Bethesda, MD - September 10, 2002 - American Capital Strategies Ltd. (Nasdaq:ACAS) announced today that it is updating its responses to questions and comments and reiterating its 2002 guidance. American Capital has posted these responses on the American Capital website.
"Due to recent heavy trading in our stock, we've taken this opportunity to supplement the information we regularly release about the Company," said Chairman, President and CEO Malon Wilkus. "Our business is a complex one, and the excellent relationships we enjoy with our shareholders are founded upon public scrutiny and ongoing dialogue that serves to strengthen the Company."
"In light of the current economic environment we wanted to express our confidence in achieving our forecasts, and so are reiterating our guidance for 2002," said CEO Wilkus.
RESTATEMENT OF 2002 GUIDANCE
Restated below are American Capital's forecasts of results for 2002, originally published in the Company's earnings announcement on February 5, 2002. The Company does not undertake to provide any additional disclosure regarding its expected forecasts results unless required by law.
American Capital believes the economy is poised for a recovery in 2002 and believes that the recession has leveled off. At the same time, American Capital believes that the middle market economy is still typified by illiquidity and low valuations and the risk of a double dip recession remains. The Company does not believe that it is making investments where its loans would be put seriously at risk by a double dip recession or a delayed recovery. It is the Company's view that the investing environment provides opportunities similar to the 1991-1992 recessionary period. Among other things, multiples are low and capital is scarce, and the market places a premium on liquidity and certainty that American Capital can provide. The retrenchment of senior lenders creates opportunities for American Capital to close transactions by funding throughout the capital structure of a company. The substantial growth in investing experienced by American Capital in 2001 results from these developments. As reflected in our 2002 forecasts below, it is our view that these conditions will persist throughout this year.
In light of the continued troubles in the economy, American Capital is projecting an increase of its non-accruing assets, noted below. Included in the assumptions used in preparing the forecasts below, are employee performance related compensation costs in excess of $9 million, evaluated and allocated by the Compensation and Compliance Committee of the Board of Directors among all employees. American Capital's ability to perform is greatly enhanced due to this variable cost.
NET OPERATING INCOME
As of the date of this release, American Capital believes it can achieve Net Operating Income (NOI) of $2.54 to $2.62 per share on a diluted basis for 2002 and a return on equity at cost between 13.8% and 14.8%. This projection is based on a number of factors, including those described below:
NEW INVESTMENTS
American Capital estimates it will originate between $475 and $550 million of new investments in 2002. The timing of the new investments is expected to be weighted toward the second half of the year and the yield on these new investments should be comparable with the yield achieved on investments in 2001. The amount of new investments will depend on the market for quality investments, American Capital's capital resources and its success at placing new investments.
LOAN PERFORMANCE
American Capital anticipates that it will receive from $70 to $90 million of principal repayments during 2002. In addition, the Company estimates that from $60 to $75 million of loans will on average be on non-accrual status with respect to interest payments.
NEW EMPLOYEES
In order to manage the growth in the investment portfolio, additional employees will be hired in 2002. American Capital anticipates increasing staff from 66 employees to between 85 and 108 employees in 2002, consisting of investment professionals, portfolio management professionals, marketing, technology support and administrative staff.
CERTAIN CONSIDERATIONS
To achieve the growth noted above in new investments, American Capital will be required to raise additional debt or equity financing. The terms of the future debt and equity issuances cannot be determined and there can be no assurances that the debt or equity markets will be available to the Company on terms it deems favorable. If capital is not available on favorable terms, American Capital would either have to raise debt or equity capital on unfavorable terms, reduce the volume of new investments, or exit existing investments. Any of these events could cause American Capital not to achieve these forecasts.
FORWARD-LOOKING STATEMENTS
The financial outlook presented in this release contains statements concerning American Capital's beliefs. Additional risks and other risk factors are described in our filings with the Securities and Exchange Commission. We are not obligated to update our forward-looking statements and we may not. Forward-looking statements that we do not update generally will become less meaningful over time.
American Capital's regular quarterly shareholder presentations may be found here.
For more information about American Capital's portfolio click here.
American Capital has a declared a $.66 per share dividend to be paid on October 1, 2002 to record holders as of September 12, 2002. This dividend is an 18% increase over the third quarter 2001 regular dividend of $0.56 per share. American Capital has paid or declared $9.64 in dividends since its August 1997 IPO at $15.00 per share.
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.
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.
