Allied Capital Reports Third Quarter Earnings of $0.63 Per Share; Quarterly Dividend of $0.51 Per Share Declared.Business Editors WASHINGTON--(BUSINESS WIRE)--Oct. 23, 2001 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 2001 results. Highlights for Q3 2001 -- Net operating income increased 18% to $44.2 million, or $0.47 per share, over Q3 2000 -- Net income increased 31% to $59.7 million, or $0.63 per share, over Q3 2000 -- Q4 2001 dividend of $0.51 per share declared; annual dividends for 2001 increase 10.4% over 2000 -- Net asset value increased to $13.42 per share -- New investments totaled $209.5 million for Q3 2001 Operating Results Net operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. 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. was $44.2 million, or $0.47 per share, for the third quarter of 2001, an 18% increase on a per share basis and a 44% increase in total dollars over net operating income of $30.7 million, or $0.40 per share, for the third quarter of 2000. The increase in net operating income resulted from growth in interest and dividends as well as increased fee income. For the nine months ended September 30, 2001, the company reported net operating income before net realized and unrealized gains of $126.0 million, or $1.39 per share, a 26% increase on a per share basis and a 62% increase in total dollars over the first nine months of 2000. For the three months ended September 30, 2001, Allied Capital reported net income of $59.7 million, or $0.63 per share, as compared to net income of $36.4 million, or $0.48 per share, for the three months ended September 30, 2000. For the nine months ended September 30, 2001, net income totaled $157.8 million, or $1.74 per share, a 23% increase on a per share basis and a 57% increase in total dollars over the first nine months of 2000. Net realized and unrealized gains totaled $15.5 million, or $0.16 per share, for the third quarter of 2001 as compared to $5.7 million, or $0.08 per share, for the third quarter of 2000. Third quarter 2001 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. totaled $3.3 million and net unrealized gains totaled $12.2 million. Net realized and unrealized gains can vary substantially from quarter to quarter. As a result, quarterly comparisons of net income are not meaningful. During the three months ended September 30, 2001, the company invested a total of $209.5 million. After total repayments of $7.9 million, asset sales of $57.5 million, and valuation changes during the quarter, the company's investment portfolio increased to $2.2 billion at September 30, 2001. At September 30, 2001, the overall weighted average yield on the interest bearing assets in the company's portfolio was 14.1%. At September 30, 2001, total assets were $2.3 billion, a 22% increase over total assets of $1.9 billion at December 31, 2000. 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 $1.3 billion at September 30, 2001, and net asset value was $13.42 per share. Private Finance Investing The private finance portfolio totaled $1.5 billion at September 30, 2001. The debt portion of this portfolio, which totaled $1.1 billion at September 30, 2001, had a weighted average yield of 14.5%. The equity securities in the private finance portfolio totaled $442.3 million at September 30, 2001. During the third quarter of 2001, the private finance group invested $112.7 million. Significant new private finance investments during Q3 2001 included: -- $25.0 million of senior debt 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 Simula A simulation language originating in the late 1960s that was used to model the behavior of complex systems. SIMULA was the original object-oriented language. (language) SIMULA - SIMUlation LAnguage. See Lund Simula, SIMULA 67, SIMULA I. Inc., a manufacturer and marketer of crash resistant and energy absorption technologies used in the defense industry; and -- $6.4 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 expansion of Prosperco Finanz Holding AG, a 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. group based in Switzerland. In addition to the investments above, Allied Capital also closed the controlled 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 SunSource Inc. on September 26, 2001 as anticipated. Pursuant to the merger agreement signed on June 18, 2001, the company paid $10.375 per SunSource common share for the outstanding common equity of SunSource for approximately $71.4 million. On September 28, 2001, SunSource announced that it completed the sale of its STS (Synchronous Transport Signal) The electrical equivalent of the SONET optical signal. In SDH, the European counterpart of SONET, STS is known as STM (Synchronous Transport Module). business unit. Pursuant to this sale, SunSource returned $15.0 million in cash to Allied Capital, reducing the company's cost basis. As part of the STS sale, Allied Capital invested $3.0 million in