Ares Capital Corporation · NASDAQ:ARCC
Ares Capital — Q2 2010 Earnings Presentation
34 slides from Ares Capital's earnings presentation, Aug 5, 2010
Slide 1: Second Quarter 2010 Investor Presentation
Second Quarter 2010 Investor Presentation ARES CAPITAL CORPORATION
Slide 2: Important Notice
Important Notice This presentation contains “forward looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, that are subject to risks and uncertainties. Actual outcomes and results could differ materially from those suggested by this presentation du
Slide 3: Financial and Portfolio Highlights
Financial and Portfolio Highlights Endnotes begin on page 34. Gross commitments** Q2-10: $409.9 million Q1-10: $298.8 million Q2-09: $43.1 million Exits of commitments(3)** Q2-10: $530.3 million Q1-10: $308.6 million Q2-09: $81.4 million Exits of commitments for investments purchased in the Allied A
Slide 4: Selected Historical Financial Information
Selected Historical Financial Information Gain on the Allied Acquisition $ 1.03 $ - $ - $ - $ - Dividend Declared Per Share $ 0.35 $ 0.35 $ 0.35 $ 0.35 $ 0.35 Gross Commitments** $ 409,864 $ 298,772 $ 344,407 $ 54,515 $ 43,107 Net Commitments (8)** $ (120,401) $ (9,859) $ 10,738 $ (30,851) $ (38,334
Slide 5: Selected Historical Financial Information (cont'd)
Selected Historical Financial Information (cont’d) As of (unaudited, except for 12/31/09) (Do llar amounts in 000s, except per s hare data) 6/30/10 3/31/10 12/31/09 9/30/09 6/30/09 Investments at Fair Value $ 3,794,020 $ 2,220,229 $ 2,171,814 $ 1,967,724 $ 1,962,471 % Fixed Rate 51.9% 51.5% 48.8% 56
Slide 6: Selected Investment Portfolio Information as of June 30, 2010
Selected Investment Portfolio Information as of June 30, 2010 Investments Acquired in the Allied Acquisition As of June 30, 2010 (unaudited) (Do llar amounts in 000s ) Ares Capital Excluding Investments Acquired Investments Acquired in the Allied in the Allied Ares Capital Acquisition Acquisition To
Slide 7: Quarterly Operating Results
Quarterly Operating Results *Excludes $0.06, $0.03, $0.02 and $0.02 per share of professional fees related to the Allied Acquisition for Q2-10, Q1-10, Q4-09 and Q3-09, respectively. Three Months Ended (unaud ited ) (Dollar amounts in 000s, except per share data) 6/30/10 3/31/10 12/31/09 9/30/09 6/30
Slide 8: Quarterly Operating Results Detail
Quarterly Operating Results Detail Three Months Ended (unaud ited ) (Dollar amounts in 000s) 6/30/10 3/31/10 12/31/09 9/30/09 6/30/09 Net Investment Income Before Taxes: Investment Income: Interest $ 104,079 $ 61,547 $ 61,853 $ 56,934 $ 54,047 Structuring fees 7,692 2,101 3,776 - 603 Dividends 3,424
Slide 9: Quarterly Gain/Loss Detail
Quarterly Gain/Loss Detail $ 280,613 Three Months Ended (unaud ited ) (Dollar amounts in 000s) 6/30/10 3/31/10 12/31/09 9/30/09 6/30/09 Net Realized and Unrealized Gains (Losses): Realized gains (losses) on investments: Ares Capital excluding investments purchased in the Allied Acquisition: Gains $
Slide 10: Debt Summary
Debt Summary *Represents the aggregate principal amount of the notes currently outstanding less the unaccreted discount initially recorded as part of the Allied Acquisition. **Represents the total aggregate principal amount outstanding of $1,307,797. 6.54% 306,408 $314,934 $190,610 $357,853 $444,400
Slide 11: Quarterly Balance Sheets
Quarterly Balance Sheets $ 879,255 $ 767,871 As of (unaudited, except for 12/31/09) (Dollar amounts in 000s, except per share data) 6/30/10 3/31/10 12/31/09 9/30/09 6/30/09 ASSETS Investments at fair value $ 3,794,020 $ 2,220,229 $ 2,171,814 $ 1,967,724 $ 1,962,471 Cash and cash equivalents 138,778
Slide 12: Quarterly Dividends
Quarterly Dividends (18) (17) $0.35 $0.35 $0.35 $0.35 $0.35 $0.35 $0.32 $0.34 $0.34 $0.36 $0.38 $0.40 $0.40 $0.41 $0.41 $0.42 $0.42 $0.42 $0.42 $0.42 $0.42 $0.42 $0.10 $0.00 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60 Q2-05 Q3-05 Q4-05 Q1-06 Q2-06 Q3-06 Q4-06 Q1-07 Q2-07 Q3-07 Q4-07 Q1-08 Q2-08 Q3-08 Q4-08
