Exhibit 99.1
| | | | | | |
 | | MCG Capital Corporation | | | | PRESS RELEASE |
| | 1100 Wilson Boulevard | | | | |
| | Suite 3000 | | | | Contact:Marshall Murphy |
| | Arlington, VA 22209 | | | | (703) 562-7110 |
| | (703) 247-7500 | | | | MMurphy@MCGCapital.com |
| | (866) 904-4775 (FAX) | | | | |
| | www.MCGCapital.com | | | | |
| | FOR IMMEDIATE RELEASE | | | | |
MCG CAPITAL CORPORATION REPORTS FOURTH QUARTER 2010 AND ANNUAL RESULTS
DECLARES DIVIDEND OF $0.15 PER SHARE
ARLINGTON, VA—March 4, 2011—MCG Capital Corporation (Nasdaq: MCGC) (“MCG” or the “Company”) announced today its financial results for the quarter and year ended December 31, 2010. MCG will host an investment community conference call today, March 4, 2011 at 10:00 a.m. (Eastern Time). Slides and financial information to be reviewed during the investor conference call will be available on MCG’s website athttp://www.mcgcapital.com prior to the call.
HIGHLIGHTS
| | • | | Distributable net operating income, or DNOI, for the quarter ended December 31, 2010 was $12.9 million, or $0.17 per share. DNOI for all of 2010 was $44.9 million, or $0.60 per share. DNOI refers to net operating income adjusted for amortization of employee restricted stock awards. |
| | • | | Net operating income for the quarter ended December 31, 2010 was $11.9 million, or $0.16 per share. Net operating income for the full year was $40.6 million, or $0.54 per share. |
| | • | | Net loss for the quarter ended December 31, 2010 was $17.7 million, or $0.23 per share. Net loss for the full year was $13.1 million, or $0.17 per share. |
| | • | | Net investment loss for the quarter ended December 31, 2010 was $29.7 million, which represented 3.2% of the most recently reported fair value of MCG’s investment portfolio. Net investment loss for the year ended December 31, 2010 was $54.8 million. |
| | • | | During the quarter ended December 31, 2010, MCG made $160.1 million of advances and originations, including $122.4 million in investments to 11 new portfolio companies. Payoffs and portfolio monetization activities totaled $42.7 million during the quarter. |
| | • | | MCG’s ratio of total assets to total borrowings and other senior securities was 231% as of December 31, 2010. |
DIVIDEND DECLARATION
MCG also announced today that its board of directors has declared a dividend of $0.15 per share. The dividend is payable as follows:
Record date: March 15, 2011
Payable date: April 15, 2011
OVERVIEW
Today, MCG reported a fourth quarter 2010 net loss of $17.7 million, or $0.23 per basic and diluted share, which represented a $19.3 million, or $0.25 per share, decrease from the net income of $1.6 million, or $0.02 per share, reported for the comparable period in 2009. This decrease was attributable primarily to: a $22.0 million increase in the net investment loss recognized on the fair value of MCG’s investment portfolio; partially offset by a $2.4 million increase in net operating income and a $0.3 million decrease in income tax provision.
MCG’s revenue for the fourth quarter of 2010 was $23.5 million, which represented a $0.2 million, or 0.8% decrease from the comparable period in 2009. This decrease was composed of a $1.3 million decrease in interest and dividend income primarily resulting from a reduction in the Company’s average portfolio balance and changes in the composition and
MCG Capital Corporation
March 4, 2011
Page 2
average balance of loans on non-accrual status. The $1.3 million decrease was partially offset by a $1.1 million increase in advisory fees and other income, reflecting increased origination activity during the quarter ended December 31, 2010. MCG reported DNOI of $12.9 million, or $0.17 per share, which represented a $1.3 million, or $0.02 per share, increase over the fourth quarter of 2009. Net operating income during the fourth quarter of 2010 increased 26.1% to $11.9 million from the comparable period in 2009.
“Overall we are pleased with the volume of originations that we were able to close during the fourth quarter, the level of equity monetizations that occurred during the quarter and after year-end, the increase in our fourth quarter net operating income and distributable net operating income and the repositioning of low-yielding assets. Based on our results for the quarter and the full year, we will be increasing our dividend to $0.15 per share for the fourth quarter,” said Steven Tunney, President and CEO. “This is our third consecutive quarterly dividend increase since we reinstated our dividend in April 2010. We believe, over the course of the year as we redeploy the debt and equity proceeds from our monetization activities, we can continue to increase our operating income and support the future growth of distributions to our stockholders.”
LIQUIDITYAND CAPITAL RESOURCES
As of December 31, 2010, MCG’s cash and cash equivalents totaled $45.0 million and it had $546.9 million of borrowings (the majority of which was composed of $454.3 million of collateralized non-recourse borrowings). As a business development company, MCG is required to meet an asset coverage ratio of total net assets to total borrowings and other senior securities of at least 200% in order to borrow under new or existing borrowing facilities or to distribute dividends to its stockholders. MCG’s asset coverage ratio decreased from 233% as of September 30, 2010 to 231% as of December 31, 2010. The cash balance in the securitization and restricted accounts, which may be deployed for suitable new investment opportunities, was $71.6 million as of December 31, 2010. As of December 31, 2010, MCG had $6.0 million of funded borrowing capacity, subject to the United States Small Business Administration’s, or SBA’s, approval, available in its small business investment company, or SBIC, subsidiary that effectively is exempt from the statutory asset coverage ratio requirements. In addition, MCG has $50.0 million in available incremental capacity under its 2006-1 facility, subject to facility requirements.
In January 2011, the SBA increased the total borrowing potential under its license with Solutions Capital I, L.P. from $130.0 million to $150.0 million. To access the entire $150.0 million borrowing potential, the Company would have to fund $25.4 million in addition to the $49.6 million that it had funded through December 31, 2010. Additionally, the Company submitted an application to the SBA for a second SBIC license. If approved, the total borrowing capacity would increase from $150.0 million to $225.0 million.
PORTFOLIO ACTIVITY
The fair value of MCG’s investment portfolio totaled $1,009.7 million as of December 31, 2010, as compared to $924.3 million as of September 30, 2010. During the fourth quarter of 2010, MCG made $160.1 million of originations and advances, including $141.0 million in originations, $13.1 million of advances to existing portfolio companies under revolving and line of credit facilities and $6.0 million of paid-in-kind, or PIK, advances. The originations of $141.0 million include senior debt in ten new portfolio companies and three existing companies and secured subordinated debt in one new portfolio company. Gross payments, reductions and sales of securities during the fourth quarter of 2010 of $42.7 million were composed of $24.8 million of senior debt, $2.7 million of secured subordinated debt, $2.4 million in preferred equity and $12.8 million of common equity.
