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| American Capital Announces Q2 2009 Results | ||||
BETHESDA, Md., Aug 04, 2009 /PRNewswire-FirstCall via COMTEX/ -- American Capital ("ACAS" or the "Company") (Nasdaq: ACAS) announced net operating income ("NOI") for the quarter ended June 30, 2009 of $20 million, or $0.09 per diluted share. Earnings (loss) less appreciation and depreciation ("Realized (Loss) Earnings") for the quarter was $(306) million, or $(1.41) per diluted share. For the quarter ended June 30, 2009, the Company reported a net loss of $(547) million, or $(2.52) per diluted share. Q2 2009 HIGHLIGHTS
NET OPERATING INCOME NOI decreased 87% to $0.09 per diluted share for the quarter ended June 30, 2009, compared to $0.71 per diluted share for the prior year quarter. Relative to the first quarter of 2009, NOI in the second quarter was lower by $0.22 per diluted share primarily due to additional reversals of prior quarter accrued payment in kind ("PIK") interest and dividends (which are non-cash items) and increased interest costs related to default and rating downgrade provisions. REALIZED (LOSS) EARNINGS Realized (Loss) Earnings decreased to $(1.41) per diluted share for the quarter ended June 30, 2009, compared to $0.95 per diluted share for the prior year quarter. The Realized (Loss) Earnings for the quarter included a realized loss of $(196) million, or $(0.90) per diluted share, related to the sale of our portfolio company Consolidated Bedding, Inc. NET LOSS Net loss increased to $(2.52) per diluted share for the quarter ended June 30, 2009, compared to $(0.34) per diluted share for the prior year quarter. For the quarter ended June 30, 2009, net unrealized depreciation of portfolio investments totaled $(311) million. The primary components of the net unrealized depreciation were as follows:
FINANCIAL HIGHLIGHTS As of June 30, 2009, NAV per share was $8.76, down from $12.32 per share as of March 31, 2009 and $15.41 per share as of December 31, 2008. NAV per share was $7.42 as of June 30, 2009, when adjusted for the $207 million accrued dividend payable in stock and for the 67 million shares to be distributed on August 7, 2009. Based on Realizable Value, NAV per share was $12.83 as of June 30, 2009, down from $17.07 per share as of March 31, 2009 and $20.63 per share as of December 31, 2008. Realizable Value NAV per share was $10.52 as of June 30, 2009, when adjusted for the $207 million accrued dividend payable in stock and for the 67 million shares to be distributed on August 7, 2009. "While we believe the broader economy has begun to recover in the second half of 2009, American Capital continues to face challenges," said Malon Wilkus, Chairman and Chief Executive Officer. "We remain focused on resolving the defaults with each of our unsecured creditor groups; providing operational, managerial and financial support to our portfolio companies; and improving operational efficiencies." FINANCING UPDATE AND COVENANT BREACHES The Company remains in default on $2.3 billion of unsecured credit arrangements outstanding as of June 30, 2009. The Company was able to reduce its outstanding securitized debt by $59 million during the quarter ended June 30, 2009. During the quarter ended June 30, 2009, the Company incurred expenses of $7 million related to its current debt restructuring efforts. In addition, the Company incurred $19 million during the quarter of interest expense as a result of default and rating agency downgrade provisions. The Company continues to be below the 200% asset coverage ratio set forth in the Investment Company Act of 1940 and, as a result, the Company is generally restricted from issuing any new debt except to refinance existing debt. This does not restrict the use of cash from operations, allowing the reinvestment of proceeds from realizations of portfolio exits. The Company believes that it has sufficient liquidity to meet its currently scheduled debt amortization and the investment needs within its portfolio. PORTFOLIO LIQUIDITY AND PERFORMANCE In the second quarter of 2009, $125 million of proceeds were received from realizations of portfolio investment repayments and exits, which were 1% higher than the prior quarter's valuations of each investment. There was $39 million in new committed investments in the quarter. The weighted average effective interest rate on the Company's debt investments as of June 30, 2009, was 9.7%, 100 basis points lower than as of December 31, 2008. Cash and cash equivalents totaled $183 million as of June 30, 2009 and currently total approximately $300 million. "While we expect to experience losses and depreciation during a severe recession," said John Erickson, Chief Financial Officer, "we continue to work hard to recover value from our underperforming companies. Our experience from the last recession leads us to believe that we will recover value in our portfolio companies as the economy strengthens. Despite having depreciation in some of our investments, we also have many fine investments such as People Media, where we generated a $15 million gain, a 30% annual return and $57 million in cash proceeds in July on our investment, despite one of the worst environments for middle market M&A. With our large and diverse portfolio, we continue to generate liquidity despite the poor M&A environment, as evidenced by the $125 million of proceeds during the second quarter. That trend continued in July, as we sold over $100 million of investments at approximately their fair value. We believe the worst is behind us." As of June 30, 2009, loans with a fair value of $310 million were on non-accrual. The $310 million fair value of non-accruing loans represented 7.2% of total loans at fair value as of June 30, 2009, compared to the $214 million fair value of non-accrual loans representing 4.4% of total loans at fair value as of March 31, 2009. 2009 DIVIDENDS On July 31, 2009, American Capital announced the results of its stockholders' elections relating to the Company's dividend previously declared by its Board of Directors on June 11, 2009. The dividend of $1.07 per share is payable on August 7, 2009 to stockholders of record as of the close of business on June 22, 2009, with an ex-dividend date of June 18, 2009. Stockholders had until July 24, 2009 to elect whether to receive the dividend in cash (up to an aggregate maximum of 10% of the total dividend paid) or in shares of common stock. Due to the original terms of the dividend, stockholders who elected to receive cash will receive a combination of cash and common stock. Based on stockholder elections and the price of American Capital's common stock, the dividend will consist of approximately $24 million in cash and approximately 67 million shares of common stock. The amount of cash elected to be received was greater than the cash limit of 10% of the aggregate dividend amount, and therefore stockholders who elected to receive all cash will receive a combination of cash and stock. Stockholders electing to receive the dividend in all cash, will receive cash in the amount of $0.185 per share or 17% of the $1.07 dividend and 0.275 shares of common stock or 83% of the total dividend for each share of common stock they owned on the record date. The number of shares of common stock comprising the stock portion was calculated based on a price of $3.2199 per share, the average of the volume weighted trading price per share on the NASDAQ Global Select Market on July 27, 28 and 29, 2009. AMERICAN CAPITAL, LTD.
