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Approximately $5 billion invested, $782 million in dividends paid since 1997 IPO
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Vol. 6 No. 3
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(800) 248-9340
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July 2005
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First Half 2005 New Investments Total $1.3 Billion, Up 70% From First Half 2004
Total Capital Resources of Approximately $5.4 Billion
American Capital Declares $0.75 Q2 Dividend
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Table of Contents
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NEW INVESTMENTS
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AmSan, LLC
$25,000,000 to support the recapitalization of AmSan, LLC, leading distributor of janitorial and sanitary products
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SmithBucklin Corporation
$17,000,000 to support the employee buyout of SmithBucklin Corporation, world's largest association management and professional services company
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NPC, Inc.
$30,000,000 in the buyout of NPC, Inc., leading designer and manufacturer of flexible, rubber pipe-to-manhole connectors for sanitary sewer, stormwater and drainage systems
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Potpourri Group, Inc.
$188,000,000 in the buyout of Potpourri Group, Inc., a multi-title catalog company offering a broad product line of distinctive home décor, casual apparel, gifts and unique accessories
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Unwired Technology LLC
$56,000,000 in the buyout of Unwired Technology LLC, leading designer, marketer and supplier of wireless headphones for automotive entertainment systems
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Nursery Supplies, Inc.
$20,000,000 in support of the recapitalization of Nursery Supplies, Inc., leading North American manufacturer of a broad range of plastic containers for nurseries and distributors of nursery supplies
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Zenta
$28,500,000 to support the acquisition of Zenta, U.S.-based leader in high quality business process outsourcing services
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Engineered Textile Group, Inc.
$57,000,000 in the buyout of Engineered Textile Group, Inc. parent company to Southern Weaving Company, leading global provider of narrow, high tensile strength woven webbings to a wide variety of industries including marine, mining, transportation, construction and energy
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Tyden Group, Inc.
$66,000,000 to support the acquisition of Tyden Group, Inc., leading provider of global cargo security and product identification and traceability solutions
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Astrodyne Corporation
$31,000,000 in the buyout of Astrodyne Corporation, manufacturer and distributor of AC/DC power supplies and DC/DC converters
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Selig Sealing Products, Inc.
$15,000,000 to support the acquisition of Selig Sealing Products, Inc., leading North American manufacturer of heat induction foil seals for plastic containers
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Milton's Baking Company LLC
$8,500,000 to support the acquisition of Milton's Baking Company LLC, leading branded food products company in the fresh baked bread, gourmet cracker and frozen dinner entrée categories
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PORTFOLIO COMPANIES
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Montana Silversmiths, Inc.
$13,000,000 to support an acquisition by Montana Silversmiths, Inc., leading designer, manufacturer and distributor of accessories, jewelry and lifestyle products for the western industry
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Roadrunner Dawes, Inc.
$28,000,000 to support the merger of Roadrunner Freight Systems, Inc. and Dawes Transport, Inc., leading non-asset based, less-than-truckload transportation provider
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Specialty Brands of America Inc.
$55,000,000 to support an add-on acquisition by Specialty Brands of America Inc., leading branded specialty foods company
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Confluence Holdings Corp.
$19,000,000 to support an acquisition by Confluence Holdings Corp., leading manufacturer and distributor of kayaks, canoes and paddlesports accessories
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Stravina Operating Company, LLC
$53,000,000 in its portfolio company Stravina Operating Company, LLC, leading designer and supplier of impulse-purchase novelty and souvenir items
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American Capital Obtains $230 Million Unsecured Credit Facility from Wachovia and BB&T
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In June, American Capital obtained a $230 million unsecured revolving credit facility. Wachovia Bank N.A. is agent, Wachovia Capital Markets LLC and BB&T Capital Markets LLC are joint lead arrangers and Citicorp North America and JPMorgan Chase Bank N.A. are co-documentation agents for a syndicate of eight lenders. The facility is priced at LIBOR plus 1.375%. The facility replaces American Capital's previous $100 million unsecured facility.
"American Capital has achieved a significant improvement in pricing and an increased debt capacity with this unsecured facility," said Tom McHale, American Capital Vice President, Finance and Investor Relations. "The pricing reflects the Company's strong credit quality. We have also increased the number of banks in the syndicate from five to eight. Our increase in unsecured debt capacity coupled with our consistent access to the term securitization markets provides American Capital with diverse low cost borrowing sources, which remains a tremendous competitive advantage. To date, American Capital has raised $2.9 billion of debt capital since 1999."
