PHILADELPHIA, Feb. 27, 2020 /PRNewswire/ — FS KKR Capital Corp. (NYSE: FSK), a leading publicly traded business development company focused on providing customized credit solutions to private middle market U.S. companies, announced its financial and operating results for the quarter and year ended December 31, 2019, and that its board of directors has declared a first quarter 2020 regular distribution totaling $0.19 per share.

(PRNewsfoto/FS/KKR Advisor, LLC)

Financial and Operating Highlights for the Quarter Ended December 31, 2019(1)

  • Net investment income of $0.20 per share, compared to $0.19 per share for the quarter ended December 31, 2018
  • Adjusted net investment income of $0.21 per share, compared to $0.21 per share for the quarter ended December 31, 2018(2)
  • Total net realized and unrealized loss of $0.25 per share, compared to a total net realized and unrealized loss of $0.62(3) per share for the quarter ended December 31, 2018
  • Paid cash distributions to stockholders totaling $0.19 per share(4)
  • Total purchases of $1,147 million versus $929 million of sales and repayments
  • Net asset value of $7.64 per share, compared to $7.86 per share as of September 30, 2019

Financial and Operating Highlights for the Year Ended December 31, 2019(1)

  • Net investment income of $0.79 per share, compared to $0.82 per share for the year ended December 31, 2018
  • Adjusted net investment income of $0.80 per share, compared to $0.85 per share for the year ended December 31, 2018(2)
  • Total net realized and unrealized loss of $0.47 per share, compared to a total net realized and unrealized loss of $1.40(3) per share for the year ended December 31, 2018
  • Paid cash distributions to stockholders totaling $0.76 per share(4)
  • FSK repurchased $153 million of shares in 2019 under the previously announced $200 million share repurchase program. Through February 26, 2020, FSK repurchased approximately $171 million under the program

«We are pleased with the strategic progress we made during 2019,» said Michael Forman, Chairman and Chief Executive Officer of FSK. «From an operational standpoint, we continued rotating our portfolio toward FS KKR originated investments, as we invested approximately $2.9 billion during the year. From a balance sheet perspective, we further reduced our already attractive cost of capital and we extended maturities across a meaningful percentage of our capital structure. As we move into 2020, we remain focused on continuing to rotate our investment portfolio while harnessing the full potential of the FS KKR origination platform.»

Declaration of Regular Distribution for First Quarter 2020

FSK’s board of directors has declared a regular cash distribution for the first quarter of $0.19 per share, which will be paid on or about April 2, 2020 to stockholders of record as of the close of business on March 18, 2020.

Summary Consolidated Results

Three Months Ended

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

December 31, 2019

September 30, 2019

December 31, 2018

Total investment income

$186

$199

$103

Net investment income

100

115

53

Net increase (decrease) in net assets resulting from
operations(3)

(27)

71

(119)

Net investment income per share

$0.20

$0.22

$0.19

Total net realized and unrealized gain (loss) per share

$(0.25)

$(0.08)

$(0.62)

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

$(0.05)

$0.14

$(0.43)

Stockholder distributions per share(4)

$0.19000

$0.19000

$0.28000

Net asset value per share at period end

$7.64

$7.86

$7.84

Weighted average shares outstanding

508,758,302

516,523,604

277,283,374

Shares outstanding, end of period

506,327,064

512,262,372

531,478,739

As of
December 31, 2019

As of
December 31, 2018

(dollar amounts in millions)

Total fair value of investments

$7,357

$7,387

Total assets

8,216

7,705

Total stockholders’ equity

3,866

4,166

 

Portfolio Highlights as of December 31, 2019

  • Total fair value of investments was $7.4 billion of which 70% was invested in senior secured securities.
  • Direct originations(5) represented approximately 88% of the portfolio by fair value as of December 31, 2019.
  • Weighted average annual yield on accruing debt investments(6) was 9.7%, compared to 10.1% as of September 30, 2019.
  • Exposure to the top ten largest portfolio companies by fair value was 22% as of December 31, 2019, compared to 22% as of September 30, 2019.

