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MVC Capital Announces Third Quarter Fiscal 2013 Results

PURCHASE, N.Y., Sept. 9, 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 third fiscal quarter ended July 31, 2013.

Third Fiscal Quarter 2013 Financial Highlights

  • Interest and dividend income of $5.7 million, compared with $2.8 million in Q3 2012
  • Approximately $2.9 million of which was a U.S. Gas & Electric, Inc. ("USG&E") dividend
  • Total net realized and unrealized gains on investments of $20.2 million compared to a loss of $12.6 million in Q3 2012
  • This increase is mostly attributed to significant write-ups in two portfolio holdings; USG&E and Custom Alloy Corporation
  • Fee and other income of $1.6 million, compared with $1.2 million in Q3 2012
  • Paid quarterly dividend of $0.135 per share totaling $3.1 million; 33rd consecutive quarterly dividend
  • Raised an additional $33.9 million from Senior Notes
  • Entered into a new $50 million revolving credit facility
  • Repurchased $16.7 million of MVC stock in FY2013 through July 31, 2013
  • Made two new yielding investments and two follow-on investments totaling over $42 million
  • $27.2 million of net investment activity during the quarter

"With our improved cash position as a result of the capital raise and sale of Summit Research Labs, we have ramped up our investment activity in pursuit of our yield-generating focused strategy," said Michael Tokarz, Chairman & Portfolio Manager of MVC Capital. "During the quarter, we invested in two new portfolio companies and continued to support our existing portfolio. We are excited by the quality of the middle-market companies seeking our financial support and expertise to strengthen their performance and drive future growth."

Third-Fiscal Quarter 2013 Results

Quarter Ended 9 months ended
(Unaudited) ($ in thousands except for per share data) Q1 2013 Q2 2013 Q3 2013 Q3 2012 July-13 July-12
Total operating income 6,386 6,663 7,245 3,931 20,294 23,739
Management fee 2,080 1,865 2,101 2,127 6,046 6,560
Portfolio fees - asset management 106 103 103 338 312 862
Management fee - asset management 232 232 232 41 696 618
Administrative 890 902 897 971 2,689 2,709
Interest, fees and other borrowing costs 937 1,418 2,115 854 4,470 2,481
Net Incentive compensation 1,175 1,008 3,961 (2,415) 6,144 (4,527)
Total waiver by adviser (38) (37) (38) (37) (113) (2,516)
Tax expense 1 1 1 -- 3 1
Net operating income (loss) before net realized and unrealized gains 1,003 1,171 (2,127) 2,052 47 17,549
Net increase (decrease) in net assets resulting from operations 6,876 7,892 18,114 (10,595) 32,882 (18,098)
Net increase (decrease) in net assets resulting from operations per share 0.29 0.33 0.79 (0.45) 1.41 (0.76)
Net asset value per share 16.29 16.56 17.36 16.42 17.36 16.42

In the third quarter of 2013, the Company earned $5.7 million in interest and dividend income and $1.6 million in fee and other income, compared to $2.8 million and $1.2 million for the third quarter of 2012, respectively. The increase is mainly attributable to dividend payments received from USG&E in the fiscal third quarter of 2013 totaling approximately $2.9 million.

The Company reported a net operating loss of $2.1 million for the third quarter, as compared to net operating income of $2.1 million for the same quarter in 2012. Net operating income for the quarter was primarily impacted by the $4.0 million in the Company's provision for incentive compensation, $2.1 million in interest and other borrowing costs and $2.1 million in management fees.

Third-Fiscal Quarter 2013 Portfolio Adjustments

As of July 31, 2013, the Company's net assets were $392.8 million or $17.36 per share, compared with net assets of $388.6 million, or $16.56 per share, at the beginning of the quarter and $392.8 million, or $16.42 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 eleven portfolio companies, resulting in a net increase of $19.4 million or $0.86 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.

