|
FOR IMMEDIATE RELEASE:
May 13, 2003
Contact:
John Erickson, Chief Financial Officer (301) 951-6122
American Capital Q1 2003 Net Operating Income Increases 7% to $0.65 per Share
Bethesda, MD - May 13, 2003 - American Capital Strategies Ltd. (Nasdaq: ACAS)
announced today its results for the quarter ended March 31, 2003. Net operating income (NOI) for the quarter increased 32% to $31 million compared to $23 million for first quarter 2002. On a diluted per share basis, NOI for the quarter increased 7% to $0.65 per share compared to $0.61 per share for first quarter 2002.
"American Capital's total new investments for the first quarter increased to a record $178 million as demand for our capital remains high," said Chairman, President and CEO Malon Wilkus. "In first quarter 2003, we earned $5 million in gross realized gains and also received $96 million in principal repayments. We remain on track to achieve our guidance of $10 million to $30 million in net capital gains and $250 million to $300 million in principal repayments for 2003. We are updating our projections to include a forecast of our dividend at $2.79 to $2.87 per share for the year, paid from ordinary income, of which we have already paid $0.67 per share in the first quarter and declared $0.68 per share for the second quarter. We know no better way to make evident our strong performance than to pay our income to our shareholders in cash dividends."
The net decrease in shareholders' equity resulting from operations (NOI plus net unrealized appreciation and depreciation and net realized gains and losses of the Company's assets) for the first quarter was $(1) million, or $(0.02) per diluted share, compared to a net increase in shareholders' equity resulting from operations of $4 million, or $0.09 per diluted share, in first quarter 2002.
"American Capital raised a quarter of a billion dollars in two overnight equity offerings in first quarter 2003, a strong result during a difficult capital raising environment," said CFO John Erickson. "During the quarter, we were faced with the uncertainty of a war and its potential to impact both the capital markets and the economy. Due to this uncertainty, in addition to our normal business challenges, we elected to operate with more equity capital and less leverage than we might otherwise. Our continued strong access to public capital continues to separate us from many of our competitors."
In first quarter 2003, American Capital completed financing transactions totaling $178 million, an increase of 63% over first quarter 2002's total of $109 million. The first quarter's transactions were composed of $59 million of senior debt, $109 million of subordinated debt, $9 million of common stock warrants and $1 million of common stock. Five investments, totaling $132 million were investments in private equity buyouts. One investment, totaling $40 million was a direct investment. The multiple for these investments on a weighted average basis was 4.0 times last twelve months (LTM) adjusted earnings before interest, taxes, depreciation and amortization (EBITDA). American Capital completed no buyouts that it sponsored in the first quarter.
In first quarter 2003, the number of investment opportunities American Capital reviewed increased 86% compared to first quarter 2002. Among these opportunities, the Company invested $132 million, or 74% of its $178 million total, in five private equity buyouts; whereas in first quarter 2002 American Capital invested $9 million, or 8% of the Company's $109 million total, in one private equity buyout.
"American Capital's robust flow of investment opportunities and our investment flexibility has allowed us to adapt to cycles in the marketplace," said COO Ira Wagner. "During the quarter, private equity firms became more active and American Capital increased our investing in private equity buyouts compared to sponsoring our own buyouts. The ability of our team of versatile investment professionals to execute on all three of our products - buyouts that we sponsor, investments in private equity buyouts, and direct investments - is integral to the unique middle market investment franchise we are building. In addition, we are continuing to leverage our operating staff, with our employees generating $1.6 million in revenues per employee and $11.2 million per Principal in the past twelve months. We compete with hundreds of buyout and mezzanine firms to attract the very best buyout and mezzanine professionals, and we are pleased to have been able to attract an outstanding team that can exercise critical judgment in a very demanding profession."
The weighted average interest rate on the total capital invested during the quarter was 11.3%. The weighted average effective interest rate on American Capital's total capital invested in debt securities as of March 31, 2003 was 12.5%. As of March 31, 2003, loans from eight portfolio companies totaling $92 million were on non-accrual. At March 31, 2003, the weighted average grade of American Capital's loan portfolio remained at 3.0 on a scale of 1 to 4, with 4 being the highest quality.
