APOLLO INVESTMENT CORP - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - May 18, 2017

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Apollo Investment Corporation
Reports Financial Results for the Quarter and Fiscal Year Ended March 31, 2017


Fiscal Fourth Quarter and Other Recent Highlights:
•
Net investment income per share for the quarter was $0.17, compared to $0.17 for the quarter ended December 31, 2016
•
Net asset value per share as of the end of the quarter was $6.74 compared to $6.86 as of December 31, 2016, a 1.7% decrease
•
Declared a distribution of $0.15 per share
•
Net leverage as of the end of the quarter was 0.55 x, compared to 0.66 x as of December 31, 2016 providing us with substantial investment capacity to execute our portfolio repositioning strategy
•
Continued to make what we believe to be considerable progress toward the successful execution of our portfolio repositioning strategy including:

◦
Increased first lien debt to 45% of the total portfolio as of the end of the quarter, at fair value
◦
Increased floating rate debt to 84%(1) of the corporate debt portfolio as of the end of the quarter, at fair value
◦
Reduced exposure to non-core assets(2) by $372 million(3) since June 30, 2016 while meaningfully improving the risk profile of the portfolio
◦
Invested over $620 million in our core strategies(4) since July 1, 2016 through May 15, 2017, including more than $200 million since April 1, 2017 bringing net leverage within our target range

New York, NY — May 18, 2017 — Apollo Investment Corporation (NASDAQ: AINV) or the “Company,” or “Apollo Investment,” today announced financial results for its fourth fiscal quarter ended March 31, 2017. The Company’s net investment income was $0.17 per share for the quarter ended March 31, 2017, compared to $0.17 per share for the quarter ended December 31, 2016. The Company’s net asset value (“NAV”) was $6.74 per share as of March 31, 2017 compared to $6.86 as of December 31, 2016.
On May 17, 2017, the Board of Directors declared a distribution of $0.15 per share, payable on July 6, 2017 to shareholders of record as of June 21, 2017.
Mr. James Zelter, Apollo Investment’s Chief Executive Officer, commented, “We have made considerable progress implementing the strategy that we outlined last year including 1) the deployment of capital into assets sourced by the Apollo / Midcap direct origination platform, including investments made pursuant to our co-investment exemptive order, 2) the reduction of our exposure to certain positions and industries which are higher on the risk spectrum and have more volatile returns, and 3) the resolution of several legacy positions.” Mr. Zelter continued, “Looking ahead to fiscal year 2018, we believe that we are well positioned for when opportunities become more attractive given our substantial investment capacity. We will continue to focus on deploying capital into opportunities sourced from the Apollo / MidCap direct origination platform.”
___________________
(1)
The Company has modified the calculation of its interest rate type information.  The interest type information is calculated using the Company’s corporate debt portfolio and excludes aviation, oil and gas, structured credit, renewables, shipping, commodities and investments on non-accrual status. 
(2)
Non-core assets include oil & gas, structured credit, renewables, shipping, and commodities.
(3)
Includes the repayment of the Company's investments in Craft 2013-1 which occurred in April 2017.
(4)
Core strategies include corporate lending, aviation, life sciences, asset based and lender finance.




1


FINANCIAL HIGHLIGHTS
($ in billions, except per share data)
March 31,
2017
 
December 31,
2016
 
September 30,
2016
 
June 30,
2016
 
March 31,
2016
Total assets (1)
$
2.41

 
$
2.64

 
$
2.65

 
$
2.79

 
$
3.08

Investment portfolio (fair value)
$
2.32

 
$
2.53

 
$
2.55

 
$
2.62

 
$
2.92

Debt outstanding (1)
$
0.85

 
$
1.03

 
$
1.01

 
$
1.10

 
$
1.31

Net assets
$
1.48

 
$
1.51

 
$
1.54

 
$
1.55

 
$
1.65

Net asset value per share
$
6.74

 
$
6.86

 
$
6.95

 
$
6.90

 
$
7.28

 
 
 
 
 
 
 
 
 
 
Debt-to-equity ratio (1)
0.57
 x
 
0.69
 x
 
0.66
 x
 
0.71
 x
 
0.80
 x
Net leverage ratio (1) (2)
0.55
 x
 
0.66
 x
 
0.63
 x
 
0.66
 x
 
0.75
 x
___________________
(1)
Numbers for March 31, 2016 were updated due to the retrospective application of the new accounting pronouncements (ASU 2015-03 and ASU 2015-15) adopted as of April 1, 2016.
(2)
The Company’s net leverage ratio is defined as debt outstanding plus payable for investments purchased, less receivable for investments sold, less cash, less foreign currencies, divided by net assets.

