MVC Capital Announces Fiscal Fourth Quarter and Full Year 2013 Results

PURCHASE, N.Y., Jan. 13, 2014 (GLOBE NEWSWIRE) -- MVC Capital, Inc. (NYSE:MVC), a publicly traded business development company that makes private debt and equity investments, today announced its financial results for the fiscal fourth quarter and full year ended October 31, 2013.

Fiscal Fourth Quarter 2013 and Recent Financial Highlights

-- Interest income was $3.2 million, compared to $2.7 million in Q4 2012

-- Dividend income was $100,000, compared to $2.5 million in Q4 2012

-- NAV increased to $17.40, compared to $17.36 at Q3 2013 and $16.14 at Q4 2012

-- Fee and other income was $1.1 million, compared to $1.0 million in Q4 2012

-- Paid quarterly dividend of $0.135 per share, totaling $3.1 million; 34th consecutive quarterly dividend

-- Made two new investments totaling $15.5 million

-- Increased investment in Morey's Seafood to $15.0 million

Fiscal Year 2013 Financial Highlights

-- Interest and dividend income was $19.6 million, compared to $25.2 million in FY 2012

-- Total net realized and unrealized gains on investments was $40.2 million, compared to a loss of $42.8 million in FY 2012

  • Large increase in realized gains was mostly attributable to the sale of Summit Research Labs (Summit) in April 2013

-- Issued $114.4 million of Senior Notes

-- Made $58.9 million worth of yielding investments

-- Repurchased $16.7 million of MVC stock in FY 2013

"During the quarter, we continued to focus our investment activity on yielding investments, where we see numerous opportunities to achieve solid risk adjusted returns for MVC's shareholders," said Michael Tokarz, Chairman & Portfolio Manager of MVC Capital. "As we pursue these opportunities, we remain committed to capitalizing on the value of our investment in U.S. Gas & Electric (USG&E), either through dividends from cash flow or a sale of the asset. Overall, we are excited about opportunities in the middle market and believe we are well positioned to deliver strong results in 2014."

Fiscal Fourth Quarter and Full Year 2013 Results
(Unaudited except for FY results, which are based on audited data) ($ in thousands except for per share data) Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q4 2012 FY 2013 FY 2012
Total operating income 6,386 6,663 7,245 4,469 6,148 24,763 29,887
Management fee 2,080 1,865 2,101 2,221 2,027 8,267 8,588
Portfolio fees - asset management 106 103 103 106 106 418 968
Management fee - asset management 232 232 232 233 140 929 757
Administrative 890 902 897 1,023 862 3,712 3,573
Interest, fees and other borrowing costs 937 1,418 2,115 2,254 886 6,724 3,367
Net Incentive compensation 1,175 1,008 3,961 2,160 (1,410) 8,304 (5,937)
Total waiver by adviser (38) (37) (38) (37) (38) (150) (2,554)
Tax expense 1 1 1 1 3 4 4
Net operating income (loss) before net realized and unrealized gains 1,003 1,171 (2,127) (3,492) 3,572 (3,445) 21,121
Net increase (decrease) in net assets resulting from operations 6,876 7,892 18,114 3,855 (3,556) 36,737 (21,654)
Net increase (decrease) per share in net assets resulting from operations 0.29 0.33 0.79 0.18 (0.14) 1.59 (0.90)
Net asset value per share 16.29 16.56 17.36 17.40 16.14 17.40 16.14

In the fourth quarter of 2013, the Company earned $3.2 million in interest income, $100,000 in dividend income and $1.1 million in fee and other income, compared to $2.7 million, $2.5 million and $1.0 million for the fourth quarter of 2012, respectively. The increase in interest income was primarily due to the Company's continued focus on yielding investments while the decrease in dividend income was a result of not receiving a Q4 dividend from USG&E due to a potential transaction previously announced in October 2013.

The Company reported a net operating loss of $3.5 million for the fourth quarter, compared to net operating income of $3.6 million for the same quarter in 2012. Net operating income for the quarter was primarily impacted by an increase in borrowing costs and net incentive compensation and the omitted Q4 dividend from USG&E as mentioned above.

For the full year 2013, the Company earned $19.6 million in interest and dividend income and $5.1 million in fee and other income, compared to $25.2 million and $4.7 million for the full year 2012, respectively. The decrease in interest and dividend income was primarily due to the one-time dividend payment of $12.0 million received from Summit during FY 2012.

The Company reported a net operating loss of $3.4 million for the full year 2013, compared to net operating income of $21.1 million for the full year 2012. This was driven by an increase in borrowing costs and net incentive compensation and the reduction of dividend income as mentioned above.

