Bay Street News

Apollo Investment Corporation Reports Financial Results for the Quarter Ended December 31, 2018

Bay Street

Board of Directors Authorizes a New $50 Million Stock Repurchase Plan

Fiscal Third Quarter and Other Recent Highlights:

NEW YORK, Feb. 06, 2019 (GLOBE NEWSWIRE) — Apollo Investment Corporation (NASDAQ: AINV) or the “Company,” or “Apollo Investment,” today announced financial results for its third fiscal quarter ended December 31, 2018. The Company’s net investment income was $0.45 per share for the quarter ended December 31, 2018, compared to $0.45 per share for the quarter ended September 30, 2018. The Company’s net asset value (“NAV”) was $19.03 per share as of December 31, 2018, compared to $19.40 as of September 30, 2018.

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Note:  All share and per share data shown in this press release have been adjusted for the one-for-three reverse stock split of the Company’s common stock which became effective as of the close of business on November 30, 2018.

  1. Core strategies include corporate lending, aviation, life sciences, asset based and lender finance.   
  2. On a fair value basis.   
  3. Non-core strategies include oil & gas, structured credit, renewables, shipping and commodities.  
  4. The Company’s net leverage ratio is defined as debt outstanding plus payable for investments purchased, less receivable for investments sold, less cash and cash equivalents, less foreign currencies, divided by net assets.  

On February 6, 2019, the Board of Directors (the “Board”) declared a distribution of $0.45 per share, payable on March 21, 2019 to shareholders of record as of April 5, 2019.

Mr. Howard Widra, Apollo Investment’s Chief Executive Officer commented, “During the quarter, we continued to de-risk and reposition the portfolio through active management and opportunistic sales by reducing our exposure to concentrated positions and non-core assets, and shifting the portfolio into higher quality, lower risk, diversified corporate loans sourced by the Apollo Direct Origination platform.  Given the continued successful implementation of our strategy, we ended the quarter with core assets representing 80% of the portfolio.  Importantly, investments made during the quarter had the reduced risk profile, in terms of both leverage and credit spread, consistent with our plan to prudently grow the portfolio and increase leverage over time.” Mr. Widra continued, “In addition, the Board’s decision to expand our share repurchase program again underscores our commitment to creating value for our shareholders. We consider stock buybacks below NAV to be a component of our plan to deliver value to our shareholders.”

Stock Repurchase Plan

The Company also announced today that the Board has approved a new stock repurchase plan (the “Repurchase Plan”) to acquire up to $50 million of the Company’s common stock. The new Repurchase Plan is in addition to the Company’s existing share repurchase authorization, of which approximately $33.9 million of repurchase capacity remains.  Accordingly, the Company now has approximately $83.9 million available for stock repurchases under its repurchase program.

Since the inception of the share repurchase program in August 2015, the Board has approved five stock repurchase plans for $50 million each, inclusive of the newly authorized Repurchase Plan, for total share repurchase authorization of $250 million.  Since the inception of the share repurchase program and through December 31, 2018, the Company has repurchased $166.1 million of common stock, inclusive of commissions.

Under the Repurchase Plan, the Company may, but is not obligated to, repurchase its outstanding common stock in the open market from time to time provided that the Company complies with the prohibitions under its insider trading policies and the requirements of Rule 10b-18 of the Exchange Act, including certain price, market volume and timing constraints. The Company intends to allocate a portion of the authorized amount under the Repurchase Plan to be repurchased in accordance with Rule 10b5-1 of the Exchange Act (the “10b5-1 Plan”). The Repurchase Plan and the 10b5-1 Plan are designed to allow the Company to repurchase its shares both during its open window periods and at times when it otherwise might be prevented from doing so under applicable insider trading laws or because of self-imposed trading blackout periods. The Repurchase Plan does not have an expiration date and may continue to be modified or discontinued at any time.

