Tortoise Capital Resources Corp. Releases Fiscal 2011 Third Quarter Financial Results

LEAWOOD, Kan.--(BUSINESS WIRE)-- Tortoise Capital Resources Corp. (NYSE: TTO) (the company) today announced that it has filed its Form 10-Q for the third quarter ended Aug. 31, 2011.

Recent Highlights

  • Withdrew election to be regulated as a business development company
  • Distribution guidance of not less than $0.40 per share annually
  • Net asset value $10.62 per share as of Aug.31, 2011

Regulatory Structure and Investment Outlook

TTO is focused on identifying and acquiring real property assets in the U.S. energy infrastructure sector that have the potential to become real estate investment trust qualified. The company acquired its first real property asset in June 2011 with the purchase of a 40 percent undivided interest in the New Mexico transmission line, known as the Eastern Interconnect Project. The project moves electricity between Albuquerque and Clovis, New Mexico, and is subject to a triple-net-lease with Public Service Company of New Mexico that expires in 2015. The lessee and operator of the transmission line, Public Service Company of New Mexico, performed as expected and a recent strategy announcement led to Standard & Poor’s upgrading the utility’s senior unsecured debt rating to BBB- from BB+. If TTO finds sufficient suitable, REIT-qualifying investments during the remainder of 2011 and satisfies the REIT requirements throughout 2012, then TTO expects to make an election to be treated as a REIT for tax purposes for 2012.

Liquidity and Capital Resources

Subsequent to the withdrawal of its election to be regulated as a business development company, the company expects to have greater flexibility in raising both equity and debt capital. On Sept. 21, 2011, the company filed a shelf registration statement with the SEC which effectively converted the previously filed N-2 registration under the 1940 Act, to an S-3 registration statement under the 1933 Act. When effective, the shelf registration will allow TTO to prudently raise additional capital. The company is also currently seeking to obtain a secured facility to support future working capital needs and potential investments.

TTO does not plan to make additional investments in securities (other than short-term, highly liquid investments to be held pending acquisition of real property assets) and will liquidate its securities portfolio in an orderly manner. The publicly traded securities can be liquidated more readily than the private company securities.

Distribution Guidance

On Sept. 1, 2011, the company paid a quarterly distribution of $0.10 per common share, the same amount as the prior quarter. The company expects its earned distributable cash flow to support a quarterly distribution of $0.10 per share ($0.40 annually), with upside potential depending on the performance of its private equity investments.

Quarterly Performance Review

As of Aug. 31, 2011, the company’s net asset value was $10.62 per share compared to $10.66 per share at May 31, 2011. The fair value of the company’s securities investment portfolio (excluding short-term investments) totaled $81.5 million, with approximately $54.5 million in private securities and approximately $27.0 million in publicly-traded securities. In the future, the company will not be required to include net asset value per share on the face of its financial statements; however, the company does plan to provide net asset value (book value) per share as supplemental non-GAAP information.

In June 2011, TTO invested $9.9 million in Magnetar MLP Investment LP (Magnetar MLP) which was formed solely to invest in Lightfoot Capital Partners LP. The Magnetar MLP investment represents an indirect investment into Lightfoot Capital Partners, LP (Lightfoot) which owns 83.5 percent of the outstanding limited partner units of Arc Terminals LP (Arc) and 100 percent of Arc Terminals GP, which also includes a 2.0 percent limited partnership interest. At the time of the investment, Lightfoot held approximately $60 million in cash set aside for other platform investments or additional investments in Arc. Arc is an independent operator of above ground storage and delivery services for petroleum products and chemicals including refined products, renewable fuels and crude oil. As of August 2011, Arc had nine terminals located in the United States with a combined working capacity of 3.6 million barrels.

High Sierra’s fair value increased approximately $2.7 million this quarter. In May, High Sierra completed the sale of Monroe Gas Storage for $148 million. In June, High Sierra acquired the assets of Marcum Midstream, a Colorado-based water disposal company serving the oil and gas industry.

Mowood reported a very strong third quarter, due largely to its July performance in which revenues and EBITDA were well above projections. Mowood’s fair value increased approximately $0.3 million for the quarter.

