SOURCE: Apollo Investment Corporation

May 29, 2007 16:00 ET

Apollo Investment Corporation Announces Quarter and Fiscal Year Ended March 31, 2007 Financial Results

NEW YORK, NY--(Marketwire - May 29, 2007) - Apollo Investment Corporation (NASDAQ: AINV) today announced financial results for its quarter and fiscal year ended March 31, 2007.

HIGHLIGHTS:

Investment Portfolio: $2.35 billion
Net Assets: $1.85 billion
Net Asset Value per share: $17.87
QUARTER ENDED MARCH 31, 2007 OPERATING RESULTS (in thousands, except per share amounts):
  Net income: $102,767
  Net income per share: $1.04

  Net investment income excluding accrual for net realized gain incentive
   fee: $42,993
  Net investment income per share excluding accrual for net realized gain
   incentive fee: $0.44

  Net investment income after deducting accrual for net realized gain
   incentive fee: $21,728
  Net investment income per share after deducting accrual for net realized
   gain incentive fee: $0.22

  Net realized gains: $106,599
  Net realized gains per share: $1.08

  Net change in unrealized appreciation: ($25,560)
  Net change in unrealized appreciation per share: ($0.26)

  Dividends to shareholders per share: $0.51
FISCAL YEAR ENDED MARCH 31, 2007 OPERATING RESULTS (in thousands, except per share amounts):
  Net income: $312,166
  Net income per share: $3.64

  Net investment income excluding accrual for net realized gain incentive
   fee: $146,584
  Net investment income per share excluding accrual for net realized gain
   incentive fee: $1.71

  Net investment income after deducting accrual for net realized gain
   incentive fee: $125,318
  Net investment income per share after deducting accrual for net realized
   gain incentive fee: $1.46

  Net realized gains: $132,882
  Net realized gains per share: $1.55

  Net change in unrealized appreciation: $53,966
  Net change in unrealized appreciation per share: $0.63

  Dividends to shareholders per share: $1.93
QUARTER ENDED MARCH 31, 2007 PORTFOLIO ACTIVITY:
  Cost of investments during the period: $432 million
  Investment sales and prepayments during the period: $349 million
FISCAL YEAR ENDED MARCH 31, 2007 PORTFOLIO ACTIVITY:
  Cost of investments during the period: $1.45 billion
  Investment sales and prepayments during the period: $845 million
Conference Call at 10:00 a.m. ET on May 30, 2007

The company will host a conference call at 10:00 a.m. eastern time on May 30, 2007 to discuss fiscal year financial results. All interested parties are welcome to participate. You can access the conference call by dialing (888) 802-8579 approximately 5-10 minutes prior to the call. International callers should dial (973) 633-6740. All callers should reference "conference ID #8773638" or "Apollo Investment Corporation". An archived replay of the call will be available through June 13, 2007 by calling (877) 519-4471. International callers please dial (973) 341-3080. For the replay, please reference digital pin #8773638.

Portfolio and Investment Activity

During our fiscal year ended March 31, 2007, we invested $1.45 billion, across 24 new and several existing portfolio companies. This compares to investing $1.1 billion in 26 new and several existing portfolio companies for the previous fiscal year ended March 31, 2006. Investments prepaid during the fiscal years ended March 31, 2007 and March 31, 2006 totaled $725 million and $145 million, respectively. In addition, investments sold during the fiscal years ended March 31, 2007 and March 31, 2006 totaled $120 million and $307 million, respectively.

At March 31, 2007, our net portfolio consisted of 57 portfolio companies and was invested 61% in subordinated debt, 4% in preferred equity, 9% in common equity and warrants and 26% in senior secured loans versus 46 portfolio companies invested 60% in subordinated debt, 2% in preferred equity, 7% in common equity and 31% in senior secured loans at March 31, 2006.

The weighted average yields on our subordinated debt portfolio, senior secured loan portfolio and total debt portfolio were 13.5%, 12.3% and 13.1%, respectively, at March 31, 2007. At March 31, 2006, the yields were 13.6%, 12.2%, and 13.1%, respectively.

During the quarter, we selectively invested $432 million across eight new and five existing portfolio companies with both new and existing sponsor relationships. Our average debt investment for the quarter exceeded $35 million. Investments prepaid during the quarter totaled $288 million. We also sold or reduced our positions in several investments opportunistically. Investment sales totaled $61 million. Overall portfolio credit quality remains strong with no new loans on non-accrual status during the quarter.

