American Capital Reports 2012 Net Operating Income Before Income Taxes Of $383 Million, Or $1.16 Per Diluted Share, And Net Earnings Of $1,136 Million, Or $3.44 Per Diluted Share

BETHESDA, Md., Feb. 11, 2013 /PRNewswire/ -- American Capital, Ltd. ("American Capital" or the "Company") (Nasdaq: ACAS) announced net operating income ("NOI") before income taxes for the quarter and year ended December 31, 2012 of $115 million, or $0.36 per diluted share, and $383 million, or $1.16 per diluted share, respectively.  NOI after income taxes for the quarter and year ended December 31, 2012 was $83 million, or $0.26 per diluted share, and $397 million, or $1.20 per diluted share, respectively.  Net earnings for the quarter and year ended December 31, 2012 were $123 million, or $0.38 per diluted share, and $1,136 million, or $3.44 per diluted share, respectively.  As of December 31, 2012, net asset value ("NAV") per share was $17.84, a 10% annualized, or $0.45 per share, increase from the September 30, 2012 NAV per share of $17.39 and a 29%, or $3.97 per share, increase from the December 31, 2011 NAV per share of $13.87.

2012 FINANCIAL SUMMARY

  • $1.16 NOI before income taxes per diluted share, or $383 million 
    • $80 million increase over 2011  
    • $1.20 NOI after income taxes per diluted share, or $397 million  
  • $0.38 net realized earnings per diluted share, or $124 million  
    • $14 million decline from 2011   
  • $3.06 net unrealized appreciation per diluted share, or $1,012 million   
    • $176 million increase over 2011  
  • $3.44 net earnings per diluted share, or $1,136 million  
    • 22% annual return on average shareholders' equity  
    • $162 million increase over 2011  
  • $1,498 million of cash proceeds from realizations  
  • $487 million of securitized debt repaid  
  • 34.8 million shares of American Capital common stock repurchased, totaling $362 million   
    • $10.39 average price per share   
    • $0.77 accretive to NAV per share  
  • $17.84 NAV per share     
    • $3.97 per share, or 29%, increase over Q4 2011   

Q4 2012 FINANCIAL SUMMARY

  • $0.36 NOI before income taxes per diluted share, or $115 million
    • $31 million increase over Q4 2011
    • $0.26 NOI after income taxes per diluted share, or $83 million
  • $0.31 net realized earnings per diluted share, or $98 million
    • $39 million decline from Q4 2011
  • $0.08 net unrealized appreciation per diluted share, or $25 million
    • $432 million decline from Q4 2011
  • $0.38 net earnings per diluted share, or $123 million
    • 9% annualized return on average shareholders' equity
    • $471 million decline from Q4 2011
  • $634 million of cash proceeds from realizations
  • $28 million of securitized debt repaid
  • 8.8 million shares of American Capital common stock repurchased, totaling $103 million
    • $11.72 average price per share
    • $0.18 accretive to NAV per share
  • $17.84 NAV per share
    • $0.45 per share, or 10% annualized, increase over Q3 2012
  • S&P credit rating upgraded from B to B+

"The fourth quarter of 2012 capped an excellent year for American Capital," said Malon Wilkus, Chairman and Chief Executive Officer.  "For the year, NOI totaled $397 million, American Capital Asset Management appreciated $329 million, previously depreciated assets recovered approximately $325 million of net value, and the net value of our remaining portfolio of private finance companies grew by approximately $75 million, resulting in $1.1 billion in net earnings.  These earnings were 14% higher than our prior best in 2010.  Our NAV grew $3.97 per share to $17.84 per share as of December 31, 2012, increasing an impressive 29% for the year.  We also originated $719 million of new investments, which we believe will generate attractive returns for our shareholders.  Additionally, our highly accretive stock repurchase program continues to be an important enhancement to shareholder value."

PORTFOLIO VALUATION
For the quarter ended December 31, 2012, net unrealized appreciation, before income taxes, totaled $61 million.  The primary components of the net unrealized appreciation were:

  • $50 million net unrealized appreciation in American Capital's investment in European Capital, primarily due to a strengthening of the Euro and an increase in the NAV of European Capital.
    • The Company's equity investment in European Capital was valued at $700 million as of December 31, 2012, or 75% of NAV, compared to $651 million as of September 30, 2012, or 75% of NAV;
  • $5 million net unrealized appreciation from American Capital's structured products investments, generally as a result of improved projected cash flows; and
  • $2 million net unrealized appreciation from American Capital's private finance portfolio.

