American Capital Reports 2014 Net Operating Income Before Income Taxes Of $0.65 Per Diluted Share, Net Earnings Of $1.55 Per Diluted Share And Net Asset Value Per Share Of $20.50

BETHESDA, Md., Feb. 24, 2015 /PRNewswire/ -- American Capital, Ltd. ("American Capital" or the "Company") ACAS announced consolidated net operating income ("NOI") before income taxes for the year and quarter ended December 31, 2014 of $183 million, or $0.65 per diluted share, and $60 million, or $0.21 per diluted share, respectively.  Consolidated NOI for the year and quarter ended December 31, 2014 was $117 million, or $0.42 per diluted share, and $35 million, or $0.12 per diluted share, respectively.  Consolidated net earnings for the year and quarter ended December 31, 2014 was $434 million, or $1.55 per diluted share, and $38 million, or $0.14 per diluted share, respectively. As of December 31, 2014, consolidated net asset value ("NAV") per share was $20.50, a 1% annualized, or $0.04 per share, decrease from the September 30, 2014 NAV per share of $20.54 and an 8%, or $1.53 per share, increase from the December 31, 2013 NAV per share of $18.97.

2014 CONSOLIDATED FINANCIAL SUMMARY


  • $20.50 NAV per share outstanding
    • $1.53 per share increase, or 8%, over Q4 2013 of $18.97 per share outstanding
  • $0.65 NOI before income taxes per diluted share, or $183 million
    • $0.11 per diluted share decrease from 2013, or $49 million
    • $0.07 per diluted share decrease from severance related costs, or $19 million
    • $0.42 NOI after income taxes per diluted share, or $117 million
  • $1.55 net earnings per diluted share, or $434 million
    • $0.94 per diluted share increase, or 154%, from 2013, or $250 million
  • $2.8 billion of cash proceeds from realizations
    • $265 million dividend distribution from American Capital's investment in European Capital Limited ("European Capital") through September 30, 2014
    • $540 million of proceeds from American Capital's investment in portfolio companies sold to American Capital Equity III, LP ("ACE III")
  • $3.6 billion in new committed investments
    • $1.9 billion in Senior Floating Rate Loans ("SFRLs")
    • $1.6 billion in Sponsor Finance, Structured Products and American Capital Asset Management, LLC ("ACAM") and Fund Development
  • $137 million of stock buybacks in Q1 2014 producing $0.16 accretion per share

Q4 2014 CONSOLIDATED FINANCIAL SUMMARY

  • $20.50 NAV per share outstanding
    • $0.04 per share decrease, or 1% annualized, from Q3 2014
  • $0.21 NOI before income taxes per diluted share, or $60 million
    • $0.02 per diluted share increase over Q4 2013, or $8 million
    • $0.07 per diluted share decrease from severance related costs, or $19 million
    • $0.12 NOI after income taxes per diluted share, or $35 million
  • $0.14 net earnings per diluted share, or $38 million
    • $0.80 per diluted share, or $220 million, improvement over Q4 2013 net loss of $182 million
  • $773 million of cash proceeds from realizations
  • $1,033 million in new committed investments
    • $288 million in Senior Floating Rate Loans
    • $703 million in Sponsor Finance, Structured Products and ACAM

In October 2014, the Division of Investment Management of the Securities and Exchange Commission ("SEC") issued SEC IM Guidance Update No. 2014-11, Investment Company Consolidation ("IM Update 2014-11"), which recommends that business development companies ("BDCs") consolidate wholly-owned subsidiaries when the design and purpose of the subsidiary is to act as an extension of the BDC's investment operations and to facilitate the execution of the BDC's investment strategy.  In October 2014, American Capital's Board of Directors approved a preliminary plan to transfer most of American Capital's investment assets to two newly formed BDCs, which will be implemented through dividends of the new BDCs' shares to American Capital's shareholders.  The board approval marked a change in American Capital's intent with respect to European Capital, because it is no longer considered a vehicle for third-party capital but rather is viewed as an extension of American Capital's investment operations.  As a result, in accordance with IM Update 2014-11, American Capital has consolidated European Capital's financial results as of and for the three months ended December 31, 2014 with its financial results for the same periods.  The day one financial impact of the European Capital consolidation was as follows:

  • $0.06 per share increase in NAV, or $16 million
    • $87 million of unrealized appreciation related to the difference between the fair value of American Capital's investment in European Capital and European Capital's NAV as of September 30, 2014
    • $71 million tax provision due to the difference between the removal of the deferred tax asset previously recorded on American Capital's equity investment in European Capital and the deferred tax asset on European Capital's investment portfolio that was recorded upon consolidation
      • The $71 million tax provision represents an accounting adjustment only and does not reflect a substantive change in American Capital's expectations of the amount or timing of future cash tax payments since European Capital has been included in our consolidated U.S. tax returns since inception

The impact of the European Capital consolidation on the American Capital consolidated results as of and for the three months ended December 31, 2014 was as follows:

