Tortoise Capital Resources Corp. Releases Fiscal 2010 Second Quarter Financial Results
LEAWOOD, Kan.--(BUSINESS WIRE)-- Tortoise Capital Resources Corp. (NYSE: TTO) (or the company) today announced that it has filed its Form 10-Q for its second quarter ended May 31, 2010.
Recent Highlights
-- Net assets of $79.1 million or $8.69 per share as of May 31, 2010
-- Second quarter 2010 distribution of $0.10 per share paid June 1, 2010
Performance Review
On June 1, 2010, the company paid a distribution of $0.10 per common share, a decrease of $0.03 per share compared to its prior quarter distribution of $0.13 per share. The company determines the amount of distributions paid to stockholders based on DCF, which is distributions received from investments less total expenses. In May, TTO received additional capital gain proceeds of $585,000 from Mowood, LLC as a result of a contingent payment from the February sale of its Timberline Energy subsidiary. TTO elected to include the capital gain proceeds from Mowood in its distribution this quarter and next, enabling a distribution of $0.10 per share this quarter.
Net Asset Value
At May 31, 2010, the company's net asset value was $8.69 per share compared to $9.60 per share at Feb. 28, 2010, a decrease of approximately 9 percent. The decrease in net asset value is largely attributable to a decrease in the fair value of our largest holding, High Sierra Energy, LP (High Sierra), as a result of the developments discussed below, as well as a significant decline in the market value of PostRock Energy Corporation (NASDAQ: PSTR), for which we received a substantial number of shares in exchange for our Quest Midstream units upon closing of the merger in March, partially offset by an increase in the value of International Resource Partners LP (IRP) due to strong performance relative to budget.
Portfolio Review
As of May 31, 2010, the fair value of the company's investment portfolio (excluding short-term investments) totaled $73.9 million, including equity investments of $68.6 million and debt investments of $5.3 million. The company's portfolio is approximately 49 percent midstream and downstream investments, 13 percent upstream, and 38 percent in aggregates and coal. The weighted average yield-to-cost on the investment portfolio (excluding short-term investments) as of May 31, 2010 was 5.1 percent.
As previously reported, High Sierra was unable to declare a cash distribution this quarter as a result of a credit agreement covenant default with its bank. High Sierra's results from operations were sufficient to support a distribution at or above the minimum quarterly distribution (MQD) level of $0.45 per share. High Sierra distributed $0.63 per common unit last quarter. The distribution suspension decreased TTO's distributable cash flow by approximately $0.07 per share. If High Sierra resumes cash distributions at the MQD level, TTO could maintain its $0.10-$0.11 per share quarterly distribution, absent any additional adjustments. TTO's fair value of High Sierra, inclusive of its interest in the general partner, declined by approximately $5.8 million this quarter.
PostRock Energy Corp (NASDAQ: PSTR), the new corporation formed for the purpose of wholly owning Quest Resource Corporation, Quest Energy Partners, L.P. and Quest Midstream Partners, L.P., announced on March 5, 2010 that shareholders had approved the merger. TTO received 490,769 freely tradable common units of PostRock in exchange for its 1,216,881 common units of Quest Midstream. PostRock began trading on the NASDAQ on March 8, 2010, at $19.00 per unit and closed that day at $16.36 per unit. Subsequently, the stock price declined significantly. TTO held 460,300 common units of PostRock as of May 31, 2010 at a fair value of $4.83 per unit, the NASDAQ closing price on that date.
TTO's fair value of IRP increased about $1.8 million this quarter. The strong met coal market and IRP improved production and cost controls have yielded year-to-date performance significantly above budget. IRP also announced a quarterly distribution increase from $0.40 per unit to $0.45 per unit effective this quarter.
Earnings Call
The company will host a conference call at 4 p.m. CDT on Thursday, July 8, 2010 to discuss its financial results for the fiscal quarter ended May 31, 2010. Please dial-in approximately five to 10 minutes prior to the scheduled start time.
U.S./Canada: (866) 225-8754
International: (480) 629-9692
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 July 8, 2010 and continuing until 11:59 p.m. CDT July 22, 2010, by dialing (800) 406-7325 (U.S./Canada). The replay access code is 4313836#. A replay of the webcast will also be available on the company's website at www.tortoiseadvisors.com through July 8, 2011.
About Tortoise Capital Resources Corp.
Tortoise Capital Resources invests primarily in privately-held and micro-cap public companies operating in the midstream and downstream segments, and to a lesser extent the upstream and coal/aggregate segments, of the U.S. energy infrastructure sector.
