Attached files
| file | filename |
|---|---|
| EX-32.2 - EXHIBIT 32.2 - Oxford Square Capital Corp. | s109284_ex32-2.htm |
| EX-32.1 - EXHIBIT 32.1 - Oxford Square Capital Corp. | s109284_ex32-1.htm |
| EX-31.2 - EXHIBIT 31.2 - Oxford Square Capital Corp. | s109284_ex31-2.htm |
| EX-31.1 - EXHIBIT 31.1 - Oxford Square Capital Corp. | s109284_ex31-1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________
FORM 10-K/A
(Amendment No. 1)
_______________________
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2017
OR
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 814-00638
_______________________
TICC CAPITAL CORP.
(Exact name of registrant as specified in its charter)
_______________________
|
Maryland |
|
20-0188736 |
||
|
(State of Incorporation) |
|
|
(I.R.S. Employer Identification Number) |
|
8 Sound Shore Drive, Suite 255
Greenwich, CT 06830
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (203) 983-5275
Securities registered pursuant to Section 12(b) of the Act:
|
Title of Each Class |
|
Name of Each Exchange On Which Registered |
|
Common Stock, par value $0.01 per share |
|
NASDAQ Global Select Market |
|
6.50% Notes due 2024 |
|
NASDAQ Global Select Market |
Securities registered pursuant to Section 12(g)
of the Act:
None
_______________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x.
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See definition of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
|
Large accelerated filer ¨ |
|
Accelerated filer x |
|
Non-accelerated filer ¨ |
|
Smaller reporting company ¨ |
|
(Do not check if a smaller reporting company) |
|
Emerging growth company ¨ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x.
The aggregate market value of common stock held by non-affiliates of the Registrant on June 30, 2017, based on the closing price on that date of $6.34 on the NASDAQ Global Select Market, was $307,121,781. For the purposes of calculating this amount only, all directors and executive officers of the Registrant have been treated as affiliates. There were 51,190,017 shares of the Registrant’s common stock outstanding as of February 27, 2018.
EXPLANATORY NOTE
TICC Capital Corp. (“TICC” or “the Company”) is filing this Amendment No. 1 to the Annual Report on Form 10-K/A for the purpose of correcting a typographical error in the PricewaterhouseCoopers LLP’s Report of Independent Registered Public Accounting Firm (“Auditor’s Report”) corresponding to the consolidated statements of assets and liabilities, including the consolidated schedules of investments, of TICC and its subsidiaries as of December 31, 2017 and December 31, 2016, the related consolidated statements of operations, changes in net assets and cash flows for each of the three years in the period ended December 31, 2017, including the related notes and financial statement schedule listed in the index appearing under Item 15(c) of the 2017 Annual Report on Form 10-K (collectively referred to as the “consolidated financial statements”) and the Company's internal control over financial reporting as of December 31, 2017.
The typographical error that was corrected concerns the date of the Auditor’s Report. The auditors’ opinion on the Company’s consolidated financial statements, financial statement schedule, and internal control effectiveness remained unchanged. The Auditor’s Report was included in our 2017 Annual Report on Form 10-K as originally filed with the Securities and Exchange Commission (the “SEC”) on March 1, 2018 (the “Original Filing”). Except for the aforementioned correction to the Auditor’s Report, this Amendment does not amend, modify or update the Original Filing in any respect. Information included in this Amendment is stated as of December 31, 2017 and does not reflect events that have occurred subsequent to the filing of the Original Filing and, accordingly, this Amendment should be read in conjunction with our Original Filing made with the SEC.
This Annual Report on Form 10-K/A consists of a cover page, this explanatory note, Item 8 (as amended) of the 2017 Annual Report on Form 10-K (including our consolidated financial statements and the corrected Auditor’s Report), Item 15 of the 2017 Annual Report on Form 10-K, the signature page and the required certifications of TICC’s chief executive officer and the chief financial officer.
Item 8. Consolidated Financial Statements and Supplementary Data
Index to Consolidated Financial Statements
1
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining adequate internal control over financial reporting, and for performing an assessment of the effectiveness of internal control over financial reporting as of December 31, 2017. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Management performed an assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2017 based upon criteria in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on our assessment, management determined that the Company’s internal control over financial reporting was effective as of December 31, 2017 based on the criteria in Internal Control — Integrated Framework issued by COSO. PricewaterhouseCoopers LLP, our independent registered public accounting firm, has issued an attestation report on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2017, as stated in its report, which is included herein.
F-1
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of TICC Capital Corp.:
Opinions on the Consolidated Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated statements of assets and liabilities, including the consolidated schedules of investments, of TICC Capital Corp. and its subsidiaries as of December 31, 2017 and December 31, 2016, and the related consolidated statements of operations, changes in net assets and cash flows for each of the three years in the period ended December 31, 2017, including the related notes and financial statement schedule listed in the index appearing under item 15(c) (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and December 31, 2016, and the results of their operations, changes in their net assets and their cash flows for each of the three years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control — Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our procedures included confirmation of securities owned as of December 31, 2017 and December 31, 2016 by correspondence with the custodians and transfer agent. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
F-2
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
New York, New York
March 1, 2018
We have served as the Company’s auditor since 2003.
F-3
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
|
|
|
December 31, |
|
December 31, |
||||
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
$ |
400,223,439 |
|
|
$ |
578,297,069 |
|
|
|
|
|
18,218,787 |
|
|
|
11,626,007 |
|
|
|
|
|
30,013,842 |
|
|
|
8,261,698 |
|
|
|
|
|
— |
|
|
|
3,451,636 |
|
|
|
|
|
5,085,494 |
|
|
|
9,682,672 |
|
|
|
|
|
— |
|
|
|
7,406 |
|
|
|
|
|
579,694 |
|
|
|
1,130,018 |
|
|
|
|
$ |
454,121,256 |
|
|
$ |
612,456,506 |
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
$ |
62,340,159 |
|
|
$ |
— |
|
|
|
|
|
2,706,099 |
|
|
|
3,673,381 |
|
|
|
|
|
11,621 |
|
|
|
1,731,111 |
|
|
|
|
|
644,735 |
|
|
|
1,089,043 |
|
|
|
|
|
— |
|
|
|
125,853,720 |
|
|
|
|
|
— |
|
|
|
94,116,753 |
|
|
|
|
|
65,702,614 |
|
|
|
226,464,008 |
|
|
|
COMMITMENTS AND CONTINGENCIES (Note 10) |
|
|
|
|
|
|
|
|
|
NET ASSETS |
|
|
|
|
|
|
|
|
|
|
|
514,794 |
|
|
|
514,794 |
|
|
|
|
|
529,297,749 |
|
|
|
562,050,722 |
|
|
|
|
|
(11,076,594 |
) |
|
|
(34,116,765 |
) |
|
|
|
|
(100,007,929 |
) |
|
|
(95,605,057 |
) |
|
|
|
|
(5,237,116 |
) |
|
|
(3,228,079 |
) |
|
|
|
|
(25,072,262 |
) |
|
|
(43,623,117 |
) |
|
|
|
|
388,418,642 |
|
|
|
385,992,498 |
|
|
|
|
$ |
454,121,256 |
|
|
$ |
612,456,506 |
|
|
|
Net asset value per common share |
|
$ |
7.55 |
|
|
$ |
7.50 |
|
See Accompanying Notes.
F-4
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2017
COMPANY/INVESTMENT(1)(20) |
|
PRINCIPAL |
|
COST |
|
FAIR VALUE(2) |
|
%
of Net |
||||
Senior Secured Notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
5,586,000 |
|
$ |
5,534,900 |
|
$ |
5,399,819 |
|
|
|
|
|
|
|
|
$ |
5,534,900 |
|
$ |
5,399,819 |
|
1.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
15,000,000 |
|
$ |
14,815,027 |
|
$ |
14,400,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000,000 |
|
|
4,975,253 |
|
|
4,968,750 |
|
|
|
|
|
|
10,560,000 |
|
|
10,492,764 |
|
|
10,494,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,000,000 |
|
|
12,759,617 |
|
|
12,983,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,605,055 |
|
|
14,450,063 |
|
|
15,312,460 |
|
|
|
|
|
|
10,000,000 |
|
|
9,739,241 |
|
|
9,341,700 |
|
|
|
|
|
|
|
|
$ |
67,231,965 |
|
$ |
67,500,660 |
|
17.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
19,601,471 |
|
$ |
19,318,775 |
|
$ |
19,282,947 |
|
|
|
|
|
|
|
|
$ |
19,318,775 |
|
$ |
19,282,947 |
|
4.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
15,408,145 |
|
$ |
15,294,886 |
|
$ |
15,177,023 |
|
|
|
|
|
|
|
|
$ |
15,294,886 |
|
$ |
15,177,023 |
|
3.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
5,765,441 |
|
$ |
5,745,684 |
|
$ |
4,473,002 |
|
|
|
|
|
|
|
|
$ |
5,745,684 |
|
$ |
4,473,002 |
|
1.2 |
% |
|
(continued on next page)
See Accompanying Notes.
F-5
TICC CAPITAL CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS — (continued)
December 31, 2017
COMPANY/INVESTMENT(1)(20) |
|
PRINCIPAL |
|
COST |
|
FAIR VALUE(2) |
|
%
of Net |
||||
Senior Secured Notes – (continued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,500,000 |
|
$ |
1,458,866 |
|
$ |
1,492,515 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,500,000 |
|
|
3,482,683 |
|
|
3,506,580 |
|
|
|
|
|
|
12,000,000 |
|
|
11,880,523 |
|
|
11,940,000 |
|
|
|
|
|
|
|
|
$ |
16,822,072 |
|
$ |
16,939,095 |
|
4.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,992,500 |
|
$ |
2,935,933 |
|
$ |
3,003,722 |
|
|
|
|
|
|
10,000,000 |
|
|
9,805,957 |
|
|
9,950,000 |
|
|
|
|
|
|
|
|
$ |
12,741,890 |
|
$ |
12,953,722 |
|
3.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,638,748 |
|
$ |
2,627,442 |
|
$ |
2,665,135 |
|
|
|
|
|
|
|
|
$ |
2,627,442 |
|
$ |
2,665,135 |
|
0.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
10,573,496 |
|
$ |
10,555,951 |
|
$ |
10,406,118 |
|
|
|
|
|
|
|
|
$ |
10,555,951 |
|
$ |
10,406,118 |
|
2.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
11,374,901 |
|
$ |
11,300,971 |
|
$ |
11,431,776 |
|
|
|
|
|
|
|
|
$ |
11,300,971 |
|
$ |
11,431,776 |
|
2.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
15,000,000 |
|
$ |
14,898,256 |
|
$ |
14,925,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000,000 |
|
|
9,719,036 |
|
|
9,841,700 |
|
|
|
|
|
|
|
|
$ |
24,617,292 |
|
$ |
24,766,700 |
|
6.4 |
% |
|
(continued on next page)
See Accompanying Notes.
F-6
TICC CAPITAL CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS — (continued)
December 31, 2017
COMPANY/INVESTMENT(1)(20) |
|
PRINCIPAL |
|
COST |
|
FAIR VALUE(2) |
|
%
of Net |
||||
Senior Secured Notes – (continued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
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|
|
|
|
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|
|
|
|
$ |
14,000,000 |
|
$ |
14,007,813 |
|
$ |
14,077,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,171,285 |
|
|
20,571,906 |
|
|
20,112,721 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,000,000 |
|
|
16,906,033 |
|
|
16,978,750 |
|
|
|
|
|
|
|
|
$ |
51,485,752 |
|
$ |
51,168,471 |
|
13.2 |
% |
|
|
|
|
|
$ |
243,277,580 |
|
$ |
242,164,468 |
|
62.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
778,766 |
|
$ |
776,917 |
|
$ |
786,554 |
|
|
|
|
|
|
|
|
$ |
776,917 |
|
$ |
786,554 |
|
0.2 |
% |
|
|
|
|
|
$ |
776,917 |
|
$ |
786,554 |
|
0.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized Loan Obligation – Debt Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,250,000 |
|
$ |
1,185,390 |
|
$ |
1,250,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000,000 |
|
|
3,308,060 |
|
|
3,470,000 |
|
|
|
|
|
|
|
|
$ |
4,493,450 |
|
$ |
4,720,000 |
|
1.2 |
% |
|
|
|
|
|
$ |
4,493,450 |
|
$ |
4,720,000 |
|
1.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized Loan Obligation – Equity Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
6,000,000 |
|
$ |
3,677,571 |
|
$ |
3,180,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,921,429 |
|
|
6,771,090 |
|
|
6,848,357 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,500,000 |
|
|
317,125 |
|
|
— |
|
|
|
|
(continued on next page)
See Accompanying Notes.
F-7
TICC CAPITAL CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS — (continued)
December 31, 2017
COMPANY/INVESTMENT(1)(20) |
|
PRINCIPAL |
|
COST |
|
FAIR VALUE(2) |
|
%
of Net |
|||
Collateralized Loan Obligation – Equity Investments – (continued) |
|
|
|
|
|
|
|
|
|
|
|
Structured Finance – (continued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
17,630,000 |
|
$ |
3,939,835 |
|
$ |
1,969,952 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,250,000 |
|
|
5,714,900 |
|
|
6,485,378 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,000,000 |
|
|
9,100,628 |
|
|
4,140,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,000,000 |
|
|
13,720,760 |
|
|
13,320,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,700,000 |
|
|
6,979,156 |
|
|
6,776,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,750,000 |
|
|
213,307 |
|
|
223,125 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000,000 |
|
|
6,865,057 |
|
|
6,200,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000,000 |
|
|
887,235 |
|
|
815,304 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,670,000 |
|
|
2,567,366 |
|
|
2,521,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000,000 |
|
|
2,710,747 |
|
|
1,500,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,800,000 |
|
|
8,973,086 |
|
|
8,053,212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,000,000 |
|
|
4,841,345 |
|
|
2,880,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,200,000 |
|
|
6,731,819 |
|
|
5,254,000 |
|
|
|
(continued on next page)
See Accompanying Notes.
F-8
TICC CAPITAL CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS — (continued)
December 31, 2017
COMPANY/INVESTMENT(1)(20) |
|
PRINCIPAL |
|
COST |
|
FAIR VALUE(2) |
|
%
of Net |
|||
Collateralized Loan Obligation – Equity Investments – (continued) |
|
|
|
|
|
|
|
|
|
|
|
Structured Finance – (continued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
5,422,500 |
|
$ |
5,300,799 |
|
$ |
6,127,425 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,389,676 |
|
|
— |
|
|
73,526 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,000,000 |
|
|
1,834,823 |
|
|
1,920,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,000,000 |
|
|
4,309,580 |
|
|
4,320,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,447,790 |
|
|
9,548,557 |
|
|
8,090,762 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,350,000 |
|
|
7,468,980 |
|
|
6,810,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,500,000 |
|
|
18,258,468 |
|
|
16,267,667 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,250,000 |
|
|
3,324,796 |
|
|
2,835,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,200,000 |
|
|
4,196,382 |
|
|
3,919,298 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,750,000 |
|
|
3,331,706 |
|
|
3,375,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,475,000 |
|
|
11,931,713 |
|
|
11,319,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,250,000 |
|
|
6,472,541 |
|
|
6,290,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500,000 |
|
|
4,823,259 |
|
|
4,105,937 |
|
|
|
(continued on next page)
See Accompanying Notes.
F-9
TICC CAPITAL CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS — (continued)
December 31, 2017
COMPANY/INVESTMENT(1)(20) |
|
PRINCIPAL |
|
COST |
|
FAIR VALUE(2) |
|
%
of Net |
||||
Collateralized Loan Obligation – Equity Investments – (continued) |
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
10,500,000 |
|
$ |
8,408,861 |
|
$ |
9,030,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
125,000 |
|
|
1,353,363 |
|
|
|
|
|
|
|
|
$ |
173,346,492 |
|
$ |
156,004,106 |
|
40.2 |
% |
|
|
|
|
|
$ |
173,346,492 |
|
$ |
156,004,106 |
|
40.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,244,188 |
|
$ |
684,960 |
|
$ |
3,048,261 |
|
|
|
|
|
|
|
|
$ |
684,960 |
|
$ |
3,048,261 |
|
0.8 |
% |
|
|
|
|
|
$ |
684,960 |
|
$ |
3,048,261 |
|
0.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,002,455 |
|
$ |
2,762,421 |
|
$ |
3,272,675 |
|
|
|
|
|
|
5,706,866 |
|
|
3,677,000 |
|
|
8,446,162 |
|
|
|
|
|
|
|
|
$ |
6,439,421 |
|
$ |
11,718,837 |
|
3.0 |
% |
|
|
|
|
|
$ |
6,439,421 |
|
$ |
11,718,837 |
|
3.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
159,795 |
|
$ |
— |
|
$ |
— |
|
|
|
|
|
|
|
|
$ |
— |
|
$ |
— |
|
0.0 |
% |
|
|
|
|
|
$ |
— |
|
$ |
— |
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
500,000 |
|
|
— |
|
|
|
||
|
|
|
|
$ |
500,000 |
|
$ |
— |
|
0.0 |
% |
|
|
|
|
|
$ |
500,000 |
|
$ |
— |
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments in Securities(8) |
|
|
|
|
$ |
429,518,820 |
|
$ |
418,442,226 |
|
107.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
30,013,842 |
|
$ |
30,013,842 |
|
|
|
|
|
|
|
|
$ |
30,013,842 |
|
$ |
30,013,842 |
|
7.7 |
% |
|
Total Investments in Securities and Cash Equivalents |
|
|
|
|
$ |
459,532,662 |
|
$ |
448,456,068 |
|
115.5 |
% |
____________
(1) Other than Unitek Global Services, Inc., of which we are deemed to be an “affiliate,” we do not “control” and are not an “affiliate” of any of our portfolio companies, each as defined in the Investment Company Act of 1940 (the “1940 Act”). In general, under the 1940 Act, we would be presumed to “control” a portfolio company if we owned 25% or more of its voting securities and would be an “affiliate” of a portfolio company if we owned 5% or more of its voting securities.
F-10
TICC CAPITAL CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS — (continued)
December 31, 2017
(2) Fair value is determined in good faith by the Board of Directors of the Company.
(3) Portfolio includes $6,544,207 of principal amount of debt investments which contain a PIK provision at December 31, 2017.
(4) Notes bear interest at variable rates.
(5) Cost value reflects accretion of original issue discount or market discount.
(6) Cost value reflects repayment of principal.
(7) Non-income producing at the relevant period end.
(8) Aggregate gross unrealized appreciation for federal income tax purposes is $19,352,263; aggregate gross unrealized depreciation for federal income tax purposes is $55,593,978. Net unrealized depreciation is $36,241,715 based upon a tax cost basis of $454,683,941.
(9) Cost value reflects accretion of effective yield less any cash distributions received or entitled to be received from CLO equity investments.
(10) The CLO equity investment was optionally redeemed. Refer to “Note 3. Summary of Significant Accounting Policies.”
(11) Indicates assets that the Company believes do not represent “qualifying assets” under Section 55(a) of the 1940 Act Qualifying assets must represent at least 70% of the Company’s total assets at the time of acquisition of any additional non-qualifying assets. As of December 31, 2017, the Company held qualifying assets that represented 64.6% of its total assets.
(12) Investment not domiciled in the United States.
(13) Fair value represents discounted cash flows associated with fees earned from CLO equity investments.
(14) Aggregate investments represent greater than 5% of net assets.
(15) The principal balance outstanding for this debt investment, in whole or in part, is indexed to 90-day LIBOR.
(16) The principal balance outstanding for this debt investment, in whole or in part, is indexed to 30-day LIBOR.
(17) The CLO subordinated notes and income notes are considered equity positions in the CLO funds. Equity investments are entitled to recurring distributions which are generally equal to the remaining cash flow of the payments made by the underlying fund’s securities less contractual payments to debt holders and fund expenses. The estimated yield indicated is based upon a current projection of the amount and timing of these recurring distributions and the estimated amount of repayment of principal upon expected redemption. Such projections are periodically reviewed and adjusted, and the estimated yield may not ultimately be realized.
(18) Represents the earnout payments related to the sale of Algorithmic Implementations, Inc. (d/b/a “Ai Squared”).
(19) Represents cash equivalents held in money market accounts as of December 31, 2017.
(20) The fair value of the investment was determined using significant unobservable inputs. See “Note 4. Fair Value.”
