-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, AD08uBYOys2pm3M/5u0J4OEZY7jlbiQ31QmGP6p9d4UCmrfCP84KeZXftmNkSoup 4pPlyQ5H/sK8w2UKZjXCSA== 0000912057-95-003779.txt : 19950530 0000912057-95-003779.hdr.sgml : 19950530 ACCESSION NUMBER: 0000912057-95-003779 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLIED CAPITAL CORP CENTRAL INDEX KEY: 0000003845 STANDARD INDUSTRIAL CLASSIFICATION: IRS NUMBER: 530245085 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 811-00907 FILM NUMBER: 95538895 BUSINESS ADDRESS: STREET 1: 1666 K ST N W STE 901 CITY: WASHINGTON STATE: DC ZIP: 20006 BUSINESS PHONE: 2023311112 MAIL ADDRESS: STREET 2: 1666 K STREET NW 9TH FL CITY: WASHINGTON STATE: DC ZIP: 20006 10-Q 1 10-Q Form 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period Commission file number: ended MARCH 31, 1995 814-97 -------------- -------------- ALLIED CAPITAL CORPORATION --------------------------------------------------------- (exact name of Registrant as specified in its charter) MARYLAND 53-0245085 - - - - - - - ----------------------------- ------------------- (State or jurisdiction of (IRS Employer incorporation or organization) Identification No.) 1666 K STREET, N.W. SUITE 901 WASHINGTON, DC 20006 ------------------------------------------ (Address of principal executive offices) Registrant's telephone number, including area code: (202) 331-1112 -------------- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 12 of 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods as the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ----- ----- On May 1, 1995 there were 6,162,998 shares outstanding of the Registrant's common stock, $1 par value. ALLIED CAPITAL CORPORATION AND SUBSIDIARIES FORM 10-Q INDEX PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Statement of Financial Position as of March 31, 1995 and December 31, 1994. . . . . . . . . . . . . . . . . . . 1 Consolidated Statement of Operations - For the Three Months Ended March 31, 1995 and 1994 . . . . . . . . . . . . . . . . . 2 Consolidated Statement of Changes in Net Assets - For the Three Months Ended March 31, 1995 and 1994. . . . . . . . . . . 3 Consolidated Statement of Cash Flows - For the Three Months Ended March 31, 1995 and 1994 . . . . . . . . . . . . . . . . . 4 Notes to Consolidated Financial Statements. . . . . . . . . . . 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . 6 PART II. OTHER INFORMATION Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . 7 Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . 7 Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . . 7 Item 4. Submission of Matters to a Vote of Security Holders . . . . . . 7 Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . 7 Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . 7 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ALLIED CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF FINANCIAL POSITION (in thousands, except number of shares)
March 31, 1995 December 31, 1994 -------------- ----------------- (unaudited) Assets Investments at value: Loans and debt securities. . . . . . . . . . . . $ 84,111 $ 84,949 Equity securities. . . . . . . . . . . . . . . . 26,269 28,225 Other investment assets. . . . . . . . . . . . . 1,861 1,852 -------- -------- Total investments . . . . . . . . . . . . . . 112,241 115,026 Cash and cash equivalents. . . . . . . . . . . . . 6,000 6,609 U.S. government securities . . . . . . . . . . . . 11,171 10,210 Other assets . . . . . . . . . . . . . . . . . . . 3,162 3,672 -------- -------- Total assets. . . . . . . . . . . . . . . . . $132,574 $135,517 -------- -------- -------- -------- Liabilities Revolving line of credit . . . . . . . . . . . . . $ 1,325 $ 2,205 Debentures and notes payable . . . . . . . . . . . 74,800 74,800 Accrued interest payable . . . . . . . . . . . . . 2,002 1,393 Investment advisory fee payable. . . . . . . . . . 641 658 Dividends and distributions payable. . . . . . . . 58 3,910 Other liabilities. . . . . . . . . . . . . . . . . 1,790 1,564 -------- -------- Total liabilities . . . . . . . . . . . . . . 80,616 84,530 -------- -------- Redeemable preferred stock . . . . . . . . . . . . 1,000 1,000 -------- -------- Commitments and Contingencies Shareholders' Equity Preferred stock of wholly owned subsidiary, $100 par value, 60,000 shares authorized, issued and outstanding at 3/31/95 and 12/31/94. . . . . . . . . . . . . . . . . . . . 6,000 6,000 Common stock, $1 par value; 10,000,000 shares authorized; 6,162,998 and 6,152,703 shares issued and outstanding at 3/31/95 and 12/31/94. . . . . . . . . . . . . . . . . . 6,163 6,153 Additional paid-in capital . . . . . . . . . . . 41,072 40,960 Notes receivable from sale of common stock . . . (816) (816) Net unrealized appreciation on investments . . . 2,285 1,110 Distributions in excess of accumulated earnings. (3,746) (3,420) -------- -------- Total shareholders' equity . . . . . . . . . . 50,958 49,987 -------- -------- Total liabilities and shareholders' equity . . $132,574 $135,517 -------- -------- -------- --------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS 1 ALLIED CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS (in thousands, except per share amounts)
