Exhibit 99.1
ARES CAPITAL ANNOUNCES
SEPTEMBER 30,
2005 FINANCIAL RESULTS
New York, NY – November 14, 2005 – Ares
Capital Corporation (Nasdaq: ARCC) today announced financial results for its
third quarter ended September 30, 2005.
HIGHLIGHTS
• Stockholders’
Equity (at September 30, 2005 ): $353.1 million
• Net Assets per
Share (at September 30, 2005): $15.08
• Total Fair Value
of Investments: $424.4 million
• Declared 3rd Quarter 2005 Dividend: $0.34
• Reported 3rd Quarter 2005 Basic and Diluted GAAP EPS: $0.42
• Reported 3rd Quarter 2005 Basic and Diluted core
EPS: $0.30 (1)
Third
Quarter 2005 Operating Results:
• Net
income: $9,881,890 or $0.42 per share
• Net investment
income: $6,244,278 or $0.27 per share
• Net realized and
unrealized gains: $3,637,612 or $0.15 per share
Third
Quarter 2005 Portfolio Activity
• Purchase cost of
additional investments made during period: $166.1 million
• Sales/redemptions
of investments during period: $45.3
million
• Number of
portfolio company investments as of September 30, 2005: 30
• Weighted average
yield of the debt and income producing equity securities as of September 30,
2005: 11.28%(2)
• Average total
assets for the quarter was $392.3 million
(1) Basic and
diluted core EPS is a non-GAAP financial measure. Core EPS is the net per share
increase in stockholders’ equity
resulting from operations less capital gains and losses and any
incentive management fees attributable to such capital gains and losses. The
most directly comparable GAAP financial measure is the net per share increase
in stockholders’ equity resulting from operations, which is reflected above as “Reported
3rd Quarter 2005 Basic and Diluted GAAP EPS.”
The Company believes that core EPS provides useful information to investors
regarding financial performance because it is one method the Company uses to
measure its financial condition and results of operations. The presentation of this additional
information is not meant to be considered in isolation or as a substitute for financial
results prepared in accordance with GAAP.
Reconciliation of basic and diluted core EPS to the most directly
comparable GAAP financial measure is set forth in Schedule 1 hereto.
(2) Computed as (a) annual stated
interest rate or yield earned plus the net annual amortization of original
issue discount and market discount earned on accruing debt, divided by (b) total
income producing equity securities and debt at fair value.
OPERATING RESULTS
For the
quarter ended September 30, 2005, Ares Capital reported net income of $9.9
million or $0.42 per share. Net
investment income for the third quarter ended September 30, 2005 was $6.2
million or $0.27 per share. Net realized
and unrealized gains were $3.6 million or $0.15 per share for the third quarter
of 2005.
In the third
quarter of 2005 Ares Capital invested approximately $166.1 million in new
commitments across six portfolio companies (five new borrowers and one existing
borrower). Of the $166.1 million in new
commitments during the quarter, approximately 41%, 6%, 20% and 33% were made in
first lien senior secured debt, second lien senior secured debt, senior
subordinated debt and equity/other securities, respectively. 47% of such
investments were floating rate.
Specifically during the quarter, significant new commitments included:
• $53.0 million in equity interests of
a restaurant franchisor, owner and operator;
• $45.6 million in first lien senior
secured term and revolving debt, and equity interests of an industrial
container manufacturer, reconditioner and servicer;
• $32.5 million in senior subordinated
debt of a custodial services company:
• $15.0 million in second lien senior
secured debt of a waste management equipment company;
• $13.5 million in first lien and
second lien senior secured debt of a portable restroom and site services
company.
During the
third quarter of 2005, Ares Capital had net realized and unrealized gains of
$3.6 million. The portfolio value of the
company’s investments at September 30, 2005 was $424.4 million. These portfolio investments (excluding cash
and cash equivalents) were comprised of approximately 50% senior secured debt
securities (29% first lien and 21% second lien assets), 26% mezzanine debt
securities, 20% preferred/common equity securities and 4% other securities
(senior notes/CDO investments) as of September 30, 2005.