F-11
TICC CAPITAL CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS
DECEMBER 31, 2016
COMPANY/INVESTMENT(1)(22) |
|
PRINCIPAL |
|
COST |
|
FAIR VALUE(2) |
|
%
of Net |
||||
Senior Secured Notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
5,643,000 |
|
$ |
5,586,051 |
|
$ |
5,466,656 |
|
|
|
|
|
|
|
|
$ |
5,586,051 |
|
$ |
5,466,656 |
|
1.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
4,676,389 |
|
$ |
4,687,172 |
|
$ |
4,664,698 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,609,828 |
|
|
9,609,610 |
|
|
9,561,779 |
|
|
|
|
|
|
3,000,000 |
|
|
2,978,478 |
|
|
2,940,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,769,583 |
|
|
6,497,271 |
|
|
6,803,431 |
|
|
|
|
|
|
13,000,000 |
|
|
12,744,436 |
|
|
12,870,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,436,090 |
|
|
13,060,236 |
|
|
14,048,192 |
|
|
|
|
|
|
5,000,000 |
|
|
4,804,450 |
|
|
4,800,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,537,500 |
|
|
16,195,897 |
|
|
14,883,750 |
|
|
|
|
|
|
15,000,000 |
|
|
14,586,122 |
|
|
9,723,750 |
|
|
|
|
|
|
|
|
$ |
85,163,672 |
|
$ |
80,295,600 |
|
20.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
7,975,000 |
|
$ |
7,911,297 |
|
$ |
7,855,375 |
|
|
|
|
|
|
|
|
$ |
7,911,297 |
|
$ |
7,855,375 |
|
2.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
17,640,000 |
|
$ |
17,387,178 |
|
$ |
16,912,350 |
|
|
|
|
|
|
|
|
$ |
17,387,178 |
|
$ |
16,912,350 |
|
4.4 |
% |
|
(continued on next page)
See Accompanying Notes.
F-12
TICC CAPITAL CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS — (continued)
DECEMBER 31, 2016
COMPANY/INVESTMENT(1)(22) |
|
PRINCIPAL |
|
COST |
|
FAIR VALUE(2) |
|
%
of Net |
||||
Senior Secured Notes – (continued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
15,620,604 |
|
$ |
15,486,217 |
|
$ |
15,151,986 |
|
|
|
|
|
|
|
|
$ |
15,486,217 |
|
$ |
15,151,986 |
|
3.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
5,966,443 |
|
$ |
5,931,165 |
|
$ |
4,285,875 |
|
|
|
|
|
|
|
|
$ |
5,931,165 |
|
$ |
4,285,875 |
|
1.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
13,982,241 |
|
$ |
13,870,396 |
|
$ |
13,982,241 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,000,000 |
|
|
11,777,359 |
|
|
11,820,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,262,559 |
|
|
9,214,580 |
|
|
9,262,559 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,224,081 |
|
|
12,135,248 |
|
|
11,888,285 |
|
|
|
|
|
|
|
|
$ |
46,997,583 |
|
$ |
46,953,085 |
|
12.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,638,748 |
|
$ |
2,617,067 |
|
$ |
2,665,135 |
|
|
|
|
|
|
|
|
$ |
2,617,067 |
|
$ |
2,665,135 |
|
0.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
10,727,817 |
|
$ |
10,704,694 |
|
$ |
10,584,815 |
|
|
|
|
|
|
|
|
$ |
10,704,694 |
|
$ |
10,584,815 |
|
2.7 |
% |
|
(continued on next page)
See Accompanying Notes.
F-13
TICC CAPITAL CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS — (continued)
DECEMBER 31, 2016
COMPANY/INVESTMENT(1)(22) |
|
PRINCIPAL |
|
COST |
|
FAIR VALUE(2) |
|
%
of Net |
||||
Senior Secured Notes – (continued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
4,694,081 |
|
$ |
4,621,686 |
|
$ |
4,647,140 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,682,442 |
|
|
23,447,282 |
|
|
23,504,824 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,165,400 |
|
|
15,098,034 |
|
|
14,520,871 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,839,379 |
|
|
11,578,162 |
|
|
11,602,591 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,720,058 |
|
|
8,684,453 |
|
|
8,632,857 |
|
|
|
|
|
|
|
|
$ |
63,429,617 |
|
$ |
62,908,283 |
|
16.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
8,910,000 |
|
$ |
8,760,042 |
|
$ |
8,887,725 |
|
|
|
|
|
|
10,000,000 |
|
|
9,676,019 |
|
|
9,500,000 |
|
|
|
|
|
|
|
|
$ |
18,436,061 |
|
$ |
18,387,725 |
|
4.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
8,775,262 |
|
$ |
8,731,896 |
|
$ |
8,533,942 |
|
|
|
|
|
|
14,000,000 |
|
|
14,008,442 |
|
|
12,040,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,386,525 |
|
|
21,592,757 |
|
|
19,700,142 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,983,163 |
|
|
1,975,704 |
|
|
1,969,539 |
|
|
|
|
|
|
13,000,000 |
|
|
12,903,392 |
|
|
12,593,750 |
|
|
|
|
(continued on next page)
See Accompanying Notes.
F-14
TICC CAPITAL CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS — (continued)
DECEMBER 31, 2016
COMPANY/INVESTMENT(1)(22) |
|
PRINCIPAL |
|
COST |
|
FAIR VALUE(2) |
|
%
of Net |
||||
Senior Secured Notes – (continued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
5,180,526 |
|
$ |
5,159,932 |
|
$ |
5,189,592 |
|
|
|
|
|
|
10,806,404 |
|
|
10,857,480 |
|
|
10,786,196 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,824,573 |
|
|
5,792,824 |
|
|
5,795,450 |
|
|
|
|
|
|
6,400,000 |
|
|
6,379,907 |
|
|
6,256,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,778,733 |
|
|
9,708,848 |
|
|
9,756,340 |
|
|
|
|
|
|
|
|
$ |
97,111,182 |
|
$ |
92,620,951 |
|
24.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
8,926,197 |
|
$ |
8,790,059 |
|
$ |
8,926,197 |
|
|
|
|
|
|
|
|
$ |
8,790,059 |
|
$ |
8,926,197 |
|
2.3 |
% |
|
|
|
|
|
$ |
385,551,843 |
|
$ |
373,014,033 |
|
96.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
671,053 |
|
$ |
668,162 |
|
$ |
677,764 |
|
|
|
|
|
|
|
|
$ |
668,162 |
|
$ |
677,764 |
|
0.2 |
% |
|
|
|
|
|
$ |
668,162 |
|
$ |
677,764 |
|
0.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized Loan Obligation – Debt Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
3,000,000 |
|
$ |
2,804,247 |
|
$ |
2,700,000 |
|
|
|
|
|
|
|
|
$ |
2,804,247 |
|
$ |
2,700,000 |
|
0.7 |
% |
|
|
|
|
|
$ |
2,804,247 |
|
$ |
2,700,000 |
|
0.7 |
% |
|
(continued on next page)
See Accompanying Notes.
F-15
TICC CAPITAL CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS — (continued)
DECEMBER 31, 2016
COMPANY/INVESTMENT(1)(22) |
|
PRINCIPAL |
|
COST |
|
FAIR VALUE(2) |
|
%
of Net |
|||
Collateralized Loan Obligation – Equity Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
6,000,000 |
|
$ |
2,993,455 |
|
$ |
3,240,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,801,000 |
|
|
2,503,234 |
|
|
2,599,034 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,000,000 |
|
|
3,698,795 |
|
|
3,600,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,921,429 |
|
|
7,298,625 |
|
|
5,943,857 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,500,000 |
|
|
9,799,870 |
|
|
8,370,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,630,000 |
|
|
9,247,832 |
|
|
7,833,790 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,750,000 |
|
|
8,897,649 |
|
|
7,355,511 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,000,000 |
|
|
4,295,766 |
|
|
4,540,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,450,000 |
|
|
19,654,575 |
|
|
16,855,411 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,250,000 |
|
|
6,122,479 |
|
|
5,599,429 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,000,000 |
|
|
11,239,113 |
|
|
5,750,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,750,000 |
|
|
13,853,409 |
|
|
13,125,000 |
|
|
|
(continued on next page)
See Accompanying Notes.
F-16
TICC CAPITAL CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS — (continued)
DECEMBER 31, 2016
COMPANY/INVESTMENT(1)(22) |
|
PRINCIPAL |
|
COST |
|
FAIR VALUE(2) |
|
%
of Net |
|||
Collateralized Loan Obligation – Equity Investments – (continued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
12,750,000 |
|
$ |
7,066,122 |
|
$ |
6,757,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,670,000 |
|
|
2,749,405 |
|
|
3,269,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,000,000 |
|
|
5,020,677 |
|
|
3,700,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000,000 |
|
|
3,218,541 |
|
|
2,400,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,000,000 |
|
|
11,572,127 |
|
|
10,590,431 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,000,000 |
|
|
4,890,961 |
|
|
4,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000,000 |
|
|
1,949,974 |
|
|
2,250,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,000,000 |
|
|
5,725,139 |
|
|
6,160,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,422,500 |
|
|
5,417,070 |
|
|
5,856,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,217,000 |
|
|
10,050,816 |
|
|
6,109,956 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,200,000 |
|
|
10,236,812 |
|
|
6,657,469 |
|
|
|
|
|
2,389,676 |
|
|
— |
|
|
288,747 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,000,000 |
|
|
1,745,162 |
|
|
1,830,000 |
|
|
|
(continued on next page)
See Accompanying Notes.
F-17
TICC CAPITAL CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS — (continued)
DECEMBER 31, 2016
COMPANY/INVESTMENT(1)(22) |
|
PRINCIPAL |
|
COST |
|
FAIR VALUE(2) |
|
%
of Net |
||||
Collateralized Loan Obligation – Equity Investments – (continued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
24,400,000 |
|
$ |
16,014,950 |
|
$ |
12,503,876 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,416,666 |
|
|
7,191,952 |
|
|
5,572,916 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,350,000 |
|
|
7,010,740 |
|
|
6,881,917 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,500,000 |
|
|
7,454,218 |
|
|
6,286,825 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500,000 |
|
|
4,929,958 |
|
|
5,257,464 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,850,000 |
|
|
16,741,765 |
|
|
18,051,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
1,588,172 |
|
|
|
|
|
|
|
|
$ |
228,591,191 |
|
$ |
200,824,105 |
|
52.0 |
% |
|
|
|
|
|
$ |
228,591,191 |
|
$ |
200,824,105 |
|
52.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
815,266 |
|
|
535,000 |
|
|
864,182 |
|
|
|
|
|
|
|
|
$ |
535,000 |
|
$ |
864,182 |
|
0.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telecommunications Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
775,846 |
|
|
1,712,398 |
|
|
4,150,776 |
|
|
|
|
|
|
|
|
$ |
1,712,398 |
|
$ |
4,150,776 |
|
1.1 |
% |
|
|
|
|
|
$ |
2,247,398 |
|
$ |
5,014,958 |
|
1.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,706,866 |
|
|
3,677,000 |
|
|
7,418,926 |
|
|
|
|
|
|
|
|
$ |
3,677,000 |
|
$ |
7,418,926 |
|
1.9 |
% |
|
|
|
|
|
$ |
3,677,000 |
|
$ |
7,418,926 |
|
1.9 |
% |
|
(continued on next page)
See Accompanying Notes.
F-18
TICC CAPITAL CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS — (continued)
DECEMBER 31, 2016
COMPANY/INVESTMENT(1) |
|
PRINCIPAL |
|
COST |
|
FAIR VALUE(2) |
|
%
of Net |
|||
Other Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
500,000 |
|
$ |
273,290 |
|
|
|
|
|
|
|
$ |
500,000 |
|
$ |
273,290 |
|
0.1 |
% |
|
|
|
|
$ |
500,000 |
|
$ |
273,290 |
|
0.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments in Securities(8) |
|
|
|
$ |
624,039,841 |
|
$ |
589,923,076 |
|
152.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Cash Equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
8,261,698 |
|
$ |
8,261,698 |
|
|
|
|
|
|
|
$ |
8,261,698 |
|
$ |
8,261,698 |
|
2.2 |
% |
|
Total Investments in Securities and Cash Equivalents |
|
|
|
$ |
632,301,539 |
|
$ |
598,184,774 |
|
155.0 |
% |
____________
(1) Other than Unitek Global Services, Inc., of which we are deemed to be an “affiliate,” we do not “control” and are not an “affiliate” of any of our portfolio companies, each as defined in the Investment Company Act of 1940 (the “1940 Act”). In general, under the 1940 Act, we would be presumed to “control” a portfolio company if we owned 25% or more of its voting securities and would be an “affiliate” of a portfolio company if we owned 5% or more of its voting securities.
(2) Fair value is determined in good faith by the Board of Directors of the Company.
(3) Portfolio includes $6,637,496 of principal amount of debt investments which contain a PIK provision at December 31, 2016.
(4) Notes bear interest at variable rates.
(5) Cost value reflects accretion of original issue discount or market discount.
(6) Cost value reflects repayment of principal.
(7) Non-income producing at the relevant period end.
(8) Aggregate gross unrealized appreciation for federal income tax purposes is $16,039,914; aggregate gross unrealized depreciation for federal income tax purposes is $93,938,149. Net unrealized depreciation is $77,903,235 based upon a tax cost basis of $667,826,311.
(9) Cost value reflects accretion of effective yield less any cash distributions received or entitled to be received from CLO equity investments.
(10) All or a portion of this investment represents TICC CLO 2012-1 LLC collateral.
(11) Indicates assets that the Company believes do not represent “qualifying assets” under Section 55(a) of the 1940 Act Qualifying assets must represent at least 70% of the Company’s total assets at the time of acquisition of any additional non-qualifying assets. As of December 31, 2016, the Company held qualifying assets that represented 65.9% of its total assets
(12) Investment not domiciled in the United States.
(13) Fair value represents discounted cash flows associated with fees earned from CLO equity investments
(14) Aggregate investments represent greater than 5% of net assets.
(15) The principal balance outstanding for this debt investment, in whole or in part, is indexed to 90-day LIBOR.
(16) The principal balance outstanding for this debt investment, in whole or in part, is indexed to 1-year LIBOR.
(17) The principal balance outstanding for this debt investment, in whole or in part, is indexed to 30-day LIBOR.
(18) The principal balance outstanding for this debt investment, in whole or in part, is indexed to 180-day LIBOR.
(19) The CLO subordinated notes and income notes are considered equity positions in the CLO funds. Equity investments are entitled to recurring distributions which are generally equal to the remaining cash flow of the payments made by the underlying fund’s securities less contractual payments to debt holders and fund expenses. The estimated yield indicated is based upon a current projection of the amount and timing of these recurring distributions and the estimated amount of repayment of principal upon expected redemption. Such projections are periodically reviewed and adjusted, and the estimated yield may not ultimately be realized.
(20) Represents the earnout payments related to the sale of Algorithmic Implementations, Inc. (d/b/a “Ai Squared”).
(21) Represents cash equivalents held in a money market account as of December 31, 2016.
(22) The fair value of the investment was determined using significant unobservable inputs. See “Note 4. Fair Value.”
See Accompanying Notes.
F-19
CONSOLIDATED STATEMENT OF OPERATIONS
|
|
|
Year Ended |
|
Year Ended |
|
Year Ended |
||||||
|
INVESTMENT INCOME |
|
|
|
|
|
|
|
|
|
|
|
|
|
From non-affiliated/non-control investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
24,561,956 |
|
|
$ |
33,649,267 |
|
|
$ |
48,556,075 |
|
|
|
|
|
33,274,392 |
|
|
|
32,503,279 |
|
|
|
34,901,766 |
|
|
|
|
|
3,198,469 |
|
|
|
2,228,877 |
|
|
|
2,332,680 |
|
|
|
|
|
61,034,817 |
|
|
|
68,381,423 |
|
|
|
85,790,521 |
|
|
|
From affiliated investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
382,200 |
|
|
|
331,404 |
|
|
|
300,544 |
|
|
|
|
|
382,200 |
|
|
|
331,404 |
|
|
|
300,544 |
|
|
|
From control investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
567,219 |
|
|
|
1,371,874 |
|
|
|
|
|
— |
|
|
|
567,219 |
|
|
|
1,371,874 |
|
|
|
|
|
61,417,017 |
|
|
|
69,280,046 |
|
|
|
87,462,939 |
|
|
|
EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,898,815 |
|
|
|
17,202,851 |
|
|
|
19,889,147 |
|
|
|
|
|
8,140,010 |
|
|
|
11,292,395 |
|
|
|
19,770,170 |
|
|
|
|
|
2,799,113 |
|
|
|
6,393,812 |
|
|
|
5,690,799 |
|
|
|
|
|
901,472 |
|
|
|
837,343 |
|
|
|
1,158,622 |
|
|
|
|
|
584,580 |
|
|
|
642,000 |
|
|
|
514,501 |
|
|
|
|
|
256,956 |
|
|
|
159,573 |
|
|
|
68,679 |
|
|
|
|
|
244,115 |
|
|
|
316,577 |
|
|
|
332,796 |
|
|
|
|
|
1,014,580 |
|
|
|
2,861,803 |
|
|
|
1,340,326 |
|
|
|
|
|
26,839,641 |
|
|
|
39,706,354 |
|
|
|
48,765,040 |
|
|
|
|
|
3,850,646 |
|
|
|
2,795,399 |
|
|
|
(929,933 |
) |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
3,850,646 |
|
|
|
2,795,399 |
|
|
|
(929,933 |
) |
|
|
|
|
30,690,287 |
|
|
|
42,501,753 |
|
|
|
47,835,107 |
|
|
|
Net investment income |
|
|
30,726,730 |
|
|
|
26,778,293 |
|
|
|
39,627,832 |
|
|
Net change in unrealized appreciation/depreciation on investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,478,902 |
|
|
|
90,159,779 |
|
|
|
(101,525,472 |
) |
|
|
|
|
3,561,269 |
|
|
|
4,695,861 |
|
|
|
7,057,989 |
|
|
|
|
|
— |
|
|
|
5,750,000 |
|
|
|
(3,910,000 |
) |
|
|
|
|
23,040,171 |
|
|
|
100,605,640 |
|
|
|
(98,377,483 |
) |
|
|
Net realized (losses) gains |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,007,892 |
) |
|
|
(11,262,943 |
) |
|
|
425,240 |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
(6,762,328 |
) |
|
|
|
|
— |
|
|
|
(3,000,000 |
) |
|
|
— |
|
|
|
|
|
(3,149,338 |
) |
|
|
(2,759,227 |
) |
|
|
(1,046,910 |
) |
|
|
|
|
(10,157,230 |
) |
|
|
(17,022,170 |
) |
|
|
(7,383,998 |
) |
|
|
Net increase/(decrease) in net assets resulting from operations |
|
$ |
43,609,671 |
|
|
$ |
110,361,763 |
|
|
$ |
(66,133,649 |
) |
(continued on next page)
See Accompanying Notes.
F-20
TICC CAPITAL CORP.
CONSOLIDATED STATEMENT OF OPERATIONS – (continued)
|
|
|
Year Ended |
|
Year Ended |
|
Year Ended |
||||
|
Net increase in net assets resulting from net investment income per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0.60 |
|
$ |
0.52 |
|
$ |
0.66 |
|
|
|
|
$ |
0.60 |
|
$ |
0.52 |
|
$ |
0.66 |
|
|
|
Net increase/(decrease) in net assets resulting from operations per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0.85 |
|
$ |
2.13 |
|
$ |
(1.11 |
) |
|
|
|
$ |
0.83 |
|
$ |
1.90 |
|
$ |
(1.11 |
) |
|
|
Weighted average shares of common stock outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
51,479,409 |
|
|
51,858,313 |
|
|
59,752,896 |
|
|
|
|
|
58,349,224 |
|
|
61,773,392 |
|
|
69,786,048 |
|
|
|
Distributions per share |
|
$ |
0.80 |
|
$ |
1.16 |
|
$ |
1.14 |
|
See Accompanying Notes.
F-21
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS
|
|
|
Year Ended |
|
Year Ended |
|
Year Ended |
||||||
|
Increase/(decrease) in net assets from operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
30,726,730 |
|
|
$ |
26,778,293 |
|
|
$ |
39,627,832 |
|
|
|
|
|
(10,157,230 |
) |
|
|
(17,022,170 |
) |
|
|
(7,383,998 |
) |
|
|
|
|
23,040,171 |
|
|
|
100,605,640 |
|
|
|
(98,377,483 |
) |
|
|
|
|
43,609,671 |
|
|
|
110,361,763 |
|
|
|
(66,133,649 |
) |
|
|
Distributions to stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(33,752,176 |
) |
|
|
(54,740,084 |
) |
|
|
(67,646,991 |
) |
|
|
|
|
(7,431,351 |
) |
|
|
(4,976,030 |
) |
|
|
— |
|
|
|
Total distributions to stockholders |
|
|
(41,183,527) |
|
|
|
(59,716,114 |
) |
|
|
(67,646,991 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital share transactions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
(25,587,862 |
) |
|
|
(26,097,710 |
) |
|
|
|
|
— |
|
|
|
(25,587,862 |
) |
|
|
(26,097,710 |
) |
|
|
Total increase/(decrease) in net assets |
|
|
2,426,144 |
|
|
|
25,057,787 |
|
|
|
(159,878,350 |
) |
|
Net assets at beginning of period |
|
|
385,992,498 |
|
|
|
360,934,711 |
|
|
|
520,813,061 |
|
|
Net assets at end of period (including over distributed net investment income of $25,072,262 and $43,623,117 and $30,180,979, respectively) |
|
$ |
388,418,642 |
|
|
$ |
385,992,498 |
|
|
$ |
360,934,711 |
|
|
Capital share activity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
(4,917,026 |
) |
|
|
(3,907,344 |
) |
|
|
|
|
— |
|
|
|
(4,917,026 |
) |
|
|
(3,907,344 |
) |
|
See Accompanying Notes.