About Tortoise Capital Advisors
Tortoise is an investment manager specializing in listed energy infrastructure, such as pipeline and power companies. As of June 30, 2010, the adviser had approximately $3.6 billion of assets under management in five NYSE-listed investment companies and private accounts. For more information, visit our Web site at 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
May 31, 2010 November 30, 2009
(Unaudited)
Assets
Investments at fair value, control
(cost $20,508,813 and $28,180,070, $ 26,556,411 $ 33,458,046
respectively)
Investments at fair value,
affiliated (cost $31,804,095 and 31,836,372 41,658,847
$52,676,299, respectively)
Investments at fair value,
non-affiliated (cost $23,757,178 17,726,201 8,865,047
and $9,568,566, respectively)
Total investments (cost
$76,070,086 and $90,424,935, 76,118,984 83,981,940
respectively)
Receivable for Adviser expense 51,617 49,843
reimbursement
Dividends 89 87
receivable
Deferred tax 4,258,358 5,429,391
asset
Prepaid expenses and other 98,919 16,792
assets
Total assets 80,527,967 89,478,053
Liabilities
Base management fees payable 309,703 299,060
to Adviser
Distribution payable to common 909,910 -
stockholders
Accrued expenses and other 219,927 282,408
liabilities
Short-term - 4,600,000
borrowings
Total 1,439,540 5,181,468
liabilities
Net assets applicable to $ 79,088,427 $ 84,296,585
common stockholders
Net Assets Applicable to Common
Stockholders Consist of:
Warrants, no par value;
945,594 issued and outstanding
at May 31, 2010 and November $ 1,370,700 $ 1,370,700
30, 2009 (5,000,000
authorized)
Capital stock, $0.001 par
value; 9,099,037 shares issued
and outstanding at May 31,
2010 and 9,078,090 issued and 9,099 9,078
outstanding at November 30,
2009 (100,000,000 shares
authorized)
Additional paid-in capital 99,983,975 101,929,307
Accumulated net investment (3,248,338 ) (3,304,416 )
loss, net of income taxes
Accumulated realized loss, net (21,417,322 ) (14,041,614 )
of income taxes
Net unrealized appreciation
(depreciation) of investments, net 2,390,313 (1,666,470 )
of income taxes
Net assets applicable to $ 79,088,427 $ 84,296,585
common stockholders
Net Asset Value per common
share outstanding (net assets
applicable to common stock, $ 8.69 $ 9.29
divided by common shares
outstanding)
Tortoise Capital
Resources
Corporation
Distributable Cash For the three For the three For the six For the six
Flow months ended months ended months ended months ended
May 31, 2010 May 31, 2009 May 31, 2010 May 31, 2009
Total from
Investments
Distributions
from $ 847,399 $ 1,852,148 $ 2,336,155 $ 4,543,782
investments
Distributions 20,972 - 20,972 -
paid in stock
Interest
income from 189,622 202,400 381,053 403,998
investments
Dividends from
money market 233 420 450 1,145
mutual funds
Other income 8,688 15,000 19,080 30,000
Total from 1,066,914 2,069,968 2,757,710 4,978,925
Investments
Operating Expenses
Before Leverage
Costs
Advisory fees
(net of
expense 258,087 281,821 516,355 609,129
reimbursement
by Adviser)
Other
operating 216,177 236,014 390,745 453,596
expenses
Total Operating
Expenses, before 474,264 517,835 907,100 1,062,725
Leverage Costs
Distributable
cash flow 592,650 1,552,133 1,850,610 3,916,200
before
leverage costs
Leverage costs - 256,842 45,619 427,958
Distributable $ 592,650 $ 1,295,291 $ 1,804,991 $ 3,488,242
Cash Flow
Capital gain 292,500 - 292,500 -
proceeds
Cash
Available for $ 885,150 $ 1,295,291 $ 2,097,491 $ 3,488,242
Distribution
Distributions paid $ 909,904 $ 1,170,247 $ 2,090,055 $ 3,231,540
on common stock
Payout percentage 103 % 90 % 100 % 93 %
for period(1)
DCF/GAAP
Reconciliation
Distributable $ 592,650 $ 1,295,291 $ 1,804,991 $ 3,488,242
Cash Flow
Adjustments to reconcile to
Net Investment Income (Loss),
before Income Taxes:
Distributions
paid in stock (20,972 ) 28,377 (20,972 ) 56,514
(2)
Return of
capital on
distributions (656,759 ) (2,864,138 ) (1,655,399 ) (4,717,386 )
received from
equity
investments
Non-recurring
professional (38,881 ) - (38,881 ) -
fees
Net
Investment
Income $ (123,962 ) $ (1,540,470 ) $ 89,739 $ (1,172,630 )
(Loss),
before Income
Taxes
(1 ) Distributions paid as a percentage of Cash
Available for Distribution.
Distributions paid in stock for the three and six months ended May 31, 2010 were
(2 ) paid as part of normal operations and are included in DCF. Distributions paid in
stock for the three and six months ended May 31, 2009 were paid in stock as a result
of credit constraints and therefore were not included in DCF.
