8-K


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________ 
FORM 8-K
____________________________________________ 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

March 7, 2016 (March 7, 2016)
Date of Report (date of Earliest Event Reported)
____________________________________________ 

NEWTEK BUSINESS SERVICES CORP.
(Exact Name of Company as Specified in its Charter)
____________________________________________ 

MARYLAND
814-01035
46-3755188
(State or Other Jurisdiction of Incorporation or Organization)
(Commission File No.)
(I.R.S. Employer Identification No.)

212 West 35th Street, Second Floor, New York, NY 10001
(Address of principal executive offices and zip code)

(212) 356-9500
(Company’s telephone number, including area code)

(Former name or former address, if changed from last report)
____________________________________________ 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))






Forward-Looking Statements

Statements in this Current Report on Form 8-K (including the exhibits), including statements regarding Newtek Business Services Corp.’s (“Newtek” or the “Company”) beliefs, expectations, intentions or strategies for the future, may be forward-looking statements. All forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from the plans, intentions and expectations reflected in or suggested by the forward-looking statements. Such risks and uncertainties include, among others, intensified competition, operating problems and their impact on revenues and profit margins, anticipated future business strategies and financial performance, anticipated future number of customers, business prospects, legislative developments and similar matters. Risk factors, cautionary statements and other conditions which could cause Newtek’s actual results to differ from management's current expectations are contained in Newtek’s filings with the Securities and Exchange Commission.  Newtek undertakes no obligation to update any forward-looking statement to reflect events or circumstances that may arise after the date of this filing.

Item 2.02.     Results of Operations and Financial Condition.

On March 7, 2016 Newtek Business Services Corp. issued a press release entitled “Newtek Business Services Corp. Reports Full Year 2015 Financial Results; Reports Net Asset Value of $14.06 Per Share at December 31, 2015” (the “Press Release”). A copy of the Press Release is furnished as Exhibit 99.1 to this Current Report on Form 8-K. The information in this report shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section, and shall not be incorporated by reference into any registration statement pursuant to the Securities Act of 1933, as amended.

Item 9.01.      Financial Statements and Exhibits.
 
(d)  Exhibits.
 
Exhibit Number
 
Description
 
 
 
99.1
 
Press Release, dated March 7, 2016, entitled “Newtek Business Services Corp. Reports Full Year 2015 Financial Results; Reports Net Asset Value of $14.06 Per Share at December 31, 2015.”







SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

                    
 
NEWTEK BUSINESS SERVICES CORP.
 
 
 
Date: March 7, 2016
By:
/S/    BARRY SLOANE        
 
 
Barry Sloane
 
 
Chairman of the Board and Chief Executive Officer







EXHIBIT INDEX
 
Exhibit Number
 
Description
 
 
 
99.1
 
Press Release, dated March 7, 2016, entitled “Newtek Business Services Corp. Reports Full Year 2015 Financial Results; Reports Net Asset Value of $14.06 Per Share at December 31, 2015.”



Exhibit


Exhibit 99.1
 
 
 
 
 
 
 
 
 

Newtek Business Services Corp. Reports Full Year 2015
Financial Results

Reports Net Asset Value of $14.06 Per Share at December 31, 2015


New York, N.Y. - March 7, 2015 - Newtek Business Services Corp. (“Newtek” or the “Company”), (NASDAQ: NEWT), an internally managed business development company (“BDC”), announced today its financial results for the year ended December 31, 2015.

