Whitehorse Finance

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WhiteHorse Finance, Inc. Announces Second Quarter 2019 Earnings Results

NEW YORK, Aug. 7, 2019 /PRNewswire/ -- WhiteHorse Finance, Inc. ("WhiteHorse Finance" or the "Company") (NASDAQ: WHF) today announced its financial results for the quarter ended June 30, 2019.

Second Quarter 2019 Summary Highlights

  • Net Asset Value of $315.9 million, or $15.38 per share
  • New investments of $71.4 million
  • Net investment income of $7.2 million, or $0.352 per share
  • Core net investment income of $7.4 million, or $0.362 per share(1)
  • Second quarter distribution of $0.355 per share

(1) Core net investment income is a non-GAAP financial measure. The Company believes that core net investment income provides useful information to investors and management because it reflects the Company's financial performance excluding (i) the net impact of costs associated with the refinancing of the Company's indebtedness, (ii) the accrual of the capital gains incentive fee attributable to net realized and unrealized gains and losses, and (iii) excise and other income taxes related to such net realized gains and losses (net of incentive fees). The presentation of this additional information is not meant to be considered in isolation or as a substitute for financial results prepared in accordance with GAAP. Additional information on core net investment income and a reconciliation of core net investment income to its most directly comparable GAAP financial measure, net investment income, are set forth in Schedule 1 hereto.

Stuart Aronson, WhiteHorse Finance's Chief Executive Officer commented, "During the second quarter we grew NAV by adding seven new first-lien originations and one add-on investment to our portfolio. First-lien senior-secured loans now account for 85% of our portfolio and our leverage ratio at the end of the second quarter was 79%, bringing us closer to our target leverage range of between 100 to 125%. Our strong origination activity helped partially offset the impact of underperformance in two of our credit positions as we enter an environment of slower economic growth. Following the close of the quarter, we activated our recently-launched joint venture, which we expect will contribute to future earnings. Going forward we will continue leveraging our differentiated three-tiered sourcing infrastructure backed by H.I.G. to prudently deploy capital into high credit quality opportunities which offer stable and attractive risk-adjusted returns and ultimately enhance shareholder value."

Portfolio and Investment Activity

As of June 30, 2019, the fair value of WhiteHorse Finance's investment portfolio was $534.8 million, compared with $468.4 million as of March 31, 2019. The portfolio at June 30, 2019 consisted of 67 positions across 47 companies with an average debt investment size of $8.8 million and a weighted average effective yield of 11.3% on income-producing investments. The majority of the portfolio was comprised of senior secured loans, and these loans were substantially all variable-rate investments (primarily indexed to LIBOR), with nearly all performing floating rate investments having interest rate floors.

During the three months ended June 30, 2019, WhiteHorse Finance made investments in seven new direct originations totaling $71.4 million. Also, the Company added $3.7 million to an existing portfolio company. Gross proceeds from repayments totaled approximately $12.3 million for the quarter, driven by partial paydowns of $3.8 million from StackPath, LLC & Highwinds Capital, Inc., $1.8 million from PMA Holdco, LLC, $1.3 million from Alpha Media, LLC as well as the full repayment of the Company's remaining investment in Account Control Technology Holdings, Inc. of $0.6 million. The Company remained highly selective in deploying new investments.

Results of Operations

For the three months ended June 30, 2019, net investment income was approximately $7.2 million, compared with approximately $4.6 million for the same period in the prior year, representing an increase of approximately 56.5%. The increase in net investment income for the year-over-year period was primarily attributable to an increase in non-recurring fee income and a decrease in the amount of capital gains incentive fee recorded.

For the three months ended June 30, 2019, WhiteHorse Finance reported net realized and unrealized gains on investments of approximately $1.0 million. This compares with net realized and unrealized gains on investments of $14.4 million for the three months ended June 30, 2018. The decrease in net realized and unrealized gains on investments for the year-over-year period was primarily attributable to the prior year mark-up of the Company's equity investment in Aretec Group, Inc. (which was sold in the fourth quarter of 2018).

WhiteHorse Finance reported a net increase in net assets resulting from operations of approximately $8.2 million for the three months ended June 30, 2019, which compares with a net increase of $19.1 million for the three months ended June 30, 2018.

WhiteHorse Finance's NAV was $315.9 million, or $15.38 per share, as of June 30, 2019, as compared with $315.0 million, or $15.33 per share, as of March 31, 2019.

Liquidity and Capital Resources

As of June 30, 2019, WhiteHorse Finance had cash and cash equivalents of $50.4 million, as compared with $36.9 million as of March 31, 2019, inclusive of restricted cash.  As of June 30, 2019, the Company also had $15.6 million of undrawn capacity under its revolving credit facility.

