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FOR IMMEDIATE RELEASE:
February 5, 2001
Contact:
John Erickson, Chief Financial Officer (301) 951-6122
AMERICAN CAPITAL NET OPERATING INCOME INCREASES 16% TO $0.52 PER SHARE FOR Q4 2000 AND 13% TO $1.96 PER SHARE FOR FULL YEAR
AMERICAN CAPITAL ANNOUNCES 2001 FORECASTS
Bethesda, MD -- American Capital Strategies Ltd. (Nasdaq:ACAS) announced today its results for the quarter and year ended December 31, 2000 and its forecasts for 2001.
Net operating income (NOI) for the year increased 81% to $44.7 million compared to $24.7 million for 1999. NOI for the fourth quarter of 2000 increased 71% to $14.0 million compared to $8.2 million for the fourth quarter of 1999. On a diluted per share basis, NOI for the year increased 13% to $1.96 per share compared to $1.73 per share for 1999. NOI for the fourth quarter of 2000 increased 16% to $0.52 per share compared to $0.45 per share in the fourth quarter of 1999.
"2000 was an excellent year for American Capital," said Chairman and CEO Malon Wilkus. "We grew NOI 13% to $1.96 per share. We paid out $2.17 in dividends and provided our shareholders a 20.5% IRR for the year. We enjoyed two realized gains, assisted one of our portfolio companies in its IPO, ended the year with over $136 million of equity interests and raised nearly $300 million of capital. All the while, we've maintained sound credit quality and positioned ourselves to take advantage of tremendous demand as we fulfill our mission of putting capital to work in the middle market."
The change in shareholders' equity resulting from operations for the year was a decrease of $4.4 million compared to an increase of $97.2 million for the year ended December 31, 1999. On a diluted per share basis, the decrease in shareholders' equity resulting from operations for the year ended December 31, 2000 was $0.19 per share compared to an increase of $6.80 for the year ended December 31, 1999. The decrease in shareholders' equity resulting from operations for the year ended December 31, 2000 was primarily due to the $71.0 million or $3.12 per share depreciation recorded on American Capital's investment in portfolio company Capital.com, reducing the value to its cost of $1.5 million.
The change in shareholders' equity resulting from operations for the fourth quarter was a decrease of $7.6 million for the quarter compared to an increase of $73.8 million in the fourth quarter of 1999. On a diluted per share basis, the decrease in shareholders' equity resulting from operations for the fourth quarter of 2000 was $0.28 per share compared to an increase of $4.02 in the fourth quarter of 1999. The decrease in shareholders' equity resulting from operations for the fourth quarter of 2000 was primarily due to the $17.9 million or $0.67 per share depreciation to $16.7 million of portfolio company o2wireless Solutions Inc. (Nasdaq: OTWO).
"It was a remarkable year. In spite of turbulent markets, American Capital twice went to the equity markets and accessed the term debt markets for the first time, securitizing a portion of our portfolio of private and public company loans," said CFO John Erickson. "In particular, the securitization has contributed to the maturation of our balance sheet. We are now able to layer in term debt to continue to prudently leverage our business. Access to this funding source also broadens our sources of capital, and strengthens our ability to serve our marketplace."
In the fourth quarter of 2000, American Capital completed ten financing transactions totaling a record $104.7 million, an increase of 83% over the fourth quarter of 1999's total of $57.1 million. Fourth quarter 2000 transactions were composed of $13.4 million of senior debt, $70.8 million of subordinated debt including $7.5 million of unfunded commitments, $3.5 million of preferred stock including $1.5 million of unfunded commitments, $3.2 million of common stock and $13.8 million of warrants.
The weighted average interest rate on the total capital invested during the quarter was 14.2%. The weighted average interest rate on American Capital's total capital invested as of December 31, 2000 was 14.6%. At December 31, 2000, the weighted average grade of American Capital's loan portfolio was 3.2 on a scale of 1 to 4, with 4 being the highest quality. Credit quality remains strong, with only one loan on non-accrual. However, two loans representing $7.4 million of fair value have been downgraded from 2 to 1.
For the year ended December 31, 2000, American Capital recorded unrealized appreciation of $33.5 million at 17 portfolio companies, including $14.1 million of appreciation on American Capital's investment in o2wireless Solutions. American Capital also realized short-term gains of $4.5 million with respect to its investments in o2wireless Solutions and Electrolux. The unrealized appreciation was offset by $86.1 million of depreciation at 10 portfolio companies, including $71.0 million of depreciation in American Capital's investment in Capital.com, reducing the value to its original cost of $1.5 million.
