American Capital Reports 2013 Net Operating Income Before Income Taxes Of $232 Million, Or $0.76 Per Diluted Share, Net Earnings Of $184 Million, Or $0.61 Per Diluted Share And Net Asset Value Per Share Of $18.97

Feb 10, 2014, 17:10 ET from American Capital, Ltd.

BETHESDA, Md., Feb. 10, 2014 /PRNewswire/ -- American Capital, Ltd. ("American Capital" or the "Company") (Nasdaq: ACAS) announced net operating income ("NOI") before income taxes for the year and quarter ended December 31, 2013 of $232 million, or $0.76 per diluted share, and $52 million, or $0.19 per diluted share, respectively.  NOI for the year and quarter ended December 31, 2013 was $156 million, or $0.51 per diluted share, and $38 million, or $0.14 per diluted share, respectively.  Net earnings for the year ended December 31, 2013 was $184 million, or $0.61 per diluted share.  Net loss for the quarter ended December 31, 2013 was $(182) million, or $(0.66) per diluted share.  As of December 31, 2013, net asset value ("NAV") per share was $18.97, a 12% annualized, or $0.57 per share, decrease from the September 30, 2013 NAV per share of $19.54 and a 6%, or $1.13 per share, increase from the December 31, 2012 NAV per share of $17.84.

2013 FINANCIAL SUMMARY

  • $18.97 NAV per share
    • $1.13 per share, or 6%, increase over Q4 2012
  • $0.76 NOI before income taxes per diluted share, or $232 million
    • $0.40 per diluted share, or $151 million, decrease over 2012
    • $0.51 NOI per diluted share, or $156 million
  • $0.33 net realized earnings per diluted share, or $101 million
    • $0.05 per diluted share, or $23 million, decline from 2012
  • $0.27 net unrealized appreciation per diluted share, or $83 million
    • $2.79 per diluted share, or $929 million, decrease over 2012
  • $0.61 net earnings per diluted share, or $184 million
    • 3% annual return on average shareholders' equity
    • $2.83 per diluted share, or $952 million, decrease over 2012
  • $1.2 billion of cash proceeds from realizations
    • Including $178 million dividend distribution and $17 million payment-in-kind interest from European Capital Limited ("European Capital")
    • Excludes $98 million net repayment of European Capital's revolving credit facility
  • 40.4 million shares of American Capital common stock repurchased, totaling $561 million
    • $13.90 average price per share
    • $0.66 accretive to NAV per share
  • Issued $350 million of 6.5% Private Unsecured Senior Notes due September 2018
  • Refinanced $450 million Secured Term Loan
    • Reduced interest rate from LIBOR + 4.25% to LIBOR + 3.00%
    • Reduced LIBOR floor from 1.25% to 1.00%
    • Reduced scheduled amortization for 2014 and 2015 from $150 million to $4.5 million annually
  • Credit rating increased to BB- from B+ by S&P

Q4 2013 FINANCIAL SUMMARY

  • $18.97 NAV per share
    • $0.57 per share, or 12% annualized, decrease over Q3 2013
  • $0.19 NOI before income taxes per diluted share, or $52 million
    • $0.17 per diluted share, or $63 million, decrease over Q4 2012
    • $0.14 NOI per diluted share, or $38 million
  • $0.21 net realized earnings per diluted share, or $57 million
    • $0.10 per diluted share, or $41 million, decline from Q4 2012
  • $(0.86) net unrealized depreciation per diluted share, or $(239) million
    • $0.94 per diluted share, or $264 million, decline from Q4 2012
  • $(0.66) net loss per diluted share, or $(182) million
    • 14% annualized loss on average shareholders' equity
    • $1.04 per diluted share, or $305 million, decline from Q4 2012
  • $559 million of cash proceeds from realizations
    • Including $158 million of cash distributions from European Capital
  • 8.9 million shares of American Capital common stock repurchased, totaling $132 million
    • $14.88 average price per share
    • $0.13 accretive to NAV per share

"In 2013, we modestly increased our book value per share by 6%, despite the headwinds of a decrease in value of American Capital Asset Management and our Operating Companies," said Malon Wilkus, Chairman and Chief Executive Officer.  "Net appreciation of European Capital more than offset net depreciation in other business lines.  We also made important progress in each of our business lines during the year, which helps position us for better performance in 2014."