American Capital had the following amounts outstanding under each term debt issuance and credit facility as of June 14, 2005:
AMERICAN CAPITAL DEBT CAPACITY (000)
| Term Debt |
Original Issuance |
Amount Outstanding |
| December 2000 |
$ 115,400 |
$ -- |
| March 2002 |
$ 147,300 |
$ -- |
| August 2002 |
$ 157,900 |
$ 27,310 |
| May 2003 |
$ 239,000 |
$ 63,176 |
| December 2003 |
$ 318,000 |
$ 140,361 |
| December 2004 |
$ 410,000 |
$ 409,772 |
| Unsecured Notes |
| September 2004 |
$ 167,000 |
$ 167,000 |
| Total Term Debt Issued |
$ 1,554,600 |
$ 807,619 |
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| Credit Facilities, Secured |
Total Commitment |
Amount Outstanding |
| Wachovia Bank N.A. |
$ 1,000,000 |
$ 853,531 |
| Harris Nesbitt |
$ 125,000 |
$ 74,000 |
| Credit Facility, Unsecured |
| BB&T* |
$ 100,000 |
$ 22,500 |
| Total Credit Facilities |
$ 1,225,000 |
$ 930,031 |
| TOTAL TERM DEBT AND CREDIT FACILITIES |
$ 2,779,600 |
$ 1,737,650 |
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*Replaced by new facility
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American Capital Declares $0.75 Q2 2005 Dividend
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In May, American Capital's Board of Directors declared a second quarter 2005 regular dividend of $0.75 per share, to record holders as of May 16, 2005, which was paid on July 1, 2005. This dividend is a 7% increase over the second quarter 2004 regular dividend of $0.70 per share. American Capital has paid a total of $782 million in dividends and paid $17.51 per share since its August 1997 IPO at $15.00 per share.
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American Capital Net Operating Income $64 Million for Q1 2005; 35% Increase Over Q1 2004
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In May, American Capital announced its results for the quarter ended March 31, 2005. Net Operating Income (NOI) for the quarter increased 35% to $64 million compared to $47 million for first quarter 2004.
For the complete release click here.
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American Capital Opens Affiliate European Capital Office in Paris
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 In April, American Capital announced the opening of the Paris office of its affiliate European Capital Financial Services Ltd. European Capital is a buyout and mezzanine investment company. European Capital will be an investor in and sponsor of management and employee buyouts, invest in private equity buyouts, and provide capital directly to private and mid-sized public companies. European Capital intends to invest from €5 million (US$ 6 million) to €125 million (US$ 153 million) per transaction million in equity, mezzanine debt and senior debt to fund growth, acquisitions and recapitalizations.
For the complete release click here.
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Fitch Upgrades and Affirms American Capital Securitizations
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In April, Fitch Ratings upgraded the ratings on three classes of American Capital securitizations and affirmed four classes.
For the complete releases, go to
http://www.americancapital.com/news/press_releases/pr/pr20050428-2.pdf
and
http://www.americancapital.com/news/press_releases/pr/pr20050428-1.pdf
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Growth in Investments, First Half 2001 - 2005
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$25 Million in AmSan, LLC
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  In June, American Capital invested $25 million in the recapitalization of AmSan, LLC, a leading distributor of janitorial and sanitary products to building services contractors, educational, healthcare and hospitality customers. American Capital's investment took the form of senior term debt. Merrill Lynch Capital provided a revolving credit facility and invested in senior term debt. AmSan management is significantly invested in the equity. GTCR Golder Rauner LLC is the majority owner.
AmSan was founded in 1997 to consolidate the highly fragmented janitorial and sanitation products distribution industry, which consists of over 5,000 small competitors. AmSan has a diverse customer base of over 50,000 customers. With over 60 locations and serving customers in over 40 states AmSan is widely recognized as the leader in the janitorial-sanitary maintenance distribution industry. AmSan distributes paper, plastic and chemical supplies as well as other janitorial accessories and power equipment under national brands as well as its own proprietary brand, Renown™.
For more information about AmSan click here.
Contact Tom Gregory, Managing Director, or call (312) 681-7400.
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$17 Million in SmithBucklin Corporation
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 In June, American Capital invested $17 million in SmithBucklin Corporation, the world's largest association management and professional services company. American Capital's investment took the form of a senior term B loan and senior subordinated debt and supported the SmithBucklin Employee Stock Ownership Plan's ("ESOP") purchase of the business from the financial investors who had the majority interest in the Company. In addition, SmithBucklin secured a revolving credit facility and a senior term A loan from LaSalle Bank and other financing to complete the transaction. As a result of this transaction, SmithBucklin employees own 100% of SmithBucklin's common stock through the ESOP.
Founded in 1949, SmithBucklin Corporation is the world's largest association management and professional services company. The Company provides full-service management and function and project-specific services to more than 185 trade associations, professional societies, technology user groups and government institutes and agencies. For its full-service clients, SmithBucklin provides staff resources specializing in all phases of association activity, reports directly to the association's Board of Directors and is responsible for all association operations. Client organizations include the Pet Food Institute, Society of Gynecologic Oncologists, America's SAP Users Group, National Association of Orthopaedic Nurses, Society for Information Management, Regional Airline Association and International Car Wash Association. The Company has three operating facilities in Chicago, Washington, DC and St. Louis and employs over 580 professionals.
For more information about SmithBucklin click here.
Contact Ian Larkin, Managing Director, Greg Long, Vice President, or call (312) 681-7400.
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$30 Million in Buyout of NPC, Inc.
