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American Capital Invests $2 Billion in 2004
Total Capital Resources of More Than $4.8 Billion
American Capital Total Return to Shareholders of 22% Annualized Since IPO
$2.91 In Dividends Paid or Declared in 2004
American Capital Gains Greater Participation in its Dividend Reinvestment Program by Adding 5% Discount
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Table of Contents
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$10,000 invested in American Capital on August 29, 1997 would have grown to $42,632 as of December 31, 2004, including reinvestment of dividends, an increase of 326% or a 22% annualized versus 4% annualized for the S&P 500.
$2.91 In Dividends Paid or Declared in 2004
American Capital Gains Greater Participation in its Dividend Reinvestment Program by Adding 5% Discount
$500 Million Securitization
American Capital Adds Bank of America to Credit Facility
New Investments
$30 Million in Rocky Shoes and Boots, Inc. (Nasdaq: RCKY), a manufacturer of rugged outdoor boots
$78 Million in Bankruptcy Management Solutions, the leading provider of case management software, financial and other services to Chapter 7 bankruptcy trustees, Chapter 11 bankruptcy trustees and other fiduciaries
$89 Million in Pasternack Enterprises, manufacturer, marketer and value-added distributor of coaxial, fiber optic connectors, adapters, cables, and other related electronic parts
$48 Million in Phillips & Temro Industries, Inc., a leading manufacturer of highly engineered cold weather starting and comfort products for the automotive and truck OEM market and aftermarket
$33 Million in Qualitor, Inc., leading diversified automotive aftermarket parts manufacturer
$20 Million in Seroyal International Inc. and Seroyal USA Inc.
$39 Million in eLynx, Ltd., leading provider of secure electronic document delivery solutions to the mortgage industry
$66 Million in BBB Industries, Inc., leading remanufacturer of starters and alternators for sale in the automotive aftermarket
$46 Million in Hospitality Mints, LLC, leading vertically integrated niche provider of custom-imprinted and individually wrapped mints and candies
$26 Million in Montana Silversmiths, Inc., leading designer, manufacturer and distributor of western-style accessories
$15 Million in Pelican Products, Inc., global leader in the design, development and manufacture of unbreakable, watertight protective cases and technically advanced professional flashlights
Portfolio Companies
$39 Million Add-On Investment in Halex Corporation, leading manufacturer and distributor of flooring and installation products
$24 Million Add-On Investment in The Tensar Corporation, manufacturer of polymeric earthwork geogrid reinforcement products and systems
Exit Events & Prepayments
Phillips & Temro Industries, Inc.
TransCore Holdings, Inc.
Texstars, Inc.
MoneyMailer, LLC
Bridgeport International
Q3 Exits and Prepayments
Erie County Plastics Corporation
Riddell Sports Group, Inc.
T-NETIX, Inc.
Baran Group Ltd.
DigitalNet, Inc.
Other Q3 Exits and prepayments can be found at http://www.acas.com/news/reports/report102004.html.
Corporate News
American Capital Appoints Samuel A. Flax As Executive Vice President and General Counsel
American Capital Promotions
American Capital Hires Principal, Vice President and Associates
Charts
Investment Value
Total Return to Investors
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$2.91 In Dividends Paid or Declared in 2004
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In November, American Capital declared a fourth quarter 2004 regular dividend of $0.73 per share, a 6% increase over the fourth quarter 2003 regular dividend of $0.69 per share. In December, American Capital declared an additional dividend on its common stock of $0.06 per share. Total dividends declared for 2004 were $2.91 per share, an increase of 4% over 2003.
American Capital has paid a total of $651 million in dividends and paid $16.03 in dividends per share since its August 1997 IPO at $15.00 per share.
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American Capital Gains Greater Participation in its Dividend Reinvestment Program by Adding 5% Discount
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In December, American Capital announced that participation in its Dividend Reinvestment Program (DRIP) has increased significantly since the Company began offering a 5% discount on shares purchased through the DRIP. Further information on how to enroll in the DRIP program appears below.
As of December 8, 2004, approximately 6.2 million shares out of approximately 85.6 million American Capital shares outstanding were participating in the DRIP, totaling 7% of shares outstanding. At July 1, 2004, there were approximately 0.5 million shares participating. In August 2004, American Capital announced that it had amended the DRIP in order to provide a 5% discount on shares purchased through the reinvestment of dividends, effective for dividends paid starting in December 2004, subject to the terms of the DRIP.
Stockholders interested in the dividend reinvestment plan should review a DRIP prospectus, which is available from American Capital or accessible on the American Capital website.