the new STS. CMBS CMBS See: Commercial Mortgage Backed Securities Investing During the third quarter of 2001, the company's commercial real estate finance group invested $96.8 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 two transactions. The effective yield on these new securities is estimated to be 15.0%, after assuming a 1% loss on the entire underlying collateral pool. The company also sold $55.6 million in CMBS bonds during the quarter. At September 30, 2001, the company's purchased CMBS portfolio totaled $472.1 million, or 21% of total assets, and had a weighted average yield to maturity of 15.2%, after assuming a 1% loss on the entire underlying collateral pool. At September 30, 2001, the unamortized discount on the purchased CMBS portfolio was $510.3 million. 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, "We continue to make solid progress during a challenging period for the capital markets and the economy. There's a lot of uncertainty about the prospective length and depth of the current economic downturn. But as our long-time shareholders know, we have always underwritten our investments with an eye as to how well they'll perform in a tough economy. This focus on market leaders in less cyclical industries Cyclical Industry A term describing an industry that is sensitive to the business cycle and price changes. Many cyclical industries produce durable goods such as raw materials and heavy equipment. is serving our shareholders well during 2001. Looking forward, we are well positioned to capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. the current relative scarcity Scarcity The basic economic problem which arises from people having unlimited wants while there are and always will be limited resources. Because of scarcity, various economic decisions must be made to allocate resources efficiently. of growth capital and believe that there will continue to be interesting investment opportunities ahead." Liquidity and Capital Resources In August, the company renewed its unsecured 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. and increased borrowing capacity from $417.5 million to $467.5 million. As part of the renewal, the company extended the maturity date of the facility to August 2003, with an available one-year extension at the company's option. At September 30, 2001, the company had a weighted average cost of debt of 7.1%. Allied Capital has no significant maturities of 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. until 2003. At September 30, 2001, the company had a regulatory asset coverage ratio Asset Coverage Ratio A test that determines a company's ability to cover debt obligations with its assets after all liabilities have been satisfied. It is calculated as the following: of 255% and the ratio of total debt to equity was 0.71 to 1. The company is required to maintain regulatory asset coverage of at least 200%. During the third quarter, Allied Capital issued $114.0 million of new equity from the company's shelf registration statement in three separate placements, including the sale of $64.1 million on September 20, 2001. Bill Walton noted, "We have been successful in building our equity base substantially over the last few years and, more recently, in reducing our leverage ratio as a response to a soft economy, and now a country at war. The market's receptivity receptivity, n the state of being open to the action of a drug or homeopathic remedy. See also reactivity. to Allied Capital immediately after the attack of September 11 was very gratifying grat·i·fy tr.v. grat·i·fied, grat·i·fy·ing, grat·i·fies 1. To please or satisfy: His achievement gratified his father. See Synonyms at please. 2. . We have positioned the company with a diversified diversified (di·verˑ·s portfolio and a rock-solid balance sheet. Combined with our long history of growing cash dividends, this approach is paying off in these difficult times." Portfolio Quality and Valuation 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 with plan. Grade 3 is 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 full loss of interest and some loss of principal is expected, and the loan 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. . At September 30, 2001, the portfolio of Grade 1 investments totaled $477.4 million, or 22% of the total portfolio at value; Grade 2 investments totaled $1.56 billion, or 72% of the total portfolio; Grade 3 investments totaled $67.3 million, or 3% of the total portfolio; Grade 4 investments totaled $40.0 million, or 2% of the total portfolio; and Grade 5 investments totaled $28.0 million, or 1% of the total portfolio. 