Bethesda, MD -- American Capital Strategies Ltd. (Nasdaq: ACAS) announced today its results for the quarter ended June 30, 2001. Net operating income for the quarter increased 65% to $16.2 million compared to $9.8 million in the second quarter of 2000. On a diluted per share basis, net operating income for the quarter increased 19% to $0.56 per share compared to $0.47 per share in the second quarter of 2000.
The increase in shareholders' equity resulting from operations for the second quarter was $11.6 million compared of $11.2 million in the second quarter of 2000. On a diluted per share basis, the increase in shareholders' equity resulting from operations for the second quarter of 2001 was $0.40 per share compared to $0.54 in the second quarter of 2000.
During the quarter, American Capital completed a $132 million equity offering underwritten by Salomon Smith Barney, First Union Securities Inc., A.G. Edwards & Sons Inc. and Robertson Stephens. With this offering, American Capital now has a market capitalization of nearly $1 billion. Investors in American Capital's November 2000 offering would have earned a 49% compounded annual return through the second quarter follow-on offering.
"American Capital's second quarter results reflect both our ability to take advantage of current market conditions and the quality of our portfolio management. Other sources of capital do not have our flexibility and have been forced to concentrate on problems in their portfolios, to the exclusion of market opportunities," said Chairman, President and CEO Malon Wilkus. "We completed three buyouts in the second quarter followed by a fourth last week, filling gaps left by senior lenders and closing transactions when many equity and mezzanine funds have been sidelined. New investments in the first half of 2001 increased 57% over the same period in 2000. And, of course, we are pleased that our net operating income is growing at an excellent rate at a time when many companies are reporting disappointing earnings."
In the second quarter of 2001, American Capital completed 7 financing transactions totaling $94.2 million, an increase of 54% over the second quarter of 2000's total of $61 million. Second quarter 2001 transactions were composed of $24.9 million of senior debt, including $2.9 million of unfunded commitments, $64.8 million of subordinated debt, $8.2 million of unfunded commitments, $3 million of preferred stock, and $1.5 million of common stock.
Earnings for the quarter included net unrealized depreciation of $4.6 million. American Capital recorded unrealized appreciation of $1.4 million at 2 portfolio companies. The unrealized appreciation was offset by $7.5 million of unrealized depreciation at 11 portfolio companies.
The weighted average interest rate on the total capital invested during the quarter was 13.6%. The weighted average interest rate on American Capital's total capital invested as of June 30, 2001 was 13.8%. The weighted average cost of borrowing dropped 240 basis points in the second quarter to 6.0%. Credit quality remains strong with only 2 loans totaling $15.0 million on non-accrual, and at June 30, 2001, the weighted average grade of American Capital's loan portfolio had decreased from 3.2 to 3.1 on a 4.0 scale with 4.0 being the best.
"The capital goods side of the economy remains weak and the modest overall depreciation of our portfolio reflects that. While we are not pleased to have any softness in our portfolio, we also expect it during soft economic periods. Our non-accruals remained constant and within the ranges of our forecast in our annual plan and we are pleased with the overall condition of our portfolio," said CFO John Erickson. "In the second quarter we raised equity capital, putting it to work in new investments and paying down debt. Our follow-on offering was a success partly because the capital markets understand the tremendous opportunities presented to us in tough economic times when companies are selling at historically low values."
Since our August 1997 IPO, American Capital has invested $770 million in 51 portfolio companies. American Capital shareholders have enjoyed a total return of 153% since the IPO - a compounded annualized return of 27%. This assumes reinvestment of $6.54 in dividends paid per share.
"American Capital has taken the lead to raise and participate in several senior credit facilities in structuring our buyouts over the last 12 months," said COO Ira Wagner. "Our flexibility, manifested by our ability to act as a one-stop shop, and strong banking relationships have been important factors in completing many of our transactions in the past year. American Capital has invested a total of $78.5 million in buyouts year-to-date and $149 million over the past twelve months. We raised and participated in $137 million in third party senior debt to support these transactions."
Click here for a chart showing American Capital second quarter buyouts.
A brief discussion of some of American Capital's new investments follows.
Click here for additional information.
Roy F. Weston: $30 Million Going-Private ESOP Transaction
At Roy F. Weston Inc. we led a going private ESOP transaction, investing $27 million in subordinated debt financing in addition to a $3 million investment in preferred and common stock for a total of $30 million and 38% ownership. Bank of America Commercial Finance, a subsidiary of Bank of America (NYSE: BAC), led a $49 million senior credit facility in a tough bank market. Weston is a leading infrastructure redevelopment services firm which delivers integrated environmental engineering solutions to industrial and government clients, providing services in site remediation, redevelopment, infrastructure operations and knowledge management. Weston employees are expected to receive approximately 40% of the equity over a five-year period through the company's employee retirement savings and stock ownership plan.