Full Year 2015 Highlights:

Adjusted net investment income1 for the year ended December 31, 2015 was $22.2 million, or $2.06 per share.
Net asset value (“NAV”) was $203.9 million, or $14.06 per share, at December 31, 2015; an increase from NAV of $13.10 per share at October 1, 2015.
Net increase in net assets for the year ended December 31, 2015 was $35.7 million.
Total investment income for the year ended December 31, 2015 was $26.1 million.
Funded $242.5 million of SBA 7(a) loans in 2015; an increase of 19.9% over 2014.
Reaffirmed loan funding forecast of approximately $320 million in SBA 7(a) and SBA 504 loans, (SBA 504 loans are originated by one of Newtek’s controlled portfolio companies) which would represent an approximate 32% increase over 2015.
Total investment portfolio was $266.9 million at December 31, 2015.
Debt-to-equity ratio was approximately 66.5% at December 31, 2015.
Announced a stock repurchase program under which the Company may repurchase up to 150,000 shares of common stock.
Completed sixth securitization of $40.8 million of Standard and Poor's AA rated Unguaranteed SBA 7(a) Loan-Backed Notes, the Company’s largest securitization to date.
The Notes were priced and sold to investors at a yield of 2.5%, which represents an approximate 100 basis point improvement in the overall yield since the Company's last securitization.
Closed an underwritten offering in October 2015 of 2.3 million shares of common stock for total gross proceeds of approximately $38.0 million. 
Completed a public offering in September 2015 of $8.3 million in aggregate principal amount of 7.5% Notes due 2022. The Notes trade on the Nasdaq Global Market under the trading symbol “NEWTZ.”
Acquired Premier Payments LLC in July 2015 as a controlled portfolio company, a national electronic payment processor, for approximately $16.5 million in cash and newly issued restricted Common Shares. Premier had double-digit revenue and Adjusted EBITDA year-over-year percentage growth in 2015.

2015 Dividend Payments:

The Company declared $20.9 million, or $1.76(3) per share, in cash dividends during 2015, which represented approximately 94.0% of the RIC’s 2015 estimated taxable income.




On December 31, 2015, the Company paid a special dividend of approximately $34.0 million, or $2.69 per share, to shareholders of record on November 18, 2015, with 27% paid in cash and 73% paid in newly issued shares.
The Company issued 1.8 million new shares on December 31, 2015 in connection with the special dividend bringing the total outstanding share count to approximately 14.5 million at December 31, 2015.
2016 Dividend Payments:
Anticipate paying an annual cash dividend of approximately $21.8 million, or $1.50(2) per share in 2016 (which does not include the fourth quarter 2015 dividend of $0.40 per share paid on January 19, 2016); which would represent a 4.3% increase over the $20.9 million in cash dividends declared for 2015.
On February 25, 2016, the Company’s board of directors declared a first quarter dividend of approximately $5.1 million, or $0.35(2) per share, payable on March 31, 2016 to shareholders of record as of March 22, 2016.

Barry Sloane, Chairman, President and Chief Executive Officer said, “We are pleased to report 2015 adjusted net investment income of $2.06 per share. For the full year 2015, the Company demonstrated a relatively stable NAV and dividend, which we anticipate will continue in 2016. We ended 2015 with an attractive debt-to-equity ratio of 66.5% which, if needed, gives us the ability to raise between $65 and $80 million of debt capital based on our December 31, 2015 NAV of $14.06 per share. As a result, we do not anticipate having to raise equity capital for the foreseeable future. Thus far in 2016, we have experienced strong performance in our businesses, in particular with better than expected metrics in our SBA 7(a) business. The recent increase in bond prices has provided a solid support level for the realized gains we recognize on the sale of the government guaranteed portions of our SBA 7(a) loan investments. In addition, so far in 2016, the credit quality of our loans has met or exceeded our expectations and indicates strong performance with both minimal credit write-offs and non-performing loans.”
Mr. Sloane continued, “Our acquisition of Premier Payments LLC generated approximately $1.4 million of Adjusted EBITDA, proving to be additive to our 2015 dividend income. In 2015, our electronic payment processing portfolio companies generated $10.9 million in Adjusted EBITDA, compared to $7.1 million in Adjusted EBITDA generated by Newtek Merchant Solutions in 2014. For 2016, we are forecasting Adjusted EBITDA of $13.1 million for our electronic payment processing portfolio companies, which would represent a 20% increase over 2015.”
Mr. Sloane concluded, “We are proud to say that we have been recognized as the leading performing BDC in 2015, generating a total annual return based on market value to our shareholders of approximately 24.46%. We will continue to communicate the various differences innate to our business model within the BDC market, which we believe offer a significant opportunity from an investment standpoint. We will address these differences in detail, and how we believe they provide a unique advantage to Newtek, during our conference call scheduled for tomorrow morning at 8:30am ET.”
Investor Conference Call and Webcast

