BETHESDA, Md., February 2, 2000 -- American Capital Strategies, Ltd. (Nasdaq:ACAS) announced today announced today its results for the quarter and year ended December 31, 1999.
Earnings for 1999 increased 475% to $97,201,000 or $6.80 per share on a diluted basis, compared to $16,915,000 or $1.48 per share on a diluted basis, for 1998. Earnings for the fourth quarter of 1999 increased 1,195% to $73,781,000 or $4.02 per share on a diluted basis, compared to $5,699,000 or $0.51 per share on a diluted basis, for the fourth quarter of 1998. These results include $70,881,000 of unrealized appreciation of Capital.com, Inc., a portfolio company of American Capital.
Net operating income (NOI) for the year ended December 31, 1999 was $24,661,000 or $1.73 per share on a diluted basis, compared to $14,788,000 in net operating income or $1.29 per share on a diluted basis for the year ended December 31, 1998. This represents a 67% increase in NOI for 1999 over 1998. Net operating income for the fourth quarter ended December 31, 1999 was $8,185,000 or $0.45 per share on a diluted basis on total operating income of $10,587,000 compared to net operating income of $4,515,000 or $0.41 per share on a diluted basis on total operating income of $5,242,000 for the fourth quarter of 1998.
American Capital invests in middle market companies many of whom have limited access to capital because of inefficiencies in the marketplace. "1999
has been a year of tremendous progress and innovation at American Capital," said Malon Wilkus, American Capital Chairman and Chief Executive Officer. "We further strengthened our leadership position in middle market finance, initiated the rationalization of middle market access to capital through Capital.com, and continued to deliver on our commitments to our shareholders. We are excited about our successes and are well-positioned to continue our outstanding performance into 2000."
In 1999, American Capital completed 24 financings totaling $176 million with a weighted average yield of 13.9%. As of December 31, 1999, all of American Capital's loans were current. In the fourth quarter of 1999, American Capital completed six transactions totaling $57.1 million of investments and commitments. This includes $4.6 million in senior debt, $31.6 million in subordinated debt, $7.3 million in warrants, $0.6 million in preferred stock, and $13.0 million in commitments for future financings.
American Capital declared and paid dividends of $1.74 per share during 1999, an increase of 30% over the $1.34 declared and paid for 1998.
John Erickson, Chief Financial Officer of American Capital, commented, "1999 has been an outstanding year. We delivered on a number of strategic initiatives that enhanced our financial position and situated ourselves for continued growth. During the year, we continued to attract top quality analysts to research and report on our Company. We successfully completed an equity offering during market conditions that were difficult, and we obtained and expanded our credit facility reaching $225 million by the fourth quarter. Equally as important, credit quality remained outstanding and all of our loans are current. American Capital is ready to continue its impressive track record of growth in 2000 and beyond."
1999 Highlights
Launch of Capital.com, Inc.
In the fourth quarter, a subsidiary of First Union Corporation (NYSE: FTU) invested $15 million in American Capital's online investment bank, www.Capital.com. Launched in July as an online investment bank and financial portal for small and mid-size companies, AmericanCapitalOnline was renamed www.Capital.com and contributed to a newly formed portfolio company, Capital.com, Inc. in December of 1999.
In exchange for the $15 million investment, First Union received a 15% common equity stake and warrants to acquire up to an additional 5% of the common equity at a nominal price. The warrants are exercisable based on a subsequent valuation of Capital.com in connection with a subsequent investment or offer to invest within a year of First Union's stock purchase. If the subsequent valuation results in a fair market value of Capital.com of $100 million or more, the warrants will be extinguished. If the subsequent valuation results in a fair market value of Capital.com of $75 million or less, all the warrants will be exercisable. If the subsequent valuation results in a fair market value between $75 million and $100 million, a pro-rata portion of the warrants will be exercisable.
As of December 31, 1999, American Capital valued its 85% interest in Capital.com at $72,500,000. Valuations of Internet companies such as Capital.com are subject to considerable volatility. Investors should consider that volatility in the value of Capital.com may impact American Capital's earnings in the future.
Proceeds from the investment are anticipated to be used to accelerate the development of Capital.com and fund in part a $10 million targeted marketing program aimed at creating brand awareness.
Maturing Portfolio
American Capital began to build a record of realizing gains, with $2.7 million in gains recognized from the sale of Four-S Bakery and the sale of equity interest in Specialty Transportation Services. In addition, American Capital portfolio companies Decorative Surfaces, Inc., and Chance Coach prepaid portions of their American Capital debt.
