|
FOR IMMEDIATE RELEASE:
July 30, 2002
Contact:
John Erickson, Chief Financial Officer (301) 951-6122
AMERICAN CAPITAL NET OPERATING INCOME INCREASES 14% TO $0.64 PER SHARE FOR Q2 2002
Bethesda, MD - July 30, 2002 - American Capital Strategies Ltd. (Nasdaq:ACAS) announced today its results for the quarter ended June 30, 2002. Net operating income (NOI) for the quarter increased 54% to $24.6 million compared to $16.0 million in the second quarter of 2001. On a diluted per share basis, NOI for the second quarter of 2002 increased 14% to $0.64 per share compared to $0.56 per share in the second quarter of 2001.
The net increase in shareholders' equity resulting from operations (NOI plus net realized gains and losses and net unrealized appreciation and depreciation of our assets) for the second quarter was $12.3 million compared to $11.3 million in the second quarter of 2001. On a diluted per share basis, the net increase in shareholders' equity resulting from operations for the second quarter of 2002 was $0.32 per share compared to $0.39 in the second quarter of 2001.
"American Capital's second quarter was marked by excellent financing opportunities and increased backlog," said Chairman, President and CEO Malon Wilkus. "We continued to expand our investments in great middle market companies at attractive valuations. We have already seen some very good performance from our 2001 investments and 2002 is shaping up to be an equally outstanding investment climate. We saw operating results stabilize in the manufacturing sector as reflected in improving credit quality trends. We were also able to preserve value in two problem portfolio companies through thoughtful, hands-on management. Finally, two portfolio gains point to our increasing ability to harvest value from a seasoning portfolio for American Capital shareholders."
Year-to-date through July, American Capital has raised $282 million through an on-balance sheet term securitization, an increase in a revolving line of credit and an equity offering. American Capital has invested $298 million year-to-date through July. The Company's dividends have been paid from cash collections from portfolio investments, and the growth in the Company's capital base has funded new investments.
In the second quarter of 2002, American Capital completed 15 financing transactions totaling $139.7 million, an increase of 48% over the second quarter of 2001's total of $94.2 million. Second quarter 2002 transactions were composed of $46.6 million of senior debt (including $10.0 million of unfunded commitments), $62.4 million of subordinated debt (including $1.1 million of unfunded commitments), $19.0 million of preferred stock, and $3.5 million of common stock and $8.2 million of warrants.
"Our access to capital remains outstanding despite difficult market conditions. Early in July, we raised $77 million in an overnight equity offering despite the bear market," said American Capital CFO John Erickson. "Our ability to finance our strong transaction volume by accessing the equity and debt capital markets rapidly, efficiently and at attractive costs provides a significant advantage over the approximately one thousand funds with whom we compete."
The weighted average interest rate on the total capital invested during the quarter was 11.6%. "This weighted average interest rate partially reflects our willingness to invest a higher proportion of our total financing in senior debt at attractive multiples of cash flow on excellent terms. This allows us to take advantage of a tight senior debt market, achieve attractive yields and provides a competitive advantage to placing our mezzanine capital," continued Erickson.
The weighted average spread between the rate at which American Capital lends and its interest cost for the second quarter totaled 8.7%. As of June 30, 2002, nine loans totaling $67 million were on non-accrual, an 8% decline from the $73 million level at the end of the first quarter. The weighted average grade of American Capital's loan portfolio increased from 2.9 to 3.0 on a 4.0 scale with 4.0 being the best. This is the first average portfolio loan grade increase since the second quarter of 2000.
American Capital had unrealized appreciation of $45.3 million at 16 portfolio companies during the quarter. Unrealized appreciation was offset by $48.1 million of unrealized depreciation at 36 portfolio companies. In addition, the interest rate swaps required as part of the Company's term securitizations had $9.4 million of depreciation, making the total net depreciation $12.2 million.
"American Capital continues to grow its franchise and the systems that support it," said Chief Operating Officer Ira Wagner. "Our in-house due diligence capability, led by our 15 principals supported by 47 professionals (with credentials or experience as CPAs, MBAs, JDs as well as CFOs) is unmatched by our competitors. Our seasoned team gives us tremendous insight when underwriting potential investments and a strong foundation to work with our portfolio companies post-closing. Our centralized capital raising, marketing, diligence and monitoring capabilities allow our regional office system of Principals, Vice Presidents and Associates, who are originating and managing our investments, to become more productive all the time."
Since its August 1997 IPO, American Capital has invested over $1 billion in 74 portfolio companies. American Capital shareholders have enjoyed a total return of 169% since the IPO through June - an annualized return of 23%. This assumes reinvestment of $8.98 in dividends paid per share during this period. On July 11, 2002 American Capital declared a $0.66 per share dividend for the third quarter, representing an 18% increase over the prior year third quarter.
Additional information may be found here.