A conference call to discuss the full year 2015 results will be hosted by Barry Sloane, Chairman, President and Chief Executive Officer, and Jennifer Eddelson, Executive Vice President and Chief Accounting Officer, tomorrow, Tuesday, March 8, 2015 at 8:30 a.m. ET. The live conference call can be accessed by dialing (877) 303-6993 or (760) 666-3611.
A live audio webcast of the call with the corresponding presentation will be available in the ‘Events & Presentations’ section of the Investor Relations portion of Newtek’s website at http://investor.newtekbusinessservices.com/events.cfm. A replay of the webcast with the corresponding presentation will be available on Newtek’s website shortly following the live presentation and will remain available for 90 days following the live presentation.
Use of Non-GAAP Financial Measures - Newtek Business Services Corp. and Subsidiaries:

In evaluating its business, Newtek considers and uses adjusted net investment income as a measure of its operating performance. Adjusted net investment income includes short-term capital gains from the sale of the guaranteed portions of SBA 7(a) loans, which is a reoccurring event. The Company defines Adjusted net investment income (loss) as Net investment income (loss) plus Net realized gains (losses) recognized from the sale of guaranteed portions of SBA 7(a) loan investments.
The term Adjusted net investment income is not defined under U.S. generally accepted accounting principles, or U.S. GAAP, and is not a measure of operating income, operating performance or liquidity presented in accordance with U.S. GAAP.  Adjusted net investment income has limitations as an analytical tool and, when assessing the Company’s operating performance, investors should not consider Adjusted net investment income in isolation, or as a substitute for net investment income (loss), or other consolidated income statement data prepared in accordance with U.S. GAAP.  Among other things, Adjusted net investment income does not reflect the Company’s actual cash expenditures.  Other companies may calculate similar measures differently than Newtek, limiting their usefulness as comparative tools.  The




Company compensates for these limitations by relying primarily on its GAAP results supplemented by Adjusted net investment income.

Use of Non-GAAP Financial Measures - Newtek’s Controlled Portfolio Company Investments:

The Company’s controlled portfolio company investments define Adjusted EBITDA as earnings before, interest expense, taxes, depreciation and amortization, managerial assistance fees, loss on lease and stock compensation expense.  Adjusted EBITDA is used as a supplemental measure to review and assess the operating performance of the portfolio companies.  The Company’s portfolio companies also present the Adjusted EBITDA because it believes it is frequently used by securities analysts, investors and other interested parties as a measure of financial performance.
The term Adjusted EBITDA is not defined under U.S. generally accepted accounting principles, or U.S. GAAP, and is not a measure of operating income, operating performance or liquidity presented in accordance with U.S. GAAP.  Adjusted EBITDA has limitations as analytical tools and, when assessing the portfolio company’s operating performance, investors should not consider Adjusted EBITDA in isolation, or as a substitute for net income, or other income statement data prepared in accordance with U.S. GAAP.  Among other things, Adjusted EBITDA does not reflect the portfolio companies’ actual cash expenditures.  Other companies may calculate similar measures differently than the portfolio company, limiting their usefulness as comparative tools.  The Company compensates for these limitations by relying primarily on its GAAP results supplemented by Adjusted EBITDA.

1Adjusted net investment income (loss) = Net investment income (loss) + Net realized gains recognized from the sale of guaranteed portions of SBA 7(a) loans.

2Amount and timing of dividends, if any, remain subject to the discretion of the Company’s board of directors. 2016 dividend forecast based on shares outstanding at December 31, 2015.

