Tortoise Capital Resources Corp. Announces Fiscal 2008 Results and Distribution Decrease
LEAWOOD, Kan.--(BUSINESS WIRE)-- Tortoise Capital Resources Corp. (NYSE: TTO) today announced its financial results for the fiscal year ended Nov. 30, 2008, in its Annual Report on Form 10-K filed Feb. 12, 2009 and its first quarter 2009 distribution.
Announcement of First Quarter 2009 Distribution
The Board of Directors today declared the company's first quarter 2009 distribution of $0.23 per share. This represents a decrease of $0.035, or 13.2 percent from the fourth quarter 2008 distribution. The distribution represents an estimated 94 percent of distributable cash flow and will be paid on Mar. 02, 2009 to stockholders of record on Feb. 23, 2009. A portion of this distribution is expected to be treated as return of capital for income tax purposes, although the ultimate determination will not be made until determination of the company's earnings and profits after our year-end. Based on current financial information, this distribution is estimated to consist of 15-20 percent ordinary income and the remainder as return of capital for book purposes.
"In today's environment of reduced credit availability, private companies in particular, are reducing their equity distributions in order to fund working capital. Our NAV has declined reflecting the uncertainty of free cash flow available to pay to equity holders in future quarters," said Ed Russell, Tortoise Capital Resources Corp. President. "While we expect the next year to be challenging for almost every industry, including the energy infrastructure sector, we continue to believe the flow of energy commodities remains critical to the economy and that the long term prospects for our investments are attractive."
Highlights for the Year
-- Net assets of $89.2 million or $9.96 per share as of Nov. 30, 2008 -- Total assets of $112.3 million as of Nov. 30, 2008 -- Realized gains of $8.7 million (before deferred taxes) during the fiscal year ended Nov. 30, 2008 -- Distributable cash flow of $8.4 million for the fiscal year ended Nov. 30, 2008 -- Fourth quarter 2008 distribution of $0.2650 per share paid Nov. 28, 2008
As of Nov. 30, 2008, the fair value of the company's investment portfolio (excluding short-term investments) totaled $105.8 million, including equity investments of $97.5 million and debt investments of $8.3 million. The portfolio represents a mix of 60 percent midstream and downstream investments, 13 percent upstream investments, and 27 percent in aggregates and coal. The weighted average yield-to-cost on the investment portfolio (excluding short-term investments) as of Nov. 30, 2008 was 8.0 percent.
Two realization events occurred during this fiscal year resulting in realized gains of approximately $8.7 million (before deferred taxes). In July, Lonestar Midstream Partners, LP sold its gas gathering and transportation assets to Penn Virginia Resource Partners, L.P. (NYSE: PVR), and in October, Millennium sold its partnership interests to Eagle Rock Energy Partners, L.P. (NASDAQ: EROC).
The company made follow-on investments in two portfolio companies during the 2008 fiscal year. The company invested a total of $4.7 million in debt and equity of Mowood, LLC, in part to fund landfill gas-to-energy projects at its subsidiary, Timberline Energy LLC. Timberline now operates 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 using current technology. In August, VantaCore repaid the company's $3.75 million term note at a 3 percent premium to par value. The company reinvested those funds and an additional $6.1 million, to purchase common units and 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, Louisiana.
Net Asset Value
At Nov. 30, 2008, the company's net asset value was $9.96 per share compared to $13.76 per share at Nov. 30, 2007. Total assets decreased from $159.2 million as of Nov. 30, 2007 to $112.3 million as of Nov. 30, 2008. Because the company is a taxpaying entity, the financial statements reflect deferred tax assets according to generally accepted accounting principles. Presently, the total cost basis of the company's investments for financial statement reporting purposes exceeds the fair value reflected on the Statement of Assets and Liabilities as shown below. That, combined with operating losses, results in a deferred tax asset. As a result, the Statement of Assets and Liabilities reflects a deferred tax asset of $5.7 million (net of a $2.8 million valuation allowance), or approximately $0.63 per share. A deferred tax asset is the benefit the company expects to realize from the reduction in taxes payable in future periods. The company does not include the deferred tax asset in the calculation of its management fee.
The company views distributable cash flow (DCF) as the best indicator of its core financial performance and prospects for the future. The company 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 fiscal year ended Nov. 30, 2008 was approximately $8.4 million as shown below, an increase over last fiscal year of approximately $4.0 million. Historically we have included all paid-in-kind units in our distributable cash flow. In the future, we do not intend to include in distributable cash flow the value of distributions received from portfolio companies which are paid-in-kind as a result of credit constraints, market dislocation or other similar issues.