  • No impact to NAV from Q4 2014
    • $0.14 per share increase from net earnings, or $38 million
    • $0.14 per share decrease from foreign exchange cumulative translation adjustment, net of tax, or $38 million
  • $0.01 per diluted share increase in NOI in Q4 2014, or $4 million
  • $0.14 per diluted share increase in net earnings in Q4 2014, or $38 million
  • $386 million in cash proceeds from realizations in Q4 2014
  • $39 million in new committed investments in Q4 2014

"Since our board approved our plan to spin off two new BDCs to our shareholders, we have been working with our advisors and have had discussions with our regulators concerning a variety of matters related to the spin off.  We have made good progress and are awaiting important feedback to determine the appropriate path to proceed to execute the transaction," said Malon Wilkus, Chairman and Chief Executive Officer.  "We continue to adjust our assets so that the two new BDCs will be able to pay market rate dividends and so that the asset composition of the new BDCs will meet statutory requirements."

"We had a very successful 2014," continued Mr. Wilkus.  "We increased total earning assets under management by 19%, raising five new funds under ACAM management.  We invested $1.9 billion in a highly diverse set of Senior Floating Rate Loans, plus we invested $1.6 billion in Sponsor Finance, Structured Products, ACAM and fund development, all toward improving our net operating income, expanding ACAM and advancing our spin off plans.  At year end, Senior Floating Rate Loans represented 22% and equity in middle market companies represented 12% of total assets.  As a result of our efforts in 2014, we increased NAV per share by 8% and net earnings per diluted share by 154% to $434 million."

PORTFOLIO VALUATION
For the quarter ended December 31, 2014, net unrealized depreciation, before income taxes, totaled $150 million.  The primary components of the net unrealized depreciation were:

  • $179 million of reversal of prior period unrealized appreciation associated with net realized gains on portfolio investments;
  • $29 million net unrealized depreciation from American Capital One Stop Buyouts® as a result of declining portfolio company performance primarily in one portfolio company offset by appreciation as a result of increased multiples and improved performance in portfolio companies; and
  • $8 million net unrealized depreciation in Senior Floating Rate Loans; partially offset by
  • $87 million unrealized appreciation due to the elimination of the discount to NAV on the consolidation of European Capital.

"During the quarter, the SEC updated guidance for investment company consolidation," said John Erickson, Chief Financial Officer.  "Under our strategic plan, we plan that future equity capital raises in Europe will be done via new funds and not by European Capital.  Therefore, we concluded it was appropriate to consolidate ECAS under the updated SEC accounting guidance and did so during the quarter.  As part of the consolidation, we recognized a $16 million net increase to NAV, comprised of $87 million of unrealized appreciation associated with the removal of the discount to the European Capital NAV as of September 30, 2013 and a $71 million tax provision, which does not reflect a substantive change in our expectations of the amount or timing of future cash tax payments but is required under GAAP due to the consolidation of European Capital."

PORTFOLIO REALIZATIONS AND PERFORMANCE
In 2014, $2.8 billion of cash proceeds were received from realizations of portfolio investments, including a $265 million dividend distribution from European Capital through September 30, 2014, $386 million from European Capital's investment portfolio in the fourth quarter of 2014 and $540 million of proceeds from the portfolio companies sold to ACE III, a new American Capital private equity fund, which closed on September 23, 2014.  American Capital made $3.6 billion in new committed investments during the year, including $1.9 billion in Senior Floating Rate Loans.  In the fourth quarter of 2014, $773 million of cash proceeds were received from realizations of portfolio investments, including $386 million from European Capital's investment portfolio.   American Capital made $1.0 billion in new committed investments during the quarter, including $0.3 billion in Senior Floating Rate Loans.

As of December 31, 2014, the Company's investments in Senior Floating Rate Loans were diversified across 230 portfolio companies and 51 industries, with the average issuer concentration at 0.4% and no single company representing more than 1.7% of the Company's Senior Floating Rate Loans.  The weighted average effective interest rate on the Company's Senior Floating Rate Loans as of December 31, 2014 was 4.4%, which was the same as of September 30, 2014.  The weighted average effective interest rate on the Company's debt investments, excluding Senior Floating Rate Loans and European Capital's debt investments, as of December 31, 2014 was 9.3%, 20 basis points higher than the September 30, 2014 rate of 9.1% and 70 basis points lower than the December 31, 2013 rate of 10.0%.  The weighted average effective interest rate on European Capital's debt investments as of December 31, 2014 was 5.0%.

As of December 31, 2014, American Capital loans with a fair value of $116 million were on non-accrual, representing 3.5% of total American Capital loans at fair value, compared to $172 million fair value of non-accrual American Capital loans, or 5.7% of total American Capital loans at fair value as of September 30, 2014.  The $56 million decrease in the fair value of American Capital loans on non-accrual was generally driven by net depreciation of existing non-accrual loans.  Total American Capital loans on non-accrual were valued at 57.7% of cost at the end of the fourth quarter, a 9.5% decrease from the prior quarter.  This is an estimate of the amount the Company expects to recover on non-accruing loans.  The estimated loss on total loans at cost, defined as net accumulated depreciation on non-accrual loans plus realized losses on loans during the period, was $108 million, or 3.2%.

