Harvest Capital Credit Corporation Announces Financial Results for Fiscal Year and Quarter Ended December 31, 2020
Harvest Capital Credit Corporation (HCAP) reported its financial results for the fiscal year and Q4 ending December 31, 2020. The company recorded a net income of $2.5 million, a significant recovery from a net loss of $0.3 million in Q4 2019. However, net investment income declined to $1.7 million, down from $3.8 million in 2019, reflecting lower yields and increased expenses related to a merger with Portman Ridge Finance Corporation. The net asset value per share fell to $10.42 from $11.23, while total portfolio investments also decreased to $89.6 million.
- Net income increased to $2.5 million in Q4 2020 from a loss of $0.3 million in Q4 2019.
- Non-accrual loans reduced to $5.6 million at year-end, enhancing liquidity.
- NAV rose 9.9% on an annualized basis to $10.42 per share.
- Net investment income decreased to $1.7 million, down from $3.8 million in the previous year.
- Total assets decreased to $129.9 million, down from $140.1 million in 2019.
- Reported realized losses increased significantly to $4.9 million for FY 2020.
Harvest Capital Credit Corporation (the “Company,” “we,” or “our”) (NASDAQ: HCAP) announced financial results for its fiscal year and fourth quarter ended December 31, 2020.
FINANCIAL HIGHLIGHTS
|
Q4-20 |
|
Q4-19 |
|
FY-20 |
|
FY-19 |
||||||||||||||||
|
Amount |
Per share |
|
Amount |
Per share |
|
Amount |
Per share |
|
Amount |
Per share |
||||||||||||
Net investment income (loss) |
( |
) |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Core net investment income (loss) (1) |
(382,537 |
) |
(0.06 |
) |
|
1,153,280 |
|
0.19 |
|
|
1,664,179 |
|
0.28 |
|
|
3,828,786 |
|
0.63 |
|
||||
Net realized losses on investments |
(2,908,762 |
) |
(0.49 |
) |
|
(2,333,549 |
) |
(0.39 |
) |
|
(4,923,171 |
) |
(0.83 |
) |
|
(2,363,853 |
) |
(0.38 |
) |
||||
Net change in unrealized appreciation (depreciation) on investments |
7,012,964 |
|
1.18 |
|
|
869,874 |
|
0.15 |
|
|
2,160,547 |
|
0.36 |
|
|
(2,671,388 |
) |
(0.44 |
) |
||||
Provision for taxes on unrealized gains on investments |
(1,236,329 |
) |
(0.21 |
) |
|
— |
|
— |
|
|
(1,236,329 |
) |
(0.21 |
) |
|
— |
|
— |
|
||||
Net income (loss) |
|
|
|
|
|
( |
) |
( |
) |
|
( |
) |
( |
) |
|
( |
) |
( |
) |
||||
Weighted average shares outstanding (basic and diluted) |
5,958,799 |
|
|
|
5,944,914 |
|
|
|
5,956,339 |
|
|
|
6,114,474 |
|
|
||||||||
(1) |
Core net investment income and core net investment income per share are non-GAAP financial measures. For each of the fiscal years and quarters ended December 31, 2020 and 2019, there were no adjustments to GAAP net investment income and GAAP net investment income per share to arrive at core net investment income and core net investment income per share. |
PORTFOLIO ACTIVITY
|
December 31, 2020 |
|
December 31, 2019 |
|
|
|
|
||||||||
Portfolio investments at fair value |
$ |
89,554,573 |
|
|
$ |
116,809,390 |
|
|
|
|
|
||||
Total assets |
$ |
129,944,513 |
|
|
$ |
140,059,736 |
|
|
|
|
|
||||
Net assets |
$ |
62,216,521 |
|
|
$ |
66,781,482 |
|
|
|
|
|
||||
Shares outstanding |
5,968,296 |
|
|
5,945,854 |
|
|
|
|
|
||||||
Net asset value per share |
$ |
10.42 |
|
|
$ |
11.23 |
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
||||||||
|
Q4-20 |
|
Q4-19 |
|
FY-20 |
|
FY-19 |
||||||||
Portfolio activity during the period: |
|
|
|
|
|
|
|
||||||||
New debt investments |
$ |
— |
|
|
$ |
4,426,801 |
|
|
$ |
2,219,812 |
|
|
$ |
55,322,156 |
|
New equity investments |
193,367 |
|
|
10,637 |
|
|
425,099 |
|
|
3,747,775 |
|
||||
Exits of debt investments |
(8,285,151 |
) |
|
— |
|
|
(25,338,310 |
) |
|
(21,438,058 |
) |
||||
Exits of equity investments |
— |
|
|
— |
|
|
(289,391 |
) |
|
(206,435 |
) |
||||
Principal repayments |
(602,315 |
) |
|
(1,890,347 |
) |
|
(4,263,595 |
) |
|
(8,073,409 |
) |
||||
Net activity |
$ |
(8,694,099 |
) |
|
$ |
2,547,091 |
|
|
$ |
(27,246,385 |
) |
|
$ |
29,352,029 |
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
December 31, 2020 |
|
December 31, 2019 |
||||||||
Number of portfolio company investments |
21 |
|
|
25 |
|
||||||||||
Number of debt investments |
|
|
|
|
14 |
|
|
20 |
|
||||||
|
|
|
|
|
|
|
|
||||||||
Weighted average yield of debt and other income producing investments (1): |
|
|
|
||||||||||||
Cash |
|
|
|
|
9.0 |
% |
|
12.0 |
% |
||||||
PIK |
|
|