Fiscal Fourth Quarter and Full Year 2013 Portfolio Adjustments

As of October 31, 2013, the Company's net assets were $393.6 million or $17.40 per share, compared with net assets of $392.8 million, or $17.36 per share, at the beginning of the quarter and $386.0 million, or $16.14 per share, at the end of the same period last year.

During the quarter, the Valuation Committee, which is comprised of three independent directors, changed the fair values of 17 portfolio companies, resulting in a net increase of $6.8 million or $0.30 per share1. In arriving at these determinations and consistent with the Company's valuation procedures and ASC 820, the Valuation Committee took into account many factors, including the performance of the portfolio companies, as well as the impact of changes in market multiples within certain sectors and fluctuations in currency valuations, particularly in the Euro.

For the full fiscal year 2013, the Valuation Committee changed the fair values of 22 portfolio companies, resulting in a net increase of $35.7 million or $1.58 per share1.

Write ups (downs)
Active Deals: Q4 2013 Q4 2012 FY 2013 FY 2012
Biovations Holdings, Inc. $87,124 $-- $90,386 $--
BPC II LLC -- -- -- (180,000)
BP Clothing LLC -- -- -- (100,000)
Centile Holding B.V. 568,000 (34,376) 1,637,000 (34,376)
Custom Alloy Corporation 4,160,000 -- 10,000,000 --
Foliofn, Inc. (3,808,000) -- (3,808,000) --
Freshii USA Inc (11,839) -- (15,219) --
Harmony Health & Beauty, Inc. -- (150,000) (100,000) (900,000)
JSC Tekers Invest -- -- (1,000,000) --
MVC Automotive Group B.V. 778,910 (362,000) 3,623,910 (8,931,000)
MVC Private Equity Fund, L.P. – GP interest 15,554 12,640 54,588 1,492
MVC Private Equity Fund, L.P. – LP interest 633,039 (71,360) 2,228,504 (1,075,229)
NPWT Corporation 19,000 (465,000) (205,274) (591,364)
Octagon Credit Investors, LLC -- 700,000 450,000 700,000
Octagon High Income Cayman Fund -- -- -- 227,247
Ohio Medical Corporation (1,900,000) (8,525,000) (5,675,000) (9,225,000)
Pre-Paid Legal Services, Inc. 144,081 -- 262,601 --
RuMe, Inc. (750,000) -- (327,000) 417,185
Security Holdings, B.V. 3,358,000 (2,959,000) 12,247,000 (9,189,000)
SGDA Europe B.V. 141,000 239,000 (1,174,000) (2,585,000)
SIA Tekers Invest 214,000 139,000 230,000 (278,000)
Turf Products, LLC -- 271,000 592,000 153,000
US Gas & Electric, Inc. -- -- 11,600,000 --
Velocitius B.V. 505,000 2,452,000 (1,860,000) (3,375,000)
Vestal Manufacturing Enterprises, Inc. 2,675,000 1,750,000 6,800,000 4,195,000
TOTAL $ 6,828,869 $ (7,003,096) $ 35,651,496 $ (30,770,045)

1 Based on shares outstanding as of October 31, 2013.

Quarterly and Annual Investment Activity

MVC announced in the fiscal fourth quarter of 2013 two new investments totaling $15.5 million. The new investments were made in Morey's Seafood International LLC for $8.0 million and in Advantage Insurance Holdings Ltd. for $7.5 million.

For the full 2013 fiscal year, MVC made six new investments and nine follow-on investments totaling $95.7 million. $58.9 million of these were yielding investments.

During the fiscal fourth quarter of 2013, MVC did not purchase any of its shares under the repurchase program authorized by the Board of Directors in April 2013. For the full 2013 fiscal year, MVC repurchased approximately 1,299,294 of its shares at an average price of $12.79, before commissions, for a total cost of $16.7 million. These repurchases accreted NAV per share by $0.21 over the course of FY 2013.

Liquidity

As of October 31, 2013, the Company had investments in portfolio companies totaling $440.3 million and cash and cash equivalents of approximately $74.2 million, excluding restricted cash and cash equivalents of $6.8 million.

Dividends

The board of directors declared a dividend of $0.135 per share, or a total of $3.1 million distributed to shareholders during the fourth quarter. The dividend was paid on October 31, 2013 to shareholders of record on October 24, 2013. This distribution represented the thirty-fourth consecutive quarterly dividend paid by the Company since implementing a dividend policy in July of 2005. The dividends issued under current management have resulted in approximately $98 million in distributions to the Company's shareholders.