As of December 31, 2014, European Capital loans with a fair value of $32 million were on non-accrual, representing 8.9% of total European Capital loans at fair value.  Total European Capital loans on non-accrual were valued at 33.3% of cost at the end of the fourth quarter.  This is an estimate of the amount the Company expects to recover on non-accruing loans.  The estimated loss on total loans at cost was $140 million, or 27.4%.

Due to changes in the composition of American Capital's investment portfolio and market conditions, strategic reviews of its business were conducted in the fourth quarter of 2014, which resulted in the closing of one office and a workforce reduction of approximately 13% of its employees.  As a result, a charge of approximately $19 million was recorded for the fourth quarter of 2014 related to accrued severance payments and stock based compensation charges associated with the workforce reduction.

 

AMERICAN CAPITAL, LTD.

CONSOLIDATED BALANCE SHEETS

As of December 31, 2014 and 2013

(in millions, except per share amounts)




















2014 Versus 2013


2014



2013



$


%


(unaudited)










Assets












Investments at fair value (cost of $6,416 and $5,548, respectively)

$

6,280



$

5,072



$

1,208



24

%

Cash and cash equivalents

676



315



361



115

%

Restricted cash and cash equivalents

167



74



93



126

%

Interest and dividend receivable

46



38



8



21

%

Deferred tax asset, net

354



414



(60)



(14%)


Other

117



96



21



22

%

          Total assets

$

7,640



$

6,009



$

1,631



27

%













Liabilities and Shareholders' Equity












Debt

$

1,703



$

791



$

912



115

%

Trade date settlement liability

191



15



176



NM

Long term incentive plan liability

82





82



100

%

Other

192



77



115



149

%

          Total liabilities

2,168



883



1,285



146

%













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, 271.1 and 274.8 issued 
     and 266.9 and 270.2 outstanding, respectively

3



3





%

Capital in excess of par value

6,246



6,296



(50)



(1%)


Cumulative translation adjustment

(38)





(38)



(100%)


Distributions in excess of net realized earnings

(505)



(774)



269



35

%

Net unrealized depreciation of investments

(234)



(399)



165



41

%

          Total shareholders' equity

5,472



5,126



346



7

%

          Total liabilities and shareholders' equity

$

7,640



$

6,009



$

1,631



27

%













NAV per common share outstanding

$

20.50



$

18.97



$

1.53



8

%

______________________________

NM = Not meaningful

Note: Effective October 1, 2014, European Capital's financial results as of and for the three months ended December 31, 2014 have been consolidated with the
financial results of ACAS for the same periods.

 

AMERICAN CAPITAL, LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months and Fiscal Years Ended December 31, 2014 and 2013

(in millions, except per share data)




























Three Months Ended








Fiscal Year Ended


Three Months Ended


December 31,


Fiscal Year Ended


December 31,


December 31,


2014 Versus 2013


December 31,


2014 Versus 2013


2014



2013



$


%


2014



2013



$


%


(unaudited)


(unaudited)








(unaudited)










OPERATING REVENUE
























Interest and dividend income

$

144



$

92



$

52



57

%


$

413



$

423



$

(10)



(2%)


Fee income

14



26



(12)



(46%)



58



64



(6)



(9%)


Total operating revenue

158



118



40



34

%


471



487



(16)



(3%)


























OPERATING EXPENSES
























Interest

17



12



5



42

%


54



44



10



23

%

Salaries, benefits and stock-based 
     compensation

54



41



13



32

%


168



156



12



8

%

Management fees

5





5



100

%


5





5



100

%

General and administrative

22



13



9



69

%


61



55



6



11

%

Total operating expenses

98



66



32



48

%


288



255



33



13

%

























NET OPERATING INCOME BEFORE 
     INCOME TAXES

60



52



8



15

%


183



232



(49)



(21%)


























Tax provision

(25)



(14)



(11)



(79%)



(66)



(76)



10



13

%

NET OPERATING INCOME

35



38



(3)



(8%)



117



156



(39)



(25%)


























Net realized gain (loss)
























Portfolio company investments

210



12



198



NM



263



(104)



367



NM


Foreign currency transactions

(12)



3



(15)



NM



(17)



3



(20)



NM


Derivative agreements

1



1





%


(41)



(14)



(27)



(193%)


Tax (provision) benefit

(72)



3



(75)



NM



(53)



60



(113)



NM


Total net realized gain (loss)

127



19



108



568

%


152



(55)



207



NM


























Net unrealized appreciation (depreciation)
























Portfolio company investments

(206)



(261)



55



21

%


149



49



100



204

%

Foreign currency translation

8



21



(13)



(62%)



(74)



