<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 JUNE 30, 1996 0-22832
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ALLIED CAPITAL LENDING CORPORATION
-----------------------------------------------------------
(exact name of Registrant as specified in its charter)
MARYLAND 52-1081052
- ----------------------- ------------------------
(State or jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
C/O ALLIED CAPITAL ADVISERS, INC.
1666 K STREET, NW
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 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 August 5, 1996 there were 5,117,521 shares outstanding of the Registrant's
common stock, $0.0001 par value.
<PAGE> 2
ALLIED CAPITAL LENDING CORPORATION
FORM 10-Q INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheet as of June 30, 1996
and December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Consolidated Statement of Operations - For the Three and Six Months Ended
June 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Consolidated Statement of Changes in Net Assets - For the Six Months Ended
June 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statement of Cash Flows - For the Six Months Ended
June 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
PART II. OTHER INFORMATION
<TABLE>
<S> <C>
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
<PAGE> 3
PART I - Financial Information
Item 1. Financial Statements
ALLIED CAPITAL LENDING CORPORATION
CONSOLIDATED BALANCE SHEET
(in thousands, except number of shares)
<TABLE>
<CAPTION>
June 30, December 31,
------- -----------
1996 1995
---- ----
(unaudited)
<S> <C> <C>
ASSETS
Investments at value:
Loans receivable (cost: 1996 - $46,960; 1995 - $46,451) . . . . . . . . $46,754 $46,223
Loans held for sale (cost: 1996 - $6,155; 1995 - $851) . . . . . . . . 6,464 924
------ -------
Total investments . . . . . . . . . . . . . . . . . . . . . . . 53,218 47,147
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . 1,354 3,020
Accrued interest receivable . . . . . . . . . . . . . . . . . . . . . . . 801 732
Excess servicing asset . . . . . . . . . . . . . . . . . . . . . . . . . 4,281 3,828
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 952 753
------ -------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . $60,606 $55,480
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $18,664 $18,914
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . 2,068 3,012
Investment advisory fee payable . . . . . . . . . . . . . . . . . . . . 372 330
Dividends and distributions payable . . . . . . . . . . . . . . . . . . - 340
------ ------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . 21,104 22,596
------ ------
Commitments and Contingencies
Shareholders' Equity:
Common stock, $0.0001 par value; 20,000,000 shares
authorized; 4,943,163 and 4,384,921 shares issued and
outstanding at 6/30/96 and 12/31/95 . . . . . . . . . . . . . . . . . . - -
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . 40,191 33,252
Net unrealized appreciation (depreciation) on investments . . . . . . . . 103 (155)
Distributions in excess of accumulated earnings . . . . . . . . . . . . (792) (213)
------ ------
Total shareholders' equity . . . . . . . . . . . . . . . . . . 39,502 32,884
------ ------
Total liabilities and shareholders' equity . . . . . . . . . . $60,606 $55,480
====== ======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
1
<PAGE> 4
ALLIED CAPITAL LENDING CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
------- -------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Investment Income:
Interest . . . . . . . . . . . . . . . . . . . . . . . . $1,668 $1,464 $3,259 $2,686
Premium income . . . . . . . . . . . . . . . . . . . . . 269 307 931 912
----- ----- ----- -----
Total investment income . . . . . . . . . . . . . . . . 1,937 1,771 4,190 3,598
----- ----- ----- -----
Operating Expenses:
Investment advisory fee . . . . . . . . . . . . . . . . . 371 273 685 497
Interest expense . . . . . . . . . . . . . . . . . . . . 466 179 862 253
Other operating expenses . . . . . . . . . . . . . . . . 209 88 341 223
----- ----- ----- -----
Total expenses . . . . . . . . . . . . . . . . . . . . 1,046 540 1,888 973
----- ----- ----- -----
Net investment income . . . . . . . . . . . . . . . . . . . 891 1,231 2,302 2,625
Net realized losses on investments . . . . . . . . . . . . (24) (48) (84) (38)
----- ----- ----- -----
Net investment income before net unrealized
appreciation on investments . . . . . . . . . . . . . . . 867 1,183 2,218 2,587
Net unrealized appreciation on investments . . . . . . . . 279 65 258 6
----- ----- ----- -----
Net increase in net assets resulting from operations . . . $1,146 $1,248 $2,476 $2,593
===== ===== ===== =====
Earnings per share . . . . . . . . . . . . . . . . . . . . $ 0.25 $ 0.29 $ 0.55 $ 0.59
===== ===== ===== =====
Weighted average number of shares and share
equivalents outstanding . . . . . . . . . . . . . . . . . 4,549 4,377 4,469 4,377
===== ===== ===== =====
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
2
<PAGE> 5
ALLIED CAPITAL LENDING CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
