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MVC Capital Announces Second Quarter Fiscal 2014 Results

PURCHASE, N.Y., June 6, 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 second fiscal quarter ended April 30, 2014.

Fiscal Second Quarter 2014 and Recent Financial Summary

  • Interest income was $4.0 million, compared to $2.5 million in Q2 2013
  • NAV was $16.42, compared to $16.56 at Q2 2013 and $17.36 at Q1 2014
    • Seasonal challenges across certain portfolio sectors
  • Committed $22.5 million to yielding investments during the second quarter
    • Weighted average yield on the portfolio of 11.3%1
  • Paid quarterly dividend of $0.135 per share, totaling $3.0 million; 36th consecutive quarterly dividend
  • Repurchased $2.1 million of common stock during Q2 2014
  • On May 14, 2014, MVC completed a share exchange with Equus Total Return, Inc., which resulted in MVC receiving 2.1 million shares of the company
    • Through June 4, 2014, an additional 1,362,557 shares of Equus were acquired


"In what proved to be a challenging quarter, MVC continued its shift to yielding investments. During the quarter, we generated a 61% increase in interest income over the prior year, which was the direct result of investments we made since redirecting our investment strategy," said Michael Tokarz, Chairman & Portfolio Manager of MVC Capital. "While historically cold weather in the United States and a tepid economic environment in Europe created temporary challenges at some of our portfolio companies, we remain confident about the long-term fundamentals and optionality of our portfolio, and recent activity."

Fiscal Second Quarter 2014 Results
Quarter Ended Six Month Period
Ended
(Unaudited) ($ in thousands except for per share data) Q2 2014 Q1 2014 Q2 2013 April-14 April-13
Total operating income 5,863 4,613 6,663 10,476 13,049
Management fee 2,306 2,304 1,865 4,610 3,945
Portfolio fees - asset management 341 106 103 447 209
Management fee - asset management 231 232 232 463 464
Administrative 727 908 902 1,635 1,792
Interest, fees and other borrowing costs 2,406 2,255 1,418 4,661 2,355
Net Incentive compensation (4,868) 554 1,008 (4,314) 2,183
Total waiver by adviser (37) (38) (37) (75) (75)
Tax expense 0 1 1 1 2
Net operating income (loss) before net realized and unrealized gains 4,757 (1,709) 1,171 3,048 2,174
Net increase (decrease) in net assets resulting from operations (18,546) 2,047 7,892 (16,499) 14,768
Net increase (decrease) in net assets resulting from operations per share (0.83) 0.10 0.33 (0.73) 0.62
Net asset value per share 16.42 17.36 16.56 16.42 16.56

In the second quarter of 2014, the Company earned $4.0 million in interest income, $177,839 in dividend income and $1.7 million in fee and other income, compared to $2.5 million in interest income, $2.5 million in dividend income and $1.7 million in fee and other income for the second quarter of 2013. The decrease in operating income over the same period last year was primarily due to a reduction in dividend income from portfolio companies, specifically U.S. Gas & Electric ("USG&E"), from which MVC did not receive a quarterly dividend in the second fiscal quarter 2014. The decrease in operating income was partially offset by an increase in interest income from portfolio companies as the Company continued to focus on yielding investments.

The Company reported net operating income of $4.8 million for the second quarter, compared to net operating income of $1.2 million for the same quarter in 2013. Net operating income for the quarter was primarily impacted by a reduction in net incentive compensation due to the change in unrealized depreciation in the portfolio, which lowered overall operating expenses.

Fiscal Second Quarter 2014 Portfolio Adjustments

As of April 30, 2014, the Company's net assets were $368.9 million, or $16.42 per share, compared with net assets of $392.5 million, or $17.36 per share, at the beginning of the quarter and $388.6 million or $16.56 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 16 portfolio companies, resulting in a net decrease of $24.7 million in assets or $1.10 per share2. 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.

