Tortoise Capital Resources Corp. Releases Fiscal 2008 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, 2008.
Recent Highlights
-- Third quarter distribution of $0.2650 per share paid Sept. 02,
2008 (annualized yield of 7.1% based on initial offering price
of $15.00 per share and the fifth consecutive distribution
increase since the IPO)
-- Net assets at quarter end of $119.0 million, or $13.38 per
share
-- Received a substantial distribution from LONESTAR Midstream
Partners LP and LSMP GP, LP (collectively LONESTAR) related to
its sale of assets to Penn Virginia Resource Partners, L.P.
(NYSE: PVR)
-- Millennium Midstream Partners, LP (Millennium) sold its
partnership interests to Eagle Rock Energy Partners, L.P.
(NASDAQ: EROC)
Portfolio and Investment Activity
Net assets at Aug. 31, 2008 were $119.0 million or $13.38 per share as compared to $121.5 million or $13.69 per share at May 31, 2008. As of Aug. 31, 2008, the fair value of the company's investment portfolio (excluding short-term investments) totaled $160.3 million including equity investments of $153.2 million and debt investments of $7.1 million, with 63 percent in midstream and downstream investments, 23 percent in aggregates and coal investments and 14 percent in upstream investments. The weighted average yield-to-cost on the investment portfolio (excluding short-term investments) as of Aug. 31, 2008 was 8.8 percent.
On Oct. 01, 2008, Millennium sold its partnership interests to EROC for $181 million in cash and approximately four million EROC unregistered common units. In exchange for its Millennium partnership interests, the company received $13.7 million in cash and 373,224 EROC unregistered common units with an aggregate basis of $5.0 million for total proceeds at close of approximately $18.7 million. The company originally invested $17.5 million in Millennium, and had an adjusted cost basis of approximately $15.1 million (after reducing its basis for expected cash distributions received since investment that were treated as return of capital), resulting in a realized gain for book purposes of approximately $3.6 million. For purposes of the capital gain incentive fee, the realized gain will be approximately $1.2 million, which excludes that portion of the fee that would be due as a result of expected cash distributions characterized as return of capital for book purposes. The capital gains incentive fee is accrued during the year as a result of increases or decreases in the fair value of investments and realized gains or losses, but it is only paid annually if there are realization events and if the calculation defined in the Investment Advisory Agreement results in an amount due. In addition, approximately $84,000 in cash and 253,113 units with an aggregate basis of $3.5 million will be held in escrow for 18 months, subject to customary closing adjustments.
On July 17, 2008, LONESTAR closed a transaction with Penn Virginia Resource Partners, L.P. (NYSE: PVR) for the sale of its gas gathering and transportation assets. LONESTAR distributed substantially all of the initial sales proceeds to its limited partners but did not redeem partnership interests. On July 24, 2008, the company received a distribution of $10.5 million in cash, 468,001 newly issued unregistered common units of PVR at an aggregate basis of approximately $10.8 million, and 59,503 unregistered common units of Penn Virginia GP Holdings, L.P. (NYSE: PVG) at an aggregate basis of approximately $1.6 million. The company characterized this distribution as approximately $20.8 million return of capital and approximately $2.1 million as realized gain from the sale of the underlying assets. The realized gain is considered in the calculation of the accrued capital gains incentive fees as reflected in the current financial statements; however, it will not be deemed a realization event for purposes of payment of the capital gains incentive fee until such time as the LONESTAR partnership interests are sold or otherwise disposed. The company expects to receive additional unregistered PVR and PVG units which are held in escrow, due to be released to LONESTAR in the next six to twelve months along with cash distributions received on the escrow units retained by the escrow agent, subject to customary closing adjustments.
Additionally, the company expects a future cash distribution from LONESTAR of approximately $1.0 million payable on December 31, 2009 and two future contingent payments due LONESTAR for which the company's expected portion would total approximately $9.6 million, payable in cash or common units of PVR (at PVR's election). The contingent payments are based on the achievement of specific revenue targets by or before June 30, 2013, and no payments are due if these revenue targets are not achieved.
