PHILADELPHIA and NEW
YORK, Feb. 27, 2023 /PRNewswire/ -- FS KKR
Capital Corp. (NYSE: FSK), today announced its financial and
operating results for the quarter and year ended December 31, 2022, and that its board of
directors has declared a first quarter 2023 distribution totaling
$0.70 per share.
Financial and Operating Highlights for the Quarter Ended
December 31,
2022(1)
- Net investment income of $0.80
per share, compared to $0.76 per
share for the quarter ended September 30,
2022
-
- Adjusted net investment income(2) of $0.81 per share, compared to $0.73 per share for the quarter ended
September 30, 2022
- Net asset value of $24.89 per
share, compared to $25.30 per share
as of September 30, 2022
- Total net realized and unrealized loss of $0.56 per share, compared to a total net realized
and unrealized loss of $1.21 per
share for the quarter ended September 30,
2022
-
- Adjusted net realized and unrealized loss(2) of
$0.52 per share, compared to adjusted
net realized and unrealized loss of $1.17 per share for the quarter ended
September 30, 2022
- Earnings per Share of $0.24,
compared to Earnings per Share of $(0.45) for the quarter ended September 30, 2022
- Total purchases of $863 million
versus $1,211 million of sales and
repayments, including $127 million of
sales to its joint venture Credit Opportunities Partners JV,
LLC
- Net debt to equity ratio(3) as December 31, 2022 was 118%, compared to 119% as
of September 30, 2022
- Paid cash distributions to stockholders totaling $0.68 per share(4)
Financial and Operating Highlights for the Year Ended
December 31,
2022(1)
- Net investment income of $3.05
per share, compared to $2.76 per
share for the year ended December 31,
2021
- Total net realized and unrealized loss of $2.73 per share, compared to a total net realized
and unrealized gain of $4.40 per
share for the year ended December 31,
2021
- Paid cash distributions to stockholders totaling $2.66 per share(4)
"We are pleased to report fourth quarter adjusted net investment
income of $0.81 per share,
representing an increase of approximately 11% quarter over
quarter," said Michael C. Forman,
Chief Executive Officer & Chairman. "Additionally, we are
excited to announce a first quarter cash distribution totaling
$0.70 per share, consisting of a base
distribution of $0.64 per share and a
supplemental distribution totaling $0.06 per share. Our quarterly base distribution
of $0.64 per share represents an
increase of approximately 5% over our previous quarter's base
distribution of $0.61 per share,
reflecting our positive outlook on the long-term earnings power of
FSK. As we look forward, we believe we are well positioned to
generate significant net investment income, which will underpin our
dividend strategy of sharing excess levels of earnings with
investors on a real time basis."
Declaration of Distribution for First Quarter 2023 and
Expectations for Full Year 2023
FSK's board of directors has declared a total cash distribution
for the first quarter of $0.70 per
share, consisting of a base distribution of $0.64 per share and a supplemental distribution
of $0.06 per share, which will be
paid on or about April 3, 2023 to
stockholders of record as of the close of business on March 15, 2023. Based on the overall strength of
the company's earnings power, it is currently expected that FSK's
quarterly supplemental distribution will equate to a minimum of
$0.06 per share throughout 2023, and
possibly longer.
Portfolio Highlights as of December
31, 2022
- Total fair value of investments was $15.4 billion of which 69% was invested in senior
secured securities.
- Weighted average annual yield on accruing debt
investments(5) was 12.0%, compared to 11.1% as of
September 30, 2022. Excluding the
impact of merger accounting, weighted average annual yield on
accruing debt investments was 11.4%, compared to 10.4% as of
September 30, 2022.
- Weighted average annual yield on all debt
investments(5) was 11.2%, compared to 10.3% as of
September 30, 2022. Excluding the
impact of merger accounting, weighted average annual yield on all
debt investments was 10.6%, compared to 9.7% as of September 30, 2022.
- Exposure to the top ten largest portfolio companies by fair
value was 19% as of December 31,
2022, compared to 19% as of September
30, 2022.
- As of December 31, 2022,
investments on non-accrual status represented 2.4% and 4.9% of the
total investment portfolio at fair value and amortized cost,
respectively, compared to 2.5% and 5.0% as of September 30, 2022.
