10-Q

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________

 

FORM 10-Q

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

 

For the quarterly period ended September 30, 2021

 

 

 

OR

 

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

 

For the transition period from  to

 

Commission file number 814-00861

 

Fidus Investment Corporation

(Exact Name of Registrant as Specified in its Charter)

 

Maryland

27-5017321

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

 

 

1603 Orrington Avenue, Suite 1005

Evanston, Illinois

 

60201

(Address of Principal Executive Offices)

(Zip Code)

 

(847) 859-3940

(Registrant’s telephone number, including area code)

________________

n/a

(Former name, former address and former fiscal year, if changed since last report)

_______________

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

 

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, par value $0.001 per share

FDUS

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 the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer ☐

Accelerated filer

Non-accelerated filer

Smaller reporting company ☐

Emerging growth company ☐

(Do not check if a smaller reporting company)

 

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

As of November 1, 2021, the Registrant had outstanding 24,437,400 shares of common stock, $0.001 par value.

 

 

 

1


 

FIDUS INVESTMENT CORPORATION

TABLE OF CONTENTS

QUARTERLY REPORT ON FORM 10-Q

 

 

PART I — FINANCIAL INFORMATION

 

Item 1.

Financial Statements.

 

 

Consolidated Statements of Assets and Liabilities — September 30, 2021 (unaudited) and December 31, 2020

3

 

Consolidated Statements of Operations — three and nine months ended September 30, 2021 (unaudited) and 2020 (unaudited)

4

 

Consolidated Statements of Changes in Net Assets — three and nine months ended September 30, 2021 (unaudited) and 2020 (unaudited)

5

 

Consolidated Statements of Cash Flows — three and nine months ended September 30, 2021, (unaudited) and 2020 (unaudited)

6

 

Consolidated Schedules of Investments — September 30, 2021 (unaudited) and December 31, 2020

7

 

Notes to Consolidated Financial Statements (unaudited)

17

Item 2.

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

39

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

58

Item 4.

Controls and Procedures.

59

 

PART II — OTHER INFORMATION

 

Item 1.

Legal Proceedings.

60

Item 1A.

Risk Factors.

60

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

60

Item 3.

Defaults Upon Senior Securities.

60

Item 4.

Mine Safety Disclosures.

60

Item 5.

Other Information.

60

Item 6.

Exhibits.

61

Signatures

62

Exhibit Index

 

 

 

2


 

PART I — FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

FIDUS INVESTMENT CORPORATION

Consolidated Statements of Assets and Liabilities

(in thousands, except shares and per share data)

 

 

 

September 30,

 

 

 

 

 

 

2021

 

 

December 31,

 

 

 

(unaudited)

 

 

2020

 

ASSETS

 

 

 

 

 

 

Investments, at fair value:

 

 

 

 

 

 

   Control investments (cost: $52,889 and $32,969, respectively)

 

$

43,284

 

 

$

28,253

 

   Affiliate investments (cost: $33,021 and $31,836, respectively)

 

 

107,053

 

 

 

81,394

 

   Non-control/non-affiliate investments (cost: $545,353 and $622,222, respectively)

 

 

568,787

 

 

 

633,222

 

Total investments, at fair value (cost: $631,263 and $687,027, respectively)

 

 

719,124

 

 

 

742,869

 

Cash and cash equivalents

 

 

98,812

 

 

 

124,308

 

Interest receivable

 

 

8,246

 

 

 

7,548

 

Prepaid expenses and other assets

 

 

1,584

 

 

 

1,015

 

Total assets

 

$

827,766

 

 

$

875,740

 

LIABILITIES

 

 

 

 

 

 

SBA debentures, net of deferred financing costs (Note 6)

 

$

92,146

 

 

$

144,004

 

Notes, net of deferred financing costs (Note 6)

 

 

203,142

 

 

 

300,294

 

Borrowings under Credit Facility, net of deferred financing costs (Note 6)

 

 

39,291

 

 

 

(1,048

)

Secured Borrowings

 

 

17,746

 

 

 

