NEWS
Two Bethesda Metro Center
14th Floor
Bethesda, MD 20814
(301) 951-6122
(301) 654-6714 Fax
Info@AmericanCapital.com
www.AmericanCapital.com
FOR IMMEDIATE RELEASE:
August 1, 2006
Contact
John Erickson, Chief Financial Officer - (301) 951-6122
Tom McHale, Senior Vice President, Finance - (301) 951-6122
American Capital Increases Q3 2006 Dividend 6% to $0.83 Reports $0.82 NOI, $0.98 in Net Realized Earnings and $2.18 Earnings Per Basic Share in Q2 2006
Bethesda, MD – August 1, 2006 – American Capital Strategies Ltd. (NASDAQ: ACAS) announced today its third quarter 2006 dividend and its results for the second quarter of 2006.
2006 Q3 DIVIDEND DECLARATION
American Capital’s Board of Directors has declared a third quarter 2006 regular dividend of $0.83 per share to record holders as of September 6, 2006, payable on October 2, 2006. This dividend is a 6% increase over the third quarter 2005 regular dividend of $0.78 per share. American Capital has paid a total of $1.2 billion in dividends and paid or declared dividends of $21.56 per share since its August 1997 IPO at $15.00 per share. Also, American Capital has reiterated its 2006 dividend guidance of $3.29 per share from ordinary taxable income earned in 2006. The estimated remaining 2006 dividend per share is $0.84 for the fourth quarter of 2006.
SECOND QUARTER 2006 RESULTS
In addition, American Capital announced today its results for the quarter ended June 30, 2006. Net operating income (NOI) for the quarter increased 49% to $109 million compared to $73 million for second quarter of 2005. On a basic per share basis, NOI increased 5% to $0.82 per share compared to $0.78 per share in the second quarter of 2005. On a diluted per share basis, NOI increased 7% to $0.81 per share compared to $0.76 per share for the second quarter of 2005.
Net realized earnings (NOI plus net realized gains and losses) for the quarter increased 26% to $131 million compared to $104 million for second quarter of 2005. On a basic per share basis, net realized earnings decreased 11% to $0.98 per share compared to $1.10 per share for the second quarter of 2005. On a diluted per share basis, net realized earnings decreased 9% to $0.97 per share compared to $1.07 per share for the second quarter of 2005.
For the quarter, the net increase in net assets resulting from operations (NOI plus net appreciation and depreciation and net gains and losses on investments) was $290 million, or $2.18 per basic share and $2.16 per diluted share, compared to $79 million, or $0.84 per basic share and $0.82 per diluted share, in the second quarter of 2005.
Second quarter 2006 dividends were $0.82 per share, a 9% growth over second quarter 2005 dividends of $0.75 per share. American Capital’s net asset value per share at June 30, 2006 was $27.63, a $3.26 or 13% growth over the December 31, 2005 net asset value per share of $24.37, and $5.20 or 23% over the June 30, 2005 net asset value per share of $22.43.
"American Capital had a record breaking second quarter earning $2.18 per basic share, producing over the past year a 21% earnings return on equity and growing our book value 23% to $27.63 per share, continuing nine years of market leading performance since our IPO in 1997, performance that rivals the best public companies. With a current dividend yield of 9.4% and an annual dividend growth rate of 7% we are providing a 16.4% total return assuming no change to our dividend multiple." said Malon Wilkus, American Capital Chairman, President and CEO. "Having invested $4.7 billion in the past year we are the largest Business Development Company and one of the largest buyout and mezzanine funds in the world. The quality of our assets are excellent, allowing us to be one of a few investment grade buyout funds and one of two buyout funds that have raised equity at a premium to book, which we have done 24 times. We pioneered the securitization of our asset class, completing our eighth securitization in July and have 45% of our capital funded with investment grade debt. As we roll out our asset management strategy, which we expect will increase our return on equity, it is an excellent time to be an American Capital shareholder."
In the second quarter of 2006, American Capital invested $1.6 billion of capital. Also in the second quarter of 2006, American Capital received $259 million of proceeds from exits of portfolio investments.
“We continue to see strong investment opportunities,” said Ira Wagner, Chief Operating Officer. “We invested $1.6 billion this quarter but we are being very selective as evidenced by our closing ratio, which has recently declined from our 2% historical average to about 1.5% for the last year. We can achieve those results because we have the best market coverage and largest deal flow of any middle market buyout and mezzanine investor and we have broad capabilities that enhance our competitiveness. We can invest up to $350 million, we do One-Stop Buyouts™ and financings, and we invest in a broad range of geographies and sectors, including Europe, energy, CMBS, CDO, special situations and technology. We currently have $26 billion of investment opportunities in our 10 offices worldwide, which are staffed by 417 employees, including 162 investment professionals, 53 CPAs or audit professionals performing accounting due diligence and a 26 member operations team. As a result, we believe our investment volume will be strong in the second half of the year.”
In the second quarter of 2006, American Capital recorded $17 million in portfolio net realized gains and $4 million in net realized gains attributable to interest rate derivatives. In the second quarter of 2006, net unrealized appreciation totaled $160 million, consisting of gross appreciation of $243 million from 34 portfolio companies, $83 million of gross depreciation from 25 portfolio companies, $12 million of net unrealized depreciation resulting from the recognition of net realized gains and $12 million of net appreciation on interest rate derivatives.
