Allied Capital Announces Third Quarter 2005 Financial Results; Quarterly Dividend of $0.58 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 third quarter 2005 financial results. Highlights for Q3 2005 --Net income was $0.82 per share, or $113.2 million --Net investment income was $0.33 per share, or $46.1 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 $0.85 per share, or $116.8 million --Net unrealized depreciation was $0.03 per share, or $3.7 million --Third quarter regular quarterly dividend of $0.58 per share was paid; fourth quarter dividend of $0.58 per share was declared --Net asset value per share was $17.37 --Shareholders' equity was $2.4 billion --New investments totaled $673.4 million for the quarter Operating Results For the three months ended September 30, 2005, net investment income was $46.1 million or $0.33 per share, as compared to $52.7 million or $0.40 per share for the three months ended September 30, 2004. Net realized gains were $70.7 million or $0.51 per share for the quarter ended September 30, 2005, as compared to $1.3 million or $0.01 per share for the quarter ended September 30, 2004. The sum of net investment income and net realized gains was $116.8 million or $0.85 per share for the three months ended September 30, 2005, as compared to $54.0 million or $0.41 per share for the three months ended September 30, 2004. Net income for the quarter ended September 30, 2005, was $113.2 million or $0.82 per share, including net unrealized depreciation of $3.7 million or $0.03 per share. Net income for the quarter ended September 30, 2004, was $86.0 million or $0.66 per share, including net unrealized appreciation of $32.0 million or $0.24 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 nine months ended September 30, 2005, net investment income was $100.2 million or $0.73 per share, as compared to $146.3 million or $1.11 per share for the nine months ended September 30, 2004. Net realized gains were $288.5 million or $2.11 per share for the nine months ended September 30, 2005, and were $175.8 million or $1.34 per share for the nine months ended September 30, 2004. The sum of net investment income and net realized gains was $388.6 million or $2.84 per share for the nine months ended September 30, 2005, as compared to $322.0 million or $2.45 per share for the nine months ended September 30, 2004. Net income for the nine months ended September 30, 2005, was $544.7 million or $3.99 per share, including net unrealized appreciation of $156.0 million or $1.15 per share. Net income for the nine months ended September 30, 2004, was $201.6 million or $1.53 per share, including net unrealized depreciation of $120.4 million or $0.92 per share. During the third quarter, the company invested a total of $673.4 million. After total portfolio repayments and asset sales of $151.0 million and valuation and other changes during the quarter, the total portfolio was $3.2 billion at September 30, 2005. At September 30, 2005, the overall weighted average yield on the interest-bearing portfolio was 12.6%, as compared to 14.0% at December 31, 2004. 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 $2.4 billion at September 30, 2005, with a net asset value per share of $17.37 as compared to $2.0 billion or $14.87 per share at December 31, 2004. Private Finance The private finance portfolio totaled $3.1 billion at value at September 30, 2005. Loans and debt securities, which totaled $2.0 billion at value at September 30, 2005, had a weighted average yield of 13.0%, as compared to 13.9% at December 31, 2004. New private finance investments totaled $665.7 million for the quarter. Significant new private finance investments during the third quarter of 2005 included: --$157.0 million to finance a management-led 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. of Norwesco, Inc., a designer, manufacturer and marketer of a broad assortment assortment /as·sort·ment/ (ah-sort´ment) the random distribution of nonhomologous chromosomes to daughter cells in metaphase of the first meiotic division. as·sort·ment n. of polyethylene polyethylene (pŏl'ēĕth`əlēn), widely used plastic. It is a polymer of ethylene, CH2=CH2, having the formula (-CH2-CH2-)n tanks primarily to the agricultural and septic tank septic tank, underground sedimentation tank in which sewage is retained for a short period while it is decomposed and purified by bacterial action. The organic matter in the sewage settles to the bottom of the tank, a film forms excluding atmospheric oxygen, and markets; --$78.2 million to Triax Holdings, LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control to finance its acquisition of Tretinoin tretinoin /tret·i·noin/ (tret´i-noin?) the all-trans stereoisomer of retinoic acid, used as a topical keratolytic in the treatment of acne vulgaris and disorders of keratinization and administered orally in the treatment of acute , the generic equivalent of a leading topical topical /top·i·cal/ (top´i-k'l) pertaining to a particular area, as a topical antiinfective applied to a certain area of the skin and affecting only the area to which it is applied. top·i·cal adj. prescription acne acne, common inflammatory disease of the hair follicles and sebaceous glands characterized by blackheads, whiteheads, pustules, nodules and, in the more severe forms, by cysts and scarring. The lesions appear on the face, neck, back, chest, and arms. medication, and other related assets; --$68.9 million to finance a management-led recapitalization of Palm Coast Data Holdings, LLC, a provider of outsourced fulfillment ful·fill also ful·fil tr.v. ful·filled, ful·fill·ing, ful·fills also ful·fils 1. To bring into actuality; effect: fulfilled their promises. 