PORTFOLIO AND INVESTMENT ACTIVITY
(in millions)*
Three Months Ended March 31, 2017
 
Year Ended March 31, 2017
Investments made in portfolio companies
$
149.4

 
$
601.1

Investments sold
(38.4
)
 
(219.5
)
Net activity before repaid investments
111.0

 
381.6

Investments repaid
(306.4
)
 
(875.2
)
Net investment activity
$
(195.4
)
 
$
(493.6
)
 
 
 
 
Portfolio companies at beginning of period
85

 
89

Number of new portfolio companies
13

 
37

Number of exited portfolio companies
(12
)
 
(40
)
Portfolio companies at end of period
86

 
86

 
 
 
 
Number of investments made in existing portfolio companies
10

 
26

____________________
* Totals may not foot due to rounding.

2


OPERATING RESULTS
(in millions) *
Three Months Ended March 31, 2017
 
Year Ended March 31, 2017
Net investment income
$
37.3

 
$
149.2

Net realized and change in unrealized gains (losses)
(29.2
)
 
(130.9
)
Net increase (decrease) in net assets resulting from operations
$
8.1

 
$
18.4

 
 
 
 
(per share) *
 
 
 
Net investment income on per average share basis
$
0.17

 
$
0.67

Net realized and change in unrealized gain (loss) per share
(0.13
)
 
(0.59
)
Earnings per share — basic
$
0.04

 
$
0.08

____________________
* Totals may not foot due to rounding.


3


SHARE REPURCHASE PROGRAM
On September 15, 2016, the Company announced that its Board of Directors expanded the Company’s stock repurchase program by $50 million which increased the total amount available to be repurchased to $150 million.
During the three months ended March 31, 2017, the Company did not repurchase any shares. During the year ended March 31, 2017, the Company repurchased 6,461,842 shares at weighted average price per share of $5.87 inclusive of commissions, for a total cost of $37.9 million.
Since the inception of the share repurchase program and through March 31, 2017, the Company repurchased 17,046,697 shares at weighted average price per share of $5.89 inclusive of commissions, for a total cost of $100.4 million.










4


CONFERENCE CALL / WEBCAST AT 10:00 AM EDT ON MAY 18, 2017
The Company will host a conference call on Thursday, May 18, 2017 at 10:00 a.m. Eastern Time. All interested parties are welcome to participate in the conference call by dialing (888) 802-8579 approximately 5-10 minutes prior to the call; international callers should dial (973) 633-6740. Participants should reference Apollo Investment Corporation or Conference ID #99579978 when prompted. A simultaneous webcast of the conference call will be available to the public on a listen-only basis and can be accessed through the Event Calendar in the Investor Relations section of our website at www.apolloic.com. Following the call you may access a replay of the event either telephonically or via audio webcast. The telephonic replay will be available approximately two hours after the live call and through June 12, 2017 by dialing (800) 585-8367; international callers please dial (404) 537-3406, reference Conference ID # 99579978. A replay of the audio webcast will also be available later that same day. To access the audio webcast please visit the Event Calendar in the Investor Relations section of the Company’s website at www.apolloic.com.
SUPPLEMENTAL INFORMATION
The Company provides a supplemental information package to offer more transparency into its financial results and make its reporting more informative and easier to follow. The supplemental package is available on the Investor Relations section of the Company’s website at www.apolloic.com.

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Our portfolio composition and weighted average yields as of March 31, 2017, December 31, 2016, September 30, 2016, June 30, 2016, and March 31, 2016 were as follows:
 
March 31,
2017
 
December 31,
2016
 
September 30,
2016
 
June 30,
2016
 
March 31,
2016
Portfolio composition, at fair value:
 
 
 
 
 
 
 
 
 
Secured debt
75%
 
69%
 
64%
 
65%
 
65%
Unsecured debt
7%
 
10%
 
9%
 
9%
 
9%
Structured products and other
7%
 
9%
 
12%
 
12%
 
11%
Preferred equity
1%
 
1%
 
3%
 
3%
 
3%
Common equity/interests and warrants
10%
 
11%
 
12%
 
11%
 
12%
Weighted average yields, at amortized cost, exclusive of investments on non-accrual status (1):
 
 
 
 
 
 
 
 
 
Secured debt portfolio
10.2%
 
10.9%
 
11.0%
 
11.0%
 
11.0%
Unsecured debt portfolio
11.1%
 
10.7%
 
10.8%
 
10.8%
 
10.7%
Total debt portfolio
10.3%
 
10.9%
 
11.0%
 
11.0%
 
11.0%
Interest Rate Type, at fair value (2):
 
 
 
 
 
 
 
 
 