3 Paid a total of $1.36 per share in cash dividends in the calendar year 2015, with the fourth quarter 2015 dividend of $0.40 per share paid on January 19, 2016.

Note regarding Dividend Payments: The Company's Board of Directors expects to maintain a dividend policy with the objective of making quarterly distributions in an amount that approximates at least 90% to 98% of the Company's annual taxable income. The determination of the tax attributes of the Company's distributions is made annually as of the end of the Company's fiscal year based upon its taxable income for the full year and distributions paid for the full year.

About Newtek Business Services Corp.

Newtek Business Services Corp., The Small Business Authority®, is an internally managed BDC, which along with its controlled portfolio companies, provides a wide range of business services and financial products under the Newtek® brand to the small- and medium-sized business (“SMB”) market. Since 1999, Newtek has provided state-of-the-art, cost-efficient products and services and efficient business strategies to over 100,000 SMB accounts across all 50 states to help them grow their sales, control their expenses and reduce their risk.

Newtek’s and its portfolio companies’ products and services include: Business Lending, Electronic Payment Processing, Managed Technology Solutions (Cloud Computing), eCommerce, Accounts Receivable Financing, The Secure Gateway, The Newtek Advantage, Insurance Services, Web Services, Data Backup, Storage and Retrieval and Payroll.
The Small Business Authority® is a registered trade mark of Newtek Business Services Corp., and neither are a part of, or endorsed by the U.S. Small Business Administration.

Note Regarding Forward Looking Statements
This press release contains certain forward-looking statements. Words such as “believes,” “intends,” “expects,” “projects,” “anticipates,” “forecasts,” and “future” or similar expressions are intended to identify forward-looking statements. All forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from the plans, intentions and expectations reflected in or suggested by the forward-looking statements. Such risks and uncertainties include, among others, intensified competition, operating problems and their impact on revenues and profit margins, anticipated future business strategies and financial performance, anticipated future number of customers, business prospects, legislative developments and similar matters. Risk factors, cautionary




statements and other conditions, which could cause Newtek’s actual results to differ from management’s current expectations, are contained in Newtek’s filings with the Securities and Exchange Commission and available through http://www.sec.gov/. Newtek cautions you that forward-looking statements are not guarantees of future performance and that actual results or developments may differ materially from those projected or implied in these statements.
SOURCE: Newtek Business Services Corp.

Investor Relations
Contact: Jayne Cavuoto
Telephone: (212) 273-8179 / jcavuoto@thesba.com

Public Relations
Contact: Simrita Singh
Telephone: (212) 356-9566 / ssingh@thesba.com




NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(In Thousands, except for Per Share Data)
 
December 31,
 
2015
 
2014
ASSETS
 
 
 
Investments, at fair value
 
 
 
SBA unguaranteed non-affiliate investments (cost of $166,752 and $131,093, respectively; includes $146,463 and $120,990, respectively, related to securitization trust VIE)
$
158,355

 
$
121,477

Controlled investments (cost of $35,781 and $18,065, respectively)
104,376

 
77,499

SBA guaranteed non-affiliate investments (cost of $2,069 and $28,057, respectively)
2,284

 
31,486

Non-control/non-affiliate investments (cost of $1,847 and $0, respectively)
1,824

 

Investments in money market funds (cost of $35 and $3,000, respectively)
35

 
3,000

Total investments at fair value
266,874

 
233,462

Cash and cash equivalents
4,308

 
17,813

Restricted cash
22,869

 
15,389

Broker receivable
32,083

 

Other assets (includes $2,501 and $2,550, respectively, related to securitization trust VIE)
12,393

 
20,266

Due from related parties
3,056

 
3,190

Servicing assets, at fair value
13,042

 
9,483

Credits in lieu of cash, at fair value
860

 
2,229

Total assets
$
355,485

 
$
301,832

LIABILITIES AND NET ASSETS
 
 
 
Liabilities:
 
 
 
Bank notes payable
$
29,100

 
$
43,023

Note payable - related party
5,647

 

