Allied Capital Earnings Increase 32% to $0.50 Per Share for Second Quarter 2000.Business Editors WASHINGTON--(BUSINESS WIRE)--July 25, 2000 Allied Capital Corporation (Nasdaq:ALLC ALLC Association for Literary and Linguistic Computing ALLC Allied Capital Corporation (stock symbol) ALLC Army Logistics Leadership Center (Red River Defense Complex, Texarkana, TX) ) today reported quarterly results for the second quarter of 2000, including news of $100 million in new equity capital raised, and a dividend increase to $0.46 per share. Summary of Second Quarter Highlights - Net income per share increases by 32% over Q2 1999 - Net realized capital gains total $12.9 million for Q2 2000 - New investments total $184 million for Q2 2000 - Portfolio credit quality remains strong - $100 million of new equity capital raised to fuel growth - Quarterly dividend increased to $0.46 per share for Q3 2000 - New relationships established with select tech-oriented private equity firms - New Managing Directors appointed within Private Finance Group - Allied Capital Express opens two new regional offices Earnings News For the three months ended June June: see month. 30, 2000, the company reported earnings of $34.8 million, or $0.50 per share, a 32% increase over earnings of $22.1 million, or $0.38 per share, for the three months ended June 30, 1999. For the six months ended June 30, 2000, the company reported earnings of $64.4 million, or $0.94 per share, as compared to $40.7 million, or $0.70 per share, for the comparable six-month period in 1999. Portfolio income before 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. totaled $24.7 million, or $0.35 per share, a 25% increase over $16.6 million, or $0.28 per share, reported for the second quarter of 1999. Portfolio income was $47.3 million, or $0.69 per share, for the six months ended June 30, 2000, a 33% increase over portfolio income of $30.4 million, or $0.52 per share, for the comparable period in 1999. Net realized and unrealized gains totaled $10.1 million for the second quarter, and included 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. of $12.9 million. The second quarter realized gains exceeded the company's original estimate of capital gains for the quarter, and was primarily due to the sale of all of its warrant interest in a single portfolio company. The occurrence of this significant gain had the effect of accelerating some of the estimated gains for year 2000 into the second quarter. The company sets an annual capital gain target, and therefore realized and unrealized gains can vary substantially on a quarterly basis. During the three months ended June 30, 2000, the company invested a total of $184 million. After total repayments of $5.3 million, loan sales of $77.5 million, and valuation changes during the quarter, the value of the company's investment portfolio increased to $1.5 billion at June 30, 2000, a 21% increase since December December: see month. 31, 1999. The company's interest-bearing portfolio had a yield of 13.6% at June 30, 2000. Private Finance News During the second quarter of 2000, the private finance group invested $126.4 million, a 44% increase over $87.9 million invested during the second quarter of 1999. At June 30, 2000, the loans and debt securities within the private finance portfolio totaled $744.5 million and had a weighted average yield of 14.5%. Equity securities within the private finance portfolio were valued at $127.1 million at June 30, 2000. New Private Finance Investments. Investment opportunities continue to be abundant, and the company's highly selective screening and due diligence Research; analysis; your homework. This term has caught on in all industries, because it sounds so "wired." Who would want to do analysis or research when they can do due diligence. See wired. processes identify the best opportunities for investment. Significant new financings during Q2 2000 were: - Packaging Advantage Corporation -- Allied Capital provided $14.5 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". with warrants and common equity 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 Packaging Advantage, a leading contract manufacturer that blends, fills and packages liquid and paste products for leading consumer products manufacturers. The company has been operating for over 40 years. PPM America was the equity sponsor for the transaction, which totaled $72 million. - Wilmar Industries, Inc. -- Allied Capital invested $30 million of subordinated debt with warrants to recapitalize re·cap·i·tal·ize tr.v. re·cap·i·tal·ized, re·cap·i·tal·iz·ing, re·cap·i·tal·iz·es To change the capital structure of (a corporation). re·cap this leading national distributor of repair and maintenance products to apartment and institutional property markets in a "going private" transaction. The lead equity sponsor was Parthenon Capital, and the total transaction was valued at approximately $300 million. - PF.Net Communications, Inc. -- Allied Capital provided $15 million of subordinated debt with warrants to finance the growth of PF.Net's nationwide fiber optic network in a joint venture with Koch Industries Koch Industries, Inc. (pronounced "koke") is a private corporation based in Wichita, Kansas. According to Forbes Magazine, it is the largest privately owned company in the world by revenue (surpassing Cargill in 2005 with the acquisition of Georgia-Pacific), with subsidiaries and AT&T. Odyssey Odyssey (ŏd`ĭsē): see Homer. Odyssey Homer’s long, narrative poem centered on Odysseus. [Gk. Lit.: Odyssey] See : Epic Odyssey Investment