Tortoise Capital Resources Corporation
STATEMENTS OF
OPERATIONS
(Unaudited)
For the three For the three For the six For the six
months ended May months ended months ended months ended
31, 2010 May 31, 2009 May 31, 2010 May 31, 2009
Investment
Income
Distributions
from
investments
Control $ 478,380 $ 579,215 $ 1,034,259 $ 1,158,430
investments
Affiliated 224,999 836,038 1,081,891 1,665,376
investments
Non-affiliated 144,020 465,272 220,005 1,776,490
investments
Total
distributions 847,399 1,880,525 2,336,155 4,600,296
from
investments
Less return of
capital on (656,759 ) (2,864,138 ) (1,655,399 ) (4,717,386 )
distributions
Net
distributions 190,640 (983,613 ) 680,756 (117,090 )
from
investments
Interest income
from control 189,622 202,400 381,053 403,998
investments
Dividends from
money market 233 420 450 1,145
mutual funds
Fee income 8,688 15,000 19,080 30,000
Total
Investment 389,183 (765,793 ) 1,081,339 318,053
Income
Operating
Expenses
Base management 309,704 338,186 619,626 730,955
fees
Professional 153,693 145,017 238,855 274,109
fees
Directors' fees 33,271 22,080 59,432 43,737
Reports to 16,174 15,408 31,877 30,481
stockholders
Administrator 14,456 15,782 28,916 34,111
fees
Fund accounting 7,039 8,735 14,011 16,740
fees
Registration 6,496 7,891 12,851 15,610
fees
Stock transfer 3,462 3,403 6,592 6,584
agent fees
Franchise tax 4,958 - 7,530 -
expense
Custodian fees 2,755 4,673 4,330 7,760
and expenses
Other expenses 12,754 13,025 25,232 24,464
Total
Operating 564,762 574,200 1,049,252 1,184,551
Expenses
Interest - 256,842 45,619 427,958
expense
Total Expenses 564,762 831,042 1,094,871 1,612,509
Less expense
reimbursement by (51,617 ) (56,365 ) (103,271 ) (121,826 )
Adviser
Net Expenses 513,145 774,677 991,600 1,490,683
Net Investment
Income, before (123,962 ) (1,540,470 ) 89,739 (1,172,630 )
Income Taxes
Deferred tax
benefit (967 ) 8,283 (33,661 ) (92,900 )
(expense)
Net Investment (124,929 ) (1,532,187 ) 56,078 (1,265,530 )
Income (Loss)
Realized and
Unrealized Gain
(Loss) on
Investments
Net realized
gain on control 585,000 - 2,163,001 -
investments
Net realized
loss on (9,607,112 ) - (9,624,557 ) (173,145 )
affiliated
investments
Net realized
loss on (1,239,501 ) (7,335,157 ) (1,211,889 ) (7,661,830 )
non-affiliated
investments
Net realized
loss, before (10,261,613 ) (7,335,157 ) (8,673,445 ) (7,834,975 )
income taxes
Deferred tax
benefit 1,540,708 (758,204 ) 1,297,737 (620,717 )
(expense)
Net realized
loss on (8,720,905 ) (8,093,361 ) (7,375,708 ) (8,455,692 )
investments
Net unrealized
appreciation
(depreciation) of (765,835 ) 3,029,773 769,622 3,157,483
control
investments
Net unrealized
appreciation
(depreciation) of 9,841,655 3,374,165 11,049,729 (4,903,883 )
affiliated
investments
Net unrealized
appreciation
(depreciation) of (5,525,233 ) 9,978,917 (5,327,459 ) 5,195,197
non-affiliated
investments
Net unrealized
appreciation, 3,550,587 16,382,855 6,491,892 3,448,797
before income
taxes
Deferred tax
benefit (1,985,123 ) (3,284,590 ) (2,435,109 ) 273,227
(expense)
Net unrealized
appreciation 1,565,464 13,098,265 4,056,783 3,722,024
of investments
Net Realized and
Unrealized Gain (7,155,441 ) 5,004,904 (3,318,925 ) (4,733,668 )
(Loss) on
Investments
Net Increase
(Decrease) in Net
Assets Applicable
to Common $ (7,280,370 ) $ 3,472,717 $ (3,262,847 ) $ (5,999,198 )
Stockholders
Resulting from
Operations
Net Increase
(Decrease) in
Net Assets
Applicable to
Common
Stockholders
Resulting from
Operations Per
Common Share:
Basic and $ (0.80 ) $ 0.39 $ (0.36 ) $ (0.67 )
Diluted
Weighted Average
Shares of Common
Stock
Outstanding:
Basic and 9,099,037 9,000,174 9,088,679 8,981,369
Diluted
Source: Tortoise Capital Resources Corp.
Released July 8, 2010