Quarter End Write ups (downs) 9 Month Write ups (downs)
Active Deals: Q1 2013 Q2 2013 Q3 2013 Q3 2012 July-13 July-12
Biovations Holdings, Inc. $ -- $(50,104) $53,366 $ -- $3,262 $ --
BPC II LLC -- -- -- (180,000) -- (180,000)
BP Clothing LLC -- -- -- -- -- (100,000)
Centile Holding B.V. 90,000 505,000 474,000 -- 1,069,000 --
Custom Alloy Corporation 840,000 -- 5,000,000 -- 5,840,000 --
Freshii USA Inc -- 4,880 (8,260) -- (3,380) --
Harmony Health & Beauty, Inc. (100,000) -- -- (150,000) (100,000) (750,000)
JSC Tekers Invest -- (1,000,000) -- -- (1,000,000) --
MVC Automotive Group B.V. 2,180,000 665,000 -- (1,140,000) 2,845,000 (8,569,000)
MVC Partners LLC -- -- -- (564,971) -- (1,003,869)
MVC Private Equity Fund, L.P. 11,965 1,707,958 (85,424) 48 1,634,499 (11,148)
NPWT Corporation (84,091) 69,817 (210,000) -- (224,274) (126,364)
Octagon Credit Investors, LLC 450,000 -- -- -- 450,000 --
Octagon High Income Cayman Fund -- -- -- -- -- 227,247
Ohio Medical Corporation (350,000) (3,425,000) -- -- (3,775,000) (700,000)
Pre-Paid Legal Services, Inc. 118,520 -- -- -- 118,520 --
RuMe, Inc. 423,000 -- -- 417,185 423,000 417,185
Security Holdings, B.V. 2,955,000 4,029,000 1,905,000 (6,536,000) 8,889,000 (6,230,000)
SGDA Europe B.V. (1,742,000) 614,000 (187,000) (3,122,000) (1,315,000) (2,824,000)
SIA Tekers Invest 234,000 (218,000) -- (141,000) 16,000 (417,000)
Turf Products, LLC 180,000 412,000 -- (618,000) 592,000 (118,000)
US Gas & Electric, Inc. -- -- 11,600,000 -- 11,600,000 --
Velocitius B.V. (1,054,000) (1,195,000) (116,000) (1,851,000) (2,365,000) (5,827,000)
Vestal Manufacturing Enterprises, Inc. 1,650,000 1,475,000 1,000,000 1,245,000 4,125,000 2,445,000
TOTAL $5,802,394 $3,594,551 $19,425,682 $(12,640,738) $28,822,627 $(23,766,949)

Quarterly Investment Activity

MVC Capital ("MVC") announced in the fiscal third quarter of 2013 two new investments and two follow-on investments totaling $42.7 million. The new investments were made in Pre-Paid Legal Services, Inc. for $9.9 million and into Biogenic Reagents for $9.5 million.

The Company made a follow-on investment of $700,000 in the MVC Private Equity Fund and completed a follow-on investment of $22.6 million in Ohio Medical Corporation ("OMC"). The OMC investment replaced equity financings in OMC that deleveraged the company. This investment was made in accordance with a guarantee that MVC committed to when it was unable to make non-diversified investments in 2011.

During the fiscal year 2013 and through July 31, 2013, MVC repurchased approximately $16.7 million or 1,299,294 of its shares at an average price of $12.79, before commissions. These shares were repurchased under the share repurchase program authorized by the Board of Directors in April 2013.

Liquidity

As of July 31, 2013, the Company had investments in portfolio companies totaling $416.4 million and cash and cash equivalents of approximately $94.6 million, excluding restricted cash and cash equivalents of $6.7 million.

Dividends

The board of directors declared a dividend of $0.135 per share, or a total of $3.1 million distributed to shareholders for the third quarter of fiscal 2013. The dividend was paid on July 31, 2013 to shareholders of record on July 24, 2013. This distribution represents the thirty-third 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 $95 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, 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.