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 In June, American Capital invested $30 million in the buyout of NPC, Inc., the leading designer and manufacturer of flexible, rubber pipe-to-manhole connectors for sanitary sewer, stormwater and drainage systems. American Capital's investment took the form of a senior term C loan, senior subordinated debt and equity. American Capital is also providing a revolving credit facility. NPC management invested in equity alongside American Capital. American Capital owns approximately 89% of NPC, on a fully diluted basis.
NPC's flexible connectors, or "Boots", create a watertight seal between inlet and outlet pipes and concrete manholes, preventing leakage and ground water infiltration while allowing for movement due to ground settling, shifting and vibration. NPC's products are sold to a diversified customer base of more than 300 concrete precasters, who produce manholes, box culverts, storm-drain structures and septic tanks. The Company has built its market leading position and brand awareness through a 30 year history of serving precasters. In addition to its core connectors business, the Company manufactures a broad product line of specialized equipment and products used in producing, testing and repairing manholes and pipes. These products include chimney seals and internal joint seals for manhole and pipe repair, targeting the growing market for rehabilitation products for North America's decaying sewer infrastructure. NPC operates from three facilities, two in Milford, New Hampshire and one in Park Hills, Missouri. The Company has a history of stable and consistent financials.
For more information about NPC click here.
Contact Robert Klein, Managing Director, or Dale Stohr, Principal, or call (212) 213-2009.
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$188 Million in Buyout of Potpourri Group, Inc.
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 In June, American Capital invested $188 million in the buyout of Potpourri Group, Inc. ("PGI"), a multi-title catalog company offering a broad product line of distinctive home décor, casual apparel, gifts and unique accessories. American Capital's investment took the form of senior term loans, senior and junior subordinated debt and redeemable preferred and common equity. American Capital is also providing a revolving credit facility. PGI management invested in equity and will continue to manage the Company. American Capital owns approximately 83% of PGI, on a fully diluted basis.
Formed in 1998, Chelmsford, MA-headquartered Potpourri Group is a catalog company with 12 diverse titles catering primarily to women. Through its portfolio of catalogs, PGI offers a broad product line of distinctive home décor, casual apparel, gifts and accessories that are unique or difficult to find in other outlets. The Company's catalogs include: The Stitchery, offering needle craft and cross stitch products; Expressions, offering home and garden décor and unique collectibles and accessories; Potpourri, offering a unique range of sentimental and whimsical gifts, home décor items and personalized items; Back in the Saddle, offering equine-themed home décor, casual apparel and gifts; Nature's Jewelry, offering nature-themed jewelry, casual apparel and gifts; NorthStyle, offering cabin-themed home décor, casual apparel and jewelry; The Pyramid Collection, offering personal growth, spiritual and meditation gifts, home décor items, apparel and jewelry, Serengeti; offering nature and wildlife themed gifts, casual apparel and gifts; In the Company of Dogs, offering dog-themed merchandise for pet owners; Young Explorers, offering educational toys and games; Whatever Works, offering home improvement and utilitarian household products; and Catalog Favorites, offering a combination of the best selling items from all the catalogs in PGI's portfolio. PGI has recorded sales growth of approximately 18% annualized over the last five years and recorded annual net sales of $160 million for the fiscal year ending March 31, 2005. The Company has approximately 300 year-round employees.
For more information about Potpourri Group click here.
Contact Brian Graff, Regional Managing Director, or Dale Stohr, Principal, or Adam Spence, Vice President, or call (212) 213-2009.
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$56 Million in Buyout of Unwired Technology LLC
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 In June, American Capital invested $56 million in the buyout of Unwired Technology LLC, a leading designer, marketer and supplier of wireless headphones for automotive entertainment systems. American Capital's investment took the form of a senior term loan, senior subordinated debt, junior subordinated debt and equity. American Capital is also providing a revolving credit facility and committed to a senior term loan. Unwired founder, President and CEO Lawrence Richenstein is rolling over a portion of his equity and will retain a significant ownership interest and continue to manage the Company. American Capital owns approximately 57% of Unwired, on a fully diluted basis.
Founded in 1997, Plainview, NY-headquartered Unwired was the first to adapt wireless headphone technology for in-vehicle use and the first to introduce two source headphone systems. The Company offers a complete line of single and multi-source analog wireless systems, including infrared headphones and transmitters. These wireless systems are used for entertainment and information applications in vehicles, including video game, DVD, CD, satellite radio and television, voice-based navigation and MP3 player systems. In 2003, the Company began producing a new headphone system with a new proprietary digital technology called WhiteFire®, the only four source digital system available. WhiteFire® was recognized by the Consumer Electronics Association as a Consumer Electronics Show Innovation Awards Honoree. The Company's list of customers includes all of the premier suppliers to both the automotive OEM market and aftermarket.
For more information about Unwired click here.
Contact Ian Larkin, Managing Director, or Jon Leiman, Principal, or call (312) 681-7400.
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$20 Million in Nursery Supplies, Inc.