CONSOLIDATED BALANCE SHEETS
As of June 30, 2009, December 31, 2008 and June 30, 2008
(in millions)
Q2 2009 Versus Q4
2008
Q2 Q4 ------------------
2009 2008 $ %
---- ---- --- ---
(unaudited)
Assets
Investments at fair value
(cost of $10,295, $10,691
and $10,680, respectively) $6,193 $7,427 $(1,234) -17%
Cash and cash equivalents 183 209 (26) -12%
Restricted cash and cash equivalents 55 71 (16) -23%
Interest receivable 43 44 (1) -2%
Other assets 154 159 (5) -3%
--- --- -- --
Total assets $6,628 $7,910 $(1,282) -16%
====== ====== ======= ===
Liabilities and Shareholders' Equity
Debt $4,321 $4,428 $(107) -2%
Derivative and option agreements
(cost of $0, $(20) and $1,
respectively) 92 222 (130) -59%
Accrued dividends payable 231 - 231 100%
Other liabilities 94 105 (11) -10%
-- --- --- ---
Total liabilities 4,738 4,755 (17) -
----- ----- --- ---
Commitments and contingencies
Shareholders' equity:
Undesignated preferred
stock, $0.01 par value,
5.0 shares authorized, 0
issued and outstanding - - - -
Common stock, $0.01 par
value, 1,000.0 shares
authorized, 225.8, 214.3
and 214.0 issued and
215.7, 204.7 and 207.2
outstanding, respectively 2 2 - -
Capital in excess of par value 6,605 6,545 60 1%
(Distributions in excess
of) undistributed net
realized earnings (516) 76 (592) NM
Net unrealized depreciation of
investments (4,201) (3,468) (733) -21%
------ ------ ---- ---
Total shareholders' equity 1,890 3,155 (1,265) -40%
----- ----- ------ ---
Total liabilities and
shareholders' equity $6,628 $7,910 $(1,282) -16%
====== ====== ======= ===
Q2 2009 Versus
Q2 2008
Q2 --------------
2008 $ %
---- - -
(unaudited)
Assets
Investments at fair value (cost of $10,295,
$10,691 and $10,680, respectively) $9,687 $(3,494) -36%
Cash and cash equivalents 262 (79) -30%
Restricted cash and cash equivalents 229 (174) -76%
Interest receivable 42 1 2%
Other assets 236 (82) -35%
--- --- ---
Total assets $10,456 $(3,828) -37%
======= ======= ===
Liabilities and Shareholders' Equity
Debt $4,475 $(154) -3%
Derivative and option agreements (cost of
$0, $(20) and $1, respectively) 76 16 21%
Accrued dividends payable 209 22 11%
Other liabilities 100 (6) -6%
--- -- --
Total liabilities 4,860 (122) -3%
----- ---- --
Commitments and contingencies
Shareholders' equity:
Undesignated preferred stock, $0.01 par
value, 5.0 shares authorized, 0 issued and
outstanding - - -
Common stock, $0.01 par value, 1,000.0
Shares authorized, 225.8, 214.3 and 214.0
issued and 215.7, 204.7 and 207.2
outstanding, respectively 2 - -
Capital in excess of par value 6,457 148 2%
(Distributions in excess of) undistributed
net realized earnings 226 (742) NM
Net unrealized depreciation of investments (1,089) (3,112) -286%
------ ------ ----
Total shareholders' equity 5,596 (3,706) -66%
----- ------ ---
Total liabilities and shareholders'
Equity $10,456 $(3,828) -37%
======= ======= ===
AMERICAN CAPITAL, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three and Six Months Ended June 30, 2009 and 2008
(in millions, except per share data)
(unaudited)
Three Months Ended
Three Months Ended June 30, 2009
June 30, Versus 2008
---------------- --------------
2009 2008 $ %
---- ---- - -
OPERATING INCOME:
Investing operating income(1) $126 $231 $(105) -45%
Asset management and advisory
operating income(2) 14 32 (18) -56%
-- -- --- ---
Total operating income 140 263 (123) -47%
--- --- ---- ---
OPERATING EXPENSES:
Interest 60 48 12 25%
Salaries, benefits and stock-based
compensation 47 57 (10) -18%
General and administrative 24 20 4 20%
-- -- -- --
Total operating expenses 131 125 6 5%
--- --- -- --
OPERATING INCOME BEFORE INCOME TAXES 9 138 (129) -93%
-- --- ---- ---
Benefit for income taxes 11 7 4 57%
-- -- -- --
NET OPERATING INCOME 20 145 (125) -86%
-- --- ---- ---
Net gain on extinguishment of debt - - - -
-- -- -- --