In addition to
$9.3 million of investments that Ares Capital Corporation has made since September 30,
2005, Ares Capital has outstanding commitments to fund an aggregate of over $140
million of investments. In addition,
Ares Capital has signed proposal letters or mandates from other companies for additional
investments in an aggregate of approximately $40 million. The consummation of any of the investments in
this backlog and pipeline of over $180 million depends upon, among other
things, one or more of the following: satisfactory completion of our due
diligence investigation of the prospective portfolio company, our acceptance of
the terms and structure of such investment, the execution and delivery of
satisfactory documentation and the receipt of any necessary consents. We cannot
assure you that we will make any of these investments.
2
Total assets
were $444.9 million as of September 30, 2005. Stockholders’ equity was $353.1 million at September 30,
2005, while net assets per share was $15.08.
As of
September 30,
2005, the weighted average yield of the debt and
income producing equity securities was 11.28% (computed as (a) annual
stated interest rate or yield earned plus the net annual amortization of
original issue discount and market discount earned on accruing debt, divided by
(b) total income producing equity securities and debt at fair value). As of September 30, 2005, 55% of the
fund’s assets were in floating rate debt securities.
PORTFOLIO QUALITY
Ares Capital
employs an investment rating system (Grade 1 to 4) to categorize its
investments. As of September 30,
2005, the weighted average grade of Ares Capital’s portfolio investments was
3.0 (with no 1.0 ratings in the portfolio).
Grade 4 is for those investments that involve the least amount of risk
in our portfolio (i.e. the borrower is performing above expectations and the trends
and risk factors are generally favorable).
Grade 3 is for those investments that involve a level of risk that is
similar to the risk at the time of origination (i.e. the borrower is performing
as expected and the risk factors are neutral to favorable). Grade 2 is for those investments where a
borrower is performing below expectations and indicates that the risk has
increased materially since origination.
Grade 1 is for those investments that are not anticipated to be repaid
in full.
3
LIQUIDITY AND CAPITAL RESOURCES
During 2005, Ares Capital has raised a total
of approximately $398 million in net proceeds from public offerings of its
common stock. As of September 30,
2005 we had $82.0 million outstanding under our revolving credit facility,
which expires on November 1, 2006, unless extended prior to such date with
the consent of the lenders. On November 14,
2005, we entered into an amendment that increased the available amount for
borrowing under our credit facility from $225.0 million to $350.0 million and
decreased the interest rate payable on commercial paper funding from the
commercial paper rate plus 125 basis points to the commercial paper rate plus
75 basis points. The amendment also made
certain provisions of the credit facility more flexible and decreased our
commitment fee for unused portions of the credit facility from 0.175% to a
range from 0.10% to 0.125%, depending on funding levels.
DIVIDEND
For the period from July 1, 2005 through
September 30, 2005, Ares Capital declared a dividend on September 6,
2005 of $0.34 per share for a total of $7,940,174. The record date was September 16, 2005
and the dividend was distributed on September 30, 2005.
CONFERENCE CALL
The company will
host a conference call, Tuesday, November 15, 2005, at 4:00 p.m. (ET)
to discuss its third quarter 2005 financial results. All interested
parties are welcome to participate. You can access the conference call by
dialing (888) 343-7167 approximately 5-10 minutes prior to the call.
International callers should dial (415) 537-1980. All callers should
reference “Ares Capital Corporation.” An archived replay of the call will be
available through November 25, 2005 by calling (800) 633-8625.
International callers please dial (402) 977-9141. For all replays, please
reference pin #21267071.
4
ABOUT
ARES CAPITAL CORPORATION
Ares Capital Corporation is a
closed-end, non-diversified management investment company that is regulated as
a business development company under the Investment Company Act of 1940. Its
investment objectives are to generate both current income and capital
appreciation through debt and equity investments. Ares Capital Corporation
invests primarily in first and second lien senior loans and mezzanine debt,
which in some cases includes an equity component, and, to a lesser extent, in
equity investments in private middle market companies.
