WhiteHorse Finance, Inc. Announces Third Quarter 2016 Earnings Results

WhiteHorse Finance, Inc. Announces Third Quarter 2016 Earnings Results

PR Newswire

NEW YORK, Nov. 3, 2016

NEW YORK, Nov. 3, 2016 /PRNewswire/ -- WhiteHorse Finance, Inc. ("WhiteHorse Finance" or the "Company") (NASDAQ: WHF) today announced its financial results for the quarter ended September 30, 2016.

Third Quarter 2016 Summary Highlights

  • Investments of $33.0 million
  • Net investment income of $7.3 million
  • Third quarter net investment income of $0.397 per share
  • Third quarter distribution of $0.355 per share

Stuart Aronson, WhiteHorse Finance's Chief Executive Officer commented, "This was a solid quarter for WhiteHorse, with strong net interest income and modest gains in our NAV. The leadership of our firm remains committed to conservative investing in senior secured assets with a goal of earning our dividend each year and protecting NAV. The pipeline for the fourth quarter is strong, with the majority of the pipeline comprised of deals with low leverage and expected double digit returns."

Portfolio and Investment Activity

As of September 30, 2016, the fair value of WhiteHorse Finance's investment portfolio was $402.9 million, compared with $400.9 million as of June 30, 2016. The portfolio at September 30, 2016 consisted of 34 positions across 28 companies with an average investment size of $11.9 million and a weighted average effective yield of 12.1%, up from 11.9% last quarter.  The majority of the portfolio was comprised of senior secured loans and approximately 99.6% of these loans were variable-rate investments (primarily indexed to LIBOR), which should continue to position the portfolio well for a potential rising interest rate environment.

During the three months ended September 30, 2016, WhiteHorse Finance made investments in two portfolio companies totaling $33.0 million. Gross proceeds from sales and repayments totaled $33.2 million for the quarter. The Company continued to be highly selective with the deployment of capital into new investments.

Results of Operations

For the three months ended September 30, 2016, net investment income was approximately $7.3 million, compared with approximately $5.7 million for the same period in the prior year, representing an increase of 28.1%. The increase in net investment income was primarily attributable to an increase in the balance of average earning investments over the same period in the prior year. In the past 24 months, cumulative core net investment income, a non-GAAP financial measure, exceeded distributions to stockholders.(1)

For the three months ended September 30, 2016, WhiteHorse Finance reported realized and unrealized gains on investments of $1.3 million. This compares with realized and unrealized losses on investments of ($4.2) million for the three months ended September 30, 2015. The increase in realized and unrealized gains on investments was primarily attributable to fair value adjustments and the sale our Orion Healthcorp warrants.

WhiteHorse Finance reported a net increase in net assets of $8.6 million for the three months ended September 30, 2016, which compares with a net increase of $1.4 million for the three months ended September 30, 2015.

WhiteHorse Finance's NAV was $246.8 million, or $13.48 per share, as of September 30, 2016, as compared with $244.7 million, or $13.37 per share, reported as of June 30, 2016.

Liquidity and Capital Resources

As of September 30, 2016, WhiteHorse Finance had cash and cash equivalents of $23.7 million, as compared with $44.1 million as of June 30, 2016, inclusive of restricted cash.  As of September 30, 2016, the Company had $56.7 million of undrawn capacity under its revolving credit facility.

Distributions

On September 8, 2016, the Company declared a distribution of $0.355 per share for the quarter ended September 30, 2016, consistent for the sixteenth consecutive quarter since the Company's IPO. The distribution was paid on October 3, 2016 to shareholders of record as of September 19, 2016.

Distributions are paid from taxable earnings and may include return of capital and/or capital gains.  The specific tax characteristics of the distributions will be reported to stockholders on Form 1099-DIV after the end of the calendar year and in the Company's periodic reports filed with the Securities and Exchange Commission.

Conference Call

WhiteHorse Finance will host a conference call to discuss its third quarter results at 10:00 am ET on Thursday, November 3, 2016. To access the teleconference, please dial 706-758-9224 (domestic and international) approximately 10 minutes before the teleconference's scheduled start time and reference ID #3321749. Investors may also access the call on the investor relations portion of the Company's website at www.whitehorsefinance.com.

If you are unable to access the live teleconference, a replay will be available beginning approximately two hours after the call's completion through November 7, 2016. The teleconference replay can be accessed by dialing 404-537-3406 (domestic and international) and entering ID #3321749. A webcast replay will also be available on the investor relations portion of the Company's website at www.whitehorsefinance.com.

About WhiteHorse Finance, Inc.

