Attached files
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| 8-K - 8-K - MCG CAPITAL CORP | mcgc20130630earningsrelease.htm |
Exhibit 99.1
 | MCG Capital Corporation | PRESS RELEASE | |
1001 19th Street North | |||
10th Floor | Contact: Keith Kennedy | ||
Arlington, VA 22209 | (703) 247-7513 | ||
(703) 247-7500 | KKennedy@MCGCapital.com | ||
(866) 774-4951 (FAX) | |||
www.MCGCapital.com | |||
FOR IMMEDIATE RELEASE | |||
MCG CAPITAL CORPORATION REPORTS SECOND QUARTER 2013 RESULTS
AND DISTRIBUTION OF $0.125 PER SHARE
ARLINGTON, VA—July 30, 2013—MCG Capital Corporation (Nasdaq: MCGC) (“MCG,” "we," "our," "us" or the “Company”) announced today its financial results for the quarter ended June 30, 2013.
HIGHLIGHTS
As outlined in further detail in this earnings release and in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, the following highlights occurred during the three months ended June 30, 2013:
• | Net operating income, or NOI, was $7.6 million, or $0.11 per share; |
• | Net income was $8.6 million, or $0.12 per share; |
• | We funded $70.9 million of advances and originations to new and existing companies, including $68.3 million of senior secured loans to four new portfolio companies and two existing borrowers; |
• | We monetized $19.8 million of our debt portfolio; and |
• | At June 30, 2013, we had $96.6 million of cash on-hand to make new investments using unrestricted cash and restricted cash from our SBIC. In addition, we had $19.4 million in securitization accounts and other restricted cash accounts. |
DISTRIBUTION
On July 26, 2013, the MCG board of directors declared a distribution of $0.125 per share. The distribution is payable as follows:
Record date: August 9, 2013
Payable date: August 30, 2013
If we determined the tax attributes of our 2013 distributions as of June 30, 2013, 74% would be from ordinary income and 26% would be a return of capital. However, actual determinations of the tax attributes of our distributions, including determinations of return of capital, are made annually as of the end of the fiscal year based upon our taxable income and distributions paid for the full year. Therefore, a determination as to the tax attributes of the distributions made on a quarterly basis may not be representative of the actual tax attributes for a full year. We intend to update stockholders quarterly with an estimated percentage of our distributions that resulted from taxable ordinary income. The actual tax characteristics of distributions to stockholders will be reported to stockholders annually on a Form 1099-DIV.
MCG Capital Corporation
July 30, 2013
Page 2
RECENT DEVELOPMENTS
• | Originations and Advances — We made $70.9 million in originations and advances to new and existing portfolio companies, including $68.3 million of senior secured loans to four new portfolio companies and two existing borrowers. |
• | Loan Monetizations — We received $19.8 million in loan payoffs and amortization payments: two borrowers repaid $11.5 million in principal at or above par and we received $8.3 million in loan amortization and paid-in-kind interest, or PIK, payments. |
• | Loans on Non-Accrual — Loans on non-accrual, at cost (remained under 4% of the total loan portfolio) and fair value (under 20 basis points of the total loan portfolio) remained stable in the second quarter of 2013. |
• | Equity Monetizations and Realizations — Miles Media Group, LLC purchased our warrants representing a 15% interest in the company for $3.0 million, which we financed, and we received $1.0 million in connection with the final disposition of our interest in Jenzabar, Inc. During the second quarter, we received $0.3 million in dividend and other equity payments. |
• | Operating Costs — Excluding interest expense, our total operating costs were 0.5% of $580 million in total assets (equal to an annualized rate of approximately 2% of total assets). |
• | Reduced Leverage — From March 31, 2013 to June 30, 2013, we reduced our outstanding borrowings under our MCG Commercial Loan Trust, or 2006-1 Trust, by $28.1 million, reducing our borrowings under our 2006-1 Trust from $83.0 million to $54.9 million as of June 30, 2013. In July 2013, we further reduced our borrowings under our 2006-1 Trust by $25.8 million from $54.9 million to $29.1 million. |
OUTLOOK
Throughout the remainder of 2013, we anticipate that we will monetize approximately $30 million to $50 million of investments. In addition, we expect to use part of the proceeds from these monetizations to reduce the borrowings in our 2006-1 Trust to approximately $20 million to $25 million. We expect to originate new loans and equity co-investments sufficient to end the year with total investments of $500 million to $530 million (calculated at fair value).
At June 30, 2013, including unrestricted cash and restricted cash from our small business investment company, or SBIC, we had $96.6 million of cash on-hand to make new investments. Assuming continued stability in the market, actionable opportunities that meet our underwriting standards, portfolio granularity requirements and no material repayments beyond maturities that we are aware of as of June 30, 2013, we anticipate that we will substantially deploy our cash on-hand in 2013.