Net realized (loss) gain on investments
Portfolio company investments (308) 63 (371) NM
Taxes on net realized gain - (3) 3 100%
Foreign currency transactions - 1 (1) -100%
Derivative and option agreements (18) (12) (6) -50%
--- --- -- ---
Total net realized (loss) gain on
investments (326) 49 (375) NM
---- -- ---- --
REALIZED (LOSS) EARNINGS (306) 194 (500) NM
---- --- ---- --
Net unrealized (depreciation)
appreciation of investments
Portfolio company investments (311) (336) 25 7%
Foreign currency translation 66 - 66 100%
Derivative and option agreements and
other 4 72 (68) -94%
-- -- --- ---
Total net unrealized depreciation of
investments (241) (264) 23 9%
---- ---- -- --
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS ("NET LOSS") $(547) $(70) $(477) -681%
===== ==== ===== ====
NET OPERATING INCOME PER
COMMON SHARE*:
Basic $0.09 $0.71 $(0.62) -87%
Diluted $0.09 $0.71 $(0.62) -87%
REALIZED (LOSS) EARNINGS PER
COMMON SHARE*:
Basic $(1.41) $0.95 $(2.36) NM
Diluted $(1.41) $0.95 $(2.36) NM
NET LOSS PER COMMON SHARE*:
Basic $(2.52) $(0.34) $(2.18) -641%
Diluted $(2.52) $(0.34) $(2.18) -641%
WEIGHTED AVERAGE SHARES OF COMMON
STOCK OUTSTANDING:
Basic 217.0 204.4 12.6 6%
Diluted 217.0 204.4 12.6 6%
DIVIDENDS DECLARED PER COMMON SHARE $1.07 (3) $1.03 $0.04 4%
Six Months Ended
Six Months Ended June 30, 2009
June 30, Versus 2008
----------------- ----------------
2009 2008 $ %
---- ---- -- --
OPERATING INCOME:
Investing operating income(1) $307 $486 $(179) -37%
Asset management and advisory
operating income(2) 28 69 (41) -59%
-- -- --- ---
Total operating income 335 555 (220) -40%
--- --- ---- ---
OPERATING EXPENSES:
Interest 112 111 1 1%
Salaries, benefits and
stock-based compensation 100 113 (13) -12%
General and administrative 50 43 7 16%
-- -- -- --
Total operating expenses 262 267 (5) -2%
--- --- -- --
OPERATING INCOME BEFORE INCOME
TAXES 73 288 (215) -75%
-- --- ---- ---
Benefit for income taxes 11 8 3 38%
-- -- -- --
NET OPERATING INCOME 84 296 (212) -72%
-- --- ---- ---
Net gain on extinguishment of
debt 12 - 12 100%
-- -- -- ---
Net realized (loss) gain on
investments
Portfolio company investments (387) 91 (478) NM
Taxes on net realized gain - (4) 4 100%
Foreign currency transactions (2) 6 (8) NM
Derivative and option
agreements (68) (11) (57) -518%
--- --- --- -----
Total net realized (loss) gain
on investments (457) 82 (539) NM
---- -- ---- --
REALIZED (LOSS) EARNINGS (361) 378 (739) NM
---- --- ---- --
Net unrealized (depreciation)
appreciation of investments
Portfolio company investments (836) (1,333) 497 37%
Foreign currency translation (3) 73 (76) NM
Derivative and option
agreements and other 106 (1) 107 NM
--- -- --- --
Total net unrealized
depreciation of investments (733) (1,261) 528 42%
---- ------ --- --
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS
("NET LOSS") $(1,094) $(883) $(211) -24%
======= ===== ===== ===
NET OPERATING INCOME PER
COMMON SHARE*:
Basic $0.40 $1.48 $(1.08) -73%
Diluted $0.40 $1.48 $(1.08) -73%
REALIZED (LOSS) EARNINGS PER
COMMON SHARE*:
Basic $(1.70) $1.89 $(3.59) NM
Diluted $(1.70) $1.89 $(3.59) NM
NET LOSS PER COMMON SHARE*:
Basic $(5.16) $(4.42) $(0.74) -17%
Diluted $(5.16) $(4.42) $(0.74) -17%
WEIGHTED AVERAGE SHARES OF
COMMON STOCK OUTSTANDING:
Basic 211.9 199.8 12.1 6%
Diluted 211.9 199.8 12.1 6%
DIVIDENDS DECLARED PER COMMON
SHARE $1.07 $2.04 $(0.97) -48%
NM = Not meaningful.
* May not recalculate due to rounding.
(1) The investing operating income consists of interest, dividends,
prepayment fees and other investment fee income.
(2) The asset management and advisory operating income consists primarily
of asset management fees and reimbursements, dividends from portfolio
company fund managers, transaction structuring fees, equity and loan
financing fees, portfolio company management and administrative fees
and other fee income.