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$500 Million Securitization
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In December, American Capital announced that ACAS Business Loan Trust 2004-1, a wholly owned affiliate of American Capital, had issued $410 million of investment grade notes backed by $500 million of senior and subordinated business loans originated by American Capital. Wachovia Capital Markets LLC acted as the lead manager, structuring and placement agent and initial purchaser of the securities. Citigroup Global Markets Inc. and J.P. Morgan Securities Inc. were senior co-managers. Harris Nesbitt Corp. and BB&T Capital Markets were junior co-managers.
The private placement note offering to investors consists of $303 million Class A notes, $34 million Class B notes and $74 million class C notes. American Capital retained $50 million of Class D notes and $40 million of Class E notes.
Moody's, S&P & Fitch Ratings*:
| Class Of Note |
S&P |
Moody's |
Fitch |
Amount (000) |
Pricing - LIBOR Plus |
| A |
AAA |
Aaa |
AAA |
$303,000 |
32 bp |
| B |
AA |
Aa2 |
AA |
34,000 |
50 bp |
| C |
A |
A2 |
A |
74,000 |
100 bp |
| D |
NR |
NR |
BBB |
50,000 |
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*The A, B and C notes were rated by three rating agencies and the Class D notes were rated by Fitch.
The blended pricing of the offered notes, excluding fees, is LIBOR plus 46 basis points.
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American Capital Adds Bank of America to Credit Facility
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In November, American Capital announced that a Bank of America administered Asset Backed Commercial Paper conduit joined an affiliate of Wachovia Bank, N.A., JPMorgan Chase Bank and Citigroup Global Markets Realty Corp. ("CGMRC"), an affiliate of Citigroup Inc., as a lender in one of American Capital's revolving credit facilities, committing up to $150 million in additional capacity. This resulted in an increase in the maximum availability under the facility to $850 million. American Capital now has over $1 billion of capacity from its combined credit facilities.
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$30 Million in Rocky Shoes and Boots, Inc.
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 In January 2005, American Capital invested $30 million in Rocky Shoes and Boots, Inc. (Nasdaq: RCKY), a manufacturer of rugged outdoor boots, to support its acquisition of EJ Footwear LLC, a manufacturer of boots for work applications and general outdoor use. American Capital's investment took the form of a senior term loan B. GMAC Commercial Finance is providing a revolving credit facility and a senior term loan.
"American Capital is off to a great start in 2005 by supporting the combination of two leading, non-fashion, niche focused boot manufacturers," said American Capital COO Ira Wagner. "We are pleased to back Rocky's strong and experienced management team, enabling them to expand and strengthen their business with a complementary acquisition. Our ability to directly invest capital in middle market companies is critical to their growth and success."
The combined companies earned revenues of approximately $270 million in the twelve month period ending in September 2004.
Click here for more information about Rocky.
Contact Ken Jones, Principal, or call (610)238-0210.
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$78 Million Bankruptcy Management Solutions
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  In December 2004 American Capital invested $78 million in the recapitalization of its portfolio company Bankruptcy Management Solutions, the leading provider of case management software, financial and other services to Chapter 7 bankruptcy trustees, Chapter 11 bankruptcy trustees and other fiduciaries. American Capital's investment took the form of senior term debt and senior and junior subordinated debt. American Capital is also continuing to provide a revolving credit facility. American Capital first invested in BMS in December 2003, investing in senior term notes, senior and junior subordinated debt with warrants, common equity and providing a revolving credit facility. The proceeds from the recapitalization were used to refinance existing debt, pay a dividend to the equity holders, and fund working capital to support BMS' growth plans. As part of BMS' refinancing, American Capital received full repayment of its senior term notes and senior and junior subordinated debt and terminated its revolving credit facility. American Capital retains its equity interest in BMS. Lincolnshire Management remains the majority owner of BMS, and BMS management is maintaining its equity investment in the company.
BMS provides bankruptcy trustees with comprehensive systems, including computer hardware, software, help desk services, financial services and other services. BMS systems allow trustees to manage financial assets and meet fiduciary obligations as well as the extensive administrative requirements associated with the almost 100 different bankruptcy courts in the U.S., each of whom may have different, changing requirements. BMS is headquartered in Irvine, CA.
Click here for more information about BMS.
Contact Frank Do, Managing Director, or call (310) 806-6280.
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$89 Million in Pasternack Enterprises
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 In December 2004, American Capital invested $89 million in the acquisition of Pasternack Enterprises, a manufacturer, marketer and value-added distributor of coaxial, fiber optic connectors, adaptors, cables, and other related electronic parts. American Capital's investment took the form of senior term debt, senior and junior subordinated debt and equity. American Capital also provided a revolving credit facility. CEO Chuck Becker, an industry veteran, also made a significant equity investment.