ACCESS TO CAPITAL AND LIQUIDITY
At June 30, 2013, we had $91.3 million of cash and cash equivalents available for general corporate purposes, as well as $5.3 million of cash in restricted accounts related to our SBIC that we may use to fund new investments in the SBIC and $2.7 million of restricted cash held in escrow. In addition, we had $16.7 million of cash in securitization accounts, that may only be used to make interest and principal payments on our securitized borrowings or distributions to MCG in accordance with the indenture agreement of the 2006-1 Trust.
At June 30, 2013, cash in securitization accounts included $14.4 million in the principal collections account of our 2006-1 Trust. In July 2013, we used $36.2 million of securitized cash, including $21.8 million collected in July 2013, to repay borrowings of our 2006-1 Trust, a pro rata portion of which we received for the principal we own. The reinvestment period for this facility ended on July 20, 2011 and all subsequent principal collections received have been, and will be, used to repay the securitized debt. At June 30, 2013, the net outstanding borrowings under the 2006-1 Trust were $54.9 million, which was reduced to $29.1 million in July 2013.
At June 30, 2013, $150.0 million of United States Small Business Administration, or SBA, borrowings were outstanding, the maximum available under our current SBIC license.
At June 30, 2013, we had full access to our $20.0 million unsecured revolving credit facility with Bank of America, N.A.
MCG Capital Corporation
July 30, 2013
Page 3
Conference Call (Live Call) | Date and time | Tuesday, July 30, 2013 at 10:00 a.m. Eastern Time |
Dial-in Number (No Conference ID required) | (877) 312-8798 domestic (253) 237-1193 international | |
Webcast | http://investor.mcgcapital.com | |
Replay (Available through August 13, 2013) | Call Replay (Conference ID for replay is #23474696) | (855) 859-2056 domestic (404) 537-3406 international |
Web Replay | http://investor.mcgcapital.com | |
MCG Capital Corporation
July 30, 2013
Page 4
RESULTS OF OPERATIONS
The following section compares our results of operations for the three months ended June 30, 2013 to the three months ended June 30, 2012.
COMPARISON OF THE THREE MONTHS ENDED June 30, 2013 AND 2012
The following table summarizes the components of our net income for the three months ended June 30, 2013 and 2012:
Three months ended June 30, | Variance | ||||||||||
(dollars in thousands) | 2013 | 2012 | $ | Percentage | |||||||
Revenue | |||||||||||
Interest and dividend income | |||||||||||
Interest income | $ | 11,222 | $ | 13,826 | $ | (2,604 | ) | (18.8 | )% | ||
Dividend income | 917 | 896 | 21 | 2.3 | |||||||
Loan fees | 435 | 1,100 | (665 | ) | (60.5 | ) | |||||
Total interest and dividend income | 12,574 | 15,822 | (3,248 | ) | (20.5 | ) | |||||
Advisory fees and other income | 316 | 2,122 | (1,806 | ) | (85.1 | ) | |||||
Total revenue | 12,890 | 17,944 | (5,054 | ) | (28.2 | ) | |||||
Operating expenses | |||||||||||
Interest expense | 2,305 | 4,552 | (2,247 | ) | (49.4 | ) | |||||
Employee compensation | |||||||||||
Salaries and benefits | 1,559 | 2,791 | (1,232 | ) | (44.1 | ) | |||||
Amortization of employee restricted stock | 379 | 711 | (332 | ) | (46.7 | ) | |||||
Total employee compensation | 1,938 | 3,502 | (1,564 | ) | (44.7 | ) | |||||
General and administrative expense | 1,086 | 4,274 | (3,188 | ) | (74.6 | ) | |||||
Restructuring expense | 5 | 21 | (16 | ) | (76.2 | ) | |||||
Total operating expense | 5,334 | 12,349 | (7,015 | ) | (56.8 | ) | |||||
Net operating income before net investment gain (loss) and income tax (benefit) provision | 7,556 | 5,595 | 1,961 | 35.0 | |||||||
Net investment gain (loss) before income tax (benefit) provision | 1,012 | (12,339 | ) | 13,351 | NM | ||||||
Income tax (benefit) provision | (6 | ) | 293 | (299 | ) | NM | |||||
Net income (loss) | $ | 8,574 | $ | (7,037 | ) | $ | 15,611 | NM | |||
NM=Not Meaningful | |||||||||||
TOTAL REVENUE
Total revenue includes interest and dividend income, loan fees, advisory fees and other income. The following sections describe the reasons for the variances in each major component of our revenue during the three months ended June 30, 2013 from the three months ended June 30, 2012.
INTEREST INCOME
The level of interest income that we earn depends upon the level of interest-bearing investments outstanding during the period, as well as the weighted-average yield on these investments. During the three months ended June 30, 2013, the total yield on our average debt portfolio at fair value was 12.5% compared to 11.5% during the three months ended June 30, 2012. The weighted-average yield varies each period because of changes in the composition of our portfolio of debt investments, changes in stated interest rates, fee accelerations of unearned fees on paid-off/restructured loans and the balance of loans on non-accrual status for which we are not accruing interest.
