Market Overview

Ares Capital Corporation Declares Third Quarter 2018 Dividend of $0.39 Per Share and Announces June 30, 2018 Financial Results

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Third Quarter 2018 Dividend Declared

Ares Capital Corporation ("Ares Capital") (NASDAQ:ARCC) announced that
its Board of Directors has declared a third quarter dividend of $0.39
per share, an increase of $0.01 per share over the prior quarter
dividend. The third quarter dividend is payable on September 28, 2018 to
stockholders of record as of September 14, 2018.

JUNE 30, 2018 FINANCIAL RESULTS

Ares Capital also announced financial results for its second quarter
ended June 30, 2018.

HIGHLIGHTS

Financial

   
 
Q2-18 Q2-17
(dollar amounts in millions, except per share data)    

Total
Amount

 

Per
Share(1)

Total
Amount

 

Per
Share(1)

Core EPS(2) $ 0.39 $ 0.34
Net investment income $ 162 $ 0.38 $ 124 $ 0.29
Net realized gains $ 27 $ 0.07 $ 106 $ 0.25
Net unrealized gains (losses) $ 65 $ 0.15 $ (52 ) $ (0.12 )
GAAP net income $ 254 $ 0.60 $ 178 $ 0.42
Dividends declared and payable $ 0.38 $ 0.38
 
As of
(dollar amounts in millions, except per share data) June 30, 2018   June 30, 2017 December 31, 2017
Portfolio investments at fair value $ 11,527   $ 11,498 $ 11,841
Total assets $ 12,297 $ 12,328 $ 12,347
Stockholders' equity $ 7,270 $ 7,051 $ 7,098
Net assets per share $ 17.05 $ 16.54 $ 16.65
 

__________________________________________________

(1)   All per share amounts are basic and diluted.
 
(2)

Basic and diluted Core EPS is a non-GAAP financial measure. Core
EPS is the net per share increase (decrease) in
stockholders'
equity resulting from operations less net professional fees and
other costs related to the acquisition of
American Capital,
Ltd. ("American Capital") (the "American Capital Acquisition"),
expense reimbursement (the
"Ares Reimbursement") from Ares
Capital Management LLC ("Ares Capital Management"), net realized
and
unrealized gains and losses, any capital gains incentive
fees attributable to such net realized and unrealized gains and
losses
and any income taxes related to such net realized gains and
losses. Basic and diluted GAAP EPS is the most
directly
comparable GAAP financial measure. Ares Capital believes that Core
EPS provides useful information to
investors regarding
financial performance because it is one method Ares Capital uses
to measure its financial condition
and results of operations.
The presentation of this additional information is not meant to be
considered in isolation or
as a substitute for financial
results prepared in accordance with GAAP. Reconciliations of basic
and diluted Core EPS
to the most directly comparable GAAP
financial measure are set forth in Schedule 1 hereto. For more
information
about the Ares Reimbursement, see Note 12
"Related Party Transactions" in Part I, Item I "Financial
Statements" in
the Company's Quarterly Report on Form 10-Q
for the quarterly period ended June 30, 2018.

 
     

Portfolio Activity

(dollar amounts in millions) Q2-18 Q2-17 Q4-17
Portfolio Activity During the Period:
Gross commitments $ 1,619 $ 1,973 $ 1,506
Exits of commitments $ 2,200 $ 1,792 $ 1,321
 
Portfolio as of the End of the Period:
Number of portfolio company investments 346 319 314
Weighted average yield of debt and other income producing
securities(3):
At amortized cost 10.4 % 9.4 % 9.7 %
At fair value 10.5 % 9.5 % 9.8 %
Weighted average yield on total investments(4):
At amortized cost 9.1 % 8.2 % 8.7 %
At fair value 9.0 % 8.3 % 8.7 %
 

__________________________________________________

(3)  

Weighted average yield of debt and other income producing
securities is computed as (a) the annual stated interest rate
or
yield earned plus the net annual amortization of original issue
discount and market discount or premium earned on
accruing
debt and other income producing securities divided by (b) the
total accruing debt and other income producing
securities at
amortized cost or at fair value as applicable.

 
(4)

Weighted average yield on total investments is calculated as (a)
the annual stated interest rate or yield earned plus the
net
annual amortization of original issue discount and market discount
or premium earned on accruing debt and other
income producing
securities divided by (b) the total investments at amortized cost
or at fair value as applicable.