Pasternack, based in Irvine, CA was founded in 1972. Pasternack's product offering is the broadest in the RF and microwave industry. In addition, the company provides value-added cable assembly capabilities to its customers. Its diverse and growing product portfolio is sold into multiple end markets, including the military, telecommunications, instrumentation, computers and computer peripherals, consumer electronics, commercial aircraft, industrial equipment and medical equipment. The company's products are used in such end-use products as electronic instruments, radar, and base stations for wireless networks as well as transmitters for wireless LANs.
Click here for more information about Pasternack.
Contact Frank Do, Managing Director, or call (310) 806-6280.
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$48 Million in Phillips & Temro Industries, Inc.
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  In December 2004, American Capital invested $48 million in Phillips & Temro Industries, Inc., a leading manufacturer of highly engineered cold weather starting and comfort products for the automotive and truck OEM market and aftermarket. American Capital's investment took the form of a revolving credit facility, senior term loans and senior subordinated debt. The investment supported Morgenthaler Partners' acquisition of Phillips & Temro from TMB Industries. American Capital was also an existing investor in Phillips & Temro.
Phillips & Temro is a designer and manufacturer of cold weather start and emissions control components and systems, engine silencers and power distribution components and systems, serving predominantly the automotive and truck diesel OEM market and aftermarket. The company has established leading positions in these product categories through the continued introduction of patented products and technologies that improve the operating performance of engines while serving the need for compliance with environmental regulations. Phillips & Temro currently has 29 active patents and 9 patents pending in the US and abroad. The Company serves major OEM customers, including Caterpillar Inc., Cummins Engine Company, DaimlerChrysler Corporation, Ford Motor Company, General Motors Corporation, International Truck & Engine Corp., Kohler Co., Mack Trucks Inc., PACCAR Inc. and Volvo Truck Corporation. Headquartered in Eden Prairie, MN, the Company has three additional operating facilities in Minnesota and Manitoba and employs over 450 people.
Click here for more information about Phillips & Temro.
Contact Ken Jones, Principal, or call (610)238-0210.
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$33 Million in Qualitor, Inc.
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  In December 2004, American Capital invested $33 million in Qualitor, Inc., a diversified automotive aftermarket parts manufacturer. American Capital's investment took the form of senior and junior subordinated debt and preferred and common equity. A syndicate of lenders led by Antares Capital Corporation invested in a revolving credit facility, senior term loans and a second lien term loan. Thayer Capital Partners is the lead investor and majority owner in Qualitor and Baird Capital Partners played an active supporting role in the transaction.
Founded in 1999, Southfield, MI based Qualitor manufactures application-specific wear products, including brake components, wiper blades, engine control devices and heavy duty truck parts. In addition to its headquarters, Qualitor has eight manufacturing, distribution and storage facilities in Connecticut, Florida, Michigan and Ohio and employs nearly 800.
Click here for more information about Qualitor.
Contact David Ehrenfest Steinglass, Managing Director, or call (301) 951-6122.
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$20 Million in Seroyal International Inc. and Seroyal USA Inc.
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In December 2004, American Capital invested $20 million in Seroyal International Inc. and Seroyal USA Inc. (together, "Seroyal"), a leading marketer and distributor of branded nutritional supplements and homeopathic medicines to healthcare professionals in Canada and the U.S. American Capital's investment took the form of a senior term loan B, senior subordinated debt and preferred and common equity and supports Bruckmann, Rosser, Sherrill & Co. LLC's ("BRS") recapitalization of Seroyal. Rosetta Raso, founder and owner of Seroyal, will continue to serve in her capacity as President and Chief Executive Officer of Seroyal.
Founded in 1984, and headquartered in Richmond Hill, Ontario, Seroyal markets and distributes nutritional supplements and homeopathic products under the Genestra and Unda brands, respectively. The Unda homeopathic products are manufactured by Unda SA of Belgium, a leading manufacturer of homeopathic products known for quality products through its greater than 50 year history. Seroyal enjoys a diversified recurring customer base of several thousand customers in the U.S. and Canada, including naturopaths, homeopaths, chiropractors, medical doctors, nutritionists, and acupuncturists. In addition to its Ontario facility, Seroyal has a U.S. distribution facility in Wood Dale, Illinois.
Click here for more information about Seroyal.
Contact Brian Graff, Managing Director, or call (212) 213-2009.
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$39 Million in eLynx. Ltd.
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 In December 2004, American Capital invested $39 million in the buyout of eLynx, Ltd., the leading provider of secure electronic document delivery ("EDD") solutions to the mortgage industry. American Capital's investment took the form of a revolving credit facility, senior term loan, senior and junior subordinated debt and redeemable preferred and common equity. eLynx management also invested in equity. Post close, American Capital owns approximately 84% of eLynx on a fully diluted basis, with eLynx management owning the remaining balance.