For the fourth quarter of 2000, American Capital recorded unrealized appreciation of $6.0 million at 6 portfolio companies. The unrealized appreciation was offset by $26.8 million of depreciation at 9 portfolio companies including $17.9 million of depreciation on American Capital's investment in o2wireless Solutions. American Capital's investment in o2wireless Solutions common stock warrants was valued at $16.7 million at December 31, 2000.
Since its August 1997 IPO, American Capital has invested $620 million in nearly 50 portfolio companies and realized over $7 million in gains. As of December 31, 2000, American Capital shareholders have enjoyed a total return of 117.8% since the IPO -- an annualized return of 26.3%. This assumes reinvestment of $5.46 in dividends paid per share.
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2001 Forecast
Commencing in 2001, American Capital will issue guidance on the Company's budgeted performance for the upcoming fiscal year.
Discussed below are American Capital's forecasts of results for the year ended December 31, 2001. The Company does not undertake to provide any additional disclosure regarding its expected forecast results for the year ended December 31, 2001 unless required by law.
Net Operating Income
As of the date of this release, American Capital believes it can achieve Net Operating Income (NOI) of $2.21 to $2.32 per share on a diluted basis for the year ended December 31, 2001. This projection is based on a number of factors, including the following:
New Investments
American Capital estimates it will originate between $350 million and $415 million of new investments in 2001. The timing of the new investments will be somewhat weighted toward the second half of the year and the yield on these new investments should be comparable with the yield achieved on investments in 2000. The amount of new investments will depend on the market for quality investments, American Capital's capital resources and its success at placing new investments.
Loan Performance
American Capital anticipates that it will receive from $75 million to $113 million of principal repayments during 2001. In addition, the Company estimates that from $8 million to $18 million of loans will on average be on non-accrual status with respect to interest payments.
New Employees
In order to manage the growth in the investment portfolio, additional employees will be hired in 2001. American Capital anticipates increasing staff from 58 employees to between 75 and 85 employees in 2001, consisting of both investment professionals and administrative staff.
Certain Considerations
To achieve the growth noted above in new investments, American Capital will be required to raise additional debt or equity financing. The terms of the future debt and equity issuances cannot be determined and there can be no assurances that the debt or equity markets will be available to the Company on terms it deems favorable. If capital is not available on favorable terms, American Capital would either have to raise debt or equity capital on unfavorable terms, reduce the volume of new investments, or exit existing investments. Any of these events could cause American Capital to not achieve its budgeted earnings.
Forward-Looking Statements
The financial outlook presented in this release contains statements concerning American Capital's beliefs. Additional risks and other risk factors are described in our filings with the Securities and Exchange Commission. We are not obligated to update our forward-looking statements and we may not. Forward-looking statements that we do not update generally will become less meaningful over time.
Financial highlights for the quarter and year to date period are as follows.
AMERICAN CAPITAL STRATEGIES, LTD.
Balance Sheets
(Unaudited)
(In thousands except per share data)
December 31, December 31,
2000 1999
Assets
Cash and cash equivalents 11,192 2,037
Investments at fair value
(cost of $563,360 and $305,264,
respectively) $582,074 $377,554
Investment in unconsolidated
operating subsidiary 1,120 4,893
Due from unconsolidated operating subsidiary 7,433 2,331
Interest receivable 4,935 2,417
Other 7,890 6,140
Total assets $614,644 $395,372
Liabilities and Shareholders' Equity
Revolving credit facility $68,002 78,545
Notes payable 87,200 --
Accrued dividends payable -- 547
Other 8,112 4,535
Total liabilities 163,314 83,627
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 28,003 and 18,252 issued and
outstanding, respectively 280 183
Capital in excess of par value 448,587 255,922
Notes receivable from sale of common stock (27,389) (23,052)
Undistributed net realized earnings 5,822 1,080
Net unrealized appreciation of investments 24,030 77,612
Total shareholders' equity 451,330 311,745
Total liabilities and shareholders' equity $614,644 $395,372
AMERICAN CAPITAL STRATEGIES, LTD.