Senior Secured Revolving Credit Facility Amendment

On November 19, 2018, the Company amended, extended and upsized its senior secured revolving credit facility (the “Senior Secured Facility”). The amendment reduced the Company’s minimum asset coverage financial covenant from 200% to 150% and includes certain related changes to the borrowing base calculation. This amendment follows the passage of the Small Business Credit Availability Act (“SBCA Act”) in March 2018 and the Board’s approval of the application of the modified asset coverage requirement for the Company in April 2018 which will become effective on April 4, 2019. There was no change in the borrowing cost in connection with the amendment. Lender commitments to the Senior Secured Facility increased by $400 million from $1.19 billion to $1.59 billion. In addition, the final maturity date of the Senior Secured Facility was extended by approximately 2 years from December 21, 2021 to November 19, 2023. For further information, please see the Company’s current report on Form 8-K filed with the Securities and Exchange Commission on November 20, 2018.

FINANCIAL HIGHLIGHTS

($ in billions, except per share data) December 31,
 2018		   September 30,
 2018		   June 30,
 2018		   March 31,
 2018		   December 31,
 2017
Total assets $ 2.38     $ 2.39     $ 2.57     $ 2.31     $ 2.42  
Investment portfolio (fair value) $ 2.31     $ 2.32     $ 2.50     $ 2.25     $ 2.35  
Debt outstanding $ 0.99     $ 0.95     $ 1.10     $ 0.79     $ 0.88  
Net assets $ 1.32     $ 1.37     $ 1.39     $ 1.42     $ 1.44  
Net asset value per share $ 19.03     $ 19.40     $ 19.42     $ 19.67     $ 19.81  
                   
Debt-to-equity ratio 0.76 x   0.69 x   0.79 x   0.56 x   0.61 x
Net leverage ratio (1) 0.74 x   0.68 x   0.78 x   0.57 x   0.62 x

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  1. The Company’s net leverage ratio is defined as debt outstanding plus payable for investments purchased, less receivable for investments sold, less cash and cash equivalents, less foreign currencies, divided by net assets.


PORTFOLIO AND INVESTMENT ACTIVITY

  Three Months Ended
December 31,		   Nine Months Ended
December 31,
(in millions)* 2018   2017   2018   2017
Investments made in portfolio companies $ 305.3     $ 198.4     $ 1,027.8     $ 806.0  
Investments sold (16.3 )   (48.1 )   (194.4 )   (69.7 )
Net activity before repaid investments 289.0     150.3     833.4     736.3  
Investments repaid (274.4 )   (156.7 )   (740.2 )   (726.8 )
Net investment activity $ 14.6     $ (6.4 )   $ 93.2     $ 9.5  
               
Portfolio companies at beginning of period 98     87     90     86  
Number of new portfolio companies 14     8     30     31  
Number of exited portfolio companies (9 )   (9 )   (17 )   (31 )
Portfolio companies at end of period 103     86     103     86  
               
Number of investments made in existing portfolio companies 26     12     35     19  

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* Totals may not foot due to rounding.


OPERATING RESULTS

  Three Months Ended
December 31,		   Nine Months Ended
December 31,
(in millions)* 2018   2017   2018   2017
Net investment income $ 31.5     $ 34.0     $ 95.2     $ 101.4  
Net realized and change in unrealized losses (32.7 )   (28.1 )   $ (55.1 )   $ (35.0 )
Net increase (decrease) in net assets resulting from operations $ (1.2 )   $ 5.8     $ 40.1     $ 66.4  
               
(per share)* (1)              
Net investment income on per average share basis $ 0.45     $ 0.47     $ 1.34     $ 1.39  
Net realized and change in unrealized loss per share $ (0.47 )   $ (0.39 )   $ (0.77 )   $ (0.48 )
Earnings (loss) per share $ (0.02 )   $ 0.08     $ 0.56     $ 0.91  

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* Totals may not foot due to rounding.