In August 2011, VantaCore completed an acquisition of Cherry Grove Quarry in Todd County, Kentucky. TTO provided VantaCore $1.2 million in August to help fund the acquisition in exchange for newly issued Preferred B units. The fair value of VantaCore securities decreased approximately $3.3 million in total in the quarter, exclusive of these Preferred B units. As VantaCore was unable to meet its minimum quarterly distribution of $0.475 per unit for its quarter ended June 30, 2011, TTO received 27,167 preferred units in addition to $0.04 in cash per common and preferred unit.

Earnings Call

TTO will host a conference call on Thursday, Oct. 13, 2011 at 4:00 p.m. Central to report its earnings results for its third quarter ended Aug. 31, 2011. Please dial into the call using the toll free number: (800) 762-8779.

The call will also be webcast in a listen-only format. A link to the webcast will be accessible at www.tortoiseadvisors.com. A replay of the call will be available beginning at 6:00 p.m. CDT on Oct. 13, 2011 and continuing through Oct. 27, 2011, by dialing (800) 406-7325. The replay access code is 4467190. A replay of the webcast will also be available on the company's website at www.tortoiseadvisors.com through Oct.13, 2012.

About Tortoise Capital Resources Corp.

Tortoise Capital Resources Corp. (NYSE: TTO) is focused on real asset acquisitions primarily in the U.S. energy infrastructure sector. Tortoise Capital Advisors, LLC entered into a consulting agreement with Corridor Energy LLC to identify, analyze and finance potential investments for TTO in real estate investment trust (REIT) qualifying assets. For more information, visit www.corridorenergy.com.

About Tortoise Capital Advisors, LLC

Tortoise Capital Advisors, LLC is an investment manager specializing in managing portfolios of MLPs and other energy companies. As of Sept. 30, 2011 the adviser had approximately $6.4 billion of assets under management in five NYSE-listed closed-end investment companies, TTO, an open-end fund and private accounts. For more information, visit www.tortoiseadvisors.com.

Safe Harbor Statement

This press release shall not constitute an offer to sell or a solicitation to buy, nor shall there be any sale of these securities in any state or jurisdiction in which such offer or solicitation or sale would be unlawful prior to registration or qualification under the laws of such state or jurisdiction.

Forward-Looking Statement

This press release contains certain statements that may include "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical fact, included herein are "forward-looking statements." Although the company and Tortoise Capital Advisors believe that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the company's reports that are filed with the Securities and Exchange Commission. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Other than as required by law, the company and Tortoise Capital Advisors do not assume a duty to update this forward-looking statement. Any distribution paid in the future to our stockholders will depend on the actual performance of the company's investments, its costs of leverage and other operating expenses and will be subject to the approval of the company's Board and compliance with asset coverage requirements of the Investment Company Act of 1940 and the leverage covenants.

         
Tortoise Capital Resources Corporation              
STATEMENTS OF ASSETS & LIABILITIES
 
 
  August 31, 2011     November 30, 2010
(Unaudited)
Assets
Investments at fair value, control (cost $4,615,500 and $18,122,054, respectively) $ 8,326,078 $ 23,260,566
Investments at fair value, affiliated (cost $45,754,017 and $31,329,809, respectively) 46,030,656 49,066,009
Investments at fair value, non-affiliated (cost $30,392,767 and $21,628,965, respectively)   30,970,571     22,875,848  
Total investments (cost $80,762,284 and $71,080,828, respectively) 85,327,305 95,202,423
Leased property, net of accumulated depreciation of $117,724 14,009,125 -
Intangible lease asset, net of accumulated amortization of $48,657 1,046,114 -
Escrow receivable 1,677,052 -
Receivable for Adviser expense reimbursement 124,173 109,145
Receivable for investments sold - 5,198
Interest receivable from control investments - 42,778
Dividends and distributions receivable 124,278 83
Lease receivable 1,185,381 -
Deferred tax asset - 656,743
Prepaid expenses and other assets   33,671     25,023  
Total assets   103,527,099     96,041,393  
 
Liabilities
Base management fees payable to Adviser 372,518 327,436
Distribution payable to common stockholders 916,490 -
Accrued expenses and other liabilities 395,508 234,784
Long-term debt 3,551,320 -
Deferred tax liability   916,285     -  
Total liabilities   6,152,121     562,220  
Net assets applicable to common stockholders $ 97,374,978   $ 95,479,173  
 