In addition and pursuant to a sale and purchase agreement dated as of January 24, 2007, along with the GS Funds, GS Prysmian (including Apollo Investment's position in GS Prysmian Co-Invest LP) agreed to sell its remaining equity securities it owned in Prysmian (Lux) Sarl to a newly created entity for cash and new equity securities consideration totaling EUR 85.6 million. This resulted in a $107.6 million realized capital gain included within our Statement of Operations. Apollo Investment is the sole limited partner of GS Prysmian Co-Invest L.P. ("GS Prysmian"), a limited partnership established under the laws of the Cayman Islands. Apollo Investment, through its limited partnership interest in GS Prysmian, indirectly owns approximately 4% of the common shares of Prysmian SpA (PRY. MI) ("Prysmian"), which commenced trading publicly in Milan on May 3, 2007, at EUR 15 per share (for a total implied equity capitalization of approximately EUR 2.7 billion as of May 3, 2007). Based on the IPO price, Apollo Investment's position in GS Prysmian Co-Invest L.P. is currently valued at approximately EUR 114 million. Apollo Investment's shares in Prysmian owned through GS Prysmian are subject to a 180-day lock-up arrangement. After the 180-day lock-up period expires, the GS Prysmian partnership will dissolve and Apollo Investment will own its shares in Prysmian directly.

Also subsequent to quarter end on April 16, 2007, a press release was issued announcing that Innkeepers USA Trust ("Innkeepers"), a hotel real estate investment trust and a leading owner of upscale extended-stay hotel properties throughout the United States, including Residence Inns, Summerfield Suites and Hampton Inns, has entered into a definitive agreement to be acquired by Apollo Investment Corporation through an affiliate for $17.75 per share in cash, plus the assumption of Innkeepers indebtedness. In connection with such transaction, we made a commitment of up to $200 million in common and preferred equity and agreed to pay certain fee obligations of the purchaser under certain circumstances. The transaction is subject to the approval of the common shareholders of Innkeepers and other customary closing conditions and is expected to close in the second quarter of 2007.

"We continue to benefit from our strong relationships with middle market sponsors and with commercial and investment banks in attracting investment opportunities in a highly competitive marketplace," said John J. Hannan, Chairman and Chief Executive Officer. "Total invested capital since our IPO now exceeds $3.4 billion and has generated an IRR in excess of 21%. Accordingly, we are extremely pleased with these results and remain well-positioned with significant capital resources and good dividend visibility heading into fiscal 2008."

RESULTS OF OPERATIONS

Results comparisons are for the quarters ended March 31, 2007 and March 31, 2006 and the fiscal years ended March 31, 2007 and March 31, 2006.

Investment Income

For the quarters ended March 31, 2007 and March 31, 2006, gross investment income totaled $75.3 million and $42.5 million, respectively. For the fiscal years ended March 31, 2007 and March 31, 2006, gross investment income totaled $266.1 million and $152.8 million, respectively. The continued increase in gross investment income for the quarters ended March 31, 2007 and 2006 and the fiscal years 2007 and 2006 was primarily due to the growth of our investment portfolio as compared to the previous fiscal period. Origination, closing and/or commitment fees associated with investments in portfolio companies are accreted into interest income over the respective terms of the applicable loans.

Expenses

For the quarters ended March 31, 2007 and March 31, 2006, net expenses totaled $53.1 million and $19.8 million, respectively. Of which, $32.0 million and $5.7 million, respectively, were performance-based incentive fees and $7.7 million and $6.0 million, respectively, were interest and other credit facility expenses. For the fiscal years ended March 31, 2007 and 2006, net expenses totaled $139.7 million and $63.7 million, respectively. Of which, $57.9 million and $22.3 million, respectively, were performance-based incentive fees and $34.4 million and $13.0 million, respectively, were interest and other credit facility expenses. Expenses exclusive of performance-based incentive fees and interest and other credit facility expenses for the quarters ended March 31, 2007 and March 31, 2006 were $13.4 million and $8.2 million, respectively. For the years ended March 31, 2007 and March 31, 2006, expenses exclusive of performance-based incentive fees and interest and other credit facility expenses were $47.4 million and $28.4 million, respectively. Of these expenses, general and administrative expenses totaled $1.8 million and $1.0 million, respectively, for the quarters ended March 31, 2007 and 2006 and $6.8 million and $5.0 million, respectively, for the fiscal years ended March 31, 2007 and 2006. Excise tax expense totaled $0.4 million and $0, respectively, for the quarters ended March 31, 2007 and March 31, 2006 and $1.1 million and $0, respectively, for the fiscal years ended March 31, 2007 and March 31, 2006. Expenses consist of base investment advisory and management fees, insurance expenses, administrative services fees, professional fees, directors' fees, audit and tax services expenses, and other general and administrative expenses. The increase in net expenses from fiscal 2006 to fiscal 2007 was primarily related to an accrual of $21.3 million in net realized capital gain incentive fees and an increase in base management fees and other general and administrative expenses related to the growth of our investment portfolio as compared to the previous period.