  1. Based on the weighted average number of shares outstanding for the period presented.


STOCK REPURCHASE PROGRAM

During the three months ended December 31, 2018, the Company repurchased 1,497,831 shares at a weighted average price per share of $14.73, inclusive of commissions, for a total cost of $22.1 million.  Since the inception of the share repurchase program and through December 31, 2018, the Company repurchased 9,725,950 shares at a weighted average price per share of $17.08, inclusive of commissions, for a total cost of $166.1 million.  The Company now has approximately $83.9 million available for stock repurchases under its repurchase program inclusive of the newly authorized $50 million Repurchase Plan.

CONFERENCE CALL / WEBCAST AT 5:00 PM EST ON FEBRUARY 6, 2019

The Company will host a conference call on Wednesday, February 6, 2019 at 5:00 p.m. Eastern Time. All interested parties are welcome to participate in the conference call by dialing (888) 802-8579 approximately 5-10 minutes prior to the call; international callers should dial (973) 633-6740. Participants should reference Apollo Investment Corporation or Conference ID #1796418 when prompted. A simultaneous webcast of the conference call will be available to the public on a listen-only basis and can be accessed through the Events Calendar in the Shareholder section of our website at www.apolloic.com. Following the call, you may access a replay of the event either telephonically or via audio webcast. The telephonic replay will be available approximately two hours after the live call and through February 27, 2019 by dialing (800) 585-8367; international callers please dial (404) 537-3406, reference Conference ID #1796418.  A replay of the audio webcast will also be available later that same day. To access the audio webcast please visit the Events Calendar in the Shareholder section of the Company’s website at www.apolloic.com.

SUPPLEMENTAL INFORMATION

The Company provides a supplemental information package to offer more transparency into its financial results and make its reporting more informative and easier to follow. The supplemental package is available in the Shareholders section of the Company’s website under Presentations at www.apolloic.com.

Our portfolio composition and weighted average yields as of December 31, 2018, September 30, 2018, June 30, 2018, March 31, 2018, and December 31, 2017 were as follows:

  December 31,
 2018		   September 30,
 2018		   June 30,
 2018		   March 31,
 2018		   December 31,
 2017
Portfolio composition, at fair value:                  
First lien secured debt 64%   57%   55%   50%   50%
Second lien secured debt 24%   27%   30%   31%   32%
Total secured debt 88%   84%   84%   82%   81%
Unsecured debt 0%   3%   4%   5%   5%
Structured products and other 3%   3%   3%   3%   4%
Preferred equity 1%   1%   1%   1%   1%
Common equity/interests and warrants 8%   9%   8%   9%   9%
Weighted average yields, at amortized cost (1):                  
First lien secured debt (2) 10.4%   10.4%   10.4%   10.5%   10.3%
Second lien secured debt (2) 11.4%   11.2%   11.1%   10.9%   10.8%
Total secured debt (2) 10.7%   10.7%   10.7%   10.7%   10.5%
Unsecured debt portfolio (2) —   11.0%   11.4%   11.3%   11.2%
Total debt portfolio (2) 10.7%   10.7%   10.7%   10.7%   10.5%
Total portfolio (3) 9.6%   9.7%   9.7%   9.6%   9.6%
Interest rate type, at fair value (4):                  
Fixed rate amount $— billion   $0.1 billion   $0.1 billion   $0.1 billion   $0.1 billion
Floating rate amount $1.4 billion   $1.3 billion   $1.4 billion   $1.2 billion   $1.3 billion
Fixed rate, as percentage of total 0%   6%   6%   8%   8%
Floating rate, as percentage of total 100%   94%   94%   92%   92%
Interest rate type, at amortized cost (4):                  
Fixed rate amount $— billion   $0.1 billion   $0.1 billion   $0.1 billion   $0.1 billion
Floating rate amount $1.4 billion   $1.3 billion   $1.4 billion   $1.2 billion   $1.2 billion
Fixed rate, as percentage of total 0%   6%   6%   8%   9%
Floating rate, as percentage of total 100%   94%   94%   92%   91%

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  1. An investor’s yield may be lower than the portfolio yield due to sales loads and other expenses.
  2. Exclusive of investments on non-accrual status.
  3. Inclusive of all income generating investments, non-income generating investments and investments on non-accrual status.
  4. The interest rate type information is calculated using the Company’s corporate debt portfolio and excludes aviation, oil and gas, structured credit, renewables, shipping, commodities and investments on non-accrual status.