Write ups (downs) Quarter Ended Six Month Period Ended
Active Deals: Q2 2014 Q1 2014 Q2 2013 April-14 April-13
Biovations Holdings, Inc. $ (19,860) $ 59,846 $ (50,104) $ 39,986 $ (50,104)
Centile Holding B.V. 57,000 (29,000) 505,000 28,000 595,000
Custom Alloy Corporation (1,340,000) 4,000,000 -- 2,660,000 840,000
Foliofn, Inc. 127,000 (1,091,000) -- (964,000) --
Freshii USA Inc 8,531 14,600 4,880 23,131 4,880
G3K Displays, Inc. (5,625,000) -- -- (5,625,000) --
Harmony Health & Beauty, Inc. -- -- -- -- (100,000)
JSC Tekers Holdings -- -- (1,000,000) -- (1,000,000)
MVC Automotive Group B.V. (11,175,000) (1,924,409) 665,000 (13,099,409) 2,845,000
MVC Private Equity Fund, L.P. 910,704 2,204,636 1,707,958 3,115,340 1,719,923
NPWT Corporation (74,000) 35,000 69,817 (39,000) (14,274)
Octagon Credit Investors, LLC 1,133,657 (1,153,305) -- (19,648) 450,000
Ohio Medical Corporation -- -- (3,425,000) -- (3,775,000)
Pre-Paid Legal Services, Inc. 100,000 -- -- 100,000 118,520
RuMe, Inc. -- -- -- -- 423,000
Security Holdings, B.V. 422,000 (304,000) 4,029,000 118,000 6,984,000
SGDA Europe B.V. 350,000 (57,000) 614,000 293,000 (1,128,000)
SIA Tekers Invest 7,000 (12,000) (218,000) (5,000) 16,000
Turf Products, LLC -- (92,000) 412,000 (92,000) 592,000
U.S. Gas & Electric, Inc. (9,000,000) -- -- (9,000,000) --
Velocitius B.V. (606,000) (1,874,000) (1,195,000) (2,480,000) (2,249,000)
Vestal Manufacturing Enterprises, Inc. -- 3,000,000 1,475,000 3,000,000 3,125,000
TOTAL $ (24,723,968) $ 2,777,368 $ 3,594,551 $ (21,946,600) $ 9,396,945

Quarterly Investment Activity

During the quarter ended April 30, 2014, the Company made two new investments and five follow-on investments in existing portfolio companies committing capital of approximately $29.3 million. The new investments were made in G3K Displays, Inc. ($6.0 million) and Inland Environmental & Remediation LP ($15.0 million).

The follow-on investments were made in MVC Automotive ($4.0 million), RuMe ($43,000), MVC PE Fund ($2.8 million) and Marine Exhibition Corporation ($1.5 million).

Liquidity

As of April 30, 2014, the Company had investments in portfolio companies totaling $463.1 million and cash and cash equivalents of approximately $23.1 million, excluding restricted cash and cash equivalents of $6.9 million.

Dividends

The Board of Directors declared a dividend of $0.135 per share, or a total of $3.0 million distributed to shareholders during the second quarter. The dividend was paid on April 30, 2014 to shareholders of record on April 24, 2014. This distribution represented the thirty-sixth 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 $104 million in distributions to the Company's shareholders.

MVC-G

1 Calculation is gross yield on the yielding portion of our portfolio based on FMV, net of reserves.

2 Based on shares outstanding as of April 30, 2014.

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.