MCG Capital Corporation
March 4, 2011
Page 3
During the three months ended December 31, 2010, MCG reported net investment losses before income tax provision of $29.7 million, which are detailed below:
| | | | | | | | | | | | | | | | | | | | |
| | | | | Three months ended December 31, 2010 | |
(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 | | $ | — | | | $ | (24,340 | ) | | $ | — | | | $ | (24,340 | ) |
Avenue Broadband LLC | | Cable | | Control | | | — | | | | (3,791 | ) | | | — | | | | (3,791 | ) |
GSDM Holdings, LLC | | Healthcare | | Non-Affiliate | | | — | | | | (3,480 | ) | | | — | | | | (3,480 | ) |
Jet Plastica Investors, LLC | | Plastic Products | | Control | | | — | | | | (3,311 | ) | | | — | | | | (3,311 | ) |
Active Brands International, Inc. | | Consumer Products | | Non-Affiliate | | | — | | | | (1,812 | ) | | | — | | | | (1,812 | ) |
Metropolitan Telecommunications Holding Company | | Communications | | Non-Affiliate | | | 10,157 | | | | — | | | | (11,756 | ) | | | (1,599 | ) |
Total Sleep Holdings, Inc. | | Healthcare | | Control | | | — | | | | (1,189 | ) | | | — | | | | (1,189 | ) |
Jenzabar, Inc. | | Technology | | Non-Affiliate | | | — | | | | 3,369 | | | | — | | | | 3,369 | |
RadioPharmacy Investors, LLC | | Healthcare | | Control | | | — | | | | 2,573 | | | | — | | | | 2,573 | |
Stratford School Holdings, Inc. | | Education | | Affiliate | | | — | | | | 1,717 | | | | — | | | | 1,717 | |
Other (< $1 million net gain (loss)) | | | | | | | (251 | ) | | | 1,724 | | | | 701 | | | | 2,174 | |
| | | | | | | | | | | | | | | | | | | | |
Total | | | | | | $ | 9,906 | | | $ | (28,540 | ) | | $ | (11,055 | ) | | $ | (29,689 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | |
Conference Call (Live Call) | | Date and time | | Friday, March 4, 2011 at 10:00 a.m. Eastern Time |
| | Dial-in Number (No Conference ID required) | | (877) 878-2269 domestic (847) 829-0062 international |
| | Webcast | | http://investor.mcgcapital.com |
| | |
Replay (Available through March 18, 2011) | | Call Replay (Conference ID for replay is #48072648) | | (800) 642-1687 domestic (706) 645-9291 international |
| | Web Replay | | http://investor.mcgcapital.com |
MCG Capital Corporation
March 4, 2011
Page 4
MCG Capital Corporation
Consolidated Balance Sheets
| | | | | | | | |
(in thousands, except per share amounts) | | December 31,
2010 | | | December 31,
2009 | |
| | |
Assets | | | | | | | | |
Cash and cash equivalents | | $ | 44,970 | | | $ | 54,187 | |
Cash, securitization accounts | | | 42,245 | | | | 109,141 | |
Cash, restricted | | | 29,383 | | | | 21,232 | |
Investments at fair value | | | | | | | | |
Non-affiliate investments (cost of$684,785and $560,347, respectively) | | | 646,116 | | | | 531,974 | |
Affiliate investments (cost of$43,721and $38,845, respectively) | | | 53,300 | | | | 44,388 | |
Control investments (cost of$517,167and $555,732, respectively) | | | 310,289 | | | | 409,984 | |
| | | | | | | | |
Total investments (cost of$1,245,673and $1,154,924, respectively) | | | 1,009,705 | | | | 986,346 | |
Interest receivable | | | 5,453 | | | | 6,025 | |
Other assets | | | 13,521 | | | | 14,218 | |
| | | | | | | | |
Total assets | | $ | 1,145,277 | | | $ | 1,191,149 | |
| | | | | | | | |
| | |
Liabilities | | | | | | | | |
Borrowings (maturing within one year of$18,858and $13,327, respectively) | | $ | 546,882 | | | $ | 557,848 | |
Interest payable | | | 2,291 | | | | 2,736 | |
Dividends payable | | | 10,735 | | | | — | |
Other liabilities | | | 7,353 | | | | 14,882 | |
| | | | | | | | |
Total liabilities | | | 567,261 | | | | 575,466 | |
| | | | | | | | |
| | |
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 December 31, 2010 and 2009,76,662issued and outstanding on December 31, 2010 and 76,394 issued and outstanding on December 31, 2009 | | | 767 | | | | 764 | |
Paid-in capital | | | 1,008,823 | | | | 1,005,085 | |
Distributions in excess of earnings | | | | | | | | |
Paid-in capital | | | (166,029 | ) | | | (162,783 | ) |
Other | | | (28,555 | ) | | | (57,066 | ) |
Net unrealized depreciation on investments | | | (236,990 | ) | | | (170,317 | ) |
| | | | | | | | |
Total stockholders’ equity | | | 578,016 | | | | 615,683 | |
| | | | | | | | |
Total liabilities and stockholders’ equity | | $ | 1,145,277 | | | $ | 1,191,149 | |
| | | | | | | | |
| | |
Net asset value per common share at end of period | | $ | 7.54 | | | $ | 8.06 | |
MCG Capital Corporation
March 4, 2011
Page 5
MCG Capital Corporation
Consolidated Statements of Operations
| | | | | | | | | | | | | | | | |
| | | Three months ended
December 31, | | | Years ended
December 31, | |
(in thousands, except per share amounts) | | 2010 | | | 2009 | | | 2010 | | | 2009 | |
Revenue | | | | | | | | | | | | | | | | |
Interest and dividend income | | | | | | | | | | | | | | | | |
Non-affiliate investments (less than 5% owned) | | $ | 15,273 | | | $ | 16,251 | | | $ | 61,396 | | | $ | 64,209 | |
Affiliate investments (5% to 25% owned) | | | 2,302 | | | | 1,087 | | | | 4,859 | | | | 4,470 | |
Control investments (more than 25% owned) | | | 4,300 | | | | 5,885 | | | | 20,274 | | | | 28,627 | |
| | | | | | | | | | | | | | | | |
Total interest and dividend income | | | 21,875 | | | | 23,223 | | | | 86,529 | | | | 97,306 | |
| | | | | | | | | | | | | | | | |
Advisory fees and other income | | | | | | | | | | | | | | | | |
Non-affiliate investments (less than 5% owned) | | | 1,257 | | | | 252 | | | | 1,982 | | | | 1,333 | |
Affiliate investments (5% to 25% owned) | | | 320 | | | | — | | | | 320 | | | | — | |