Founded in 1994, Cincinnati, OH-based eLynx was the first to develop a web-based EDD processing system that transmitted secure mortgage documents. The Company now provides secure EDD and electronic signatures to the mortgage industry through its web posting service ("WPS") and uSign™ products, respectively. WPS is constructed with proprietary code that enables clients to securely deliver electronic documents through the use of a common Web browser and save up to 75% of traditional paper delivery costs. In 2003, with the introduction of uSign™, eLynx became the first company to integrate e-signature capabilities into a commercially viable EDD solution. In addition, the Company has recently launched a new product, eLynx PRO, which provides a neutral, desktop platform that installs in minutes, captures documents from any application, interfaces with the user via a familiar email-like appearance and provides Web-based security.
eLynx serves over 100 customers, including six of the top ten and 16 of the top 30 mortgage lenders. Selected top customers include Wells Fargo Home Mortgage, National City Mortgage, Golden West Financial, GreenPoint Mortgage, HSBC Mortgage and ditech.com. In 2003, the Company was named to Mortgage Technology's "Top 100 Mortgage Technology Vendors" list. In addition to its headquarters, the Company has two offsite data facilities in Chicago, IL and Atlanta, GA.
Click here for more information about eLynx.
Contact Todd Wilson, Principal, or Robert Klein, Managing Director, or call (212) 213-2009.
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$66 Million in BBB Industries, Inc.
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  In November 2004, American Capital invested $66 million in BBB Industries, Inc., a leading remanufacturer of starters and alternators for sale in the automotive aftermarket. American Capital's investment took the form of a revolving credit facility, senior term notes and senior subordinated debt to provide liquidity for the growth needs of the Company. ShoreView Industries is the sponsor. BBB's current senior management team is remaining with the Company.
Founded in 1987, BBB is headquartered in Mobile, AL and operates a 170,000 square foot manufacturing facility in Reynosa, Mexico, which is the only facility in the industry ISO/TS 16949 certified. The Company currently has over 1,300 employees.
Click here for more information about BBB.
Contact Frank Do, Managing Director, or Kimberly Chu, Vice President, or call (310) 806-6280.
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$46 Million in Hospitality Mints, LLC
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 In November 2004, American Capital invested $46 million in Hospitality Mints, LLC, a leading, vertically integrated niche provider of custom-imprinted and individually wrapped mints and candies. American Capital's investment took the form of senior term debt, senior and junior subordinated debt with warrants and equity. Texas Capital Bank provided a revolving loan facility and a senior term loan. Hospitality Mints management invested in the equity. Post close, American Capital owns approximately 86% of Hospitality Mints on a fully diluted basis.
Based in Boone, NC and founded in 1978, Hospitality Mints employs 112 individuals and serves a customer base in excess of 6,000. Hospitality Mints products include soft and hard candies and mints, chocolate squares, bubblegum and jelly candies. The candies come in customized wrappers and packaging to convey the customer's marketing message and logo. The Company produces four million candies a day, or over 9 million pounds of candy annually, in 25 varieties at its Boone manufacturing facility. Customers include Sizzler, Ruth's Chris Steak House, Chick-fil-A, TGI Friday's and Burger King, among other household names.
Click here for more information about Hospitality Mints.
Contact Jeff MacDowell, Principal, or call (214) 273-6633.
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$26 Million in Montana Silversmiths, Inc.
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  In October 2004, American Capital invested $26 million in Montana Silversmiths, Inc., a leading designer, manufacturer and distributor of accessories, jewelry and lifestyle products for the western industry. American Capital's investment took the form of a senior term loan and senior subordinated debt and supported Thompson Street Capital Partners' and management's acquisition of Montana. American Capital also provided a revolving credit facility.
Founded in 1973, Columbus, MT-headquartered Montana holds one of the most recognizable brand names in the western accessories market. The Company's wide selection of over 10,000 SKUs of premium and aesthetically appealing products include buckles, jewelry, watches, accent trim and home decor sold under three brand names: Montana Silversmiths, Montana Lifestyles and Reflexions. Customers include western specialty stores such as Corral West, Sheplers, Cavender's, Boot Barn and Western Warehouse.
Click here for more information about Montana Silversmiths.
Contact Jon Isaacson, Principal, or call (301) 951-6122.
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$15 Million in Pelican Products, Inc.
