<PAGE> 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 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.)
C/O ALLIED CAPITAL ADVISERS, INC.
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 7,026,013 shares outstanding of the Registrant's
common stock, $1 par value.
<PAGE> 2
ALLIED CAPITAL CORPORATION AND SUBSIDIARIES
FORM 10-Q INDEX
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet as of September 30, 1996
and December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Consolidated Statement of Operations - For the Three and Nine Months Ended
September 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Consolidated Statement of Changes in Net Assets - For the Nine Months
Ended September 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statement of Cash Flows - For the Nine Months Ended
September 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . 10
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
<PAGE> 3
PART I - Financial Information
Item 1. Financial Statements
ALLIED CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in thousands, except number of shares)
<TABLE>
<CAPTION>
September 30, 1996 December 31, 1995
------------------ -----------------
(unaudited)
<S> <C> <C>
ASSETS
Investments at Value:
Loans and debt securities (cost: 1996 - $101,437; 1995 - $ 93,408 $ 90,377
$98,119). . . . . . . . . . . . . . . . . . . . . . . . . .
Equity securities (cost: 1996 - $19,275; 1995 - $15,039) . 34,369 31,600
Other investment assets (cost: 1996 - $1,441; 1995 -
$2,457) . . . . . . . . . . . . . . . . . . . . . . . . 243 1,207
--------- -------
Total investments . . . . . . . . . . . . . . . . . . 128,020 123,184
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . 30,219 22,743
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . 3,305 2,341
-------- -------
Total assets . . . . . . . . . . . . . . . . . . . . . $161,544 $148,268
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Debentures and notes payable . . . . . . . . . . . . . . . . $ 86,300 $ 81,300
Revolving line of credit . . . . . . . . . . . . . . . . . . - 1,500
Dividends and distributions payable . . . . . . . . . . . . . 165 3,808
Other liabilities . . . . . . . . . . . . . . . . . . . . . . 2,877 3,479
-------- -------
89,342 90,087
Redeemable preferred stock . . . . . . . . . . . . . . . . . . 1,000 1,000
Commitments and Contingencies
Shareholders' Equity:
Preferred stock of wholly owned subsidiary, $100 par
value; 200,000 shares authorized, 60,000 shares issued and
outstanding at 9/30/96 and 12/31/95 . . . . . . . . . . . . 6,000 6,000
Common stock, $1 par value; 10,000,000 shares
authorized; 7,026,013 and 6,198,138 shares
issued and outstanding at 9/30/96 and 12/31/95 . . . . . . 7,026 6,198
Additional paid-in capital . . . . . . . . . . . . . . . . . 51,103 41,491
Notes receivable from sale of common stock . . . . . . . . . (735) (401)
Net unrealized appreciation on investments . . . . . . . . . 5,867 7,569
Undistributed (distributions in excess of) accumulated
earnings . . . . . . . . . . . . . . . . . . . . . . . . . 1,941 (3,676)
------- --------
Total shareholders' equity . . . . . . . . . . . . . . 71,202 57,181
------- --------
Total liabilities and shareholders' equity . . . . . . $161,544 $148,268
======= =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
1
<PAGE> 4
ALLIED CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
------------ ------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Investment income:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . $3,015 $2,929 $10,240 $ 8,645
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . 382 371 1,144 1,079
Other income . . . . . . . . . . . . . . . . . . . . . . . . 40 264 108 618
----- ----- ------ ------
Total investment income . . . . . . . . . . . . . . . . . . 3,437 3,564 11,492 10,342
----- ----- ------ ------
Expenses:
Interest expense . . . . . . . . . . . . . . . . . . . . . . 1,916 1,648 5,607 4,994
Investment advisory fee . . . . . . . . . . . . . . . . . . . 754 731 2,192 2,077
Other operating expenses . . . . . . . . . . . . . . . . . . 19 286 586 987
----- ----- ------ ------
Total expenses . . . . . . . . . . . . . . . . . . . . . . 2,689 2,665 8,385 8,058
----- ----- ------ ------
Net investment income . . . . . . . . . . . . . . . . . . . . . 748 899 3,107 2,284