Control investments (more than 25% owned) | | | 32 | | | | 204 | | | | 738 | | | | 1,195 | |
| | | | | | | | | | | | | | | | |
Total advisory fees and other income | | | 1,609 | | | | 456 | | | | 3,040 | | | | 2,528 | |
| | | | | | | | | | | | | | | | |
| | | | |
Total revenue | | | 23,484 | | | | 23,679 | | | | 89,569 | | | | 99,834 | |
| | | | | | | | | | | | | | | | |
| | | | |
Operating expenses | | | | | | | | | | | | | | | | |
Interest expense | | | 3,709 | | | | 5,053 | | | | 16,891 | | | | 23,444 | |
Employee compensation | | | | | | | | | | | | | | | | |
Salaries and benefits | | | 4,210 | | | | 4,001 | | | | 16,275 | | | | 14,825 | |
Amortization of employee restricted stock awards | | | 979 | | | | 2,124 | | | | 4,342 | | | | 7,727 | |
| | | | | | | | | | | | | | | | |
Total employee compensation | | | 5,189 | | | | 6,125 | | | | 20,617 | | | | 22,552 | |
General and administrative expense | | | 2,710 | | | | 3,082 | | | | 11,496 | | | | 15,650 | |
| | | | | | | | | | | | | | | | |
| | | | |
Total operating expenses | | | 11,608 | | | | 14,260 | | | | 49,004 | | | | 61,646 | |
| | | | | | | | | | | | | | | | |
| | | | |
Net operating income before net investment loss, gain on extinguishment of debt and income tax provision (benefit) | | | 11,876 | | | | 9,419 | | | | 40,565 | | | | 38,188 | |
| | | | | | | | | | | | | | | | |
| | | | |
Net realized gain (loss) on investments | | | | | | | | | | | | | | | | |
Non-affiliate investments (less than 5% owned) | | | 9,692 | | | | (12,024 | ) | | | 17,529 | | | | (18,015 | ) |
Affiliate investments (5% to 25% owned) | | | 36 | | | | — | | | | 36 | | | | (1,947 | ) |
Control investments (more than 25% owned) | | | 178 | | | | (150,088 | ) | | | (5,711 | ) | | | (172,022 | ) |
| | | | | | | | | | | | | | | | |
Total net realized gain (loss) gain on investments | | | 9,906 | | | | (162,112 | ) | | | 11,854 | | | | (191,984 | ) |
| | | | | | | | | | | | | | | | |
| | | | |
Net unrealized (depreciation) appreciation on investments | | | | | | | | | | | | | | | | |
Non-affiliate investments (less than 5% owned) | | | (10,741 | ) | | | 8,321 | | | | (10,296 | ) | | | (6,803 | ) |
Affiliate investments (5% to 25% owned) | | | 1,985 | | | | (4,894 | ) | | | 4,036 | | | | (5,442 | ) |
Control investments (more than 25% owned) | | | (31,294 | ) | | | 150,525 | | | | (61,130 | ) | | | 110,642 | |
Derivative and other fair value adjustments | | | 455 | | | | 518 | | | | 717 | | | | (766 | ) |
| | | | | | | | | | | | | | | | |
Total net unrealized (depreciation) appreciation on investments | | | (39,595 | ) | | | 154,470 | | | | (66,673 | ) | | | 97,631 | |
| | | | | | | | | | | | | | | | |
Net investment loss before income tax provision (benefit) | | | (29,689 | ) | | | (7,642 | ) | | | (54,819 | ) | | | (94,353 | ) |
Gain on extinguishment of debt before income tax provision (benefit) | | | — | | | | — | | | | 2,983 | | | | 5,025 | |
Income tax provision (benefit) | | | (65 | ) | | | 212 | | | | 1,801 | | | | (81 | ) |
| | | | | | | | | | | | | | | | |
Net income (loss) | | $ | (17,748 | ) | | $ | 1,565 | | | $ | (13,072 | ) | | $ | (51,059 | ) |
| | | | | | | | | | | | | | | | |
Earnings (loss) per basic and diluted common share | | $ | (0.23 | ) | | $ | 0.02 | | | $ | (0.17 | ) | | $ | (0.68 | ) |
Cash distributions declared per common share | | $ | 0.14 | | | $ | — | | | $ | 0.37 | | | $ | — | |
Weighted-average common shares outstanding—basic and diluted | | | 75,648 | | | | 76,267 | | | | 75,422 | | | | 74,692 | |
MCG Capital Corporation
March 4, 2011
Page 6
MCG Capital Corporation
Consolidated Statements of Cash Flows
| | | | | | | | |
| | | Years ended December 31, | |
(in thousands) | | 2010 | | | 2009 | |
Cash flows from operating activities | | | | | | | | |
Net loss | | $ | (13,072 | ) | | $ | (51,059 | ) |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities | | | | | | | | |
Investments in portfolio companies | | | (294,904 | ) | | | (58,673 | ) |
Principal collections related to investment repayments or sales | | | 216,879 | | | | 196,575 | |
Increase in interest receivable, accrued payment-in-kind interest and dividends | | | (395 | ) | | | (13,330 | ) |
Amortization of restricted stock awards | | | | | | | | |
Employee | | | 4,342 | | | | 7,727 | |
Non-employee director | | | 76 | | | | 135 | |
Decrease in cash—securitization accounts from interest collections | | | 2,552 | | | | 1,305 | |
Depreciation and amortization | | | 3,954 | | | | 5,395 | |
Unrealized appreciation on stockholder loans | | | — | | | | (31 | ) |
Decrease in other assets | | | 166 | | | | 1,160 | |
Increase (decrease) in other liabilities | | | (7,223 | ) | | | 663 | |
Realized (gain) loss on investments | | | (11,854 | ) | | | 191,984 | |
Net change in unrealized depreciation (appreciation) on investments | | | 66,673 | | | | (97,631 | ) |
Gain on extinguishment of debt | | | (2,983 | ) | | | (5,025 | ) |
| | | | | | | | |
Net cash (used in) provided by operating activities | | | (35,789 | ) | | | 179,195 | |
| | | | | | | | |
| | |
Cash flows from financing activities | | | | | | | | |
Payments on borrowings | | | (88,983 | ) | | | (73,776 | ) |
Proceeds from borrowings | | | 81,000 | | | | — | |
Decrease (increase) in cash in restricted and securitization accounts | | | | | | | | |
Securitization accounts for repayment of principal on debt | | | 64,344 | | | | (72,953 | ) |
Restricted cash | | | (8,151 | ) | | | (20,253 | ) |
Payment of financing costs | | | (3,353 | ) | | | (4,175 | ) |
Distributions paid | | | (17,608 | ) | | | — | |