For the Three Months Ended March 31, ------------------------------------ 1995 1994 ---------- ----------- (unaudited) (unaudited) Investment and other income: Interest . . . . . . . . . . . . . . $ 3,142 $ 2,187 Dividends. . . . . . . . . . . . . . 346 407 Other income . . . . . . . . . . . . 61 -- -------- -------- Total investment and other income. 3,549 2,594 -------- -------- Expenses: Interest expense . . . . . . . . . . 1,697 1,567 Investment advisory fee. . . . . . . 637 539 Legal and audit services . . . . . . 190 212 Other operating expenses . . . . . . 144 72 -------- -------- Total expenses . . . . . . . . . . 2,668 2,390 -------- -------- Net investment income. . . . . . . . . 881 204 Net realized gains on investments. . . 78 242 -------- -------- Net investment income before net unrealized appreciation on investments . . . . . . . . . . . . . 959 446 Net unrealized appreciation on investments . . . . . . . . . . . . . 1,175 306 -------- -------- Net increase in net assets resulting from operations . . . . . . . . . . . $ 2,134 $ 752 -------- -------- -------- -------- Earnings per common share. . . . . . . $ 0.34 $ 0.11 -------- -------- -------- -------- Weighted average number of common shares and common share equivalents outstanding. . . . . . . . . . . . . . 6,154 6,156 -------- -------- -------- --------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS 2 ALLIED CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS (in thousands, except per share amounts)
For the Three Months Ended March 31, ------------------------------------ 1995 1994 ----------- ----------- (unaudited) (unaudited) Increase in Net Assets Resulting from Operations: Net investment income. . . . . . . . . . . . . . . . $ 881 $ 204 Net realized gains on investments. . . . . . . . . . 78 242 Net unrealized appreciation on investments . . . . . 1,175 306 -------- -------- Net increase in net assets resulting from operations . . . . . . . . . . . . . . . . . . . . 2,134 752 Distributions: Cash distributions to common shareholders. . . . . . (1,108) (1,227) Stock distributions to common shareholders . . . . . (122) -- Accrued distributions to preferred shareholders. . . (55) (55) Capital Share Transactions: Common shares issued in lieu of cash distributions . 122 15 -------- -------- Net increase (decrease) in net assets. . . . . . . . . 971 (515) Net assets at beginning of period. . . . . . . . . . . 49,987 52,185 -------- -------- Net assets at end of period. . . . . . . . . . . . . . 50,958 51,670 Preferred stock of wholly owned subsidiary . . . . . . 6,000 6,000 -------- -------- Net asset value available to common shareholders . . . $ 44,958 $ 45,670 -------- -------- -------- -------- Net asset value per common share . . . . . . . . . . . $ 7.29 $ 7.44 -------- -------- -------- -------- Common shares outstanding at end of period . . . . . . 6,163 6,134 -------- -------- -------- --------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS 3 ALLIED CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (in thousands)
For the Three Months Ended March 31, ------------------------------------ 1995 1994 ----------- ----------- (unaudited) (unaudited) Cash Flows From Operating Activities: Net increase in net assets resulting from operations . . . . . . . . . . . . . . . . . . $ 2,134 $ 752 Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by operating activities: Net unrealized appreciation on investments. . . . (1,175) (306) Net realized gains on investments . . . . . . . . (78) (242) Changes in assets and liabilities: Other assets. . . . . . . . . . . . . . . . . . . 510 (51) Accrued interest payable. . . . . . . . . . . . . 609 841 Investment advisory fee payable . . . . . . . . . (17) (11) Other liabilities . . . . . . . . . . . . . . . . 226 260 ------- ------- Net cash provided by operating activities. . . 2,209 1,243 ------- ------- Cash Flows From Investing Activities: Net (increase) decrease in investments. . . . . . 351 (6,433) Net (purchase) redemption of U.S. government securities . . . . . . . . . . . . . . . . . . . (961) 595 Payments on notes receivable. . . . . . . . . . . -- 15 ------- ------- Net cash used in investing activities. . . . . (610) (5,823) ------- ------- Cash Flows From Financing Activities: Common dividends and distributions paid . . . . . (1,108) (4,587) Preferred stock dividends . . . . . . . . . . . . (220) (220) Net repayments under revolving line of credit . . (880) -- ------- ------- Net cash used in financing activities. . . . . (2,208) (4,807) ------- ------- Net decrease in cash and cash equivalents. . . . . . . (609) (9,387) Cash and cash equivalents, beginning of period . . . . 6,609 24,358 ------- ------- Cash and cash equivalents, end of period . . . . . . . $ 6,000 $14,971 ------- ------- ------- -------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS 4 ALLIED CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1995 (UNAUDITED) NOTE 1. GENERAL In the opinion of management, the accompanying unaudited consolidated financial statements of Allied Capital Corporation and subsidiaries (the Company) contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the Company's consolidated financial position as of March 31, 1995 and the results of operations, changes in net assets, and cash flows for the periods indicated. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 1994 Annual Report. The results of operations for the three months ended March 31, 1995 are not necessarily indicative of the operating results to be expected for the full year. Certain reclassifications have been made to the 1994 condensed financial statements in order to conform to the 1995 presentation. NOTE 2. DISTRIBUTIONS The Company's Board of Directors declared a first quarter dividend equivalent to $0.20 per share payable on March 31, 1995 to shareholders of record on March 17, 1995. In connection with this dividend, the Company paid cash of $1,108,000 and distributed new shares of common stock with a value of $122,000 for a total dividend of $1,230,000. The Company owned all of the outstanding capital stock of Allied Capital Lending Corporation ("Allied Lending") prior to consummation of the initial public offering of Allied Lending shares in November 1993. As a result of that initial public offering, the Company's ownership of Allied Lending shares was reduced to 1,580,000 shares, or 36.2% of the Allied Lending shares outstanding at December 31, 1993. The Company has agreed that it would divest itself of all shares of Allied Lending by December 31, 1998 by public offerings, private placements, distributions to the Company's shareholders or otherwise. The Company declared an extra dividend in December of 1994 and distributed on January 6, 1995 an aggregate of 335,086 Allied Lending shares, which reduced its ownership of Allied Lending shares to 1,244,914 shares, or 28.5% of the Allied Lending shares then outstanding. NOTE 3. COMMITMENTS AND CONTINGENCIES Loans. The Company had loan commitments outstanding of $7.2 million at March 31, 1995 to various existing and prospective portfolio companies. Litigation. The Company is a party to a number of lawsuits in connection with loans it has made to small businesses. In the opinion of the Company's management, none of these proceedings are material in relation to the Company's consolidated financial position. NOTE 4. SUBSEQUENT EVENT On April 10, 1995, the Company entered into a loan agreement with Overseas Private Investment Corporation under which it may borrow up to $20 million to provide financing for international projects involving qualifying U.S. small businesses. Loans made under this agreement bear interest at the U.S. Treasury Rate plus .5%, and have a ten year maturity from the date of disbursement. The loan agreement expires on the earlier of the first date on which the amount of the loan(s) equal $20 million or April 10, 1998. 5 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES Total investments decreased by $2.8 million or 2.4% from $115 million at December 31, 1994 to $112 million at March 31, 1995. This decrease was primarily due to new investments of approximately $6 million less $9.8 million in repayments and the distribution of 335,086 shares of Allied Lending to the Company's shareholders on January 6, 1995, and an increase in unrealized appreciation of $1.2 million. Cash and cash equivalents and U.S. government securities increased from $16.8 million at December 31, 1994 to $17.2 million at March 31, 1995. The small increase in cash and cash equivalents and government securities resulted from total repayments of investments exceeding new investments made, net of the effect of dividends paid to shareholders during the three months ended March 31, 1995. Subsequent to the close of the first quarter of 1995, the Company secured a credit facility with the Oversees Private Investment Corporation for up to $20 million in financing for international projects involving small businesses. Given the availability of this facility and current cash and government securities available at March 31, 1995, the Company believes that it has adequate capital to continue to meet its new investment objectives throughout the year. The Company continues to explore obtaining additional investment capital from the Small Business Administration and private lenders as well. RESULTS OF OPERATIONS Net increase in net assets resulting from operations was $2,134,000 and $752,000 for the three months ended March 31, 1995 and 1994, respectively. The 1995 increase was primarily due to a significant increase in investment and other income of $955,000 and an increase in unrealized appreciation of $869,000 for the three months ended March 31, 1995 as compared to the corresponding period in 1994. Investment and other income increased because of a significant increase in investments in loans and debt securities during 1994. Unrealized appreciation increased as shown in the Portfolio Changes section below. PORTFOLIO CHANGES The following represents portfolio investment balances in the Company as of March 31, 1995 that have changed in appreciation or depreciation by more than 10% as compared to the appreciation or depreciation as of December 31, 1994.
