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Article Excerpt
BETHESDA, Md., Nov. 3 /PRNewswire-FirstCall/ -- American Capital ("ACAS" or the "Company") announced net operating income ("NOI") for the quarter ended September 30, 2009 of $32 million, or $0.12 per diluted share. Net income (loss) less appreciation and depreciation ("Realized (Loss) Earnings") for the quarter was $(34) million, or $(0.13) per diluted share. For the quarter ended September 30, 2009, the Company reported net income of $77 million, or $0.30 per diluted share.
Q3 2009 HIGHLIGHTS -- $32 million of NOI -- $86 million net unrealized appreciation of portfolio investments -- The first appreciation in the past nine quarters -- $(47) million net realized loss on portfolio investments -- $463 million of realizations -- Significant increase over the past three quarters -- $7.80 net asset value ("NAV") per share -- $10.30 anticipated realizable value per share upon settlement or maturity of investments ("Realizable Value") (See Use of Non-GAAP Financial Information below) -- Paid a dividend of $24 million in cash and 67 million shares of common stock NET OPERATING INCOME
NOI decreased 84% to $0.12 per diluted share for the quarter ended September 30, 2009, compared to $0.74 per diluted share for the prior year quarter. The NOI for the quarter ended September 30, 2009 included an accrual for "make-whole" interest payments of approximately $22 million as a result of acceleration notices on $393 million of the Company's privately placed notes. Shortly after the receipt of these notices, the Company entered into forbearance agreements with the noteholders in which the "make-whole" interest payments were added to the outstanding principal balance.
REALIZED (LOSS) EARNINGS
Realized (Loss) Earnings decreased to $(0.13) per diluted share for the quarter ended September 30, 2009, compared to $0.72 per diluted share for the prior year quarter.
NET INCOME
Net income increased to $0.30 per diluted share for the quarter ended September 30, 2009, compared to a net loss of $(2.63) per diluted share for the prior year quarter.
"American Capital has made significant progress in the past several months," said Malon Wilkus, Chairman and Chief Executive Officer. "As separately announced today, we have reached an agreement in principle that we believe will provide a basis for restructuring our $2.4 billion of unsecured debt. In the third quarter we generated $463 million of realizations within 1% of the June 30 fair values, in a very tough M&A market. And, for the first time in nine quarters, our portfolio experienced modest appreciation and our income stabilized. These are all the elements necessary to begin rebuilding shareholder value."
PORTFOLIO VALUATION
For the quarter ended September 30, 2009, net unrealized appreciation of portfolio investments totaled $86 million. The primary components of the net unrealized appreciation were:
-- $41 million of reversals of prior depreciation associated with net realized losses on portfolio investments; -- The associated realizations were within 1% of the prior quarter's valuation. -- $(6) million of depreciation of American Capital's investment in European Capital Limited, reflecting a significant discount to its NAV due primarily to covenant defaults under European Capital Limited's credit facilities, which could prevent realization of the NAV; -- American Capital's equity investment in European Capital Limited is valued at $0.1 billion versus its NAV of approximately $0.8 billion. -- $14 million of net appreciation of American Capital's private finance portfolio; -- $14 million of appreciation of American Capital's investment in American Capital Agency Corp.; and -- $23 million of net appreciation from structured products.
As of September 30, 2009, NAV per share was $7.80, a decrease from $8.76 per share as of June 30, 2009 and $15.41 per share as of December 31, 2008. The decrease in NAV per share from June 30, 2009 was primarily the result of the distribution of the 67 million shares of common stock on August 7, 2009 for the stock portion of the Q2 2009 dividend. Realizable Value per share was $10.30 as of September 30, 2009, a decrease from $12.83 per share as of June 30, 2009 and $20.63 per share as of December 31, 2008.
"We have long believed that the performance of our portfolio is a proxy for the broader economy," said John Erickson, Chief Financial Officer. "That appeared to be the case in the third quarter with both the quarterly change in GDP turning positive and there being a small net appreciation in our portfolio. Prior to this quarter, we experienced eight quarters of net depreciation in our portfolio, which mirrored the significant downturn in the economy. While it may be too early to declare the recession is over, we believe that if the economy continues its recovery, our portfolio should as well. Additionally, we have seen the mergers and acquisitions market become more active from its depressed levels, which should help the economy recapitalize and recover."
PORTFOLIO LIQUIDITY AND PERFORMANCE
In the third quarter of 2009, $463 million of proceeds were received from realizations of portfolio investments and exits, which were within 1% of the prior quarter's valuations of the investments. There was $7 million in new committed investments in the quarter. The weighted average effective interest rate on the Company's debt investments as of September 30, 2009 was 9.9%, 80 basis points lower than as of December 31, 2008. Unrestricted cash and cash equivalents totaled $445 million as of September 30, 2009 and approximately $500 million as of...
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