Cancellation of common stock held as collateral for stockholder loans | | | — | | | | (92 | ) |
Common stock withheld to pay taxes applicable to the vesting of restricted stock | | | (661 | ) | | | — | |
Net forfeitures of restricted common stock | | | (16 | ) | | | — | |
Repayment of stockholder loans | | | — | | | | 92 | |
| | | | | | | | |
Net cash provided by (used in) financing activities | | | 26,572 | | | | (171,157 | ) |
| | | | | | | | |
Increase (decrease) in cash and cash equivalents | | | (9,217 | ) | | | 8,038 | |
| | |
Cash and cash equivalents | | | | | | | | |
Beginning balance | | | 54,187 | | | | 46,149 | |
| | | | | | | | |
Ending balance | | $ | 44,970 | | | $ | 54,187 | |
| | | | | | | | |
| | |
Supplemental disclosure of cash flow information | | | | | | | | |
Interest paid | | $ | 14,666 | | | $ | 22,056 | |
Income taxes paid | | | 3,247 | | | | 59 | |
Payment-in-kind interest collected | | | 18,819 | | | | 2,214 | |
Dividend income collected | | | 3,970 | | | | 8,414 | |
MCG Capital Corporation
March 4, 2011
Page 7
SELECTED FINANCIAL DATA
QUARTERLY OPERATING INFORMATION
| | | | | | | | | | | | | | | | | | | | |
(in thousands, except per share amounts) | | 2009
Q4 | | | 2010
Q1 | | | 2010
Q2 | | | 2010
Q3 | | | 2010
Q4 | |
Revenue | | | | | | | | | | | | | | | | | | | | |
Interest and dividend income | | | | | | | | | | | | | | | | | | | | |
Interest income | | $ | 21,113 | | | $ | 19,558 | | | $ | 19,089 | | | $ | 19,519 | | | $ | 18,459 | |
Dividend income | | | 1,334 | | | | 1,329 | | | | 1,494 | | | | 1,561 | | | | 2,984 | |
Loan fee income | | | 776 | | | | 724 | | | | 570 | | | | 810 | | | | 432 | |
| | | | | | | | | | | | | | | | | | | | |
Total interest and dividend income | | | 23,223 | | | | 21,611 | | | | 21,153 | | | | 21,890 | | | | 21,875 | |
Advisory fees and other income | | | 456 | | | | 135 | | | | 615 | | | | 681 | | | | 1,609 | |
| | | | | | | | | | | | | | | | | | | | |
Total revenue | | | 23,679 | | | | 21,746 | | | | 21,768 | | | | 22,571 | | | | 23,484 | |
| | | | | | | | | | | | | | | | | | | | |
Operating expense | | | | | | | | | | | | | | | | | | | | |
Interest expense | | | 5,053 | | | | 4,473 | | | | 4,383 | | | | 4,326 | | | | 3,709 | |
Salaries and benefits | | | 4,001 | | | | 4,796 | | | | 3,742 | | | | 3,527 | | | | 4,210 | |
Amortization of employee restricted stock awards | | | 2,124 | | | | 1,227 | | | | 1,123 | | | | 1,013 | | | | 979 | |
General and administrative(a) | | | 3,082 | | | | 2,811 | | | | 3,670 | | | | 2,305 | | | | 2,710 | |
| | | | | | | | | | | | | | | | | | | | |
Total operating expense | | | 14,260 | | | | 13,307 | | | | 12,918 | | | | 11,171 | | | | 11,608 | |
| | | | | | | | | | | | | | | | | | | | |
Net operating income before net investment loss, gain (loss) on extinguishment of debt and income tax provision (benefit) | | | 9,419 | | | | 8,439 | | | | 8,850 | | | | 11,400 | | | | 11,876 | |
| | | | | |
Net investment loss before income tax provision (benefit) | | | (7,642 | ) | | | (2,364 | ) | | | (12,966 | ) | | | (9,800 | ) | | | (29,689 | ) |
Gain (loss) on extinguishment of debt before income tax provision (benefit) | | | — | | | | (58 | ) | | | 3,490 | | | | (449 | ) | | | — | |
Income tax provision (benefit) | | | 212 | | | | 62 | | | | 124 | | | | 1,680 | | | | (65 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net earnings (loss) | | $ | 1,565 | | | $ | 5,955 | | | $ | (750 | ) | | $ | (529 | ) | | $ | (17,748 | ) |
| | | | | | | | | | | | | | | | | | | | |
Reconciliation of DNOI to net operating income | | | | | | | | | | | | | | | | | | | | |
Net operating income before net investment loss, gain (loss) on extinguishment of debt and income tax provision (benefit) | | $ | 9,419 | | | $ | 8,439 | | | $ | 8,850 | | | $ | 11,400 | | | $ | 11,876 | |
Amortization of employee restricted stock awards | | | 2,124 | | | | 1,227 | | | | 1,123 | | | | 1,013 | | | | 979 | |
| | | | | | | | | | | | | | | | | | | | |
DNOI(b) | | $ | 11,543 | | | $ | 9,666 | | | $ | 9,973 | | | $ | 12,413 | | | $ | 12,855 | |
| | | | | | | | | | | | | | | | | | | | |
DNOI per share-weighted average common shares—basic and diluted(b) | | $ | 0.15 | | | $ | 0.13 | | | $ | 0.13 | | | $ | 0.16 | | | $ | 0.17 | |
Per common share statistics | | | | | | | | | | | | | | | | | | | | |
Weighted-average common shares outstanding—basic and diluted | | | 76,267 | | | | 76,339 | | | | 75,392 | | | | 75,486 | | | | 75,648 | |
Net operating income before net investment loss, gain (loss) on extinguishment of debt and income tax provision (benefit) per common share—basic and diluted | | $ | 0.12 | | | $ | 0.11 | | | $ | 0.12 | | | $ | 0.15 | | | $ | 0.16 | |
Earnings (loss) per common share—basic and diluted | | $ | 0.02 | | | $ | 0.08 | | | $ | (0.01 | ) | | $ | (0.01 | ) | | $ | (0.23 | ) |
Net asset value per common share—period end | | $ | 8.06 | | | $ | 8.16 | | | $ | 8.03 | | | $ | 7.92 | | | $ | 7.54 | |
Dividends declared per common share(c) | | $ | — | | | $ | — | | | $ | 0.11 | | | $ | 0.12 | | | $ | 0.14 | |
| (a) | Q4 2009 included $2 of costs associated with MCG’s restructuring expense. |