PORTFOLIO VALUATION For the quarter ended December 31, 2013, net unrealized depreciation, before income taxes, totaled $237 million.  The primary components of the net unrealized depreciation were:

  • $185 million unrealized depreciation in American Capital's investment in American Capital Asset Management, LLC ("ACAM"), substantially due to a reduction in projected management fees from the two mortgage REITs that it manages;
  • $152 million net unrealized depreciation from American Capital's private finance portfolio primarily driven by declining specific company performance;
  • $14 million net unrealized depreciation from American Capital's structured products investments, a majority of which is not associated with declining credit; partially offset by
  • $115 million unrealized appreciation in American Capital's investment in European Capital, driven by a reduction in the discount applied to the NAV of European Capital, net unrealized appreciation of European Capital's underlying investment portfolio and foreign currency translation.
    • The Company's equity investment in European Capital was valued at $841 million as of December 31, 2013, or 85% of European Capital's NAV, compared to $881 million as of September 30, 2013, or 80% of European Capital's NAV.

"While the valuation of ACAM declined in the fourth quarter of 2013 primarily from the declining assets under management in our mortgage REITS, we believe that the mortgage bond market has stabilized and we are guardedly optimistic for growth at ACAM in 2014," said John Erickson, Chief Financial Officer.  "Including the successful IPO of American Capital Senior Floating, our new BDC, in January 2014, we added three new funds totaling approximately $1 billion dollars over the last year and we are actively working on launching additional new funds in 2014."

PORTFOLIO REALIZATIONS AND PERFORMANCE In 2013, $1.2 billion of cash proceeds were received from realizations of portfolio investments, including $195 million of payment-in-kind interest and cash distributions from European Capital and excluding $98 million net repayment of European Capital's revolving credit facility.  The aggregate amount of proceeds received from exits during the year equaled the prior quarter's fair value of these investments.  American Capital made $1.1 billion in new committed investments during the year, including $271 million of investments in ACAM and for other fund development, with $189 million used to purchase the initial investment portfolio of American Capital Senior Floating, Ltd. ("ACSF").  In the fourth quarter of 2013, $559 million of cash proceeds were received from realizations of portfolio investments, including $158 million of cash distributions from European Capital.  American Capital made $897 million in new committed investments during the quarter, including $240 million of investments in ACAM and for other fund development, primarily ACSF and $391 million associated with the recapitalization of Cambridge Major Laboratories ("CML") with AAIPharma Services Corp. ("AAI Pharma").

The weighted average effective interest rate on American Capital's debt investments as of December 31, 2013 was 10.0%, 80 basis points lower than the September 30, 2013 rate of 10.8% and 140 basis points lower than the December 31, 2012 rate of 11.4%.  The primary driver of the decline in the weighted average effective interest rate during the quarter and the year was debt originations of $499 million and $583 million, respectively, at weighted average interest rates below the weighted average effective interest rate of our debt investment portfolio as of the beginning of the respective periods.

As of December 31, 2013, loans with a fair value of $154 million were on non-accrual, representing 9.7% of total loans at fair value, compared to $169 million fair value of non-accrual loans, or 11.3% of total loans at fair value as of September 30, 2013.  The $15 million decrease in the fair value of loans on non-accrual was generally driven by net depreciation of existing non-accrual loans.  Total loans on non-accrual were valued at 53.7% of cost at the end of the fourth quarter, a 2.8% 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 $156 million, or 9.3%.  Net operating income before income taxes of $0.19 per diluted share and $0.76 per diluted share during the quarter and year, respectively, was reduced by $0.05 per diluted share and $0.11 per diluted share, respectively, due to the net impact of debt and equity securities being added and removed from non-accrual status.

