Allied Capital Reports 2000 First Quarter Earnings Up 36% to $0.45 Per Share Quarterly Dividend of $0.45 Per Share Declared.Business Editors WASHINGTON--(BUSINESS WIRE)--April 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 financial results for the first quarter of 2000. For the three months ended March 31, 2000, the company reported earnings of $29.6 million, or $0.45 per share, a 36% increase over earnings of $18.6 million, or $0.33 per share, for the three months ended March 31, 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 $22.6 million, or $0.34 per share, a 42% increase over $13.8 million, or $0.24 per share, reported for the first quarter of 1999. This increase is the result of strong portfolio growth, a focus on higher yielding assets and increased premiums from loan dispositions. Total 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 $2.2 million and net unrealized gains were $4.8 million for the three-month period ended March 31, 2000, for total net gains of $7.0 million for the quarter. Net gains for the first quarter of 1999 totaled $4.8 million. Realized and unrealized gains can vary substantially on a quarterly basis. During the three months ended March 31, 2000, the company invested a total of $218.3 million, a 37% increase over first quarter 1999 investments of $159.4 million. After total repayments of $53.4 million, loan sales of $39.6 million, and valuation changes during the quarter, the company's investment portfolio increased to $1.4 billion at March 31, 2000. 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, "The significant growth in net income and ordinary income per share this quarter continues to validate the strength of our business plan. Our company is truly unique in that we provide our shareholders with both current 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. cash income as well as upside Upside The potential dollar amount by which the market or a stock could rise. Notes: This is basically an educated guess on how high a stock could go in the near future. See also: Bull, Downside from capital gains. In today's volatile stock market, where other publicly traded venture capital companies can experience significant changes in value in their portfolio overnight, we believe our business platform is preferable because of its ability to provide predictable income as well as excellent growth." Private Finance Investment Activity. During the first quarter of 2000, the private finance group invested $112.6 million, a significant increase over $39.4 million invested during the first quarter of 1999. At March 31, 2000, the debt component of the private finance portfolio totaled $625.7 million and had a weighted average yield of 13.9%. The equity component of the portfolio totaled $105.5 million. The company originated seven new private financings during the first quarter of 2000, with an average investment size of $15 million. The new financings included: - $20 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 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 Warn Industries, Inc., a leading manufacturer and supplier of component parts for the automotive industry The automotive industry is the industry involved in the design, development, manufacture, marketing, and sale of motor vehicles. In 2006, more than 69 million motor vehicles, including cars and commercial vehicles were produced worldwide. ; - 18 million of subordinated debt with warrants and common stock to finance the buyout of International Filler fill·er 1 n. One that fills, as: a. Something added to augment weight or size or fill space. b. A composition, especially a semisolid that hardens on drying, used to fill pores, cracks, or holes in wood, plaster, Corporation, a leading producer of cellulose cellulose, chief constituent of the cell walls of plants. Chemically, it is a carbohydrate that is a high molecular weight polysaccharide. Raw cotton is composed of 91% pure cellulose; other important natural sources are flax, hemp, jute, straw, and wood. and fiber filler products; - $15 million of subordinated debt to finance the growth of Morton Grove Morton Grove, village (1990 pop. 22,408), Cook co., N of Chicago, NE Ill.; inc. 1895. It has research laboratories and plants that manufacture goods such as pumps, electrical equipment, and cosmetics. Pharmaceuticals, a specialty generic drug generic drug, a drug sold or prescribed under the nonproprietary name of its active ingredients or under a generally descriptive name rather than under a brand or trade name. company; and - $12 million of subordinated debt with preferred and common stock to finance the buyout of Component Hardware, a manufacturer and distributor of specialty hardware. Allied Capital Express Activity. Allied Capital Express funded $41.8 million in secured small business loans during the first quarter of 2000, a 90% increase over first quarter 1999 funding activity of $22.0 million. In addition, 10% of the first quarter 2000 new 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. activity was sourced online through the company's web site at AlliedCapitalExpress.com. The significant increase in loan origination volume was primarily due to the company's strategic initiatives to develop the company's web site and online origination Origination The process through which a mortgage lender creates a mortgage secured by some amount of the mortgagor's real property. Notes: Also known as loan origination, everyone must go through the origination process when securing a mortgage for a piece of real process. The company has made great strides in the past year in developing proprietary technologies to streamline the sourcing, 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 closing processes. Commercial Real Estate Finance Activity. During the first quarter of 2000, the company's real estate finance group invested a total of $63.9 million, including $50.4 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 CMBS See: Commercial Mortgage Backed Securities ) in two separate transactions, and $13.5 million in commercial mortgage loans. In the first quarter of 1999, the company invested $88.0 million in CMBS and $10.0 million in commercial mortgage loans. The company's purchased CMBS portfolio was valued