The weighted average effective interest rate on American Capital's total investments in debt securities as of June 30, 2006 was 12.5%. At June 30, 2006, the weighted average loan grade of American Capital's loan portfolio was 3.1 on a scale of 1 to 4, with 4 being the highest quality, compared to 3.1 as of June 30, 2005. As of June 30, 2006, loans totaling $190 million, with a fair value of $55 million, were on non-accrual. Delinquent and non-accruing loans to 16 portfolio companies totaled $237 million, or 6% of total loans, at June 30, 2006, compared to $137 million, or 5% of total loans, at June 30, 2005.
“Our credit quality is extremely good and we are experiencing great exits from our portfolio companies with $17 million in portfolio net realized gains this quarter,” said Chief Financial Officer John Erickson. “We have generated $216 million in net realized gains from our 2001 - 2006 static pools and we expect significant additional net realized gains for the year given the number of companies we currently have for sale. This quarter alone produced net realized earnings of $0.98 per basic share, which is 120% of our $0.82 second quarter dividend. For the first half of the year, our net realized earnings were $2.12 per share, or 131% of our $1.62 of dividends. Not only do we have an excellent and growing dividend paid entirely from ordinary taxable income, our retention of capital gains provides additional returns to our shareholders, which should help us increase the growth rate of our dividend in 2007.”
In the second quarter of 2006, American Capital’s portfolio company European Capital, the €750 million, or $941 million, fund managed by a wholly owned subsidiary of American Capital, made investments in four portfolio companies totaling €137 million or $172 million. Since inception in September of last year, it has invested in 21 portfolio companies totaling €504 million or $612 million. European Capital produced its first quarterly profit since inception in the second quarter and is expected to declare its first dividend in the fourth quarter of 2006.
Since its August 1997 IPO through second quarter 2006, American Capital has earned an 18% compounded annual return, including interest, dividends, fees and net gains, on 131 exits and prepayments of senior debt, subordinated debt and equity investments, totaling $3.0 billion of invested capital. These exits and prepayments represent 28% of all amounts invested by American Capital since its August 1997 IPO. Proceeds from these exits and prepayments exceeded the associated prior quarter valuation of the investments by $56 million in aggregate, or 2%. Seventeen percent of these exits and prepayments were from portfolio companies that had at one time been either a loan grade 1 or 2 in American Capital's four point loan grading system, with 1 being the lowest loan grade. Since its IPO through the second quarter of 2006, $88 million of American Capital’s PIK interest and dividends and accreted OID have been repaid, representing 26% of all PIK and OID recorded.
“Our Operations Team has contributed tremendously to helping several troubled companies turn around and gain value that had been previously depreciated,” said Gordon O’Brien, Senior Vice President in charge of the Operations Team. “We have not been successful in all cases, but already in six portfolio companies from the 1998 – 2001 static pools, the Operations Team worked diligently and drove turnarounds that resulted in $131 million of net appreciation, gains and losses from their low points. Our ability to hold investments through economic cycles gives us time to effect critical operational changes and in some cases drive industry consolidation, resulting in significant results for our shareholders. In fact, the IRRs on our older static pools have increased from their lows as a direct result of the improvement in these portfolio companies.”
THIRD PARTY VALUATION OF PORTFOLIO INVESTMENTS
American Capital’s Board of Directors is responsible for determining the fair value of American Capital’s portfolio investments on a quarterly basis. In that regard, the board has retained Houlihan Lokey Howard & Zukin Financial Advisors Inc. ("Houlihan Lokey") to assist it by having Houlihan Lokey regularly review a designated percentage of our fair value determinations. Houlihan Lokey is a leading valuation firm in the U.S., engaged in approximately 1,000 valuation assignments per year for clients worldwide. Each quarter, Houlihan Lokey reviews American Capital’s determination of the fair value of approximately 25% of its portfolio company investments that have been portfolio companies for at least one year and that have a fair value in excess of $10 million. In the second quarter of 2006, Houlihan Lokey reviewed valuations of 22 portfolio company investments having an aggregate $852 million in fair value as of the period end. Over the last four quarters, Houlihan Lokey has reviewed 97 portfolio companies totaling $3.4 billion in fair value as of their respective valuation dates. In addition, Houlihan Lokey representatives attend American Capital’s quarterly valuation meetings and provide periodic reports and recommendations to the Audit and Compliance Committee of the Board of Directors.
For those portfolio company investments that Houlihan Lokey has reviewed during the applicable period using the scope of review set forth by American Capital’s Board of Directors, the Board has made a fair value determination that is within the aggregate range of fair value for such investments as determined by Houlihan Lokey.
