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Over $3.4 billion invested, $583 million in dividends paid since 1997 IPO
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Vol. 5 No. 4
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(800) 248-9340
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October 2004
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American Capital Raises More Than $1 Billion in Q3
Total Capital Resources of More Than $4.2 Billion
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Table of Contents
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American Capital Raises More Than $1 Billion in Q3
September Equity Offering Totaling $418 Million;
July Common Stock Offering of $124 Million;
First Unsecured Term Debt: September Issuance of $167 Million;
August Increase in Credit Facilities of $350 Million
American Capital Declares Dividend of $0.72 Per Share for Q3
American Capital Announces 5% Discount on Shares Purchased through Dividend Reinvestment Plan
New Investments: July-October
$24 Million in Weber Manufacturing Limited, designer and manufacturer of specialty molds and precision products for the automotive, aerospace and building products industries
$65 Million in BarrierSafe Solutions International, owner of two leading companies in the development and marketing of disposable gloves and related products
$40 million in Erickson Construction Co., Inc., cost-effective manufacturer of panelized building components for the homebuilding industry
$12 Million in Breeze Industrial Products Corporation, leading global supplier of steel clamps
$25 Million in Soff-Cut International, Inc., leading designer and manufacturer of specialized Ultra Early Entry™ concrete saws
$58 Million in Two New Portfolio Companies: Evenflo Company Inc., leading supplier of juvenile products for children ranging from infants to preschoolers, and Schoor DePalma Inc., leading diversified provider of design and engineering services
$11 Million in Sanlo Manufacturing Co., Inc., leading manufacturer and distributor of coated cable, cable assembly products and accessories
$43 Million in HMS Healthcare, Inc., to fund the acquisition of two independent non-risk access preferred provider organizations
$35 Million in Hopkins Manufacturing Corp., leading manufacturer and marketer of specialized towing products and functional accessories for the automotive and recreational vehicle aftermarket
$43 Million in Future Food LP, leading producer and marketer of refrigerated dips, spreads and seafood salads
Portfolio Companies
$15 Million Add-On Investment in CIVCO Holdings, Inc., designer, manufacturer and marketer of disposable and consumable accessory technologies supporting ultrasound imaging equipment
$7 Million Add-On Investment for Acquisition by 3SI Security Systems, global provider of security solutions utilizing dye-based staining and wireless tracking systems to protect currency
$14 Million Add-On Investment for Acquisition by Dynisco LLC, global manufacturer of branded test, measurement and process control devices for the plastics industry
$22 Million Committed to Add-on Investment in Futurelogic, Inc., designer and developer of thermal printer solutions with leading position in slot machines
Exit Events & Prepayments
American Capital Receives $74 Million in Proceeds From Exits & Repayments
Nancy's Specialty Foods, Inc.
Roadrunner Freight Systems, Inc.
Fulton Bellows & Components, Inc.
Vigo Remittance Corporation
Alemite Corporation
Charts
American Capital Dividend History
American Capital Portfolio Diversification
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American Capital Raises More Than $1 Billion in Q3
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September Equity Offering Totaling $418 Million
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In September, American Capital announced that 11.5 million shares of its common stock had been sold on September 24 to the public at $31.60 per share. In October, the underwriters exercised their over-allotment option and purchased an additional 1.7 million shares for sale to the public. The total gross proceeds from the offering, including the underwriters over-allotment, were $418 million. Of the total of 13.2 million shares that were sold, 4.2 million were offered directly by the American Capital, which received $128 million in immediate net proceeds. The remaining 9 million shares were borrowed from third party market sources by three counter-parties, who then sold those borrowed shares on September 24, 2004 in the public offering to retail and institutional buyers, receiving $272 million in net proceeds.
The counter-parties implemented these transactions in connection with one year agreements (the "Forward Sale Agreements") whereby they must purchase from American Capital and American Capital must sell to them the 9 million shares of common stock at $31.60 per share, less certain adjustments. The timing of these sales, which must occur within the next year, will generally be determined by American Capital.
