10-Q 1 fidus_2022_q1.htm 10-Q 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 March 31, 2022

 

 

 

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 May 3, 2022, 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 — March 31, 2022 (unaudited) and December 31, 2021

3

 

Consolidated Statements of Operations — three months ended March 31, 2022 (unaudited) and 2021 (unaudited)

4

 

Consolidated Statements of Changes in Net Assets — three months ended March 31, 2022 (unaudited) and 2021 (unaudited)

5

 

Consolidated Statements of Cash Flows — three months ended March 31, 2022, (unaudited) and 2021 (unaudited)

6

 

Consolidated Schedules of Investments — March 31, 2022 (unaudited) and December 31, 2021

7

 

Notes to Consolidated Financial Statements (unaudited)

15

Item 2.

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

36

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

52

 

PART II — OTHER INFORMATION

 

Item 1.

Legal Proceedings.

54

Item 1A.

Risk Factors.

54

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

54

Item 3.

Defaults Upon Senior Securities.

54

Item 4.

Mine Safety Disclosures.

54

Item 5.

Other Information.

54

Item 6.

Exhibits.

55

Signatures

56

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)

 

 

 

March 31,

 

 

 

 

 

 

2022

 

 

December 31,

 

 

 

(unaudited)

 

 

2021

 

ASSETS

 

 

 

 

 

 

Investments, at fair value:

 

 

 

 

 

 

   Control investments (cost: $6,832 and $6,833, respectively)

 

$

2,150

 

 

$

2,151

 

   Affiliate investments (cost: $46,542 and $55,519, respectively)

 

 

122,428

 

 

 

137,284

 

   Non-control/non-affiliate investments (cost: $666,602 and $559,434, respectively)

 

 

687,417

 

 

 

579,689

 

Total investments, at fair value (cost: $719,976 and $621,786, respectively)

 

 

811,995

 

 

 

719,124

 

Cash and cash equivalents

 

 

86,113

 

 

 

169,417

 

Interest receivable

 

 

10,318

 

 

 

8,231

 

Prepaid expenses and other assets

 

 

580

 

 

 

413

 

Total assets

 

$

909,006

 

 

$

897,185

 

LIABILITIES

 

 

 

 

 

 

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

 

$

124,803

 

 

$

103,978

 

Notes, net of deferred financing costs (Note 6)

 

 

245,290

 

 

 

245,016

 

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

 

 

(483

)

 

 

(595

)

Secured Borrowings

 

 

17,443

 

 

 

17,637

 

Accrued interest and fees payable

 

 

3,615

 

 

 

4,668

 

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

 

 

3,268

 

 

 

3,135

 

Income incentive fee payable – due to affiliate

 

 

1,053

 

 

 

2,622

 

Capital gains incentive fee payable – due to affiliate

 

 

23,361

 

 

 

29,227

 

Administration fee payable and other – due to affiliate

 

 

420

 

 

 

668

 

Taxes (receivable) payable

 

 

2,043

 

 

 

2,410

 

Accounts payable and other liabilities

 

 

1,691

 

 

 

655

 

Total liabilities

 

$

422,504

 

 

$

409,421

 

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 March 31, 2022 and December 31, 2021, respectively)

 

$

24

 

 

$

24

 

Additional paid-in capital

 

 

361,807

 

 

 

361,807

 

Total distributable earnings

 

 

124,671

 

 

 

125,933

 

Total net assets

 

 

486,502

 

 

 

487,764

 

Total liabilities and net assets

 

$

909,006

 

 

$

897,185

 

Net asset value per common share

 

$

19.91

 

 

$

19.96

 

 

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

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

Investment Income:

 

 

 

 

 

 

Interest income

 

 

 

 

 

 

Control investments

 

$

-

 

 

$

593

 

Affiliate investments

 

 

884

 

 

 

848

 

Non-control/non-affiliate investments

 

 

16,197

 

 

 

17,697

 

Total interest income

 