Net realized gain on investments . . . . . . . . . . . . . . . 2,225 3,289 8,376 3,584
----- ----- ------ ------
Net investment income before net unrealized
appreciation (depreciation) on investments . . . . . . . . 2,973 4,188 11,483 5,868
Net unrealized appreciation (depreciation) on investments . . . 2,732 (1,099) (1,702) 6,551
----- ------ ------ ------
Net increase in net assets resulting from
operations . . . . . . . . . . . . . . . . . . . . . . . . . $5,705 $3,089 $ 9,781 $12,419
===== ===== ====== ======
Earnings per common share . . . . . . . . . . . . . . . . . . . $ 0.80 $ 0.49 $ 1.41 $ 1.97
===== ===== ====== ======
Weighted average number of common shares and
common share equivalents outstanding . . . . . . . . . . . . 7,056 6,193 6,839 6,207
===== ===== ====== ======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
2
<PAGE> 5
ALLIED CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30,
------------
1996 1995
---- ----
<S> <C> <C>
Increase in net assets resulting from operations:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,107 $ 2,284
Net realized gain on investments . . . . . . . . . . . . . . . . . . . 8,376 3,584
Net unrealized appreciation (depreciation) on investments . . . . . . . (1,702) 6,551
------- ------
Net increase in net assets resulting from operations . . . . . . . 9,781 12,419
------ ------
Distributions to shareholders:
Common stock dividend . . . . . . . . . . . . . . . . . . . . . . . . . (5,701) (3,823)
Preferred stock dividend . . . . . . . . . . . . . . . . . . . . . . . (165) (165)
------ ------
Net decrease in net assets resulting from distributions to
shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . (5,866) (3,988)
------ ------
Capital share transactions:
Net (increase) decrease in notes receivable from sale of common stock . (334) 415
Issuance of common shares upon the exercise of stock options . . . . . 1,087 -
Issuance of common shares in lieu of cash distributions . . . . . . . . 1,089 405
Issuance of common shares in rights offering . . . . . . . . . . . . . 8,264 -
------ ------
Net increase in net assets resulting from capital share
transactions . . . . . . . . . . . . . . . . . . . . . . . . . . 10,106 820
------ ------
Net increase in net assets . . . . . . . . . . . . . . . . . . . . . . . 14,021 9,251
Net assets at beginning of the period . . . . . . . . . . . . . . . . . . 57,181 49,987
------ ------
Net assets at end of period . . . . . . . . . . . . . . . . . . . . . . . 71,202 59,238
Preferred stock of wholly owned subsidiary . . . . . . . . . . . . . . . (6,000) (6,000)
------ ------
Net asset value available to common shareholders . . . . . . . . . . . . $65,202 $53,238
====== ======
Net asset value per common share . . . . . . . . . . . . . . . . . . . . $ 9.28 $ 8.61
====== ======
Common shares outstanding at end of period . . . . . . . . . . . . . . . 7,026 6,186
====== ======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
3
<PAGE> 6
ALLIED CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30,
------------
1996 1995
---- ----
<S> <C> <C>
Cash Flows From Operating Activities:
Net increase in net assets resulting from operations . . . . . . . . . $ 9,781 $12,419
Adjustments to reconcile net increase in net assets resulting from
operations to net cash provided by operating activities:
Net unrealized (appreciation) depreciation on investments . . . . . 1,702 (6,551)
Net realized gain on investments . . . . . . . . . . . . . . . . . . (8,376) (3,584)
Amortization of loan discounts and fees . . . . . . . . . . . . . . (1,128) (521)
Changes in assets and liabilities:
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . (964) 736
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . (602) (384)
-------- -------
Net cash provided by operating activities . . . . . . . . . . . . 413 2,115
-------- ------
Cash Flows From Investing Activities:
Investments in small business concerns . . . . . . . . . . . . . . . (27,742) (17,811)
Collections from loans and debt securities and other investment
assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,132 14,272
Net proceeds from sale of equity securities . . . . . . . . . . . . 10,577 4,366
Net purchase of U.S. government securities . . . . . . . . . . . . . - 338
Collections from notes receivable from sale of common stock . . . . 66 415
-------- -------
Net cash provided by investing activities . . . . . . . . . . . . 3,033 1,580