 

SECOND QUARTER 2018 OPERATING RESULTS

For the second quarter of 2018, Ares Capital reported GAAP net income of
$254 million or $0.60 per share (basic and diluted), Core EPS(2) of
$0.39 per share (basic and diluted), net investment income of $162
million or $0.38 per share (basic and diluted), and net realized and
unrealized gains of $92 million or $0.22 per share (basic and diluted).

Net income can vary substantially from period to period due to various
factors, including the level of new investment commitments, the amount
of acquisition related expenses, the recognition of realized gains and
losses and unrealized appreciation and depreciation. As a result,
quarterly comparisons of net income may not be meaningful.

As of June 30, 2018, total assets were $12.3 billion, stockholders'
equity was $7.3 billion and net asset value per share was $17.05.

In the second quarter of 2018, Ares Capital made $1,619 million in new
investment commitments, including commitments to 14 new portfolio
companies, 27 existing portfolio companies and five additional portfolio
companies through the Senior Direct Lending Program, LLC (the "SDLP"),
through which Ares Capital co-invests with Varagon Capital Partners
("Varagon") and its clients to fund first lien senior secured loans. Of
the new commitments, 42 were sponsored transactions. As of June 30,
2018, 173 separate private equity sponsors were represented in Ares
Capital's portfolio. Of the $1,619 million in new commitments made
during the second quarter of 2018, 67% were in first lien senior secured
loans, 25% were in second lien senior secured loans, 6% were in the
subordinated certificates of the SDLP, 1% were in senior subordinated
loans and 1% were in other equity securities. Of these commitments, 99%
were in floating rate debt securities, of which 93% contained interest
rate floors and 7% were in the subordinated certificates of the SDLP to
make co-investments with Varagon and its clients in floating rate first
lien senior secured loans through the SDLP, all of which contained
interest rate floors. Ares Capital may seek to sell all or a portion of
these new investment commitments, although there can be no assurance
that Ares Capital will be able to do so.

In the second quarter of 2018, significant new commitments included:

  • $380 million in first lien senior secured delayed draw and term loans
    and second lien senior secured delayed draw and term loans of a
    software and payment services provider to faith-based institutions;
  • $119 million in the subordinated certificates of the SDLP to make
    co-investments with Varagon and its clients in first lien senior
    secured loans to four portfolio companies in a variety of industries;
  • $80 million in a second lien senior secured term loan of a provider of
    student information system software solutions to the K-12 education
    market;
  • $79 million in first lien senior secured revolving, delayed draw and
    term loans, second lien senior secured delayed draw and term loans and
    subordinated delayed draw and term loans of a real estate and
    facilities management software provider;
  • $75 million in a first lien senior secured term loan of a sand-based
    proppant producer and distributor to the oil and natural gas industry;
  • $70 million in a first lien senior secured delayed draw term loan of a
    developer and operator of small scale power generation projects;
  • $67 million in a first lien senior secured term loan of a manager and
    operator of leisure properties;
  • $61 million in a second lien senior secured term loan of an oil and
    gas producer;
  • $54 million in first lien senior secured revolving, delayed draw and
    term loans and second lien senior secured delayed draw and term loans
    of an enterprise management software provider for the convenience
    retail and petroleum wholesale markets;
  • $50 million in a first lien senior secured term loan of a gas turbine
    power generation facilities operator;
  • $44 million in a first lien senior secured term loan of a distributor
    of non-discretionary, mission-critical aftermarket automotive
    replacement parts;
  • $43 million in first lien senior secured revolving and term loans of a
    venue management and food and beverage provider;
  • $41 million in a second lien senior secured term loan of a provider of
    structural integrity management services to transmission and
    distribution infrastructure;
  • $29 million in first lien senior secured revolving and term loans and
    equity of a provider of outsourced crew accommodations and logistics
    management solutions to the airline industry;
  • $28 million in first lien senior secured revolving, delayed draw and
    term loans and second lien senior secured delayed draw and term loans
    of an adenosine triphosphate testing technology provider;
  • $28 million in first and second lien senior secured delayed draw term
    loans of a heating, ventilation and air conditioning services provider;
  • $27 million in a second lien senior secured term loan of a producer of
    flashlights;
  • $26 million in first lien senior secured revolving, delayed draw and
    term loans of a supply chain risk management software provider; and
  • $24 million in first lien senior secured revolving, delayed draw and
    term loans of a hotel operator.

