Whitehorse Finance

News Release

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WhiteHorse Finance, Inc. Announces Third Quarter 2019 Earnings Results

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

Third Quarter 2019 Summary Highlights

  • Net Asset Value of $315.5 million, or $15.36 per share
  • Investment portfolio(1) totaling $527.5 million
  • STRS JV investment portfolio totaling $54.9 million
  • Gross investment additions(2) of $80.5 million, including new originations of $47.0 million and $32.8 million of fundings for refinancings and add-ons to existing investments
  • Net investment income of $8.7 million, or $0.421 per share
  • Core net investment income of $8.3 million, or $0.403 per share(3)
  • Third quarter distribution of $0.355 per share

(1) Includes investments in WHF STRS Ohio Senior Loan Fund LLC ("STRS JV"), an unconsolidated joint venture, totaling $24.4 million, at fair value.
(2) Excludes investments made in STRS JV for the quarter.
(3) 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 third quarter, we transferred 5 assets into our recently-launched joint venture, increasing our investment by $24.4 million. Following the close of the third quarter we contributed another 4 assets into the JV, allowing us to quickly ramp up and directly originate into the JV portfolio going forward, offering a wider range of sourcing opportunities. In addition to the JV transfers, we added four new first-lien originations and 3 add-on investments to our portfolio during the quarter to stabilize NAV relative to the JV asset transfers. Our fourth quarter pipeline is as strong as it has ever been, which we credit to our differentiated three-tiered sourcing infrastructure backed by H.I.G. that offers stable and attractive risk-adjusted returns and ultimately enhance shareholder value."

Portfolio and Investment Activity

As of September 30, 2019, the fair value of WhiteHorse Finance's investment portfolio was $527.5 million, compared with $534.8 million as of June 30, 2019. The portfolio at September 30, 2019 consisted of 65 positions across 48 companies with a weighted average effective yield of 11.0% on income-producing debt investments.  The average debt investment size (excluding investments in STRS JV) was $9.9 million with the overall portfolio comprised of 80% in first lien secured loans, 12% in second lien secured loans, 3% in equity and 5% in investments in STRS JV.  All 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 September 30, 2019, WhiteHorse Finance launched the operations of its joint venture by transferring assets totaling $56.4 million in exchange for a net investment in STRS JV of $24.4 million as well as cash proceeds of $32 million.

In addition to the transactions with STRS JV, WhiteHorse Finance made investments in four new portfolio companies totaling $47.0 million. Also, the Company added $8.9 million to existing portfolio companies, exclusive of refinancing. Proceeds from sales and repayments, including net fundings on revolvers but exclusive of refinancing, totaled approximately $31.4 million for the quarter, driven by a full repayment of Planet Fit Indy 10 LLC of $19.2 million and a partial paydown of $7.4 million from its investment in CHS Therapy, LLC.  In addition, WhiteHorse Finance participated in two refinancings of existing investments.  The Company refinanced its $7.5 million first lien investment to Honors Holdings, LLC, increasing its position by adding a net $1.7 million.  The Company also participated in the recapitalization of its $17.1 million first lien investment to Clarus Commerce, LLC, by reducing its position by a net $2.4 million to new borrower Marlin DTC-LS Midco 2, LLC.  The Company remained highly selective in deploying new investments.

WHF STRS Ohio Senior Loan Fund LLC

As of September 30, 2019, STRS JV's portfolio totaled $54.9 million, consisted of 5 portfolio companies and had a weighted average effective yield of 8.6%.

Results of Operations

For the three months ended September 30, 2019, net investment income was approximately $8.7 million, compared with approximately $3.8 million for the same period in the prior year, representing an increase of approximately 128.9%. 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 fees recorded.

For the three months ended September 30, 2019, WhiteHorse Finance reported net realized and unrealized losses on investments of approximately $1.8 million. This compares with net realized and unrealized gains on investments of $15.7 million for the three months ended September 30, 2018. The decrease in net realized and unrealized gains on investments for the year-over-year period was primarily attributable to the unrealized gain recognized in the prior year due to the 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 $6.9 million for the three months ended September 30, 2019, which compares with a net increase of $19.5 million for the three months ended September 30, 2018.

WhiteHorse Finance's NAV was $315.5 million, or $15.36 per share, as of September 30, 2019, as compared with $315.9 million, or $15.38 per share, as of June 30, 2019.

