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FOR IMMEDIATE RELEASE:
August 1, 2000
Contact:
John Erickson, Chief Financial Officer (301) 951-6122
AMERICAN CAPITAL REPORTS SECOND QUARTER EARNINGS OF $0.54 PER SHARE
NET OPERATING INCOME OF $0.47 PER SHARE
Bethesda, MD -- American Capital Strategies, Ltd. (Nasdaq:ACAS) announced today its results for the quarter ended June 30, 2000. Earnings for the second quarter of 2000 increased to $11.2 million from $6.2 million in the second quarter of 1999. On a diluted per share basis, earnings for the quarter increased to $0.54 per share compared to $0.53 in the second quarter of 1999. Net operating income for the quarter increased to $9.8 million compared to $5.1 million in the second quarter of 1999. On a diluted per share basis, net operating income for the quarter increased to $0.47 per share compared to $0.44 per share in the second quarter of 1999.
In the second quarter of 2000, American Capital completed nine financing transactions totaling $61.2 million, an increase of 38% over the second quarter of 1999's total of $44.3 million. Second quarter 2000 transactions were composed of $0.9 million of senior debt, $52.7 million of subordinated debt, $0.2 million of preferred stock, $1.3 million of common stock and $6.1 million of warrants.
Earnings for the quarter included net unrealized appreciation of $1.2 million. American Capital recorded unrealized appreciation of $14.0 million at nine portfolio companies, including $7.7 million of appreciation on its investment in O2 Wireless, $1.6 million on its investment in Lion Brewery, Inc. and $1.4 million on its investment in The Inca Group. The unrealized appreciation was offset by $12.8 million of depreciation at four portfolio companies, including depreciation of $9.0 million on American Capital's investment in Capital.com, $2 million in EuroCaribe Packing Company, Inc., and $1.3 million in IGI, Inc.
The weighted average interest rate on the total capital invested during the quarter was 16.3%. The weighted average interest rate on American Capital's total capital invested as of June 30, 2000 was 14.3%. All loans are current and at June 30, 2000, the weighted average grade of American Capital's loan portfolio increased from 3.3 in the first quarter of 2000 to 3.4 on a 4.0 scale.
"This was a remarkable quarter," said American Capital Chairman and CEO Malon Wilkus. "Approaching the third anniversary of our IPO, we raised $130 million in our second follow-on offering. The follow-on is also a milestone in the Company's growth because our increased market capitalization now places us in the Russell 2000 and The Nasdaq Financial 100 indices. We are especially pleased that one of our portfolio companies has filed a registration statement with the Securities and Exchange Commission. Finally, we made a record level of new investments and continued our expansion by opening an office in Los Angeles"
"The follow-on, like American Capital's previous offering, was a success in spite of difficult market conditions," said CFO John Erickson. "During the past four quarters we have raised $225 million of equity capital as we continue to build our balance sheet. We have been able to put that new capital to work right away by paying down our credit facility and closing a series of outstanding transactions. Our credit quality remains strong and we are experiencing more opportunities for liquidity in the portfolio. In addition, we're off to a strong start in the third quarter with a $30 million transaction."
Since its August 1997 IPO, American Capital has invested $440 million in 38 portfolio companies and realized $2.9 million in gains on its portfolio. American Capital shareholders have enjoyed a total return of 96.5% since the IPO -- an annualized return of 26.9%. This assumes reinvestment of $3.29 in dividends paid per share.
A brief discussion of American Capital's new investments and other key events follows. Click here for additional information.
TransCore Acquires Amtech, Inc.
On June 30, 2000 American Capital invested $20.5 million to finance the acquisition of Amtech, Inc. by TransCore, Inc. The investment consists of $20.0 million in the form of senior subordinated debt with detachable warrants and $0.5 million in the form of preferred stock. American Capital had previously invested $7.3 million in subordinated debt with warrants and redeemable preferred stock of TransCore in September 1999. KRG Capital Partners, a Denver-based private equity fund, will substantially increase its equity investment in the company in conjunction with the acquisition. Management and employees of TransCore will retain a large equity position in the combined company.