-------
1996 1995
---- ----
<S> <C> <C>
Increase in Net Assets Resulting from Operations:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . $ 2,302 $ 2,625
Net realized losses on investments . . . . . . . . . . . . . . . . . (84) (38)
Net unrealized appreciation on investments . . . . . . . . . . . . . 258 6
----- -----
Net increase in net assets resulting from operations . . . . . . 2,476 2,593
----- -----
Distributions to shareholders . . . . . . . . . . . . . . . . . . . . . . (2,797) (2,415)
------ ------
Capital Share Transactions:
Issuance of common shares in rights offering . . . . . . . . . . . . . 6,809 -
Issuance of common shares in lieu of cash distributions . . . . . . . . 130 87
----- ------
Net increase in net assets resulting from capital share
transactions . . . . . . . . . . . . . . . . . . . . . . . . . 6,939 87
----- ------
Total increase in net assets . . . . . . . . . . . . . . . . . . . . . . 6,618 265
Net assets at beginning of period . . . . . . . . . . . . . . . . . . . . 32,884 32,788
------ ------
Net assets at end of period . . . . . . . . . . . . . . . . . . . . . . . $39,502 $33,053
====== ======
Net asset value per share . . . . . . . . . . . . . . . . . . . . . . . . $ 7.99 $ 7.55
====== ======
Shares outstanding at end of period . . . . . . . . . . . . . . . . . . . 4,943 4,377
====== ======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
3
<PAGE> 6
ALLIED CAPITAL LENDING CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
-------
Cash Flows from Operating Activities: 1996 1995
---- ----
<S> <C> <C>
Net increase in net assets resulting from operations . . . . . . . . . $ 2,476 $ 2,593
Adjustments to reconcile net increase in assets resulting from
operations to net cash provided by (used in) operating activities:
Premium income . . . . . . . . . . . . . . . . . . . . . . . . . . (931) (912)
Amortization of loan discounts and fees . . . . . . . . . . . . . (192) (167)
Net realized losses on investments . . . . . . . . . . . . . . . . 84 38
Net unrealized appreciation on investments . . . . . . . . . (258) (6)
Changes in assets and liabilities:
Accrued interest receivable . . . . . . . . . . . . . . . . . . . . (69) (243)
Excess servicing asset . . . . . . . . . . . . . . . . . . . . . . . (453) (314)
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . (199) 39
Accounts payable and accrued expenses . . . . . . . . . . . . . . . (944) 324
Investment advisory fee payable . . . . . . . . . . . . . . . . . . 42 43
------- --------
Net cash provided by (used in) operating activities . . . . . . (444) 1,395
-------- --------
Cash flows from Investing Activities:
Loan originations . . . . . . . . . . . . . . . . . . . . . . . . . . (21,619) (21,597)
Proceeds from the sale of loans . . . . . . . . . . . . . . . . . . . 11,860 14,049
Collection of principal . . . . . . . . . . . . . . . . . . . . . . . 4,985 1,681
------- -------
Net cash used in investing activities . . . . . . . . . . . . . (4,774) (5,867)
------- -------
Cash Flows from Financing Activities:
Issuance of common shares . . . . . . . . . . . . . . . . . . . . . 6,809 -
Dividends and distributions paid . . . . . . . . . . . . . . . . . . (3,007) (2,591)
Net borrowings (repayments) under revolving lines of credit . . . . (250) 6,785
------ ------
Net cash provided by financing activities . . . . . . . . . . 3,552 4,194
------ ------
Net decrease in cash and cash equivalents . . . . . . . . . . . . . . . . (1,666) (278)
Cash and cash equivalents, beginning of period . . . . . . . . . . . . . 3,020 1,297
------ ------
Cash and cash equivalents, end of period . . . . . . . . . . . . . . . . $ 1,354 $ 1,019
====== ======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
4
<PAGE> 7
ALLIED CAPITAL LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30. 1996
(UNAUDITED)
NOTE 1. GENERAL
In the opinion of management, the accompanying unaudited consolidated
financial statements of Allied Capital Lending Corporation (the
Company) contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the Company's consolidated
financial position as of June 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
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
six months ended June 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. DISTRIBUTIONS
The Company's board of directors declared a second quarter dividend
equivalent to $0.30 per share payable on June 28, 1996 to shareholders
of record on June 14, 1996. In connection with this dividend, the
Company paid cash of $1,417,000 and distributed new shares of common
stock to participants in the dividend reinvestment plan with a value
of $64,000 for a total dividend of $1,481,000. In addition, the
Company's board of directors declared a first quarter dividend
equivalent to $0.30 per share payable on March 29, 1996 to
shareholders of record on March 15, 1996. In connection with this
dividend, the Company paid cash of $1,263,000 and distributed new
shares of common stock to participants in the dividend reinvestment
plan with a value of $53,000 for a total dividend of $1,316,000.
