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Ares Capital Corporation (NASDAQ:ARCC)
Q4 2008 Earnings Call
March 2, 2009 10:00 pm ET
Michael J. Arougheti – President & Director
S. Davis – Chief Financial Officer
Carl Drake – Senior Vice President Finance, Head of Capital Markets and Investor Relations
Scott Lem – Vice President of Finance
Eric Beckman – Investment Committee Member
R. Kipp deVeer – Investment Committee Member
Mitch Goldstein – Investment Committee Member
Michael L. Smith – Investment Committee Member
Greg Mason – Stifel Nicolaus & Company, Inc.
Vernon Plack – BB&T Capital Markets
Jasper Birch – Fox-Pitt Kelton
Sanjay Sakhrani – Keefe, Bruyette & Woods
Fay Elliott-Gurney – Bank of America/Merrill Lynch
[Adam Waldo – Private Investor]
[Dennis Foss – Private Investor]
Nicholas J. Capuano– Imperial Capital
Welcome to the Ares Capital Corporation earnings conference call. At this time all participants are in listen only mode. As a reminder, this conference is being recorded on Monday, March 2, 2009. Comments made during the course of this conference call and webcast and the accompanying documents contain forward-looking statements and are subject to risk and uncertainties.
Many of these forward looking statements can be identified by the use of the words such as anticipates, believes, expects, intends, will, should, may and similar expressions. The company's actual results could differ materially from those expressed in the forward-looking statements for any reason including those listed in its SEC filings. Ares Capital Corporation assumes no obligation to update any such forward-looking statements.
Please also note that the past performances or market information is not a guarantee of future results. During this conference call the company may discuss core earnings per share or core EPS which is a non-GAAP financial measure as defined by SEC's Regulation G core EPS and the net per share increase or decrease in stockholders' equity resulting from operations less realized and unrealized gains and losses, any incentives and management fees attributed to such realized gains and losses and any income taxes related to such realized gains.
A reconciliation of core EPS to the net per share increases decreases in stockholders' equity resulting from operations, the most directly comparable GAAP financial measure can be found in the company's earnings press release. The company believes that core EPS provides useful information to investors regarding financial performance because it is one method the company uses to measure its financial condition and results of operations.
At this time we would like to invite participants to access the accompanying slide show presentation by going to the company's website at www.AresCapitalCorp.com and clicking on the March 2, 2009 presentation link under the stock information section of the investor resources tab. Ares Capital Corporation's earnings release and annual report are also available on the company's website.
I will now turn the call over to Mr. Michael Arougheti, Ares Capital Corporation's president.
Michael J. Arougheti
I'm joined today by Rick Davis our CFO; Carl Drake; and Scott Lem from our financing and accounting team and Eric Beckman, Kipp deVeer, Mitch Goldstein and Michael Smith, senior members of our investment advisors management team.
I hope you all have had a chance to review our press release and our investor presentation hosted on our website. Before Rick gets in to the financial details of the quarter, I want to take a few minutes to comment on current market conditions and describe how we are managing through these turbulent times. I'll think finish by highlighting our results and then touch on our dividend.
As you all know the fourth quarter was one of the most challenging periods all of us have seen in terms of credit and stock market volatility as well as economic deterioration. The credit crunch that began in the summer of 2007 entered its most serious phase during the fourth quarter as the economic recession and financial crisis deepened. The broadly syndicated leverage loan market came under severe technical pressure as CLO and hedged fund unwinds triggered force selling of loan portfolios.
The fourth quarter set a record with over $5 billion in loans from liquidating portfolios sold at auction versus an average of $2 billion per quarter for the first nine months of the year. On the demand side funds flows were negative with CLO issuance down 85% for the year and with prime rate funds experiencing redemptions from retailer investors. In addition, repayments available for new investments slowed to the lowest pace in six years.
As the quarter progressed, these technical pressures gave way to weakening fundamentals as default rates began to rise. Although defaults remain most pronounced in cyclical industry sectors where ARCC has minimal or underweighted exposure, lagging 12 month industry defaults as measured by S&P increased from about 3.3% to 4.4% based upon the number of issuers defaulting.
Default rates have continued to increase significantly in 2009 and overall S&P index of broadly syndicated leverage loans which had been under pressure in the third quarter declined roughly 23% during the fourth quarter and 29% for the year. Within the loan market and S&P's leverage loan index in particular, asset performance was bifurcated meaningfully based upon quality in certain portfolio attributes.
For example, defensive industry sectors within the index such as healthcare and food and beverage which represent nearly a third of ARCC's portfolio collectively ended the year with average sector bid prices nearly 30 percentage points higher than more cyclical sectors such as auto, building and development, publishing and home furnishings which represent less than 5% of ARCC's portfolio.
Overall, approximately 78% of ARCC's portfolio industry weightings were above the median price performance within the index. Importantly, the types of loans more representative in our portfolio, 2008 vintage, full covenant and middle market all outperformed their respective index counter parts pre-2008, covenant light and large corporate.
As we described last quarter ARCC's portfolio is not directly comparable to this index. In fact, it has very positive characteristics not exhibited in the index such as significantly higher LIBOR spreads, stronger covenant protection and mostly lead agent or control positions of a particular tranche within credits.
Now, as far as market conditions in the first quarter, recent federal reserve and government actions to stimulate broken credit markets has slowly improved credit market activity. We have recently seen the credit markets dealing from the equity markets. Forced auctions of portfolios have slowed significantly and net investor inflows to the sector are positive year-to-date. This is evidenced by the improvement in the broad leverage loan market indices since year end which are up about seven percentage points, the surge in investment grade issuances and lately the reopening of the high yield market.
Government action has also improved the tone in current credit markets and credit spreads have declined for investment grade and high yield asset classes since year end. However, financial and BDC stocks have continued to underperform reflecting fears regarding liquidity and covenant compliance, credit weakness and potential dilution. Recent equity market trends are a reminder that despite some easing in the credit markets we still face some pretty severe economic headwinds.
At ARCC, we were clearly impacted by this economic and market environment, most notably by the lower market pricing for loans and the declining new issue market. Nevertheless, we remain confident in our strategy and positioning. We believe our defensibly positioned portfolio together with our efforts in managing the business in three key areas: balance sheet and liquidity; aggressive credit management; and the pursuit of strategic initiatives to enhance shareholder value will all enable us to weather this turbulent market.
Let me now take a few moments to remind you and update you on these key focus areas. Regarding balance sheet priorities, our goal is to enhance our financing flexibility and maintain a prudent degree of leverage. During the fourth quarter and in to the first quarter of the year we made significant progress on this front. In December, we relaxed our net worth requirement on our CP funding facility to create an additional $200 million of cushion. At year end this covenant was less restrictive than our 2 to 1 asset coverage test and more in line with the covenants of our larger revolving credit facility.
Following quarter end we increased our than $510 million longer term revolving credit facility to $525 million using the facilities accordion feature to bring in a new financial institution in to our bank group with no change in terms. While we recognize the attractiveness of share repurchases in the current environment, we have chosen not to buy back stock as we are laser focused on managing our leverage limitations. Therefore, we are concentrating on using our available capital to repurchase our CLO debt as a way to reduce leverage on an accretive basis for shareholders.
As disclosed in the release this morning, we recently executed and are closing on multiple opportunistic debt repurchases of our on balance sheet CLO notes totaling $27 million at a total cost of $6.6 million. These 2009 transactions reduced our debt by a net $20.4 million and also created a distributed realized gain of $20.4 million or $0.21 per share.
Importantly, these transactions increase the cushion under our asset coverage ratio by $40.8 million bringing the total cushion on a pro forma basis to $276 million for an adjusted net debt to equity ratio of .75 times using our 12/31/08 balance sheet. This calculation nets out to $48.6 million in cash not restricted for our dividend paid on January 2nd.
However, our work is not done on the financing front, as our annually renewable $350 million CP funding facility which had $114.3 million drawn at year end matures in July of this year. Our hope is that we will renew or modify and extend that facility ahead of its July renewal date. While there can be no assurances to the outcome, we are currently having very productive and preliminary discussion with our banking partner to do this.
From the credit side of things, our strategy is to be pro active with respect to potential restructurings, repricing, repayments and future funding needs within the portfolio. As such, in addition to our normal course portfolio management we are in the process or re-underwriting all of the credits in our portfolio, a process which involves among other things site visits, management interviews, customer and supplier diligence and a reforecast of all of our portfolio companies financial and operating plans as well as associated covenant compliance.
Many benefits come from this process but the most important one is the fact that we arm ourselves with the knowledge to be proactive. We are not simply reacting to situations as they occur. These actions may uncover potential future repricing or necessary balance sheet restructurings which could result in new capital injections, the reduction of unfunded commitments or debt pay downs.
Since we are a lead agent or have a blocking position in this significant majority of these situations, we often are in a position to drive this process. From a repricing standpoint we continue to make progress in Q4 by completing several and we are also getting an increasing number of LIBOR floors in our credits as we reprice. We now have LIBOR floors in approximately 17% of our floating rate assets.
Lastly, our strategic initiatives to enhance shareholder value include continuing to focus on raising new managed funds, pursuing selective asset sales for diversification and deleveraging, rotating our portfolio and harvesting equity gains where possible. We hope to continue raising additional managed funds to compliment our over $650 million of assets, managed in Ivy Hill Funds I and II and we continue to believe that investment opportunities are compelling for those with capital.