| (b) | DNOI represents net operating income before net investment loss, gain (loss) on extinguishment of debt and income tax provision (benefit) as determined in accordance with U.S. generally accepted accounting principles, or GAAP, adjusted for amortization of employee restricted stock awards. MCG views DNOI and the related per share measures as useful and appropriate supplements to net operating income, net income (loss), earnings (loss) per share and cash flows from operating activities. These measures serve as an additional measure of MCG’s operating performance exclusive of employee restricted stock amortization, which represents an expense of the Company but does not require settlement in cash. DNOI does include PIK interest and dividend income which are generally not payable in cash on a regular basis, but rather at investment maturity or when declared. DNOI should not be considered as an alternative to net operating income, net income (loss), earnings (loss) per share and cash flows from operating activities (each computed in accordance with GAAP). Instead, DNOI should be reviewed in connection with net operating income, net income (loss), earnings (loss) per share and cash flows from operating activities in MCG’s consolidated financial statements, to help analyze how MCG’s business is performing. |
| (c) | On March 1, 2011, MCG’s board of directors declared a dividend of $0.15 per share payable on April 15, 2011 to shareholders of record as of March 15, 2011. |
MCG Capital Corporation
March 4, 2011
Page 8
SELECTED FINANCIAL DATA
KEY QUARTERLY STATISTICS
| | | | | | | | | | | | | | | | | | | | |
| | | 2009 | | | 2010 | | | 2010 | | | 2010 | | | 2010 | |
(dollars in thousands) | | Q4 | | | Q1 | | | Q2 | | | Q3 | | | Q4 | |
Average quarterly loan portfolio at fair value | | $ | 728,731 | | | $ | 684,370 | | | $ | 686,746 | | | $ | 670,726 | | | $ | 663,443 | |
Average quarterly total investment portfolio - fair value | | | 1,027,699 | | | | 986,022 | | | | 989,782 | | | | 954,231 | | | | 948,504 | |
Average quarterly total assets | | | 1,182,402 | | | | 1,171,779 | | | | 1,162,988 | | | | 1,153,995 | | | | 1,111,728 | |
Average quarterly stockholders’ equity | | | 610,193 | | | | 616,726 | | | | 620,079 | | | | 606,933 | | | | 600,816 | |
Return on average total assets (trailing 12 months) | | | | | | | | | | | | | | | | | | | | |
Net operating income before net investment loss, gain (loss) on extinguishment of debt and income tax provision (benefit) | | | 3.12 | % | | | 2.91 | % | | | 3.01 | % | | | 3.26 | % | | | 3.53 | % |
Net (loss) income | | | (4.17 | )% | | | 0.49 | % | | | 0.93 | % | | | 0.53 | % | | | (1.14 | )% |
Return on average equity (trailing 12 months) | | | | | | | | | | | | | | | | | | | | |
Net operating income before net investment loss, gain (loss) on extinguishment of debt and income tax provision (benefit) | | | 6.16 | % | | | 5.69 | % | | | 5.77 | % | | | 6.21 | % | | | 6.64 | % |
Net (loss) income | | | (8.23 | )% | | | 0.96 | % | | | 1.79 | % | | | 1.02 | % | | | (2.14 | )% |
Yield on average loan portfolio at fair value | | | | | | | | | | | | | | | | | | | | |
Average LIBOR (90-Day) | | | 0.27 | % | | | 0.26 | % | | | 0.43 | % | | | 0.39 | % | | | 0.29 | % |
Spread to average LIBOR on average yielding loan portfolio at fair value(a) | | | 11.97 | % | | | 12.37 | % | | | 11.89 | % | | | 12.45 | % | | | 11.51 | % |
| | | | | | | | | | | | | | | | | | | | |
| | | 12.24 | % | | | 12.63 | % | | | 12.32 | % | | | 12.84 | % | | | 11.80 | % |
Impact of fee accelerations of unearned fees on paid/restructured loans | | | 0.14 | % | | | 0.14 | % | | | 0.05 | % | | | 0.20 | % | | | 0.00 | % |
Impact of non-accrual loans | | | (0.46 | )% | | | (0.75 | )% | | | (0.89 | )% | | | (1.02 | )% | | | (0.50 | )% |
| | | | | | | | | | | | | | | | | | | | |
Total yield on average loan portfolio at fair value | | | 11.92 | % | | | 12.02 | % | | | 11.48 | % | | | 12.02 | % | | | 11.30 | % |
| | | | | | | | | | | | | | | | | | | | |
Cost of funds | | | | | | | | | | | | | | | | | | | | |
Average LIBOR | | | 0.27 | % | | | 0.26 | % | | | 0.43 | % | | | 0.39 | % | | | 0.29 | % |
Spread to average LIBOR excluding amortization of deferred debt issuance costs(a) | | | 2.65 | % | | | 2.48 | % | | | 2.31 | % | | | 2.31 | % | | | 2.16 | % |
Impact of amortization of deferred debt issuance costs | | | 0.60 | % | | | 0.55 | % | | | 0.57 | % | | | 0.50 | % | | | 0.46 | % |
| | | | | | | | | | | | | | | | | | | | |
Total cost of funds | | | 3.52 | % | | | 3.29 | % | | | 3.31 | % | | | 3.20 | % | | | 2.91 | % |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net portfolio yield margin | | | 6.92 | % | | | 6.95 | % | | | 6.70 | % | | | 7.20 | % | | | 7.49 | % |
| | | | | |
Selected period-end balance sheet statistics | | | | | | | | | | | | | | | | | | | | |
Total investment portfolio at fair value | | $ | 986,346 | | | $ | 991,032 | | | $ | 997,590 | | | $ | 924,253 | | | $ | 1,009,705 | |
Total assets | | | 1,191,149 | | | | 1,171,385 | | | | 1,170,463 | | | | 1,136,665 | | | | 1,145,277 | |
Borrowings | | | 557,848 | | | | 534,892 | | | | 534,278 | | | | 508,899 | | | | 546,882 | |
Total equity | | | 615,683 | | | | 622,897 | | | | 614,855 | | | | 606,078 | | | | 578,016 | |
Cash, securitization and restricted accounts | | | 130,373 | | | | 103,643 | | | | 108,612 | | | | 124,545 | | | | 71,628 | |
Debt to equity | | | 90.61 | % | | | 85.87 | % | | | 86.89 | % | | | 83.97 | % | | | 94.61 | % |
Debt, net of cash, securitization and restricted accounts to equity | | | 69.43 | % | | | 69.23 | % | | | 69.23 | % | | | 63.42 | % | | | 82.22 | % |
| | | | | |
Other statistics (at period end) | | | | | | | | | | | | | | | | | | | | |
BDC asset coverage ratio | | | 216 | % | | | 222 | % | | | 224 | % | | | 233 | % | | | 231 | % |
Number of portfolio companies | | | 59 | | | | 58 | | | | 59 | | | | 62 | | | | 71 | |
Number of employees | | | 64 | | | | 65 | | | | 65 | | | | 66 | | | | 66 | |