NOTE 3. NOTES PAYABLE
The Company has a $20,000,000 secured line of credit with a bank which
expires December 31, 1996. The interest rate associated with this
line of credit is equal to the one-month LIBOR plus 2.2 percent per
annum, payable monthly. As of June 30, 1996 and December 31, 1995,
the Company was paying interest at 7.638 percent and 7.95 percent per
annum, respectively, on the amounts outstanding under this line. The
line of credit requires a quarterly facility fee of 0.375 percent per
annum on the unused portion of the line of credit. As of June 30,
1996 and December 31, 1995, the Company had outstanding borrowings
under the secured line of credit equal to $13,603,000 and $13,335,000,
respectively.
The Company had a $2,000,000 unsecured revolving line of credit with a
bank, which charged interest at The Wall Street Journal prime rate
plus 0.25 percent per annum, payable monthly. This unsecured line of
credit was canceled in April 1996. As of December 31, 1995, the
Company was paying interest at 8.75 percent per annum on the amount
outstanding under this line. The line of credit required a quarterly
facility fee of 0.375 percent per annum on the unused portion of the
line of credit. As of December 31, 1995, the Company had outstanding
borrowings under the unsecured line of credit equal to $1,055,000.
The Company's subsidiary has a credit agreement with an investment
bank whereby the subsidiary can borrow up to $20,000,000 in order to
finance its loans to small business concerns. This credit agreement
bears interest at a rate equal to one-month LIBOR plus 2 percent per
annum, payable monthly, and expires on September 27, 1996. The
agreement requires a quarterly facility fee of 0.15 percent per annum
on the unused portion of the line. The subsidiary had total
borrowings under this agreement equal to $4,524,000 at December 31,
1995, at interest rates ranging from 7.75 percent to 7.93 percent per
annum. There were no borrowings under this agreement at June 30,
1996.
5
<PAGE> 8
ALLIED CAPITAL LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30. 1996
(UNAUDITED)
The Company's subsidiary entered into a new secured revolving line of
credit with a bank in April 1996 to borrow up to $15,000,000 at
one-month LIBOR plus 2.7 percent per annum, payable monthly, which
expires May 31, 1997. As of June 30, 1996, the subsidiary was paying
interest of 8.138 percent on the amounts outstanding under this line.
The agreement requires payment of a quarterly facility fee of 0.375
percent per annum on the unused portion of the line. As of June 30,
1996, the subsidiary had outstanding borrowings under this agreement
equal to $5,061,000.
NOTE 4. SHAREHOLDERS' EQUITY
The Company issued to common stockholders of record at the close of
business on April 26, 1996, the record date, non-transferable
subscription rights that entitled record date stockholders to
subscribe for and purchase from the Company up to one authorized, but
unissued share of the Company's common stock for each five
subscription rights held ("rights offering"). The Company offered a
total of 628,909 shares of common stock pursuant to this offer, with
the right to increase the number of shares subject to be purchased by
15 percent, or 94,336 shares, for an aggregate total of 723,245 shares
available under the offer. Stockholders who fully exercised their
subscription rights were entitled to the additional privilege of
subscribing for shares from the offer not acquired by the exercise of
subscription rights.
Stockholders participating in the rights offering subscribed for
195,457 shares through the primary subscription and 353,430 shares
through the oversubscription privilege for a total of 548,887 shares.
The subscription price per common share was $13.04, 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 June 4, 1996 (the
expiration date of the offer) and each of the four preceding business
days. The Company received net proceeds of $6,809,000 from the rights
offering after expenses of $349,000, including a 2.5 percent
commission paid to eligible broker/dealers on each share sold as a
result of their soliciting efforts.