52



(126)



NM


Derivative agreements and others

48



3



45



NM



35



19



16



84

%

Tax benefit (provision)

26



(2)



28



NM



55



(37)



92



NM


Total net unrealized (depreciation) 
     appreciation

(124)



(239)



115



48

%


165



83



82



99

%

























NET INCREASE (DECREASE) IN NET 
     ASSETS RESULTING FROM 
     OPERATIONS ("NET EARNINGS 
     (LOSS) ")

$

38



$

(182)



$

220



NM



$

434



$

184



$

250



136

%

























NET OPERATING INCOME PER COMMON SHARE
























Basic

$

0.13



$

0.14



$

(0.01)



(7%)



$

0.44



$

0.53



$

(0.09)



(17%)


Diluted

$

0.12



$

0.14



$

(0.02)



(14%)



$

0.42



$

0.51



$

(0.09)



(18%)


























NET REALIZED EARNINGS PER COMMON SHARE
























Basic

$

0.60



$

0.21



$

0.39



186

%


$

1.00



$

0.35



$

0.65



186

%

Diluted

$

0.58



$

0.21



$

0.37



176

%


$

0.96



$

0.33



$

0.63



191

%

























NET EARNINGS (LOSS) PER 
     COMMON SHARE
























Basic

$

0.14



$

(0.66)



$

0.80



NM



$

1.62



$

0.63



$

0.99



157

%

Diluted

$

0.14



$

(0.66)



$

0.80



NM



$

1.55



$

0.61



$

0.94



154

%

























WEIGHTED AVERAGE SHARES OF 
     COMMON STOCK OUTSTANDING
























Basic

269.0



277.5



(8.5)



(3%)



268.2



291.6



(23.4)



(8%)


Diluted

281.1



277.5



3.6



1

%


280.7



303.9



(23.2)



(8%)


______________________________

NM = Not meaningful

Note: Effective October 1, 2014, European Capital's financial results as of and for the three months ended December 31, 2014 have been consolidated with the
financial results of ACAS for the same periods.

 

AMERICAN CAPITAL, LTD.

OTHER FINANCIAL INFORMATION

Three Months Ended December 31, 2014 and September 30, 2014 and Fiscal Years Ended December 31, 2014 and 2013

(in millions, except per share data)

(unaudited)
































 Q4 2014 Versus
 Q3 2014








2014 Versus 2013


Q4 2014


Q3 2014


$


%


2014



2013



$


%

























Assets Under Management
























American Capital Total Assets at Fair Value

$

7,640



$

7,176



$

464



6

%


$

7,640



$

6,009



$

1,631



27

%

Externally Managed Assets at Fair Value(1)

78,782



73,304



5,478



7

%


78,782



87,201



(8,419)



(10%)


Total

$

86,422



$

80,480



$

5,942



7

%


$

86,422



$

93,210



$

(6,788)



(7%)


























 Third-Party Earning Assets Under Management(2)

$

14,467



$

14,044



$

423



3

%


$

14,467



$

12,594



$

1,873



15

%

 Total Earning Assets Under Management(3)

$

22,107



$

21,220



$

887



4

%


$

22,107



$

18,603



$

3,504



19

%

























New Investments
























First Lien Senior Debt

$

385



$

928



$

(543)



(59%)



$

2,039



$

103



$

1,936



NM


Second Lien Senior Debt

248



129



119



92

%


589



511



78



15

%

Mezzanine Debt



4



(4)



(100%)



10





10



100

%

Preferred Equity

10



23



(13)



(57%)



35



125



(90)



(72%)


Common Equity

122



207



(85)



(41%)



405



236



169



72

%

Structured Products

268



152



116



76

%


532



132



400



303

%

Total by Security Type

$

1,033



$

1,443



$

(410)



(28%)



$

3,610



$

1,107



$

2,503



226

%

























Sponsor Finance Investments

$

281



$

155



$

126



81

%


$

597



$

125



$

472



378

%

Senior Floating Rate Loans

288



825



(537)



(65%)



1,891





1,891



100

%

Structured Products

268



152



116



76

%


512



75



437



583

%

Investments in ACAM and Fund Development

152



201



(49)



(24%)



437



271



166



61

%

European Capital

39





39



100

%


39





39



100

%

American Capital One Stop Buyouts®







%




27



(27)



(100%)


Add-on Financing for Growth and Working Capital

3



106



(103)



(97%)



116



56



60



107

%

Add-on Financing for Distressed Situations

2





2



100

%


14



42



(28)



(67%)


Add-on Financing for Acquisitions







%




391



(391)



(100%)


Add-on Financing for Recapitalizations, not
      Including Distressed Investments



4



(4)



(100%)



4



104



(100)



(96%)


Add-on Financing for Purchase of Debt of a Portfolio Company







%




16



(16)



(100%)


Total by Use

$

1,033



$

1,443



$

(410)



(28%)



$

3,610



$

1,107



$

2,503



226

%

























Realizations
























Equity Investments

$

401



$

656



$

(255)