|
|
2.6 |
% |
|
1.1 |
% |
||||||
Fee amortization |
|
|
|
|
0.3 |
% |
|
0.9 |
% |
||||||
Total |
|
|
|
|
11.9 |
% |
|
14.0 |
% |
||||||
|
|
|
|
|
|
|
|
||||||||
Weighted average yield on total investments (2): |
|
|
|
||||||||||||
Cash |
|
|
|
|
6.9 |
% |
|
9.7 |
% |
||||||
PIK |
|
|
|
|
2.0 |
% |
|
0.9 |
% |
||||||
Fee amortization |
|
|
|
|
0.2 |
% |
|
0.7 |
% |
||||||
Total |
|
|
|
|
9.1 |
% |
|
11.3 |
% |
||||||
(1) |
The dollar-weighted average annualized effective yield is computed using the effective interest rates for our debt investments and other income producing investments, including cash and PIK interest as well as the accretion of deferred fees. The individual investment yields are then weighted by the respective fair values of the investments (as of the date presented) in calculating the weighted average effective yield of the portfolio as a percentage of our debt and other income producing investments. The dollar-weighted average annualized yield on the Company’s investments for a given period will generally be higher than what investors in our common stock would realize in a return over the same period because the dollar-weighted average annualized yield does not reflect the Company’s expenses or any sales load that may be paid by investors. GK Holdings, Inc. and ProAir Holdings Corporation were excluded from the calculation as of December 31, 2020 and Infinite Care, LLC and CP Holding Co., Inc. were excluded from the calculation as of December 31, 2019 because they were on non-accrual status on such dates. |
(2) |
The dollar-weighted average yield on total investments takes the same yields but weights them to determine the weighted average effective yield as a percentage of the Company's total investments. The dollar-weighted average annualized yield on the Company's investments for a given period will generally be higher than what investors in our common stock would realize in a return over the same period because the dollar-weighted average annualized yield does not reflect the Company's expenses or any sales load that may be paid by investors. |
FOURTH QUARTER AND YEAR TO DATE 2020 OPERATING RESULTS
For the three months ended December 31, 2020, the Company recorded net income of
Net investment loss and core net investment loss was
For the year ended December 31, 2020, the Company recorded a net loss of
Net investment income was
As of December 31, 2020, our total portfolio investments at fair value and total assets were
During the fourth quarter of 2020, the Company made two additional equity investments in existing portfolio companies. The Company had one payoff during the three months ended December 31, 2020. The significant investment activity for the quarter ended December 31, 2020 was as follows:
New and Incremental Investments
On October 28, 2020, the Company increased its equity investment in Slappey Communications, LLC with a
On December 24, 2020, the Company increased its equity investment in Surge Hippodrome Partners LP with a
Investment Sales and Payoffs
On October 30, 2020, the Company received a
* IRR is the rate of return that makes the net present value of all cash flows into or from the investment equal to zero, and is calculated based on the amount of each cash flow received or invested by the Company and the day it was received or invested.
"We made good progress in migrating away from assets rated lower on our internal investment rating scale and increasing our liquidity in the fourth quarter of 2020. At year end, non-accrual loans had been reduced to
CREDIT QUALITY
The Company employs various risk management and monitoring tools to categorize and assess its investments. No less frequently than quarterly, the Company applies an investment risk rating system which uses a five-level numeric scale. In determining an investment rating, Company management takes into account various aspects of a company's performance during the measurement period and assigns an investment rating to each aspect, which are then averaged. Such averages may inform, but do not necessarily determine, the investment rating assigned to a company. The following is a description of the conditions associated with each investment rating:
- Investment Rating 1 is used for investments that are performing above expectations, and whose risks remain favorable compared to the expected risk at the time of the original investment.