MCG Capital Corporation
July 30, 2013
Page 5
The following table shows the various components of the total yield on our average debt portfolio at fair value for the three months ended June 30, 2013 and 2012:
Three months ended June 30, | ||||
2013 | 2012 | |||
Average 90-day LIBOR | 0.3 | % | 0.5 | % |
Spread to average LIBOR on average loan portfolio | 12.1 | 10.7 | ||
Impact of fee accelerations of unearned fees on paid/restructured loans | 0.1 | 0.6 | ||
Impact of non-accrual loans | — | (0.3 | ) | |
Total yield on average loan portfolio | 12.5 | % | 11.5 | % |
During the three months ended June 30, 2013, interest income was $11.2 million, compared to $13.8 million during the three months ended June 30, 2012, which represented a $2.6 million, or 18.8%, decrease. This decrease reflected a $4.3 million decrease in interest income resulting from a 27.6% decrease in our average loan balance. The decrease in interest income also reflected a decrease of $0.2 million due to interest rate floors, a $0.2 million decrease related to the decrease in LIBOR and a $0.2 million decrease resulting from the net impact of loans that had been on non-accrual status during the three months ended June 30, 2013 that were accruing interest during the three months ended June 30, 2012. These decreases were partially offset by a $2.3 million increase in interest income attributable to a 1.6% increase in our net spread to LIBOR.
PIK Income
Interest income includes certain amounts that we have not received in cash, such as PIK interest. PIK interest represents contractually deferred interest that is added to the principal balance of the loan and compounded if not paid on a current basis. Borrowers may, in some instances, be required to prepay PIK because of certain contractual provisions or they may choose to prepay; however, more typically, PIK is paid at the end of the loan term. The following table shows the PIK-related activity for the three months ended June 30, 2013 and 2012, at cost:
Three months ended June 30, | ||||||
(in thousands) | 2013 | 2012 | ||||
Beginning PIK loan balance | $ | 7,973 | $ | 16,656 | ||
PIK interest earned during the period | 1,430 | 1,535 | ||||
Payments received from PIK loans | (67 | ) | (7,554 | ) | ||
Realized loss | — | (5,012 | ) | |||
Ending PIK loan balance | $ | 9,336 | $ | 5,625 | ||
As of June 30, 2013, all of our PIK loans were accruing interest and, as of June 30, 2012, we were not accruing interest on $1.0 million of the PIK loans, at cost, shown in the preceding table. During the three months ended June 30, 2012, we received payments on PIK loans from eight investments, including $2.9 million from Jet Plastica Investors, LLC, $1.8 million from GSDM Holdings Corp. and $1.3 million from Coastal Sunbelt Holding, Inc.
DIVIDEND INCOME
We accrete dividends on equity investments with stated dividend rates as they are earned, to the extent that we believe the dividends will be paid ultimately and the associated portfolio company has sufficient value to support the accretion. We recognize dividends on our other equity investments when we receive the dividend payment. Our dividend income varies from period to period because of changes in the size and composition of our equity investments, the yield from the investments in our equity portfolio and the ability of the portfolio companies to declare and pay dividends. During each of the three months ended June 30, 2013 and 2012, we recognized dividend income of $0.9 million. In addition, during the three months ended June 30, 2013 and 2012, we received payments on accrued dividends of $0.2 million and $4.4 million, respectively. As of June 30, 2013, the balance of accrued dividends was $10.7 million.
ADVISORY FEES AND OTHER INCOME
Advisory fees and other income primarily include fees related to prepayment, advisory and management services, equity structuring, syndication, bank interest and other income. Generally, advisory fees and other income relate to specific transactions or services and, therefore, may vary from period to period depending on the level and types of services provided. During the three months ended June 30, 2013, we earned $0.3 million of advisory fees and other income, which represented a $1.8 million, or 85.1%, decrease from the three months ended June 30, 2012. This decrease resulted from a decrease in prepayment fees related to loan prepayments in the second quarter of 2012.
MCG Capital Corporation
July 30, 2013
Page 6
TOTAL OPERATING EXPENSES
Total operating expenses include interest, employee compensation and general and administrative expenses. The reasons for these variances are discussed in more detail below.
INTEREST EXPENSE
During the three months ended June 30, 2013, we incurred $2.3 million of interest expense, which represented a $2.2 million, or 49.4%, decrease from the same period in 2012. During these respective periods, our average cost to borrow decreased to 4.4% from 5.0%, principally due to a decrease in the amortization of deferred financing costs (to $0.3 million from $2.0 million) offset by the repayment of securitized debt of our 2006-1 Trust (which carries interest rates ranging from L+0.33% to L+2.25%) and additional borrowings under the SBIC debenture program (which carry a weighted average fixed rate of 4.33%).
