Attached files
file | filename |
---|---|
EX-99.1 - EX-99.1 - AMERICAN CAPITAL, LTD | d596672dex991.htm |
8-K - FORM 8-K - AMERICAN CAPITAL, LTD | d596672d8k.htm |
Exhibit 99.2
The following table shows the portfolio composition of our private finance investments by industry grouping at fair value as a percentage of total investments as of June 30, 2013.
Fair Value | June 30, 2013 | |||
|
||||
Life Sciences Tools and Services |
8.3% | |||
Electrical Equipment |
7.1% | |||
Health Care Providers and Services |
7.1% | |||
Pharmaceuticals |
6.5% | |||
Hotels, Restaurants and Leisure |
6.2% | |||
Health Care Equipment and Supplies |
6.2% | |||
Commercial Services and Supplies |
6.1% | |||
Professional Services |
5.9% | |||
Construction and Engineering |
5.6% | |||
Internet and Catalog Retail |
5.2% | |||
Electronic Equipment, Instruments and Components |
3.1% | |||
Computers and Peripherals |
2.8% | |||
Building Products |
2.7% | |||
Food Products |
2.5% | |||
Diversified Financial Services |
2.1% | |||
Oil, Gas and Consumable Fuels |
2.1% | |||
Auto Components |
2.0% | |||
Energy Equipment and Services |
2.0% | |||
IT Services |
1.9% | |||
Personal Products |
1.7% | |||
Real Estate and Real Estate Investment Trusts |
1.6% | |||
Diversified Consumer Services |
1.6% | |||
Other |
9.7% | |||
|
|
|||
Total |
100.0% | |||
|
The following table shows the dividend and fee income the Company receives from ACAM:
For the years ended December 31, |
Twelve months ended June 30, |
|||||||||||||||
2010 | 2011 | 2012 | 2013 | |||||||||||||
|
||||||||||||||||
(dollars in millions) | (unaudited) | |||||||||||||||
Dividends and fee income |
$ | 16.0 | $ | 50.8 | $ | 102.7 | $ | 123.2 | ||||||||
Growth over prior period |
218% | 102% | 20% | |||||||||||||
|
1
Below is an overview of certain information with respect to ACAMs funds under management as of June 30, 2013:
European Capital |
AGNC | MTGE | ACE I | ACE II | ACAS CLO 2007-1 |
ACAS CLO 2012-1 | ||||||||
| ||||||||||||||
Fund type |
Private Equity Fund |
Publicly Traded REIT NASDAQ |
Publicly Traded REIT NASDAQ (MTGE) |
Private Equity Fund |
Private Equity Fund |
CLO | CLO | |||||||
Established |
2005 | 2008 | 2011 | 2006 | 2007 | 2006 | 2012 | |||||||
Assets under management |
$1.6 billion(3) |
$98.7 billion |
$11.7 billion |
$0.6 billion |
$0.3 billion |
$0.4 billion(3) |
$0.4 billion(3) | |||||||
Fee base |
N/A | $11.7 billion |
$1.3 billion |
$0.5 billion |
$0.3 billion |
$0.4 billion(3) |
$0.4 billion(3) | |||||||
Management fee |
N/A | 1.25% | 1.50% | 2.00% | 2.00% | 0.68% | 0.42% | |||||||
Incentive fee(1) |
N/A | N/A | N/A | Up to 30% |
Up to 35% |
20% | 20% | |||||||
LTM management fees paid to ACAM(2) |
N/A | $133 million | $15 million | $6 million |
$4 million |
$3 million |
$1 million | |||||||
Investment types |
Senior and Mezzanine Debt, Equity, Structured Products |
Agency Securities |
Mortgage Investments |
Equity | Equity | Senior Debt |
Senior Debt | |||||||
Capital type |
Permanent | Permanent | Permanent | Finite Life |
Finite Life |
Finite Life |
Finite Life | |||||||
|
(1) | Subject to performance targets established in the applicable management agreements. |
(2) | Excludes incentive fees. |
(3) | As of December 31, 2012. |
2
The following table shows the portfolio composition of European Capital by industry grouping at fair value as a percentage of total investments as of December 31, 2012.