APOLLO INVESTMENT CORPORATION
STATEMENTS OF ASSETS AND LIABILITIES
(In thousands, except share and per share data)
 
  December 31, 2018   March 31, 2018
  (Unaudited)    
Assets      
Investments at fair value:      
Non-controlled/non-affiliated investments (cost — $1,522,779 and $1,471,492, respectively) $ 1,492,712     $ 1,450,033  
Non-controlled/affiliated investments (cost — $67,308 and $73,943, respectively) 51,236     68,954  
Controlled investments (cost — $767,028 and $723,161, respectively) 764,018     729,060  
Cash and cash equivalents 22,654     14,035  
Foreign currencies (cost — $7,259 and $1,292, respectively) 7,283     1,298  
Cash collateral on options contracts —     5,016  
Receivable for investments sold 43     2,190  
Interest receivable 20,695     22,272  
Dividends receivable 3,454     2,550  
Deferred financing costs 20,603     14,137  
Variation margin receivable on options contracts —     1,846  
Prepaid expenses and other assets 969     419  
Total Assets $ 2,383,667     $ 2,311,810  
       
Liabilities      
Debt $ 994,487     $ 789,846  
Payable for investments purchased 7,811     41,827  
Distributions payable 31,302     32,447  
Management and performance-based incentive fees payable 14,276     16,585  
Interest payable 9,508     5,310  
Accrued administrative services expense 3,012     2,507  
Other liabilities and accrued expenses 6,666     5,202  
Total Liabilities $ 1,067,062     $ 893,724  
       
Net Assets $ 1,316,605     $ 1,418,086  
       
Net Assets      
Common stock, $0.001 par value (400,000,000 shares authorized; 69,187,804 and 72,104,032 shares issued and outstanding, respectively) $ 69     $ 72  
Paid-in capital in excess of par 2,590,605     2,636,651  
Accumulated over-distributed net investment income (10,565 )   (10,229 )
Accumulated net realized loss (1,216,679 )   (1,166,471 )
Net unrealized loss (46,825 )   (41,937 )
Net Assets $ 1,316,605     $ 1,418,086  
       
Net Asset Value Per Share $ 19.03     $ 19.67  
               

APOLLO INVESTMENT CORPORATION
STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share data)
 