"In 2012, we experienced $1.5 billion of liquidity in our portfolio at excellent valuations which coupled with our cash flows from operations allowed us to continue to execute on our balance sheet management strategies," said John Erickson, Chief Financial Officer.  "With net debt of $304 million compared to equity of $5,429 million, our balance sheet is outstanding.  In fact, our net debt is now about the amount of the liquidity we generate on average in a quarter.  Looking forward to 2013, we believe that our liquidity can be invested in new assets at attractive returns and in repurchasing our shares.  We remain laser focused on maximizing shareholder value."


PORTFOLIO REALIZATIONS AND PERFORMANCE
In the fourth quarter of 2012, $634 million of cash proceeds were received from realizations of portfolio investments.  American Capital made $527 million in new committed investments during the quarter.  The weighted average effective interest rate on American Capital's debt investments as of December 31, 2012 was 11.4%, 30 basis points higher than the September 30, 2012 rate of 11.1% and 70 basis points higher than the December 31, 2011 rate of 10.7%.  As of December 31, 2012, loans with a fair value of $177 million were on non-accrual, representing 9.0% of total loans at fair value, compared to $252 million fair value of non-accrual loans, or 12.5% of total loans at fair value as of September 30, 2012.  The $75 million decrease in the fair value of loans on non-accrual was generally driven by loans removed from non-accrual status as a result of improved company performance.

"We are extremely pleased with the two One Stop Buyouts® and six new Sponsor Finance investments we completed during the fourth quarter of 2012," said Darin Winn, Senior Vice President and Senior Managing Director.  "Collectively, we committed more than a half a billion dollars in the fourth quarter of 2012.  We believe that our two One Stop Buyouts® are synergistic with our existing Health Care Products and Services segment and energy investments and we will continue to seek One Stop Buyouts® in 2013."

STOCK REPURCHASE AND DIVIDEND PROGRAM
During the third quarter of 2011, American Capital's Board of Directors adopted a program that may provide for repurchases of shares or dividend payments through December 31, 2013.  Under the program, American Capital will consider quarterly setting an amount to be utilized for stock repurchases or dividends.  Generally, the amount may be utilized for repurchases if the price of American Capital's common stock represents a discount to the NAV of its shares, and the amount may be utilized for the payment of cash dividends if the price of American Capital's common stock represents a premium to the NAV of its shares.  

In determining the quarterly amount for repurchases or dividends, the Company's Board will be guided by the Company's cumulative net cash provided by operating activities in the prior quarter and since the beginning of 2012, cumulative repurchases or dividends, cash on hand, debt service considerations, investment plans, forecasts of financial liquidity and economic conditions, operational issues and the then current trading price of American Capital stock.

The repurchase and dividend program may be suspended, terminated or modified at any time for any reason.  The program does not obligate American Capital to acquire any specific number of shares, and all repurchases will be made in accordance with SEC Rule 10b-18, which sets certain restrictions on the method, timing, price and volume of stock repurchases.  During the fourth quarter of 2012, American Capital made open market purchases of 8.8 million shares, or $103 million, of American Capital common stock at an average price of $11.72 per share.  Since the inception of the program, American Capital has made open market purchases of 52.4 million shares, or $495 million, of American Capital common stock at an average price of $9.46 per share.

 

AMERICAN CAPITAL, LTD.

CONSOLIDATED BALANCE SHEETS

As of December 31, 2012 and 2011

(in millions, except per share amounts)














2012 Versus 2011


2012


2011


$


%


(unaudited)







Assets








Investments at fair value (cost of $5,842 and $6,739, respectively)

$ 5,265


$ 5,130


$ 135


3%

Cash and cash equivalents

331


204


127


62%

Restricted cash and cash equivalents

140


80


60


75%

Interest receivable

17


24


(7)


(29%)

Deferred tax asset, net

455


428


27


6%

Derivative agreements at fair value

11


10


1


10%

Other

100


85


15


18%

Total assets

$ 6,319


$ 5,961


$ 358


6%









Liabilities and Shareholders' Equity








Debt

$ 775


$ 1,251


$ (476)


(38%)

Derivative agreements at fair value

38


99


(61)


(62%)

Other

77


48


29


60%

      Total liabilities

890


1,398


(508)


(36%)









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, 310.1 and 336.4 issued

      and 304.4 and 329.1 outstanding, respectively

3


3


-


-

Capital in excess of par value

6,783


7,053


(270)