(3) Dividend payable on August 7, 2009 in the form of $24 million in cash
and approximately 67 million shares.
AMERICAN CAPITAL, LTD.
OTHER FINANCIAL INFORMATION
Three Months Ended June 30, 2009, March 31, 2009 and June 30, 2008
(in millions, except per share data)
(unaudited)
Q2 2009 Versus Q1 2009
----------------------
Q2 2009 Q1 2009 $ %
------- ------- --- ---
Assets Under Management:
American Capital Assets at
Fair Value(1) $6,628 $7,211 $(583) -8%
Externally Managed Assets at
Fair Value(2) 4,070 3,659 411 11%
------ ------ ----- --
Total $10,698 $10,870 $(172) -2%
======= ======= ===== ==
Capital Resources Under Management:
American Capital Assets at
Fair Value plus Available
Capital Resources(1) $ 6,628 $ 7,211 $(583) -8%
Externally Managed Assets at
Fair Value plus Available
Capital Resources(2) 4,294 3,884 410 11%
------ ------ ----- --
Total $10,922 $11,095 $(173) -2%
======= ======= ===== ==
New Investments:
Senior Debt $2 $27 $(25) -93%
Subordinated Debt 8 5 3 60%
Preferred Equity 3 8 (5) -63%
Common Equity 26 - 26 100%
Structured Products - - - -
------ ------ ----- --
Total $39 $40 $(1) -3%
=== === === ==
Investments in Managed Funds $- $- $- -
Financing for Private Equity
Buyouts - - - -
Direct Investments - - - -
Structured Products - - - 100%
Add-on Financing for Working
Capital in Distressed
Situations 36 25 11 44%
Add-on Financing for Growth
and Working Capital 2 - 2 100%
Add-on Financing for Acquisitions - - - -
Add-on Financing for
Recapitalizations 1 15 (14) -93%
------ ------ ----- --
Total $39 $40 $(1) -3%
=== === === ==
Realizations:
Scheduled Principal Amortization $15 $10 $5 50%
Loan Syndications and Sales 21 8 13 163%
Principal Prepayments 35 42 (7) -17%
Payment of Accrued Payment-in-kind
Interest and Dividends and
Original Issue Discount 1 4 (3) -75%
Sale of Equity Investments 53 15 38 253%
------ ------ ----- ---
Total $125 $79 $46 58%
==== === === ==
Appreciation, Depreciation,
Gain and Loss:
Gross Realized Gain $35 $8 $27 338%
Gross Realized Loss (343) (87) (256) -294%
---- --- ---- ----
Portfolio Net Realized (Loss)
Gain (308) (79) (229) -290%
Taxes on Realized Net Gain - - - -
Foreign Currency - (2) 2 100%
Option Agreement - (44) 44 100%
Derivative Agreements (18) (6) (12) -200%
---- --- ---- ----
Net Realized (Loss) Gain (326) (131) (195) -149%
---- --- ---- ----
Gross Unrealized Appreciation of
Private Finance Portfolio
Investments 187 33 154 467%
Gross Unrealized Depreciation of
Private Finance Portfolio
Investments (476) (453) (23) -5%
---- --- ---- ----
Net Unrealized Depreciation of
Private Finance Portfolio
Investments (289) (420) 131 31%
Net Unrealized Appreciation
(Depreciation) of European
Capital Limited (409) 43 (452) NM
Net Unrealized Appreciation
(Depreciation) of American
Capital Agency Corp. 31 (18) 49 272%
Net Unrealized Appreciation
(Depreciation) of American
Capital, LLC 4 (162) 166 NM
Net Unrealized Appreciation
(Depreciation) of Structured
Products 37 (46) 83 NM
Reversal of Prior Period Net
Unrealized Depreciation Upon
Realization 315 78 237 304%
---- --- ---- ----
Net Unrealized Depreciation
of Portfolio Investments (311) (525) 214 41%
Foreign Currency Translation 66 (69) 135 NM
Derivative Agreements and Other 4 53 (49) -92%
Reversal of Prior Period Net
Unrealized Depreciation
(Appreciation) on Option
Agreements - 49 (49) -100%
---- --- ---- ----
Net Unrealized Depreciation
of Investments (241) (492) 251 51%
---- --- ---- ----
Net Gains, Losses,
Appreciation and
Depreciation $(567) $(623) $56 -9%
===== ===== === ==
Other Financial Data:
NAV per Share $8.76 $12.32 $(3.56) -29%
NAV per Share Adjusted for Q2
2009 Stock Dividend(3) $7.42 N/A N/A N/A
NAV per Share Based on
Realizable Value(4) $12.83 $17.07 $(4.24) -25%
Financial Liabilities at Cost $4,321 $4,377 $(56) -1%
Financial Liabilities at
Fair Value $3,189 $2,722 $467 17%
Market Capitalization $692 $403 $289 72%
Total Enterprise Value $4,830 $4,692 $138 3%
Credit Quality:
Weighted Average Effective
Interest Rate on Debt
Investments at Period End 9.7% 9.5% 0.2% 2%
Loans on Non-Accrual at Face $1,025 $1,103 $(78) -7%
Loans on Non-Accrual at
Fair Value $310 $214 $96 45%
Past Due Loans at Face $45 $41 $4 10%
Past Due and Non-Accrual
Loans at Face as a
Percentage of Total Loans 19.4% 18.1%
Non-Accrual Loans at Fair
Value as a Percentage
of Total Loans 7.2% 4.4%
Number of Portfolio Companies
on Non-Accrual and Past Due 40 38
Debt to Equity Conversions
at Cost $355 $35 $320 100%
Return on Equity:
LTM Net Operating Income
Return on Average Equity
at Cost 4.3% 6.1%
LTM Realized (Loss) Earnings
Return on Average Equity
at Cost -3.3% 4.3%
LTM Loss on Average Equity -90.6% -64.2%