Wachovia Capital Markets, LLC, Citigroup Global Markets Inc., J.P. Morgan Securities Inc., UBS Securities LLC, A.G. Edwards & Sons, Inc. and Legg Mason Wood Walker, Incorporated were the underwriters for the offering. The joint book-running managers for the offering were Wachovia Capital Markets, LLC and Citigroup Global Markets Inc. J.P. Morgan Securities Inc. served as the sole structuring agent for the Forward Sale Agreements. The three counter-parties of the Forward Sale Agreements were J.P. Morgan Securities Inc., Citigroup Global Markets Inc., and Wachovia Capital Markets, LLC.
American Capital has used substantially all of the $128 million in immediate net proceeds from the direct sale of 4,225,000 shares of common stock to reduce the borrowings under its existing revolving credit facilities and to fund investments. American Capital expects to use substantially all of the net proceeds from the sale of its common stock pursuant to the Forward Sale Agreements, which initially are valued at approximately $272 million for similar purposes. The repayments under the revolving credit facilities create availability under the facilities, which will generally be used for funding future American Capital investments and general corporate purposes.
Click here for press release.
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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July Common Stock Offering of $124 Million
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In July, American Capital sold a total of 4,425,000 shares of its common stock at $28.00 per share. The total gross proceeds from the offering, including the over-allotment, were approximately $123.9 million. A.G. Edwards & Sons, Inc., BB&T Capital Markets, a division of Scott & Stringfellow, Inc., Legg Mason Wood Walker, Incorporated, Piper Jaffray & Co., and RBC Capital Markets were the underwriters. A.G. Edwards & Sons, Inc. acted as book-running manager of the offering.
Click here for press release.
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September Issuance of $167 Million in Unsecured Debt
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In September American Capital issued $167 million of long-term unsecured five- and seven-year notes in a private placement. The five-year notes, which totaled $82 million, have a fixed interest rate of 5.92%. The seven-year notes, which totaled $85 million, have a fixed interest rate of 6.46%. Net proceeds from the sale of the notes were used to repay outstanding indebtedness under the American Capital's revolving credit facilities and for general corporate purposes. The terms of the unsecured debt issuances were similar to investment grade offerings.
Click here for press release.
The securities referred to herein have not been registered under the Securities Act of 1933 and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of such Act.
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August Increases in Credit Facilities of $350 Million to $700 Million
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In August, American Capital announced in two separate releases that JPMorgan Chase Bank and Citigroup Global Markets Realty Corp. ("CGMRC"), an affiliate of Citigroup Inc., had joined an affiliate of Wachovia Bank, N.A. as lenders in one of American Capital's revolving credit facilities. JPMorgan committed up to $250 million and Citigroup committed up to $100 million in additional capacity. This results in an increase in the maximum availability under the facility to $700 million.
"We have been actively expanding our credit relationships to prepare us to meet the needs of our growing pipeline of opportunities," said American Capital CFO John Erickson. "With the addition of JPMorgan Chase Bank and CGMRC, American Capital now has approximately $900 million of capacity from our combined credit facilities."
Click here for the press release announcing the addition of CGMRC.
Click here for the press release announcing the addition of JPMorgan Chase Bank.
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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American Capital Declares Dividend of $0.72 Per Share for Q3
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In August, American Capital Strategies declared a third quarter 2004 regular dividend of $0.72 per share, payable on October 1, 2004 to record holders as of August 16, 2004. This dividend is a 4% increase over the third quarter 2003 regular dividend of $0.69 per share. American Capital has paid a total of $583 million in dividends, and paid $15.24 in dividends per share since its August 1997 IPO at $15.00 per share. "This dividend marked the complete return of the capital invested by those shareholders that purchased their shares at the time of our IPO and held them through the receipt of this dividend," noted American Capital Chairman, President and CEO Malon Wilkus.
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American Capital Announces 5% Discount on Shares Purchased through Dividend Reinvestment Plan
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In August, American Capital announced it has amended its Dividend Reinvestment Plan ("DRIP") to provide a 5% discount on shares purchased through the reinvestment of dividends, effective for dividends paid starting in December 2004 and thereafter and subject to the terms of the DRIP.
"With our latest dividend declaration of $0.72 per share, we have paid or declared $15.24 per share in dividends, exceeding our IPO price of $15 per share. We are very pleased to take the opportunity that this milestone presents to thank our loyal shareholders for their support with a 5% discount on reinvested dividends," said American Capital Chairman, President and CEO Malon Wilkus. "The dividend is the single most important indicator of American Capital's success, and dividend reinvestment is a terrific way to accumulate additional shares in the Company."