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  In October 2004, American Capital invested $15 million in Pelican Products, Inc., a global leader in the design, development and manufacture of unbreakable, watertight protective cases and technically advanced professional flashlights. American Capital's investment took the form of a second lien loan and supported Behrman Capital's acquisition of Pelican. A syndicate led by GE Capital Corporation, a unit of General Electric Corporation (NYSE: GE), provided a revolving credit facility, senior term loans and a second lien loan. Behrman Capital and Pelican management invested in equity.
Founded in 1976, Torrance, CA-headquartered Pelican is a leading manufacturer of protective cases and professional flashlights. The Company's unbreakable, watertight and dustproof cases exceed the highest industrial and military specifications and are used to protect a variety of commercial, military and recreational products. Pelican's professional-grade flashlights are widely recognized for their superior performance and are used by industrial, fire services, military and government customers. Recent earnings growth has exceeded 20%, annualized. The Company has operating facilities in California, Canada and Spain and has over 400 global trademarks, holds 32 patents and has 10 patents pending.
Click here for more information about Pelican.
Contact John Thornton, Principal, or Natasha Volyanskaya, Vice President, or call (415) 591-0120.
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$39 Million Add-On Investment in Halex Corporation
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 In December 2004, American Capital invested an additional $39 million in its portfolio company Halex Corporation to refinance existing debt and to support the acquisition of Capitol USA, a leading manufacturer and distributor of flooring installation products and accessories. American Capital's investment took the form of a senior term loan, senior and junior subordinated debt and common equity. American Capital also provided a revolving credit facility. American Capital's total current investment in Halex is $72 million. The founders of Halex are maintaining their equity investment.
Dalton, GA-headquartered Capitol USA is a leading manufacturer and distributor of flooring installation products and accessories. Capitol's broad product offering includes carpet tackstrip, plywood underlayment, carpet seaming tape, flooring adhesives, binding tape, carpet paddings and non-slip padding. Capitol has four operating facilities in Georgia and Pennsylvania.
In August 2002 American Capital invested $33 million in debt and equity alongside management in a recapitalization of Halex. Founded in 1990, Pomona, CA-headquartered Halex is a leading global manufacturer and distributor of flooring installation supplies, including carpet tackstrips and plywood underlayment.
Click here for more information about Halex.
Contact Frank Do, Managing Director, or Bill Bujake, Vice President, or call (310) 806-6280.
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$24 Million Add-On Investment for Recapitalization of Tensar
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  In December 2004, American Capital announced today it has invested $24 million in the recapitalization of its portfolio company, The Tensar Corporation ("Tensar"). American Capital's new investment took the form of senior and junior subordinated debt. The company's existing lenders participated in the recapitalization. In conjunction with this transaction, Tensar redeemed $1.2 million of American Capital's redeemable preferred stock plus $0.4 million in accrued dividends.
American Capital first invested $19.75 million in Tensar in December 2000 in support of the acquisition of Tensar (then known as Atlantech International), by KRG Capital Partners. In April 2004, American Capital was repaid its original $18.75 million senior subordinated debt investment while retaining its equity investments. KRG remains the lead investor.
Founded in 1983 and based in Atlanta, GA, Tensar is the largest manufacturer of polymeric earthwork geogrid reinforcement products in the world. Geogrids permit cheaper, faster and more durable construction of transportation and environmental infrastructure projects, including roadways, parking lots, retaining walls and coastal protection systems. Tensar holds over 70 patents, including a method of use patent that provides the Company exclusive rights for use of its UX™ and BX™ geogrids for all civil construction applications in the U.S. The company is also a full-service provider of specialty products and engineering services used for cost-effective site development of commercial, residential, industrial and municipal properties as well as in transportation and environmental infrastructure. Tensar's customers include municipal, county and state departments of transportation and environmental regulatory agencies, as well as customers from the commercial and industrial sectors.
Click here for more information about Tensar.
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Exits and Prepayments
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American Capital earned 33%, 25%, 27%, 20%, 18%, 20%, 39%, 42% and 46% compounded annual returns on the following investments, including all fees, interest and principal received over the life of American Capital's investments in these companies.
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Phillips & Temro Industries, Inc.
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In November 2002, American Capital and a wholly-owned affiliate of American Capital invested $5 million in the form of a senior secured subordinated note and common equity in support of TMB's acquisition of Phillips & Temro. In December 2004, American Capital and its affiliate received net proceeds of $7 million for the full repayment of the note and sale of the common equity interest, earning a combined 33% compounded annual rate of return, including all fees, interest and principal received over the life of American Capital's investment.
Click here for the complete press release.
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TransCore Holdings, Inc.
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In December of 2004 American Capital received proceeds of $26 million from the exit of its preferred and common equity investment in TransCore Holdings Inc., realizing a gain of $18 million. TransCore was acquired by Roper Industries Inc. in a transaction valued at approximately $600 million.