"Our Operating Companies grew aggregate revenues moderately in the fourth quarter of 2013", said Gordon O'Brien, President Specialty Finance and Operations.  "However, their total adjusted EBITDA declined slightly during  this period and some company-specific issues together caused the value of our investments in Operating Companies to depreciate by a net $136 million in the fourth quarter, bringing full year depreciation to a net $102 million.  We are working hard on resolving the particular companies' issues and driving improved earnings.  The value of our Operating Companies was also affected by essentially no growth in private company multiples in the fourth quarter and limited growth for the full year, even though public company multiples growth was significant, particularly in the full year period."

STOCK REPURCHASE AND DIVIDEND PROGRAM American Capital's Board of Directors has adopted a program that may provide for repurchases of shares or dividend payments.  The program is currently in place through December 31, 2014.  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.

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 2013, American Capital made open market purchases of 40.4 million shares, or $561 million, of American Capital common stock at an average price of $13.90 per share.  During the fourth quarter of 2013, American Capital made open market purchases of 8.9 million shares, or $132 million, of American Capital common stock at an average price of $14.88 per share.  Since the inception of the program in August 2011, American Capital has made open market purchases of 92.7 million shares, or $1.1 billion, of American Capital common stock at an average price of $11.39 per share. This represents 27% of shares outstanding immediately prior to the launch of the program.

AMERICAN CAPITAL, LTD.

CONSOLIDATED BALANCE SHEETS

As of December 31, 2013 and 2012

(in millions, except per share amounts)

2013 Versus 2012

2013

2012

$

%

(unaudited)

Assets

Investments at fair value (cost of $5,548 and $5,842, respectively)

$        5,072

$ 5,265

$ (193)

(4%)

Cash and cash equivalents

315

331

(16)

(5%)

Restricted cash and cash equivalents

74

140

(66)

(47%)

Interest and dividend receivable

38

39

(1)

(3%)

Deferred tax asset, net

414

455

(41)

(9%)

Other

96

89

7

8%

          Total assets

$        6,009

$ 6,319

$ (310)

(5%)

Liabilities and Shareholders' Equity

Debt

$           791

$    775

$    16

2%

Other

92

115

(23)

(20%)

          Total liabilities

883

890

(7)

(1%)

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, 274.8 and 310.1    issued and 270.2 and 304.4 outstanding, respectively

3

3

—%

Capital in excess of par value

6,296

6,783

(487)

(7%)

Distributions in excess of net realized earnings

(774)

(875)

101

12%

Net unrealized depreciation of investments

(399)

(482)

83

17%

          Total shareholders' equity

5,126

5,429

(303)

(6%)

          Total liabilities and shareholders' equity

$        6,009

$  6,319

$ (310)

(5%)

NAV per common share outstanding

$        18.97

$  17.84

$  1.13

6%

 

  

AMERICAN CAPITAL, LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months and Fiscal Years Ended December 31, 2013 and 2012

(in millions, except per share data)

Three Months Ended

Fiscal Year Ended

Three Months Ended

December 31,

Fiscal Year Ended

December 31,

December 31,

2013 Versus 2012

December 31,

2013 Versus 2012

2013

2012

$

%

2013

2012

$

%

(unaudited)

(unaudited)

(unaudited)

OPERATING REVENUE

Interest and dividend income

$             92

$           157

$    (65)

(41%)

$           423

$    586

$  (163)

(28%)

Fee income

26

23

3

13%

64

60

4

7%

Total operating revenue

118

180

(62)

(34%)

487

646

(159)

(25%)

OPERATING EXPENSES

Interest

12

12

—%

44

59

(15)

(25%)

Salaries, benefits and stock-based compensation

41

40

1

3%

156

148

8

5%

General and administrative

13

13

—%

55

56

(1)

(2%)

Total operating expenses

66

65

1

2%

255

263

(8)

(3%)

NET OPERATING INCOME BEFORE INCOME TAXES

52

115

(63)

(55%)

232

383

(151)

(39%)

Tax (provision) benefit

(14)

(32)

18

56%

(76)

14

(90)