Current Quarter Net Operating
Income Return on Average
Equity at Cost Annualized 1.3% 3.9%
Current Quarter Realized (Loss)
Earnings Return on Average
Equity at Cost Annualized -19.3% -3.4%
Current Quarter Loss on Average
Equity Annualized -96.2% -75.4%
Q2 2009
Versus Q2 2008
----------------
Q2 2008 $ %
------- ------- ---
Assets Under Management:
American Capital Assets at Fair Value(1) $10,456 $(3,828) -37%
Externally Managed Assets at Fair Value(2) 7,491 (3,421) -46%
----- ------ ---
Total $17,947 $(7,249) -40%
======= ======= ===
Capital Resources Under Management:
American Capital Assets at Fair Value plus
Available Capital Resources(1) $12,045 $(5,417) -45%
Externally Managed Assets at Fair Value
plus Available Capital Resources(2) 7,934 (3,640) -46%
----- ------ ---
Total $19,979 $(9,057) -45%
======= ======= ===
New Investments:
Senior Debt $111 $(109) -98%
Subordinated Debt 475 (467) -98%
Preferred Equity 82 (79) -96%
Common Equity 150 (124) -83%
Structured Products 100 (100) -100%
--- ---- ----
Total $918 $(879) -96%
==== ===== ===
Investments in Managed Funds $125 $(125) -100%
Financing for Private Equity Buyouts 109 (109) -100%
Direct Investments 50 (50) -100%
Structured Products 100 (100) -100%
Add-on Financing for Working Capital in
Distressed Situations 26 10 38%
Add-on Financing for Growth and Working
Capital 343 (341) -99%
Add-on Financing for Acquisitions 66 (66) -100%
Add-on Financing for Recapitalizations 99 (98) -99%
-- --- ---
Total $918 $(879) -96%
==== ===== ===
Realizations:
Scheduled Principal Amortization $28 $(13) -46%
Loan Syndications and Sales 21 - -
Principal Prepayments 265 (230) -87%
Payment of Accrued Payment-in-kind Interest
and Dividends and Original Issue Discount 16 (15) -94%
Sale of Equity Investments 149 (96) -64%
--- --- ---
Total $479 $(354) -74%
==== ===== ===
Appreciation, Depreciation, Gain and Loss:
Gross Realized Gain $102 $(67) -66%
Gross Realized Loss (39) (304) -779%
--- ---- ----
Portfolio Net Realized (Loss) Gain 63 (371) -589%
Taxes on Realized Net Gain (3) 3 100%
Foreign Currency 1 (1) -100%
Option Agreement - - -
Derivative Agreements (12) (6) -50%
--- -- ---
Net Realized (Loss) Gain 49 (375) NM
-- ---- --
Gross Unrealized Appreciation of Private
Finance Portfolio Investments 151 36 24%
Gross Unrealized Depreciation of Private
Finance Portfolio Investments (443) (33) -7%
--- --- --
Net Unrealized Depreciation of Private
Finance Portfolio Investments (292) 3 1%
Net Unrealized Appreciation (Depreciation)
of European Capital Limited 20 (429) NM
Net Unrealized Appreciation (Depreciation)
of American Capital Agency Corp. (26) 57 NM
Net Unrealized Appreciation (Depreciation)
of American Capital, LLC (17) 21 NM
Net Unrealized Appreciation (Depreciation)
of Structured Products 46 (9) -20%
Reversal of Prior Period Net Unrealized
Depreciation Upon Realization (67) 382 NM
--- --- --
Net Unrealized Depreciation of Portfolio
Investments (336) 25 7%
Foreign Currency Translation - 66 100%
Derivative Agreements and Other 72 (68) -94%
Reversal of Prior Period Net Unrealized
Depreciation (Appreciation) on Option
Agreements - - -
--- --- ---
Net Unrealized Depreciation of
Investments (264) 23 9%
---- -- --
Net Gains, Losses, Appreciation
and Depreciation $(215) $(352) -164%
===== ===== ====
Other Financial Data:
NAV per Share $27.01 $(18.25) -68%
NAV per Share Adjusted for Q2 2009 Stock
Dividend(3) N/A N/A N/A
NAV per Share Based on Realizable Value(4) $30.09 $(17.26) -57%
Financial Liabilities at Cost $4,475 $(154) -3%
Financial Liabilities at Fair Value $4,153 $(964) -23%
Market Capitalization $4,925 $(4,233) -86%
Total Enterprise Value $9,137 $(4,307) -47%
Credit Quality:
Weighted Average Effective Interest Rate on
Debt Investments at Period End 11.2% -1.5% -13%
Loans on Non-Accrual at Face $481 $544 113%
Loans on Non-Accrual at Fair Value $116 $194 167%
Past Due Loans at Face $42 $3 7%
Past Due and Non-Accrual Loans at Face as a
Percentage of Total Loans 8.6%
Non-Accrual Loans at Fair Value as a
Percentage of Total Loans 2.1%
Number of Portfolio Companies on
Non-Accrual and Past Due 24
Debt to Equity Conversions at Cost $30 $325 1083%
Return on Equity:
LTM Net Operating Income Return on Average
Equity at Cost 10.0%
LTM Realized (Loss) Earnings Return on
Average Equity at Cost 13.2%
LTM Loss on Average Equity -17.9%
Current Quarter Net Operating Income Return
on Average Equity at Cost Annualized 8.8%
Current Quarter Realized (Loss) Earnings
Return on Average Equity at Cost
Annualized 11.8%
Current Quarter Loss on Average Equity
Annualized -4.9%
NM = Not meaningful
(1) Includes American Capital's investment in its externally managed
funds.