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  In June, American Capital invested $20 million in Nursery Supplies, Inc., ("NSI") the leading North American manufacturer of a broad range of plastic containers for nurseries and distributors of nursery supplies. American Capital's investment took the form of senior and junior subordinated debt and supported Lincolnshire Management, Inc.'s recapitalization of NSI. GE Capital Corporation, a unit of General Electric Corporation (NYSE: GE), is providing a revolving credit facility and senior term loans. NSI management also invested alongside Lincolnshire. NSI founders rolled over a portion of their equity.
Founded in 1957, Chambersburg, PA-headquartered, NSI manufactures a broad range of nursery containers in a variety of models and styles comprising several hundred SKUs. The Company manufactures containers using multiple processing techniques consisting of blow molding, injection molding, high-speed pressure forming and vacuum forming. NSI has trademarked and patented many of its innovations, including its Grip-Lip™ and Econo-Lip™ lines of blow molded containers. In addition to nursery containers, NSI sells related products including plant trays and plant pouches. NSI has over 450 full-time employees in its four operating facilities located in Pennsylvania, California, Oregon and Florida. NSI's customers range from small, independent nurseries and growers, to large regional and national wholesale nursery supplies distributors, to which NSI is almost always the exclusive supplier. Customers include national distributors such as Agro Distribution, Griffin Greenhouse & Nursery Supplies, Plant Products Ltd., B F G Supply Co., McConkey Company, and most of the largest growers in the U.S., including Monrovia Nursery and Zelenka Nursery.
For more information about Nursery Supplies click here.
Contact Frank Do, Managing Director, or Bill Bujake, Vice President, or call (310) 806-6280.
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$28.5 Million in Zenta Acquisition
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 In May, American Capital invested $28.5 million to support the acquisition of Zenta by H-Cube LLC. Zenta is a U.S.-based leader in high quality business process outsourcing services. H-Cube was formed earlier this year by GTCR Golder Rauner, LLC and Henry Hortenstine, a former Executive Vice President of Affiliated Computer Services Inc., a Fortune 500 global business process outsourcing company. Mr. Hortenstine will become Executive Chairman of Zenta and Priya Hiranandani, Zenta's founder, will continue to serve as Zenta's Chief Executive Officer. American Capital's investment took the form of a senior term loan and a modest equity co-investment alongside GTCR and Zenta senior management. American Capital also committed additional debt financing to support anticipated growth and for other corporate purposes.
Zenta, founded in 2001 and headquartered in Wayne, Pennsylvania, with principal operating offices in India, provides business process outsourcing ("BPO") services. The Company is the sixth largest Indian BPO and one of the largest non-captive Indian BPO service providers in its market. Zenta currently has over 2,600 full time employees in its operational facilities in Mumbai, India. Zenta's business offering includes credit card servicing, mortgage servicing, accounts receivable management and insurance claims management. Zenta is ISO-9001 certified and was recently rated in the top 10 of India's BPO companies by NASSCOM, the leading organization for public policy for the Indian software industry.
For more information about Zenta click here.
Contact Tom Gregory, Managing Director, or Demian Kircher, Principal, or call (312) 681-7400.
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$57 Million in Buyout of Engineered Textile Group, Inc.
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 In May, American Capital invested $57 million in the buyout of Engineered Textile Group, Inc. ("ETG"), parent company to Southern Weaving Company, a leading global provider of narrow, high tensile strength woven webbings to a wide variety of industries including marine, mining, transportation, construction and energy. American Capital's investment took the form of senior term loans, senior and junior subordinated debt and preferred equity. American Capital's investment also included a revolving credit facility. ETG management rolled over a portion of equity and will continue to manage the company. American Capital owns a controlling interest in ETG with ETG management maintaining a significant ownership interest.
Founded in 1924, Greenville, South Carolina-headquartered, Engineered Textile Group, through its subsidiary Southern Weaving Company, manufactures webbing for lifting slings, fall protection harnesses, hose sleeving and cargo restraints. The Company's products are sold into a broad array of industries, including the construction, marine, mining, transportation, utility and energy industries. The Company has five facilities located in South Carolina, North Carolina and Canada and employs over 250 people.
For more information about Engineered Textile Group click here.
Contact Bowen Diehl, Principal, or John Drennan, Vice President, or call (214) 273-6630.
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$66 Million in Tyden Group, Inc.
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  In May, American Capital invested $66 million in Tyden Group, Inc., a leading provider of global cargo security and product identification and traceability solutions. American Capital's investment took the form of senior term loans, senior subordinated debt and common equity and supported Crimson Investment's acquisition of Tyden. American Capital is also providing a revolving credit facility.
Tyden Group, headquartered in Grand Rapids, MI, was founded in 1897. Through its three divisions, Tyden Seal, Brammall and Telesis Technologies, the Company provides products that ensure greater security for the transportation of goods and increased efficiency throughout the global supply chain. Tyden Seal and Brammall are manufacturers of tamper-evident and traceable cargo security seals for companies in the rail, truck and ocean transportation industries. Telesis Technologies is the only manufacturer of product marking and identification equipment that offers both dot-peen and laser marking systems that customers use to uniquely mark and authenticate parts and products as they move through the supply chain. Dot peen marking machines, typically suited for metal, utilize a stylus or pin to repeatedly strike the surface of the product, creating straight, arced or radial inscriptions whereas laser marking systems utilize the heat of a laser beam to etch the desired text, logo or other identifier into metal, plastic, fabric, rubber and leather surfaces. The Company serves a diverse customer base in the rail and truck transportation, automotive, aerospace, consumer products, industrial equipment and medical devices industries. Customers include the U.S. Postal Service, United Parcel Service of America Inc. (NYSE: UPS), Cargill Inc., Exxon Mobil Corporation (NYSE: XOM) and Smith & Nephew (NYSE: SNN).