 

Total Portfolio Activity(7)

Three Months Ended

(dollar amounts in millions)

December 31, 2019

September 30, 2019

December 31, 2018

Purchases

$1,147

$698

$220

Sales and redemptions

(929)

(723)

(397)

Net portfolio activity

$218

$(25)

($177)

Portfolio Data

 As of December 31, 2019

 As of December 31, 2018

Total fair value of investments

$7,357

$7,387

Number of Portfolio Companies

210

204

% of Investments on Non-Accrual 

(based on fair value)(8)

2.8%

1.0%

Asset Class (based on fair value)

Senior Secured Loans — First Lien

50.6%

54.2%

Senior Secured Loans — Second Lien

16.3%

15.1%

Other Senior Secured Debt

3.2%

4.6%

Subordinated Debt

5.6%

5.8%

Asset Based Finance

10.0%

9.0%

Strategic Credit Opportunities Partners, LLC

6.5%

4.0%

Equity/Other

7.8%

7.3%

Interest Rate Type (based on fair value)(6)

% Variable Rate Debt Investments

64.8%

68.1%

% Fixed Rate Debt Investments

14.6%

16.5%

% Other Income Producing Investments

11.2%

6.8%

% Non-Income Producing Investments(9)

6.6%

7.6%

% of Investments on Non-Accrual

2.8%

1.0%

Direct Originations

 

Direct Originations Portfolio Data

As of December 31, 2019

As of December 31, 2018

Total Fair Value of Direct Originations

$6,492

$6,510

Leverage and Liquidity as of December 31, 2019

  • Net debt to equity ratio(10) of 89%, based on $4.2 billion in total debt outstanding, $106 million of cash and foreign currency and $642 million of net receivable for investments sold and repaid and stockholders’ equity of $3.9 billion. FSK’s weighted average effective interest rate (including the effect of non-usage fees) was 4.01%.
  • Cash and foreign currency of $106 million and availability under its financing arrangements of $637 million, subject to borrowing base and other limitations.

Conference Call Information        

FSK will host a conference call at 10:00 a.m. (Eastern Time) on Friday, February 28, 2020, to discuss its fourth quarter and full year 2019 financial and operating results. All interested parties are welcome to participate. Interested parties can access the conference call by dialing (833) 818-6808 and using the conference ID 6190199 approximately 10 minutes prior to the call. The conference call also will be webcast, which can be accessed from the Investor Relations section of FSK’s website at www.fskkrcapitalcorp.com under Events and Presentations.

A replay of the call will be available shortly after the end of the call for a period of 30 days following the call by visiting the Investor Relations section of FSK’s website at www.fskkrcapitalcorp.com under Events and Presentations. 

Supplemental Information

An investor presentation containing financial and operating information will be made available prior to the call in the Investor Relations section of FSK’s website at www.fskkrcapitalcorp.com under Events and Presentations.

About FS KKR Capital Corp.

FS KKR Capital Corp. (NYSE: FSK) is a leading publicly traded business development company (BDC) focused on providing customized credit solutions to private middle market U.S. companies. FSK seeks to invest primarily in the senior secured debt and, to a lesser extent, the subordinated debt of private middle market companies. FSK is advised by FS/KKR Advisor, LLC.  For more information, please visit www.fskkrcapitalcorp.com.

About FS/KKR Advisor, LLC

FS/KKR Advisor, LLC (FS/KKR) is a partnership between FS Investments and KKR Credit that serves as the investment adviser to BDCs with approximately $17 billion in assets under management as of December 31, 2019. The BDCs managed by FS/KKR are FSK and FS KKR Capital Corp. II.

FS Investments is a leading asset manager dedicated to helping individuals, financial professionals and institutions design better portfolios. The firm provides access to alternative sources of income and growth, and focuses on setting industry standards for investor protection, education and transparency. FS Investments is headquartered in Philadelphia, PA with offices in New York, NY, Orlando, FL and Washington, DC. Visit www.fsinvestments.com to learn more.

