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FOR IMMEDIATE RELEASE:
November 3, 1999
AMERICAN CAPITAL EARNINGS INCREASES 57% TO $0.66 PER SHARE, NET OPERATING INCOME INCREASES 26% TO $0.43 PER SHARE
Bethesda, MD -- American Capital Strategies, Ltd. (Nasdaq:ACAS) today announced the results for its third quarter ended September 30, 1999. Earnings for the third quarter of 1999 increased 57% to $10,234,000, or $0.66 per share on a diluted basis, compared to $4,824,000, or $0.42 per share on a diluted basis, for the third quarter of 1998. Net operating income for the quarter increased 26% to $6,664,000, or $0.43 per share on a diluted basis, compared to $3,900,000, or $0.34 per share on a diluted basis, for the third quarter ended September 30, 1998.
American Capital Chairman and CEO Malon Wilkus commented, "In the third quarter we made significant progress enhancing our leadership in middle market finance. Adam Blumenthal was promoted to President and COO during the quarter and continues to do a great job of managing our Principals and deal flow. This is evidenced by the continued strong origination volume in which we closed $48.4 million during the quarter. In addition, we substantially increased our capital base by closing a $95 million equity offering which allows us to continue our strong growth. We are also extremely excited by the performance of our newest website www.AmericanCapitalOnline.com. It has operated for its first full quarter and has already begun to contribute to our great deal flow."
American Capital also declared and paid a $0.43 per share regular quarterly dividend for the third quarter of 1999, a 34% increase compared to $0.32 for the third quarter of 1998. Commencing this quarter, American Capital is announcing its per share results on a diluted basis. Shareholders may review the per share results on a basic basis on charts below.
In the third quarter, American Capital completed seven financing transactions totaling $48.4 million, composed of purchases of $6.8 million of senior debt, $28.2 million of subordinated debt, $9.0 million of warrants, $1.3 million of preferred stock and $3.1 million of common stock. These amounts include $3.4 million of growth and acquisition financing for current American Capital portfolio companies.
The weighted average interest rate on the total capital invested during the quarter was 13.3%. The weighted average interest rate on American Capital's total investment portfolio as of September 30, 1999 was 13.8%. As of September 30, 1999, the weighted average grade of American Capital's loan portfolio was 3.1, with 4 being the highest grade. There are no loans past due.
John Erickson, Chief Financial Officer, stated, "We are extremely pleased to have raised $95 million of equity and have strengthened our balance sheet during a quarter when many finance companies had difficulty accessing the capital markets. The performance of our portfolio, pace of our new investments, and our ability to immediately reduce interest expense by repaying our credit facility allowed us to increase our diluted weighted average outstanding common shares from 11,666,000 for the second quarter to 15,609,000 for the third quarter while maintaining our dividend and improving per share earnings. Our portfolio has become more seasoned and diversified. The credit quality of our portfolio companies remains excellent with all loans current and we are continuing to see net appreciation in the value of our equity investments."
American Capital added five great portfolio companies this quarter:
- American Capital invested $14.25 million of senior debt, subordinated debt with warrants, and $2.25 million of common equity to lead the buyout of MBT, the second largest distributor of musical accessories and the third largest distributor of instruments and accessories combined in the United States.
- American Capital invested $4.2 million of subordinated debt with warrants in Dixie Trucking, as the institutional junior capital in a management buyout. Dixie is the premier next-day early delivery commercial carrier in North and South Carolina.
- American Capital invested $7.0 million of subordinated debt with warrants and $0.3 million of preferred equity in Transcore Holdings, a management buyout of a company formerly owned by Science Applications International Corporation. Transcore has a niche in virtually every segment of the toll collection and intelligent transportation systems industry.
- American Capital invested $4.2 million of senior debt and subordinated debt with warrants in one of America's oldest companies, Caswell Massey, again as the institutional junior capital in a management buyout.
- American Capital invested $14.15 million of subordinated debt with warrants and $.85 million of common equity to support the leveraged recapitalization of the Inca Group, a leading southwestern steel products company.
Financial highlights for the quarter are as follows:
AMERICAN CAPITAL STRATEGIES, LTD.
