EX-99.1 2 a4689950ex991.txt PRESS RELEASE EXHIBIT 99.1 Allied Capital Announces Second Quarter 2004 Financial Results; Quarterly Dividend of $0.57 Per Share Declared WASHINGTON--(BUSINESS WIRE)--July 28, 2004--Allied Capital Corporation (NYSE: ALD) today announced second quarter 2004 financial results. Highlights for Q2 2004 -- Net income was $0.73 per share, or $95.3 million -- Net investment income was $0.37 per share, or $49.0 million -- The total of net investment income and net realized gains was $0.58 per share, or $75.6 million -- Net unrealized appreciation was $0.15 per share, or $19.7 million -- Second regular quarterly dividend of $0.57 per share was paid; third quarter dividend of $0.57 per share was declared -- Net asset value per share was $14.77 per share -- Shareholders' equity was $1.9 billion -- New investments totaled $577.3 million for the quarter Operating Results For the three months ended June 30, 2004, net investment income was $49.0 million or $0.37 per share, as compared to $44.6 million or $0.39 per share for the three months ended June 30, 2003. Net investment income for the three months ended June 30, 2004, was reduced by $2.9 million, or $0.02 per share, due to the accrual of the company's individual performance award. Net realized gains were $26.6 million, or $0.20 per share for the quarter ended June 30, 2004, as compared to $8.5 million or $0.07 per share for the quarter ended June 30, 2003. The sum of net investment income and net realized gains was $75.6 million or $0.58 per share for the three months ended June 30, 2004, as compared to $53.1 million or $0.46 per share for the three months ended June 30, 2003. Net income for the quarter ended June 30, 2004, was $95.3 million or $0.73 per share, after net unrealized appreciation of $19.7 million or $0.15 per share. Net income for the quarter ended June 30, 2003, was $59.9 million or $0.52 per share, after net unrealized appreciation of $6.8 million or $0.06 per share. Net income can vary substantially from quarter to quarter primarily due to changes in unrealized appreciation or depreciation and the recognition of realized gains or losses, which vary from quarter to quarter. As a result, quarterly comparisons of net income may not be meaningful. For the six months ended June 30, 2004, net investment income was $93.5 million or $0.71 per share, as compared to $87.3 million or $0.78 per share for the six months ended June 30, 2003. Net realized gains were $174.5 million or $1.33 per share for the six months ended June 30, 2004. Net realized gains were $56.9 million or $0.51 per share for the six months ended June 30, 2003. The sum of net investment income and net realized gains was $268.0 million or $2.04 per share for the six months ended June 30, 2004, as compared to $144.1 million or $1.28 per share for the six months ended June 30, 2003. Net income for the six months ended June 30, 2004, was $115.7 million or $0.88 per share, after net unrealized depreciation of $152.3 million or $1.16 per share. Net income for the six months ended June 30, 2003, was $79.8 million or $0.71 per share, after net unrealized depreciation of $64.3 million or $0.57 per share. During the quarter, the company invested a total of $577.3 million. After total repayments and asset sales of $193.7 million and valuation and other changes during the quarter, total assets were $3.2 billion at June 30, 2004. Merger and acquisition activity in the middle market has been strong in the first half of 2004. For the six months ended June 30, 2004, the Company made investments totaling $795.1 million, and received investment repayments and proceeds from investment sales of $430.9 million. The Company has realized a record $204.0 million in gross realized gains, which net of gross realized losses of $29.5 million resulted in net realized gains of $174.5 million for the six months ended June 30, 2004. Shareholders' equity was $1.9 billion at June 30, 2004, with a net asset value per share of $14.77. Portfolio Activity for Q2 2004 The Company invested $404.8 million in its private finance portfolio and $172.5 million in its commercial real estate portfolio during the quarter. At June 30, 2004, the overall weighted average yield on the interest-bearing portfolio was 14.0%, as compared to 14.7% at December 31, 2003. Private Finance The private finance portfolio totaled $1.9 billion at June 30, 2004. Loans and debt securities, which totaled $1.3 billion at June 30, 2004, had a weighted average yield of 14.6% as compared to 15.0% at December 31, 2003. Significant new private finance investments during the second quarter of 2004 