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FSIC Reports Fourth Quarter and Annual 2016 Financial Results and Declares Regular Distribution for First Quarter

PHILADELPHIA, March 1, 2017 /PRNewswire/ -- FS Investment Corporation (FSIC), a publicly traded business development company focused on providing customized credit solutions to private middle market U.S. companies, announced its operating results for the quarter and year ended December 31, 2016, and announced that its board of directors has declared its first quarter 2017 regular distribution.

Financial Highlights for the Quarter Ended December 31, 20161

  • Net investment income of $0.21 per share, compared to $0.23 per share for the quarter ended December 31, 2015
  • Adjusted net investment income of $0.23 per share, compared to $0.24 per share for the quarter ended December 31, 20152
  • Total net realized loss of $0.18 per share and total net change in unrealized appreciation of $0.18 per share, compared to a total net realized loss of $0.08 per share and a total net change in unrealized depreciation of $0.47 per share for the quarter ended December 31, 2015
  • Paid cash distributions to stockholders totaling $0.22275 per share3
  • Total purchases of $495.1 million versus $715.6 million of sales and repayments
  • Net asset value of $9.41 per share, compared to $9.42 per share as of September 30, 2016

Financial Highlights for the Year Ended December 31, 20161

  • Net investment income of $0.85 per share, compared to $1.10 per share for the year ended December 31, 2015
  • Adjusted net investment income of $0.87 per share, compared to $1.03 per share for the year ended December 31, 20152
  • Total net realized loss of $0.26 per share and total net change in unrealized appreciation of $0.62 per share, compared to a total net realized loss of $0.26 per share and a total net change in unrealized depreciation of $0.68 per share for the year ended December 31, 2015
  • Paid cash distributions to stockholders totaling $0.89100 per share
  • Total purchases of $1.2 billion versus $1.6 billion of sales and repayments

"FSIC's focus on long-term performance, the strength of its investment portfolio and the scale of its direct lending platform helped to deliver strong total returns for our stockholders in the fourth quarter and full-year 2016," said Michael C. Forman, Chairman and Chief Executive Officer of FSIC. "The backdrop of tight credit markets necessitated a conservative approach during the fourth quarter. As a result, we focused on investing in senior secured first-lien loans, consistent with FSIC's commitment to being judicious stewards of stockholders' capital."

Declaration of Regular Distribution for First Quarter 2017

FSIC's board of directors has declared a regular cash distribution for the first quarter of $0.22275 per share, which will be paid on or about April 4, 2017 to stockholders of record as of the close of business on March 22, 2017.

 Summary Consolidated Results



Three Months Ended

(dollars in thousands, except per share data)
(all per share amounts are basic and diluted)1

December 31, 2016

September 30, 2016

December 31, 2015

Total investment income

$108,978

$100,557

$114,763

Net investment income

51,542

49,003

56,151

Net increase (decrease) in net assets resulting from operations

51,862

114,369

(78,468)





Net investment income per share

$0.21

$0.20

$0.23

Adjusted net investment income per share2

$0.23

$0.20

$0.24

Total net realized and unrealized gain (loss) per share

$0.00

$0.27

$(0.55)

Net increase (decrease) in net assets resulting from operations (Earnings per Share)

$0.21

$0.47

$(0.32)

Stockholder distributions per share3

$0.22275

$0.22275

$0.22275

Net asset value per share at period end

$9.41

$9.42

$9.10

Weighted average shares outstanding

244,016,474

243,488,590

242,800,333

Shares outstanding, end of period

244,063,357

243,488,590

242,847,016







As of
December 31, 2016

As of
December 31, 2015

Total fair value of investments


$3,726,816

$4,029,371

Total assets


4,110,071

4,148,173

Total stockholders' equity


2,297,377

2,208,928

 

Portfolio Highlights as of December 31, 2016

  • Total fair value of investments was $3.7 billion.
  • Core investment strategies4 represented 97% of the portfolio by fair value as of December 31, 2016, including 88% from direct originations and 9% from opportunistic investments. Broadly syndicated/other investments represented the remaining 3% of the portfolio by fair value.
  • Gross portfolio yield prior to leverage (based on amortized cost and excluding non-income producing assets)5 was 10.1%, compared to 10.2% as of September 30, 2016. 
  • Total commitments to direct originations (including unfunded commitments) made during the fourth quarter of 2016 was $526.6 million in 18 companies, 13 of which were existing portfolio companies.
  • As of December 31, 2016, approximately 0.2% of investments were on non-accrual based on fair value.6