Portfolio
Data
|
As of December 31,
2022
|
As of September 30,
2022
|
|
|
|
|
Total fair value of
investments
|
$15,377
|
$15,792
|
|
|
Asset Class (based on
fair value)
|
|
|
|
|
Senior Secured Loans —
First Lien
|
60.3 %
|
61.9 %
|
|
|
Senior Secured Loans —
Second Lien
|
7.8 %
|
7.9 %
|
|
|
Other Senior Secured
Debt
|
0.7 %
|
0.7 %
|
|
|
Subordinated
Debt
|
1.7 %
|
1.6 %
|
|
|
Asset Based
Finance
|
12.4 %
|
11.6 %
|
|
|
Credit Opportunities
Partners JV, LLC
|
9.3 %
|
9.3 %
|
|
|
Equity/Other
|
7.8 %
|
7.0 %
|
|
|
Interest Rate Type
(based on fair value)
|
|
|
|
|
% Variable Rate Debt
Investments
|
69.6 %
|
70.9 %
|
|
|
% Fixed Rate Debt
Investments
|
8.6 %
|
8.7 %
|
|
|
% Other Income
Producing Investments
|
15.0 %
|
13.5 %
|
|
|
% Non-Income Producing
Investments(7)
|
4.4 %
|
4.4 %
|
|
|
% of Investments on
Non-Accrual(6)
|
2.4 %
|
2.5 %
|
|
|
Leverage and Liquidity as of December
31, 2022
- Net debt to equity ratio(3) of 118%, based on
$8.7 billion in total debt
outstanding, $251 million of cash and
foreign currency and $198 million of
net receivable for investments sold and repaid and stockholders'
equity of $7.0 billion. FSK's
weighted average effective interest rate (including the effect of
non-usage fees) was 4.78%.
- Cash and foreign currency of $251
million and availability under its financing arrangements of
$2,559 million, subject to borrowing
base and other limitations.
- As of December 31, 2022, 54% of
the Company's approximately $8,731
million of total debt outstanding was in unsecured debt and
46% in secured debt.
Conference Call Information
FSK will host a conference call at 9:00
a.m. (Eastern Time) on Tuesday, February 28, 2023, to
discuss its fourth quarter and full year 2022 financial and
operating results. All interested parties are welcome to
participate and can access the live conference call by registering
using the following URL:
https://register.vevent.com/register/BI54be26668394498bb0ed71c0207ecca0.
Participants are requested to register a day in advance or at a
minimum 15 minutes before the start of the call. Once registered,
they will receive the dial-in numbers and their unique PIN number.
When they dial in, they will input their PIN and be placed into the
call. The conference call will also be webcast, which can be
accessed from the Investor Relations section of FSK's website at
www.fskkradvisor.com under Events.
A replay of the call will be available shortly after the end of
the call by visiting the Investor Relations section of FSK's
website under Events or by using the following URL:
https://edge.media-server.com/mmc/p/mzpzszr6.
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.fskkradvisor.com
under Earnings presentations.
About FS KKR Capital Corp.
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.fskkradvisor.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
FSK.
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 Leawood, KS. 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, credit and real assets, 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
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, geo-political
risks, natural disasters or pandemics such as COVID-19, 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,
2022, which FSK filed with the U.S. Securities and Exchange
Commission (the SEC) on February 27,
2023, 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, 2022 and FSK's other
reports filed with the SEC can be found on FSK's website at
www.fskkradvisor.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.