CONSOLIDATED FINANCIAL STATEMENTS
MVC Capital, Inc.
Consolidated Balance Sheets
July 31, October 31,
2013 2012
(Unaudited)
ASSETS
Assets
Cash and cash equivalents $ 94,631,624 $ 36,160,558
Restricted cash and cash equivalents 6,650,000 6,480,000
Investments at fair value
Short term investments (cost $49,508,735 and $0) 50,026,641 --
Non-control/Non-affiliated investments (cost $82,461,260 and $54,629,419) 68,294,064 34,197,990
Affiliate investments (cost $130,204,755 and $128,521,214) 205,923,003 178,396,856
Control investments (cost $143,159,786 and $149,281,248) 142,202,543 191,575,802
Total investments at fair value (cost $405,334,536 and $332,431,881) 466,446,251 404,170,648
Escrow receivables, net of reserves 5,912,749 991,563
Dividends and interest receivables, net of reserves 4,149,151 4,559,703
Deferred financing fees 3,331,810 --
Fee and other receivables 1,973,959 3,314,116
Prepaid expenses 323,985 753,501
Prepaid taxes 336 591
Total assets $ 583,419,865 $ 456,430,680
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Senior notes $ 114,408,750 $ --
Revolving credit facility 50,000,000 --
Provision for incentive compensation (Note 11) 21,799,378 15,655,438
Management fee payable 2,100,496 2,027,571
Professional fees payable 712,642 767,835
Other accrued expenses and liabilities 656,314 734,501
Management fee payable - Asset Management 374,393 1,054,433
Interest payable 368,651 --
Portfolio fees payable - Asset Management 138,528 140,293
Consulting fees payable 108,631 34,476
Term loan -- 50,000,000
Total liabilities 190,667,783 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 425,651,660 425,651,660
Accumulated earnings 64,572,122 64,524,665
Distributions paid to stockholders (101,484,091) (92,010,775)
Accumulated net realized loss (2,939,916) (46,401,983)
Net unrealized appreciation 61,111,715 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 392,752,082 386,016,133
Total liabilities and shareholders' equity $ 583,419,865 $ 456,430,680
Net asset value per share $ 17.36 $ 16.14
The accompanying notes are an integral part of these consolidated financial statements.
MVC Capital, Inc.
Consolidated Statements of Operations
(Unaudited)
For the Nine Month Period For the Nine Month Period
November 1, 2012 to November 1, 2011 to
July 31, 2013 July 31, 2012
Operating Income:
Dividend income
Non-control/Non-affiliated investments $ 1,804 $ 6,352
Affiliate investments 7,817,470 92,574
Control investments 426,300 12,000,000
Total dividend income 8,245,574 12,098,926
Payment-in-kind dividend income
Affiliate investments 200,408 185,146
Total payment-in-kind dividend income 200,408 185,146
Interest income
Non-control/Non-affiliated investments 1,785,285 1,453,152
Affiliate investments 2,673,283 2,987,903
Control investments 1,157,569 761,122
Total interest income 5,616,137 5,202,177
Payment-in-kind interest income
Non-control/Non-affiliated investments 899,068 51,597
Affiliate investments 726,483 873,564
Control investments 581,774 1,653,154
Total payment-in-kind interest income 2,207,325 2,578,315
Fee income
Non-control/Non-affiliated investments 686,095 67,427
Affiliate investments 707,308 807,246
Control investments 988,159 570,331
Total fee income 2,381,562 1,445,004
Fee income - Asset Management(1)
Portfolio fees 416,618 1,149,779
Management Fees 928,471 823,562
Total fee income - Asset Management 1,345,089 1,973,341
Other income 298,096 255,874
Total operating income 20,294,191 23,738,783
Operating Expenses:
Net Incentive compensation (Note 11) 6,143,940 (4,526,865)
Management fee 6,045,866 6,560,420
Interest and other borrowing costs 4,470,464 2,480,757
Management fee - Asset Management(1) 696,350 617,671
Audit fees 473,700 522,000
Consulting fees 427,753 327,353
Other expenses 407,999 466,045
Legal fees 408,000 511,238
Portfolio fees - Asset Management(1) 312,464 862,335
Directors' fee 309,375 259,000
Insurance 248,310 250,839
Administration fee 190,166 197,751
