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MVC Capital Announces First Quarter Fiscal 2013 Results

PURCHASE, N.Y., March 7, 2013 (GLOBE NEWSWIRE) -- MVC Capital, Inc. (NYSE:MVC), a publicly traded business development company that makes private equity and debt investments, today announced its financial results for the first fiscal quarter ended January 31, 2013.

First Fiscal Quarter 2013 Financial Highlights

  • Interest and dividend income of $5.6 million, compared with $2.7 million in Q1 2012
  • Fee and other income of $0.8 million, compared with $1 million in Q1 2012
  • Net operating income of $1.0 million, compared with $1.3 million in Q1 2012
  • Paid quarterly dividend of $0.135 per share; 31st consecutive quarterly dividend

"The sale of Summit, combined with the successful completion of our recent unsecured note issuance and subsequent retirement of our $50 million term loan, positions us to implement our strategy shift towards yielding investments. With these activities behind us, we can dedicate resources towards refocusing and building a portfolio of investments capable of offering a steady stream of income to sustain and seek to build our dividend over the long-term," said Michael Tokarz, Chairman and Portfolio Manager. "We are looking to prudently invest the capital we just raised. Our focus will continue to be towards investing in proprietary deals, which we have a successful track record of sourcing."

First-Fiscal Quarter 2013 Results

(Unaudited) (in thousands except for per share data) Q1 2013 Q4 2012 Q1 2012
Total operating income 6,386 6,148 3,644
Management fee 2,080 2,027 2,257
Portfolio fees - asset management 106 106 62
Management fee - asset management 232 140 388
Administrative 890 862 923
Interest, fees and other borrowing costs 937 886 795
Net Incentive compensation 1,175 (1,410) (1,937)
Total waiver by adviser (38) (38) (96)
Tax expense 1 3 1
Net operating income before net realized and unrealized gains 1,003 3,572 1,251
Net (decrease) increase in net assets resulting from operations 6,876 (3,556) (9,018)
Net (decrease) increase in net assets resulting from operations per share $0.29 ($0.14) ($0.37)
Net asset value per share $16.29 $16.14 $17.04

In the first quarter of 2013, the Company earned $5.6 million in interest and dividend income and $790,000 in fee and other income, representing an increase in total operating income of $2.7 million or 75% as compared to the same quarter in 2012.

The Company reported net operating income of $1.0 million for the first quarter, as compared to net operating income of $1.3 million for the same quarter in 2012. Net operating income for the quarter was impacted by the $1.2 million increase in the Company's provision for incentive compensation as a result of an increase in the valuations of certain portfolio companies. This compares to the $1.9 million decrease in the provision for incentive compensation that favorably impacted the net operating income results for the first quarter of 2012.

Q1 2013 Q4 2012
Active Deals: Write up (down) Write up (down)
Security Holdings, B.V. $2,955,000 $(2,959,000)
MVC Automotive Group B.V. $2,180,000 $(362,000)
Vestal Manufacturing Enterprises, Inc. $1,650,000 $1,750,000
Custom Alloy Corporation $840,000
Octagon Credit Investors, LLC $450,000 $700,000
RuMe, Inc. $423,000
SIA Tekers Invest $234,000 $139,000
Turf Products, LLC $180,000 $271,000
Pre-Paid Legal Services, Inc. $118,520
Centile Holding B.V. $90,000 $(34,376)
MVC Private Equity Fund, L.P. $11,965 $(58,720)
NPWT Corporation $(84,091) $(465,000)
Harmony Health & Beauty, Inc. $(100,000) $(150,000)
Ohio Medical Corporation $(350,000) $(8,525,000)
Velocitius B.V. $(1,054,000) $2,452,000
SGDA Europe B.V. $(1,742,000) $239,000
TOTAL $5,802,394 $(7,003,096)

First-Fiscal Quarter 2013 Portfolio Adjustments

As of January 31, 2013, the Company's net assets were $389.7 million or $16.29 per share, compared with net assets of $386.0 million, or $16.14 per share, at the beginning of the quarter and $407.6 million, or $17.04 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 sixteen portfolio companies, resulting in a net increase of $5.8 million or $0.24 per share. 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.