at $329.7 million at March 31, 2000 and had a weighted average yield to maturity of 14.6% after assuming a 1% loss rate on the entire underlying mortgage loan pool. "The increase in private finance activity during the first quarter, which is traditionally a slower quarter in the industry, clearly demonstrates the need for our financial products in the capital markets," Walton remarked. "With the high yield market essentially closed, and the public equity markets closed for smaller cap companies, we are experiencing strong demand for our mezzanine loans A mezzanine loan is a relatively large loan, typically unsecured (ie., not backed by a pledging of assets) or with a deeply subordinated security structure (e.g., third lien on the property but non-recourse vis-a-vis the borrower). and other private finance products." Walton continued, "We are especially excited about the positive response we are receiving from AlliedCapitalExpress.com. We will continue to develop our leading edge technology for small business loan origination. We selectively invested in two CMBS issuances this quarter, however, we are curtailing our CMBS investing activity in order to maintain the balance in our portfolio." Credit Quality. 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 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. . The quality of the company's investment portfolio remains strong. At March 31, 2000, Grade 1 investments totaled $149.2 million, or 11% of the total portfolio at value; Grade 2 investments totaled $1.1 billion, or 82%; Grade 3 investments totaled $53.3 million, or 4%; Grade 4 investments totaled $33.1 million, or 2%; and Grade 5 investments totaled $12.7 million, or 1%. Grade 5 private finance investments totaled $11.7 million at value at March 31, 2000, or 0.9% of the company's total investment portfolio. The value of these Grade 5 investments has been reduced from an aggregate cost of $31.1 million in order to reflect the company's estimate of the net realizable value of these investments upon disposition. This reduction in value has been recorded previously as unrealized depreciation over several years in the company's earnings. At March 31, 2000, the credit quality of the company's CMBS portfolio remained strong and delinquencies in the underlying collateral pool were negligible. The yield used to 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 this portfolio assumes a 1% loss rate on the entire underlying collateral mortgage pool. For the total investment portfolio, loans greater than 120 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. were $31.9 million at value at March 31, 2000, or 2% of the total portfolio. This category includes $11.9 million of loans that are fully secured by real estate. Capital Raising. During the first quarter, the company raised $42.2 million in new equity through the sale of 2.6 million shares from its shelf registration statement. As demonstrated by the strong growth in earnings per share during the first quarter, raising new equity to fuel growth is accretive to existing shareholders. Even though companies in the financial services 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. sector are currently undervalued Undervalued A stock or other security that is trading below its true value. Notes: The difficulty is knowing what the "true" value actually is. Analysts will usually recommend an undervalued stock with a strong buy rating. in the capital markets, the company has been successful in its ability to access the equity markets and raise new equity accretively. Quarterly Dividend of $0.45 Per Share Declared At their most recent meeting, the company's Board of Directors declared a quarterly dividend of $0.45 per share. The dividend is payable as follows: Record date June 16, 2000 Payable date June 30, 2000 Investor Web Cast/ Conference Call The company will host a web cast/ conference call at 10:15 Eastern, on Tuesday, April 25, 2000 to discuss first 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. Allied Capital provides long-term 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 is also an active participant in the real estate capital markets, providing commercial mortgage loans and investing in commercial mortgage-backed securities. The company is headquartered in Washington, DC and has eleven 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 March 31, At Dec. 31,
2000 1999
----------- -----------
ASSETS (in thousands)
Portfolio at Value:
Private finance $ 731,238 $ 647,040
Commercial real
estate finance 561,406 520,029
Small business finance 73,043 61,428
---------- ----------
Total Portfolio
at Value 1,365,687 1,228,497
Cash and cash
equivalents 12,806 18,155
Other assets 50,767 43,386
---------- ----------
Total Assets $1,429,260 $1,290,038
========== ==========
LIABILITES and
SHAREHOLDERS' EQUITY
Liabilities:
Debt 683,350 $ 592,850
Other liabilities 27,370 22,675
---------- ----------
710,720 615,525
Preferred stock
issued to SBA 7,000 7,000
Common shareholders'
equity 711,540 667,513
---------- ----------
Total Liabilities and
Shareholders' Equity $1,429,260 $1,290,038
========== ==========
For the Three Months
Ended March 31,
2000 1999
-------- --------
Interest and related
portfolio income: (in thousands)
Interest $38,728 $24,684
Net premiums from loan
dispositions 3,289 1,901
Investment advisory fees
and other income 1,880 1,093
------- -------
Total interest and
related portfolio
income 43,897 27,678
------- -------
Expenses:
Interest 12,311 6,365
Employee 4,569 3,361
Administrative 2,753 2,350
------- -------
Total operating
expenses 19,633 12,076
------- -------
Formula and
cut-off awards 1,691 1,772
------- -------
Portfolio income before
realized and unrealized
gains 22,573 13,830
------- -------
Net realized and
unrealized gains:
Net realized gains 2,176 466
Net unrealized gains 4,832 4,284
------- -------
Total net realized
and unrealized gains 7,008 4,750
------- -------
Net Income $29,581 $18,580
======= =======
Basic earnings
per common share $ 0.45 $ 0.33
Diluted earnings
per common share $ 0.45 $ 0.33
Weighted average common
shares outstanding - basic 66,289 56,799
Weighted average common
shares outstanding - diluted 66,308 56,828
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