Financial highlights for the quarter are as follows:
AMERICAN CAPITAL STRATEGIES, LTD.CONSOLIDATED BALANCE SHEETS As of June 30, 2006, December 31, 2005 and June 30, 2005 (in thousands, except per share data) | |||||||
|
Q2 |
Q4 |
Q2 2006 Versus Q4 2005 |
Q2 |
Q2 2006 Versus Q2 2005 | |||
|
2006 |
2005 |
$ |
% |
2005 |
$ |
% | |
|
(unaudited) |
(unaudited) |
||||||
|
Assets | |||||||
|
Investments at fair value (cost of $6,872,830, $5,134,398 and $4,040,689, respectively) |
|||||||
|
Non-Control/Non-Affiliate investments |
$ 3,768,999 |
$ 2,135,795 |
$ 1,633,204 |
76% |
$ 1,445,592 |
$ 2,323,407 |
161% |
|
Affiliate investments |
456,000 |
449,026 |
6,974 |
2% |
485,405 |
(29,405) |
-6% |
|
Control investments |
2,765,584 |
2,516,282 |
249,302 |
10% |
2,110,298 |
655,286 |
31% |
|
Interest rate derivatives |
49,768 |
18,132 |
31,636 |
174% |
1,340 |
48,428 |
3614% |
|
Total investments at fair value |
7,040,351 |
5,119,235 |
1,921,116 |
38% |
4,042,635 |
2,997,716 |
74% |
|
Cash and cash equivalents |
172,350 |
97,134 |
75,216 |
77% |
103,554 |
68,796 |
66% |
|
Restricted cash |
65,977 |
121,772 |
(55,795) |
-46% |
105,812 |
(39,835) |
-38% |
|
Interest receivable |
39,442 |
32,668 |
6,774 |
21% |
27,870 |
11,572 |
42% |
|
Other |
90,502 |
78,300 |
12,202 |
16% |
53,762 |
36,740 |
68% |
|
Total assets |
$ 7,408,622 |
$ 5,449,109 |
$ 1,959,513 |
36% |
$ 4,333,633 |
$ 3,074,989 |
71% |
|
Liabilities and Shareholders' Equity | |||||||
|
Debt |
$ 3,370,301 |
$ 2,466,860 |
$ 903,441 |
37% |
$ 1,997,751 |
$ 1,372,550 |
69% |
|
Interest rate derivatives |
733 |
2,140 |
(1,407) |
-66% |
15,257 |
(14,524) |
-95% |
|
Accrued dividends payable |
110,097 |
3,574 |
106,523 |
2980% |
70,136 |
39,961 |
57% |
|
Other |
92,890 |
78,898 |
13,992 |
18% |
52,103 |
40,787 |
78% |
|
Total liabilities |
3,574,021 |
2,551,472 |
1,022,549 |
40% |
2,135,247 |
1,438,774 |
67% |
| Commitments and contingencies | |||||||
|
Shareholders' equity: |
|||||||
|
Undesignated preferred stock, $0.01 par value, 5,000 shares authorized, 0 issued and outstanding |
- |
- |
- |
0% |
- |
- |
0% |
|
Common stock, $0.01 par value, 200,000 shares authorized, 141,897, 119,123 and 98,220 issued and 138,808, 118,913 and 98,012 outstanding, respectively |
1,388 |
1,189 |
199 |
17% |
980 |
408 |
42% |
|
Capital in excess of par value |
3,641,112 |
2,942,814 |
698,298 |
24% |
2,243,841 |
1,397,271 |
62% |
|
Notes receivable from sale of common stock |
(6,655) |
(6,655) |
- |
0% |
(6,679) |
24 |
0% |
|
Undistributed (distributions in excess of) net realized earnings |
32,519 |
(22,408) |
54,927 |
245% |
(26,445) |
58,964 |
223% |
|
Net unrealized appreciation (depreciation) of investments |
166,237 |
(17,303) |
183,540 |
1061% |
(13,311) |
179,548 |
1349% |
|
Total shareholders' equity |
3,834,601 |
2,897,637 |
936,964 |
32% |
2,198,386 |
1,636,215 |
74% |
|
Total liabilities and shareholders' equity |
$ 7,408,622 |
$ 5,449,109 |
$ 1,959,513 |
36% |
$ 4,333,633 |
$ 3,074,989 |
71% |
AMERICAN CAPITAL STRATEGIES, LTD.CONSOLIDATED STATEMENTS OF OPERATIONSThree and Six Months Ended June 30, 2006 and 2005 (in thousands, except per share data) (unaudited) | ||||||||
|
Three Months Ended |
Three Months Ended |
Six Months Ended |
Six Months Ended | |||||
|
June 30, |
June 30, 2006 Versus 2005 |
June 30, |
June 30, 2006 Versus 2005 | |||||
|
2006 |
2005 |
$ |
% |
2006 |
2005 |
$ |
% | |
|
OPERATING INCOME: |
||||||||
|
Interest and dividend income |
156,539 |
97,910 |
58,629 |
60% |
287,664 |
184,328 |
103,336 |
56% |
|
Fee and other income |
55,496 |
33,822 |
21,674 |
64% |
97,549 |
48,259 |
49,290 |
102% |
|
Total operating income |
212,035 |
131,732 |
80,303 |
61% |
385,213 |
232,587 |
152,626 |
66% |
|
OPERATING EXPENSES: |
||||||||
|
Interest |
40,778 |
21,990 |
18,788 |
85% |