These managed funds are beneficial to our shareholders as they provide management fee income, additional capital to support ARCC portfolio companies and allow us to maintain an energized and active organization. We continue to rotate our portfolio. We are pleased that 67% or $1.3 billion of our portfolio has now been either originated or repriced since the credit dislocation began in July of 2007. We did harvest a small realized gain during 4Q of $0.02 per share.
Turning to our results for the quarter then, please turn to the summary Slide Three in our presentation. As you'll see we reported fourth quarter core earnings per share of $0.33 versus $0.37 a year ago and $0.34 last quarter. Including net realized gains of $0.02 per share, our core earnings per share and net realized gains totaled $0.35 per share providing about 83% dividend coverage in the fourth quarter. However, due to the fact that certain management incentive fees were accrued but not paid and were therefore not tax deductable expenses, our distributable income for 2008 was higher than our dividend in 2008.
These incentive management fees were earned by our investment advisor and are accrued on our financial statements but will not be paid until there is a minimum 8% increase in book shareholders equity over a trailing four quarter period. Deferral of these incentive fees aligns the interests of our investment advisor with those of our shareholders and provides additional liquidity until the benchmark shareholder return is met. Accordingly, we are carrying over an estimated $0.16 of distributable income in to 2009. Despite the lower transaction activity during the quarter that we will discuss later, our core EPS was essentially flat with the third quarter when deducting the $0.01 of excise tax that we paid on the carryover.
The decline in our net asset value per share from $12.83 to $11.27 resulted mostly from marking our portfolio to market as of 12/31 and to a lesser extent from credit or performance weakness in a select number of our portfolio companies. During the fourth quarter we also increased our use of independent third party valuation firms who during this period reviewed more than 60% of our portfolio. Factoring in the company's independently reviewed at September 30, 2008, over 80% of our portfolio companies are either new additions or have been reviewed by third parties since September 30th.
We feel good about the overall health of the portfolio with five issuers on non-accrual out of 91 total, up from four last quarter now representing approximately 1.6% of the portfolio at value and 4.4% at cost. Our weighted average portfolio credit rating of 2.9 was unchanged from last quarter.
Now, a few words about our dividend. As you may know, BDC RIETS are required to pay out at least 90% of annual taxable income in dividends. A BDC may elect to pay out more than 100% in any quarter or even over a year and return capital to stockholders if it deems either it is in the best interest of all stockholders and it has the liquidity to do so, or it expects the shortfall to be temporary.
Now, at ARCC as you know, we have a policy of not providing dividend guidance however, as we did last quarter we want to continue to provide investors a framework to understand how we think about the dividend and how current market conditions could impact dividend levels. As you can see in the release, we paid our fourth quarter dividend of $0.42 and this morning we declared our first quarter dividend of $0.42, consistent with prior levels.
As I stated, for the tax year 2008 we fully covered our dividend from distributable income and generated an estimated carryover of $0.16 per share in to 2009. Although our core EPS and net realized gains totaled $1.49 for the year versus our $1.68 dividend, our spill over taxable income from 2007 of $0.09 and the accrued but unpaid incentive fees I mentioned earlier totaling $0.26 provided the excess.
Going forward, these same variables will be in play. Our core EPS and net realized gains or losses will be measured against important balance sheet and market considerations. If you consider our current level of core EPS and our net realized gains announced thus far in 2009, we believe there is a path to full dividend coverage. However, there are number of other factors that can affect our dividend levels going forward.
The positive factors that may help us are the deployment of capital for accretive uses such as new investments, debt repurchases or potential share repurchases. Thirdly, continued portfolio rotation and repricings, potential realized gains and a recovery in the loan market which could trigger unrealized appreciation. Potential negative factors could be further material mark-to-market losses, a weakening economy which may cause increased realized credit losses, non-accruing loans or further credit write downs and lastly, a significant increase in our borrowing spread or lack of available financing.
We will continue to actively monitor all of these variables as part of our dividend policy and ongoing dividend discussions and we recognize the importance of dividends to our shareholders but as we note in our 10K filing, at some point in the future we may determine it is in the best interest of our shareholders to reduce the dividend.
I'll discuss recent portfolio activity and credit quality in a few minutes and then conclude our prepared remarks following Rick's comments covering our Q4 and full year 2008 financial results in detail.
Richard S. Davis
Please stay on Slide Three in our presentation. As Mike outlined our basic and diluted core EPS and net investment income were both $0.33 for the fourth quarter, a $0.01 decrease versus last quarter and a $0.04 decline from the same period last year. However, for the year we earned $1.42 in core EPS versus $1.40 in 2007, a slight increase despite the over 30% increase in shares outstanding.
Adding in net realized gains, we earned core EPS plus net realized gains of $0.35 for Q4 versus $0.41 in Q4 2007 and for the full year we earned $1.49 versus $1.50 in 2007. As Mike stated, our core EPS would have been flat with last quarter's excluding excise tax we paid on our estimated carryover of $16 million in distributable income in 2009. On a GAAP basis we incurred a loss of $1.56 per share for the full year 2008 versus $1.34 in earnings in 2007.
Despite significantly lower originates of $76 million in Q4 versus $183 million in Q3 and well below the $477 million in the fourth quarter of 2007, our fee income held steady quarter-over-quarter partially on higher percent fees on new deals and the strength of higher management and minimum related fees. Accordingly, our recurring interest and dividend income was 90% of our revenues for the quarter.
Our net commitments were essentially flat with $76 million in gross new commitments offset by an exit of $75.1 million in existing commitments. From a funding standpoint, our gross and net fundings were $111.2 million and $12.7 million respectively. Despite market conditions we continued to experience a relatively healthy level of exits and repayments totaling just under $100 million of which only $11.5 million were asset sales to our Ivy Hill funds.
We experienced one repayment of about $35 million at 107% of par for an airport retailer resulting in a realized IRR of 34%. The remaining $52 million was related to portfolio amortization, prepayments, and revolver pay downs from existing portfolio companies. Consistent with our objectives, our gross new commitments provided an aggregate yield of over 15% versus our exited commitments with a yield of 11.5%. The total return profile on such commitments is higher when including fees and call protection.
Despite the over 250 basis point drop in LIBOR during the fourth quarter which impacted our floating rate portfolio, our fixed rate portfolio which makes up 57% of our assets LIBOR floors and higher yielding new investments led us to hold our yield relatively stable. Specifically, the weighted average yield on our debt and income producing securities for the fourth quarter was 11.73% at costs compare to 11.83% at the end of Q3 and 11.64% during the fourth quarter of last year.
On the other hand, our cost of debt declined 98 basis points from 4.01% to 3.03% sequentially and was down 263 basis points year-over-year reflecting lower LIBOR rates and our attractive low cost funding. Putting it together, our investment spread improved to 8.7%, 88 basis points sequentially and 278 basis points from a year ago.
We closed the fourth quarter with a $2 billion investment portfolio at value covering 91 portfolio companies that have a weighted average EBITDA of $45 million. Excluding cash and cash equivalents, our quarter end portfolio was comprised of approximately 54% in secured senior debt securities with 32% in first lien and 22% in second lien assets, 31% in senior subordinated debt securities and 15% equity in other securities.
Now, turning to Slide Four, although we reported net realized gains of $0.02 for the quarter, we reported net unrealized losses of $1.49 per share which contributed to our GAAP net loss of $1.14 per share. Our net asset value per share was $11.27 at the end of the quarter down from $12.83 a quarter ago reflecting primarily lower mark-to-market values in our portfolio and to a lesser extent some credit related write downs.
As shown on Slide Six, we had $142.6 million of net investment losses which included $144.2 million of net unrealized depreciation partially offset by $1.7 million in net realized gains. Our net unrealized depreciation is net of approximately $15.2 million of unrealized appreciation primarily due to either strong company performance or M&A valuation indications of certain portfolio companies.
Of the unrealized appreciation for the quarter, we think of these as occurring in three general categories: mark-to-market write downs; some combination of mark-to-market write downs; some element of company performance; and primarily credit related write downs. When combing our credit related write downs net of our write ups due to stronger performance and expected gain activity, this amounted to less than 15% of our total net write downs for the quarter.
Slide Eight shows the summary of our debt facilities. As of December we had $908 million in total debt outstanding with approximately $265.2 million of capacity available for additional borrowing under our existing credit facilities, they're subject to leveraging and borrowing base restrictions. In February of this year we also increased our borrowing capacity by $15 million by increasing the size of our revolving credit facility to $525 million.
We also had $89.4 million in cash on hand but when you deduct our dividend payable of $40.8 million which was paid on January 2nd our cash would have totaled $48.6 million at year end. Reducing debt by this $48.6 million in cash our net debt to equity ratio at year end was about .79 times. In addition, as Mike mentioned earlier and as noted in our earnings release, since the beginning of 2009 we have also reduced our debt by a net amount of $20.4 million and recognized a $20.4 million realized gain by purchasing our CLO notes at a 76% discount.
Inclusive of these repurchases, our debt net of cash on hand has declined to $840 million. Using our 12/31/08 stockholders' equity, this would place our adjusted debt to ratio at .75 times and our asset coverage ratio at 233% or dollar cushion of $276 million. What's not shown in this Slide is our investment capacity in our managed funds. The Ivy Hill middle market credit funds I and II. At year end, these funds had approximately $34 million and $214 million of investment capacity respectively.