F-22
CONSOLIDATED STATEMENT OF CASH FLOWS
|
|
|
Year Ended |
|
Year Ended |
|
Year Ended |
||||||
|
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
43,609,671 |
|
|
$ |
110,361,763 |
|
|
$ |
(66,133,649 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,003,086 |
) |
|
|
(1,158,404 |
) |
|
|
(3,865,663 |
) |
|
|
|
|
937,871 |
|
|
|
638,289 |
|
|
|
1,296,613 |
|
|
|
|
|
(229,173 |
) |
|
|
(216,674 |
) |
|
|
(572,408 |
) |
|
|
|
|
(3,575,888 |
) |
|
|
(1,373,149 |
) |
|
|
— |
|
|
|
|
|
(208,765,224 |
) |
|
|
(159,955,516 |
) |
|
|
(238,846,186 |
) |
|
|
|
|
189,159,479 |
|
|
|
103,529,757 |
|
|
|
216,782,637 |
|
|
|
|
|
171,360,617 |
|
|
|
184,608,355 |
|
|
|
188,402,747 |
|
|
|
|
|
10,157,230 |
|
|
|
17,022,170 |
|
|
|
7,383,998 |
|
|
|
|
|
37,073,681 |
|
|
|
34,165,951 |
|
|
|
41,636,795 |
|
|
|
|
|
(23,040,171 |
) |
|
|
(100,605,640 |
) |
|
|
98,377,483 |
|
|
|
|
|
4,597,178 |
|
|
|
2,586,325 |
|
|
|
(826,708 |
) |
|
|
|
|
474,567 |
|
|
|
(808,974 |
) |
|
|
(30,799 |
) |
|
|
|
|
(1,719,490 |
) |
|
|
(408,755 |
) |
|
|
(456,698 |
) |
|
|
|
|
(967,282 |
) |
|
|
(522,520 |
) |
|
|
(1,987,585 |
) |
|
|
|
|
(444,308 |
) |
|
|
(2,189,544 |
) |
|
|
2,649,460 |
|
|
|
Net cash provided by operating activities |
|
|
217,625,672 |
|
|
|
185,673,434 |
|
|
|
243,810,037 |
|
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,451,636 |
|
|
|
14,513,596 |
|
|
|
2,611,018 |
|
|
|
|
|
3,451,636 |
|
|
|
14,513,596 |
|
|
|
2,611,018 |
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(125,705,930) |
|
|
|
(109,345,033 |
) |
|
|
— |
|
|
|
|
|
(94,542,000) |
|
|
|
(20,458,000 |
) |
|
|
— |
|
|
|
|
|
64,370,225 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
(2,263,932 |
) |
|
|
— |
|
|
|
— |
|
|
| Repayment of credit facility | — | — | (150,000,000 | ) | ||||||||
|
|
|
(41,183,527 |
) |
|
|
(59,716,114 |
) |
|
|
(67,646,991 |
) |
|
|
|
|
— |
|
|
|
(25,587,862 |
) |
|
|
(26,097,710 |
) |
|
|
|
|
(199,325,164 |
) |
|
|
(215,107,009 |
) |
|
|
(243,744,701 |
) |
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
21,752,144 |
|
|
|
(14,919,979 |
) |
|
|
2,676,354 |
|
|
Cash and cash equivalents, beginning of period |
|
|
8,261,698 |
|
|
|
23,181,677 |
|
|
|
20,505,323 |
|
|
Cash and cash equivalents, end of period |
|
$ |
30,013,842 |
|
|
$ |
8,261,698 |
|
|
$ |
23,181,677 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
13,680,433 |
|
|
$ |
16,257,290 |
|
|
$ |
19,049,232 |
|
|
|
Impairment of other assets |
|
$ |
75,757 |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CASH ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
— |
|
|
$ |
7,406 |
|
|
$ |
7,845,706 |
|
|
|
|
$ |
— |
|
|
$ |
11,613,301 |
|
|
$ |
7,323,770 |
|
|
See Accompanying Notes.
F-23
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2017
NOTE 1. ORGANIZATION
TICC Capital Corp. (“TICC” or the “Company”) was incorporated under the General Corporation Laws of the State of Maryland on July 21, 2003 and is a non-diversified, closed-end investment company. TICC has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, TICC has elected to be treated for tax purposes as a regulated investment company (“RIC”), under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). The Company’s investment objective is to maximize its total return, by investing primarily in corporate debt securities.
TICC’s investment activities are managed by TICC Management. TICC Management is an investment adviser registered under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). TICC Management is owned by BDC Partners, LLC (“BDC Partners”), its managing member, and Charles M. Royce, a member of our Board of Directors who holds a minority, non-controlling interest in TICC Management. Under the investment advisory agreement, TICC has agreed to pay TICC Management an annual base management fee based on its gross assets as well as an incentive fee based on its performance.
The Company’s consolidated operations include the activities of its wholly-owned subsidiaries, TICC CLO 2012-1 LLC (“2012 Securitization Issuer” or “TICC CLO 2012-1”) and TICC Funding, LLC (“TICC Funding”) for the periods in which they were held. These subsidiaries were formed for the purpose of enabling the Company to obtain debt financing and were operated solely for the investment activities of the Company. TICC Funding was formed on September 17, 2014, for the purpose of entering into a credit and security agreement with Citibank, N.A. (the “Facility”). During the fourth quarter of 2015, the Company liquidated portions of the TICC Funding portfolio and, as of December 31, 2015, the Facility had been fully repaid. During the quarter ended September 30, 2016, the Company, as collateral manager of TICC Funding, dissolved TICC Funding pursuant to Delaware law by filing a certificate of cancellation with the Secretary of State in Delaware. TICC CLO 2012-1 was formed on October 23, 2012 for the purpose of investing in leveraged loans. The Company served as collateral manager to TICC CLO 2012-1 and held all subordinated notes issued by TICC CLO 2012-1. During the third quarter of 2017, TICC CLO 2012-1 repaid the remaining secured notes. During the quarter ended December 31, 2017, the Company, as collateral manager of TICC CLO 2012-1, dissolved TICC CLO 2012-1 pursuant to Delaware law by filing a certificate of cancellation with the Secretary of State in Delaware. See “Note 6. Borrowings” for additional information on the Company’s subsidiaries and their borrowings.
NOTE 2. CHANGE OF
ACCOUNTING FOR COLLATERALIZED LOAN OBLIGATION EQUITY
INVESTMENT INCOME
During the first quarter of 2015, the Company identified a non-material error in its accounting for income from collateralized loan obligation (“CLO”) equity investments. The Company had recorded income from its CLO equity investments using the distribution recognition model as described in ASC 946-320; specifically, distributions were recognized on the applicable record date, subject to estimation and collectability, with a reduction to cost basis in those instances where the Company believed that a return of capital had occurred. The Company has determined that the appropriate method for recording investment income on CLO equity investments is the effective yield method as described in ASC 325-40, Beneficial Interests in Securitized Financial Assets. This method requires the calculation of an effective yield to expected redemption based upon an estimation of the amount and timing of future cash flows, including recurring cash flows as well as future principal repayments; the difference between the actual cash received (and record date distributions to be received) and the effective yield income calculation is an adjustment to cost. The effective yield is reviewed quarterly and adjusted as appropriate.
The difference between the two methods resulted in an income reclassification error which would generally have resulted in a decrease in total investment income with a corresponding and offsetting increase to net change in unrealized appreciation/depreciation on investments and net realized gains/losses on investments. The Company quantified this error and assessed it
F-24
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2017
NOTE 2. CHANGE OF
ACCOUNTING FOR COLLATERALIZED LOAN OBLIGATION EQUITY
INVESTMENT INCOME (continued)
in accordance with the guidance provided in SEC Staff Accounting Bulletin (“SAB”) 108, Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements. Based on this assessment, the Company concluded that the error in income classification did not have a material impact on the Company’s previously filed consolidated financial statements.
As a result of this misclassification of income, net investment income incentive fees were overstated by approximately $2.4 million on a cumulative basis through the year ended December 31, 2014 and, as a result, total net assets as of December 31, 2014 were understated by the same amount, approximately $0.04 per share. The Company also considered this indirect impact of the error in classification and concluded that the error was not material to the Company’s previously filed consolidated financial statements. The error was corrected by an out-of-period adjustment in the first quarter of 2015, reducing net investment income incentive fees by approximately $2.4 million and recognizing a corresponding “due from affiliate” of $2.4 million. TICC Management repaid in full to TICC, on April 30, 2015, the portion of its previously paid net investment income incentive fees attributable to the overstated amounts.
Prospectively as of January 1, 2015, the Company records income from its CLO equity investments using the effective yield method in accordance with the accounting guidance in ASC 325-40 based upon an effective yield to the expected redemption utilizing estimated cash flows.
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and are stated in U.S. Dollars. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, TICC CLO 2012-1 and TICC Funding, for the periods during which they were held. All inter-company accounts and transactions have been eliminated in consolidation.
The Company follows the accounting and reporting guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946, Financial Services — Investment Companies. Certain prior period figures have been reclassified from those originally published in quarterly and annual reports to conform to the current period presentation for comparative purposes.
In the normal course of business, the Company may enter into contracts that contain a variety of representations and provide indemnifications. The Company’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Company that have not yet occurred. However, based upon experience, the Company expects the risk of loss to be remote.
During the quarter ended September 30, 2015, the Company recorded an out of period adjustment related to a miscalculation of discount accretion which increased interest income and increased investment cost, by approximately $1.4 million. For the year ended December 31, 2015, approximately $1.1 million of the $1.4 million adjustment related to prior years. The increase in the investment cost has a corresponding effect on the investment’s unrealized depreciation of the same amount. Management concluded the adjustment was not material to previously filed financial statements.
USE OF ESTIMATES
The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results may differ from those estimates, and these differences could be material.
F-25
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2017
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
CONSOLIDATION
As provided under Regulation S-X and ASC Topic 946-810, Consolidation, the Company will generally not consolidate its investment in a company other than a wholly-owned investment company or a controlled operating company whose business consists of providing services to the Company. TICC CLO 2012-1 would be considered an investment company but for the exceptions under Sections 3(c)(1) and 3(c)(7) under the 1940 Act, and was established solely for the purpose of allowing the Company to borrow funds for the purpose of making investments. The Company owned all of the equity in this entity and controlled the decision making power that drives its economic performance. Accordingly, the Company consolidated its wholly-owned subsidiary in its financial statements for the respective period, and follows the accounting and reporting guidance in ASC 946-810.
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Cash and cash equivalents consist of demand deposits and highly liquid investments with original maturities of three months or less. The Company places its cash and cash equivalents with financial institutions and, at times, cash held in bank accounts may exceed the Federal Deposit Insurance Corporation (“FDIC”) insured limit. Cash and cash equivalents are classified as Level 1 assets and are included on the Company’s Consolidated Schedule of Investments. Cash and cash equivalents are carried at cost or amortized cost which approximates fair value.
Restricted cash represents the cash held by the trustee of the 2012 Securitization Issuer. The amounts are held by the trustee for payment of interest expense and operating expenses of the entity, principal repayments on borrowings, or new investments, based upon the terms of the respective indenture, and are not available for general corporate purposes. There was no restricted cash as of December 31, 2017 as TICC CLO 2012-1 effectively ceased operations on August 25, 2017.
INVESTMENT VALUATION
The Company fair values its investment portfolio in accordance with the provisions of ASC 820, Fair Value Measurement and Disclosure. Estimates made in the preparation of TICC’s consolidated financial statements include the valuation of investments and the related amounts of unrealized appreciation and depreciation of investments recorded. TICC believes that there is no single definitive method for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistently applied valuation process for the types of investments TICC makes.
ASC 820-10 clarified the definition of fair value and requires companies to expand their disclosure about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. ASC 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820-10 also establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, which includes inputs such as quoted prices for similar securities in active markets and quoted prices for identical securities in markets that are not active; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions. TICC considers the attributes of current market conditions on an on-going basis and has determined that due to the general illiquidity of the market for its investment portfolio, whereby little or no market data exists, almost all of TICC’s investments are based upon “Level 3” inputs as of December 31, 2017.
F-26
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2017
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
TICC’s Board of Directors determines the value of its investment portfolio each quarter. In connection with that determination, members of TICC Management’s portfolio management team prepare a quarterly analysis of each portfolio investment using the most recent portfolio company financial statements, forecasts and other relevant financial and operational information. Since March 2004, TICC has engaged third-party valuation firms to provide assistance in valuing certain of its syndicated loans and bilateral investments, including related equity investments, although TICC’s Board of Directors ultimately determines the appropriate valuation of each such investment. Changes in fair value, as described above, are recorded in the Consolidated Statement of Operations as Net change in unrealized appreciation/(depreciation).
Syndicated Loans
In accordance with ASC 820-10, TICC’s valuation procedures specifically provide for the review of indicative quotes supplied by the large agent banks that make a market for each security. However, the marketplace from which TICC obtains indicative bid quotes for purposes of determining the fair value of its syndicated loan investments has shown attributes of illiquidity as described by ASC-820-10. During such periods of illiquidity, when TICC believes that the non-binding indicative bids received from agent banks for certain syndicated investments that we own may not be determinative of their fair value or when no market indicative quote is available, TICC may engage third-party valuation firms to provide assistance in valuing certain syndicated investments that TICC owns. In addition, TICC Management prepares an analysis of each syndicated loan, including a financial summary, covenant compliance review, recent trading activity in the security, if known, and other business developments related to the portfolio company. All available information, including non-binding indicative bids which may not be determinative of fair value, is presented to the Valuation Committee to consider in its determination of fair value. In some instances, there may be limited trading activity in a security even though the market for the security is considered not active. In such cases the Valuation Committee will consider the number of trades, the size and timing of each trade, and other circumstances around such trades, to the extent such information is available, in its determination of fair value. The Valuation Committee will evaluate the impact of such additional information, and factor it into its consideration of the fair value that is indicated by the analysis provided by third-party valuation firms, if any.
Collateralized Loan Obligations — Debt and Equity
TICC has acquired a number of debt and equity positions in CLO investment vehicles and CLO warehouse investments. These investments are special purpose financing vehicles. In valuing such investments, TICC considers the indicative prices provided by a recognized industry pricing service as a primary source, and the implied yield of such prices, supplemented by actual trades executed in the market at or around period-end, as well as the indicative prices provided by the broker who arranges transactions in such investment vehicles. TICC also considers those instances in which the record date for an equity distribution payment falls on or before the last day of the period, and the likelihood that a prospective purchaser would require a downward adjustment to the indicative price representing substantially all of the pending distribution. Additional factors include any available information on other relevant transactions including firm bids and offers in the market and information resulting from bids-wanted-in-competition. In addition, TICC considers the operating metrics of the specific investment vehicle, including compliance with collateralization tests, defaulted and restructured securities, and payment defaults, if any. TICC Management or the Valuation Committee may request an additional analysis by a third-party firm to assist in the valuation process of CLO investment vehicles. All information is presented to TICC’s Board of Directors for its determination of fair value of these investments.
Bilateral Investments (Including Equity)
Bilateral investments for which market quotations are readily available are valued by an independent pricing agent or market maker. If such market quotations are not readily available, under the valuation procedures approved by TICC’s Board
F-27
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2017
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
of Directors, upon the recommendation of the Valuation Committee, a third-party valuation firm will prepare valuations for each of TICC’s bilateral investments that, when combined with all other investments in the same portfolio company, (i) have a value as of the previous quarter of greater than or equal to 2.5% of its total assets as of the previous quarter, and (ii) have a value as of the current quarter of greater than or equal to 2.5% of its total assets as of the previous quarter, after taking into account any repayment of principal during the current quarter. In addition, in those instances where a third-party valuation is prepared for a portfolio investment which meets the parameters noted in (i) and (ii) above, the frequency of those third-party valuations is based upon the grade assigned to each such security under its credit grading system as follows: Grade 1, at least annually; Grade 2, at least semi-annually; Grades 3, 4, and 5, at least quarterly. Bilateral investments which do not meet the parameters in (i) and (ii) above are not required to have a third-party valuation and, in those instances, a valuation analysis will be prepared by TICC Management. TICC Management also retains the authority to seek, on TICC’s behalf, additional third party valuations with respect to TICC’s bilateral portfolio securities, TICC’s syndicated loan investments, and CLO investment vehicles. TICC’s Board of Directors retains ultimate authority as to the third-party review cycle as well as the appropriate valuation of each investment.
INVESTMENT INCOME:
Interest Income
Interest income is recorded on an accrual basis using the contractual rate applicable to each debt investment and includes the accretion of discounts and amortization of premiums. Discounts from and premiums to par value on securities purchased are accreted/amortized into interest income over the life of the respective security using the effective yield method. The amortized cost of investments represents the original cost adjusted for the accretion of discounts and amortization of premiums, if any.
Generally, when interest and/or principal payments on a loan become past due, or if the Company otherwise does not expect the borrower to be able to service its debt and other obligations, the Company will place the loan on non-accrual status and will generally cease recognizing interest income on that loan for financial reporting purposes until all principal and interest have been brought current through payment or due to restructuring such that the interest income is deemed to be collectible. The Company generally restores non-accrual loans to accrual status when past due principal and interest is paid and, in the Company’s judgment, is likely to remain current. As of December 31, 2017 and 2016, the Company had no investments that were on non-accrual status. As of December 31, 2015, the Company’s investment in Innovairre Holding Company’s (f/k/a “RBS Holding Company”) second lien senior secured notes was on non-accrual status.
In addition, the Company earns income from the discount on debt securities it purchases, including original issue discount (“OID”) and market discount. OID and market discounts are capitalized and amortized into income using the effective yield method, as applicable.
Income from Securitization Vehicles and Equity Investments
Income from investments in the equity class securities of CLO vehicles (typically income notes or subordinated notes) is recorded using the effective yield method in accordance with the provisions of ASC 325-40, based upon an effective yield to the expected redemption utilizing estimated cash flows, including those CLO equity investments that have not made their inaugural distribution for the relevant period end. The Company monitors the expected residual payments, and effective yield is determined and updated periodically, as needed. Accordingly, investment income recognized on CLO equity securities in the GAAP statement of operations differs from both the tax-basis investment income and from the cash distributions actually received by the Company during the period.
F-28
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2017
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Payment-In-Kind
TICC has investments in its portfolio which contain a contractual payment-in-kind (“PIK”) provision. Certain PIK investments offer issuers the option at each payment date of making payments in cash or additional securities. PIK interest computed at the contractual rate is accrued into income and added to the principal balance on the capitalization date. Upon capitalization, the PIK portion of the investment is subject to the fair value estimates associated with their related investments. PIK investments on non-accrual status are restored to accrual status once it becomes probable that PIK will be realized. To qualify for tax treatment as a RIC, this income must be paid out to stockholders in the form of distributions, even though TICC has not collected any cash. Amounts necessary to pay these distributions may come from available cash or the liquidation of certain investments.
Other Income
Other income includes prepayment, amendment, and other fees earned by the Company’s loan investments, distributions from fee letters and success fees associated with portfolio investments. Distributions from fee letters are an enhancement to the return on a CLO equity investment and are based upon a percentage of the collateral manager’s fees, and are recorded as other income when earned. The Company may also earn success fees associated with its investments in certain securitization vehicles or “CLO warehouse facilities,” which are contingent upon a repayment of the warehouse by a permanent CLO securitization structure; such fees are earned and recognized when the repayment is completed.
DEFERRED DEBT ISSUANCE COSTS
Deferred debt issuance costs consist of fees and expenses incurred in connection with the closing or amending of credit facilities and debt offerings, and are capitalized at the time of payment. These costs are amortized using the straight line method over the terms of the respective credit facilities and debt securities. This amortization expense is included in Interest Expense in the Company’s Consolidated Statement of Operations. Upon early termination of debt, or a credit facility, the remaining balance of unamortized fees related to such debt is accelerated into Realized Losses on Extinguishment of Debt on the Company’s Consolidated Statement of Operations. Deferred offering costs are presented on the balance sheet as a direct deduction from the related debt liability.
EQUITY OFFERING COSTS
Equity offering costs consist of fees and expenses incurred in connection with the registration and public offer and sale of the Company’s common stock, including legal, accounting and printing fees. These costs are deferred at the time of incurrence and are subsequently charged to capital when the offering takes place or as shares are issued. Deferred costs are periodically reviewed and expensed if the related registration is no longer active.
SHARE REPURCHASES
From time to time, the Company’s Board of Directors may authorize a share repurchase program under which shares are purchased in open market transactions. Since the Company is incorporated in the State of Maryland, state law requires share repurchases to be accounted for as a share retirement. The cost of repurchased shares is charged against capital on the settlement date.
OTHER ASSETS
Other assets consist of funds held in escrow, prepaid expenses associated primarily with insurance costs and deferred equity offering costs. At December 31, 2017, funds held in escrow totaled approximately $155,000, related to the sale of the Company’s investment in Ai Squared during the quarter ended June 30, 2016. The funds are expected to be released to the Company during the first quarter of 2018, net of settlement of any indemnity claims and expenses related to the transaction.