NOTE 5. SUBSEQUENT EVENTS
The Company reserved the right to offer and sell any shares not
subscribed for in the rights offering discussed in Note 4 to one or
more third parties through a public offering. Therefore, in July 1996
the Company sold the 174,358 shares (includes the additional 94,336
shares added to the offer at the discretion of the Company as
discussed in Note 4) not sold in the rights offering to a private
buyer at a net price of $12.74 per share. The underwriter for the
transaction received a 2.56% commission, or $0.326 per share. The
Company estimates net proceeds of $2,100,000 from this sale after
expenses of approximately $120,000.
NOTE 6. COMMITMENTS AND CONTINGENCIES
Commitments. The Company had loan commitments outstanding equal to
$32,200,000 at June 30, 1996 to invest in various existing and
prospective portfolio companies.
6
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
For the Second Quarter Ended June 30, 1996 and 1995.
For the three months ended June 30, 1996, the net increase in net
assets resulting from operations was $1.1 million, or $0.25 per share,
an 8.2% decrease from $1.2 million, or $0.29 per share, for the same
period for 1995.
Total investment income increased $166,000, or 9.4%, over the
comparative three months in 1995 to $1.9 million. This increase is
due to the net increase in loans of $13.5 million from June 30, 1995,
which increased interest income earned by the Company. Premium income
from the sales of the guaranteed portion of the Section 7(a)
guaranteed loans was $269,000 for the three months ended June 30, 1996
as compared to $307,000 for the three months ended June 30, 1995.
Premium income declined because fewer SBA guaranteed loans were
available for sale in the second quarter of 1996, due to the slower
loan origination pace experienced in the first quarter of 1996. Loan
originations of $15.2 million in the second quarter of 1996, a 19%
increase over the comparable quarter of the prior year, will be
available for sale in the third and fourth quarters of 1996.
Interest expense was $466,000 for the three months ended June 30, 1996
as compared to $179,000 for the same period in 1995. Interest expense
increased due to increased borrowings in the second quarter of 1996 in
order to fund the higher level of SBA guaranteed and related loan
originations, and a small increase in the Company's short-term
borrowing interest rates in the second quarter of 1996 as compared to
the same period in 1995. The Company finances the origination of SBA
Section 7(a) guaranteed loans and the 7(a) and 504 companion loans
with warehouse credit facilities until the loans can be sold. Notes
payable increased to $18.7 million at June 30, 1996 as compared to
$9.9 million at June 30, 1995.
Investment advisory fees increased $98,000 to $371,000 for the three
months ended June 30, 1996 compared to $273,000 for the three months
ended June 30, 1995. This increase also is a result of increased loan
origination activity seen in the second quarter of 1996. All other
expenses were $209,000 for the three months ended June 30, 1996, a
137.5% increase over other expenses of $88,000 for the same period of
1995 due primarily to an increase in stock record expenses incurred to
service shareholders, portfolio monitoring expenses due to an increase
in the number of loans in the portfolio, and board of directors fees
due to an additional meeting held in the second quarter of 1996.
At June 30, 1996 the Company held loans with a cost of $6.2 million
for sale to third-party purchasers. These loans have been valued at
their estimated sales price upon culminations of the sale. These
loans consist of SBA 7(a), 504, and companion loans. These loans are
expected to be sold at premiums ranging from 3.25% to 10%, and will be
sold during the third and fourth quarters of 1996. The difference
between the cost and value of the loans of $309,000 has been recorded
as unrealized appreciation in the 1996 three- and six-month
consolidated statement of operations.
For the Six Months Ended June 30, 1996 and 1995.
Net increase in net assets resulting from operations was $2.5 million,
or $0.55 per share, for the six months ended June 30, 1996, compared
to $2.6 million, or $.59 per share, for the same period in 1995. The
decline in the net increase in net assets resulting from operations
for the first six months of 1996 was caused by the same factors
discussed in the quarter-to-quarter comparison above.
LIQUIDITY AND CAPITAL RESOURCES
The Company originated $21.6 million in new loans during the first six
months of 1996. Net of loan sales, repayments and changes in
portfolio valuation, the Company's total loans to small businesses
increased by $6.1 million to $53.2 million at June 30, 1996 as
compared to $47.1 million at December 31, 1995. At June 30, 1996,
loans to small businesses totaled 88% of the Company's total assets,
compared to 85% at December 31, 1995.
