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American Capital Raises More Than $454 Million in Q1 2005
Total Capital Resources of Approximately $5.2 Billion
American Capital Declares $0.73 Q1 Dividend
Total Q1 Investments Over $390 Million
Since 1997, American Capital Has Provided a 311% Total Return to Investors,
Outperforming 96% of All Public Companies in Each of the Past 1, 3, 5 and 7 Year Time Periods
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Table of Contents
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NEW INVESTMENTS
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Electro-Component Assembly Company
$50 Million in buyout of Electro-Component Assembly Company, leading firm specializing in the design, development and manufacture of disposable torque wrenches, hexagon keys and solid wrenches used in the installation of pacemakers, defibrillators and other implantable medical devices
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Edge Products LLC
$30 Million in Edge Products LLC, a leading designer and manufacturer of performance related automotive aftermarket parts
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NewQuest Health Solutions, LLC
$35 Million in NewQuest Health Solutions, LLC, an independent managed care organization
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Continental Structural Plastics, Inc
$14 Million in Continental Structural Plastics, Inc., manufacturer of compression-molded, reinforced plastics used in automotive and industrial end-products
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Wausau Financial Systems
$16 Million in Wausau Financial Systems, leading provider of fully-bundled software and hardware technology solutions for remittance and check processing
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Beacon Hospice
$24 Million in Beacon Hospice, leading provider of hospice services
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PORTFOLIO COMPANIES
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FutureLogic, Inc.
$108 Million in buyout of FutureLogic, Inc., leading designer and developer of customized small format embedded thermal printing solutions
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Northwest Coatings, LLC
$24 Million in acquisition by Northwest Coatings, LLC, leading developer and manufacturer of customized specialty energy-curable and water-based coatings and adhesives
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American Capital Raises More Than $454 Million in Q1 2005
March Equity Offering Totaling $274 Million;
February Issuance of $100 Million Unsecured Credit Facility by BB&T;
Credit Facility Increased to $1 Billion by Citigroup Affiliate
American Capital Declares $0.73 Q1 2005 Dividend
Fitch Upgrades 1 Class of ACAS Business Loan Trust 2002-1
Total Q1 Investments Over $390 Million
Exit Events
American Capital Receives Proceeds of $60 Million From Two Exits
Cycle Gear, Inc.
CamelBak Products, Inc.
Corporate News
American Capital Adds Syndications Head
Charts
Growth in Total Q1 Investments, 2001 - 2005
Since 1997, American Capital Has Provided a 311% Total Return to Investors, Outperforming 96% of All Public Companies in Each of the Past 1, 3, 5 and 7 Year Time Periods
Industry Diversification
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American Capital Raises More Than $454 Million in Q1 2005
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March Equity Offering Totaling $274 Million
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On March 29, 2005, American Capital and Citigroup Global Markets, Inc., Wachovia Bank, National Association and J.P. Morgan Securities, Inc. (the "Counter Parties") sold 8.7 million shares of American Capital's common stock at $31.50 per share to the public, resulting in total gross proceeds of $274 million. Of the total 8.7 million shares that were sold, 700,000 shares were offered directly by American Capital, which received $21 million in immediate net proceeds. The remaining 8 million shares were offered by the Counter Parties in connection with agreements to purchase common stock from American Capital at a future date (the "Forward Sale Agreements"). American Capital also granted the underwriters an option to purchase an additional 1.3 million shares of American Capital's common stock at the public offering price, less the underwriting discount, to cover over-allotments.
In connection with the offering, American Capital entered into the Forward Sale Agreements on March 23, 2005 with each of the Counter Parties. Under the terms of the Forward Sale Agreements, the Counter Parties agreed to purchase from American Capital and American Capital agreed to sell to them 8 million shares of American Capital's common stock at $31.50 per share, less certain adjustments. The timing of these sales, which must occur within the next year, will generally be determined by American Capital.
Citigroup Global Markets, Inc., Wachovia Capital Markets, LLC, Friedman, Billings, Ramsey & Co., Inc., J.P. Morgan Securities Inc., BB&T Capital Markets, a division of Scott & Stringfellow, Inc., and Piper Jaffray & Co. were the underwriters for the offering. The joint book-running managers for the offering were Citigroup Global Markets, Inc. and Wachovia Capital Markets, LLC.