The company will host a conference call at 4 p.m. CST on Thursday, Feb. 12, 2009 to discuss its financial results for the fiscal year ended Nov. 30, 2008. Please dial-in approximately five to 10 minutes prior to the scheduled start time.
U.S./Canada: (800) 218-0713
International: (303) 275-2170
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. CST on Feb. 12, 2009 and continuing until 11:59 p.m. CST Feb. 27, 2009, by dialing (800) 405-2236 (U.S./Canada). The replay access code is 11124158#. A replay of the webcast will also be available on the company's Web site at www.tortoiseadvisors.com through Feb. 12, 2010.
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
Tortoise Capital Advisors, LLC is a pioneer in 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 sector. As of Jan. 31, 2009, the adviser had approximately $1.7 billion of assets under management. 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.
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 funds' 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 November 30, 2008 November 30, 2007 Assets Investments at fair value, control (cost $30,418,802 and $20,521,816, $ 30,213,280 $ 23,292,904 respectively) Investments at fair value, affiliated (cost $56,662,500 and 48,016,925 98,007,275 $95,507,198, respectively) Investments at fair value, non-affiliated (cost $49,760,304 and 27,921,025 37,336,154 $31,716,576, respectively) Total investments (cost $136,841,606 106,151,230 158,636,333 and $147,745,590, respectively) Income tax receivable 212,054 218,935 Receivable for Adviser expense 88,925 94,181 reimbursement Interest receivable from control 76,609 68,686 investments Dividends receivable 696 1,419 Deferred tax asset, net 5,683,747 - Prepaid expenses and other assets 107,796 154,766 Total assets 112,321,057 159,174,320 Liabilities Base management fees payable to 533,552 565,086 Adviser Accrued capital gain incentive fees - 307,611 payable to Adviser (Note 4) Payable for investments purchased - 1,235,994 Accrued expenses and other 362,205 419,744 liabilities Short-term borrowings 22,200,000 30,550,000 Deferred tax liability, net - 4,182,919 Total liabilities 23,095,757 37,261,354 Net assets applicable to common $ 89,225,300 $ 121,912,966 stockholders Net Assets Applicable to Common Stockholders Consist of: Warrants, no par value; 945,594 issued and outstanding at November 30, 2008 and 945,774 issued and outstanding at $ 1,370,700 $ 1,370,957 November 30, 2007 (5,000,000 authorized) Capital stock, $0.001 par value; 8,962,147 shares issued and outstanding at November 30, 2008 and 8,962 8,858 8,858,168 issued and outstanding at November 30, 2007 (100,000,000 shares authorized) Additional paid-in capital 106,869,132 115,186,412 Accumulated net investment loss, net (2,544,267 ) (1,565,774 ) of income taxes Accumulated realized gain, net of 6,364,262 160,474 income taxes Net unrealized appreciation (depreciation) of investments, net (22,843,489 ) 6,752,039 of income taxes Net assets applicable to common $ 89,225,300 $ 121,912,966 stockholders Net Asset Value per common share outstanding (net assets applicable $ 9.96 $ 13.76 to common stock, divided by common shares outstanding)
Distributable Cash Flow Year Ended Year Ended November 30, 2008 November 30, 2007 Total from Investments Distributions from investments $ 9,688,521 $ 6,520,432 Distributions paid in stock (1) 2,186,767 295,120 Interest income from investments 1,103,059 921,978 Dividends from money market mutual funds 18,205 624,385 Other income 28,987 - Total from Investments 13,025,539 8,361,915 Operating Expenses Before Leverage Costs and Current Taxes Advisory fees (net of expense reimbursement 1,928,109 1,831,878 by Adviser) Other operating expenses (excluding capital 1,037,624 1,094,677 gain incentive fees) Total Operating Expenses 2,965,733 2,926,555 Distributable cash flow before leverage 10,059,806 5,435,360 costs and current taxes Leverage Costs 1,650,926 1,076,171 Distributable Cash Flow $ 8,408,880 $ 4,359,189 Distributions paid on common stock $ 9,265,351 $ 5,349,244 Payout percentage for period(2) 110 % 123 % DCF/GAAP Reconciliation Distributable Cash Flow $ 8,408,880 $ 4,359,189 Adjustments to reconcile to Net Investment Loss, before Income Taxes Distributions paid in stock (2,186,767 ) (295,120 ) Return of capital on distributions received (7,894,819 ) (5,031,851 ) from equity investments Capital gain incentive fees 307,611 (307,611 ) Loss on redemption of preferred stock - (731,713 ) Net Investment Loss, before Income Taxes $ (1,365,095 ) $ (2,007,106 ) (1) Distributions paid in stock for the year ended November 30, 2008 include paid-in-kind distributions from Lonestar Midstream, LP, High Sierra Energy, LP and High Sierra Energy GP, LLC. Distributions paid in stock for the year ended November 30, 2007 include paid-in-kind distributions from Lonestar Midstream, LP. (2) Distributions paid as a percentage of Distributable Cash Flow.
