The good news - HCAP's NAV fell by only a penny. There were still significant portfolio losses - but TII jumped big.
Harvest Capital Credit Corporation reported Q4-15 Total Investment Income of $6.574 million ($1.0495/share); Net Investment Income of $3.395 million ($0.5420/share); and a Net Increase in Net Assets Resulting from Operations of $2.095 million ($0.3345/share) due to $1.301 million in realized and unrealized losses. The Net asset value per share was $14.26 compared to $14.27 last quarter. HCAP had its initial public offering on 5-03-13 at a price of $15.00. HCAP has paid $3.465 in dividends over that time period. On 3-15-16 HCAP closed at $10.59.
Income quality: For 2015 HCAP had $20.327 million in TII. Of that amount, 81% (16.510) was in cash interest income; 1.2% (0.253) was in fees (HCAP had 0.187 in non-cash amendment fees that may be a component of the fee income); 5.4% (1.092 million) was in PIK and 12.2% (2.472 million) was in amortizations. HCAP collected $0.860 million in PIK income - and that number may or may not be needed to be added to cash income to arrive at an adjusted cash interest amount.
(Question: A BDC is charged an amount of the unused portion of its line of credit for its credit facility. The ability to access funds at a moments notice has a value - and they are changed for that ability. And BDCs also offer lines of credit to their portfolio companies. I have never seen a 'line of credit' income line on a BDC earnings release. My question is - "is line of credit income FEE income or INTEREST income -- and if it is interest income, how does that impact the portfolio weighted average yield?")
The consensus projections from Yahoo Finance:
| Earnings Est | Current Qtr. Dec 15 | Next Qtr. Mar 16 | Current Year Dec 15 | Next Year Dec 16 |
|---|---|---|---|---|
| Avg. Estimate | 0.35 | 0.36 | 1.34 | 1.42 |
| No. of Analysts | 3.00 | 3.00 | 3.00 | 3.00 |
| Low Estimate | 0.35 | 0.34 | 1.32 | 1.35 |
| High Estimate | 0.36 | 0.37 | 1.36 | 1.48 |
| Revenue Est | Current Qtr. Dec 15 | Next Qtr. Mar 16 | Current Year Dec 15 | Next Year Dec 16 |
|---|---|---|---|---|
| Avg. Estimate | 5.16M | 5.35M | 18.90M | 21.72M |
| No. of Analysts | 2 | 2 | 2 | 2 |
| Low Estimate | 5.10M | 5.25M | 18.83M | 21.30M |
| High Estimate | 5.23M | 5.45M | 18.98M | 22.14M |
| Year Ago Sales | 4.24M | 4.11M | 14.71M | 18.90M |
My HCAP spreadsheets:
| Q4-13 | Q3-13 | |||||||||
| Realized & Unrealized Gains | -1.301 | -1.351 | 1.140 | -1.728 | 0.631 | -0.257 | 0.579 | 0.177 | -1.808 | -0.360 |
| Realized & Unrealized Gains/share | -0.2077 | -0.2159 | 0.1824 | -0.2774 | 0.1016 | -0.0415 | 0.0937 | 0.0287 | -0.2949 | -0.0590 |
| Q4-15 | Q3-15 | Q2-15 | Q1-15 | Q4-14 | Q3-14 | Q2-14 | Q1-14 | Q4-13 | Q3-13 | Q2-13 | |
| Cash interest income in thousands | 5,075 | 4,085 | 3,919 | 3,430 | 3,175 | 2,665 | 2,785 | 2,437 | 2,065 | 1,622 | 1,493 |
| PIK income | 203 | 268 | 315 | 306 | 276 | 289 | 421 | 370 | 287 | 316 | 299 |
| Amortization of fees & discounts | 1,082 | 603 | 426 | 361 | 459 | 643 | 231 | 199 | 452 | 643 | 267 |
| Other income | 214 | 16 | 9 | 15 | 330 | 293 | 81 | 3 | 60 | 293 | 0 |
| #'s in millions | |||||||||||
| Total investment income | 6.574 | 4.971 | 4.669 | 4.112 | 4.240 | 3.917 | 3.517 | 3.037 | 2.864 | 2.052 | 1.906 |
| Net investment income | 3.395 | 2.192 | 2.016 | 2.012 | 2.113 | 2.273 | 1.813 | 2.066 | 2.329 | 1.474 | 1.263 |
| Core Net investment income | 3.395 | 2.165 | 2.056 | 1.869 | 2.265 | 2.222 | 1.929 | 2.102 | 1.968 | 1.402 | 1.251 |
| Investments @ fair value | 0.143 | 0.144 | 0.130 | 0.124 | 0.116 | 0.097 | 0.091 | 0.082 | 0.071 | 0.052 | 0.045 |
| Wt Av Share Count | 6.264 | 6.256 | 6.249 | 6.229 | 6.212 | 6.194 | 6.176 | 6.156 | 6.130 | 6.098 | 4.248 |
| TII/share | $1.0495 | $0.7946 | $0.7472 | $0.6601 | $0.6825 | $0.6324 | $0.5695 | $0.4933 | $0.4672 | $0.3365 | $0.4487 |
| NII/share | $0.5420 | $0.3504 | $0.3226 | $0.3230 | $0.3401 | $0.3700 | $0.2935 | $0.3356 | $0.3799 | $0.2417 | $0.2973 |
| Core NII/share | $0.54 | $0.35 | $0.33 | $0.30 | $0.36 | $0.36 | $0.31 | $0.34 | $0.32 | $0.23 | $0.29 |
| NAV/share | $14.26 | $14.27 | $14.47 | $14.30 | $14.60 | $14.51 | $14.52 | $14.48 | $14.45 | $14.69 | $14.85 |
| Wt Av Yield | 13.9% | 14.0% | 15.2% | 14.8% | 15.1% | 15.4% | 15.4% | 15.7% | 16.6% | 17.6% | 17.5% |
Core Net Investment Income and Core Net Investment Income per share are non-GAAP financial measures that are calculated by excluding capital gains incentive fees that affect Net Investment Income for GAAP purposes for the periods presented, and excluding any income taxes related to realized capital gains and losses. What They Own
| 12-31-15 | Cost | Fair Value |
| Senior Secured | 81,879,369 | 81,131,788 |
| Junior Secured | 59,156,136 | 58,236,001 |
| Equity | 1,626,877 | 1,824,777 |
| CLO Equity | 1,567,861 | 1,567,860 |
| Total Investments | 144,230,262 | 142,760,426 |
As of December 31, 2015, HCAP had $142.8 million (at fair value) invested in 33 companies. As of December 31, 2015, the portfolio, at fair value, included approximately 56.8% of senior secured term loans, 40.8% of junior secured term loans, 1.3% of equity investments and 1.1% of CLO equity at fair value. The weighted average yield on all of our debt investments as of December 31, 2015 was approximately 13.9%. The weighted average yield was computed using the effective interest rates for all of our debt investments, including cash and PIK interest as well as the accretion of original issue discount. As of December 31, 2015, HCAP had one loan on non-accrual status. The $0.900 million loan on non-accrual status as of December 31, 2015 comprised approximately 1.1% of the portfolio at cost and 0.9% at fair value.
What They Owe HCAP has a credit facility with a balance of $29.689 million and unsecured notes of 27.500 million. 'Debt' at the end of Q4-15 was $57.198 million. With shares outstanding of 6.270 million, debt/share was $9.1225 and the debt/NAV ratio was 63.97% (a low number compared to sector average) at the end of Q4-15.
Summary: Great quarter. I hate CLOs - but at least the weighting is tiny. Buy the baby bond - not the equity.