American Capital expects to use substantially all of the net proceeds from the direct sale of 700,000 shares of its common stock of approximately $21 million and from the sale of its common stock pursuant to the Forward Sale Agreements, which initially are valued at approximately $241 million, primarily to reduce borrowings under the Company's existing revolving credit facilities and to fund investments. The repayments under the revolving credit facilities create availability under the facilities, which will generally be used for funding future American Capital investments and general corporate purposes.
This newsletter is neither an offer to sell nor a solicitation of an offer to buy shares of common stock. The offering of securities can be made only by means of a prospectus and a related prospectus supplement.
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February Issuance of $100 Million Unsecured Credit Facility by BB&T;
Credit Facility Increased to $1 Billion by Citigroup Affiliate
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In February, American Capital announced that BB&T Capital Markets has arranged a $100 million unsecured revolving credit facility with Branch Banking and Trust Company as agent for a syndicate of lenders, replacing American Capital's previous $70 million secured credit facility. In addition, Citigroup Global Markets Realty Corp. ("CGMRC"), an affiliate of Citigroup Inc., increased the amount available under one of American Capital's revolving credit facilities to $250 million from $100 million, resulting in a total capacity of $1 billion for that credit facility. Affiliates of Wachovia Bank N.A. are the agent of the facility and a participating lender. Other lenders in American Capital's revolving credit facility are JPMorgan Chase Bank and a Bank of America administered Asset Backed Commercial Paper conduit.
"American Capital has raised $2.8 billion of debt capital since 1999," said Tom McHale, American Capital Vice President of Finance and Investor Relations. "American Capital now has $1.2 billion of capacity from its combined revolving facilities, has issued $1.4 billion in notes through six term securitizations over the past five years and issued $167 million of unsecured term notes in 2004. Our capital resources have greatly expanded and diversified during the past two years and remain a tremendous competitive advantage."
For the complete March 3 press release click here.
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American Capital Declares $0.73 Q1 2005 Dividend
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In February, American Capital's Board of Directors declared a first quarter 2005 regular dividend of $0.73 per share, which was paid on April 1, 2005 to record holders as of February 25, 2005. This dividend is a 4% increase over the first quarter 2004 regular dividend of $0.70 per share. During 2004, American Capital declared $2.91 per share in dividends that were paid from ordinary income for tax purposes, a total of $222 million in dividends. American Capital has paid a total of $717 million in dividends and paid $16.76 in dividends per share since its August 1997 IPO at $15.00 per share.
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Fitch Upgrades 1 Class of ACAS Business Loan Trust 2002-1
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In February, Fitch Ratings upgraded the ratings on one class of American Capital securitizations.
For the complete release click here.
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Growth in Total Q1 Investments, 2001 - 2005
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$50 Million in Electro-Component Assembly Company
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In April, American Capital invested $50 million in the buyout of Stamping Specialties Corporation, doing business as Electro-Component Assembly Company ("ECA"), the leading firm specializing in the design, development and manufacture of disposable torque wrenches, hexagon keys and solid wrenches used in the installation of pacemakers, defibrillators and other implantable medical devices. American Capital's investment took the form of senior term loans, senior subordinated debt and common equity. American Capital also provided a revolving credit facility. ECA founders retained a seller note as part of the transaction. American Capital now holds a controlling equity stake in ECA.
Founded in 1979, Newbury Park, CA-headquartered ECA is a manufacturer of disposable torque wrenches, hexagon keys and solid wrenches specifically designed for tightening and loosening screws during the installation of pacemakers, defibrillators and other implantable medical devices. The Company distributes its products to pacemaker and defibrillator OEMs who then package the appropriate wrench or key with their implantable cardiac devices. ECA sells its products to the world's largest manufacturers of implantable cardiac devices, including Medtronic Inc. (NYSE:MDT), Guidant Corporation (NYSE: GDT) and St. Jude Medical Inc. (NYSE: STJ).
Click here or more information about ECA.
Contact Kimberly Chu, Vice President, or call (310) 806-6280.
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$30 Million in Edge Products LLC
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In March, American Capital invested $30 million in Edge Products LLC, a leading designer and manufacturer of performance related automotive aftermarket parts. American Capital's investment took the form of a senior term loan, senior subordinated debt, junior subordinated debt and common equity. American Capital is also providing a revolving credit facility. Edge will utilize American Capital's investment primarily for growth capital and to recapitalize the Company.