For more information about Tyden click here.
Contact Natasha Volyanskaya, Vice President, or call (415) 591-0120.
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$31 Million in Buyout of Astrodyne Corporation
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 In May, American Capital invested $31 million in the buyout of Astrodyne Corporation, a manufacturer and distributor of AC/DC power supplies and DC/DC converters. American Capital's investment took the form of a senior term loan, senior subordinated debt and convertible preferred equity. American Capital is also providing a revolving credit facility. Astrodyne's senior management rolled over a portion of their equity. American Capital owns 81% of Astrodyne, on a fully diluted basis.
Founded in 1992, Taunton, MA-headquartered Astrodyne is a manufacturer and distributor of AC/DC power supplies and DC/DC converters for telecommunication, computer and industrial applications. AC/DC power supplies convert alternating current ("AC") from a power source into a direct current ("DC"), whereas DC/DC converters modify DC voltage levels to meet the power needs of electrical equipment. Astrodyne offers more than 2,000 application-specific SKUs under the Astrodyne brand name and markets its products primarily through its direct mail catalogs and its website www.astrodyne.com. Astrodyne's products are sold to over 5,000 customers, including Fortune 500 companies such as General Electric Company (NYSE:GE), Sanmina-SCI Corporation (Nasdaq: SANM), Tyco International Ltd. (NYSE: TYC), Teledyne Technologies Inc. (NYSE: TDY) and Abbott Laboratories (NYSE:ABT). In addition to its headquarters, the Company also operates a manufacturing joint venture in Taiwan, Astrodyne Pacific.
For more information about Astrodyne click here.
Contact Jon Isaacson, Managing Director, or call (301) 951-6122.
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$15 Million in Selig Sealing Products, Inc.
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  In May, American Capital invested $15 million in Selig Sealing Products, Inc., a leading North American manufacturer of heat induction foil seals for plastic containers. American Capital's investment took the form of a senior term loan and supports Behrman Capital's acquisition of Selig. Madison Capital is providing a revolving credit facility and senior term loans. Selig management rolled over their equity investment.
Founded in 1972, Forrest, IL-headquartered Selig Sealing Products was the first company to develop a foil seal to prevent the leakage of plastic bottles and also, through partnering with 3M, introduced the first U.S. Food and Drug Administration approved tamper-evident closure foil liner. The Company's seals are found on bottles of over-the-counter pain relievers and peanut butter jars, as well as ketchup bottles, sports drinks, nutraceuticals and automotive and other industrial products.
For more information about Selig click here.
Contact David Ehrenfest Steinglass, Managing Director, or call (301) 951-6122.
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$8.5 Million in Milton's Baking Company
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  In May, American Capital invested $8.5 million in Milton's Baking Company LLC, a leading branded food products company in the fresh baked bread, gourmet cracker and frozen dinner entrée categories. American Capital's investment took the form of senior subordinated debt and supported the recapitalization of Milton's led by Red Diamond Capital Partners LP. NewStar Financial Inc. is providing a revolving credit and term loan facility to the transaction. Milton's founders and management rolled over a significant portion of their equity and will continue to manage the business.
Founded in 1996, Del Mar, CA-headquartered Milton's operates through two divisions, Milton's Baking Company and MBR Foods, both formulators and marketers of branded, high quality, healthy food products. Milton's Baking Company products include 99% fat free bread products, including multi-grain, whole-grain, buttermilk, gourmet white, dark and hearty, and potato breads, as well as muffins, bagels, hamburger buns, hot dog rolls and snack and hors d'oeuvre premium crackers, all branded under the Milton's Baking Company label. Through its MBR Foods division, the Company develops and markets frozen dinner entrees, including Chicken & Rice, Meat and Vegetable Lasagnas and Turkey Divan alongside an assortment of seasonal selections, all branded as Milton's Restaurant Classics. Milton's customers include national club, specialty and grocery stores.
For more information about Milton's click here.
Contact Ian Larkin, Managing Director, or John Cannon, Vice President, or call (312) 681-7400.
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$13 Million in Montana Silversmiths Acquisition
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  In June, American Capital invested an additional $13 million in its portfolio company Montana Silversmiths, Inc. to support its acquisition of Big Sky Carvers LLC ("BSC"), a manufacturer and distributor of outdoor and lodge-themed woodcarvings, home accents and collectibles. Montana is 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, senior subordinated debt and LLC membership units. American Capital also committed additional debt financing to support anticipated growth and for other corporate purposes. Thompson Street Capital Partners is the majority owner. BSC management rolled over their equity investment.