On Aug. 04, 2008, the company invested an additional $1.5 million of equity in Mowood, LLC (Mowood). The investment was used for Mowood's subsidiary, Timberline Energy, LLC, to complete landfill gas to energy projects in Butler, Neb. and Hernando, Fla. The Butler facility became operational in September. Construction on the Hernando facility is complete and the facility is expected to be operational shortly. With the completion of the Butler and Hernando facilities, Timberline will operate a high Btu facility, a direct use facility and an electricity generation facility -- one of each of the three types of landfill gas to energy projects feasible under current technology.
On Aug. 04, 2008, the company invested $9.9 million in VantaCore Partners LP (VantaCore), an existing portfolio company focused on the aggregates industry. VantaCore repaid the company's $3.75 million term note at a three percent premium to par value. The company reinvested the proceeds from this repayment, and an additional $6.1 million, to purchase 508,430 common units and 199 incentive distribution rights of VantaCore. VantaCore used the proceeds from this investment to partially fund its acquisition of Southern Aggregates LLC, a sand and gravel operation located near Baton Rouge, La. The Southern Aggregates acquisition is the third acquisition for VantaCore, and diversifies VantaCore's earnings base and geographic footprint to include the Baton Rouge and Lafayette, La. markets.
On Sept. 26, the company invested an additional $0.5 million in Mowood in the form of a promissory note. The note has a variable annual interest rate equal to the one-month LIBOR plus 3.75 percent and matures on Nov. 29, 2008. Mowood plans to use the proceeds for working capital purposes.
As of Aug. 31, 2008, all portfolio companies had a risk profile rating of (1), with the exception of Quest Midstream Partners, L.P. (Quest), High Sierra Energy, LP, and High Sierra Energy GP, LLC (collectively High Sierra), each of which had a rating of (2). Quest is re-negotiating the terms of its credit facility following announcements of an alleged misappropriation of funds by Mr. Jerry Cash, former Chairman and CEO of Quest Resource Corporation, Quest Energy Partners, L.P. and Quest Midstream Partners, L.P. High Sierra Energy, LP also is re-negotiating the terms of its credit facility amidst tight conditions in the credit markets, further complicated by its material aggregate exposure to the SemGroup, L.P. bankruptcy in the form of unsecured trade debts.
"We are pleased to have completed two investments in the third quarter which funded growth in our portfolio companies. Our investment in VantaCore helped to facilitate the acquisition of Southern Aggregates LLC which significantly increases the size and geographic diversification of VantaCore's operations. Our investment in Mowood will allow its subsidiary, Timberline Energy, LLC, to complete two additional landfill gas to energy projects. The completion of the three initial projects will signal a change in Timberline from a development company to an operating company" said Ed Russell President. "We believe these events, along with the sale of Millennium's partnership interests to EROC, are positive events for our stockholders and we are pleased to see continued growth in several of our portfolio companies despite recent market turmoil."
Capital Resources
As of Aug. 31, 2008, the principal balance outstanding on the company's credit facility was $31.8 million at a rate of 4.24 percent. As of Oct. 8, 2008, the company had $28.8 million of availability under its credit facility; with an outstanding principal balance of $21.2 million at a rate of 4.29 percent.
On Apr. 8, 2008, the company filed an initial shelf registration statement, and on June 19, 2008 filed a pre-effective amendment, with the Securities and Exchange Commission. When effective, the shelf registration will allow the company to prudently raise additional capital when market conditions are acceptable.
Performance Review
The company views distributable cash flow (DCF) as the best indicator of its operating performance and distribution-paying capacity. The Board of Directors determines the amount of distributions paid to stockholders based on DCF which is defined as distributions received from investments less total expenses. DCF for the three months ended Aug. 31, 2008 was approximately $2.5 million, an increase over the prior quarter of approximately $0.1 million.