FORWARD-LOOKING
STATEMENTS
Statements included herein may constitute “forward-looking
statements” within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements are not guarantees of future performance or
results and involve a number of risks and uncertainties. Actual results
may differ materially from those in the forward-looking statements as a result
of a number of factors, including those described from time to time in our
filings with the Securities and Exchange Commission. The Company
undertakes no duty to update any forward-looking statements made herein.
INFO SOURCES
Ares Capital
Corporation; Regulatory Filings (SEC)
Merritt S.
Hooper
Ares Capital Corporation
310-201-4200
5
ARES CAPITAL CORPORATION AND
SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
As of September 30, 2005 and December 31,
2004
|
|
|
As of
|
|
|
|
|
September 30, 2005
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|
December 31, 2004
|
|
|
|
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(unaudited)
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|
|
|
|
ASSETS
|
|
|
|
|
|
|
Investments at fair value
(amortized cost of $424,079,852 and $182,329,200, respectively)
|
|
|
|
|
|
|
Non-control/Non-affiliate
investments
|
|
$
|
349,221,287
|
|
$
|
165,126,181
|
|
|
Affiliate investments
|
|
75,192,208
|
|
17,433,966
|
|
|
Total investments at fair value
|
|
424,413,495
|
|
182,560,147
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|
|
Cash and cash equivalents
|
|
15,408,955
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|
26,806,160
|
|
|
Receivable for open trades
|
|
164,945
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|
8,794,478
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|
|
Interest receivable
|
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3,438,207
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|
1,140,495
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|
|
Other assets
|
|
1,501,986
|
|
1,154,334
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|
Total assets
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$
|
444,927,588
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$
|
220,455,614
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|
|
|
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|
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LIABILITIES
|
|
|
|
|
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Credit facility payable
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$
|
82,000,000
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|
$
|
55,500,000
|
|
|
Reimbursed underwriting costs
payable to the Inv’t Adviser
|
|
2,475,000
|
|
—
|
|
|
Dividend payable
|
|
—
|
|
3,320,030
|
|
|
Accounts payable and accrued
expenses
|
|
1,694,808
|
|
1,556,446
|
|
|
Management and incentive fees
payable
|
|
5,222,118
|
|
274,657
|
|
|
Interest and facility fees
payable
|
|
310,463
|
|
96,176
|
|
|
Interest payable to the
Investment Adviser
|
|
115,706
|
|
—
|
|
|
Total liabilities
|
|
$
|
91,818,095
|
|
$
|
60,747,309
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Commitments and contingencies
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STOCKHOLDERS’ EQUITY
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Common stock, par value $.001 per
share, 100,000,000 common shares authorized, 23,409,484 and 11,066,767 common
shares issued and outstanding, respectively
|
|
23,410
|
|
11,067
|
|
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Capital in excess of par value
|
|
345,678,147
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|
159,602,706
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|
|
Distributions less than (in
excess of) net investment income
|
|
—
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(136,415
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)
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Accumulated net realized gain on
sale of investments
|
|
7,074,293
|
|
—
|
|
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Net unrealized appreciation on
investments
|
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333,643
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|
230,947
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|
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Total stockholders’ equity
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353,109,493
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159,708,305
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|
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Total liabilities and
stockholders’ equity
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$
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444,927,588
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$
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220,455,614
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|
|
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NET ASSETS PER SHARE
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$
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15.08
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$
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14.43