  Three Months Ended December 31,   Nine Months Ended December 31,
  2018   2017   2018   2017
Investment Income              
Non-controlled/non-affiliated investments:              
Interest income (excluding Payment-in-kind (“PIK”) interest income) $ 39,494     $ 38,350     $ 123,523     $ 116,519  
Dividend income 2     —     2     —  
PIK interest income 643     1,752     2,709     5,926  
Other income 3,748     1,487     6,961     5,264  
Non-controlled/affiliated investments:              
Interest income (excluding PIK interest income) —     —     —     114  
Dividend income 298     392     904     2,461  
PIK interest income —     2,644     —     7,582  
Other income —     —     —     (306 )
Controlled investments:              
Interest income (excluding PIK interest income) 15,061     13,499     44,627     42,789  
Dividend income 3,300     5,250     10,550     13,403  
PIK interest income 1,495     1,379     4,390     4,046  
Total Investment Income $ 64,041     $ 64,753     $ 193,666     $ 197,798  
Expenses              
Management fees $ 8,720     $ 12,048     $ 26,851     $ 36,463  
Performance-based incentive fees 7,409     7,484     21,190     23,433  
Interest and other debt expenses 14,217     12,433     42,697     40,479  
Administrative services expense 1,657     1,693     5,152     5,061  
Other general and administrative expenses 2,564     2,262     8,621     6,438  
Total expenses 34,567     35,920     104,511     111,874  
Management and performance-based incentive fees waived (1,852 )   (4,986 )   (5,542 )   (15,077 )
Expense reimbursements (161 )   (148 )   (500 )   (444 )
Net Expenses $ 32,554     $ 30,786     $ 98,469     $ 96,353  
Net Investment Income $ 31,487     $ 33,967     $ 95,197     $ 101,445  
Net Realized and Change in Unrealized Gains (Losses)              
Net realized gains (losses):              
Non-controlled/non-affiliated investments $ (12,421 )   $ 443     $ (22,140 )   $ (96,704 )
Non-controlled/affiliated investments —     5,369     2,007     (141,472 )
Option contracts (6,475 )   (614 )   (29,995 )   (619 )
Foreign currency transactions (55 )   16     (80 )   6,635  
Extinguishment of debt —     (5,790 )   —     (5,790 )
Net realized losses (18,951 )   (576 )   (50,208 )   (237,950 )
Net change in unrealized gains (losses):              
Non-controlled/non-affiliated investments 2,235     (12,502 )   (8,603 )   88,785  
Non-controlled/affiliated investments (7,124 )   (6,391 )   (11,084 )   150,828  
Controlled investments (18,883 )   4,988     (8,911 )   (796 )
Option contracts 8,787     (12,100 )   19,146     (13,973 )
Foreign currency translations 1,271     (1,553 )   4,564     (21,937 )
Net change in unrealized gains (losses) (13,714 )   (27,558 )   (4,888 )   202,907  
Net Realized and Change in Unrealized Losses $ (32,665 )   $ (28,134 )   $ (55,096 )   $ (35,043 )
Net Increase (Decrease) in Net Assets Resulting from Operations $ (1,178 )   $ 5,833     $ 40,101     $ 66,402  
Earnings (Loss) Per Share — Basic $ (0.02 )   $ 0.08     $ 0.56     $ 0.91  
                               


Apollo Investment Corporation

Apollo Investment Corporation (NASDAQ: AINV) is a closed-end investment company that has elected to be treated as a business development company under the Investment Company Act of 1940. The Company invests primarily in various forms of debt investments, including secured and unsecured debt, loan investments, and/or equity in private middle-market companies. The Company may also invest in the securities of public companies and structured products and other investments such as collateralized loan obligations and credit-linked notes. The Company seeks to provide private financing solutions for private companies that do not have access to the more traditional providers of credit. Apollo Investment Corporation is managed by Apollo Investment Management, L.P., an affiliate of Apollo Global Management, LLC, a leading global alternative investment manager. For more information, please visit www.apolloic.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties, including, but not limited to, statements as to our future operating results; our business prospects and the prospects of our portfolio companies; the impact of investments that we expect to make; our contractual arrangements and relationships with third parties; the dependence of our future success on the general economy and its impact on the industries in which we invest; the ability of our portfolio companies to achieve their objectives; our expected financings and investments; the adequacy of our cash resources and working capital; and the timing of cash flows, if any, from the operations of our portfolio companies.

We may use words such as “anticipates,” “believes,” “expects,” “intends,” “will,” “should,” “may” and similar expressions to identify forward-looking statements. Such statements are based on currently available operating, financial and competitive information and are subject to various risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations. Statements regarding the following subjects, among others, may be forward-looking: the return on equity; the yield on investments; the ability to borrow to finance assets; new strategic initiatives; the ability to reposition the investment portfolio; the market outlook; future investment activity; and risks associated with changes in business conditions and the general economy. Undue reliance should not be placed on such forward-looking statements as such statements speak only as of the date on which they are made. We do not undertake to update our forward-looking statements unless required by law.

Contact

Elizabeth Besen
Investor Relations Manager
Apollo Investment Corporation
212.822.0625
ebesen@apollo.com