Fixed rate amount
$0.2 billion
 
$0.2 billion
 
$0.2 billion
 
$0.3 billion
 
$0.3 billion
Floating rate amount
$1.1 billion
 
$1.0 billion
 
$0.9 billion
 
$0.8 billion
 
$1.0 billion
Fixed rate, as percentage of total
16%
 
16%
 
21%
 
23%
 
24%
Floating rate, as percentage of total
84%
 
84%
 
79%
 
77%
 
76%
Interest Rate Type, at amortized cost (2):
 
 
 
 
 
 
 
 
 
Fixed rate amount
$0.2 billion
 
$0.2 billion
 
$0.2 billion
 
$0.3 billion
 
$0.4 billion
Floating rate amount
$1.0 billion
 
$1.0 billion
 
$0.9 billion
 
$0.9 billion
 
$1.0 billion
Fixed rate, as percentage of total
17%
 
17%
 
22%
 
24%
 
26%
Floating rate, as percentage of total
83%
 
83%
 
78%
 
76%
 
74%
____________________
(1)
An investor’s yield may be lower than the portfolio yield due to sales loads and other expenses.
(2)
The Company has modified the calculation of its interest rate type information.  The interest type information is calculated using the Company’s corporate debt portfolio and excludes aviation, oil and gas, structured credit, renewables, shipping, commodities and investments on non-accrual status.  Prior periods have been modified to reflect this definition.


6


APOLLO INVESTMENT CORPORATION
STATEMENTS OF ASSETS AND LIABILITIES
(In thousands, except share and per share data)

March 31, 2017
 
March 31, 2016


 

Assets

 

Investments at fair value:


 


Non-controlled/non-affiliated investments (cost — $1,510,980 and $2,052,896, respectively)
$
1,402,409

 
$
1,790,294

Non-controlled/affiliated investments (cost — $417,471 and $216,202, respectively)
239,050

 
272,558

Controlled investments (cost — $676,972 and $829,029, respectively)
675,249

 
853,977

Total investments at fair value (cost — $2,605,423 and $3,098,127, respectively)
2,316,708

 
2,916,829

Cash and cash equivalents
9,783

 
16,521

Foreign currencies (cost — $1,494 and $2,354, respectively)
1,497

 
2,384

Receivable for investments sold
40,226

 
79,625

Interest receivable
17,072

 
29,749

Dividends receivable
6,489

 
9,509

Deferred financing costs
17,632

 
14,497

Prepaid expenses and other assets
713

 
9,523

Total Assets
$
2,410,120

 
$
3,078,637



 

Liabilities

 

Debt
$
848,449

 
$
1,312,960

Payable for investments purchased
13,970

 
25,091

Distributions payable
32,954

 
45,231

Management and performance-based incentive fees payable
16,306

 
31,124

Interest payable
7,319

 
7,444

Accrued administrative services expense
2,250

 
2,015

Other liabilities and accrued expenses
7,075

 
9,191

Total Liabilities
$
928,323

 
$
1,433,056

 


 


Net Assets
$
1,481,797

 
$
1,645,581



 

Net Assets

 

Common stock, $0.001 par value (400,000,000 shares authorized; 219,694,654 and 226,156,496 shares issued and outstanding, respectively)
$
220

 
$
226

Paid-in capital in excess of par
2,924,775

 
3,026,922

Accumulated underdistributed net investment income
88,134

 
71,231

Accumulated net realized loss
(1,277,625
)
 
(1,288,141
)
Net unrealized loss
(253,707
)
 
(164,657
)
Net Assets
$
1,481,797

 
$
1,645,581




 


Net Asset Value Per Share
$
6.74

 
$
7.28







7


APOLLO INVESTMENT CORPORATION
STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share data)

Three Months Ended March 31,
 
Year Ended March 31,

2017
 
2016
 
2017
 
2016
 
(Unaudited)
 
(Unaudited)
 
 
 
 
Investment Income

 

 

 

Non-controlled/non-affiliated investments:

 

 

 

Interest income
$
40,396

 
$
52,412

 
$
167,816

 
$
257,997

Dividend income
—

 
1,061

 
2,531

 
3,885

Other income
1,568

 
4,355

 
4,551

 
11,176

Non-controlled/affiliated investments:

 

 

 

Interest income
3,708

 
561

 
4,723

 
1,194

Dividend income
2,173

 
4,032

 
14,485

 
32,295

Other income
—

 
70

 
70

 
368

Controlled investments:

 

 

 

Interest income
14,551

 
16,545

 
67,936

 
51,116

Dividend income
3,900

 
6,299

 
17,750

 
21,651

Other income
—

 
—

 
—

 
63

Total Investment Income
$
66,296

 
$
85,335

 
$
279,862

 
$
379,745

Expenses
 
 
 