$23 Million Acquisition Financing in Portfolio Company Aeriform
In June, American Capital invested $23 million in its portfolio company Aeriform Corporation to finance Aeriform's acquisition of a significant cylinder gas distribution operation from Air Liquide America. Employee-owned Aeriform is one of the country's largest independent distributors of specialty and industrial cylinder gases. With its strategic acquisition of 22 cylinder gas operations, Aeriform nearly doubles its size and strengthens its position as a market leader. American Capital's investment took the form of a senior term loan and senior and junior subordinated debt with warrants. We now hold warrants that are convertible into 51% of the fully diluted common stock. Aeriform senior management and directors will also invest in this transaction and the ESOP will continue its common stock ownership.
$25.5 Million Buyout: Texstars
American Capital invested $25.5 million to fund the buyout of Texstars Inc. from BBA US Holdings Inc., a subsidiary of BBA Group plc (LSE: BBA). Our ownership is in the form of senior debt, senior subordinated debt, and common equity, aggregating to 80% ownership. Texstars management has also invested equity. Texas-based Texstars is the leading supplier of canopies for the F-16 fighter aircraft, the most widely used U.S. fighter aircraft. The canopy is the clear one-piece windshield that wraps around the pilot. Texstars is also a leading supplier of polycarbonate canopies for many other military aircraft applications. In addition, Texstars manufactures components for both military and non-military aircraft, and for mass transit applications. American Capital's flexibility made this transaction possible, as we funded all but a line of credit, which was provided by LaSalle Bank NA. We are seeking add-on acquisition opportunities for Texstars.
$10.4 Million of Acquisition Financing for OMNOVA
OMNOVA Solutions Inc. is purchasing the assets and business lines of the Columbus facility of Decorative Surfaces International with a series of notes. ACAS is purchasing the notes from DSI's senior lenders at a discount, which will provide DSI liquidity to reduce its senior debt. DSI is selling its under-performing Columbus business lines and assets and will continue to manufacture decorative paper and vinyl surfacing material for the home and industrial markets in its new, state-of-the-art St. Louis facility. At quarter's end, ACAS had purchased approximately $2.1 million of these notes with commitments to purchase up to $10.4 million of the notes.
$1.0 Million Bridge Financing
ACAS funded $1.0 million to DSI to provide working capital during its execution of the sale of its Columbus business lines and assets to OMNOVA. This bridge financing was repaid in July.
$3.9 Million in Portfolio Company Fulton Bellows
We invested $3.9 million in portfolio company Fulton Bellows and Components Inc. Fulton products are used to regulate pressure and temperature in automobile and aerospace engines, home heating systems, medical equipment, and as seals for industrial valves and electrical equipment.
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, 2001 |
December 31, 2000 |
| Assets: |
| Cash and cash equivalents |
$ 2,225 |
$ 11,192 |
Investments at fair value
(cost of $679,043 and $563,331, respectively) |
727,181 |
582,108 |
| Investment in unconsolidated operating subsidiary |
-- |
1,120 |
| Due from unconsolidated operating subsidiary |
11,307 |
7,433 |
| Interest receivable |
7,516 |
4,935 |
| Other |
7,382 |
7,856 |
| Total assets |
$ 697,062 |
$ 614,644 |
|
| Liabilities and Shareholders' Equity |
| Revolving credit facility |
$ 19,571 |
$ 68,002 |
| Notes payable |
111,091 |
87,200 |
| Investment in unconsolidated operating subsidiary |
663 |
-- |
| Accrued dividends payable |
-- |
6,163 |
| Other |
9,649 |
8,112 |
| Total liabilities |
140,974 |
169,477 |
|
| 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 33,685 and 28,003 issued and outstanding, respectively |
337 |
280 |
| Capital in excess of par value |
584,866 |
448,587 |
| Notes receivable from sale of common stock |
(24,096) |
(27,389) |
| Distributions in excess of net realized earnings |
287 |
(341) |
| Net unrealized (depreciation) appreciation of investments |
(5,306) |
24,030 |
|
| Total shareholders' equity |
556,088 |
445,167 |
|
| Total liabilities and shareholders' equity |
$ 697,062 |
$ 614,644 |
|
|
AMERICAN CAPITAL STRATEGIES LTD.
