Exhibit 99.1
ARES CAPITAL ANNOUNCES
JUNE 30, 2005 FINANCIAL RESULTS
New York, NY – August 8, 2005 – Ares Capital Corporation (Nasdaq: ARCC) today announced financial results for its second quarter ended June 30, 2005. Ares Capital commenced material operations on October 8, 2004 after closing its initial public offering of 11,000,000 shares of common stock at $15.00 per share. On March 23, 2005 Ares Capital completed a follow-on offering of 12,075,000 shares at $16.00 per share. Ares Capital received net proceeds of approximately $341 million from these offerings.
HIGHLIGHTS
• Stockholders’ Equity (at June 30, 2005 ): $346.9 million
• Net Assets per Share (at June 30, 2005): $14.97
• Declared 2nd Quarter 2005 Dividend: $0.32
• Reported 2nd Quarter 2005 EPS Basic and Diluted: $0.33
• Total Fair Value of Investments: $302.3 million
Second Quarter 2005 Operating Results:
• Net income: $7,602,256 or $0.33 per share
• Net investment income: $5,768,134 or $0.25 per share
• Net realized and unrealized gains: $1,834,122 or $0.08 per share
Second Quarter 2005 Portfolio Activity
• Purchase cost of additional investments made during period: $110.3 million
• Sales/redemptions of investments during period: $39.1 million
• Number of portfolio company investments as of June 30, 2005: 27
• Weighted average yield of the debt and income producing equity securities as of June 30, 2005: 11.13%(1)
(1) Computed as (a) the annual stated interest rate (or, in the case of equity securities, dividend rate) plus the annual amortization of loan origination fees, original issue discount on accruing loans, debt and income producing equity securities divided by (b) total loans, debt and income producing equity securities at fair value.
OPERATING RESULTS
For the quarter ended June 30, 2005, Ares Capital reported net income of $7.6 million or $0.33 per share. Net investment income for the second quarter ended June 30, 2005 was $5.8 million or $0.25 per share. Net realized and unrealized gains were $1.8 million or $0.08 per share for the second quarter of 2005.
In the second quarter of 2005 Ares Capital invested approximately $110.3 million in new commitments across nine portfolio companies (six new borrowers and three existing borrowers). Of the $110.3 million in new commitments during the quarter, approximately 52%, 23%, 9% and 16% were made in first lien senior secured debt, second lien senior secured debt, senior subordinated debt and equity/other securities, respectively. 75% of such investments were floating rate. Specifically during the quarter, significant new commitments included:
• $26.0 million in first lien senior secured debt, senior subordinated debt and equity to a scrapbooking branded products manufacturer;
• $25.0 million in second lien senior secured debt to a waste management services company;
• $16.3 million in second lien senior secured debt to a print publication and tradeshow services company;
• $13.7 million in first lien senior secured debt and equity to an industrial drill bit manufacturer; and,
• $10.8 million in senior notes and equity to an agricultural equipment manufacturer.
During the second quarter of 2005, Ares Capital had net gains of $1.8 million from dispositions. The portfolio value of the company’s investments at June 30, 2005 was $302.3 million. These portfolio investments (excluding cash and cash equivalents) were comprised of approximately 48% senior secured debt securities (26% first lien and 22% second lien assets), 32% mezzanine debt securities, 10% preferred/common equity securities and 10% other securities (senior notes/CDO investments) as of June 30, 2005.
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Since June 30, 2005, Ares Capital has invested an additional $32.5 million in mezzanine debt securities. Ares Capital has made second lien senior debt commitments in an aggregate amount of approximately $20 million that are pending closing and funding. In addition, Ares Capital has signed proposal letters with several companies for additional investments in excess of $150 million in the aggregate. The consummation of any of these investments depends upon, among other things, satisfactory completion of due diligence, the execution and delivery of satisfactory documentation and the receipt of any necessary consents. We cannot assure you that we will make any of these investments.
Total assets were $360.8 million as of June 30, 2005. Stockholders’ equity was $346.9 million at June 30, 2005, while net assets per share was $14.97. As of June 30, 2005, the weighted average yield of the debt and income producing equity securities was 11.13% (computed as (a) the annual stated interest rate (or, in the case of equity securities, dividend rate) plus the annual amortization of loan origination fees, original issue discount on accruing loans, debt and income producing equity securities divided by (b) total loans, debt and income producing equity securities at fair value). As of June 30, 2005, 53% of the fund’s assets were in floating rate debt securities.
