American Capital Reports Net Operating Income Before Income Taxes of $81 Million, or $0.24 Per Diluted Share, and Net Earnings of $580 Million, or $1.71 Per Diluted Share, and Extends Stock Repurchase and Dividend Program

BETHESDA, Md., May 1, 2012 /PRNewswire/ -- American Capital, Ltd. ("American Capital" or the "Company") (Nasdaq: ACAS) announced net operating income ("NOI") before income taxes for the quarter ended March 31, 2012 of $81 million, or $0.24 per diluted share.  NOI after income taxes for the quarter ended March 31, 2012 was $49 million, or $0.14 per diluted share.  Net earnings for the quarter ended March 31, 2012 were $580 million, or $1.71 per diluted share.  As of March 31, 2012, net asset value ("NAV") per share was $15.71, a $1.84, or 13% per share, increase from the December 31, 2011 NAV per share of  $13.87.

Q1 2012 FINANCIAL SUMMARY

  • $0.24 NOI before income taxes per diluted share, or $81 million
    • $3 million decrease over Q4 2011
    • $0.14 NOI per diluted share, or $49 million, after income taxes
  • $(0.17) net realized loss per diluted share, or $(58) million
    • $195 million decrease over Q4 2011
  • $1.88 net unrealized appreciation per diluted share, or $638 million
    • $181 million increase over Q4 2011
  • $1.71 net earnings per diluted share, or $580 million
    • $14 million decrease over Q4 2011
  • $396 million of cash proceeds from realizations
  • $118 million of securitized debt repaid
  • 5.5 million shares repurchased, totaling $48 million, of American Capital common stock
    • $8.79 average price per share
    • $0.12 accretive to NAV per share
  • $15.71 NAV per share
    • $1.84 per share, or 13% increase over Q4 2011

"Our NAV per share grew by $1.84 for the quarter to $15.71, delivering a 53% annualized return for the quarter," said Malon Wilkus, Chairman and Chief Executive Officer.  "We have earned $2.7 billion of net income from when the U.S. GDP turned positive in the third quarter of 2009, while our shareholders' equity has grown from $1.9 billion to $5.1 billion.  We believe that the performance of our portfolio will continue to be positive as the U.S. economy continues to recover.  Based on this confidence and the current price to book ratio, we believe our shares are an excellent value.  Therefore, our Board of Directors extended by a year our stock repurchase and dividend program through December 31, 2013.  Since we initiated our stock buyback program, it has been accretive to our NAV by $0.44 per share.  If we had not repurchased these shares, we would have had to earn an additional $143 million during that three quarter period to have produced the $15.71 per share NAV we have today."

PORTFOLIO VALUATION

For the quarter ended March 31, 2012, net unrealized appreciation, before income taxes, totaled $659 million.  The primary components of the net unrealized appreciation were:

  • $287 million unrealized appreciation in American Capital's investment in American Capital, LLC, its alternative asset management company, due to an increase in actual and forecasted growth;
  • $78 million net unrealized appreciation from American Capital's private finance portfolio, generally as a result of improved portfolio company performance and improved multiples;
  • $117 million of reversals of net unrealized depreciation upon realization of portfolio company investments; and
  • $164 million net unrealized appreciation in American Capital's investment in European Capital, primarily due to an increase in European Capital's NAV and a decrease in the implied discount to European Capital's NAV.
    • The Company's equity investment in European Capital was valued at $711 million as of March 31, 2012, compared to the $868 million fair value of European Capital's NAV at the end of the first quarter, which was 82% of NAV as of March 31, 2012, compared to 67% of NAV at the end of the prior quarter.

"During the quarter, our balance sheet continued to strengthen, with shareholders' equity growing by $551 million and debt declining by $119 million," said John Erickson, Chief Financial Officer.  "The investment in our asset management company, American Capital, LLC, appreciated $287 million as a result of continued strong performance.  American Capital LLC's earning assets under management grew by $2.4 billion during the quarter as American Capital Agency Corp. and American Capital Mortgage Investment Corp. continued their market leading performance.  Looking forward, we continue to expect strong performance by American Capital, LLC as we grow existing funds under management as well as seek to raise new funds."

PORTFOLIO LIQUIDITY AND PERFORMANCE

In the first quarter of 2012, $396 million of cash proceeds were received from realizations of portfolio investments.  The Company made $83 million in new committed investments during the quarter.  The weighted average effective interest rate on the Company's private finance debt investments as of March 31, 2012 was 11.1%, 40 basis points higher than the December 31, 2011 rate of 10.7%. As of March 31, 2012, loans with a fair value of $178 million were on non-accrual, representing 8.1% of total loans at fair value, compared to $219 million fair value of non-accrual loans, representing 8.7% of total loans at fair value as of December 31, 2011.

"Since the beginning of 2011, our non-accruing loans at cost have declined by $346 million. If the economy continues to improve, we would expect this trend to continue," noted Gordon O'Brien, President, Specialty Finance and Operations.  "In addition, our Syndications Team has done a good job refinancing our majority owned portfolio companies with upcoming debt maturities.  This speaks to the underlying strength of our businesses." 