In January 2004, American Capital was repaid its $27 million subordinated debt investment in TransCore, realizing a $2 million gain. American Capital has realized a total gain of $20 million and a 25% compounded annual return on its total investment in TransCore, including the realized gains, interest, dividends and fees received over the life of American Capital's total investment in the company. The sale proceeds recognized by American Capital include proceeds to be held in escrow to secure customary representations and warranties of the sale and additional amounts due American Capital totaling approximately $3 million. The amount realized by American Capital was less than the third quarter 2004 valuation of the investment by $0.7 million, or 3%.
Click here for the complete press release.
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Texstars, Inc.
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In the fourth quarter of 2004, American Capital realized a gain of $11 million from the sale of its portfolio company Texstars Inc. to Hampson Industries PLC. American Capital received total proceeds of $34 million upon the exit, earning a 27% compounded annual rate of return on its investment in senior notes, senior subordinated notes and common equity interest. The 27% return includes the realized gain and the interest and fees received over the life of American Capital's investment in the company. The sale proceeds recognized by American Capital include proceeds to be held in escrow to secure standard representations and warranties of the sale of approximately $2 million. The amount realized by American Capital exceeded the third quarter 2004 valuation of the investment by $1.3 million, or 4%.
In June 2001, American Capital invested $25.5 million to fund the buyout of Texstars. Texas-based Texstars is the leading supplier of canopies for the F-16 fighter aircraft, the most widely used U.S. fighter aircraft. The canopy is the clear structure that wraps around the pilot. Texstars is a leading supplier of polycarbonate canopies for many military aircraft applications. In addition, Texstars manufactures other components for both military and non-military aircraft and for mass transit applications.
Click here for the complete press release.
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Money Mailer, LLC
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In the fourth quarter of 2004, American Capital received full repayment of its $8.5 million senior subordinated debt investment in Money Mailer LLC, earning a 20% compounded annual rate of return on the debt investment, including all fees, interest and principal received over the life of American Capital's debt investment in the company. American Capital continues to retain a 5% fully diluted equity ownership in the parent of Money Mailer.
Click here for the complete press release.
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Bridgeport International Receives $11 Million in Asset and Inventory Sale
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In November, American Capital announced that affiliates of its portfolio company Bridgeport International LLC ("BIL") received approximately $11 million from Hardinge Inc. (Nasdaq: HDNG) in the sale of the intellectual property rights, certain assets and certain inventory associated with Bridgeport's worldwide operations. The proceeds are expected to be used to repay American Capital debt. In 2002, affiliates of BIL entered into an agreement with Hardinge whereby Hardinge purchased the right to manufacture and distribute Bridgeport knee mills, related parts and service support functions, and other products in North America previously produced by a Bridgeport affiliate in the U.S. This affiliate of BIL will continue to receive royalties from that agreement with Hardinge. Hardinge is a leading international producer of advanced material-cutting solutions.
Click here for more information about Bridgeport.
Contact John Erickson, CFO, or call (301) 951-6122.
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Third Quarter Exits and Prepayments
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Erie County Plastics Corporation
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In 1999, American Capital invested $10 million in subordinated debt with warrants of Erie County Plastics Corporation to support the company's growth strategy. Erie Plastics is a nationally recognized leader in the manufacture of custom injection molded plastic packaging components, serving some of the best known names in the consumer products industry. In the third quarter of 2004, American Capital completely exited its investment in Erie Plastics through the full repayment of its $10 million subordinated debt investment and the sale of its common stock warrants for $1.8 million, realizing a total gain of $1.3 million and earning an 18% compounded annual rate of return on its investment, including all fees, interest and principal received over the life of American Capital's investment in the company.
Click here for more information about the Erie investment.
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Riddell Sports Group, Inc.
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In 2003, American Capital invested $23 million in Riddell Sports Group Inc., a leading designer, manufacturer and licensor of branded sporting goods, reconditioning services and collectibles. American Capital's investment took the form of senior subordinated debt and equity and supported the acquisition of Riddell by Fenway Partners Inc. In September 2004, Riddell acquired Bell Sports, a leading designer, developer and marketer of helmets for bicycling and action sports. As part of the acquisition, American Capital's $20 million subordinated debt investment was paid in full, earning a 20% compounded annual rate of return, including all fees, interest and principal received over the life of American Capital's debt investment in the company. American Capital retains its 2.4% fully diluted equity interest in Riddell.
Click here for more information about the Riddell investment.
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T-NETIX, Inc.