- Investment Rating 2 is used for investments that are performing within expectations and whose risks remain neutral compared to the expected risk at the time of the original investment. All new loans are initially rated 2.
- Investment Rating 3 is used for investments that are performing below expectations and that require closer monitoring, but where no loss of return or principal is expected. Portfolio companies with a rating of 3 may be out of compliance with financial covenants.
- Investment Rating 4 is used for investments that are performing substantially below expectations and whose risks have increased substantially since the original investment. These investments are often in workout. Investments with a rating of 4 are those for which there is an increased possibility of loss of return, but no loss of principal is expected.
- Investment Rating 5 is used for investments that are performing substantially below expectations and whose risks have increased substantially since the original investment. These investments are almost always in workout. Investments with a rating of 5 are those for which loss of return and principal is expected.
As of December 31, 2020, the weighted average risk rating of the debt investments in the Company's portfolio improved slightly to 2.74 from 2.80 in the previous quarter. Also, as of December 31, 2020, three of the Company’s fourteen debt investments were rated 1, four investments were rated 2, three investment were rated 3, four investments were rated 4, and no investments were rated 5. As of December 31, 2020, two investments with a combined fair value of
LIQUIDITY AND CAPITAL RESOURCES
Our liquidity and capital resources are derived from our senior secured revolving credit facility, proceeds received from offerings of our securities, if any, such as the 2022 Notes in August 2017, cash flows from operations, including investment sales and repayments, and cash income earned. Our primary use of funds from operations includes investments in portfolio companies and other operating expenses we incur, as well as the payment of distributions to the holders of our common stock. We used, and expect to continue to use, these capital resources as well as proceeds from any future public and private offerings of securities to finance our investment activities. To the extent the proposed merger with Portman Ridge Finance Corporation does not close, we may amend or refinance our leverage facilities and borrowings, in order to, among other things, modify covenants or the interest rates payable and extend the reinvestment period or maturity date.
As of December 31, 2020, the Company had
SIGNIFICANT PORTFOLIO DEVELOPMENTS SUBSEQUENT TO DECEMBER 31, 2020
On March 1, 2021, the Company received
ABOUT HARVEST CAPITAL CREDIT CORPORATION
Harvest Capital Credit Corporation (NASDAQ: HCAP) provides customized financing solutions to privately held small and mid-sized companies in the U.S., generally targeting companies with annual revenues of less than
Forward-Looking Statements
This press release contains forward-looking statements subject to the inherent uncertainties in predicting future events, results and conditions. Any statements that are not of historical fact (including statements containing the words "believes", "plans", "anticipates", "expects", "estimates", and similar expressions) should also be considered to be forward-looking statements. Certain factors could cause actual events, results and conditions, including those relating to the timing or likelihood of the closing of the proposed merger with Portman Ridge Finance Corporation, to differ materially from those discussed or projected in these forward-looking statements, including, without limitation, the failure to secure the shareholder approval required for the consummation of the merger with Portman Ridge Finance Corporation, the failure to fulfill all of the other various conditions to the consummation of the merger, changes in our relationships and contractual arrangements with lenders and our portfolio companies and changes in economic, market or other conditions, including with respect to the impact of the COVID-19 pandemic and its effects on the Company and its portfolio companies' results of operations and financial condition. These factors are identified from time to time in our filings with the Securities and Exchange Commission, including our annual report on Form 10-K and our quarterly reports on Form 10-Q. We undertake no obligation to update such statements to reflect subsequent events, except as may be required by law.
