Tortoise Capital Resources Corp. Announces Fiscal 2008 Results and Distribution Decrease

FOR IMMEDIATE RELEASE

LEAWOOD, Kan.– Feb. 12, 2009 – 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
 
Investment Review

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.
 
Performance Review

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.

Earnings Call

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.

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 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.
 
Contact information:
Tortoise Capital Advisors, LLC
Pam Kearney, Investor Relations, (866) 362-9331, pkearney@tortoiseadvisors.com


 
 
 

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, respectively)
   $
30,213,280
     $
23,292,904
  
Investments at fair value, affiliated (cost $56,662,500 and $95,507,198, respectively)
    
48,016,925
      
98,007,275
  
Investments at fair value, non-affiliated (cost $49,760,304 and $31,716,576, respectively)
    
27,921,025
      
37,336,154
  
Total investments (cost $136,841,606 and $147,745,590, respectively)
    
106,151,230
      
158,636,333
  
Income tax receivable
    
212,054
      
218,935
  
Receivable for Adviser expense reimbursement
    
88,925
      
94,181
  
Interest receivable from control investments
    
76,609
      
68,686
  
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 Adviser
    
533,552
      
565,086
  
Accrued capital gain incentive fees payable to Adviser (Note 4)
    
-
      
307,611
  
Payable for investments purchased
    
-
      
1,235,994
  
Accrued expenses and other liabilities
    
362,205
      
419,744
  
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 stockholders
   $
89,225,300
     $
121,912,966
  
                 
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
                
November 30, 2007 (5,000,000 authorized)
   $
1,370,700
     $
1,370,957
  
Capital stock, $0.001 par value; 8,962,147 shares issued and
                
outstanding at November 30, 2008 and 8,858,168 issued and outstanding
                
at November 30, 2007 (100,000,000 shares authorized)
    
8,962
      
8,858
  
Additional paid-in capital
    
106,869,132
      
115,186,412
  
Accumulated net investment loss, net of income taxes
     (2,544,267 )     (1,565,774 )
Accumulated realized gain, net of income taxes
    
6,364,262
      
160,474
  
Net unrealized appreciation (depreciation) of investments, net of income taxes
     (22,843,489 )    
6,752,039
  
Net assets applicable to common stockholders
   $
89,225,300
     $
121,912,966
  
                 
Net Asset Value per common share outstanding (net assets applicable
                
to common stock, divided by common shares outstanding)
   $
9.96
     $
13.76
  
                 

 
 
 


   
Year Ended
    
Year Ended
  
Distributable Cash Flow
  
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 by Adviser)
    
1,928,109
      
1,831,878
  
Other operating expenses (excluding capital gain incentive fees)
    
1,037,624
      
1,094,677
  
Total Operating Expenses
    
2,965,733
      
2,926,555
  
Distributable cash flow before leverage costs and current taxes
    
10,059,806
      
5,435,360
  
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 from equity investments
     (7,894,819 )     (5,031,851 )
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 November 30, 2008
    
Year Ended November 30, 2007
    
Period from December 8, 2005 (1) through 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 investments
    
3,412,723
      
1,885,231
      
4,122,244
  
   Total distributions from investments
    
9,688,521
      
6,520,432
      
4,222,244
  
   Less return of capital on distributions
     (7,894,819 )     (5,031,851 )     (3,808,154 )
            Net distributions from investments
    
1,793,702
      
1,488,581
      
414,090
  
   Interest income from control investments
    
1,103,059
      
921,978
      
270,633
  
   Dividends from money market mutual funds
    
18,205
      
624,385
      
1,210,120
  
   Fee income
    
-
      
-
      
225,000
  
   Other income
    
28,987
      
-
      
-
  
Total Investment Income
    
2,943,953
      
3,034,944
      
2,119,843
  
                         
Operating Expenses
                        
   Base management fees
    
2,313,731
      
1,926,059
      
634,989
  
   Capital gain incentive fees (Note 4)
     (307,611 )    
307,611
      
-
  
   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 expenses
    
17,426
      
10,174
      
6,647
  
   Stock transfer agent fees
    
13,538
      
13,600
      
17,329
  
   Other expenses
    
47,157
      
51,784
      
18,944
  
Total Operating Expenses
    
3,043,744
      
3,328,347
      
995,145
  
   Interest expense
    
1,650,926
      
847,421
      
-
  
   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
    
1,650,926
      
1,807,884
      
-
  
Total Expenses
    
4,694,670
      
5,136,231
      
995,145
  
   Less expense reimbursement by Adviser
     (385,622 )     (94,181 )    
-
  
Net Expenses
    
4,309,048
      
5,042,050
      
995,145
  
Net Investment Income (Loss), before Income Taxes
     (1,365,095 )     (2,007,106 )    
1,124,698
  
     Current tax benefit (expense)
     (6,881 )    
261,667
       (266,455 )
     Deferred tax benefit (expense)
    
393,483
      
179,665
       (124,967 )
Income tax benefit (expense)
    
386,602
      
441,332
       (391,422 )
Net Investment Income (Loss)
     (978,493 )     (1,565,774 )    
733,276
  
                         
Realized and Unrealized Gain (Loss) on Investments
                        
   Net realized gain (loss) on investments, before deferred tax expense
    
8,716,197
      
260,290
       (1,462 )
Current tax benefit
    
-
      
-
      
556
  
Deferred tax expense
     (2,512,409 )     (98,910 )    
-
  
Net realized gain (loss) on investments
    
6,203,788
      
161,380
       (906 )
   Net unrealized appreciation (depreciation) of control investments
     (2,976,609 )    
2,771,088
      
-
  
   Net unrealized appreciation (depreciation) of affiliated investments
     (11,145,652 )    
2,262,736
      
328,858
  
   Net unrealized appreciation (depreciation) of non-affiliated investments
     (27,458,859 )    
5,528,064
      
-
  
Net unrealized appreciation (depreciation), before deferred taxes
     (41,581,120 )    
10,561,888
      
328,858
  
Deferred tax benefit (expense)
    
11,985,592
       (4,013,518 )     (125,189 )
Net unrealized appreciation (depreciation) of investments
     (29,595,528 )    
6,548,370
      
203,669
  
Net Realized and Unrealized Gain (Loss) on Investments
     (23,391,740 )    
6,709,750
      
202,763
  
                         
Net Increase (Decrease) in Net Assets Applicable to Common Stockholders
                        
   Resulting from Operations
   $ (24,370,233 )   $
5,143,976
     $
936,039
  
                         
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