PORTFOLIO QUALITY
Ares Capital employs an investment rating system (Grade 1 to 4) to categorize its investments. As of June 30, 2005, the weighted average grade of Ares Capital’s portfolio investments was 3.1 (with no 1.0 ratings in the portfolio). Grade 4 is for those investments that involve the least amount of risk in our portfolio (i.e. the borrower is performing above expectations and the trends and risk factors are generally favorable). Grade 3 is for those investments that involve a level of risk that is similar to the risk at the time of origination (i.e. the borrower is performing as expected and the risk factors are neutral to favorable). Grade 2 is for those investments where a borrower is performing below expectations and indicates that the risk has increased materially since origination. Grade 1 is for those investments that are not anticipated to be repaid in full.
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of 2005, Ares Capital raised a total of $183.9 million in net proceeds from its March secondary public offering. In April 2005, Ares Capital successfully increased its revolving credit facility to allow for up to $225.0 million of total commitments. As of June 30, 2005 we had no borrowings outstanding under the revolving facility and Ares Capital continues to be in compliance with all of the limitations and requirements of the facility. The facility expires on November 3, 2005, unless extended prior to such date for an additional 364-day period with the consent of the lender. If the facility is not extended, any principal amounts then outstanding will be amortized over a 24-month period through a termination date of November 3, 2007.
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DIVIDEND
For the period from April 1, 2005 through June 30, 2005, Ares Capital declared a dividend on June 20, 2005 of $0.32 per share for a total of $7,413,951. The record date was June 30, 2005 and the dividend was distributed on July 15, 2005.
CONFERENCE CALL
The company will host a conference call tomorrow, August 9, 2005, at 4:00 p.m. (ET) to discuss its second quarter 2005 financial results. All interested parties are welcome to participate. You can access the conference call by dialing (800) 621-5346 approximately 5-10 minutes prior to the call. International callers should dial (212) 748-2800. All callers should reference “Ares Capital Corporation.” An archived replay of the call will be available through August 23, 2005 by calling (800) 633-8625. International callers please dial (402) 977-9141. For all replays, please reference pin # 21256412.
ABOUT ARES CAPITAL CORPORATION
Ares Capital Corporation is a closed-end, non-diversified management investment company that is regulated as a business development company under the Investment Company Act of 1940. Its investment objectives are to generate both current income and capital appreciation through debt and equity investments. Ares Capital Corporation invests primarily in first and second lien senior loans and mezzanine debt, which in some cases may include an equity component, and, to a lesser extent, in equity investments in private middle market companies.
FORWARD-LOOKING STATEMENTS
Statements included herein may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in our filings with the Securities and Exchange Commission. The Company undertakes no duty to update any forward-looking statements made herein.
INFO SOURCES
Ares Capital Corporation; Regulatory Filings (SEC)
Merritt S. Hooper
Ares Capital Corporation
310-201-4200
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ARES CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
As of June 30, 2005 and December 31, 2004
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| As of |
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| June 30, 2005 |
| December 31, 2004 |
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| (Unaudited) |
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ASSETS |
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Investments at fair value (amortized cost of $302,413,472 and $182,329,200, respectively) |
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Non-control/Non-affiliate investments |
| $ | 262,449,541 |
| $ | 165,126,181 |
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Affiliate investments |
| 39,848,665 |
| 17,433,966 |
| ||
Total investments at fair value |
| 302,298,206 |
| 182,560,147 |
| ||
Cash and cash equivalents |
| 53,891,961 |
| 26,806,160 |
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Receivable for open trades |
| 497,770 |
| 8,794,478 |
| ||
Interest receivable |
| 3,379,843 |
| 1,140,495 |
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Other assets |
| 765,935 |
| 1,154,334 |
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Total assets |
| $ | 360,833,715 |
| $ | 220,455,614 |
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LIABILITIES |
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Credit facility payable |
| $ | — |
| $ | 55,500,000 |
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Reimbursed underwriting costs payable to the Inv’t Adviser |
| 2,475,000 |
| — |
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Dividend payable |
| 7,413,950 |
| 3,320,030 |
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Accounts payable and accrued expenses |
| 1,006,711 |
| 1,556,446 |
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Management and incentive fees payable |