(2) Includes European Capital (for Q2 2008), American Capital Equity I,
American Capital Equity II, ACAS CLO-1 and ACAS CRE CDO 2007-1.
(3) Dividend payable on August 7, 2009 in the form of $24 million in cash
and approximately 67 million shares.
(4) Realizable Value is a non-GAAP financial measure which does not
represent current fair value or net present value. Realizable Value
is the future value that we anticipate realizing on the settlement or
maturity of our investments.
Refer to the table on the following page for additional information
and discussion regarding the use of non-GAAP financial information.
AMERICAN CAPITAL, LTD.
OTHER FINANCIAL INFORMATION
As of June 30, 2009
(in millions)
(unaudited)
The following table summarizes the current GAAP cost basis and fair value
of our investments as of June 30, 2009 compared to the realizable value,
which is the amount that we currently anticipate realizing on settlement
or maturity of these investments, or realizable value:
Difference
Between
Realizable
Value
GAAP Cost GAAP Fair Realizable GAAP and
Asset Class Basis Value Value Fair Value
----------- --------- --------- ---------- ----------
$7,882 $5,755 $6,126 $371
Private finance
European Capital Limited 1,266 97 97 -
American Capital Agency
Corp. 100 115 115 -
Structured products 952 174 737 563
American Capital, LLC 95 44 44 -
Derivatives, net and other - (87) (143) (56)
--- --- ---- ---
Total $10,295 $6,098 $6,976 $878
======= ====== ====== ====
USE OF NON-GAAP FINANCIAL INFORMATION In addition to the results presented in accordance with generally accepted accounting principles ("GAAP"), this press release includes Realizable Value, a non-GAAP financial measure which management uses in its internal analysis of results, and believes may be informative to investors gauging the quality of the Company's assets and financial performance from a long-term perspective, identifying trends in its results and providing meaningful period-to-period comparisons. Realizable Value is defined as the future value that American Capital currently anticipates realizing on the settlement or maturity of its investments as of the reporting date. It does not represent current fair value or net present value and is based on assumptions of future cash flows as of the reporting date. Accordingly, changes to expectations of future cash flows as a result of events subsequent to the reporting date are not adjusted in the realizable value as of the reporting date. American Capital believes that this non-GAAP financial measure provides information useful to investors because the Company generally intends to hold its assets to settlement or maturity, and there may be material differences between the GAAP fair values of its investments and the amounts the Company expects to realize on settlement or maturity as of the reporting date. This is primarily because the current lack of liquidity in the financial markets has caused investment spreads between the cost of funds and investment income to widen significantly on investments, resulting in current fair values under Statement of Financial Accounting Standards No. 157, Fair Value Measurements, that are materially lower than what the Company currently anticipates realizing on settlement or maturity. American Capital believes that providing investors with Realizable Value in addition to the related GAAP fair value gives investors greater transparency to the information used by management in its financial operational decision-making. Although American Capital believes that this non-GAAP financial measure enhances investors' understanding of its business and performance, Realizable Value should not be considered as an alternative to GAAP basis financial measures. A reconciliation of non-GAAP Realizable Value to GAAP fair value is set forth above. Portfolio Statistics (1) Pre-2000 2000 2001 2002
($in millions, unaudited) -------- ---- ---- ----
------------------------
IRR - Realizable Value - All
Investments(2) 7.8% 8.0% 18.1% 7.3%
IRR - GAAP Fair Value - All
Investments(3) 7.8% 8.0% 18.1% 7.2%
IRR - GAAP Fair Value - Equity
Investments Only(3)(4)(5) 2.9% 12.1% 46.9% 11.1%
IRR - Exited Investments(6) 8.8% 8.0% 20.3% 9.1%
Original Investments and Commitments $780 $285 $376 $961
Total Exits and Prepayments of Original
Investments $713 $285 $351 $754
Total Interest, Dividends and Fees
Collected $302 $105 $148 $317
Total Net Realized (Loss) Gain on
Investments $(89) $(39) $(4) $(88)
Current Cost of Investments $76 $- $24 $197
Current Fair Value of Investments $15 $- $3 $120
Current Fair Value of Investments as a
% of Total Investments at Fair Value 0.2% - - 1.9%
Net Unrealized
Appreciation/(Depreciation) $(61) $- $(21) $(77)
Non-Accruing Loans at Face $14 $- $15 $53
Non-Accruing Loans at Fair Value $7 $- $2 $30
Equity Interest at Fair Value(4) $4 $- $- $-
Debt to EBITDA(7)(8)(9) 8.6 - NM 8.6
Interest Coverage(7)(9) 2.1 - NM 1.4