76,760 |
39,336 |
37,424 |
95% |
|
Salaries, benefits and stock-based compensation |
38,800 |
22,701 |
16,099 |
71% |
62,015 |
35,013 |
27,002 |
77% |
|
General and administrative |
16,510 |
8,808 |
7,702 |
87% |
31,927 |
15,093 |
16,834 |
112% |
|
Total operating expenses |
96,088 |
53,499 |
42,589 |
80% |
170,702 |
89,442 |
81,260 |
91% |
|
OPERATING INCOME BEFORE INCOME TAXES |
115,947 |
78,233 |
37,714 |
48% |
214,511 |
143,145 |
71,366 |
50% |
|
Provision for income taxes |
(6,708) |
(4,759) |
(1,949) |
41% |
(12,376) |
(5,784) |
(6,592) |
114% |
|
NET OPERATING INCOME |
109,239 |
73,474 |
35,765 |
49% |
202,135 |
137,361 |
64,774 |
47% |
|
Net realized gain (loss) on investments |
||||||||
|
Portfolio company investments |
17,165 |
32,357 |
(15,192) |
-47% |
60,067 |
40,478 |
19,589 |
48% |
|
Interest rate derivative agreements |
4,334 |
(2,161) |
6,495 |
301% |
5,630 |
(5,456) |
11,086 |
203% |
|
Total net realized gain |
21,499 |
30,196 |
(8,697) |
-29% |
65,697 |
35,022 |
30,675 |
88% |
|
NET REALIZED EARNINGS |
130,738 |
103,670 |
27,068 |
26% |
267,832 |
172,383 |
95,449 |
55% |
|
Net unrealized appreciation (depreciation) of investments |
||||||||
|
Portfolio company investments |
148,045 |
(7,872) |
155,917 |
1981% |
151,047 |
16,845 |
134,202 |
797% |
|
Interest rate derivative agreements |
11,561 |
(16,449) |
28,010 |
170% |
32,493 |
1,801 |
30,692 |
1704% |
|
Total net unrealized appreciation (depreciation) |
159,606 |
(24,321) |
183,927 |
756% |
183,540 |
18,646 |
164,894 |
884% |
|
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE |
290,344 |
79,349 |
210,995 |
266% |
451,372 |
191,029 |
260,343 |
136% |
|
Cumulative effect of accounting change, net of tax (1) |
- |
- |
- |
0% |
1,026 |
- |
1,026 |
0% |
|
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS |
$ 290,344 |
$ 79,349 |
$ 210,995 |
266% |
$ 452,398 |
$ 191,029 |
$ 261,369 |
137% |
|
NET OPERATING INCOME PER COMMON SHARE: |
||||||||
|
Basic |
$ 0.82 |
$ 0.78 |
$ 0.04 |
5% |
$ 1.60 |
$ 1.50 |
$ 0.10 |
7% |
|
Diluted |
$ 0.81 |
$ 0.76 |
$ 0.05 |
7% |
$ 1.58 |
$ 1.46 |
$ 0.12 |
8% |
|
NET REALIZED EARNINGS PER COMMON SHARE: |
||||||||
|
Basic |
$ 0.98 |
$ 1.10 |
$ (0.12) |
-11% |
$ 2.12 |
$ 1.88 |
$ 0.24 |
13% |
|
Diluted |
$ 0.97 |
$ 1.07 |
$ (0.10) |
-9% |
$ 2.10 |
$ 1.83 |
$ 0.27 |
15% |
|
NET EARNINGS PER COMMON SHARE: |
||||||||
|
Basic |
$ 2.18 |
$ 0.84 |
$ 1.34 |
160% |
$ 3.57 |
$ 2.08 |
$ 1.49 |
72% |
|
Diluted |
$ 2.16 |
$ 0.82 |
$ 1.34 |
163% |
$ 3.54 |
$ 2.03 |
$ 1.51 |
74% |
|
WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING: |
||||||||
|
Basic |
133,286 |
93,915 |
39,371 |
42% |
126,613 |
91,737 |
34,876 |
38% |
|
Diluted |
134,189 |
96,731 |
37,458 |
39% |
127,675 |
94,078 |
33,597 |
36% |
|
DIVIDENDS DECLARED PER COMMON SHARE |
$ 0.82 |
$ 0.75 |
$ 0.07 |
9% |
$ 1.62 |
$ 1.48 |
$ 0.14 |
9% |
| (1) Effective January 1, 2006, American Capital adopted FASB Statement No. 123 (revised 2004), "Share-Based Payment," a revision to FASB Statement No. 123 ("SFAS 123R"). American Capital had adopted SFAS 123R using the "modified prospective" method. Effective January 1, 2003, American Capital adopted the fair-value-based method of accounting for stock-based compensation plans for all stock options granted in 2003 and forward as permitted under FASB Statement No. 148. All of American Capital's stock options granted prior to January 1, 2003, which were accounted for under APB No. 25 and not expensed in the consolidated statements of operations, were fully vested as of January 1, 2006 and therefore, no additional stock compensation costs for those stock option grants will be recorded as a result of the adoption of SFAS 123R. Under FASB Statement No. 123, American Capital elected to adjust compensation costs for forfeitures when the unvested awards were actually forfeited. Under SFAS 123R, American Capital is required to estimate forfeitures of unvested awards when recognizing compensation cost. Upon the adoption of SFAS 123R, American Capital recorded a cumulative effect of an accounting change for an adjustment to compensation costs recognized in prior periods to record forfeitures based on the amounts that would have been estimated during those periods. | ||||||||