Also in the second quarter of 2018, Ares Capital exited approximately
$2,200 million of investment commitments (including exits of $179
million of commitments acquired as part of the American Capital
Acquisition). Of the total investment commitments exited, 66% were first
lien senior secured loans, 24% were second lien senior secured loans, 7%
were senior subordinated loans, 1% were collateralized loan obligations,
1% were preferred equity securities and 1% were other equity securities.
Of the approximately $2,200 million of exited investment commitments,
92% were floating rate, 6% were fixed rate, 1% were on non-accrual
status and 1% were non-interest bearing.

The fair value of Ares Capital's portfolio investments at June 30, 2018
was $11.5 billion, including $9.9 billion in accruing debt and other
income producing securities. As of June 30, 2018, the total portfolio at
fair value included $1.5 billion of investments acquired in the American
Capital Acquisition. The total portfolio investments at fair value were
comprised of approximately 40% of first lien senior secured loans, 30%
of second lien senior secured loans, 5% of subordinated certificates of
the SDLP (the proceeds of which were applied to co-investments with
Varagon and its clients to fund first lien senior secured loans through
the SDLP), 9% of senior subordinated loans, 1% of collateralized loan
obligations, 6% of preferred equity securities and 9% of other equity
securities. As of June 30, 2018, the weighted average yield of debt and
other income producing securities in the portfolio at amortized cost and
fair value was 10.4% and 10.5%, respectively, the weighted average yield
on total investments in the portfolio at amortized cost and fair value
was 9.1% and 9.0%, respectively, and 78% of the total investments at
fair value were in floating rate securities.

"We generated another strong quarter, with substantial year over year
growth in our core earnings and net asset value as we benefited from
portfolio rotation opportunities and rising interest rates," said Kipp
deVeer Chief Executive Officer of Ares Capital. "We also had another
quarter of stable credit and investment performance and net gains
primarily driven by our acquired ACAS investments. As previously
announced, our board's recent decision in June to approve the reduction
in our asset coverage requirement will allow ARCC to benefit from the
regulatory relief in the Small Business Credit Availability Act. We
believe this added flexibility will improve our risk profile, enhance
our earnings and broaden our market opportunity once the plan is fully
implemented."

PORTFOLIO QUALITY

Ares Capital Management LLC ("Ares Capital Management" or Ares Capital's
"investment adviser") employs an investment rating system to categorize
Ares Capital's investments. In addition to various risk management and
monitoring tools, Ares Capital's investment adviser grades the credit
risk of all investments on a scale of 1 to 4 no less frequently than
quarterly. This system is intended primarily to reflect the underlying
risk of a portfolio investment relative to Ares Capital's initial cost
basis in respect of such portfolio investment (i.e., at the time of
origination or acquisition), although it may also take into account
under certain circumstances the performance of the portfolio company's
business, the collateral coverage of the investment and other relevant
factors. Under this system, investments with a grade of 4 involve the
least amount of risk to Ares Capital's initial cost basis. The trends
and risk factors for this investment since origination or acquisition
are generally favorable, which may include the performance of the
portfolio company or a potential exit. Investments graded 3 involve a
level of risk to Ares Capital's initial cost basis that is similar to
the risk to Ares Capital's initial cost basis at the time of origination
or acquisition. This portfolio company is generally performing as
expected and the risk factors to Ares Capital's ability to ultimately
recoup the cost of Ares Capital's investment are neutral to favorable.
All investments or acquired investments in new portfolio companies are
initially assessed a grade of 3. Investments graded 2 indicate that the
risk to Ares Capital's ability to recoup the initial cost basis of such
investment has increased materially since origination or acquisition,
including as a result of factors such as declining performance and
non-compliance with debt covenants; however, payments are generally not
more than 120 days past due. An investment grade of 1 indicates that the
risk to Ares Capital's ability to recoup the initial cost basis of such
investment has substantially increased since origination or acquisition,
and the portfolio company likely has materially declining performance.
For debt investments with an investment grade of 1, most or all of the
debt covenants are out of compliance and payments are substantially
delinquent. For investments graded 1, it is anticipated that Ares
Capital will not recoup Ares Capital's initial cost basis and may
realize a substantial loss of Ares Capital's initial cost basis upon
exit. For investments graded 1 or 2, Ares Capital's investment adviser
enhances its level of scrutiny over the monitoring of such portfolio
company. The grade of a portfolio investment may be reduced or increased
over time.