Balance Sheets
(Unaudited)
(In thousands except per share data)
September 30, 1999 December 31, 1998
Assets
Investments at
fair value (cost of
$256,699 and $252,718,
respectively) $264,948 $254,983
Cash and cash equivalents 45,186 6,149
Investment in
unconsolidated operating
subsidiary 5,233 6,386
Due from unconsolidated
operating subsidiary 2,345 778
Interest receivable 3,082 1,561
Other 4,171 162
Total assets $324,965 $270,019
Liabilities and Shareholders' Equity
Accounts payable
and accrued
liabilities $255 $126
Accrued dividends payable 7,572 1,222
Notes payable -- 85,948
Revolving credit facility 69,840 30,000
Total liabilities 77,667 117,296
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
18,215 and 11,081 issued
and outstanding,
respectively 183 111
Capital in excess
of par value 257,331 145,245
Note receivable from
sale of common stock (24,015) (300)
Undistributed (distributions
in excess of) net
realized earnings (60) (116)
Unrealized appreciation
of investments 13,859 7,783
Total shareholders' equity 247,298 152,723
Total liabilities
and shareholders'
equity $324,965 $270,019
AMERICAN CAPITAL STRATEGIES, LTD.
Statements of Operations
(Unaudited)
(In thousands except per share data)
Three Months Nine Months Three Months Nine Months
Ended Ended Ended Ended
Sept. 30, Sept. 30, Sept. 30 Sept. 30,
1999 1998 1999 1998
Operating income:
Interest and dividend
income $8,414 $4,090 $20,758 $9,931
Loan fees 729 672 2,060 1,806
Total operating
income 9,143 4,762 22,818 11,737
Operating expenses:
Salaries and benefits 411 250 909 628
General, administrative
and other 382 246 1,035 683
Interest 1,349 -- 3,245 --
Total operating
expenses 2,142 496 5,189 1,311
Operating income
before equity in
(loss) earnings of
unconsolidated operating
subsidiary 7,001 4,266 17,629 10,427
Equity in (loss)
earnings of
unconsolidated operating
subsidiary (337) (366) (1,153) (154)
Net operating income 6,664 3,900 16,476 10,273
Net realized gain
on investments - -- 867 --
Increase in unrealized
appreciation of
investments 3,570 924 6,077 943
Net increase in
shareholders' equity
resulting from
operations $10,234 $4,824 $23,420 $11,216
Net operating income
per share:
Earnings per
common share $0.45 $0.35 $1.33 $0.93
Diluted $0.43 $0.34 $1.28 $0.89
Net increase in
shareholders' equity
resulting from operations
per common share:
Basic $0.69 $0.44 $1.89 $1.01
Diluted $0.66 $0.42 $1.81 $0.97
Weighted average shares of
common stock outstanding
Basic 14,869 11,070 12,395 11,069
Diluted 15,619 11,461 12,920 11,544
Dividend per share $0.43 $0.32 $1.27 $0.86
Portfolio Statistics: Aggregate Pre -1999 Static Pool
Interest Coverage 2.5 2.2
Debt Service Coverage 2.0 1.9
Debt to EBITDA 5.1 5.2
Weighted Average Loan Grade 3.1 3.1
Weighted Average Age
of Portfolio Companies 39 years 43 years
Weighted Average Sales
of Portfolio
Companies $62 million $59 million
Weighted Average
American Capital
Ownership Percentage
of Portfolio Companies 26% 32%
Click here for further information about American Capital's dividend currently yielding 8.6%.
American Capital invites its shareholders and analysts to attend the American Capital Analyst Meeting by phone on Wednesday, November 3 at 11:00 a.m. EST. The dial in number is 800-230-1074. Please advise the operator you are dialing in for the American Capital Analyst Call Meeting.
During the Analyst Call, American Capital would like to invite you to turn to its shareholder website and click on the November 3, 1999 Analyst Call Slide Presentation to view slides displaying information concerning some of the issues that will be discussed during the conference call. This slide presentation will be made available shortly after the earnings release on November 2nd. American Capital would hope that you will take the time to review the slides in advance of the Analyst Call. American Capital does not intend to review all the slides during the Analyst Call so that the company can devote more time for questions and answers.
American Capital is a buyout and specialty finance company with capital resources exceeding $360 million. American Capital invests in senior debt, subordinated debt and equity in middle market companies in need of capital for growth, acquisitions, ESOP buyouts, management buyouts, liquidity and restructurings. Through www.AmericanCapitalOnline.com financing is provided to small and middle market companies in need of capital for receivable and inventory financing, working capital loans, machinery and equipment loans, real estate loans, construction financing, acquisition funding, management buyouts, ESOP financings, liquidity and restructurings.
Companies interested in learning more about American Capital and its flexible financing should contact John Hoffmire, Vice President of Sales and
Marketing, at (800) 248-9340 or visit its website at www.AmericanCapitalOnline.com or its shareholder site at www.ACASOnline.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.
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