FSK may fund its cash distributions to stockholders from any
sources of funds legally available to it, including net investment
income from operations, capital gains proceeds from the sale of
assets, non-capital gains proceeds from the sale of assets,
dividends or other distributions paid to it on account of preferred
and common equity investments in portfolio companies, proceeds from
the sale of shares of FSK's common stock and borrowings. 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
Robert.Paun@fsinvestments.com
FS Investments Media Team
Melanie Hemmert
Melanie.Hemmert@fsinvestments.com
Consolidated
Statements of Operations
(in millions, except
share and per share amounts)
|
|
|
|
Year Ended December
31,
|
|
|
2022
|
|
2021
|
|
2020
|
Investment
income
|
|
|
|
|
|
|
From
non-controlled/unaffiliated investments:
|
|
|
|
|
|
|
Interest
income
|
|
$ 1,020
|
|
$ 641
|
|
$ 427
|
Paid-in-kind interest
income
|
|
72
|
|
52
|
|
43
|
Fee income
|
|
74
|
|
88
|
|
33
|
Dividend and other
income
|
|
50
|
|
30
|
|
16
|
From
non-controlled/affiliated investments:
|
|
|
|
|
|
|
Interest
income
|
|
28
|
|
21
|
|
10
|
Paid-in-kind interest
income
|
|
48
|
|
19
|
|
19
|
Fee income
|
|
6
|
|
2
|
|
—
|
Dividend and other
income
|
|
7
|
|
—
|
|
—
|
From
controlled/affiliated investments:
|
|
|
|
|
|
|
Interest
income
|
|
58
|
|
25
|
|
7
|
Paid-in-kind interest
income
|
|
43
|
|
36
|
|
4
|
Fee income
|
|
—
|
|
1
|
|
—
|
Dividend and other
income
|
|
229
|
|
166
|
|
80
|
Total investment
income
|
|
1,635
|
|
1,081
|
|
639
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
Management
fees
|
|
245
|
|
173
|
|
106
|
Subordinated income
incentive fees
|
|
159
|
|
77
|
|
—
|
Administrative services
expenses
|
|
15
|
|
12
|
|
7
|
Accounting and
administrative fees
|
|
5
|
|
3
|
|
2
|
Interest
expense
|
|
365
|
|
231
|
|
170
|
Other general and
administrative expenses
|
|
22
|
|
19
|
|
13
|
Total operating
expenses
|
|
811
|
|
515
|
|
298
|
Incentive fee
waiver
|
|
(60)
|
|
(30)
|
|
—
|
Net expenses
|
|
751
|
|
485
|
|
298
|
Net investment income
before taxes
|
|
884
|
|
596
|
|
341
|
Excise
taxes
|
|
19
|
|
12
|
|
10
|
Net investment
income
|
|
865
|
|
584
|
|
331
|
|
|
|
|
|
|
|
Realized and
unrealized gain/loss
|
|
|
|
|
|
|
Net realized gain
(loss) on investments:
|
|
|
|
|
|
|
Non-controlled/unaffiliated investments
|
|
136
|
|
28
|
|
(323)
|
Non-controlled/affiliated investments
|
|
84
|
|
192
|
|
(132)
|
Controlled/affiliated
investments
|
|
(71)
|
|
(49)
|
|
(35)
|
Net realized gain
(loss) on foreign currency forward contracts
|
|
10
|
|
0
|
|
0
|
Net realized gain
(loss) on foreign currency
|
|
23
|
|
(7)
|
|
(6)
|
Net change in
unrealized appreciation (depreciation) on investments:
|
|
|
|
|
|
|
Non-controlled/unaffiliated investments
|
|
(679)
|
|
478
|
|
17
|
Non-controlled/affiliated investments
|
|
(131)
|
|
94
|
|
(126)
|
Controlled/affiliated
investments
|
|
(171)
|
|
156
|
|
(112)
|
Net change in
unrealized appreciation (depreciation) on foreign currency forward
contracts
|
|
16
|
|
12
|
|
(3)
|
Net change in
unrealized gain (loss) on foreign currency
|
|
15
|
|
30
|
|
(16)
|
Total net realized and
unrealized gain (loss)
|
|
(768)
|
|
934
|
|
(736)
|
Provision for taxes on
realized and unrealized gains on investments
|
|
(5)
|
|
—
|
|
—
|
Realized loss on
extinguishment of debt
|
|
—
|
|
(3)
|
|
—
|
Net increase
(decrease) in net assets resulting from operations
|
|
$ 92
|
|
$ 1,515
|
|
$ (405)
|
|
|
|
|
|
|
|
Per share
information—basic and diluted
|
|
|
|
|
|
|
Net increase (decrease)
in net assets resulting from operations (Earnings per
Share)
|
|
$ 0.32
|
|
$ 7.16
|
|
$ (3.26)
|
Weighted average shares
outstanding
|
|
283,508,494
|
|
211,670,361
|
|
124,290,607
|
Consolidated Balance
Sheets
(in millions, except