The complete release is at: http://www.ACAS.com/news/press_releases/pr/pr.cfm?p_pr=pr20040806.html
Stockholders interested in the dividend reinvestment plan can review a prospectus, which available from American Capital or accessible at http://www.acas.com/investor_relations/dividends/dividend_reinvestment.cfm |
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$24 Million in Weber Manufacturing Limited
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 In October, American Capital invested $24 million in the buyout of Weber Manufacturing Limited ("Weber"), a Midland, Ontario based designer and manufacturer of large-cavity specialty molds and precision products for the automotive, aerospace and building products industries. American Capital's investment took the form of senior subordinated debt and preferred and common equity. Bank of Nova Scotia is provided a revolving credit facility and a senior term loan. TMB Industries and Weber management also invested in the equity. American Capital owns approximately 90% of Weber on a fully diluted basis. Mr. Reinhart Weber, founder and former owner of Weber, will continue to serve as a consultant and member of the Weber Board of Directors.
Founded in 1962, Weber designs and manufactures nickel shell molds, traditional injection and compression steel molds and prototype aluminum molds for international customers in the automotive, heavy duty truck, aerospace and residential housing markets. It is the only company in the world that uses the superior technology of nickel vapor deposition (NVD) to produce complex high quality, nickel shell molds. Weber's steel, aluminum and nickel molds are used for various consumer products such as automotive deck lids and fenders, interior trim and instrument panels, bathtubs, showers, kitchen sinks, front entry doors and aircraft components. The company has five active design and process patents for forming mold cavities from pure nickel using a unique nickel vapor deposition process. The company has two operating facilities in Midland, Ontario and employs over 200.
Click here for more information about Weber.
Contact L. Thomas Gregory, Managing Director, or call (312) 681-7400.
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$65 Million in BarrierSafe Solutions International
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 In September, American Capital invested $65 million in BarrierSafe Solutions International, which owns Microflex Corporation and FoodHandler Inc., two leading companies in the development and marketing of disposable gloves and related products in a variety of end use markets. American Capital's investment took the form of a senior term loan and senior and junior subordinated debt. Microflex Corporation was a portfolio company of Riverside Partners and FoodHandler Inc. was a portfolio company of StoneCreek Capital. Riverside Partners and StoneCreek Capital will be the majority owners of BarrierSafe and BarrierSafe management will hold a significant equity stake. As subsidiaries of BarrierSafe, FoodHandler and Microflex will continue to operate out of their respective headquarters in Westbury, NY and Reno, NV, and will maintain their brands in the markets they serve.
Founded in 1987, Reno, NV-headquartered Microflex is a developer and marketer of branded natural rubber latex and synthetic disposable gloves sold to the dental, laboratory, emergency medical services, healthcare, automotive, industrial and food service markets. The company has over 20 product lines and several patents issued and pending. Microflex's customers include over 16,000 end-users and an extensive network of over 500 distributors.
FoodHandler, founded in 1969 and based in Westbury, NY, is a provider of safe food handling solutions to the food service industry. The company offers high quality disposable gloves, bags, aprons, bibs and headwear, all marketed under three different brands: FoodHandler, MedHandler and JobSelect, to over 600 distributors. FoodHandler is currently the only glove and bags supplier certified by NSF International, an independent public health and safety certification and standard setting organization that independently certifies product quality and efficacy.
Click here for more information about BarrierSafe Solutions.
Contact Frank Do, Managing Director, or call (818) 676-1222.
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$40 Million in Erickson Construction Co, Inc.
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 In September, American Capital invested $40 million in Erickson Construction Co., Inc., a cost-effective manufacturer of panelized building components for the homebuilding industry. American Capital's investment took the form of a Term B loan and supported the acquisition of Erickson by a private equity firm.
Founded in 1975, Chandler, AZ-headquartered Erickson produces panelized building components for the frame construction of homes to large residential homebuilders in the Phoenix, AZ, Sacramento, CA and Reno, NV markets.
Click here for more information about Erickson.
Contact John Thornton, Principal or call (415) 591-0120.