Liquidity and Capital Resources

As of September 30, 2019, WhiteHorse Finance had cash and cash equivalents of $22.2 million, as compared with $50.4 million as of June 30, 2019, inclusive of restricted cash.  As of September 30, 2019, the Company also had $29.7 million of undrawn capacity under its revolving credit facility.

Distributions

On September 13, 2019, the Company declared a distribution of $0.355 per share for the quarter ended September 30, 2019, consistent for the twenty-eighth consecutive quarter since the Company's IPO. The distribution was paid on October 3, 2019 to shareholders of record as of September 23, 2019. In addition, the Company also declared a special distribution of $0.195 per share, which will be payable on December 10, 2019 to stockholders of record as of October 31, 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 Thursday, November 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 # 8954769. Investors may also access the call on the investor relations portion of the Company's website at www.whitehorsefinance.com.

If you are unable to access the live teleconference, a replay will be available beginning approximately two hours after the call's completion through November 14, 2019. The teleconference replay can be accessed by dialing 404-537-3406 (domestic and international) and entering ID # 8954769. 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(4) 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.

 (4) 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 excise or other income taxes related to net realized gains and losses for the quarters ended September 30, 2019 and September 30, 2018. Additionally, the Company did not refinance any of its indebtedness for the quarter ended September 30, 2019.

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



September 30, 2019



September 30, 2018




Amount



 Per
Share

Amounts



Amount



 Per
Share

Amounts


Net investment income


$

8,655



$

0.421



$

3,777



$

0.184


Net impact of costs associated with refinancing of indebtedness



-




-




259




0.012


Accrual for capital gains incentive fee



(360)




(0.018)




3,137




0.153


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



-




-




-




-


Core net investment income


$

8,295



$

0.403



$

7,173



$

0.349



















 

 

WhiteHorse Finance, Inc.

Consolidated Statements of Assets and Liabilities

(in thousands, except share and per share data)




September 
30, 2019



December 31, 2018




(Unaudited)





Assets









Investments, at fair value









Non-controlled/non-affiliate company investments


$

493,460



$

459,399


Non-controlled affiliate company investments



9,673




10,165


Controlled affiliate company investments



24,410




-


Total investments, at fair value (amortized cost $535,213 and $477,839, 
  respectively)



527,543




469,564


Cash and cash equivalents



9,827




24,148


Restricted cash and cash equivalents



12,335




9,584


Interest receivable



6,952




4,616


Amounts receivable on unsettled investment transactions



9,219




5,608


Prepaid expenses and other receivables



158




575


Total assets


$

566,034



$

514,095











Liabilities









Debt


$

231,966



$

175,953


Management and incentive fees payable



7,717




11,193


Distributions payable



7,294




7,294


Amounts payable on unsettled investment transactions



-




445


Accounts payable and accrued expenses



2,417




2,322


Interest payable



1,067




1,562


Advances received from unfunded credit facilities



79




30


Total liabilities



250,540




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



13,916




13,718


Total net assets



315,494




315,296


Total liabilities and total net assets


$

566,034



$

514,095











Number of shares outstanding



20,546,032




20,546,032


Net asset value per share


$

15.36



$

15.35


 

 

WhiteHorse Finance, Inc.

Consolidated Statements of Operations (Unaudited)

(in thousands, except share and per share data)




Three months ended September 30,



Nine months ended September 30,




2019



2018



2019



2018


Investment income

















From non-controlled/non-affiliate
company investments

















Interest income


$

14,865



$

13,843



$

42,104



$

40,871


Fee income



2,246




875




6,328




3,855


From non-controlled affiliate company
investments

















Dividend income



301




600




888




1,851


From controlled affiliate company
investments

















Interest income



343




-




343




-


Total investment income



17,755




15,318




49,663




46,577



















Expenses

















Interest expense



3,495




3,283




9,744




8,649


Base management fees



2,834




2,761




8,240




7,813


Performance-based incentive fees



1,714




4,865




5,520




10,900


Administrative service fees



159




175




475




525


General and administrative expenses



660




572




1,875




1,843


Total expenses, before fees waived



8,862




11,656




25,854




29,730


Base management fees waived



-




(115)




(397)




(115)


Total expenses, net of fees waived



8,862




11,541




25,457




29,615


Net investment income before excise
tax



8,893




3,777




24,206




16,962


Excise tax



238




-




712




-


Net investment income after excise
tax



8,655




3,777




23,494




16,962



















Realized and unrealized gains
(losses) on investments

















Net realized gains (losses)

















Non-controlled/non-affiliate
company investments



(2)




17




(2,020)




90


Net realized gains (losses)



(2)




17




(2,020)




