Allied Capital Announces 2001 Results; Net Income Increases 11% Per Share; Net Operating Income Increases 25% Per Share.Business Editors WASHINGTON--(BUSINESS WIRE)--Feb. 20, 2002 Allied Capital Corporation (NYSE NYSE See: New York Stock Exchange :ALD ALD abbr. adrenoleukodystrophy ALD, n.pr See adrenoleukodystrophy. ALD aldolase. ) today announced 2001 annual results as well as fourth quarter 2001 results. Highlights for 2001 -- $15.0 million in subordinated debt to support the acquisition of HSCA by MedAssets HSCA, a healthcare outsourcing company; -- $13.0 million in subordinated debt and equity capital in a recapitalization of Elmhurst Consulting LLC, an implementation-focused supply chain consulting firm; -- $11.0 million of subordinated debt with warrants to recapitalize Advantage Mayer, Inc., one of the country's leading regional food brokers; and -- $5.1 million in preferred stock to fund the growth of Foresite Towers LLC, a developer of communications towers. Operating Results For the year ended December December: see month. 31, 2001, Allied Capital reported net income of $200.7 million, or $2.16 per share, an 11% increase on a per share basis as compared to earnings of $143.1 million, or $1.94 per share, for 2000. For the three months ended December 31, 2001, the company reported net income of $42.9 million, or $0.43 per share, as compared to net income of $42.3 million, or $0.52 per share, for the three months ended December 31, 2000. Net income varies substantially from quarter to quarter due to the varied timing of events that result in net realized and unrealized gains Unrealized Gain A profit that results from holding on to an asset rather than cashing it in and using the funds. Notes: Let's say you own a stock that has doubled, but you haven't sold it yet. This is said to be an unrealized gain. or losses. As a result, quarterly comparisons of net income may not be meaningful. Net operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. before net realized and unrealized gains or losses was $179.1 million, or $1.92 per share for 2001, a 25% increase on a per share basis as compared to net operating income of $112.7 million, or $1.53 per share, for 2000. For the fourth quarter of 2001, net operating income before net realized and unrealized gains or losses totaled $53.0 million, or $0.53 per share, a 26% increase on a per share basis as compared to fourth quarter 2000 net operating income of $34.7 million, or $0.42 per share. Net realized and unrealized gains totaled $21.3 million, or $0.23 per share, for 2001 as compared to $30.4 million, or $0.41 per share, for 2000. For the year ended December 31, 2001, Allied Capital recognized realized gains Realized Gain A gain resulting from selling an asset at a price higher than the original purchase price. Notes: There may be tax consequences for a realized profit. of $10.1 million and realized losses Realized Loss A loss recognized when assets are sold for a price lower than the original purchase price. Notes: A portion of the realized loss may be applied against a capital gain or realized profit to reduce taxes. of $9.4 million. During 2001, the company invested a total of $680.3 million. After total repayments of $74.5 million, asset sales of $130.0 million and valuation changes during the year, total assets increased to $2.46 billion at December 31, 2001, a 33% increase over total assets of $1.85 billion at December 31, 2000. Shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. increased 31% to $1.35 billion at December 31, 2001 from $1.03 billion at December 31, 2000. Net asset value per share at December 31, 2001 was $13.57, a 12% increase over the net asset value per share of $12.11 at December 31, 2000. For the year ended December 31, 2001, Allied Capital's total return to shareholders was 35%, including reinvestment Reinvestment Using dividends, interest and capital gains earned in an investment or mutual fund to purchase additional shares or units, rather than receiving the distributions in cash. 1. In terms of stocks, it is the reinvestment of dividends to purchase additional shares. of dividends and share price appreciation during the year. The annual return on average assets was 9% and the annual return on average equity was 17% for the year ended December 31, 2001. Bill Walton William Theodore Walton III, better known as Bill Walton (born November 5, 1952), is a former American basketball player and current television sportscaster. He is the father of current Los Angeles Lakers player Luke Walton. , Chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. , remarked, "We are pleased with Allied Capital's performance in 2001, both on a relative and an absolute basis. Our portfolio continues to perform well in a difficult economy, and our new investment activity was strong in 2001 because of the balance we strike between our core private finance business and our commercial real estate investing Real estate investing involves the purchase of real estate for profit. Profits are accumulated slowly by renting out properties in a cashflow method, or are generally improved and resold for a capital gain. activity. In