 

17,081

 

 

 

19,138

 

Payment-in-kind interest income

 

 

 

 

 

 

Control investments

 

 

-

 

 

 

341

 

Affiliate investments

 

 

30

 

 

 

111

 

Non-control/non-affiliate investments

 

 

517

 

 

 

516

 

Total payment-in-kind interest income

 

 

547

 

 

 

968

 

Dividend income

 

 

 

 

 

 

Control investments

 

 

-

 

 

 

-

 

Affiliate investments

 

 

656

 

 

 

-

 

Non-control/non-affiliate investments

 

 

33

 

 

 

93

 

Total dividend income

 

 

689

 

 

 

93

 

Fee income

 

 

 

 

 

 

Control investments

 

 

-

 

 

 

400

 

Affiliate investments

 

 

137

 

 

 

183

 

Non-control/non-affiliate investments

 

 

2,061

 

 

 

2,508

 

Total fee income

 

 

2,198

 

 

 

3,091

 

Interest on idle funds

 

 

3

 

 

 

-

 

Total investment income

 

 

20,518

 

 

 

23,290

 

Expenses:

 

 

 

 

 

 

Interest and financing expenses

 

 

4,412

 

 

 

5,194

 

Base management fee

 

 

3,343

 

 

 

3,176

 

Incentive fee - income

 

 

1,053

 

 

 

2,669

 

Incentive fee (reversal) - capital gains

 

 

270

 

 

 

91

 

Administrative service expenses

 

 

422

 

 

 

413

 

Professional fees

 

 

515

 

 

 

323

 

Other general and administrative expenses

 

 

287

 

 

 

345

 

Total expenses before base management fee waiver

 

 

10,302

 

 

 

12,211

 

Base management fee waiver

 

 

(76

)

 

 

-

 

Total expenses, net of base management fee waiver

 

 

10,226

 

 

 

12,211

 

Net investment income before income taxes

 

 

10,292

 

 

 

11,079

 

Income tax provision (benefit)

 

 

(46

)

 

 

(2

)

Net investment income

 

 

10,338

 

 

 

11,081

 

Net realized and unrealized gains (losses) on investments:

 

 

 

 

 

 

Net realized gains (losses):

 

 

 

 

 

 

Control investments

 

 

139

 

 

 

957

 

Affiliate investments

 

 

324

 

 

 

-

 

Non-control/non-affiliate investments

 

 

6,405

 

 

 

2,259

 

Total net realized gain (loss) on investments

 

 

6,868

 

 

 

3,216

 

Income tax (provision) benefit from realized gains on investments

 

 

1

 

 

 

-

 

Net change in unrealized appreciation (depreciation):

 

 

 

 

 

 

Control investments

 

 

-

 

 

 

892

 

Affiliate investments

 

 

(5,879

)

 

 

3,952

 

Non-control/non-affiliate investments

 

 

560

 

 

 

(5,423

)

Total net change in unrealized appreciation (depreciation) on investments

 

 

(5,319

)

 

 

(579

)

Net gain (loss) on investments

 

 

1,550

 

 

 

2,637

 

Realized losses on extinguishment of debt

 

 

(198

)

 

 

(2,180

)

Net increase (decrease) in net assets resulting from operations

 

$

11,690

 

 

$

11,538

 

Per common share data:

 

 

 

 

 

 

Net investment income per share-basic and diluted

 

$

0.42

 

 

$

0.45

 

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

 

$

0.48

 

 

$

0.47

 

Dividends declared per share

 

$

0.53

 

 

$

0.38

 

Weighted average number of shares outstanding — basic and diluted

 

 

24,437,400

 

 

 

24,437,400

 

 

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, 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

 

Balances at December 31, 2021

 

 

24,437,400

 

 

$

24

 

 

$

361,807

 

 

$

125,933

 

 

$

487,764

 

Net investment income

 

 

 

 

 

 

 

 

 

 

 

10,338

 

