Form 10-Q

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

10-Q 1 d26269d10q.htm FORM 10-Q Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarter Ended March 31, 2021

☐	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 814-00754

SLR INVESTMENT CORP.

(Exact name of registrant as specified in its charter)


Maryland		26-1381340
(State of Incorporation)		(I.R.S. Employer Identification No.)
500 Park Avenue New York, N.Y.		10022
(Address of principal executive offices)		(Zip Code)

(212) 993-1670

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading

Symbol(s)

Name of Each Exchange

on Which Registered

Common Stock, par value $0.01 per share

SLRC

The NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the registrant’s Common Stock, $.01 par value, outstanding as of April 30, 2021 was 42,260,826.

SLR INVESTMENT CORP.

FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2021

TABLE OF CONTENTS


		PAGE
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Statements of Assets and Liabilities as of March 31, 2021 (unaudited) and December 31, 2020		1

	Consolidated Statements of Operations for the three months ended March 31, 2021 (unaudited) and the three months ended March 31, 2020 (unaudited)		2

	Consolidated Statements of Changes in Net Assets for the three months ended March 31, 2021 (unaudited) and the three months ended March 31, 2020 (unaudited)		3

	Consolidated Statements of Cash Flows for the three months ended March 31, 2021 (unaudited) and the three months ended March 31, 2020 (unaudited)		4

	Consolidated Schedule of Investments as of March 31, 2021 (unaudited)		5

	Consolidated Schedule of Investments as of December 31, 2020		10

	Notes to Consolidated Financial Statements (unaudited)		15

	Report of Independent Registered Public Accounting Firm		31

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		32

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		46

Item 4.	Controls and Procedures		46

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings		47

Item 1A.	Risk Factors		47

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		48

Item 3.	Defaults Upon Senior Securities		48

Item 4.	Mine Safety Disclosures		48

Item 5.	Other Information		48

Item 6.	Exhibits		48

	Signatures		49

PART I. FINANCIAL INFORMATION

In this Quarterly Report, “Company”, “we”, “us”, and “our” refer to SLR Investment Corp. unless the context states otherwise.

Item 1.

Financial Statements

SLR INVESTMENT CORP.

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

(in thousands, except share amounts)


	March 31, 2021 (unaudited)			December 31, 2020
Assets
Investments at fair value:
Companies less than 5% owned (cost: $869,229 and $832,507, respectively)	$	865,066		$	822,298
Companies more than 25% owned (cost: $723,909 and $724,428, respectively)		709,498			709,653
Cash		7,762			8,779
Cash equivalents (cost: $350,000 and $379,997, respectively)		350,000			379,997
Dividends receivable		9,508			7,927
Interest receivable		6,875			6,478
Receivable for investments sold		956			255
Prepaid expenses and other assets		752			571

Total assets	$	1,950,417		$	1,935,958

Liabilities
Debt ($711,000 and $677,000 face amounts, respectively, reported net of unamortized debt issuance costs of $5,155 and $5,549, respectively. See notes 6 and 7)	$	705,845		$	671,451
Payable for investments and cash equivalents purchased		350,041			380,038
Distributions payable		17,327			17,327
Management fee payable (see note 3)		6,810			6,535
Performance-based incentive fee payable (see note 3)		3,867			792
Interest payable (see note 7)		6,723			3,416
Administrative services payable (see note 3)		995			1,946
Other liabilities and accrued expenses		2,603			2,430

Total liabilities	$	1,094,211		$	1,083,935

Commitments and contingencies (see note 10)
Net Assets
Common stock, par value $0.01 per share, 200,000,000 and 200,000,000 common shares authorized, respectively, and 42,260,826 and 42,260,826 shares issued and outstanding, respectively	$	423		$	423
Paid-in capital in excess of par		962,481			962,481
Accumulated distributable net loss		(106,698	)		(110,881	)

Total net assets	$	856,206		$	852,023

Net Asset Value Per Share	$	20.26		$	20.16

See notes to consolidated financial statements.