| 2,858,596 |
| 274,657 |
| ||
Interest and facility fees payable |
| 62,979 |
| 96,176 |
| ||
Interest payable to the Investment Adviser |
| 83,539 |
| — |
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Total liabilities |
| $ | 13,900,775 |
| $ | 60,747,309 |
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Commitments and contingencies |
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STOCKHOLDERS’ EQUITY |
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Common stock, par value $.001 per share, 100,000,000 common shares authorized, 23,168,595 and 11,066,767 common shares issued and outstanding, respectively |
| 23,169 |
| 11,067 |
| ||
Capital in excess of par value |
| 341,443,552 |
| 159,602,706 |
| ||
Net unrealized appreciation on investments |
| (115,266 | ) | 230,947 |
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Accumulated net realized gain on sale of investments |
| 5,581,485 |
| — |
| ||
Distributions less than (in excess of) net investment income |
| — |
| (136,415 | ) | ||
Total stockholders’ equity |
| 346,932,940 |
| 159,708,305 |
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Total liabilities and stockholders’ equity |
| $ | 360,833,715 |
| $ | 220,455,614 |
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NET ASSETS PER SHARE |
| $ | 14.97 |
| $ | 14.43 |
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ARES CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
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| For the three |
| For the six |
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| months ended |
| months ended |
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| (Unaudited) |
| (Unaudited) |
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INVESTMENT INCOME: |
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From non-control/non-affiliate investments: |
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Interest from investments |
| $ | 6,027,175 |
| $ | 10,947,830 |
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Interest from cash & cash equivalents |
| 565,412 |
| 595,768 |
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Dividend income |
| 744,818 |
| 744,818 |
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Capital structuring service fees |
| 631,333 |
| 935,083 |
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Other income |
| 62,765 |
| 122,161 |
| ||
Total investment income from non-control/non-affiliate investments |
| 8,031,503 |
| 13,345,660 |
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From affiliate investments: |
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Interest from investments |
| 700,871 |
| 1,011,464 |
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Capital structuring service fees |
| 862,500 |
| 862,500 |
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Other income |
| 6,741 |
| 132,583 |
| ||
Total investment income from affiliate investments |
| 1,570,112 |
| 2,006,547 |
| ||
Total investment income |
| 9,601,615 |
| 15,352,207 |
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EXPENSES: |
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Management and incentive fees |
| 2,826,054 |
| 3,911,049 |
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Administrative |
| 256,115 |
| 489,387 |
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Professional fees |
| 320,800 |
| 485,794 |
| ||
Directors fees |
| 85,643 |
| 157,808 |
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Insurance |
| 144,400 |
| 287,213 |
| ||
Interest and credit facility fees |
| 62,979 |
| 438,269 |
| ||
Interest payable to the Investment Adviser |
| 31,814 |
| 83,539 |
| ||
Amortization of debt issuance costs |
| 65,736 |
| 131,426 |
| ||
Other |
| 39,940 |
| 69,759 |
| ||
Total expenses |
| 3,833,481 |
| 6,054,244 |
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NET INVESTMENT INCOME |
| 5,768,134 |
| 9,297,963 |
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REALIZED AND UNREALIZED GAIN ON INVESTMENTS: |
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Net realized gains (losses): |
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Net realized gains from non-control/non-affiliate investment transactions |
| 6,747,262 |
| 7,156,442 |
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Net realized loss from affiliate investment transactions |
| (1,880 | ) | (2,030 | ) | ||
Net realized gains from investment transactions |
| 6,745,382 |
| 7,154,412 |
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Net unrealized gains (losses): |
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Investment transactions from non-control/non-affiliate investments |
| (4,910,024 | ) | (343,793 | ) | ||
Investment transactions from affiliate investments |
| (1,236 | ) | (2,420 | ) | ||
Net unrealized losses from investment transactions |
| (4,911,260 | ) | (346,213 | ) | ||
Net realized and unrealized gain on investments |
| 1,834,122 |
| 6,808,199 |
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NET INCREASE IN STOCKHOLDERS’ EQUITY RESULTING FROM OPERATIONS |
| $ | 7,602,256 |
| $ | 16,106,162 |
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BASIC AND DILUTED EARNINGS PER COMMON SHARE |
| $ | 0.33 |
| $ | 0.91 |
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WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING |
| 23,164,444 |
| 17,683,309 |
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