Net Investment Income

The Company's net investment income totaled $21.7 million and $22.7 million, respectively, for the quarters ended March 31, 2007 and 2006 and $125.3 million and $89.1 million, respectively, for the fiscal years ended March 31, 2007 and 2006. Due to significant gains realized during the quarter and fiscal year ended March 31, 2007, a net realized capital gains based incentive fee of $21.3 million was accrued within operating expenses lowering net investment income during those periods. The amount actually payable by the Company will be determined as-of the end of the calendar year.

Net Realized Gains

The Company had investment sales and prepayments totaling $349 million and $91 million, respectively, for the quarters ended March 31, 2007 and 2006 and $845 million and $452 million, respectively, for the fiscal years ended March 31, 2007 and 2006. Net realized gains for the quarters ended March 31, 2007 and 2006 were $106.6 million and $0.3 million, respectively and $132.9 million and $11.2 million, respectively, for the fiscal years ended March 31, 2007 and 2006. The increase in net realized gains from fiscal year 2006 to fiscal year 2007 was primarily due to a gain of $107.6 million realized from GS Prysmian Co-Invest LP (pursuant to a sale and purchase agreement dated as of January 24, 2007, along with the GS Funds, GS Prysmian Co-Invest LP agreed to sell its remaining equity securities it owned in Prysmian (Lux) Sarl to a newly created entity for cash and equity securities consideration totaling EUR 85.6 million).

Net Unrealized Appreciation on Investments and Foreign Currencies

For the quarters ended March 31, 2007 and March 31, 2006, net unrealized appreciation on the Company's investments, foreign currencies and other assets and liabilities decreased $25.6 million and increased $19.3 million, respectively. For the fiscal years ended March 31, 2007 and 2006, net unrealized appreciation on the Company's investments, foreign currencies and other assets and liabilities increased $54.0 million and $20.1 million, respectively. The decrease in net unrealized appreciation was primarily due to the reversal of significant unrealized gains on GS Prysmian Co-Invest LP during the quarter ended March 31, 2007. At March 31, 2007, net unrealized appreciation totaled $92.2 million of which $21.6 million was attributable to net unrealized depreciation on our bank debt/senior secured debt and $113.8 million was attributable to net unrealized appreciation on our subordinated debt, preferred stock and private equity (after considering the effects of foreign currency borrowing/hedging for our non-U.S. investments).

Net Increase in Net Assets From Operations

For the quarters ended March 31, 2007 and March 31, 2006, the Company had a net increase in net assets resulting from operations of $102.8 million and $42.3 million, respectively. For the fiscal years ended March 31, 2007 and 2006, the Company had a net increase in net assets resulting from operations of $312.2 million and $120.4 million, respectively. The net change in net assets from operations per share was $1.04 and $0.65, respectively, for the quarters ended March 31, 2007 and 2006 and $3.64 and $1.90, respectively, for the years ended March 31, 2007 and 2006.

LIQUIDITY AND CAPITAL RESOURCES

The Company's liquidity and capital resources are generated primarily through its senior secured, multi-currency, five-year, revolving credit facility maturing in April 2011 as well as from cash flows from operations, including investment sales and prepayments of senior and subordinated loans and income earned from investments and cash equivalents. During the quarter ended March 31, 2007, we closed on a follow-on equity offering and, including the underwriters' over-allotment option, issued 20.7 million shares of common stock receiving $443 million in net proceeds. We also increased our total commitments under our multi-currency, revolving credit facility during the quarter to $1.7 billion. The interest rate applicable to borrowings remains at LIBOR plus 100 basis points. At March 31, 2007, the Company has $492 million in borrowings outstanding and had $1.208 billion available for its use. In the future, the Company may raise additional equity or debt capital off its shelf registration or may securitize a portion of its investments. The Company may also further access $300 million of additional credit commitments available to it under the terms of its existing credit facility and as the Company's equity capital base grows. The primary use of funds will be investments in portfolio companies, cash distributions to our shareholders and for other general corporate purposes.