Our next debt maturity is July 21, 2009 when our CP facility is scheduled to mature. As Mike mentioned, we are actively engaged in discussion with Wachovia Wells Fargo, the servicer of this facility to renew or modify and extend the facility ahead of its July renewal date. We have no other scheduled maturities until the end of 2010. At year end we were in compliance with the covenants on each of the three debt facilities. We continue to believe our most restrictive financial covenant is either our 2 to 1 asset coverage test or our net worth test in our revolving credit facility calculated at $873.8 million or a pro forma cushion of about $242 million.
One other item I want to mention on the topic of our liabilities, while we fair value our assets each quarter under FAS 157, we elected to not fair value our liabilities under the FAS 159 election during a short window of time we had the option. Given the long term lower cost liabilities we enjoy, our reported net asset value would be significantly higher had we made this election.
By marking our liabilities to market prices as of the end of the fourth quarter as disclosed in our 10K we estimate that the unrealized gains on the fair value of our debt would exceed $186 million indicating that over $1.91 per share of value is not reflected in our net asset value as of yearend. This value reflects the attractive below current market interest rates on our long term funding in place and has been substantiated by our recent debt repurchases.
Turning to Slide Nine, we paid our regular fourth quarter dividend of $0.42 per share on January 2nd and we've also declared our regular first quarter dividend of $0.42 per share payable on March 31, 2009 to stockholders of record as of March 16th. I'll now turn the call back over to Mike.
Michael J. Arougheti
Now, a few words about our recent investment activity and touch on our portfolio performance before concluding. As Rick mentioned earlier in the fourth quarter we closed $76 million in new commitments across five companies with four commitments to existing portfolio companies and only one new commitment. Our one new commitment involved a $44.5 million commitment to one of the largest canned seafood manufacturers in North America.
As part of the transaction, we were paid an arrangement fee for leading and structuring $135 million senior subordinated facility. Our other activities during the quarter were all opportunistic debt purchase of existing portfolio companies at attractive prices.
Slide 10 outlines our new investment activity. Of our new commitments 40% were in first lien senior secured debt, 53% in senior subordinated debt and 7% in equity securities. The vast majority of the new commitments were fixed rate with only 24% of such commitments in floating rate assets. From a repayment standpoint, 32% were in first lien, 55% in second lien with 13% in senior subordinated debt.
Now, turning to Slide 11 for updated portfolio quality statistics, as the data here reflects, we are investing in larger companies at higher net investment spreads. We have accomplished this by bringing our average total portfolio leverage down, now at 4.2 times versus 4.6 times a year ago and holding our interest coverage flat to trending higher now at 2.6 times versus 2.2 times a year ago and 2.8 times last quarter.
I'd like to point out a couple of important points. Number one, the portfolio average EBITDA has increased significantly from $26.2 million in the fourth quarter 2007 to $45.2 million in the fourth quarter of 2008 as larger company investments increased the average. During the fourth quarter the average EBITDA for new investments totaled $66.7 million. What is not shown is the positive outcome of our majority senior debt portfolio strategy. We are lending on a weighted average basis beginning at 1.9 times cash flow through the 4.2 times EBITDA.
Accordingly, we believe our recoveries on defaulted loans should be superior to a typical subordinated debt investor that may have invested between four times and six times or in certain cases higher in the capital structure. This quarter to give investors more transparency in to portfolio quality I'll provide some summary performance information. Using the average for our portfolio, underlying company level year-over-year revenue and EBITDA increased 5% and declined just over 1% respectively.
Importantly, on a weighted average basis giving credit to our most significant investments year-over-year revenue and EBITDA both increased over 10% respectively. So, while some of our portfolio companies are no doubt experiencing some weakness given the overall market conditions, in the aggregate performance in the portfolio has held up quite well particularly in our largest positions.
Turning to Slide 12, consistent with our views on the credit and economic environment, we've continued to focus our investments in more defensive non-cyclical and service oriented businesses. For example, at the end of the fourth quarter our three largest industry concentrations, now at 43% of the total and each representing 10% or more of our portfolio, were healthcare at 20%, food and beverage at 12% and education at 11%.
Our overall portfolio sector weightings compare very favorably to the sectors within the broad leverage loan market indices in terms of price performance and default experience. Accordingly, we continue to believe that our portfolio will continue to be less volatile compared to the broadly syndicated loan market given our negligible exposure to real estate, autos, gaming and lodging, transportation and media and our underweighted exposure to publishing in favor of over weights in healthcare, education and food and beverage.
Slide 13 provides another view of our portfolio quality. As a reminder, we employ an investment rating system which grades one through four with one being the lowest grade for investments that are not anticipated to be repaid in full and with four being the highest grade for investments that involve the least amount of risk in our portfolio. At the end of the fourth quarter, the weighted average grade of our portfolio investments remained at 2.9, unchanged from the last two quarters.
We did have some movement with a few new two and one credits and since we had a realization and a gain on a four rated credit and we left a small equity investment in place, we downgraded that investment from a four to a three. Overall, we have 2.4% of our portfolio at value in our lowest rating category of one where we do not expect a full recovery against 5.7% at value in our highest rated category four.
Regarding our equity portfolio which represents about $250 million at fair value, 99% of the portfolio is rated there or four with approximately 1% rated at two, 86% rated at three and 13% rated four. The equity portfolio carries an overall rating of 3.1. Continuing on with the quality discussion, other than our five portfolio companies on non-accrual, one of which was new this quarter representing about 1% of cost, we have no companies in payment default.
Lastly, turning to Slide 15 I'll discuss new investments to date. Since the end of the fourth quarter we closed $9.6 million of new investments yielding 16.5% at costs and we exited $21.7 million yielding 13.5% including $19.5 million in asset sales to Ivy Hill I and II for a net reduction of $12.1 million. At this point in time we have no significant backlog or pipeline to speak of and this is a reflection of our stated balance sheet strategy and liquidity management as well as a reflection of the general market slowdown.
In conclusion, we recognize that we are in a prolonged recession and in a difficult part of the credit cycle with industry defaults heading higher. We clearly face many challenges ahead with respect to the difficult economic and market conditions and tight liquidity. Although we've seen improving credit markets thus far in 2009, liquidity still remains tight particularly for financial issuers. However, we continue to believe that we are well positioned at ARCC given the current market.
Our cautious optimism is based upon a number of things, our defensibly positioned portfolio both from an industry leverage and asset class standpoint, our affiliation with Ares Management which provides invaluable expertise, capital relationships and industry knowledge, our lead agent or control position which gives us the ability to control re-pricings and restructurings, our capital position with a pro forma net debt to equity ratio of .75 times and we believe we have the flexibility to sell assets for further liquidity needs if necessary.
Fifth our capability to recycle capital into higher yielding assets over time and lastly the potential growth opportunity in our managed fund business given the compelling market opportunity for those with capital and strong investor relationships.
To reiterate our strategy we plan to work to maintain a prudent level of leverage and financial cushion against our asset coverage test and financial covenants, we will aggress manage our credit profile and we will opportunistically explore ways to improve shareholder value in keeping with such priorities.
Rest assured we will continue to evaluate all of our options and seek to make appropriate adjustments to our strategy that are in the best interests of our shareholders. We'd like to thank all of our shareholders for their loyalty and confidence in us through these very difficult times and we would as importantly like to thank our entire team of professionals here at Ares for all of their hard work and dedication in these challenging markets.
With that, that covers our prepared remarks and we would love to open up the line for questions.
Question-And-Answer Session
(Operator Instructions) Our first question comes from Greg Mason – Stifel Nicolaus & Company, Inc.
Greg Mason – Stifel Nicolaus & Company, Inc.
I know you mentioned that your gains are going to help cover the dividend shortfall for probably the next quarter or two, but could you give us a little more color on your plans to getting core EPS in the dividend more aligned? Assuming that the market stays where it is today, what's your timing and execution of the plan to get those realigned?
Michael J. Arougheti
It's really an ongoing day to day analysis for us, Greg, as we mentioned last quarter. We strategically raised capital in April, 2008 and we laid out a one year plan for ourselves to develop our strategy and despite the market headwinds, we actually feel that we're very far along in that plan. As we mentioned in the call, it's really a constant monitoring of our income statement and our ability to drive core earnings through increased investment, re-pricings and restructurings, capital gains, etc. measured against our liquidity picture.
Right now we can't really predict where it's going to go and where it's going to come from. What we can say, and we tried to lay out in the call, is we have a lot of levers to pull both from a balance sheet and income statement perspective that we're working to pull and we're really going to keep an eye on the market and see how things develop.
Greg Mason – Stifel Nicolaus & Company, Inc.
You mentioned you have the ability to buy back CLO debt. What's the opportunity to buy back more? Was that just a onetime distress seller or are there lots of opportunities and was there a hint in your commentary that you alluded to potential stock buy back in the future?
Michael J. Arougheti
Taking the first part of your question, we think it is a very significant opportunity for us to continue to explore debt repurchases. The total size of our CLO facility was about $314 million at face.
In that market, as I think everybody on the call knows, almost everybody is a distress seller, just given a lot of the pressures that the leveraged and structured products buyers are under, the prices at which you can accumulate that kind of paper are very low and in our personal opinion not a real good indicator of fundamental value. It's something that we will continue to pursue and we'll pursue aggressively.
The reason that we're doing it is we mentioned on the call and in the earnings release it ahs the benefit of providing realized capital gains that are distributable as part of our dividend strategy. Number two I think and most importantly it reduces our leverage and increases our leverage cushioned by the amount of the profit.