7
<PAGE> 10
As of June 30, 1996 and December 31, 1995, the Company was paying an
interest rate of 7.638% and 7.95% per annum, respectively, for its $20
million secured line of credit. The secured line of credit expires
December 31, 1996. The Company had total borrowings under this
facility equal to $13.6 million at June 30, 1996. In April 1996, this
line of credit was amended to increase the borrowing limit to $20
million from $19 million. This line of credit is used to finance
loans made under the Section 7(a) guaranteed loan program.
In April 1996, the Company canceled its unsecured line of credit that
had a borrowing limit of $2 million and charged interest at The Wall
Street Journal prime rate plus 0.25% per annum. As of December 31,
1995, the Company was paying an interest rate of 8.75% per annum and
had total borrowings under the facility equal to $1.1 million.
The Company's subsidiary has a credit agreement with an investment
bank whereby the subsidiary can borrow up to $20 million in order to
finance its loans closed under the SBA 504 program and companion loans
closed in conjunction with guaranteed loans. This credit agreement
bears interest at one-month LIBOR plus 2% per annum and expires
September 27, 1996. The Company had total borrowings under this
agreement equal to $4.5 million at December 31, 1995, at interest
rates ranging from 7.75% to 7.93% per annum. There were no borrowings
under this agreement at June 30, 1996.
In addition, the Company's subsidiary entered into a new secured line
of credit with a bank in April 1996 to borrow up to $15 million at
one-month LIBOR plus 2.7% per annum which expires May 31, 1997. At
June 30, 1996, the subsidiary was paying interest of 8.138% on the
$5.1 million borrowed under this agreement. This line of credit is
also being used to finance the subsidiary's loans closed under the
Section 504 program and companion loans closed in conjunction with
guaranteed loans.
The Company issued to common stockholders of record at the close of
business on April 26, 1996, the record date, non-transferable
subscription rights that entitled record date stockholders to
subscribe for and purchase from the Company up to one authorized, but
unissued share of the Company's common stock for each five
subscription rights held ("rights offering"). The Company offered a
total of 628,909 shares of common stock pursuant to this offer, with
the right to increase the number of shares subject to be purchased by
15 percent, or 94,336 shares, for an aggregate total of 723,245 shares
available under the offer. Stockholders who fully exercised their
subscription rights were entitled to the additional privilege of
subscribing for shares from the offer not acquired by the exercise of
subscription rights.
Stockholders participating in the rights offering subscribed for
195,457 shares through the primary subscription and 353,430 shares
through the oversubscription privilege for a total of 548,887 shares.
The subscription price per common share was $13.04, 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 June 4, 1996 (the
expiration date of the offer) and each of the four preceding business
days. The Company received net proceeds of $6.8 million from the
rights offering after expenses of $349,000, including a 2.5 percent
commission paid to eligible broker/dealers on each share sold as a
result of their soliciting efforts.
The Company reserved the right to offer and sell any shares not
subscribed for in the rights offering to one or more third parties
through a public offering. Therefore, in July 1996 the Company sold
the 174,358 shares not sold in the rights offering to a private buyer
at a net price of $12.74 per share. This price was determined as the
$13.04 per share paid by shareholders in the rights offering on June
4, 1996 less the second quarter dividend of $0.30 per share paid to
shareholders of record on June 14, 1996. This price allowed the buyer
to purchase the stock in July 1996 at the same price he would have
paid if he had been a shareholder participating in the rights offering
prior to payment of the second quarter dividend. The underwriter for
the transaction received a 2.56% commission, or $0.326 per share. The
Company estimates net proceeds of $2.1 million from this sale after
expenses of approximately $120,000.
Management plans to continue to use leverage to finance the growth of
the Company, however as a business development company (BDC), the
Company must maintain 200% asset coverage for indebtedness
representing senior securities, which will limit the Company's ability
to borrow. It is management's belief that the Company will have
access to the capital resources necessary to expand and develop its
business. The Company may seek to obtain funds through additional
equity offerings, debt financings, or loan sales. The Company
anticipates that adequate cash will be available to make new loans,
fund its operating and administrative expenses, satisfy debt service
obligations and pay dividends throughout 1996.