Fair Value | December 31, 2012 | |||
|
||||
Household Products |
15% | |||
Food Products |
13% | |||
Software |
8% | |||
Electronic Equipment & Instruments |
8% | |||
Machinery |
7% | |||
Textiles, Apparel & Luxury |
7% | |||
Commercial Services & Supplies |
6% | |||
Building Products |
5% | |||
Pharmaceuticals |
5% | |||
Specialty Retail |
4% | |||
Oil, Gas & Consumable Fuels |
4% | |||
Diversified Financial Services |
3% | |||
Household Durables |
3% | |||
Energy Equipment & Services |
3% | |||
Health Care Providers & Services |
3% | |||
Auto Components |
2% | |||
Hotels, Restaurants & Leisure |
1% | |||
Other |
3% | |||
|
|
|||
Total |
100.0% | |||
|
3
Our total cash flow from Structured Products for the last twelve months ended June 30, 2013 was $99 million consisting of (i) cash proceeds of $26 million from the realizations of Structured Products and (ii) interest income of $73 million. Our effective yield on Structured Products for the twelve months ended June 30, 2013 was 32% at fair value.
Our third-party asset management business, ACAM, has over $113 billion of total assets under management (including levered assets) and $15 billion in fee earning assets across six private and two public funds as of June 30, 2013. From January 1, 2010 through June 30, 2013, we have grown our fee earning assets under management at a compound annual rate of 79%, including 36% over the twelve months ended June 30, 2013. As of June 30, 2013, our two public funds with permanent capital (non-redeemable) accounted for 87% of our fee earning assets under management. Over the twelve months ended June 30, 2013, ACAM generated gross revenue of $222 million and distributed $123 million to us in the form of fees and dividends, comprising 20.6% of our total revenue. For the quarter ended June 30, 2013, approximately 26% of our total revenue was derived from ACAM. The following table sets forth ACAM revenue as a percent of total revenue:
For the Years ended December 31, | For
the Six months ended June 30, |
Twelve Months ended June 30, |
||||||||||||||||||||||||||
(dollars in millions) | 2009 | 2010 | 2011 | 2012 | 2012 | 2013 | 2013 | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
ACAM revenue |
$ | 26 | $ | 16 | $ | 51 | $ | 103 | $ | 46 | $ | 66 | $ | 123 | ||||||||||||||
% of total revenue |
3.7% | 2.7% | 8.6% | 15.9% | 14.7% | 25.1% | 20.6% | |||||||||||||||||||||
Total revenue |
$ | 697 | $ | 600 | $ | 591 | $ | 646 | $ | 312 | $ | 263 | $ | 597 | ||||||||||||||
|
From January 1, 2010 to June 30, 2013, we have reduced our outstanding debt by $3.5 billion and our debt-to-equity ratio from 1.8x to 0.1x. Over the same time period, our total assets remained stable, decreasing from $6.7 billion to $6.3 billion while generating cumulative earnings of $3.5 billion. As of June 30, 2013, the asset coverage of our total debt was 10.1x. The following table sets forth historical asset and debt balances, and debt to equity ratios:
As of December 31, | For the six months ended June 30, |
|||||||||||||||||||
(dollars in millions) | 2009 | 2010 | 2011 | 2012 | 2013 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Total assets |
$ | 6,672 | $ | 6,084 | $ | 5,961 | $ | 6,319 | $ | 6,260 | ||||||||||
Debt outstanding |
$ | 4,142 | $ | 2,259 | $ | 1,251 | $ | 775 | $ | 614 | ||||||||||
Equity |
$ | 2,329 | $ | 3,668 | $ | 4,563 | $ | 5,429 | $ | 5,579 | ||||||||||
Debt-to-equity |
1.8x | 0.6x | 0.3x | 0.1x | 0.1x | |||||||||||||||
Assets / debt outstanding |
1.6x | 2.7x | 4.8x | 8.2x | 10.2x | |||||||||||||||
|
Additionally, our coverage ratios have improved over time. The following table sets forth historical balances and ratios with respect to our interest coverage ratio:
For the Years ended December 31, | Six months ended |
Twelve months ended June 30, 2013 |
||||||||||||||||||||||||||
(dollars in millions) | 2009 | 2010 | 2011 | 2012 | 2012 | 2013 | ||||||||||||||||||||||
|
