Exhibit 99.1
| | |
 | | Two Bethesda Metro Center 14th Floor Bethesda, MD 20814 (301) 951-6122 (301) 654-6714 Fax www.AmericanCapital.com |
FOR IMMEDIATE RELEASE
August 3, 2010
CONTACT:
Investors – (301) 951-5917
Media – (301) 968-9400
AMERICAN CAPITAL REPORTS $0.09 NET OPERATING INCOME PER DILUTED
SHARE AND $0.84 NET EARNINGS PER DILUTED SHARE
Bethesda, MD – August 3, 2010 – American Capital, Ltd. (“ACAS” or the “Company”) (Nasdaq: ACAS) announced net operating income (“NOI”) for the quarter ended June 30, 2010 of $29 million, or $0.09 per diluted share. Net earnings (loss) less appreciation and (depreciation) (“Net Realized Loss”) for the quarter was $(291) million, or $(0.87) per diluted share. For the quarter ended June 30, 2010, the Company reported net earnings of $281 million, or $0.84 per diluted share.
Q2 2010 FINANCIAL SUMMARY
| | ü | | 45% increase over Q2 2009 |
| | ü | | $17 million of debt refinancing costs in Q2 2010 versus $7 million in Q2 2009 |
| | • | | $572 million net unrealized appreciation of investments |
| | • | | $(291) million net realized loss on portfolio investments |
| | • | | $281 million net earnings |
| | ü | | $828 million increased over Q2 2009 |
| | • | | $351 million of cash proceeds from realizations |
| | • | | $9.15 net asset value (“NAV”) per share |
| | ü | | $0.17 per share, or 2% increase over Q1 2010 |
| | • | | $295 million equity offering in April 2010 |
“We had another good quarter with respect to the strong growth in our book value and substantial progress towards deleveraging our balance sheet,” said Malon Wilkus, Chairman and Chief Executive Officer. “Our asset coverage ratio is now back over 200% as our book value has grown by $1.2 billion and we have repaid $1.4 billion of debt since the low-point in the second quarter last year. We are now focused on originating high quality investment opportunities while continuing to improve our balance sheet. We have generated a 27% return on equity since the second quarter of 2009 and believe we will continue to generate strong book value growth for our shareholders as we recover from the recession.”
NET OPERATING INCOME
NOI increased to $29 million, or $0.09 per diluted share, for the quarter ended June 30, 2010 compared to $20 million, or $0.09 per diluted share, for the comparable quarter in 2009.
American Capital, Ltd.
August 3, 2010
Page 2
NET REALIZED LOSS
Net Realized Loss improved to $(291) million, or $(0.87) per diluted share, for the quarter ended June 30, 2010 compared to $(306) million, or $(1.41) per diluted share, for the comparable quarter in 2009.
NET EARNINGS (LOSS)
Net earnings (loss) improved to $281 million, or $0.84 per diluted share, for the quarter ended June 30, 2010 compared to $(547) million, or $(2.52) per diluted share, for the comparable quarter in 2009.
PORTFOLIO VALUATION
For the quarter ended June 30, 2010, net unrealized appreciation of investments totaled $572 million. The primary components of the net unrealized appreciation were:
| | • | | $157 million of appreciation on American Capital’s investment in European Capital Limited, excluding any impact of foreign currency translation on European Capital Limited’s cost basis or cumulative unrealized depreciation, primarily due to appreciation in the NAV of European Capital Limited and a decrease to the implied discount to NAV; |
| | ü | | The equity investment in European Capital Limited is valued at $0.4 billion compared to European Capital Limited’s NAV of approximately $0.7 billion. |
| | • | | $139 million of net appreciation of American Capital’s private finance portfolio primarily a result of improved portfolio company performance, multiples and investment spreads; and |
| | • | | $309 million of reversals of prior unrealized depreciation associated with net realized losses on portfolio investments. |
As of June 30, 2010, NAV per share was $9.15, an increase of $0.17 per share from a NAV per share of $8.98 as of March 31, 2010.
“With our asset coverage ratio now above 200%, we no longer have restrictions on our ability to pay dividends,” said John Erickson, Chief Financial Officer. “But, our realized losses have reduced the requirement for a dividend in the near term. We have no remaining undistributed taxable income for our 2009 tax year and we currently project that we will have no 2010 taxable income due to carry over capital losses and additional ordinary loan losses from assets that are already depreciated on our books. We will continue to focus on maximizing the value of our assets to drive strong growth in shareholder value.”
PORTFOLIO LIQUIDITY AND PERFORMANCE
In the second quarter of 2010, $351 million of cash proceeds were received from realizations of portfolio investments and exits, which were 7.7% higher than the prior quarter’s valuations of the investments. There was $52 million in new committed investments during the quarter. The weighted average effective interest rate on the Company’s private finance debt investments as of June 30, 2010 was 10.3%, which was equal to the March 31, 2010 rate and 40 basis points higher than as of December 31, 2009.
As of June 30, 2010, loans with a fair value of $308 million were on non-accrual representing 8.5% of total loans at fair value, compared to $263 million fair value of non-accrual loans representing 7.0% of total loans at fair value as of March 31, 2010.