------ ------
Cash Flows From Financing Activities:
Issuance of common shares . . . . . . . . . . . . . . . . . . . . . 8,950 -
Common distributions paid . . . . . . . . . . . . . . . . . . . . . (8,200) (3,416)
Preferred distributions paid . . . . . . . . . . . . . . . . . . . . (220) (220)
Net proceeds from the issuance of SBA debentures . . . . . . . . . . - 6,500
Proceeds from the issuance of OPIC debentures . . . . . . . . . . . 5,000 -
Net payments on revolving line of credit . . . . . . . . . . . . . (1,500) (2,205)
------ ------
Net cash provided by financing activities . . . . . . . . . . . . 4,030 659
------ -------
Net increase in cash and cash equivalents . . . . . . . . . . . . . . . . 7,476 4,354
Cash and cash equivalents, beginning of period . . . . . . . . . . . . . 22,743 6,609
------ ------
Cash and cash equivalents, end of period . . . . . . . . . . . . . . . . $30,219 $10,963
====== ======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
4
<PAGE> 7
ALLIED CAPITAL CORPORATION AND SUBSIDIARIES
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 Corporation and its
subsidiaries (the Company) contain all adjustments (consisting of only
normal recurring accruals) necessary to present fairly the financial
position of the Company as of September 30, 1996 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 consolidated financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted. It is suggested that these consolidated
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. DIVIDENDS AND DISTRIBUTIONS
The Company's board of directors declared a third quarter dividend
equivalent to $0.29 per share payable on September 30, 1996 to
shareholders of record as of September 13, 1996. In connection with
this dividend, the Company paid cash of $1,796,000 and distributed new
shares of common stock to participants in the dividend reinvestment
plan with a value of $237,000 for a total dividend of $2,033,000. The
Company's board of directors have declared dividends equivalent to
$0.82 per share for the nine months ended September 1996. In
connection with these dividends, the Company paid cash of $5,029,000
and distributed new shares of common stock to participants in the
dividend reinvestment plan with a value of $672,000 for a total
dividend of $5,701,000.
NOTE 3. DEBT
The Company had no borrowings outstanding under its revolving line of
credit agreement as of September 30, 1996.
The Company borrowed $5,000,000 under its loan agreement with the
Overseas Private Investment Corporation (OPIC) in order to finance its
first OPIC qualified investment in February, 1996. The OPIC loan
bears interest at 6.48% and all principal is due at the maturity date,
which is February 2006. In addition, OPIC is entitled to receive from
the Company a contingent fee at maturity of the loan equal to five
percent of the return generated by the OPIC-related investments in
excess of seven percent.
NOTE 4. SHAREHOLDERS' EQUITY
The Company issued to the common shareholders at the close of business
on January 22, 1996, the record date, non-transferable subscription
rights that entitled record date shareholders to subscribe for and
purchase from the Company up to one authorized, but unissued share of
the Company's common stock for each seven subscription rights held.
The Company offered a total of 885,448 shares of common stock pursuant
to this offer. Shareholders who fully exercised their subscription
rights were entitled to the additional privilege of subscribing for
shares from the offering not acquired by exercise of subscription
rights.
5
<PAGE> 8
ALLIED CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
The subscription price per common share was $13.11, which equaled 95
percent of the average of the last reported sale price of a share of
common stock on the Nasdaq National Market on February 27, 1996 (the
expiration date of the offer) and each of the four preceding business
days. Shareholders participating in the offering subscribed for
411,961 shares through the primary subscription and 251,749 shares
through the oversubscription privilege for a total of 663,710 shares.
The Company received net proceeds of $8,264,000 from the rights
offering after expenses of $437,000, including a 2.5 percent
commission paid to eligible broker/dealers on each share sold as a
result of their soliciting efforts.