(39%)



$

1,523



$

362



$

1,161



321

%

Principal Prepayments

166



332



(166)



(50%)



699



604



95



16

%

Payment of Accrued PIK Notes and 
     Dividends and Accreted OID

155



110



45



41

%


389



187



202



108

%

Loan Syndications and Sales

45



32



13



41

%


98



14



84



600

%

Scheduled Principal Amortization

6



12



(6)



(50%)



56



41



15



37

%

Total by Source

$

773



$

1,142



$

(369)



(32%)



$

2,765



$

1,208



$

1,557



129

%

























European Capital(6)

$

386



$

127



$

259



204

%


$

651



$

195



$

456



234

%

American Capital One Stop Buyouts®

180



639



(459)



(72%)



1,167



530



637



120

%

Senior Floating Rate Loans

98



57



41



72

%


163





163



100

%

Sponsor Finance Investments

54



234



(180)



(77%)



386



444



(58)



(13%)


Structured Products

50



83



(33)



(40%)



192



27



165



611

%

American Capital Asset Management

5



2



3



150

%


206



12



194



NM


Total by Business Line

$

773



$

1,142



$

(369)



(32%)



$

2,765



$

1,208



$

1,557



129

%

























Appreciation, Depreciation, Gain and Loss
























Gross Realized Gain

$

270



$

110



$

160



145

%


$

474



$

117



$

357



305

%

Gross Realized Loss

(60)



(64)



4



6

%


(211)



(221)



10



5

%

Portfolio Net Realized Gain (Loss)

210



46



164



357

%


263



(104)



367



NM


Foreign Currency Transactions

(12)



(8)



(4)



(50%)



(17)



3



(20)



NM


Derivative Agreements

1



(44)



45



NM



(41)



(14)



(27)



(193%)


Tax Benefit

(72)



17



(89)



NM



(53)



60



(113)



NM


Net Realized Gain (Loss)

127



11



116



NM



152



(55)



207



NM


























Net Unrealized (Depreciation) Appreciation of 
     American Capital One Stop Buyouts®

(29)



110



(139)



NM



(47)



(102)



55



54

%

Net Unrealized Appreciation (Depreciation) of 
     American Capital Sponsor Finance Investments

7



19



(12)



(63%)



11



(15)



26



NM


Net Unrealized Appreciation of European Capital
      Investments

7





7



100

%


7





7



100

%

Net Unrealized Appreciation of Investment in 
     European Capital



37



(37)



(100%)



167



281



(114)



(41%)


Net Unrealized Appreciation (Depreciation) of
      Investment in European Capital Foreign 
     Currency Translation



12



(12)



(100%)



14



(14)



28



NM


Net Unrealized Appreciation (Depreciation) of
      ACAM







%


222



(165)



387



NM


Net Unrealized Depreciation of SFRLs

(8)



(16)



8



50

%


(24)





(24)



100

%

Net Unrealized (Depreciation) Appreciation of 
     Structured Products

(4)



8



(12)



NM



5



(41)



46



NM


Reversal of Prior Period Net Unrealized 
     (Appreciation) Depreciation Upon Realization

(179)



(35)



(144)



(411%)



(206)



105



(311)



NM


Net Unrealized (Depreciation) Appreciation of 
     Portfolio Company Investments

(206)



135



(341)



NM



149



49



100



204

%

Net Unrealized Appreciation Due to Consolidation 
     of European Capital

87





87



100

%


87





87



100

%

Foreign Currency Translation - Investment in 
     European Capital



(63)



63



100

%


(75)



49



(124)



NM


Foreign Currency Translation - European Capital 
     Investments

11





11



100

%


11





11



100

%

Foreign Currency Translation - Other

(3)



(3)





%


(10)



3



(13)



NM


Derivative Agreements and Other

(39)



(11)



(28)



(255%)



(52)



19



(71)



NM


Tax Benefit (Provision)

26



(6)



32



NM



55



(37)



92



NM


Net Unrealized (Depreciation)
Appreciation of Investments

(124)



52



(176)



NM



165



83



82



99

%

























Net Gains, Losses, Appreciation and Depreciation

$

3



$

63



$

(60)



(95%)



$

317



$

28



$

289



NM


























Other Financial Data
























NAV per Share

$

20.50



$

20.54



$

(0.04)



%


$

20.50



$

18.97



$

1.53



8

%

Debt at Cost

$

1,703



$

1,382



$

321



23

%


$

1,703



$

791



$

912



115

%

Market Capitalization

$

3,899



$

3,751



$

148



4

%


$

3,899



$

4,226



$

(327)



(8%)


Total Enterprise Value(4)

$

4,926



$

4,675



$

251



5

%


$

4,926



$

4,702



$

224



5

%

Asset Coverage Ratio

419

%


423

%








419

%


588

%







Debt to Equity Ratio

0.3x


0.3x








0.3x


0.1x







Credit Quality
























Weighted Average Effective Interest Rate on 
     SFRLs at Period End

4.4

%


4.4

%








4.4

%


N/A








Weighted Average Effective Interest Rate on Debt
      Investments, Excluding SFRLs, at Period End