share and per share amounts)
|
|
|
|
December
31,
|
|
|
2022
|
|
2021
|
Assets
|
|
|
|
|
Investments, at fair
value
|
|
|
|
|
Non-controlled/unaffiliated investments (amortized
cost—$12,566 and 12,419, respectively)
|
|
$ 12,026
|
|
$ 12,558
|
Non-controlled/affiliated investments (amortized
cost—$575 and $860, respectively)
|
|
443
|
|
859
|
Controlled/affiliated
investments (amortized cost—$3,173 and $2,778,
respectively)
|
|
2,908
|
|
2,684
|
Total investments, at
fair value (amortized cost—$16,314 and $16,057,
respectively)
|
|
15,377
|
|
16,101
|
Cash
|
|
248
|
|
258
|
Foreign currency, at
fair value (cost—$3 and $119, respectively)
|
|
3
|
|
119
|
Receivable for
investments sold and repaid
|
|
212
|
|
567
|
Income
receivable
|
|
227
|
|
153
|
Unrealized appreciation
on foreign currency forward contracts
|
|
25
|
|
9
|
Deferred financing
costs
|
|
23
|
|
16
|
Prepaid expenses and
other assets
|
|
9
|
|
5
|
Total
assets
|
|
$ 16,124
|
|
$ 17,228
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Payable for investments
purchased
|
|
$ 14
|
|
$ 2
|
Debt (net of deferred
financing costs of $34 and $38, respectively)
|
|
8,694
|
|
9,142
|
Unrealized depreciation
on foreign currency forward contracts
|
|
1
|
|
1
|
Stockholder
distributions payable
|
|
192
|
|
176
|
Management and
investment adviser fees payable
|
|
59
|
|
60
|
Subordinated income
incentive fees payable
|
|
27
|
|
19
|
Administrative services
expense payable
|
|
6
|
|
5
|
Interest
payable
|
|
90
|
|
70
|
Other accrued expenses
and liabilities
|
|
29
|
|
23
|
Total
liabilities
|
|
9,112
|
|
9,498
|
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, 281,731,750 and
284,543,091 shares issued and outstanding, respectively
|
|
0
|
|
0
|
Capital in excess of
par value
|
|
9,610
|
|
9,658
|
Retained earnings
(accumulated deficit)
|
|
(2,598)
|
|
(1,928)
|
Total stockholders'
equity
|
|
7,012
|
|
7,730
|
Total liabilities
and stockholders' equity
|
|
$ 16,124
|
|
$ 17,228
|
Net asset value per
share of common stock at year end
|
|
$ 24.89
|
|
$ 27.17
|
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,
2022
|
|
September 30,
2022
|
GAAP net investment
income per share
|
$0.80
|
|
$0.76
|
Accretion resulting
from merger accounting
|
($0.04)
|
|
($0.04)
|
Excise Taxes
|
$0.05
|
|
$0.01
|
Adjusted net investment
income per share(2)
|
$0.81
|
|
$0.73
|
GAAP Net realized and
unrealized gain (loss) per share
|
($0.56)
|
|
($1.21)
|
Unrealized appreciation
from merger accounting
|
$0.04
|
|
$0.04
|
Adjusted net realized
and unrealized gain(2)
|
($0.52)
|
|
($1.17)
|
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 (iii) the impact
of accretion resulting from merger accounting; and (iv) 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. Adjusted net realized and unrealized gain is a non-GAAP
financial measure. Adjusted net realized and unrealized gain is
presented for all periods as GAAP realized and unrealized gains to
exclude the impact of the merger accounting. 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 and GAAP net realized and
unrealized gain to adjusted net realized and unrealized gain can be
found above.
|
3)
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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.
|
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, 2022 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.
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6)
|
Interest income is
recorded on an accrual basis. See FSK's annual report on Form 10-K
for the year ended December 31, 2022 for a description of FSK's
revenue recognition policy.
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7)
|
Does not include
investments on non-accrual status.
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SOURCE FS KKR Capital Corp.