 NM 

NET OPERATING INCOME

38

83

(45)

(54%)

156

397

(241)

(61%)

Loss on extinguishment of debt, net of tax

—%

(3)

3

100%

Net realized gain (loss)

Portfolio company investments

12

9

3

33%

(104)

(271)

167

62%

Foreign currency transactions

3

3

100%

3

1

2

200%

Derivative agreements

1

(3)

4

NM

(14)

(87)

73

84%

Tax benefit

3

9

(6)

(67%)

60

87

(27)

(31%)

Total net realized gain (loss)

19

15

4

27%

(55)

(270)

215

80%

NET REALIZED EARNINGS

57

98

(41)

(42%)

101

124

(23)

(19%)

Net unrealized appreciation (depreciation)

Portfolio company investments

(261)

22

(283)

 NM 

49

1,005

(956)

(95%)

Foreign currency translation

21

36

(15)

(42%)

52

27

25

93%

Derivative agreements

3

3

—%

19

62

(43)

(69%)

Tax provision

(2)

(36)

34

94%

(37)

(82)

45

55%

Total net unrealized (depreciation) appreciation

(239)

25

(264)

 NM 

83

1,012

(929)

(92%)

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

$         (182)

$           123

$  (305)

 NM 

$           184

$ 1,136

$  (952)

(84%)

NET OPERATING INCOME PER COMMON SHARE

Basic

$          0.14

$          0.27

$ (0.13)

(48%)

$          0.53

$   1.24

$ (0.71)

(57%)

Diluted

$          0.14

$          0.26

$ (0.12)

(46%)

$          0.51

$   1.20

$ (0.69)

(58%)

NET REALIZED EARNINGS PER COMMON SHARE

Basic

$          0.21

$          0.32

$ (0.11)

(34%)

$          0.35

$   0.39

$ (0.04)

(10%)

Diluted

$          0.21

$          0.31

$ (0.10)

(32%)

$          0.33

$   0.38

$ (0.05)

(13%)

NET (LOSS) EARNINGS PER COMMON SHARE

Basic

$        (0.66)

$          0.40

$ (1.06)

 NM 

$          0.63

$   3.55

$ (2.92)

(82%)

Diluted

$        (0.66)

$          0.38

$ (1.04)

 NM 

$          0.61

$   3.44

$ (2.83)

(82%)

WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING

Basic

277.5

309.7

(32.2)

(10%)

291.6

320.3

(28.7)

(9%)

Diluted

277.5

320.7

(43.2)

(13%)

303.9

330.3

(26.4)

(8%)

NM = Not meaningful.

  

AMERICAN CAPITAL, LTD.

OTHER FINANCIAL INFORMATION

Three Months Ended December 31, 2013 and September 30, 2013 and Fiscal Years Ended December 31, 2013 and 2012

(in millions, except per share data)

(unaudited)

Q4 2013 Versus Q3 2012

2013 Versus 2012

Q4 2013

Q3 2013

$

%

2013

2012

$

%

Assets Under Management

 American Capital Assets at Fair Value

$      6,009

$        6,271

$         (262)

(4%)

$      6,009

$        6,319

$        (310)

(5%)

 Externally Managed Assets at Fair Value(1)

87,201

110,787

(23,586)

(21%)

87,201

110,481

(23,280)

(21%)

Total

$    93,210

$    117,058

$    (23,848)

(20%)

$    93,210

$    116,800

$   (23,590)

(20%)

Third-Party Earning Assets Under

     Management(2)

$    12,677

$      14,209

$      (1,532)

(11%)

$    12,677

$      12,381

$          296

2%

      Total Earning Assets Under Management(3)

$    18,603

$      20,395

$      (1,792)

(9%)

$    18,613

$      18,642

$          (29)

—%

New Investments

 Senior Debt

$         499

$               7

$          492

 NM 

$         614

$           417

$          197

47%

 Mezzanine Debt

—%

56

(56)

(100%)