8.2

%


9.1

%








8.2

%


10.0

%







Weighted Average Effective Interest Rate on All Debt     
     Investments at Period End

6.6

%


6.8

%








6.6

%


10.0

%







Loans on Non-Accrual at Cost

$

371



$

256



$

115



45

%


$

371



$

287



$

84



29

%

Loans on Non-Accrual at Fair Value

$

148



$

172



$

(24)



(14%)



$

148



$

154



$

(6)



(4%)


Non-Accrual Loans at Cost as a Percentage of 
     Total Loans at Cost

9.4

%


8.3

%








9.4

%


17.0

%







Non-Accrual Loans at Fair Value as a Percentage of 
     Total Loans at Fair Value

4.0

%


5.7

%








4.0

%


9.7

%







Non-Accruing Loans at Fair Value as a Percentage of
      Non-Accruing Loans at Cost

39.9

%


67.2

%








39.9

%


53.7

%







Estimated Loss(5)

$

248



$

108



$

140



130

%


$

648



$

531



$

117



22

%

Estimated Loss as a Percentage of Total Loans at Cost

6.3

%


3.7

%








16.4

%


31.4

%







Past Due Loans at Cost

$



$

45



$

(45)



(100%)



$



$

26



$

(26)



(100%)


Debt to Equity Conversions at Cost

$

9



$



$

9



100

%


$

9



$

75



$

(66)



(88%)










































































Return on Average Equity
























LTM Net Operating Income Before Income Taxes 
     Return on Average Shareholders' Equity

3.5

%


3.3

%








3.5

%


4.3

%







LTM Net Operating Income Return on Average 
     Shareholders' Equity

2.2

%


2.3

%








2.2

%


2.9

%







LTM Net Realized Earnings Return on Average 
     Shareholders' Equity

5.1

%


3.1

%








5.1

%


1.9

%







LTM Net Earnings Return on Average 
     Shareholders' Equity

8.2

%


4.1

%








8.2

%


3.4

%







Current Quarter Annualized Net Operating Income 
     Before Income Taxes Return on Average 
     Shareholders' Equity

4.4

%


5.0

%








4.4

%


3.9

%







Current Quarter Annualized Net Operating Income 
     Return on Average Shareholders' Equity

2.6

%


3.8

%








2.6

%


2.8

%







Current Quarter Annualized Net Realized Earnings
      Return on Average Shareholders' Equity

11.9

%


4.6

%








11.9

%


4.3

%







Current Quarter Annualized Net Earnings (Loss) 
     Return on Average Shareholders' Equity

2.7

%


8.5

%








2.7

%


(13.8%)








______________________________

NM = Not meaningful

Note: Effective October 1, 2014, European Capital's financial results as of and for the three months ended December 31, 2014 have been consolidated with the
financial results of ACAS for the same periods.


(1) Includes total assets of American Capital Agency, American Capital Mortgage, American Capital Senior Floating, investment in European Capital through
September 30, 2014, American Capital Equity I, American Capital Equity II, American Capital Equity III, ACAS CLO 2007-1, ACAS CLO 2012-1, ACAS
CLO 2013-1, ACAS CLO 2013-2, ACAS CLO 2014-1 and ACAS CLO 2014-2, less American Capital's investment in the funds.

(2) Represents third-party earning assets under management from which the associated base management fees are calculated.

(3) Represents total assets of American Capital less American Capital's investment in the funds as well as third-party earning assets under management from which
the associated base management fees are calculated.

(4) Enterprise value is calculated as debt at cost plus market capitalization less cash and cash equivalents on hand.

(5) Net accumulated depreciation on non-accrual loans plus realized losses on loans during the period presented.

(6) Includes realizations from American Capital's investment in European Capital through September 30, 2014. Includes European Capital investment portfolio
realizations during the three months ended December 31, 2014.

 



Static Pool (1)

American Capital Portfolio Statistics
($ in millions, unaudited)

Aggregate

1997-
2003

2004


2005


2006


2007


2008


2011


2012


2013


2014


1997-2014
Static Pools 
Aggregate

IRR of All Investments(2)

12.2

%

12.5

%

14.0

%

10.5

%

(1.7%)


9.7

%

21.8

%

(13.3%)


45.2

%

3.6

%

9.1

%

IRR of Exited Investments(3)

12.5

%

14.9

%

18.1

%

9.3

%

(2.1%)


9.7

%

21.9

%

16.4

%

16.4

%

5.4

%

10.2

%

IRR of Equity Investments(2)(4)(5)

17.5

%

24.4

%

14.1

%

13.8

%

(6.4%)


20.6

%

29.6

%

(81.1%)


192.4

%

56.0

%

11.4

%

IRR of Exited Equity Investments(3)(4)(5)