addition, we believe our robust business model, where our profits are paid to our shareholders in cash dividends, serves us well in today's uncertain capital markets." Portfolio Activity for 2001 For 2001, private finance investments totaled $287.7 million and commercial real estate investments totaled $392.6 million. For the fourth quarter of 2001, total new loans and investments were $170.7 million. At December 31, 2001, the overall weighted average yield on the company's portfolio was 14.3%, as compared to 14.1% at December 31, 2000. Private Finance The private finance portfolio totaled $1.60 billion at December 31, 2001. The debt portion of this portfolio, which totaled $1.11 billion at December 31, 2001, had a weighted average yield of 14.8%, as compared to 14.6% at December 31, 2000. During the fourth quarter of 2001, Allied Capital invested a total of $60.9 million in its core private finance business. Significant new private finance investments during Q4 2001 included: -- $15.0 million in subordinated debt to support the acquisition of HSCA by MedAssets HSCA, a healthcare outsourcing company; -- $13.0 million in subordinated debt and equity capital in a recapitalization of Elmhurst Consulting LLC, an implementation-focused supply chain consulting firm; -- $11.0 million of subordinated debt with warrants to recapitalize Advantage Mayer, Inc., one of the country's leading regional food brokers; and -- $5.1 million in preferred stock to fund the growth of Foresite Towers LLC, a developer of communications towers. CMBS CMBS See: Commercial Mortgage Backed Securities Investing During the year ended December 31, 2001, the company's commercial real estate finance group invested $390.4 million in nine separate transactions. For the year ended December 31, 2001, the company sold a total of $124.5 million of CMBS. During the fourth quarter of 2001, the company invested $109.6 million in CMBS in three separate transactions. At December 31, 2001, the company's portfolio of CMBS, all of which was acquired directly from the original issuers, totaled $582.6 million, or 24% of total assets, and had a weighted average yield to maturity of 14.8%. Because the company has acquired its CMBS investments at an approximate ap·prox·i·mate v. To bring together, as cut edges of tissue. adj. 1. Relating to the contact surfaces, either proximal or distal, of two adjacent teeth; proximate. 2. Close together. discount of 50% from the face amount of the bonds, the unamortized discount on the CMBS portfolio at December 31, 2001 totaled $611.9 million. From time to time, the company will purchase lower yielding BB bonds in anticipation of future opportunities to sell such bonds at a premium. In February February: see month. 2002, the company completed the sale of $122.6 million of BB+, BB and BB- bonds that were purchased during 2001, 2000 and 1999. Liquidity and Capital Resources During 2001, Allied Capital raised $286.9 million of new equity in eight separate placements. In addition, the company obtained additional unsecured Unsecured A loan or equity interest that is given without any guarantee of payment, performance, satisfaction or opportunity for return from the recipient. No property, interest or security is used as collateral in either a guarantee or a pledge. long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. of $150 million. The company also expanded its committed unsecured revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility to $497.5 million, of which $352.8 million was available at December 31, 2001. At December 31, 2001, the company had a weighted average cost of debt of 7.0%. At December 31, 2001, the company had regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. asset coverage of 245% and the ratio of debt to equity was 0.75 to 1. The company is required to maintain regulatory asset coverage of at least 200%. Portfolio Quality Allied Capital employs a grading system to monitor the quality of its portfolio. Grade 1 is for those investments from which a capital gain is expected. Grade 2 is for investments performing in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with plan. Grade 3 is for investments that require closer monitoring; however, no loss of interest or principal is expected. Grade 4 is for investments for which some loss of contractually con·trac·tu·al adj. Of, relating to, or having the nature of a contract. con·trac  tu·al·ly adv.Adv. 1. due interest is expected, but no loss of principal is expected. Grade 5 is for investments for which full loss of interest and some loss of principal is expected, and the loan is marked down to net realizable value Net realizable value (NRV) is a commonly used method of evaluating an asset's worth in the field of inventory accounting. NRV is part of GAAP rules that apply to valuing inventory, so as to not overstate or understate the value of inventory goods. . At December 31, 2001, the portfolio of Grade 1 investments totaled $603.3 million, or 26% of the total portfolio at value; Grade 2 investments totaled $1.55 billion, or 67% of the total portfolio; Grade 3 investments totaled $79.5 million, or 3% of the total