F-29
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2017
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
U.S. FEDERAL INCOME TAXES
The Company intends to operate so as to qualify to be taxed as a RIC under Subchapter M of the Code and, as such, to not be subject to U.S. federal income tax on the portion of its taxable income and gains distributed to stockholders. To qualify for RIC tax treatment, TICC is required to distribute at least 90% of its investment company taxable income annually, meet diversification requirements quarterly and file Form 1120-RIC, as defined by the Code.
Because U.S. federal income tax regulations differ from accounting principles generally accepted in the United States, distributions in accordance with tax regulations may differ from net investment income and realized gains recognized for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the financial statements to reflect their tax character. Temporary differences arise when certain items of income, expense, gain or loss are recognized at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes.
The Company recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained, assuming examination by tax authorities. Management has analyzed the Company’s tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions expected to be taken in the Company’s 2017 tax returns. The Company identifies its major tax jurisdictions as U.S Federal and Connecticut State; however, the Company is not aware of any tax position for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
For tax purposes, the cost basis of the portfolio investments as of December 31, 2017 and December 31, 2016, was approximately $454,683,941 and $667,826,311, respectively.
SECURITIES TRANSACTIONS
Securities transactions are recorded on trade date. Realized gains and losses on investments sold are recorded on the basis of specific identification. Distributions received on CLO equity investments which were optionally redeemed for which the cost basis has been reduced to zero are recorded as realized gains.
NOTE 4. FAIR VALUE
The Company’s assets measured at fair value on a recurring basis as of December 31, 2017 were as follows:
|
|
|
Fair Value Measurements at Reporting Date Using |
|
|
||||||||
|
Assets ($ in millions) |
|
Quoted Prices |
|
Significant |
|
Significant |
|
Total |
||||
|
Senior Secured Notes |
|
$ |
— |
|
$ |
— |
|
$ |
242.2 |
|
$ |
242.2 |
|
Subordinated Debt |
|
|
— |
|
|
— |
|
|
0.8 |
|
|
0.8 |
|
CLO Debt |
|
|
— |
|
|
— |
|
|
4.7 |
|
|
4.7 |
|
CLO Equity |
|
|
— |
|
|
— |
|
|
156.0 |
|
|
156.0 |
|
Equity and Other Investments |
|
|
— |
|
|
— |
|
|
14.7 |
|
|
14.7 |
|
Total Investments at fair value |
|
|
— |
|
|
— |
|
|
418.4 |
|
|
418.4 |
|
Cash and cash equivalents |
|
|
30.0 |
|
|
— |
|
|
— |
|
|
30.0 |
|
Total assets at fair value |
|
$ |
30.0 |
|
$ |
— |
|
$ |
418.4 |
|
$ |
448.4 |
F-30
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2017
NOTE 4. FAIR VALUE (continued)
The Company’s assets measured at fair value on a recurring basis as of December 31, 2016 were as follows:
|
|
|
Fair Value Measurements at Reporting Date Using |
|
|
||||||||
|
Assets ($ in millions) |
|
Quoted Prices |
|
Significant |
|
Significant |
|
Total |
||||
|
Senior Secured Notes |
|
$ |
— |
|
$ |
4.7 |
|
$ |
368.3 |
|
$ |
373.0 |
|
Subordinated Debt |
|
|
— |
|
|
— |
|
|
0.7 |
|
|
0.7 |
|
CLO Debt |
|
|
— |
|
|
— |
|
|
2.7 |
|
|
2.7 |
|
CLO Equity |
|
|
— |
|
|
— |
|
|
200.8 |
|
|
200.8 |
|
Equity and Other Investments |
|
|
— |
|
|
— |
|
|
12.7 |
|
|
12.7 |
|
Total Investments at fair value |
|
|
— |
|
|
4.7 |
|
|
585.2 |
|
|
589.9 |
|
Cash and cash equivalents |
|
|
8.3 |
|
|
— |
|
|
— |
|
|
8.3 |
|
Total assets at fair value |
|
$ |
8.3 |
|
$ |
4.7 |
|
$ |
585.2 |
|
$ |
598.2 |
Significant Unobservable Inputs for Level 3 Investments
The following tables provide quantitative information about the Company’s Level 3 fair value measurements as of December 31, 2017 and 2016, respectively. The Company’s valuation policy, as described above, establishes parameters for the sources and types of valuation analysis, as well as the methodologies and inputs that the Company uses in determining fair value. If the Valuation Committee or TICC Management determines that additional techniques, sources or inputs are appropriate or necessary in a given situation, such additional work will be undertaken. The tables, therefore, are not all-inclusive, but provide information on the significant Level 3 inputs that are pertinent to the Company’s fair value measurements. The weighted average calculations in the table below are based on principal balances for all debt related calculations and CLO equity.
|
|
Quantitative Information about Level 3 Fair Value Measurements |
|
|
|||||||||||||
Assets ($ in millions) |
|
Fair
Value |
|
Valuation
Techniques/ |
|
Unobservable |
|
Range/Weighted |
|
Impact
to |
|||||||
Senior Secured Notes |
|
$ |
214.9 |
|
Market quotes |
|
|
|
NBIB(1) |
|
|
77.6% – 100.6%/98.1% |
|
|
NA |
||
|
|
|
1.5 |
|
Yield Analysis |
|
|
|
Discount Margin |
|
|
|
10.8%/ncm(4) |
|
|
Decrease |
|
|
|
|
23.1 |
|
Recent transactions |
|
|
|
Actual trade/payoff(6) |
|
|
95.0% – 100.4%/95.7% |
|
|
|
NA |
|
|
|
|
2.7 |
|
Enterprise
value(7)/ |
|
Market
multiples(2)/ |
|
5.5x
– 6.0x/ncm(4) |
|
Increase |
||||||
Subordinated Debt |
|
|
0.8 |
|
Enterprise
value(7)/ |
|
Market
multiples(2)/ |
|
5.5x
– 6.0x/ncm(4) |
|
|
|
Increase |
||||
CLO debt |
|
|
4.7 |
|
Market quotes |
|
|
|
NBIB(1) |
|
|
86.8% – 100.0%/89.9% |
|
|
|
NA |
|
CLO equity |
|
|
154.6 |
|
Market quotes |
|
|
|
NBIB(1) |
|
|
1.8% – 113.0%/51.3% |
|
|
|
NA |
|
|
|
|
1.4 |
|
Discounted cash flow(5) |
|
|
Discount rate(3)(5) |
|
|
11.5% – 27.6%/15.4% |
|
|
Decrease |
|||
Equity Shares |
|
|
14.7 |
|
Enterprise
value(7)/ |
|
EBITDA(2)/ |
|
$41.6
/ ncm(4) |
|
Increase |
||||||
Other investments |
|
|
— |
|
Other |
|
|
|
NA |
|
NA |
|
|
|
NA |
||
Total Fair Value for Level 3 Investments |
|
$ |
418.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-31
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2017
NOTE 4. FAIR VALUE (continued)
____________
(1) The Company generally uses prices provided by an independent pricing service, or broker or agent bank non-binding indicative bid prices (“NBIB”) on or near the valuation date as the primary basis for the fair value determinations for syndicated notes, and CLO debt and equity investments, which may be adjusted for pending equity distributions as of valuation date. These bid prices are non-binding, and may not be determinative of fair value. Each bid price is evaluated by the Valuation Committee in conjunction with additional information compiled by TICC Management, including financial performance, recent business developments, and, in the case of CLO debt and equity investments, performance and covenant compliance information as provided by the independent trustee.
(2) EBITDA, or earnings before interest expense, taxes, depreciation and amortization, is an unobservable input which is generally based on most recently available twelve month financial statements provided by the portfolio company. Market multiples, also an unobservable input, represent an estimation of where market participants might value an enterprise based upon information available for comparable companies in the market.
(3) Discount rate represents the rate at which future cash flows are discounted to calculate a present value, reflecting market assumptions for risk.
(4) The calculation of weighted average for a range of values, for multiple investments within a given asset category, is not considered to provide a meaningful representation (“ncm”).
(5) The Company will calculate the fair value of certain CLO equity investments based upon the net present value of expected contractual payment streams discounted using estimated market yields for the equity tranche of the respective CLO vehicle. TICC will also consider those investments in which the record date for an equity distribution payment falls on the last day of the period, and the likelihood that a prospective purchaser would require an adjustment to the transaction price representing substantially all of the pending distribution.
(6) Prices provided by independent pricing services are evaluated in conjunction with actual trades and payoffs and, in certain cases, the value represented by actual trades or payoffs may be more representative of fair value as determined by the Valuation Committee.
(7) For the corporate debt investments and equity investments, third-party valuation firms evaluate the financial and operational information of the portfolio companies that we provide to them, as well as independent market and industry information that they consider appropriate in forming an opinion as to the fair value of the Company’s securities. In those instances where the carrying value and/or internal credit rating of the investment does not require the use of a third-party valuation firm, a valuation is prepared by TICC Management, which may include liquidation analysis or which may utilize a subsequent transaction to provide an indication of fair value.
(8) Weighted averages are calculated based on fair value of investments.
F-32
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2017
NOTE 4. FAIR VALUE (continued)
|
|
Quantitative Information about Level 3 Fair Value Measurements |
|
|
||||||||||||||||
Assets ($ in millions) |
|
Fair
Value |
|
Valuation
Techniques/ |
|
Unobservable |
|
Range/Weighted
|
|
Impact
to |
||||||||||
Senior Secured Notes |
|
$ |
309.5 |
|
Market quotes |
|
|
|
NBIB(1) |
|
|
|
|
64.8% – 100.5%/94.5% |
|
|
|
NA |
||
|
|
|
11.8 |
|
Yield Analysis |
|
|
|
NBIB(1) |
|
|
|
|
|
97.3%/ncm(4) |
|
|
|
NA |
|
|
|
|
32.7 |
|
Recent transactions |
|
|
|
Actual trade/payoff(6) |
|
|
|
|
96.0% – 100.0%/99.3% |
|
|
|
|
NA |
|
|
|
|
14.3 |
|
Market quotes/Enterprise value(7) |
|
|
NBIB(1) |
|
|
|
|
98.0% – 101.0%/98.5% |
|
|
|
NA |
|||
|
|
|
|
|
|
|
|
|
EBITDA multiples(2) |
|
|
|
|
4.5x – 6.25x/ncm(4) |
|
|
|
Increase |
||
|
|
0.7 |
|
Market quotes/Enterprise value(7) |
|
|
NBIB(1) |
|
|
|
101.0%/ncm(4) |
|
|
|
NA |
|||||
CLO debt |
|
|
2.7 |
|
Market quotes |
|
|
|
NBIB(1) |
|
|
|
|
90.0%/ncm(4) |
|
|
|
|
NA |
|
CLO equity |
|
|
155.8 |
|
Market quotes |
|
|
|
NBIB(1) |
|
|
|
|
25.0% – 108.0%/55.7% |
|
|
|
NA |
||
|
|
|
1.9 |
|
Discounted cash flow(5) |
|
|
Discount rate(3)(5) |
|
|
|
|
13.1% – 16.0%/13.9% |
|
|
|
Decrease |
|||
|
|
|
43.1 |
|
Recent transactions |
|
|
|
Actual trade/payoff(6) |
|
|
|
|
38.7% – 71.9%/56.2% |
|
|
|
NA |
||
Equity Shares |
|
|
12.4 |
|
Enterprise value(7)/ Discounted cash flow(5) |
|
EBITDA(2) Market multiples(2) Discount rates(3) |
|
|
$35.2 – $170.7/ncm(4) 4.5x – 9.5x/ncm(4) 20.0%/ncm(4) |
|
Increase |
||||||||
Other investments |
|
|
0.3 |
|
Other |
|
|
|
Discount rates(3) |
|
|
|
|
10.9%/ncm(4) |
|
|
|
Decrease |
||
Total Fair Value for Level 3 Investments |
|
$ |
585.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
____________
(1) The Company generally uses prices provided by an independent pricing service, or broker or agent bank non-binding indicative bid prices (NBIB) on or near the valuation date as the primary basis for the fair value determinations for syndicated notes, and CLO debt and equity investments, which may be adjusted for pending equity distributions as of valuation date. These bid prices are non-binding, and may not be determinative of fair value. Each bid price is evaluated by the Valuation Committee in conjunction with additional information compiled by TICC Management, including financial performance, recent business developments, and, in the case of CLO debt and equity investments, performance and covenant compliance information as provided by the independent trustee.
(2) EBITDA, or earnings before interest expense, taxes, depreciation and amortization, is an unobservable input which is generally based on most recently available twelve month financial statements provided by the portfolio company. Market multiples, also an unobservable input, represent an estimation of where market participants might value an enterprise based upon information available for comparable companies in the market.
(3) Discount rate represents the rate at which future cash flows are discounted to calculate a present value, reflecting market assumptions for risk.
(4) The calculation of weighted average for a range of values, for multiple investments within a given asset category, is not considered to provide a meaningful representation (“ncm”).
(5) The Company will calculate the fair value of certain CLO equity investments based upon the net present value of expected contractual payment streams discounted using estimated market yields for the equity tranche of the respective CLO vehicle. TICC will also consider those investments in which the record date for an equity distribution payment falls on the last day of the period, and the likelihood that a prospective purchaser would require an adjustment to the transaction price representing substantially all of the pending distribution.
(6) Prices provided by independent pricing services are evaluated in conjunction with actual trades and payoffs and, in certain cases, the value represented by actual trades or payoffs may be more representative of fair value as determined by the Valuation Committee.
F-33
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2017
NOTE 4. FAIR VALUE (continued)
(7) For the corporate debt investments and equity investments, third-party valuation firms evaluate the financial and operational information of the portfolio companies that we provide to them, as well as independent market and industry information that they consider appropriate in forming an opinion as to the fair value of the Company’s securities. In those instances where the carrying value and/or internal credit rating of the investment does not require the use of a third-party valuation firm, a valuation is prepared by TICC Management, which may include liquidation analysis or which may utilize a subsequent transaction to provide an indication of fair value.
(8) Weighted averages are calculated based on fair value of investments.
Financial Instruments Disclosed, But Not Carried, At Fair Value
The following table presents the carrying value and fair value of the Company’s financial liabilities disclosed, but not carried, at fair value as of December 31, 2017 and the level of each financial liability within the fair value hierarchy:
|
($ in thousands) |
|
Carrying |
|
Fair Value |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|||||
|
6.50% Unsecured Notes(2) |
|
$ |
62,340 |
|
$ |
66,546 |
|
$ |
— |
|
$ |
66,546 |
|
$ |
— |
|
Total |
|
$ |
62,340 |
|
$ |
66,546 |
|
$ |
— |
|
$ |
66,546 |
|
$ |
— |
____________
(1) Carrying value is net of deferred debt issuance costs which totaled approximately $2.0 million as of December 31, 2017.
(2) For the 6.50% Unsecured Notes, fair value is based upon the closing price on the last day of the period. The 6.50% Unsecured Notes are listed on the NASDAQ Global Select Market (trading symbol TICCL).
The following table presents the carrying value and fair value of the Company’s financial liabilities disclosed, but not carried, at fair value as of December 31, 2016 and the level of each financial liability within the fair value hierarchy:
|
($ in thousands) |
|
Carrying |
|
Fair Value(3) |
|
Level 1 |
|
Level 2 |
|
Level 3 |
||||||
|
TICC CLO 2012-1 LLC Class A-1 Notes, net of discount(1) |
|
$ |
64,788 |
|
|
$ |
65,282 |
|
$ |
— |
|
$ |
— |
|
$ |
65,282 |
|
TICC CLO 2012-1 LLC Class B-1 Notes, net of discount(1) |
|
|
19,633 |
|
|
|
20,025 |
|
|
— |
|
|
— |
|
|
20,025 |
|
TICC CLO 2012-1 LLC Class C-1 Notes, net of discount(1) |
|
|
22,375 |
|
|
|
23,058 |
|
|
— |
|
|
— |
|
|
23,058 |
|
TICC CLO 2012-1 LLC Class D-1 Notes, net of discount(1) |
|
|
20,290 |
|
|
|
21,210 |
|
|
— |
|
|
— |
|
|
21,210 |
|
TICC CLO 2012-1 LLC deferred debt issuance costs(2) |
|
|
(1,232 |
) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Sub-total TICC CLO 2012-1, LLC Notes(1)(2) |
|
|
125,854 |
|
|
|
129,575 |
|
|
— |
|
|
— |
|
|
129,575 |
|
Convertible Notes(2)(4) |
|
|
94,117 |
|
|
|
96,906 |
|
|
|
|
|
|
|
|
96,906 |
|
Total |
|
$ |
219,971 |
|
|
$ |
226,481 |
|
$ |
— |
|
$ |
— |
|
$ |
226,481 |
____________
(1) Carrying value is net of discount.
(2) Carrying value is net of deferred debt issuance costs. Deferred debt issuance costs associated with the outstanding TICC CLO 2012-1 notes are aggregated at the CLO level, and not by class. Deferred debt issuance costs associated with the Convertible Notes totaled $425 at December 31, 2016.
(3) For the TICC CLO 2012-1 notes, fair value is based upon the bid price provided by the placement agent at the measurement date; for the Convertible Notes, fair value is based upon the mid-point between the bid and ask prices.
(4) Includes rounding adjustments to reconcile period balances.
F-34
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2017
NOTE 4. FAIR VALUE (continued)
A reconciliation of the fair value of investments for the year ended December 31, 2017, utilizing significant unobservable inputs, is as follows:
|
($ in millions) |
|
Senior Notes |
|
Subordinated |
|
CLO |
|
CLO |
|
Equity/ |
|
Total |
|||||||||||
|
Balance at December 31, 2016 |
|
$ |
368.3 |
|
|
$ |
0.7 |
|
$ |
2.7 |
|
|
$ |
200.8 |
|
|
$ |
12.7 |
|
|
$ |
585.2 |
|
|
Realized (losses) gains included in earnings |
|
|
2.4 |
|
|
|
— |
|
|
0.2 |
|
|
|
(12.1 |
) |
|
|
2.5 |
|
|
|
(7.0 |
) |
|
Unrealized appreciation included in earnings |
|
|
11.3 |
|
|
|
0.1 |
|
|
0.3 |
|
|
|
10.5 |
|
|
|
0.8 |
|
|
|
23.0 |
|
|
Accretion of discount |
|
|
1.0 |
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1.0 |
|
|
Purchases |
|
|
94.3 |
|
|
|
— |
|
|
4.5 |
|
|
|
107.0 |
|
|
|
3.0 |
|
|
|
208.8 |
|
|
Repayments and Sales |
|
|
(235.4 |
) |
|
|
— |
|
|
(3.0 |
) |
|
|
(113.1 |
) |
|
|
(4.2 |
) |
|
|
(355.7 |
) |
|
Reductions to CLO equity cost value(1) |
|
|
— |
|
|
|
— |
|
|
— |
|
|
|
(37.1 |
) |
|
|
— |
|
|
|
(37.1 |
) |
|
Payment in Kind income |
|
|
0.2 |
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.2 |
|
Transfers in and/or (out) of level 3 |
|
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Balance at December 31, 2017(2) |
|
$ |
242.2 |
|
|
$ |
0.8 |
|
$ |
4.7 |
|
|
$ |
156.0 |
|
|
$ |
14.7 |
|
|
$ |
418.4 |
|
|
The amount of total gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to our Level 3 assets still held at the reporting date and reported within the net change in unrealized gains or losses on investments in our Statement of Operations(2) |
|
$ |
4.5 |
|
|
$ |
— |
|
$ |
0.3 |
|
|
$ |
(4.1 |
) |
|
$ |
3.2 |
|
|
$ |
4.0 |
|
____________
(1) Reduction to cost value on the Company’s CLO equity investments represents the difference between distributions received, or entitled to be received, of approximately $70.4 million and the effective yield interest income of approximately $33.3 million.
(2) Totals may not sum due to rounding.
F-35
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2017
NOTE 4. FAIR VALUE (continued)
A reconciliation of the fair value of investments for the year ended December 31, 2016, utilizing significant unobservable inputs, is as follows:
|
($ in millions) |
|
Senior |
|
Subordinated |
|
CLO |
|
CLO |
|
Equity/ |
|
Total |
|||||||||||
|
Balance at December 31, 2015 |
|
$ |
444.5 |
|
|
$ |
0.6 |
|
$ |
2.1 |
|
|
$ |
179.0 |
|
|
$ |
8.8 |
|
|
$ |
635.0 |
|
|
Realized (losses) gains included in earnings |
|
|
(3.7 |
) |
|
|
— |
|
|
1.7 |
|
|
|
(9.2 |
) |
|
|
(3.0 |
) |
|
|
(14.2 |
) |
|
Unrealized appreciation included in |
|
|
19.0 |
|
|
|
— |
|
|
0.5 |
|
|
|
73.6 |
|
|
|
6.4 |
|
|
|
99.5 |
|
|
Accretion of discount |
|
|
0.8 |
|
|
|
— |
|
|
0.3 |
|
|
|
— |
|
|
|
— |
|
|
|
1.1 |
|
|
Purchases |
|
|
95.7 |
|
|
|
— |
|
|
6.7 |
|
|
|
68.6 |
|
|
|
0.5 |
|
|
|
171.5 |
|
|
Repayments and Sales(1) |
|
|
(188.2 |
) |
|
|
— |
|
|
(8.6 |
) |
|
|
(77.0 |
) |
|
|
— |
|
|
|
(273.8 |
) |
|
Reductions to CLO equity cost value (2) |
|
|
— |
|
|
|
— |
|
|
— |
|
|
|
(34.2 |
) |
|
|
— |
|
|
|
(34.2 |
) |
|
Payment in Kind income |
|
|
0.2 |
|
|
|
0.1 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.3 |
|
|
Transfers in and/or (out) of level 3 |
|
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Balance at December 31, 2016 |
|
$ |
368.3 |
|
|
$ |
0.7 |
|
$ |
2.7 |
|
|
$ |
200.8 |
|
|
$ |
12.7 |
|
|
$ |
585.2 |
|
|
The amount of total gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to our Level 3 assets still held at the reporting date and reported within the net change in unrealized gains or losses on investments in our Statement of Operations(1) |
|
$ |
9.9 |
|
|
$ |
— |
|
$ |
0.5 |
|
|
$ |
50.7 |
|
|
$ |
3.5 |
|
|
$ |
64.6 |
|
____________
(1) Includes rounding adjustments to reconcile period balances.