Dividends

Dividends paid to stockholders for the fiscal years ended March 31, 2007, 2006 and for the period April 8, 2004 (commencement of operations) through March 31, 2005 totaled $168.4 million or $1.93 per share, $102.7 million or $1.63 per share, and $30.2 million or $0.485 per share, respectively. The following table summarizes our quarterly dividends paid to shareholders for the fiscal years ended March 31, 2007, 2006 and 2005, respectively:

                                                       Declared Dividends
                                                       --------------------
Fiscal Year Ending March 31, 2007
Fourth Fiscal Quarter                                         $0.510
Third Fiscal Quarter                                          $0.500
Second Fiscal Quarter                                         $0.470
First Fiscal Quarter                                          $0.450

Fiscal Year Ending March 31, 2006
Fourth Fiscal Quarter                                         $0.450
Third Fiscal Quarter                                          $0.440
Second Fiscal Quarter                                         $0.430
First Fiscal Quarter                                          $0.310

Fiscal Year Ending March 31, 2005
Fourth Fiscal Quarter                                         $0.260
Third Fiscal Quarter                                          $0.180
Second Fiscal Quarter                                         $0.045




                      APOLLO INVESTMENT CORPORATION
                   STATEMENTS OF ASSETS AND LIABILITIES
                 (in thousands, except per share amounts)


                                                March 31,      March 31,
                                                  2007           2006
                                              -------------  -------------
Assets

Investments, at fair value (cost - $2,244,400
 and $1,520,025, respectively) (1)            $   2,348,981  $   1,556,698
Cash equivalents, at value (cost - $1,089,792
 and $898,374, respectively)                      1,089,792        898,374
Cash                                                  7,326          5,506
Foreign currency (cost - $832 and $1,078,
 respectively)                                          834          1,079
Interest receivable                                  35,217         24,827
Receivable for investments sold                      28,248         17,261
Receivable for commitment fee                             -            812
Dividends receivable                                  6,987            173
Prepaid expenses and other assets                     5,833          6,344
                                              -------------  -------------
    Total assets                              $   3,523,218  $   2,511,074
                                              -------------  -------------

Liabilities

Payable for investments and cash equivalents
 purchased                                    $   1,134,561  $     940,874
Credit facility payable                             492,312        323,852
Management and performance-based incentive
 fees payable                                        43,579         12,850
Interest payable                                      1,848          1,300
Accrued administrative expenses                         200            453
Unrealized depreciation on forward foreign
 currency contract                                        -            363
Other accrued expenses                                  970          1,527
                                              -------------  -------------
    Total liabilities                         $   1,673,470  $   1,281,219
                                              -------------  -------------

Net Assets

Common stock, par value $.001 per share,
 400,000 and 400,000 common shares
 authorized, respectively, and 103,508 and
 81,192 issued and outstanding, respectively  $         104  $          81
Paid-in capital in excess of par                  1,673,191      1,198,137
Distributions in excess of net investment
 income                                             (16,283)        (7,653)
Accumulated net realized gain                       100,494          1,014
Net unrealized appreciation                          92,242         38,276
                                              -------------  -------------
  Total Net Assets                            $   1,849,748  $   1,229,855
                                              -------------  -------------
  Total liabilities and net assets            $   3,523,218  $   2,511,074
                                              -------------  -------------Net Asset Value Per Share                     $       17.87  $       15.15
                                              -------------  -------------

(1) None of our portfolio companies are controlled by or affiliated to
    the Company as defined by the Investment Company Act of 1940.