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In March 2004, American Capital invested $27 million to support the acquisition of T-NETIX Inc., a leading provider of telecommunications products and services to correctional facilities. American Capital's investment took the form of senior and junior subordinated debt and common equity, and supported the acquisition of T-NETIX by H.I.G. Capital in a going private transaction. During the third quarter of 2004, American Capital received full repayment of its $26 million subordinated debt investment in T-NETIX, realizing a gain of $0.3 million and earning a 39% compounded annual rate of return, including all fees, interest and principal received over the life of American Capital's debt investment in the company. American Capital retains its 2.6% fully diluted equity interest in T-NETIX.
Click here for more information about the T-NETIX investment.
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Baran Group, Ltd.
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American Capital has exited its common stock investment in Baran Group Ltd., a publicly traded company that provides engineering, technology and construction solutions, realizing a loss of $2.2 million in the third quarter. Over the life of its investment in the company, American Capital has realized a total gain of $2.1 million, earning a 42% compounded annual rate of return on its investment, including all fees, interest and principal received.
In 1999, American Capital invested $13 million in senior subordinated debt with warrants in o2 Wireless Solutions Inc. (formerly Clear Communications Group). In August 2000, o2 Wireless completed an initial public offering. In conjunction with the offering, o2 Wireless repaid American Capital's $13 million debt investment in full and American Capital sold a portion of its stock in the company, realizing a total gain of $4.3 million. In November 2002, o2 Wireless merged with Baran Group Ltd. American Capital has now sold the Baran Group stock it received in this merger.
Click here for more information about the Baran Group investment.
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DigitalNet, Inc.
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American Capital has completely exited its investment in DigitalNet Inc., a publicly traded federal IT and managed network services company, by selling its common stock investment for total proceeds of $0.8 million in the third quarter of 2004. In March 2003, American Capital invested $14.5 million in DigitalNet in senior subordinated bridge notes and common stock warrants. In July 2003, DigitalNet issued high yield notes and repaid American Capital's debt investments in full, resulting in American Capital realizing a gain of $0.7 million. In October 2003, DigitalNet completed an initial public offering. Over the life of American Capital's investment in the company, it realized a total gain of $0.8 million, earning a 46% compounded annual rate of return on its investment including all fees, interest and principal received.
Other Q3 exits and prepayments can be found here.
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Corporate News
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American Capital Appoints Samuel A. Flax As Executive Vice President and General Counsel
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In December, American Capital announced that its Board of Directors elected Samuel A. Flax, 48, to the newly created post of Executive Vice President and General Counsel, effective January 1, 2005. Mr. Flax was a partner in the Washington, D.C., law firm of Arnold & Porter LLP and had been American Capital's principal external counsel since before the company's 1997 initial public offering. He will also serve as the company's corporate Secretary and Chief Compliance Officer. As General Counsel, he will head the legal department, which currently has 7 lawyers and a total staff of 12.
"Sam Flax is one of the leading legal experts on Business Development Companies and has provided his expertise assisting American Capital's growth and development for over fifteen years as outside counsel," said Malon Wilkus, Chairman, President and CEO. "He has been instrumental in building our in-house legal team. We are extremely proud of the fact that he has elected to join American Capital as General Counsel. We look forward to the continuing development of the legal department with the expectation that more of American Capital's legal work will be brought in-house, which we believe will be more economical and provide better overall quality and service."
"I am excited about the prospect of being even more involved in American Capital's business and being part of its success," said Mr. Flax. "The opportunity to join one of the most active buyout and mezzanine funds in the country with over 120 portfolio companies and to be an integral part of the American Capital senior management team is a great one."
Mr. Flax joined Arnold & Porter in 1985 and has been a partner in the firm's corporate and securities practice group since 1990. He is a graduate of the Washington & Lee University School of Law, where he was an editor of the Law Review, and received his undergraduate degree in industrial engineering from Georgia Tech. Following graduation from law school, he was a law clerk for the Hon. H. Emory Widener, Jr., of the United States Court of Appeals for the Fourth Circuit.
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American Capital Promotions
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In the American Capital Dallas office, Darin Winn has been promoted to Regional Managing Director, Jeff MacDowell to Managing Director, Kevin Kuykendall to Principal and John Drennan to Vice President. In New York, Dale Stohr has been promoted to Principal and Dustin Smith to Vice President. In Los Angeles, Shaun Park and Josh Phillips have been promoted to Vice President. In Chicago, John Cannon has been promoted to Vice President. In Bethesda, Juan Carlos Morales has been promoted to Vice President in the Operations Team, Jay Beam to Vice President, Financial Analysis and Compliance Team (FACT), Michael Sarner to Director, Treasury and Justin DuFour to Associate, Investment Committee.
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American Capital Hires Principal, Vice President and Associates
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American Capital has hired one Principal, one Vice President and nine Associates.