In first quarter 2003, American Capital experienced net realized gains of $4 million. The Company's gains resulted primarily from exits and repayments of investments in six portfolio companies, reaping compounded annual returns of 32%, 30%, 21%, 19%, 17% and 8% for a weighted average return of 22%. Since the Company's August 1997 IPO, cumulative net realized losses have totaled $3 million. Net unrealized depreciation totaled $36 million for the quarter, consisting of appreciation of $13 million at nine portfolio companies, and $48 million of depreciation at 17 portfolio companies and $1 million of depreciation on interest rate swaps. Interest rate swaps are required by American Capital's loan agreements and asset securitizations to lock in interest rate spreads and reduce interest rate risks. They appreciate or depreciate based on relative market interest rates. Their fair value will resolve to zero if held to maturity. Since the Company's August 1997 IPO, cumulative net depreciation totals $126 million, $93 million excluding interest rate swaps.
At the May 15, 2003 annual meeting, shareholders will vote on a new stock option plan proposal. If shareholders approve the plan, American Capital will adopt SFAS 123 prospectively in the second quarter of 2003 for all options granted in 2003 and would expense the cost of these options using a fair value based on an option pricing model over the vesting period of the options. The expensing of stock options using generally accepted accounting principles (GAAP) will result in a lower NOI, however the GAAP expense will not impact how the Company determines taxable income or its calculation of its required dividend. Therefore, American Capital will begin forecasting dividends per share rather than NOI per share. American Capital is replacing its 2003 forecast of NOI per share of $2.79 to $2.87, with a 2003 forecast of dividends per share of $2.79 to $2.87. American Capital expects all its dividends for 2003 will be paid from ordinary income. The Company pays out at least 98% of its ordinary taxable income in cash dividends. American Capital is reiterating the balance of its forecasts for 2003 including earning net capital gains of $10 million to $30 million, which it expects to retain.
Since its August 1997 IPO, American Capital has invested nearly $1.8 billion in 93 portfolio companies. As of March 31, 2003, American Capital shareholders have enjoyed a total return of 141% since the Company's IPO -- an annualized return of 17%. This assumes reinvestment of $11.00 in dividends paid per share during this period. On April 24, 2003, American Capital declared a $0.68 per share dividend to be paid June 30, 2003 to record shareholders as of June 12, 2003. American Capital has paid or declared a total of $11.68 per share in dividends since its August 1997 IPO at $15 per share.
Additional information may be found here.
Financial highlights for the quarter and year to date period are as follows.
AMERICAN CAPITAL STRATEGIES, LTD.
CONSOLIDATED BALANCE SHEETS
(In thousands)
|
March 31, 2003
(Unaudited) |
December 31, 2002 |
| Assets: |
| Cash and cash equivalents |
$ 28,622 |
$ 13,080 |
Investments at fair value
(cost of $1,425,908 and $1,334,987, respectively) |
|
|
| Non-Control and Non-Affiliate investments |
679,750 |
557,490 |
| Control Investments |
603,178 |
671,141 |
| Affiliate Investments |
53,579 |
52,083 |
| Interest rate swaps |
(32,729) |
(32,255) |
| Total Investments at fair value |
1,303,778 |
1,248,459 |
| Interest receivable |
12,112 |
