Ares Capital Corporation · NASDAQ:ARCC
Ares Capital — Q3 2010 Earnings Presentation
32 slides from Ares Capital's earnings presentation, Nov 4, 2010
Slide 1: Third Quarter 2010 Investor Presentation
Third 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 Q3-10: $511.8 million Q2-10: $409.9 million*** Q3-09: $54.5 million Exits of commitments for core ARCC portfolio(2) Q3-10: $131.6 million Q2-10: $530.3 million Q3-09: $85.4 million Exits of commitments for investments pu
Slide 4: Selected Historical Financial Information
Selected Historical Financial Information **Excludes $1.03 per share gain on the Allied Acquisition. "As of and for the Three Months Ended" (unaudited) (Dollar amounts in 000s, except per share data and stock prices) 9/30/10 6/30/10 3/31/10 12/31/09 9/30/09 "Core EPS (excludes professional fees and
Slide 5: Selected Historical Financial Information (cont'd)
Selected Historical Financial Information (cont’d) *Q2-10 excludes investments purchased as part of the Allied Acquisition on April 1, 2010. In addition to the $1.8 billion of funded investments purchased as part of the Allied Acquisition, $83.3 million in unfunded commitments were also acquired. As
Slide 6: Selected Investment Portfolio Information as of September 30, 2010
Selected Investment Portfolio Information as of September 30, 2010 As of September 30, 2010 (unaudited) (Dollar amounts in 000s) Ares Capital Excluding Investments Acquired in the Allied Acquisition ("Core ARCC Portfolio") Investments Acquired in the Allied Acquisition Ares Capital Total Investments
Slide 7: Quarterly Operating Results
Quarterly Operating Results *Excludes $0.01, $0.06, $0.03, $0.02 and $0.02 per share of professional fees and other costs related to the Allied Acquisition for Q3-10, Q2-10, Q1-10, Q4-09 and Q3-09, respectively. **Includes realized gain on the Allied Acquisition of $195,876. Three Months Ended (unau
Slide 8: Quarterly Operating Results Detail
Quarterly Operating Results Detail 67,070 Three Months Ended (unaud ited ) (Dollar amounts in 000s) 9/30/10 6/30/10 3/31/10 12/31/09 9/30/09 Net Investment Income Before Taxes: Investment Income: Interest $ 107,881 $ 104,079 $ 61,547 $ 61,853 $ 56,934 Structuring fees 20,611 7,692 2,101 3,776 - Divi
Slide 9: Quarterly Gain/Loss Detail
Quarterly Gain/Loss Detail Realized gain on the Allied Acquisition Three Months Ended (unaud ited ) (Dollar amounts in 000s) 9/30/10 6/30/10 3/31/10 12/31/09 9/30/09 Net Realized and Unrealized Gains (Losses): Realized gains (losses) on investments: Ares Capital excluding investments purchased in th
Slide 10: Quarterly Balance Sheets
Quarterly Balance Sheets As of (unaudited, except for 12/31/09) (Dollar amounts in 000s, except per share data) 9/30/10 6/30/10 3/31/10 12/31/09 9/30/09 ASSETS Investments at fair value $ 4,149,790 $ 3,794,020 $ 2,220,229 $ 2,171,814 $ 1,967,724 Cash and cash equivalents 134,362 138,778 83,813 99,22
Slide 11: Quarterly Dividends
Quarterly Dividends (17) (16) $0.35 $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
Slide 12: 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 26% 46% 34% 50% 31% 46% 47% 91% 66% 15% 38% 33% 25% 10% 5% 3% 1% 1% 51% 36% 24% 15% 47% 22% 4
Slide 13: Investments Acquired in Allied Acquisition
Investments Acquired in the Allied Acquisition *Includes fundings of revolver and other commitments of $23 million, PIK interest and accretion of purchase discounts. $ % of Total Yield $ % of Total Yield $ Lower Yielding / Non-Yielding Debt Securities Yielding < 10% 128,311 7.0% 6.5% 110,605 6.6% 7.