“The quality of the portfolio continues to improve,” said Gordon O’Brien, President of Specialty Finance and Operations. “Our investment and operations teams have made good progress in improving many of our troubled companies and the pace of new troubles developing in the portfolio has slowed significantly. We are pleased to now be able to turn our focus to making new investments. History has shown that the most attractive investment opportunities are made during the recovery from a recession and we believe that will continue to hold true.”
American Capital, Ltd.
August 3, 2010
Page 3
AMERICAN CAPITAL, LTD.
CONSOLIDATED BALANCE SHEETS
As of June 30, 2010, December 31, 2009 and June 30, 2009
(in millions, except per share amounts)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Q2
2010 | | | Q4
2009 | | | Q2 2010 Versus
Q4 2009 | | | Q2
2009 | | | Q2 2010 Versus
Q2 2009 | |
| | | | $ | | | % | | | | $ | | | % | |
| | (unaudited) | | | | | | | | | | | | (unaudited) | | | | | | | |
Assets | | | | | | | | | | | | | | | | | | | | | | | | | | |
Investments at fair value (cost of $8,439, $9,158 and $10,295, respectively) | | $ | 5,694 | | | $ | 5,575 | | | $ | 119 | | | 2 | % | | $ | 6,185 | | | $ | (491 | ) | | -8 | % |
Cash and cash equivalents | | | 176 | | | | 835 | | | | (659 | ) | | -79 | % | | | 183 | | | | (7 | ) | | -4 | % |
Restricted cash and cash equivalents | | | 185 | | | | 96 | | | | 89 | | | 93 | % | | | 55 | | | | 130 | | | 236 | % |
Interest receivable | | | 32 | | | | 38 | | | | (6 | ) | | -16 | % | | | 43 | | | | (11 | ) | | -26 | % |
Derivative agreements at fair value | | | 3 | | | | 1 | | | | 2 | | | 200 | % | | | 8 | | | | (5 | ) | | -63 | % |
Other | | | 131 | | | | 127 | | | | 4 | | | 3 | % | | | 154 | | | | (23 | ) | | -15 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Total assets | | $ | 6,221 | | | $ | 6,672 | | | $ | (451 | ) | | -7 | % | | $ | 6,628 | | | $ | (407 | ) | | -6 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Liabilities and Shareholders’ Equity | | | | | | | | | | | | | | | | | | | | | | | | | | |
Debt | | $ | 2,924 | | | $ | 4,142 | | | $ | (1,218 | ) | | -29 | % | | $ | 4,321 | | | $ | (1,397 | ) | | -32 | % |
Derivative agreements at fair value | | | 120 | | | | 102 | | | | 18 | | | 18 | % | | | 92 | | | | 28 | | | 30 | % |
Accrued dividends payable | | | — | | | | — | | | | — | | | — | | | | 231 | | | | (231 | ) | | -100 | % |
Other | | | 64 | | | | 99 | | | | (35 | ) | | -35 | % | | | 94 | | | | (30 | ) | | -32 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Total liabilities | | | 3,108 | | | | 4,343 | | | | (1,235 | ) | | -28 | % | | | 4,738 | | | | (1,630 | ) | | -34 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
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, 351.5, 292.9 and 225.8 issued and 340.1, 280.9 and 215.7 outstanding, respectively | | | 3 | | | | 3 | | | | — | | | — | | | | 2 | | | | 1 | | | 50 | % |
Capital in excess of par value | | | 7,051 | | | | 6,735 | | | | 316 | | | 5 | % | | | 6,605 | | | | 446 | | | 7 | % |
Distributions in excess of net realized earnings | | | (1,077 | ) | | | (709 | ) | | | (368 | ) | | -52 | % | | | (516 | ) | | | (561 | ) | | -109 | % |
Net unrealized depreciation of investments | | | (2,864 | ) | | | (3,700 | ) | | | 836 | | | 23 | % | | | (4,201 | ) | | | 1,337 | | | 32 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Total shareholders’ equity | | | 3,113 | | | | 2,329 | | | | 784 | | | 34 | % | | | 1,890 | | | | 1,223 | | | 65 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Total liabilities and shareholders’ equity | | $ | 6,221 | | | $ | 6,672 | | | $ | (451 | ) | | -7 | % | | $ | 6,628 | | | $ | (407 | ) | | -6 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Net asset value per common share | | $ | 9.15 | | | $ | 8.29 | | | $ | 0.86 | | | 10 | % | | $ | 8.76 | | | $ | 0.39 | | | 4 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
American Capital, Ltd.
