-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BZjysjdJCahEgyNKk8MrE+2dBACsYdN6VCqCtq6DP3tEDa/yh6cB4K6PodOAJw4p B6Qs5W95Mtmb4U6jepNYeQ== 0000950133-96-002508.txt : 19961115 0000950133-96-002508.hdr.sgml : 19961115 ACCESSION NUMBER: 0000950133-96-002508 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961113 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLIED CAPITAL ADVISERS INC CENTRAL INDEX KEY: 0000868207 STANDARD INDUSTRIAL CLASSIFICATION: INVESTMENT ADVICE [6282] IRS NUMBER: 520812307 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18826 FILM NUMBER: 96662165 BUSINESS ADDRESS: STREET 1: 1666 K ST N W STE 901 CITY: WASHINGTON STATE: DC ZIP: 20006 BUSINESS PHONE: 2023311112 MAIL ADDRESS: STREET 1: 1666 K ST NW STREET 2: 9TH FL CITY: WASHINGTON STATE: DC ZIP: 20006 FORMER COMPANY: FORMER CONFORMED NAME: ALLIED ADVISORY INC /MD/ DATE OF NAME CHANGE: 19600201 10-Q 1 ALLIED CAPITAL ADVISERS FORM 10-Q. 1 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 SEPTEMBER 30, 1996 0-18826 ------------------ ---------------------- ALLIED CAPITAL ADVISERS, INC. ------------------------------------------------------ (exact name of Registrant as specified in its charter) MARYLAND 52-0812307 - ----------------------- ---------------------- (State or jurisdiction of (IRS Employer incorporation or organization) Identification No.) 1666 K STREET, N.W. 9TH FLOOR 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 or 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 November 8, 1996 there were 8,990,349 shares outstanding of the Registrant's common stock, $0.001 par value. 2 ALLIED CAPITAL ADVISERS, INC. FORM 10-Q INDEX PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheet - September 30, 1996 and December 31, 1995 . . . . . . . . . . . . . 1 Consolidated Statement of Income - For the Three and Nine Months Ended September 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Consolidated Statement of Cash Flows - For the Nine Months Ended September 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 4 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
3 PART I - Financial Information Item 1. Financial Statements ALLIED CAPITAL ADVISERS, INC. CONSOLIDATED BALANCE SHEET (in thousands, except share amounts)
September 30, December 31, ------------- ------------ 1996 1995 ---- ---- (unaudited) ASSETS Current assets: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . $ 5,736 $ 4,386 Investment advisory fees receivable . . . . . . . . . . . . . . . . . 4,370 4,067 Other current assets . . . . . . . . . . . . . . . . . . . . . . . . 1,100 1,099 ------- -------- Total current assets . . . . . . . . . . . . . . . . . . . . . . . 11,206 9,552 Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . 4,320 4,273 Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 841 706 Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 252 245 ------- -------- Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,619 $ 14,776 ======= ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accrued salaries and employee benefits . . . . . . . . . . . . . . . $ 1,813 $ 2,483 Accounts payable and accrued expenses . . . . . . . . . . . . . . . . 876 929 ------- -------- Total current liabilities . . . . . . . . . . . . . . . . . . . . . 2,689 3,412 Deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . . 2,617 2,377 ------- -------- Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 5,306 5,789 ------- -------- Contingencies Shareholders' Equity: Common stock, $0.001 par value; 20,000,000 shares authorized; 8,990,349 shares issued and outstanding as of 9/30/96 and 12/31/95 . . . . . . . . . . . . . . 9 9 Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . 5,674 5,674 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . 5,630 3,304 ------- -------- Total shareholders' equity . . . . . . . . . . . . . . . . . . . . 11,313 8,987 ------- -------- Total liabilities and shareholders' equity . . . . . . . . . . . . $ 16,619 $ 14,776 ======= ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS 1 4 ALLIED CAPITAL ADVISERS, INC. CONSOLIDATED STATEMENT OF INCOME (in thousands, except per share amounts) (unaudited)
For the Three Months Ended For the Nine Months Ended September 30, September 30, ------------------------------ ------------------------- 1996 1995 1996 1995 ---------------- --------- ---------- --------- Revenue: Investment advisory and management fees . . . . . . . . . . . . $ 4,064 $ 3,582 $11,850 $ 10,569 Rental and other income . . . . . . . . . . . . . . . . . . . . 318 307 899 773 -------- ------- ------ ------- Total revenue . . . . . . . . . . . . . . . . . . . . . . . 4,382 3,889 12,749 11,342 -------- ------- ------ ------- Expenses: Salary and employee benefit expenses . . . . . . . . . . . . . 2,010 1,917 6,277 5,987 Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160 160 481 479 General and administrative . . . . . . . . . . . . . . . . . . 