Founded in 1999, Ogden, UT-based Edge designs and manufactures electrical modules and programmers that control the fuel delivery and injection timing on trucks, allowing operators to maximize power, speed, towing capacity and fuel efficiency. The Company also provides in-cab control display monitors that provide a wide range of information to the user such as vehicle diagnostics. Edge's Attitude 2 (A2) in-cab controller won the 2004 Specialty Equipment Market Association (SEMA) New Product of the Year Award. Edge's products are manufactured for major truck manufacturers including Ford, Chevy and Dodge trucks and are distributed through numerous warehouse distributors.
Click here for more information about Edge Products.
Contact Frank Do, Managing Director, or Joshua Phillips, Vice President, or call (310) 806-6280.
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$35 Million in NewQuest Health Solutions, LLC
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 In March, American Capital invested $35 million in NewQuest Health Solutions, LLC, an independent managed care organization primarily focused on providing Medicare Advantage HMO health plans to members in Alabama, Illinois, Tennessee and Texas. American Capital's investment took the form of senior subordinated debt and supported GTCR Golder Rauner LLC's recapitalization of NewQuest. UBS Securities LLC is providing a revolving credit facility and invested in a senior term loan. NewQuest management and existing investors in NewQuest rolled over a significant amount of equity.
Medicare HMOs contract with the Centers for Medicare and Medicaid Services, a component of the U.S. Department of Health and Human Services, to provide healthcare coverage to Medicare beneficiaries in exchange for a predetermined monthly amount per member. The Medicare Prescription Drug Benefit, Improvement and Modernization Act of 2003 established the Medicare Advantage Program, formerly Medicare+Choice, which expands the role of private plans available to Medicare beneficiaries, including regional health care plan options.
Based in Nashville, TN, NewQuest is an independent managed care organization primarily focused on providing Medicare Advantage HMO health plans through a comprehensive network of physicians and hospitals. The Company offers a broad continuum of value-added healthcare services to its members, including Independent Provider Association management services, prescription drug benefits, disease management, care enhancement and high-risk health management programs, and behavioral health and substance abuse services. Founded in 2000, NewQuest has grown from a single location in Tennessee to five facilities in Tennessee, Alabama, Illinois and Texas, serving over 100,000 beneficiaries in 60 counties and employing nearly 700. NewQuest operates four leading Medicare Advantage health plan providers: Tennessee HealthSpring, Alabama HealthSpring, HealthSpring of Illinois and Texas HealthSpring. In 2004, NewQuest was named one of Tennessee's Top 100 Companies by Business Tennessee. Also, in 2003, Nashville Business Journal awarded NewQuest one of its "Best In Business" Awards. Over the last four years, NewQuest has grown sales at approximately 61%, annualized, and recorded sales of over $600 million in 2004.
Click here for more information about NewQuest.
Contact Ian Larkin, Principal, or Demian Kircher, Vice President, or call (312) 681-7400.
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$14 Million in Continental Structural Plastics, Inc
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In February, American Capital invested $14 million in Continental Structural Plastics, Inc. (CSP), a manufacturer of compression-molded, reinforced plastics used in automotive and industrial end-products. American Capital's investment took the form of senior subordinated debt and redeemable preferred and common equity and supported Richard L. Scott Investments LLC's and CSP management's acquisition of CSP. Antares Capital Corporation and Bank One Corporation are providing a revolving credit facility and senior term loans.
Founded in 1919, CSP's compression-molded, reinforced plastics are used in automotive and industrial end-products. CSP manufactures the majority of its products with glass mat reinforced thermoplastics (GMT), one of the toughest and most flexible plastic compounds and a substitute for steel in applications requiring both strength and impact resistance. CSP's customers include North American and transplant automotive OEMs, Tier 1 automotive suppliers and industrial OEMs. CSP employs over 400 in its two manufacturing plants in Michigan and Louisiana.
Click here for more information about CSP.
Contact Ken Jones, Principal, or call (610)238-0210.
