American Capital's Q4 net earnings up 256% to US$381M year-over-year, citing steep reduction in operating expenses

Andrew Rogers

BETHESDA, Marlyand , February 16, 2011 (Associated Press) – American Capital Ltd., a private equity firm and asset manager, said on Tuesday its fourth-quarter profit more than tripled on a steep reduction in operating expenses. The performance beat Wall Street expectations, and shares of American Capital surged more than 10 percent in extended trading.

For the three months ended Dec. 31, American Capital earned $381 million, or $1.08 per share, up from $107 million, or 38 cents per share, in the same quarter a year ago.

Its net operating income grew to $67 million, or 19 cents per share, from $19 million, or 7 cents per share in 2009.

Analysts surveyed by FactSet had expected net operating income of 17 cents per share, on average.

Shares in American Capital jumped 88 cents to $9.60 in after-market trading following the release of the earnings report.

Total operating income fell 15 percent to $143 million from $169 million. That category includes interest and dividend income, and fee income.

That decline was more than offset by a 53 percent reduction in operating expenses, which fell to $76 million from $160 million. The biggest expense line, covering salaries, benefits and stock-based compensation, fell 49 percent.

With $23 billion in assets under management, American Capital works with other private equity investors to buy stakes in companies. It provides mezzanine debt and senior debt, meaning that another fund acts as the deal's sponsor.

American Capital's largest shareholder is billionaire John Paulson's hedge fund. He made a fortune during the housing crash by betting against the same mortgage investments that crippled banks and other investors.

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