 

  Total Portfolio Activity


Three Months Ended

(dollar amounts in thousands)

December 31, 2016

September 30, 2016

December 31, 2015

Purchases

$495,071

$217,337

$563,346

Sales and redemptions

(715,567)

(290,764)

(511,289)

Net portfolio activity

$(220,496)

$(73,427)

$52,057


Portfolio Data

 As of December 31, 2016

As of December 31, 2015

Total fair value of investments

$3,726,816

$4,029,371

Number of Portfolio Companies

102

114

Average Annual EBITDA of Portfolio Companies

$100,000

$113,200

Weighted Average Purchase Price of Debt Investments

(as a % of par)

98.6%

98.3%

% of Investments on Non-Accrual 

(based on fair value)6

0.2%



Asset Class (based on fair value)


Senior Secured Loans — First Lien

52%

54%

Senior Secured Loans — Second Lien

16%

15%

Senior Secured Bonds

4%

6%

Subordinated Debt

12%

11%

Collateralized Securities

2%

2%

Equity/Other

14%

12%



Portfolio Composition by Strategy (based on fair value)4




Direct Originations

88%

85%

Opportunistic

9%

12%

Broadly Syndicated/Other

3%

3%



Interest Rate Type (based on fair value)


% Variable Rate

67.0%

66.8%

% Fixed Rate

19.4%

21.6%

% Income Producing Equity/Other Investments

2.7%

4.1%

% Non-Income Producing Equity/Other Investments

10.9%

7.5%



Yields (based on amortized cost)5


Gross Portfolio Yield Prior to Leverage

9.1%

9.8%

Gross Portfolio Yield Prior to Leverage — Excluding Non-Income Producing Assets

10.1%

10.4%







 

 

  Direct Origination Activity


Three Months Ended

(dollar amounts in thousands)

December 31, 2016

September 30, 2016

December 31, 2015

 

Total Commitments

(including unfunded commitments)

$526,589

$144,226

$604,203

Exited Investments (including partial paydowns)

(598,468)

(198,010)

(318,719)

Net Direct Originations

$(71,879)

$(53,784)

$285,484

 

 

Direct Originations Portfolio Data

As of December 31, 2016

 

As of December 31, 2015

Total Fair Value of Direct Originations

$3,264,395

$3,434,588

Number of Portfolio Companies

67

71

Average Annual EBITDA of Portfolio Companies

$64,600

$61,500

Average Leverage Through Tranche of Portfolio Companies —

Excluding Equity/Other and Collateralized Securities

4.8x

4.9x

% of Investments on Non-Accrual (based on fair value)6

0.1%






Three Months Ended

New Direct Originations by Asset Class (including unfunded commitments)

December 31, 2016

September 30, 2016

December 31, 2015

Senior Secured Loans — First Lien

88%

94%

60%

Senior Secured Loans — Second Lien

5%

5%

6%

Senior Secured Bonds

1%

10%

Subordinated Debt

2%

12%

Collateralized Securities

Equity/Other

4%

1%

12%

 

Average New Direct Origination Commitment Amount

$29,255

$20,604

$37,763

Weighted Average Maturity for New Direct Originations

6/20/2023

12/11/2021

10/10/2021

Gross Portfolio Yield Prior to Leverage (based on amortized cost) of New Direct Originations Funded during Period5

8.8%

9.3%

10.6%

Gross Portfolio Yield Prior to Leverage (based on amortized cost) of New Direct Originations Funded during Period —

Excluding Non-Income Producing Assets5

9.1%

9.3%

12.3%

Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Direct Originations Exited during Period5

8.0%

8.6%

9.9%







 

Leverage and Liquidity as of December 31, 2016

  • Debt to equity ratio was 74%, based on $1.70 billion in total debt outstanding and stockholders' equity of $2.30 billion. FSIC's weighted average effective interest rate (including the effect of non-usage fees) was 4.16%.
  • Cash and foreign currency of approximately $264.6 million and availability under its financing arrangements of $255.1 million, subject to borrowing base and other limitations
  • Seventeen unfunded debt investments with aggregate unfunded commitments of $186.2 million

Conference Call Information

FSIC will host a conference call at 10:00 a.m. (Eastern Time) on Thursday, March 2, 2017, to discuss its fourth quarter and year ended December 31, 2016 financial results. All interested parties are welcome to participate. You can access the conference call by dialing (877) 443-2408 and using the conference ID 54415232 approximately 10 minutes prior to the call. The conference call will also be webcast, which can be accessed from the Investor Relations section of FSIC's website at www.fsinvestmentcorp.com under Presentations and Reports.