As of June 30, 2018 and December 31, 2017, the weighted average grade of
the investments in Ares Capital's portfolio at fair value was 3.1 and
3.1, respectively, and loans on non-accrual status represented 2.7% and
3.1%, respectively, of total investments at amortized cost (or 0.8% and
1.4%, respectively, at fair value).

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2018, Ares Capital had $509 million in cash and cash
equivalents and $4.6 billion in total aggregate principal amount of debt
outstanding ($4.5 billion at carrying value). Subject to leverage,
borrowing base and other restrictions, Ares Capital had approximately
$3.1 billion available for additional borrowings under its existing
credit facilities as of June 30, 2018.

On June 21, 2018, Ares Capital's board of directors unanimously approved
the application of the modified asset coverage requirement set forth in
Section 61(a)(2) of the Investment Company Act, as amended by the Small
Business Credit Availability Act. As a result, effective June 21, 2019,
Ares Capital's asset coverage requirement applicable to senior
securities will be reduced to 150%. Once the 150% coverage ratio becomes
effective, Ares Capital expects to use incremental leverage to continue
to invest primarily in its current mix of investments with no
fundamental change in its investment objective and intends to target a
debt to equity range of 0.90x to 1.25x. In connection with Ares
Capital's board of directors approving the modification of the asset
coverage requirement, the investment advisory and management agreement
with Ares Capital Management will be amended prior to June 21, 2019 to
reduce Ares Capital's annual base management fee from 1.5% to 1.0% on
all assets financed using leverage over 1.0x debt to equity.

SECOND QUARTER 2018 DIVIDEND

On April 26, 2018, Ares Capital declared a second quarter dividend of
$0.38 per share for a total of approximately $162 million. The record
date for this dividend was June 15, 2018 and the dividend was paid on
June 29, 2018.

RECENT DEVELOPMENTS

From July 1, 2018 through July 25, 2018, Ares Capital made new
investment commitments of approximately $895 million, of which $794
million were funded. Of these new commitments, 70% were in first lien
senior secured loans, 25% were in second lien senior secured loans and
5% were in other equity securities. Of the approximately $895 million of
new investment commitments, 95% were floating rate and 5% were
non-interest bearing. The weighted average yield of debt and other
income producing securities funded during the period at amortized cost
was 7.5%. Ares Capital may seek to sell all or a portion of these new
investment commitments, although there can be no assurance that we will
be able to do so.

From July 1, 2018 through July 25, 2018, Ares Capital exited
approximately $629 million of investment commitments, including $291
million of investment commitments acquired in the American Capital
Acquisition. Of the total investment commitments exited, 62% were first
lien senior secured loans, 25% were senior subordinated loans, 11% were
second lien senior secured loans and 2% were investments in the SDLP
Certificates. Of the approximately $629 million of exited investment
commitments, 75% were floating rate and 25% were fixed rate. The
weighted average yield of debt and other income producing securities
exited or repaid during the period at amortized cost was 9.5% and the
weighted average yield on total investments exited or repaid during the
period at amortized cost was 9.5%. On the approximately $629 million of
investment commitments exited from July 1, 2018 through July 25, 2018,
Ares Capital recognized total net realized gains of approximately
$326 million.

In addition, as of July 25, 2018, Ares Capital had an investment backlog
and pipeline of approximately $710 million and $660 million,
respectively. Investment backlog includes transactions approved by Ares
Capital's investment adviser's investment committee and/or for which a
formal mandate, letter of intent or a signed commitment have been
issued, and therefore Ares Capital believes are likely to close.
Investment pipeline includes transactions where due diligence and
analysis are in process, but no formal mandate, letter of intent or
signed commitment have been issued. The consummation of any of the
investments in this backlog and pipeline depends upon, among other
things, one or more of the following: satisfactory completion of our due
diligence investigation of the prospective portfolio company, Ares
Capital's acceptance of the terms and structure of such investment and
the execution and delivery of satisfactory transaction documentation. In
addition, Ares Capital may sell all or a portion of these investments
and certain of these investments may result in the repayment of existing
investments. Ares Capital cannot assure you that it will make any of
these investments or that Ares Capital will sell all or any portion of
these investments.