||||||||||||||||||||||||||||
(unaudited) | (unaudited) | |||||||||||||||||||||||||||
Net operating income before income taxes |
$ | 115 | $ | 204 | $ | 303 | $ | 383 | $ | 178 | $ | 133 | $ | 338 | ||||||||||||||
Operating Cash Adjustments |
||||||||||||||||||||||||||||
Accrued PIK |
(97 | ) | (151 | ) | (196 | ) | (228 | ) | (123 | ) | (82 | ) | (187 | ) | ||||||||||||||
Interest expense |
256 | 177 | 90 | 59 | 32 | 22 | 49 | |||||||||||||||||||||
Depreciation |
18 | 14 | 7 | 7 | 3 | 3 | 7 | |||||||||||||||||||||
Stock-based compensation |
86 | 42 | 45 | 44 | 24 | 15 | 35 | |||||||||||||||||||||
|
|
|||||||||||||||||||||||||||
Adjusted NOI(1) |
$ | 378 | $ | 286 | $ | 249 | $ | 265 | $ | 114 | $ | 91 | $ | 242 | ||||||||||||||
|
|
|||||||||||||||||||||||||||
Payment of accrued PIK |
48 | 77 | 108 | 242 | 107 | 67 | 202 | |||||||||||||||||||||
|
|
|||||||||||||||||||||||||||
Adjusted NOI plus payment of accrued PIK(1) |
$ | 426 | $ | 363 | $ | 357 | $ | 507 | $ | 221 | $ | 158 | $ | 444 | ||||||||||||||
|
|
|||||||||||||||||||||||||||
Interest expense |
$ | 256 | $ | 177 | $ | 90 | $ | 59 | $ | 32 | $ | 22 | $ | 49 | ||||||||||||||
|
|
|||||||||||||||||||||||||||
Interest coverage (Adjusted NOI) before interest expense(1) |
1.5x | 1.6x | 2.8x | 4.5x | 3.6x | 4.1x | 4.9x | |||||||||||||||||||||
Interest coverage (Adjusted NOI plus payment of accrued PIK)(1) |
1.7x | 2.1x | 4.0x | 8.6x | 6.9x | 7.2x | 9.1x | |||||||||||||||||||||
|
(1) | Adjusted NOI is defined as net operating income before income taxes excluding accrued PIK interest expense, stock-based compensation and depreciation. |
4
We have generated liquidity from portfolio sales and debt repayments through the recent economic downturn. Despite low industry-wide mergers and acquisitions activity, we were able to sell portfolio assets for an average of 1.3% in excess of the prior quarters fair value for exits from July 1, 2008 through June 30, 2013. From January 1, 2009 through June 30, 2013, we realized $5.4 billion from our portfolio. The following table sets forth balances with respect to our portfolio realizations:
For the
Years ended December 31, |
Six months ended June 30, |
Twelve months ended June 30, 2013 |
||||||||||||||||||||||||||
(in millions) | 2009 | 2010 | 2011 | 2012 | 2012 | 2013 | ||||||||||||||||||||||
|
||||||||||||||||||||||||||||
(unaudited) | (unaudited) | |||||||||||||||||||||||||||
Principal prepayments / syndications |
$ | 726 | $ | 914 | $ | 526 | $ | 941 | $ | 511 | $ | 267 | $ | 696 | ||||||||||||||
PIK / OID collections |
48 | 77 | 108 | 242 | 107 | 67 | 202 | |||||||||||||||||||||
Principal amortization |
46 | 36 | 38 | 41 | 21 | 19 | 40 | |||||||||||||||||||||
Sale of equity investments |
323 | 266 | 394 | 274 | 89 | 78 | 263 | |||||||||||||||||||||
|
|
|||||||||||||||||||||||||||
Total portfolio realizations |
$ | 1,143 | $ | 1,293 | $ | 1,066 | $ | 1,498 | $ | 728 | $ | 431 | $ | 1,201 | ||||||||||||||
|
Additionally, our liquidity position is demonstrated by $1.0 billion of cash flows net of contractual obligations for the last twelve months ended June 30, 2013. The following table sets forth selected summary financial data with respect to our cash flow sources and contractual uses:
For the Years ended December 31, |
Six months ended |
Twelve months ended June 30, 2013 |
||||||||||||||||||||||||||
(in millions) | 2009 | 2010 | 2011 | 2012 | 2012 | 2013 | ||||||||||||||||||||||
|
||||||||||||||||||||||||||||
Selected sources: |
||||||||||||||||||||||||||||
Net cash provided by operating activities(1) |
$ | 165 | $ | 87 | $ | 174 | $ | 164 | $ | 85 | $ | 86 | $ | 165 | ||||||||||||||
Liquidity - equity assets |
323 | 266 | 394 | 274 | 89 | 78 | 263 | |||||||||||||||||||||
Liquidity - debt assets |
772 | 950 | 564 | 982 | 532 | 286 | 736 | |||||||||||||||||||||
Payment of accrued PIK |
48 | 77 | 108 | 242 | 107 | 67 | 202 | |||||||||||||||||||||
Proceeds from issuance of common stock |