TransCore is the leading system integrator and operator in the toll collection and intelligent transportation systems industry. Amtech, a subsidiary of Unova, Inc. (NYSE: UNA), is a Dallas-based leading supplier of wireless data technologies, such as radio frequency identification devices for intelligent transportation systems including highway, rail and parking applications. Amtech is also is a leading systems integrator and operator with a significant market presence in the US and internationally.
Inca Metal Products Acquires Clymer Enterprises
On June 29, 2000 American Capital invested $4,850,000 to finance the acquisition of Clymer Enterprises, Inc. by Inca Metal Products, Inc. Clymer Enterprises, located in Pandora, Ohio, is a manufacturer of industrial racks and agricultural equipment. American Capital funded a re-capitalization of Inca in September 1999. Inca is a leading manufacturer of steel products for the construction, distribution and manufacturing industries. Its products and services include rack and shelving, mechanical and structural steel tubing, and tool processing for large steel mill customers.
American Capital Invests $3 Million in Information Technology Staffing and Consulting Company
On June 9, 2000 American Capital invested $3 million in the form of senior subordinated debt with warrants in JAAGIR, LLC, a holding company for the Adea Group, Inc. and edeagroup.com. American Capital's investment is for growth financing, and is part of an $8.5 million package that includes a $5 million revolving line of credit and a $500,000 term facility provided by Bank of America. Adea provides information technology and e-commerce staffing services and edeagroup.com provides e-commerce development services. Edeagroup.com was recently established in order to provided end-to-end e-business solutions, primarily to Fortune 500 companies.
American Capital Invests $30 Million in Goldman Industrial Group
On April 24, 2000 American Capital purchased $30 million of subordinated notes with warrants from Goldman Industrial Group of Boston, MA and its affiliates. Goldman owns a group of machine tool companies that have set standards for quality within their respective industries and technologies. American Capital's investment will provide permanent financing and refinance an existing bridge loan put in place for the acquisition of Bridgeport Machines, Inc. in August 1999.
Other Key Events
Portfolio Company Electrolux LLC has agreed to sell the trademark and company name "Electrolux" in North America to the Electrolux Group of Sweden for $50 million. Portfolio company IGI, Inc. (Amex: IG) has signed an asset purchase agreement to sell its poultry vaccine division, Vineland Laboratories, to Lohmann & Co., AG, of Cuxhaven, Germany. The sale is expected to be completed in the near future, and is subject to IGI shareholder approval. The terms of the proposed sale provided for the payment by Lohmann to IGI of $12.5 million subject to certain post closing adjustments. Lohmann will also assume $2.0 million of IGI's liabilities. Beasley Broadcast Group, Inc. (Nasdaq: BBGI), a large- and mid-size market radio broadcaster, has announced that it entered into a definitive agreement with American Capital portfolio company Centennial Broadcasting to acquire six radio stations for approximately $138 million.
Financial highlights for the quarter and year to date period are as follows.
AMERICAN CAPITAL STRATEGIES, LTD.
Balance Sheets
(Unaudited)
(In thousands except per share data)
June 30, December 31,
2000 1999
Assets
Cash and cash equivalents 3,434 2,037
Investments at fair value
(cost of $401,858 and $305,264,
respectively) $486,308 $377,554
Investment in unconsolidated
operating subsidiary 3,113 4,893
Due from unconsolidated operating subsidiary 7,584 2,331
Interest receivable 4,369 2,417
Other 4,792 6,140
Total assets $509,600 $395,372
Liabilities and Shareholders' Equity
Revolving credit facility $57,039 78,545
Accrued dividends payable -- 547
Other 4,707 4,535
Total liabilities 61,746 83,627
Shareholders' equity:
Undesignated preferred stock,
$0.01 par value, 5,000 shares authorized,
0 issued and outstanding -- --
Common stock, $.01 par value,
70,000 shares authorized,
and 24,677 and 18,270 issued and
outstanding, respectively 250 183
Capital in excess of par value 380,141 255,922
Notes receivable from sale of common stock (24,577) (23,052)
Undistributed net realized earnings 2,457 1,080
Net unrealized appreciation of investments 89,583 77,612
Total shareholders' equity 447,854 311,745
Total liabilities and shareholders' equity $509,600 $395,372
AMERICAN CAPITAL STRATEGIES, LTD.