 Preferred Equity

103

1

102

 NM 

125

87

38

44%

 Common Equity

230

230

100%

236

150

86

57%

 Structured Products

65

54

11

20%

132

9

123

NM

Total by Security Type

$         897

$             62

$          835

NM

$      1,107

$           719

$          388

54%

Investments in American Capital Asset    Management, LLC and for Other Fund Development

$         240

$               4

$          236

 NM 

$         271

$           121

$          150

124%

Sponsor Finance Investments

94

94

100%

125

109

16

15%

Structured Products

27

50

(23)

(46%)

75

4

71

 NM 

American Capital One Stop Buyouts®

—%

27

301

(274)

(91%)

Investments in Managed Funds

—%

50

(50)

(100%)

Add-on Financing for Acquisitions

391

391

100%

391

19

372

 NM 

Add-on Financing for Recapitalizations, not

     Including Distressed Investments

68

68

100%

104

71

33

46%

Add-on Financing for Growth and Working

     Capital

44

3

41

 NM 

56

22

34

155%

Add-on Financing for Distressed Situations

33

1

32

 NM 

42

22

20

91%

Add-on Financing for Purchase of Debt of a

     Portfolio Company

4

(4)

(100%)

16

16

100%

Total by Use

$         897

$             62

$          835

NM

$      1,107

$           719

$          388

54%

Realizations

Equity Investments

$         245

$             39

$          206

528%

$         362

$           274

$            88

32%

Principal Prepayments

245

96

149

155%

604

938

(334)

(36%)

Payment of Accrued Payment-in-Kind Notes

     and Dividends and Accreted OID

52

68

(16)

(24%)

187

242

(55)

(23%)

Scheduled Principal Amortization

7

15

(8)

(53%)

41

41

—%

Loan Syndications and Sales

10

10

100%

14

3

11

367%

Total by Source

$         559

$           218

$          341

156%

$      1,208

$        1,498

$        (290)

(19%)

American Capital One Stop Buyouts®

$         141

$           135

$              6

4%

$         530

$           927

$        (397)

(43%)

Sponsor Finance Investments

248

32

216

675%

410

320

90

28%

Direct and Other

8

1

7

700%

34

208

(174)

(84%)

European Capital

158

37

121

327%

195

195

100%

Asset Management

1

(1)

(100%)

12

15

(3)

(20%)

Structured Products

4

12

(8)

(67%)

27

28

(1)

(4%)

Total by Business Line

$         559

$           218

$          341

156%

$      1,208

$        1,498

$        (290)

(19%)

Appreciation, Depreciation, Gain and Loss

Gross Realized Gain

$           66

$               9

$            57

633%

$         117

$             66

$            51

77%

Gross Realized Loss

(54)

(83)

29

35%

(221)

(337)

116

34%

Portfolio Net Realized Gain (Loss)

12

(74)

86

 NM 

(104)

(271)

167

62%

Foreign Currency Transactions

3

1

2

200%

3

1

2

200%

Derivative Agreements

1

2

(1)

(50%)

(14)

(87)

73

84%

Tax Benefit

3

32

(29)

(91%)

60

87

(27)

(31%)

Net Realized Gain (Loss)

19

(39)

58

 NM 

(55)

(270)

215

80%

Gross Unrealized Appreciation of Private

     Finance Portfolio Investments

72

113

(41)

(36%)

281

412

(131)

(32%)

Gross Unrealized Depreciation of Private

     Finance Portfolio Investments

(224)

(125)

(99)

(79%)

(398)

(218)

(180)

(83%)

Net Unrealized (Depreciation) Appreciation of

     Private Finance Portfolio Investments

(152)

(12)

(140)

NM

(117)

194

(311)

NM

Net Unrealized Appreciation of European

     Capital Investment

102

68

34

50%

281

146

135

92%

Net Unrealized Depreciation of European

     Capital Foreign Currency Translation

(7)

(18)

11

61%

(14)

(19)

5

26%

Net Unrealized (Depreciation) Appreciation of

     American Capital Asset Management, LLC

(185)

(119)

(66)

(55%)

(165)

329

(494)

 NM 

Net Unrealized Appreciation of American

     Capital Mortgage Investment Corp.