Distributions
In the third quarter of 2008, the Board of Directors declared a distribution of $0.2650 per share which was paid on Sept. 02, 2008. The distribution represents an annualized yield of 7.1% based upon the initial public offering price of $15.00 per share, and is the fifth consecutive distribution increase since the IPO. The company continues to pursue its investment objective of providing its stockholders with a high level of total return, with an emphasis on distribution growth.
Earnings Call
The company will host a conference call at 4:00 p.m. CDT on Oct. 09, 2008 to discuss its third quarter financial results. Please dial-in approximately five to 10 minutes prior to the scheduled start time.
U.S./Canada: (800) 218-0204
International: (303) 262-2175
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 7:00 p.m. CDT on Oct. 09, 2008 and continuing until 11:59 p.m. CDT Oct. 23, 2008, by dialing (303) 590-3000 (U.S./Canada). The replay access code is 11118970#. A replay of the webcast will also be available on the company's Web site at www.tortoiseadvisors.com through Oct. 09, 2009.
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 segment, of the U.S. energy infrastructure sector. Tortoise Capital Resources seeks to provide stockholders a high level of total return, with an emphasis on distributions and distribution growth.
About Tortoise Capital Advisors, LLC
Tortoise Capital Advisors, LLC, the adviser to Tortoise Capital Resources Corp., is a pioneer in the capital markets for master limited partnership (MLP) investment companies and a leader in closed-end funds and separately managed accounts focused on MLPs in the energy infrastructure sector. As of Sept. 30, 2008, the adviser had approximately $2.2 billion of assets under management.
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.
Tortoise Capital Resources Corporation
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STATEMENTS OF ASSETS & LIABILITIES
August 31, November 30,
2008 2007
------------ ------------
(Unaudited)
Assets
Investments at fair value, control (cost
$29,645,849 and $20,521,816,
respectively) $32,655,040 $23,292,904
Investments at fair value, affiliated
(cost $72,023,625 and $95,507,198,
respectively) 84,914,692 98,007,275
Investments at fair value, non-affiliated
(cost $42,777,633 and $31,716,576,
respectively) 43,331,758 37,336,154
------------ ------------
Total investments (cost $144,447,107 and
$147,745,590, respectively) 160,901,490 158,636,333
Income tax receivable 218,935 218,935
Receivable for Adviser expense
reimbursement 100,822 94,181
Interest receivable from control
investments 72,850 68,686
Dividends and distributions receivable 135,602 1,419
Prepaid expenses and other assets 201,793 154,766
------------ ------------
Total assets 161,631,492 159,174,320
------------ ------------
Liabilities
Base management fees payable to Adviser 604,930 565,086
Accrued capital gain incentive fees
payable to Adviser 1,054,745 307,611
Distribution payable to common
stockholders 2,356,874 -
Payable for investments purchased - 1,235,994
Accrued expenses and other liabilities 423,402 419,744
Short-term borrowings 31,800,000 30,550,000
Deferred tax liability 6,372,081 4,182,919
------------ ------------
Total liabilities 42,612,032 37,261,354
------------ ------------
Net assets applicable to common
stockholders $119,019,460 $121,912,966
============ ============
