(Source: PRNewswire-FirstCall)
BETHESDA, Md., Aug. 4 /PRNewswire-FirstCall/ -- American Capital ("ACAS" or the "Company") announced net operating income ("NOI") for the quarter ended June 30, 2009 of $20 million, or $0.09 per diluted share. Earnings (loss) less appreciation and depreciation ("Realized (Loss) Earnings") for the quarter was $(306) million, or $(1.41) per diluted share. For the quarter ended June 30, 2009, the Company reported a net loss of $(547) million, or $(2.52) per diluted share.
Q2 2009 HIGHLIGHTS -- $1.07 per share dividend declared (in the aggregate 10% to be paid in cash and 90% in stock) -- $20 million of NOI -- $(308) million net realized loss on portfolio investments -- $125 million of realizations -- $8.76 net asset value ("NAV") per share -- $7.42 NAV per share adjusted for stock portion of accrued dividend payable and August 7, 2009 share dividend -- $12.83 anticipated realizable value upon settlement or maturity ("Realizable Value") per share -- $10.52 Realizable Value NAV per share adjusted for stock portion of accrued dividend payable and August 7, 2009 share dividend -- 44% reduction in workforce to date since March 31, 2008 NET OPERATING INCOME NOI decreased 87% to $0.09 per diluted share for the quarter ended June 30, 2009, compared to $0.71 per diluted share for the prior year quarter. Relative to the first quarter of 2009, NOI in the second quarter was lower by $0.22 per diluted share primarily due to additional reversals of prior quarter accrued payment in kind ("PIK") interest and dividends (which are non-cash items) and increased interest costs related to default and rating downgrade provisions.
REALIZED (LOSS) EARNINGS
Realized (Loss) Earnings decreased to $(1.41) per diluted share for the quarter ended June 30, 2009, compared to $0.95 per diluted share for the prior year quarter. The Realized (Loss) Earnings for the quarter included a realized loss of $(196) million, or $(0.90) per diluted share, related to the sale of our portfolio company Consolidated Bedding, Inc.
NET LOSS
Net loss increased to $(2.52) per diluted share for the quarter ended June 30, 2009, compared to $(0.34) per diluted share for the prior year quarter.
For the quarter ended June 30, 2009, net unrealized depreciation of portfolio investments totaled $(311) million. The primary components of the net unrealized depreciation were as follows:
-- $315 million of reversals of prior depreciation associated with net realized losses on portfolio investments; -- $(409) million of depreciation of American Capital's investment in European Capital, Ltd., reflecting a significant discount to its NAV due to covenant defaults under European Capital's credit facilities, which could prevent realization of the NAV; -- $(289) million of net depreciation of American Capital's private finance portfolio; -- $35 million of appreciation of American Capital's investment in American Capital Agency Corp. and our portfolio company American Capital, LLC, an alternative asset fund manager; and -- $37 million of net appreciation from structured products. FINANCIAL HIGHLIGHTS
As of June 30, 2009, NAV per share was $8.76, down from $12.32 per share as of March 31, 2009 and $15.41 per share as of December 31, 2008. NAV per share was $7.42 as of June 30, 2009, when adjusted for the $207 million accrued dividend payable in stock and for the 67 million shares to be distributed on August 7, 2009. Based on Realizable Value, NAV per share was $12.83 as of June 30, 2009, down from $17.07 per share as of March 31, 2009 and $20.63 per share as of December 31, 2008. Realizable Value NAV per share was $10.52 as of June 30, 2009, when adjusted for the $207 million accrued dividend payable in stock and for the 67 million shares to be distributed on August 7, 2009.
"While we believe the broader economy has begun to recover in the second half of 2009, American Capital continues to face challenges," said Malon Wilkus, Chairman and Chief Executive Officer. "We remain focused on resolving the defaults with each of our unsecured creditor groups; providing operational, managerial and financial support to our portfolio companies; and improving operational efficiencies."
FINANCING UPDATE AND COVENANT BREACHES
The Company remains in default on $2.3 billion of unsecured credit arrangements outstanding as of June 30, 2009. The Company was able to reduce its outstanding securitized debt by $59 million during the quarter ended June 30, 2009. During the quarter ended June 30, 2009, the Company incurred expenses of $7 million related to its current debt restructuring efforts. In addition, the Company incurred $19 million during the quarter of interest expense as a result of default and rating agency downgrade provisions.
The Company continues to be below the 200% asset coverage ratio set forth in the Investment Company Act of 1940 and, as a result, the Company is generally restricted from issuing any new debt except to refinance existing debt. This does not restrict the use of cash from operations, allowing the reinvestment of proceeds from realizations of portfolio exits. The Company believes that it has sufficient liquidity to meet its currently scheduled debt amortization and the investment needs within its portfolio.
PORTFOLIO LIQUIDITY AND PERFORMANCE
In the second quarter of 2009, $125 million of proceeds were received from realizations of portfolio investment repayments and exits, which were 1% higher than the prior quarter's valuations of each investment. There was $39 million in new committed investments in the quarter. The weighted average effective interest rate on the Company's debt investments as of June 30, 2009, was 9.7%, 100 basis points lower than as of December 31, 2008. Cash and cash equivalents totaled $183 million as of June 30, 2009 and currently total approximately $300 million.