AMERICAN CAPITAL STRATEGIES, LTD.OTHER FINANCIAL INFORMATION Quarter Ended June 30, 2006, December 31, 2005 and June 30, 2005 (dollars in thousands) (unaudited) | |||||||||
| Q2 | Q4 | Q2 2006 Versus Q4 2005 | Q2 | Q2 2006 Versus Q2 2005 | |||||
| 2006 | 2005 | $ | % | 2005 | $ | % | |||
|
New Investments: |
|||||||||
|
Senior Debt |
$ 790,900 |
$ 382,800 |
$ 408,100 |
107% |
$ 485,300 |
$ 305,600 |
63% | ||
|
Subordinated Debt |
260,100 |
193,400 |
66,700 |
34% |
209,500 |
50,600 |
24% | ||
|
Preferred Equity |
279,800 |
169,900 |
109,900 |
65% |
134,000 |
145,800 |
109% | ||
|
Common Equity |
49,900 |
64,500 |
(14,600) |
-23% |
48,500 |
1,400 |
3% | ||
|
Common Equity warrants |
21,600 |
86,700 |
(65,100) |
-75% |
26,100 |
(4,500) |
-17% | ||
|
CMBS Investments |
144,000 |
80,500 |
63,500 |
79% |
- |
144,000 |
100% | ||
|
CDO/CLO Investments |
25,000 |
- |
25,000 |
100% |
- |
25,000 |
100% | ||
|
Total |
$ 1,571,300 |
$ 977,800 |
$ 593,500 |
61% |
$ 903,400 |
$ 667,900 |
74% | ||
|
American Capital Sponsored Buyouts |
$ 902,100 |
$ 564,800 |
$ 337,300 |
60% |
$ 475,000 |
$ 427,100 |
90% | ||
|
Financing for Private Equity Buyouts |
109,100 |
121,700 |
(12,600) |
-10% |
206,000 |
(96,900) |
-47% | ||
|
Direct Investments |
6,100 |
- |
6,100 |
100% |
25,100 |
(19,000) |
-76% | ||
|
CMBS Investments |
144,000 |
80,500 |
63,500 |
79% |
- |
144,000 |
100% | ||
|
CDO/CLO Investments |
25,000 |
- |
25,000 |
100% |
- |
25,000 |
100% | ||
|
Add-on Financing for Acquisitions |
240,800 |
20,300 |
220,500 |
1086% |
102,500 |
138,300 |
135% | ||
|
Add-on Financing for Recapitalizations |
142,100 |
183,700 |
(41,600) |
-23% |
71,000 |
71,100 |
100% | ||
|
Add-on Financing for Working Capital in Distressed Situations |
2,100 |
2,800 |
(700) |
-25% |
13,500 |
(11,400) |
-84% | ||
|
Add-on Financing for Working Capital |
- |
4,000 |
(4,000) |
-100% |
10,300 |
(10,300) |
-100% | ||
|
Total |
$ 1,571,300 |
$ 977,800 |
$ 593,500 |
61% |
$ 903,400 |
$ 667,900 |
74% | ||
|
Exits and Repayments(1): |
|||||||||
|
Scheduled Principal Amortization |
$ 14,264 |
$ 16,990 |
$ (2,726) |
-16% |
$ 14,064 |
$ 200 |
1% | ||
|
Senior Loan Sales |
67,213 |
174,037 |
(106,824) |
-61% |
42,750 |
24,463 |
57% | ||
|
Principal Prepayments |
131,448 |
258,536 |
(127,088) |
-49% |
146,898 |
(15,450) |
-11% | ||
|
Payment of Accrued Payment-in-kind Interest and Dividends and Original Issue Discount |
5,848 |
13,971 |
(8,123) |
-58% |
4,367 |
1,481 |
34% | ||
|
Sale of Equity Investments |
39,820 |
81,239 |
(41,419) |
-51% |
80,228 |
(40,408) |
-50% | ||
|
Total |
$ 258,593 |
$ 544,773 |
$ (286,180) |
-53% |
$ 288,307 |
$ (29,714) |
-10% | ||
|
Appreciation, Depreciation, Gains and Losses: |
|||||||||
|
Gross Realized Gains |
$ 32,097 |
$ 69,973 |
$ (37,876) |
-54% |
$ 54,416 |
$ (22,319) |
-41% | ||
|
Gross Realized Losses |
(14,932) |
(64,288) |
49,356 |
-77% |
(22,059) |
7,127 |
-32% | ||
|
Portfolio Net Realized Gains |
17,165 |
5,685 |
11,480 |
202% |
32,357 |
(15,192) |
-47% | ||
|
Net Realized Gains (Losses) From Interest Rate Derivatives |
4,334 |
(825) |
5,159 |
625% |
(2,161) |
6,495 |
301% | ||
|
Net Realized Gains |
21,499 |
4,860 |
16,639 |
342% |
30,196 |
(8,697) |
-29% | ||
|
Gross Unrealized Appreciation at 34, 20 and 22 Portfolio Companies |
242,649 |
54,628 |
188,021 |
344% |
95,405 |
147,244 |
154% | ||
|