Obviously as a result the book value goes up. The reason I mentioned share repurchases was really as a juxtaposition to the debt repurchase because as attractive as share repurchases from a strict IRR standpoint, buying back stock with capital in this environment obviously puts a lot of pressure on liquidity and on the asset coverage test, so we believe at least given our balance sheet that focusing on buying back our debt right now is a much better use of capital.
Greg Mason – Stifel Nicolaus & Company, Inc.
Then I'll ask one more and the hop back into the queue, I was surprised to hear you mention what the impact of a mark-to-market of FAS 159 would be. Are you hearing something out of Washington that that window may reopen and are there any regulations potentially coming out of Washington that have you excited?
Michael J. Arougheti
We've been mentioning the FAS 159 adjustment in all of our filings since the FAS 159 window opened and closed at the beginning of the year so you can look every quarter as to what that number is. The disclosure is not new. I think that the disclosure has a little bit more weight behind it in light of our debt buy back strategies as a good indicator for what that value really is.
There's a lot of discussion in Washington around BDCs and finance companies and banks in general and there are a lot of things to get us excited but people have their hands full down there. We're not managing our company relying on any relief from Washington but are hopeful that as the government continues to look for ways to get capital flowing in our economy again that we may not be overlooked.
Our next question comes from Vernon Plack – BB&T Capital Markets.
Vernon Plack – BB&T Capital Markets
Michael, you mentioned on an adjusted basis debt to equity is .75. Where would you like to see that number today?
Michael J. Arougheti
I'd like to see it as low as possible. Historically, we've operated at about .6 times leverage. Running with the low leverage that we did I think put us in a position to absorb some of the mark-to-market accounting issues that the industry is facing. Obviously it's a balancing act.
You have to make sure that you are maintaining a prudent amount of leverage so that you're not jeopardizing the balance sheet but you want to make sure that you're staying invested so that you can maintain your EPS and your dividend.
Vernon Plack – BB&T Capital Markets
That's kind of why I asked the question.
Michael J. Arougheti
We feel good about where we are now. We'll continue to try to reduce it through some debt repurchases and just general portfolio run off. Again, given the fact that we're the lead investor in most of the deals that we're involved with, we have very good visibility to the liquidity picture in our portfolio. If there's ever a point in time where we feel that liquidity is tightening as we look forward, there are other things that we could do to generate liquidity.
I think given where we are now the current level of .75 times feels more than comfortable. Lastly I would just say fourth quarter '08 was a severe dislocation in the credit markets and we saw that across the financial sector in terms of mark-to-market valuations. While Q1 economic indicators are that the economy is continuing to weaken as I mentioned in our prepared remarks, the credit markets are actually strengthening a little bit and have delinked from the equity markets.
So while we can't predict as we sit here today with a month left in the quarter, my sense is that Q1 will probably not be as severe as Q4 just given some of the trends that we're seeing in the broader capital markets for debt.
Vernon Plack – BB&T Capital Markets
I just want to make sure I understand the discussion on the deferral of payment of incentive fees. Could you go over that one more time please?
Male Executive
The way that incentive fees are calculated, as you recall the first part you go through from performance standpoint they were earned but there's also a second piece on payment of those incentive fees that essentially you have to have a minimum of an 8% increase in booked shareholders' equity over a four quarter trailing period.
So those incentive fees were accrued. Actually the incentive fee for the first quarter was paid but for quarters two through four, they were deferred. The total amount came to about $25.3 million and from a tax standpoint, we were not able to deduct those so that increased our distributable income for 2008.
When that reverses and those are actually paid in the future, they'll be deducted for tax purposes.
Vernon Plack – BB&T Capital Markets
Last question, Mike, just sort of bigger picture in terms of balance sheet management and one of the things that has gotten some of the BBCs in trouble is you, and this is an oversimplification, but you're lending long and borrowing short and while it's nice to buy some of your longer term debt at a material discount which has plenty of benefits, what about the thought in terms of how you manage your balance sheet and are you thinking of alternatives in terms of just the short term facilities that you have in terms of funding your portfolio?
Michael J. Arougheti
I would agree to I think that's a little bit of an oversimplification. A lot of the issues that some of our peers have gotten into I think have more to do with portfolio construction and underlying credit quality than they do frankly with asset and liability matching. If you look at the weighted average life of our underlying portfolio, I would venture to say it's probably a four year duration versus a six year stated maturity.
When you think about our weighted average life of our liabilities, and we have this in our Investor Presentation, we're actually quite nicely matched. Number one priority right now is obviously to deal with our July maturity. We are in active discussions to do that. We have good relationships with our banking partners and our lenders and so while we can't promise anything, we're hopeful that we'll get that renewed ahead of the July maturity date.
Michael J. Arougheti
The challenge that we face is we are an investment grade rated company, Ares Management manages in excess of $30 billion of assets in total around the globe and we have very deep lender relationships. The reality of it is, is that capital flows to investment grade financials right now is challenged to say the least.
Rest assured we are spending a lot of time on planes talking to our banking partners, talking to other financing providers and alternatives but as we sit here today, the markets are challenged and constrained. We do hope that when the markets open, and we expect that they will open given all the government intervention that's been going on and some of the signs of life we're seeing in the credit markets, that when they open that they will flow to companies like ourselves.
Our goal is just to make sure that we're staying in front of people and managing that process as best we can. But unfortunately we can't force people to lend to us.
Our next question comes from Jasper Birch – Fox-Pitt Kelton.
Jasper Birch – Fox-Pitt Kelton
Following on your CB funding facility, thanks for the color but how much capital do you have on hand if you do have to pay it down, if it was today?
Michael J. Arougheti
At the end of the year, we had about $85 million of cash on hand and roughly half of it was set aside for the payment of our dividend on January 2nd and the facility outstandings at the end of the year were about $114 million.
Jasper Birch – Fox-Pitt Kelton
In terms of your asset management, both the Ivy Hill funds, are those fully invested right now?
Michael J. Arougheti
They are not. We mentioned on our call we have capacity in those funds of about $250 million in the aggregate.
Jasper Birch – Fox-Pitt Kelton
Also in terms of expanding your asset management business I'm assuming a little bit longer term, would you be looking at raising a new fund yourself or are you looking at the market right now about taking off maybe CLOs from managers that maybe aren't performing so well?
Michael J. Arougheti
Both and it's not just CLOs. Given our capabilities and the breadth of our platform, we feel very good that there will be an opportunity to consolidate the industry and consolidate some subscale asset managers. That is less of a capital outlay and fund formation as it is just entering into management contracts and merger discussions.
With regard to the fund formation, again Ares Management is a very large well established manager of credit globally and what we've tried to do, and hopefully it's appreciated, is bring our private investor relationships to the table for the benefit of the public shareholders given all the constraints in the equity and debt markets today.
Hopefully it'll be a combination of both where we're raising new funds and looking for ways to use our platform to manage other assets.
Jasper Birch – Fox-Pitt Kelton
Then just one last thing, in terms of your investment activity, I think it was Slide 15, you gave some great color. Is that an appropriate run rate for what we can expect for the last month of this quarter?
Michael J. Arougheti
Again, we're being very stingy with our capital, it's one of the great frustrations that we have. We still have to capacity in our Ivy Hill funds and we're actively investing those but right now we're focused on preserving liquidity and preserving balance sheet. I would expect our new investment activity, at least on balance sheet, to be fairly low for the foreseeable future until the markets stabilize and we have a better view towards asset values reversing.
Jasper Birch – Fox-Pitt Kelton
In terms of your $22 million of assets, what sorts of bids were you seeing? Were they pretty much in line with where you had things valued at the end of the year?
Michael J. Arougheti
Yes, they were. Remember 95% plus of what we do we exit through the M&A market which is one of the frustrations of trying to shoe horn our assets into a FAS 157 framework, but in a context where most of our exits are coming from the M&A market, there's a sale to the company and we get repaid. As we mentioned, our one gain this quarter came from a second lien investment that we had made where the company got acquired by a strategic acquirer and we got taken out.
We got taken out significantly above our mark for two reasons. Number one, we had marked the asset on a FAS 157 basis but as importantly, there was call protection in that investment and one of the challenges of marking credit assets to market is that you actually don't get to write them up to account for call protection.
As we've talked about in previous calls, we have a number of assets where we have embedded gains to the extent that the companies get taken out with call protection, so that's not reflected in the balance sheet.
Our next question comes from Sanjay Sakhrani – Keefe, Bruyette & Woods.
Sanjay Sakhrani – Keefe, Bruyette & Woods
Most of my questions have been answered, but I've got a couple. On the dividend, understanding the goal is not to cut, but if at some point you think reducing the dividend is the best course of action, how should we think about the level of the dividend? Should we think that you've cut to what current income is or somewhere to incorporate the weaker economic trajectory?
Michael J. Arougheti
I don't have a good answer for you, Sanjay. Again this is something that we'll develop over time. Our hope is that we can maintain it and we'll do everything that we can to maintain it. We feel that we have done as well of a job as we can protecting the balance sheet and the enterprise value of the company.
So long as we don't believe that maintained dividend jeopardizes the enterprise or is not the interest of our shareholders, then we'll do everything we can to keep it. I can't answer that question, because we really don't have the data now to really evaluate where the markets are going and how our company is going to look relative to those markets.
Sanjay Sakhrani – Keefe, Bruyette & Woods
I guess this came up in a competitor call earlier, but I was just wondering, along the lines of FAS 159, is there any way to restructure the debt where as if you could qualify for FAS 159 even though you didn't elect it last year? Just trying to understand that and I guess just to follow up on that, are the covenants based off of GAAP in the revolver?
