Exhibit 99.1
Allied Capital Announces First Quarter 2003 Financial Results;
Quarterly Dividend of $0.57 Per Share Declared
WASHINGTON--(BUSINESS WIRE)--April 22, 2003--Allied Capital
Corporation (NYSE: ALD) today announced first quarter 2003 financial
results.
Highlights for Q1 2003
-- Net investment income was $0.39 per share, or $42.7 million
-- Net realized gains were $0.44 per share, or $48.3 million
-- The total of net investment income and net realized gains was
$0.83 per share, or $91.0 million
-- Net unrealized losses (including the reversal of unrealized
gains) were $0.65 per share or $71.1 million
-- Net income was $0.18 per share, or $19.9 million
-- Regular quarterly dividend of $0.57 per share paid; second
quarter dividend of $0.57 per share declared
-- Net asset value per share was $14.05 per share
-- Shareholders' equity increased 3% to $1.59 billion
-- Debt to equity ratio declined to 0.54 to 1
-- New investments totaled $269.0 million for the quarter
Operating Results
For the three months ended March 31, 2003, Allied Capital reported
net investment income of $0.39 per share. Net realized gains were
$0.44 per share, and the sum of net investment income and net realized
gains was $0.83 per share. Net investment income and net realized
gains for the quarter ended March 31, 2002 were $0.62 per share. Net
investment income and net realized gains are the primary components of
the company's annual taxable income that is used to pay dividends to
shareholders.
Net income for the quarter ended March 31, 2003 was $0.18 per
share after recording net unrealized losses of $0.65 per share. Net
income for the quarter ended March 31, 2002 was $0.55 per share. Net
income can vary substantially from quarter to quarter primarily due to
the recognition of realized and unrealized gains or losses, which vary
from quarter to quarter. As a result, quarterly comparisons of net
income may not be meaningful. Changes in unrealized appreciation and
depreciation have no impact on the company's taxable income.
Net investment income for the quarter was lower by an estimated
$0.02 per share because the company chose to sell certain CMBS bonds
in order to realize significant appreciation that had accumulated in
these investments. Total net realized gains from the sale of CMBS
investments were $24.6 million or $0.22 per share. In addition, the
company realized net gains of $23.7 million or $0.22 per share from
the exit of private finance portfolio investments.
Net unrealized losses of $71.1 million or $0.65 per share were the
result of the following: the reversal of previously recorded
unrealized appreciation on assets that were sold for gains, the
reversal of previously recorded appreciation on assets where these
assets have declined in value, and other changes in values in the
portfolio. In conjunction with the realization of $48.3 million in net
gains, the company reversed net unrealized gains of $42.8 million or
$0.39 per share. The company recorded additional unrealized losses of
$14.0 million or $0.13 per share to reverse previously recorded
unrealized gains on portfolio companies where values had declined
during the quarter. The company also recorded additional net
unrealized losses of $14.3 million or $0.13 per share due to changes
in values of other portfolio investments. The sum of these three
components of net unrealized losses, $42.8 million, $14.0 million and
$14.3 million, totaled $71.1 million for the quarter.
During the quarter, the company invested a total of $269.0
million. After total repayments of $76.0 million, asset sales of
$244.1 million and valuation and other changes during the quarter,
total assets were $2.59 billion at March 31, 2003. Shareholders'
equity increased 3% to $1.59 billion at March 31, 2003 from $1.55
billion at December 31, 2002. Net asset value per share was $14.05 at
March 31, 2003.
Bill Walton, Chairman and CEO, remarked, "We made good progress in
the first quarter towards achieving our 2003 dividend payments to
shareholders. The early gains harvest of $0.44 per share combined with
our net investment income positions the company to continue our record
of consistent regular quarterly dividends. The economy continues to be
weak, and we have seen weakness in certain portfolio companies.
However, there also continues to be strong appreciation in the
portfolio, and overall we are weathering this difficult recession
well. Cash flow from the portfolio remains strong, our leverage is
very modest, and we are well positioned to invest as the pace of
buyout activity increases throughout the year."
Portfolio Activity for Q1 2003
New private finance investments totaled $110.1 million and
commercial real estate investments totaled $158.9 million for the
quarter. At March 31, 2003, the overall weighted average yield on the
interest-bearing portfolio was 14.0%, which was unchanged from
December 31, 2002.