Notes due 2022
8,324

 

Notes payable – Securitization trust VIE
91,745

 
79,520

Dividends payable
5,802

 

Due to related parties
256

 
2,867

Notes payable in credits in lieu of cash, at fair value
860

 
2,229

Deferred tax liability
857

 

Accounts payable, accrued expenses and other liabilities
8,945

 
7,775

Total liabilities
151,536

 
135,414

Commitments and contingencies
 
 
 
Net Assets:
 
 
 
Preferred stock (par value $0.02 per share; authorized 1,000 shares, no shares issued and outstanding)

 

Common stock (par value $0.02 per share; authorized 200,000 shares, 14,509 and 10,206 issued and outstanding, respectively, not including 17 shares held in escrow at December 31, 2014)
290

 
205

Additional paid-in capital
189,031

 
165,532

Undistributed net investment income (loss)
4,437

 
(2,523
)
Net unrealized appreciation, net of deferred taxes
8,062

 
2,609

Net realized gains
2,129

 
595

Total net assets
203,949

 
166,418

Total liabilities and net assets
$
355,485

 
$
301,832

Number of common shares outstanding
14,509

 
10,206

Net asset value per common share
$
14.06

 
$
16.31





NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, except for Per Share Data)
 
As a Business Development Company
 
Prior to becoming a Business Development Company
 
Year ended December 31, 2015
 
November 12, 2014 to December 31, 2014
 
January 1, 2014 to November 11, 2014
 
Year ended December 31, 2013
Investment income:
 
 
 
 
 
 
 
From non-affiliate investments:
 
 
 
 
 
 
 
Interest income
$
8,924

 
$
1,076

 
$

 
$

Servicing income
4,611

 
562

 

 

Other income
1,929

 
270

 

 

Total investment income from non-affiliate investments
15,464

 
1,908

 

 

From controlled investments:
 
 
 
 
 
 
 
Interest income
277

 
27

 

 

Dividend income
10,218

 
37

 

 

Other income
111

 
4

 

 

Total investment income from controlled investments
10,606

 
68

 

 

Total investment income
26,070

 
1,976

 

 

Operating revenues:
 
 
 
 
 
 
 
Electronic payment processing
$

 
$

 
$
79,527

 
$
89,651

Web hosting and design

 

 
13,730

 
17,375

Premium income

 

 
18,623

 
19,456

Interest income

 

 
5,663

 
4,838

Servicing fee income – NSBF portfolio

 

 
3,111

 
2,769

Servicing fee income – external portfolios

 

 
6,142

 
3,796

Income from tax credits

 

 
48

 
113

Insurance commissions

 

 
1,480

 
1,737

Other income

 

 
3,523

 
3,858

Total operating revenues

 

 
131,847

 
143,593

Net change in fair value of:
 
 
 
 
 
 
 
SBA loans

 

 
(3,663
)
 
(1,226
)
Credits in lieu of cash and notes payable in credits in lieu of cash

 

 
(5
)
 
21

Total net change in fair value

 

 
(3,668
)
 
(1,205
)
Expenses:
 
 
 
 
 
 
 
Electronic payment processing costs

 

 
67,011

 
75,761

Salaries and benefits
12,753

 
1,458

 
23,373

 
24,360

Interest
6,479

 
568

 
7,323

 
5,863

Depreciation and amortization
326

 
43

 
3,140

 
3,284

Goodwill impairment

 

 
1,706

 

Provision for loan losses

 

 
(53
)
 
1,322

Other general and administrative costs
12,697

 
2,236

 
18,536

 
20,729

Total expenses
32,255

 
4,305

 
121,036

 
131,319

Net investment loss before income tax
(6,185
)
 
(2,329
)
 

 

Provision for income tax - post BDC

 
194

 

 

Net investment loss
(6,185
)
 
(2,523
)
 

 





NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, except for Per Share Data)
 
