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FOR IMMEDIATE RELEASE:
April 30, 2001
Contact:
John Erickson, Chief Financial Officer (301) 951-6122
AMERICAN CAPITAL NET OPERATING INCOME UP 15%
TO $0.54 PER SHARE FOR FIRST QUARTER
Bethesda, MD -- American Capital Strategies Ltd. (Nasdaq:ACAS) announced today its results for the quarter ended March 31, 2001. Net operating income for the quarter increased 79% to $15.2 million compared to $8.5 million in the first quarter of 2000. On a diluted per share basis, net operating income for the quarter increased 15% to $0.54 per share compared to $0.47 per share in the first quarter of 2000.
The change in shareholders' equity resulting from operations for the first quarter was a decrease of $9.6 million compared to an increase of $19.3 million in the first quarter of 2000. On a diluted per share basis, the decrease in shareholders' equity resulting from operations for the first quarter of 2001 was $0.34 per share compared to an increase of $1.05 per share in the first quarter of 2000. The decrease in shareholders' equity resulting from operations for the first quarter of 2001 was primarily due to the $12.6 million, or $0.45 per share, depreciation of ACAS's equity interest in its portfolio company o2wireless Solutions Inc. (Nasdaq: OTWO).
"We are proud that during such a disappointing earnings season we delivered on our budget for net operating income, enjoying 15% growth over last year and 63% growth in new investments," said Malon Wilkus, Chairman and CEO. "The first quarter's investment climate was characterized by two main forces. First, senior lenders' willingness to lend to even the strongest mid-sized companies has declined, resulting in a liquidity crunch that is creating opportunities for us to deploy capital at lower multiples and on highly favorable terms. Second, sector specific recession has contributed to a decline in our portfolio valuation. We believe our exposure to this recessionary pressure is limited - for example, we have no debt exposure in the telecommunications industry, which has been the Achilles heel of many private equity funds. We have provided additional financial support to some of our portfolio companies, assisting them through this cycle with the expectation of achieving greater competitive position when the economy strengthens. We remain bullish on the outlook for new investments this year and confident of our Net Operating Income forecast for the year of $2.21 to $2.32 per share and anticipate valuations to rise as the economy recovers."
In the first quarter of 2001, American Capital completed 7 financing transactions totaling $52.1 million, an increase of 63% over the first quarter of 2000's total of $32.0 million. First quarter 2001 transactions were composed of $17.2 million of senior debt, including $1.1 million of unfunded commitments, $29.7 million of subordinated debt, including $2.0 million of unfunded commitments, $2.0 million of preferred stock, and $3.2 million of warrants.
Earnings for the quarter included net unrealized depreciation of $24.8 million. American Capital recorded unrealized appreciation of $2.6 million at 2 portfolio companies, including $2.2 million in American Capital's investment in TransCore Holdings Inc. The unrealized appreciation was offset by $25.0 million of depreciation at 12 portfolio companies including $12.6 million in ACAS's investment in o2wireless Solutions Inc.
The weighted average interest rate on the total capital invested during the quarter was 15.4%. The weighted average interest rate on American Capital's total capital invested as of March 31, 2001 was 14.0%. Credit quality remains strong with only two loans totaling $15 million on non-accrual, and at March 31, 2001, the weighted average grade of American Capital's loan portfolio remains 3.2 on a 4.0 scale.
"We are prepared to move forward in turbulent economic times," said CFO John Erickson. "We renewed our credit facility during the quarter at a spread of LIBOR plus 125 bps, a 25 bps reduction, while increasing the advance rate on assets from 50% to 75%. This enhances a source of efficient capital that enables us to respond quickly to investment opportunities. In addition, while valuations declined, our credit quality remained very strong which is a testament to our ability to underwrite and monitor our investments. We have been proactive in the few portfolio companies that have seen signs of softness, quickly moving to help take costs out of their businesses. This approach should help us maintain solid credit quality."
Since its August 1997 IPO, American Capital has invested $675 million in 48 portfolio companies and realized over $7 million in gains on its portfolio. American Capital shareholders have enjoyed a total return of 125% since the IPO -- an annualized return of 25%. This assumes reinvestment of $5.99 in dividends paid per share.