The officers of American Capital are not subject to the Securities and Exchange Commission's Order No. 4-460, which requires the CEO and CFO of certain larger, publicly traded companies to file a statement with the SEC under oath concerning the company's financial statements. However, Messrs. Wilkus and Erickson intend to each voluntarily file such a statement as an attachment to a Form 8-K concurrent with the filing of the Company's second quarter Form 10-Q.
Financial highlights for the quarter and year to date period are as follows.
AMERICAN CAPITAL STRATEGIES, LTD.
CONSOLIDATED BALANCE SHEETS
(In thousands except per share data)
|
June 30, 2002 |
December 31, 2001 |
| Assets: |
|
| Cash and cash equivalents |
$ 3,692 |
$ 18,890 |
Investments at fair value
(cost of $1,105,289 and $882,731, respectively)* |
|
| Other Investments |
565,523 |
486,639 |
| Control Investments |
477,713 |
361,055 |
| Affiliate Investments |
5,568 |
10,572 |
| Total Investments at fair value |
1,048,804 |
858,266 |
| Interest receivable |
12,659 |
12,957 |
| Other |
21,764 |
14,071 |
|
| Total assets |
$ 1,086,919 |
$ 904,184 |
|
| Liabilities and Shareholders' Equity |
|
| Revolving credit facility |
$ 233,291 |
$ 147,646 |
| Notes payable |
229,929 |
103,495 |
| Accrued dividends payable |
-- |
3,420 |
| Other |
8,758 |
9,358 |
|
| Total liabilities |
471,978 |
263,919 |
|
| 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 38,510 and 38,017 issued and outstanding, respectively |
385 |
380 |
| Capital in excess of par value |
711,260 |
699,291 |
| Notes receivable from sale of common stock |
(33,050) |
(27,143) |
| Distributions in excess of net realized earnings |
(3,342) |
(3,823) |
| Net unrealized depreciation of investments |
(60,312) |
(28,440) |
|
| Total shareholders' equity |
614,941 |
640,265 |
|
| Total liabilities and shareholders' equity |
$ 1,086,919 |
$ 904,184 |
|
|
|
*"Control Investments are investments in those persons that American Capital is deemed to "Control, as defined by the Investment Company Act of 1940, as amended ("the Act"). "Affiliate Investments are investments in those persons that are "Affiliated Companies of American Capital, as defined in the Act, other than Control Investments. "Non-Control/Non-Affiliate Investments are those that are neither Control Investments nor Affiliate Investments. Generally, under the Act, American Capital is deemed to Control a person in which it has invested if it owns 25% or more of the voting securities of such person and it is an Affiliated Company of a person in which it has invested if it owns 5% or more of the voting securities of such person. |
AMERICAN CAPITAL STRATEGIES LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands except per share data)
|
Three Months
Ended
June 30, 2002 |
Three Months
Ended
June 30, 2001 |
Six Months
Ended
June 30, 2002 |
Six Months
Ended
June 30, 2001 |
| Operating income: |
| Interest and dividend income* |
| Other Investments |
16,504 |
12,463 |
32,176 |
25,491 |
| Control Investments |
13,202 |
8,012 |
25,335 |
15,339 |
| Affiliate Investments |
19 |
62 |
482 |
472 |
| Total interest and dividend income |
29,725 |
20,537 |
57,993 |
41,302 |
| Fees* |
| Other Investments |
2,445 |
1,122 |
3,115 |
2,715 |
| Control Investments |
1,785 |
4,217 |
5,488 |
4,551 |
| Affiliate Investments |
223 |
-- |
223 |
--- |
| Total fee income |
4,453 |
5,339 |
8,826 |
7,266 |
| Total operating income |
34,178 |
25,876 |
66,819 |
48,568 |
|
| Operating expenses: |
| Interest |
3,150 |
2,935 |
5,386 |
6,459 |
| Salaries and benefits |
4,190 |
5,226 |
8,515 |
7,595 |
| General and administrative |
2,190 |
1,682 |
5,019 |
3,430 |
| Total operating expenses |
9,530 |
9,843 |
18,920 |
17,484 |
|
| Net operating income |
24,648 |
16,033 |
47,899 |
31,084 |
| Net realized (loss) gain on investments |
(215) |
-- |
(158) |
24 |
| Net unrealized depreciation of investments |
(12,181) |
(4,782) |
(31,872) |
(29,788) |
|
Net increase in shareholders'
equity resulting from operations |
$ 12,252 |
$ 11,251 |
$ 15,869 |
$ 1,320 |
|
| Net operating income per common share: |
| Basic |
$ 0.65 |
$ 0.57 |
$ 1.27 |
$ 1.11 |
| Diluted |
$ 0.64 |
$ 0.56 |
$ 1.24 |
$ 1.09 |
|
| Earnings per common share: |
| Basic |
$ 0.32 |
$ 0.40 |
$ 0.42 |
$ 0.05 |
| Diluted |
$ 0.32 |
$ 0.39 |
$ 0.41 |
$ 0.05 |
|
Weighted average shares of common stock
outstanding: |
| Basic |
37,802 |