During the three months ended June 30, 2013, our averaging borrowings declined to approximately $209.6 million from an average of approximately $362.4 million for the same period in 2012, which accounted for a $1.5 million reduction in our interest expense. In addition, interest expense decreased by $1.7 million related to decreased amortization of debt issuance costs and $0.2 million due to a decrease in the average LIBOR rate from 0.47% to 0.28%. These decreases were offset by $1.1 million attributable to the spread to LIBOR increasing from approximately 2.33% to 3.55%.
We recognized $0.3 million in deferred financing costs during the three months ended June 30, 2013, down $1.7 million from the same period in 2012. The decrease is primarily attributable to $0.8 million in accelerated deferred financing fees related to repayment in full of our SunTrust Warehouse financing facility in the second quarter of 2012.
EMPLOYEE COMPENSATION
Employee compensation expense includes base salaries and benefits, variable annual incentive compensation and amortization of employee stock awards. During the three months ended June 30, 2013, our employee compensation expense was $1.9 million, which represented a $1.6 million, or 44.7%, decrease from the same period in June 30, 2012. Our salaries and benefits decreased by $1.2 million, or 44.1%, due to a $0.6 million decrease in incentive compensation and a $0.7 million decrease in salaries and benefits primarily resulting from our operational realignment. As of June 30, 2013, we had 21 employees compared to 27 employees as of June 30, 2012.
GENERAL AND ADMINISTRATIVE
During the three months ended June 30, 2013, general and administrative expense was $1.1 million, which represented a $3.2 million, or 74.6%, decrease compared to the same period in 2012. In the second quarter of 2012, general and administrative expense included $1.8 million in severance costs. In addition, general and administrative expense decreased $0.5 million due to reduced occupancy and other costs for our new corporate office space.
NET INVESTMENT GAIN BEFORE INCOME TAX PROVISION
During the three months ended June 30, 2013, we recorded $1.0 million of net investment gains before income tax provision, compared to $12.3 million of net investment losses during the same period in 2012. These amounts represent the total of net realized gains and losses, net unrealized appreciation (depreciation), and reversals of unrealized (appreciation) depreciation. We reverse unrealized (appreciation) depreciation at the time that we realize the gain or loss. The following table summarizes our realized and unrealized gain and (loss) on investments and changes in our unrealized appreciation and depreciation on investments for the three months ended June 30, 2013:
Three months ended June 30, 2013 | ||||||||||||||
(in thousands) | Industry | Type | Realized Gain/(Loss) | Unrealized (Depreciation)/ Appreciation | Reversal of Unrealized Depreciation/ (Appreciation) | Net (Loss)/ Gain | ||||||||
Portfolio Company | ||||||||||||||
Miles Media Group, LLC | Business Services | Affiliate | $ | 2,877 | $ | — | $ | (1,170 | ) | $ | 1,707 | |||
Other (< $1.0 million net gain (loss)) | (109 | ) | (671 | ) | 85 | (695 | ) | |||||||
Total | $ | 2,768 | $ | (671 | ) | $ | (1,085 | ) | $ | 1,012 | ||||
MCG Capital Corporation
July 30, 2013
Page 7
• | We received $3.0 million for the sale of our equity investment in Miles Media Group, LLC, which resulted in a $2.9 million realized gain and a reversal of previously unrealized appreciation of $1.2 million. |
The remaining unrealized depreciation and appreciation shown in the above table resulted predominantly from the change in the performance of certain of our portfolio companies and the multiples used to value certain of our investments.
The following table summarizes our realized and unrealized (loss) and gain on investments and changes in our unrealized appreciation and depreciation on investments for the three months ended June 30, 2012:
Three months ended June 30, 2012 | ||||||||||||||
(in thousands) | Industry | Type | Realized Gain/(Loss) | Unrealized (Depreciation)/ Appreciation | Reversal of Unrealized Depreciation/ (Appreciation) | Net (Loss)/ Gain | ||||||||
Portfolio Company | ||||||||||||||
Broadview Networks Holdings, Inc. | Communications | Control | $ | — | $ | (8,917 | ) | $ | — | $ | (8,917 | ) | ||
Cruz Bay Publishing, Inc. | Publishing | Non-Affiliate | — | (3,355 | ) | — | (3,355 | ) | ||||||
Miles Media Group, LLC | Business Services | Non-Affiliate | — | (1,602 | ) | — | (1,602 | ) | ||||||