included: -- $209.2 million to complete the purchase of a majority ownership stake in Advantage Sales & Marketing Inc, a leading sales and marketing agency providing outsourced sales, merchandising, and marketing services to the consumer packaged goods industry; -- $82.6 million to complete the purchase of a majority ownership stake in Mercury Air Centers, Inc., an operator of fixed base operations; -- $23.5 million to International Fiber Corporation, a manufacturer of ingredients for food and industrial applications to finance a buyout of the company; -- $22.0 million to Opinion Research Corporation, a corporate marketing research firm, in connection with the recapitalization of the company; -- $11.1 million to United Site Services, a provider of portable restroom services in the United States, to fund their acquisition of two portable restroom providers; -- $10.0 million to Business Loan Express, LLC, a nationwide small business lender, under a new $20.0 million revolving credit facility; and -- $7.9 million to PresAirTrol LLC, a designer and manufacturer of safe pressure switching systems, to finance a buyout of the company. Commercial Real Estate Finance At June 30, 2004, the Company's commercial real estate finance portfolio totaled $872.3 million, and the interest-bearing investments had a weighted average yield of 13.1%, as compared to 14.1% at December 31, 2003. Significant new CMBS investments totaled $86.7 million in four new CMBS transactions during the second quarter of 2004. In addition, the Company invested $73.4 million in commercial mortgage loans. The unamortized discount on the CMBS bond portfolio totaled $725.9 million at June 30, 2004. Portfolio Quality Allied Capital employs a standard 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 investment return or principal is expected. Grade 4 is for investments that are in workout and for which some loss of current investment return is expected, but no loss of principal is expected. Grade 5 is for investments that are in workout and for which some loss of principal is expected. At June 30, 2004, Grade 1 investments totaled $748.4 million, or 26.9% of the total portfolio at value; Grade 2 investments totaled $1.8 billion, or 65.0% of the total portfolio; Grade 3 investments totaled $82.4 million, or 2.9% of the total portfolio; Grade 4 investments totaled $36.4 million, or 1.3% of the total portfolio; and Grade 5 investments totaled $108.4 million, or 3.9% of the total portfolio. In the private finance portfolio, loans and debt securities over 90 days delinquent totaled $61.0 million at June 30, 2004, as compared to $85.6 million at December 31, 2003. In the commercial real estate portfolio, loans and debt securities over 90 days delinquent totaled $55.1 million at June 30, 2004, as compared to $44.0 million at December 31, 2003. Loans and debt securities not accruing interest totaled $170.5 million at June 30, 2004. At June 30, 2004, the company's CMBS investments included investments in the first loss, unrated bond class of 40 CMBS issuances. For these issuances, loans over 30 days delinquent or classified as real estate owned totaled 1.5% of the total outstanding principal balance of the underlying collateral pool at June 30, 2004. Liquidity and Capital Resources The company increased its line of credit during the quarter, with a new committed amount of $552.5 million. Outstanding borrowings on the company's unsecured revolving line of credit at June 30, 2004, were $208.5 million. The company repaid long-term debt totaling $112.0 million during the quarter. At June 30, 2004, the company had a weighted average cost of debt of 6.8%. The company's regulatory asset coverage was 296%. The company is required to maintain regulatory asset coverage of at least 200%. Quarterly Dividend of $0.57 Per Share Declared As previously released on July 22, 2004, the company declared its 164th regular quarterly dividend of $0.57 per share for the third quarter of 2004. The dividend is payable as follows: Record date: September 10, 2004 Payable date: September 30, 2004 The company's dividend is paid from taxable income. The Board determines the dividend based on annual estimates of taxable income, which differ from book income due to changes in unrealized appreciation and depreciation and due to temporary and permanent differences in income and expense recognition. Webcast/ Conference Call at 10:15 a.m. EDT on July 28, 2004 The company will host a webcast/conference call at 10:15 a.m. (EDT) today to discuss second quarter 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) 689-4612 approximately 15 minutes prior to