28,331 |
37,640 |
28,094 |
| Diluted |
38,712 |
28,883 |
38,547 |
28,582 |
|
| Dividends declared per share |
$ 0.63 |
$ 0.55 |
$ 1.22 |
$ 1.08 |
| Dividends paid |
$24,260 |
$15,700 |
$47,260 |
$30,699 |
|
|
|
*"Control Investments are investments in those persons that American Capital is deemed to "Control, as defined by the Investment Company Act of 1940, as amended ("the Act"). "Affiliate Investments are investments in those persons that are "Affiliated Companies of American Capital, as defined in the Act, other than Control Investments. "Non-Control/Non-Affiliate Investments are those that are neither Control Investments nor Affiliate Investments. Generally, under the Act, American Capital is deemed to Control a person in which it has invested if it owns 25% or more of the voting securities of such person and it is an Affiliated Company of a person in which it has invested if it owns 5% or more of the voting securities of such person. |
Portfolio Statistics
On a Weighted Average Basis*:
($ in millions) |
Aggregate |
2002 YTD
Static Pool |
2001
Static Pool |
2000
Static Pool |
1999
Static Pool |
Pre-1999
Static Pool |
Original Investments and
Commitments |
$ 1,263 |
$ 248 |
$ 390 |
$ 276 |
$ 178 |
$ 171 |
| Total Exits and Prepayments |
$ 151 |
$ 12 |
$ 6 |
$ 33 |
$ 18 |
$ 82 |
| Realized Gain on Investments |
$ 13 |
$ -- |
$ -- |
$ 1 |
$ 6 |
$ 6 |
Current Cost of Original
Investments |
$ 1,112 |
$ 245 |
$ 375 |
$ 232 |
$ 150 |
$ 110 |
| Fair Value of Investments |
$ 1,064 |
$ 256 |
$ 390 |
$ 185 |
$ 141 |
$ 92 |
| Non-Accruing Loans |
$ 67 |
$ -- |
$ -- |
$ 37 |
$ 18 |
$ 12 |
|
| Interest Coverage |
2.3 |
2.7 |
2.1 |
1.8 |
2.8 |
1.8 |
| Debt Service Coverage |
1.5 |
1.8 |
1.5 |
1.2 |
1.7 |
1.5 |
| Debt to EBITDA |
5.7 |
4.8 |
5.1 |
7.2 |
4.8 |
9.4 |
| Investment Grade |
3.0 |
3.0 |
3.0 |
2.9 |
3.2 |
2.9 |
|
| Average Age of Companies** |
41 years |
37 years |
43 years |
38 years |
53 years |
37 years |
| Total Sales** |
$ 5,916 |
$ 474 |
$ 2,431 |
$ 685 |
$ 1,481 |
$ 845 |
| Average Sales** |
$104 |
$38 |
$151 |
$105 |
$99 |
$100 |
| Total EBITDA** |
$ 616 |
$ 83 |
$ 254 |
$ 72 |
$ 154 |
$ 51 |
| Average EBITDA** |
$14 |
$7 |
$18 |
$19 |
$12 |
$9 |
| Ownership Percentage** |
43% |
59% |
35% |
44% |
40% |
36% |
| % with Senior Lien*** |
23% |
24% |
38% |
22% |
8% |
14% |
| % with Senior or Junior Lien*** |
83% |
73% |
85% |
88% |
97% |
72% |
|
*These amounts do not include investments in which American Capital only owns equity.
**Includes American Capital's equity investment in Electrolux and o2wireless Solutions.
***As a percentage of American Capital's total debt investments. |
American Capital invites its prospective shareholders, shareholders and analysts to attend the American Capital Shareholder Call on Wednesday, July 31 at 11:00 am ET. The dial in number is 888-276-0007. International callers should dial 612-332-0342. 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, www.ACAS.com, and click on the July 31 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 streaming slide presentation live on our website. The shareholder slide presentation that will be used during the shareholder call will be made available shortly after the earnings release on July 30 on our website. You may wish to take the time to review the slides in advance of the Shareholder Call.
For the convenience of our shareholders, there will be an audio only recording available from 9:30 pm July 31 to 11:00 pm August 10, please dial 800-475-6701 and enter code 644137. International callers may dial 320-365-3844 and enter the same code, 644137. We will also have the shareholder presentation, including audio and accompanying slides, available on our website starting August 2.
For further information or questions, please do not hesitate to call our Shareholder Relations department at (301) 951-6122.
American Capital is a publicly traded buyout and mezzanine fund with capital resources exceeding $1 billion. American Capital is an equity partner in management and employee buyouts; invests in private equity sponsored buyouts, and provides capital directly to private and small public companies. American Capital provides senior debt, mezzanine debt and equity to fund growth, acquisitions and recapitalizations. The Company has paid and declared $9.64 per share in dividends since going public in 1997.
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.
|