(2) Reduction to cost value on the Company’s CLO equity investments represents the difference between distributions received, or entitled to be received, of approximately $66.7 million and the effective yield interest income of approximately $32.5 million.
The following table shows the fair value of TICC’s portfolio of investments by asset class as of December 31, 2017 and 2016:
|
|
|
2017 |
|
2016 |
||||||||
|
($ in millions) |
|
Investments at |
|
Percentage of |
|
Investments at |
|
Percentage of |
||||
|
Senior Secured Notes |
|
$ |
242.2 |
|
57.9 |
% |
|
$ |
373.0 |
|
63.2 |
% |
|
Subordinated Debt |
|
|
0.8 |
|
0.2 |
% |
|
|
0.7 |
|
0.1 |
% |
|
CLO Debt |
|
|
4.7 |
|
1.1 |
% |
|
|
2.7 |
|
0.5 |
% |
|
CLO Equity |
|
|
156.0 |
|
37.3 |
% |
|
|
200.8 |
|
34.0 |
% |
Equity and Other Investments |
|
|
14.8 |
|
3.5 |
% |
|
|
12.7 |
|
2.2 |
% |
Total(1) |
|
$ |
418.4 |
|
100.0 |
% |
|
$ |
589.9 |
|
100.0 |
% |
____________
(1) Totals may not sum due to rounding.
F-36
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2017
NOTE 5. CASH, CASH EQUIVALENTS AND RESTRICTED CASH
At December 31, 2017 and December 31, 2016, respectively, cash, cash equivalents and restricted cash were as follows:
|
|
|
December 31, 2017 |
|
December 31, 2016 |
||
|
Cash |
|
$ |
— |
|
$ |
— |
Cash Equivalents |
|
|
30,013,842 |
|
|
8,261,698 |
|
Total Cash and Cash Equivalents |
|
$ |
30,013,842 |
|
$ |
8,261,698 |
Restricted Cash |
|
$ |
— |
|
$ |
3,451,636 |
NOTE 6. BORROWINGS
In accordance with the 1940 Act, with certain limited exceptions, the Company is only allowed to borrow amounts such that its asset coverage, as defined in the 1940 Act, is at least 200% immediately after such borrowing. As of December 31, 2017 and 2016, the Company’s asset coverage for borrowed amounts was approximately 700% and 271% respectively.
The following are the Company’s outstanding principal amounts, carrying values and fair values of the Company’s borrowings as of December 31, 2017 and December 31, 2016. Fair values of our notes payable are based upon the bid price provided by the placement agent at the measurement date, if available:
|
|
|
As of |
|||||||||||||||||
|
|
|
December 31, 2017 |
|
December 31, 2016 |
|||||||||||||||
|
(dollars in thousands) |
|
Principal |
|
Carrying |
|
Fair |
|
Principal |
|
Carrying |
|
Fair |
|||||||
|
TICC CLO 2012-1 LLC Class A-1 Notes |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
65,282 |
|
$ |
64,788 |
(1) |
|
$ |
65,282 |
|
TICC CLO 2012-1 LLC Class B-1 Notes |
|
|
— |
|
|
— |
|
|
— |
|
|
20,000 |
|
|
19,633 |
(1) |
|
|
20,025 |
|
TICC CLO 2012-1 LLC Class C-1 Notes |
|
|
— |
|
|
— |
|
|
— |
|
|
23,000 |
|
|
22,375 |
(1) |
|
|
23,058 |
|
TICC CLO 2012-1 LLC Class D-1 Notes |
|
|
— |
|
|
— |
|
|
— |
|
|
21,000 |
|
|
20,290 |
(1) |
|
|
21,210 |
TICC CLO 2012-1 LLC deferred issuance costs |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,232 |
) |
|
|
— |
|
Sub-total TICC CLO 2012-1, LLC Notes |
|
|
— |
|
|
— |
|
|
— |
|
|
129,282 |
|
|
125,854 |
|
|
|
129,575 |
Convertible Notes(2) |
|
|
— |
|
|
— |
|
|
— |
|
|
94,542 |
|
|
94,117 |
|
|
|
96,906 |
6.50% Unsecured Notes(2) |
|
|
64,370 |
|
|
62,340 |
|
|
66,546 |
|
|
— |
|
|
— |
|
|
|
— |
|
$ |
64,370 |
|
$ |
62,340 |
|
$ |
66,546 |
|
$ |
223,824 |
|
$ |
219,971 |
|
|
$ |
226,481 |
|
____________
(1) Represents the aggregate principal amount outstanding less the unaccreted discount. The total unaccreted discount as of December 31, 2016 for the 2023 Class A Notes, the 2023 Class B Notes, the 2023 Class C Notes and the 2023 Class D Notes was approximately $494, $367, $625 and $710, respectively.
(2) Represents the aggregate principal amount outstanding less the unamortized deferred issuance costs. As of December 31, 2017, the total unamortized deferred issuance costs for the Convertible Notes and 6.50% Unsecured Notes was approximately $0 and $2,030, respectively. As of December 31, 2016, the total unamortized deferred issuance costs for the Convertible Notes was approximately $425.
F-37
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2017
NOTE 6. BORROWINGS (continued)
The weighted average stated interest rate and weighted average maturity on all our debt outstanding as of December 31, 2017 were 6.50% and 6.2 years, respectively, and as of December 31, 2016 were 5.56% and 4.2 years, respectively.
The table below summarizes the components of interest expense for the years ended December 31, 2017 and 2016:
|
|
|
Year Ended December 31, 2017 |
||||||||||
|
($ in thousands) |
|
Stated |
|
Note |
|
Amortization of |
|
Total |
||||
TICC CLO 2012-1 LLC Class A-1 Notes |
|
$ |
623.8 |
|
$ |
25.4 |
|
$ |
— |
|
$ |
649.2 |
TICC CLO 2012-1 LLC Class B-1 Notes |
|
|
600.0 |
|
|
35.3 |
|
|
— |
|
|
635.3 |
TICC CLO 2012-1 LLC Class C-1 Notes |
|
|
878.4 |
|
|
59.4 |
|
|
— |
|
|
937.8 |
TICC CLO 2012-1 LLC Class D-1 Notes |
|
|
939.7 |
|
|
66.9 |
|
|
— |
|
|
1,006.6 |
TICC CLO 2012-1 amortization of deferred debt |
|
|
— |
|
|
— |
|
|
91.7 |
|
|
91.7 |
Convertible Notes |
|
|
5,908.9 |
|
|
— |
|
|
425.2 |
|
|
6,334.1 |
6.50% Unsecured Notes |
|
|
3,010.2 |
|
|
— |
|
|
233.9 |
|
|
3,244.1 |
|
$ |
11,961.0 |
|
$ |
187.0 |
|
$ |
750.8 |
|
$ |
12,898.8 |
|
|
|
|
Year Ended December 31, 2016 |
||||||||||
|
($ in thousands) |
|
Stated |
|
Note |
|
Amortization of |
|
Total |
||||
|
TICC CLO 2012-1 LLC Class A-1 Notes |
|
$ |
3,819.8 |
|
$ |
176.8 |
|
$ |
— |
|
$ |
3,996.6 |
|
TICC CLO 2012-1 LLC Class B-1 Notes |
|
|
852.5 |
|
|
54.4 |
|
|
— |
|
|
906.9 |
|
TICC CLO 2012-1 LLC Class C-1 Notes |
|
|
1,273.4 |
|
|
91.0 |
|
|
— |
|
|
1,364.4 |
|
TICC CLO 2012-1 LLC Class D-1 Notes |
|
|
1,376.8 |
|
|
102.3 |
|
|
— |
|
|
1,479.1 |
|
TICC CLO 2012-1 amortization of deferred debt |
|
|
— |
|
|
— |
|
|
316.1 |
|
|
316.1 |
Convertible Notes |
|
|
8,526.1 |
|
|
— |
|
|
613.7 |
|
|
9,139.8 |
|
$ |
15,848.6 |
|
$ |
424.5 |
|
$ |
929.8 |
|
$ |
17,202.9 |
|
|
|
|
Year Ended December 31, 2015 |
||||||||||
|
($ in thousands) |
|
Stated |
|
Note |
|
Amortization of |
|
Total |
||||
|
TICC CLO 2012-1 LLC Class A-1 Notes |
|
$ |
3,634.6 |
|
$ |
198.5 |
|
$ |
— |
|
$ |
3,833.1 |
|
TICC CLO 2012-1 LLC Class B-1 Notes |
|
|
766.9 |
|
|
53.9 |
|
|
— |
|
|
820.8 |
|
TICC CLO 2012-1 LLC Class C-1 Notes |
|
|
1,172.6 |
|
|
90.0 |
|
|
— |
|
|
1,262.6 |
|
TICC CLO 2012-1 LLC Class D-1 Notes |
|
|
1,283.0 |
|
|
100.8 |
|
|
— |
|
|
1,383.8 |
|
TICC CLO 2012-1 amortization of deferred debt |
|
|
— |
|
|
— |
|
|
344.0 |
|
|
344.0 |
|
Convertible Notes |
|
|
8,625.0 |
|
|
— |
|
|
619.0 |
|
|
9,244.0 |
TICC Funding LLC |
|
|
2,536.9 |
|
— |
|
|
464.0 |
|
|
3,000.9 |
|
|
$ |
18,019.0 |
|
$ |
443.2 |
|
$ |
1,427.0 |
|
$ |
19,889.2 |
|
6.50% Unsecured Notes Due 2024
On April 12, 2017, the Company completed an underwritten public offering of approximately $64.4 million in aggregate principal amount of 6.50% unsecured notes due 2024 (the “6.50% Unsecured Notes”). The 6.50% Unsecured Notes will mature on March 30, 2024, and may be redeemed in whole or in part at any time or from time to time at the Company’s
F-38
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2017
NOTE 6. BORROWINGS (continued)
option on or after March 30, 2020. The 6.50% Unsecured Notes will bear interest at a rate of 6.50% per year payable quarterly on March 30, June 30, September 30, and December 30 of each year, commencing June 30, 2017.
The aggregate accrued interest payable on the 6.50% Unsecured Notes as of December 31, 2017 was approximately $11,600. As of December 31, 2017, the Company had unamortized deferred debt issuance costs of approximately $2.0 million relating to these notes. The deferred debt issuance costs are being amortized over the term of the 6.50% Unsecured Notes and are included in Interest Expense in the Consolidated Statements of Operations.
The following table sets forth the components of interest expense, effective annualized average interest rates and cash paid for interest of the 6.50% Unsecured Notes for the year ended December 31, 2017:
|
6.50% Unsecured Notes ($ in thousands) |
|
Year-Ended |
|
|
|
Stated interest expense |
|
$ |
3,010.2 |
|
Amortization of deferred issuance costs |
|
|
233.9 |
|
Total interest expense |
|
$ |
3,244.1 |
|
|
Effective annualized average interest rate |
|
|
6.97 |
% |
|
Cash paid for interest |
|
$ |
2,998.6 |
|
Notes Payable — TICC CLO 2012-1 LLC
On August 23, 2012, the Company completed a $160 million debt securitization financing transaction, consisting of $120 million in secured notes and $40.0 million of the 2012 Subordinated Notes. On February 25, 2013 and May 28, 2013, TICC CLO 2012-1 issued additional secured notes totaling an aggregate of $120 million and 2012 Subordinated Notes totaling an aggregate of $40.0 million, which 2012 Subordinated Notes were purchased by TICC under the “accordion” feature of the debt securitization which allowed, under certain circumstances and subject to the satisfaction of certain conditions, for an increase in the amount of secured and subordinated notes. It is not necessary that the Company own all or any of the notes permitted by this feature, which may affect the accounting treatment of the debt securitization financing transaction. On August 25, 2016, November 25, 2016, February 27, 2017, and May 25, 2017, the Securitization Issuer repaid approximately $36.0 million, approximately $74.7 million, approximately $24.5 million, and approximately $31.4 million of the class A-1 notes, respectively. On August 25, 2017, the Securitization Issuer repaid, in full, the remaining secured notes (classes A-1, B-1, C-1 and D-1) outstanding of approximately $73.4 million. During the quarter ended December 31, 2017, the Company, as collateral manager of TICC CLO 2012-1, dissolved TICC CLO 2012-1 pursuant to Delaware law by filing a certificate of cancellation with the Secretary of State in Delaware.
In connection with the August 25, 2016 repayment of approximately $36.0 million of the Class A-1 notes, the Company incurred debt extinguishment costs of approximately $648,000, which consisted of approximately $287,000 in accelerated note discount expense and approximately $361,000 in accelerated deferred debt issuance costs.
In connection with the November 25, 2016 repayment of approximately $74.7 million of the Class A-1 notes, the Company incurred debt extinguishment costs of approximately $1,296,000, which consisted of approximately $574,000 in accelerated note discount expense and approximately $722,000 in accelerated deferred debt issuance costs.
In connection with the February 27, 2017 repayment of approximately $24.5 million of the Class A-1 notes, the Company incurred debt extinguishment costs of approximately $409,000, which consisted of approximately $181,000 in accelerated note discount expense and approximately $228,000 in accelerated deferred debt issuance costs.
In connection with the May 25, 2017 repayment of approximately $31.4 million of the Class A-1 notes, the Company incurred debt extinguishment costs of approximately $505,000, which consisted of approximately $224,000 in accelerated note discount expense and approximately $281,000 in accelerated deferred debt issuance costs.
F-39
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2017
NOTE 6. BORROWINGS (continued)
In connection with the August 25, 2017 repayment of approximately $73.4 million of the Class A-1, B-1, C-1 and D-1 notes, the Company incurred debt extinguishment costs of approximately $2.2 million, which consisted of approximately $1.6 million in accelerated note discount expense and approximately $0.6 million in accelerated deferred debt issuance costs.
The accelerated note discount expense and accelerated deferred debt issuance costs are recorded within Realized Losses on Extinguishment of Debt in the Consolidated Statement of Operations. The realized loss on extinguishment of debt incurred in prior periods was reclassified from Interest Expense in the Consolidated Statement of Operations to conform with the current period presentation for comparative purposes.
|
TICC CLO 2012-1 LLC ($ in thousands) |
|
Year-Ended |
|
Year-Ended |
|
Year-Ended |
||||||
|
Stated interest expense |
|
$ |
3,041.9 |
|
|
$ |
7,322.5 |
|
|
$ |
6,857.2 |
|
|
Amortization of deferred issuance costs |
|
|
91.7 |
|
|
|
316.1 |
|
|
|
343.8 |
|
Note discount expense |
|
|
187.0 |
|
|
|
424.5 |
|
|
|
443.2 |
|
Total interest expense |
|
$ |
3,320.6 |
|
|
$ |
8,063.1 |
|
|
$ |
7,644.2 |
|
Effective annualized average interest rate |
|
|
5.33 |
% |
|
|
3.71 |
% |
|
|
3.19 |
% |
|
Cash paid for interest |
|
$ |
3,591.2 |
|
|
$ |
7,475.5 |
|
|
$ |
6,837.1 |
|
Effective January 1, 2017 and through February 27, 2017, the interest charged under the securitization was based on three-month LIBOR, which was 0.930%. Effective February 28, 2017 and through May 25, 2017, the interest charged under the securitization was based on three-month LIBOR, which was approximately 1.052%. Effective May 26, 2017 and through August 25, 2017, the interest charged under the securitization was based on three-month LIBOR, which was approximately 1.189%.
The classes, interest rates, spread over LIBOR, cash paid for interest and stated interest expense of each of the Class A-1, B-1, C-1 and D-1 for the year ended December 31, 2017 is as follows:
|
|
|
|
|
|
|
Year Ended December 31, 2017 |
|||||
|
TICC CLO 2012-1 LLC ($ in thousands) |
|
Stated |
|
LIBOR
Spread |
|
Cash
Paid for |
|
Stated |
|||
|
Class A-1 Notes |
|
2.93867 |
% |
|
175 |
|
$ |
803.6 |
|
$ |
623.8 |
|
Class B-1 Notes |
|
4.68867 |
% |
|
350 |
|
|
691.0 |
|
|
600.0 |
|
Class C-1 Notes |
|
5.93867 |
% |
|
475 |
|
|
1,012.7 |
|
|
878.4 |
Class D-1 Notes |
|
6.93867 |
% |
|
575 |
|
|
1,083.9 |
|
|
939.7 |
Total |
|
|
|
|
|
|
$ |
3,591.2 |
|
$ |
3,041.9 |
____________
(1) The stated interest rate represents the rate as of August 25, 2017.
F-40
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2017
NOTE 6. BORROWINGS (continued)
The classes, interest rates, spread over LIBOR, cash paid for interest and stated interest expense of each of the Class A-1, B-1, C-1 and D-1 for the year ended December 31, 2016 is as follows:
|
|
|
|
|
|
|
Year Ended December 31, 2016 |
|||||
|
TICC CLO 2012-1 LLC ($ in thousands) |
|
Stated |
|
LIBOR
Spread |
|
Cash
Paid for |
|
Stated |
|||
|
Class A-1 Notes |
|
2.68011 |
% |
|
175 |
|
$ |
4,017.2 |
|
$ |
3,819.8 |
|
Class B-1 Notes |
|
4.43011 |
% |
|
350 |
|
|
839.3 |
|
|
852.5 |
|
Class C-1 Notes |
|
5.68011 |
% |
|
475 |
|
|
1,257.4 |
|
|
1,273.4 |
Class D-1 Notes |
|
6.68011 |
% |
|
575 |
|
|
1,361.6 |
|
|
1,376.8 |
Total |
|
|
|
|
|
|
$ |
7,475.5 |
|
$ |
7,322.5 |
The classes, interest rates, spread over LIBOR, cash paid for interest and stated interest expense of each of the Class A-1, B-1, C-1 and D-1 for the year ended December 31, 2015 is as follows:
|
|
|
|
|
|
|
Year Ended December 31, 2015 |
|||||
|
TICC CLO 2012-1 LLC ($ in thousands) |
|
Stated |
|
LIBOR
Spread |
|
Cash
Paid for |
|
Stated |
|||
|
Class A-1 Notes |
|
2.14320 |
% |
|
175 |
|
$ |
3,616.1 |
|
$ |
3,634.6 |
|
Class B-1 Notes |
|
3.89320 |
% |
|
350 |
|
|
765.8 |
|
|
766.9 |
|
Class C-1 Notes |
|
5.14320 |
% |
|
475 |
|
|
1,172.1 |
|
|
1,172.6 |
Class D-1 Notes |
|
6.14320 |
% |
|
575 |
|
|
1,283.1 |
|
|
1,283.0 |
Total(1) |
|
|
|
|
|
|
$ |
6,837.1 |
|
$ |
6,857.2 |
____________
(1) Total may not sum due to rounding.