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$12 Million in Breeze Industrial Products Corporation
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 In August, American Capital invested $12 million in Breeze Industrial Products Corporation, a leading global supplier of proprietary and patented steel clamps primarily serving the heavy duty truck, automotive and industrial sectors. American Capital's investment took the form of senior and junior subordinated debt and supported the acquisition of Breeze by Wind Point Partners. Albion Alliance LLC also invested in the subordinated debt of Breeze. Antares Capital Corporation provided the senior debt facility.
Founded in 1948 in Saltsburg, Pennsylvania, Breeze invented and patented the first worm-drive hose clamp, which uses a worm screw configuration to tighten, seal and connect pipes and tubes. Breeze now manufactures worm-drive clamps, exhaust clamps, T-Bolt and V-Band clamps and no-hub couplings. These components are engineered in a wide variety of sizes, strengths, designs and materials for diverse clamping applications. The Company is the only major supplier capable of offering both metal-to-hose and metal-to-metal clamping solutions. Currently, Breeze has 22 U.S. and foreign patents and sells its products under the Breeze, Torca, and Clamp-All brand names to over 500 customers in more than 40 countries. Breeze provides clamps directly to OEMs and Tier I suppliers within the automotive and heavy duty truck markets, and also serves the industrial, hardware, plumbing, agricultural and construction industries together with its network of over seventy distributors. Customers include Tenneco, PACCAS, ArvinMeritor, DaimlerChrysler, Cummins, Textron, Navistar/International, Volvo and Harley Davidson. The Company has three ISO 9001/2000 certified operating facilities in Pennsylvania, Michigan and Frittlingen, Germany and employs nearly 500. Breeze recorded revenues of nearly $89 million for the fiscal year ending March 2004.
Click here for more information about Breeze.
Contact Todd Wilson, Principal, or call (212) 213-2009.
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$25 Million in Soff-Cut International, Inc.
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 In August, American Capital announced its $25 million investment in Soff-Cut International, Inc., a leading designer and manufacturer of specialized Ultra Early Entry™ concrete saws for the commercial and residential construction markets. American Capital's investment took the form of a senior term loan and senior and junior subordinated debt and supported Westar Capital LLC's debt recapitalization of its portfolio company Soff-Cut. American Capital is also providing a revolving credit facility.
Founded in 1988, Corona, CA headquartered Soff-Cut is a designer and manufacturer of Ultra Early Entry™ concrete saws. Soff-Cut's patented Ultra Early Entry™ design and technology enables contractors to cut control joints in concrete 1-2 hours after finishing and before final set. This procedure relieves the pressure and tension in the concrete as it hydrates and begins to set and thereby minimizes the incidence of random cracking during the curing process, providing a significant cost and technological advantage. The company's main product categories are saws, diamond blades and accessories. Soff-Cut holds 26 U.S. patents covering its extensive product offering and 21 international patents related to its Ultra Early Entry™ technology Soff-Cut distributes its products through construction equipment dealers both in the U.S. and internationally.
Click here for more information about Soff-Cut.
Contact Frank Do, Managing Director, at (818) 676-1222.
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$58 Million in Two New Portfolio Companies: Evenflo Company Inc., Schoor DePalma Inc.
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In August, American Capital invested $58 million in two new portfolio companies. One company, Evenflo Company Inc., is a leading supplier of juvenile products for children ranging from infants to preschoolers. The investment supported Harvest Partners Inc.'s acquisition of Evenflo from Kohlberg, Kravis Roberts & Co. The other company, Schoor DePalma Inc., is a leading diversified provider of design and engineering services. The investment supported Trivest Partners L.P.'s recapitalization. American Capital's investments in the two companies include senior debt, a second lien note and equity. In addition, Schoor DePalma management is investing in Schoor DePalma common stock. Employee shareholders retain a significant share of Schoor DePalma's equity.
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Evenflo Company Inc.