Appreciation (Depreciation) ---------------------------------- Portfolio Company March 31, 1995 December 31, 1994 $ Change Percent Change - - - - - - - ------------------ -------------- ----------------- ----------- -------------- Allied Capital Lending Corporation $9,525,000 $8,246,000 $1,279,000 15.5% DMI Furniture 114,634 75,770 38,864 51.3% June Broadcasting, Inc. 781,927 524,327 257,600 49.1% West Virginia Radio Corporation (200,000) (122,113) (77,887) (63.8%) Pizza Shops (645,000) (181,000) (464,000) (256.4%) * Percentage not applicable as zero balance at December 31, 1994.
6 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The individual owners of six Spa Lady-licensed borrowers filed suit in 1994 in the Circuit Court of Fairfax County, Virginia, against Allied Capital Investment Corporation, Allied Venture Partnership and two other parties, seeking compensatory, punitive and treble damages totalling approximately $8,988,000 on the basis of alleged conspiracy to injure the plaintiff's businesses and tortious interference with regard to unsuccessful workouts of their loans, which resulted in foreclosure on certain subject health spas. That action was dismissed in October 1994, and a similar case filed in 1994 by the six corporate borrowers was dismissed in January 1995, which dismissal has been appealed by those plaintiffs. The Company believes that these claims have no merit. ITEM 2. CHANGES IN SECURITIES No material changes have occurred in the securities of the Registrant. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5. OTHER INFORMATION During 1994, in the course of a review of certain regulatory matters, the Company determined that the board of directors of the Company was composed of a lesser percentage of non-interested directors than required by relevant provisions of the Investment Company Act of 1940 (the "1940 Act"). Specifically, certain non-officer directors of the Company owned stock of Allied Capital Advisers, Inc. ("Advisers"), and one non-officer director had a material business relationship with Advisers. Actions were taken promptly to bring the board of directors into compliance with the relevant provisions of the 1940 Act. A committee of non-interested directors of the Company and Allied Capital Corporation II was formed to review this matter. At its own initiative, Advisers also undertook an audit of compliance with securities laws as they relate to the Company. The Company currently does not believe that this situation will have a material adverse effect on the operations of the Company or on its financial position. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) List of Exhibits 11 Statement of Computation of Earnings Per Share (b) Reports on Form 8-K No reports on Form 8-K were filed by the Company during the quarter ended March 31, 1995. 7 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunder duly authorized. ALLIED CAPITAL CORPORATION -------------------------- (Registrant) /s/ Jon A. DeLuca --------------------------- Date: May 12, 1995 Jon A. DeLuca Senior Vice President and Chief Financial Officer 8 EX-11 2 EXHIBIT 11 Allied Capital Corporation and Subsidiaries Exhibit 11 Computation of Earnings Per Common Share Form 10-Q March 31, 1995
For the Three Months Ended March 31, --------------------------- 1995 1994 ---------- ---------- Primary Earnings Per Common Share: Net Increase in Net Assets Resulting from Operations. . . . . . . . . . . . . . . . . $2,134,000 $ 752,000 Less: Dividends for Preferred Stock. . . . . . . . . (55,000) (55,000) ---------- ---------- Net Increase in Net Assets Resulting from Operations Available to Common Shareholders. . . . . . . . . . . . . . . $2,079,000 $ 697,000 ---------- ---------- ---------- ---------- Weighted average number of common shares outstanding . . . . . . . . . . . . . . . 6,152,817 6,118,680 Weighted average number of common shares issuable on exercise of outstanding stock options . . . . . . . . . . 876 37,078 ---------- ---------- Weighted average number of common shares and common share equivalents outstanding . . . . 6,153,693 6,155,758 ---------- ---------- ---------- ---------- Earnings per Common Share . . . . . . . . . . . . . . $ 0.34 $ 0.11 ---------- ---------- ---------- ---------- Fully Diluted Earnings Per Common Share: Net Increase in Net Assets Resulting from Operations. . . . . . . . . . . . . . . . . $2,134,000 $ 752,000 Less: Dividends for Preferred Stock. . . . . . . . . (55,000) (55,000) ---------- ---------- Net Increase in Net Assets Resulting from Operations Available to Common Shareholders. . . . . . . . . . . . . . . $2,079,000 $ 697,000 ---------- ---------- ---------- ---------- Weighted average number of common shares and common share equivalents outstanding as computed for primary earnings per share . . . . . . . . . . . 6,153,693 6,155,758 Weighted average of additional shares issuable on exercise of outstanding stock options . . . . . . . . . . - - ---------- ---------- Weighted average number of common shares and common share equivalents outstanding, as adjusted . . . . . . . . . . . . 6,153,693 6,155,758 ---------- ---------- Earnings per Common Share . . . . . . . . . . . . . . $ 0.34 $ 0.11 ---------- ---------- ---------- ----------
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