Partners was the equity sponsor for the financing, which totaled approximately $700 million. - Wilshire Restaurant Group, Inc. -- Allied Capital invested $15 million of subordinated debt with warrants for this full-service specialty restaurant chain operating as "Marie Callender's Restaurant and Bakery." The company has over 50 years of business history. Castle Harlan, the equity sponsor for this transaction, has sponsored a number of successful restaurant investments including Morton's and McCormick & Schmick. - StarTec Global Communications, Inc. -- Allied Capital funded $20 million of subordinated debt with warrants to finance the expansion of this integrated communications provider of VoIP (Voice over Internet Protocol See Internet and TCP/IP. (networking) Internet Protocol - (IP) The network layer for the TCP/IP protocol suite widely used on Ethernet networks, defined in STD 5, RFC 791. IP is a connectionless, best-effort packet switching protocol. ), data and Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the services to emerging economies. Startec has a market capitalization Market Capitalization A measure of a public company's size. Market capitalization is the total dollar value of all outstanding shares. It's calculated by multiplying the number of shares times the current market price. This term is often referred to as market cap. of approximately $164 million. - Intellirisk Management Corporation -- Allied Capital invested $10 million of senior subordinated debt to finance acquisitions for the third largest receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed collections and related teleservices company in the U.S. Harvest Partners was the equity sponsor for this transaction. IntelliRisk has acquired 11 companies to date, and has raised over $250 million in capital. Relationships with Selected Private Equity Funds Established. During the second quarter, the company began an initiative to invest in and strategically partner with select private equity funds focused on investments in technology and the new economy. The strategy for these fund investments is to provide solid investment returns, increase the technology allocation The apportionment or designation of an item for a specific purpose or to a particular place. In the law of trusts, the allocation of cash dividends earned by a stock that makes up the principal of a trust for a beneficiary usually means that the dividends will be treated as of the overall portfolio, and build strategic relationships with the fund managers and their portfolio companies. The company believes that it will have opportunities to co-invest with the funds as well as finance their portfolio companies as they mature. The company believes that the fund investment strategy is an excellent means of participating in technology investing through a diverse pooled investment portfolio. The fund concept allows the company to participate in a pooled investment return without exposure to the risk of any single technology investment. During the second quarter, the company committed a total of $17.7 million to four private equity funds. The committed amount is expected to be invested over the next three years. The company funded $4.0 million of this commitment during the second quarter. 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, "Our portfolio of interest-bearing assets now presents 91% of our total portfolio, and our recurring re·cur intr.v. re·curred, re·cur·ring, re·curs 1. To happen, come up, or show up again or repeatedly. 2. To return to one's attention or memory. 3. To return in thought or discourse. portfolio income provides a substantial amount of our annual dividend. We have established predictability in our income stream, and we believe that as prudent investors, we should allocate To reserve a resource such as memory or disk. See memory allocation. a small portion of our portfolio to more equity-related investments, particularly in the technology sector. We see great benefit in developing relationships with these talented tech-oriented investors. In addition, for the past 20 years, private equity funds have delivered, on average, an internal rate of return to investors of 18%. We think the investment in these funds will provide solid investment returns with the benefits of managed risk through diversified diversified (di·verˑ·s portfolios." Three New Managing Directors Appointed. Allied Capital recently promoted Scott S. Binder binder: see combine. An earlier Microsoft Office workbook file that let users combine related documents from different Office applications. The documents could be viewed, saved, opened, e-mailed and printed as a group. , Samuel B. Guren, and Thomas (language) Thomas - A language compatible with the language Dylan(TM). Thomas is NOT Dylan(TM). The first public release of a translator to Scheme by Matt Birkholz, Jim Miller, and Ron Weiss, written at Digital Equipment Corporation's Cambridge Research Laboratory runs H. Westbrook to Managing Directors in a move that demonstrates Allied Capital's continued growth and expansion in the private finance industry. Scott Binder, who has been with Allied Capital since 1991, leads Allied Capital's Telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. and New Media investment activity. With 25 years of diversified finance and operations experience as an owner/operator of cable television systems and radio stations, Mr. Binder provides seasoned expertise in financing the growth of this sector. Sam (1) (Security Accounts Manager) The part of Windows NT that manages the database of usernames, passwords and permissions. A SAM resides in each server as well as in each domain controller. See PDC and trust relationship. Guren joined Allied Capital in 1999 with over 25 years of venture capital investing experience. Mr. Guren heads the Chicago office and is focused on equity oriented o·ri·ent n. 1. Orient The countries of Asia, especially of eastern Asia. 2. a. The luster characteristic of a pearl of high quality. b. A pearl having exceptional luster. 3. investment activity. Prior to joining Allied Capital, Mr. Guren was a co-founder of the William Blair
