Allied Capital Announces Third Quarter 2007 Financial Results.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 2007 financial results. Allied Capital will host an investment community conference call today at 8:30 a.m. ET. Highlights for Q3 2007 * Net investment income was $0.12 per share, or $18.3 million * 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. were $1.37 per share, or $212.4 million * The total of net investment income and net realized gains was $1.49 per share, or $230.7 million * Net unrealized depreciation was $2.11 per share, or $327.2 million; including net declines in investment values of $0.96 per share, or $149.1 million, and the reversal of net unrealized appreciation associated with net realized gains of $1.15 per share or $178.1 million * Net loss was $0.62 per share, or $96.5 million * Third quarter 2007 dividend of $0.65 per share was paid; fourth quarter dividend of $0.65 and extra dividend of $0.07 per share to be paid * Net asset value per share was $17.90 * 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 $2.8 billion * New investments totaled $577.5 million for the quarter For the three months ended September 30, 2007, net investment income was $18.3 million or $0.12 per share compared to net investment income of $25.2 million or $0.16 per share for the three months ended June 30, 2007, and $48.7 million or $0.33 per share for the three months ended September 30, 2006. Net investment income was reduced in the third quarter by stock option expense of $18.3 million or $0.12 per share, which included a one-time charge of $14.4 million or $0.09 per share resulting from a FASB FASB See: Financial Accounting Standards Board FASB See Financial Accounting Standards Board (FASB). 123R expense related to the cancellation of stock options in conjunction with a tender offer that was completed in the third quarter. Stock option expense for the second quarter of 2007 was $9.5 million or $0.06 per share and was $3.6 million or $0.02 per share for the third quarter of 2006. Net investment income for the third quarter of 2007 was also reduced by income and excise taxes excise taxes, governmental levies on specific goods produced and consumed inside a country. They differ from tariffs, which usually apply only to foreign-made goods, and from sales taxes, which typically apply to all commodities other than those specifically exempted. which were $11.2 million or $0.07 per share, as compared to $5.5 million or $0.04 per share in the second quarter of 2007 and $1.6 million or $0.01 per share in the third quarter of 2006. For the three months ended September 30, 2007, the company had net realized gains of $212.4 million, including a $259.5 million gain from the sale of its investment in Mercury Air Centers, Inc., a $24.8 million loss from the sale of Jakel, Inc. and $20.2 million loss from the sale of its investment in Startec Global Communications Inc. For the three months ended September 30, 2006, the company had net realized gains of $9.9 million. For the three months ended September 30, 2007, the sum of net investment and net realized gains was $230.7 million or $1.49 per share, as compared to $58.6 million or $0.40 per share for the quarter ended September 30, 2006. For the three months ended September 30, 2007, net change in unrealized appreciation or depreciation was a decrease of $327.2 million or $2.11 per share. The net depreciation for the quarter resulted from net declines in investment values of $149.1 million or $0.96 per share and the reversal of net unrealized appreciation associated with net realized gains of $178.1 million or $1.15 per share. For the three months ended September 30, 2006, net change in unrealized appreciation or depreciation was an increase of $19.3 million or $0.13 per share. The net change in unrealized appreciation or depreciation led to a third quarter 2007 net loss of $96.5 million or $0.62 per share, as compared to net income of $77.9 million or $0.53 per share for the quarter ended September 30, 2006. Net income (loss) can vary substantially from quarter to quarter due to the recognition of realized gains and losses and unrealized appreciation and depreciation. As a result, quarterly comparisons of net income may not be meaningful. At December 31, 2006, the company had excess 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. of $402.8 million available for distribution to shareholders in 2007. For the first three quarters of 2007, the company paid dividends of $293.7 million. The remainder of 2006's taxable income will be distributed in the fourth quarter of 2007. The company's Board of Directors previously declared a $0.65 per share dividend for the fourth quarter of 2007 and an extra cash dividend of $0.07 per share. The company expects that substantially all of the 2007 dividend payments will be made from excess 2006 taxable earnings. As a result, substantially all of the taxable income generated from 2007 net investment income and net realized gains will be available for distribution in 2008. In addition to spillover spill·o·ver n. 1. The act or an instance of spilling over. 2. An amount or quantity spilled over. 3. A side effect arising from or as if from an unpredicted source: taxable income, the company had $221.9 million in deferred taxable income resulting from installment sale Installment sale The sale of an asset in exchange for a specified series of payments (the installments). installment sale A sale in which the buyer is scheduled to make a series of payments over a period of time. gains as of December 31, 2006. These gains may be deferred for tax purposes until the notes or other amounts received from the sale of the related investments are sold or collected in cash. The company believes that the performance of the portfolio and related net realized gains has provided additional visibility for future dividend payments for shareholders. Portfolio and Investment Activity New investments totaled $577.5 million for the third quarter of 2007. These investments included: * $94.1 million to support the 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 Higginbotham Insurance Agency, Inc., a middle market insurance brokerage and risk management firm; * $82.2 million to support the recapitalization of Woodstream Corporation, a marketer and manufacturer of branded natural solution products for pest control pest control n → control m de plagas pest control n → lutte f contre les nuisibles pest control pest n ; * $62.0 million to support the acquisition of Summit Energy Services, Inc., a provider of outsourced energy management and procurement The fancy word for "purchasing." The procurement department within