-

 

Accrued interest and fees payable

 

 

2,202

 

 

 

3,500

 

Base management fee payable, net of base management fee waiver – due to affiliate

 

 

3,201

 

 

 

3,244

 

Income incentive fee payable, net of income incentive fee waiver – due to affiliate

 

 

2,425

 

 

 

2,610

 

Capital gains incentive fee payable – due to affiliate

 

 

19,669

 

 

 

11,031

 

Administration fee payable and other – due to affiliate

 

 

571

 

 

 

576

 

Taxes (receivable) payable

 

 

(883

)

 

 

275

 

Accounts payable and other liabilities

 

 

711

 

 

 

494

 

Total liabilities

 

$

380,221

 

 

$

464,980

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

NET ASSETS

 

 

 

 

 

 

Common stock, $0.001 par value (100,000,000 shares authorized, 24,437,400 and 24,437,400 shares

 

 

 

 

 

 

 issued and outstanding at September 30, 2021 and December 31, 2020, respectively)

 

$

24

 

 

$

24

 

Additional paid-in capital

 

 

363,751

 

 

 

363,751

 

Total distributable earnings

 

 

83,770

 

 

 

46,985

 

Total net assets

 

 

447,545

 

 

 

410,760

 

Total liabilities and net assets

 

$

827,766

 

 

$

875,740

 

Net asset value per common share

 

$

18.31

 

 

$

16.81

 

 

See Notes to Consolidated Financial Statements (unaudited).

 

3


 

FIDUS INVESTMENT CORPORATION

Consolidated Statements of Operations (unaudited)

(in thousands, except shares and per share data)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Investment Income:

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

 

 

 

 

 

 

 

 

 

 

Control investments

 

$

927

 

 

$

467

 

 

$

2,495

 

 

$

1,348

 

Affiliate investments

 

 

537

 

 

 

849

 

 

 

2,096

 

 

 

2,663

 

Non-control/non-affiliate investments

 

 

16,395

 

 

 

17,449

 

 

 

50,197

 

 

 

51,060

 

Total interest income

 

 

17,859

 

 

 

18,765

 

 

 

54,788

 

 

 

55,071

 

Payment-in-kind interest income

 

 

 

 

 

 

 

 

 

 

 

 

Control investments

 

 

724

 

 

 

453

 

 

 

1,661

 

 

 

1,323

 

Affiliate investments

 

 

86

 

 

 

106

 

 

 

281

 

 

 

175

 

Non-control/non-affiliate investments

 

 

450

 

 

 

690

 

 

 

1,390

 

 

 

2,013

 

Total payment-in-kind interest income

 

 

1,260

 

 

 

1,249

 

 

 

3,332

 

 

 

3,511

 

Dividend income

 

 

 

 

 

 

 

 

 

 

 

 

Control investments

 

 

 

 

 

 

 

 

568

 

 

 

 

Affiliate investments

 

 

 

 

 

357

 

 

 

110

 

 

 

465

 

Non-control/non-affiliate investments

 

 

457

 

 

 

114

 

 

 

699

 

 

 

160

 

Total dividend income

 

 

457

 

 

 

471

 

 

 

1,377

 

 

 

625

 

Fee income

 

 

 

 

 

 

 

 

 

 

 

 

Control investments

 

 

 

 

 

 

 

 

400

 

 

 

 

Affiliate investments

 

 

102

 

 

 

22

 

 

 

370

 

 

 

88

 

Non-control/non-affiliate investments

 

 

1,545

 

 

 

571

 

 

 

6,071

 

 

 

2,189

 

Total fee income

 

 

1,647

 

 

 

593

 

 

 

6,841

 

 

 

2,277

 

Interest on idle funds

 

 

6

 

 

 

(1

)

 

 

7

 

 

 

9

 

Total investment income

 

 

21,229

 

 

 

21,077

 

 

 

66,345

 

 

 

61,493

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Interest and financing expenses

 

 

4,662

 

 

 

4,878

 

 

 

14,418

 

 

 

14,701

 