Jet Plastica Investors, LLC | Plastic Products | Control | (90,802 | ) | (1,786 | ) | 91,288 | (1,300 | ) | |||||
Orbitel Holdings, LLC | Cable | Control | (2,066 | ) | — | 805 | (1,261 | ) | ||||||
GSDM Holdings, LLC | Healthcare | Non-Affiliate | 1,576 | — | (1,976 | ) | (400 | ) | ||||||
Intran Media, LLC | Other Media | Control | (4,250 | ) | — | 4,250 | — | |||||||
Stratford School Holdings, Inc. | Education | Affiliate | 16,370 | — | (13,056 | ) | 3,314 | |||||||
NPS Holding Group, LLC | Business Services | Control | — | 1,330 | — | 1,330 | ||||||||
NDSSI Holdings, LLC | Electronics | Non-Affiliate | — | 1,002 | — | 1,002 | ||||||||
Philadelphia Media Network, Inc. | Newspaper | Non-Affiliate | (5,027 | ) | — | 5,064 | 37 | |||||||
Other (< $1 million net gain (loss)) | (153 | ) | (651 | ) | (383 | ) | (1,187 | ) | ||||||
Total | $ | (84,352 | ) | $ | (13,979 | ) | $ | 85,992 | $ | (12,339 | ) | |||
• | In July 2012, Broadview Networks Holdings, Inc. agreed with certain of its noteholders and equityholders to solicit consents to file a pre-packaged chapter 11 plan of reorganization. As of June 30, 2012, our fair value estimate of our investment in Broadview reflected this restructuring if consummated on the then contemplated terms. |
• | In April 2012, Jet Plastica Investors, LLC liquidated substantially all of its assets. Including the proceeds from the liquidation, we received $11.0 million in payments on our senior debt and anticipate receiving additional payments on our senior debt upon future collection of certain accounts receivable, resulting in a $90.8 million realized loss and a $91.3 million reversal of unrealized depreciation in the second quarter of 2012. |
• | In the second quarter of 2012, we received $34.0 million for the repayment of our debt and the sale of our equity investment in Stratford School Holdings, Inc., which resulted in a $16.4 million realized gain and a reversal of previously unrealized appreciation of $13.1 million. |
• | We received $35.3 million for the repayment of our debt and the sale of our equity investment in Orbitel Holdings, LLC, which resulted in a $2.1 million realized loss and a reversal of previously unrealized depreciation of $0.8 million. |
• | We received $34.7 million for the repayment of our debt and the sale of our equity investment in GSDM Holdings, LLC, which resulted in a $1.6 million realized gain and a reversal of previously unrealized appreciation of $2.0 million. |
• | We also received $44,000 for our equity investment in Philadelphia Media Network, Inc. and wrote off part of our equity investment in Intran Media, LLC which resulted in realized losses and reversals of previously unrealized depreciation on those investments. |
INCOME TAX (BENEFIT) PROVISION
During the three months ended June 30, 2013, we incurred a $6,000 income tax benefit compared to a $0.3 million income tax provision during the three months ended June 30, 2012. The income tax provision for both periods was primarily attributable to flow-through taxable income on certain investments held by our subsidiaries.
MCG Capital Corporation
July 30, 2013
Page 8
MCG Capital Corporation
Consolidated Balance Sheets
(in thousands, except per share amounts) | June 30, 2013 | December 31, 2012 | ||||
(unaudited) | ||||||
Assets | ||||||
Cash and cash equivalents | $ | 91,259 | $ | 73,588 | ||
Cash, securitization accounts | 16,748 | 16,980 | ||||
Cash, restricted | 8,064 | 54,838 | ||||
Investments at fair value | ||||||
Non-affiliate investments (cost of $537,092 and $534,389, respectively) | 362,973 | 365,639 | ||||
Affiliate investments (cost of $45,953 and $69,500, respectively) | 46,967 | 62,079 | ||||
Control investments (cost of $62,003 and $64,898, respectively) | 46,087 | 50,006 | ||||
Total investments (cost of $645,048 and $668,787, respectively) | 456,027 | 477,724 | ||||
Interest receivable | 3,966 | 2,700 | ||||
Other assets | 4,247 | 4,946 | ||||
Total assets | $ | 580,311 | $ | 630,776 | ||
Liabilities | ||||||
Borrowings (maturing within one year of $25,754 and $15,038, respectively) | $ | 204,927 | $ | 248,053 | ||
Interest payable | 2,428 | 2,496 | ||||
Other liabilities | 4,247 | 8,499 | ||||
Total liabilities | 211,602 | 259,048 | ||||
Stockholders’ equity | ||||||
Preferred stock, par value $0.01, authorized 1 share, none issued and outstanding | — | — | ||||
Common stock, par value $0.01, authorized 200,000 shares on June 30, 2013 and December 31, 2012, 71,222 issued and outstanding on June 30, 2013 and 71,721 issued and outstanding on December 31, 2012 | 712 | 717 | ||||
Paid-in capital | 982,932 | 984,468 | ||||