an organization manages all the major purchases. services; * $44.9 million to The Step2 Company, LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control , a designer, manufacturer and marketer of branded children's and home products, to support the acquisition of Infantino, LLC, a maker of infant and newborn soft toys soft toy n → juguete m de peluche soft toy n → jouet m en peluche soft toy soft n → Stofftier , activity toys and travel products; * $41.4 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 CK Franchising Inc., a franchisor in the non-medical, in-home care market for seniors and other adults needing care; * $40.0 million to EarthColor, Inc., a commercial printer focused on providing a one-stop printing solution of electronic prepress The use of computers to prepare camera-ready materials up to the actual printing stage. It includes drawing, page makeup and typesetting, all performed electronically rather than by drafting or mechanical cut and paste methods. , printing and finishing, to support the strategic acquisition of L.P. Thebault Co., a commercial printer; * $39.7 million to support the acquisition of Bushnell, Inc., a designer, distributor and marketer of branded products for consumers with active outdoor lifestyles; * $30.0 million to support the buyout of Bojangles', an operator and franchisor of chicken quick-service restaurants; and * $25.2 million in the income notes of Callidus Debt Partner CLO CLO See: Collateralized Loan Obligation. Fund VI, Ltd. After principal collections related to investment repayments or sales of $351.1 million, portfolio exits and valuation and other changes during the quarter, the total portfolio at value was $4.3 billion at September 30, 2007. At September 30, 2007, the weighted average yield on the interest-bearing portfolio was 11.9%, as compared to 11.6% at June 30, 2007, and 11.9% at December 31, 2006. Portfolio Quality Grade 4 and Grade 5 assets were 3.3% of the total portfolio at value at September 30, 2007, as compared to 4.0% at June 30, 2007. Grade 5 assets included certain BLX BLX Business Line Expert BLX Basic Launch Complex BLX British Legion of Xbox (gaming clan) Class B and Class C equity interests totaling $16.3 million or 0.4% of the total portfolio at value at September 30, 2007, and $55.6 million or 1.2% of the total portfolio at value at June 30, 2007. Loans on non-accrual were $250.1 million or 5.8% of the total portfolio at value at September 30, 2007, as compared to $298.1 million or 6.7% of the total portfolio at value at June 30, 2007. Investment in BLX Class A equity interests on non-accrual totaled $95.8 million or 2.2% of the total portfolio at value at September 30, 2007, and $95.8 million or 2.1% of the total portfolio at value at June 30, 2007. Liquidity and Capital Resources At September 30, 2007, the company had cash and money market and other securities totaling $305.9 million, including the liquidity portfolio of $200.7 million. The company had 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 $1.9 billion. The company had availability under 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. of $859.0 million. At September 30, 2007, the company had a weighted average cost of debt of 6.6% and its regulatory asset coverage was 244%. The company is required to maintain regulatory asset coverage of at least 200%. Quarterly Dividend of $0.65 Per Share To Be Paid for the Fourth Quarter of 2007 and Extra Dividend of $0.07 To Be Paid for 2007 As previously released, the company declared a fourth quarter dividend of $0.65 per share and an extra dividend of $0.07 per share. The fourth quarter dividend represents the 177th consecutive quarterly dividend for Allied Capital shareholders since 1963. In accordance with regulated investment company Regulated investment company An investment company allowed to pass capital gains, dividends, and interest earned on fund investments directly to its shareholders so that it is taxed only at the personal level, and double taxation is avoided. distribution rules, the company declared the fourth quarter dividend during the third quarter because it is expected to be paid primarily from 2006 taxable income. [TABLE OMITTED] The company's dividend is paid from taxable income. It is estimated that 30% of the distributions made for 2007 will be generated from ordinary taxable income and 70% will be generated from taxable net long-term capital gains Long-term capital gain A profit on the sale of a security or mutual fund share that has been held for more than one year. . This allocation is only an estimate and should not be relied upon for tax reporting purposes. The Board determines the dividend based on estimates of annual taxable income, which differs 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 8:30 a.m. ET on Wednesday, November 7, 2007 The company will host a webcast/conference call at 8:30 a.m. (Eastern Time) on Wednesday, November 7, 2007, 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, 2007 by calling (800) 642-1687 (international callers please dial (706) 645-9291). Please reference passcode "22213466." 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 $5 billion, has paid regular, quarterly cash dividends to shareholders since 1963. 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, Allied Capital 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. 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. In serving its shareholders, Allied Capital helps build middle market businesses and support American jobs. At September 30, 2007, the company's private finance portfolio included investments in 151 companies that generate aggregate revenues of over $13 billion and employ more than 90,000 people. Allied Capital provides flexible, competitive debt and equity capital for management and sponsor-led buyouts, recapitalizations, acquisitions and growth of middle market companies. Allied Capital's seamless, one-stop financing capabilities include first and second lien A Second lien financing is a form of financing secured on a second ranking basis by (more or less) the same security, which secures the first ranking financing. The first lien lenders and the second lien lenders agree that, in the event of a security enforcement or bankruptcy, the senior loans, unitranche debt, junior or 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. 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. 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. This press release should be read in conjunction with the company's recent SEC filings. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
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