Distributions

On June 10, 2019, the Company declared a distribution of $0.355 per share for the quarter ended June 30, 2019, consistent for the twenty-seventh consecutive quarter since the Company's IPO. The distribution was paid on July 3, 2019 to shareholders of record as of June 20, 2019.

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

Conference Call

WhiteHorse Finance will host a conference call to discuss its second quarter results at 10:00 a.m. ET on Wednesday, August 7, 2019. To access the teleconference, please dial 706-758-9224 (domestic and international) approximately 10 minutes before the teleconference's scheduled start time and reference ID # 4389314. Investors may also access the call on the investor relations portion of the Company's website at www.whitehorsefinance.com.  

If you are unable to access the live teleconference, a replay will be available beginning approximately two hours after the call's completion through August 15, 2019. The teleconference replay can be accessed by dialing 404-537-3406 (domestic and international) and entering ID # 4389314. A webcast replay will also be available on the investor relations portion of the Company's website at www.whitehorsefinance.com.  

About WhiteHorse Finance, Inc.

WhiteHorse Finance is a business development company that originates and invests in loans to privately held, lower middle market companies across a broad range of industries.  The Company's investment activities are managed by H.I.G. WhiteHorse Advisers, LLC, an affiliate of H.I.G. Capital, LLC, ("H.I.G. Capital"). H.I.G. Capital is a leading global alternative asset manager with $34 billion of capital under management(2) across a number of funds focused on the small and mid-cap markets. For more information about H.I.G. Capital, please visit http://www.higcapital.com.  For more information about the Company, please visit http://www.whitehorsefinance.com.

Forward-Looking Statements

This press release may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Statements other than statements of historical facts included in this press release may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in filings with the Securities and Exchange Commission. The Company undertakes no duty to update any forward-looking statement made herein. All forward-looking statements speak only as of the date of this press release.

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

SCHEDULE 1

As a supplement to GAAP financial measures, the Company has provided information relating to core net investment income, which is a non-GAAP measure. This measure is provided in addition to, but not as a substitute for, net investment income determined in accordance with GAAP. The Company's non-GAAP measures may differ from similar measures by other companies, even if similar terms are used to identify such measures. Core net investment income represents net investment income adjusted to exclude the net impact of costs associated with the refinancing of the Company's indebtedness, the accrual of the capital gains incentive fee attributable to net realized and unrealized gains and losses, and excise or other income taxes related to such net realized gains and losses (net of incentive fees). There were no associated refinancing costs in connection with the Company's indebtedness and no excise or other income taxes related to net realized gains and losses for the quarters ended June 30, 2019 and June 30, 2018.

The following table provides a reconciliation of net investment income to core net investment income for the three months ended June 30, 2019 and June 30, 2018 (in thousands, except per share data):



June 30, 2019



June 30, 2018




Amount



 Per Share

Amounts



Amount



 Per Share

Amounts


Net investment income


$

7,226



$

0.352



$

4,607



$

0.224


Net impact of costs associated with refinancing of indebtedness



-




-




-




-


Accrual for capital gains incentive fee



198




0.010




2,191




0.107


Net impact of excise tax expense related to net realized gains
and losses



-




-




-




-


Core net investment income


$

7,424



$

0.362



$

6,798



$

0.331



















 

WhiteHorse Finance, Inc.
Consolidated Statements of Assets and Liabilities
(in thousands, except share and per share data)




June 30, 2019



December 31, 2018




(Unaudited)





Assets









Investments, at fair value









Non-controlled/non-affiliate company investments


$

525,192



$

459,399


Non-controlled affiliate company investments



9,645




10,165


Total investments, at fair value (amortized cost $540,708 and $477,839,
  respectively)



534,837




469,564


Cash and cash equivalents



16,586




24,148


Restricted cash and cash equivalents



33,810




9,584


Interest receivable



5,256




4,616


Receivables from investments sold



2,083




5,608


Prepaid expenses and other receivables



545




575


Total assets


$

593,117



$

514,095











Liabilities









Debt


$

245,818



$

175,953


Management and incentive fees payable



7,429




11,193


Distributions payable



7,294




7,294


Payables for investments purchased



13,698




445


Accounts payable and accrued expenses



1,327




2,322


Interest payable



1,507




1,562


Advances received from unfunded credit facilities



112




30


Total liabilities



277,185




198,799











Commitments and contingencies


















Net assets









Common stock, 20,546,032 and 20,546,032 shares issued and outstanding, par
  value $0.001 per share, respectively, and 100,000,000 authorized



21




21


Paid-in capital in excess of par



301,557




301,557


Accumulated undistributed earnings



14,354




13,718


Total net assets



315,932




315,296


Total liabilities and total net assets


$

593,117



$

514,095











Number of shares outstanding



20,546,032




20,546,032


Net asset value per share


$

15.38



$

15.35


 

