Allied Capital Announces Second Quarter 2006 Financial Results; Quarterly Dividend of $0.61 Per Share Declared.WASHINGTON -- Allied Capital Corporation (NYSE NYSE See: New York Stock Exchange :ALD ALD abbr. adrenoleukodystrophy ALD, n.pr See adrenoleukodystrophy. ALD aldolase. ) today announced second quarter 2006 financial results. Highlights for Q2 2006 --Net income was $0.24 per share, or $33.7 million --Net investment income was $0.35 per share, or $50.2 million --The total of net investment income and net 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. was $1.05 per share, or $150.4 million --Net unrealized depreciation was $0.81 per share, or $116.7 million --Second regular quarterly dividend of $0.60 per share was paid; third quarter dividend of $0.61 per share was declared --Net asset value per share was $19.17 --Shareholders' equity was $2.7 billion --New investments totaled $453.4 million for the second quarter and $1.3 billion for the first half of 2006 Operating Results For the three months ended June 30, 2006, net investment income was $50.2 million or $0.35 per share, which included stock options expense of $4.6 million or $0.03 per share and excise tax Excise Tax 1. An indirect tax charged on the sale of a particular good. 2. A penalty tax applied to ineligible transactions in retirement accounts. This penalty is assessed by and paid to the IRS. Notes: 1. expense of $3.2 million or $0.02 per share. For the three months ended June 30, 2005, net investment income was $15.3 million or $0.11 per share, which included excise tax expense of $4.0 million or $0.03 per share. Net realized gains were $100.2 million or $0.70 per share for the quarter ended June 30, 2006, and were $207.5 million or $1.52 per share for the quarter ended June 30, 2005. The sum of net investment income and net realized gains was $150.4 million or $1.05 per share for the three months ended June 30, 2006, as compared to $222.8 million or $1.63 per share for the three months ended June 30, 2005. Net income for the quarter ended June 30, 2006, was $33.7 million or $0.24 per share, after net unrealized depreciation of $116.7 million or $0.81 per share. Net income for the quarter ended June 30, 2005, was $311.9 million or $2.29 per share, after net unrealized appreciation of $89.1 million or $0.65 per share. Net income can vary substantially from quarter to quarter primarily due to changes in unrealized appreciation or depreciation and the recognition of realized gains or losses, which vary from quarter to quarter. As a result, quarterly comparisons of net income may not be meaningful. For the six months ended June 30, 2006, net investment income was $91.5 million or $0.64 per share, which included stock options expense of $8.2 million or $0.06 per share and excise tax expense of $11.6 million or $0.08 per share. For the six months ended June 30, 2005, net investment income was $54.0 million or $0.40 per share, which included excise tax expense of $4.0 million or $0.03 per share. Net realized gains were $533.1 million or $3.74 per share for the six months ended June 30, 2006, and were $217.8 million or $1.60 per share for the six months ended June 30, 2005. The sum of net investment income and net realized gains was $624.6 million or $4.38 per share for the six months ended June 30, 2006, as compared to $271.8 million or $2.00 per share for the six months ended June 30, 2005. Net income for the six months ended June 30, 2006, was $133.3 million or $0.94 per share, including net unrealized depreciation of $491.3 million or $3.45 per share. Net income for the six months ended June 30, 2005, was $431.5 million or $3.17 per share, including net unrealized appreciation of $159.7 million or $1.17 per share. During the second quarter, the company invested a total of $453.4 million. After principal collections related to investment repayments or sales of $429.2 million, portfolio exits and valuation and other changes during the quarter, the total portfolio at value was $3.6 billion at June 30, 2006. At June 30, 2006, the overall weighted average yield on the interest-bearing portfolio was 12.6%, as compared to 12.8% at December 31, 2005. 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. was $2.7 billion at June 30, 2006, with a net asset value per share of $19.17 as compared to $2.6 billion or $19.17 per share at December 31, 2005. Private Finance The private finance portfolio totaled $3.5 billion at value at June 30, 2006. Loans and debt securities, which totaled $2.5 billion at value at June 30, 2006, had a weighted average yield of 12.7%, as compared to 13.0% at December 31, 2005. New private finance investments totaled $441.5 million during the second quarter of 2006, which was composed of $68.3 million of senior loans, $180.9 million of unitranche debt, $139.1 million of subordinated debt Subordinated Debt A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known as "junior security" or "subordinated loan". and $53.2 million of equity. These investments included: --$82.5 million to support the buyout Buyout The purchase of a company or a controlling interest of a corporation's shares. Notes: A leveraged buyout is accomplished with borrowed money or by issuing more stock. of The Step2 Company, LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control , a designer, manufacturer and marketer of large-format, branded children's and home products; --$77.0 million to support the buyout of Cook Inlet Cook Inlet Inlet, Gulf of Alaska in the northern Pacific Ocean. Bounded by the Kenai Peninsula on the east, it extends northeast for 220 mi (350 km), narrowing from 80 to 9 mi (129 to 14 km). Anchorage is situated near its head. Alternative Risk, LLC, a provider of management services to small businesses enrolled in workers' compensation workers' compensation, payment by employers for some part of the cost of injuries, or in some cases of occupational diseases, received by employees in the course of their work. self-insured groups; --$65.1 million to support the management-led buyout of MHF MHF Mental Health Foundation (London, UK) MHF Malaysian Hockey Federation MHF Method Hiding Factor MHF Medium High Frequency MHF Major Hazards Facility MHF Mixed Hydrazine Fuel MHF Magnolia House of Furniture, Inc Logistical lo·gis·tic also lo·gis·ti·cal adj. 1. Of or relating to symbolic logic. 