Founded in 1980, Manhattan, MT-based Big Sky Carvers offers lodge and outdoor-themed wood and plastic sculptures, ornaments, home accents and other collectibles. BSC's products are sold through independent retailers, large retail outlets and mail-order catalogs. In addition, the Company sells private-labeled products to conservation and fundraising organizations, which use the products as giveaways and prizes. BSC also currently provides design and sourcing services for Montana's Lifestyles brand. BSC customers include Ducks Unlimited, Cabela's, Orvis and L.L. Bean. The Company has approximately 1,500 SKUs and designs and launches more than 400 products annually.
American Capital first invested $26 million in Montana Silversmiths in October 2004, supporting Thompson Street Capital's and management's acquisition. American Capital's investment took the form of a senior term loan, senior subordinated debt and 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 décor 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.
For more information about Montana Silversmiths click here.
Contact Jon Isaacson, Managing Director, or call (301) 951-6122.
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$28 Million in Roadrunner Dawes Combination
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  In June, American Capital invested $28 million to partially finance the merger of Roadrunner Freight Systems, Inc. and Dawes Transport, Inc. The combined entity, Roadrunner Dawes Inc., is a leading non-asset based, less-than-truckload ("LTL") transportation provider. American Capital's investment took the form of senior subordinated debt and voting and non-voting common equity. LaSalle Bank, M&I Bank and US Bank are providing a revolving credit facility and invested in senior term debt. Sankaty Advisors invested in senior subordinated debt and equity. Eos Partners also invested in equity. Thayer Capital Partners is the majority owner. American Capital owns approximately 12% of Roadrunner Dawes, on a fully diluted basis.
In July 2003, American Capital invested $33 million in the acquisition of Roadrunner. American Capital's investment took the form of senior and junior subordinated debt with warrants and common equity. In 2004, the Company prepaid $14 million of American Capital's senior subordinated note, resulting in a gain of $1.7 million. In May 2005, American Capital sold Roadrunner to Thayer Capital for total proceeds of $47 million, realizing an additional gain of $26 million. To assist in Thayer's purchase of Roadrunner, American Capital provided $24 million of financing in the form of senior and junior subordinated notes, which have been repaid in connection with the merger of Roadrunner and Dawes. American Capital earned a 69% compounded annual rate of return on its investment in subordinated notes and common equity interest in Roadrunner. The 69% return includes the realized gain, interest and fees received over the life of American Capital's investment in the company.
Founded in 1984 in Milwaukee, WI, Roadrunner Freight Systems Inc. is an inter-regional freight services company, which consolidates less-than-truckload ("LTL") shipments into full truckloads, minimizing the need for intermediate handling. Dawes was established in 1981 in Milwaukee, WI and is also an inter-regional, long-haul LTL transportation service provider. Dawes has seen 22 consecutive years of revenue gains. The combined company operates a network of 18 terminals throughout the Midwest, Southeast, Texas and West Coast, and utilizes a network of independent agents to deliver to additional destinations. Roadrunner Dawes generated, on a pro forma basis, revenues of approximately $340 million as of the closing on a trailing twelve month basis. The new company will maintain its corporate headquarters in Milwaukee.
For more information about Roadrunner click here.
Contact Jon Isaacson, Managing Director, or Sean Eagle, Principal, or call (301) 951-6122.
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$55 Million in Add-On Acquisition by Specialty Brands of America
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 In June, American Capital invested $55 million in the add-on acquisition of Bear Creek Country Kitchens LLC by its portfolio company Specialty Brands of America, Inc., a leading branded specialty foods company. Bear Creek is a leading manufacturer and marketer of dry soups and soup bases. American Capital's investment took the form of senior term loans, senior and junior subordinated debt and convertible preferred equity. American Capital is also providing a revolving credit facility.
Founded in 1991, Heber City, UT-based Bear Creek is the second largest manufacturer and marketer of dry soups and soup bases in the U.S. Bear Creek offers a range of packaged food products including hearty dry soups, ready-to-serve soups and culinary bases under the Bear Creek® brand. The Company also sells soups, dips and smoothies under the Sheila's Select® brand, and gourmet salsas, pickled vegetables and gourmet jellies under the Cherith Valley® brand. Bear Creek's products are sold in over 30,000 stores nationwide, including retail stores, club stores, dollar stores, specialty food outlets, gift shops and military and mass market channels. Customers include Costco, Kehe Food Distributors, Kroger, Wal-Mart and Safeway.
In December 2003, American Capital invested $68 million in the buyout of Specialty Brands of America. American Capital's investment took the form of a revolving credit facility, senior term debt, senior and junior subordinated debt and redeemable preferred and common equity. Founded in 1991 and based in Westbury, NY, Specialty Brands has built a leading branded specialty foods company through acquisitions and internal growth. Specialty Brands is the leading marketer of maple syrup and sugar free syrups worldwide, with the Spring Tree®, Cary's®, and MacDonalds™ brands. Specialty Brands' syrups can be found in the U.S. in just about every grocery store, in leading breakfast restaurant chains and in 18 countries. Specialty Brands also markets Original Trenton Crackers®, Dixie Fry® Coating Mix, New York Flatbreads®, and Canoleo® Margarine. The Company's customers include all of the leading retailers and wholesalers in the U.S.