For the 2013 fiscal year, the Company paid dividends totaling $0.540 per share, or approximately $12.5 million.

MVC-G

About MVC Capital, Inc.

MVC is a business development company traded on the New York Stock Exchange that provides long-term debt and equity investment capital to fund growth, acquisitions and recapitalizations of companies in a variety of industries. For additional information about MVC, please visit the MVC's website at www.mvccapital.com.

Safe Harbor Statement

The information contained in this press release contains forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors could cause actual results and conditions to differ materially from those projected in these forward-looking statements, including: MVC Capital's ability to execute its investment strategy; the performance of MVC Capital's investments; and changes in economic or financial market conditions and other factors that are enumerated in the Company's periodic filings with the Securities and Exchange Commission. MVC Capital disclaims and does not undertake any obligation to update or revise any forward-looking statement in this press release.

The press release contains unaudited financial results. For ease of review, we have excluded the word "approximately" when rounding the results.

There can be no assurance that future USG&E dividend payments to MVC or MVC dividend payments will match or exceed historic ones, or that they will be made at all. There can be no assurance that MVC will achieve its investment objective.

The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED FINANCIAL STATEMENTS
MVC Capital, Inc.
Consolidated Balance Sheets
October 31, October 31,
2013 2012
ASSETS
Assets
Cash and cash equivalents $ 74,234,560 $ 36,160,558
Restricted cash and cash equivalents 6,792,000 6,480,000
Investments at fair value
Short-term investments (cost $49,937,320 and $0) 49,826,893 --
Non-control/Non-affiliated investments (cost $92,139,375 and $54,629,419) 74,433,413 34,197,990
Affiliate investments (cost $136,499,386 and $128,521,214) 219,694,633 178,396,856
Control investments (cost $143,292,881 and $149,281,248) 146,169,917 191,575,802
Total investments at fair value (cost $421,868,962 and $332,431,881) 490,124,856 404,170,648
Escrow receivables, net of reserves 6,236,928 991,563
Dividends and interest receivables, net of reserves 3,528,899 4,559,703
Deferred financing fees 3,265,495 --
Fee and other receivables 2,109,538 3,314,116
Prepaid expenses 534,904 753,501
Prepaid taxes 336 591
Total assets $ 586,827,516 $ 456,430,680
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Senior notes $ 114,408,750 $ --
Revolving credit facility 50,000,000 --
Provision for incentive compensation (Note 5) 23,959,109 15,655,438
Management fee payable 2,221,213 2,027,571
Professional fees payable 742,859 767,835
Accrued expenses and liabilities 655,615 725,473
Management fee payable - Asset Management 606,766 1,054,433
Interest payable 371,817 9,028
Consulting fees payable 167,968 34,476
Portfolio fees payable - Asset Management 140,347 140,293
Term loan -- 50,000,000
Total liabilities 193,274,444 70,414,547
Shareholders' equity
Common stock, $0.01 par value; 150,000,000 shares authorized; 22,617,688 and 23,916,982 shares outstanding, respectively 283,044 283,044
Additional paid-in-capital 420,165,045 425,651,660
Accumulated earnings 66,030,475 64,524,665
Dividends paid to stockholders (104,537,479) (92,010,775)
Accumulated net realized loss (2,201,455) (46,401,983)
Net unrealized appreciation 68,255,894 71,738,767
Treasury stock, at cost, 5,686,760 and 4,387,466 shares held, respectively (54,442,452) (37,769,245)
Total shareholders' equity 393,553,072 386,016,133
Total liabilities and shareholders' equity $ 586,827,516 $ 456,430,680
Net asset value per share $ 17.40 $ 16.14
The accompanying notes are an integral part of these consolidated financial statements.
MVC Capital, Inc.
Consolidated Statements of Operations
For the Year Ended For the Year Ended For the Year Ended
October 31, 2013 October 31, 2012 October 31, 2011
Operating Income:
Dividend income
Non-control/Non-affiliated investments $ 1,993 $ 7,755 $ 246,234
Affiliate investments 7,852,217 2,481,234 341,043
Control investments 426,300 12,000,000 --
Total dividend income 8,280,510 14,488,989 587,277
Payment-in-kind dividend income
Affiliate investments 269,900 249,347 230,358