2. Of or relating to logistics. [Medieval Latin logisticus, of calculation Solutions, Inc., a third-party environmental logistics company; --$37.1 million to Air Medical Group Holdings LLC, a provider of air medical transportation and urgent care services to rural communities, to support a recapitalization Recapitalization Restructuring a company's debt and equity mixture often with the aim of making a company's capital structure more stable. Notes: Companies often want to diversify their debt-to-equity ratio to improve liquidity. and an acquisition; --$33.7 million to support the buyout of York Insurance Services Group, Inc., a third-party claims administrator providing outsourced processing, adjusting and settlement claims services to insureds on behalf of their customers; --$30.0 million in connection with the company's sale of its equity interest in STS (Synchronous Transport Signal) The electrical equivalent of the SONET optical signal. In SDH, the European counterpart of SONET, STS is known as STM (Synchronous Transport Module). Operating, Inc., a distributor of fluid power components, and provider of services including engineering, design, assembly, repair and technical training; --$22.5 million to Regency Regency, in British history, the period of the last nine years (1811–20) of the reign of George III, when the king's insanity had rendered him unfit to rule and the government was vested in the prince of Wales (later George IV) as regent. Healthcare Group, LLC, a Medicare-certified provider of home-based hospice hospice, program of humane and supportive care for the terminally ill and their families; the term also applies to a professional facility that provides care to dying patients who can no longer be cared for at home. services, to support an acquisition; --$20.0 million in the recapitalization of TransTechnology Corporation, a global designer, manufacturer and servicer of sophisticated, performance-critical lifting devices for specialty aerospace and defense applications; --$14.4 million to support the acquisition of Carlisle Wide Plank Floors, Inc., a manufacturer of wide plank softwood softwood Timber obtained from coniferous trees (mainly of the pine and fir families). With the exception of bald cypress, tamarack, and larch, softwood trees are evergreens. and hardwood hardwood: see wood. hardwood Timber obtained from broad-leaved, flower-bearing trees. Hardwood trees are deciduous trees, except in the warmest regions. flooring; --$12.5 million in the preferred shares Preferred shares Preferred shares give investors a fixed dividend from the company's earnings and entitle them to be paid before common shareholders. See: Preferred stock. of Callidus Debt Partners CLO CLO See: Collateralized Loan Obligation. Fund IV, Ltd.; and --$12.0 million in the recapitalization of Passport passport Document issued by a national government identifying a traveler as a citizen with a right to protection while abroad and a right to return to the country of citizenship. It is normally a small booklet containing a description and photograph of the bearer. Health Communications, Inc., a healthcare technology company that offers products designed to enhance the revenue cycle management process of healthcare service providers. Investments funded during July of 2006 totaled $274.8 million. 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 investment return or principal is expected. Grade 4 is for investments that are in workout Workout Informal repayment or loan forgiveness arrangement between a borrower and creditors. workout 1. The process of a debtor's meeting a loan commitment by satisfying altered repayment terms. and for which some loss of current investment return is expected, but no loss of principal is expected. Grade 5 is for investments that are in workout and for which some loss of principal is expected. At June 30, 2006, Grade 1 investments totaled $1.2 billion, or 34.5% of the total portfolio at value; Grade 2 investments totaled $2.2 billion, or 60.6% of the total portfolio; Grade 3 investments totaled $93.1 million, or 2.6% of the total portfolio; Grade 4 investments totaled $27.4 million, or 0.8% of the total portfolio; and Grade 5 investments totaled $54.0 million, or 1.5% of the total portfolio. Loans and debt securities over 90 days delinquent delinquent 1) adj. not paid in full amount or on time. 2) n. short for an underage violator of the law as in juvenile delinquent. DELINQUENT, civil law. He who has been guilty of some crime, offence or failure of duty. totaled $50.9 million at June 30, 2006, as compared to $80.7 million at December 31, 2005. Loans and debt securities not accruing interest totaled $112.6 million at June 30, 2006, as compared to $155.8 million at December 31, 2005. In general, the company does not accrue To increase; to augment; to come to by way of increase; to be added as an increase, profit, or damage. Acquired; falling due; made or executed; matured; occurred; received; vested; was created; was incurred. interest on loans or debt securities where there is doubt about interest collection or where the enterprise value of the portfolio company may not support further accrual accrual, n continually recurring short-term liabilities. Examples are accrued wages, taxes, and interest. . As a result, loans or debt securities on non-accrual may be different than loans or debt securities that are over 90 days delinquent. Liquidity