For more information about Specialty Brands of America click here.
Contact Brian Graff, Regional Managing Director, or Adam Spence, Vice President, or call (212) 213-2009.
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$19 Million in Confluence Holdings Corp. Acquisition
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 In May, American Capital invested an additional $19 million in its portfolio company Confluence Holdings Corp. to support the acquisition of the water sports business assets of Watermark Paddlesports Inc. Confluence is a leading manufacturer and distributor of kayaks, canoes and paddlesports accessories. American Capital's new investment took the form of a senior term loan and senior subordinated debt. In addition to the new investment, American Capital owns senior subordinated debt, junior subordinated debt, junior unsecured subordinated debt and equity. American Capital's total current investment in Confluence is $61 million. GMAC Commercial Finance LLC is providing a revolving credit facility. American Capital owns approximately 95% of Confluence, on a fully diluted basis.
Headquartered in Easley, SC, Watermark manufactures and distributes the industry's most complete line of whitewater, touring and recreational kayaks as well as complementary accessories, including high end specialty paddles. The company's brands include kayak leaders Dagger®, Perception®, and Mainstream®, in addition to Harmony® paddlesports accessories and AT Paddles.
American Capital first invested in Confluence Holdings in September 1998. Headquartered in Trinity, NC, Confluence, is a leading manufacturer of kayaks, canoes, sailing trimarans and water sports accessories. Confluence's products are sold under the Mad River Canoe®, Wilderness Systems®, WindRider®, Voyageur®, and Wave Sport® brand names.
Confluence's customers include well-known sporting goods retailers and mass retailers such as Dick's Sporting Goods Inc. (NYSE: DKS) and its subsidiary Galyan's Trading Company, Inc., Recreational Equipment Inc., Eastern Mountain Sports, L.L. Bean Inc. and Bass Pro Shop.
For more information about Confluence click here.
Contact Gordon O'Brien, Managing Director, Operations, or Myung Yi, Principal, Operations, or Bob Sharp, Principal, Operations, or call (301) 951-6122.
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$53 Million in Portfolio Company Stravina Operating Company
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  In June 9, American Capital invested an additional $53 million in its portfolio company Stravina Operating Company LLC, purchasing the senior debt of Stravina, committing to a senior term loan and providing a revolving credit facility. Stravina is a leading designer and supplier of impulse-purchase novelty and souvenir items. Blue Capital Management LLC is the majority owner and equity sponsor of Stravina.
American Capital first invested in Stravina in May 2002, supporting Blue Capital Management LLC's acquisition with a $19.5 million investment. In August 2003, American Capital invested an additional $7.5 million supporting the Company's acquisition of Hanover Accessories, a designer and marketer of children's jewelry and hair accessories, pet accessories and novelty products. Hanover also operates CRS/Lawrence, a company offering in-store merchandising services for major retailers and manufacturers in over 14,000 retail stores across the country.
Stravina, headquartered in Chatsworth, CA, has over 100 product lines, including personalized key chains, photo frames, pens, pencils, rulers, Post-It notes, as well as souvenir products including magnets, shot glasses and plush toys. The Company sells to mass merchants, gift stores, party and craft stores, toy stores, drug stores and grocery stores. The Company also sells to five of the top ten retailers in the U.S.
For more information about Stravina click here.
Contact Gordon O'Brien, Managing Director, Operations, or Steven Price, Principal, Operations, or call (301) 951-6122.
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American Capital Receives Proceeds of $68 Million From Four Exits
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In May, American Capital received total proceeds of $68 million from exits of four portfolio companies, realizing a total gain of $30 million.
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Roadrunner Freight Systems, Inc.
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In the second quarter of 2005, American Capital realized a gain of $26 million from the sale of its portfolio company Roadrunner Freight Systems Inc. to Thayer Capital. Upon the exit, American Capital received total proceeds of $47 million, earning a 69% compounded annual rate of return on its investment in subordinated notes and common equity interest.
For more information about the Roadrunner transaction click here. |
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The Lion Brewery, Inc.
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American Capital earned a $2 million gain and received full repayment of its senior subordinated note in The Lion Brewery Inc. in the first quarter of 2005. American Capital received total proceeds of $8.8 million upon the exit, earning a 17% compounded annual rate of return on its investment in subordinated notes and warrants. The 17% return includes the realized gain, interest and fees received over the life of American Capital's investment in the company. The amount realized by American Capital was less than the fourth quarter 2004 valuation of the investment by $1.8 million, or 17%.
In January 1999, American Capital invested $6.6 million in the management buyout of The Lion Brewery Inc. American Capital's investment took the form of senior subordinated debt with warrants. Lion Brewery is a producer and bottler of non-alcoholic malt products, craft and traditional beers and specialty soft drinks. Established in 1933, it has operated continuously at the same facility.
For more information about The Lion Brewery transaction click here. |
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Bumble Bee Seafoods L.P.