Base management fee

 

 

3,270

 

 

 

3,223

 

 

 

9,661

 

 

 

9,688

 

Incentive fee - income

 

 

2,425

 

 

 

2,374

 

 

 

7,644

 

 

 

6,342

 

Incentive fee (reversal) - capital gains

 

 

4,664

 

 

 

2,761

 

 

 

8,638

 

 

 

(6,380

)

Administrative service expenses

 

 

438

 

 

 

412

 

 

 

1,281

 

 

 

1,242

 

Professional fees

 

 

347

 

 

 

301

 

 

 

982

 

 

 

1,508

 

Other general and administrative expenses

 

 

374

 

 

 

224

 

 

 

1,115

 

 

 

1,059

 

Total expenses before base management and income incentive fee waivers

 

 

16,180

 

 

 

14,173

 

 

 

43,739

 

 

 

28,160

 

Base management and income incentive fee waivers

 

 

(69

)

 

 

 

 

 

(98

)

 

 

(423

)

Total expenses, net of base management and incentive fee waivers

 

 

16,111

 

 

 

14,173

 

 

 

43,641

 

 

 

27,737

 

Net investment income before income taxes

 

 

5,118

 

 

 

6,904

 

 

 

22,704

 

 

 

33,756

 

Income tax provision (benefit)

 

 

-

 

 

 

2

 

 

 

32

 

 

 

146

 

Net investment income

 

 

5,118

 

 

 

6,902

 

 

 

22,672

 

 

 

33,610

 

Net realized and unrealized gains (losses) on investments:

 

 

 

 

 

 

 

 

 

 

 

 

Net realized gains (losses):

 

 

 

 

 

 

 

 

 

 

 

 

Control investments

 

 

(990

)

 

 

 

 

 

(33

)

 

 

 

Affiliate investments

 

 

30

 

 

 

(65

)

 

 

30

 

 

 

24,354

 

Non-control/non-affiliate investments

 

 

9,266

 

 

 

1,380

 

 

 

13,675

 

 

 

8,543

 

Total net realized gain (loss) on investments

 

 

8,306

 

 

 

1,315

 

 

 

13,672

 

 

 

32,897

 

Income tax (provision) benefit from realized gains on investments

 

 

143

 

 

 

 

 

 

143

 

 

 

(1,065

)

Net change in unrealized appreciation (depreciation):

 

 

 

 

 

 

 

 

 

 

 

 

Control investments

 

 

1,096

 

 

 

607

 

 

 

(4,889

)

 

 

(1,157

)

Affiliate investments

 

 

8,106

 

 

 

7,158

 

 

 

24,474

 

 

 

(28,295

)

Non-control/non-affiliate investments

 

 

6,133

 

 

 

4,899

 

 

 

12,434

 

 

 

(33,982

)

Total net change in unrealized appreciation (depreciation) on investments

 

 

15,335

 

 

 

12,664

 

 

 

32,019

 

 

 

(63,434

)

Net gain (loss) on investments

 

 

23,784

 

 

 

13,979

 

 

 

45,834

 

 

 

(31,602

)

Realized losses on extinguishment of debt

 

 

(460

)

 

 

(174

)

 

 

(2,640

)

 

 

(299

)

Net increase (decrease) in net assets resulting from operations

 

$

28,442

 

 

$

20,707

 

 

$

65,866

 

 

$

1,709

 

Per common share data:

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income per share-basic and diluted

 

$

0.21

 

 

$

0.28

 

 

$

0.93

 

 

$

1.37

 

Net increase in net assets resulting from operations per share — basic and diluted

 

$

1.16

 

 

$

0.85

 

 

$

2.70

 

 

$

0.07

 

Dividends declared per share

 

$

0.42

 

 

$

0.30

 

 

$

1.19

 

 

$

0.99

 

Weighted average number of shares outstanding — basic and diluted

 

 

24,437,400

 

 

 

24,437,400

 

 

 

24,437,400

 

 

 

24,444,120

 

 

See Notes to Consolidated Financial Statements (unaudited).

