been adjusted forthe periods shown to reflect the one-for-six reverse stock split effected onAugust 21, 2020 on a retroactive basis.

Capitala Finance Corp.

Consolidated Statements of Operations(in thousands, except share and per share data)

For the three months ended For the years ended December December 31 31 2020 2019 2020 2019 INVESTMENT INCOME Interest and fee income: Non-control/ non-affiliate $ 3,581 $ 6,563 $ 17,387 $ 27,659 investments Affiliate 1,618 1,773 6,650 8,351 investments Control 101 145 410 1,566 investments Total interest 5,300 8,481 24,447 37,576 and fee incomePayment-in-kind interest and dividend income: Non-control/ non-affiliate 170 438 1,105 1,721 investments Affiliate 208 258 818 869 investments Control - - - 372 investments Total payment-in-kind 378 696 1,923 2,962 interest and dividend incomeDividend income: Non-control/ non-affiliate - 64 - 1,345 investments Affiliate - 25 25 50 investments Control - 320 - 1,904 investments Total dividend - 409 25 3,299 incomeInterest incomefrom cash and 1 48 51 198 cash equivalents Total investment 5,679 9,634 26,446 44,035 income EXPENSES Interest andfinancing 3,009 4,371 15,144 17,121 expensesBase management 1,440 1,904 6,428 7,967 feeIncentive fees - - - 1,497 Administrative 350 350 1,400 1,400 service feesGeneral andadministrative 942 1,107 3,416 3,295 expenses Expenses before incentive fee 5,741 7,732 26,388 31,280 waiver Incentive fee - - - (288 ) waiver Total expenses 5,741 7,732 26,388 30,992 NET INVESTMENT (62 ) 1,902 58 13,043 INCOME (LOSS) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTSNet realized gain (loss) on investments: Non-control/ non-affiliate 502 20,073 (25,016 ) 16,529 investments Affiliate 110 - 1,451 2,288 investments Control - (18,917 ) (484 ) (38,573 ) investments Net realized gain (loss) on 612 1,156 (24,049 ) (19,756 ) investmentsNet unrealized appreciation (depreciation) on investments: Non-control/ non-affiliate (9,195 ) (20,655 ) (5,509 ) (16,116 ) investments Affiliate 9,344 1,087 (5,543 ) (2,632 ) investments Control (161 ) 16,441 (559 ) (1,558 ) investments Net unrealized depreciation on (12 ) (3,127 ) (11,611 ) (20,306 ) investments Net realized and unrealized 600 (1,971 ) (35,660 ) (40,062 ) gain (loss) on investmentsTax provision - - - (628 ) Total net realized and unrealized gain 600 (1,971 ) (35,660 ) (40,690 ) (loss) on investments, net of taxes Net realized gainon extinguishment - - 155 - of debt NET INCREASE(DECREASE) IN NET $ 538 $ (69 ) $ (35,447 ) $ (27,647 )ASSETS RESULTINGFROM OPERATIONS NET INCREASE(DECREASE) IN NETASSETS PER SHARERESULTING FROM $ 0.20 $ (0.03 ) $ (13.08 ) $ (10.29 )OPERATIONS ?BASIC AND DILUTED^(1) WEIGHTED AVERAGECOMMON STOCKOUTSTANDING ? 2,711,068 2,679,418 2,709,169 2,686,287 BASIC AND DILUTED^(1) DISTRIBUTIONSPAID PER SHARE ^ $ - $ 1.50 $ 1.50 $ 6.00 (2) (1) Basic and diluted shares of the Company's common stock have been adjustedfor the periods shown to reflect the one-for-six reverse stock split effectedon August 21, 2020 on a retroactive basis.(2) Dividends paid per share of the Company's common stock have been adjustedfor the periods shown to reflect the one-for-six reverse stock split effectedon August 21, 2020 on a retroactive basis.