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 Headquartered in Vandalia, Ohio, Evenflo manufactures a diverse portfolio of juvenile products including car seats, baby bottles, safety gates, strollers, travel systems, activity centers and infant carriers. Evenflo's portfolio of well-known brands includes Evenflo®, Snugli®, Exersaucer® and Gerry®. The company's customers include prominent retailers such as Wal-Mart, Target, Toys "R" Us, Kmart and Burlington Coat Factory. Evenflo holds approximately 300 patents and has licensing agreements with popular children's brands such as Disney Babies®, Baby Looney Tunes®, Barbie®, HotWheels® and OshKosh B'Gosh®. Evenflo, which recorded 2003 sales of approximately $300 million, has 17 manufacturing facilities, warehouses and offices throughout the United States, as well as in Mexico, Canada, mainland China, Hong Kong and Taiwan, and employs nearly 1,500.
For more information about Evenflow click here.
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Schoor DePalma Inc.
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 Founded in 1968, Manalapan, NJ headquartered Schoor DePalma is a single-source provider of design and engineering services to the commercial and government sectors. The company provides its broad base of more than 500 clients a wide range of services through its eight divisions: real estate, environmental, facilities, traffic and planning, municipal services, water resources, transportation and construction engineering services. Services include those related to all phases of commercial, corporate and residential development. The company's customers include municipalities, boards, agencies, authorities, bi-state authorities and companies in various industries such as real estate development, insurance, banking, utilities and construction. Schoor DePalma employs approximately 600 in twelve regional offices in New Jersey, New York and Pennsylvania. The company has grown revenues at an annualized rate of approximately 17% since 2000 and was recently listed as the one the Top 150 Global Design Firms by Engineering News Record.
For more information about Schoor DePalma click here.
Contact Brian Graff, Managing Director, or call (212) 213-2009.
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$11 million in Sanlo Manufacturing Co., Inc.
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 In August, American Capital invested $11 million in Sanlo Manufacturing Co., Inc., a leading manufacturer and distributor of coated cable, cable assembly products and accessories, in support of its acquisition by Cortec Group. American Capital's investment took the form of senior and junior subordinated debt with warrants. Merrill Lynch Capital is providing a revolving loan and invested in senior debt. Cortec Group invested in the common equity of Sanlo and is its majority owner. Additionally, Sanlo's senior management has invested in the transaction.
Founded in 1957, Sanlo's operations are housed in its Michigan City, Indiana facility. Sanlo specializes in custom mechanical cable assemblies and in the extrusion of vinyl, nylon, and other thermoplastic coatings over aircraft type cable, wire rope and strand.
Click here for more information about Sanlo.
Contact Brian Graff, Managing Director, or call (212) 213-2009.
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$43 Million in HMS Healthcare, Inc.
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In August, American Capital invested $43 million in HMS Healthcare, Inc., a holding company established for the acquisition of Sloans Lake Managed Care ("SLMC") and PPOM LLC, two independent non-risk access preferred provider organizations ("PPOs"). American Capital's investment took the form of senior subordinated debt, junior subordinated debt with warrants and preferred and common equity. GE Capital Corporation, a unit of General Electric Corporation (NYSE: GE), Royal Bank of Canada (NYSE: RY), Merrill Lynch Capital, LaSalle Bank and Key Bank (NYSE: KEY) are providing a revolving credit facility and senior term debt. American International Group Inc. (NYSE: AIG) also invested in the subordinated debt and the junior subordinated debt. KRG Capital Partners is the majority owner and lead sponsor of HMS Healthcare.
PPOs contract with providers of healthcare services, aggregating together a network, which they then offer (or "lease") to payors, including insurance carriers, self-insured employers, union trusts and third party administrators ("TPAs"). Providers receive increased patient volume, while payors access cost effective healthcare for their benefit plan enrollees. SLMC, based in Denver, CO, maintains the largest access PPO network in Colorado, with a customer base including nearly all insurance carriers operating in the state. PPOM, based in Southfield, MI, maintains the largest access PPO network in Michigan and also operates in Ohio and Indiana. The combined entity will provide access to healthcare for approximately 1.5 million people and have direct relationships with more than 500 hospitals and 60,000 physicians.
Click here for more information about HMS.
Contact Darin Winn, Managing Director or call (214) 273-6650.
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$35 million in Hopkins Manufacturing Corp.