Net Assets Applicable to Common Stockholders Consist of:
Warrants, no par value; 945,594 issued and outstanding
at August 31, 2011 and November 30, 2010
(5,000,000 authorized) $ 1,370,700 $ 1,370,700
Capital stock, $0.001 par value; 9,164,865 shares issued and outstanding at
August 31, 2011 and 9,146,506 shares issued and outstanding at
November 30, 2010 (100,000,000 shares authorized) 9,165 9,147
Additional paid-in capital 95,853,818 98,444,952
Accumulated net investment loss, net of income taxes (3,874,494 ) (3,308,522 )
Accumulated realized loss, net of income taxes (1,207,160 ) (18,532,648 )
Net unrealized appreciation of investments, net of income taxes   5,222,949     17,495,544  
Net assets applicable to common stockholders $ 97,374,978   $ 95,479,173  
 
Net Asset Value per common share outstanding (net assets applicable
to common stock, divided by common shares outstanding) $ 10.62   $ 10.44  
 
             
Tortoise Capital Resources Corporation                      
Distributable Cash Flow
(Unaudited)

For the Three
Months Ended
August 31,
2011

For the Three
Months Ended
August 31,
2010

For the Nine
Months Ended
August 31,
2011

For the Nine
Months Ended
August 31,
2010

 
Total from Investments
Distributions from investments $ 800,733 $ 889,895 $ 2,120,684 $ 3,226,050
Distributions paid in stock 24,608 21,746 72,368 42,718
Lease income (1) 415,915 - 415,915 -
Interest income from investments 135,956 182,622 407,242 563,675
Dividends from money market mutual funds 3,008 230 8,196 680
Other income   -     8,000     40,000     27,080  
Total from Investments 1,380,220 1,102,493 3,064,405 3,860,203
 
Operating Expenses Before Leverage Costs
Advisory fees (net of expense reimbursement by Adviser) 248,367 191,174 724,240 707,529
Other operating expenses   243,431     168,115     554,286     558,860  
Total Operating Expenses, before Leverage Costs   491,798     359,289     1,278,526     1,266,389  
Distributable cash flow before leverage costs 888,422 743,204 1,785,879 2,593,814
Leverage costs   -     -     -     45,619  
Distributable Cash Flow $ 888,422   $ 743,204   $ 1,785,879   $ 2,548,195  
 
Capital gain proceeds   -     292,500     520,589     585,000  
Cash Available for Distribution $ 888,422   $ 1,035,704   $ 2,306,468   $ 3,133,195  
 
Distributions paid on common stock $ 916,486 $ 911,646 $ 2,746,830 $ 3,001,701
 
Payout percentage for period (2) 103 % 88 % 119 % 96 %
 
DCF/GAAP Reconciliation
Distributable Cash Flow $ 888,422 $ 743,204 $ 1,785,879 $ 2,548,195
Adjustments to reconcile to Net Investment Loss,
before Income Taxes:
Distributions paid in stock (3) (24,608 ) (21,746 ) (72,368 ) (42,718 )
Return of capital on distributions received from equity investments (1,128,698 ) (1,057,882 ) (1,909,941 ) (2,713,281 )
Non-cash depreciation and amortization (122,208 ) - (122,208 ) -
Non-recurring asset acquisition expenses (583,248 ) - (583,248 ) -
Non-recurring professional fees   -     (202,619 )   -     (241,500 )
Net Investment Loss, before Income Taxes $ (970,340 ) $ (539,043 ) $ (901,886 ) $ (449,304 )
(1)  

Reflects lease income to be received, less borrowing costs on debt related to the leased assets.

(2)

Distributions paid as a percentage of Cash Available for Distribution.

(3)

Distributions paid in stock for the three and nine months ended August 31, 2011 and August 31, 2010 were paid as part of normal operations and are included in DCF.