2. services to U.S. publishers of consumer magazines and membership organizations; --$68.0 million to finance 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 Healthy Pet Corp., an operator of veterinary hospitals in the eastern United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. ; --$53.2 million to support the buyout of Line-X, Inc., a national franchisor of branded, spray-on pick-up truck bedliners Truck bedliners are coverings that protect the inner-side of a truck bed from damage and also prevent the utensils inside the truck bed from cascading throughout the bed. Traditional bedliners are of the plastic drop-in type but "spray on" bedliners are also popular. , a common truck accessory A Truck accessory is an aftermarket part that is used to enhance the style or function of the original OEM pickup truck. Truck accessories are differentiated from other parts, typically referred to as "hard parts" or "cores" that include distributors, water pumps, radiators and the used to protect truck beds from weather, payload (1) Refers to the "actual data" in a packet or file minus all headers attached for transport and minus all descriptive meta-data. In a network packet, headers are appended to the payload for transport and then discarded at their destination. and other damage; --$53.6 million under Callidus Capital Corporation's 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. and syndication See syndication format. facility to fund its senior debt investment in Triax Holdings, LLC; --$41.9 million to Woodstream Corporation, a manufacturer and marketer of poison poison, any agent that may produce chemically an injurious or deadly effect when introduced into the body in sufficient quantity. Some poisons can be deadly in minute quantities, others only if relatively large amounts are involved. free pest control pest control n → control m de plagas pest control n → lutte f contre les nuisibles pest control pest n and pet and wildlife caring control products, to support an acquisition; --$40.0 million to N.E.W. Customer Service Companies Inc., a leading provider of extended service contracts and buyer protection programs, as part of a recapitalization of the company; and --$39.0 million to Havco Wood Products, LLC, a manufacturer of hardwood hardwood: see wood. hardwood Timber obtained from broad-leaved, flower-bearing trees. Hardwood trees are deciduous trees, except in the warmest regions. flooring products used in the dry freight truck trailer industry. 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 September 30, 2005, Grade 1 investments totaled $1.2 billion or 35.7% of the total portfolio at value; Grade 2 investments totaled $1.8 billion or 56.0% of the total portfolio; Grade 3 investments totaled $183.2 million or 5.7% of the total portfolio; Grade 4 investments totaled $10.0 million or 0.3% of the total portfolio; and Grade 5 investments totaled $74.3 million or 2.3% 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 $87.1 million at September 30, 2005, as compared to $132.6 million at December 31, 2004. Loans and debt securities not accruing interest totaled $192.7 million at September 30, 2005, as compared to $114.9 million at December 31, 2004. 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 September 30, 2005, the company had cash and cash equivalents of $58.1 million, 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 $968.3 million, and did not have any outstanding borrowings on the 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 September 30, 2005, the company had a weighted average cost of debt of 6.8% and its regulatory asset coverage was 352%. The company is required to maintain regulatory asset coverage of at least 200%. On September 30, 2005, the company closed a three-year 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. revolving line of credit facility with a committed amount of $722.5 million provided by 18 banks. On November 4, 2005, the company expanded the committed amount under the revolving line of credit facility by $50.0 million which brings the total committed amount to $772.5 million. The facility may be expanded through new or additional commitments up to $922.5 million at the company's option during the three-year period. The credit facility generally bears interest at a rate equal to LIBOR LIBOR See: London Interbank Offered Rate LIBOR See London interbank offered rate (LIBOR). plus 1.30%, and has an annual commitment fee on the committed amount