SLR INVESTMENT CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(in thousands, except share amounts)


	Three months ended
	March 31, 2021			March 31, 2020
INVESTMENT INCOME:
Interest:
Companies less than 5% owned	$	20,832		$	24,834
Companies more than 25% owned		2,885			1,356
Dividends:
Companies less than 5% owned		133			13
Companies more than 25% owned		9,575			6,468
Other income:
Companies less than 5% owned		2,462			228
Companies more than 25% owned		—			5

Total investment income		35,887			32,904

EXPENSES:
Management fees (see note 3)	$	6,810		$	6,269
Performance-based incentive fees (see note 3)		3,867			1,480
Interest and other credit facility expenses (see note 7)		7,229			7,040
Administrative services expense (see note 3)		1,360			1,147
Other general and administrative expenses		1,155			1,115

Total expenses		20,421			17,051

Net investment income	$	15,466		$	15,853

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, CASH EQUIVALENTS, DEBT AND UNFUNDED COMMITMENTS:
Net realized gain (loss) on investments and cash equivalents (companies less than 5% owned)	$	(366	)	$	28

Net change in unrealized gain (loss) on investments, cash equivalents and unfunded commitments and net change in unrealized (gain) loss on debt:
Companies less than 5% owned		6,046			(47,415	)
Companies more than 25% owned		364			(55,074	)
Debt		—			11,500
Unfunded commitments		—			(361	)

Net change in unrealized gain (loss) on investments, cash equivalents, debt and unfunded commitments		6,410			(91,350	)

Net realized and unrealized gain (loss) on investments, cash equivalents, debt and unfunded commitments		6,044			(91,322	)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS	$	21,510		$	(75,469	)

EARNINGS (LOSS) PER SHARE (see note 5)	$	0.51		$	(1.79	)

See notes to consolidated financial statements.

SLR INVESTMENT CORP.

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (unaudited)

(in thousands, except share amounts)


	Three months ended
	March 31, 2021			March 31, 2020
Increase (decrease) in net assets resulting from operations:
Net investment income	$	15,466		$	15,853
Net realized gain (loss)		(366	)		28
Net change in unrealized gain (loss)		6,410			(91,350	)

Net increase (decrease) in net assets resulting from operations		21,510			(75,469	)

Distributions to stockholders:
From net investment income		(17,327	)		(17,327	)

Capital transactions (see note 12):
Net increase in net assets resulting from capital transactions		—			—

Total increase (decrease) in net assets		4,183			(92,796	)
Net assets at beginning of period		852,023			905,880

Net assets at end of period	$	856,206		$	813,084

Capital stock activity (see note 12):
Net increase from capital stock activity		—			—

See notes to consolidated financial statements.

SLR INVESTMENT CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(in thousands)


	Three months ended
	March 31, 2021			March 31, 2020
Cash Flows from Operating Activities:
Net increase (decrease) in net assets resulting from operations	$	21,510		$	(75,469	)
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
Net realized (gain) loss on investments and cash equivalents		366			(28	)
Net change in unrealized (gain) loss on investments		(6,410	)		102,446
Net change in unrealized loss on debt		—			(11,500	)
(Increase) decrease in operating assets:
Purchase of investments		(98,715	)		(79,642	)
Proceeds from disposition of investments		65,514			197,548
Net accretion of discount on investments		(1,654	)		(1,554	)
Capitalization of payment-in-kind interest		(1,737	)		(156	)
Collections of payment-in-kind interest		23			123
Receivable for investments sold		(701	)		420
Interest receivable		(397	)		(511	)
Dividends receivable		(1,581	)		4,231
Prepaid expenses and other assets		(181	)		(208	)
Increase (decrease) in operating liabilities:
Payable for investments and cash equivalents purchased		(29,997	)		6,217
Management fee payable		275			(478	)
Performance-based incentive fee payable		3,075			(2,801	)
Administrative services expense payable		(951	)		(2,757	)
Interest payable		3,307			2,881
Other liabilities and accrued expenses		173			459

Net Cash Provided by (Used in) Operating Activities		(48,081	)		139,221

Cash Flows from Financing Activities:
Cash distributions paid		(17,327	)		(17,327	)
Deferred financing costs		394			185
Proceeds from secured borrowings		146,000			31,000
Repayment of secured borrowings		(112,000	)		(103,900	)

Net Cash Provided by (Used in) Financing Activities		17,067			(90,042	)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(31,014	)		49,179
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		388,776			436,354

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	357,762		$	485,533

Supplemental disclosure of cash flow information:
Cash paid for interest	$	3,922		$	4,159

See notes to consolidated financial statements.

SLR INVESTMENT CORP.