19.3

%

38.6

%

28.7

%

12.5

%

4.9

%

21.3

%

35.1

%

N/A



N/A


N/A


19.7

%

IRR of All One Stop Buyout Investments(2)(19)

10.9

%

13.8

%

27.3

%

12.8

%

2.5

%

15.8

%

31.2

%

(20.2%)


256.5

%

N/A


13.1

%

IRR of All One Stop Buyout Equity Investments(2)(4)(5)(19)

15.5

%

23.5

%

38.4

%

15.6

%

(6.1%)


16.0

%

33.1

%

(81.1%)


256.1

%

N/A


16.8

%

IRR of Current One Stop Buyout Investments(2)(19)

10.6

%

(0.8%)


25.4

%

10.7

%

(0.5%)


24.9

%

31.2

%

(20.2%)


256.5

%

N/A


9.7

%

IRR of Exited One Stop Buyout Investments(3)

11.4

%

19.7

%

21.7

%

12.2

%

11.4

%

15.8

%


N/A


19.6

%


NM


N/A


14.1

%

Committed Investments(7)

$

3,848


$

2,291


$

5,540


$

5,329


$

7,552


$

1,071


$

216


$

882


$

334


$

3,108


$

30,171


Total Exits and Prepayments of Committed Investments(7)

$

3,791


$

2,127


$

4,715


$

4,811


$

5,953


$

832


$

168


$

289


$

109


$

224


$

23,019


Total Interest, Dividends and Fees Collected

$

1,426


$

715


$

1,663


$

1,598


$

1,591


$

450


$

32


$

82


$

44


$

52


$

7,653


Total Net Realized (Loss) Gain on Investments

$

(105)


$

(12)


$

402


$

(258)


$

(1,291)


$

(78)


$

12


$

4


$


$

(2)


$

(1,328)


Current Cost of Investments

$

39


$

175


$

544


$

284


$

934


$

192


$

34


$

582


$

218


$

2,572


$

5,574


Current Fair Value of Investments

$

24


$

52


$

1,251


$

274


$

629


$

167


$

44


$

398


$

302


$

2,552


$

5,693


Current Fair Value of Investments as a % of Total Investments at Fair Value


0.4

%

0.9

%

22.0

%

4.8

%

11.1

%

2.9

%

0.8

%

7.0

%

5.3

%

44.8

%

100.0

%

Net Unrealized (Depreciation) Appreciation

$

(15)


$

(123)


$

707


$

(10)


$

(305)


$

(25)


$

10


$

(184)


$

84


$

(20)


$

119


Non-Accruing Loans at Cost

$

6


$


$

19


$

49


$

122


$

5


$


$


$


$


$

201


Non-Accruing Loans at Fair Value

$

2


$


$

4


$

24


$

81


$

5


$


$


$


$


$

116


Equity Interest at Fair Value(4)

$

3


$

45


$

1,138


$

134


$

253


$

43


$

36


$

15


$

138


$

16


$

1,821


Debt to Adjusted EBITDA(8)(9)(12)(13)(16)

13.2


2.3


0.8


7.5


5.1


6.6



6.8


6.6


5.9


4.1


Interest Coverage(10)(12)(13)(16)

0.2


6.7


0.2


1.1


1.9


1.7



2.1


2.5


2.5


1.3


Debt Service Coverage(11)(12)(13)(16)

0.2


1.4


0.1


0.8


1.7


1.3



1.8


2.2


2.1


1.1


Average Age of Companies(13)(16)

 34 yrs

 40 yrs

 11 yrs

 46 yrs

 35 yrs

 21 yrs

5 yrs

 19 yrs

 20 yrs

 26 yrs

 22 yrs

Diluted Ownership Percentage(4)(17)

76

%

80

%

84

%

49

%

59

%

60

%

66

%

86

%

76

%

2

%

76

%

Average Revenue(13)(14)(16)

$

78


$

30


$

175


$

168


$

249


$

25


$


$

192


$

294


$

279


$

201


Average Adjusted EBITDA(8)(13)(16)

$

8


$

7


$

72


$

34


$

28


$

12


$


$

49


$

29


$

64


$

51


Total Revenue(13)(14)

$

730


$

87


$

516


$

2,197


$

2,565


$

52


$


$

933


$

2,004


$

4,688


$

13,772


Total Adjusted EBITDA(8)(13)

$

86


$

3


$

112


$

29


$

101


$

23


$


$

287


$

327


$

1,202


$

2,170


% of Senior Loans(12)(13)(15)

88

%

100

%

6

%

24

%

59

%

39

%

100

%

95

%

100

%

100

%

77

%

% of Loans with Lien(12)(13)(15)

100

%

100

%

88

%

100

%

94

%

46

%

100

%

100

%

100

%

100

%

94

%

Diluted Ownership Percentage of ACAS in MOPC(6)(17)

%

81

%

97

%

52

%

76

%

97

%

81

%

92

%

84

%

N/A

%

89

%

Total Third-party Debt at Cost in MOPC(6)(18)

$

5


$

74


$

18


$

353


$

232


$

42


$


$

24


$



N/A


$

748


———————

NM = Not Meaningful

Note: Excludes portfolio companies of European Capital. For static pool statistics, American Capital's investment in European Capital was treated as an exited investment at its net asset value on October 1, 2014, the date on which it was consolidated into American Capital.