August 3, 2010
Page 4
AMERICAN CAPITAL, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three and Six Months Ended June 30, 2010 and 2009
(in millions, except per share data)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended
June 30, | | | Three Months Ended
June 30,
2010 Versus 2009 | | | Six Months Ended
June 30, | | | Six Months Ended
June 30,
2010 Versus 2009 | |
| | | 2010 | | | 2009 | | | $ | | | % | | | 2010 | | | 2009 | | | $ | | | % | |
Operating Income | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest and dividend income | | $ | 138 | | | $ | 127 | | | $ | 11 | | | 9 | % | | $ | 288 | | | $ | 306 | | | $ | (18 | ) | | -6 | % |
Fee income | | | 13 | | | | 13 | | | | — | | | — | | | | 27 | | | | 29 | | | | (2 | ) | | -7 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total operating income | | | 151 | | | | 140 | | | | 11 | | | 8 | % | | | 315 | | | | 335 | | | | (20 | ) | | -6 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Operating Expenses | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest | | | 56 | | | | 60 | | | | (4 | ) | | -7 | % | | | 113 | | | | 112 | | | | 1 | | | 1 | % |
Salaries, benefits and stock-based compensation | | | 34 | | | | 47 | | | | (13 | ) | | -28 | % | | | 68 | | | | 100 | | | | (32 | ) | | -32 | % |
General and administrative | | | 15 | | | | 17 | | | | (2 | ) | | -12 | % | | | 35 | | | | 40 | | | | (5 | ) | | -13 | % |
Debt refinancing costs | | | 17 | | | | 7 | | | | 10 | | | 143 | % | | | 21 | | | | 10 | | | | 11 | | | 110 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total operating expenses | | | 122 | | | | 131 | | | | (9 | ) | | -7 | % | | | 237 | | | | 262 | | | | (25 | ) | | -10 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Operating Income Before Income Taxes | | | 29 | | | | 9 | | | | 20 | | | 222 | % | | | 78 | | | | 73 | | | | 5 | | | 7 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Benefit for income taxes | | | — | | | | 11 | | | | (11 | ) | | -100 | % | | | — | | | | 11 | | | | (11 | ) | | -100 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net Operating Income | | | 29 | | | | 20 | | | | 9 | | | 45 | % | | | 78 | | | | 84 | | | | (6 | ) | | -7 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net gain on extinguishment of debt | | | — | | | | — | | | | — | | | — | | | | — | | | | 12 | | | | (12 | ) | | -100 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net realized loss on investments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio company investments | | | (291 | ) | | | (308 | ) | | | 17 | | | 6 | % | | | (398 | ) | | | (387 | ) | | | (11 | ) | | -3 | % |
Foreign currency transactions | | | 1 | | | | — | | | | 1 | | | 100 | % | | | (2 | ) | | | (2 | ) | | | — | | | — | |
Derivative and option agreements | | | (30 | ) | | | (18 | ) | | | (12 | ) | | -67 | % | | | (46 | ) | | | (68 | ) | | | 22 | | | 32 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total net realized loss on investments | | | (320 | ) | | | (326 | ) | | | 6 | | | 2 | % | | | (446 | ) | | | (457 | ) | | | 11 | | | 2 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net Realized Loss | | | (291 | ) | | | (306 | ) | | | 15 | | | 5 | % | | | (368 | ) | | | (361 | ) | | | (7 | ) | | -2 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net unrealized appreciation (depreciation) of investments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio company investments | | | 695 | | | | (311 | ) | | | 1,006 | | | NM | | | | 1,052 | | | | (836 | ) | | | 1,888 | | | NM | |
Foreign currency translation | | | (125 | ) | | | 66 | | | | (191 | ) | | NM | | | | (212 | ) | | | (3 | ) | | | (209 | ) | | NM | |
Derivative and option agreements | | | 2 | | | | 4 | | | | (2 | ) | | -50 | % | | | (4 | ) | | | 106 | | | | (110 | ) | | NM | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total net unrealized appreciation (depreciation) of investments | | | 572 | | | | (241 | ) | | | 813 | | | NM | | | | 836 | | | | (733 | ) | | | 1,569 | | | NM | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net Increase (Decrease) in Net Assets Resulting From Operations (“Net Earnings (Loss)”) | | $ | 281 | | | $ | (547 | ) | | $ | 828 | | | NM | | | $ | 468 | | | $ | (1,094 | ) | | $ | 1,562 | | | NM | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
American Capital, Ltd.
August 3, 2010
Page 5
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended
June 30, | | | Three Months Ended
June 30,
2010 Versus 2009 | | | Six Months Ended
June 30, | | | Six Months Ended
June 30,
2010 Versus 2009 | |
| | | 2010 | | | 2009 | | | $ | | | % | | | 2010 | | | 2009 | | | $ | | | % | |
Net Operating Income Per Common Share | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic | | $ | 0.09 | | | $ | 0.09 | | | $ | — | | | — | | | $ | 0.25 | | | $ | 0.40 | | | $ | (0.15 | ) | | -38 | % |
Diluted | | $ | 0.09 | | | $ | 0.09 | | | $ | — | | | — | | | $ | 0.25 | | | $ | 0.40 | | | $ | (0.15 | ) | | -38 | % |
Net Realized Loss Per Common Share | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic | | $ | (0.88 | ) | | $ | (1.41 | ) | | $ | 0.53 | | | 38 | % | | $ | (1.20 | ) | | $ | (1.70 | ) | | $ | 0.50 | | | 29 | % |
Diluted | | $ | (0.87 | ) | | $ | (1.41 | ) | | $ | 0.54 | | | 38 | % | | $ | (1.18 | ) | | $ | (1.70 | ) | | $ | 0.52 | | | 31 | % |
Net Earnings (Loss) Per Common Share | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic | | $ | 0.85 | | | $ | (2.52 | ) | | $ | 3.37 | | | NM | | | $ | 1.52 | | | $ | (5.16 | ) | | $ | 6.68 | | | NM | |
Diluted | | $ | 0.84 | | | $ | (2.52 | ) | | $ | 3.36 | | | NM | | | $ | 1.50 | | | $ | (5.16 | ) | | $ | 6.66 | | | NM | |
Weighted Average Shares of Common Stock Outstanding | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic | | | 330.9 | | | | 217.0 | | | | 113.9 | | | 52 | % | | | 307.4 | | | | 211.9 | | | | 95.5 | | | 45 | % |
Diluted | | | 335.7 | | | | 217.0 | | | | 118.7 | | | 55 | % | | | 311.0 | | | | 211.9 | | | | 99.1 | | | 47 | % |
Dividends Declared Per Common Share | | $ | — | | | $ | 1.07 | (1) | | $ | (1.07 | ) | | -100 | % | | $ | — | | | $ | 1.07 | (1) | | $ | (1.07 | ) | | -100 | % |
NM = Not meaningful.