portfolio; Grade 4 investments totaled $44.5 million, or 2% of the total portfolio; and Grade 5 investments totaled $48.5 million, or 2% of the total portfolio. Included in Grade 4 and 5 investments are assets totaling $6.6 million that are secured by commercial real estate. For the total investment portfolio, loans greater than 90 days past due were $39.1 million at value at December 31, 2001, or 2% of the total portfolio. Included in this category are loans valued at $14.1 million that are secured by commercial real estate. At December 31, 2001, greater than 30-day delinquencies in the underlying collateral collateral (kəlăt`ərəl), something of value given or pledged as security for payment of a loan. Collateral consists usually of financial instruments, such as stocks, bonds, and negotiable paper, rather than physical goods, although pool related to the CMBS portfolio were 0.45%. Quarterly Dividend Increased to $0.53 Per Share As previously released, on February 7, 2002, the company increased its regular quarterly dividend to $0.53 per share for the first quarter of 2002. This dividend will represent the company's 154th consecutive quarterly dividend. The dividend is payable as follows: Record date March 15, 2002 Payable date March 28, 2002 For 2001, the company paid total dividends of $2.01 per share, a 10.4% increase over total dividends of $1.82 per share in 2000. The company's dividend is paid from taxable income Under the federal tax law, gross income reduced by adjustments and allowable deductions. It is the income against which tax rates are applied to compute an individual or entity's tax liability. The essence of taxable income is the accrual of some gain, profit, or benefit to a taxpayer. . The Board determines the dividend, based on annual estimates of taxable income, which differs from book income due to both timing and absolute differences in income and expense recognition. Changes in unrealized appreciation and depreciation have no impact on the company's taxable income. Webcast/ Conference Call at 10:15 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy on February 20, 2002 The company will host a webcast/ conference call at 10:15 a.m. Eastern today to discuss fourth quarter and year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. 2001 financial results. All interested parties are welcome to attend the live webcast, which will be hosted through our web site at www.alliedcapital.com. Please visit the web site to test your connection before the call. You can also access the conference call by dialing (888) 748-9804 approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 15 minutes prior to the call; please reference the passcode "Allied Capital." International callers should dial (312) 470-0029. For complete information about the webcast/ conference call and the replay, please visit our web site or call Allied Capital Investor Relations Investor relations The process by which the corporation communicates with its investors. at (888) 818-5298. An archived replay of the event will be available on our web site through February 27, 2002. About Allied Capital Allied Capital is the nation's largest business development company, and provides long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. investment capital to support the expansion of growing companies nationwide. The company provides mezzanine mez·za·nine n. 1. A partial story between two main stories of a building. 2. The lowest balcony in a theater or the first few rows of that balcony. debt and equity financing Equity Financing The act of raising money for company activities by selling common or preferred stock to individual or institutional investors. In return for the money paid, shareholders receive ownership interests in the corporation. , and also invests in commercial mortgage-backed securities Commercial mortgage-backed securities (CMBS) are a type of bond commonly issued in American security markets. They are a type of Mortgage-backed security which are backed by mortgages on commercial rather than residential real estate. . The company is headquartered in Washington Washington, town, England Washington, town (1991 pop. 48,856), Sunderland metropolitan district, NE England. Washington was designated one of the new towns in 1964 to alleviate overpopulation in the Tyneside-Wearside area. , DC. For more information, please visit the web site at www.alliedcapital.com, call Allied Capital Investor Relations toll-free at (888) 818-5298 or e-mail us at ir@alliedcapital.com. Forward-looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. The information contained in this press release contains forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors could cause actual results and conditions to differ materially from those projected in these forward-looking statements, and these factors are enumerated This term is often used in law as equivalent to mentioned specifically, designated, or expressly named or granted; as in speaking of enumerated governmental powers, items of property, or articles in a tariff schedule. in the company's periodic filings with the Securities and Exchange Commission.