90


Net change in unrealized appreciation
(depreciation)

















Non-controlled/non-affiliate
company investments



(1,882)




(1,164)




1,042




(2,125)


Non-controlled affiliate company
investments



28




16,832




(492)




37,442


Controlled affiliate company
investments



56




-




56




-


Net change in unrealized
appreciation (depreciation)



(1,798)




15,668




606




35,317


Net realized and unrealized gains on
investments



(1,800)




15,685




(1,414)




35,407


Net increase in net assets resulting
from operations


$

6,855



$

19,462



$

22,080



$

52,369



















Per Common Share Data

















Basic and diluted earnings per
common share


$

0.34



$

0.95



$

1.08



$

2.55


Dividends and distributions declared
per common share


$

0.36



$

0.36



$

1.07



$

1.07


Basic and diluted weighted average
common shares outstanding



20,546,032




20,545,726




20,546,032




20,536,591


 

 

WhiteHorse Finance, Inc.

Consolidated Schedule of Investments (Unaudited)

September 30, 2019

(in thousands)





















Fair Value





















As A




Spread








Principal/









Percentage




Above


Interest


Acquisition


Maturity


Share



Amortized



Fair



of Net


Investment Type(1)


Index(2)


Rate(3)


Date(10)


Date


Amount



 Cost



Value(11)



Assets


North America

























Debt Investments

























Advertising

























Fluent, LLC

























First Lien Secured Term Loan


L+ 7.00%


9.04%


03/26/18


03/27/23



9,727



$

9,727



$

9,727




3.08

%



(0.50% Floor)























Air Freight & Logistics

























Access USA Shipping, LLC

























First Lien Secured Term Loan


L+ 8.00%


10.04%


02/08/19


02/08/24



5,724




5,649




5,673




1.80




(1.50% Floor)























Application Software

























Newscycle Solutions, Inc.

























First Lien Secured Term Loan


L+ 7.00%


9.04%


06/14/19


12/29/22



5,330




5,233




5,224




1.66




(1.00% Floor)























First Lien Secured Revolving Loan(7)


L+ 7.00%


9.06%


06/14/19


12/29/22



241




238




237




0.08




(1.00% Floor)


































5,571




5,471




5,461




1.74


Automotive Retail

























Team Car Care Holdings, LLC

























First Lien Secured Term Loan(12)


base rate+ 7.99%


10.32%


02/26/18


02/23/23



16,837




16,580




16,837




5.34




(1.00% Floor)























Broadcasting

























Alpha Media, LLC

























First Lien Secured Term Loan


L+ 6.00%


8.15%


08/14/18


02/25/22



5,629




5,506




5,623




1.78




(1.00% Floor)























Multicultural Radio Broadcasting, Inc.

























First Lien Secured Term Loan


L+ 8.00%


10.04%


12/28/17


12/28/22



16,588




16,373




16,588




5.26




(1.00% Floor)























Rural Media Group, Inc.

























First Lien Secured Term Loan


L+ 7.71%


9.97%


12/29/17


12/29/22



7,133




7,043




7,048




2.23




(1.00% Floor)


































29,350




28,922




29,259




9.27


Cable & Satellite

























Bulk Midco, LLC

























First Lien Secured Term Loan


L+ 7.31%


9.68%


06/08/18


06/08/23



15,000




14,834




13,950




4.42




(1.00% Floor)























Communications Equipment

























Sorenson Communications, LLC

























First Lien Secured Term Loan


L+ 6.50%


8.60%


03/15/19


03/15/24



5,119




4,978




5,100




1.62




(0.00% Floor)























Construction & Engineering

























SFP Holding, Inc.

























First Lien Secured Term Loan


L+ 6.25%


8.35%


07/26/19


09/01/22



6,172




6,172




6,172




1.96




(1.00% Floor)























First Lien Secured Delayed Draw Loan(7)


L+ 6.25%


8.45%


07/26/19


09/01/22



2,637




2,637




2,637




0.84




(6.25% Floor)























First Lien Secured Revolving Loan(7)


L+ 6.25%


8.41%


07/26/19


09/01/22



193




193




193




0.06






































9,002




9,002




9,002




2.86


Data Processing & Outsourced Services

























FPT Operating Company, LLC/

























TLabs Operating Company, LLC

























First Lien Secured Term Loan


L+ 8.25%


10.35%


06/07/19


06/07/24



25,063




24,825




24,437




7.75




(1.00% Floor)