Net Assets Applicable to Common
Stockholders Consist of:
Warrants, no par value; 945,594 issued
and outstanding at August 31, 2008 and
945,774 issued and outstanding at
November 30, 2007 (5,000,000
authorized) $1,370,700 $1,370,957
Capital stock, $0.001 par value;
8,893,866 shares issued and outstanding
at August 31, 2008 and 8,858,168 issued
and outstanding at November 30, 2007
(100,000,000 shares authorized) 8,894 8,858
Additional paid-in capital 108,721,336 115,186,412
Accumulated net investment loss, net of
deferred tax benefit (2,822,758) (1,565,774)
Accumulated realized gain, net of
deferred tax expense 1,539,792 160,474
Net unrealized appreciation of
investments, net of deferred tax
expense 10,201,496 6,752,039
------------ ------------
Net assets applicable to common
stockholders $119,019,460 $121,912,966
============ ============
Net Asset Value per common share
outstanding (net assets applicable to
common stock, divided by common shares
outstanding) $13.38 $13.76
============ ============
Distributable Cash
Flow
For the For the
three three For the nine For the nine
months months months months
ended ended ended ended
August 31, August 31, August 31, August 31,
2008 2007 2008 2007
----------------------- -------------------------
Total from
Investments
Distributions from
investments $2,734,812 $2,009,605 $8,129,460 $4,038,759
Distributions paid
in stock (1) 621,122 - 1,558,842 -
Interest income from
investments 269,235 306,738 884,588 597,614
Dividends from money
market mutual funds 3,643 38,726 6,770 620,385
Other income - - 28,987 -
----------------------- -------------------------
Total from
Investments 3,628,812 2,355,069 10,608,647 5,256,758
Operating Expenses
Before Leverage
Costs and Current
Taxes
Advisory fees (net
of expense
reimbursement by
Adviser) 504,109 512,894 1,483,483 1,360,973
Other operating
expenses (excluding
capital gain
incentive fees) 253,236 293,643 766,032 656,662
----------------------- -------------------------
Total Operating
Expenses 757,345 806,537 2,249,515 2,017,635
----------------------- -------------------------
Distributable cash
flow before
leverage costs and
current taxes 2,871,467 1,548,532 8,359,132 3,239,123
Leverage Costs 395,791 229,692 1,329,289 576,152
----------------------- -------------------------
Distributable Cash
Flow $2,475,676 $1,318,840 $7,029,843 $2,662,971
----------------------- -------------------------
DCF/GAAP
Reconciliation
Distributable Cash
Flow $2,475,676 $1,318,840 $7,029,843 $2,662,971
Adjustments to
reconcile to Net
Investment Loss,
before Income Taxes
Distributions paid
in stock (1) (621,122) - (1,558,842) -
Pro forma
distribution on new
investment (2) (254,215) (254,215)
Return of capital on
distributions
received from
equity investments (2,306,739) (1,552,395) (6,497,044) (3,516,593)
Capital gain
incentive fees 340,369 170,648 (747,134) (1,325,846)
Loss on redemption
of preferred stock - - - (731,713)
----------------------- -------------------------
Net Investment
Loss, before
Income Taxes $(366,031) $(62,907) $(2,027,392) $(2,911,181)
(1) Distributions paid in stock for the three and nine months ended
August 31, 2008 include shares received from High Sierra Energy, LP
as a distribution received in lieu of cash for their second quarter
distribution paid on August 15, 2008.
(2) Consists of $254,215 as pro forma distribution on new investment
in VantaCore Partners, LP common units this quarter.