11,552 |
| Other |
49,348 |
45,432 |
|
| Total assets |
$ 1,393,860 |
$ 1,318,523 |
|
| Liabilities and Shareholders' Equity |
|
| Revolving credit facility |
$ 174,508 |
$ 255,793 |
| Notes payable |
312,811 |
364,171 |
| Accrued dividends payable |
-- |
869 |
| Other |
6,717 |
10,031 |
|
| Total liabilities |
494,036 |
630,864 |
|
| Commitments and Contingencies |
|
| 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, 55,841 and 44,450 issued, and
54,860 and 43,469 outstanding, respectively |
549 |
435 |
| Capital in excess of par value |
1,057,447 |
812,150 |
| Notes receivable from sale of common stock |
(9,021) |
(9,021) |
| Distributions in excess of net realized earnings |
(23,321) |
(25,718) |
| Net unrealized depreciation of investments |
(125,830) |
(90,187) |
|
| Total shareholders' equity |
899,824 |
687,659 |
|
| Total liabilities and shareholders' equity |
$ 1,393,860 |
$ 1,318,523 |
|
|
AMERICAN CAPITAL STRATEGIES LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands except per share data)
|
Three Months Ended March 31, 2003 |
Three Months Ended March 31, 2002 |
| Operating income: |
| Interest and dividend income |
| Non-Control/Non-Affiliate investments |
19,901 |
17,014 |
| Control Investments |
17,004 |
12,133 |
| Affiliate Investments |
1,476 |
463 |
| Interest rate swap agreements |
(3,676) |
(1,342) |
| Total interest and dividend income |
34,705 |
28,268 |
| Fees |
| Non-Control/Non-Affiliate investments |
6,859 |
670 |
| Control Investments |
1,498 |
3,703 |
| Affiliate Investments |
2 |
-- |
| Total fee income |
8,359 |
4,373 |
| Total operating income |
43,064 |
32,641 |
|
| Operating expenses |
| Interest |
4,011 |
2,236 |
| Salaries and benefits |
4,674 |
4,325 |
| General and administrative |
3,616 |
2,829 |
| Total operating expenses |
12,301 |
9,390 |
|
| Net operating income |
30,763 |
23,251 |
| Net realized gain on investments |
| Non-Control/Non-Affiliate investments |
3,191 |
57 |
| Control Investments |
714 |
-- |
| Affiliate Investments |
-- |
-- |
| Total net realized gain on investments |
3,905 |
57 |
|
| Net unrealized appreciation (depreciation) of investments |
| Non-Control/Non-Affiliate investments |
(9,544) |
(13,624) |
| Control Investments |
(26,964) |
(8,175) |
| Affiliate Investments |
1,339 |
-- |
| Interest rate swap agreements |
(474) |
2,108 |
| Total net unrealized depreciation of investments |
(35,643) |
(19,691) |
|
Net increase (decrease) in shareholders'
equity resulting from operations |
$(975) |
$3,617 |
|
| Net operating income per common share: |
| Basic |
$ 0.65 |
$ 0.62 |
| Diluted |
$ 0.65 |
$ 0.61 |
|
| Net Earnings (Loss) per common share: |
| Basic |
$ (.02) |
$ .10 |
| Diluted |
$ (.02) |
$ .09 |
|
Weighted average shares of common stock
outstanding: |
| Basic |
47,393 |
37,477 |
| Diluted |
47,578 |
38,374 |
|
| Dividends declared per Common Share |
$ .67 |
$ .59 |
|
|
Portfolio Statistics
On a Weighted Average Basis:
($ in millions) |
Aggregate |
2003
Static Pool |
2002
Static Pool |
2001
Static Pool |
2000
Static Pool |
1999
Static Pool |
Pre-1999
Static Pool |
Original Investments and
Commitments at Cost |
$ 1,766 |
$ 178 |
$ 573 |
$ 390 |
$ 276 |
$ 178 |
$ 171 |
| Total Exits and Prepayments |
$ 357 |
$ -- |
$ 33 |
$ 106 |
$ 88 |
$ 42 |
$ 88 |
| Total Collection of Cash Interest, Dividends and Fees |
$ 337 |
$ 7 |
$ 47 |
$ 78 |
$ 66 |
$ 67 |
$ 72 |
| Total Realized (Loss) Gain on Investments |
$ (3.3) |
$ -- |
$ 0.1 |
$ 8.9 |
$ (25.0) |
$ 6.4 |
$ 6.3 |
Current Cost of Original
Investments |