Quarterly Investment Activity

During the quarter, the Company made no new investments and two follow-on investments in two existing portfolio companies, allocating $8.5 million of capital to JSC Tekers Holdings and Biovation Holdings, Inc. During the first quarter ended January 31, 2012, the Company made one new investment and four follow-on investments in two existing portfolio companies, committing total capital of approximately $7.3 million.

Liquidity

As of January 31, 2013, the Company had investments in portfolio companies totaling $416.5 million and investments in cash and cash equivalents of approximately $37.1 million, including restricted cash and cash equivalents of $6.8 million.

Subsequent Quarterly Activity

MVC Capital announced the sale of one of its largest portfolio holdings, Summit Research Labs, Inc. to an affiliate of One Rock Capital Partners, LLC for gross equity proceeds of $63 million, which approximates the fair market value of the asset on our books as of January 31, 2013. Upon completion, the investment will result in an IRR of 31%1, calculated from the original date of purchase in August 2006. As part of the sale, and after receiving repayment of its outstanding $12.1 million loan to Summit, MVC will provide Summit with a new $22 million second lien loan.

Also subsequent to the quarter, MVC issued and sold a total of $80.5 million of senior unsecured notes due in 2023, which closed on February 26, 2013. The first quarterly interest payment on the notes will be made on April 15, 2013 to holders of record on April 1, 2013. Due to the success of the notes offering, MVC repaid its outstanding $50 million term loan on February 26, 2013.

The proceeds from the sale of Summit and the issuance of the unsecured notes will be used for corporate purposes, including, for example, investing in portfolio companies according to our investment objective and strategy, repurchasing MVC common stock pursuant to the share repurchase program adopted by the Company's Board of Directors, funding distributions, and/or funding the activities of our subsidiaries.

Also after the quarter-end, the Company realized the loss of $4.5 million on its Legacy investment, DPHI, Inc. and received a principal payment of $5.0 million from Custom Alloy Corporation.

Dividends

The board of directors declared a dividend of $0.135 per share, or a total of $3.2 million distributed to shareholders for the first quarter of fiscal 2013. The dividend was paid on January 7, 2013 to shareholders of record on December 31, 2012 and will therefore be taxed at 2012 rates. This distribution represents the thirty-first 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 $88.9 million in distributions to the Company's shareholders.

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, and these factors are enumerated in the company's periodic filings with the Securities and Exchange Commission.

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

[1] The anticipated IRR assumes the full receipt of all escrow proceeds.