Michael J. Arougheti
I'm sorry, Sanjay. The second part of the question was, what about GAAP and the revolver?
Sanjay Sakhrani – Keefe, Bruyette & Woods
The covenants in the revolver on the debt side, are they based off of GAAP or some other measurement?
Michael J. Arougheti
They're based off of GAAP. To the extent that there was some change in GAAP or ruling as to what GAAP should be our types of assets it would obviously have a very beneficial impact on our financial statements and our covenant compliance. With regard to 159, it has to be a material restructuring of a loan agreement or a new loan facility.
For example, if we opened up a new line somewhere we could theoretically adopt 159 for that line, but the value of 159 would be negligible because in theory you would be borrowing at current market rates.
The real benefit of a 159 election would have been to capture the value in some of our longer dated lower yielding debt that we originated three, four and five years ago. Any new facilities I would image would get re-priced to the existing market and wouldn't really have a beneficial impact.
Our next question comes from Fay Elliott-Gurney – Bank of America/Merrill Lynch.
Fay Elliott-Gurney – Bank of America/Merrill Lynch
Is that $250 million from the Ivy Hill fund fully available to you or are there any restrictions on what they could buy from you or if they're available even to buy your debt our your equity?
Michael J. Arougheti
As per the Regs being that they are in our corporate chain, there are no restrictions on co-investment. We obviously as fiduciaries for those funds manage those funds with appropriate concentration and diversification limits. But no, there's nothing legally or from a tax standpoint that would prohibit co-investment between Ares Capital and those funds.
Fay Elliott-Gurney – Bank of America/Merrill Lynch
Would they be allowed to buy any actual Ares equity or Ares debt?
Michael J. Arougheti
In theory they would.
Our next question comes from Greg Mason – Stifel Nicolaus & Company, Inc.
Greg Mason – Stifel Nicolaus & Company, Inc.
Could we talk about as we look at your portfolio and cash turnover, how much of your portfolio matures in 2009 and what type of prepayment activity can you guys foresee going forward in terms of exits from the portfolio?
Michael J. Arougheti
We're digging through the maturity number and we'll get you that in a second. I'll approach the second part of that question as we dig up the number. M&A activity has slowed dramatically as everyone knows and would expect. However, we've been pleasantly surprised both in the third quarter of last year and the fourth quarter of last year at the amount of repayments excluding sales for our own managed funds.
My recollection is in Q3 we had about $175 million of net repayments and in Q4 it was about $100 million which on a percentage of portfolio basis is pretty high given the market conditions. We attribute that to the strength of the underlying portfolio companies and some of the industries that we're in that tend to be healthier and have a fair amount of strategic M&A activity.
While we recognize that activity will be slow, we're cautiously optimistic that we'll continue to see repayments through strategic M&A activity within the portfolio. Then obviously the question back to the dividend and investment strategy here is when we get that capital back, we have to make sure that we go through the analysis and evaluate what the best use of those funds would be.
Greg Mason – Stifel Nicolaus & Company, Inc.
While you're checking on the maturity for 2009, can you comment on your thoughts about paying the dividend in stock or maybe the shortfall between core EPS and the dividend in stock?
Michael J. Arougheti
By the way we don't think that we have any material maturities in 2009 and offline we can get that information to you to the extent that the answer is different. The stock dividend question is again something that we have considered and looked at and evaluated. Again, given the market environment this is the kind of world where you have to consider all things and try to evaluate the positives and the negatives.
I think it's a very good thing for the industry because a lot of the liquidity issues that the industry is facing are based on mark-to-market accounting issues that are outside of the control of certain companies and having the opportunity to create incremental liquidity on a balance sheet in this kind of a market environment is obviously pretty significant. I think you guys put out a very good piece on the pluses and minuses of issuing stock at the current levels.
So I direct people to that piece to really evaluate it, but it's not something we chose to do this quarter. It's one of many tools that we have in our toolkit to manage through these difficult markets and we'll just continue to play it by ear.
Greg Mason – Stifel Nicolaus & Company, Inc.
Just hypothetically assuming the stock is at this level if you were faced with between cutting it or paying the dividend in stock, what would your thoughts be?
Michael J. Arougheti
I would view that as dividend guidance, Greg, and I'd be reluctant to answer that on this call.
Greg Mason – Stifel Nicolaus & Company, Inc.
You talked about some of your investments in existing portfolio companies. You're able to buy at pretty steep discounts. Can you talk to us what the average discounts were for those investments?
Michael J. Arougheti
We can't specifically but again you could probably infer the types of levels we're talking about just based on where the indices are trading and the types of levels that get publicized when people are selling assets in distress.
Greg Mason – Stifel Nicolaus & Company, Inc.
Then one last question, we were looking through the K and it looks like you have about $280 million of unfunded commitments and $100 million you have the discretion over. Can you talk about the remaining $180 million, what type of timing that you guys are thinking about on those unfunded commitments.
Michael J. Arougheti
Sure, this question came up last quarter as well so I'll just reiterate the framework for understanding those. You have to think of those in two big buckets. One are traditional revolving credit facilities or working capital facilities where the borrower has the ability to borrow at a day's notice subject to borrowing base compliance.
The other bucket is what we would call delayed draw or multiyear acquisition lines or cap ex facilities. If you look at the $182 million roughly $93.5 million is traditional working capital facilities. Of that $93.5 million based on the most recent borrowing bases about $86 million was available to be borrowed.
While we can't give you an exact sense of where the cash position is company by company, day to day as we mentioned last quarter of those companies in the aggregate there's about $87 million of cash on hand as of the date of their most recent financial statements.
All of the revolvers are out to some of our strongest portfolio companies and to put it in perspective, during the fourth quarter which arguably was probably the most difficult quarter we faced, we saw $8.4 million of net borrowings in the aggregate under those facilities and the number was at or slightly below that in Q3.
The second bucket is again more strategic types of capital lines and those tend to be used in tandem with things like making acquisitions or paying earn outs. Given the economic environment that we're in as you can imagine a lot of the triggers to free up that capital will probably not be met and as per the contract there's an ability on the part of our borrowers to borrow that as we watch the company performance and we think about where these companies are heading.
We don't perceive a material risk in those funding either. As I mentioned in our prepared remarks obviously as part of our re-underwriting discussions and ongoing process any chance we get to reduce unfunded exposure to our portfolio companies without jeopardizing the health or liquidity position of those companies, we take it and you can see that over time we've been bringing that number down naturally over the last three quarters.
Greg Mason – Stifel Nicolaus & Company, Inc.
I apologize, one last question. As we look on your balance sheet and we see the management and incentive fees payable now at $33 million, is that the buildup of the incentive fees that you haven't had to pay each quarter?
Michael J. Arougheti
Greg Mason – Stifel Nicolaus & Company, Inc.
And so at some point when the markets come back and you exceed your hurdle rate, when that becomes payable I assume that entire amount is due in cash immediately?
Michael J. Arougheti
Greg Mason – Stifel Nicolaus & Company, Inc.
Can you remind us what the hurdle is that's for that to hit?
Michael J. Arougheti
An 8% increase in shareholders' equity through distributions over a trailing four quarter period.
We have a question from [Adam Waldo – Private Investor].
[Adam Waldo – Private Investor]
I wonder if you call can just spend a little bit more on this liquidity issue that's been touched on a couple different times in the call around the CP facility that matures in July of 2009? You talked obviously about the extensive conversations you're having with Wells Fargo/Wachovia and presumably other banks about renewing and/or extending that facility.
I wonder if you all have had some conversations to this point or are anticipating your term conversations with non-bank potential lenders, the Feds commercial paper facility, family offices, insurance companies and the like? If you can just spend a minute on that?
Michael J. Arougheti
As I mentioned, we are talking to anybody that will talk to us. There's a lot of things that a management team needs to do in this kind of a market environment and we're doing them. We're spending a lot of time managing our existing lender relationships and also trying to cultivate new ones.
I think the reality of where the markets are today is that liquidity is severely constrained in all the public and private markets and credit is just not flowing normally or the way that it should. That said, we think through a lot of the government programs that have been put in place, the credit will start to flow and our hope is that given our performance and the breadth of our platform that we will see some of that capital.
But I would just characterize the nature of the conversations that we're having with most parties as people are very supportive of what we're doing, they're very supportive of the business model and complementary of the strategy but are dealing with their own liquidity issues and are reluctant to part with capital right now.
[Adam Waldo – Private Investor]
Have you formally submitted or do you plan formally to submit an application to participate in the Feds commercial paper lending facility?
Michael J. Arougheti
We have not and as of today we do not.
Our next question is from [Dennis Foss – Private Investor].
[Dennis Foss – Private Investor]
My name is Dr. Dennis Foss, I'm an accredited investor and I'd like to echo your last comments. My sense is that things are thawing a little bit and mass psychology is a funny thing, but the great fear that has been gripping people I think could turn around quite easily and actually become quite positive over the coming months and so I think you're wise to keep your options open.
I'd like to congratulate you gentlemen on the prudence with which you've approached your portfolio, the way you've harbored your resources, the kind of defensive portfolio you've built. It's really a very impressive portfolio, I think, fitting the times. I'd like to comment a little bit on the dividends. I'm a dividend investor, it's an important part of my investing style.
I think the fact that you've maintained your dividend is sending a very clear, positive psychological sense of your own belief in your practices and your own belief in your investments and your own belief in your future.