KKR Credit is a subsidiary of KKR & Co. Inc., a leading global investment firm that manages multiple alternative asset classes, including private equity, energy, infrastructure, real estate and credit, with strategic manager partnerships that manage hedge funds. KKR aims to generate attractive investment returns for its fund investors by following a patient and disciplined investment approach, employing world-class people, and driving growth and value creation with KKR portfolio companies. KKR invests its own capital alongside the capital it manages for fund investors and provides financing solutions and investment opportunities through its capital markets business. References to KKR’s investments may include the activities of its sponsored funds. For additional information about KKR & Co. Inc. (NYSE: KKR), please visit KKR’s website at www.kkr.com and on Twitter @KKR_Co.

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 FSK. 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 FSK’s operations or the economy generally due to terrorism or natural disasters, future changes in laws or regulations and conditions in FSK’s operating area, and the price at which shares of FSK’s common stock trade on the New York Stock Exchange. Some of these factors are enumerated in the filings FSK makes with the SEC. FSK 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 FSK. The information contained in this press release is summary information that is intended to be considered in the context of FSK’s SEC filings and other public announcements that FSK may make, by press release or otherwise, from time to time. FSK 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 FSK, or information about the market, as indicative of FSK’s future results.

Other Information

The information in this press release is summary information only and should be read in conjunction with FSK’s annual report on Form 10-K for the year ended December 31, 2019, which FSK filed with the U.S. Securities and Exchange Commission (the SEC) on February 27, 2020, as well as FSK’s other reports filed with the SEC. A copy of FSK’s annual report on Form 10-K for the year ended December 31, 2019 and FSK’s other reports filed with the SEC can be found on FSK’s website at www.fskkrcapitalcorp.com and the SEC’s website at www.sec.gov.

Certain Information About Distributions

The determination of the tax attributes of FSK’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. FSK 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 FSK’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, including the special distribution referenced herein.

FSK may fund its cash distributions to stockholders from any sources of funds legally available to it, including proceeds from the sale of shares of FSK’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. FSK has not established limits on the amount of funds it may use from available sources to make distributions. There can be no assurance that FSK will be able to pay distributions at a specific rate or at all.

Contact Information:

Investor Relations Contact

Robert Paun
[email protected]

FS Investments Media Team

Melanie Hemmert
[email protected]

 

Income Statement ($ amounts in millions, except per share data)

Year Ended December 31,

2019

2018

2017

Investment income

From non-controlled/unaffiliated investments:

Interest income

$

571

$

305

$

319

Paid-in-kind interest income

40

34

32

Fee income

42

13

41

Dividend income

10

8

0

From non-controlled/affiliated investments:

Interest income

28

3

11

Paid-in-kind interest income

16

2

3

Fee income

3

From controlled/affiliated investments:

Interest income

11

9

4

Paid-in-kind interest income

4

19

6

Dividend income

57

1

     Total investment income

779

394

419

Operating expenses

Management fees

115

63

73

Subordinated income incentive fees

57

26

50

Administrative services expenses

9

4

3

Accounting and administrative fees

2

1

1

Interest expense

170

84

79

Directors’ fees

1

1

1

Other general and administrative expenses

8

6

6

     Total operating expenses

362

185

213

     Management fee waiver

(3)

(3)

     Net expenses

362

182

210

Net investment income before taxes

417

212

209

Excise taxes

7

7

5

Net investment income

410

205

204

Realized and unrealized gain/loss

Net realized gain (loss) on investments:

Non-controlled/unaffiliated investments

$

(114)

$

(116)

$

(98)

Non-controlled/affiliated investments

32

(9)

9

Controlled/affiliated investments

1

(53)

Net realized gain (loss) on swap contracts

(11)

0

Net realized gain (loss) on foreign currency forward contracts

12

Net realized gain (loss) on secured borrowing

0

Net realized gain (loss) on foreign currency

2

6

0

Net change in unrealized appreciation (depreciation) on investments:

Non-controlled/unaffiliated investments

(105)

(48)

137

Non-controlled/affiliated investments

55

(57)

(17)

Controlled/affiliated investments

(33)

(113)

6

Net change in unrealized appreciation (depreciation) on swap contracts

16

(16)

Net change in unrealized appreciation (depreciation) on foreign currency forward contracts

(2)

3

Net change in unrealized appreciation (depreciation) on secured borrowing

0

Net change in unrealized gain (loss) on foreign currency

(17)

(3)

(6)

Change in unrealized appreciation from merger accounting

717

     Total net realized and unrealized gain (loss)