840 665 2,021 1,798 -------- ------- ------ ------- Total Expenses . . . . . . . . . . . . . . . . . . . . . . . 3,010 2,742 8,779 8,264 -------- ------- ------ ------- Income before income taxes . . . . . . . . . . . . . . . . . . . 1,372 1,147 3,970 3,078 Income tax expense . . . . . . . . . . . . . . . . . . . . . . . 565 488 1,644 1,286 -------- ------- ------ ------- Net income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 807 $ 659 $ 2,326 $ 1,792 ======== ======= ====== ======= Net income per share . . . . . . . . . . . . . . . . . . . . . . $ 0.08 $ 0.07 $ 0.24 $ 0.19 ======== ======= ====== ======= Weighted average number of shares and share equivalents outstanding . . . . . . . . . . . . . . . . . . . 9,913 9,772 9,877 9,624 ======== ======= ====== =======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS 2 5 ALLIED CAPITAL ADVISERS, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (in thousands) (unaudited)
For the Nine Months Ended September 30, --------------------------------------- 1996 1995 ----------- ---------- Cash Flows from Operating Activities: Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,326 $1,792 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization . . . . . . . . . . . . . . . . . . 281 212 Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . (135) (136) Changes in assets and liabilities . . . . . . . . . . . . . . . . . . (794) (802) ------- ------- Net cash provided by operating activities . . . . . . . . . . . . . . 1,678 1,066 ------ ------ Cash Flows from Investing Activities: Expenditures for property and equipment . . . . . . . . . . . . . (328) (312) Net cash used in investing activities . . . . . . . . . . . . . . . . (328) (312) ------- ------- Cash Flows from Financing Activities: Issuance of common stock . . . . . . . . . . . . . . . . . . . . -- 328 ------ ------ Net cash provided by financing activities . . . . . . . . . . . . . . -- 328 ------ ------ Net increase in cash and cash equivalents . . . . . . . . . . . . . . 1,350 1,082 Cash and cash equivalents - beginning of period . . . . . . . . . . . 4,386 1,955 ------ ------ Cash and cash equivalents - end of period . . . . . . . . . . . . . . $5,736 $3,037 ====== ======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS 3 6 ALLIED CAPITAL ADVISERS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1996 (UNAUDITED) NOTE 1. GENERAL In the opinion of management, the accompanying unaudited consolidated financial statements of Allied Capital Advisers, Inc. and Subsidiary (the Company) contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the Company's financial position as of September 30, 1996 and the results of operations, 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 financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 1995 Annual Report. The results of operations for the nine months ended September 30, 1996 are not necessarily indicative of the operating results to be expected for the full year. Certain reclassifications have been made to the 1995 financial statements in order to conform to the 1996 presentation. NOTE 2. INVESTMENT ADVISORY SERVICES The Company has investment advisory or management agreements to manage the assets of certain companies. The Company charges a management fee for managing the day-to-day activities of these companies pursuant to those agreements. In May 1996, the Company reached an agreement with Allied Capital Commercial Corporation ("Allied Commercial"), a commercial mortgage real estate investment trust whose assets are managed by the Company, to revise the fee schedule under the investment management agreement between those entities. As of September 30, 1996 and December 31, 1995, the assets of Allied Commercial represented approximately $348 million, or 46%, and $298 million, or 44%, of the assets under management of the Company, respectively. Fees earned from managing Allied Commercial's assets represented approximately 42% and 39% of the Company's total revenue for the nine months ended September 30, 1996 and for the year ended December 31, 1995, respectively. The revised fee schedule applies to fees payable by Allied Commercial beginning with the quarter ended March 31, 1996, and only applies to loans originated or purchased by Allied Commercial on or after January 1, 1996. All other loans in Allied Commercial's portfolio remain subject to the prior fee schedule of approximately 2.5% per annum on invested assets. The revised fee schedule reflects three tiers of management fee percentages payable to the Company, based upon a classification of the outstanding loans (i.e., "Invested Assets") held in Allied Commercial's investment portfolio. This three-tiered schedule is intended to allow Allied Commercial to enter into two new business areas. First, Allied Commercial will seek to originate or purchase high credit quality, lower interest rate loans and to be more cost competitive on these types of loans. Second, it will seek to originate or