Gross Unrealized Depreciation at 25, 11 and 19 Portfolio Companies |
(82,632) |
(78,807) |
(3,825) |
5% |
(77,345) |
(5,287) |
7% | ||
|
Current Portfolio Net Unrealized Appreciation (Depreciation) |
160,017 |
(24,179) |
184,196 |
762% |
18,060 |
141,957 |
786% | ||
|
Net Depreciation From the Recognition of Net Realized Gains |
(11,972) |
(2,987) |
(8,985) |
301% |
(25,932) |
13,960 |
54% | ||
|
Interest Rate Derivatives |
11,561 |
11,568 |
(7) |
0% |
(16,449) |
28,010 |
170% | ||
|
Net Unrealized Appreciation (Depreciation) |
159,606 |
(15,598) |
175,204 |
1123% |
(24,321) |
183,927 |
756% | ||
|
Net Gains, Losses, Appreciation and Depreciation |
$ 181,105 |
$ (10,738) |
$ 191,843 |
1787% |
$ 5,875 |
$ 175,230 |
2983% | ||
|
Other Financial Data: |
|||||||||
|
Net Asset Value per Share |
$ 27.63 |
$ 24.37 |
$ 3.26 |
13% |
$ 22.43 |
$ 5.20 |
23% | ||
|
Weighted Average Effective Interest Rate on Debt Investments |
12.5% |
12.8% |
12.9% |
||||||
|
Weighted Average Loan Grade |
3.1 |
3.1 |
3.1 |
||||||
|
Loans on Non-Accrual at Face |
$ 189,563 |
$ 132,330 |
$ 57,233 |
43% |
$ 115,397 |
$ 74,166 |
64% | ||
|
Loans on Non-Accrual at Fair Value |
$ 54,694 |
$ 48,304 |
$ 6,390 |
13% |
$ 35,449 |
$ 19,245 |
54% | ||
|
Past Due Loans at Face |
$ 47,722 |
$ 53,675 |
$ (5,953) |
-11% |
$ 21,951 |
$ 25,771 |
117% | ||
|
Past Due and Non-Accrual Loans as a Percentage of Total Loans |
6% |
5% |
5% |
||||||
|
Number of Portfolio Companies on Non-Accrual and Past Due |
16 |
14 |
12 |
||||||
|
Debt to Equity Conversions at Face Value |
$ 27,691 |
$ 24,769 |
$ 2,922 |
12% |
$ 12,464 |
$ 15,227 |
122% | ||
|
LTM Net Operating Income Return on Average Equity at Cost |
13.1% |
13.6% |
13.7% |
||||||
|
LTM Net Realized Earnings Return on Average Equity at Cost |
15.5% |
15.2% |
16.5% |
||||||
|
LTM Net Earnings Return on Average Equity |
21.5% |
15.9% |
18.9% |
||||||
|
Current Quarter Net Operating Income Return on Average Equity at Cost Annualized |
12.9% |
13.3% |
14.0% |
||||||
|
Current Quarter Net Realized Earnings Return on Average Equity at Cost |
15.4% |
14.0% |
19.8% |
||||||
|
Current Quarter Net Earnings Return on Average Equity Annualized |
33.4% |
11.8% |
15.2% |
||||||
|
Market Capitalization |
$ 4,647,275 |
$ 4,305,840 |
$ 341,435 |
8% |
$ 3,539,213 |
$ 1,108,062 |
31% | ||
|
Total Enterprise Value |
$ 7,845,226 |
$ 6,675,566 |
$ 1,169,660 |
18% |
$ 5,433,410 |
$ 2,411,816 |
44% | ||
|
(1) |
Excludes Repayments of European Capital Limited Bridge Loans. |
||||||||
|
Portfolio Statistics (1) |
Static Pool |
2001-2006 | |||||||||
|
($ in millions, unaudited): |
Pre-1999 |
1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
Aggregate |
Aggregate |
|
Internal Rate of Return(2) |
10.7% |
7.4% |
6.9% |
22.6% |
10.0% |
25.1% |
19.1% |
20.9% |
103.0% |
16.3% |
20.4% |
|
Original Investments and Commitments |
$ 375 |
$ 380 |
$ 395 |
$ 369 |
$ 943 |
$ 1,317 |
$ 1,991 |
$ 3,171 |
$ 1,730 |
$ 10,671 |
$ 9,521 |
|
Total Exits and Prepayments of Original Investments |
$ 141 |
$ 191 |
$ 226 |
$ 259 |
$ 443 |
$ 701 |
$ 555 |
$ 494 |
$ 14 |
$ 3,024 |
$ 2,466 |
|
Total Interest, Dividends and Fees Collected |
$ 137 |
$ 131 |
$ 94 |
$ 143 |
$ 241 |
$ 274 |
$ 281 |
$ 238 |
$ 78 |
$ 1,617 |
$ 1,255 |
|
Total Net Realized (Loss) Gain on Investments |
$ (19) |
$ (22) |
$ (75) |
$ 49 |
$ 32 |
$ 120 |
$ 10 |
$ 5 |
$ - |
$ 100 |
$ 216 |
|
Current Cost of Investments |
$ 191 |
$ 175 |
$ 198 |
$ 94 |
$ 452 |
$ 631 |
$ 1,331 |
$ 2,257 |
$ 1,544 |
$ 6,873 |
$ 6,309 |
|
Current Fair Value of Investments |
$ 183 |
$ 121 |
$ 216 |
$ 78 |
$ 340 |
$ 704 |
$ 1,391 |
$ 2,344 |
$ 1,614 |
$ 6,991 |
$ 6,471 |
|
Net Unrealized Appreciation/(Depreciation) |
$ (8) |
$ (54) |
$ 18 |
$ (16) |
$ (112) |
$ 73 |
$ 60 |
$ 87 |
$ 70 |
$ 118 |
$ 162 |
|
Non-Accruing Loans at Face |