WhiteHorse Finance is a business development company that originates and invests in loans to privately held small-cap companies across a broad range of industries.  The Company's investment activities are managed by WhiteHorse Advisers, an affiliate of H.I.G. Capital. H.I.G. Capital is a leading global alternative asset manager with $20 billion of capital under management(2) across a number of funds focused on the small and mid-cap markets. For more information about H.I.G. Capital, please visit http://www.higcapital.com.  For more information about the Company, please visit http://www.whitehorsefinance.com.

Forward-Looking Statements

This press release may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. 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 risks and uncertainties. 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 filings 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.

(1) Net investment income and core net investment income during the three months ended December 31, 2015 were $0.237 per share and $0.352 per share, respectively. Net investment income was equal to core net investment income for every other quarter since the Company's initial public offering. Core net investment income is a non-GAAP financial measure. The Company believes that core net investment income provides useful information to investors and management because it reflects the Company's financial performance excluding the net impact of costs associated with the refinancing of the Company's revolving credit facility. The presentation of this additional information is not meant to be considered in isolation or as a substitute for financial results prepared in accordance with GAAP.

(2) Based on total capital commitments managed by H.I.G. Capital and affiliates.

 


WhiteHorse Finance, Inc.

Consolidated Statements of Assets and Liabilities

(in thousands, except share and per share data)

September  30, 2016

December 31, 2015


(Unaudited)



Assets







Investments, at fair value







Non-controlled/non-affiliate company investments

$

383,876

$

395,143

Non-controlled affiliate company investments

19,010


20,200

Total investments, at fair value (amortized cost $421,376 and $436,109,
respectively)

402,886


415,343

Cash and cash equivalents

17,796


22,769

Restricted cash and cash equivalents

5,913


—

Receivables from investments sold

—


—

Interest receivable

3,966


3,407

Prepaid expenses and other receivables

385


192

Total assets

$

430,946

$

441,711









Liabilities







Debt

$

170,379

$

183,482

Distributions payable

6,498


6,498

Management fees payable

5,876


3,813

Payables for investments purchased

—


2,865

Accounts payable and accrued expenses

993


1,001

Interest payable

385


—

Total liabilities

$

184,131

$

197,659









Commitments and contingencies (See Note 7)
















Net assets







Common stock, 18,303,890 shares issued and outstanding, par value
$0.001 per share and 100,000,000 authorized

18


18

Paid-in capital in excess of par

271,679


271,679

Accumulated overdistributed net investment income

(6,454)


(7,419)

Accumulated realized gains on investments

698


1,176

Accumulated unrealized depreciation on investments

(19,126)


(21,402)

Total net assets

$

246,815

$

244,052

Total liabilities and total net assets

$

430,946

$

441,711









Number of shares outstanding

18,303,890


18,303,890

Net asset value per share

$

13.48

$

13.33

 

 

  

WhiteHorse Finance, Inc.

Consolidated Statements of Operations (Unaudited)

(in thousands, except share and per share data)

Three months ended September 30,

Nine months ended September 30,


2016

2015

2016

2015

Investment income















From non-controlled/non-affiliate
company investments















Interest income

$

12,507

$

10,338

$

36,633

$

31,545

Fee income

683


681


1,615


1,505

From non-controlled affiliate company
investments















Dividend income

840


688


2,243


2,090

Total investment income

14,030


11,707


40,491


35,140

















Expenses















Interest expense

2,050


1,654


5,917


5,028

Base management fees

2,250


2,125


6,749


6,377

Performance-based incentive fees

1,817


1,415


5,116


4,220

Administrative service fees

134


255


550


898

General and administrative expenses

511


596


1,700


1,736

Total expenses

6,762


6,045


20,032


18,259

Net investment income

7,268


5,662


20,459


16,881

















Realized and unrealized gains (losses)
on investments















Net realized gains/(losses)















Non-controlled/non-affiliate company
investments

660


—


(478)


(379)

Net realized gains/(losses)

660


—


(478)


(379)

Net change in unrealized appreciation
(depreciation)















Non-controlled/non-affiliate company
investments

1,856


(4,234)


3,466


(4,751)

Non-controlled affiliate company
investments

(1,190)


—


(1,190)


200

Net change in unrealized appreciation
(depreciation)

666


(4,234)


2,276


(4,551)

Net realized and unrealized gains/(losses)
on investments

1,326


(4,234)


1,798


(4,930)

Net increase in net assets resulting from
operations

$

8,594

$

1,428

$

22,257

$

11,951

















Per Common Share Data















Basic and diluted earnings per common
share

$

0.47

$

0.10

$

1.22

$

0.80

Dividends and distributions declared per
common share

$

0.36

$

0.36

$

1.07

$

1.07

Basic and diluted weighted average
common shares outstanding

18,303,890


14,982,857


18,303,890


14,982,857

 

 

 

WhiteHorse Finance, Inc.