 
               
Tortoise Capital Resources Corporation                        
STATEMENTS OF OPERATIONS
(Unaudited)

For the three
months ended
August 31, 2011

For the three
months ended
August 31, 2010

For the nine
months ended
August 31, 2011

For the nine
months ended
August 31, 2010

Investment Income
Distributions from investments
Control investments $ 69,545 $ 485,379 $ 209,256 $ 1,519,638
Affiliated investments 319,027 250,000 816,315 1,331,891
Non-affiliated investments   412,161     154,516     1,095,113     374,521  
Total distributions from investments 800,733 889,895 2,120,684 3,226,050
Less return of capital on distributions   (1,128,698 )   (1,057,882 )   (1,909,941 )   (2,713,281 )
Net distributions from investments (327,965 ) (167,987 ) 210,743 512,769
Interest income from control investments 135,956 182,622 407,242 563,675
Lease income 425,496 - 425,496 -
Dividends from money market mutual funds 3,008 230 8,196 680
Fee income   -     8,000     40,000     27,080  
Total Investment Income   236,495     22,865     1,091,677     1,104,204  
 
Operating Expenses
Base management fees 372,551 286,761 1,086,360 906,387
Asset acquisition expense 583,248 - 583,248 -
Professional fees 165,360 290,606 329,188 529,461
Depreciation expense 117,724 - 117,724 -
Directors' fees 18,697 17,543 48,666 76,975
Stockholder communication expenses 13,199 16,053 39,311 47,930
Administrator fees 9,935 13,382 28,970 42,298
Fund accounting fees 7,565 6,442 22,412 20,453
Registration fees 6,297 6,297 18,753 19,148
Franchise tax expense 5,109 2,798 15,216 10,328
Stock transfer agent fees 3,428 3,403 10,209 9,995
Custodian fees and expenses 1,165 1,457 3,447 5,787
Other expenses   12,677     12,753     38,115     37,985  
Total Operating Expenses   1,316,955     657,495     2,341,619     1,706,747  
Interest expense   14,064     -     14,064     45,619  
Total Expenses 1,331,019 657,495 2,355,683 1,752,366
Less expense reimbursement by Adviser   (124,184 )   (95,587 )   (362,120 )   (198,858 )
Net Expenses   1,206,835     561,908     1,993,563     1,553,508  
Net Investment Loss, before Income Taxes (970,340 ) (539,043 ) (901,886 ) (449,304 )
Deferred tax benefit   360,320     202,195     335,914     168,534  
Net Investment Loss   (610,020 )   (336,848 )   (565,972 )   (280,770 )
 
Realized and Unrealized Gain on Investments
Net realized gain (loss) on control investments (90,000 ) - (90,000 ) 2,163,001
Net realized gain (loss) on affiliated investments 678,301 - 24,774,537 (9,624,557 )
Net realized gain (loss) on non-affiliated investments   22,750     (1,340,452 )   2,033,872     (2,552,341 )
Net realized gain (loss), before income taxes   611,051     (1,340,452 )   26,718,409     (10,013,897 )
Current tax expense - - (200,000 ) -
Deferred tax benefit (expense)   (642,875 )   4,102,850     (9,192,921 )   5,400,587  
Income tax benefit (expense), net   (642,875 )   4,102,850     (9,392,921 )   5,400,587  
Net realized gain (loss) on investments   (31,824 )   2,762,398     17,325,488     (4,613,310 )
Net unrealized appreciation (depreciation) of control investments 262,569 (729,984 ) (1,427,934 ) 39,638
Net unrealized appreciation (depreciation) of affiliated investments 553,956 12,627,879 (17,459,561 ) 23,677,608
Net unrealized appreciation (depreciation) of non-affiliated investments   615,443     1,092,409     (669,079 )   (4,235,050 )
Net unrealized appreciation (depreciation), before income taxes 1,431,968 12,990,304 (19,556,574 ) 19,482,196
Deferred tax benefit (expense)   (199,485 )   (4,872,663 )   7,283,979     (7,307,772 )
Net unrealized appreciation (depreciation) of investments   1,232,483     8,117,641     (12,272,595 )   12,174,424  
Net Realized and Unrealized Gain on Investments   1,200,659     10,880,039     5,052,893     7,561,114  
 
Net Increase in Net Assets Applicable to
Common Stockholders Resulting from Operations $ 590,639   $ 10,543,191   $ 4,486,921   $ 7,280,344  
 
Net Increase in Net Assets Applicable to Common Stockholders
Resulting from Operations Per Common Share:
Basic and Diluted $ 0.06 $ 1.16 $ 0.49 $ 0.80
 
Weighted Average Shares of Common Stock Outstanding:
Basic and Diluted 9,164,865 9,116,456 9,156,171 9,098,005

Tortoise Capital Advisors, LLC
Pam Kearney, 866-362-9331
Investor Relations
pkearney@tortoiseadvisors.com

Source: Tortoise Capital Resources Corp.