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Business Services Industry

Allied Capital Announces First Quarter 2008 Financial Results

Business Wire, May 7, 2008

WASHINGTON -- Allied Capital Corporation (NYSE: ALD) today announced first quarter 2008 financial results.

Highlights for Q1 2008

* Net investment income was $0.43 per share, or $69.5 million

* Net realized gains were $0.02 per share, or $3.1 million

* The total of net investment income and net realized gains was $0.45 per share, or $72.7 million

* Net unrealized depreciation was $0.70 per share, or $113.4 million

* Net loss was $0.25 per share, or $40.7 million

* First quarter 2008 dividend of $0.65 per share was paid; second quarter dividend of $0.65 per share was declared

* Net asset value per share was $16.99

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* Shareholders' equity was $2.8 billion

* New investments totaled $275.1 million for the quarter

For the quarter ended March 31, 2008, net investment income was $69.5 million or $0.43 per share compared to net investment income of $39.5 million or $0.26 per share for the quarter ended March 31, 2007. Net investment income for the quarter ended March 31, 2008, included dividend income of $16.9 million, which included dividends received in conjunction with the sale of assets to AGILE Fund I, LLC (AGILE) totaling $5.4 million and the recapitalization of Norwesco, LLC of $7.1 million. Dividend income for the quarter ended March 31, 2007, was $1.3 million. Net investment income was reduced by excise tax expense of $2.3 million or $0.01 per share for 2008 and $3.6 million or $0.02 per share for 2007 and employee stock option expense of $4.2 million or $0.03 per share for 2008 and $3.7 million or $0.02 per share for 2007. For the quarter ended March 31, 2008, the company had net realized gains of $3.1 million, including a net realized gain of $8.8 million from the sale of a pro-rata strip of equity securities to AGILE. For the quarter ended March 31, 2007, the company had net realized gains of $27.7 million, including a $20.0 million gain from the sale of its investment in Palm Coast Data, LLC.

For the quarter ended March 31, 2008, the sum of net investment income and net realized gains was $72.7 million or $0.45 per share, as compared to $67.2 million or $0.44 per share for the quarter ended March 31, 2007.

For the quarter ended March 31, 2008, net change in unrealized appreciation or depreciation was a decrease of $113.4 million or $0.70 per share. The net depreciation for the first quarter of 2008 resulted from the reversal of net unrealized appreciation associated with net realized gains and dividend income of $17.5 million or $0.11 per share and net declines in investment values of $95.9 million or $0.59 per share. Net declines in investment values for the quarter ended March 31, 2008, included net depreciation in investments in financial services companies, asset managers, and CLO/CDO assets totaling $78.7 million, net depreciation of $9.3 million on our non-buyout loan and debt security portfolio as a result of using a yield analysis in connection with the adoption of FASB Statement No. 157, and net depreciation in the remainder of the portfolio of $7.9 million. For the quarter ended March 31, 2007, net change in unrealized appreciation or depreciation was an increase of $65.9 million or $0.43 per share. The net appreciation for the first quarter of 2007 resulted from the reversal of net unrealized appreciation associated with net realized gains of $26.3 million or $0.17 per share and net increases in investment values of $92.2 million or $0.60 per share.

Net loss for the three months ended March 31, 2008, was $40.7 million or $0.25 per share, as compared to net income of $133.1 million or $0.87 per share for the quarter ended March 31, 2007. The net loss for the first quarter of 2008 was due to net unrealized depreciation for the quarter. Net income (loss) can vary substantially from period to period due to the recognition of realized gains and losses and unrealized appreciation and depreciation, among other factors. As a result, quarterly comparisons of net income (loss) may not be meaningful.

At December 31, 2007, the company had estimated excess taxable income of $403 million available for distribution to shareholders in 2008. Given the company's regular quarterly dividend payout, which for the first quarter of 2008 was $108.1 million, we expect that a majority of the 2008 dividend payments will be made from excess 2007 taxable earnings. As a result, we expect most of the taxable income generated from 2008 net investment income and net realized gains to be available for distribution in 2009.

In addition to spillover taxable income, the company had approximately $235 million in deferred taxable income resulting from installment sale gains as of December 31, 2007. These gains may be deferred for tax purposes until the notes or other amounts received from the sale of the related investments are sold or collected in cash.

Portfolio and Investment Activity

New investments totaled $275.1 million for the first quarter of 2008. These investments included:

* $68.0 million to support the buyout of Augusta Sportswear Group, a supplier of blank athletic uniforms and apparel, outerwear and school-inspired products;

Business Services Industry

Allied Capital Announces First Quarter 2008 Financial Results

Business Wire, May 7, 2008

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