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 In July, American Capital invested $35 million in Hopkins Manufacturing Corp., a leading manufacturer and marketer of specialized towing products and functional accessories for the automotive and recreational vehicle aftermarket. American Capital's investment took the form of senior and junior subordinated debt and redeemable preferred equity and supported the acquisition of Hopkins by Friend Skoler Equity Investors LP from Harbour Group. Antares Capital Corporation led the senior financing.
Founded in 1953 and headquartered in Emporia, KS, Hopkins is a manufacturer and marketer of specialized towing products and accessories for the automotive and recreational vehicle aftermarket. The company sells over 2,700 SKUs under well-recognized brand names, including Hoppy®, LiteMate®, TAP™, BrakeBuddy®, FloTool™, SpillSaver® and Spillmaster®. The Company sells a wide range of vehicle-to-trailer wiring products including adapters, connectors, electronic brake controllers, and converters, as well as the leading RV supplemental tow brake system and a variety of automotive accessories including ice scrapers, snow brushes, flow control spouts, funnels, oil change kits, cup holders, headlight aimers, brushes and squeegees.
Click here for more information about Hopkins.
Contact David Ehrenfest Steinglass, Managing Director, or call (301) 951-6122.
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$43 Million in Future Food LP
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 In July, American Capital invested $43 million in the buyout of Future Food LP, a producer and marketer of refrigerated dips, spreads and seafood salads, from Transition Capital Partners and Private Equity Partners. American Capital's investment took the form of a senior term loan, senior and junior subordinated debt with warrants and common partnership interests. Texas Capital Bank, a subsidiary of Texas Capital Bancshares (Nasdaq: TCBI), is providing a revolving credit facility and a senior term loan. Future Food management is also investing in the common stock. American Capital owns approximately 99% of Future Food on a fully diluted basis.
Founded in 1984, Carrolton, Texas based Future Food manufactures a complete line of refrigerated dips, spreads, and seafood salads, with a primary focus on seafood dips and salads containing "surimi," imitation crab meat made from Pollack fish. The company offers nearly 50 recipes and over 170 SKUs, including items such as Cajun Krab Dip™, Jalapeño Krab Dip™, Spinach Dip with Water Chestnuts™, and Raspberry Chipotle Dip™. Its three product lines, Santa Barbara Bay, Salads of the Sea and private label brands, are distributed throughout 45 states through major U.S. grocery retailers, club stores, and mass merchandisers. Customers include Costco, Wal-Mart, Super Target, Winn-Dixie, Albertsons, Harris Teeter, Safeway, Kroger, and Ahold. In addition to its headquarters, the company has a manufacturing facility in California and outsources a portion of production to two co-packers in Texas. Future Food has seen sales grow at an annual compounded rate of over 10% since 2000.
Click here for more information about uture Food.
Contact Jeff MacDowell, Principal, or call (214) 273-6633.
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$15 Million Add-On Investment in CIVCO Holdings, Inc.
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 In October, American Capital invested an additional $15 million in its portfolio company CIVCO Holdings ("CIVCO"), supporting KRG Capital's recapitalization of CIVCO. American Capital's investment took the form of junior subordinated debt with warrants and brings the Company's total current investment in CIVCO to $30 million. CIVCO's existing senior lenders increased their senior debt financing in support of the recapitalization.
American Capital first invested in CIVCO in July 2003, supporting KRG Capital's acquisition with a $15 million investment. Headquartered in Kalona, IA, CIVCO's primary product lines include equipment covers, imaged-guided biopsy systems, ultrasound supplies and imaging equipment positioning systems. The Company operates out of two facilities in Kalona, IA and Sarasota, FL and employs over 120. Customers include GE Healthcare, Siemens Medical Systems Inc., Philips Medical Systems, B-K Medical and Boston Scientific.
Click here for more information about CIVCO.
Contact Darin Winn, Managing Director, or call (214) 273-6650.
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$7 Million Add-On Investment for Acquisition by 3SI Security Systems
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 In September, American Capital invested an additional $7 million in its portfolio company 3SI Security Systems ("3SI") to support the acquisition of the assets of U.S. Currency Protection Corp. ("USCPC"). American Capital's additional investment took the form of junior and senior subordinated debt and brings the Company's total current investment in 3SI to $65 million. Union Bank of California NA provided the original revolving credit facility and senior term loans to 3SI and is increasing the senior debt facility for this acquisition.