Tom Westbrook has been promoted to lead the company's Business Services investment activity. Mr. Westbrook has served as a key member of Allied Capital's Washington-based private finance group for ten years, and has more than 15 years of experience in the private finance industry. Allied Capital Express News Allied Capital Express funded $30.5 million in secured small business loans during the second quarter of 2000, a 34% increase over second quarter 1999 funding activity of $22.7 million. Market demand for small business loans continues to be robust, and the company continues to focus its efforts on technology development and the Internet. Enhanced Web Site to Go Live During Third Quarter. The company continued its web site development during the second quarter towards releasing the next phase of the AlliedCapitalExpress.com web site, which is expected to go live on the Internet during Q3 2000. The enhanced site will go beyond a standard online loan application, and will generate a customized term sheet for a borrower using digitized rules-based 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. . The company believes this new functionality will enhance the company's access to qualified borrowers nationwide. During the second quarter, the company actively expanded its relationships with online loan aggregators. AlliedCapitalExpress.com is now linked to 15 online mortgage and business loan broker web sites, and the company is working with these online brokers to increase its loan origination The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. volume. New Regional Offices in Idaho and Indiana Indiana, state, United States Indiana, midwestern state in the N central United States. It is bordered by Lake Michigan and the state of Michigan (N), Ohio (E), Kentucky, across the Ohio R. (S), and Illinois (W). . During the second quarter, Allied Capital Express opened two new business development offices in Coeur d'Alene Coeur d'Alene, city, United States Coeur d'Alene (kûrdəlān`), city (1990 pop. 24,563), seat of Kootenai co., N Idaho, near the Wash. line; inc. 1907. , ID and Indianapolis, IN. These offices allow the company to have a local presence in rural areas to visit with entrepreneurs and pursue loan opportunities. Allied Capital Express now has eight business development offices including Detroit, Atlanta, Chicago, Philadelphia, Greenville, SC and Nashua, NH. CMBS CMBS See: Commercial Mortgage Backed Securities Investing News During the second quarter of 2000, the company's real estate finance group invested $25.1 million in non-investment grade 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. (CMBS) in one transaction. The bonds were issued by Donaldson, Lufkin & Jenrette. The securities are collateralized by mortgages on 128 commercial properties with wide geographic and property type diversity. The pool has a weighted average loan-to-value (LTV LTV See: Loan-to-value ratio ) of 69%, a weighted average debt service coverage ratio The debt service coverage ratio (DSCR), or debt service ratio, is the ratio of net operating income to debt payments on a piece of investment real estate. It is a popular benchmark used in the measurement of an income-producing property’s ability to produce (DSCR DSCR See: Debt-service coverage ratio ) of 1.33 times, and an estimated yield to maturity of 15.2%. The company's entire purchased CMBS portfolio, which totaled $356.5 million at June 30, 2000, had a weighted average yield to maturity of 14.7%, after assuming a 1% loss on the entire underlying mortgage loan pool. The credit characteristics of the underlying loan portfolios remain strong with less than 0.2% in delinquencies, average LTVs of 71%, and average DSCRs of 1.39 times. The company has purchased its CMBS portfolio at an average discount from the face amount of the bonds of 52%. At June 30, 2000, the unamortized discount was $356.0 million. Portfolio Credit Quality At June 30, 2000, the credit quality of the company's portfolio remained strong, with 95% of the company's portfolio at Grade 3 or above. At June 30, 2000, Grade 1 investments totaled $138.1 million, or 9% of the total portfolio at value; Grade 2 investments totaled $1.2 billion, or 83%; Grade 3 investments totaled $46.1 million, or 3%; Grade 4 investments totaled $38.6 million, or 3%; and Grade 5 investments totaled $25.0 million, or 2%. The company uses the following scale to grade the credit quality of its portfolio. Grade 1 is used for those investments from which a capital gain is expected. Grade 2 is used 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 used 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 due interest is expected, but no loss of principal is expected. Grade 5 is for investments for which some loss of principal is expected and the investment 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. . Allied Capital Raises $100 Million of New Equity to Fuel Growth During the second quarter, Allied Capital