Debt Service Coverage(7)(9) 1.7 - NM 1.3
Average Age of Companies(9) 49 yrs - 24 yrs 45 yrs
Diluted Ownership Percentage(4) 61% - 86% 36%
Average Sales(9)(10) $40 $- $11 $52
Average EBITDA(9)(11) $3 $- $- $9
Average EBITDA Margin 6.3% - - 16.5%
Total Sales(9)(10) $131 $- $239 $209
Total EBITDA(9)(11) $11 $- $4 $20
% of Senior Loans(9)(12) 58% - 12% 64%
% of Loans with Lien(9)(12) 100% - 100% 100%
Portfolio Statistics (1) 2003 2004 2005 2006
($in millions, unaudited) ---- ---- ---- ----
------------------------
IRR - Realizable Value - All
Investments(2) 21.4% 13.9% -2.0% 8.6%
IRR - GAAP Fair Value - All
Investments(3) 21.4% 13.3% -3.0% 6.5%
IRR - GAAP Fair Value - Equity
Investments Only(3)(4)(5) 30.0% 27.1% -18.4% 15.4%
IRR - Exited Investments(6) 23.5% 21.4% 24.3% 13.5%
Original Investments and Commitments $1,432 $2,266 $4,556 $5,163
Total Exits and Prepayments of Original
Investments $1,083 $1,661 $2,009 $2,876
Total Interest, Dividends and Fees
Collected $380 $576 $899 $822
Total Net Realized (Loss) Gain on
Investments $143 $161 $305 $24
Current Cost of Investments $309 $598 $2,260 $1,944
Current Fair Value of Investments $390 $356 $858 $1,472
Current Fair Value of Investments as a
% of Total Investments at Fair Value 6.3% 5.8% 13.9% 23.8%
Net Unrealized
Appreciation/(Depreciation) $81 $(242) $(1,402) $(472)
Non-Accruing Loans at Face $- $197 $81 $290
Non-Accruing Loans at Fair Value $- $34 $36 $76
Equity Interest at Fair Value(4) $177 $59 $274 $546
Debt to EBITDA(7)(8)(9) 4.5 7.5 4.8 5.1
Interest Coverage(7)(9) 2.0 2.2 2.3 2.5
Debt Service Coverage(7)(9) 1.9 1.8 1.6 2.1
Average Age of Companies(9) 40 yrs 42 yrs 30 yrs 27 yrs
Diluted Ownership Percentage(4) 52% 47% 38% 36%
Average Sales(9)(10) $189 $102 $114 $136
Average EBITDA(9)(11) $35 $21 $23 $36
Average EBITDA Margin 18.5% 20.6% 20.2% 26.5%
Total Sales(9)(10) $1,360 $1,330 $2,568 $5,585
Total EBITDA(9)(11) $183 $234 $361 $1,003
% of Senior Loans(9)(12) 60% 46% 46% 41%
% of Loans with Lien(9)(12) 100% 92% 92% 96%
Portfolio Statistics (1) 2007 2008 2009
($in millions, unaudited) ---- ---- ----
------------------------
IRR - Realizable Value - All
Investments(2) -6.6% -3.5% -
IRR - GAAP Fair Value - All
Investments(3) -15.4% -16.0% -
IRR - GAAP Fair Value - Equity
Investments Only(3)(4)(5) -20.4% -25.0% -
IRR - Exited Investments(6) -16.0% 75.0% -
Original Investments and Commitments $7,320 $1,014 $-
Total Exits and Prepayments of Original
Investments $2,171 $15 $-
Total Interest, Dividends and Fees
Collected $734 $125 $-
Total Net Realized (Loss) Gain on
Investments $(260) $6 $-
Current Cost of Investments $3,980 $907 $-
Current Fair Value of Investments $2,352 $619 $-
Current Fair Value of Investments as a
% of Total Investments at Fair Value 38.0% 10.0% -
Net Unrealized
Appreciation/(Depreciation) $(1,628) $(288) $-
Non-Accruing Loans at Face $312 $63 $-
Non-Accruing Loans at Fair Value $125 $- $-
Equity Interest at Fair Value(4) $510 $154 $-
Debt to EBITDA(7)(8)(9) 6.7 6.8 -
Interest Coverage(7)(9) 1.8 1.4 -
Debt Service Coverage(7)(9) 1.6 1.2 -
Average Age of Companies(9) 31 yrs 27 yrs -
Diluted Ownership Percentage(4) 45% 32% -
Average Sales(9)(10) $182 $115 $-
Average EBITDA(9)(11) $33 $30 $-
Average EBITDA Margin 18.1% 26.1% -
Total Sales(9)(10) $8,547 $1,185 $-
Total EBITDA(9)(11) $1,573 $259 $-
% of Senior Loans(9)(12) 61% 28% -
% of Loans with Lien(9)(12) 94% 62% -
Pre-2000 - 2004 -
Portfolio Statistics (1) 2009 2009
($in millions, unaudited) Aggregate Aggregate
-------------------------- --------- ---------
IRR - Realizable Value - All
Investments(2) 5.3% 2.0%
IRR - GAAP Fair Value - All
Investments(3) 2.5% -2.0%
IRR - GAAP Fair Value - Equity
Investments Only(3)(4)(5) 0.1% -5.3%
IRR - Exited Investments(6) 14.7% 17.3%
Original Investments and Commitments $24,153 $20,319
Total Exits and Prepayments of Original
Investments $11,918 $8,732
Total Interest, Dividends and Fees
Collected $4,408 $3,156
Total Net Realized (Loss) Gain on
Investments $159 $236
Current Cost of Investments $10,295 $9,689
Current Fair Value of Investments $6,185 $5,657
Current Fair Value of Investments as a
% of Total Investments at Fair Value 100.0% 91.5%
Net Unrealized
Appreciation/(Depreciation) $(4,110) $(4,032)
Non-Accruing Loans at Face $1,025 $943
Non-Accruing Loans at Fair Value $310 $271
Equity Interest at Fair Value(4) $1,724 $1,543
Debt to EBITDA(7)(8)(9) 6.0 6.1
Interest Coverage(7)(9) 2.1 2.1
Debt Service Coverage(7)(9) 1.7 1.7
Average Age of Companies(9) 31 yrs 30 yrs
Diluted Ownership Percentage(4) 41% 40%
Average Sales(9)(10) $149 $148
Average EBITDA(9)(11) $31 $31
Average EBITDA Margin 20.8% 21.2%
Total Sales(9)(10) $21,153 $19,215
Total EBITDA(9)(11) $3,648 $3,430
% of Senior Loans(9)(12) 50% 49%
% of Loans with Lien(9)(12) 91% 90%
(1) Static pool classification is based on the year the initial
investment was made. Subsequent add-on investments are included in
the static pool year of the original investment. Investments in
