American Capital Earnings Drop 54% in Q4 After Reporting a Loss

American Capital (NASDAQ: ACAS  ) reported $232 million in operating income in 2013, which represented a decrease of $151 million, or 39%, relative to the $383 million seen in 2012. This was almost entirely the result of a $163 million decline in its interest and dividend income, which fell 28% year over year.

For the fourth quarter, the company said its operating income fell from $83 million to $38 million, a 54% decline. In addition, as a result of a depreciation of its portfolio company investments, earnings per share fell by $1.04 to a loss of $0.66 per share.

American Capital did increase its book value by 6% over the full year, from $17.84 per share to $18.97, a $1.13 gain. However, that represented a decrease of $0.57 per share relative to the $19.54 in book value the company reported in the third quarter.

"In 2013, we modestly increased our book value per share by 6%, despite the headwinds of a decrease in value of American Capital Asset Management and our Operating Companies," said Chairman and CEO Malon Wilkus. "Net appreciation of European Capital more than offset net depreciation in other business lines. We also made important progress in each of our business lines during the year, which helps position us for better performance in 2014."

The company said it continued its share repurchase efforts, and during 2013 it repurchased more than $560 million (or 40.4 million shares) of its common stock. In the fourth quarter, American Capital repurchased 8.9 million of its shares for $132 million, representing an average price of $14.88 per share. Since it began repurchasing shares in August 2011, it has purchased $1.1 billion of its common stock, or 27% of the shares outstanding before the program launch.

"While the valuation of [American Capital] declined in the fourth quarter of 2013 primarily from the declining assets under management in our mortgage REITs, we believe that the mortgage bond market has stabilized and we are guardedly optimistic for growth at [American Capital] in 2014," CFO John Erickson said.

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  • Report this Comment On February 11, 2014, at 1:50 PM, spokanimal wrote:

    "Stabilization" of the m-REIT market, as they say, remains to be seen as the Fed continues to taper it's Quantitative Easing program.

    We'll see if their singing that tune if the 10 year treasury yield surges to 3.5% this year, now won't we.


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Patrick Morris

After a few stints in banking and corporate finance, Patrick joined the Motley Fool as a writer covering the financial sector. He's scaled back his everyday writing a bit, but he's always happy to opine on the latest headline news surrounding Berkshire Hathaway, Warren Buffett and all things personal finance.

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9/3/2015 11:02 AM
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