Distributions in excess of earnings | (425,915 | ) | (422,395 | ) | ||
Net unrealized depreciation on investments | (189,020 | ) | (191,062 | ) | ||
Total stockholders’ equity | 368,709 | 371,728 | ||||
Total liabilities and stockholders’ equity | $ | 580,311 | $ | 630,776 | ||
Net asset value per common share at end of period | $ | 5.18 | $ | 5.18 | ||
MCG Capital Corporation
July 30, 2013
Page 9
MCG Capital Corporation
Consolidated Statements of Operations
(unaudited)
Three months ended | Six months ended | |||||||||||
(in thousands, except per share amounts) | June 30 | June 30 | ||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||
Revenue | ||||||||||||
Interest and dividend income | ||||||||||||
Non-affiliate investments (less than 5% owned) | $ | 9,008 | $ | 12,446 | $ | 18,856 | $ | 26,227 | ||||
Affiliate investments (5% to 25% owned) | 1,694 | 1,678 | 3,321 | 3,438 | ||||||||
Control investments (more than 25% owned) | 1,872 | 1,698 | 3,173 | 3,453 | ||||||||
Total interest and dividend income | 12,574 | 15,822 | 25,350 | 33,118 | ||||||||
Advisory fees and other income | ||||||||||||
Non-affiliate investments (less than 5% owned) | 316 | 910 | 774 | 1,146 | ||||||||
Control investments (more than 25% owned) | — | 1,212 | 12 | 1,239 | ||||||||
Total advisory fees and other income | 316 | 2,122 | 786 | 2,385 | ||||||||
Total revenue | 12,890 | 17,944 | 26,136 | 35,503 | ||||||||
Operating expense | ||||||||||||
Interest expense | 2,305 | 4,552 | 4,687 | 9,754 | ||||||||
Employee compensation | ||||||||||||
Salaries and benefits | 1,559 | 2,791 | 2,966 | 6,666 | ||||||||
Amortization of employee restricted stock awards | 379 | 711 | 754 | 1,189 | ||||||||
Total employee compensation | 1,938 | 3,502 | 3,720 | 7,855 | ||||||||
General and administrative expense | 1,086 | 4,274 | 2,118 | 8,210 | ||||||||
Restructuring expense | 5 | 21 | 12 | 47 | ||||||||
Total operating expense | 5,334 | 12,349 | 10,537 | 25,866 | ||||||||
Net operating income before net investment gain (loss), loss on extinguishment of debt and income tax (benefit) provision | 7,556 | 5,595 | 15,599 | 9,637 | ||||||||
Net realized gain (loss) on investments | ||||||||||||
Non-affiliate investments (less than 5% owned) | (109 | ) | (3,820 | ) | (4,191 | ) | 12,550 | |||||
Affiliate investments (5% to 25% owned) | 2,877 | 16,370 | 2,877 | 16,370 | ||||||||
Control investments (more than 25% owned) | — | (96,902 | ) | 51 | (96,894 | ) | ||||||
Total net realized gain (loss) on investments | 2,768 | (84,352 | ) | (1,263 | ) | (67,974 | ) | |||||
Net unrealized (depreciation) appreciation on investments | ||||||||||||
Non-affiliate investments (less than 5% owned) | (274 | ) | 239 | (5,369 | ) | (16,355 | ) | |||||
Affiliate investments (5% to 25% owned) | (672 | ) | (14,319 | ) | 8,435 | (15,745 | ) | |||||
Control investments (more than 25% owned) | (810 | ) | 86,117 | (1,024 | ) | 85,271 | ||||||
Derivative and other fair value adjustments | — | (24 | ) | — | (29 | ) | ||||||
Total net unrealized (depreciation) appreciation on investments | (1,756 | ) | 72,013 | 2,042 | 53,142 | |||||||
Net investment gain (loss) before income tax (benefit) provision | 1,012 | (12,339 | ) | 779 | (14,832 | ) | ||||||
Loss on extinguishment of debt before income tax (benefit) provision | — | — | — | (174 | ) | |||||||
Income tax (benefit) provision | (6 | ) | 293 | 52 | 311 | |||||||
Net income (loss) | $ | 8,574 | $ | (7,037 | ) | $ | 16,326 | $ | (5,680 | ) | ||
Income per basic and diluted common share | $ | 0.12 | $ | (0.09 | ) | $ | 0.23 | $ | (0.07 | ) | ||
Cash distributions declared per common share | $ | 0.125 | $ | 0.14 | $ | 0.25 | $ | 0.31 | ||||
Weighted-average common shares outstanding—basic and diluted | 71,217 | 75,142 | 71,361 | 75,793 | ||||||||
MCG Capital Corporation
July 30, 2013
Page 10
MCG Capital Corporation
Consolidated Statements of Changes in Net Assets
(unaudited)
Six months ended | ||||||
June 30 | ||||||
(in thousands, except per share amounts) | 2013 | 2012 | ||||
Increase in net assets from operations | ||||||
Net operating income before net investment loss, loss on extinguishment of debt and income tax provision | $ | 15,599 | $ | 9,637 | ||
Net realized loss on investments | (1,263 | ) | (67,974 | ) | ||
Net unrealized appreciation on investments | 2,042 | 53,142 | ||||
Loss on extinguishment of debt before income tax provision | — | (174 | ) | |||
Income tax provision | (52 | ) | (311 | ) | ||
Net income (loss) | 16,326 | (5,680 | ) | |||
Distributions to stockholders | ||||||
Distributions declared | (17,804 | ) | (23,519 | ) | ||