The gentleman who had mentioned the study that they had done on giving stock in lieu of cash dividends, my sense when I've seen it happen is that it's absolutely disastrous to the stock because a) you're diluted and b) people who are looking for income sell that stock when they receive and you're also giving out stock at a very, very low price.
I'd rather see if you had to make a cut, I'd rather see the dividend simply cut to preserve the cash and forget giving out additional stock, but I'm really pleased to hear that your goal is try and maintain the dividend. Again you can't send a stronger psychological message to the markets than maintaining your dividend and I'm sure that eventually your stock price is going to reflect that once we reach calmer days.
Again my primary thrust is to compliment you on your prudence and your good judgment.
Michael J. Arougheti
Thank you, sir, we appreciate the kind words.
Our next question comes from Nicholas J. Capuano– Imperial Capital.
Nicholas J. Capuano– Imperial Capital
Just a quick question on the size and quality of the backlog of potential investment opportunities you're seeing out there, just in terms of the quality and terms. How is it trended, how does it look today and then just one quick follow up after that?
Michael J. Arougheti
I'll give you a slightly longer answer than maybe you wanted, but as we've talked about before, we think about our origination channels in four key buckets. One is just the general new issue market, i.e., new buy outs and new opportunities in performing companies to put capital work in change of controller growth financings.
As we've said a couple times this morning, that market is very slow right now, there's a pretty wide disparity between seller expectations and buyer expectations and given the general liquidity and valuation picture, the highest quality companies are probably not coming to market right now.
Secondly, is opportunities within our existing portfolio and as we mentioned in our prepared remarks of the five investments that we made last quarter four of them were within our existing portfolio and only one was a new company.
Obviously we can't think of a better place to invest capital than behind our existing portfolio companies, companies where we have a relationship with management, where we have visibility into the operations and underlying financial performance of the business and situations where we can actually bring new capital to improve our existing position either by changing our investment structure or by re-pricing our existing investments.
So we will continue to look for ways to accretively invest within our existing portfolio. Third is just general secondary market purchases. Obviously there's a lot of press and discussion about opportunities to buy bank debt and high yields and other debt securities at deep discounts from distressed sellers.
That opportunity is obviously very significant but probably a little harder to execute on than the newspapers would lead people to believe. We did see a lot of forced selling towards the end of last year. We have not seen a lot of forced selling in the first quarter of the New Year and while it's an attractive economic opportunity, we're not quite sure how it fits with our core balance sheet strategy.
So we're tending to use the Ivy Hill funds when it comes to just buying smaller positions in broadly syndicated loans at a discount, but that opportunity is obviously attractive and you can get a sense for what those IRRs are when you look at where the indices are trading.
The fourth is what we would call generally distressed investing or rescue capital or refinancing opportunities where as a new issue we have the ability to bring capital to bare to shore up a balance sheet in an overleveraged company or to bring capital to bare to provide capital to an undercapitalized business and given the fact that a lot of the technical pressure we saw towards the end of last year has given way to fundamental weakness, our expectation is that in '09 and '10 that we will see a fair amount of that type of activity and for those that know us well, they know that that's obviously a core competency of ours.
Gentlemen, we have no further questions in the queue.
Michael J. Arougheti
Thank you all for taking so much time with us this morning. Again, we want to thank you for your continued support and loyalty and we again want to thank the team for all of their hard work and dedication over the last couple of quarters. We will keep at it and we will talk to you all next quarter. Thank you.
Ladies and gentlemen, that does conclude our conference call for today. If you missed any part of today's call, a recording of this conference will be available until March 23rd, 2009. To access the replay, you can call 1-877-344-7529. To call internationally, you can call 412-317-0088. For all replays the ID number is 428049. Thank you for your participation. You may now disconnect.
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Posted by Serena Bakes Simply From Scratch / Wednesday, February 18, 2015
Pico De Gallo
Cook time: 0 minutes
Total time: 15 minutes
Yield: 12 servings
- 2 pounds Tomatoes, Diced
- 1/2 whole Small Whole Head Cabbage, Shredded
- 2 whole Carrot, Shredded
- 1/2 whole Red Onion, Diced
- 1-2 whole Jalapeno, Diced (Dependent On How Hot You Like It.)
- 1/4 cup Pickled Jalapenos, Chopped
- 1/2 whole Orange, Juiced
- 2 whole Lime, Juiced
- 1/2 bunch Cilantro, Chopped Finely
- 1/2 teaspoon Sea Salt, Or To Taste
- 1/2 teaspoon Pepper, Or To Taste
- 1 teaspoon Garlic Powder
- 1 tablespoon Pickled Jalapeno Juice
- Place all ingredients in a large bowl. Fold in all ingredients until thoroughly combined. Best if allowed to chill for 2 hours but can be eaten immediately.
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34 comments:
Hi Serena, it look appetizing and a healthy version. Like your idea of using orange juice. I suppose it's nice to goes with tortillas too. Have a nice day.ReplyDelete
Mmm, pico de gallo.. :) I love mine on grilled chicken! This recipe is great! Hugs!ReplyDelete
It sounds so good!!!ReplyDelete
I really like this recipe.
xoxoxo ^^
I loooove homemade pico! Really like the orange juice addition as well.ReplyDelete
Serena! I would love that brownie recipe too!! :) I will have to try this recipe out, seeing as how much i love tacos and cheese dips aren't really creative or healthy for my hips...ReplyDelete
Hi Serena: I'm so glad you stopped by my blog. I'm your newest "follower" as I don't want to miss any of your delicious-looking recipes.ReplyDelete
Hi Serena!ReplyDelete
What a lovely place you have here! I have enjoyed perusing many of your posts. So many wonderful recipes and great photos too!
Nice to meet you!
Kindly, Lorraine
I love the addition of the cabbage, carrot and oj. This looks like a recipe I must try soon. We do love Pico De Gallo in many forms. Thanks for commenting on my blog. Glad I found you, I'm a follower!ReplyDelete
I was just about to say that this would be perfect on grilled chicken, and then I saw that someone said that above. (Apparently, I'm not that creative. Ha!) It looks delicious. Now, I'm headed off to click that thumbnail I see for zucchini/carrot/pineapple/walnut cake.ReplyDelete
Hi There. I wanted to let you know that I have passed the Liebster Award on to you! If you have not heard of it or seen it on other blogs, it's an award given to fantastic blogs with under 200 followers. And your one of them! Now you get to pass it along to 5 other blogs of your choice!ReplyDelete
You can see the post on my blog here: http://dawnye7-noideas.blogspot.com/2012/02/liebster-award.html
this looks divine! LOVE pico! can't wait to try your recipe.ReplyDelete
Thank you for your visit and kind words and following. I see some yummies here that I will have to try. This salas is one for sure.ReplyDelete
GOD bless and keep you all safe.
This looks so appetizing! I love it.ReplyDelete
I love pico de gallo - so fresh and delicious!ReplyDelete
Thanks for stopping by my blog. Just love this recipe and am now a follower. Take care DianeReplyDelete
I love pico de gallo in restaurants, but I have to admit I have never made it at home. Your recipe looks wonderful! I have never tried pickled jalapeno. Is that your own addition, or is it traditional for this recipe?ReplyDelete
Thank you for the kind comment on my blog. I'm so glad you stopped by my blog because it helped me to find you and your wonderful blog.:) I look forward to checking out all of your wonderful recipes!
Oh I love your pictures and they way you've presentedReplyDelete
Looks so good! I can't wait until we have fresh tomatoes again (can. not. stand the ones from the store)!ReplyDelete
Heather- I not am really not sure if it's traditional... We have had it that way at several Mexican places and I enjoyed it, so it's the way I make it!ReplyDelete
This looks and sounds delicious! Have a lovely weekend:)ReplyDelete
What a lovely recipe and beautiful photos! This would surely be a hit at any party or any day of the week!ReplyDelete
Hi, Serena! We live in Texas, and make Pico often. I can't wait to try this variation..it sounds great. I am a new follower!ReplyDelete
Hi Serena, that looks delicious! Very fresh and colourful. Gorgeous light on the pictures too: )ReplyDelete
Lovely Pico,Serena!And I love the jumble of bright colors the concoction has to offer.The addition of orange juice caught my eye and I'm sure it adds an extra zing to the Pico.Awesome flavors:)ReplyDelete
Yay for chips and Pico! This looks so good! Can't wait to try this one this weekend. ;)ReplyDelete
Hey Serena I've been wanting to make this pico for a while now and finally whipped it up for my Grandpa's 81st birthday party yesterday. Everyone devoured it, it was literally the first dish gone. We enjoyed it with a big bag of Food Should Taste Good multigrain chips. Thanks for the recipe... I'll definately be making this again!ReplyDelete
I could put pico on basically everything and be completely content with life. Love this, Serena! Pinned!ReplyDelete
I love pico de gallo, it's such a fresh burst of flavor in the wintertime!ReplyDelete
So fresh and delicious!! SU & Yummed! Cant wait to try this!ReplyDelete
So healthy, pretty and undoubtedly delish...I want to make some very soon!ReplyDelete
Love homemade pico and yours looks great.ReplyDelete
This sounds divinely delicious and healthy!!! Too good.ReplyDelete
Wow, never had pico with cabbage and carrots but it sounds wonderful and so healthy too! Love all he extra veggies!ReplyDelete
We love a fresh pico de gallo and your recipe sounds so healthy, crunchy, fresh, and delicious! Thank you for sharing Serena!ReplyDelete


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The DK Eyewitness Travel Guide Naples & the Amalfi Coast will lead you straight to the very best of this stunning region. Packed with detailed maps, beautiful cutaways and floor plans of all Naples and the Amalfi Coast's major sights, this best-selling guide highlights the unmissable. From exploring the magnificent Baroque churches and world-class beaches on the coast line, to visiting the teeming street markets, and trying pizza in Naples, the guide provides all the information you need to experience authentic Naples at it's best. Features include detailed information on the five main areas of Naples, plus all the must-see attractions of Pompeii, Sorrento, Ravello, Capri, Amalfi and the rest of the stunning coastline. The DK Eyewitness Travel Guide is fully updated and expanded with dozens of reviews for hotels and restaurants, as well as tips for shopping and entertainment in Naples and the Amalfi Coast.