Harvest Capital Credit Corporation Consolidated Statements of Assets and Liabilities |
|||||||
|
December 31, |
|
December 31, |
||||
|
2020 |
|
2019 |
||||
ASSETS: |
|
|
|
||||
Non-affiliated/non-control investments, at fair value (cost of |
$ |
43,075,802 |
|
|
$ |
60,973,556 |
|
Affiliated investments, at fair value (cost of |
35,563,428 |
|
|
47,431,234 |
|
||
Control investments, at fair value (cost of |
10,915,343 |
|
|
8,404,600 |
|
||
Cash |
7,905,299 |
|
|
11,199,083 |
|
||
Restricted cash |
31,478,661 |
|
|
10,648,199 |
|
||
Interest receivable |
545,330 |
|
|
663,191 |
|
||
Accounts receivable – other |
106,415 |
|
|
184,804 |
|
||
Deferred financing costs |
205,630 |
|
|
425,379 |
|
||
Other assets |
148,605 |
|
|
129,690 |
|
||
Total assets |
$ |
129,944,513 |
|
|
$ |
140,059,736 |
|
|
|
|
|
||||
LIABILITIES: |
|
|
|
||||
Revolving line of credit |
$ |
35,591,406 |
|
|
$ |
43,700,000 |
|
2022 Notes (net of deferred offering costs of |
28,339,670 |
|
|
28,126,724 |
|
||
Accrued interest payable |
114,367 |
|
|
152,544 |
|
||
Accounts payable - base management fees |
474,217 |
|
|
593,266 |
|
||
Accounts payable - administrative services expenses |
350,000 |
|
|
350,000 |
|
||
Accounts payable - accrued expenses |
1,622,003 |
|
|
355,720 |
|
||
Deferred tax liability |
1,236,329 |
|
|
— |
|
||
Total liabilities |
67,727,992 |
|
|
73,278,254 |
|
||
|
|
|
|
||||
Commitments and contingencies |
|
|
|
||||
|
|
|
|
||||
NET ASSETS: |
|
|
|
||||
Common stock, |
6,610 |
|
|
6,588 |
|
||
Capital in excess of common stock |
89,578,243 |
|
|
90,876,759 |
|
||
Treasury shares at cost 641,965 shares at each of 12/31/20 and 12/31/19 |
(6,723,505 |
) |
|
(6,723,505 |
) |
||
Accumulated over distributed earnings |
(20,644,827 |
) |
|
(17,378,360 |
) |
||
Total net assets |
62,216,521 |
|
|
66,781,482 |
|
||
Total liabilities and net assets |
$ |
129,944,513 |
|
|
$ |
140,059,736 |
|
|
|
|
|
||||
Common stock outstanding |
5,968,296 |
|
|
5,945,854 |
|
||
|
|
|
|
||||
Net asset value per common share |
$ |
10.42 |
|
|
$ |
11.23 |
|
Harvest Capital Credit Corporation Consolidated Statements of Operations |
|||||||||||||||
|
Three Months Ended December 31, |
|
Year Ended December 31, |
||||||||||||
|
2020 (Unaudited) |
|
2019 (Unaudited) |
|
2020 |
|
2019 |
||||||||
Investment Income: |
|
|
|
|
|
|
|
||||||||
Interest: |
|
|
|
|
|
|
|
||||||||
Cash - non-affiliated/non-control investments |
$ |
981,641 |
|
|
$ |
1,693,943 |
|
|
$ |
4,580,619 |
|
|
$ |
5,941,454 |
|
Cash - affiliated investments |
623,874 |
|
|
1,224,324 |
|
|
4,114,144 |
|
|
4,718,181 |
|
||||
Cash - control investments |
98,633 |
|
|
— |
|
|
98,633 |
|
|
— |
|
||||
PIK - non-affiliated/non-control investments |
177,453 |
|
|
85,904 |
|
|
553,774 |
|
|
135,140 |
|
||||
PIK - affiliated investments |
210,436 |
|
|
157,246 |
|
|
646,817 |
|
|
726,693 |
|
||||
PIK - control investments |
98,633 |
|
|
— |
|
|
98,633 |
|
|
— |
|
||||
Amortization of fees, discounts and premiums, net: |
|
|
|
|
|
|
|
||||||||
Non-affiliated/non-control investments |
89,672 |
|
|
94,216 |
|
|
338,136 |
|
|
642,433 |
|
||||
Affiliated investments |
167,778 |
|
|
53,547 |
|
|
759,743 |
|
|
171,672 |
|
||||
Total interest income |
2,448,120 |
|
|
3,309,180 |
|
|
11,190,499 |
|
|
12,335,573 |
|
||||
Other income |
195,000 |
|
|
46,357 |
|
|
357,317 |
|
|
334,811 |
|
||||
Total investment income |
2,643,120 |
|
|
3,355,537 |
|
|
11,547,816 |
|
|
12,670,384 |
|
||||
|
|
|
|
|
|
|
|
||||||||
Expenses: |
|
|
|
|
|
|
|
||||||||
Interest expense – revolving line of credit |