Private Finance
The private finance portfolio totaled $1.74 billion at March 31,
2003. The debt portion of this portfolio, which totaled $1.10 billion
at March 31, 2003, had a weighted average yield of 14.0% as compared
to 14.4% at December 31, 2002. During the first quarter of 2003,
Allied Capital invested a total of $110.1 million in its private
finance business. Significant private finance investments during the
first quarter of 2003 included:
-- $25 million in a short-term line of credit and $25 million of
preferred equity to Business Loan Express, LLC, the country's
second largest lender specializing in originating, selling,
and servicing loans under the SBA's Section 7(a) Guaranteed
Loan Program, in connection with BLX's acquisition of $128
million in assets from Amresco Independence Funding;
-- $30 million of senior secured debt to Resun Leasing, Inc., a
provider of modular space solutions;
-- $10 million of senior secured debt with warrants to
HealthMarket Inc., a provider of health plan alternatives for
small and mid-sized businesses; and
-- $5 million of subordinated debt and $1 million of preferred
and common stock to Sidarus Holdings, Inc., a provider of
information technology services and solutions to the U.S.
government in key areas of homeland security and national
defense.
CMBS Investing
At March 31, 2003, the company's CMBS and CDO portfolio totaled
$498.5 million, and had a weighted average yield to maturity of 15.4%,
as compared to 14.4% at December 31, 2002. The company invested a
total of $40.8 million in two new CMBS transactions, and $118.1
million in a CDO transaction during the first quarter of 2003. Because
the company generally acquires its CMBS investments at significant
discounts from the face amounts of the bonds, the unamortized discount
on the CMBS bond portfolio totaled $518.0 million at March 31, 2003.
During the first quarter of 2003, the company sold BB+ through B
rated CMBS bonds with a cost basis of $244.1 million for cash proceeds
of $275.1 million, resulting in realized gains of $24.6 million, net
of realized losses on related hedges of $6.4 million. The company sold
the bonds with an overall yield of 11.9%, in order to realize the
significant appreciated value that had accumulated in these
investments due to declining Treasury yields and narrowing spreads in
the CMBS market. In addition, the company chose to sell the bonds in
order to reinvest the capital into higher yielding assets. The sale of
these bonds lowered the level of recurring net investment income in
the first quarter by an estimated $0.02 per share.
Liquidity and Capital Resources
During the quarter ended March 31, 2003, Allied Capital raised a
total of $82.4 million in new equity in two transactions. Outstanding
borrowings on the company's unsecured revolving line of credit at
March 31, 2003 were $61.8 million. Subsequent to quarter-end, the
company renewed the revolving credit facility for an additional two
years, with the option to extend for a third year. The committed
amount under the new facility is $462.5 million.
At March 31, 2003, the company had a weighted average cost of debt
of 7.6%. The company's regulatory asset coverage was 307% and the
ratio of debt to equity was 0.54 to 1. The company is required to
maintain regulatory asset coverage of at least 200%.
Portfolio Quality
Allied Capital employs a grading system to monitor the quality of
its portfolio. Grade 1 is for those investments from which a capital
gain is expected. Grade 2 is for investments performing in accordance
with plan. Grade 3 is for investments that require closer monitoring;
however, no loss of investment return or principal is expected. Grade
4 is for investments that are in workout and for which some loss of
current investment return is expected, but no loss of principal is
expected. Grade 5 is for investments that are in workout and for which
some loss of principal is expected and the investment is written down
to net realizable value.
At March 31, 2003, the portfolio of Grade 1 investments totaled
$762.2 million, or 32.1% of the total portfolio at value; Grade 2
investments totaled $1.35 billion, or 56.6% of the total portfolio;
Grade 3 investments totaled $133.3 million, or 5.6% of the total
portfolio; Grade 4 investments totaled $23.1 million, or 1.0% of the
total portfolio; and Grade 5 investments totaled $112.0 million, or
4.7% of the total portfolio. Included in Grade 4 and 5 investments are
assets totaling $27.2 million that are secured by commercial real
estate. During the quarter the total portfolio declined by $111.2
million in size, yet portfolio grade categories remained relatively
constant.
For the total investment portfolio, loans and debt securities
greater than 90 days past due were $99.6 million at value at March 31,
2003, or 4.2% of the total portfolio. Included in this category are
loans and debt securities valued at $36.2 million that are secured by
commercial real estate. At March 31, 2003, 0.93% of the loans in the
underlying collateral pool for the CMBS bonds was over 30 days
delinquent or was classified as real estate owned.
