American Capital Reports In Line - Analyst Blog
03 8월 2011 - 6:45PM
Zacks
American Capital
Ltd.’s (ACAS) second-quarter 2011 operating income of 20
cents per share was in line with the Zacks Consensus Estimate.
However, results outpaced the prior-year quarter’s earnings of 9
cents per share. The favorable outcome was due to a drop in
operating expenses, though partially offset by a decline in
interest and dividend income in the reported quarter.
Net earnings for the quarter were
$410 million, or $1.13 per share, significantly up from $281
million or 84 cents per share in the prior-year quarter.
Performance in
Detail
Total interest and dividend income
for the quarter was $131 million, down 5% from $138 million in the
prior-year quarter. The weighted average effective interest rate on
the company's private finance debt investments as of June 30, 2011
was 10.5%, up 20 basis points at the end of the previous quarter.
Fee income was down 15% year over year to $11 million.
In the second quarter of 2011,
total operating income was $142 million, down 6% from $151 million
in the prior-year quarter, attributable to lower fee income and
interest and dividend income. Operating income was also in line
with the Zacks Consensus Estimate.
Operating expenses plummeted 42%
year over year to $71 million in the quarter, attributable to a
decline in interest expenses, general and administrative expenses,
and debt refinancing costs, partly offset by higher salaries,
benefits and stock-based compensation expenses. Net realized
investment loss was $248 million for the quarter compared with a
loss of $320 million in the prior-year quarter.
As of June 30, 2011, non-accrual
loans were $255 million, representing 9.0% of total loans at fair
value, up from $227 million of non-accrual loans, representing 7.7%
of total loans at fair value as of March 31, 2011.
As of June 30, 2011, net asset
value (NAV) per share came in at $13.16, up 10% or $1.19 per share
from NAV per share of $11.97 as of March 31, 2011. Annualized
return on equity in the reported quarter was 38%. Management
expects an improvement in the portfolio along with an economic
recovery and thereby posts a growth in book value.
American Capital’s asset coverage
ratio increased to 376% from 336% in the prior quarter. The company
repaid an additional $100 million in debt, strengthening its
balance sheet.
Change in Tax
Status
American Capital will not qualify
as a Regulated Investment Company (RIC) under the Internal Revenue
Code (the Code) for its tax year ending September 30, 2011 due to
non-fulfillment of Code's portfolio diversification requirements as
of June 30, 2011. Therefore, Subchapter C of the Code will be
applicable for American Capital instead of Subchapter M of the
Code. Management believes for income tax purposes, American
Capital will have a net operating loss for the tax year ending
September 30, 2011, which can be carry forwarded in the following
tax years.
Major competitors of American
Capital, Ares Capital Corporation (ARCC) and
Fortress Investment Group LLC (FIG), are scheduled
to release their earnings for the second quarter of 2011 on August
4.
Our Take
American Capital’s successful
restructuring of debt provided it with sufficient operating
flexibility and the company also continues to derisk its balance
sheet through a number of initiatives including repayment of debt.
However, we believe limited accessibility to capital and increased
funding costs have weakened the company’s strategic position in its
sector. The resumption of dividend payments is not expected in the
near term, given projections for capital losses. Moreover, the
improved credit quality of the portfolio is expected to continue
along with the economic recovery.
American Capital currently retains
its Zacks #2 Rank, which translates into a short-term (1−3 months)
“Buy” rating.
AMER CAP LTD (ACAS): Free Stock Analysis Report
ARES CAP CP (ARCC): Free Stock Analysis Report
FORTRESS INVEST (FIG): Free Stock Analysis Report
Zacks Investment Research
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