BETHESDA, Md., Feb.. 2 /PRNewswire/ -- American Capital Strategies (Nasdaq:ACAS), today announced the results for the year and quarter ended December 31, 1998. Net operating income for the year ended December 31, 1998 was $14,788,000 or $1.34 per share on total operating income of $16,979,000. 1998 was American Capital's first complete year operating as a public company.
Net operating income for the quarter ended December 31, 1998 was $4,515,000 or $0.41 per share on total operating income of $5,241,000, a 99% increase compared to net operating income of $2,270,000 or $0.21 per share and total operating income of $2,797,000 for the quarter ended December 31, 1997. American Capital also declared and paid a $0.37 per share regular dividend and declared an $0.11 per share bonus dividend during the quarter.
In the fourth quarter, American Capital completed three financing transactions totaling $49.5 million, composed of purchases of $44.7 million of senior debt and subordinated debt at a weighted average interest rate of 15.6%, $4.3 million of warrants and $500,000 of common stock. These amounts include $700,000 of unfunded senior debt commitments for working capital requirements. The weighted average interest rate on the total $49.5 million of capital invested during the quarter was 14.0%. For the year ending 1998, American Capital has completed 14 financings totaling $150.0 million with a weighted average yield of 13.1%. At December 31, 1998, all of American Capital's loans were graded either 3 or 4 and the portfolio's weighted average grade was 3.2, with 4 the highest grade. There are no loans past due.
American Capital Chairman and CEO Malon Wilkus commented, ``I am extremely pleased to have concluded American Capital's first full year of operations as a public company and to have exceeded the results projected at the time of the initial public offering. The original analyst projections showed American Capital paying a dividend of $1.22 per share, having net operating income of $1.29 per share and investing $117 million for the year ending December 31,1998. We exceeded those estimates and delivered outstanding results while making quality investments. In addition to the financial results, we have spent the year making American Capital a stronger company. We increased the number of principals from ten to fifteen and increased the number of associates from four to ten. We also opened offices in Chicago and Dallas this year, which are located in the heart of several key markets. We are well positioned to continue executing our business plan in 1999.''
John Erickson, Chief Financial Officer, stated, ``We have worked hard to expand the number of firms making a market in American Capital's stock during 1998. We obtained coverage from Scott & Stringfellow, Inc., Hilliard Lyons and Legg Mason Wood Walker, Inc. during 1998 and look forward to continuing to expand that list. We also secured $35 million in credit facilities during difficult market conditions and are actively negotiating a significant increase to our credit capacity. During 1998, we established reporting standards for our portfolio that I believe allow investors to be better informed as to the value and quality of our investments. We are reporting relevant portfolio monitoring statistics, such as debt service coverage and debt to EBITDA on a static pool basis so that investors can track the quality of our investments.''
American Capital Executive Vice President Adam Blumenthal commented ``I believe the strength of our portfolio exceeds our original expectations. Our loans are to companies that have been in business for 36 years and have revenues of $57 million on a weighted average basis. We have a 26.6% weighted average ownership stake in our portfolio companies, on a fully diluted basis. These are companies that generally have demonstrated abilities to operate in various economic settings, and have strong cash flows to service our loans as evidenced by the weighted average debt service coverage ratio of 2.1 to 1. In addition to the current strength of the loans, I believe that over time we will enjoy an equity rate of return on our ownership stakes thereby enhancing our shareholder returns. We will continue evaluating in excess of 1,500 opportunities per year to find the handful that meet our criteria.''
Financial highlights for the quarter and year are as follows:
AMERICAN CAPITAL STRATEGIES, LTD.
Unaudited Financial Highlights
(In Thousands Except Share and Per Share Data)
|
Three Months Ended
12/31/98 |
Year Ended
12/31/98 |
| Total operating income |
$ 5,241 |
$ 16,979 |
| Total operating expenses |
397 |
1,709 |
| Operating income before equity in earnings of unconsolidated operating subsidiary |
4,844 |
15,270 |
| Equity in earnings of unconsolidated operating subsidiary |
(329) |
(482) |
| Net operating income |
4,515 |
14,788 |
| Change in unrealized appreciation of investments |
1,184 |
2,127 |
| Net increase in shareholders' equity resulting from operations |
$ 5,699 |
$ 16,915 |
| Basic Weighted Average Shares Outstanding |
11,061,940 |
11,068,008 |
| Diluted Weighted Average Shares Outstanding |
11,064,872 |
11,424,241 |
| Net operating income per share - Basic |
$ 0.41 |
$ 1.34 |
| Net increase in shareholders' equity resulting from operations per share - Basic |
$ 0.52 |
$ 1.53 |
| Dividends declared per share |
$ 0.48 |
$ 1.34 |
| Total assets |
$ 270,019,000 |
|
| Total shareholders' equity |
$ 152,722,000 |
|
| Net asset value per share |
$ 13.78 |
|
| Portfolio Statistics: |
| Interest Coverage: |
2.5 |
|
| Debt Service Coverage: |
2.1 |
|
| Debt to EBITDA: |
5.1 |
|
| Weighted Average Loan Grade: |
3.2 on a scale of 4 high to 1 low. |
| Weighted Average Age of Portfolio Companies: |
36 years |
| Weighted Average Sales of Portfolio Companies: |
$57 million |
| Average American Capital Ownership Percentage of Portfolio Companies: |
26.6% |
|
Click here for additional portfolio information.
American Capital has elected to be regulated as a Business Development Company under the Investment Company Act of 1940, as amended. On October 1, 1997, American Capital elected to be taxed as a Regulated Investment Company (RIC) pursuant to subchapter M of the Internal Revenue Code. As contemplated by these transactions, American Capital materially changed its business plan and format from structuring and arranging financing for buyout transactions on a fee for services basis to primarily being a lender to and investor in middle market companies. As a result of the changes, American Capital's predominant source of operating income has changed from financial performance and advisory fees to interest and dividends earned from investing the company's assets in debt and equity of middle market companies and short term government securities.
The results of ACS Capital Investments Corporation (CIC), a subsidiary of American Capital, were consolidated in the financial statements of American Capital through September 30, 1997. As of October 1, 1997, CIC has not been consolidated with American Capital and is accounted for under the equity method due to the change in American Capital's business format. As a result of these changes, the American Capital's financial statements for periods through September 30, 1997 are not comparable with the financial statements for periods commencing after October 1, 1997.
American Capital invites its shareholders and analysts to attend the American Capital ``Analyst Meeting'' by phone on Wednesday, February 3, 1999 at 11:00 a.m. EST. The dial in number is 800-863-3256. Please advise the operator that 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 Fourth Quarter 1998 Shareholder Presentation to view slides displaying information concerning some of the issues that will be covered during the conference call. This slide show will not be available prior to the Analyst Call.
For the convenience of our shareholders, there will be a recording available from February 3 through February 10, 1999. If you are interested in hearing the recording of the presentation, please dial 800-611-0653 and enter access code 1508. Or, visit our shareholder website to listen to the presentation and view the slides reviewed during the Analyst Call.
American Capital is a buyout and specialty finance company with capital resources exceeding $190 million. American Capital invests $3 to $20 million in the form of senior debt, subordinated debt and equity to middle market companies in need of capital for growth, acquisitions, ESOP buyouts, management buyouts, liquidity and restructurings. Companies interested in learning more about American Capital and its unique and flexible financing should contact John Hoffmire, Vice President of Sales and Marketing, at 781-862-4447 or visit its website at www.American-Capital.com or its shareholder site at www.ACAS1.com.
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.