 

 

10,338

 

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

 

 

 

 

 

 

 

 

 

 

 

6,869

 

 

 

6,869

 

Net unrealized appreciation (depreciation) on investments

 

 

 

 

 

 

 

 

 

 

 

(5,319

)

 

 

(5,319

)

Realized losses on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

(198

)

 

 

(198

)

Dividends declared

 

 

 

 

 

 

 

 

 

 

 

(12,952

)

 

 

(12,952

)

Balances at March 31, 2022

 

 

24,437,400

 

 

$

24

 

 

$

361,807

 

 

$

124,671

 

 

$

486,502

 

 

See Notes to Consolidated Financial Statements (unaudited).

 

5


 

FIDUS INVESTMENT CORPORATION

Consolidated Statements of Cash Flows (unaudited)

(in thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

Net increase (decrease) in net assets resulting from operations

 

$

11,690

 

 

$

11,538

 

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

 

 

5,319

 

 

 

579

 

Net realized (gain) loss on investments

 

 

(6,868

)

 

 

(3,216

)

Interest and dividend income paid-in-kind

 

 

(547

)

 

 

(968

)

Accretion of original issue discount

 

 

(23

)

 

 

(597

)

Accretion of loan origination fees

 

 

(280

)

 

 

(747

)

Purchase of investments

 

 

(114,428

)

 

 

(63,107

)

Proceeds from sales and repayments of investments

 

 

23,185

 

 

 

98,565

 

Proceeds from loan origination fees

 

 

771

 

 

 

476

 

Realized losses on extinguishment of debt

 

 

198

 

 

 

2,180

 

Amortization of deferred financing costs

 

 

524

 

 

 

583

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Interest receivable

 

 

(2,087

)

 

 

457

 

Prepaid expenses and other assets

 

 

(167

)

 

 

(652

)

Accrued interest and fees payable

 

 

(1,053

)

 

 

(533

)

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

 

 

133

 

 

 

(68

)

Income incentive fee payable – due to affiliate

 

 

(1,569

)

 

 

59

 

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

 

 

(5,866

)

 

 

91

 

Administration fee payable and other – due to affiliate

 

 

(248

)

 

 

(382

)

Taxes payable

 

 

(367

)

 

 

(700

)

Accounts payable and other liabilities

 

 

1,036

 

 

 

(57

)

Net cash provided by (used for) operating activities

 

 

(90,647

)

 

 

43,501

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

Proceeds received from SBA debentures

 

 

41,500

 

 

 

6,000

 

Repayments of SBA debentures

 

 

(20,000

)

 

 

(19,200

)

Principal payments on Notes

 

 

 

 

 

(100,000

)

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

 

 

 

 

 

15,000

 

Proceeds received from (repayments of) Secured Borrowings, net

 

 

(194

)

 

 

 

Payment of deferred financing costs

 

 

(1,011

)

 

 

(148

)

Dividends paid to stockholders, including expenses

 

 

(12,952

)

 

 

(9,286

)

Net cash provided by (used for) financing activities

 

 

7,343

 

 

 

(107,634

)

Net increase (decrease) in cash and cash equivalents

 

 

(83,304

)

 

 

(64,133

)

Cash and cash equivalents:

 

 

 

 

 

 

Beginning of period

 

 

169,417

 

 

 

124,308

 

End of period

 

$

86,113

 

 

$

60,175

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash payments for interest

 

$

4,941

 

 

$

5,144

 

Cash payments for taxes, net of tax refunds received

 

$

320

 

 

$

698

 

 

See Notes to Consolidated Financial Statements (unaudited).