interest rate derivative agreements are excluded.
(2) Assumes investments are exited at realizable based on anticipated
proceeds to be received upon settlement or maturity.
(3) Assumes investments are exited at current GAAP fair value.
(4) Excludes investments in structured products.
(5) Excludes equity investments that are the result of conversions of
debt and warrants received with the issuance of debt.
(6) Includes exited securities of existing portfolio companies.
(7) These amounts do not include investments in which we own only
equity.
(8) For portfolio companies with a nominal EBITDA amount, the portfolio
company's maximum debt leverage is limited to 15 times EBITDA.
(9) Excludes investments in structured products, managed funds and
American Capital, LLC.
(10) Sales of the most recent twelve months, or when appropriate, the
forecasted twelve months.
(11) EBITDA of the most recent twelve months, or when appropriate, the
forecasted twelve months.
(12) As a percentage of our total debt investments.
SHAREHOLDER CALL American Capital invites shareholders, prospective shareholders and analysts to attend the shareholder call on August 5, 2009 at 11:00 am ET. The shareholder call can be accessed through a free live webcast at www.AmericanCapital.com or by dialing (877) 209-9919 (U.S. domestic) or +1 (612) 288-0329 (international). Please advise the operator you are dialing in for the American Capital shareholder call. A slide presentation will accompany the shareholder call and will be available at www.AmericanCapital.com in advance of the shareholder call. Select the Q2 2009 Earnings Presentation link to download and print the presentation. An archived audio replay of the shareholder call combined with the slide presentation will be made available on our website after the call. In addition, there will be a phone recording available from 3:00 pm ET August 5, 2009 until 11:59 pm ET August 19, 2009. If you are interested in hearing the recording of the presentation, please dial (800) 475-6701 (U.S. domestic) or +1 (320) 365-3844 (international). The access code for both domestic and international callers is 107656. ABOUT AMERICAN CAPITAL American Capital is a publicly traded private equity firm and global asset manager. American Capital, both directly and through its asset management business, originates, underwrites and manages investments in middle market private equity, leveraged finance, real estate and structured products. Founded in 1986, American Capital currently has $11 billion in capital resources under management and ten offices in the U.S., Europe and Asia. For further information, please refer to www.AmericanCapital.com. ADDITIONAL INFORMATION Persons considering an investment in American Capital should consider the investment objectives, risks and charges and expenses of the Company carefully before investing. Such information and other information about the Company is available in the Company's annual report on Form 10-K, quarterly reports on Form 10-Q and in the prospectuses the Company issues from time to time in connection with its offering of securities. Such materials are filed with the Securities and Exchange Commission ("SEC") and copies are available on the SEC's website, www.sec.gov. Prospective investors should read such materials carefully before investing. 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 press release contains forward-looking statements. Forward-looking statements are based on estimates, projections, beliefs and assumptions of management of the Company at the time of such statements and are not guarantees of future performance. Forward-looking statements involve risks and uncertainties in predicting future results and conditions. Actual results could differ materially from those projected in these forward-looking statements due to a variety of factors, including, without limitation, the uncertainties associated with the timing of transaction closings, changes in interest rates, availability of transactions, changes in regional, national or international economic conditions or changes in the conditions of the industries in which American Capital has made investments. Certain factors that could cause actual results to differ materially from those contained in the forward-looking statements are included in the "Risk Factors" section of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2008 and the Company's subsequent periodic filings. Copies are available on the SEC's website at www.sec.gov. Forward-looking statements are made as of the date of this press release, and are subject to change without notice. We disclaim any obligation to update or revise any forward-looking statements based on the occurrence of future events, the receipt of new information, or otherwise. Contact: SOURCE: American Capital Ltd. www.americancapital.com |
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