otherwise invest, on a limited basis, in loans secured by real estate with more difficult credit situations that may offer a higher return to the portfolio. Class A loans, which have loan-to-value, debt service coverage, and payment history characteristics that generally are superior to those of Allied Commercial's loan portfolio at December 31, 1995, will incur management fees, payable quarterly in arrears, at a rate of 1.25% per annum, subject to adjustment by the Company to a rate of 1.0% per annum under certain circumstances. Class B loans, which have credit characteristics that generally are comparable to those of the majority of loans held in Allied Commercial's loan portfolio at December 31, 1995, will incur management fees, payable quarterly in arrears, at a rate of 2.5% per annum. Most small loans fall into this category, which reflects the prior fee structure for Allied Commercial's portfolio of Invested Assets. 4 7 ALLIED CAPITAL ADVISERS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1996 (UNAUDITED) Class C loans, which have credit characteristics that generally are inferior to those of Allied Commercial's existing loan portfolio, will incur management fees, payable quarterly in arrears, at a rate of 3.5% per annum. These loans are "out of the ordinary," and therefore require more sophisticated underwriting and/or closer monitoring than the majority of Allied Commercial's existing loans. Class C loans either represent "turnaround financing" investments or have a non-performing or sub-performing payment history. Similar to the previous fee arrangement, the revised fee schedule places a quarterly cap, at a rate of 2.5% per annum, on the total management fees payable to the Company with respect to Allied Commercial's holdings of Invested Assets. Management fees payable to the Company with respect to Allied Commercial's holdings of cash, cash equivalents, and short-term U.S. government or agency securities and repurchase agreements collateralized thereby (i.e., "Cash and Interim Investments") are not affected by the revised fee schedule. Cash and Interim Investments will continue to incur management fees, payable quarterly in arrears, at a rate of 0.5% per annum. NOTE 3. REVOLVING LINE OF CREDIT AGREEMENT The Company renewed its revolving line-of-credit agreement (the "Agreement") with a bank whereby the Company may borrow the lesser of 70% of the accrued advisory fee receivable or $1,000,000 with the same terms. The renewed Agreement expires May 31, 1997. 5 8 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS FOR THE THIRD QUARTER ENDED SEPTEMBER 30, 1996 AND 1995 Net income increased 22% to $807,000 or $0.08 per share for the third quarter of 1996 from $659,000 or $0.07 per share in the third quarter of 1995. Total revenue increased 13% to $4,382,000 from the same quarter a year ago. Total revenue is comprised of investment advisory and management fees and rental and other income. The increase in investment advisory and management fee revenue resulted from the increase in assets under management. Assets under management equaled approximately $755 million and approximately $639 million as of September 30, 1996 and 1995, respectively. This represents an 18% increase in assets under management. In addition, rental and other income increased 4% to $318,000 from $307,000 for the three months ended September 30, 1996 and 1995, respectively. This increase resulted primarily from the increase in interest earned from cash and temporary investments. The Company has been able to control its operating expenses as it continues to increase its assets under management. Total operating expenses as a percent of revenue have declined to 69% for third quarter 1996 as compared to 71% for the comparable period in 1995. The effective tax rate in determining net income was approximately 41% and 42% for three months ended September 30, 1996 and 1995, respectively. FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 Net income for the nine months ended September 30, 1996 was $2.33 million or $0.24 per share, an increase of $534,000 or 30% over the comparable nine month period of the prior year. The growth in assets under management resulted in an increase of 12% in investment advisory and management fee revenue over the comparable period last year. Operating expenses in 1996 as compared with the corresponding period in 1995, have grown at a rate of 6%. The Company's total revenue for the nine months ended September 30, 1996 was $12,749,000, as compared to $11,342,000 for the same period in 1995. Assets under management increased by approximately $85 million during the nine months ended September 30, 1996 with a total increase of $116 million since the end of the third quarter of 1995. The growth in assets during the nine months ended September 30, 1996 was largely due to the purchase and origination of commercial real estate loans for Allied Commercial and Business Mortgage