STOCK REPURCHASE AND DIVIDEND PROGRAM EXTENDED

During the third quarter of 2011, American Capital's Board of Directors adopted a program that may provide for additional repurchases of shares or dividend payments.  On April 26, 2012, American Capital's Board of Directors extended the stock repurchase and dividend program 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 dividends 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 first quarter of 2012, American Capital made open market purchases of 5.5 million shares, or $48 million, of American Capital common stock at an average price of $8.79 per share.

  















AMERICAN CAPITAL, LTD.

CONSOLIDATED BALANCE SHEETS

As of March 31, 2012, December 31, 2011 and March 31, 2011

(in millions, except per share amounts)
















Q1


Q4


Q1 2012 Versus
Q4 2011


Q1


Q1 2012 Versus
Q1 2011


2012


2011


$


%


2011


$


%


(unaudited)








(unaudited)





Assets














Investments at fair value (cost of $6,322, $6,739 
    and $7,535, respectively)

$        5,379


$ 5,130


$  249


5 %


$        5,652


$ (273)


(5)%

Cash and cash equivalents

313


204


109


53 %


98


215


219%

Restricted cash and cash equivalents

205


80


125


156 %


98


107


109%

Interest receivable

22


24


(2)


(8)%


30


(8)


(27)%

Deferred tax asset, net

396


428


(32)


(7)%


-


396


100%

Derivative agreements at fair value

10


10


-


-


5


5


100%

Other

96


85


11


13 %


120


(24)


(20)%

Total assets

$        6,421


$ 5,961


$  460


8 %


$        6,003


$  418


7%















Liabilities and Shareholders' Equity














Debt

$        1,132


$ 1,251


$ (119)


(10)%


$        1,742


$ (610)


(35)%

Derivative agreements at fair value

105


99


6


6 %


95


10


11%

Other

70


48


22


46 %


50


20


40%

       Total liabilities

$        1,307


$ 1,398


$   (91)


(7)%


$        1,887


$ (580)


(31)%















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, 332.5, 336.4 and 353.8 
    issued and 325.6, 329.1 and 343.9
    outstanding, respectively

3


3


-


-


3


-


-

Capital in excess of par value

7,024


7,053


(29)


-


7,145


(121)


(2)%

Distributions in excess of net realized earnings

(1,058)


(999)


(59)


(6)%


(1,056)


(2)


-

Net unrealized depreciation of investments

(855)


(1,494)


639


43 %


(1,976)


1,121


57%

Total shareholders' equity

5,114


4,563


551


12 %


4,116


998


24%

Total liabilities and shareholders' equity

$        6,421


$ 5,961


$  460


8 %


$        6,003


$  418


7%















NAV per common share outstanding

$        15.71


$ 13.87


$ 1.84


13 %


$        11.97


$ 3.74


31%






























    











AMERICAN CAPITAL, LTD.



CONSOLIDATED STATEMENTS OF OPERATIONS



Three Months Ended March 31, 2012 and 2011



(in millions, except per share data)



(unaudited)


















Three Months Ended




Three Months Ended


March 31,




March 31,


2012 Versus 2011



2012


2011


$


%













OPERATING INCOME










Interest and dividend income

$   136


$  146


$    (10)


(7)%



Fee income

13


13


-


-



Total operating income

149


159


(10)


(6)%













OPERATING EXPENSES










Interest

16


29


(13)


(45)%



Salaries, benefits and stock-based compensation

37


36


1


3 %



General and administrative

15


11


4


36 %



Total operating expenses

68


76


(8)


(11)%













NET OPERATING INCOME BEFORE INCOME TAXES

81


83


(2)


(2)%













Tax provision

(32)


-


(32)


(100) %



NET OPERATING INCOME

49


83


(34)


(41)%













Net realized (loss) gain










Portfolio company investments

(122)


10


(132)


 NM 



Foreign currency transactions

1


-


1


100 %



Derivative agreements

(8)


(13)


5


38 %



Tax benefit

22


-


22


100 %



Total net realized loss

(107)


(3)


(104)


 NM 













NET REALIZED (LOSS) EARNINGS

(58)


80


(138)


 NM 













Net unrealized appreciation (depreciation)










Portfolio company investments

627


256


371


145 %



Foreign currency translation

38


85


(47)


(55)%



Derivative agreements

(6)


13


(19)


 NM 



Tax provision

(21)


-


(21)


(100) %



Total net unrealized appreciation

638


354


284


80%













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

$   580


$  434


$   146


34 %













NET OPERATING INCOME PER COMMON SHARE










Basic

$  0.15


$ 0.24


$ (0.09)


(38)%



Diluted

$  0.14


$ 0.23


$ (0.09)


(39)%













NET REALIZED (LOSS) EARNINGS PER COMMON SHARE










Basic

$ (0.18)


$ 0.23


$ (0.41)


 NM 



Diluted

$ (0.17)


$ 0.22


$ (0.39)


 NM 













NET EARNINGS PER COMMON SHARE










Basic

$  1.75


$ 1.25


$  0.50


40 %



Diluted

$  1.71


$ 1.21


$  0.50


41 %













WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING










Basic

330.9


346.1


(15.2)


(4)%



Diluted

339.6


358.4


(18.8)


(5)%













NM = Not meaningful.