American Capital Reports Net Operating Income Before Income Taxes of $97 Million, or $0.29 Per Diluted Share, and Net Earnings of $237 Million, or $0.71 Per Diluted Share
BETHESDA, Md., July 31, 2012 /PRNewswire/ -- American Capital, Ltd. ("American Capital" or the "Company") (Nasdaq: ACAS) announced net operating income ("NOI") before income taxes for the quarter ended June 30, 2012 of $97 million, or $0.29 per diluted share. NOI after income taxes for the quarter was $194 million, or $0.58 per diluted share, and net earnings for the quarter were $237 million, or $0.71 per diluted share. As of June 30, 2012, net asset value ("NAV") per share was $16.62, a 6%, or $0.91 per share, increase from the March 31, 2012 NAV per share of $15.71.
Q2 2012 FINANCIAL SUMMARY
- $0.29 NOI before income taxes per diluted share, or $97 million
- $26 million increase over Q2 2011
- $0.58 NOI after income taxes per diluted share, or $194 million
- $0.40 tax benefit per diluted share related to change in tax treatment of preferred stock dividends, or $132 million
- $0.04 net realized earnings per diluted share, or $12 million
- $189 million improvement over Q2 2011
- $0.67 net unrealized appreciation per diluted share, or $225 million
- $362 million decrease over Q2 2011
- $0.71 net earnings per diluted share, or $237 million
- $173 million decrease over Q2 2011
- $332 million of cash proceeds from realizations
- $191 million of securitized debt repaid
- 9.1 million shares repurchased, totaling $85 million, of American Capital common stock
- $9.34 average price per share
- $0.20 accretive to NAV per share
- $16.62 NAV per share
- $0.91 per share, or 6% increase over Q1 2012
"NAV per share grew by $0.91 for the quarter to $16.62, delivering a 23% annualized return for the quarter," said Malon Wilkus, Chairman and Chief Executive Officer. "In the past three months, both our aggregate U.S. portfolio companies and our aggregate European Capital portfolio companies experienced moderate revenue and EBITDA growth, year over year. Despite concerns over the troubles in Europe, European Capital's Euro-denominated NAV held steady. The fair value of our investment in European Capital was primarily impacted by a decrease in the stock price to NAV of comparable public funds and negative foreign currency movements. Our asset management business, conducted through American Capital, LLC, which is now our largest portfolio company investment at $806 million at fair value, continues to thrive, producing increased dividend income while diversifying the income streams at American Capital. Having raised a combined $644 million of equity for American Capital Agency and American Capital Mortgage during the quarter, we are pleased that we were able to grow its existing funds under management and look forward to developing new funds for it to manage."
For the quarter ended June 30, 2012, net unrealized appreciation, before income taxes, totaled $230 million. The primary components of the net unrealized appreciation were:
- $41 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, increasing its investment to $806 million at fair value;
- $80 million net unrealized appreciation from American Capital's private finance portfolio, generally as a result of improved portfolio company performance and improved multiples;
- $182 million of reversals of net unrealized depreciation upon realization of portfolio company investments; and
- $138 million net unrealized depreciation in American Capital's investment in European Capital, primarily due to a weakening of the Euro and an increase in the implied discount to European Capital's NAV.
- The Company's equity investment in European Capital was valued at $574 million as of June 30, 2012, or 70% of NAV, compared to $711 million as of March 31, 2012, or 82% of NAV.
PORTFOLIO REALIZATIONS AND PERFORMANCE
In the second quarter of 2012, $332 million of cash proceeds were received from realizations of portfolio investments. American Capital made $103 million in new committed investments during the quarter. The weighted average effective interest rate on American Capital's private finance debt investments as of June 30, 2012 was 11.0%, 10 basis points lower than the March 31, 2012 rate of 11.1%. As of June 30, 2012, loans with a fair value of $243 million were on non-accrual, representing 12.3% of total loans at fair value, compared to $178 million fair value of non-accrual loans, representing 8.1% of total loans at fair value as of March 31, 2012. The $65 million increase in the fair value of loans on non-accrual was driven by additional loans being placed on non-accrual during the quarter and appreciation in the fair value of loans already on non-accrual status.
"During the quarter, we deployed our capital into areas that add significant shareholder value," said Gordon O'Brien, President, Specialty Finance and Operations. "We invested an additional $30 million in American Capital, LLC, to support the development of new funds, which we believe will further enhance the value of our asset management portfolio company. In addition, we invested $51 million into seven existing portfolio companies and $22 million into two new portfolio companies with attractive risk/reward profiles. We are committed to supporting our existing portfolio by funding both organic growth and accretive add-on acquisitions as well as originating new, attractive investments."
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 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 second quarter of 2012, American Capital made open market purchases of 9.1 million shares, or $85 million, of American Capital common stock at an average price of $9.34 per share. Since the inception of the program, American Capital made open market purchases of 32.2 million shares, or $267 million, of American Capital common stock at an average price of $8.30 per share.
"During the quarter, we reaffirmed and extended our stock repurchase program through December 2013," said John Erickson, Chief Financial Officer. "With our second quarter repurchase of 9.1 million shares, we have now repurchased 9% of the Company's shares over the past four quarters, which has accreted $0.65 to NAV per share. Furthermore, the increase in our net deferred tax asset this quarter added $0.46 to NAV per share, primarily driven by a $132 million deferred tax benefit resulting from the IRS approval of a change in the tax accounting method on PIK preferred equity investments. Also, we have significantly de-levered and de-risked our balance sheet over the past two years, which has significantly improved our potential to refinance and lower our cost of debt and extend its maturity."