Consolidated Schedule of Investments (Unaudited)

September 30, 2016

(in thousands)


Investment Type(1)

Spread
Above
Index(2)

Interest
Rate(3)

Maturity
Date

Principal
Amount

Amortized
Cost

Fair
Value

Fair Value
As A
Percentage
Of Net Assets

North America





















Debt Investments





















Advertising





















Fluent Acquisition II, LLC





















First Lien Secured Term Loan

L+11.50%

12.00%

12/8/20

$

27,165

$

26,713

$

27,029


10.82

%

(0.50% Floor)

(1.00% PIK)

















Intersection Acquisition, LLC





















First Lien Secured Term Loan

L+10.00%

11.00%

9/15/20

16,149


16,021


16,149


6.49


(1.00% Floor)




























43,314


42,734


43,178


17.31

Auto Parts & Equipment





















Crowne Group, LLC





















First Lien Secured Term Loan

L+9.25%

10.25%

5/26/21

12,500


12,096


12,375


4.90


(1.00% Floor)










































Broadcasting





















Multicultural Radio Broadcasting, Inc.





















First Lien Secured Term Loan

L+10.50%

11.50%

6/27/19

14,850


14,850


14,757


6.02


(1.00% Floor)



















Consumer Finance





















Golden Pear Funding III, LLC(7)





















Second Lien Secured Term Loan

L+10.25%

11.25%

6/25/20

25,000


24,782


24,770


10.04


(1.00% Floor)



















Second Lien Secured Revolving Loan

L+10.25%

11.25%

6/25/20

5,000


4,956


4,954


2.01


(1.00% Floor)



















Oasis Legal Finance, LLC(7)





















Second Lien Secured Term Loan

L+10.75%

11.75%

3/1/22

20,000


19,605


19,800


7.94


(1.00% Floor)



















Sigue Corporation(6)























Second Lien Secured Term Loan

L+11.00%

12.00%

12/27/18

25,000


24,776


24,375


10.04


(1.00% Floor)




























75,000


74,119


73,899


30.03

Data Processing & Outsourced Services





















Future Payment Technologies, L.P.





















Second Lien Secured Term Loan

L+12.00%

13.00%

12/31/18

36,726


36,096


34,155


14.62


(1.00% Floor)

(1.00% PIK)

















Department Stores





















Mills Fleet Farm Group, LLC





















Second Lien Secured Term Loan

L+9.75%

10.75%

2/26/23

7,146


7,012


7,146


2.84


(1.00% Floor)



















Distributors





















360 Holdings III Corp.





















First Lien Secured Term Loan

L+9.00%

10.00%

10/1/21

9,900


9,556


9,900


3.87


(1.00% Floor)



















Diversified Support Services





















Sitel Worldwide Corporation





















Second Lien Secured Term Loan

L+9.50%

10.50%

9/18/22

8,670


8,522


8,476


3.45


(1.00% Floor)



















Electronic Equipment & Instruments





















AP Gaming I, LLC





















First Lien Secured Term Loan

L+8.25%

9.25%

12/20/20

9,725


9,547


9,384


3.87


(1.00% Floor)



















 

 

 

WhiteHorse Finance, Inc.

Consolidated Schedule of Investments (Unaudited) (Continued)

September 30, 2016

(in thousands)


Investment Type(1)

Spread
Above
Index(2)

Interest
Rate(3)

Maturity
Date

Principal
Amount

Amortized
Cost

Fair
Value

Fair Value
As A
Percentage
Of Net Assets

Food Retail





















AG Kings Holdings Inc.





















     First Lien Secured Term Loan

L+9.95%

10.95%

8/10/21

$

14,000

$

13,412

$

13,685


5.43%


(1.00% Floor)



















Crews of California, Inc.





















First Lien Secured Term Loan

L+11.00%

12.00%

11/20/19

17,493


17,282


17,404


7.00


(1.00% Floor)

(1.00% PIK)

















First Lien Secured Revolving Loan

L+11.00%

12.00%

11/20/19

5,055


4,972


5,029


2.01


(1.00% Floor)

(1.00% PIK)

















First Lien Secured Delayed Draw Loan

L+11.00%

12.00%

11/20/19

5,070


4,993


5,045


2.02


(1.00% Floor)

(1.00% PIK)


























41,618


40,659


41,163


16.46

Health Care Facilities





















Coastal Sober Living, LLC(6)





















First Lien Secured Term Loan

L+10.25%

11.25%

6/30/19

23,529


23,284


23,529


9.43


(1.00% Floor)



















Grupo HIMA San Pablo, Inc.





















First Lien Secured Term Loan

L+9.00%

10.50%

1/31/18

14,475


14,398


13,158


5.83


(1.50% Floor)



















Second Lien Secured Term Loan

N/A(5)

15.75%

7/31/18

1,000


983


641


0.40









39,004


38,665


37,328


15.66























Integrated Telecommunication Services





















Securus Technologies Holdings, Inc.





