4


 

FIDUS INVESTMENT CORPORATION

Consolidated Statements of Changes in Net Assets (unaudited)

(in thousands, except shares)

 

 

 

Common Stock

 

 

Additional

 

 

Total

 

 

 

 

 

 

Number of

 

 

Par

 

 

paid-in

 

 

distributable

 

 

Total net

 

 

 

shares

 

 

value

 

 

capital

 

 

earnings

 

 

assets

 

Balances at December 31, 2019

 

 

24,463,119

 

 

$

24

 

 

$

366,061

 

 

$

46,225

 

 

$

412,310

 

Repurchases of common stock under Stock Repurchase Program (Note 8)

 

 

(25,719

)

 

 

(0

)

*

 

(268

)

 

 

 

 

 

(268

)

Net investment income

 

 

 

 

 

 

 

 

 

 

 

17,417

 

 

 

17,417

 

Net realized gain (loss) on investments, net of taxes

 

 

 

 

 

 

 

 

 

 

 

30,327

 

 

 

30,327

 

Net unrealized appreciation (depreciation) on investments

 

 

 

 

 

 

 

 

 

 

 

(74,590

)

 

 

(74,590

)

Realized losses on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

(125

)

 

 

(125

)

Dividends declared

 

 

 

 

 

 

 

 

 

 

 

(9,537

)

 

 

(9,537

)

Balances at March 31, 2020

 

 

24,437,400

 

 

 

24

 

 

 

365,793

 

 

 

9,717

 

 

 

375,534

 

Net investment income

 

 

 

 

 

 

 

 

 

 

 

9,291

 

 

 

9,291

 

Net realized gain (loss) on investments, net of taxes

 

 

 

 

 

 

 

 

 

 

 

190

 

 

 

190

 

Net unrealized appreciation (depreciation) on investments

 

 

 

 

 

 

 

 

 

 

 

(1,508

)

 

 

(1,508

)

Realized losses on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared

 

 

 

 

 

 

 

 

 

 

 

(7,331

)

 

 

(7,331

)

Balances at June 30, 2020

 

 

24,437,400

 

 

 

24

 

 

 

365,793

 

 

 

10,359

 

 

 

376,176

 

Net investment income

 

 

 

 

 

 

 

 

 

 

 

6,902

 

 

 

6,902

 

Net realized gain (loss) on investments, net of taxes

 

 

 

 

 

 

 

 

 

 

 

1,315

 

 

 

1,315

 

Net unrealized appreciation (depreciation) on investments

 

 

 

 

 

 

 

 

 

 

 

12,664

 

 

 

12,664

 

Realized losses on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

(174

)

 

 

(174

)

Dividends declared

 

 

 

 

 

 

 

 

 

 

 

(7,331

)

 

 

(7,331

)

Balances at September 30, 2020

 

 

24,437,400

 

 

$

24

 

 

$

365,793

 

 

$

23,735

 

 

$

389,552

 

Balances at December 31, 2020

 

 

24,437,400

 

 

$

24

 

 

$

363,751

 

 

$

46,985

 

 

$

410,760

 

Net investment income

 

 

 

 

 

 

 

 

 

 

 

11,081

 

 

 

11,081

 

Net realized gain (loss) on investments, net of taxes

 

 

 

 

 

 

 

 

 

 

 

3,216

 

 

 

3,216

 

Net unrealized appreciation (depreciation) on investments

 

 

 

 

 

 

 

 

 

 

 

(579

)

 

 

(579

)

Realized losses on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

(2,180

)

 

 

(2,180

)

Dividends declared

 

 

 

 

 

 

 

 

 

 

 

(9,286

)

 

 

(9,286

)

Balances at March 31, 2021

 

 

24,437,400

 

 

 

24

 

 

 

363,751

 

 

 

49,237

 

 

 

413,012

 

Net investment income

 

 

 

 

 

 

 

 

 

 

 

6,473

 

 

 

6,473

 

Net realized gain (loss) on investments, net of taxes

 

 

 

 

 

 