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$16 Million in Wausau Financial Systems
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 In February, American Capital invested $16 million in Wausau Financial Systems, a leading provider of fully-bundled software and hardware technology solutions for remittance and check processing. American Capital's investment took the form of senior subordinated debt and equity and supported Frontenac Company's acquisition of Wausau and Wausau's primary licensed software developer, Kyris Image Software, Inc. Wells Fargo Foothill invested in senior term debt and provided a revolving credit facility. Frontenac CEO1st™ executive Joseph Delgadillo is Wausau's incoming CEO. He invested in the equity and, along with Wausau senior management, is participating in an option pool.
Wausau, based in Mosinee, WI, was founded in 1974 as a provider of cash registers, accounting machines and maintenance services to financial institutions. Wausau's software platform is a customized imaging and transaction processing system installed onto NCR and Unisys hardware. The Company delivers its bundled solutions to a diverse customer base of over 600, including commercial clients, third-party processors, and financial institutions. Customers include The Bank of New York Company, Bank of America Corporation, Wachovia Corporation, Citigroup Inc., Wells Fargo & Co. and California Bank and Trust. The Company has seen sales growth of 16%, annualized, since 1995 and has nearly 400 employees.
Click here for more information about Wausau.
Contact Ian Larkin, Principal, or John Cannon, Vice President, or call (312) 681-7400.
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$24 Million in Beacon Hospice
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 In February, American Capital invested $24 million in Beacon Hospice, a leading provider of hospice services in New England. American Capital's investment took the form of a revolving credit facility, senior term loan B and senior subordinated debt. Halpern Denny & Co. is the majority owner of Beacon. Beacon CEO Betty Brennan invested in the equity and the Company's senior management will participate in a significant option pool.
Hospice care is utilized by patients who have been diagnosed with a terminal illness and have chosen, with the assistance of their doctors and families, to receive palliative care, counseling and only necessary healthcare services rather than curative care. Hospice care is provided at a number of locations, including private homes, hospitals, nursing facilities and hospice centers.
Founded in 1995, Beacon Hospice is a leading provider of hospice services in New England. The Company provides a full range of services tailored to the individual needs of patients, including nursing care, physician visits, social worker visits, counseling, palliative care and radiation therapy in both institution-based and in-home settings. The Company has grown organically from a single Boston program in 1999 to ten programs across Massachusetts, Rhode Island, Maine and New Hampshire and has over 300 full and part time employees.
Click here for more information about Beacon Hospice.
Contact Jon Isaacson, Principal, or call (301) 951-6122.
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$108 Million in Buyout of FutureLogic, Inc.
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In February, American Capital invested $108 million in the buyout of FutureLogic, Inc., a leading designer and developer of customized small format embedded thermal printing solutions. American Capital has been a minority investor in FutureLogic since December 2002. American Capital's new investment took the form of senior term loans, senior and junior subordinated debt and common equity. American Capital rolled over its previous common equity and warrants and is also providing a revolving credit facility. FutureLogic management rolled over its common equity. American Capital now owns approximately 64% of FutureLogic on a fully diluted basis.
Founded in 1983, Glendale, CA-based FutureLogic is the leading supplier for thermal printers found in cashless slot machines. Thermal printing is the accepted technology for transaction-based receipt printing, such as vouchers for slot machines, bar code labels used for tracking purposes and pay-at-the-pump gasoline purchases. Customers include International Gaming Technology (NYSE:IGT), Alliance Gaming Corp. (NYSE:AGI), WMS Industries, Inc. (NYSE: WMS), Atronic Americas LLC, Cardinal Health, Inc. (NYSE:CAH), Aristocrat Technologies, Konami Gaming Inc., Advanced Electronic Systems, Inc., Multimedia Games, Inc. and Spielo. The Company has four manufacturing, distribution and sales facilities located in Arizona, Nevada, Ohio and London and employs over 100.
Click here for more information about FutureLogic.
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$24 Million in Acquisition by Northwest Coatings
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 In February, American Capital invested $24 million in its portfolio company Northwest Coatings LLC to support an add-on acquisition and to refinance existing debt, including $10 million of American Capital senior subordinated debt. Northwest Coatings is a leading developer and manufacturer of customized specialty energy-curable and water-based coatings and adhesives serving predominantly customers in the packaging, narrow-web tag and label, printing and other industries. American Capital is providing a revolving loan facility and also invested in senior term loans, subordinated debt and equity. American Capital's total investment in Northwest Coatings is $27 million. Caltius Capital Management, the majority owner of Northwest Coatings, and company management invested additional equity alongside American Capital.