| (1) | Dividend paid on August 7, 2009 in the form of $24 million in cash and 67 million shares. |
American Capital, Ltd.
August 3, 2010
Page 6
AMERICAN CAPITAL, LTD.
OTHER FINANCIAL INFORMATION
Three Months Ended June 30, 2010, December 31, 2009 and June 30, 2009
(in millions, except per share data)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Q2
2010 | | | Q4
2009 | | | Q2 2010 Versus
Q4 2009 | | | Q2
2009 | | | Q2 2010 Versus
Q2 2009 | |
| | | | | $ | | | % | | | | $ | | | % | |
Assets Under Management | | | | | | | | | | | | | | | | | | | | | | | | | | |
American Capital Assets at Fair Value(1) | | $ | 6,221 | | | $ | 6,672 | | | $ | (451 | ) | | -7 | % | | $ | 6,628 | | | $ | (407 | ) | | -6 | % |
Externally Managed Assets at Fair Value(2) | | | 8,961 | | | | 5,802 | | | | 3,159 | | | 54 | % | | | 4,070 | | | | 4,891 | | | 120 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 15,182 | | | $ | 12,474 | | | $ | 2,708 | | | 22 | % | | $ | 10,698 | | | $ | 4,484 | | | 42 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Capital Resources Under Management | | | | | | | | | | | | | | | | | | | | | | | | | | |
American Capital Assets at Fair Value plus Available Capital Resources(1) | | $ | 6,221 | | | $ | 6,672 | | | $ | (451 | ) | | -7 | % | | $ | 6,628 | | | $ | (407 | ) | | -6 | % |
Externally Managed Assets at Fair Value plus Available Capital Resources(2) | | | 9,179 | | | | 6,020 | | | | 3,159 | | | 52 | % | | | 4,294 | | | | 4,885 | | | 114 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 15,400 | | | $ | 12,692 | | | $ | 2,708 | | | 21 | % | | $ | 10,922 | | | $ | 4,478 | | | 41 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
New Investments | | | | | | | | | | | | | | | | | | | | | | | | | | |
Senior Debt | | $ | 47 | | | $ | 12 | | | $ | 35 | | | 292 | % | | $ | 2 | | | $ | 45 | | | 2250 | % |
Subordinated Debt | | | 4 | | | | — | | | | 4 | | | 100 | % | | | 8 | | | | (4 | ) | | -50 | % |
Preferred Equity | | | 1 | | | | 4 | | | | (3 | ) | | -75 | % | | | 3 | | | | (2 | ) | | -67 | % |
Common Equity | | | — | | | | 7 | | | | (7 | ) | | -100 | % | | | 26 | | | | (26 | ) | | -100 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 52 | | | $ | 23 | | | $ | 29 | | | 126 | % | | $ | 39 | | | $ | 13 | | | 33 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Financing for Private Equity Buyouts | | $ | 35 | | | $ | — | | | $ | 35 | | | 100 | % | | $ | — | | | $ | 35 | | | 100 | % |
Add-on Financing for Working Capital in Distressed Situations | | | 12 | | | | 17 | | | | (5 | ) | | -29 | % | | | 36 | | | | (24 | ) | | -67 | % |
Add-on Financing for Acquisitions | | | — | | | | 3 | | | | (3 | ) | | -100 | % | | | — | | | | — | | | — | |
Add-on Financing for Growth and Working Capital | | | — | | | | 2 | | | | (2 | ) | | -100 | % | | | 2 | | | | (2 | ) | | -100 | % |
Add-on Financing for Recapitalizations | | | 5 | | | | 1 | | | | 4 | | | 400 | % | | | 1 | | | | 4 | | | 400 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 52 | | | $ | 23 | | | $ | 29 | | | 126 | % | | $ | 39 | | | $ | 13 | | | 33 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Realizations | | | | | | | | | | | | | | | | | | | | | | | | | | |
