Allied Capital Reports Second Quarter 1998 Earnings of $0.28 Per Share.WASHINGTON--(BUSINESS WIRE)--July 30, 1998--Allied Capital Corporation (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 announced 1998 second quarter and six months financial results. Net income for the three months ended June June: see month. 30, 1998 totaled $14.5 million, or $0.28 per share. The second quarter earnings results exceeded the $0.27 per share First Call consensus estimate. For the six months ended June 30, 1998, the company reported net income of $46.5 million, as compared to net income of $30.9 million for the first six months of 1997. The company reported diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of of $0.89 for the first six months of 1998, as compared to diluted earnings per share of $0.63 for the first six months of 1997. The company originated a total of $141 million in new loans during the second quarter of 1998, a 17% increase over loan originations 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. completed in the second quarter of 1997, which totaled $121 million. Loan repayments were approximately $30 million for the second quarter of 1998 as compared to repayments of approximately $65 million during the second quarter of 1997. Loan originations for the first half of 1998 were approximately $249 million, and loan repayments were approximately $60 million. Loan originations and repayments for the first half of 1997 were approximately $193 million and $90 million, respectively. 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. , said, "We are very pleased with second quarter results. We are right on plan for the year and are picking up momentum in our loan origination activity. The portfolio's credit quality remains strong. "We have been disappointed with the recent weakness in our stock price, which does not reflect our strong performance and prospects for the future. We're going to continue to focus our efforts on delivering consistent and positive earnings results, and are confident that the market will recognize the strength of our franchise and the value of our company." 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. Portfolio Activity. Mezzanine loan 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). originations were approximately $45 million for the second quarter of 1998, a 45% increase over second quarter 1997 originations of $31 million. Mezzanine loan repayments were approximately $8 million, as compared to loan repayments of $32 million during the second quarter of 1997. At June 30, 1998, the mezzanine debt and equity portfolio totaled $261 million, a 28% increase over the mezzanine debt and equity portfolio at December 31, 1997. At June 30, 1998, the mezzanine debt portfolio had a weighted average yield of 13.6%. Commercial Real Estate Portfolio Activity. Commercial real estate loan originations were approximately $82 million for the second quarter of 1998, which was similar to the level of originations for the second quarter of 1997. The company reported commercial mortgage loan repayments of approximately $19 million during the second quarter of 1998 as compared to loan repayments of approximately $29 million during the second quarter of 1997. At June 30, 1998, the commercial mortgage loan portfolio totaled $269 million, a 40% decrease from the portfolio balance at December 31, 1997 as a result of a loan securitization Securitization The process of creating a financial instrument by combining other financial assets and then marketing them to investors. Notes: Mortgage backed securities are a perfect example of securitization. May also be spelled as "securitisation. transaction completed in January 1998. At June 30, 1998, the commercial mortgage loan portfolio had a weighted average stated interest rate of 9.5%, and a weighted average yield of 10.6%. SBA SBA abbr. Small Business Administration Noun 1. SBA - an independent agency of the United States government that protects the interests of small businesses and ensures that they receive a fair share of government 7(a) Loan Portfolio Activity. The company's SBA Section 7(a) guaranteed loan originations were approximately $14 million for the second quarter of 1998, and sales of the guaranteed portions of these loans were approximately $9 million. This compares to 7(a) loan originations and loan sales of $12 million and $19 million, respectively, for the second quarter of 1997. At June 30, 1998, the company's 7(a) loan portfolio totaled $48 million, an 18% increase over the portfolio at December 31, 1997. Generally, the company's 7(a) loans are originated at spreads ranging from 1.75% to 2.75% over the prime lending rate The lowest rate of interest that a financial institution, such as a bank, charges its best customers, usually large corporations, for short-term unsecured loans. The prime lending rate is an economic indicator and is often used as a measuring point for adjusting interest . 