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)
March 31, December 31,
2001 2000
Assets
Cash and cash equivalents 4,676 11,192
Investments at fair value
(cost of $596,410 and $563,331,
respectively) $590,581 $582,108
Investment in unconsolidated
operating subsidiary -- 1,120
Due from unconsolidated operating subsidiary 13,548 7,433
Interest receivable 7,044 4,935
Other 7,423 7,856
Total assets $623,272 $614,644
Liabilities and Shareholders' Equity
Revolving credit facility $74,822 68,002
Notes payable 112,476 87,200
Investment in unconsolidated
operating subsidiary 623 --
Accrued dividends payable -- 6,163
Other 9,316 8,112
Total liabilities 197,237 169,477
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 28,295 and 28,003 issued and
outstanding, respectively 283 280
Capital in excess of par value 455,189 448,587
Notes receivable from sale of common stock (28,525) (27,389)
Undistributed net realized earnings (189) (341)
Net unrealized appreciation of investments (723) 24,030
Total shareholders' equity 426,035 445,167
Total liabilities and shareholders' equity $623,272 $614,644
AMERICAN CAPITAL STRATEGIES, LTD.
Statements of Operations
(Unaudited)
(In thousands except per share data)
Three Months Ended Three Months Ended
March 31, 2001 March 31, 2000
Operating income:
Interest and dividend income $20,563 $11,038
Loan fees 909 480
Total operating income 21,472 11,518
Operating expenses:
Salaries and benefits 334 164
General and administrative 721 471
Interest 3,524 1,779
Total operating expenses 4,579 2,414
Operating income before equity
in loss of unconsolidated
operating subsidiary 16,893 9,104
Equity in loss of unconsolidated
operating subsidiary (1,742) (558)
Net operating income 15,151 8,546
(Decrease) increase in net unrealized
appreciation of investments (24,752) 10,768
Net (decrease) increase in shareholders'
equity resulting from operations $(9,601) $19,314
Net operating income per common share:
Basic $0.54 $0.48
Diluted $0.54 $0.47
(Loss) earnings per common share:
Basic $(0.34) $1.08
Diluted $(0.34) $1.05
Weighted average shares of
Common stock outstanding
Basic 27,856 17,833
Diluted 28,278 18,351
Dividends declared per share $0.53 $0.45
Portfolio Statistics
On a Weighted Average Basis*: 2000 1999 Pre -1999
Aggregate** Static Pool Static Pool Static Pool
Fair Value of Investments $591 million $269 million $158 million $112 million
Interest Coverage 2.2 1.9 2.1 2.5
Debt Service Coverage 1.6 1.5 1.4 2.0
Debt to EBITDA 5.2 5.4 5.0 5.5
Investment Grade 3.2 3.0 3.4 3.2
Age of Portfolio Companies*** 43 years 44 years 50 years 38 years
Average Sales*** $101 million $121 million $93 million $77 million
Ownership Percentage
of Portfolio Companies*** 36% 37% 37% 33%
% with Senior Lien**** 18% 20% 11% 18%
% with Senior or Junior Lien**** 85% 77% 90% 88%
*These amounts do not include investments in which American Capital only owns equity.
**Aggregate consists of Pre-1999 Static Pool, 1999 Static Pool, 2000 Static Pool, and 2001 investments.
***These amounts include ACAS's equity investments in Westwind Group Holdings Inc, Electrolux LLC and o2wireless.
****As a percentage of total debt investments.
American Capital invites its prospective shareholders, shareholders and analysts to attend the American Capital Shareholder Call on Tuesday, May 1, at 11:00 am EST. The dial in number is 877-209-9923. Please advise the operator you are dialing in for the American Capital Shareholder Call.
During the Shareholder Call, we would like to invite you to turn to our shareholder website and click on the May 1 Shareholder Call Slide Show to view slides displaying substantial additional information concerning some of the issues addressed in this earnings release and that will be discussed during the conference call. This slide show will be made available shortly after the earnings release on April 30. We hope you will take the time to review the slides in advance of the Shareholder Call. We do not intend to review all the slides during the Shareholder 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 6:00 pm May 1 through 11:59 pm May 13, 2001. If you are interested in hearing the recording of the presentation, please dial 800-475-6701 and enter code 582069. International callers may dial 320-365-3844 and enter the same code, 582069. We will also have the Shareholder Slide Show 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, 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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