Total payment-in-kind dividend income 269,900 249,347 230,358
Interest income
Non-control/Non-affiliated investments 3,206,590 2,050,801 2,356,210
Affiliate investments 3,319,241 3,111,318 2,978,289
Control investments 1,458,138 2,423,174 2,353,376
Total interest income 7,983,969 7,585,293 7,687,875
Payment-in-kind interest income
Non-control/Non-affiliated investments 1,497,860 44,304 268,423
Affiliate investments 969,775 2,024,462 1,920,686
Control investments 619,495 812,929 755,254
Total payment-in-kind interest income 3,087,130 2,881,695 2,944,363
Fee income
Non-control/Non-affiliated investments 846,598 68,056 1,086,961
Affiliate investments 937,309 1,105,226 1,130,131
Control investments 1,068,910 766,631 566,426
Total fee income 2,852,817 1,939,913 2,783,518
Fee income - Asset Management 1
Portfolio fees 557,071 1,290,160 --
Management fees 1,238,301 1,009,577 396,333
Total fee income - Asset Management 1,795,372 2,299,737 396,333
Other income 492,743 442,138 1,341,241
Total operating income 24,762,441 29,887,112 15,970,965
Operating Expenses:
Net Incentive compensation (Note 5) 8,303,671 (5,937,431) 1,947,744
Management fee 8,267,079 8,587,992 8,844,572
Interest and other borrowing costs 6,724,270 3,366,756 3,082,125
Management fee - Asset Management 1 928,722 757,183 297,250
Consulting fees 722,996 384,104 550,271
Audit & tax preparation fees 652,700 769,500 560,800
Other expenses 543,422 590,859 1,209,693
Legal fees 523,000 635,238 884,472
Portfolio fees - Asset Management 1 417,803 967,620 --
Directors' fees 412,500 348,833 329,000
Insurance 333,700 333,752 348,027
Administration 254,961 261,914 268,146
Public relations fees 184,500 119,700 89,800
Printing and postage 84,712 129,942 80,280
Total operating expenses 28,354,036 11,315,962 18,492,180
Less: Voluntary Expense Waiver by Adviser 2 (150,000) (150,000) (150,000)
Less: Voluntary Management Fee Waiver by Adviser 3 -- (58,728) (100,635)
Less: Voluntary Incentive Fee Waiver by Adviser 4 -- (2,345,189) --
Total waivers (150,000) (2,553,917) (250,635)
Net operating (loss) income before taxes (3,441,595) 21,125,067 (2,270,580)
Tax Expenses:
Current tax expense 3,600 3,997 13,557
Total tax expense 3,600 3,997 13,557
Net operating (loss) income (3,445,195) 21,121,070 (2,284,137)
Net Realized and Unrealized Gain (Loss) on Investments:
Net realized gain (loss) on investments
Non-control/Non-affiliated investments (6,073,420) (19,209,277) (16,339,803)
Affiliate investments 82,512 -- (10,081,806)
Control investments 49,655,826 (1,309,156) --
Total net realized gain (loss) on investments 43,664,918 (20,518,433) (26,421,609)
Net unrealized (depreciation) appreciation on investments (3,482,873) (22,257,313) 35,676,725
Net realized and unrealized gain (loss) on investments 40,182,045 (42,775,746) 9,255,116
Net increase (decrease) in net assets resulting from operations $ 36,736,850 $ (21,654,676) $ 6,970,979
Net increase (decrease) in net assets per share resulting from operations $ 1.59 $ (0.90) $ 0.30
Dividends declared per share $ 0.540 $ 0.495 $ 0.480
Weighted average number of shares outstanding 23,334,367 23,916,982 23,951,138
The accompanying notes are an integral part of these consolidated financial statements.
1 These items are related to the management of the MVC Private Equity Fund, L.P. ("PE Fund"). Please see Note 4 "Management" for more information.
2 Reflects TTG Advisers' voluntary waiver of $150,000 of expenses for the 2013, 2012 and 2011 fiscal years that the Company would otherwise be obligated to reimburse TTG Advisers under the Advisory Agreement. Please see Note 4 "Management" for more information.
3 Reflects TTG Advisers' voluntary agreement that any assets of the Company invested in exchange-traded funds or the Octagon High Income Cayman Fund Ltd. would not be taken into the calculation of the base management fee due to TTG Advisers under the Advisory Agreement. Please see Note 4 "Management" for more information.
4 Reflects TTG Advisers' voluntary waiver of the Incentive Fee associated with pre-incentive fee net operating income for the fiscal year ended October 31, 2012. Please see Note 4 "Management" for more information.

CONTACT: Investor Relations Jackie Rothchild MVC Capital 914-510-9400 or Jeffrey Goldberger / Garth Russell KCSA Strategic Communications 212-896-1249 / 212-896-1250 Media Inquiries Nathaniel Garnick / Patrick Scanlan Sard Verbinnen & Co. 212-687-8080Source:MVC Capital