Tortoise Capital Resources Corporation STATEMENTS OF OPERATIONS Year Ended Year Ended Period from December November 30, November 30, 8, 2005(1)through 2008 2007 November 30, 2006 Investment Income Distributions from investments Control investments $ 1,576,716 $ 389,720 $ - Affiliated investments 4,699,082 4,245,481 100,000 Non-affiliated 3,412,723 1,885,231 4,122,244 investments Total distributions 9,688,521 6,520,432 4,222,244 from investments Less return of capital (7,894,819 ) (5,031,851 ) (3,808,154 ) on distributions Net distributions from 1,793,702 1,488,581 414,090 investments Interest income from 1,103,059 921,978 270,633 control investments Dividends from money 18,205 624,385 1,210,120 market mutual funds Fee income - - 225,000 Other income 28,987 - - Total Investment 2,943,953 3,034,944 2,119,843 Income Operating Expenses Base management fees 2,313,731 1,926,059 634,989 Capital gain incentive (307,611 ) 307,611 - fees (Note 4) Professional fees 642,615 727,055 205,018 Administrator fees 107,325 81,002 1,322 Directors' fees 86,406 84,609 69,550 Reports to stockholders 58,943 53,610 15,810 Fund accounting fees 34,546 32,183 25,536 Registration fees 29,668 40,660 - Custodian fees and 17,426 10,174 6,647 expenses Stock transfer agent 13,538 13,600 17,329 fees Other expenses 47,157 51,784 18,944 Total Operating 3,043,744 3,328,347 995,145 Expenses Interest expense 1,650,926 847,421 - Preferred stock - 228,750 - distributions Loss on redemption of - 731,713 - preferred stock Total Interest Expense, Preferred Stock Distributions 1,650,926 1,807,884 - and Loss on Redemption of Preferred Stock Total Expenses 4,694,670 5,136,231 995,145 Less expense reimbursement by (385,622 ) (94,181 ) - Adviser Net Expenses 4,309,048 5,042,050 995,145 Net Investment Income (Loss), before Income (1,365,095 ) (2,007,106 ) 1,124,698 Taxes Current tax benefit (6,881 ) 261,667 (266,455 ) (expense) Deferred tax benefit 393,483 179,665 (124,967 ) (expense) Income tax benefit 386,602 441,332 (391,422 ) (expense) Net Investment Income (978,493 ) (1,565,774 ) 733,276 (Loss) Realized and Unrealized Gain (Loss) on Investments Net realized gain (loss) on investments, 8,716,197 260,290 (1,462 ) before deferred tax expense Current tax benefit - - 556 Deferred tax expense (2,512,409 ) (98,910 ) - Net realized gain (loss) on 6,203,788 161,380 (906 ) investments Net unrealized appreciation (2,976,609 ) 2,771,088 - (depreciation) of control investments Net unrealized appreciation (11,145,652 ) 2,262,736 328,858 (depreciation) of affiliated investments Net unrealized appreciation (depreciation) of (27,458,859 ) 5,528,064 - non-affiliated investments Net unrealized appreciation (41,581,120 ) 10,561,888 328,858 (depreciation), before deferred taxes Deferred tax benefit 11,985,592 (4,013,518 ) (125,189 ) (expense) Net unrealized appreciation (29,595,528 ) 6,548,370 203,669 (depreciation) of investments Net Realized and Unrealized Gain (Loss) (23,391,740 ) 6,709,750 202,763 on Investments Net Increase (Decrease) in Net Assets Applicable to Common Stockholders Resulting from $ ) $ $ 936,039 Operations (24,370,233 5,143,976 Net Increase (Decrease) in Net Assets Applicable to Common Stockholders Resulting from Operations Per Common Share: Basic and Diluted $ (2.74 ) $ 0.66 $ 0.30 Weighted Average Shares of Common Stock Outstanding: Basic and Diluted 8,887,085 7,751,591 3,088,596 (1) Commencement of Operations
Source: Tortoise Capital Advisors, LLC
Released February 12, 2009