NOTE 5. COMMITMENTS AND CONTINGENCIES
Commitments. The Company had commitments outstanding of $5,194,000 at
September 30, 1996 to invest in various existing and prospective
portfolio companies.
Litigation. The Company is party to certain lawsuits in connection
with investments it has made to small businesses that are not deemed
to be material. While the outcome of these legal proceedings cannot
at this time be predicted with certainty, management does not expect
that these actions will have a material effect upon the consolidated
financial position of the Company.
6
<PAGE> 9
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.
The net increase in net assets resulting from operations for the
quarter ended September 30, 1996 was $5.7 million as compared to $3.1
million for the quarter ended September 30, 1995. Earnings per common
share were $0.80 for the current quarter as compared to $0.49 for the
comparable quarter of the prior year.
For the quarter ended September 30, 1996, net investment income
decreased 17% to $748,000 as compared to $899,000 for the comparable
quarter of 1995. Total investment income decreased 4% in the third
quarter of 1996 as compared to the third quarter of 1995. Other
investment income for the quarter ended September 30, 1995 included
non-recurring income consisting of $105,000 of litigation costs from
prior periods recovered during the third quarter of 1995 and $130,000
of income from an equity participation in one portfolio company.
Total expenses remained level at $2.7 million for the quarters ended
September 30, 1996 and 1995. Interest expense increased 16% for the
third quarter of 1996 as compared to the comparable quarter of the
previous year as a result of the Company's outstanding borrowings
increasing to $86.3 million from $74.8 million at September 30, 1995.
The Company's investment advisory fee for the third quarter 1996 of
$754,000 was 3% higher than the same quarter in 1995 of $731,000.
Higher advisory fees were the result of the increase in total assets,
which totaled $161.5 million at September 30, 1996, as compared to
$145.6 million at September 30, 1995. Other operating expenses
decreased 93% for the third quarter of 1996 as compared to 1995. This
decline resulted from a decline in legal costs related to one lawsuit,
which was pending against the Company and filed by a portfolio
company, which was settled in early 1995.
Net realized gains on investments were $2.2 million for the quarter
ended September 30, 1996. During the quarter, the Company
successfully liquidated certain equity investments in its portfolio
and received early payoffs of some loans in its portfolio. Net
realized gains on investments were $3.3 million for the third quarter
of 1995. Net gains are realized when the Company sells or otherwise
liquidates its investments, and as a result may vary significantly
from quarter to quarter.
Net unrealized appreciation on investments for the three months ended
September 30, 1996 was $2.7 million as compared to net unrealized
depreciation of $1.1 million for the three months ended September 30,
1995. The Company disposed of portfolio investments during the third
quarter that had net unrealized appreciation at June 30, 1996 of
$419,000. When sold, net unrealized appreciation was reduced by
$419,000 and the actual net gain realized on these investments of $1.3
million was included in net realized gain on investments. The
remaining net unrealized appreciation of $3.2 million for the third
quarter of 1996 is due primarily to the increase in the market value
of the Company's investments in Allied Capital Lending Corporation of
$1.8 million and TPG Holdings, Inc. of $1.5 million, reduced by the
decline in the value of the Company's investments in Enviroplan, Inc.
of $745,000 and Williams Brothers Lumber Company of $792,000.
For the Nine Months ended September 30, 1996 and 1995.
Net increase in net assets resulting from operations was $9.8 million,
or $1.41 per common share, for the nine months ended September 30,
1996, compared to $12.4 million, or $1.97 per common share, for the
same period in 1995. Net investment income and net realized gains for
the nine months ended September 30, 1996 increased 36% and 134%,
respectively, over the comparable nine-month period of the prior year.
These increases, however, were offset by a significant decline in the
net unrealized appreciation in the investment portfolio of 126%.