CONSOLIDATED FINANCIAL STATEMENTS
MVC Capital, Inc.
Consolidated Balance Sheets
January 31, October 31,
2013 2012
(Unaudited)
ASSETS
Assets
Cash and cash equivalents $ 30,339,225 $ 36,160,558
Restricted cash and cash equivalents 6,790,000 6,480,000
Investments at fair value
Non-control/Non-affiliated investments (cost $53,047,510 and $54,629,419) 34,656,895 34,197,990
Affiliate investments (cost $136,400,934 and $128,521,214) 189,187,170 178,396,856
Control investments (cost $147,494,206 and $149,281,248) 192,633,030 191,575,802
Total investments at fair value (cost $336,942,650 and $332,431,881) 416,477,095 404,170,648
Dividends and interest receivables, net of reserves 2,811,833 4,559,703
Fee and other receivables 3,729,860 3,314,116
Escrow receivables 494,827 991,563
Prepaid expenses 822,417 753,501
Prepaid taxes 415 591
Total assets $ 461,465,672 $ 456,430,680
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Term loan $ 50,000,000 $ 50,000,000
Provision for incentive compensation (Note 10) 16,830,099 15,655,438
Management fee payable 2,080,237 2,027,571
Management fee payable - Asset Management 1,286,063 1,054,433
Professional fees payable 612,060 767,835
Other accrued expenses and liabilities 800,964 734,501
Portfolio fees payable - Asset Management 140,467 140,293
Consulting fees payable 52,204 34,476
Total liabilities 71,802,094 70,414,547
Shareholders' equity
Common stock, $0.01 par value; 150,000,000 shares authorized; 23,916,982 and 23,916,982 shares outstanding, respectively 283,044 283,044
Additional paid-in-capital 425,651,660 425,651,660
Accumulated earnings 65,527,765 64,524,665
Dividends paid to stockholders (95,239,568) (92,010,775)
Accumulated net realized loss (48,324,522) (46,401,983)
Net unrealized appreciation 79,534,444 71,738,767
Treasury stock, at cost, 4,387,466 and 4,387,466 shares held, respectively (37,769,245) (37,769,245)
Total shareholders' equity 389,663,578 386,016,133
Total liabilities and shareholders' equity $ 461,465,672 $ 456,430,680
Net asset value per share $ 16.29 $ 16.14
MVC Capital, Inc.
Consolidated Statements of Operations
(Unaudited)
For the Quarter Ended For the Quarter Ended
January 31, 2013 January 31, 2012
Operating Income:
Dividend income
Non-control/Non-affiliated investments $ 974 $ 1,580
Affiliate investments 2,385,748 30,249
Control investments 426,300 --
Total dividend income 2,813,022 31,829
Payment-in-kind dividend income
Affiliate investments 65,484 60,497
Total payment-in-kind dividend income 65,484 60,497
Interest income
Non-control/Non-affiliated investments 543,884 495,471
Affiliate investments 1,022,952 771,642
Control investments 581,774 609,393
Total interest income 2,148,610 1,876,506
Payment-in-kind interest income
Non-control/Non-affiliated investments 16,012
Affiliate investments 338,675 500,024
Control investments 213,574 198,945
Total payment-in-kind interest income 568,261 698,969
Fee income
Non-control/Non-affiliated investments 104 15,082
Affiliate investments 236,846 93,615
Control investments 133,800 178,073
Total fee income 370,750 486,770
Fee income - Asset Management1
Portfolio fees 140,613 83,417
Management Fees 308,841 517,805
Total fee income - Asset Management 449,454 601,222
Other loss (29,845) (111,652)
Total operating income 6,385,736 3,644,141
Operating Expenses:
Management fee 2,080,237 2,256,419
Interest and other borrowing costs 937,043 795,124
Management fee - Asset Management1 231,631 388,353
Legal fees 136,000 175,020
Audit fees 158,300 144,000
Other expenses 133,553 184,203
Consulting fees 132,251 122,251
Portfolio fees - Asset Management1 105,460 62,563
Directors fees 103,125 87,000
Insurance 82,770 83,613
Administration 63,872 67,356
Public relations fees 49,500 25,500
Printing and postage 31,000 34,200
Incentive compensation (Note 10) 1,174,661 (1,937,136)
Total operating expenses 5,419,403 2,488,466
Less: Voluntary Expense Waiver by Adviser2 (37,500) (37,500)
Less: Voluntary Management Fee Waiver by Adviser3 -- (58,728)
Total waivers (37,500) (96,228)
Net operating income before taxes 1,003,833 1,251,903
Tax Expenses:
Current tax expense 733 549
Total tax expense 733 549
Net operating income 1,003,100 1,251,354
Net Realized and Unrealized Gain (Loss) on Investments:
Net realized (loss) gain on investments
Non-control/Non-affiliated investments (1,922,539) 193,793
Total net realized (loss) gain on investments (1,922,539) 193,793
Net change in unrealized appreciation (depreciation) on investments 7,795,677 (10,462,974)
Net realized and unrealized gain (loss) on investments 5,873,138 (10,269,181)
Net increase (decrease) in net assets resulting from operations $ 6,876,238 $ (9,017,827)
Net increase (decrease) in net assets per share resulting from operations $ 0.29 $ (0.38)
Dividends declared per share $ 0.135 $ 0.120
1These 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 the quarterly portion of the TTG Advisers' voluntary waiver of $150,000 of expenses for the 2013 and 2012 fiscal years, that the Company would otherwise be obligated to reimburse TTG Advisers under the Advisory Agreement (the "Voluntary Waiver"). Please see Note 9 "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 9 "Management" for more information.

CONTACT: Investor Relations Jackie Rothchild MVC Capital 914-510-9400 or Garth Russell KCSA Strategic Communications 212.896.1250 Media Inquiries Sard Verbinnen & Co Nathaniel Garnick/Pat Scanlan, 212-687-8080Source:MVC Capital