Steve Martinez joined American Capital as a Principal in the San Francisco office. Prior to joining American Capital, Steve was a Principal with H.I.G. Capital, a $1.7 billion private equity fund focused on leveraged buyouts of middle market companies. At H.I.G., Steve worked on over 20 transactions, including leading a number of acquisitions in the direct marketing, consumer products and marketing services industries. Also at H.I.G., Steve served as a board member for several portfolio companies and worked on industry consolidations in industrial, contracting and business process outsourcing sectors. Steve earned his M.B.A from the Amos Tuck School at Dartmouth College and a B.S. from the University of Southern California.
Brian Marshall joined American Capital as a Vice President in the New York office. Prior to joining American Capital, Brian spent over five years at Wafra Partners LLC, a New York-based middle-market private equity firm. As a Vice President at Wafra, he was responsible for the identification, evaluation, structuring, execution and monitoring of private equity transactions for the firm. Brian graduated with a B.S. in Economics, cum laude, from The Wharton School at the University of Pennsylvania.
Aaron Bartley joined American Capital as an Associate in the Bethesda, MD office. Prior to joining American Capital, Aaron worked as a financial analyst in investment banking at Houlihan Lokey Howard & Zukin. At Houlihan Lokey, he worked on a number of financial restructurings, mergers and acquisitions, leveraged buyouts and financial advisory engagements involving middle market companies. Aaron received his B.S. in Commerce, with distinction, from the McIntire School of the University of Virginia.
Brady Busch, Molly Gregg and Peter Iwancio have joined the New York office as Associates. Prior to joining American Capital, Peter was a Senior Analyst at Harris Williams & Co., a middle market merger and acquisition advisory firm, where he was engaged in buyer and seller advisory assignments across a broad range of industries. Peter received his B.S., cum laude, in Business Administration and Accounting from Washington and Lee University. Previously, Molly was an Associate at GSC Partners, a $6 billion private investment firm, where she worked across their broad range of investments including private equity, controlled distressed debt, and structured finance. Molly holds a B.A. from Dartmouth College and a M.Sc. from the London School of Economics. Brady had previously spent two years as an Associate at GTCR Golder Rauner, a Chicago-based LBO/private equity fund with more than $6 billion under management. Brady holds a B.B.A. with distinction from the University of Michigan and an M.B.A. from the Kellogg School of Management at Northwestern University.
Ryan Nagim and Marshall White have joined American Capital's Dallas office as Associates. Prior to joining American Capital, Ryan worked as an analyst in the Retail and Consumer Products Investment Banking group at J.P. Morgan Securities Inc. in Dallas. Ryan also spent time in J.P. Morgan's Mergers and Acquisitions group in New York. While at J.P. Morgan, Ryan executed numerous merger and acquisition transactions, primarily focused in the Retail Industry, as well as various capital raising assignments including recapitalizations, debtor-in-possession financing and high yield and investment grade debt offerings. Ryan graduated cum laude with a B.B.A. in Finance from Southern Methodist University in 2001. Previously, Marshall spent over two years as an analyst in the Industrials and Transportation Investment Banking group at JPMorgan in New York. While at JPMorgan, Marshall executed numerous merger and acquisition transactions, primarily focused on large-cap industrial companies. He also worked with several Class I railroad companies on various debt offerings and acquisition financings. Marshall graduated with a B.S.B.A. from Georgetown University in May 2002.
Brad Johl and Eric Uva have joined American Capital's Chicago office as Associates. Prior to joining American Capital, Brad spent two years as a generalist in the Investment Banking division of Bear, Stearns & Co. Inc. in the firm's Dallas office. At Bear Stearns, Brad worked on numerous debt and equity raising transactions as well as advisory services for merger and acquisition assignments. Brad received a B.B.A. in Finance from the University of Texas at Austin. Previously, Eric was an analyst at Jefferies & Company, a global investment bank serving the middle market and growth companies. While at Jefferies, Eric distributed his efforts between the High Yield Capital Markets Syndicate and the Energy group, his transaction experience includes recapitalization & restructuring advisory, public and private issuances of debt and equity, and various merger & acquisition assignments as both seller and buyer. Eric received his B.S./B.A. from Boston College in Finance and Philosophy with concentrations in Biology and Organic Chemistry.
Bo Leung joined American Capital as an Associate in the Los Angeles office. Prior to joining American Capital, Bo worked as an analyst at the Investment Bank of Houlihan Lokey Howard & Zukin in Los Angeles. At Houlihan Lokey Bo participated in a number of leverage buyouts, mergers and acquisitions and restructurings. Bo holds a B.A. in Business Economics with a minor in Accounting from the University of California, Los Angeles.
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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.AmericanCapital.com
(800) 248-9340
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