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 $61.6 million at value at September 30, 2001, or 2.8% of the total portfolio. Included in this category are loans valued at $10.4 million that are fully secured by commercial 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 September 30, 2001, delinquencies in the CMBS portfolio related to the underlying collateral pool were 0.30%. Quarterly Dividend of $0.51 Per Share Declared As was previously released on October 18, 2001, the company declared a regular quarterly dividend of $0.51 per share for the fourth quarter of 2001. This represents the company's 153rd consecutive quarterly dividend. For 2001, the company paid or declared dividends declared dividend A dividend authorized by a firm's board of directors. At the time a dividend is declared, the firm creates a liability for the dividend's payment. totaling $2.01 per share, a 10.4% increase over total dividends of $1.82 per share paid during 2000. The dividend is payable as follows: Record date December 14, 2001 Payable date December 28, 2001 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 differs from book income because of both timing and absolute differences in income and expense recognition. Changes in unrealized appreciation and depreciation have no impact on the company's taxable income. Webcast/ Conference Call at 10:15 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy on October 23, 2001 Allied Capital will host a web cast/ conference call at 10:15 (EST) this morning to discuss third quarter 2001 financial results. 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 888/748-9804 approximately 15 minutes prior to the call; please reference the passcode "Allied Capital." International callers should dial 312/470-0029. 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 888/253-0512. An archived replay of the event will be available until Tuesday, November 6, 2001 on our web site, or by dialing 800/839-4890 (international callers, please dial 402/998-1604). For complete information about the webcast/ conference call and the replay, please visit our web site. About Allied Capital Allied Capital is the nation's largest business development company, and provides long-term investment capital to support the expansion of growing companies nationwide. The company 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. , and also participates in the real estate capital markets as an investor in commercial mortgage-backed securities. The company is headquartered in Washington, DC. For more information, please visit the web site at www.alliedcapital.com, call Allied Capital Investor Relations toll-free at 888/253-0512 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 the company's periodic filings with the Securities and Exchange Commission.
(in thousands, except per share amounts) At Sept. 30, At Dec. 31,
2001 2000
----------------------------
ASSETS (unaudited)
Portfolio at Value:
Private finance $1,539,253 $1,282,467
Commercial real
estate finance 635,120 505,534
---------- ----------
Total Portfolio at
Value 2,174,373 1,788,001
Cash and cash equivalents 3,140 2,449
Other assets 89,320 63,367
---------- ----------
Total Assets $2,266,833 $1,853,817
========== ==========
LIABILITIES and
SHAREHOLDERS'
EQUITY
Liabilities:
Debt 924,484 786,648
Other liabilities 35,112 30,477
---------- ----------
959,596 817,125
Preferred stock 7,000 7,000
Common shareholders'
equity 1,300,237 1,029,692
---------- ----------
Total Liabilities
and Shareholders'
Equity $2,266,833 $1,853,817
========== ==========
Net asset value per share $ 13.42 $ 12.11
Actual shares outstanding at end of period 96,921 85,057
3 Months Ended 9 Months Ended
(in thousands, except September 30, September 30,
per share amounts) 2001 2000 2001 2000
--------------------------------------------------
Interest and Portfolio (unaudited) (unaudited)
Related Income:
Interest and
dividends $ 60,023 $ 48,054 $ 173,722 $ 129,768
Premiums from
loan
dispositions 339 2,909 2,070 10,752
Fees and other
income 12,272 5,029 30,652 9,334
--------- --------- --------- ---------
Total Interest
and
Related
Portfolio
Income 72,634 55,992 206,444 149,854
--------- --------- --------- ---------
Expenses:
Interest 16,093 15,054 47,974 41,645
Employee 8,213 4,949 22,178 14,709
Administrative 4,139 3,876 10,166 10,711
--------- --------- --------- ---------
Total Operating
Expenses 28,445 23,879 80,318 67,065
--------- --------- --------- ---------
Formula and
cut-off awards 0 1,394 91 4,797
--------- --------- --------- ---------
Net Operating
Income
Before Net
Realized
and
Unrealized
Gains 44,189 30,719 126,035 77,992
Net Realized and
Unrealized Gains:
Net realized
gains 3,348 8,054 8,339 23,095
Net unrealized
gains (losses) 12,166 (2,324) 23,463 (267)
--------- --------- --------- ---------
Total Net Realized
and Unrealized
Gains 15,514 5,730 31,802 22,828
--------- --------- --------- ---------
--------- --------- --------- ---------
Net Income $ 59,703 $ 36,449 $ 157,837 $ 100,820
========= ========= ========= =========
Earnings per
share - diluted $ 0.63 $ 0.48 $ 1.74 $ 1.42
Weighted average
shares outstanding
- diluted 94,585 76,133 90,864 70,777
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