146,455 |
|
|
312,626 |
|
|
1,158,910 |
|
|
640,119 |
|
||||
Interest expense - unused line of credit |
44,185 |
|
|
59,406 |
|
|
159,237 |
|
|
327,876 |
|
||||
Interest expense - deferred financing costs |
61,337 |
|
|
57,780 |
|
|
301,582 |
|
|
226,678 |
|
||||
Interest expense - unsecured notes |
440,235 |
|
|
440,235 |
|
|
1,760,940 |
|
|
1,760,940 |
|
||||
Interest expense - deferred offering costs |
54,637 |
|
|
50,956 |
|
|
212,948 |
|
|
198,602 |
|
||||
Total interest expense |
746,849 |
|
|
921,003 |
|
|
3,593,617 |
|
|
3,154,215 |
|
||||
Professional fees |
990,411 |
|
|
82,835 |
|
|
1,598,981 |
|
|
1,099,075 |
|
||||
General and administrative |
364,181 |
|
|
255,154 |
|
|
1,073,803 |
|
|
982,003 |
|
||||
Base management fees |
474,216 |
|
|
593,265 |
|
|
2,117,236 |
|
|
2,206,305 |
|
||||
Investment banking fees |
100,000 |
|
|
— |
|
|
100,000 |
|
|
— |
|
||||
Administrative services expense |
350,000 |
|
|
350,000 |
|
|
1,400,000 |
|
|
1,400,000 |
|
||||
Total expenses |
3,025,657 |
|
|
2,202,257 |
|
|
9,883,637 |
|
|
8,841,598 |
|
||||
Net Investment Income (Loss) |
(382,537 |
) |
|
1,153,280 |
|
|
1,664,179 |
|
|
3,828,786 |
|
||||
Net realized gains (losses): |
|
|
|
|
|
|
|
||||||||
Non-Affiliated / Non-Control investments |
(2,843,176 |
) |
|
(2,165,243 |
) |
|
(5,019,378 |
) |
|
(2,112,792 |
) |
||||
Affiliated investments |
(39,587 |
) |
|
— |
|
|
208,707 |
|
|
20,750 |
|
||||
Control investments |
(25,999 |
) |
|
(168,306 |
) |
|
(112,500 |
) |
|
(271,811 |
) |
||||
Net realized losses |
(2,908,762 |
) |
|
(2,333,549 |
) |
|
(4,923,171 |
) |
|
(2,363,853 |
) |
||||
Net change in unrealized appreciation (depreciation) on investments: |
|
|
|
|
|
|
|
||||||||
Non-Affiliated / Non-Control investments |
3,023,037 |
|
|
973,998 |
|
|
(1,599,890 |
) |
|
(2,474,585 |
) |
||||
Affiliated investments |
1,845,082 |
|
|
(390,254 |
) |
|
1,271,692 |
|
|
275,097 |
|
||||
Control investments |
2,144,845 |
|
|
286,130 |
|
|
2,488,745 |
|
|
(471,900 |
) |
||||
Net change in unrealized appreciation (depreciation) on investments |
7,012,964 |
|
|
869,874 |
|
|
2,160,547 |
|
|
(2,671,388 |
) |
||||
Total net unrealized and realized gains (losses) on investments |
4,104,202 |
|
|
(1,463,675 |
) |
|
(2,762,624 |
) |
|
(5,035,241 |
) |
||||
Provision for taxes on unrealized gains on investments |
(1,236,329 |
) |
|
— |
|
|
(1,236,329 |
) |
|
— |
|
||||
Net increase (decrease) in net assets resulting from operations |
$ |
2,485,336 |
|
|
$ |
(310,395 |
) |
|
$ |
(2,334,774 |
) |
|
$ |
(1,206,455 |
) |
|
|
|
|
|
|
|
|
||||||||
Net investment income (loss) per share |
( |
) |
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Net increase (decrease) in net assets resulting from operations per share |
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( |
) |
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( |
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( |
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Weighted average shares outstanding (basic and diluted) |
5,958,799 |
|
|
5,944,914 |
|
|
5,956,339 |
|
|
6,114,474 |
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View source version on businesswire.com: https://www.businesswire.com/news/home/20210312005524/en/
FAQ
What were Harvest Capital Credit Corporation's Q4 2020 financial results?
What is HCAP's net asset value per share as of December 31, 2020?
How has HCAP's investment income changed in fiscal year 2020?
What impact did the merger with Portman Ridge Finance Corporation have on HCAP?