The amounts, ratings and interest rates (expressed as a spread to LIBOR) of the Class A-1, B-1, C-1, D-1 and 2012 Subordinated Notes as of December 31, 2016 are as follows:
Description |
|
Class A-1 Notes |
|
Class B-1 Notes |
|
Class C-1 Notes |
|
Class D-1 Notes |
|
Subordinated
|
Type |
|
Senior Secured Floating Rate |
|
Senior Secured Floating Rate |
|
Secured Deferrable Floating Rate |
|
Secured Deferrable Floating Rate |
|
Subordinated |
Amount Outstanding |
|
$65,281,817 |
|
$20,000,000 |
|
$23,000,000 |
|
$21,000,000 |
|
$80,000,000 |
Moody’s Rating |
|
“Aaa” |
|
“Aaa” |
|
“Aa2” |
|
“A3” |
|
N/A |
Standard & Poor’s Rating |
|
“AAA” |
|
“AAA” |
|
“AA+” |
|
“A+” |
|
N/A |
Interest Rate |
|
LIBOR + 1.75% |
|
LIBOR + 3.50% |
|
LIBOR + 4.75% |
|
LIBOR + 5.75% |
|
N/A |
Stated Maturity |
|
August 25, 2023 |
|
August 25, 2023 |
|
August 25, 2023 |
|
August 25, 2023 |
|
August 25, 2023 |
Junior Classes |
|
B-1, C-1, D-1 and Subordinated |
|
C-1, D-1 and Subordinated |
|
D-1 and Subordinated |
|
Subordinated |
|
None |
F-41
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2017
NOTE 6. BORROWINGS (continued)
The amounts, ratings and interest rates (expressed as a spread to LIBOR) of the Class A-1, B-1, C-1, D-1 and 2012 Subordinated Notes as of December 31, 2015 are as follows:
Description |
|
Class A-1 Notes |
|
Class B-1 Notes |
|
Class C-1 Notes |
|
Class D-1 Notes |
|
Subordinated
|
Type |
|
Senior Secured Floating Rate |
|
Senior Secured Floating Rate |
|
Secured Deferrable Floating Rate |
|
Secured Deferrable Floating Rate |
|
Subordinated |
Amount Outstanding |
|
$176,000,000 |
|
$20,000,000 |
|
$23,000,000 |
|
$21,000,000 |
|
$80,000,000 |
Moody’s Rating |
|
“Aaa” |
|
“Aa1” |
|
“A1” |
|
“Baa1” |
|
N/A |
Standard & Poor’s Rating |
|
“AAA” |
|
“AA” |
|
“A” |
|
“BBB” |
|
N/A |
Interest Rate |
|
LIBOR + 1.75% |
|
LIBOR + 3.50% |
|
LIBOR + 4.75% |
|
LIBOR + 5.75% |
|
N/A |
Stated Maturity |
|
August 25, 2023 |
|
August 25, 2023 |
|
August 25, 2023 |
|
August 25, 2023 |
|
August 25, 2023 |
Junior Classes |
|
B-1, C-1, D-1 and Subordinated |
|
C-1, D-1 and Subordinated |
|
D-1 and Subordinated |
|
Subordinated |
|
None |
TICC served as collateral manager to the 2012 Securitization Issuer under a collateral management agreement. TICC is entitled to a deferred fee for its services as collateral manager. The deferred fee is eliminated in consolidation.
TICC CLO 2012-1 was a consolidated subsidiary of TICC. The Company consolidated the results of its wholly-owned subsidiary in its consolidated financial statements as the subsidiary was operated solely for investment activities of the Company, and the Company had substantial equity at risk. The creditors of TICC CLO 2012-1 have received security interests in the assets owned by TICC CLO 2012-1 and such assets are not intended to be available to the creditors of TICC (or any other affiliate of TICC).
Notes Payable — Convertible Notes
On September 26, 2012, the Company issued $105.0 million aggregate principal amount of convertible notes (the “Convertible Notes”), and an additional $10.0 million aggregate principal amount of the Convertible Notes was issued on October 22, 2012 pursuant to the exercise of the initial purchasers’ option to purchase additional Convertible Notes. The Convertible Notes bear interest at a rate of 7.50% per year, payable semi-annually in arrears on May 1 and November 1 of each year, commencing on May 1, 2013. The Convertible Notes are convertible into shares of TICC’s common stock based on an initial conversion rate of 87.2448 shares of its common stock per $1,000 principal amount of the Convertible Notes, which is equivalent to an initial conversion price of approximately $11.46 per share of common stock. The conversion price for the Convertible Notes will be reduced for quarterly cash distributions paid to common shares to the extent that the quarterly distribution exceeds $0.29 cents per share, subject to adjustment. Deferred debt issuance costs represent fees and other direct incremental costs incurred in connection with the Convertible Notes. On December 2, 2016 and December 16, 2016, the Company repurchased $12.0 million and approximately $8.5 million of the Convertible Notes, respectively. On November 1, 2017, the Convertible Notes matured and were repaid in full (approximately $94.5 million) in accordance with their terms.
In connection with the repurchase of approximately $20.5 million of the Convertible Notes in December 2016, the Company recognized a net extinguishment loss of approximately $815,000, which consisted of approximately $716,000 from repurchasing the Convertible Notes at a premium to par and approximately $99,000 in previously unamortized deferred debt issuance costs. These costs are recorded within Realized Losses on Extinguishment of Debt in the Consolidated Statement of Operations. The realized loss on extinguishment of debt incurred in prior periods was reclassified from Interest Expense in the Consolidated Statement of Operations to conform with the current period presentation for comparative purposes.
F-42
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2017
NOTE 6. BORROWINGS (continued)
The following table sets forth the components of interest expense, effective annualized average interest rates and cash paid for interest of the Convertible Notes for the years ended December 31, 2017, 2016 and 2015, respectively:
|
Convertible Notes ($ in thousands) |
|
Year Ended |
|
Year Ended |
|
Year Ended |
||||||
|
Stated interest expense |
|
$ |
5,908.9 |
|
|
$ |
8,526.1 |
|
|
$ |
8,625.0 |
|
Amortization of deferred issuance costs |
|
|
425.2 |
|
|
|
613.7 |
|
|
|
619.0 |
|
Total interest expense |
|
$ |
6,334.1 |
|
|
$ |
9,139.8 |
|
|
$ |
9,244.0 |
|
|
Effective annualized average interest rate |
|
|
8.07 |
% |
|
|
8.03 |
% |
|
|
8.04 |
% |
|
Cash paid for interest |
|
$ |
7,090.7 |
|
|
$ |
8,781.8 |
|
|
$ |
8,625.0 |
|
Credit Facility
On October 27, 2014, TICC Funding, a special purpose vehicle and wholly-owned subsidiary of the Company, entered into a revolving credit facility (the “Facility”) with Citibank, N.A. Subject to certain exceptions, pricing under the Facility is based on the London interbank offered rate (“LIBOR”) for an interest period equal to three months plus a spread of 1.50% per annum. Pursuant to the terms of the credit agreement governing the Facility, TICC Funding borrowed, on a revolving basis, the maximum aggregate principal amount of $150,000,000.
During the fourth quarter of 2015, the Company liquidated portions of the TICC Funding portfolio and, as of December 31, 2015, the Facility had been fully repaid. In connection with the extinguishment of the Facility, the Company incurred debt extinguishment costs of $1,046,910 which consisted of $473,511 in accelerated deferred issuance costs and $573,399 in extinguishment fees. These costs are recorded within Realized Losses on Extinguishment of Debt in the Consolidated Statement of Operations. The realized loss on extinguishment of debt incurred in prior periods was reclassified from Interest Expense in the Consolidated Statement of Operations to conform with the current period presentation for comparative purposes.
During the quarter ended September 30, 2016, the Company, as collateral manager of TICC Funding, dissolved TICC Funding pursuant to Delaware law by filing a certificate of cancellation with the Secretary of State in Delaware.
The following table sets forth the components of interest expense, effective annualized average interest rates and cash paid for interest of the Facility for the years ended December 31, 2015, respectively:
| Credit Facility ($ in thousands) | Year-Ended December 31, 2015 | |||
| Stated interest expense | $ | 2,536.9 | ||
| Amortization of deferred issuance costs | 464.0 | |||
| Total interest expense | $ | 3,000.9 | ||
| Effective annualized average interest rate | 2.01 | % | ||
| Cash paid for interest | $ | 3,013.7 | ||
F-43
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2017
NOTE 7. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted net increase in net assets resulting from investment income per share for the years ended December 31, 2017, 2016 and 2015:
|
|
|
Year Ended |
|
Year Ended |
|
Year Ended |
|||
|
Net increase in net assets resulting from net investment income per common share – basic: |
|
|
|
|
|
|
|
|
|
|
Net investment income(1) |
|
$ |
30,726,730 |
|
$ |
26,778,293 |
|
$ |
39,627,832 |
|
Weighted average common shares outstanding – basic |
|
|
51,479,409 |
|
|
51,858,313 |
|
|
59,752,896 |
|
Net increase in net assets resulting from net investment income per common share – basic(1) |
|
$ |
0.60 |
|
$ |
0.52 |
|
$ |
0.66 |
|
Net increase in net assets resulting from net investment income per common share – diluted: |
|
|
|
|
|
|
|
|
|
|
Net investment income, before adjustments(1) |
|
$ |
30,726,730 |
|
$ |
26,778,293 |
|
$ |
39,627,832 |
|
Adjustments for interest and deferred issuance costs on the Convertible Notes, and related impact on the Base Fees and net investment income incentive fees(2) |
|
|
— |
|
|
— |
|
|
— |
|
Net investment income, as adjusted(1)(2) |
|
$ |
30,726,730 |
|
$ |
26,778,293 |
|
$ |
39,627,832 |
|
Weighted average common shares outstanding – basic |
|
|
51,479,409 |
|
|
51,858,313 |
|
|
59,752,896 |
|
Share adjustments for dilutive effect of the Convertible Notes(2) |
|
|
— |
|
|
— |
|
|
— |
|
Weighted average common shares outstanding – diluted(2) |
|
|
51,479,409 |
|
|
51,858,313 |
|
|
59,752,896 |
|
Net increase in net assets resulting from net investment income per common share – diluted(1)(2) |
|
$ |
0.60 |
|
$ |
0.52 |
|
$ |
0.66 |
The following table sets forth the computation of basic and diluted net increase (decrease) in net assets resulting from operations per share for the years ended December 31, 2017, 2016 and 2015:
|
|
|
Year Ended |
|
Year Ended |
|
Year Ended |
||||
|
Net increase in net assets resulting from operations per common share – basic: |
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in net assets resulting from operations |
|
$ |
43,609,671 |
|
$ |
110,361,763 |
|
$ |
(66,133,649 |
) |
|
Weighted average common shares outstanding – basic |
|
|
51,479,409 |
|
|
51,858,313 |
|
|
59,752,896 |
|
|
Net increase (decrease) in net assets resulting from operations per common share – basic |
|
$ |
0.85 |
|
$ |
2.13 |
|
$ |
(1.11 |
) |
|
Net increase (decrease) in net assets resulting from operations per common share – diluted: |
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in net assets resulting from operations, before adjustments |
|
$ |
43,609,671 |
|
$ |
110,361,763 |
|
$ |
(66,133,649 |
) |
Adjustments for interest and deferred issuance costs on the Convertible Notes, and related impact on the Base Fees and net investment income incentive fees(2) |
|
|
4,724,234 |
|
|
7,157,374 |
|
|
— |
|
Net increase (decrease) in net assets resulting from operations, as adjusted(2) |
|
$ |
48,333,905 |
|
$ |
117,519,137 |
|
$ |
(66,133,649 |
) |
Weighted average common shares outstanding – basic |
|
|
51,479,409 |
|
|
51,858,313 |
|
|
59,752,896 |
|
Share adjustments for dilutive effect of the Convertible Notes(2) |
|
|
6,869,815 |
|
|
9,915,079 |
|
|
— |
|
Weighted average common shares outstanding – diluted(2) |
|
|
58,349,224 |
|
|
61,773,392 |
|
|
59,752,896 |
|
Net increase (decrease) in net assets resulting from operations per common share – diluted(2) |
|
$ |
0.83 |
|
$ |
1.90 |
|
$ |
(1.11 |
) |
F-44
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2017
NOTE 7. EARNINGS PER SHARE (continued)
____________
(1) During the first quarter of 2015, the Company identified a non-material error in its accounting for income from CLO equity investments — refer to “Note 2. Change of Accounting for Collateralized Loan Obligation Equity Income.” Prospectively as of January 1, 2015, the Company records income from its CLO equity investments using the effective yield method in accordance with the accounting guidance in ASC 325-40, Beneficial Interests in Securitized Financial Assets, based upon an estimation of an effective yield to maturity utilizing assumed cash flows. An out-of-period adjustment to net investment income incentive fees, in the amount of $2.4 million, or $0.04 per share, is reflected in the year ended December 31, 2015. Prior period amounts are not materially affected.
During quarter ended September 30, 2015, the Company recorded an out of period adjustment related to a miscalculation of discount accretion which increased interest income and increased investment cost, by approximately $1.4 million. For the year ended December 31, 2015, approximately $1.1 million, or $0.02 per share, of the adjustment related to prior years. The increase in the investment cost has a corresponding effect on the investment’s unrealized depreciation of the same amount. Management concluded the adjustment was not material to previously filed financial statements.
(2) Due to the anti-dilutive effect on the computation of diluted earnings per share for the years ended December 31, 2017, 2016 and 2015, the adjustments for interest and deferred issuance costs on the Convertible Notes, and the related impact on the Base Fees and net investment income incentive fees as well as share adjustments for dilutive effect of the Convertible Notes were excluded from the respective periods’ diluted earnings per share computation.
The following table represents the respective adjustments which were not made due to the anti-dilutive effect on the computation of diluted change in net assets resulting from net investment income per common share and the diluted change in net assets resulting from operations per common share for the years ended December 31, 2017, 2016 and 2015:
|
|
|
Year Ended |
|
Year Ended |
|
Year Ended |
|||
|
Net increase in net assets resulting from net investment income per common share – diluted: |
|
|
|
|
|
|
|
|
|
|
Adjustments for interest and deferred issuance costs on the Convertible Notes, and related impact on the base management fees and net investment income incentive fees |
|
$ |
4,724,234 |
|
$ |
7,157,374 |
|
$ |
7,412,846 |
|
Share adjustments for dilutive effect of the Convertible Notes |
|
|
6,869,815 |
|
|
9,915,079 |
|
|
10,033,152 |
|
Net increase in net assets resulting from operations per common share – diluted: |
|
|
|
|
|
|
|
|
|
|
Adjustments for interest and deferred issuance costs on the Convertible Notes, and related impact on the base management fees and net investment income incentive fees |
|
$ |
— |
|
$ |
— |
|
$ |
7,412,846 |
|
Share adjustments for dilutive effect of the Convertible Notes |
|
|
— |
|
|
— |
|
|
10,033,152 |
NOTE 8. RELATED PARTY TRANSACTIONS
TICC pays TICC Management a fee for its services under the Investment Advisory Agreement consisting of two components — a base management fee (the “Base Fee”) and an incentive fee. The cost of both the Base Fee payable to TICC Management and any incentive fees earned by TICC Management are ultimately borne by TICC’s common stockholders.
Base Management Fee
Through March 31, 2016, the Base Fee was calculated at an annual rate of 2.00%. Effective April 1, 2016, the Base Fee is currently calculated at an annual rate of 1.50%. The Base Fee is payable quarterly in arrears, and is calculated based on the average value of TICC’s gross assets at the end of the two most recently completed calendar quarters, and appropriately adjusted for any equity or debt capital raises, repurchases or redemptions during the current calendar quarter (however, no
F-45
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2017
NOTE 8. RELATED PARTY TRANSACTIONS (continued)
Base Fee will be payable on the cash proceeds received by the Company in connection with any share of debt issuances until such proceeds have been invested in accordance with its investment objective). Accordingly, the Base Fee will be payable regardless of whether the value of the Company’s gross assets has decreased during the quarter. The Base Fee for any partial quarter will be appropriately prorated.
The following table represents the Base Fee for the years ended December 31, 2017, 2016 and 2015, respectively:
|
|
|
Year ended |
|
Year ended |
|
Year ended |
|||
Base Fee |
|
$ |
8,140,010 |
|
$ |
11,292,395 |
|
$ |
19,770,170 |
The Base Fee payable to TICC Management as of December 31, 2017 and 2016 was $1,683,444 and $2,544,576, respectively.
Incentive Fee
The incentive fee has two parts: the net investment income incentive fee and the capital gains incentive fee. The net investment income incentive fee is calculated and payable quarterly in arrears based on the amount by which (x) the “Pre-Incentive Fee Net Investment Income” for the immediately preceding calendar quarter exceeds (y) the “Preferred Return Amount” for calendar quarter. For this purpose, “Pre-Incentive Fee Net Investment Income” means interest income, dividend income and any other income (including any accrued income that we have not yet received in cash and any other fees such as commitment, origination, structuring, diligence and consulting fees or other fees that we receive from portfolio companies) accrued during the calendar quarter minus TICC’s operating expenses accrued the calendar quarter (including the Base Fee, expenses payable under a separate agreement with BDC Partners (the “Administration Agreement”), and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee). “Pre-Incentive Fee Net Investment Income” includes, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with payment-in-kind (“PIK”) interest and zero coupon securities), accrued income that the Company has not yet received in cash. TICC Management will not be under any obligation to reimburse TICC for any part of the incentive fee it received that was based on accrued income that it never received as a result of a default by an entity on the obligation that resulted in the accrual of such income. “Pre-Incentive Fee Net Investment Income” does not include any realized gains, realized losses or unrealized appreciation or depreciation. Given that this portion of the incentive fee is payable without regard to any gain, loss or unrealized depreciation that may occur during the quarter, this portion of TICC Management’s incentive fee may also be payable notwithstanding a decline in net asset value that quarter.
Effective April 1, 2016, a “Preferred Return Amount” is calculated on a quarterly basis by multiplying 1.75% by the Company’s net asset value at the end of the immediately preceding calendar quarter. The net investment income incentive fee is then calculated as follows: (a) no net investment income incentive fee is payable to TICC Management in any calendar quarter in which the “Pre-Incentive Fee Net Investment Income” does not exceed the “Preferred Return Amount”; (b) 100% of the “Pre-Incentive Fee Net Investment Income” for such quarter, if any, that exceeds the “Preferred Return Amount” but is less than or equal to a “Catch-Up Amount” determined on a quarterly basis by multiplying 2.1875% by TICC’s net asset value at the end of such calendar quarter; and (c) for any quarter in which the “Pre-Incentive Fee Net Investment Income” exceeds the “Catch-Up Amount,” the net investment income incentive fee will be 20% of the amount of the “Pre-Incentive Fee Net Investment Income” for such quarter. There is no accumulation of amounts from quarter to quarter for the “Preferred Return Amount,” and accordingly there is no claw back of amounts previously paid to TICC Management if the “Pre-Incentive Fee Net Investment Income” for subsequent quarters is below the quarterly “Preferred Return Amount,” and there is no delay of payment of incentive fees to TICC Management if the “Pre-Incentive Fee Net Investment Income” for prior quarters is below the quarterly “Preferred Return Amount” for the quarter for which the calculation is being made.
F-46
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2017
NOTE 8. RELATED PARTY TRANSACTIONS (continued)
In addition, effective April 1, 2016, the calculation of the Company’s net investment income incentive fee is subject to a total return requirement, which provides that a net investment income incentive fee will not be payable to TICC Management except to the extent 20% of the “cumulative net increase in net assets resulting from operations” (which is the amount, if positive, of the sum of the “Pre-Incentive Fee Net Investment Income,” realized gains and losses and unrealized appreciation and depreciation) during the calendar quarter for which such fees are being calculated and the eleven (11) preceding quarters (or if shorter, the number of quarters since April 1, 2016) exceeds the cumulative net investment income incentive fees accrued and/or paid for such eleven (11) preceding quarters (or if shorter, the number of quarters since April 1, 2016). Under the revised fee structure, under no circumstances will the aggregate fees earned from April 1, 2016 by TICC Management in any quarterly period be higher than the aggregate fees that would have been earned prior to the adoption of these changes.
From January 1, 2005 through March 31, 2016, the “Pre-Incentive Fee Net Investment Income,” which was expressed as a rate of return on the value of our net assets at the end of the immediately preceding calendar quarter, was compared to one-fourth of an annual hurdle rate that was determined as of the immediately preceding December 31st by adding 5.00% to the interest rate then payable on the most recently issued five-year U.S. Treasury Notes, up to a maximum annual hurdle rate of 10.00%. The annual hurdle rates for the 2017, 2016 and 2015 calendar years was 6.93%, 6.65%, and 6.75% respectively.
The following table represents the net investment income incentive fees for each of the years ended December 31, 2017, 2016 and 2015, respectively:
|
|
|
Year ended |
|
Year ended |
|
Year ended |
||||
Net investment income incentive fee |
|
$ |
3,850,646 |
|
$ |
2,795,399 |
|
$ |
(929,933 |
) |
During the first quarter of 2015, the Company identified a non-material error in its accounting policy for revenue recognition — refer to “Note 2. Change of Accounting for Collateralized Loan Obligation Equity Income.” As a result of this error, because the net investment income incentive fee in prior years was based upon net investment income as previously reported, the net investment income incentive fees were overstated by approximately $2.4 million on a cumulative basis through the year ended 2014. Therefore, a reduction in expenses as well as “due from affiliate” of approximately $2.4 million was recorded for the quarter ended March 31, 2015, which represents the cumulative indirect effect of the error on the Company’s net investment income incentive fees. This reversal of expenses was partially offset by net investment income incentive fees incurred for the year ended December 31, 2015 of approximately $1.4 million. TICC Management repaid in full to TICC, on April 30, 2015, the portion of its previously paid net investment income incentive fees attributable to the overstated amounts.
The net investment income incentive fee payable to TICC Management as of December 31, 2017 and 2016, was approximately $1,022,655 and $1,128,805, respectively.
Capital Gains Incentive Fees
The capital gains incentive fee is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, as of the termination date), and equals 20% of our “Incentive Fee Capital Gains,” which consists of our realized capital gains for each calendar year, computed net of all realized capital losses and unrealized capital depreciation for that calendar year. For accounting purposes only, in order to reflect the theoretical capital gains incentive fee that would be payable for a given period as if all unrealized gains were realized, we will accrue a capital gains incentive fee based upon net realized gains and unrealized depreciation for that calendar year (in accordance with the
F-47
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2017
NOTE 8. RELATED PARTY TRANSACTIONS (continued)
terms of the Investment Advisory Agreement), plus unrealized appreciation on investments held at the end of the period. It should be noted that a fee so calculated and accrued would not necessarily be payable under the Investment Advisory Agreement, and may never be paid based upon the computation of capital gains incentive fees in subsequent periods. Amounts paid under the Investment Advisory Agreement will be consistent with the formula reflected in the Investment Advisory Agreement.