In November 2002, American Capital invested $12.5 million to support the acquisition of Northwest Coatings by Caltius Capital Management. Northwest Coatings was founded in 1970 to manufacture customized water-based adhesives and coatings for regional industrial customers. The Company now manufactures a wide range of primarily energy-curable adhesives and coatings for customers worldwide. Northwest Coatings has experienced exceptional success in the tag and label market, where it has secured the position of market leader with its energy-curable adhesives and coatings.
Click here for more information about Northwest Coatings.
Contact Frank Do, Managing Director, or Bill Bujake, Vice President, or call (310) 806-6280.
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American Capital Receives Proceeds of $60 Million From Two Exits
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In February, American Capital received proceeds of $60 million from the full exit of two portfolio companies, realizing a gain of $4 million.
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Cycle Gear, Inc.
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In February, American Capital realized a $4 million gain through a recapitalization of its portfolio company Cycle Gear, Inc. by Harvest Partners. American Capital received total proceeds of $21 million upon the exit, earning a 20% compounded annual rate of return on its investment in senior notes, subordinated notes, preferred stock and common stock warrants. The 20% return includes the realized gain and interest, dividends and fees received over the life of American Capital's investment in the company. The proceeds recognized by American Capital include proceeds to be held in escrow to secure standard representations and warranties for the recapitalization of approximately $1 million. The amount realized by American Capital exceeds the fourth quarter 2004 valuation of the investment by $0.6 million, or 3%.
In September 1998, American Capital invested $6 million senior and junior secured notes and common stock warrants in Cycle Gear Inc., the largest multi-store retailer of general motorcycle parts and accessories in the U.S., supporting the chain's expansion. Subsequently, American Capital invested an additional $10 million in junior secured notes, common stock warrants and preferred stock.
Click here for more about the Cycle Gear investment.
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CamelBak Products, Inc.
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In February, American Capital received full repayment of its original $38 million of junior and senior subordinated debt investments, including $1 million payment-in-kind interest, in CamelBak Products LLC, earning a 20% compounded annual rate of return, including all fees, interest and principal received over the life of American Capital's investment in CamelBak.
In November 2003, American Capital invested $38 million in junior and senior subordinated debt in CamelBak Products LLC, the dominant global designer, manufacturer and marketer of portable hands-free hydration systems, or customized backpacks that include integrated water storage and delivery systems. American Capital's investment supported the acquisition of CamelBak by Bear Stearns Merchant Banking.
Click here for more about the CamelBak investment.
For a chart detailing American Capital realized gains click here.
For a chart listing American Capital's exited portfolio companies click here.
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American Capital Adds Syndications Head
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In April, American Capital announced that Jeffery Schumacher joined the Company as Senior Vice President, Group Head of Syndications. Mr. Schumacher joined American Capital from the Royal Bank of Scotland's (RBS) Leveraged Syndications Group, where he was a Senior Vice President responsible for structuring and syndicating middle market leveraged transactions across a broad range of industries. Mr. Schumacher will be primarily responsible for both expanding American Capital's syndication activities for senior debt securities issued by portfolio companies and sourcing similar assets for American Capital. Over the past 18 months, American Capital has sold approximately $300 million of senior debt securities.
"We are very pleased to have Jeff Schumacher, a seasoned loan market professional with 16 years experience, join American Capital as our first syndications head," said American Capital Chairman, President and CEO Malon Wilkus. "Jeff's work will allow American Capital to interact more effectively with the wide range of financing providers for middle market companies and senior loan market investors, thereby allowing us to provide lower cost financing for the private equity firms with whom we work and our portfolio companies."
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Charts
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*64% of the Automotive Components category consists of companies in the aftermarket versus the OEM market.
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This newsletter 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, national and international economic conditions, and changes in the conditions of the industries in which American Capital has made investments. This newsletter is neither an offer to sell nor a solicitation of an offer to buy shares of common stock. The offering of securities can be made only by means of a prospectus and a related prospectus supplement.
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Two Bethesda Metro Center
14th Floor
Bethesda, MD 20814
Phone: (301) 951-6122
Fax: (301) 654-6714
Info@AmericanCapital.com
Nasdaq: ACAS
www.acas.com
(800) 248-9340
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