8
<PAGE> 11
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
Allied Capital Lending Corporation held its annual meeting of
shareholders on May 13, 1996 in North Bethesda, Maryland. The
following directors were elected as proposed in the proxy material to
serve until the next annual shareholders meeting:
<TABLE>
<CAPTION>
FOR WITHHELD
--- --------
<S> <C> <C>
David Gladstone 4,183,261 19,515
George C. Williams 4,182,356 20,420
Katherine C. Marien 4,182,350 20,426
Jon W. Barker 4,183,190 19,587
Eleanor D. Bierbower 4,183,227 19,549
Robert V. Fleming II 4,183,261 19,515
Anthony T. Garcia 4,183,261 19,515
Arthur H. Keeney III 4,183,261 19,515
Robin B. Martin 4,183,117 19,659
</TABLE>
Shareholders also ratified the selection of Matthews Carter & Boyce to
serve as independent accountants until the next shareholders meeting.
The Company received 4,168,563 shares voting in favor of ratification,
5,158 shares voting against the ratification, and 29,053 shares
abstaining from voting.
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 June 30, 1996.
9
<PAGE> 12
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 LENDING CORPORATION
----------------------------------
(Registrant)
/s/ Jon A.DeLuca
----------------------------------
Date: August 12, 1996 Jon A. DeLuca
--------------- Executive Vice President and
Chief Financial Officer
10
<PAGE> 1
Allied Capital Lending Corporation
Exhibit 11 Statement of Computation of Earnings Per Common Share
Form 10-Q
June 30, 1996
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
------------------------------------ ------------------------------
1996 1995 1996 1995
------------------------------------ ------------------------------
<S> <C> <C>
Primary Earnings Per Common Share:
Net Increase in Net Assets Resulting
from Operations $1,146,000 $1,248,000 $2,476,000 $2,593,000
==================================== ==============================
Weighted average number of
shares outstanding 4,548,971 4,377,334 4,469,063 4,377,334
Weighted average number of
shares issuable on exercise
of outstanding stock options - - - -
------------------------------------ ------------------------------
Weighted average number of shares and
share equivalents outstanding 4,548,971 4,377,334 4,469,063 4,377,334
==================================== ==============================
Earnings per Share $0.25 $0.29 $0.55 $0.59
==================================== ==============================
Fully Diluted Earnings Per Common Share:
Net Increase in Net Assets Resulting
from Operations $1,146,000 $1,248,000 $2,476,000 $2,593,000
==================================== ==============================
Weighted average number of
shares and share equivalents
outstanding as computed for
primary earnings per share 4,548,971 4,377,334 4,469,063 4,377,334
Weighted average of additional
shares issuable on exercise
of outstanding stock options - - - -
------------------------------------ ------------------------------
Weighted average of shares and
share equivalent outstanding, as adjusted 4,548,971 4,377,334 4,469,063 4,377,334
==================================== ==============================
Earnings per Share $0.25 $0.29 $0.55 $0.59
==================================== ==============================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from Allied
Capital Lending 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 53,115
<INVESTMENTS-AT-VALUE> 53,218
<RECEIVABLES> 801
<ASSETS-OTHER> 952
<OTHER-ITEMS-ASSETS> 5,635
<TOTAL-ASSETS> 60,606
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 18,664
<OTHER-ITEMS-LIABILITIES> 2,377
<TOTAL-LIABILITIES> 21,041
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 40,191
<SHARES-COMMON-STOCK> 4,943
<SHARES-COMMON-PRIOR> 4,389
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (792)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 103
<NET-ASSETS> 39,502
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,259
<OTHER-INCOME> 931
<EXPENSES-NET> 1,888
<NET-INVESTMENT-INCOME> 2,302
<REALIZED-GAINS-CURRENT> (84)
<APPREC-INCREASE-CURRENT> 258
<NET-CHANGE-FROM-OPS> 2,476
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,797
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 549
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 5
<NET-CHANGE-IN-ASSETS> 6,618
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 685
<INTEREST-EXPENSE> 862
<GROSS-EXPENSE> 1,888
<AVERAGE-NET-ASSETS> 36,193
<PER-SHARE-NAV-BEGIN> 7.50
<PER-SHARE-NII> 0.46
<PER-SHARE-GAIN-APPREC> 0.03
<PER-SHARE-DIVIDEND> 0.60
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 7.99
<EXPENSE-RATIO> 0.05
<AVG-DEBT-OUTSTANDING> 18,790
<AVG-DEBT-PER-SHARE> 3.80
</TABLE>