 

 

 

 

 

2,150

 

 

 

2,150

 

Net unrealized appreciation (depreciation) on investments

 

 

 

 

 

 

 

 

 

 

 

17,263

 

 

 

17,263

 

Realized losses on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared

 

 

 

 

 

 

 

 

 

 

 

(9,531

)

 

 

(9,531

)

Balances at June 30, 2021

 

 

24,437,400

 

 

 

24

 

 

 

363,751

 

 

 

65,592

 

 

 

429,367

 

Net investment income

 

 

 

 

 

 

 

 

 

 

 

5,118

 

 

 

5,118

 

Net realized gain (loss) on investments, net of taxes

 

 

 

 

 

 

 

 

 

 

 

8,449

 

 

 

8,449

 

Net unrealized appreciation (depreciation) on investments

 

 

 

 

 

 

 

 

 

 

 

15,335

 

 

 

15,335

 

Realized losses on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

(460

)

 

 

(460

)

Dividends declared

 

 

 

 

 

 

 

 

 

 

 

(10,264

)

 

 

(10,264

)

Balances at September 30, 2021

 

 

24,437,400

 

 

$

24

 

 

$

363,751

 

 

$

83,770

 

 

$

447,545

 

*amount is greater than zero but less than one

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See Notes to Consolidated Financial Statements (unaudited).

 

5


 

FIDUS INVESTMENT CORPORATION

Consolidated Statements of Cash Flows (unaudited)

(in thousands)

 

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

Net increase (decrease) in net assets resulting from operations

 

$

65,866

 

 

$

1,709

 

Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used for) operating activities:

 

Net change in unrealized (appreciation) depreciation on investments

 

 

(32,019

)

 

 

63,434

 

Net realized (gain) loss on investments

 

 

(13,672

)

 

 

(32,897

)

Interest and dividend income paid-in-kind

 

 

(3,437

)

 

 

(3,511

)

Accretion of original issue discount

 

 

(734

)

 

 

(118

)

Accretion of loan origination fees

 

 

(1,832

)

 

 

(866

)

Purchase of investments

 

 

(245,546

)

 

 

(86,121

)

Proceeds from sales and repayments of investments

 

 

319,036

 

 

 

110,149

 

Proceeds from loan origination fees

 

 

1,949

 

 

 

1,444

 

Realized losses on extinguishment of debt

 

 

2,640

 

 

 

299

 

Amortization of deferred financing costs

 

 

1,655

 

 

 

1,680

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Interest receivable

 

 

(698

)

 

 

(740

)

Prepaid expenses and other assets

 

 

(504

)

 

 

34

 

Accrued interest and fees payable

 

 

(1,298

)

 

 

(1,383

)

Base management fee payable, net of base management fee waiver – due to affiliate

 

 

(43

)

 

 

(110

)

Income incentive fee payable, net of income incentive fee waiver – due to affiliate

 

 

(185

)

 

 

877

 

Capital gains incentive fee (reversal) – due to (from) affiliate

 

 

8,638

 

 

 

(6,380

)

Administration fee payable and other – due to affiliate

 

 

(5

)

 

 

67

 

Taxes payable

 

 

(1,158

)

 

 

(424

)

Accounts payable and other liabilities

 

 

217

 

 

 

(16

)

Net cash provided by (used for) operating activities

 

 

98,870

 

 

 

47,127

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

Proceeds received from SBA debentures

 

 

11,500

 

 

 

6,000

 

Repayments of SBA debentures

 

 

(63,500

)

 

 

(16,500

)

Principal payments on Notes

 

 

(100,000

)

 

 

 

Proceeds received from (repayments of) borrowings under Credit Facility, net

 

 

40,000

 

 

 

(2,000

)

Proceeds from Secured Borrowings

 

 

17,746

 

 

 

 

Payment of deferred financing costs

 

 

(1,031

)

 

 

(490

)

Dividends paid to stockholders, including expenses

 

 

(29,081

)

 

 

(24,199

)

Repurchases of common stock under Stock Repurchase Program