$ 4 |
$ 30 |
$ - |
$ 29 |
$ 88 |
$ - |
$ 22 |
$ 17 |
$ - |
$ 190 |
$ 156 |
|
Equity Interest at Fair Value(9) |
$ 52 |
$ 9 |
$ 66 |
$ 39 |
$ 49 |
$ 312 |
$ 391 |
$ 1,098 |
$ 594 |
$ 2,610 |
$ 2,483 |
|
Debt to EBITDA(3)(4)(5) |
7.0 |
8.6 |
4.4 |
4.4 |
7.4 |
4.6 |
4.6 |
4.5 |
4.9 |
4.9 |
4.8 |
|
Interest Coverage(3)(5) |
1.7 |
1.8 |
3.5 |
1.6 |
1.7 |
2.3 |
2.1 |
2.3 |
1.9 |
2.1 |
2.1 |
|
Debt Service Coverage(3)(5) |
1.5 |
1.5 |
2.3 |
1.2 |
1.3 |
1.8 |
1.6 |
1.9 |
1.5 |
1.7 |
1.7 |
|
Loan Grade(3)(10) |
2.9 |
1.5 |
3.4 |
3.2 |
2.5 |
3.1 |
3.3 |
3.2 |
3.0 |
3.1 |
3.1 |
|
Average Age of Companies(5) |
44 yrs |
56 yrs |
30 yrs |
37 yrs |
35 yrs |
14 yrs |
40 yrs |
33 yrs |
28 yrs |
32 yrs |
32 yrs |
|
Ownership Percentage(9) |
88% |
69% |
26% |
64% |
57% |
70% |
43% |
58% |
72% |
59% |
59% |
|
Average Sales(5)(6) |
$ 121 |
$ 70 |
$ 120 |
$ 175 |
$ 89 |
$ 110 |
$ 86 |
$ 108 |
$ 132 |
$ 108 |
$ 108 |
|
Average EBITDA(5)(7) |
$ 7 |
$ 6 |
$ 40 |
$ 18 |
$ 10 |
$ 23 |
$ 18 |
$ 24 |
$ 19 |
$ 20 |
$ 20 |
|
Average EBITDA Margin |
5.8% |
8.6% |
33.3% |
10.3% |
11.2% |
20.9% |
20.9% |
22.2% |
14.4% |
18.5% |
18.5% |
|
Total Sales(5)(6) |
$ 495 |
$ 405 |
$ 367 |
$ 1,758 |
$ 1,006 |
$ 1,803 |
$ 3,149 |
$ 4,516 |
$ 1,271 |
$ 14,770 |
$ 13,503 |
|
Total EBITDA(5)(7) |
$ 38 |
$ 33 |
$ 97 |
$ 161 |
$ 80 |
$ 307 |
$ 591 |
$ 735 |
$ 186 |
$ 2,228 |
$ 2,060 |
|
% of Senior Loans(5)(8) |
52% |
39% |
55% |
25% |
62% |
46% |
56% |
40% |
57% |
50% |
50% |
|
% of Loans with Lien(5)(8) |
69% |
49% |
81% |
100% |
95% |
97% |
85% |
83% |
88% |
85% |
87% |
- Static pool classification is based on the year the initial investment was made. Subsequent add-on investments are included in the static pool year of the original investment. Investments in government securities and interest rate derivative agreements are excluded.
- Assumes investments are exited at current fair value.
- These amounts do not include investments in which the Company owns only equity.
- For portfolio companies with a nominal EBITDA amount, the portfolio company’s maximum debt leverage is limited to 15 times EBITDA.
- Excludes investments in commercial mortgage backed securities, collateralized debt obligations and European Capital Limited.
- Sales of the most recent twelve months, or when appropriate, the forecasted twelve months.
- EBITDA of the most recent twelve months, or when appropriate, the forecasted twelve months.
- As a percentage of our total debt investments.
- Excludes investments in commercial mortgage backed securities and collateralized debt obligations.
- Excludes investments in collateralized debt obligations and European Capital Limited.
ADDITIONAL DIVIDEND INFORMATION
American Capital must make certain distributions of its taxable income in order to maintain its tax status as a regulated investment company. Investors can refer to American Capital’s most recent report on Form 10-K for more information about its tax status. American Capital intends to retain net long-term capital gains and treat them as deemed distributions for tax purposes. Therefore, the taxable income that is distributed as dividends would be expected to be treated as ordinary income for tax purposes. Taxable income differs from GAAP income because of both temporary and permanent differences in income and expense recognition. For example, changes in appreciation and depreciation of portfolio investments have no impact on American Capital's taxable income. American Capital reports the anticipated tax characteristics of each dividend when announced, while the actual tax characteristics of each year’s dividends are reported annually to stockholders on Form 1099DIV. The 2006 declared dividend to-date, totaling $2.45 per share, is anticipated to be a distribution of ordinary income for tax purposes.