—%

12

(12)

(100%)

Net Unrealized (Depreciation) Appreciation of

     Structured Products

(14)

(7)

(7)

(100%)

(41)

47

(88)

NM

Reversal of Prior Period Net Unrealized

     (Appreciation) Depreciation Upon

     Realization

(5)

83

(88)

NM

105

296

(191)

(65%)

Net Unrealized (Depreciation) Appreciation of

     Portfolio Company Investments

(261)

(5)

(256)

NM

49

1,005

(956)

(95%)

Foreign Currency Translation - European

     Capital

20

49

(29)

(59%)

49

26

23

88%

Foreign Currency Translation - Other

1

2

(1)

(50%)

3

1

2

200%

Derivative Agreements

3

1

2

200%

6

7

(1)

(14%)

Reversal of Prior Period Net Unrealized

     Depreciation Upon Realization of Terminated

     Swaps

1

(1)

(100%)

13

55

(42)

(76%)

Tax Provision

(2)

(33)

31

94%

(37)

(82)

45

55%

Net Unrealized (Depreciation) Appreciation of Investments

(239)

15

(254)

 NM 

83

1,012

(929)

(92%)

Net Gains, Losses, Appreciation and Depreciation

$       (220)

$           (24)

$        (196)

(817%)

$           28

$           742

$        (714)

(96%)

Other Financial Data

NAV per Share

$      18.97

$        19.54

$       (0.57)

(3%)

$      18.97

$        17.84

$         1.13

6%

Debt at Cost

$         791

$           791

$            —

—%

$         791

$           775

$            16

2%

Debt at Fair Value

$         817

$           806

$            11

1%

$         817

$           781

$            36

5%

Market Capitalization

$      4,226

$        3,813

$          413

11%

$      4,226

$        3,659

$          567

15%

Total Enterprise Value(4)

$      4,702

$        3,971

$          731

18%

$      4,702

$        4,103

$          599

15%

Asset Coverage Ratio

588 %

785 %

588 %

801 %

Debt to Equity Ratio

0.2x

0.1x

0.2x

0.1x

Credit Quality

Weighted Average Effective Interest Rate on

     Debt Investments at Period End

10.0 %

10.8 %

10.0 %

11.4 %

Loans on Non-Accrual at Cost

$         287

$           299

$           (12)

(4%)

$         287

$           260

$            27

10%

Loans on Non-Accrual at Fair Value

$         154

$           169

$           (15)

(9%)

$         154

$           177

$          (23)

(13%)

Non-Accrual Loans at Cost as a Percentage of

     Total Loans at Cost

17.0%

18.8%

17.0%

12.9%

Non-Accrual Loans at Fair Value as a

     Percentage of Total Loans at Fair Value

9.7%

11.3%

9.7%

9.0%

Non-Accruing Loans at Fair Value as a

     Percentage of Non-Accruing Loans at Cost

53.7%

56.5%

53.7%

68.1%

Estimated Loss(5)

$         156

$           130

$            26

20%

$         531

$           620

$          (89)

(14%)

Estimated Loss as a Percentage of Total Loans

     at Cost

9.3%

8.2%

31.4%

30.7%

Past Due Loans at Cost

$           26

$              —

$            26

100%

$           26

$             54

$          (28)

(52%)

Debt to Equity Conversions at Cost

$           74

$              —

$            74

100%

$           75

$             60

$            15

25%

Return on Average Equity

LTM Net Operating Income Return on Average

     Shareholders' Equity

2.9%

3.7%

2.9%

7.7%

LTM Net Realized Earnings Return on Average

     Shareholders' Equity

1.9%

2.6%

1.9%

2.4%

LTM Net Earnings Return on Average

     Shareholders' Equity

3.4%

8.9%

3.4%

22.1%

Current Quarter Annualized Net Operating

     Income Return on Average Shareholders'

     Equity

2.8%

1.7%

2.8%

6.1%

Current Quarter Annualized Net Realized

     Earnings (Loss) Return on Average

     Shareholders' Equity

4.3%

(1.1%)

4.3%

7.3%

Current Quarter Annualized Net (Loss)

     Earnings Return on Average Shareholders'

     Equity

(13.8%)

(0.1%)

(13.8%)

9.1%

NM = Not meaningful.