Loans on non-accrual as a percentage of total debt investments | | | | | | | | | | | | | | | | | | | | |
Fair Value | | | 3.74 | % | | | 4.08 | % | | | 4.69 | % | | | 4.35 | % | | | 3.43 | % |
Cost | | | 10.80 | % | | | 12.92 | % | | | 15.12 | % | | | 18.33 | % | | | 15.87 | % |
| (a) | The impact due to the timing of the LIBOR resets and floors is included in the spread to average LIBOR. The impact to the yield on average loan portfolio at fair value due to the timing of LIBOR resets and floors for Q4 2009, Q1 2010, Q2 2010, Q3 2010 and Q4 2010 was approximately 0.94%, 0.78%, 0.73%, 1.25% and 1.34%, respectively. The impact to the cost of funds due to the timing of LIBOR resets for Q4 2009, Q1 2010, Q2 2010, Q3 2010 and Q4 2010 was approximately 0.18%, 0.01%, (0.01)%, 0.05% and 0.05%, respectively. |
MCG Capital Corporation
March 4, 2011
Page 9
SELECTED FINANCIAL DATA
QUARTERLY INVESTMENT RISKAND CHANGESIN PORTFOLIO COMPOSITION
| | | | | | | | | | | | | | | | | | | | |
| | | 2009 | | | 2010 | | | 2010 | | | 2010 | | | 2010 | |
(dollars in thousands) | | Q4 | | | Q1 | | | Q2 | | | Q3 | | | Q4 | |
Investment rating:(a) | | | | | | | | | | | | | | | | | | | | |
IR 1 total investments at fair value(b) | | $ | 573,231 | | | $ | 568,918 | | | $ | 555,745 | | | $ | 451,743 | | | $ | 330,605 | |
IR 2 total investments at fair value | | | 125,222 | | | | 151,526 | | | | 194,690 | | | | 242,579 | | | | 370,694 | |
IR 3 total investments at fair value | | | 271,447 | | | | 256,380 | | | | 204,892 | | | | 195,342 | | | | 173,447 | |
IR 4 total investments at fair value | | | 3,394 | | | | 3,188 | | | | 1,988 | | | | 6,796 | | | | 112,811 | |
IR 5 total investments at fair value | | | 13,052 | | | | 11,020 | | | | 40,275 | | | | 27,793 | | | | 22,148 | |
| | | | | |
IR 1 percentage of total portfolio | | | 58.1 | % | | | 57.4 | % | | | 55.7 | % | | | 48.9 | % | | | 32.7 | % |
IR 2 percentage of total portfolio | | | 12.7 | % | | | 15.3 | % | | | 19.5 | % | | | 26.3 | % | | | 36.7 | % |
IR 3 percentage of total portfolio | | | 27.5 | % | | | 25.9 | % | | | 20.6 | % | | | 21.1 | % | | | 17.2 | % |
IR 4 percentage of total portfolio | | | 0.4 | % | | | 0.3 | % | | | 0.2 | % | | | 0.7 | % | | | 11.2 | % |
IR 5 percentage of total portfolio | | | 1.3 | % | | | 1.1 | % | | | 4.0 | % | | | 3.0 | % | | | 2.2 | % |
| | | | | |
Originations and advances by security type: | | | | | | | | | | | | | | | | | | | | |
Senior secured debt | | $ | 1,468 | | | $ | 32,814 | | | $ | 34,596 | | | $ | 46,692 | | | $ | 145,440 | |
Subordinated debt—Secured | | | 4,956 | | | | 6,387 | | | | 4,001 | | | | 17,986 | | | | 9,116 | |
Subordinated debt—Unsecured | | | 134 | | | | 132 | | | | 10,178 | | | | 2,855 | | | | 75 | |
Preferred equity | | | 1,479 | | | | 1,330 | | | | 1,636 | | | | 1,561 | | | | 4,751 | |
Common/common equivalents equity | | | — | | | | — | | | | 1 | | | | — | | | | 716 | |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 8,037 | | | $ | 40,663 | | | $ | 50,412 | | | $ | 69,094 | | | $ | 160,098 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Exits and repayments by security type: | | | | | | | | | | | | | | | | | | | | |
Senior secured debt | | $ | 38,508 | | | $ | 32,649 | | | $ | 9,517 | | | $ | 21,315 | | | $ | 24,770 | |
Subordinated debt—Secured | | | 11,803 | | | | 667 | | | | 11,880 | | | | 51,177 | | | | 2,749 | |
Subordinated debt—Unsecured | | | — | | | | — | | | | — | | | | 31,618 | | | | — | |
Preferred equity | | | 70 | | | | — | | | | 8,844 | | | | 16,579 | | | | 2,410 | |
Common/common equivalents equity | | | 1,500 | | | | 133 | | | | 55 | | | | 12,531 | | | | 12,774 | |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 51,881 | | | $ | 33,449 | | | $ | 30,296 | | | $ | 133,220 | | | $ | 42,703 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Exits and repayments by transaction type: | | | | | | | | | | | | | | | | | | | | |
Scheduled principal amortization | | $ | 7,537 | | | $ | 7,092 | | | $ | 16,933 | | | $ | 6,277 | | | $ | 12,186 | |
Principal prepayments and loan sales | | | 42,124 | | | | 25,819 | | | | 50 | | | | 85,129 | | | | 14,037 | |
Payment of payment-in-kind interest and dividends | | | 720 | | | | 405 | | | | 5,369 | | | | 13,851 | | | | 3,164 | |
Sale of equity investments | | | 1,500 | | | | 133 | | | | 7,944 | | | | 27,963 | | | | 13,316 | |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 51,881 | | | $ | 33,449 | | | $ | 30,296 | | | $ | 133,220 | | | $ | 42,703 | |
| | | | | | | | | | | | | | | | | | | | |
| (a) | MCG uses an investment rating system to characterize and monitor its expected level of returns on each investment in MCG’s portfolio. MCG uses the following 1 to 5 investment rating scale: |
| | |
Investment
Rating | | |
| 1 | | Capital gain expected or realized |
| 2 | | Full return of principal and interest or dividend expected with customer performing in accordance with plan |
| 3 | | Full return of principal and interest or dividend expected but customer requires closer monitoring |
| 4 | | Some loss of interest or dividend expected but still expecting an overall positive internal rate of return on the investment |
| 5 | | Loss of interest or dividend and some loss of principal investment expected which would result in an overall negative internal rate of return on the investment |
| (b) | As of December 31, 2009, March 31, 2010, June 30, 2010, September 30, 2010 and December 31, 2010, approximately, $219 million, $207 million, $205 million, $117 million and $112 million, respectively, of MCG’s investments with an investment rating of “1” represented loans to companies in which MCG also held equity. |