Principal Prepayments | | $ | 272 | | | $ | 88 | | | $ | 184 | | | 209 | % | | $ | 35 | | | $ | 237 | | | 677 | % |
Loan Syndications and Sales | | | — | | | | 303 | | | | (303 | ) | | -100 | % | | | 21 | | | | (21 | ) | | -100 | % |
Scheduled Principal Amortization | | | 9 | | | | 12 | | | | (3 | ) | | -25 | % | | | 15 | | | | (6 | ) | | -40 | % |
Payment of Accrued Payment-in-kind Notes and Dividends and Accreted Loan Discounts | | | 25 | | | | 16 | | | | 9 | | | 56 | % | | | 1 | | | | 24 | | | 2400 | % |
Sale of Equity Investments | | | 45 | | | | 57 | | | | (12 | ) | | -21 | % | | | 53 | | | | (8 | ) | | -15 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 351 | | | $ | 476 | | | $ | (125 | ) | | -26 | % | | $ | 125 | | | $ | 226 | | | 181 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Appreciation, Depreciation, Gain and Loss | | | | | | | | | | | | | | | | | | | | | | | | | | |
Gross Realized Gain | | $ | 10 | | | $ | 3 | | | $ | 7 | | | 233 | % | | $ | 35 | | | $ | (25 | ) | | -71 | % |
Gross Realized Loss | | | (301 | ) | | | (285 | ) | | | (16 | ) | | -6 | % | | | (343 | ) | | | 42 | | | 12 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Net Realized Loss | | | (291 | ) | | | (282 | ) | | | (9 | ) | | -3 | % | | | (308 | ) | | | 17 | | | 6 | % |
Foreign Currency | | | 1 | | | | (1 | ) | | | 2 | | | NM | | | | — | | | | 1 | | | 100 | % |
Derivative and Option Agreements | | | (30 | ) | | | (19 | ) | | | (11 | ) | | -58 | % | | | (18 | ) | | | (12 | ) | | -67 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Net Realized Loss | | | (320 | ) | | | (302 | ) | | | (18 | ) | | -6 | % | | | (326 | ) | | | 6 | | | 2 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Gross Unrealized Appreciation of Private Finance Portfolio Investments | | | 213 | | | | 163 | | | | 50 | | | 31 | % | | | 187 | | | | 26 | | | 14 | % |
Gross Unrealized Depreciation of Private Finance Portfolio Investments | | | (74 | ) | | | (141 | ) | | | 67 | | | 48 | % | | | (476 | ) | | | 402 | | | 84 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Net Unrealized Appreciation (Depreciation) of Private Finance Portfolio Investments | | | 139 | | | | 22 | | | | 117 | | | 532 | % | | | (289 | ) | | | 428 | | | NM | |
Net Unrealized Appreciation (Depreciation) of European Capital Limited Investment | | | 157 | | | | 102 | | | | 55 | | | 54 | % | | | (355 | ) | | | 512 | | | NM | |
Net Unrealized Appreciation (Depreciation) of European Capital Limited Foreign Currency Translation | | | 94 | | | | 22 | | | | 72 | | | 327 | % | | | (54 | ) | | | 148 | | | NM | |
Net Unrealized Appreciation (Depreciation) of American Capital Agency Corp. | | | 2 | | | | (5 | ) | | | 7 | | | NM | | | | 31 | | | | (29 | ) | | -94 | % |
Net Unrealized Appreciation of American Capital, LLC | | | 10 | | | | 10 | | | | — | | | — | | | | 4 | | | | 6 | | | 150 | % |
Net Unrealized (Depreciation) Appreciation of Structured Products | | | (16 | ) | | | (25 | ) | | | 9 | | | 36 | % | | | 37 | | | | (53 | ) | | NM | |
Reversal of Prior Period Net Unrealized Depreciation Upon Realization | | | 309 | | | | 284 | | | | 25 | | | 9 | % | | | 315 | | | | (6 | ) | | -2 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
American Capital, Ltd.