Statements of Operations
(Unaudited)
(In thousands except per share data)
Three Months Ended Year Ended
December 31, December 31,
2000 1999 2000 1999
Operating income:
Interest and dividend income $18,621 $10,075 $58,733 $30,833
Loan fees 740 512 3,995 2,572
Total operating income 19,361 10,587 62,728 33,405
Operating expenses:
Salaries and benefits 564 136 2,179 1,045
General and administrative 769 455 2,414 1,490
Interest 3,340 1,471 9,691 4,716
Total operating expenses 4,673 2,062 14,284 7,251
Operating income before equity
in loss of unconsolidated
operating subsidiary 14,688 8,525 48,444 26,154
Equity in loss of unconsolidated
operating subsidiary (686) (340) (3,773) (1,493)
Net operating income 14,002 8,185 44,671 24,661
Net realized gain on investments -- 1,844 4,538 2,711
(Decrease) increase in net unrealized
appreciation of investments (21,612) 63,752 (53,582) 69,829
Net (decrease) increase in shareholders'
equity resulting from operations $(7,610) $73,781 $(4,373) $97,201
Net operating income per common share:
Basic $0.53 $0.46 $2.00 $1.79
Diluted $0.52 $0.45 $1.96 $1.73
(Loss) earnings per common share:
Basic $(0.29) $4.14 $(0.20) $7.07
Diluted $(0.28) $4.02 $(0.19) $6.80
Weighted average shares of
Common stock outstanding
Basic 26,666 17,819 22,323 13,744
Diluted 26,849 18,374 22,748 14,294
Dividends declared per share $0.74 $0.47 $2.17 $1.74
Portfolio Statistics
On a Weighted Average Basis*: 2000 1999 Pre -1999
Aggregate Static Pool Static Pool Static Pool
Fair Value of Investments $545 million $269 million $161 million $115 million
Interest Coverage 2.2 2.0 2.3 2.4
Debt Service Coverage 1.6 1.5 1.6 1.9
Debt to EBITDA 5.0 5.1 4.5 5.4
Investment Grade 3.2 3.0 3.4 3.3
Average Age of Companies** 44 years 44 years 48 years 38 years
Average Sales** $98 million $114 million $90 million $73 million
Ownership Percentage** 36% 38% 36% 33%
% with Senior Lien*** 13% 15% 11% 11%
% with Senior or Junior Lien*** 84% 78% 90% 86%
* These amounts do not include American Capital's equity investments in Electrolux, o2wireless Solutions, Inc., Capital.com, ACS Equities, LP, and Wrenchead.com and debt investment in Centennial Broadcasting unless noted.
** Includes American Capital's equity investment in Electrolux and o2wireless Solutions.
*** As a percentage of American Capital's total debt investments.
American Capital invites its prospective shareholders, shareholders and analysts to attend the American Capital Analyst Call on Tuesday, February 6, at 11:00 am EST. The dial in number is 800-230-1093. Please advise the operator you are dialing in for the American Capital Analyst Call.
During the Analyst Call, we would like to invite you to turn to our shareholder website and click on the February 6 Analyst Call Slide Show to view slides displaying information concerning some of the issues that will be discussed during the conference call. This slide show will be made available shortly after the earnings release on February 5. We hope that you take the time to review the slides in advance of the Analyst Call. We do not intend to review all the slides during the Analyst Call so that we can devote more time for questions and answers.
For the convenience of our shareholders, there will be a recording available from February 6 through February 16, 2001. If you are interested in hearing the recording of the presentation, please dial 800-475-6701 and enter code 567230. International callers may dial 320-365-3844 and enter the same code, 567230. We will also have both the slides and the audio of the Analyst Call available on our website.
For further information or questions, please do not hesitate to call our Shareholder Relations department at 301-951-6122.
American Capital is a publicly traded buyout and mezzanine fund. American Capital is an equity partner in management and employee buyouts; invests in debt and equity of companies led by private equity firms, and provides capital directly to private and small public companies. American Capital funds growth, acquisitions and recapitalizations.
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.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, availability of capital at attractive costs, changes in regional or national economic conditions, or changes in the conditions of the industries in which American Capital has made investments. Additional risks and other risk factors are described in our filings with the Securities and Exchange Commission. We do not undertake to update our forward-looking statements and we may not unless required by law. Forward-looking statements that we do not update generally will become less meaningful over time.
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