Department Stores

























Mills Fleet Farm Group, LLC

























First Lien Secured Term Loan


L+ 7.00%


9.04%


10/24/18


10/24/24



14,888




14,635




14,186




4.50




(1.00% Floor)


(0.75% PIK)





















Distributors

























Crown Brands, LLC

























First Lien Secured Term Loan


L+ 8.00%


10.04%


01/28/19


01/25/24



5,801




5,676




5,669




1.80




(1.50% Floor)























First Lien Secured Delayed Draw Loan(7)


L+ 8.00%


10.04%


01/28/19


01/25/24



-




-




(1)




-




(1.50% Floor)


































5,801




5,676




5,668




1.80


Diversified Support Services

























ImageOne Industries, LLC

























First Lien Secured Term Loan


L+ 10.00%


12.04%


01/11/18


01/11/23



7,183




7,019




6,824




2.16




(1.00% Floor)


(4.00% PIK)





















First Lien Secured Revolving Loan(4)(12)


L+ 5.75%


9.33%


07/22/19


12/12/22



787




787




787




0.25



























NNA Services, LLC

























First Lien Secured Term Loan


L+ 7.00%


9.10%


10/16/18


10/16/23



9,954




9,793




9,894




3.14




(1.50% Floor)


































17,924




17,599




17,505




5.55


 

 

WhiteHorse Finance, Inc.

Consolidated Schedule of Investments (Unaudited) - (continued)

September 30, 2019

(in thousands)





















Fair Value





















As A




Spread








Principal/









Percentage




Above


Interest


Acquisition


Maturity


Share



Amortized



Fair



of Net


Investment Type(1)


Index(2)


Rate(3)


Date(10)


Date


Amount



Cost



Value(11)



Assets


Food Retail

























AG Kings Holdings, Inc.

























First Lien Secured Term Loan(8)


L+ 11.95%


14.05%


08/10/16


08/10/21



13,046



$

12,837



$

8,480




2.69

%



(1.00% Floor)


(2.00%PIK)





















Crews of California, Inc.

























First Lien Secured Term Loan


L+ 11.00%


13.04%


11/20/14


11/20/19



9,313




9,308




9,265




2.94




(1.00% Floor)


(1.00%PIK)





















First Lien Secured Revolving Loan


L+ 11.00%


13.04%


06/05/15


11/20/19



5,211




5,207




5,184




1.64




(1.00% Floor)


(1.00%PIK)





















First Lien Secured Delayed Draw Loan


L+ 11.00%


13.04%


03/27/15


11/20/19



2,675




2,673




2,661




0.84




(1.00% Floor)


(1.00%PIK)
































30,245




30,025




25,590




8.11


Health Care Facilities

























Grupo HIMA San Pablo, Inc.

























First Lien Secured Term Loan A


L+ 9.00%


11.27%


05/15/19


04/30/19



3,855




3,855




3,276




1.04




(1.50% Floor)























First Lien Secured Term Loan B


L+ 9.00%


11.27%


02/01/13


04/30/19



13,511




13,511




11,484




3.64




(1.50% Floor)























Second Lien Secured Term Loan(8)


N/A


15.75%


02/01/13


07/31/18



1,028




1,024




-




-






(2.00%PIK)
































18,394




18,390




14,760




4.68


Health Care Services

























CHS Therapy, LLC

























First Lien Secured Term Loan A


L+ 8.50%


10.63%


06/14/19


06/14/24



7,663




7,526




7,539




2.39




(1.50% Floor)























PMA Holdco, LLC

























First Lien Secured Term Loan


L+ 7.75%


9.85%


06/28/18


06/28/23



12,854




12,650




12,785




4.05




(1.00% Floor)


































20,517




20,176




20,324




6.44


Home Furnishings

























Sure Fit Home Products, LLC

























First Lien Secured Term Loan


L+ 9.75%


11.86%


10/26/18


07/13/22



5,320




5,240




5,107




1.62




(1.00% Floor)























Human Resources & Employment Services

























Pluto Acquisition Topco, LLC

























First Lien Secured Term Loan


L+ 6.56%


8.81%


01/31/19


01/31/24



12,417




12,202




12,304




3.90




(1.50% Floor)























Internet & Direct Marketing Retail

























Marlin DTC-LS Midco 2, LLC

























First Lien Secured Term Loan


L+ 6.00%


8.04%


07/01/19


07/01/25



966




947




948




0.30




(1.00% Floor)























First Lien Secured Revolving Loan(7)


L+ 6.00%


8.04%


07/01/19


07/01/25



-




-




-