Slide 13: Portfolio Activity
Portfolio Activity *6/30/10 excludes investments purchased in the Allied Acquisition. **99 portfolio companies at 6/30/10 were new to the Ares portfolio as they were acquired in the Allied Acquisition. Three portfolio companies were a part of both Ares Capital Corporation and Allied Capital Corporat
Slide 14: Portfolio Activity
Portfolio Activity *Excludes investments purchased in the Allied Acquisition. **Exits of investments purchased in the Allied Acquisition. Gross Commitments by Asset Class* Exits of Commitments by Asset Class 89% 26% 46% 34% 50% 31% 46% 6% 15% 38% 33% 25% 3% 1% 1% 5% 51% 36% 24% 15% 47% 22% 22% 3% 1%
Slide 15: Investments Acquired in Allied Acquisition
15 Investments Acquired in the Allied Acquisition Fair Value Yield at Fair Value Fair Value Yield at Fair Value Performing Debt Securities Yields >10% at Fair Value 875,163 $ 14.33% 61,558 $ 16.98% Yields < 10% at Fair Value 162,156 8.60% 45,301 6.20% 1,037,319 13.56% 106,859 12.41% Debt Securities
Slide 16: Investment Spread and Portfolio Company Credit Statistics
Investment Spread and Portfolio Company Credit Statistics 8.7% 10.0% 9.7% 9.9% 9.7% 8.7% 4.5x 4.1x 3.7x 3.9x 4.1x 4.1x 4.2x 2.8x 2.9x 2.7x 2.7x 2.7x 2.4x 3.7x 3.3x 2.2x 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% Q4-08 Q2-09 Q3-09 Q4-09 Q1-10 Q2-10 0.5x 1.0x 1.5x 2.0x 2.5x 3.0x 3.5x 4.0x 4.5x 5.0x Investme
Slide 17: Portfolio Company EBITDA
Portfolio Company EBITDA(20) Total Portfolio Weighted Average EBITDA for Gross Commitments made during the Quarter (excluding investments purchased in the Allied Acquisition) Total Portfolio Weighted Average EBITDA Portfolio Weighted Average EBITDA for Investments Purchased in the Allied Acquisition
Slide 18: Investment Portfolio as of June 30, 2010
Investment Portfolio as of June 30, 2010 $3.8 Billion Total Fair Value of Investments Number of Portfolio Company Investments 188* Investments *Three portfolio companies were a part of both Ares Capital Corporation and Allied Capital Corporation’s respective portfolios at the time of acquisition. In
Slide 19: Portfolio by Issuer Concentration as of June 30, 2010
Portfolio by Issuer Concentration as of June 30, 2010*** Remaining 173 Investments Top 15 Investments 33.28% $3.8 billion Portfolio *Senior Secured Loan Fund portfolio consists of first and second lien senior debt from twelve different issuers. **Investments purchased in the Allied Acquisition. ***A
Slide 20: Investment Portfolio by Asset Class as of June 30, 2010
Investment Portfolio by Asset Class as of June 30, 2010* Investments Purchased in the Allied Acquisition Ares Capital Ares Capital Excluding Investments Purchased in the Allied Acquisition *At fair value. 31% 7% 5% 6% 1% 33% 17% 1st Lien Senior Debt 2nd Lien Senior Debt Senior Subordinated Debt Seni
Slide 21: Investment Portfolio by Industry as of June 30, 2010
Ares Capital Excluding Investments Purchased in the Allied Acquisition Investment Portfolio by Industry as of June 30, 2010* Investments Purchased in the Allied Acquisition Ares Capital *At fair value. 6% 2% 8% 2% 1% 7% 19% 10% 2% 7% 3% 5% 4% 24% 1% 20% 3% 1% 10% 1% 3% 4% 16% 3% 2% 4% 32% 18% 4% 6%
Slide 22: Portfolio By Grade
Portfolio By Grade Portfolio by Grade (23) *Excludes investments purchased in the Allied Acquisition. **Represents investments purchased in the Allied Acquisition. % By Fair Value 0% 20% 40% 60% 80% 100% Excluding Allied* Allied** Total ARCC Q1-09 Q2-09 Q3-09 Q4-09 Q1-10 Q2-10 Grade 1 Grade 2 Grade
Slide 23: Investments on Non-Accrual Status
Investments on Non-Accrual Status Amortized Cost Fair Value $131 $141 $118 $60 $101 $87 $277 4.2% 2.3% 5.7% 6.2% 5.3% 2.5% 4.2% 9.4% $0 $100 $200 $300 $400 $500 Q1-09 Q2-09 Q3-09 Q4-09 Q1-10 Q2-10 (MMs) 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% % of Total Investment Portfolio Investmen