Statements of Operations
(Unaudited)
(In thousands except per share data)
|
Three Months
Ended
June 30, 2001 |
Three Months
Ended
June 30, 2000 |
Six Months
Ended
June, 2001 |
Six Months
Ended
June 30, 2000 |
| Operating income: |
| Interest and dividend income |
$ 20,311 |
$ 13,094 |
$ 40,874 |
$ 24,132 |
| Loan fees |
450 |
1,799 |
1,359 |
2,279 |
| Total operating income |
20,761 |
14,893 |
42,233 |
26,411 |
|
| Operating expenses: |
| Salaries and benefits |
880 |
764 |
1,214 |
928 |
| General and administrative |
729 |
650 |
1,451 |
1,121 |
| Interest |
2,935 |
2,466 |
6,459 |
4,245 |
| Total operating expenses |
4,544 |
3,880 |
9,124 |
6,294 |
|
Operating income before equity in loss of
unconsolidated operating subsidiary |
16,217 |
11,013 |
33,109 |
20,117 |
Equity in loss of unconsolidated
operating subsidiary |
(40) |
(1,222) |
(1,782) |
(1,780) |
|
| Net operating income |
16,177 |
9,791 |
31,327 |
18,337 |
| Net realized gain on investments |
-- |
235 |
-- |
235 |
| Net unrealized (depreciation) appreciation of investments |
(4,583) |
1,203 |
(29,335) |
11,971 |
|
Net (decrease) increase in shareholders'
equity resulting from operations |
$ 11,594 |
$ 11,229 |
$ 1,992 |
$ 30,543 |
|
| Net operating income per common share: |
| Basic |
$ 0.57 |
$ 0.48 |
$ 1.11 |
$ 0.96 |
| Diluted |
$ 0.56 |
$ 0.47 |
$ 1.10 |
$ 0.93 |
|
| (Loss) earnings per common share: |
| Basic |
$ 0.41 |
$ 0.55 |
$ 0.07 |
$ 1.60 |
| Diluted |
$ 0.40 |
$ 0.54 |
$ 0.07 |
$ 1.56 |
|
| Weighted average shares of common stock outstanding: |
| Basic |
28,353 |
20,364 |
28,106 |
19,098 |
| Diluted |
28,906 |
20,878 |
28,593 |
19,619 |
|
| Dividends declared per common share |
$ 0.55 |
$ 0.49 |
$ 1.08 |
$ 0.94 |
|
|
Portfolio Statistics
On a Weighted Average Basis*:
($ in millions) |
Aggregate** |
2000
Static Pool |
1999
Static Pool |
Pre-1999
Static Pool |
| Original Investments at Cost |
$ 738 |
$ 276 |
$ 159 |
$ 157 |
| Total Exits and Prepayments |
$ 72 |
$ 7 |
$ 17 |
$ 48 |
| Current Cost of Original Investments |
$ 663 |
$ 265 |
$ 148 |
$ 114 |
| Fair Value of Investments |
$ 661 |
$ 261 |
$ 154 |
$ 111 |
| Interest Coverage |
2.1 |
2.0 |
2.2 |
2.3 |
| Debt Service Coverage |
1.6 |
1.6 |
1.4 |
1.8 |
| Debt to EBITDA |
5.4 |
5.5 |
5.0 |
5.9 |
| Investment Grade |
3.1 |
2.9 |
3.3 |
3.0 |
|
| Age of Portfolio Companies |
44 years |
42 years |
50 years |
38 years |
| Total Sales |
$ 4,465 |
$ 970 |
$ 1,588 |
$ 836 |
| Average Sales |
$ 102 |
$ 122 |
$ 96 |
$ 79 |
| Total EBITDA |
$ 479 |
$ 155 |
$ 156 |
$ 77 |
| Average EBITDA |
$ 14 |
$ 16 |
$ 10 |
$ 9 |
| Ownership Percentage of Portfolio Companies |
38% |
36% |
38% |
30% |
|
*These amounts do not include investments in which American Capital only owns equity.
**Aggregate consists of Pre-1999 Static Pool, 1999 Static Pool, 2000 Static Pool, and 2001 investments. |
American Capital invites its prospective shareholders, shareholders and analysts to attend the American Capital Shareholder Call on Wednesday, August 1 at 11:00 am EDT. The dial in number is 877-209-9921. International callers should dial 612-332-0530. Please advise the operator you are dialing in for the American Capital Shareholder Call.
During the Shareholder Call, we invite you to turn to our shareholder website and click on the August 1 Shareholder Call Slide Show button. The quarterly shareholder presentation includes a summary slide show to accompany the call that participants may download and print, a longer version with supplementary information, and a downloadable spreadsheet with summary financial data. Participants will also be able to access the complete streaming presentation on our website. We hope that you will take the time to review the slides in advance of the Shareholder Call.
For the convenience of our shareholders, there will be a recording available from 6:00 pm August 1 through 11:55 pm August 10, 2001. If you are interested in hearing the recording of the presentation, please dial 800-475-6701 and enter code 595205. International callers may dial 320-365-3844 and enter the same code, 595205. We will also have the Shareholder Slide Shows available on our website.
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.This press release contains forward-looking statements. 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.