WhiteHorse Finance, Inc.
Consolidated Statements of Operations (Unaudited)
(in thousands, except share and per share data)




Three months ended June 30,



Six months ended June 30,




2019



2018



2019



2018


Investment income

















From non-controlled/non-affiliate company
investments

















Interest income


$

12,746



$

13,265



$

27,238



$

27,028


Fee income



2,926




788




4,083




2,980


From non-controlled affiliate company
investments

















Dividend income



312




601




587




1,251


Total investment income



15,984




14,654




31,908




31,259



















Expenses

















Interest expense



3,176




2,801




6,249




5,366


Base management fees



2,818




2,607




5,407




5,052


Performance-based incentive fees



2,055




3,891




3,806




6,035


Administrative service fees



159




175




317




350


General and administrative expenses



532




573




1,214




1,271


Total expenses, before fees waived



8,740




10,047




16,993




18,074


Base management fee waived



(220)




-




(397)




-


Total expenses, net of fees waived



8,520




10,047




16,596




18,074


Net investment income before excise tax



7,464




4,607




15,312




13,185


Excise tax



238




-




475




-


Net investment income after excise tax



7,226




4,607




14,837




13,185



















Realized and unrealized gains (losses) on
investments

















Net realized gains (losses)

















Non-controlled/non-affiliate company
investments



-




73




(2,018)




73


       Net realized gains (losses)



-




73




(2,018)




73


Net change in unrealized appreciation
(depreciation)

















Non-controlled/non-affiliate company
investments



937




1,950




2,925




(961)


Non-controlled affiliate company investments



56




12,424




(520)




20,610


Net change in unrealized appreciation



993




14,374




2,405




19,649


Net realized and unrealized gains on
investments



993




14,447




387




19,722


Net increase in net assets resulting from
operations


$

8,219



$

19,054



$

15,224



$

32,907



















Per Common Share Data

















Basic and diluted earnings per common share


$

0.41



$

0.93



$

0.74



$

1.60


Dividends and distributions declared per
common share


$

0.36



$

0.36



$

0.71



$

0.71


Basic and diluted weighted average common
shares outstanding



20,546,032




20,531,948




20,546,032




20,531,948


 

WhiteHorse Finance, Inc.
Consolidated Schedule of Investments (Unaudited)
June 30, 2019
(in thousands)


Investment Type(1)



Spread

Above

Index(2)



Interest

Rate(3)



Acquisition

Date(10)



Maturity

Date



Principal/

Share

Amount



Amortized

Cost



Fair

Value(11)



Fair Value

As A

Percentage

of Net

Assets


North America






























Debt Investments






























Advertising






























Fluent, LLC






























First Lien Secured Term Loan



L+ 7.00%



9.40%



03/26/18



03/27/23




10,219



$

10,219



$

10,219




3.23

%




(0.50% Floor)



























Air Freight & Logistics






























Access USA Shipping, LLC






























First Lien Secured Term Loan



L+ 8.00%



10.40%



02/08/19



02/08/24




5,797




5,717




5,717




1.81





(1.50% Floor)



























Application Software






























Newscycle Solutions, Inc.






























First Lien Secured Term Loan



L+ 7.00%



9.40%



06/14/19



12/29/22




5,398




5,291




5,290




1.67





(1.00% Floor)



























First Lien Secured Revolving
Loan(7)



L+ 7.00%



9.40%



06/14/19



12/29/22




193




190




190




0.06





(1.00% Floor)











































5,591




5,481




5,480




1.73


Automotive Retail






























Team Car Care Holdings, LLC






























First Lien Secured Term
Loan(12)



base rate+ 7.01%



12.49%



02/26/18



02/23/23




16,953




16,674




16,816




5.32





(1.00% Floor)



























Broadcasting






























Alpha Media, LLC






























First Lien Secured Term Loan



L+ 6.00%



8.48%



08/14/18



02/25/22




4,588




4,471




4,582




1.45





(1.00% Floor)



























Multicultural Radio Broadcasting,
Inc.






























First Lien Secured Term Loan



L+ 8.00%



10.40%



12/28/17



12/28/22




17,059




16,820




17,059




5.40





(1.00% Floor)



























Rural Media Group, Inc.






