MCG Capital Corporation
March 4, 2011
Page 10
SELECTED FINANCIAL DATA
PORTFOLIO COMPOSITIONBY TYPE
| | | | | | | | | | | | | | | | | | | | |
| | | 2009 | | | 2010 | | | 2010 | | | 2010 | | | 2010 | |
(dollars in thousands) | | Q4 | | | Q1 | | | Q2 | | | Q3 | | | Q4 | |
Composition of investments at period end, fair value | | | | | | | | | | | | | | | | | | | | |
Senior secured debt | | $ | 379,457 | | | $ | 379,600 | | | $ | 419,398 | | | $ | 437,709 | | | $ | 555,667 | |
Subordinated debt | | | | | | | | | | | | | | | | | | | | |
Secured | | | 275,398 | | | | 272,713 | | | | 237,226 | | | | 187,918 | | | | 190,309 | |
Unsecured | | | 30,618 | | | | 30,760 | | | | 40,848 | | | | 12,241 | | | | 12,321 | |
| | | | | | | | | | | | | | | | | | | | |
Total debt investments | | | 685,473 | | | | 683,073 | | | | 697,472 | | | | 637,868 | | | | 758,297 | |
| | | | | | | | | | | | | | | | | | | | |
Preferred equity | | | 257,984 | | | | 261,931 | | | | 248,983 | | | | 244,864 | | | | 218,690 | |
Common/common equivalents equity | | | 42,889 | | | | 46,028 | | | | 51,135 | | | | 41,521 | | | | 32,718 | |
| | | | | | | | | | | | | | | | | | | | |
Total equity investments | | | 300,873 | | | | 307,959 | | | | 300,118 | | | | 286,385 | | | | 251,408 | |
| | | | | | | | | | | | | | | | | | | | |
Total investments | | $ | 986,346 | | | $ | 991,032 | | | $ | 997,590 | | | $ | 924,253 | | | $ | 1,009,705 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Percentage of investments at period end, fair value | | | | | | | | | | | | | | | | | | | | |
Senior secured debt | | | 38.5 | % | | | 38.3 | % | | | 42.0 | % | | | 47.4 | % | | | 55.0 | % |
Subordinated debt | | | | | | | | | | | | | | | | | | | | |
Secured | | | 27.9 | % | | | 27.5 | % | | | 23.8 | % | | | 20.3 | % | | | 18.9 | % |
Unsecured | | | 3.1 | % | | | 3.1 | % | | | 4.1 | % | | | 1.3 | % | | | 1.2 | % |
| | | | | | | | | | | | | | | | | | | | |
Total debt investments | | | 69.5 | % | | | 68.9 | % | | | 69.9 | % | | | 69.0 | % | | | 75.1 | % |
| | | | | | | | | | | | | | | | | | | | |
Preferred equity | | | 26.2 | % | | | 26.4 | % | | | 25.0 | % | | | 26.5 | % | | | 21.7 | % |
Common/common equivalents equity | | | 4.3 | % | | | 4.7 | % | | | 5.1 | % | | | 4.5 | % | | | 3.2 | % |
| | | | | | | | | | | | | | | | | | | | |
Total equity investments | | | 30.5 | % | | | 31.1 | % | | | 30.1 | % | | | 31.0 | % | | | 24.9 | % |
| | | | | | | | | | | | | | | | | | | | |
Total investments | | | 100.0 | % | | | 100.0 | % | | | 100.0 | % | | | 100.0 | % | | | 100.0 | % |
| | | | | | | | | | | | | | | | | | | | |
MCG Capital Corporation
March 4, 2011
Page 11
SELECTED FINANCIAL DATA
KEY ANNUAL FINANCIALAND STATISTICAL INFORMATION
| | | | | | | | |
| | | Years Ended December 31, | |
(dollars in thousands) | | 2009 | | | 2010 | |
Reconciliation of DNOI(a) to net operating income | | | | | | | | |
Net operating income before investment losses, gain on extinguishment of debt and income tax provision | | $ | 38,188 | | | $ | 40,565 | |
Amortization of employee restricted stock awards | | | 7,727 | | | | 4,342 | |
| | | | | | | | |
DNOI(a) | | $ | 45,915 | | | $ | 44,907 | |
DNOI per share-weighted average common shares(a) | | $ | 0.61 | | | $ | 0.60 | |
Weighted-average common shares outstanding | | | 74,692 | | | | 75,422 | |
| | |
Average loan portfolio - fair value | | $ | 767,186 | | | $ | 676,249 | |
Average total investment portfolio - fair value | | | 1,095,934 | | | | 969,490 | |
Average total assets | | | 1,223,800 | | | | 1,149,969 | |
Average stockholders’ equity | | | 620,243 | | | | 611,084 | |
Return on average total assets | | | | | | | | |
Net operating income before net investment losses, gain on extinguishment of debt and income tax provision | | | 3.12 | % | | | 3.53 | % |
Net income | | | (4.17 | )% | | | (1.14 | )% |
Return on average equity | | | | | | | | |
Net operating income before net investment losses, gain on extinguishment of debt and income tax provision | | | 6.16 | % | | | 6.64 | % |
Net income | | | (8.23 | )% | | | (2.14 | )% |
Yield on average loan portfolio at fair value | | | | | | | | |
Average LIBOR | | | 0.69 | % | | | 0.34 | % |
Spread to average LIBOR on average loan portfolio at fair value | | | 12.00 | % | | | 12.05 | % |
| | | | | | | | |
| | | 12.69 | % | | | 12.39 | % |
Impact of fee accelerations of unearned fees on paid/restructured loans | | | 0.03 | % | | | 0.10 | % |
Impact of non-accrual loans | | | (0.84 | )% | | | (0.78 | )% |
| | | | | | | | |
Total yield on average loan portfolio at fair value | | | 11.88 | % | | | 11.71 | % |
| | | | | | | | |
Cost of funds | | | | | | | | |
Average LIBOR | | | 0.69 | % | | | 0.35 | % |
Spread to LIBOR excluding amortization of deferred debt issuance costs | | | 2.54 | % | | | 2.33 | % |
Impact of amortization of deferred debt issuance costs | | | 0.67 | % | | | 0.50 | % |
| | | | | | | | |
Total cost of funds | | | 3.90 | % | | | 3.18 | % |
| | | | | | | | |
Net portfolio yield margin | | | 6.65 | % | | | 7.08 | % |
| | | | | | | | |