DIVIDEND REINVESTMENT PLAN (DRIP)
In appreciation of the loyal support of our shareholders, American Capital’s Dividend Reinvestment Plan grants a 5% discount to the market price for reinvested dividends. Brokerages that have confirmed participation in the DRIP include:
A.G. EdwardsCitigroup-Smith Barney
Fidelity
Merrill Lynch
Morgan Keegan
RBC Dain Rauscher
UBS Financial
Wachovia Securities
Wedbush Morgan
A summary of American Capital’s dividend history and forecast follows. For further dividend history, please visit our website at www.ACAS.com. For more information regarding the DRIP, please visit our website or call our Investor Relations Department at (301) 951-6122.
AMERICAN CAPITAL’S DIVIDEND HISTORY$21.56 Declared Since August 1997 IPO at $15.00 Per Share | |||||
| Year/Quarter | Regular Dividend | % Change of Regular Dividend Over Prior Year | Additional Dividend | Total | % Change of Total Dividend Over Prior Year |
|
Total 1997 to Q3 2006 Declared |
$21.56 | ||||
| 2006 | $3.29 | 8% | Not Planned | $3.29 | 7% |
|
Q4 Forecast |
$0.84 | 6% | |||
|
Q3 Declared |
$0.83 | 6% | |||
|
Q2 |
$0.82 | 9% | |||
|
Q1 |
$0.80 | 10% | |||
| 2005 | $3.05 | 7% | $0.03 | $3.08 | 6% |
|
Q4 |
$0.79 | 8% | |||
|
Q3 |
$0.78 | 8% | |||
|
Q2 |
$0.75 | 7% | |||
|
Q1 |
$0.73 | 4% | |||
| 2004 | $2.85 | 4% | $0.06 | $2.91 | 4% |
|
Q4 |
$0.73 | 6% | |||
|
Q3 |
$0.72 | 4% | |||
|
Q2 |
$0.70 | 3% | |||
|
Q1 |
$0.70 | 4% | |||
| 2003 | $2.73 | 7% | $0.06 | $2.79 | 9% |
|
Q4 |
$0.69 | 3% | |||
|
Q3 |
$0.69 | 5% | |||
|
Q2 |
$0.68 | 8% | |||
|
Q1 |
$0.67 | 14% | |||
| 2002 | $2.55 | 15% | $0.02 | $2.57 | 12% |
|
Q4 |
$0.67 | 18% | |||
|
Q3 |
$0.66 | 18% | |||
|
Q2 |
$0.63 | 15% | |||
|
Q1 |
$0.59 | 11% | |||
| 2001 | $2.21 | 13% | $0.09 | $2.30 | 6% |
|
Q4 |
$0.57 | 10% | |||
|
Q3 |
$0.56 | 14% | |||
|
Q2 |
$0.55 | 12% | |||
|
Q1 |
$0.53 | 18% | |||
| 2000 | $1.95 | 14% | $0.22 | $2.17 | 25% |
|
Q4 |
$0.52 | 18% | |||
|
Q3 |
$0.49 | 14% | |||
|
Q2 |
$0.49 | 14% | |||
|
Q1 |
$0.45 | 10% | |||
| 1999 | $1.71 | 39% | $0.03 | $1.74 | 30% |
|
Q4 |
$0.44 | 19% | |||
|
Q3 |
$0.43 | 34% | |||
|
Q2 |
$0.43 | 48% | |||
|
Q1 |
$0.41 | 64% | |||
| 1998 | $1.23 | N/A | $0.11 | $1.34 | |
|
Q4 |
$0.37 | 76% | |||
|
Q3 |
$0.32 | N/A | |||
|
Q2 |
$0.29 | N/A | |||
|
Q1 |
$0.25 | N/A | |||
|
1997 Q4 |
$0.21 | $0.21 | |||
| Total Declared | $21.56 | ||||
SHAREHOLDER CALL
American Capital invites shareholders, prospective shareholders and analysts to attend the American Capital Shareholder Call on Wednesday, August 2, 2006 at 11:00 am ET. The dial in number will be (877) 209-9922. International callers should dial +1(612) 288-0329. Please advise the operator you are dialing in for the American Capital Shareholder Call.
BEFORE THE CALL:
SLIDE PRESENTATION AVAILABLE IN ADVANCE OF THE SHAREHOLDER CALL:
The quarterly shareholder presentation includes a slide show to accompany the call that participants may download from the American Capital website at www.ACAS.com and print prior to the call. You may wish to take the time to review the slides in advance of the Shareholder Call.
DURING THE CALL:
STREAMING SLIDE PRESENTATION DURING THE SHAREHOLDER CALL:
During the Shareholder Call you may access the webcast or listen to the Shareholder Call by phone and step through the slides at your own pace.
AFTER THE CALL:
The presentation will be made available on our website after the call. An archive of the quar