A replay of the call will be available for a period of 30 days following the call by visiting the Investor Relations section of FSIC's website at www.fsinvestmentcorp.com under Presentations and Reports. 

Supplemental Information

An investor presentation of financial information will be made available prior to the call in the Investor Relations section of FSIC's website at www.fsinvestmentcorp.com under Presentations and Reports.

About FS Investment Corporation

FS Investment Corporation (FSIC) is a publicly traded business development company ("BDC") focused on providing customized credit solutions to private middle market U.S. companies. FSIC seeks to invest primarily in the senior secured debt and, to a lesser extent, the subordinated debt of private middle market companies to achieve the best risk-adjusted returns for its investors. In connection with its debt investments, FSIC may receive equity interests such as warrants or options.

FSIC is advised by FB Income Advisor, LLC, an affiliate of FS Investments, and is sub-advised by GSO / Blackstone Debt Funds Management LLC, an affiliate of GSO Capital Partners ("GSO"). GSO, with approximately $93.3 billion in assets under management as of December 31, 2016, is the credit platform of Blackstone, one of the world's leading managers of alternative investments. For more information, please visit www.fsinvestmentcorp.com.  

About FS Investments

FS Investments is a leading asset manager dedicated to helping individuals, financial professionals and institutions design better portfolios. The firm creates access to alternative sources of income and growth through funds managed in partnership with top institutional investment advisers. It focuses on setting industry standards for investor protection, education and transparency. 

FS Investments was founded in 2007 as Franklin Square Capital Partners. It is headquartered in Philadelphia with offices in Orlando and Washington, DC. The firm currently manages six funds with over $19 billion in assets under management as of December 31, 2016. Its affiliated broker-dealer, FS Investment Solutions, LLC (member FINRA/SIPC), distributes its offerings.

Visit www.fsinvestments.com to learn more.

Forward-Looking Statements and Important Disclosure Notice

This announcement may contain certain forward-looking statements, including statements with regard to future events or the future performance or operations of FSIC. Words such as "believes," "expects," "projects," and "future" or similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors could cause actual results to differ materially from those projected in these forward-looking statements. Factors that could cause actual results to differ materially include changes in the economy, risks associated with possible disruption in FSIC's operations or the economy generally due to terrorism or natural disasters, future changes in laws or regulations and conditions in FSIC's operating area, and the price at which shares of FSIC's common stock trade on the New York Stock Exchange. Some of these factors are enumerated in the filings FSIC makes with the SEC. FSIC undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

The press release above contains summaries of certain financial and statistical information about FSIC. The information contained in this press release is summary information that is intended to be considered in the context of FSIC's SEC filings and other public announcements that FSIC may make, by press release or otherwise, from time to time. FSIC undertakes no duty or obligation to update or revise the information contained in this press release. In addition, information related to past performance, while helpful as an evaluative tool, is not necessarily indicative of future results, the achievement of which cannot be assured. Investors should not view the past performance of FSIC, or information about the market, as indicative of FSIC's future results.

Individual investors and endowments may have different investment horizons, liquidity needs and risk tolerances. In addition, fees that may be incurred by an investor in a fund sponsored by FS Investments may be different than fees incurred by an endowment investing in similar assets as those in which the funds invest.

Other Information

The information in this press release is summary information only and should be read in conjunction with FSIC's annual report on Form 10-K for the year ended December 31, 2016, which FSIC filed with the U.S. Securities and Exchange Commission (the "SEC") on March 1, 2016, as well as FSIC's other reports filed with the SEC. A copy of FSIC's annual report on Form 10-K for the year ended December 31, 2016 and FSIC's other reports filed with the SEC can be found on FSIC's website at www.fsinvestmentcorp.com and the SEC's website at www.sec.gov.  