Slide 14: Investment Spread and Portfolio Company Credit Statistics
Investment Spread and Portfolio Company Credit Statistics * Excludes the weighted average total leverage multiple for the Senior Secured Loan Program as well as the portfolio companies in the Senior Secured Loan Program. As of September 30, 2010, the weighted average total leverage multiple for the
Slide 15: Portfolio Company EBITDA
Portfolio Company EBITDA(19) Total Portfolio Weighted Average EBITDA for Core ARCC Portfolio (excludes investments purchased in the Allied Acquisition) (20) Total Portfolio Weighted Average EBITDA (includes investments purchased in the Allied Acquisition beginning Q2-10) (20) Total Portfolio Weighte
Slide 16: Investment Portfolio as of September 30, 2010
Investment Portfolio as of September 30, 2010 $4.1 Billion Total Fair Value of Investments Number of Portfolio Company Investments 184 Investments * *Three portfolio companies were a part of both Ares Capital Corporation and Allied Capital Corporation’s respective portfolios at the time of the Allie
Slide 17: Portfolio by Issuer Concentration as of September 30, 2010
Portfolio by Issuer Concentration as of September 30, 2010* Remaining 169 Investments Top 15 Investments 39.31% $4.1 billion Portfolio *At fair value. **Senior Secured Loan Program portfolio consists of first lien senior secured debt to 17 different issuers. ***Investments purchased in the Allied Ac
Slide 18: Investment Portfolio by Asset Class as of September 30, 2010
Investment Portfolio by Asset Class as of September 30, 2010* Investments Purchased in the Allied Acquisition Ares Capital Ares Capital Excluding Investments Purchased in the Allied Acquisition *At fair value. 31% 6% 10% 6% 1% 29% 17% 1st Lien Senior Debt 2nd Lien Senior Debt Senior Subordinated Deb
Slide 19: Investment Portfolio by Industry as of September 30, 2010
Ares Capital Excluding Investments Purchased in the Allied Acquisition Investment Portfolio by Industry as of September 30, 2010* Investments Purchased in the Allied Acquisition Ares Capital *At fair value. 23% 6% 19% 5% 10% 6% 5% 4% 5% 2% 4% 7% 2% 11% 28% 4% 17% 7% 9% 4% 3% 4% 4% 3% 3% 2% 1% 15% 4%
Slide 20: Portfolio by Region as of September 30, 2010
Portfolio by Region as of September 30, 2010* Investments Purchased in the Allied Acquisition Ares Capital Ares Capital Excluding Investments Purchased in the Allied Acquisition *At fair value. 33% 37% 13% 16% 1% 26% 13% 29% 21% 7% 4% 29% 23% 22% 19% 4% 3% Mid-Atlantic Midwest West Southeast Interna
Slide 21: 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% Core ARCC Portfolio* Allied** Total ARCC Core ARCC Portfolio* Allied** Total ARCC Q1-09 Q2-09 Q3
Slide 22: Investment Activity Since Quarter End
As of November 3, 2010, we made $128 million of new investment commitments since September 30, 2010 61% were investments in the Senior Secured Loan Program, 29% were in 1st lien senior secured debt, 2% were in 2nd lien senior secured debt and 8% were in equity securities 66% were fixed rate with a w
Slide 23: Committed Backlog and Pipeline
As of November 3, 2010, we had a current committed backlog and pipeline of $180 million and $310 million, respectively(25) 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
Slide 24: 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 25: 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 basic and diluted Core earnings per share: *Excludes $0.01, $0.06, $0.03, $0.02 and $0.02 per share of professional fees and other costs related to the Allied Acq
Slide 26: Change in Net Asset Value
Change in Net Asset Value *Excludes equity issued for the Allied Acquisition. Equity issuances, including DRIP* (27) (Dollar amounts in 000s, except per share data (26)) (unaudited) Quarter ended Quarter ended Quarter ended Quarter ended Quarter ended September 30, 2010 June 30, 2010 March 31, 2010
Slide 27: Portfolio Income Summary
Portfolio Income Summary Revenues by Source (28) Interest and Dividend Income by Asset Class $54,730 $59,118 $62,327 $62,028 $107,503 $111,757 93% 97% 90% 93% 88% 81% 15% 1% 5% 3% 7% 6% 3% 5% 5% 4% 4% $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 $90,000 $100,000 $110,000 $120,0
Slide 28: Portfolio Summary – Weighted Average Yields
Portfolio Summary – Weighted Average Yields(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% 16.00% Q2-09 Q3-09 Q4-09 Q1-10 Q2-10 Q3-10 0.00% 2.00% 4.00% 6.00% 8.00% 1
Slide 29: Portfolio Summary – Weighted Average Spread on Floating Rate Investments
Portfolio Summary – Weighted Average Spread on Floating Rate Investments(30) 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% Q2-09 Q3-09 Q4-09 Q1-10 Q2-10 Q3-10 0.00% 2.
Slide 30: Distribution of ARCC IRRs
Distribution of ARCC IRRs(31) Total of 103 exits from portfolio from October 8, 2004 through September 30, 2010 for an aggregate cash flow IRR to ARCC of approximately 14% Original capital invested of $2.5 billion and total proceeds from exits of $2.9 billion Approximately 81% of exits with IRRs to
Slide 31: 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 32: 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