CONSOLIDATED SCHEDULE OF INVESTMENTS (unaudited)

March 31, 2021

(in thousands, except share/unit amounts)


Description	Industry	Spread Above Index⁽⁷⁾		LIBOR Floor			Interest Rate⁽¹⁾			Acquisition Date		Maturity Date		Par Amount		Cost		Fair Value
Senior Secured Loans — 98.1%

First Lien Bank Debt/Senior Secured Loans
Aegis Toxicology Sciences Corporation	Health Care Providers & Services		L+550		1.00	%		6.50	%		5/7/2018		5/9/2025	$	16,687	$	16,495	$	16,436
Alteon Health, LLC	Health Care Providers & Services		L+650		1.00	%		7.50	%		9/14/2018		9/1/2023		14,249		14,195		13,964
American Teleconferencing Services, Ltd. (PGI)	Communications Equipment		L+650		1.00	%		7.50	%		5/5/2016		6/8/2023		29,970		29,554		27,722
Atria Wealth Solutions, Inc.	Diversified Financial Services		L+600		1.00	%		7.00	%		9/14/2018		11/30/2022		6,393		6,364		6,393
AviatorCap SII, LLC (2)	Aerospace & Defense		L+700		—			7.22	%		3/19/2019		9/30/2021		2,929		2,929		2,929
Basic Fun, Inc.	Specialty Retail		L+675		1.00	%		7.75	%		10/30/2020		10/30/2023		2,150		2,121		2,128
Enhanced Permanent Capital, LLC(3)	Capital Markets		L+700		1.00	%		8.00	%		12/29/2020		12/29/2025		21,489		20,895		20,871
Foundation Consumer Brands, LLC	Personal Products		L+638		1.00	%		7.38	%		2/12/2021		2/12/2027		37,058		36,148		36,131
High Street Insurance Partners, Inc.	Insurance		L+650		1.00	%		7.50	%		3/3/2021		12/3/2025		1,406		1,385		1,392
iCIMS, Inc.	Software		L+650		1.00	%		7.50	%		9/7/2018		9/12/2024		19,341		19,067		19,341
Kingsbridge Holdings, LLC(2)	Multi-Sector Holdings		L+700		1.00	%		8.00	%		12/21/2018		12/21/2024		80,000		79,653		80,000
KORE Wireless Group, Inc.	Wireless Telecommunication Services		L+550		—			5.70	%		12/21/2018		12/21/2024		36,385		35,886		36,385
Legility, LLC	Commercial Services & Supplies		L+600		1.00	%		7.00	%		2/27/2020		12/17/2025		19,500		19,174		18,720
Logix Holding Company, LLC	Communications Equipment		L+575		1.00	%		6.75	%		9/14/2018		12/22/2024		7,008		6,966		6,868
One Touch Direct, LLC	Commercial Services & Supplies		P+75		—			4.00	%		4/3/2020		9/30/2022		252		252		252
Pet Holdings ULC & Pet Supermarket, Inc. (3)	Specialty Retail		L+550		1.00	%		6.50	%		9/14/2018		7/5/2022		28,670		28,560		28,670
PhyNet Dermatology LLC	Health Care Providers & Services		L+650⁽¹⁸⁾		1.00	%		7.50	%		9/5/2018		8/16/2024		14,644		14,568		14,132
Pinnacle Treatment Centers, Inc.	Health Care Providers & Services		L+575		1.00	%		6.75	%		1/22/2020		12/31/2022		11,770		11,696		11,770
PPT Management Holdings, LLC	Health Care Providers & Services		L+850⁽¹⁵⁾		1.00	%		9.50	%		9/14/2018		12/16/2022		20,907		20,848		19,130
Sentry Data Systems, Inc.	Software		L+675		1.00	%		7.75	%		9/27/2020		10/6/2025		15,726		15,437		15,726
Smile Doctors LLC	Personal Products		L+600		1.00	%		7.00	%		12/17/2020		10/6/2022		10,420		10,227		10,211
The Children’s Place, Inc.(3)	Specialty Retail		L+800		1.00	%		9.00	%		10/5/2020		5/9/2024		15,765		15,556		15,765
USR Parent, Inc. (Staples)	Specialty Retail		L+884		1.00	%		9.84	%		6/3/2020		9/12/2022		4,132		4,132		4,153

Total First Lien Bank Debt/Senior Secured Loans																$	412,108	$	409,089

Second Lien Asset-Based Senior Secured Loans
Greystone Select Holdings LLC & Greystone & Co., Inc.	Thrifts & Mortgage Finance		L+800		1.00	%		9.00	%		3/29/2017		4/17/2024		19,457	$	19,357	$	19,457
Varilease Finance, Inc.	Multi-Sector Holdings		L+750		1.00	%		8.50	%		8/22/2014		11/15/2025		36,438		36,312		36,438

Total Second Lien Asset-Based Senior Secured Loans																$	55,669	$	55,895

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller Reporting company

Emerging growth company

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