"While we expect to experience losses and depreciation during a severe recession," said John Erickson, Chief Financial Officer, "we continue to work hard to recover value from our underperforming companies. Our experience from the last recession leads us to believe that we will recover value in our portfolio companies as the economy strengthens. Despite having depreciation in some of our investments, we also have many fine investments such as People Media, where we generated a $15 million gain, a 30% annual return and $57 million in cash proceeds in July on our investment, despite one of the worst environments for middle market M&A. With our large and diverse portfolio, we continue to generate liquidity despite the poor M&A environment, as evidenced by the $125 million of proceeds during the second quarter. That trend continued in July, as we sold over $100 million of investments at approximately their fair value. We believe the worst is behind us."
As of June 30, 2009, loans with a fair value of $310 million were on non-accrual. The $310 million fair value of non-accruing loans represented 7.2% of total loans at fair value as of June 30, 2009, compared to the $214 million fair value of non-accrual loans representing 4.4% of total loans at fair value as of March 31, 2009.
2009 DIVIDENDS
On July 31, 2009, American Capital announced the results of its stockholders' elections relating to the Company's dividend previously declared by its Board of Directors on June 11, 2009. The dividend of $1.07 per share is payable on August 7, 2009 to stockholders of record as of the close of business on June 22, 2009, with an ex-dividend date of June 18, 2009. Stockholders had until July 24, 2009 to elect whether to receive the dividend in cash (up to an aggregate maximum of 10% of the total dividend paid) or in shares of common stock. Due to the original terms of the dividend, stockholders who elected to receive cash will receive a combination of cash and common stock.
Based on stockholder elections and the price of American Capital's common stock, the dividend will consist of approximately $24 million in cash and approximately 67 million shares of common stock. The amount of cash elected to be received was greater than the cash limit of 10% of the aggregate dividend amount, and therefore stockholders who elected to receive all cash will receive a combination of cash and stock. Stockholders electing to receive the dividend in all cash, will receive cash in the amount of $0.185 per share or 17% of the $1.07 dividend and 0.275 shares of common stock or 83% of the total dividend for each share of common stock they owned on the record date. The number of shares of common stock comprising the stock portion was calculated based on a price of $3.2199 per share, the average of the volume weighted trading price per share on the NASDAQ Global Select Market on July 27, 28 and 29, 2009.
AMERICAN CAPITAL, LTD. CONSOLIDATED BALANCE SHEETS As of June 30, 2009, December 31, 2008 and June 30, 2008 (in millions) Q2 2009 Versus Q4 2008 Q2 Q4 ------------------ 2009 2008 $ % ---- ---- --- --- (unaudited) Assets Investments at fair value (cost of $10,295, $10,691 and $10,680, respectively) $6,193 $7,427 $(1,234) -17% Cash and cash equivalents 183 209 (26) -12% Restricted cash and cash equivalents 55 71 (16) -23% Interest receivable 43 44 (1) -2% Other assets 154 159 (5) -3% --- --- -- -- Total assets $6,628 $7,910 $(1,282) -16% ====== ====== ======= === Liabilities and Shareholders' Equity Debt $4,321 $4,428 $(107) -2% Derivative and option agreements (cost of $0, $(20) and $1, respectively) 92 222 (130) -59% Accrued dividends payable 231 - 231 100% Other liabilities 94 105 (11) -10% -- --- --- --- Total liabilities 4,738 4,755 (17) - ----- ----- --- --- Commitments and contingencies 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, 225.8, 214.3 and 214.0 issued and 215.7, 204.7 and 207.2 outstanding, respectively 2 2 - - Capital in excess of par value 6,605 6,545 60 1% (Distributions in excess of) undistributed net realized earnings (516) 76 (592) NM Net unrealized depreciation of investments (4,201) (3,468) (733) -21% ------ ------ ---- --- Total shareholders' equity 1,890 3,155 (1,265) -40% ----- ----- ------ --- Total liabilities and shareholders' equity $6,628 $7,910 $(1,282) -16% ====== ====== ======= === Q2 2009 Versus Q2 2008 Q2 -------------- 2008 $ % ---- - - (unaudited) Assets Investments at fair value (cost of $10,295, $10,691 and $10,680, respectively) $9,687 $(3,494) -36% Cash and cash equivalents 262 (79) -30% Restricted cash and cash equivalents 229 (174) -76% Interest receivable 42 1 2% Other assets 236 (82) -35% --- --- --- Total assets $10,456 $(3,828) -37% ======= ======= === Liabilities and Shareholders' Equity Debt $4,475 $(154) -3% Derivative and option agreements (cost of $0, $(20) and $1, respectively) 76 16 21% Accrued dividends payable 209 22 11% Other liabilities 100 (6) -6% --- -- -- Total liabilities 4,860 (122) -3% ----- ---- -- Commitments and contingencies 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, 225.8, 214.3 and 214.0 issued and 215.7, 204.7 and 207.2 outstanding, respectively 2 - - Capital in excess of par value 6,457 148 2% (Distributions in excess of) undistributed net realized earnings 226 (742) NM Net unrealized depreciation of investments (1,089) (3,112) -286% ------ ------ ---- Total shareholders' equity 5,596 (3,706) -66% ----- ------ --- Total liabilities and shareholders' Equity $10,456 $(3,828) -37% ======= ======= === AMERICAN CAPITAL, LTD.