Second Lien Secured Term Loan

L+7.75%

9.00%

4/30/21

9,090


9,066


8,793


3.67


(1.25% Floor)



















Internet Retail





















Clarus Commerce, LLC





















First Lien Secured Term Loan

L+11.21%

12.21%

3/17/21

6,000


5,893


5,895


2.39


(1.00% Floor)



















Office Services & Supplies





















Katun Corporation





















Second Lien Secured Term Loan

L+11.25%

12.25%

1/25/21

5,000


4,968


4,975


2.01


(1.00% Floor)



















Oil & Gas Drilling





















ProPetro Services, Inc.(6)





















First Lien Secured Term Loan

L+6.25%

7.25%

9/30/19

8,440


8,397


7,130


3.40


(1.00% Floor)



















Oil & Gas Exploration & Production





















Caelus Energy Alaska O3, LLC





















Second Lien Secured Term Loan

L+7.50%

8.75%

4/15/20

13,000


12,890


9,162


5.22


(1.25% Floor)



















Other Diversified Financial Services





















The Pay-O-Matic Corp





















First Lien Secured Term Loan

L+11.00%

12.00%

4/2/18

9,059


8,969


9,004


3.63


(1.00% Floor)



















 

 

WhiteHorse Finance, Inc.

Consolidated Schedule of Investments (Unaudited) (Continued)

September 30, 2016

(in thousands)


Investment Type(1)

Spread
Above
Index(2)

Interest
Rate(3)

Maturity
Date

Principal
Amount

Amortized
Cost

Fair
Value

Fair Value
As A
Percentage
Of Net Assets

Research & Consulting Services





















Project Time & Cost, LLC





















First Lien Secured Term Loan

L+12.00%

12.50%

10/9/20

$

10,405

$

10,238

$

10,145


4.15

%

(0.50% Floor)



















Specialized Consumer Services





















Pre-Paid Legal Services, Inc.





















Second Lien Secured Term Loan

L+9.00%

10.25%

7/1/20

18,000


17,873


17,937


7.24


(1.25% Floor)



















Specialized Finance





















GMT Holdings 1, Ltd. & GMT Holdings 12, Ltd.(4) (7)





















First Lien Secured Term Loan

N/A(5)

10.00%

6/30/17

965


959


965


0.39























Trucking





















Fox Rent A Car, Inc. 





















Second Lien Secured Term Loan

L+15.00%

15.50%

10/31/19

7,500


7,454


7,393


3.02























Total Debt Investments







385,912


380,563


373,160


154.15























Equity Investments





















Advertising





















IDI, Inc. Warrants(6)

N/A

N/A

12/8/25

—


—


—


—























Food Retail





















Crews of California, Inc. Warrants(6)

N/A

N/A

12/31/24

—


—


1,933


0.00

Nicholas & Associates, LLC Warrants(6)

N/A

N/A

12/31/24

—


—


373


0.00

Pinnacle Management Group, LLC Warrants(6)

N/A

N/A

12/31/24

—


—


700


0.00

RC3 Enterprises, LLC Warrants(6)

N/A

N/A

12/31/24

—


—


206


0.00









—


—


3,212


0.00

Other Diversified Financial Services





















Aretec Group, Inc. (6) (7)

 N/A

N/A

N/A

—


20,693


7,504


8.38























Specialized Finance





















NMFC Senior Loan Program I LLC Units(1)(6)(7)

N/A

N/A

6/10/19

—


20,120


19,010


8.15























Total Equity Investments







—


40,813


29,726


16.53























Total Investments






$

385,912

$

421,376

$

402,886


170.68

%

  

(1)

Except as otherwise noted, all investments are in companies that are not affiliated persons of, or controlled by, the Company, as defined by the Investment Company Act of 1940, as amended (the ''1940 Act''), and provide collateral for the Company's credit facility.

 

(2)

The investments bear interest at a rate that may be determined by reference to the London Interbank Offered Rate (''LIBOR'' or ''L'') or the Prime Rate (''Prime'' or ''P''), which resets monthly, quarterly or semiannually.

 

(3)

The interest rate is the ''all-in-rate'' including the current index and spread, the fixed rate, and the payment-in-kind (''PIK'') interest rate, as the case may be.

 

(4)

The Company's investments in GMT Holdings 1, Ltd. and GMT Holdings 12, Ltd. are held through its subsidiary Bayside Financing S.A.R.L.

 

(5)

Interest rate is fixed and accordingly the spread above the index is not applicable.

 

(6)

The investment or a portion of the investment does not provide collateral for the Company's revolving credit facility.

 

(7)

Not a qualifying asset under Section 55(a) of the 1940 Act. Under the 1940 Act, the Company may not acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of total assets. Qualifying assets represent 85% of total assets.

 

 

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SOURCE WhiteHorse Finance, Inc.

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