Certain Information About Distributions

The determination of the tax attributes of FSIC's distributions is made annually as of the end of its fiscal year based upon its taxable income and distributions paid, in each case, for the full year. Therefore, a determination as to the tax attributes of the distributions made on a quarterly basis may not be representative of the actual tax attributes for a full year. FSIC intends to update stockholders quarterly with an estimated percentage of its distributions that resulted from taxable ordinary income. The actual tax characteristics of distributions to stockholders will be reported to stockholders annually on Form 1099-DIV.

The timing and amount of any future distributions on FSIC's shares of common stock are subject to applicable legal restrictions and the sole discretion of its board of directors. There can be no assurance as to the amount or timing of any such future distributions.

FSIC may fund its cash distributions to stockholders from any sources of funds legally available to it, including proceeds from the sale of shares of FSIC's common stock, borrowings, net investment income from operations, capital gains proceeds from the sale of assets, non-capital gains proceeds from the sale of assets and dividends or other distributions paid to it on account of preferred and common equity investments in portfolio companies. FSIC has not established limits on the amount of funds it may use from available sources to make distributions. There can be no assurance that FSIC will be able to pay distributions at a specific rate or at all.

Contact Information:

Investors:
Dominic Mammarella
Director, Investor Relations
dominic.mammarella@fsinvestments.com
215-220-4280

Media:
FS Investments Media Team
media@fsinvestments.com
215-495-1174

 

Income Statement



Year Ended December 31,



2016


2015


2014

Investment income







From non-controlled/unaffiliated investments:







Interest income


$

373,158



$

420,834



$

418,749


Fee income


35,541



43,392



44,961


Dividend income


2,727



6,499



810


From non-controlled/affiliated investments:







Interest income


6,824



2,603




Fee income


752



790




Dividend income


224



299



299


From controlled/affiliated investments:







Interest income


3,583



380




     Total investment income


422,809



474,797



464,819









Operating expenses







Management fees


71,280



75,401



84,617


Capital gains incentive fees




(21,075)



(9,468)


Subordinated income incentive fees


51,830



61,036



58,122


Administrative services expenses


3,475



4,182



4,794


Accounting and administrative fees


966



1,082



1,223


Interest expense


74,058



75,127



64,804


Directors' fees


1,139



1,026



1,027


Listing advisory fees






5,043


Other general and administrative expenses


7,184



6,872



10,086


     Total operating expenses


209,932



203,651



220,248


     Management fee waiver






(2,837)


     Net expenses


209,932



203,651



217,411


Net investment income before taxes


212,877



271,146



247,408


Excise taxes


5,554



6,056



5,400


Net investment income


207,323



265,090



242,008


Realized and unrealized gain/loss







Net realized gain (loss) on investments:







Non-controlled/unaffiliated investments


$

(63,535)



$

(62,426)



$

30,607


Controlled/affiliated investments


(26)






Net realized gain (loss) on foreign currency


330



(640)



(301)


Net change in unrealized appreciation (depreciation) on investments:







Non-controlled/unaffiliated investments


138,719



(212,155)



(79,008)


Non-controlled/affiliated investments


8,519



44,247



(3,138)


Controlled/affiliated investments


1,453



743




Net change in unrealized appreciation (depreciation) on secured borrowing


(49)






Net change in unrealized gain (loss) on foreign currency


1,557



3,526



4,613


     Total net realized and unrealized gain (loss)


86,968



(226,705)



(47,227)


Net increase (decrease) in net assets resulting from operations


$

294,291



$

38,385



$

194,781


Per share information—basic and diluted







Net increase (decrease) in net assets resulting from operations (Earnings per Share)


$

1.21



$

0.16



$

0.78


Weighted average shares outstanding


243,448,610



241,946,850



248,799,524


 

 

Balance Sheet



December 31,



2016


2015

Assets





Investments, at fair value





Non-controlled/unaffiliated investments (amortized cost—$3,509,899 and $4,027,950, respectively)


$

3,440,951



$

3,820,283


Non-controlled/affiliated investments (amortized cost—$153,167 and $91,248, respectively)


202,795



132,357


Controlled/affiliated investments (amortized cost—$80,874 and $75,988, respectively)


83,070



76,731


Total investments, at fair value (amortized cost—$3,743,940 and $4,195,186, respectively)


$

3,726,816



$

4,029,371


Cash


264,594



80,807


Foreign currency, at fair value (cost—$4 and $1,175, respectively)