(164)

364

(22)

Net increase (decrease) in net assets resulting from operations

$

246

$

569

$

182

Per share information—basic and diluted

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

$

0.47

$         2.26(5)

$

0.74

Weighted average shares outstanding

518,946,741

251,377,426

245,270,969

 

Balance Sheet ($ amounts in millions, except per share data)

December 31,

2019

2018

Assets

Investments, at fair value

Non-controlled/unaffiliated investments (amortized cost—$6,006 and $6,457, respectively)

$

5,661

$

6,217

Non-controlled/affiliated investments (amortized cost—$686 and $382, respectively)

717

358

Controlled/affiliated investments (amortized cost—$1,117 and $917, respectively)

979

812

Total investments, at fair value (amortized cost—$7,809 and $7,756, respectively)

7,357

7,387

Cash

93

101

Foreign currency, at fair value (cost—$13 and $3, respectively)

13

3

Receivable for investments sold and repaid

657

144

Income receivable

82

60

Unrealized appreciation on foreign currency forward contracts

1

3

Deferred financing costs

10

6

Prepaid expenses and other assets

3

1

       Total assets

$

8,216

$

7,705

Liabilities

Payable for investments purchased

$

15

$

6

Debt (net of deferred financing costs of $9 and $3, respectively)

4,173

3,391

Unrealized depreciation on swap contracts

16

Unrealized depreciation on foreign currency forward contracts

0

0

Stockholder distributions payable

96

45

Management and investment adviser fees payable

30

20

Subordinated income incentive fees payable

14

Administrative services expense payable

3

1

Interest payable

23

28

Directors’ fees payable

0

0

Other accrued expenses and liabilities

10

18

       Total liabilities

4,350

3,539

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, 750,000,000 shares authorized, 506,327,064 and 531,478,739 shares issued and outstanding, respectively

1

1

Capital in excess of par value

4,041

4,235

Retained earnings (accumulated deficit)

(176)

(70)

       Total stockholders’ equity

3,866

4,166

       Total liabilities and stockholders’ equity

$

8,216

$

7,705

Net asset value per share of common stock at year end

$

7.64

$

7.84

 

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). FSK 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 FSK’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 FSK’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 Measures(1)

Three Months Ended

December 31, 2019

September 30, 2019

December 31, 2018

GAAP net investment income per share

$0.20

$0.22

$0.19

Plus capital gains incentive fees per share

Plus excise taxes per share

0.01

0.02

Plus one-time expenses per share(11)

(0.00)

Adjusted net investment income per share(2)

$0.21

$0.22

$0.21

 

 

1)

 

Per share data was derived by using the weighted average shares of FSK’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 FSK’s normal course of business (referred to herein as one-time expenses). FSK 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)

Three months ended December 31, 2018 excludes the impact of $717 million in unrealized appreciation resulting from merger
accounting. See FSK’s annual report on Form 10-K for the year ended December 31, 2019 for additional information.

4)

The per share data for distributions reflects the amount of distributions paid per share of our common stock to stockholders of
record during each applicable period.

5)

See FSK’s annual report on Form 10-K for the year ended December 31, 2019 for a description of FSK’s investment strategies,
including its definition of «direct originations.»

6)

See FSK’s annual report on Form 10-K for the year ended December 31, 2019 for important information, including information
related to the calculation and definition of weighted average annual yield on accruing debt investments, weighted average annual
yield on all debt investments, variable rate debt investments, fixed rate debt investments, other income producing investments
and non-income producing investments.

7)

Purchases do not include the investments acquired in connection with the acquisition of CCT for the three months ended
December 31, 2018.

8)

Interest income is recorded on an accrual basis. See FSK’s annual report on Form 10-K for the year ended December 31, 2019
for a description of FSK’s revenue recognition policy.

9)

Does not include investments on non-accrual status.

10)

Net debt to equity ratio is debt outstanding, net of cash and foreign currency and net payable/receivable for investments
purchased/sold and repaid, divided by net assets.

11)

FSK’s one-time expenses for the three months ended September 30, 2019 consist of a reversal of $1 resulting from a reduction in
the estimate for deferred taxes.

 

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SOURCE FS KKR Capital Corp.