Statements of Operations
(Unaudited)
(In thousands except per share data)
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
Operating income:
Interest and dividend income $13,094 $6,490 $24,132 $12,344
Loan fees 1,799 665 2,279 1,331
Total operating income 14,893 7,155 26,411 13,675
Operating expenses:
Salaries and benefits 764 188 928 498
General and administrative 650 385 1,121 654
Interest 2,466 1,077 4,245 1,896
Total operating expenses 3,880 1,650 6,294 3,048
Operating income before equity
in loss of unconsolidated
operating subsidiary 11,013 5,505 20,117 10,627
Equity in loss of unconsolidated
operating subsidiary (1,222) (421) (1,780) (816)
Net operating income 9,791 5,084 18,337 9,811
Net realized gain on investments 235 551 235 867
Increase in unrealized
appreciation of investments 1,201 526 11,971 2,507
Net increase in shareholders' equity
resulting from operations $11,227 $6,161 $30,543 $13,185
Net operating income per share:
Basic $0.48 $0.46 $0.96 $0.88
Diluted $0.47 $0.44 $0.93 $0.85
Earnings per common share:
Basic $0.55 $0.55 $1.60 $1.19
Diluted $0.54 $0.53 $1.56 $1.15
Weighted average shares of
Common stock outstanding
Basic 20,364 11,131 19,098 11,102
Diluted 20,878 11,666 19,619 11,498
Dividends declared per share $0.49 $0.43 $0.94 $0.84
Portfolio Statistics
On a Weighted Average Basis*: 1999 Pre -1999
Aggregate** Static Pool Static Pool
Interest Coverage 2.5 2.7 2.3
Debt Service Coverage 1.7 1.7 1.9
Debt to EBITDA 4.7 4.2 5.6
Investment Grade 3.4 3.4 3.3
Age of Portfolio Companies 46 years 43 years 39 years
Average Sales $89 million $82 million $74 million
American Capital
Ownership Percentage
of Portfolio Companies 29% 31% 33%
* These amounts do not include American Capital's equity investments in Capital.com, ACS Equities, LP, and Wrenchead.com.
** Aggregate consists of Pre-1999 Static Pool, 1999 Static Pool and 2000 investments.
American Capital invites its prospective shareholders, shareholders and analysts to attend the American Capital Analyst Meeting by phone on Wednesday, August 2, at 11:00 a.m. EDT. The dial in number is 888-273-9887. Please advise the operator you are dialing in for the American Capital Analyst Meeting.
During the Analyst Call, we would like to invite you to turn to our shareholder website and click on the August 2, 2000 Analyst Call Slide Show to view slides displaying information concerning some of the issues that will be discussed during the conference call. We would hope that you will take the time to review the slides in advance of the Analyst Call. We do not intend to review all the slides during the Analyst Call so that we can devote more time for questions and answers.
American Capital is a publicly traded buyout and mezzanine fund. American Capital is an equity partner in management and employee buyouts; invests in debt and equity of companies led by private equity firms, and provides capital directly to private and small public companies. American Capital funds growth, acquisitions and recapitalizations.
Companies interested in learning more about American Capital's flexible financing and ability to provide senior debt, subordinated debt and equity should contact Mark Opel, Principal, at (800) 248-9340, or visit our website. Capital.com, Inc., funded by investments from American Capital Strategies, Ltd. (Nasdaq: ACAS) and First Union Corp. (NYSE: FTU), is a business finance portal where premier financing sources compete to provide receivable and inventory financing, machinery and equipment loans and leasing, real estate and construction financing, subordinated debt and equity financing for growth, acquisitions, management buyouts, liquidity, recapitalizations, ESOP transactions and SBA loans. Companies in need of financing or information about financial services should contact Capital.com at info@Capital.com, or call Harry Kelly, vice president, at (646) 935-1100.
This press release contains forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The statements regarding expected results of American Capital Strategies are subject to various factors and uncertainties, including the uncertainties associated with the timing of transaction closings, changes in interest rates, availability of transactions, changes in regional or national economic conditions, or changes in the conditions of the industries in which American Capital has made investments.
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