First Lien Secured Term Loan



L+ 7.73%



10.32%



12/29/17



12/29/22




7,133




7,036




7,048




2.23





(1.00% Floor)











































28,780




28,327




28,689




9.08


Cable & Satellite






























Bulk Midco, LLC






























First Lien Secured Term Loan



L+ 7.35%



9.71%



06/08/18



06/08/23




15,000




14,823




13,977




4.42





(1.00% Floor)



























Communications Equipment






























Sorenson Communications, LLC






























First Lien Secured Term Loan



L+ 6.50%



8.83%



03/15/19



03/15/24




5,250




5,098




5,230




1.65





(0.00% Floor)



























Data Processing & Outsourced
Services






























FPT Operating Company, LLC/






























TLabs Operating Company, LLC






























First Lien Secured Term Loan



L+ 8.25%



10.69%



06/07/19



06/07/24




25,063




24,815




24,438




7.73





(1.00% Floor)



























Department Stores






























Mills Fleet Farm Group, LLC






























First Lien Secured Term Loan



L+ 6.25%



8.65%



10/24/18



10/24/24




14,925




14,659




14,196




4.49





(1.00% Floor)



























Distributors






























Crown Brands, LLC






























First Lien Secured Term Loan



L+ 8.00%



10.40%



01/28/19



01/25/24




5,876




5,741




5,735




1.82





(1.50% Floor)



























First Lien Secured Delayed
Draw Loan(7)



L+ 8.00%



10.40%



01/28/19



01/25/24




-




-




(1)




-





(1.50% Floor)











































5,876




5,741




5,734




1.82


Diversified Support Services






























ImageOne Industries, LLC






























First Lien Secured Term Loan



L+ 10.00%



12.40%



01/11/18



01/11/23




7,146




6,982




6,788




2.15





(1.00% Floor)



 (2.00 %
PIK)
























NNA Services, LLC






























First Lien Secured Term Loan



L+ 7.00%



9.33%



10/16/18



10/16/23




10,172




9,997




10,078




3.19





(1.50% Floor)



























Quest Events, LLC






























First Lien Secured Term Loan



L+ 6.00%



8.33%



12/28/18



12/28/24




10,888




10,688




10,670




3.38





(1.00% Floor)



























First Lien Secured Revolving
Loan(7)



L+ 6.00%



8.33%



12/28/18



12/28/24




-




-




(2)




-





(1.00% Floor)











































28,206




27,667




27,534




8.72
































 

WhiteHorse Finance, Inc.
Consolidated Schedule of Investments (Unaudited) - (continued)
June 30, 2019
(in thousands)


Investment Type(1)



Spread

Above

Index(2)



Interest

Rate(3)



Acquisition

Date(10)



Maturity

Date



Principal/

Share

Amount



Amortized

Cost



Fair

Value(11)



Fair Value

As A

Percentage

of Net

Assets


Food Retail






























AG Kings Holdings, Inc.






























First Lien Secured Term Loan(8)



L+ 11.95%



14.28 %



08/10/16



08/10/21




13,046



$

12,808



$

9,784




3.10

%




(1.00% Floor)



(2.00 % PIK)
























Crews of California, Inc.






























First Lien Secured Term Loan



L+ 11.00%



13.40 %



11/20/14



11/20/19




9,707




9,693




9,665




3.06





(1.00% Floor)



(1.00 % PIK)
























First Lien Secured Revolving
Loan



L+ 11.00%



13.40 %



06/05/15



11/20/19




5,198




5,187




5,175




1.64





(1.00% Floor)



(1.00 % PIK)
























First Lien Secured Delayed Draw
Loan



L+ 11.00%



13.40 %



03/27/15



11/20/19




2,788




2,783




2,776




0.88





(1.00% Floor)



(1.00 % PIK)








































30,739




30,471




27,400




8.68


Health Care Facilities






























Grupo HIMA San Pablo, Inc.






























First Lien Secured Term Loan



L+ 11.00%



13.58 %



04/01/18



04/30/19




17,603




17,349




16,489




5.22





(1.50% Floor)



























Second Lien Secured Term
Loan(8)



N/A



15.75 %



02/01/13



07/31/18




1,028




1,024




103




0.03








(2.00 % PIK)








































18,631




18,373




16,592




5.25


Health Care Services






























Akumin Corp.






























First Lien Secured Term Loan



L+ 6.00%



8.40 %



05/31/19



05/31/24




13,700




13,438




13,434




4.25





(1.00% Floor)



























CHS Therapy, LLC






























First Lien Secured Term Loan A



L+ 8.50%



10.93 %



06/14/19



06/14/24




6,861




6,725




6,724




2.13





(1.50% Floor)



























First Lien Secured Term Loan B



L+ 8.00%



10.43 %



06/14/19



06/14/24




7,389




7,242




7,241




2.29





(1.50% Floor)



























First Lien Secured Delayed Draw
Loan(7)



L+ 8.50%



10.93 %



06/14/19



06/14/24




-




-




(32)




(0.01)





(1.50% Floor)



























PMA Holdco, LLC






























First Lien Secured Term Loan



L+ 8.00%



10.33 %



06/28/18



06/28/23




12,949




12,729




12,840




4.06





(1.00% Floor)











































40,899




40,134




40,207




12.72


Home Furnishings






























Sure Fit Home Products, LLC