of 20 basis points. On October 13, 2005, the company issued $350 million of long-term unsecured five- and seven-year notes in a private placement. The five-year notes, which totaled $261 million, have a fixed interest rate of 6.15% and the seven-year notes, which totaled $89 million, have a fixed interest rate of 6.34%. The proceeds from the offering were used to repay $125 million of existing unsecured long-term notes that matured on October 15, 2005, and will also be used to fund new portfolio investments and for general corporate purposes. Quarterly Dividend of $0.58 Per Share Declared As previously released on October 24, 2005, the company declared its 169th regular quarterly dividend of $0.58 per share for the fourth quarter of 2005. The dividend is payable as follows:
Record date: December 9, 2005
Payable date: December 29, 2005
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 differ from book income due to changes in unrealized appreciation and depreciation and due to temporary and permanent differences in income and expense recognition. Webcast/ Conference Call at 8:30 a.m. ET on Monday, November 7, 2005 The company will host a webcast/conference call at 8:30 a.m. (ET) on Monday, November 7, 2005, to discuss the results for the 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 November 21, 2005, by calling (800) 642-1687 (international callers please dial (706) 645-9291). Please reference passcode "1525536." An archived replay will also be available on our website. 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. About Allied Capital Allied Capital Corporation, a leading business development company with total assets of more than $3 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 more than $10 billion and employ more than 90,000 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 Financial Dynamics at (202) 434-0601. 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 September At December
30, 31,
2005 2004
------------- ------------
(unaudited)
ASSETS
Portfolio at value:
Private finance $3,080,985 $2,302,086
Commercial real estate finance 142,765 711,325
------------- ------------
Total portfolio at value 3,223,750 3,013,411
Deposits of proceeds from sales of borrowed
Treasury securities 17,933 38,226
Accrued interest and dividends receivable 65,147 79,489
Other assets 81,565 72,712
Cash and cash equivalents 58,081 57,160
------------- ------------
Total assets $3,446,476 $3,260,998
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Notes payable and debentures $968,335 $1,064,568
Revolving line of credit - 112,000
Obligations to replenish borrowed
Treasury securities 17,933 38,226
Accounts payable and other liabilities 93,222 66,426
------------- ------------
Total liabilities 1,079,490 1,281,220
Shareholders' equity:
Common stock 14 13
Additional paid-in capital 2,171,063 2,094,421
Common stock held in deferred
compensation trust (17,781) (13,503)
Notes receivable from sale of common
stock (4,138) (5,470)
Net unrealized appreciation
(depreciation) on portfolio 48,259 (107,767)
Undistributed (distributions in excess
of) earnings 169,569 12,084
------------- ------------
Total shareholders' equity 2,366,986 1,979,778
------------- ------------
Total liabilities and shareholders'
equity $3,446,476 $3,260,998
============= ============
Net asset value per common share $17.37 $14.87
Common shares outstanding 136,289 133,099
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ---------------------
2005 2004 2005 2004
----------- -------- ----------- ---------
(unaudited) (unaudited)
Interest and related
portfolio income
Interest and dividends $76,353 $85,828 $232,628 $233,540
Loan prepayment premiums 2,105 193 4,635 4,210
Fees and other income 16,399 10,842 38,720 28,378
----------- -------- ----------- ---------
Total interest and
related portfolio
income 94,857 96,863 275,983 266,128
----------- -------- ----------- ---------
Expenses
Interest 17,735 20,253 57,114 57,349
Employee 13,969 13,896 52,302 38,171
Administrative 15,130 10,169 58,932 25,072
----------- -------- ----------- ---------
Total operating
expenses 46,834 44,318 168,348 120,592
----------- -------- ----------- ---------
Net investment income before
income taxes 48,023 52,545 107,635 145,536
Income tax expense
(benefit), including excise
tax 1,889 (200) 7,482 (744)
----------- -------- ----------- ---------
Net investment income 46,134 52,745 100,153 146,280
----------- -------- ----------- ---------
Net realized and unrealized
gains (losses)
Net realized gains 70,714 1,300 288,495 175,753
Net change in unrealized
appreciation or
depreciation (3,680) 31,954 156,026 (120,384)
----------- -------- ----------- ---------
Total net gains 67,034 33,254 444,521 55,369
----------- -------- ----------- ---------
Net increase in net assets
resulting from operations $113,168 $85,999 $544,674 $201,649
=========== ======== =========== =========
Diluted earnings per common
share $0.82 $0.66 $3.99 $1.53
Weighted average common
shares outstanding -
diluted 138,058 131,192 136,669 131,487
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