DK Eyewitness Travel Guide Naples & the Amalfi Coast - showing you what others only tell you.
DK Eyewitness Travel Guide Naples & the Amalfi Coast - showing you what others only tell you.
(Computer Bookshops Limited)
Bli först att betygsätta och recensera boken .
Fler böcker inom
- Häftad (paperback)
- Språk: Engelska
- Antal sidor: 256
- Utg.datum: 2011-05-23
- Upplaga: New edition.
- Förlag: DORLING KINDERSLEY
- Illustratör/Fotograf: 650 illustations
- Illustrationer: 650
- Dimensioner: 223 x 132 x 22 mm
- Vikt: 481 g
- Antal komponenter: 1
Fler böcker av Dorling Kindersley
Recensioner i media
"A pleasurable read with ravishing photography plus maps and plans of supreme quality." -- The Observer
(Computer Bookshops Limited)


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Get Your EDF 4.1 DLC Free for a Limited Time
Who hasn't had their dreams haunted by the chant; EDF! EDF!? Recently it would be everyone without a Playstation 4 as the latest outing for the series, Earth Defense Force 4.1, is only out on that platform. To increase any potential jealousy, new DLC is out for the game and is free to download for the first two weeks.


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Hack your biorhythms! Blaring alarm clocks be gone: A mix of light, soothing sounds and aromatherapy smells rouse you gently from your slumber with gentler way to start the day. It runs $69.95 from Hammacher Schlemmer, and includes 4 types of aromatherapy beads and 10 felt disks for your own custom aromatherapy oils, plus an array of other features.
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- February 26, 2010
( 21)
Demo Version Available!
This game is for little Kids.
Drag the puzzle piece shown at the top of the screen to match it with its other half or with its shadow.
Only 3 different puzzles. Kid gets bored quickly. Could be much better with more puzzles and updates. Full version is not worth purchasing yet.
Terrible! Want a refund! Only three puzzles! Free games are better than this!
Could use some more puzzles.
Needs more then 3 puzzles.
Very appropriate game for the two through five age group.
Very entertaing for my 3 yr old
Memorize & match the pairs of farm animals with fun learning game for toddlers!


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San Diego Articles
Showing 1-3 of 3 Historical Resorts
The Sofia Hotel
Walk the streets of downtown San Diego, where the cobblestone shows through modern engineering and you are transported to a simpler time. The Sofia Hotel is surrounded by these stone memorials and you can discover the stories of years past with a trip to a number of local museums. The history buff in your group will have no complaints! ... more
- Wifi
- Restaurant Onsite
- Pets Allowed
- Property Size 211 units
- Conference Facility
- Kids Allowed
- Nearby City San Diego
- Nearby Water Pacific Ocean
- Open Dates All Year
- Beach
- Family
- Romantic
- Ecotourism
- Luxury
- Historical
- Honeymoon
- Holiday
- Spa
Hotel del Coronado
Minutes from the international hub of downtown San Diego, Coronado Island captures the relaxed beauty and seaside charms of the quintessential Southern California coastal lifestyle. The legendary Hotel del Coronado was built in 1888 and is designated a National Historic Landmark. A living legend for 128 years, The Del celebrates its rich history as... more
Glorietta Bay Inn
Built in 1908 as the home for John D. Spreckels - a San Diego civic visionary - the mansion features a spectacularly-resorted Music room with a baby grand piano and guest library, a Breakfast Patio, and the Verandah Room featuring a unique porthole wall design. Learn more about the area when you participate in the 90-minute Coronado Historic... more
Showing 1-3 of 3 Historical Resorts


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Related quotes
"The yen continues to weaken, as it should, given the continued weak economic data coming from Tokyo."
"Commodity funds now believe that the dollar can only weaken further so they have nothing to lose by getting heavily into gold."
"With the US new home sales proving to be a positive surprise, traders who are still holding short dollar positions are likely to continue adjusting their positions this week."
"Weaker job creation weakens the Canadian dollar. The Bank of Canada may be a little less active in 2006."
"We have been expecting this system to weaken for the last few days, but the system has not weakened. I cannot speculate about it because we don't know why."


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This FOA is a collaborative initiative between OAH and the Centers for Disease Control and Prevention. The purpose of this research opportunity is to rigorously evaluate innovative interventions, designed for young men ages 15-24 years old to reduce their risk of fathering a teen pregnancy, that can be feasibly implemented in target settings (e.g., clinics, schools, community settings, youth-serving organizations, correctional settings). Up to three five-year research projects will be funded with an annual budget of $600,000 - $1,000,000. Any questions should be directed to the CDC contacts listed in the FOA.
Resources for RFA-DP-15-007
- Effectiveness of Teen Pregnancy Prevention Programs Designed Specifically for Young Males
- Letters of Intent Due: Friday, February 6, 2015
- Update on Letters of Intent: Letters of Intent were requested, but not required. Eighty (80) letters of intent were received. This number does not necessarily indicate the number of applications that will be submitted for the Friday, March 6, 2015 deadline.
- Applications Due: Friday, March 6, 2015
- Technical Assistance Webinar for Potential Applicants – Wednesday, January 14, 2015 at 1:00pm ET
- Call-in number: 1-877-985-9419, passcode 773482


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Forty ecstatic guests were entertained at Stewart Thomas Manor, 2143, Boundary Avenue, Farmingdale New York. A great choice, close to everything yet a world away. The philosophy here is, 'Excellence in catering'.
A groom's night is very rowdy and guys have a lot of fun.The idea is that the bride is not present, as this is the last time a groom is free and away from his wife to be. The cake that was ordered from us had to capture that mood.
So, on a white fondant covered board we set a scene of murky waves surging over the beach sand, made from brown sugar. A treasure chest, still containing the glittering loot, was left near the pirate ship. The remains of an octopus in pink floats on the water.
Our artists creation of the ship, was very realistic in deep purple and gold, anchored nearby. Gold railings adorned the edges. Sombre black sails featuring the emblem of pirates, skulls and crossbows, adding a touch of foreboding to the mystical scene. The ship apparently abandoned, seemed derelict. However, for a more realistic moment of enjoyment we used a delicious filling of red velvet and cream cheese.
The cake, the vibes and the fun, was appreciated by all attending the party.


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Pool Renovations
Brisbane Swimming Pool Renovations
email us with your requirements and see what we can do for you.
We use Blue Glass Pebble Company for Glass Bead interiors... Click HERE for more info.
We use The Pool Tile Company for Ceramic, Granite & Travertine tiles... Click HERE for more info.
You may need swimming pool renovations in Brisbane for practical, cosmetic or luxury purposes. In any case, a hardworking renovation team makes all the difference in a project's success. Here at Proswim Pool Renovations, we help clients achieve their desired improvements.
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Make Us Your Resource for Any Kind of Renovation
Our clients call our renovation team for a variety of reasons. Most often, their needs fall into one of three categories.
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If you have a finished product in mind, call our office to convey your vision. We will do what it takes to make your envisioned pool become a reality.
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154 +/- Acres
Little Valley Ranch sits at an ideal location along the rugged and beautiful Mendocino coast. At ~400 feet elevation and just 2 miles from the sea, the property gets an ideal mix of cool ocean air and full sun... Read More
PROPERTY TYPE: Farms & Ranches, Homes & Cabins, Recreation
97 +/- Acres
97 +/- ridge top acres of private forest land. Beautiful redwoods, douglas fir, bishop pine, madrone trees. Ocean views can be obtained with a little tree thinning. Two cleared homesites already in place with trails throughout the property.... Read More
PROPERTY TYPE: Bare Land, Recreation, Timberland


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Photo: Randy Mayor; Styling: Leigh Ann Ross
For a spicier kick to the pungent Kung Pao glaze, leave the seeds in the chiles. Chinese black vinegar has a deep, almost smoky taste. Look for it in Asian markets, or substitute balsamic vinegar for a sweeter flavor to this shrimp dish.