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. . For the second quarter of 1998, the company reported 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 $7.4 million, primarily from the sale of securities related to three portfolio companies: Waterview, a commercial office property, for $3.0 million; Z Spanish Spanish, river, c.150 mi (240 km) long, issuing from Spanish Lake, S Ont., Canada, NW of Sudbury, and flowing generally S through Biskotasi and Agnew lakes to Lake Huron opposite Manitoulin island. There are several hydroelectric stations on the river. Radio Network, Inc., a multi-station Spanish language Spanish language, member of the Romance group of the Italic subfamily of the Indo-European family of languages (see Romance languages). The official language of Spain and 19 Latin American nations, Spanish is spoken as a first language by about 330 million persons radio network, for $2.7 million; and El Dorado El Dorado, legendary country of South America El Dorado (ĕl`dərä`dō, –rā`–) [Span.,=the gilded man], legendary country of the Golden Man sought by adventurers in South America. Communications, a multi-station radio/media company, for $0.8 million. Because these gains were realized, the company reversed previously recorded unrealized appreciation of $6.1 million. Upon completion of the company's second quarter portfolio valuation, the company recorded additional unrealized appreciation related to equity securities of $9.5 million, and depreciation of $5.5 million. In total, the company recorded net unrealized depreciation of $2.1 million for the quarter ended June 30, 1998. Unrealized depreciation is a non-cash charge Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. to income similar to a loan loss provision. Credit Quality. The company has just completed its quarterly valuation of the portfolio and management believes that the portfolio has a low level of risk of future credit loss. Grade 5 mezzanine investments, or those investments the company has identified as troubled assets, totaled $7.2 million at value at June 30, 1998, or 1.1% of the company's total portfolio. The value of these grade 5 loans has been reduced from an aggregate cost of $26.3 million in order to reflect the company's estimate of the realizable value of these investments upon disposition. This reduction in value has been recorded previously as unrealized depreciation over time in the company's earnings. The company continues to follow its historical practices of working with a troubled portfolio company in order to recover the maximum amount of the company's investment, but records unrealized depreciation for a substantial amount of the potential exposure when such exposure is identified. Of the mezzanine grade 5 investments, three portfolio companies represent approximately 73% of the total. The company continues to work on recovery of grade 5 credits, and believes that it has valued all troubled credits to reflect estimated realizable value. Commercial real estate grade 5 loans totaled $6.9 million at value at June 30, 1998. These loans are fully secured by real estate, and as a result, the company does not expect to incur To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. any significant loss from these loans. In total, 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 $19.5 million at value at June 30, 1998. Included in this category are loans valued at $15.8 million which are fully secured by real estate. Loans greater than 120 days delinquent generally do 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. At June 30, 1997 grade 5 mezzanine investments totaled $5.2 million at value, and grade 5 real estate loans totaled $6.7 million at value. At June 30, 1997, total loans greater than 120 days delinquent were $16.7 million at value of which $11.6 million were secured by real estate. The company is continuing its strategy of emphasizing mezzanine financing Mezzanine Financing A hybrid of debt and equity financing. Mezzanine financing is typically used to finance the expansion of existing companies, and it is basically debt capital that gives the lender the rights to convert to an ownership or equity interest in the company if the for larger more seasoned borrowers. The financial profile of the company's borrowers for new mezzanine loans originated in the first six months of 1998 was as follows: revenues averaged $69 million; cash flows averaged $7 million with an 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 of 2.6 times; and the average age of the companies was approximately 19 years. The company will continue to pursue mezzanine borrowers with similar characteristics. Non-recurring Items. During the first quarter of 1998, the company securitized securitized Of, related to, or being debt securities that are secured with assets. For example, mortgage purchase bonds are secured by mortgages that have been purchased with the bond issue's proceeds. a pool of approximately $295 million of commercial mortgage loans. This transaction resulted in a gain of $14.8 million. This transaction effectively accelerated future earnings into the first quarter of 1998, thereby increasing first quarter earnings by approximately $0.29 per share and reducing future quarterly earnings. During the second quarter of 1998, the company recorded expenses of $2.2 million, or $0.04 per share related to the non-recurring Formula and Cut-off cut-off Anesthesiology The point at which elongation of the carbon chain of the 1-alkanol family of anesthetics results in a precipitous drop in the anesthetic potential of these agents–eg, at > 12 carbons in length, there is little anesthetic activity, Awards resulting from the termination of pre-merger stock option plans in connection with the company's 1997 merger. The impact of the 1998 asset securitization, the expense of the Formula and Cut-off Awards, and an increase in shares issued through the exchange of shares in the 1997 merger, were the primary reasons that second quarter 1998 earnings per share of $0.28 were not comparable to second quarter 1997 earnings per share of $0.37. Because of the 1997 merger, historical quarterly results represent the accumulation of five separate public companies, and as a result, quarterly earnings comparisons are not relevant. Capital Raising. The company completed a private placement of $180 million of long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. 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. notes in May 1998. These five and seven year notes were issued with an average coupon of 7.2%. At June 30, 1998 the company had available committed credit facilities credit facilities npl → facilidades fpl de crédito credit facilities npl → facilités fpl de paiement credit facilities totaling $339 million from its unsecured line of credit and two repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. facilities. In May 1998, the company registered for sale 5.75 million shares of common stock in order to opportunistically issue equity at then-favorable market prices. During the course of the registration and marketing process, the stock market weakened weak·en tr. & intr.v. weak·ened, weak·en·ing, weak·ens To make or become weak or weaker. weak  en·er n. , and in June of 1998 the