During the nine months ended September 30, 1996, the Company realized
net gains on the sale of investments which had net unrealized
appreciation totaling $3.8 million, or $0.56 per common share, that
had been previously recognized into net income as net unrealized
appreciation. Thus upon the realization of these gains, the
year-to-date 1996 net increase in net assets resulting from operations
reflects an offsetting decrease in net unrealized appreciation for the
same amount. Generally, as investments in the portfolio
7
<PAGE> 10
appreciate or depreciate, the increase or decrease in value is
recognized into net income as the change in net unrealized
appreciation. When gains or losses are realized upon the disposition
of the investment, the effect on net income is approximately neutral;
however, net income would be impacted in the current period to the
extent the realized gain or loss differed from the unrealized
appreciation or depreciation.
Other changes in the results of operations for the first nine months
of 1996 as compared to the nine months ended September 30, 1995 were
caused by the same factors discussed in the quarter-to-quarter
comparison above.
LIQUIDITY AND CAPITAL RESOURCES
Total assets increased $13.3 million to $161.5 million at September
30, 1996 from $148.3 million at December 31, 1995. This growth in
total assets resulted primarily from the Company's one-for-seven
non-transferable rights offering that was completed in February 1996,
which netted $8.3 million in proceeds.
Total investments at September 30, 1996 increased $4.8 million from
December 31, 1995 as new investments of $27.7 million exceeded total
repayments and changes in investment valuations during the first nine
months of 1996. Cash and cash equivalents increased to $30.2 million
as of September 30, 1996 from $22.7 million at December 31, 1995 due
to the proceeds received from the rights offering and investment
dispositions.
The Company believes that it has adequate capital to continue to
satisfy its operating needs, debt service obligations, commitments and
other future investment opportunities that may arise over the next the
year.
PORTFOLIO CHANGES
For the nine months ended September 30, 1996, overall the Company's
portfolio depreciated, net of appreciation, by $1.7 million due to the
sale of certain investments which resulted in realized gains (losses),
changes in investment values from the change in market prices for
public equity investments, and changes in value of certain private
investments.
The disposition of the following portfolio investments resulted in
unrealized appreciation (depreciation) and the recognition of realized
gains (losses) during the nine months ended September 30, 1996 as
follows:
<TABLE>
<CAPTION>
Unrealized Realized
Appreciation Gain
(Depreciation) (Loss)
-------------- ------------
<S> <C> <C>
Garden Ridge Corporation (stock) $(1,518,000) $1,692,000
Garden Ridge Corporation (warrants) (1,996,000) 3,579,000
June Broadcasting, Inc. (1,948,000) 2,182,000
Kittiwake 400,000 (370,000)
Labor Ready, Inc.* (203,000) 1,662,000
Palmer Corporation 100,000 (5,000)
Providential Corporation 789,000 (789,000)
Other 532,000 425,000
* Sale of certain stock only.
</TABLE>
The Company's public equity investments which appreciated
(depreciated) in value during the nine months ended September 30, 1996
were:
<TABLE>
<CAPTION>
Unrealized
Appreciation
(Depreciation)
--------------
<S> <C>
Allied Capital Lending Corporation $ 2,031,000
Au Bon Pain (109,000)
DMI Furniture, Inc. 150,000
Labor Ready, Inc. 1,064,000
Nobel Education Dynamics, Inc. 756,000
Quality Software Products Holdings, PLC (305,000)
</TABLE>
The Company's investment in Peerless Group, Inc. appreciated
$1,519,000 in anticipation of its initial public offering on October
3, 1996. In addition, the following private companies had unrealized
depreciation during the nine months ended September 30, 1996:
Enviroplan, Inc. - $1,177,000; SunStates Refrigerated Services, Inc. -
8
<PAGE> 11
$772,000; and Williams Brothers Lumber Company -$1,599,000. The
remaining investment portfolio had net unrealized appreciation during
the nine months ended September 30, 1996 of $584,000.
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.
9
<PAGE> 12
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
None.
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.