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ARES CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
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For the three
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For the nine
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months ended September 30, 2005
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months ended September 30, 2005
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(unaudited)
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(unaudited)
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|
INVESTMENT
INCOME:
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|
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From non-control/non-affiliate
investments:
|
|
|
|
|
|
|
Interest from investments
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|
$
|
8,700,840
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|
$
|
19,648,671
|
|
|
Interest from cash &
cash equivalents
|
|
282,092
|
|
877,860
|
|
|
Dividend income
|
|
—
|
|
744,818
|
|
|
Capital structuring service fees
|
|
759,615
|
|
1,694,698
|
|
|
Other income
|
|
91,637
|
|
213,797
|
|
|
Total investment income from non-control/non-affiliate
investments
|
|
9,834,184
|
|
23,179,844
|
|
|
From affiliate investments:
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|
|
|
|
|
|
Interest from investments
|
|
853,666
|
|
1,865,130
|
|
|
Capital structuring service fees
|
|
901,250
|
|
1,763,750
|
|
|
Other income
|
|
18,889
|
|
151,472
|
|
|
Total investment income from
affiliate investments
|
|
1,773,805
|
|
3,780,352
|
|
|
Total investment income
|
|
11,607,989
|
|
26,960,196
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|
|
|
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|
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EXPENSES:
|
|
|
|
|
|
|
Base management fees
|
|
1,380,863
|
|
3,222,709
|
|
|
Incentive management fees
|
|
2,643,353
|
|
4,712,556
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|
|
Administrative
|
|
195,360
|
|
684,747
|
|
|
Professional fees
|
|
368,146
|
|
853,940
|
|
|
Directors fees
|
|
74,995
|
|
232,803
|
|
|
Insurance
|
|
151,019
|
|
438,232
|
|
|
Interest and credit facility fees
|
|
310,463
|
|
748,732
|
|
|
Interest payable to the
Investment Adviser
|
|
32,167
|
|
115,706
|
|
|
Amortization of debt issuance
costs
|
|
84,855
|
|
216,281
|
|
|
Other
|
|
122,490
|
|
192,248
|
|
|
Total expenses
|
|
5,363,711
|
|
11,417,954
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|
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NET INVESTMENT INCOME
|
|
6,244,278
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|
15,542,242
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|
|
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REALIZED
AND UNREALIZED GAIN ON INVESTMENTS:
|
|
|
|
|
|
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Net realized gains (losses):
|
|
|
|
|
|
|
Net realized gains from non-control/non-affiliate
investment transactions
|
|
3,189,827
|
|
10,346,269
|
|
|
Net realized losses from
affiliate investment transactions
|
|
(1,124
|
)
|
(3,154
|
)
|
|
Net realized gains from
investment transactions
|
|
3,188,703
|
|
10,343,115
|
|
|
Net unrealized gains (losses):
|
|
|
|
|
|
|
Investment transactions from non-control/non-affiliate
investments
|
|
447,617
|
|
103,824
|
|
|
Investment transactions from
affiliate investments
|
|
1,292
|
|
(1,128
|
)
|
|
Net unrealized gains from
investment transactions
|
|
448,909
|
|
102,296
|
|
|
Net realized and unrealized gain
on investments
|
|
3,637,612
|
|
10,445,811
|
|
|
|
|
|
|
|
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|
NET INCREASE IN STOCKHOLDERS’
EQUITY RESULTING FROM OPERATIONS
|
|
$
|
9,881,890
|
|
$
|
25,988,053
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED EARNINGS PER COMMON SHARE
|
|
$
|
0.42
|
|
$
|
1.33
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING
|
|
23,323,314
|
|
19,583,970
|
|
SCHEDULE 1
Reconciliation
of basic and diluted core EPS to basic and diluted GAAP EPS
Reconciliation of basic and diluted core EPS to basic and diluted GAAP
EPS, the most directly comparable GAAP financial measure, for the three month
period ended September 30, 2005 is provided below.
|
|
|
Three months ended
September 30, 2005
|
|
|
Basic and
diluted core EPS(1)
|
|
$
|
0.30
|
|
|
EPS
attributable to capital gains and losses and any incentive management fees
related to such capital gains and losses
|
|
$
|
0.12
|
|
|
Basic and
diluted GAAP EPS
|
|
$
|
0.42
|
|
(1) Basic and diluted core EPS is a non-GAAP financial measure.
Core EPS is the net per share increase in stockholders’ equity resulting from operations less capital gains
and losses and any incentive management fees attributable to such capital gains
and losses. The Company believes that
core EPS provides useful information to investors regarding financial
performance because it is one method the Company uses to measure its financial
condition and results of operations. The
presentation of this additional information is not meant to be considered in
isolation or as a substitute for financial results prepared in accordance with
GAAP.