company chose not to sell the shares at a depressed stock price.The company has various viable financing alternatives and does not believe that the postponement of the equity offering will have any negative effect on the company's business or future growth plans. Dividend Declared. At their recent meeting, the board of directors declared the company's regular quarterly dividend of $0.35 per share. The dividend will be payable on September 30, 1998 to shareholders of record on September 18, 1998. Allied Capital Corporation is a commercial finance company principally engaged in lending to and investing in private small and medium-sized businesses. For 40 years, the Years, The the seven decades of Eleanor Pargiter’s life. [Br. Lit.: Benét, 1109] See : Time company has been dedicated to financing growing businesses nationwide. The company provides loans and investments ranging in size from $500,000 to $25 million in three areas: mezzanine finance, commercial real estate finance, and SBA 7(a) lending. The company has offices in Washington DC, Chicago, San Francisco San Francisco (săn frănsĭs`kō), city (1990 pop. 723,959), coextensive with San Francisco co., W Calif., on the tip of a peninsula between the Pacific Ocean and San Francisco Bay, which are connected by the strait known as the Golden , and Frankfurt, Germany. For more information, please contact Suzanne V. Sparrow, Principal, Investor Relations Investor relations The process by which the corporation communicates with its investors. , at 888/818-5298 or 202/973-6326. -0-
As of June 30, As of December 31,
ASSETS 1998 1997
Portfolio at value: (in thousands)
Commercial mortgage loans $268,966 $447,244
Mezzanine loans and debt
securities 216,600 167,842
SBA 7(a) loans 47,850 40,709
Interest in securitization
pool of commercial mortgage
loans 86,043 --
Equity interests in portfolio
companies 44,559 39,906
Other portfolio assets 3,009 1,320
Total portfolio at value 667,027 697,021
Cash, cash equivalents and
government securities 40,773 81,528
Other assets 33,004 29,226
Total assets $740,804 $807,775
LIABILITIES and SHAREHOLDERS' EQUITY
Liabilities:
Indebtedness $298,000 $347,663
Other liabilities 17,539 33,052
Preferred stock issued to SBA 7,000 7,000
Common shareholders' equity 418,265 420,060
Total liabilities and
shareholders' equity $740,804 $807,775
For the Three Months For the Six Months
Ended June 30 Ended June 30
1998 1997 1998 1997
Interest and related portfolio income:
(in thousands)
Interest $18,744 $21,115 $38,245 $40,745
Net premiums
from loan
dispositions 712 2,527 2,048 3,228
Net gain on
securitization of
commercial mortgage
loans -- -- 14,812 --
Investment advisory
fees and other
income 1,865 1,269 3,113 2,337
Total interest
and related
portfolio
income 21,321 24,911 58,218 46,310
Expenses:
Interest on
indebtedness 4,232 6,551 8,830 12,339
Salaries and
employee benefits 2,667 2,148 5,517 4,205
General and
administrative 3,120 2,117 5,877 3,703
Total operating
expenses 10,019 10,816 20,224 20,247
Formula and
cut-off awards 2,154 -- 3,926 --
Portfolio income
before realized
and unrealized gains 9,148 14,095 34,068 26,063
Net realized and unrealized gains:
Net realized gains 7,373 948 13,794 4,625
Net unrealized
gains (losses) (2,045) 4,068 (1,321) 1,909
Total net realized
and unrealized
gains 5,328 5,016 12,473 6,534
Income before minority
interests and income
taxes 14,476 19,111 46,541 32,597
Minority interests -- 283 -- 589
Income tax expense -- 532 -- 1,066
Net Income $14,476 $18,296 $46,541 $30,942
Basic earnings per
common share $0.28 $0.38 $0.90 $0.64
Diluted earnings
per common share $0.28 $0.37 $0.89 $0.63
Weighted average
common shares
outstanding 51,329 48,586 51,570 48,465
All financial information presented assumes that the merger of the Allied Capital companies, which was completed on December 31, 1997, occurred at the beginning of the earliest period presented. Prior to the merger, Allied Capital Corporation (old) owned approximately 16% of Allied Capital Lending Capital lending is the process of a large company, or corporation, offering financing on large "ticket" items to encourage the customer to purchase that item. Many major corporations have set up finance divisions, or subsidiaries, to help the customer purchase their product over Corporation's total shares outstanding. For financial reporting purposes, this ownership position has been eliminated for all periods presented. 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. In addition, the company may experience significant fluctuations in its quarterly results due to the timing of the realization of gains and due to other factors such as securitization transactions. Therefore, quarterly results should not be considered indicative of annual results. CONTACT: Allied Capital Suzanne Sparrow, 202/973-6326 |
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