The amount of capital gains incentive fee expense related to the hypothetical liquidation of the portfolio (and assuming no other changes in realized or unrealized gains and losses) would only become payable to TICC Management in the event of a complete liquidation of the Company’s portfolio as of period end and the termination of the Investment Advisory Agreement on such date. Also, it should be noted that the capital gains incentive fee expense fluctuates with the Company’s overall investment results.
There were no capital gains incentive fee based on hypothetical liquidation for the years ended December 31, 2017, 2016 and 2015.
Administration Agreement
The Company has also entered into the Administration Agreement with BDC Partners under which BDC Partners provides administrative services for TICC. The Company pays BDC Partners an allocable portion of overhead and other expenses incurred by BDC Partners in performing its obligations under the Administration Agreement, including a portion of the rent and the compensation of the chief financial officer, accounting staff and other administrative support personnel, which creates potential conflicts of interest that the Board of Directors must monitor. The Company also reimburses BDC Partners for the costs associated with the functions performed by TICC’s Chief Compliance Officer that BDC Partners pays on the Company’s behalf pursuant to the terms of an agreement between the Company and Alaric Compliance Services, LLC.
TICC Management is controlled by BDC Partners, its managing member. Charles M. Royce holds a minority, non-controlling interest in TICC Management. BDC Partners manages the business and internal affairs of TICC Management. Jonathan H. Cohen, the Company’s Chief Executive Officer, as well as a Director, is the managing member of BDC Partners. Saul B. Rosenthal, the Company’s President and Chief Operating Officer, is also the President and Chief Operating Officer of TICC Management and a member of BDC Partners. Messrs. Cohen and Rosenthal have an equal equity interest in BDC Partners. Charles M. Royce, a member of the Company’s Board of Directors, does not take part in the management or participate in the operations of TICC Management; however, Mr. Royce is expected to be available from time to time to TICC Management to provide certain consulting services without compensation.
For the years ended December 31, 2017, 2016 and 2015, TICC incurred approximately $0.9 million, $0.8 million and $1.2 million, respectively, in compensation expenses for the services of employees allocated to the administrative activities of TICC, pursuant to the Administrative Agreement with BDC Partners. In addition, TICC incurred approximately $79,000, $111,000 and $110,000 for facility costs allocated under the Administrative Agreement for the years ended December 31, 2017, 2016 and 2015, respectively. As of December 31, 2017 and December 31, 2016, there were no amounts payable under the Administration Agreement.
F-48
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2017
NOTE 9. INVESTMENT INCOME
The following table sets forth the components of investment income for the years ended December 31, 2017, 2016 and 2015, respectively:
|
|
|
December 31, |
|
December 31, |
|
December 31, |
|||
|
Interest Income |
|
|
|
|
|
|
|
|
|
|
|
$ |
23,640,789 |
|
$ |
33,154,526 |
|
$ |
45,728,704 |
|
|
|
|
1,003,086 |
|
|
1,158,401 |
|
|
3,865,679 |
|
|
|
|
233,067 |
|
|
214,389 |
|
|
572,408 |
|
|
|
|
67,214 |
|
|
20,574 |
|
|
61,702 |
|
|
|
24,944,156 |
|
|
34,547,890 |
|
|
50,228,493 |
|
Income from securitization vehicles and investments(1) |
|
|
33,274,392 |
|
|
32,503,279 |
|
|
34,901,766 |
Other income |
|
|
|
|
|
|
|
|
|
|
|
1,368,132 |
|
|
1,352,396 |
|
|
1,353,373 |
|
|
|
719,012 |
|
|
358,381 |
|
|
360,000 |
|
|
|
1,111,325 |
|
|
518,100 |
|
|
619,307 |
|
|
|
3,198,469 |
|
|
2,228,877 |
|
|
2,332,680 |
|
Total investment income |
|
$ |
61,417,017 |
|
$ |
69,280,046 |
|
$ |
87,462,939 |
____________
(1) During the first quarter of 2015, the Company identified a non-material error in its accounting policy for revenue recognition — refer to “Note 2. Change of Accounting for Collateralized Loan Obligation Equity Investment Income.”
The 1940 Act requires that a BDC offer significant managerial assistance to its portfolio companies. The Company may receive fee income for managerial assistance it renders to portfolio companies in connection with its investments. For the years ended December 31, 2017, 2016 and 2015, the Company received no fee income for managerial assistance.
NOTE 10. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company enters into a variety of undertakings containing a variety of warranties and indemnifications that may expose the Company to some risk of loss. The risk of future loss arising from such undertakings, while not quantifiable, is expected to be remote.
As of December 31, 2017, the Company had no commitments to purchase additional debt investments.
The Company is not currently subject to any material legal proceedings. From time to time, the Company may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of the Company’s rights under contracts with its portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, the Company does not expect that these proceedings will have a material effect upon its consolidated results of operations and financial condition.
F-49
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2017
NOTE 11. FINANCIAL HIGHLIGHTS
Financial highlights for the years ended December 31, 2017, 2016, 2015, 2014 and 2013 are as follows:
|
|
|
Year Ended |
|
Year Ended |
|
Year Ended |
|
Year Ended |
|
Year Ended |
||||||||||
|
Per Share Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value at beginning of period |
|
$ |
7.50 |
|
|
$ |
6.40 |
|
|
$ |
8.64 |
|
|
$ |
9.85 |
|
|
$ |
9.90 |
|
Net investment income(1)(3) |
|
|
0.60 |
|
|
|
0.52 |
|
|
|
0.66 |
|
|
|
1.17 |
|
|
|
1.09 |
|
Net realized and unrealized gains (losses)(2)(3) |
|
|
0.25 |
|
|
|
1.62 |
|
|
|
(1.85 |
) |
|
|
(1.20 |
) |
|
|
0.06 |
|
Net change in net asset value from operations |
|
|
0.85 |
|
|
|
2.14 |
|
|
|
(1.19 |
) |
|
|
(0.03 |
) |
|
|
1.15 |
|
Distributions per share from net investment income |
|
|
(0.66 |
) |
|
|
(1.06 |
) |
|
|
(1.14 |
) |
|
|
(1.00 |
) |
|
|
(1.16 |
) |
Distributions based on weighted average share impact |
|
|
— |
|
|
|
0.01 |
|
|
|
0.01 |
|
|
|
(0.03 |
) |
|
|
(0.04 |
) |
Tax return of capital distributions |
|
|
(0.14 |
) |
|
|
(0.10 |
) |
|
|
— |
|
|
|
(0.16 |
) |
|
|
— |
|
Total distributions(4) |
|
|
(0.80 |
) |
|
|
(1.15 |
) |
|
|
(1.13 |
) |
|
|
(1.19 |
) |
|
|
(1.20 |
) |
Effect of shares issued, net of offering expenses |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Effect of shares repurchased, gross |
|
|
— |
|
|
|
0.11 |
|
|
|
0.08 |
|
|
|
0.01 |
|
|
|
— |
|
Net asset value at end of period |
|
$ |
7.55 |
|
|
$ |
7.50 |
|
|
$ |
6.40 |
|
|
$ |
8.64 |
|
|
$ |
9.85 |
|
Per share market value at beginning of period |
|
$ |
6.61 |
|
|
$ |
6.08 |
|
|
$ |
7.53 |
|
|
$ |
10.34 |
|
|
$ |
10.12 |
|
|
Per share market value at end of period |
|
$ |
5.74 |
|
|
$ |
6.61 |
|
|
$ |
6.08 |
|
|
$ |
7.53 |
|
|
$ |
10.34 |
|
|
Total return(5) |
|
|
(2.01 |
)% |
|
|
33.29 |
% |
|
|
(4.35 |
)% |
|
|
(17.22 |
)% |
|
|
14.68 |
% |
|
Shares outstanding at end of period |
|
|
51,479,409 |
|
|
|
51,479,409 |
|
|
|
56,396,435 |
|
|
|
60,303,769 |
|
|
|
53,400,745 |
|
|
Ratios/Supplemental Data(7) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets at end of period (000’s) |
|
$ |
388,419 |
|
|
$ |
385,992 |
|
|
$ |
360,935 |
|
|
$ |
520,813 |
|
|
$ |
526,242 |
|
Average net assets (000’s) |
|
$ |
385,947 |
|
|
$ |
343,328 |
|
|
$ |
487,894 |
|
|
$ |
560,169 |
|
|
$ |
506,093 |
|
|
Ratio of expenses to average net assets |
|
|
7.95 |
% |
|
|
12.38 |
% |
|
|
9.80 |
% |
|
|
8.70 |
% |
|
|
9.74 |
% |
|
Ratio of net investment income to average net assets |
|
|
7.96 |
% |
|
|
7.80 |
% |
|
|
8.12 |
% |
|
|
12.24 |
% |
|
|
11.02 |
% |
|
Portfolio turnover rate(6) |
|
|
43.02 |
% |
|
|
25.73 |
% |
|
|
24.96 |
% |
|
|
45.91 |
% |
|
|
38.22 |
% |
____________
(1) Represents per share net investment income for the period, based upon weighted average shares outstanding.
(2) Net realized and unrealized gains include rounding adjustments to reconcile change in net asset value per share.
(3) During the first quarter of 2015, the Company identified a non-material error in its accounting for income from CLO equity investments — refer to “Note 2. Change of Accounting for Collateralized Loan Obligation Equity Income.” Prospectively as of January 1, 2015, the Company records income from its CLO equity investments using the effective yield method in accordance with the accounting guidance in ASC 325-40, Beneficial Interests in Securitized Financial Assets, based upon an estimation of an effective yield to maturity utilizing assumed cash flows. An out-of-period adjustment to net investment income incentive fees, in the amount of $2.4 million, or $0.04 per share, is reflected in the year ended December 31, 2015. Prior period amounts are not materially affected.
During the quarter ended September 30, 2015, the Company recorded an out of period adjustment related to a miscalculation of discount accretion which increased interest income and increased investment cost, by approximately $1.4 million. For the year ended December 31, 2015, approximately $1.1 million, or $0.02 per share, of the adjustment
F-50
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2017
NOTE 11. FINANCIAL HIGHLIGHTS (continued)
related to prior years. The increase in the investment cost has a corresponding effect on the investment’s unrealized depreciation of the same amount. Management concluded the adjustment was not material to previously filed financial statements.
(4) Management monitors available taxable earnings, including net investment income and realized capital gains, to determine if a tax return of capital may occur for the year. To the extent the Company’s taxable earnings fall below the total amount of the Company’s distributions for that fiscal year, a portion of those distributions may be deemed a tax return of capital to the Company’s stockholders. The ultimate tax character of the Company’s earnings cannot be determined until tax returns are prepared after the end of the fiscal year.
(5) Total return equals the increase or decrease of ending market value over beginning market value, plus distributions, divided by the beginning market value per share, assuming distribution reinvestment prices obtained under the Company’s distribution reinvestment plan, excluding any discounts.
(6) Portfolio turnover rate is calculated using the lesser of the annual cash investment sales and debt repayments or annual cash investment purchases over the average of the total investments at fair value.
(7) The following table provides supplemental performance ratios measured for the years ended December 31, 2017, 2016, 2015, 2014 and 2013:
|
|
|
Year Ended |
|
Year Ended |
|
Year Ended December 31, 2015 |
|
Year Ended December 31, 2014 |
|
Year Ended |
|||||
|
Ratio of expenses to average net assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses before incentive fees |
|
6.95 |
% |
|
11.57 |
% |
|
10.00 |
% |
|
8.39 |
% |
|
8.68 |
% |
|
Net investment income incentive fees |
|
1.00 |
% |
|
0.81 |
% |
|
(0.19 |
)% |
|
1.00 |
% |
|
1.30 |
% |
|
Capital gains incentive fees |
|
— |
% |
|
— |
% |
|
— |
% |
|
(0.69 |
)% |
|
(0.24 |
)% |
|
Ratio of expenses, excluding interest expense, to average net assets |
|
4.61 |
% |
|
7.37 |
% |
|
5.73 |
% |
|
5.17 |
% |
|
6.00 |
% |
F-51
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2017
NOTE 12. DISTRIBUTIONS
The following table represents the cash distributions, including distributions, distributions reinvested and returns of capital, if any, declared per share since January 1, 2015:
|
Date Declared |
|
Record Date |
|
Payment Date |
|
Distributions |
|
GAAP net |
|
Distributions |
||||||
|
Fiscal 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 22, 2018 |
|
March 16, 2018 |
|
March 30, 2018 |
|
$ |
0.20 |
|
|
$ |
— |
(1) |
|
$ |
— |
(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 27, 2017 |
|
December 15, 2017 |
|
December 29, 2017 |
|
$ |
0.20 |
|
|
$ |
0.15 |
|
|
$ |
0.05 |
|
|
February 27, 2017 |
|
September 15, 2017 |
|
September 29, 2017 |
|
|
0.20 |
|
|
|
0.13 |
|
|
|
0.07 |
|
|
February 27, 2017 |
|
June 16, 2017 |
|
June 30, 2017 |
|
|
0.20 |
|
|
|
0.16 |
|
|
|
0.04 |
|
February 27, 2017 |
|
March 16, 2017 |
|
March 31, 2017 |
|
|
0.20 |
|
|
|
0.16 |
|
|
|
0.04 |
|
Total (2017) |
|
|
|
|
|
$ |
0.80 |
(2) |
|
$ |
0.60 |
|
|
$ |
0.20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 26, 2016 |
|
December 16, 2016 |
|
December 30, 2016 |
|
$ |
0.29 |
|
|
$ |
0.18 |
|
|
$ |
0.11 |
|
|
July 28, 2016 |
|
September 16, 2016 |
|
September 30, 2016 |
|
|
0.29 |
|
|
|
0.13 |
|
|
|
0.16 |
|
|
April 28, 2016 |
|
June 16, 2016 |
|
June 30, 2016 |
|
|
0.29 |
|
|
|
0.13 |
|
|
|
0.16 |
|
February 18, 2016 |
|
March 17, 2016 |
|
March 31, 2016 |
|
|
0.29 |
|
|
|
0.08 |
|
|
|
0.21 |
|
Total (2016) |
|
|
|
|
|
$ |
1.16 |
(3) |
|
$ |
0.52 |
|
|
$ |
0.64 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 2, 2015 |
|
December 16, 2015 |
|
December 31, 2015 |
|
$ |
0.29 |
|
|
$ |
0.09 |
|
|
$ |
0.20 |
|
|
July 30, 2015 |
|
September 16, 2015 |
|
September 30, 2015 |
|
|
0.29 |
|
|
|
0.18 |
|
|
|
0.11 |
|
|
April 27, 2015 |
|
June 16, 2015 |
|
June 30, 2015 |
|
|
0.29 |
|
|
|
0.18 |
|
|
|
0.11 |
|
February 19, 2015 |
|
March 17, 2015 |
|
March 31, 2015 |
|
|
0.27 |
|
|
|
0.21 |
|
|
|
0.06 |
|
Total (2015) |
|
|
|
|
|
$ |
1.14 |
(4) |
|
|
0.66 |
|
|
|
0.48 |
|
____________
(1) Earnings for this period have not yet been reported.
(2) The tax characterization of cash distributions for the year ended December 31, 2017 will not be known until the tax return for such year is finalized.
(3) Cash distributions for the year ended December 31, 2016 includes a tax return of capital of approximately $0.59 per share for tax purposes.
(4) Cash distributions for the year ended December 31, 2015 includes a tax return of capital of approximately $0.08 per share for tax purposes.
The tax character of distributions declared and paid in 2017 represented, on an estimated basis, $33,752,176 from ordinary income, and $7,431,351 from tax return of capital. GAAP requires adjustments to certain components of net assets to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net asset value per share. For 2017, the permanent differences between financial and tax reporting were due to gains from unscheduled prepayments, prepayment penalty fees and basis adjustments on the disposition of CLO equity investments, resulting in a decrease of distributions in excess of investment income of $21,576,301, an increase of accumulated net realized losses on investments and extinguishment of debt of $3,745,321, and a decrease of capital in excess of par value of $25,321,622. Certain components of net assets have been reclassified from those originally published in quarterly and annual reports to conform to the current period presentation for comparative purposes.
The tax character of distributions declared and paid in 2016 represented, on an estimated basis, $54,740,084 from ordinary income, and $4,976,030 from tax return of capital. GAAP requires adjustments to certain components of net assets
F-52
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2017
NOTE 12. DISTRIBUTIONS (continued)
to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net asset value per share. For 2016, the permanent differences between financial and tax reporting were due to gains from unscheduled prepayments, prepayment penalty fees and basis adjustments on the disposition of CLO equity investments, resulting in a decrease of distributions in excess of investment income of $17,278,880, an increase of accumulated net realized losses on investments of $12,569,225, and a decrease of capital in excess of par value of $4,709,655.
The tax character of distributions declared and paid in 2015 represented $62,937,336 from ordinary income and $4,709,655 from tax return of capital. GAAP requires adjustments to certain components of net assets to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net asset value per share. For 2015, the permanent differences between financial and tax reporting were due to gains from unscheduled prepayments, prepayment penalty fees and basis adjustments on the disposition of CLO equity investments, resulting in a decrease of distributions in excess of investment income of $2,136,491, a decrease of accumulated net realized losses on investments of $776,671, and a decrease of capital in excess of par value of $2,913,162.
We have adopted an “opt out” distribution reinvestment plan for our common stockholders. As a result, if we make a cash distribution, then stockholders’ cash distributions will be automatically reinvested in additional shares of our common stock, unless they specifically “opt out” of the distribution reinvestment plan so as to receive cash distributions. During the years ended December 31, 2017, 2016 and 2015, the Company did not issue any shares of common stock to stockholders in connection with the distribution reinvestment plan.
On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted which changed various technical rules governing the tax treatment of regulated investment companies. The changes are generally effective for taxable years beginning after the date of enactment. Under the Act, the Company will be permitted to carry forward capital losses incurred in taxable years beginning after the date of enactment for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term losses rather than being considered all short-term as under previous law.
The Company has available $102,612,125 of capital losses which can be used to offset future capital gains. Of these losses, $25,681,808 will expire in 2018, if not utilized, the amount not subject to expiration under The Act is $76,930,317, representing current year post RIC modernization long term capital loss carryforward. Under the current law, capital losses related to securities realized after October 31 and prior to the Company’s fiscal year end may be deferred as occurring the first day of the following year. For the fiscal year ended December 31, 2017, the Company has deferred such losses in the amount of $2,540,061.
As of December 31, 2017, the estimated components of accumulated earnings on a tax basis were as follow:
|
|
$ |
— |
|
|
Distributable long-term capital gains (capital loss carry forward) |
|
|
(102,612,125) |
|
Unrealized depreciation on investments |
|
|
(36,241,715) |
|
Other timing differences |
|
|
(2,540,061) |
The amounts will be finalized before filing the federal income tax return.
F-53
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2017
NOTE 12. DISTRIBUTIONS (continued)
As of December 31, 2016, the estimated components of accumulated earnings on a tax basis were as follow:
|
Distributable ordinary income |
|
$ |
— |
|
|
Distributable long-term capital gains (capital loss carry forward) |
|
|
(94,026,560 |
) |
|
Unrealized depreciation on investments |
|
|
(77,903,235 |
) |
|
Other timing differences |
|
|
(1,415,144 |
) |
NOTE 13. SHARE REPURCHASE PROGRAM
On December 18, 2014, the Board of Directors authorized a repurchase program to be in place until the earlier of June 30, 2015 or until $50 million of the Company’s outstanding shares of common stock have been repurchased. During the year ending December 31, 2015, under that repurchase program, the Company repurchased 315,783 shares of outstanding common stock for approximately $2.4 million at the average weighted price of $7.56 per share, inclusive of commission, while complying with the prohibitions under our Insider Trading Policies and Procedures and the guidelines specified in Rule 10b-18 of the Exchange Act, as amended, including certain price, market volume and timing constraints. In addition, repurchases were conducted in accordance with the Investment Company Act of 1940.
On November 5, 2015, the Board of Directors authorized a new program for the purpose of repurchasing up to $75 million worth of the Company’s common stock. Under this repurchase program, the Company was able, but was not obligated to, repurchase outstanding common stock in the open market from time to time through June 30, 2016, provided that repurchases complied with the prohibitions under the Company’s Insider Trading Policies and Procedures and the guidelines specified in Rule 10b-18 of the Exchange Act, as amended, including certain price, market volume and timing constraints. Further, any repurchases were to be conducted in accordance with the 1940 Act. Additionally, under the Board of Directors’ authorization of November 5, 2015, the Company entered into a Rule 10b5-1 trading plan to undertake accretive share repurchasing on a non-discretionary basis of up to $50 million prior to March 4, 2016. In aggregate, under the November 5, 2015 plan, the Company repurchased 3,591,551 shares of its common stock for approximately $23.7 million at the weighted average price of approximately $6.63 per share, inclusive of commissions. This represents a premium of approximately 3.6% of the net asset value per share at December 31, 2015.