As a Business Development Company
 
Prior to becoming a Business Development Company
 
Year ended December 31, 2015
 
November 12, 2014 to December 31, 2014
 
January 1, 2014 to November 11, 2014
 
Year ended December 31, 2013
Net realized and unrealized gains (losses):
 
 
 
 
 
 
 
Net realized gains on non-affiliate investments
28,386

 
595

 

 

Net realized gains on controlled investments
5,473

 

 

 

Net unrealized (depreciation) appreciation on SBA guaranteed non-affiliate investments
(3,215
)
 
3,007

 

 

Net unrealized appreciation (depreciation) on SBA unguaranteed non-affiliate investments
1,183

 
(274
)
 

 

Net unrealized appreciation on controlled investments
12,250

 

 

 

Change in provision for deferred taxes on unrealized gains on investments
(857
)
 

 

 

Net unrealized depreciation on non-control/non-affiliate investments
(24
)
 

 

 

Net unrealized depreciation on servicing assets
(1,268
)
 
(120
)
 

 

Net unrealized depreciation on credits in lieu of cash and notes payable in credits in lieu of cash
(7
)
 
(4
)
 

 

Net realized and unrealized gains
41,921

 
3,204

 

 

Income before income taxes

 

 
7,143

 
11,069

Net increase in net assets
$
35,736

 
$
681

 
$

 
$

Provision for income taxes

 

 
3,935

 
3,918

Net income

 

 
3,208

 
7,151

Net loss attributable to non-controlling interests

 

 
85

 
377

Net income attributable to Newtek Business Services Corp.
$

 
$

 
$
3,293

 
$
7,528

Weighted average common shares outstanding:
 
 
 
 
 
 
 
Basic

 

 
7,315

 
7,059

Diluted

 

 
7,315

 
7,581

Basic income per share
$

 
$

 
$
0.45

 
$
1.07

Diluted income per share
$

 
$

 
$
0.45

 
$
0.99

Net increase in net assets per share
$
3.32

 
$
0.09

 
$

 
$

Net investment loss per share
$
(0.57
)
 
$
(0.33
)
 
$

 
$

Dividends and distributions declared per share
$
4.45

 
$

 
$

 
$

Weighted average shares outstanding
10,770

 
7,620

 

 





NEWTEK BUSINESS SERVICES CORP AND SUBSIDIARIES
ADJUSTED NET INVESTMENT INCOME RECONCILIATION:

Adjusted net investment income reconciliation
(in thousands, except per share amounts)
Year ended December 31, 2015
Per share
Net investment loss
$
(6,185
)
$
(0.57
)
Net realized gain on non-affiliate debt investments
28,386

          2.63

Adjusted net investment income
$
22,201

$
2.06

 
 
 
 
 

THE FOLLOWING TABLES REPRESENT A RECONCILIATION OF ADJUSTED EBITDA ONLY FOR NEWTEK’S CONTROLLED PORTFOLIO COMPANIES DISCUSSED HEREIN:


Electronic Payment Processing
Adjusted EBITDA reconciliation
(in millions)
Year ended December 31, 2015
Year ended December 31, 2014
Pretax income
$
9.3

$
6.7

Interest expense, net
0.3


Depreciation and amortization
0.7

0.3

Stock compensation expense

0.1

Managerial assistance fees
0.6


Adjusted EBITDA
$
10.9

$
7.1

 
 
 
Note: Electronic Payment Processing includes Premier Payments results as of July 23, 2015.

Premier Payments LLC
Adjusted EBITDA reconciliation
(in millions)
Year ended December 31, 2015
Pretax income
$
1.0

Interest expense, net

Depreciation and amortization
0.4

Stock compensation expense

Managerial assistance fees

Adjusted EBITDA
$
1.4


Electronic Payment Processing
Adjusted EBITDA reconciliation
(in millions)
Year ended December 31, 2016
Pretax income
$
10.3

Interest expense, net
1.0

Depreciation and amortization
1.8

Managerial assistance fees

Adjusted EBITDA
$
13.1