$ 1,426 |
$ 168 |
$ 537 |
$ 266 |
$ 201 |
$ 143 |
$ 111 |
| Fair Value of Investments |
$ 1,337 |
$ 168 |
$ 536 |
$ 285 |
$ 152 |
$ 128 |
$ 68 |
| Non-Accruing Loans |
$ 92 |
$ -- |
$ -- |
$ 3 |
$ 39 |
$ 5 |
$ 45 |
| Equity Interest at Fair Value |
$ 279 |
$ 9 |
$ 115 |
$ 82 |
$ 36 |
$ 30 |
$ 7 |
| Debt to EBITDA(1)(2) |
5.4x |
4.0x |
5.0x |
5.3x |
6.6x |
5.0x |
9.7x |
| Interest Coverage(1) |
3.0x |
3.6x |
3.5x |
2.2x |
2.6x |
2.9x |
1.7x |
| Debt Service Coverage(1) |
2.0x |
2.2x |
2.6x |
1.3x |
1.4x |
1.3x |
1.3x |
| Investment Grade(1) |
3.0 |
3.0 |
3.0 |
3.2 |
2.9 |
3.1 |
2.3 |
| Average Age of Companies |
36 years |
27 years |
34 years |
41 years |
31 years |
54 years |
33 years |
| Total Sales |
$ 5,578 |
$ 826 |
$ 1,220 |
$ 1,512 |
$ 579 |
$ 910 |
$ 531 |
| Average Sales |
$93 |
$135 |
$53 |
$137 |
$111 |
$104 |
$54 |
| Total EBITDA(3) |
$ 703 |
$ 135 |
$ 173 |
$ 187 |
$ 103 |
$ 81 |
$ 24 |
| Average EBITDA(3) |
$13 |
$24 |
$8 |
$16 |
$20 |
$12 |
$3 |
| Ownership Percentage |
40% |
6% |
47% |
41% |
43% |
47% |
50% |
| % with Senior Lien(4) |
28% |
50% |
22% |
43% |
8% |
15% |
29% |
| % with Senior or Junior Lien(4) |
80% |
91% |
81% |
86% |
79% |
66% |
64% |
|
(1)These amounts do not include investments in which the Company owns only equity.
(2)For portfolio companies with a nominal EBITDA amount, the portfolio company's maximum debt leverage is limited to 15 times EBITDA.
(3)Earnings Before Interest, Taxes, Depreciation and Amortization of the most recent twelve months, or when appropriate, the forecasted twelve months ("EBITDA").
(4)As a percentage of the Company's total debt investments.
American Capital invites its shareholders, prospective shareholders and analysts to attend the American Capital Shareholder Call on Wednesday, May 14 at 11:00 am ET. The dial in number is 888-428-4473. International callers should dial 612-332-0418. Please advise the operator you are dialing in for the American Capital Shareholder Call.
During the Shareholder Call, the Company invites you to turn to its shareholder website, www.ACAS.com, and click on the May 14 Shareholder Call Slide Presentation button. The Shareholder Call Slide Presentation includes a summary slide presentation 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 complete streaming presentation on American Capital's website during the call. The Shareholder Call Slide Presentation will be posted on the website after the earnings release on May 13. You may wish to take the time to review the Shareholder Call Slide Presentation in advance of the Shareholder Call.
For the convenience of American Capital's shareholders, there will be a recording of the shareholder call available from 9:30 pm May 14 until 11:00 pm May 24. If you are interested in hearing the recording of the presentation, please dial 800-475-6701 and enter code 682834. International callers may dial 320-365-3844 and enter the same code, 682834. American Capital will also have the Shareholder Call Slide Presentation with audio accompaniment available on its website starting the evening of May 14.
For further information or questions, please do not hesitate to call the American Capital Shareholder Relations Department at (301) 951-6122.
American Capital is a publicly traded buyout and mezzanine fund with capital resources exceeding $1.7 billion. American Capital is an equity partner in management and employee buyouts; invests in private equity 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 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.
|