August 3, 2010
Page 7
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Q2
2010 | | | Q4
2009 | | | Q2 2010 Versus
Q4 2009 | | | Q2
2009 | | | Q2 2010 Versus
Q2 2009 | |
| | | | | $ | | | % | | | | $ | | | % | |
Net Unrealized Appreciation (Depreciation) of Portfolio Investments | | | 695 | | | | 410 | | | | 285 | | | 70 | % | | | (311 | ) | | | 1,006 | | | NM | |
Foreign Currency Translation - European Capital Limited | | | (120 | ) | | | (25 | ) | | | (95 | ) | | -380 | % | | | 62 | | | | (182 | ) | | NM | |
Foreign Currency Translation - Other | | | (5 | ) | | | (1 | ) | | | (4 | ) | | -400 | % | | | 4 | | | | (9 | ) | | NM | |
Derivative Agreements and Other | | | 2 | | | | 6 | | | | (4 | ) | | -67 | % | | | 4 | | | | (2 | ) | | -50 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Net Unrealized Appreciation (Depreciation) of Investments | | | 572 | | | | 390 | | | | 182 | | | 47 | % | | | (241 | ) | | | 813 | | | NM | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Net Gains, Losses, Appreciation and Depreciation | | $ | 252 | | | $ | 88 | | | $ | 164 | | | 186 | % | | $ | (567 | ) | | $ | 819 | | | NM | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Other Financial Data | | | | | | | | | | | | | | | | | | | | | | | | | | |
NAV per Share | | $ | 9.15 | | | $ | 8.29 | | | $ | 0.86 | | | 10 | % | | $ | 8.76 | | | $ | 0.39 | | | 4 | % |
Debt at Cost | | $ | 2,924 | | | $ | 4,142 | | | $ | (1,218 | ) | | -29 | % | | $ | 4,321 | | | $ | (1,397 | ) | | -32 | % |
Debt at Fair Value | | $ | 2,844 | | | $ | 3,929 | | | $ | (1,085 | ) | | -28 | % | | $ | 3,189 | | | $ | (345 | ) | | -11 | % |
Market Capitalization | | $ | 1,639 | | | $ | 685 | | | $ | 954 | | | 139 | % | | $ | 692 | | | $ | 947 | | | 137 | % |
Total Enterprise Value(3) | | $ | 4,387 | | | $ | 3,992 | | | $ | 395 | | | 10 | % | | $ | 4,830 | | | $ | (443 | ) | | -9 | % |
Asset Coverage Ratio | | | 206 | % | | | 156 | % | | | | | | | | | | 144 | % | | | | | | | |
Debt to Equity Ratio | | | 0.9x | | | | 1.8x | | | | | | | | | | | 2.3x | | | | | | | | |
Credit Quality | | | | | | | | | | | | | | | | | | | | | | | | | | |
Weighted Average Effective Interest Rate on Private Finance Debt Investments at Period End | | | 10.3 | % | | | 9.9 | % | | | 0.4 | % | | 4 | % | | | 9.7 | % | | | 0.6 | % | | 6 | % |
Loans on Non-Accrual at Cost | | $ | 686 | | | $ | 811 | | | $ | (125 | ) | | -15 | % | | $ | 996 | | | $ | (310 | ) | | -31 | % |
Loans on Non-Accrual at Fair Value | | $ | 308 | | | $ | 290 | | | $ | 18 | | | 6 | % | | $ | 310 | | | $ | (2 | ) | | -1 | % |
Non-Accrual Loans at Cost as a Percentage of Total Loans | | | 16.5 | % | | | 18.1 | % | | | | | | | | | | 18.3 | % | | | | | | | |
Non-Accrual Loans at Fair Value as a Percentage of Total Loans | | | 8.5 | % | | | 7.8 | % | | | | | | | | | | 7.2 | % | | | | | | | |
Past Due Loans at Cost | | $ | 57 | | | $ | 88 | | | $ | (31 | ) | | -35 | % | | $ | 40 | | | $ | 17 | | | 43 | % |
Debt to Equity Conversions at Cost | | $ | — | | | $ | 54 | | | $ | (54 | ) | | -100 | % | | $ | 355 | | | $ | (355 | ) | | -100 | % |
Return on Equity | | | | | | | | | | | | | | | | | | | | | | | | | | |
LTM Net Operating Income Return on Average Equity at Cost | | | 2.1 | % | | | 2.1 | % | | | | | | | | | | 4.3 | % | | | | | | | |
LTM Realized (Loss) Return on Average Equity at Cost | | | -11.3 | % | | | -10.7 | % | | | | | | | | | | -3.3 | % | | | | | | | |
LTM Net Earnings (Loss) Return on Average Equity | | | 27.0 | % | | | -37.3 | % | | | | | | | | | | -90.6 | % | | | | | | | |
Current Quarter Net Operating Income Return on Average Equity at Cost Annualized | | | 2.0 | % | | | 1.2 | % | | | | | | | | | | 1.3 | % | | | | | | | |
Current Quarter Realized Loss Return on Average Equity at Cost Annualized | | | -19.5 | % | | | -18.4 | % | | | | | | | | | | -19.3 | % | | | | | | | |
Current Quarter Earnings (Loss) Return on Average Equity Annualized | | | 39.8 | % | | | 18.9 | % | | | | | | | | | | -96.2 | % | | | | | | | |
NM = Not meaningful
| (1) | Includes American Capital’s investment in its externally managed funds. |
| (2) | Includes American Capital Agency Corp., American Capital Equity I, American Capital Equity II and ACAS CLO-1. |