Net decrease in net assets resulting from stockholder distributions | (17,804 | ) | (23,519 | ) | ||
Capital share transactions | ||||||
Repurchase of common stock | (2,272 | ) | (16,797 | ) | ||
Amortization of restricted stock awards | ||||||
Employee awards accounted for as employee compensation | 754 | 1,189 | ||||
Non-employee director awards accounted for as general and administrative expense | 26 | 32 | ||||
Common stock withheld to pay taxes applicable to the vesting of restricted stock | (49 | ) | (251 | ) | ||
Net decrease in net assets resulting from capital share transactions | (1,541 | ) | (15,827 | ) | ||
Total decrease in net assets | (3,019 | ) | (45,026 | ) | ||
Net assets | ||||||
Beginning of period | 371,728 | 434,952 | ||||
End of period | $ | 368,709 | $ | 389,926 | ||
Net asset value per common share at end of period | $ | 5.18 | $ | 5.26 | ||
Common shares outstanding at end of period | 71,222 | 74,062 | ||||
MCG Capital Corporation
July 30, 2013
Page 11
MCG Capital Corporation
Consolidated Statements of Cash Flows
(unaudited)
Six months ended | ||||||
June 30 | ||||||
(in thousands) | 2013 | 2012 | ||||
Cash flows from operating activities | ||||||
Net income (loss) | $ | 16,326 | $ | (5,680 | ) | |
Adjustments to reconcile net income to net cash provided by operating activities | ||||||
Investments in portfolio companies | (82,160 | ) | (14,312 | ) | ||
Principal collections related to investment repayments or sales | 106,841 | 276,314 | ||||
Decrease (increase) in interest receivable, accrued payment-in-kind interest and dividends | (3,421 | ) | 11,690 | |||
Amortization of restricted stock awards | ||||||
Employee | 754 | 1,189 | ||||
Non-employee director | 26 | 32 | ||||
Decrease in cash—securitization accounts from interest collections | 1,592 | 1,643 | ||||
Decrease (increase) in restricted cash—escrow accounts | 4,912 | (274 | ) | |||
Depreciation and amortization | 660 | 5,023 | ||||
Decrease in other assets | 155 | 718 | ||||
Decrease in other liabilities | (4,371 | ) | (186 | ) | ||
Realized loss on investments | 1,263 | 67,974 | ||||
Net unrealized appreciation on investments | (2,042 | ) | (53,142 | ) | ||
Loss on extinguishment of debt | — | 174 | ||||
Net cash provided by operating activities | 40,535 | 291,163 | ||||
Cash flows from financing activities | ||||||
Repurchase of common stock | (2,272 | ) | (16,797 | ) | ||
Payments on borrowings | (43,126 | ) | (112,015 | ) | ||
Proceeds from borrowings | — | 21,400 | ||||
Decrease (increase) in cash in restricted and securitization accounts | ||||||
Securitization accounts for repayment of principal on debt | (1,360 | ) | (39,332 | ) | ||
Restricted cash | 41,863 | (95,708 | ) | |||
Payment of financing costs | (116 | ) | (1,031 | ) | ||
Distributions paid | (17,804 | ) | (26,142 | ) | ||
Common stock withheld to pay taxes applicable to the vesting of restricted stock | (49 | ) | (251 | ) | ||
Net cash used in financing activities | (22,864 | ) | (269,876 | ) | ||
Net increase in cash and cash equivalents | 17,671 | 21,287 | ||||
Cash and cash equivalents | ||||||
Beginning balance | 73,588 | 58,563 | ||||
Ending balance | $ | 91,259 | $ | 79,850 | ||
Supplemental disclosure of cash flow information | ||||||
Interest paid | $ | 4,127 | $ | 5,400 | ||
Income taxes paid | 46 | 38 | ||||
Paid-in-kind interest collected | 2,026 | 7,887 | ||||
Dividend income collected | 459 | 7,845 | ||||
MCG Capital Corporation
July 30, 2013
Page 12
SELECTED FINANCIAL DATA
QUARTERLY OPERATING INFORMATION
QUARTERLY OPERATING INFORMATION
2013 | 2013 | 2012 | 2012 | 2012 | |||||||||||
(in thousands, except per share amounts) | Q2 | Q1 | Q4 | Q3 | Q2 | ||||||||||
Revenue | |||||||||||||||
Interest and dividend income | |||||||||||||||
Interest income | $ | 11,222 | $ | 11,085 | $ | 11,028 | $ | 10,326 | $ | 13,826 | |||||
Dividend income | 916 | 898 | 848 | 867 | 896 | ||||||||||
Loan fee income | 435 | 793 | 870 | 642 | 1,100 | ||||||||||
Total interest and dividend income | 12,573 | 12,776 | 12,746 | 11,835 | 15,822 | ||||||||||
Advisory fees and other income | 317 | 470 | 675 | 234 | 2,122 | ||||||||||
Total revenue | 12,890 | 13,246 | 13,421 | 12,069 | 17,944 | ||||||||||
Operating expense | |||||||||||||||
Interest expense | 2,305 | 2,382 | 2,375 | 2,974 | 4,552 | ||||||||||
Salaries and benefits | 1,559 | 1,407 | 2,272 | 2,018 | 2,791 | ||||||||||
Amortization of employee restricted stock awards | 379 | 375 | 382 | 505 | 711 | ||||||||||
General and administrative | 1,086 | 1,032 | 3,269 | 2,504 | 4,274 | ||||||||||
Restructuring expense | 5 | 7 | 10 | 12 | 21 | ||||||||||