American Capital first invested in 3SI in July 2002, supporting Lincolnshire Equity Fund II's acquisition. In 2003, American Capital purchased 3SI from Lincolnshire in a buyout funded with $58 million of funds from American Capital along with capital from Union Bank of California NA. 3SI is the leading global provider of security solutions utilizing dye-based staining solutions to protect currency from theft in banks, ATMs, safes and transport applications.
For over 40 years, Fountain Hills, AZ-headquartered USCPS has been a designer, manufacturer and supplier of dye-packs used to protect and recover cash from bank robberies. Its new tracking product allows customers and law enforcement agencies to track stolen cash over the Internet in real time and assist in recovering cash and apprehending thieves.
The combined companies, based in Exton, PA, will have over 150 employees in two U.S. facilities in Pennsylvania and Georgia and the European headquarters in Belgium. The united entity will serve a well diversified customer base of approximately 30,000 locations, including numerous top financial institutions worldwide: 86 of the top 100 banks in the U.S. and 24 of the top 50 banks in Europe.
Click here for more information about 3SI.
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$14 Million Add-On Investment for Acquisition by Dynisco LLC
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 In September, American Capital invested an additional $14 million in its portfolio company Dynisco LLC to support Dynisco's acquisition of Alpha Technologies US LP, the leading global designer and manufacturer of precision instruments and software for the rubber processing industry. American Capital's investment took the form of senior subordinated debt, intermediate subordinated debt with warrants and common equity, bringing American Capital's total investment in Dynisco to $28 million. A syndicate led by Antares Capital Corporation is providing a revolving credit facility and invested in senior term loans. Audax Private Equity invested additional equity in the transaction and maintains its majority ownership of Dynisco.
In business since 1968, Akron, OH-headquartered Alpha Technologies manufactures precision rubber and polymer laboratory instrumentation and data acquisition and analysis software systems. Alpha's core product line of rheometers analyzes physical properties such as viscosity and elasticity of rubber throughout the manufacturing process. The Company's software is capable of collecting, tracking and integrating data from a variety of testing devices both within an industrial lab and in the production process. Alpha also provides services for its precision instruments, including aftermarket calibration, repair and preventative maintenance in over 60 countries through its own service forces and local agents. In addition to its Ohio headquarters, Alpha has sales offices throughout Europe and Asia.
American Capital first invested $15 million in Dynisco in July 2004, supporting Audax's acquisition. Headquartered in Franklin, MA, Dynisco was the first to design a transducer specifically used to measure the melt pressure of plastic during the extrusion process. The company sells its products under the Dynisco and Beringer brand names. Dynisco outsources the manufacturing of components for its products while focusing its internal efforts on engineering, design, assembly and testing. The company has assembly facilities in the United States and Germany and sales offices throughout the European Union. Dynisco serves a diverse group of customers in North America, Europe, Asia and Latin America, including OEMs, resin producers, distributors and end users served directly by Dynisco.
Click here for more information about Dynisco.
Contact David Ehrenfest Steinglass, Managing Director, or call (301) 951-6122.
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$22 Million Committed to Add-on Investment in Futurelogic, Inc.
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 In August, American Capital committed $22 million to an add-on investment in Futurelogic Inc., a leading designer and developer of thermal printer solutions, supporting ClearLight Partners LLC's refinancing of Futurelogic. Proceeds of the new funding were be used, in part, to repay approximately $11 million in senior notes held by American Capital affiliates. An existing American Capital revolving loan facility was terminated. American Capital's commitment took the form of a new revolving loan facility and senior term loans. The net increase in American Capital's investment in Futurelogic is approximately $11 million, for a total of approximately $35 million, including interest that has been paid in kind. American Capital retains an equity interest in Futurelogic. Futurelogic management also retains an equity interest in the company.
American Capital first invested in Futurelogic in December 2002, supporting ClearLight Partners' acquisition with a $27 million investment. Futurelogic, headquartered in Glendale, CA, is a leading designer and developer of customized small format embedded thermal printing solutions, with dominant market share in the gaming industry. Thermal printing is the accepted technology for transaction-based receipt printing, such as a voucher for a slot machine, a bar code label used for tracking purposes and pay-at-the-pump gasoline purchases.