Slide 24: Investment Activity Since Quarter End
As of August 4, 2010, we made $138 million of new investment commitments since June 30, 2010 80% were investments in the Senior Secured Loan Fund, 18% were in 1st lien senior secured debt and 2% were in equity securities 80% were fixed rate with a weighted average yield at amortized cost of 20% and
Slide 25: Committed Backlog and Pipeline
As of August 4, 2010, we had a current committed backlog and pipeline of $376 million and $355 million, respectively(24) Backlog are deals that are committed and/or under LOI, and we believe are likely to close Pipeline are deals where significant due diligence and analysis are in process, but no fo
Slide 26: Corporate Data
Corporate Data Corporate Counsel PROSKAUER ROSE LLP Los Angeles, CA SUTHERLAND ASBILL & BRENNAN LLP Washington, D.C. Independent Registered Public Accounting Firm KPMG LLP Los Angeles, CA Corporate Headquarters 280 Park Avenue, 22nd Floor, Building East New York, NY 10017 Tel: (212) 750-7300 Fax: (2
Slide 27: Reconciliations of Core EPS
Reconciliations of Core EPS The following are reconciliations of basic and diluted earnings per share computed in accordance with GAAP to Core earnings per share: *Excludes $0.06, $0.03, $0.02 and $0.02 per share of professional fees related to the Allied Acquisition for Q2-10, Q1-10, Q4-09 and Q3-0
Slide 28: Change in Net Asset Value
Change in Net Asset Value *Excludes equity issued for the Allied Acquisition. Equity issued for the Allied Acquisition (Dollar amounts in 000s, except per share data (25)) (unaudited) Quarter ended Quarter ended Quarter ended Quarter ended Quarter ended June 30, 2010 March 31, 2010 December 31, 2009
Slide 29: Portfolio Income Summary
Portfolio Income Summary Revenues by Source (27) Interest and Dividend Income by Asset Class $52,784 $54,730 $59,118 $62,327 $62,028 $107,503 88% 93% 90% 97% 93% 95% 7% 3% 5% 1% 2% 5% 4% 5% 3% 6% 3% $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 $90,000 $100,000 $110,000 $120,000
Slide 30: Portfolio Summary – Weighted Average Yields
Portfolio Summary – Weighted Average Yields(28) (6) Portfolio Purchased in the Allied Acquisition Ares Capital Ares Capital Excluding Portfolio Purchased in the Allied Acquisition (6) (6) (6) 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% Q1-09 Q2-09 Q3-09 Q4-09 Q1-10 Q2-10 Total Debt and
Slide 31: Portfolio Summary – Weighted Average Spread on Floating Rate Investments
Portfolio Summary – Weighted Average Spread on Floating Rate Investments(29) Portfolio Purchased in the Allied Acquisition Ares Capital Ares Capital Excluding Portfolio Purchased in the Allied Acquisition 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% Q1-09 Q2-09 Q3-09 Q4-09 Q1-10 Q2-10 0.00% 2.
Slide 32: Distribution of ARCC IRRs
Distribution of ARCC IRRs(30) Total of 97 exits from portfolio from October 8, 2004 through June 30, 2010 for an aggregate cash flow IRR to ARCC of approximately 13% Original capital invested of $2.2 billion and total proceeds from exits of $2.5 billion Approximately 80% of exits with IRRs to ARCC o
Slide 33: Endnotes
Endnotes Basic and diluted Core EPS (excluding professional fees and other costs related to the acquisition of Allied Capital Corporation (the "Allied Acquisition") is a non-GAAP financial measure. Core EPS (excluding professional fees and other costs related to the Allied Acquisition) is the net pe
Slide 34: Endnotes (cont'd)
Endnotes (cont’d) EBITDA is a non-GAAP financial measure. For a particular portfolio company, EBITDA typically represents net income before net interest expense, income tax expense, depreciation and amortization. EBITDA amounts are estimated from the most recent portfolio company financial statement