At December 31,
(In thousands, except per share amounts)
2001 2000
---- ----
ASSETS
Portfolio at Value:
Private finance $1,595,072 $1,282,467
Commercial real estate finance 734,518 505,534
---------- -- -------
Total Portfolio at Value 2,329,590 1,788,001
Cash and cash equivalents 889 2,449
Other assets 130,234 63,367
---------- ------
Total Assets $2,460,713 $1,853,817
========== ==========
LIABILITIES and SHAREHOLDERS' EQUITY
Liabilities:
Debt $1,020,806 $786,648
Other liabilities 80,784 30,477
------ ------
1,101,590 817,125
Preferred stock 7,000 7,000
Common shareholders' equity 1,352,123 1,029,692
--------- ---------
Total Liabilities and
Shareholders' Equity $2,460,713 $1,853,817
========== ==========
Net asset value per common share $13.57 $12.11
Common shares outstanding at end of year 99,607 85,057
(In thousands, except
per share amounts)
3 Months Ended 12 Months Ended
December 31 December 31
--------------- ---------------
(unaudited)
Interest and
Related Portfolio
Income: 2001 2000 2001 2000
--------- --------- --------- ---------
Interest and
dividend income $ 66,742 $ 52,539 $ 240,464 $ 182,307
Premiums from
loan
dispositions 434 5,386 2,504 16,138
Fees and other
income 15,490 3,810 46,142 13,144
--------- --------- --------- ---------
Total Interest
and Related
Portfolio
Income 82,666 61,735 289,110 211,589
--------- --------- --------- ---------
Expenses:
Interest 17,130 15,767 65,104 57,412
Employee 7,387 6,519 29,656 26,025
Administrative 5,133 4,724 15,299 15,435
--------- --------- --------- ---------
Total Operating
Expenses 29,650 27,010 110,059 98,872
--------- --------- --------- ---------
Net Operating
Income Before
Net Realized
and Unrealized
Gains (Losses) 53,016 34,725 179,051 112,717
Net Realized and
Unrealized Gains
(Losses):
Net realized
gains (losses) (7,678) (7,572) 661 15,523
Net unrealized
gains (losses) (2,860) 15,128 20,603 14,861
--------- --------- --------- ---------
Total Net
Realized and
Unrealized
Gains (Losses) (10,538) 7,556 21,264 30,384
--------- --------- --------- ---------
Net Income Before
Income Taxes 42,478 42,281 200,315 143,101
Income tax benefit 412 -- 412 --
--------- --------- --------- ---------
Net Increase in Net
Assets Resulting
From Operations $ 42,890 $ 42,281 $ 200,727 $ 143,101
========= ========= ========= =========
Diluted net
operating income
per share $ 0.53 $ 0.42 $ 1.92 $ 1.53
Diluted earnings
per share $ 0.43 $ 0.52 $ 2.16 $ 1.94
Weighted average
shares outstanding
- diluted 100,052 81,612 93,003 73,472
Certain reclassifications have been made to the 2000 balances to
conform to the 2001 financial statement presentation.
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