10
<PAGE> 13
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: November 13, 1996 Jon A. DeLuca
----------------- Executive Vice President and
Chief Financial Officer
11
<PAGE> 1
Allied Capital Corporation and Subsidiaries
Exhibit 11 Statement of Computation of Earnings Per Common Share
Form 10-Q
September 30, 1996
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
1996 1995 1996 1995
-------------------------- --------------------------
Primary Earnings Per Common Share:
<S> <C> <C> <C> <C>
Net Increase in Net Assets Resulting
from Operations $ 5,705,000 $ 3,089,000 $ 9,781,000 $12,419,000
Less: Dividends for Preferred Stock (55,000) (55,000) (165,000) (165,000)
------------------------- -------------------------
Net Increase in Net Assets Resulting
from Operations Available to
Common Shareholders $ 5,650,000 $ 3,034,000 $ 9,616,000 $12,254,000
========================= =========================
Weighted average number of common
shares outstanding 6,986,512 6,185,660 6,791,205 6,207,004
Weighted average number of common
shares issuable on exercise
of outstanding stock options 69,073 7,695 47,871 397
------------------------- -------------------------
Weighted average number of common
shares and common share equivalents outstanding 7,055,585 6,193,355 6,839,076 6,207,401
========================= =========================
Earnings per Common Share $ 0.80 $ 0.49 $ 1.41 $ 1.97
========================= =========================
Fully Diluted Earnings Per Common Share:
Net Increase in Net Assets Resulting
from Operations $ 5,705,000 $ 3,089,000 $ 9,781,000 $12,419,000
Less: Dividends for Preferred Stock (55,000) (55,000) (165,000) (165,000)
------------------------- -------------------------
Net Increase in Net Assets Resulting
from Operations Available to
Common Shareholders $ 5,650,000 $ 3,034,000 $ 9,616,000 $12,254,000
========================= =========================
Weighted average number of common
shares and common share
equivalents outstanding as computed for
primary earnings per share 7,055,585 6,193,355 6,839,076 6,207,401
Weighted average of additional
shares issuable on exercise
of outstanding stock options 39,646 7,963 60,135 13,976
------------------------- -------------------------
Weighted average number of common
shares and common share equivalents
outstanding, as adjusted 7,095,231 6,201,318 6,899,211 6,221,377
========================== =========================
Earnings per Common Share $ 0.80 $ 0.49 $ 1.39 $ 1.97
========================== =========================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from Allied
Capital Corporation and subsidiaries' consolidated balance sheet and
consolidated statements of operations, changes in net assets and cash flows and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 122,153
<INVESTMENTS-AT-VALUE> 128,020
<RECEIVABLES> 0
<ASSETS-OTHER> 33,524
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 161,544
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 86,300
<OTHER-ITEMS-LIABILITIES> 3,042
<TOTAL-LIABILITIES> 89,342
<SENIOR-EQUITY> 7,026
<PAID-IN-CAPITAL-COMMON> 51,103
<SHARES-COMMON-STOCK> 7,026
<SHARES-COMMON-PRIOR> 6,198
<ACCUMULATED-NII-CURRENT> 1,941
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,867
<NET-ASSETS> 71,202
<DIVIDEND-INCOME> 1,144
<INTEREST-INCOME> 10,240
<OTHER-INCOME> 108
<EXPENSES-NET> 8,385
<NET-INVESTMENT-INCOME> 3,107
<REALIZED-GAINS-CURRENT> 8,376
<APPREC-INCREASE-CURRENT> (1,702)
<NET-CHANGE-FROM-OPS> 9,781
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5,866
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 751
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 77
<NET-CHANGE-IN-ASSETS> 14,021
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (3,676)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,192
<INTEREST-EXPENSE> 5,607
<GROSS-EXPENSE> 8,385
<AVERAGE-NET-ASSETS> 64,191
<PER-SHARE-NAV-BEGIN> 8.26
<PER-SHARE-NII> 0.45
<PER-SHARE-GAIN-APPREC> 0.98
<PER-SHARE-DIVIDEND> 0.83
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.28
<EXPENSE-RATIO> 0.13
<AVG-DEBT-OUTSTANDING> 83,800
<AVG-DEBT-PER-SHARE> 12.25
</TABLE>