The Board of Directors’ authorized program to repurchase up to $75 million worth of the Company’s common stock expired on June 30, 2016. During the six months ended June 30, 2016, the Company repurchased shares under the November 5, 2015 repurchase program totaling 4,917,026 shares of its common stock for approximately $25.6 million at the weighted average price of approximately $5.20 per share, inclusive of commissions. This represents a discount of approximately 30.7% of the net asset value per share at December 31, 2016.
F-54
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2017
NOTE 13. SHARE REPURCHASE PROGRAM (continued)
The Company did not repurchase shares of its common stock during the year ended December 31, 2017, as the program to repurchase up to $75 million worth of the Company’s common stock expired on June 30, 2016.
|
Period |
|
Total Number |
|
Average Price |
|
Total Number |
|
Maximum |
||
|
January 1, 2015 – January 31, 2015 |
|
315,783 |
|
$ |
7.56 |
|
315,783 |
|
$ |
46.4 million |
|
February 1, 2015 – February 28, 2015 |
|
— |
|
|
— |
|
— |
|
$ |
46.4 million |
|
March 1, 2015 – March 31, 2015 |
|
— |
|
|
— |
|
— |
|
$ |
46.4 million |
|
April 1, 2015 – April 30, 2015 |
|
— |
|
|
— |
|
— |
|
$ |
46.4 million |
|
May 1,2015 – May 31, 2015 |
|
— |
|
|
— |
|
— |
|
$ |
46.4 million |
|
June 1, 2015 – June 30, 2015 |
|
— |
|
|
— |
|
— |
|
$ |
46.4 million |
|
July 1, 2015 – July 31, 2015 |
|
— |
|
|
— |
|
— |
|
|
— |
|
August 1, 2015 – August 31, 2015 |
|
— |
|
|
— |
|
— |
|
|
— |
|
September 1, 2015 – September 30, 2015 |
|
— |
|
|
— |
|
— |
|
|
— |
|
October 1, 2015 – October 31, 2015 |
|
— |
|
|
— |
|
— |
|
|
— |
|
November 1, 2105 – November 30, 2015 |
|
1,085,778 |
|
$ |
6.66 |
|
1,085,778 |
|
$ |
67.8 million |
December 1, 2015 – December 31, 2015 |
|
2,505,773 |
|
$ |
6.58 |
|
2,505,773 |
|
$ |
51.3 million |
Total – Year ended December 31, 2015 |
|
3,907,334 |
|
|
|
|
3,907,334 |
|
|
|
|
Period |
|
Total Number |
|
Average Price |
|
Total Number |
|
Maximum |
||
|
January 1, 2016 – January 31, 2016 |
|
2,155,303 |
|
$ |
5.48 |
|
2,155,303 |
|
$ |
39.5 million |
|
February 1, 2016 – February 29, 2016 |
|
2,562,494 |
|
$ |
4.97 |
|
2,562,494 |
|
$ |
26.8 million |
|
March 1, 2016 – March 31, 2016 |
|
199,229 |
|
$ |
5.17 |
|
199,229 |
|
$ |
25.8 million |
|
April 1, 2016 – April 30, 2016 |
|
— |
|
|
— |
|
— |
|
$ |
25.8 million |
|
May 1, 2016 – May 31, 2016 |
|
— |
|
|
— |
|
— |
|
$ |
25.8 million |
June 1, 2016 – December 31, 2016 |
|
— |
|
|
— |
|
— |
|
|
— |
Total – Year ended December 31, 2016 |
|
4,917,026 |
|
|
|
|
4,917,026 |
|
|
|
F-55
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2017
NOTE 14. SELECTED QUARTERLY DATA (UNAUDITED)
|
|
|
Year Ended December 31, 2017 |
||||||||||
|
|
|
Quarter Ended |
|
Quarter Ended |
|
Quarter Ended |
|
Quarter Ended |
||||
|
|
|
|
|
|
|
|
|
|
||||
|
Total Investment Income |
|
$ |
13,441,687 |
|
$ |
14,497,697 |
|
$ |
17,012,153 |
|
$ |
16,465,480 |
|
Net Investment Income |
|
|
7,628,828 |
|
|
6,767,753 |
|
|
8,046,907 |
|
|
8,283,424 |
|
Net Increase in Net Assets resulting from Operations |
|
|
16,421,797 |
|
|
6,016,019 |
|
|
9,117,896 |
|
|
12,053,959 |
|
Net Increase in Net Assets resulting from Net Investment Income, per common share, basic |
|
$ |
0.15 |
|
$ |
0.13 |
|
$ |
0.16 |
|
$ |
0.16 |
|
Net Increase in Net Assets resulting from Net Investment Income, per common share, diluted(1) |
|
$ |
0.15 |
|
$ |
0.13 |
|
$ |
0.16 |
|
$ |
0.16 |
|
Net Increase in Net Assets resulting from Operations, per common share, basic |
|
$ |
0.32 |
|
$ |
0.12 |
|
$ |
0.18 |
|
$ |
0.23 |
|
Net Increase in Net Assets resulting from Operations, per common share, diluted(1) |
|
$ |
0.31 |
|
$ |
0.12 |
|
$ |
0.18 |
|
$ |
0.23 |
____________
(1) Due to the anti-dilutive effect on the computation of diluted earnings per share, the adjustments for interest and deferred issuance costs on the Convertible Notes, and the related impact on the Base Fees and net investment income incentive fees as well as weighted average common shares outstanding adjustments for the dilutive effect of the Convertible Notes were excluded from the quarters ended December 31, 2017, September 30, 2017, June 30, 2017, and March 31, 2017.
|
|
|
Year Ended December 31, 2016 |
|||||||||||
|
|
|
Quarter Ended |
|
Quarter Ended |
|
Quarter Ended |
|
Quarter Ended |
|||||
|
Total Investment Income |
|
$ |
18,869,245 |
|
$ |
18,095,792 |
|
$ |
17,046,527 |
|
$ |
15,268,482 |
|
|
Net Investment Income |
|
|
9,395,951 |
|
|
6,539,020 |
|
|
6,798,806 |
|
|
4,044,516 |
|
|
Net Increase (Decrease) in Net Assets resulting from Operations |
|
|
36,299,055 |
|
|
42,912,763 |
|
|
48,263,840 |
|
|
(17,113,895 |
) |
|
Net Increase in Net Assets resulting from Net Investment Income, per common share, basic |
|
$ |
0.18 |
|
$ |
0.13 |
|
$ |
0.13 |
|
$ |
0.08 |
|
|
Net Increase in Net Assets resulting from Net Investment Income, per common share, diluted(2) |
|
$ |
0.18 |
|
$ |
0.13 |
|
$ |
0.13 |
|
$ |
0.08 |
|
|
Net Increase (Decrease) in Net Assets resulting from Operations, per common share, basic(1) |
|
$ |
0.71 |
|
$ |
0.83 |
|
$ |
0.94 |
|
$ |
(0.32 |
) |
|
Net Increase (Decrease) in Net Assets resulting from Operations, per common share, diluted(1) |
|
$ |
0.62 |
|
$ |
0.72 |
|
$ |
0.81 |
|
$ |
(0.32 |
) |
____________
(1) Aggregate of quarterly earnings per share differs from calculation of annual earnings per share for the year ended December 31, 2016 due to rounding.
(2) Due to the anti-dilutive effect on the computation of diluted earnings per share, the adjustments for interest and deferred issuance costs on the Convertible Notes, and the related impact on the Base Fees and net investment income incentive fees as well as weighted average common shares outstanding adjustments for the dilutive effect of the Convertible Notes were excluded from the quarters ended September 30, 2016, June 30, 2016, and March 31, 2016.
F-56
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2017
NOTE 14. SELECTED QUARTERLY DATA (UNAUDITED) (continued)
|
|
|
Year Ended December 31, 2015 |
||||||||||||
|
|
|
Quarter Ended |
|
Quarter Ended |
|
Quarter Ended |
|
Quarter Ended |
||||||
|
Total Investment Income |
|
$ |
18,808,643 |
|
|
$ |
23,134,388 |
|
|
$ |
23,776,907 |
|
$ |
21,743,001 |
|
Net Investment Income |
|
|
5,557,171 |
|
|
|
10,874,618 |
|
|
|
10,892,126 |
|
|
12,303,917 |
|
Net (Decrease) Increase in Net Assets resulting from Operations |
|
|
(67,255,331 |
) |
|
|
(29,734,738 |
) |
|
|
10,036,020 |
|
|
20,820,400 |
|
Net Increase in Net Assets resulting from Net Investment Income, per common share, basic |
|
$ |
0.09 |
|
|
$ |
0.18 |
|
|
$ |
0.18 |
|
$ |
0.21 |
|
Net Increase in Net Assets resulting from Net Investment Income, per common share, diluted(1)(2) |
|
$ |
0.09 |
|
|
$ |
0.18 |
|
|
$ |
0.18 |
|
$ |
0.20 |
|
Net (Decrease) Increase in Net Assets resulting from Operations, per common share, basic(1) |
|
$ |
(1.14 |
) |
|
$ |
(0.50 |
) |
|
$ |
0.17 |
|
$ |
0.35 |
|
Net (Decrease) Increase in Net Assets resulting from Operations, per common share, diluted(1)(2) |
|
$ |
(1.14 |
) |
|
$ |
(0.50 |
) |
|
$ |
0.17 |
|
$ |
0.32 |
____________
(1) Aggregate of quarterly earnings per share differs from calculation of annual earnings per share for the year ended December 31, 2015 due to rounding.
(2) Due to the anti-dilutive effect on the computation of diluted earnings per share, the adjustments for interest and deferred issuance costs on the Convertible Notes, and the related impact on the Base Fees and net investment income incentive fees as well as weighted average common shares outstanding adjustments for the dilutive effect of the Convertible Notes were excluded from the quarters ended December 31, 2015, September 30, 2015 and June 30, 2015.
NOTE 15. RECENT ACCOUNTING PRONOUNCEMENTS
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Revenue Recognition (Topic 605). Under the new guidance, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In May 2016, ASU 2016-12 amended ASU 2014-09 and deferred the effective period to annual reporting periods beginning after December 15, 2017. Management has concluded that its revenues associated with financial instruments are scoped out of Topic 606 and ASU 2016-12 and the subsequent adoption of the standard would not impact the Company’s consolidated results of operation and financial condition.
In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments (a Consensus of the Emerging Issues Task Force) (“ASU 2016-15”), which is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. ASU 2016-15 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. Management adopted the new guidance on January 1, 2018. ASU 2016-15 did not have a material impact on the Company’s consolidated results of operation and financial condition.
In October 2016, the SEC adopted significant reforms under the 1940 Act that impose extensive new disclosure and reporting obligations on most 1940 Act funds (collectively, the “Reporting Rules”). The Reporting Rules expand the volume of information regarding fund portfolio holdings and investment practices that must be disclosed. The adopted amendments to Regulation S-X for 1940 Act funds and BDCs include an update to the disclosures for investments in and advances to affiliates, and the requirement to include in their financial statements a standardized schedule containing detailed information about derivative investments (among other changes). The amendments to Regulation S-X were effective August 1, 2017. The Company adopted these amendments on September 30, 2017, and the adoption has not had a material impact on its consolidated financial statements.
F-57
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2017
NOTE 15. RECENT ACCOUNTING PRONOUNCEMENTS (continued)
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (a Consensus of the Emerging Issues Task Force) (“ASU 2016-18”), which requires that the statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. ASU 2016-18 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. Management adopted the new guidance on January 1, 2018. Upon adoption of the standard, restricted cash will be included as part of beginning and ending cash and cash equivalents on the consolidated statement of cash flows.
In December 2016, the FASB issued ASU 2016-19, Technical Corrections and Improvements. As part of this guidance, ASU 2016-19 amends FASB ASC 820 to clarify the difference between a valuation approach and a valuation technique. The amendment also requires an entity to disclose when there has been a change in either or both a valuation approach and/or a valuation technique. ASU 2016-19 is effective on a prospective basis for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016 on a prospective basis. The Company has adopted ASU 2016-19 on its consolidated financial statements and disclosures and the adoption of ASU 2016-19 has not had a material impact on its consolidated financial statements.
NOTE 16. RISKS AND UNCERTAINTIES
The U.S. capital markets have recently experienced periods of extreme volatility and disruption. Disruptions in the capital markets tend to increase the spread between the yields realized on risk-free and higher risk securities, resulting in illiquidity in parts of the capital markets. The Company believes these conditions may reoccur in the future. A prolonged period of market illiquidity may have an adverse effect on the Company’s business, financial condition and results of operations. Adverse economic conditions could also increase the Company’s funding costs, limit the Company’s access to the capital markets or result in a decision by lenders not to extend credit to the Company. These events could limit the Company’s investment originations, limit the Company’s ability to grow and negatively impact the Company’s operating results.
Many of the companies in which the Company has made or will make investments may be susceptible to adverse economic conditions, which may affect the ability of a company to repay TICC’s loans or engage in a liquidity event such as a sale, recapitalization, or initial public offering. Therefore, the Company’s nonperforming assets may increase, and the value of the Company’s portfolio may decrease during this period. Adverse economic conditions also may decrease the value of any collateral securing some of the Company’s loans and the value of its equity investments. Adverse economic conditions could lead to financial losses in the Company’s portfolio and a decrease in its revenues, net income, and the value of the Company’s assets.
A portfolio company’s failure to satisfy financial or operating covenants imposed by the Company or other lenders could lead to defaults and, potentially, termination of the portfolio company’s loans and foreclosure on its secured assets, which could trigger cross-defaults under other agreements and jeopardize the portfolio company’s ability to meet its obligations under the debt securities that the Company holds. The Company may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms with a defaulting portfolio company. In addition, if a portfolio company goes bankrupt, even though the Company may have structured its investment as senior debt or secured debt, depending on the facts and circumstances, including the extent to which the Company actually provided significant “managerial assistance,” if any, to that portfolio company, a bankruptcy court might re-characterize the Company’s debt holding and subordinate all or a portion of the Company’s claim to that of other creditors. These events could harm the Company’s financial condition and operating results.
As a BDC, the Company is required to carry its investments at fair value as determined in good faith by or under the direction of its Board of Directors. Decreases in the fair values of the Company’s investments are recorded as unrealized depreciation. Depending on market conditions, the Company could incur substantial losses in future periods, which could have a material adverse impact on its business, financial condition and results of operations.
F-58
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2017
NOTE 17. CONCENTRATION OF CREDIT RISK
The Company places its cash and cash equivalents with financial institutions and, at times, cash held in checking accounts may exceed the Federal Deposit Insurance Corporation insured limit. In addition, the Company’s portfolio may be concentrated in a limited number of portfolio companies, which will subject the Company to a risk of significant loss if any of these companies defaults on its obligations under any of its debt securities that the Company holds or if those sectors experience a market downturn.
NOTE 18. SUBSEQUENT EVENTS
On February 22, 2018, our Board of Directors declared quarterly distributions to stockholders as follows:
|
Per Share Distribution Amount Declared |
|
2018 Record Dates |
|
2018 Payable Dates |
|
$0.20 |
|
March 16, 2018 |
|
March 30, 2018 |
On February 5, 2018, the Board of Directors authorized a new program for the purpose of repurchasing up to $25 million worth of the Company’s common stock. Under this repurchase program, we may, but we are not obligated to, repurchase outstanding common stock in the open market from time to time through December 31, 2018 provided that repurchases comply with the prohibitions under the Company’s Insider Trading Policies and Procedures and the guidelines specified in Rule 10b-18 of the Securities Exchange Act of 1934, as amended, including certain price, market volume and timing constraints. Further, any repurchases will be conducted in accordance with the 1940 Act. From February 5, 2018 through February 27, 2018, the Company had repurchased 289,392 shares of its common stock under this repurchase program.
The Company’s management evaluated subsequent events through the date of issuance of these Consolidated Financial Statements and noted no other events that necessitate adjustments to or disclosure in the financial statements.
F-59
Item 15. Exhibits, Financial Statement Schedules
a. Documents Filed as Part of this Report
The following consolidated financial statements are set forth in Item 8:
|
|
|
Page |
|
Management’s Report on Internal Control Over Financial Reporting |
|
F-1 |
|
Report of Independent Registered Public Accounting Firm |
|
F-2 |
|
Consolidated Statements of Assets and Liabilities as of December 31, 2017 and December 31, 2016 |
|
F-4 |
|
Consolidated Schedule of Investments as of December 31, 2017 |
|
F-5 |
|
Consolidated Schedule of Investments as of December 31, 2016 |
|
F-12 |
|
Consolidated Statements of Operations for the years ended December 31, 2017, December 31, 2016 and December 31, 2015 |
|
F-20 |
|
Consolidated Statements of Changes in Net Assets for the years ended December 31, 2017, December 31, 2016 and December 31, 2015 |
|
F-22 |
|
Consolidated Statements of Cash Flows for the years ended December 31, 2017, December 31, 2016 and December 31, 2015 |
|
F-23 |
|
Notes to Consolidated Financial Statements |
|
F-25 |
b. Exhibits
The following exhibits are filed as part of this report or hereby incorporated by reference to exhibits previously filed with the SEC:
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2
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11 |
|
Computation of Per Share Earnings (included in the notes to the audited consolidated financial statements contained in this report). |
|
|
|
|
|
|
||
|
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|
|
|
21.1 |
|
Subsidiaries of Registrant and jurisdiction of incorporation/organization. None. |
|
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|
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|
||
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|
||
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|
|
Certification of Chief Executive Officer pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.* |
|
|
|
|
|
|
|
Certification of Chief Financial Officer pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.* |
____________
* Filed herewith.
c. Financial statement schedule
3
SCHEDULE 12-14
TICC CAPITAL CORP.
INVESTMENTS IN AND ADVANCES TO AFFILIATES
(AMOUNTS IN THOUSANDS)
Name of Issuer |
|
Title
of Issue |
|
Amount
of |
|
Value
as of |
|
Gross
|
|
Gross
|
|
Change
in |
|
Value
as of |
||||||||
AFFILIATED INVESTMENT: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unitek Global Systems, Inc. |
|
Senior Secured Notes |
|
|
$ |
269.1 |
|
$ |
2,665.1 |
|
$ | 10.4 |
|
$ |
— |
|
$ |
(10.4 |
) |
|
$ | 2,665.1 |
|
|
Subordinated Debt |
|
|
|
113.1 |
|
|
677.8 |
|
|
108.8 |
|
|
— |
|
|
— |
|
|
|
786.6 |
|
|
Common Stock(1) |
|
|
— |
|
|
864.2 |
|
|
150.0 |
|
|
— |
|
|
2,034.1 |
|
|
|
3,048.3 |
|
|
|
Series A Senior Preferred Equity(1) |
|
|
— |
|
|
— |
|
|
2,762.4 |
|
|
— |
|
|
510.3 |
|
|
|
3,272.7 |
|
|
|
Series A Preferred Equity(1) |
|
|
|
|
|
7,418.9 |
|
|
|
|
|
|
|
|
1,027.3 |
|
|
|
8,446.2 |
|
|
|
Warrants(1) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
Total Affiliated Investment |
|
|
|
|
|
382.2 |
|
|
11,626.0 |
|
|
3,031.6 |
|
|
— |
|
|
3,561.3 |
|
|
|
18,218.9 |
Total Control Investment |
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
— |
TOTAL CONTROL AND AFFILIATED INVESTMENTS |
|
|
|
|
$ |
382.2 |
|
$ |
11,626.0 |
|
$ |
3,031.6 |
|
$ |
— |
|
$ |
3,561.3 |
|
|
$ |
18,218.9 |
____________
(1) Investment is non-income producing.
(2) Represents the total amount of interest or distributions credited to income for the portion of the year an investment was an affiliate investment.
(3) Gross additions include increases in investments resulting from new portfolio investments, paid-in-kind interest or distributions, the amortization of discounts and fees.
(4) Gross reductions include decreases in investments resulting from principal collections related to investment repayments or sales, the amortization of premiums and acquisition costs.
4
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
TICC CAPITAL CORP. |
||
|
|
|
|
|
Date: March 9, 2018 |
|
|
|
/s/ Jonathan H. Cohen |
|
|
|
|
Jonathan H. Cohen |
|
|
|
|
Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacity and on the dates indicated.
Date: March 9, 2018 |
|
/s/ Steven P. Novak |
|
|
Steven
P. Novak |
|
|
|
Date: March 9, 2018 |
|
/s/ Jonathan H. Cohen |
|
|
Jonathan
H. Cohen |
|
|
|
Date: March 9, 2018 |
|
/s/ Bruce L. Rubin |
|
|
Bruce
L. Rubin |
|
|
|
Date: March 9, 2018 |
|
/s/ Richard W. Neu |
|
|
Richard
W. Neu |
|
|
|
Date: March 9, 2018 |
|
/s/ Charles M. Royce |
|
|
Charles
M. Royce |
|
|
|
Date: March 9, 2018 |
|
/s/ George Stelljes III |
|
|
George
Stelljes III |
5