MVC Capital, Inc.
Consolidated Balance Sheets
April 30,
2014
October 31,
2013
(Unaudited)
ASSETS
Assets
Cash and cash equivalents $ 23,124,065 $ 74,234,560
Restricted cash and cash equivalents 6,933,500 6,792,000
Investments at fair value
Short-term investments (cost $0 and $49,937,320) -- 49,826,893
Non-control/Non-affiliated investments (cost $119,215,249 and $92,139,375) 95,093,412 74,433,413
Affiliate investments (cost $139,232,093 and $136,499,386) 223,025,960 219,694,633
Control investments (cost $156,453,823 and $143,292,881) 145,006,347 146,169,917
Total investments at fair value (cost $414,901,165 and $421,868,962) 463,125,719 490,124,856
Receivable on sale of short-term investments 99,783,203 --
Escrow receivables, net of reserves 5,936,928 6,236,928
Dividends and interest receivables, net of reserves 4,236,637 3,528,899
Deferred financing fees 3,051,835 3,265,495
Fee and other receivables 1,925,720 2,109,538
Prepaid expenses 508,708 534,904
Prepaid taxes -- 336
Total assets $ 608,626,315 $ 586,827,516
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Senior notes $ 114,408,750 $ 114,408,750
Revolving credit facility 100,000,000 50,000,000
Provision for incentive compensation (Note 11) 19,645,253 23,959,109
Management fee payable 2,305,971 2,221,213
Management fee payable - Asset Management 1,069,880 606,766
Professional fees payable 820,631 742,859
Accrued expenses and liabilities 650,067 655,615
Portfolio fees payable - Asset Management 375,802 140,347
Interest payable 374,387 371,817
Consulting fees payable 115,983 167,968
Taxes payable 541 --
Total liabilities 239,767,265 193,274,444
Shareholders' equity
Common stock, $0.01 par value; 150,000,000 shares authorized; 22,464,814 and 22,617,688 shares outstanding, respectively 283,044 283,044
Additional paid-in-capital 420,165,045 420,165,045
Accumulated earnings 69,078,307 66,030,475
Dividends paid to stockholders (110,623,617) (104,537,479)
Accumulated net realized loss (1,716,744) (2,201,455)
Net unrealized appreciation 48,224,554 68,255,894
Treasury stock, at cost, 5,839,634 and 5,686,760 shares held, respectively (56,551,539) (54,442,452)
Total shareholders' equity 368,859,050 393,553,072
Total liabilities and shareholders' equity $ 608,626,315 $ 586,827,516
Net asset value per share $ 16.42 $ 17.40
The accompanying notes are an integral part of these consolidated financial statements.
MVC Capital, Inc.
Consolidated Statements of Operations
(Unaudited)
For the Six Month
Period
For the Six Month
Period
November 1, 2013 to November 1, 2012 to
April 30, 2014 April 30, 2013
Operating Income:
Dividend income
Non-control/Non-affiliated investments $ 69,580 $ 1,551
Affiliate investments 71,590 4,842,150
Control investments -- 426,300
Total dividend income 141,170 5,270,001
Payment-in-kind dividend income
Affiliate investments 143,182 132,278
Total payment-in-kind dividend income 143,182 132,278
Interest income
Non-control/Non-affiliated investments 2,692,651 1,079,798
Affiliate investments 2,406,842 1,940,922
Control investments 191,798 892,719
Total interest income 5,291,291 3,913,439
Payment-in-kind interest income
Non-control/Non-affiliated investments 1,634,473 285,698
Affiliate investments 498,657 481,435
Control investments 77,264 497,131
Total payment-in-kind interest income 2,210,394 1,264,264
Fee income
Non-control/Non-affiliated investments 300,991 400,591
Affiliate investments 460,001 473,129
Control investments 161,499 538,298
Total fee income 922,491 1,412,018
Fee income - Asset Management(1)
Portfolio fees 595,827 278,592
Management Fees 617,485 618,128
Total fee income - Asset Management 1,213,312 896,720
Other income 553,769 160,197
Total operating income 10,475,609 13,048,917
Operating Expenses:
Interest and other borrowing costs 4,660,899 2,354,861
Management fee 4,609,912 3,945,370
Management fee - Asset Management(1) 463,114 463,592
Portfolio fees - Asset Management(1) 446,870 208,944
Audit fees 324,100 316,400
Legal fees 290,000 276,000
Consulting fees 259,402 268,502
Directors fees 206,250 206,250
Insurance 173,400 165,540
Administration 126,123 126,187
Other expenses 103,797 274,291
Public relations fees 102,000 97,500
Printing and postage 49,889 61,118
Net Incentive compensation (Note 11) (4,313,856) 2,183,145
Total operating expenses 7,501,900 10,947,700
Less: Voluntary Expense Waiver by Adviser(2) (75,000) (75,000)
Total waivers (75,000) (75,000)
Net operating income before taxes 3,048,709 2,176,217
Tax Expenses:
Current tax expense 877 1,800
Total tax expense 877 1,800
Net operating income 3,047,832 2,174,417
Net Realized and Unrealized Gain (Loss) on Investments:
Net realized (loss) gain on investments
Short-term investments 176,515 --
Non-control/Non-affiliated investments 308,196 (6,441,216)
Affiliate investments -- --
Control investments -- 49,655,826
Total net realized gain on investments 484,711 43,214,610
Net change in unrealized depreciation on investments (20,031,340) (30,621,385)
Net realized and unrealized (loss) gain on investments (19,546,629) 12,593,225
Net (decrease) increase in net assets resulting from operations $ (16,498,797) $ 14,767,642
Net (decrease) increase in net assets per share resulting from operations $ (0.73) $ 0.62
Dividends declared per share $ 0.27 $ 0.27
Weighted average number of shares outstanding (3) 22,574,010 23,844,840
(1)These items are related to the management of the MVC Private Equity Fund, L.P. ("PE Fund"). Please see Note 10 "Management" for more information.
(2)Reflects the quarterly portion of the TTG Advisers' voluntary waiver of $150,000 of expenses for the 2014 and 2013 fiscal years, that the Company would otherwise be obligated to reimburse TTG Advisers under the Advisory Agreement (the "Voluntary Waiver"). Please see Note 10 "Management" for more information.
(3)Please see Note 12 "Dividends and Distributions to Shareholders and Share Repurchase Program" for more information.
The accompanying notes are an integral part of these consolidated financial statements.

CONTACT: Investor Relations Jackie Rothchild MVC Capital, Inc. 914-510-9400 Or Jeffrey Goldberger / Brad Nelson KCSA Strategic Communications 212-896-1249 / 212-896-1217 Media Inquiries Nathaniel Garnick / Patrick Scanlan Sard Verbinnen & Co. 212-687-8080

Source:MVC Capital