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MCC Reports NII Of $0.2980 Compared To A Dividend Of $0.30

|Includes: Medley Capital (MCC)

The MCC Q3-15 earnings release is lacking in good news. But MCC is selling at a 14% yield (as of 8-07-15). So it is priced for much worse news than the earnings release contains. Today, FSC gained 7.86% after an earnings release containing the news that its NAV fell from $9.18 to $9.13. But FSC 'covered' its dividend. And FSC had better NII than projected. What happens to MCC as a result of this news? I suspect the market will see a covered dividend (given the rounding that occurs with headline reporting) and the stock gets a bounce.

Earnings Release News from AP:

Medley Capital Corp. (NYSE:MCC) on Monday reported fiscal third-quarter net income of $8.4 million. MCC said it had net income of 14 cents per share. Earnings, adjusted for investment costs, came to 30 cents per share. The results missed Wall Street expectations. The average estimate of six analysts surveyed by Zacks Investment Research was for earnings of 31 cents per share.

The investment firm posted revenue of $36 million in the period, which also fell short of Street forecasts. Four analysts surveyed by Zacks expected $37 million. Medley shares have declined almost 8% since the beginning of the year. In the final minutes of trading on Monday, shares hit $8.52, a decline of 35% in the last 12 months.

The analyst consensus numbers from Yahoo Finance:

Earnings Est Current Qtr.
Jun 15
Next Qtr.
Sep 15
Current Year
Sep 15
Next Year
Sep 16
Avg. Estimate 0.32 0.32 1.31 1.30
No. of Analysts 13.00 13.00 13.00 10.00
Low Estimate 0.30 0.29 1.24 1.23
High Estimate 0.41 0.40 1.62 1.39
Year Ago EPS 0.41 0.37 1.58 1.31
Next Earnings Date: Aug 10, 2015
 
Revenue Est Current Qtr.
Jun 15
Next Qtr.
Sep 15
Current Year
Sep 15
Next Year
Sep 16
Avg. Estimate 37.51M 37.90M 152.24M 157.52M
No. of Analysts 7 7 7 6
Low Estimate 36.44M 36.60M 149.84M 149.98M
High Estimate 40.10M 40.60M 158.80M 171.75M
Year Ago Sales 38.07M 38.25M 139.39M 152.24M

The actual and historical numbers:

MCC Reports NII of $0.2980 compared to a dividend of $0.30
What They Earned Medley Capital Corporation reported for Q2-15 Total Investment Income of $35.964 million ($0.6216/share) and Net Investment Income of $17.240 million ($0.2980/share). The NII/TII ratio was 47.94%. The Net Increase in Net Assets Resulting from Operations was $8.373 million ($0.1447/share) due to $8.867 million in realized and unrealized losses. The Net asset value per common share was $11.53 compared to $11.68 last quarter. The spreadsheet below displays key income components by quarter. (Note: The numbers on portfolio gains are really, really ugly. These numbers should scare you away from MCC.)

  Q1-15 Q1-15 Q4-14 Q3-14 Q2-14 Q1-14 Q4-13 Q3-13 Q2-13 Q1-13

Realized & Unrealized Gains -8.867 -5.970 -38.706 -11.554 -4.105 -4.113 -2.738 0.770 -8.873 1.127
Realized & Unrealized Gains/share -0.1533 -0.1021 -0.6590 -0.2105 -0.0813 -0.0937 -0.0682 0.0221 -0.2717 0.0393

  Q2-15 Q1-15 Q4-14 Q3-14 Q2-14 Q1-14 Q4-13 Q3-13

Interest income 33.770 34.236 35.763 29.794 29.436 25.995 25.083 21.653
Fee income 2.085 2.539 4.084 8.456 8.634 5.401 6.583 5.818
Total investment income 35.964 36.776 39.849 38.252 38.072 31.398 31.668 27.473
Net investment income 17.240 17.753 20.390 20.388 20.694 16.555 17.031 14.355
Investments @ fair value 1.204 1.272 1.223 1.245 1.043 0.959 0.818 0.740
Wt Av Share Count 57.859 58.500 58.734 54.877 50.503 43.883 40.162 34.881
TII/share $0.6216 $0.6286 $0.6785 $0.6969 $0.7538 $0.7155 $0.7885 $0.7876
NII/share $0.2980 $0.3035 $0.3472 $0.3715 $0.4098 $0.3772 $0.4240 $0.4115
Dividend/share $0.30 $0.30 $0.37 $0.37 $0.37 $0.37 $0.37 $0.37
NAV/share $11.53 $11.68 $11.74 $12.43 $12.65 $12.69 $12.68 $12.70
Wt Av Yield 12.4% 12.6% 12.5% 12.6% 13.4% 13.5% 13.6% 13.8%
NII/TII 47.94% 48.27% 51.17% 53.30% 54.35% 52.73% 53.78% 52.25%

(Note: The numbers that follow look 'innocent and safe'. You already know that MCC is not innocent and safe. I have the impression that I lose some folks when I write about the need for 'redundant' indicators. MCC is an example where redundancy is needed.)

What They Own - now As of June 30, 2015, MCC had investments in securities of 71 portfolio companies with approximately 62.2% consisting of senior secured first lien investments, 30.3% consisting of senior secured second lien investments, 3.2% in unsecured debt and 4.3% in equities / warrants. As of June 30, 2015, the weighted average yield based upon the cost basis of our portfolio investments, excluding cash and cash equivalents, was 12.4%.

(Just to show that MCC's portfolio has not morphed towards safety - here are the numbers from Q3-13:)

What They Own - Q3-13 MCC ended the quarter with investments in securities of 57 portfolio companies with approximately 62.5% consisting of senior secured first lien investments, 33.2% consisting of senior secured second lien investments; 0.4% in equities and warrants; and 1.1% consisting of cash and cash equivalents. As of 09-30-13, the weighted average yield based upon the original cost basis of the portfolio investments, excluding cash and cash equivalents, was 13.8%.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: I do own shares in the MCC baby bond MCQ.