6


 

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments (unaudited)

March 31, 2022

(in thousands, except shares)

 

Portfolio Company (a)(b)

 

Variable Index

Rate (e)

Investment

 

Principal

 

 

 

 

 

Fair

 

Percent of

 

Investment Type (c)

Industry

Spread / Floor (d)

Cash/PIK

Date (f)

Maturity

Amount

 

 

Cost

 

 

Value (g)

 

Net Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Control Investments (t)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hilco Plastics Holdings, LLC (dba Hilco Technologies) (n)

Component Manufacturing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Equity (Units N/A)

 

 

 

4/6/2021

 

 

 

 

$

 

 

$

 

 

0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mesa Line Services, LLC (n)

Utilities: Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Equity (10 shares) (j)

 

 

 

4/22/2021

 

 

 

 

 

 

 

 

2,150

 

 

1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

US GreenFiber, LLC (n)

Building Products Manufacturing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Second Lien Debt (j)(y)

 

 

10.00%/3.00%

7/3/2014

8/30/2024

$

5,226

 

 

 

5,223

 

 

 

 

 

 

Common Equity (2,522 units) (h)(j)

 

 

 

7/3/2014

 

 

 

 

 

585

 

 

 

 

 

 

Common Equity (425,508 units) (j)

 

 

 

8/30/2019

 

 

 

 

 

1

 

 

 

 

 

 

Common Equity (1,022,813 units) (h)(j)

 

 

 

7/1/2020

 

 

 

 

 

1,023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,832

 

 

 

 

 

0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Control Investments

 

 

 

 

 

 

 

 

$

6,832

 

 

$

2,150

 

 

1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Affiliate Investments (l)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Applegate Greenfiber Intermediate Inc. (fka US GreenFiber, LLC)

Building Products Manufacturing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subordinated Debt (j)

 

 

10.00%/0.00%

12/31/2021

12/31/2027

$

9,602

 

 

$

9,602

 

 

$

9,602

 

 

 

Common Equity (5,690units) (h) (j)

 

 

 

12/31/2021

 

 

 

 

 

5,690.00

 

 

 

5,690.00

 

 

 

Common Equity (7,113 units) (h) (j)

 

 

 

12/31/2021

 

 

 

 

 

7,113.00

 

 

 

7,113.00

 

 

 

Common Equity (2,012units) (h) (j)

 

 

 

12/31/2021

 

 

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

22,405

 

 

 

22,405

 

 

4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FAR Research Inc. (n)

Specialty Chemicals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Equity (1,396 units)

 

 

 

3/31/2014

 

 

 

 

 

 

 

 

28

 

 

0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Medsurant Holdings, LLC

Healthcare Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred Equity (84,997 units) (h)(j)

 

 

 

4/12/2011

 

 

 

 

 

716

 

 

 

842

 

 

 

Warrant (252,588 units) (h)(j)(m)

 

 

 

4/12/2011

 

 

 

 

 

2,258

 

 

 

2,857

 

 

 

 

 

 

 

 

 

 

 

 

 

2,974

 

 

 

3,699

 

 

1

%

Mirage Trailers LLC (n)

Utility Equipment Manufacturing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Equity (2,500,000 shares)

 

 

 

11/25/2015

 

 

 

 

 

 

 

 

 

 

0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pfanstiehl, Inc.

Healthcare Products

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Equity (4,250 units) (j)

 

 

 

3/29/2013

 

 

 

 

 

425

 

 

 

59,297

 

 

12

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pinnergy, Ltd.

Oil & Gas Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Equity - Class A-2 (42,500 units) (j)

 

 

 

10/13/2016

 

 

 

 

 

3,000

 

 

 

18,440

 

 

4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Spectra A&D Acquisition, Inc. (fka FDS Avionics Corp.)

Aerospace & Defense Manufacturing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First Lien Debt (k)(ag)

 

(L + 5.50%) / (1.00%)

6.50%/0.00%

2/12/2021

2/11/2026

 

13,000

 

 

 

12,926

 

 

 

13,000

 

 

 

Common Equity (41,290 units) (j)

 

 

 

2/12/2021

 

 

 

 

 

2,609

 

 

 

801

 

 

 

Common Equity (12,035 units) (j)

 

 

 

8/25/2021