Total operating expense | 5,334 | 5,203 | 8,308 | 8,013 | 12,349 | ||||||||||
Net operating income before net investment income (loss) and income tax provision | 7,556 | 8,043 | 5,113 | 4,056 | 5,595 | ||||||||||
Net investment gain (loss) before income tax provision | 1,012 | (233 | ) | 1,305 | 228 | (12,339 | ) | ||||||||
Income tax provision | (6 | ) | 58 | 6 | 18 | 293 | |||||||||
Net income (loss) | $ | 8,574 | $ | 7,752 | $ | 6,412 | $ | 4,266 | $ | (7,037 | ) | ||||
Per common share statistics | |||||||||||||||
Weighted-average common shares outstanding—basic and diluted | 71,217 | 71,507 | 72,594 | 73,431 | 75,142 | ||||||||||
Net operating income before net investment income (loss) and income tax provision per common share—basic and diluted | $ | 0.11 | $ | 0.11 | $ | 0.07 | $ | 0.06 | $ | 0.07 | |||||
Income (loss) per common share—basic and diluted | $ | 0.12 | $ | 0.11 | $ | 0.09 | $ | 0.06 | $ | (0.09 | ) | ||||
Net asset value per common share—period end | $ | 5.18 | $ | 5.18 | $ | 5.18 | $ | 5.20 | $ | 5.26 | |||||
Distributions declared per common share(a) | $ | 0.125 | $ | 0.125 | $ | 0.125 | $ | 0.14 | $ | 0.14 | |||||
_____________
(a) The following table summarizes the distributions that were declared during the past five quarters:
Date Declared | Record Date | Payable Date | Dividends per Share | ||
April 26, 2013 | May 10, 2013 | May 31, 2013 | $ | 0.125 | |
March 1, 2013 | March 15, 2013 | March 29, 2013 | $ | 0.125 | |
October 26, 2012 | November 16, 2012 | November 30, 2012 | $ | 0.125 | |
July 27, 2012 | August 17, 2012 | August 31, 2012 | $ | 0.14 | |
April 27, 2012 | June 13, 2012 | July 13, 2012 | $ | 0.14 | |
MCG Capital Corporation
July 30, 2013
Page 13
ABOUT MCG CAPITAL CORPORATION
We are a solutions-focused commercial finance company providing capital and advisory services to middle-market companies throughout the United States. Our investment objective is to achieve attractive returns by generating current income and capital gains on our investments. Our capital is generally used by our portfolio companies to finance acquisitions, recapitalizations, buyouts, organic growth, working capital and other general corporate purposes.
Forward-looking Statements:
Statements in this press release regarding management's future expectations, beliefs, intentions, goals, strategies, plans or prospects, including statements relating to: MCG's results of operations, including revenues, net operating income, net investment gains and losses and general and administrative expenses and the factors that may affect such results; estimated tax attributes for 2013 stockholder distributions; anticipated investment monetization levels during 2013 and the expected use of the proceeds of such monetizations; expectations with regard to 2013 origination pacing and anticipated aggregate investment levels by year-end; MCG's expectation that it will substantially deploy cash on-hand in 2013; MCG's activities with respect to its stock repurchase program during the second half of 2013; the performance of current or former MCG portfolio companies; the cause of net investment losses; general market conditions; the state of the economy and other factors may constitute forward-looking statements for purposes of the safe harbor protection under applicable securities laws. Forward-looking statements can be identified by terminology such as “anticipate,” “believe,” “could,” “could increase the likelihood,” “estimate,” “expect,” “intend,” “is planned,” “may,” “should,” “will,” “will enable,” “would be expected,” “look forward,” “may provide,” “would” or similar terms, variations of such terms or the negative of those terms. Such forward-looking statements involve known and unknown risks, uncertainties and other factors including those risks, uncertainties and factors referred to in MCG's Annual Report on Form 10-K for the year ended December 31, 2012 filed with the Securities and Exchange Commission under the section “Risk Factors,” as well as other documents that may be filed by MCG from time to time with the Securities and Exchange Commission. As a result of such risks, uncertainties and factors, actual results may differ materially from any future results, performance or achievements discussed in or implied by the forward-looking statements contained herein. MCG is providing the information in this press release as of this date and assumes no obligations to update the information included in this press release or revise any forward-looking statements, whether as a result of new information, future events or otherwise.