Investors, Inc. ("BMI"). In the nine months ended September 30, 1996 Allied Commercial and BMI collectively have increased invested assets incurring a 2.5% per annum fee by $11 million and invested assets incurring 1 - 1.25% per annum increased $71 million. Income before income taxes increased $892,000 to $3,970,000 for the nine months ended September 30, 1996, over the same period in 1995. Total operating expenses were 69% and 73% of total revenue for the nine months ended September 30, 1996 and 1995, respectively. Income before income taxes includes the operations of the office building purchased in September of 1994. During the nine months ended September 30, 1996, the building generated rental income of $670,000, as compared to $610,000 for the same period in 1995. For the same periods, the building's total expenses were $383,000 and $360,000, respectively. LIQUIDITY AND CAPITAL RESOURCES As of September 30, 1996, the Company had $5,736,000 in cash and cash equivalents as compared to $4,386,000 at December 31, 1995. The Company does not have any short or long-term debt obligations outstanding as of September 30, 1996. The Company's primary source of funds is its advisory and management agreements with the companies it manages. The Company believes that cash flow generated from operations will be sufficient to fulfill its working capital requirements. The Company renewed its revolving line-of-credit with a bank whereby the Company may borrow the lesser of 70% of the accrued advisory fees receivable or $1,000,000. The revolving line-of-credit was renewed with the same terms as before and expires May 31, 1997. Statements included in this filing concerning the Company's future prospects are "forward looking statements" under the Federal securities laws. There can be no assurance that future results will be achieved and actual results could differ materially from forecasts and estimates. Important factors that could cause actual results to differ materially are included but are not limited to those listed in the Company's quarterly reports as filed on Form 10-Q and annual report as filed on Form 10-K. 6 9 Part II. OTHER INFORMATION Item 1. LEGAL PROCEEDINGS The Company is not a defendant in any material pending legal proceeding and no such material proceedings are known to be contemplated. 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 Not applicable 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 September 30, 1996. 7 10 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 ADVISERS, INC. ----------------------------- (Registrant) /s/Jon A. DeLuca -------------------------------------- Date: November 13, 1996 Jon A. DeLuca Executive Vice President and Chief Financial Officer 8 EX-11 2 COMPUTATION. 1 Allied Capital Advisers, Inc. Exhibit 11 Statement of Computation of Earnings Per Common Share Form 10-Q September 30, 1996
For the Three Months Ended For the Nine Months Ended September 30, September 30, -------------------------- ---------------------------- 1996 1995 1996 1995 -------------------------- ---------------------------- Primary Earnings Per Common Share: Net Income $807,000 $659,000 $2,236,000 $1,792,000 ========================== ============================ Weighted average of common shares outstanding 8,990,349 8,960,309 8,990,349 8,906,518 Weighted average of common shares issuable on exercise of outstanding stock options 922,612 811,250 886,370 717,680 -------------------------- ---------------------------- Weighted average of common shares outstanding, as adjusted 9,912,961 9,771,559 9,876,719 9,624,198 ========================== ============================ Net Income per share $0.08 $0.07 $0.24 $0.19 ========================== ============================ Fully Diluted Earnings Per Common Share: Net Income $807,000 $659,000 $2,326,000 $1,792,000 ========================== ============================ Weighted average common shares and common share equivalents as computed for primary earnings per share 9,912,961 9,771,559 9,876,719 9,624,198 Weighted average of additional shares issuable on exercise of outstanding stock options 0 18,262 30,558 134,000 -------------------------- ---------------------------- Weighted average of common shares outstanding, as adjusted 9,912,961 9,789,821 9,907,277 9,758,198 ========================== =========================== Net Income assuming full dilution $0.08 $0.07 $0.23 $0.18 ========================== ===========================
EX-27 3 FINANCIAL DATA SCHEDULE.
5 This schedule contains summary financial information extracted from the consolidated balance sheet, statement of operations and cash flows and is qualified in its entirety by reference to such Form 10-Q for the quarter ended September 30, 1996. 1,000 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 5,736 0 4,370 0 0 11,206 5,888 1,568 16,619 2,689 0 0 0 9 11,304 16,619 0 12,749 0 0 8,779 0 0 3,970 1,644 2,326 0 0 0 2,326 0.24 0.23
-----END PRIVACY-ENHANCED MESSAGE-----