(4%)

Distributions in excess of net realized earnings

(875)


(999)


124


12%

Net unrealized depreciation of investments

(482)


(1,494)


1,012


68%

Total shareholders' equity

5,429


4,563


866


19%

Total liabilities and shareholders' equity

$ 6,319


$ 5,961


$ 358


6%









NAV per common share outstanding

$ 17.84


$ 13.87


$ 3.97


29%

 

AMERICAN CAPITAL, LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months and Fiscal Years Ended December 31, 2012 and 2011

(in millions, except per share data)







Three Months Ended






Fiscal Year Ended


Three Months Ended


December 31,


Fiscal Year Ended


December 31,


December 31,


2012 Versus 2011


December 31,


2012 Versus 2011


2012


2011


$


%


2012


2011


$


%


(unaudited)


(unaudited)






(unaudited)























OPERATING REVENUE
















Interest and dividend income

$             157


$             149


$                 8


5%


$             586


$             543


$               43


8%

Fee income

23


11


12


109%


60


48


12


25%

Total operating revenue

180


160


20


13%


646


591


55


9%

















OPERATING EXPENSES
















Interest

12


21


(9)


(43%)


59


90


(31)


(34%)

Salaries, benefits and stock-based

   compensation

40


36


4


11%


148


143


5


3%

General and administrative

13


19


(6)


(32%)


56


55


1


2%

Total operating expenses

65


76


(11)


(14%)


263


288


(25)


(9%)

















NET OPERATING INCOME BEFORE

   INCOME TAXES

115


84


31


37%


383


303


80


26%

















Tax (provision) benefit

(32)


145


(177)


 NM 


14


145


(131)


(90%)

NET OPERATING INCOME

83


229


(146)


(64%)


397


448


(51)


(11%)

















Loss on extinguishment of debt, net of tax

-


-


-


-


(3)


-


(3)


(100%)

















Net realized gain (loss)
















   Portfolio company investments

9


(154)


163


 NM 


(271)


(335)


64


19%

   Foreign currency transactions

-


-


-


-


1


-


1


100%

   Derivative agreements

(3)


(13)


10


77%


(87)


(50)


(37)


(74%)

   Tax benefit

9


75


(66)


(88%)


87


75


12


16%

Total net realized gain (loss)

15


(92)


107


NM


(270)


(310)


40


13%

















NET REALIZED EARNINGS

98


137


(39)


(28%)


124


138


(14)


(10%)

















Net unrealized appreciation (depreciation)
















Portfolio company investments

22


309


(287)


(93%)


1,005


646


359


56%

Foreign currency translation

36


(65)


101


 NM 


27


(31)


58


 NM 

Derivative agreements

3


5


(2)


(40%)


62


13


49


377%

Tax (provision) benefit

(36)


208


(244)


 NM 


(82)


208


(290)


 NM 

Total net unrealized appreciation

25


457


(432)


(95%)


1,012


836


176


21%

















NET INCREASE IN NET ASSETS

   RESULTING FROM OPERATIONS

   ("NET EARNINGS")

$             123


$             594


$           (471)


(79%)


$          1,136


$             974


$             162


17%

















NET OPERATING INCOME PER

   COMMON SHARE
















Basic

$            0.27


$            0.68


$          (0.41)


(60%)


$            1.24


$            1.30


$          (0.06)


(5%)

Diluted

$            0.26


$            0.67


$          (0.41)


(61%)


$            1.20


$            1.26


$          (0.06)


(5%)

















NET REALIZED EARNINGS PER

   COMMON SHARE
















Basic

$            0.32


$            0.41


$          (0.09)


(22%)


$            0.39


$            0.40


$          (0.01)


(3%)

Diluted

$            0.31


$            0.40


$          (0.09)


(23%)


$            0.38


$            0.39


$          (0.01)


(3%)

















NET EARNINGS PER COMMON

   SHARE
















Basic

$            0.40


$            1.76


$          (1.36)


(77%)


$            3.55


$            2.83


$            0.72


25%

Diluted

$            0.38


$            1.73


$          (1.35)


(78%)


$            3.44


$            2.74


$            0.70


26%

















WEIGHTED AVERAGE SHARES OF

   COMMON STOCK OUTSTANDING
















Basic

309.7


337.1


(27.4)


(8%)


320.3


343.9


(23.6)


(7%)

Diluted

320.7


343.9


(23.2)


(7%)


330.3


355.3


(25.0)


(7%)

















NM = Not meaningful.