raised $100 million in new equity to fund the company's investment opportunities. The company sold 6.1 million shares from its shelf registration statement. The company continues to have significant opportunities to invest in high return assets, and it will continue to accretively raise new equity capital to support its investment growth. Raising new equity capital increases the company's growth in earnings per share. The company's stock trades at a premium to its net asset value, and new 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 increase both earnings and asset value for existing shareholders. As a result of the company's ability to access the capital markets for equity capital, earnings per share increased 32% quarter over comparable quarter. Quarterly Dividend Increased to $0.46 Per Share At their most recent meeting, the company's Board of Directors increased the company's quarterly dividend by $0.01 to $0.46 per share. The Board increased the quarterly dividend due to their positive outlook for the company's earnings potential. The Board's decision also reflected the company's strategy to retain a portion of its earnings to fuel future growth. The company has increased its regular dividends every year for the past 26 years. With this increase, the company is on track to distribute $1.82 per share, or over $130 million in dividends, in 2000 and ranks in the top ten of dividend paying companies of all issuers on the Nasdaq Stock Market Nasdaq stock market The first electronic stock market listing over 5000 companies. The Nasdaq stock market comprises two separate markets, namely the Nasdaq National Market, which trades large, active securities and the Nasdaq Smallcap Market that trades emerging growth companies. . The dividend is payable as follows: Record date September 15, 2000 Payable date September 29, 2000 Investor Web Cast/ Conference Call The company will host a web cast/ conference call at 10:15 Eastern, on Tuesday, July 25 to discuss second quarter results. All interested parties are welcome to attend the live web cast, 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) 606-5913 approximately 15 minutes prior to the call; please reference the passcode "Allied Capital." International callers should dial (312) 470-0052. For complete information about the web cast/ conference call, 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. About Allied Capital Allied Capital is a business development company that provides investment capital to fuel the expansion of growing companies nationwide. The company's private finance group 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. ranging in size from $5 million to $30 million. Allied Capital Express, the company's small business loan program, provides real estate loans of up to $3 million for small businesses online at www.AlliedCapitalExpress.com. The company also participates in the real estate capital markets as an investor in commercial mortgage-backed securities. The company is headquartered in Washington, DC and has regional offices throughout the 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. . 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. The information contained in this press release contains 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. . 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 June 30, At Dec. 31,
2000 1999
----------------------------
ASSETS (in thousands)
Portfolio at Value:
Private finance $ 871,587 $ 647,040
Commercial real
estate finance 548,787 520,029
Small business
finance 67,879 61,428
---------- ----------
Total Portfolio
at Value 1,488,253 1,228,497
Cash and cash
equivalents 28,724 18,155
Other assets 55,417 43,386
---------- ----------
Total Assets $1,572,394 $1,290,038
========== ==========
LIABILITES and
SHAREHOLDERS' EQUITY
Liabilities:
Debt $ 726,350 $ 592,850
Other liabilities 20,991 22,675
---------- ----------
747,341 615,525
Preferred stock
issued to SBA 7,000 7,000
Common shareholders'
equity 818,053 667,513
---------- ----------
Total Liabilities
and Shareholders'
Equity $1,572,394 $1,290,038
========== ==========
3 Months Ended 6 Months Ended
June 30 June 30
------- -------
(in thousands, except per share amounts)
Interest and
Portfolio Related
Income: 2000 1999 2000 1999
-------- -------- -------- --------
Interest $ 42,986 $ 28,158 $ 81,714 $ 52,842
Net premiums
from loan sales 4,554 2,431 7,843 4,332
Investment
advisory fees
and other
income 2,425 2,597 4,305 3,690
-------- -------- -------- --------
Total
Interest
and Related
Portfolio
Income 49,965 33,186 93,862 60,864
-------- -------- -------- --------
Expenses:
Interest 14,280 8,042 26,591 14,407
Employee 5,191 3,750 9,760 7,111
Administrative 4,082 2,926 6,835 5,276
-------- -------- -------- --------
Total
Operating
Expenses 23,553 14,718 43,186 26,794
-------- -------- -------- --------
Formula and cut
off awards 1,712 1,849 3,403 3,621
-------- -------- -------- --------
Portfolio
Income
Before Net
Realized and 24,700 16,619 47,273 30,449
Unrealized
Gains
Net Realized
and Unrealized
Gains:
Net realized
gains 12,865 11,096 15,041 11,562
Net unrealized
gains (2,775) (5,594) 2,057 (1,310)
-------- -------- -------- --------
Total Net
Realized and
Unrealized
Gains 10,090 5,502 17,098 10,252
-------- -------- -------- --------
Net Income $ 34,790 $ 22,121 $ 64,371 $ 40,701
======== ======== ======== ========
Earnings per share
- diluted $ 0.50 $ 0.38 $ 0.94 $ 0.70
Weighted average
shares
outstanding
- diluted 70,035 58,833 68,175 57,831
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