4



1,180


Receivable for investments sold and repaid


75,921



66


Interest receivable


36,106



34,600


Deferred financing costs


5,828



1,420


Prepaid expenses and other assets


802



729


       Total assets


$

4,110,071



$

4,148,173







Liabilities





Payable for investments purchased


$

5,748



$


Credit facilities payable


619,932



34,625


Unsecured notes payable (net of deferred financing costs of $1,884 and $1,490, respectively)


1,070,701



988,274


Repurchase agreement payable




800,000


Secured borrowing, at fair value (proceeds of $2,831 and $0, respectively)


2,880




Stockholder distributions payable


54,364



54,093


Management fees payable


18,022



18,415


Subordinated income incentive fees payable


12,885



13,374


Administrative services expense payable


516



946


Interest payable


20,144



22,061


Directors' fees payable


281



282


Other accrued expenses and liabilities


7,221



7,175


       Total liabilities


1,812,694



1,939,245


Commitments and contingencies










Stockholders' equity





Preferred stock, $0.001 par value, 50,000,000 shares authorized, none issued and outstanding





Common stock, $0.001 par value, 450,000,000 shares authorized, 244,063,357 and 242,847,016 shares issued and outstanding, respectively


244



243


Capital in excess of par value


2,262,323



2,264,345


Accumulated undistributed net realized gain/loss on investments and gain/loss on foreign currency


(94,830)



(45,748)


Accumulated undistributed (distributions in excess of) net investment income


137,299



147,946


Net unrealized appreciation (depreciation) on investments and secured borrowing and unrealized gain/loss on foreign currency


(7,659)



(157,858)


       Total stockholders' equity


2,297,377



2,208,928


       Total liabilities and stockholders' equity


$

4,110,071



$

4,148,173


Net asset value per share of common stock at year end


$

9.41



$

9.10


 

Non-GAAP Financial Measures

This press release contains certain financial measures that have not been prepared in accordance with generally accepted accounting principles in the United States ("GAAP"). FSIC uses these non-GAAP financial measures internally in analyzing financial results and believes that the use of these non-GAAP financial measures is useful to investors as an additional tool to evaluate ongoing results and trends and in comparing FSIC's financial results with other BDCs.

Non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures, and should be read only in conjunction with FSIC's consolidated financial statements prepared in accordance with GAAP. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures has been provided in this press release, and investors are encouraged to review the reconciliation.

Reconciliation of Non-GAAP Financial Measures1


                                      Three Months Ended


December 31, 2016

September 30, 2016

December 31, 2015

GAAP net investment income per share

$0.21

$0.20

$0.23

Plus capital gains incentive fees per share

(0.01)

Plus excise taxes per share

0.02

0.02

Plus one-time expenses per share

Adjusted net investment income per share2

$0.23

$0.20

$0.24

 

1)

Per share data was derived by using the weighted average shares of FSIC's common stock outstanding during the applicable
period. Per share numbers may not sum due to rounding.

2)

Adjusted net investment income is a non-GAAP financial measure. Adjusted net investment income is presented for all
periods as GAAP net investment income excluding (i) the accrual for the capital gains incentive fee for realized and
unrealized gains; (ii) excise taxes; and (iii) certain non-recurring operating expenses that are one-time in nature and are not
representative of ongoing operating expenses incurred during FSIC's normal course of business (referred to herein as one-time
expenses). FSIC uses this non-GAAP financial measure internally in analyzing financial results and believes that the use
of this non-GAAP financial measure is useful to investors as an additional tool to evaluate ongoing results and trends and in
comparing its financial results with other business development companies. 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. A reconciliation
of GAAP net investment income to adjusted net investment income can be found above.

3)

The per share data for distributions reflects the amount of distributions paid on January 4, 2017 to stockholders of record as
of the close of business on December 21, 2016.

4)

See FSIC's annual report on Form 10-K for the year ended December 31, 2016 for a description of FSIC's investment strategies.

5)

Gross portfolio yield represents the expected annualized yield of FSIC's investment portfolio based on the composition of the
portfolio as of the applicable date.

6)

 

Interest income is recorded on an accrual basis. See FSIC's annual report on Form 10-K for the year ended December 31,
2016 for a description of FSIC's revenue recognition policy.

               

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