WEBCAST / CONFERENCE CALL

Ares Capital will host a webcast/conference call on Wednesday, August 1,
2018 at 12:00 p.m. (ET) to discuss its quarter ended June 30, 2018
financial results. PLEASE VISIT ARES CAPITAL'S WEBCAST LINK LOCATED ON
THE HOME PAGE OF THE INVESTOR RESOURCES SECTION OF ARES CAPITAL'S
WEBSITE FOR A SLIDE PRESENTATION THAT COMPLEMENTS THE EARNINGS
CONFERENCE CALL.

All interested parties are invited to participate via telephone or the
live webcast, which will be hosted on a webcast link located on the Home
page of the Investor Resources section of Ares Capital's website at http://www.arescapitalcorp.com.
Please visit the website to test your connection before the webcast.
Domestic callers can access the conference call by dialing (888)
317-6003. International callers can access the conference call by
dialing +1 (412) 317-6061. All callers will need to enter the
Participant Elite Entry Number 0644601 followed by the # sign and
reference "Ares Capital Corporation" once connected with the operator.
All callers are asked to dial in 10-15 minutes prior to the call so that
name and company information can be collected. For interested parties,
an archived replay of the call will be available approximately one hour
after the end of the call through August 15, 2018 at 5:00 p.m. (Eastern
Time) to domestic callers by dialing (877) 344-7529 and to international
callers by dialing +1 (412) 317-0088. For all replays, please reference
conference number 10121377. An archived replay will also be available on
a webcast link located on the Home page of the Investor Resources
section of Ares Capital's website.

ABOUT ARES CAPITAL CORPORATION

Ares Capital is a leading specialty finance company that provides
one-stop debt and equity financing solutions to U.S. middle market
companies and power generation projects. Ares Capital originates and
invests in senior secured loans, mezzanine debt and, to a lesser extent,
equity investments through its national direct origination platform.
Ares Capital's investment objective is to generate both current income
and capital appreciation through debt and equity investments primarily
in private companies. Ares Capital has elected to be regulated as a
business development company ("BDC") and is the largest BDC by both
market capitalization and total assets. Ares Capital is externally
managed by a subsidiary of Ares Management, L.P. (NYSE:ARES), a
publicly traded, leading global alternative asset manager. For more
information about Ares Capital Corporation, visit www.arescapitalcorp.com.
However, the contents of such website are not and should not be deemed
to be incorporated by reference herein.

FORWARD-LOOKING STATEMENTS

Statements included herein or on the webcast/conference call may
constitute "forward-looking statements," which relate to future events
or Ares Capital's future performance or financial condition. These
statements are not guarantees of future performance, condition or
results and involve a number of risks and uncertainties. Actual results
and conditions may differ materially from those in the forward-looking
statements as a result of a number of factors, including those described
from time to time in Ares Capital's filings with the Securities and
Exchange Commission. Ares Capital undertakes no duty to update any
forward-looking statements made herein or on the webcast/conference call.

 
ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in millions, except per share data)

 

  As of
June 30, 2018   December 31, 2017
(unaudited)
ASSETS
Total investments at fair value (amortized cost of $11,435 and
$11,905, respectively)
$ 11,527 $ 11,841
Cash and cash equivalents 509 316
Interest receivable 89 93
Receivable for open trades 56 1
Other assets 116   96  
Total assets $ 12,297   $ 12,347  
LIABILITIES
Debt $ 4,542 $ 4,854
Base management fees payable 45 44
Income based fees payable 30 27
Capital gains incentive fees payable 117 79
Accounts payable and other liabilities 140 181
Interest and facility fees payable 69 64
Payable for open trades 84    
Total liabilities 5,027 5,249
STOCKHOLDERS' EQUITY

Common stock, par value $0.001 per share, 600 common shares
authorized; 426
common shares issued and outstanding

Capital in excess of par value 7,192 7,192
Accumulated overdistributed net investment income (99 )

(81

)

Accumulated undistributed net realized gains on investments,
foreign currency
transactions, extinguishment of debt and
other assets

87 72
Net unrealized gains (losses) on investments, foreign currency and
other transactions
90  

(85

)

Total stockholders' equity 7,270   7,098  
Total liabilities and stockholders' equity $ 12,297   $ 12,347  
NET ASSETS PER SHARE $ 17.05   $ 16.65  
 