                      APOLLO INVESTMENT CORPORATION
                   STATEMENTS OF OPERATIONS (unaudited)
                 (in thousands, except per share amounts)


                                    Quarter Ended       Fiscal Year Ended
                                      March 31,             March 31,
                                --------------------  --------------------
                                  2007       2006       2007       2006
                                ---------  ---------  ---------  ---------

INVESTMENT INCOME:
  Interest                      $  71,794  $  41,623  $ 245,348  $ 139,376
  Dividends                         2,003        114     18,021      3,656
  Other Income                      1,458        716      2,732      9,795
                                ---------  ---------  ---------  ---------
    Total Investment Income        75,255     42,453    266,101    152,827
                                ---------  ---------  ---------  ---------
EXPENSES:
  Management fees               $  11,565  $   7,186  $  40,569  $  23,408
  Performance-based
   incentive fees                  32,014      5,663     57,912     22,285
  Interest and other credit
   facility expenses                7,711      5,970     34,375     12,950
  Administrative services
   expense                            435        396      2,437      1,470
  Insurance expense                   201        208        819        844
  Other general and
   administrative expenses          1,218        398      3,700      2,777
                                ---------  ---------  ---------  ---------
    Total expenses                 53,144     19,821    139,812     63,734
                                ---------  ---------  ---------  ---------
    Expense offset arrangement        (46)       (20)      (128)       (50)
                                ---------  ---------  ---------  ---------
      Net expenses                 53,098     19,801    139,684     63,684
                                ---------  ---------  ---------  ---------
      Net investment income
       before excise taxes         22,157     22,652    126,417     89,143
      Excise tax expense             (429)         -     (1,099)         -
                                ---------  ---------  ---------  ---------
      Net investment income     $  21,728  $  22,652  $ 125,318  $  89,143
                                ---------  ---------  ---------  ---------
REALIZED AND UNREALIZED GAIN
 (LOSS) ON INVESTMENTS, CASH
 EQUIVALENTS AND FOREIGN
 CURRENCIES:
      Net realized gain (loss):
        Investments and cash
         equivalents              116,324      1,596    149,653      7,146
        Foreign currencies         (9,725)    (1,323)   (16,771)     4,019
                                ---------  ---------  ---------  ---------
          Net realized gain       106,599        273    132,882     11,165
                                ---------  ---------  ---------  ---------
      Net change in unrealized
       gain (loss):
         Investments and cash
          equivalents             (33,666)    22,516     67,908     19,428
         Foreign currencies         8,106     (3,170)   (13,942)       651
                                ---------  ---------  ---------  ---------
          Net change in
           unrealized gain
           (loss)                 (25,560)    19,346     53,966     20,079
                                ---------  ---------  ---------  ---------
      Net realized and
       unrealized gain from
       investments, cash
       equivalents and foreign
       currencies                  81,039     19,619    186,848     31,244
                                ---------  ---------  ---------  ---------
NET INCREASE IN NET ASSETS
 RESULTING FROM OPERATIONS      $ 102,767  $  42,271  $ 312,166  $ 120,387
                                ---------  ---------  ---------  ---------
EARNINGS PER COMMON SHARE       $    1.04  $    0.65  $    3.64  $    1.90
                                ---------  ---------  ---------  ---------
About Apollo Investment Corporation

Apollo Investment Corporation is a closed-end investment company that has elected to be treated as a business development company under the Investment Company Act of 1940. The Company's investment portfolio is principally in middle-market private companies. From time to time, the Company may also invest in public companies. The Company invests primarily in senior secured loans and mezzanine loans and equity in furtherance of its business plan. Apollo Investment Corporation is managed by Apollo Investment Management, L.P., an affiliate of Apollo Management, L.P., a leading private equity investor.

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties, including, but not limited to, statements as to our future operating results; our business prospects and the prospects of our portfolio companies; the impact of investments that we expect to make; the dependence of our future success on the general economy and its impact on the industries in which we invest; the ability of our portfolio companies to achieve their objectives; our expected financings and investments; the adequacy of our cash resources and working capital; and the timing of cash flows, if any, from the operations of our portfolio companies.

We may use words such as "anticipates," "believes," "expects," "intends", "will", "should," "may" and similar expressions to identify forward-looking statements. Such statements are based on currently available operating, financial and competitive information and are subject to various risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations. Undue reliance should not be placed on such forward-looking statements as such statements speak only as of the date on which they are made. We do not undertake to update our forward-looking statements unless required by law.

Contact Information

  • CONTACT:
    Richard L. Peteka
    Apollo Investment Corporation
    (212) 515-3488