(1)  Includes total assets of American Capital Agency Corp., American Capital Mortgage Investment Corp., European Capital, American Capital Equity I, American Capital Equity II, ACAS CLO

       2007-1, ACAS CLO 2012-1, ACAS CLO 2013-1 and ACAS CLO 2013-2, 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.

  

Static Pool (1)

Portfolio Statistics ($ in millions, unaudited)

1997- 2002

1997-2013 Static Pools Aggregate

Aggregate

2003

2004

2005

2006

2007

2008

2011

2012

2013

IRR at Fair Value of All Investments(2)

9.1 %

19.8 %

12.7 %

13.1 %

10.7 %

(2.9%)

9.8 %

25.5 %

(1.0)%

 NM 

8.8 %

IRR of Exited Investments(3)

10.5 %

19.5 %

15.8 %

20.2 %

8.2 %

(2.4%)

7.1 %

23.4 %

17.1 %

 NM 

10.1 %

IRR at Fair Value of Equity Investments Only(2)(4)(5)

10.5 %

25.8 %

24.4 %

12.2 %

14.8 %

(9.1%)

21.2 %

38.0 %

(43.6)%

 NM 

10.8 %

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

17.5 %

37.4 %

45.8 %

38.2 %

11.1 %

7.9 %

21.7 %

35.1 %

 N/A 

 N/A 

24.3 %

IRR at Fair Value of All One Stop Buyout® Investments(2)

6.7 %

18.0 %

14.2 %

26.8 %

13.1 %

1.5 %

16.5 %

96.8 %

(9.3)%

 NM 

13.0 %

IRR at Fair Value of All One Stop Buyout® Equity Investments(2)(4)(5)

6.5 %

22.9 %

23.6 %

38.1 %

16.5 %

(9.0%)

17.2 %

96.8 %

(43.6)%

 NM 

16.7 %

IRR at Fair Value of Current One Stop Buyout® Investments(2)

(0.3)%

16.4 %

(1.3)%

23.2 %

12.4 %

(2.1%)

21.0 %

96.8 %

(9.3)%

 NM 

9.9 %

IRR of Exited One Stop Buyout® Investments(3)

7.8 %

16.2 %

21.4 %

25.8 %

11.3 %

13.9 %

14.2 %

 N/A 

19.6 %

 NM 

14.6 %

Committed Investments(7)

$2,408

$1,437

$2,289

$5,135

$5,329

$7,540

$1,063

$208

$880

$271

$26,560

Total Exits and Prepayments of Committed Investments(7)

$2,204

$1,309

$2,084

$2,703

$4,466

$5,721

$728

$168

$282

$12

$19,677

Total Interest, Dividends and Fees Collected

$893

$467

$707

$1,448

$1,493

$1,468

$417

$28

$46

$9

$6,976

Total Net Realized (Loss) Gain on Investments

$(280)

$164

$16

$367

$(316)

$(1,214)

$(132)

$11

$4

$—

$(1,380)

Current Cost of Investments

$179

$110

$213

$1,879

$620

$1,435

$277

$69

$560

$206

$5,548

Current Fair Value of Investments

$77

$224

$77

$2,148

$703

$714

$300

$78

$513

$238

$5,072

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

1.5 %

4.4%

1.5 %

42.4 %

13.9 %

14.1 %

5.9 %

1.5 %

10.1 %

4.7 %

100.0 %

Net Unrealized (Depreciation) Appreciation

$102

$(114)

$136

$(269)

$(83)

$721

$(23)

$(9)

$47

$(32)

$476

Non-Accruing Loans at Cost

$63

$—

$6

$19

$69

$81

$49

$—

$—

$—

$287

Non-Accruing Loans at Fair Value

$31

$—

$1

$8

$20

$49

$45

$—

$—

$—

$154

Equity Interest at Fair Value(4)