| (a) | DNOI represents net operating income before net investment (loss) gain, gain on extinguishment of debt and income tax provision (benefit), as determined in accordance with U.S. generally accepted accounting principles, or GAAP, adjusted for amortization of employee restricted stock awards. MCG views DNOI and the related per share measures as useful and appropriate supplements to net operating income, net income (loss), earnings (loss) per share and cash flows from operating activities. These measures serve as an additional measure of MCG’s operating performance exclusive of employee restricted stock amortization, which represents an expense of the company but does not require settlement in cash. DNOI does include PIK interest and dividend income which are generally not payable in cash on a regular basis but rather at investment maturity or when declared. DNOI should not be considered as an alternative to net operating income, net (loss) income), earnings (loss) per share and cash flows from operating activities (each computed in accordance with GAAP). Instead, DNOI should be reviewed in connection with net operating income, net (loss) income, earnings (loss) per share and cash flows from operating activities in MCG’s consolidated financial statements, to help analyze how MCG’s business is performing. |
MCG Capital Corporation
March 4, 2011
Page 12
SELECTED FINANCIAL DATA
ANNUAL CHANGESIN PORTFOLIO COMPOSITION
| | | | | | | | |
| | | Years ended December 31, | |
(dollars in thousands) | | 2009 | | | 2010 | |
Originations and advances by security type | | | | | | | | |
Secured senior debt | | $ | 51,036 | | | $ | 259,541 | |
Subordinated debt - Secured | | | 16,011 | | | | 37,490 | |
Subordinated debt - Unsecured | | | 3,900 | | | | 13,240 | |
Preferred equity | | | 11,693 | | | | 9,279 | |
Common/Common equivalents equity | | | — | | | | 717 | |
| | | | | | | | |
Total | | $ | 82,640 | | | $ | 320,267 | |
| | | | | | | | |
| | |
Exits and repayments by security type | | | | | | | | |
Secured senior debt | | $ | 89,097 | | | $ | 88,252 | |
Subordinated debt - Secured | | | 46,365 | | | | 66,473 | |
Subordinated debt - Unsecured | | | — | | | | 31,618 | |
Preferred equity | | | 67,259 | | | | 27,832 | |
Common/Common equivalents equity | | | 4,482 | | | | 25,493 | |
| | | | | | | | |
Total | | $ | 207,203 | | | $ | 239,668 | |
| | | | | | | | |
| | |
Exits and repayments by transaction type | | | | | | | | |
Scheduled principal amortization | | $ | 37,713 | | | $ | 42,488 | |
Principal prepayments and loan sales | | | 95,535 | | | | 125,035 | |
Payment of payment-in-kind interest and dividends | | | 10,628 | | | | 22,789 | |
Sale of equity investments | | | 63,327 | | | | 49,356 | |
| | | | | | | | |
Total | | $ | 207,203 | | | $ | 239,668 | |
| | | | | | | | |
IMPORTANT INFORMATION ABOUT NON-GAAP REFERENCES
References by MCG Capital Corporation to distributable net operating income, or DNOI, refer to net operating income before net investment loss, gain (loss) on extinguishment of debt and income tax provision (benefit), as determined in accordance with GAAP adjusted for amortization of employee restricted stock awards.
The Company’s management uses DNOI and the related per share measures as useful and appropriate supplements to net operating income, net income (loss), earnings (loss) per share and cash flows from operating activities. These measures serve as an additional measure of MCG’s operating performance exclusive of employee restricted stock amortization, which represents an expense of the Company but does not require settlement in cash. DNOI does include PIK, interest and dividend income that generally are not payable in cash on a regular basis, but rather at investment maturity or when declared.
The Company believes that providing non-GAAP DNOI and DNOI per share affords investors a view of results that may be more easily compared to peer companies and enables investors to consider the Company’s results on both a GAAP and non-GAAP basis in periods when the Company is undertaking non-recurring activities. DNOI should not be considered as an alternative to, as an indicator of the Company’s operating performance, or as a substitute for net operating income, net (loss) income, earnings (loss) per share and cash flows from operating activities (each computed in accordance with GAAP). Instead, DNOI should be reviewed in connection with net operating income, net (loss) income , earnings (loss) per share and cash flows from operating activities in MCG’s consolidated financial statements, to help analyze how MCG’s business is performing because the items excluded from the non-GAAP measures often have a material impact on the Company’s results of operations. Therefore, management uses, and investors should use, non-GAAP measures only in conjunction with its reported GAAP results.
MCG Capital Corporation
March 4, 2011
Page 13
ABOUT MCG CAPITAL CORPORATION
MCG Capital Corporation is a solutions-focused commercial finance company providing capital and advisory services to middle market companies throughout the United States. MCG’s investment objective is to achieve current income and capital gains. Portfolio companies generally use capital provided by MCG to finance acquisitions, recapitalizations, buyouts, organic growth and working capital.
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, distributable net operating income, net investment losses and general and administrative expenses and the factors that may affect such results; management’s belief that, as the Company deploys debt and equity proceeds from monetization activities, it can continue to increase operating income and support the future growth of distributions to MCG stockholders; and general economic 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 Quarterly Report on Form 10-Q for the quarter ended September 30, 2010 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.