| (3) | Enterprise value is calculated as debt at cost plus market capitalization less cash and cash equivalents on hand. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Static Pool (1) | |
Portfolio Statistics ($ in millions, unaudited) | | Pre-2001 | | | 2001 | | | 2002 | | | 2003 | | | 2004 | | | 2005 | | | 2006 | | | 2007 | | | 2008 | | | 2009 | | 2010 | | Pre-2001 - 2010
Aggregate | | | 2005 - 2010
Aggregate | |
IRR at Fair Value of All Investments(2) | | | 8.0 | % | | | 18.1 | % | | | 8.1 | % | | | 20.3 | % | | | 13.3 | % | | | 5.5 | % | | | 8.3 | % | | | -9.5 | % | | | 0.9 | % | | | — | | | — | | | 5.4 | % | | | 0.8 | % |
IRR of Exited Investments(5) | | | 8.6 | % | | | 20.3 | % | | | 9.1 | % | | | 23.4 | % | | | 17.1 | % | | | 21.7 | % | | | 9.8 | % | | | -9.6 | % | | | -74.9 | % | | | — | | | — | | | 11.7 | % | | | 8.4 | % |
IRR at Fair Value of Equity Investments Only(2)(3)(4) | | | 5.9 | % | | | 46.9 | % | | | 11.5 | % | | | 27.2 | % | | | 27.5 | % | | | -4.0 | % | | | 13.8 | % | | | -16.4 | % | | | -1.3 | % | | | — | | | — | | | 3.8 | % | | | -2.6 | % |
IRR of Exited Equity Investments Only(3)(4)(5) | | | 8.4 | % | | | 48.8 | % | | | 18.3 | % | | | 32.2 | % | | | 43.0 | % | | | 47.2 | % | | | 18.7 | % | | | 8.1 | % | | | 69.0 | % | | | — | | | — | | | 26.4 | % | | | 27.9 | % |
Original Investments and Commitments | | $ | 1,065 | | | $ | 376 | | | $ | 962 | | | $ | 1,436 | | | $ | 2,266 | | | $ | 4,642 | | | $ | 5,181 | | | $ | 7,369 | | | $ | 1,021 | | | $ | — | | $ | — | | $ | 24,318 | | | $ | 18,213 | |
Total Exits and Prepayments of Original Investments and Commitments | | $ | 998 | | | $ | 353 | | | $ | 757 | | | $ | 1,083 | | | $ | 1,831 | | | $ | 2,253 | | | $ | 3,297 | | | $ | 3,542 | | | $ | 55 | | | $ | — | | $ | — | | $ | 14,169 | | | $ | 9,147 | |
Total Interest, Dividends and Fees Collected | | $ | 404 | | | $ | 147 | | | $ | 327 | | | $ | 404 | | | $ | 618 | | | $ | 991 | | | $ | 936 | | | $ | 939 | | | $ | 213 | | | $ | — | | $ | — | | $ | 4,979 | | | $ | 3,079 | |
Total Net Realized (Loss) Gain on Investments | | $ | (128 | ) | | $ | (4 | ) | | $ | (90 | ) | | $ | 142 | | | $ | 26 | | | $ | 280 | | | $ | (93 | ) | | $ | (651 | ) | | $ | (50 | ) | | $ | — | | $ | — | | $ | (568 | ) | | $ | (514 | ) |
Current Cost of Investments | | $ | 79 | | | $ | 23 | | | $ | 200 | | | $ | 336 | | | $ | 463 | | | $ | 2,110 | | | $ | 1,539 | | | $ | 2,892 | | | $ | 797 | | | $ | — | | $ | — | | $ | 8,439 | | | $ | 7,338 | |
Current Fair Value of Investments | | $ | 23 | | | $ | 2 | | | $ | 142 | | | $ | 399 | | | $ | 351 | | | $ | 1,196 | | | $ | 1,312 | | | $ | 1,639 | | | $ | 630 | | | $ | — | | $ | — | | $ | 5,694 | | | $ | 4,777 | |
Current Fair Value of Investments as a % of Total Investments at Fair Value | | | 0.4 | % | | | 0.0 | % | | | 2.5 | % | | | 7.0 | % | | | 6.2 | % | | | 21.0 | % | | | 23.0 | % | | | 28.8 | % | | | 11.1 | % | | | — | | | — | | | 100.0 | % | | | 83.9 | % |
Net Unrealized Appreciation (Depreciation) | | $ | (56 | ) | | $ | (21 | ) | | $ | (58 | ) | | $ | 63 | | | $ | (112 | ) | | $ | (914 | ) | | $ | (227 | ) | | $ | (1,253 | ) | | $ | (167 | ) | | $ | — | | $ | — | | $ | (2,745 | ) | | $ | (2,561 | ) |
Non-Accruing Loans at Cost | | $ | 19 | | | $ | 14 | | | $ | 27 | | | $ | — | | | $ | 31 | | | $ | 59 | | | $ | 135 | | | $ | 377 | | | $ | 24 | | | $ | — | | $ | — | | $ | 686 | | | $ | 595 | |
Non-Accruing Loans at Fair Value | | $ | 21 | | | $ | 2 | | | $ | 18 | | | $ | — | | | $ | 8 | | | $ | 49 | | | $ | 72 | | | $ | 114 | | | $ | 24 | | | $ | — | | $ | — | | $ | 308 | | | $ | 259 | |
Equity Interest at Fair Value(3) | | $ | — | | | $ | — | | | $ | 5 | | | $ | 168 | | | $ | 75 | | | $ | 684 | | | $ | 492 | | | $ | 331 | | | $ | 166 | | | $ | — | | $ | — | | $ | 1,921 | | | $ | 1,673 | |
Debt to EBITDA(6)(7)(8) | | | 8.0 | | | | NM | | | | 7.7 | | | | 3.8 | | | | 5.9 | | | | 5.3 | | | | 5.4 | | | | 6.8 | | | | 6.0 | | | | — | | | — | | | 5.9 | | | | 6.0 | |
Interest Coverage(6)(8) | | | 1.9 | | | | NM | | | | 1.0 | | | | 3.1 | | | | 2.2 | | | | 2.8 | | | | 2.3 | | | | 2.3 | | | | 1.6 | | | | — | | | — | | | 2.3 | | | | 2.3 | |
Debt Service Coverage(6)(8) | | | 1.9 | | | | NM | | | | 0.8 | | | | 2.9 | | | | 1.7 | | | | 1.8 | | | | 1.9 | | | | 1.9 | | | | 1.4 | | | | — | | | — | | | 1.9 | | | | 1.8 | |