| 298 | 11 | 36 | 10 | 16 | 42 | |||||||||||||||||||||
|
|
|||||||||||||||||||||||||||
Subtotal selected sources |
$ | 1,308 | $ | 1,678 | $ | 1,251 | $ | 1,698 | $ | 823 | $ | 533 | $ | 1,408 | ||||||||||||||
Selected contractual outflows: |
||||||||||||||||||||||||||||
Swap payments |
62 | 75 | 50 | 87 | 67 | 19 | 39 | |||||||||||||||||||||
BLT debt repayment |
288 | 544 | 583 | 487 | 309 | 162 | 340 | |||||||||||||||||||||
Deferred financing costs |
| 26 | | 16 | | | 16 | |||||||||||||||||||||
|
|
|||||||||||||||||||||||||||
Subtotal contractual outflows |
$ | 350 | $ | 645 | $ | 633 | $ | 590 | $ | 376 | $ | 181 | $ | 395 | ||||||||||||||
|
|
|||||||||||||||||||||||||||
Net cash sources |
$ | 958 | $ | 1,033 | $ | 618 | $ | 1,108 | $ | 447 | $ | 352 | $ | 1,013 | ||||||||||||||
|
(1) | Includes contractual interest payments. |
5
The following table sets forth our PIK balance, PIK collections and PIK collections as a percent of prior PIK balance:
For the Years ended December 31 | ||||||||||||||||
(dollars in millions) | 2009 | 2010 | 2011 | 2012 | ||||||||||||
|
||||||||||||||||
PIK balance |
$ | 376 | $ | 439 | $ | 515 | $ | 489 | ||||||||
PIK collections |
$ | 48 | $ | 77 | $ | 108 | $ | 242 | ||||||||
PIK collections as % of prior PIK balance |
15% | 20% | 25% | 47% | ||||||||||||
|
European Capital has also represented a meaningful source of cash flows. As of December 31, 2012, European Capital had $330 million of total secured debt outstanding with $108 million in realizations for the year ended December 31, 2012. Once this outstanding secured debt is retired, we expect European Capital will have the ability to distribute portfolio realizations to us. The following table sets for historical balances related to European Capitals deleveraging and realizations:
As of and for the Years ended December 31 |
||||||||||||||||
(in millions) | 2009 | 2010 | 2011 | 2012 | ||||||||||||
|
||||||||||||||||
ECAS secured debt outstanding |
$ | 814 | $ | 469 | $ | 352 | $ | 330 | ||||||||
Realizations |
$ | 120 | $ | 368 | $ | 252 | $ | 108 | ||||||||
|
6
Non-GAAP financial measures
To supplement our financial information presented in accordance with generally accepted accounting principles in the United States (GAAP), we have presented consolidated adjusted operating cash flow before fixed charges, adjusted net operating income (adjusted NOI) and net cash sources in this exhibit. We define adjusted operating cash flow before fixed charges as net cash provided by operating activities plus payment of accrued payment-in kind (PIK) notes and divided and accreted original issue discounts. We define adjusted NOI as net operating income before income taxes excluding accrued PIK interest expense, stock-based compensation and depreciation. Management believes that consolidated adjusted operating cash flow before fixed charges will be an important measure by which it measures American Capitals business going forward as it is component of the financial covenants included in the notes offered hereby. Adjusted NOI and the ratios derived therefrom are important measures by which management measures the business because such metrics provide an approximation of cash net operating income generated in the period. Net cash sources is an important measure by which the Company measures liquidity generation. We define adjusted operating cash flow before fixed charges, adjusted NOI and net cash sources and provide a reconciliation to the most comparable GAAP measure, respectively, herein. Adjusted operating cash flow before fixed charges, adjusted NOI and net cash sources are not measures of financial performance under GAAP. Adjusted operating cash flow before fixed charges, adjusted NOI and net cash sources have limitations as analytical tools and you should not consider these non-GAAP financial metrics in isolation or as a substitute for analysis of our results as reported under GAAP.
7