and Capital Resources At June 30, 2006, the company had cash and investments in money market securities of $25.6 million, a liquidity portfolio totaling $201.2 million which included U.S. Treasury U.S. Treasury Created in 1798, the United States Department of the Treasury is the government (Cabinet) department responsible for issuing all Treasury bonds, notes and bills. Some of the government branches operating under the U.S. Treasury umbrella include the IRS, U.S. bills and money market and other securities, outstanding 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 $1.2 billion, and outstanding borrowings of $1.8 million on its revolving line of credit Revolving line of credit A bank line of credit on which the customer pays a commitment fee and can take and repay funds at will. Normally a revolving LOC involves a firm commitment from the bank for a period of several years. . At June 30, 2006, the company had a weighted average cost of debt of 6.6% and its regulatory asset coverage was 326%. The company is required to maintain regulatory asset coverage of at least 200%. On July 24, 2006, the company completed the sale of 4.5 million shares of common stock for net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). , after the underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. discount and estimated offering expenses, of $118.1 million. On August 1, 2006, the company completed the sale of 675 thousand shares of common stock pursuant to the underwriter's over-allotment option for net proceeds, after the underwriting discount and estimated offering expenses, of $17.8 million. On July 25, 2006, the company closed on the public issuance of $400 million of 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. five-year notes. The notes will mature on July 15, 2011, and have a fixed interest rate of 6.625%. After closing on these debt and equity issuances In financial markets, an Equity Issuance is the sale of new equity or "stocks" by a firm to investors. Equity Issuance can involve a private sale, in which the transaction between investors and the firm takes place directly, or publicly, in which case the firm has to in the third quarter of 2006, there were no outstanding borrowings on the company's revolving line of credit. Quarterly Dividend of $0.61 Per Share Declared As previously released on July 24, 2006, the company declared its 172nd regular quarterly dividend of $0.61 per share for the third quarter of 2006. The dividend is payable as follows: Record date: September 15, 2006 Payable date: September 29, 2006 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 estimates of annual taxable income, which differ from book income due to changes in unrealized appreciation and depreciation and due to temporary and permanent differences in income and expense recognition, and the amount of taxable income carried over from the prior year for distribution in the current year. Webcast/ Conference Call at 10:15 a.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT on Wednesday, August 2, 2006 The company will host a webcast/conference call at 10:15 a.m. (Eastern Time) on Wednesday, August 2, 2006, to discuss the results for the second quarter. PLEASE VISIT THE PRESENTATIONS & REPORTS SECTION OF THE INVESTOR RESOURCES PORTION OF THE COMPANY'S WEBSITE FOR A SLIDE PRESENTATION THAT COMPLEMENTS TODAY'S CONFERENCE CALL. 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) 689-4612 approximately 15 minutes prior to the call. International callers should dial (706) 645-0106. All callers should reference the passcode "Allied Capital." An archived replay of the event will be available through August 16, 2006, by calling (800) 642-1687 (international callers please dial (706) 645-9291). Please reference passcode "3481188". An archived replay will also be available on our website. For 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. About Allied Capital Allied Capital Corporation, a leading business development company with total assets of more than $4 billion, has paid regular, quarterly cash dividends to shareholders since 1963. Allied Capital invests in the American entrepreneurial economy by providing capital to companies seeking a long-term financial partner and access to managerial resources often unavailable to smaller companies. Since its IPO (Initial Public Offering) The first time a company offers shares of stock to the public. While not a computer term per se, many founders, employees and insiders of computer companies have found this acronym more exciting than any tech term they ever heard. in 1960, the Company has provided long-term 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. to thousands of middle market companies. In serving its shareholders, Allied Capital helps build middle market businesses and support American jobs. The Company's private finance portfolio includes investments in over 100 companies that generate aggregate revenues of approximately $12 billion and employ more than 85,000 people. Headquartered in Washington, DC, Allied Capital offers shareholders the opportunity to participate in the private equity industry through an investment in the Company's New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of Stock Exchange-listed stock, which is traded under the symbol ALD. For more information, please visit www.alliedcapital.com, call Allied Capital investor relations toll-free at (888) 818-5298, or e-mail us at ir@alliedcapital.com. All media inquiries should be directed to Stan STAN Stanchion STAN Stärke- und Ausrüstungsnachweis (German) Stan Standard Man (human patient simulator) STAN SEMCIP Technical Assistance Network STAN System Trace Audit Number STAN Star Trek Area Network Collender of Qorvis Communications at (202) 448-3131. 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 Allied Capital's filings with the Securities and Exchange Commission.