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In May 2003, American Capital and a wholly-owned affiliate invested $15 million of senior subordinated debt with limited partnership interests in Bumble Bee Seafoods LP, a leading global producer and marketer of canned tuna and other seafood and the leader in the premium albacore tuna market. American Capital's investment supported the acquisition of the assets and operations of Bumble Bee from ConAgra Foods Inc. by management and affiliates of Centre Partners Management LLC.
In May 2004, in connection with Bumble Bee's merger with Connor Bros. Income Fund, American Capital was repaid its $15 million senior subordinated debt investment and American Capital's affiliate received a partial distribution related to its limited partnership investment in Bumble Bee. American Capital realized a gain of $0.5 million on the repayment of the debt in 2004. In the second quarter of 2005, the affiliate of American Capital received a final distribution related to its limited partnership investment in Bumble Bee, resulting in the recognition of a gain, net of tax, of $1.9 million in the second quarter of 2005. Over the life of its investment in Bumble Bee, American Capital and its affiliate have realized a total gain of $2.4 million, earning a 32% compounded annual rate of return on its investment in subordinated notes and limited partnership units. The 32% return includes the realized gain, interest and fees received over the life of American Capital's investment in the company.
Bumble Bee, with world headquarters in San Diego, CA, in addition to its leading position in the canned albacore tuna market, has established the second leading position in the overall canned tuna U.S. market and leading positions in other major canned seafood markets such as salmon and specialty canned seafood. The company sells its broad range of products under the well-known brands Bumble Bee, Clover Leaf, Brunswick and Beach Cliff.
For more information about the Bumble Bee transaction click here. |
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Valley Proteins Inc.
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American Capital received full repayment of its subordinated note investment in Valley Proteins, Inc. in the second quarter of 2005. American Capital received total proceeds of $10 million upon the exit, earning a 22% compounded annual rate of return on its investment in subordinated notes. The 22% includes the interest and fees received over the life of American Capital's investment in the company.
In June 2004 American Capital invested $10 million in the senior subordinated debt of Valley Proteins Inc., a leading independent recycler and renderer of food processing by-products. The company procures its raw materials from over 40,000 suppliers, ranging from small restaurants, butcher shops and grocery stores to some of the world's largest poultry and beef processors. The company sells fats, proteins and related products to over 170 customers, including producers of livestock feed and pet food. Valley Proteins employs over 1,000 in 20 operating facilities, including rendering plants, pet food product plants, grease processing plants and transfer stations located in Pennsylvania, Maryland, Virginia, North Carolina, South Carolina, Tennessee, West Virginia, Texas, Oklahoma, and New Mexico.
For more information about the Valley Proteins transaction click here.
For a chart detailing American Capital capital gains click here.
For a chart listing American Capital's exited portfolio companies click here.
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American Capital Stockholders Elect Directors, Approve Repeal of Fundamental Policies
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In June, American Capital stockholders re-elected two directors of the Company, approved the repeal of the Company's fundamental policies and approved the adoption of the Company's 2005 Employee Stock Option Plan. Stockholders also approved the continuation of Ernst & Young LLP as the Company's independent auditors.
Neil M. Hahl and Stan Lundine were re-elected to three year terms on the American Capital Board of Directors. Mr. Hahl is a general business consultant. He chairs the American Capital Board's Audit and Compliance Committee. Mr. Lundine is Of Counsel of the law firm Sotir and Goldman and Executive Director of the Chautauqua County Health Network. He serves on the American Capital Board's Compensation and Corporate Governance Committee.
AMERICAN CAPITAL STRATEGIES LTD. 2005 PROXY VOTING
| Proposals |
FOR |
WITHHELD |
| Re-elect Director Hahl |
86,716,890 |
1,155,264 |
| Re-elect Director Lundine |
85,953,757 |
1,918,397 |
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| |
FOR |
AGAINST |
ABSTAIN |
| Adopt 2005 Employee Stock Option Plan |
45,012,469 |
7,744,932 |
1,168,821 |
| Repeal of the Company's Fundamental Policies |
48,261,632 |
4,274,343 |
1,390,247 |
| Engage Ernst & Young LLP as Auditors for 2005 |
86,680,710 |
703,265 |
488,179 |
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American Capital Announces Promotions
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In the American Capital New York Office, Brian Graff has been promoted to Regional Managing Director.On the Bethesda deal team, Jon Isaacson has been promoted to Managing Director, Sean Eagle to Principal and Eugene Krichevsky to Vice President; on the Operations Team, Fraz Siddiqui and Omar Syed have each been promoted to Vice President of Operations.In Chicago, Ian Larkin has been promoted to Managing Director, Demian Kircher to Principal and Jon Leiman to Principal. In Philadelphia, Steven Gord has been promoted to Vice President.
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Total Return to Investors
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Performance data quoted above represents past performance of American Capital. Past performance does not guarantee future results and the investment return and principal value of an investment in American Capital will likely fluctuate. Consequently, an investor's shares, when sold, may be worth more or less than their original cost. Additionally, American Capital's current performance may be lower or higher than the performance data quoted above.
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.acas.com
(800) 248-9340
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