4 servings (serving size: 3/4 cup shrimp mixture and 3/4 cup rice)
+ Add To Shopping List
1 tablespoon Shaoxing (Chinese rice wine), dry sherry, or sake
1 teaspoon cornstarch
1/2 teaspoon salt
1 pound peeled and deveined medium shrimp
1 tablespoon sugar
2 tablespoons water
1 tablespoon Chinese black vinegar or balsamic vinegar
1 tablespoon low-sodium soy sauce
3/4 teaspoon cornstarch
1/2 teaspoon dark sesame oil
Remaining ingredients:
2 tablespoons canola oil
1 1/3 cups thinly sliced green bell pepper strips (about 1 large)
1 tablespoon minced garlic
1 tablespoon minced peeled fresh ginger
3 to 4 small dried hot red chiles, broken in half and seeded
1/4 cup chopped unsalted, dry-roasted peanuts
3 cups hot cooked short-grain rice
1. To prepare shrimp, combine first 4 ingredients; cover and chill 10 minutes.
2. To prepare sauce, combine sugar and next 5 ingredients (through sesame oil).
3. Heat a 14-inch wok over high heat. Add canola oil to wok, swirling to coat. Add bell pepper, garlic, ginger, and chiles to wok; stir-fry 1 minute or just until chiles begin to lightly brown (do not burn). Add shrimp mixture to wok; stir-fry 2 minutes or until shrimp are done. Stir sauce; add sauce to wok. Stir-fry 30 seconds or until sauce thickens. Sprinkle with chopped peanuts. Serve over rice.
Created date
August 2008
Nutritional Information
Calories 485
Caloriesfromfat 28 %
Fat 15 g
Satfat 1.7 g
Monofat 7 g
Polyfat 4.7 g
Protein 29.9 g
Carbohydrate 54.8 g
Fiber 3.4 g
Cholesterol 172 mg
Iron 57 mg
Sodium 603 mg
Calcium 77 mg


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Val de Vie
Since 2006, Julius Baer has actively been supporting polo tournaments around the world, either through sponsorship or by participation with Julius Baer's own polo team. The partnership between Julius Baer and Val de Vie for a variety of events organised throughout South Africa demonstrates our commitment to international polo and the South African market.
We are pleased to be the official financial sponsor of the Pink Polo event since 2014, of the Veuve Clicquot Masters Polo Cup since 2015, and the Johannesburg Polo Classic as of 2016.


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Frogger HOP Divot Tool and Ball Marker
Product Information:
No more digging for your ball marker in your pockets! This integrated tool allows your ball marker to securely sit in the magnetic pocket of the HOP. The ball marker has six strong magnets embedded for maximum strength.
- High-gloss zinc alloy frame
- Six embedded magnets for maximum strength
- Ergonomically shaped for great feel in hand while delivering greater leverage
- Ball marker securely fits in the magnetic pocket and clings to nearly any part of tool
- U-shaped top props club above grass to keep grips dry
- Frogger logo on tool
Country of Origin: ChinaWeb ID: 12238104
Customer Reviews:
Rated 4 out of 5�by 14 reviewers.
Rated 4 out of 5�by Lebowski Good product Good product. Exactly as advertised. Would recommended. October 3, 2016
Rated 4 out of 5�by Falmathazar Hop Ball marker does sit securely in the divot tool in my pocket. It has not fallen or been misplaced. Does what it says, but lacks style points. November 11, 2015
Rated 5 out of 5�by Mac Great tool My Grandson loves it and uses it a lot. The theme of the frog is perfect. Magnetic works very good. October 1, 2015
Rated 5 out of 5�by Jbmp123 Great product Overall a great buy for any avid golfer who enjoys the game and has the wherewithal to fix there marks , the ball marker itself is nothing to write home about style wise but can be changed , deffinatly a smart buy for those of us who struggle with removing the marker from our pockets , only complaint would be the divot tool itself the pegs are just a bit large making more work when fixing your ball mark August 5, 2015
Rated 5 out of 5�by midnyteroamer More than I expected This tool works perfectly to repair any divot with little effort. Not to thick or heavy and the ball maker stays in place. Have used it for two rounds, always there in tact when I need it. August 4, 2015
Rated 5 out of 5�by DreamWeaver Nice Design This divot tool is very well made and a great ergonomic design. July 28, 2014
Rated 5 out of 5�by Jbainlamo Divot fixer/ ball marker Been a great divot fixer. Has the perfect leverage when on the green. July 15, 2014
Rated 1 out of 5�by hooper31 Keeps breaking Bought it a year ago. One of the tines has broke off three times over that time. I keep taking it back and they keep giving me a new one, but I'm getting pretty tired of having to deal with it. July 9, 2014
Rated 5 out of 5�by Golfdude Love It Bought this last year and it is hands down the best divot repair tool I've ever used. I'm not a huge fan of the magnetic ball marker, only works sometimes unless you put the coin directly back in with your hand. June 7, 2013
Rated 4 out of 5�by Tom overall good good value, but a bit larger than a "typical" divot tool. No complaints, though. August 6, 2012


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Previous Challenge Entry (Level 1 – Beginner)
Topic: Illustrate the meaning of "Every Dark Cloud has a Silver Lining" (without using the actual phrase or literal example). (02/28/08)
TITLE: Bailey Canyon Creek
By Ginny Winters
It was 4:30 in the morning. The mom grabbed the telephone and dialed 911.
�What is the nature of your emergency?� the operator routinely inquired.
�We are being flooded!� She hollered over the rushing river sound.
�I�m sorry, we are unable to help you, there is flooding all around the city. You must get in your vehicle and drive to high ground.� She patiently said.
�No, you don�t understand� the mom exploded! Our road has been washed away and there is no way out! The cars have been caked into the river and are immovable.�
�Oh,� she said, �Well in that case I�ll call the rescue squad to come get you.�
The motley crew assembled themselves with slickers, rain hats and rubber boots. They grabbed shovels and rakes and prepared to take a stand against the enemy, but it was too late. The battle was already won in the previous hours when the water had taken out the roots of the trees that camped along the banks. The boulders were too dangerous to get in front of as they clattered down the pike taking out the picket fence and anything else that defied itself in front of the mouth of its destructive path. Soon there were flashing lights across the banks. The ladder truck from the fire station had shown up and they were tying up one of the men to a strong rope. The brave man battled the rolling rocks, walked, slipped, and floated his way across the watery barrier with a life preserver vest in his hand. He in turn put it around the shoulders of the frail grandmother who had undergone neck surgery six months prior. Her steps were hesitant, her trust unsure. Before she knew what was happening she felt herself being lifted between two big strong men. The neighbor had come across the side property and helped the fireman secure his precious cargo. The rest followed, step by step careful not to fall and drop what little they had gathered; a change of clothes, much needed medication, and a little wiener dog that was shaking from the inside out.
Two years and seven hundred ninety four miles later found her sitting in her cozy kitchen. The red cupboards displayed the warmth of the afternoon sun that reflected from the window. She took a sip of hot coffee and sighed! �Ah, who knew that after that year of trials from her mothers tragic surgery, to her own divorce, to a flood that displaced her from her home. That she would end up owning her own home outright. Never having to fear that it would be taken from her in a bad market, or an onslaught of rain again! Who knew that she would meet and be a part of a unique women�s worship band that traveled to and fro to help usher others into the Holy of Holies. Who knew that she would form a close bond with one of those members and experience friendship akin to David and Jonathan; have the opportunity to travel to Africa and beyond, to see God�s mighty hand move! Who knew that she would meet a man of God, and travel down a path she thought would be posted �No Trespassing� for the rest of her life.
God knew! God was there the whole entire time. Sometimes we only see the rain that washes away everything we had. We don�t realize that some of that stuff was not God�s best for us. The rain has stopped and God is still God! He knows the plans He has for you!
The opinions expressed by authors may not necessarily reflect the opinion of FaithWriters.com.
If you died today, are you absolutely certain that you would go to heaven? You can be right now. CLICK HERE
JOIN US at FaithWriters for Free. Grow as a Writer and Spread the Gospel.


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This rock-cut is renowned for the clarity of its limestone strata -- a standard stop for geoscience students from nearby Penn State University. GigaPanographers: Aaron and Ken
GigaPanographers: Aaron and Ken
Carbonate mudstone with calcitic dropstone from the lower member of the Ghaub Formation in Namibia. This rock records the onset of Marinoan glaciation, represented by dropstones in the Ghaub Formation. This sample is from the Snowball Earth Educational Rock Sample Suite, and comes courtesy of Paul Hoffman, Harvard U...
The Sir James Pit was operated for the mining of siderite, an iron carbonate ore. The siderite ore was originally deposited on the seafloor ~2.75 Ga as the result of seafloor hydrothermal venting in the Archean oceans. The dark outcrop seen here at the lip of the pit is thought to represent the primary vent from whic...
- Tonoloway Formation, folded as part of Patterson Creek Mountain Anticline, Corridor H, West Virginia by Callan Bentley
This spectacular outcrop, located at the Grant/Hardy County Line along Corridor H in West Virginia, showcases Silurian-aged tidal flat carbonates of the Tonoloway Formation, buckled during late Paleozoic Alleghanian mountain-building.
This fold comes to Team M.A.G.I.C. from Bill Burton of the USGS in Reston, Virginia. Bill says it's "Sample VV-120, NW corner of marble quarry in South Wallingford, VT (don't have quarry name). Interlayered marble and phyllite, strongly deformed in Taconian orogeny and probably Acadian as well. Unclear how much shear...
Graded carbonate beds from a forereef in the Guadalupe Mountains.
Mississippian carbonates.
A fine-grained carbonate laminite from above the Ghuab glacial formation. It is interpreted as a marine cap carbonate suggestive of rapid enviromental change. Sample is 8.4 cm long. This sample is from the Snowball Earth Educational Rock Sample Suite, and comes courtesy of Paul Hoffman, Harvard University; Eugene...
East Greenland #22 is a finely laminated buff yellow cherty carbonate mudstone (dolostone). This sample was taken from the unit that directly overlies the Storeelv formation glacial deposits. The sharpness of the contact between the Storeelv glacial succession and the overlying cap carbonate implies a rapid transition ...