$—

$224

$67

$1,834

$425

$317

$139

$28

$122

$59

$3,215

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

14.5

N/A

1.7

1.7

4.4

5.4

6.4

5.2

4.3

6.7

4.0

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

1.1

N/A

2.3

0.8

2.2

1.5

2.1

3.0

3.1

2.4

1.7

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

1.1

N/A

1.5

0.5

1.9

1.3

1.9

2.3

2.8

2.2

1.4

Average Age of Companies(13)(16)

  32 yrs 

  44 yrs 

 38 yrs 

 14 yrs 

 39 yrs 

 35 yrs 

 21 yrs 

 25 yrs 

 17 yrs 

 23 yrs 

 25 yrs 

Diluted Ownership Percentage(4)(17)

85 %

56 %

75 %

94 %

49 %

54 %

66 %

62 %

92 %

69 %

79 %

Average Revenue(13)(14)(16)

$46

$235

$36

$198

$152

$179

$56

$120

$227

$273

$178

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

$7

$51

$8

$67

$39

$33

$16

$27

$67

$35

$49

Total Revenue(13)(14)

$171

$1,254

$237

$1,164

$2,945

$2,691

$528

$187

$1,880

$2,317

$13,374

Total Adjusted EBITDA(8)(13)

$16

$187

$40

$258

$368

$261

$111

$41

$414

$455

$2,151

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

75 %

—%

100 %

50 %

46 %

62 %

33 %

100 %

95 %

100 %

67 %

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

100 %

—%

100 %

94 %

100 %

94 %

46 %

100 %

100 %

100 %

94 %

Majority Owned Portfolio Companies ("MOPC")(6)

1997-2013 Static Pools Aggregate

Total Number of MOPC

39

Total Revenue(14)

$3,402

Total Gross Profit(14)

$1,724

Total Adjusted EBITDA(8)

$686

Total Capital Expenditures(14)

$107

Total Current ACAS Investment in MOPC at Fair Value

$3,164

Total Current ACAS Investment in MOPC at Cost Basis

$2,992

Total Current ACAS Debt Investment in MOPC at Fair Value

$1,027

Total Current ACAS Debt Investment in MOPC at Cost Basis

$1,095

Diluted Ownership Percentage of ACAS in MOPC(17)

78 %

Total Cash(18)

$226

Total Assets(18)

$4,531

Total Debt(18)

$3,459

Total Third-party Debt at Cost(18)

$1,888

Total Shareholders' Equity(18)(19)

$2,896

NM = Not meaningful

(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 2009 and

         2010 static pool years.

(2)    Assumes investments are exited at current fair value.

(3)    Includes fully exited investments of existing portfolio companies.

(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)    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 collateralized loan

         obligations. Excludes our investment in European Capital.

(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 and managed funds.

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

(15)  As a percentage of our total debt investments.

(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)  Calculated as the estimated enterprise value of the MOPC less the cost basis of any outstanding debt of the MOPC.

SHAREHOLDER CALL  American Capital invites shareholders, analysts and interested parties to attend the shareholder call on February 11, 2014 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 (888) 317-6016 (U.S. domestic) or (412) 317-6016 (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 2013 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 11, 2014.  In addition, there will be a phone recording available from 1:00 pm ET February 11, 2014 until 9:00 am ET February 25, 2014.  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 10039554.

ABOUT AMERICAN CAPITAL  American Capital, Ltd. (NASDAQ: 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 $19 billion of assets, including assets on its balance sheet and fee earning assets under management by affiliated managers, with $93 billion of total assets under management (including levered assets).  Through an affiliate, American Capital manages publicly traded American Capital Agency Corp. (NASDAQ: AGNC) with approximately $9 billion of net book value, American Capital Mortgage Investment Corp. (NASDAQ: MTGE) with approximately $1 billion of net book value and American Capital Senior Floating, Ltd. (NASDAQ: ACSF).  From its eight offices in the U.S. and Europe, American Capital and its 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, 2012 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

SOURCE American Capital, Ltd.



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