CONSOLIDATED BALANCE SHEET
(in thousands, except per share amounts)
At June 30, At December 31,
2006 2005
--------------- ---------------
(unaudited)
ASSETS
Portfolio at value:
Private finance $ 3,460,426 $ 3,479,290
Commercial real estate finance 133,051 127,065
--------------- ---------------
Total portfolio at value 3,593,477 3,606,355
Liquidity portfolio 201,232 200,305
Investments in money market and other
securities 22,518 21,967
Deposits of proceeds from sales of
borrowed Treasury securities 17,156 17,666
Accrued interest and dividends
receivable 49,270 60,366
Other assets 124,448 87,858
Cash 3,106 31,363
--------------- ---------------
Total assets $ 4,011,207 $ 4,025,880
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Notes payable and debentures $ 1,207,137 $ 1,193,040
Revolving line of credit 1,750 91,750
Obligations to replenish borrowed
Treasury securities 17,156 17,666
Accounts payable and other
liabilities 95,145 102,878
--------------- ---------------
Total liabilities 1,321,188 1,405,334
Shareholders' equity:
Common stock 14 14
Additional paid-in capital 2,284,117 2,177,283
Common stock held in deferred
compensation trust (24,003) (19,460)
Notes receivable from sale of
common stock (3,370) (3,868)
Net unrealized appreciation
(depreciation) (136,929) 354,325
Undistributed earnings 570,190 112,252
--------------- ---------------
Total shareholders' equity 2,690,019 2,620,546
--------------- ---------------
Total liabilities and
shareholders' equity $ 4,011,207 $ 4,025,880
=============== ===============
Net asset value per common share $ 19.17 $ 19.17
Common shares outstanding 140,312 136,697
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
2006 2005 2006 2005
---------- ---------- ---------- ----------
(unaudited) (unaudited)
Interest and related
portfolio income
Interest and dividends $ 95,433 $ 71,330 $ 184,314 $ 156,275
Loan prepayment
premiums 1,745 853 7,031 2,530
Fees and other income 13,278 14,024 30,122 22,321
---------- ---------- ---------- ----------
Total interest and
related portfolio
income 110,456 86,207 221,467 181,126
---------- ---------- ---------- ----------
Expenses
Interest 21,607 19,154 45,907 39,379
Employee 20,398 22,877 41,826 38,333
Stock options 4,597 - 8,203 -
Administrative 9,861 23,048 21,380 43,802
---------- ---------- ---------- ----------
Total operating
expenses 56,463 65,079 117,316 121,514
---------- ---------- ---------- ----------
Net investment income
before income taxes 53,993 21,128 104,151 59,612
Income tax expense,
including excise tax 3,798 5,861 12,656 5,593
---------- ---------- ---------- ----------
Net investment income 50,195 15,267 91,495 54,019
---------- ---------- ---------- ----------
Net realized and
unrealized gains (losses)
Net realized gains 100,240 207,496 533,075 217,781
Net change in
unrealized
appreciation or
depreciation (116,706) 89,122 (491,254) 159,706
---------- ---------- ---------- ----------
Total net gains
(losses) (16,466) 296,618 41,821 377,487
---------- ---------- ---------- ----------
Net increase in net assets
resulting from operations $ 33,729 $ 311,885 $ 133,316 $ 431,506
========== ========== ========== ==========
Diluted net investment
income per common share $ 0.35 $ 0.11 $ 0.64 $ 0.40
Diluted earnings per
common share $ 0.24 $ 2.29 $ 0.94 $ 3.17
Weighted average common
shares outstanding -
diluted 143,213 136,381 142,466 135,982
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