1999 Earnings Conference Call Wednesday, February 2, 11:00 a.m., 800-288-8960
American Capital invites its shareholders and analysts to participate in the American Capital 1999 Earnings Conference Call on Wednesday, February 2, 2000 at 11:00 a.m. EST. The dial-in number is 800-288-8960. Please advise the operator you are dialing in for American Capital's 1999 Analyst Call. During the call, we invite you to turn to our shareholder website. By clicking on the Analyst Call Slide Presentation button, which will be prominently displayed, you will be able to view a series of slides displaying detailed information on some of the issues that will be discussed during the call. This slide presentation will be made available early in the morning of February 2, allowing time for review in advance of the call. Only a selection of slides will be reviewed during the call, so that more time will be available to answer questions. For the convenience of our shareholders and others, the call will be recorded and available for listening from February 2 at 3:30 p.m. EST to February 11 at 11:59 p.m. EST. Please call 800-475-6701, access code 498552. International callers may dial 320-365-3844, access code 498552, the same as for domestic callers.
American Capital Strategies
American Capital is a publicly traded buyout and specialty finance company with capital resources exceeding $460 million. Capital.com, Inc., a portfolio company of American Capital, provides receivable and inventory financing, machinery and equipment loans and leasing, real estate and construction financing, subordinated debt and equity financing and financing for growth, acquisition, buyouts, ESOPs, Internet development, liquidity and restructurings. Capital.com offers owners and managers access to information and analysis previously available primarily through painstaking research and expensive intermediaries. The site enables users to learn about corporate finance, value their company, build financial models, develop financing memoranda, locate experienced financial professionals and, most critically, source the capital they need, when they need it.
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.
Financial highlights for the quarter are as follows:
AMERICAN CAPITAL STRATEGIES, LTD.
Balance Sheets
(Unaudited)
(In thousands except per share data)
December 31, December 31,
1999 1998
Assets
Investments at fair value
(cost of $305,261 and $252,718,
respectively) $377,603 $254,983
Cash and cash equivalents 2,037 6,149
Investment in unconsolidated
operating subsidiary 4,893 6,386
Due from unconsolidated
operating subsidiary 2,331 778
Interest receivable 2,417 1,561
Other 6,091 162
Total assets $395,372 $270,019
Liabilities and Shareholders' Equity
Notes payable $-- $85,948
Revolving credit facility 78,545 30,000
Accrued dividends payable 547 1,222
Other 4,535 126
Total liabilities 83,627 117,296
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
18,252 and 11,081 issued and
outstanding, respectively 183 111
Capital in excess of par value 255,922 145,245
Notes receivable from sale
of common stock (23,052) (300)
Undistributed (distributions
in excess of) net realized
earnings 1,080 (116)
Unrealized appreciation of investments 77,612 7,783
Total shareholders' equity 311,745 152,723
Total liabilities and
shareholders' equity $395,372 $270,019
AMERICAN CAPITAL STRATEGIES, LTD.
Statements of Operations
(Unaudited)
(In thousands except per share data)
Three Months Year Year
Ended Ended Ended Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1999 1998 1999 1998
Operating income:
Interest and dividend
Income $10,075 $4,499 $30,833 $14,430
Loan fees 512 743 2,572 2,549
Total operating income 10,587 5,242 33,405 16,979
Operating expenses:
Salaries and benefits 136 215 1,045 843
General, administrative
and other 460 127 1,490 809
Interest 1,466 57 4,716 57
Total operating
Expenses 2,062 399 7,251 1,709
Operating income before
equity in loss of
unconsolidated
operating subsidiary 8,525 4,843 26,154 15,270
Equity in loss of
unconsolidated
operating subsidiary (340) (328) (1,493) (482)
Net operating
Income 8,185 4,515 24,661 14,788
Net realized gain
on investments 1,844 -- 2,711 --
Increase in unrealized
appreciation of
investments 63,752 1,184 69,829 2,127
Net increase in
shareholders' equity
resulting from
operations $73,781 $5,699 $97,201 $16,915
Net operating income
per share:
Basic $0.46 $0.41 $1.79 $1.34
Diluted $0.45 $0.41 $1.73 $1.29
Earnings per common share:
Basic $4.14 $0.51 $7.07 $1.53
Diluted $4.02 $0.51 $6.80 $1.48
Weighted average shares of
Common stock outstanding
Basic 17,819 11,069 13,744 11,068
Diluted 18,374 11,072 14,294 11,424
Dividends declared
per share $0.47 $0.48 $1.74 $1.34
Portfolio Statistics Pre-1999
On a Weighted Average Basis: Aggregate Static Pool
Interest Coverage 2.4 2.1
Debt Service Coverage 1.9 1.8
Debt to EBITDA 4.9 5.5
Investment Grade 3.2 3.3
Age of Portfolio Companies 42 years 38 years
Average Sales $68 million $68 million
American Capital Ownership
Percentage of Portfolio Companies 25% 31%
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.