Quarterly Dividend of $0.57 Per Share Declared
As previously released on April 17, 2003, the company declared a
regular quarterly dividend of $0.57 per share for the second quarter
of 2003. This dividend represents the company's 159th consecutive
quarterly dividend. The dividend is payable as follows:
Record date June 13, 2003
Payable date June 27, 2003
The company's dividend is paid from taxable income. The Board
determines the dividend based on annual estimates of taxable income,
which differs from book income due to both temporary and permanent
differences in income and expense recognition. Changes in unrealized
appreciation and depreciation have no impact on the company's taxable
income.
Webcast/ Conference Call at 10:15 a.m. EST on April 22, 2003
The company will host a webcast/ conference call at 10:15 a.m.
(EST) today to discuss first quarter financial results. All interested
parties are welcome to attend the live webcast, which will be hosted
through our web site at www.alliedcapital.com. Please visit the web
site to test your connection before the call. You can also access the
conference call by dialing (888) 689-4612 approximately 15 minutes
prior to the call; please reference the passcode "Allied Capital."
International callers should dial (706) 645-0106. An archived replay
of the event will be available on our web site by calling (800)
642-1687 and referencing passcode "9440173". International callers,
please dial (706) 645-9291 to access the replay. For complete
information about the webcast/ conference call and the replay, please
visit our web site or call Allied Capital Investor Relations at (888)
818-5298.
About Allied Capital
Allied Capital is the nation's largest business development
company and provides long-term debt and equity investment capital to
support the expansion of companies in a variety of industries. The
company also participates in the real estate capital markets as an
investor in non-investment grade commercial mortgage-backed
securities. The company is headquartered in Washington, DC. For more
information, please visit the web site at www.alliedcapital.com, call
Allied Capital Investor Relations toll-free at (888) 818-5298, or
e-mail us at ir@alliedcapital.com.
Forward-looking Statements
The information contained in this press release contains
forward-looking statements. These forward-looking statements are
subject to the inherent uncertainties in predicting future results and
conditions. Certain factors could cause actual results and conditions
to differ materially from those projected in these forward-looking
statements, and these factors are enumerated in the company's periodic
filings with the Securities and Exchange Commission.
(in thousands, except per share At March 31, At December 31,
amounts) 2003 2002
----------------------------------
(unaudited)
ASSETS
Portfolio at value:
Private finance $1,742,084 $1,743,215
Commercial real estate finance 634,853 744,952
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Total portfolio at value 2,376,937 2,488,167
Other assets 106,031 100,221
Deposits of proceeds from sales of
borrowed Treasury securities 99,425 194,745
Cash and cash equivalents 8,104 11,186
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Total assets $2,590,497 $2,794,319
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LIABILITIES and SHAREHOLDERS' EQUITY
Liabilities:
Debt $855,950 $998,450
Obligations to replenish borrowed
Treasury securities 100,339 197,027
Accounts payable and other
liabilities 38,915 45,771
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Total liabilities 995,204 1,241,248
Preferred stock 7,000 7,000
Shareholders' Equity:
Common stock 11 11
Additional paid-in-capital 1,631,745 1,547,183
Notes receivable from sale of
common stock (23,890) (24,704)
Net unrealized appreciation
(depreciation) on portfolio (31,725) 39,411
Undistributed (distributions in
excess of) earnings 12,152 (15,830)
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Total shareholders' equity 1,588,293 1,546,071
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Total liabilities and
shareholders' equity $2,590,497 $2,794,319
==================================
Net asset value per common share $14.05 $14.22
Common shares outstanding 113,056 108,698
For the Three Months
Ended March 31
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(In thousands, except per share amounts) (unaudited)
Interest and Related Portfolio Income: 2003 2002
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Interest and dividends $65,521 $64,973
Premiums from loan dispositions 1,121 1,613
Fees and other income 6,488 15,805
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Total interest and related portfolio
income 73,130 82,391
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Expenses:
Interest 17,922 17,469
Employee 8,121 8,035
Administrative 4,417 3,018
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Total operating expenses 30,460 28,522
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Net investment income before net realized and
unrealized gains 42,670 53,869
Net Realized and Unrealized Gains (Losses):
Net realized gains 48,339 9,605
Net unrealized losses (71,136) (7,513)
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Total net realized and unrealized
gains (losses) (22,797) 2,092
------------------------
Net income $19,873 $55,961
========================
Diluted net investment income per common share $0.39 $0.53
Diluted earnings per common share $0.18 $0.55
Weighted average common shares outstanding --
diluted 110,098 102,364
CONTACT: Allied Capital, Washington
Suzanne Sparrow, 202/973-6326