 
ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(in millions, except per share data)
(unaudited)
   
For the Three Months Ended June 30, For the Six Months Ended June 30,
2018   2017 2018   2017
INVESTMENT INCOME
Interest income from investments $ 262 $ 231 $ 516 $ 462
Capital structuring service fees 25 29 54 41
Dividend income 24 16 46 40
Other income 22   8   34   16  
Total investment income 333   284   650   559  
 
EXPENSES
Interest and credit facility fees 61 55 121 110
Base management fees 45 44 91 83
Income based fees 40 30 78 62
Capital gains incentive fees 18 10 38 26
Administrative fees 4 3 7 6

Net professional fees and other costs related to the
acquisition
of American Capital

(1 ) 12 2 38
Other general and administrative 8   9   16   17  
Total expenses 175 163 353 342
Waiver of income based fees (10 ) (10 ) (20 ) (10 )
Total expenses, net of waiver of income based fees 165   153   333   332  

NET INVESTMENT INCOME BEFORE INCOME
TAXES

168 131 317 227
Income tax expense, including excise tax 6   7   11   9  
NET INVESTMENT INCOME 162   124   306   218  

REALIZED AND UNREALIZED GAINS (LOSSES)
ON INVESTMENTS,
FOREIGN CURRENCY AND
OTHER TRANSACTIONS:

Net realized gains 27 110 15 112
Net unrealized gains (losses) 65   (52 ) 175   (30 )

Net realized and unrealized gains on investments,
foreign
currency and other transactions

92 58 190 82

REALIZED LOSSES ON EXTINGUISHMENT OF
DEBT

  (4 )   (4 )

NET INCREASE IN STOCKHOLDERS' EQUITY
RESULTING FROM OPERATIONS

$ 254   $ 178   $ 496   $ 296  

BASIC AND DILUTED EARNINGS PER COMMON
SHARE

$ 0.60   $ 0.42   $ 1.16   $ 0.70  

WEIGHTED AVERAGE SHARES OF COMMON
STOCK OUTSTANDING - BASIC
AND DILUTED

426   426   426   424  
 
 
SCHEDULE 1
 
Reconciliations of basic and diluted Core EPS to basic and
diluted GAAP EPS
 

Reconciliations of basic and diluted Core EPS to basic and diluted
GAAP EPS, the most directly comparable GAAP financial
measure,
for the three and six months ended June 30, 2018 and 2017 are
provided below.

   
For the Three Months Ended June 30, For the Six Months Ended June 30,
2018   2017 2018   2017
(unaudited) (unaudited) (unaudited) (unaudited)
Basic and diluted Core EPS(1) $ 0.39 $ 0.34 $ 0.78 $ 0.65

Net professional fees and other costs related to the
American
Capital Acquisition

(0.03 ) (0.08

)

Ares Reimbursement 0.03 0.03

 

Net realized and unrealized gains 0.22 0.13 0.44 0.19

Capital gains incentive fees attributable to net realized
and
unrealized gains and losses

(0.04 ) (0.02 ) (0.09 ) (0.06 )

Income tax expense related to net realized gains and
losses

       
Basic and diluted GAAP EPS $ 0.60   $ 0.42   $ 1.16   $ 0.70  
 

__________________________________________________

(1)  

Basic and diluted Core EPS is a non-GAAP financial measure. Core
EPS is the net per share increase (decrease) in
stockholders'
equity resulting from operations less net professional fees and
other costs related to the American
Capital Acquisition, the
Ares Reimbursement, net realized and unrealized gains and losses,
any capital gains incentive
fees attributable to such net
realized and unrealized gains and losses and any income taxes
related to such net realized
gains and losses. Basic and
diluted GAAP EPS is the most directly comparable GAAP financial
measure. Ares Capital
believes that Core EPS provides useful
information to investors regarding financial performance because
it is one
method Ares Capital uses to measure its financial
condition and results of operations. The presentation of this
additional
information is not meant to be considered in isolation or as a
substitute for financial results prepared in
accordance with
GAAP. For more information about the Ares Reimbursement, see Note
12 "Related Party
Transactions" in Part I, Item I "Financial
Statements" in the Company's Quarterly Report on Form 10-Q for the
three
and six months ended June 30, 2018.

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