the call. International callers should dial (706) 645-0106. All callers should reference the passcode "Allied Capital". An archived replay of the event will be available through August 11, 2004, by calling (800) 642-1687. (International callers please dial (706) 645-9291.) Please reference passcode "8106316". An archived replay will also be available on our website. For complete information about the webcast/conference call and the replay, please visit our web site or call Allied Capital Investor Relations at (888) 818-5298. About Allied Capital Allied Capital is the nation's largest business development company and provides long-term debt and equity investment capital to companies in a variety of industries. The company also participates in the real estate capital markets as an investor in non-investment grade commercial mortgage-backed securities and collateralized debt obligation bonds and preferred shares. 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) 818-5298, or e-mail us at ir@alliedcapital.com. Forward-Looking Statements 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 in Allied Capital's filings with the Securities and Exchange Commission. CONSOLIDATED BALANCE SHEET (in thousands, except per share amounts) At June 30, At December 31, 2004 2003 ------------ ------------ (unaudited) ASSETS Portfolio at value: Private finance $ 1,912,466 $ 1,902,672 Commercial real estate finance 872,348 681,927 ------------ ------------ Total portfolio at value 2,784,814 2,584,599 Deposits of proceeds from sales of borrowed Treasury securities 164,772 98,527 Accrued interest and dividends receivable 62,618 53,079 Other assets 75,401 69,498 Cash and cash equivalents 92,782 214,167 ------------ ------------ Total assets $ 3,180,387 $ 3,019,870 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Notes payable and debentures $ 850,280 $ 954,200 Revolving line of credit 208,500 - Obligations to replenish borrowed Treasury securities 164,772 98,525 Accounts payable and other liabilities 52,124 46,568 ------------ ------------ Total liabilities 1,275,676 1,099,293 Preferred stock - 6,000 Shareholders' equity: Common stock 13 13 Additional paid-in capital 2,003,904 1,985,652 Common stock held in deferred compensation trust (6,909) - Notes receivable from sale of common stock (8,617) (18,632) Net unrealized appreciation (depreciation) on portfolio (191,393) (39,055) Undistributed (distributions in excess of) earnings 107,713 (13,401) ------------ ------------ Total shareholders' equity 1,904,711 1,914,577 ------------ ------------ Total liabilities and shareholders' equity $ 3,180,387 $ 3,019,870 ============ ============ Net asset value per common share $14.77 $14.94 Common shares outstanding 128,960 128,118 CONSOLIDATED STATEMENT OF OPERATIONS (in thousands, except per share amounts) Three Months Ended Six Months Ended June 30, June 30, ----------------------- ----------------------- 2004 2003 2004 2003 ----------- ----------- ----------- ----------- (unaudited) (unaudited) Interest and related portfolio income Interest and dividends $ 74,173 $ 67,137 $147,712 $ 132,658 Loan prepayment premiums 3,067 1,637 4,017 2,758 Fees and other income 10,260 8,440 17,536 14,928 ----------- ----------- ----------- ----------- Total interest and related portfolio income 87,500 77,214 169,265 150,344 ----------- ----------- ----------- ----------- Expenses Interest 17,983 19,358 37,096 37,280 Employee 9,031 9,258 17,893 17,379 Individual performance award 2,889 - 6,382 - Administrative 9,076 5,081 14,903 9,498 ----------- ----------- ----------- ----------- Total operating expenses 38,979 33,697 76,274 64,157 ----------- ----------- ----------- ----------- Net investment income before income taxes 48,521 43,517 92,991 86,187 Income tax expense (benefit) (469) (1,081) (544) (1,081) ----------- ----------- ----------- ----------- Net investment income 48,990 44,598 93,535 87,268 ----------- ----------- ----------- ----------- Net realized and unrealized gains (losses) Net realized gains 26,603 8,540 174,453 56,879 Net change in unrealized appreciation or depreciation 19,749 6,802 (152,338) (64,334) ----------- ----------- ----------- ----------- Total net gains (losses) 46,352 15,342 22,115 (7,455) ----------- ----------- ----------- ----------- Net increase in net assets resulting from operations $ 95,342 $ 59,940 $ 115,650 $ 79,813 =========== =========== =========== =========== Diluted earnings per common share $ 0.73 $ 0.52 $ 0.88 $ 0.71 Weighted average common shares outstanding - diluted 131,208 114,552 131,620 112,291 CONTACT: Allied Capital Corporation Dale Lynch, 202-973-6344