Click here for more information about Futurelogic.
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Exit Events & Prepayments
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American Capital has received $74 million in proceeds from exits and repayments.
In September, American Capital announced it had received prepayments of debt investments of $25 million by two portfolio companies, realizing $1.2 million in gains. American Capital also announced that it had completely exited another portfolio company, receiving $6 million in repayments and realizing a $7.3 million loss on its investment, which had previously been depreciated and on non-accrual status.
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Nancy's Specialty Foods, Inc.
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In September 2003 American Capital invested $15 million in Nancy's Specialty Foods, Inc., a leading producer of frozen gourmet quiche entrées, appetizers and desserts. American Capital's investment took the form of senior subordinated debt and supported the recapitalization of Nancy's by Kohlberg & Co. In July 2004, the company prepaid its debt in full. American Capital earned a 28% compounded annual rate of return on its investment including all fees, interest and principal received over the life of American Capital's investment in the company.
Click here for more information about the Nancy's transaction.
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Roadrunner Freight Systems, Inc.
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In July 2003, American Capital invested $33 million in the acquisition of Roadrunner Freight Systems, Inc., a transportation services company based in Milwaukee, WI. American Capital's investment took the form of senior and junior subordinated debt with warrants and common equity. In August 2004, the company prepaid $10 million of American Capital's senior subordinated note as a result of a refinancing by its existing senior lender, resulting in a gain of $1.2 million for American Capital.
Click here for more information about the Roadrunner transaction.
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Fulton Bellows & Components, Inc.
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In March 2000, American Capital invested in the buyout of Fulton Bellows & Components, Inc. Fulton Bellows was a newly formed corporation that purchased several operating divisions and product lines of Robertshaw Controls Company, a subsidiary of Invensys. Subsequently, American Capital invested additional funding for working capital and to finance the acquisition of certain assets of Standard-Thomson Company. In June 2003, Fulton Bellows filed for Chapter 11 bankruptcy, and in July 2004 the U.S. Bankruptcy Court approved a cash sale of Fulton to a third party investor. In June 2004 American Capital sold its $8 million senior subordinated debt investment in Fulton Bellows & Components Inc. for a nominal price. American Capital realized a $6.8 million loss. Including cash collections of fees and interest, this resulted in a 32% negative rate of return. In August 2004, American Capital received net proceeds from the sale of $6 million, realizing a loss of $7.3 million on its remaining investments in Fulton. As of June 30, 2004, American Capital's remaining debt investments in Fulton were carried at a fair value of $6 million and were on non-accrual. Over the life of its investment in the company, American Capital has realized a total loss of $25 million in Fulton resulting in a negative compounded rate of return of 26% on its investment including all fees, interest and principal received.
Click here for more information about the Fulton transaction.
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In July, American Capital announced it had received prepayments of debt investments on the balance of $60 million of originally invested capital by two portfolio companies, realizing $1.4 million in gains.
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Vigo Remittance Corporation
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In June 2004 American Capital was repaid the remaining $33 million balance of its $50 million senior debt and senior subordinated debt investment in Vigo Remittance Corporation ("Vigo"), the largest privately held worldwide electronic funds transfer service firm. Vigo has refinanced the American Capital senior and senior subordinated debt through a new senior debt facilty led by Merrill Lynch Capital, as part of an institutional, five member lender group. American Capital realized a $1.3 million gain, earning a 24% compounded annual rate of return on its debt investment, including all fees, interest and principal received over the life of American Capital's investment in the company. Reflecting its continued commitment to the Company, American Capital retains its 2% common stock warrant interest in Vigo.
Click here for more information about the Vigo transaction.
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Alemite Corporation
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In July 2004 American Capital was repaid its $10.3 million senior subordinated debt investment in Alemite Corporation, a leading manufacturer of high-quality lubrication equipment. Alemite prepaid American Capital's subordinated debt investment in two years through internally generated funds and with additional financing from Alemite's existing senior lender. American Capital realized a $0.1 million gain, earning a 19% compounded annual rate of return on its debt investment, including all fees, interest and principal received over the life of American Capital's investment in the company. American Capital retains its warrant investment in Alemite.
Click here for more information about the Alemite transaction.
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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.AmericanCapital.com
(800) 248-9340
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