 
 
 
 
Management fees
$
12,256

 
$
15,620

 
$
52,934

 
$
66,176

Performance-based incentive fees
2,713

 
10,159

 
18,776

 
43,943

Interest and other debt expenses
14,061

 
17,315

 
59,765

 
80,850

Administrative services expense
1,746

 
1,835

 
7,513

 
6,449

Other general and administrative expenses
3,283

 
1,050

 
13,200

 
8,745

Total expenses
34,059

 
45,979

 
152,188

 
206,163

Management and performance-based incentive fees waived
(4,969
)
 
(5,203
)
 
(21,233
)
 
(19,440
)
Expense reimbursements
(84
)
 
(59
)
 
(336
)
 
(235
)
Net Expenses
$
29,006

 
$
40,717

 
$
130,619

 
$
186,488

Net Investment Income
$
37,290

 
$
44,618

 
$
149,243

 
$
193,257

Net Realized and Change in Unrealized Gains (Losses)

 

 

 

Net realized gains (losses):

 

 

 

Non-controlled/non-affiliated investments
$
(61,580
)
 
$
(71,334
)
 
$
(97,774
)
 
$
(154,230
)
Non-controlled/affiliated investments
(31,032
)
 
(3,912
)
 
50,014

 
(5,554
)
Controlled investments
—

 
(22
)
 
(2,173
)
 
(39,736
)
Derivatives and others
(126
)
 
(470
)
 
(126
)
 
(470
)
Foreign currency transactions
6,222

 
743

 
8,236

 
4,626

Net realized losses
(86,516
)
 
(74,995
)
 
(41,823
)
 
(195,364
)
Net change in unrealized losses:

 

 

 

Non-controlled/non-affiliated investments
63,880

 
11,635

 
134,198

 
(105,316
)
Non-controlled/affiliated investments
(2,249
)
 
(4,526
)
 
(185,926
)
 
27,086

Controlled investments
340

 
1,100

 
(55,689
)
 
33,680

Derivatives and others
4,046

 
—

 
—

 
—

Foreign currency translations
(8,739
)
 
(1,229
)
 
18,367

 
2,131

Net change in unrealized losses
57,278

 
6,980

 
(89,050
)
 
(42,419
)
Net Realized and Change in Unrealized Losses
$
(29,238
)
 
$
(68,015
)
 
$
(130,873
)
 
$
(237,783
)
Net Increase (Decrease) in Net Assets Resulting from Operations
$
8,052

 
$
(23,397
)
 
$
18,370

 
$
(44,526
)
Earnings (Loss) Per Share — Basic
$
0.04

 
$
(0.10
)
 
$
0.08

 
$
(0.19
)
Earnings (Loss) Per Share — Diluted
N/A

 
$
(0.10
)
 
N/A

 
$
(0.19
)


8


About Apollo Investment Corporation
Apollo Investment Corporation (NASDAQ: AINV) is a closed-end investment company that has elected to be treated as a business development company under the Investment Company Act of 1940. The Company invests primarily in various forms of debt investments, including secured and unsecured debt, loan investments, and/or equity in private middle-market companies. The Company may also invest in the securities of public companies and structured products and other investments such as collateralized loan obligations and credit-linked notes. The Company seeks to provide private financing solutions for private companies that do not have access to the more traditional providers of credit. Apollo Investment Corporation is managed by Apollo Investment Management, L.P., an affiliate of Apollo Global Management, LLC, a leading global alternative investment manager. For more information, please visit www.apolloic.com.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties, including, but not limited to, statements as to our future operating results; our business prospects and the prospects of our portfolio companies; the impact of investments that we expect to make; our contractual arrangements and relationships with third parties; the dependence of our future success on the general economy and its impact on the industries in which we invest; the ability of our portfolio companies to achieve their objectives; our expected financings and investments; the adequacy of our cash resources and working capital; and the timing of cash flows, if any, from the operations of our portfolio companies.
We may use words such as “anticipates,” “believes,” “expects,” “intends,” “will,” “should,” “may” and similar expressions to identify forward-looking statements. Such statements are based on currently available operating, financial and competitive information and are subject to various risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations. Statements regarding the following subjects, among others, may be forward-looking: the return on equity; the yield on investments; the ability to borrow to finance assets; new strategic initiatives; the ability to reposition the investment portfolio; the market outlook; future investment activity; and risks associated with changes in business conditions and the general economy. Undue reliance should not be placed on such forward-looking statements as such statements speak only as of the date on which they are made. We do not undertake to update our forward-looking statements unless required by law.
Contact
Elizabeth Besen
Investor Relations Manager
Apollo Investment Corporation
(212) 822-0625
ebesen@apollolp.com

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