Average Age of Companies(8) | | | 40 yrs | | | | 25 yrs | | | | 53 yrs | | | | 40 yrs | | | | 45 yrs | | | | 29 yrs | | | | 31 yrs | | | | 29 yrs | | | | 25 yrs | | | | — | | | — | | | 32 yrs | | | | 29 yrs | |
Diluted Ownership Percentage(3) | | | 63 | % | | | 86 | % | | | 37 | % | | | 52 | % | | | 45 | % | | | 63 | % | | | 46 | % | | | 42 | % | | | 36 | % | | | — | | | — | | | 47 | % | | | 47 | % |
Average Sales(8)(9) | | $ | 44 | | | $ | 7 | | | $ | 49 | | | $ | 197 | | | $ | 98 | | | $ | 104 | | | $ | 127 | | | $ | 236 | | | $ | 100 | | | $ | — | | $ | — | | $ | 156 | | | $ | 162 | |
Average EBITDA(8)(10) | | $ | 4 | | | $ | — | | | $ | 9 | | | $ | 41 | | | $ | 25 | | | $ | 21 | | | $ | 32 | | | $ | 41 | | | $ | 28 | | | $ | — | | $ | — | | $ | 32 | | | $ | 33 | |
Average EBITDA Margin | | | 9.1 | % | | | — | | | | 18.4 | % | | | 20.8 | % | | | 25.5 | % | | | 20.2 | % | | | 25.2 | % | | | 17.4 | % | | | 28.0 | % | | | — | | | — | | | 20.5 | % | | | 20.4 | % |
Total Sales(8)(9) | | $ | 73 | | | $ | 291 | | | $ | 169 | | | $ | 1,303 | | | $ | 833 | | | $ | 1,315 | | | $ | 5,287 | | | $ | 8,145 | | | $ | 1,221 | | | $ | — | | $ | — | | $ | 18,637 | | | $ | 15,968 | |
Total EBITDA(8)(10) | | $ | 7 | | | $ | 4 | | | $ | 19 | | | $ | 192 | | | $ | 169 | | | $ | 245 | | | $ | 701 | | | $ | 1,567 | | | $ | 244 | | | $ | — | | $ | — | | $ | 3,148 | | | $ | 2,757 | |
% of Senior Loans(8)(11) | | | 77 | % | | | 21 | % | | | 56 | % | | | 61 | % | | | 40 | % | | | 32 | % | | | 39 | % | | | 62 | % | | | 26 | % | | | — | | | — | | | 47 | % | | | 46 | % |
% of Loans with Lien(8)(11) | | | 100 | % | | | 68 | % | | | 100 | % | | | 100 | % | | | 90 | % | | | 91 | % | | | 92 | % | | | 92 | % | | | 60 | % | | | — | | | — | | | 90 | % | | | 88 | % |
| (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. |
| (2) | Assumes investments are exited at current fair value. |
| (3) | Excludes investments in structured products. |
| (4) | Excludes equity investments that are the result of conversions of debt and warrants received with the issuance of debt. |
| (5) | Includes exited securities of existing portfolio companies. |
| (6) | These amounts do not include investments in which we own only equity. |
| (7) | For portfolio companies with a nominal EBITDA amount, the portfolio company’s maximum debt leverage is limited to 15 times EBITDA. |
| (8) | Excludes investments in structured products, managed funds and American Capital, LLC. |
| (9) | Sales of the most recent twelve months, or when appropriate, the forecasted twelve months. |
| (10) | EBITDA of the most recent twelve months, or when appropriate, the forecasted twelve months. |
| (11) | As a percentage of our total debt investments. |
American Capital, Ltd.
August 3, 2010
Page 8
American Capital, Ltd.
August 3, 2010
Page 9
SHAREHOLDER CALL
American Capital invites shareholders, analysts and interested parties to attend the shareholder call on August 4, 2010 at 11:00 am ET. The shareholder call can be accessed through a live webcast, free of charge, atwww.AmericanCapital.com or by dialing (877) 569-8701 (U.S. domestic) or +1 (574) 941-7382 (international). Please provide the operator with the conference ID number 88487445. If you do not plan on asking a question on the call and have access to the internet, please take advantage of the webcast.
A slide presentation will accompany the shareholder call and will be available atwww.AmericanCapital.com in advance of the shareholder call. Select the Q2 2010 Earnings Presentation link to download and print the presentation in advance of the shareholder call.
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 4:00 pm ET August 4, 2010 until 11:59 pm ET August 18, 2010. If you are interested in hearing the recording of the presentation, please dial (800) 642-1687 (U.S. domestic) or +1 (706) 645-9291 (international). The access code for both domestic and international callers is 88487445.
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 $15 billion in capital resources under management and eight offices in the U.S., Europe and Asia. American Capital and its affiliates will consider investment opportunities from $5 million to $100 million. For further information, please refer towww.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, 2009 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.