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. There were no investments made in the 2009 and 2010 static pool years.

2) Internal rate of return ("IRR") calculations are based on a sequence of cash proceeds invested, cash realizations or non-cash consideration received, and the terminal value of an investment over time. For active investments, the terminal value is assumed to be the current fair value. For exited investments, the terminal value is the total cash realization received upon exit. Additionally, IRR calculations exclude securities traded but not yet settled at period end.

3) IRR calculations are based on a sequence of cash proceeds invested, cash realizations or non-cash consideration received, and the terminal value of an investment over time. For exited investments, the terminal value is the total cash realization received upon exit. This includes fully exited investments of existing portfolio companies. Additionally, IRR calculations exclude securities traded but not yet settled at period end.

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) Majority Owned Portfolio Company ("MOPC") investments represent portfolio company investments in which American Capital, or its affiliates, have a fully diluted ownership percentage of 50% or more or have over 50% board representation at the portfolio company. Includes American Capital Asset Management, LLC prior to the consolidation of the collateralized loan obligations. Excludes our investment in European Capital through September 30, 2014.

7) Represents committed investment amount at the time of origination.

8) Adjusted EBITDA may reflect certain adjustments to the reported EBITDA of a portfolio company for non-recurring, unusual or infrequent items or other pro-forma items or events to normalize current earnings which a buyer may consider in a change in control transactions. These adjustments may be material and are highly subjective in nature. Portfolio company reported EBITDA is for the most recently available twelve months, or when appropriate, the forecasted twelve months or current annualized run-rate.

9) Debt, which represents the debt and other liabilities senior to ACAS and the total of ACAS's debt in each portfolio company's debt capitalization, divided by Adjusted EBITDA. For portfolio companies with a nominal Adjusted EBITDA amount, the portfolio company's maximum debt leverage is limited to 15 times Adjusted EBITDA.

10) Adjusted EBITDA divided by the total cash interest expense of the portfolio company during the most recent twelve month period, or when appropriate as a result of a new debt capital structure, the forecasted twelve months.

11) Adjusted EBITDA divided by the total scheduled principal amortization and total cash interest expense of the portfolio company during the most recent twelve month period, or when appropriate, the forecasted twelve months.

12) Excludes investments in which we own only equity.

13) Excludes investments in Structured Products, Senior Floating Rate Loans and our investment in European Capital through September 30, 2014.

14) For the most recent twelve months, or when appropriate, the forecasted twelve months.

15) As a percentage of our total debt investments, excluding Senior Floating Rate Loans.

16) Weighted average based on fair value.

17) Weighted average based on fair value of equity investments.

18) As of the most recent month end available.

19) Includes American Capital Asset Management, LLC.

 

SHAREHOLDER CALL
American Capital invites shareholders, analysts and interested parties to attend the shareholder call on February 25, 2015 at 11:00 am ET. Callers who do not plan on asking a question and have access to the internet are encouraged to utilize the free live webcast at www.AmericanCapital.com.  Those who do plan on participating in the Q&A or do not have the internet available may access the call by dialing (877) 266-8979 (U.S. domestic) or (412) 902-6605 (international). All callers are asked to dial in 10-15 minutes prior to the call to register. 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. Select the Q4 2014 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 on February 25, 2015. In addition, there will be a phone recording available one hour after the live call on February 25, 2015 through March 11, 2015. If you are interested in hearing the recording of the presentation, please dial (877) 344-7529 (U.S. domestic) or (412) 317-0088 (international). The access code for both domestic and international callers is 10058848.

ABOUT AMERICAN CAPITAL
American Capital, Ltd. ACAS 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, energy & infrastructure and structured products. American Capital manages $22 billion of assets, including assets on its balance sheet and fee earning assets under management by affiliated managers, with $86 billion of total assets under management (including levered assets).  Through a wholly owned affiliate, American Capital manages publicly traded American Capital Agency Corp. AGNC, American Capital Mortgage Investment Corp. MTGE and American Capital Senior Floating, Ltd. ACSF with approximately $11 billion of total net book value. From its eight offices in the U.S., Europe and Asia, American Capital and its wholly owned affiliate, European Capital, will consider investment opportunities from $10 million to $750 million.  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, 2013 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:
Investors - (301) 951-5917
Media - (301) 968-9400

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/american-capital-reports-2014-net-operating-income-before-income-taxes-of-065-per-diluted-share-net-earnings-of-155-per-diluted-share-and-net-asset-value-per-share-of-2050-300040834.html

SOURCE American Capital, Ltd.

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