Tortoise Capital Resources Corporation
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STATEMENTS OF OPERATIONS (Unaudited)
For the For the For the For the
three three nine nine
months months months months
ended ended ended ended
August 31, August 31, August 31, August 31,
2008 2007 2008 2007
----------- ----------- ----------- -----------
Investment Income
Distributions
from investments
Control investments $347,500 $148,080 $975,001 $148,080
Affiliated
investments 1,139,402 1,328,533 4,499,082 2,661,815
Non-affiliated
investments 993,695 532,992 2,401,162 1,228,864
----------- ----------- ----------- -----------
Total
distributions
from investments 2,480,597 2,009,605 7,875,245 4,038,759
Less return of
capital on
distributions (2,306,739) (1,552,395) (6,497,044) (3,516,593)
----------- ----------- ----------- -----------
Net
distributions
from
investments 173,858 457,210 1,378,201 522,166
Interest income
from control
investments 269,235 306,738 884,588 597,614
Dividends from
money market
mutual funds 3,643 38,726 6,770 620,385
Other income - - 28,987 -
----------- ----------- ----------- -----------
Total Investment
Income 446,736 802,674 2,298,546 1,740,165
----------- ----------- ----------- -----------
Operating Expenses
Base management
fees 604,930 512,894 1,780,179 1,360,973
Capital gain
incentive fees (340,369) (170,648) 747,134 1,325,846
Professional fees 153,157 187,014 469,039 401,862
Administrator
fees 27,930 24,193 82,488 54,929
Directors' fees 22,181 25,205 66,927 73,578
Reports to
stockholders 13,057 10,083 39,028 26,388
Fund accounting
fees 8,652 9,294 25,690 23,571
Registration fees 7,458 14,686 22,292 22,749
Custodian fees
and expenses 5,545 3,044 14,914 8,189
Stock transfer
agent fees 3,403 3,180 10,172 10,460
Other expenses 11,853 16,944 35,482 34,936
----------- ----------- ----------- -----------
Total Operating
Expenses 517,797 635,889 3,293,345 3,343,481
----------- ----------- ----------- -----------
Interest expense 395,791 229,692 1,329,289 347,402
Preferred stock
distributions - - - 228,750
Loss on
redemption of
preferred stock - - - 731,713
----------- ----------- ----------- -----------
Total Interest
Expense, Preferred
Stock Distributions
and Loss on
Redemption of
Preferred Stock 395,791 229,692 1,329,289 1,307,865
----------- ----------- ----------- -----------
Total Expenses 913,588 865,581 4,622,634 4,651,346
Less expense
reimbursement by
Adviser (100,821) - (296,696) -
----------- ----------- ----------- -----------
Net Expenses 812,767 865,581 4,325,938 4,651,346
----------- ----------- ----------- -----------
Net Investment Loss,
before Income Taxes (366,031) (62,907) (2,027,392) (2,911,181)
Current tax
benefit - 42,732 - 42,732
Deferred tax
benefit
(expense) 139,090 (5,109) 770,408 742,149
----------- ----------- ----------- -----------
Net Investment Loss (226,941) (25,284) (1,256,984) (2,126,300)
----------- ----------- ----------- -----------
Realized and
Unrealized Gain
(Loss) on Investments
Net realized gain
on investments,
before deferred
tax expense 2,224,706 - 2,224,706 13,712
Deferred tax
expense (845,388) - (845,388) (5,211)
----------- ----------- ----------- -----------
Net Realized Gain
on Investments 1,379,318 - 1,379,318 8,501
Net unrealized
appreciation of
control
investments 234,767 615,708 238,103 789,662
Net unrealized
appreciation of
affiliated
investments 641,373 68,414 10,390,990 2,034,365
Net unrealized
appreciation
(depreciation) of
non-affiliated
investments (3,309,808) (1,821,769) (5,065,454) 5,686,094
----------- ----------- ----------- -----------
Net unrealized
appreciation
(depreciation),
before deferred
taxes (2,433,668) (1,137,647) 5,563,639 8,510,121
Deferred tax
benefit (expense) 924,795 432,306 (2,114,182) (3,233,846)
----------- ----------- ----------- -----------
Net Unrealized Gain
(Loss) on
Investments (1,508,873) (705,341) 3,449,457 5,276,275
----------- ----------- ----------- -----------
Net Realized and
Unrealized Gain
(Loss) on Investments (129,555) (705,341) 4,828,775 5,284,776
----------- ----------- ----------- -----------
Net Increase
(Decrease) in Net
Assets Applicable
to Common
Stockholders
Resulting from
Operations $(356,496) $(730,625) $3,571,791 $3,158,476
=========== =========== =========== ===========
Net Increase
(Decrease) in Net
Assets Applicable to
Common Stockholders
Resulting from
Operations Per
Common Share:
Basic and Diluted $(0.04) $(0.08) $0.40 $0.43
Weighted Average
Shares of Common
Stock Outstanding:
Basic and Diluted 8,893,866 8,840,487 8,876,079 7,387,780
Source: Tortoise Capital Advisors, LLC
Released October 9, 2008