Public relations fees 145,500 76,500
Printing and postage 76,647 99,900
Total operating expenses 20,356,534 8,704,944
Less: Voluntary Expense Waiver by Adviser(2) (112,500) (112,500)
Less: Voluntary Management Fee Waiver by Adviser(3) -- (58,728)
Less: Voluntary Incentive Fee Waiver by Adviser(4) -- (2,345,189)
Total waivers (112,500) (2,516,417)
Net operating income before taxes 50,157 17,550,256
Tax Expenses:
Current tax expense 2,700 1,646
Total tax expense 2,700 1,646
Net operating income 47,457 17,548,610
Net Realized and Unrealized (Loss) Gain on Investments:
Net realized gain (loss) on investments
Non-control/Non-affiliated investments (6,276,271) (25,170,615)
Affiliate investments 82,512 --
Control investments 49,655,826 41,097
Total net realized gain (loss) on investments 43,462,067 (25,129,518)
Net unrealized depreciation on investments (10,627,052) (10,517,555)
Net realized and unrealized gain (loss) on investments 32,835,015 (35,647,073)
Net increase (decrease) in net assets resulting from operations $ 32,882,472 $ (18,098,463)
Net increase (decrease) in net assets per share resulting from operations $ 1.41 $ (0.76)
Dividends declared per share $ 0.405 $ 0.360
Weighted average number of shares outstanding (5) 23,549,370 23,916,982
(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 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 10 "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 10 "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 quarter ended April 30, 2012. Please see Note 10 "Management" for more information.
(5) Please see Note 13 "Dividends and Distributions to Shareholders and Share Repurchase Program" for more information.
The accompanying notes are an integral part of these consolidated financial statements.
MVC Capital, Inc.
Consolidated Statements of Operations
(Unaudited)
For the Quarter For the Quarter
May 1, 2013 to May 1, 2012 to
July 31, 2013 July 31, 2012
Operating Income:
Dividend income
Non-control/Non-affiliated investments $ 253 $ 2,110
Affiliate investments 2,975,320 31,471
Total dividend income 2,975,573 33,581
Payment-in-kind dividend income
Affiliate investments 68,130 62,942
Total payment-in-kind dividend income 68,130 62,942
Interest income
Non-control/Non-affiliated investments 705,487 473,719
Affiliate investments 732,361 1,090,935
Control investments 264,850 250,983
Total interest income 1,702,698 1,815,637
Payment-in-kind interest income
Non-control/Non-affiliated investments 613,370 33,365
Affiliate investments 245,048 242,405
Control investments 84,643 563,382
Total payment-in-kind interest income 943,061 839,152
Fee income
Non-control/Non-affiliated investments 285,504 13,308
Affiliate investments 234,179 268,668
Control investments 449,861 196,300
Total fee income 969,544 478,276
Fee income - Asset Management(1)
Management fees 138,026 450,903
Portfolio fees 310,343 54,473
Total fee income - Asset Management 448,369 505,376
Other income 137,899 195,737
Total operating income 7,245,274 3,930,701
Operating Expenses:
Net Incentive compensation (Note 11) 3,960,795 (2,415,163)
Interest and other borrowing costs 2,115,603 853,645
Management fee 2,100,496 2,127,182
Management fee - Asset Management(1) 232,758 40,855
Consulting fees 159,251 109,651
Audit fees 157,300 234,000
Other expenses 133,708 138,870
Legal fees 132,000 198,718
Portfolio fees - Asset Management(1) 103,520 338,178
Directors' fees 103,125 84,000
Insurance 82,770 83,613
Administration fee 63,979 65,548
Public relations fees 48,000 25,500
Printing and postage 15,529 31,500
Total operating expenses 9,408,834 1,916,097
Less: Voluntary Expense Waiver by Adviser (2) (37,500) (37,500)
Total waivers (37,500) (37,500)
Net operating (loss) income before taxes (2,126,060) 2,052,104
Tax Expenses:
Current tax expense 900 549
Total tax expense 900 549
Net operating (loss) income (2,126,960) 2,051,555
Net Realized and Unrealized Gain (Loss) on Investments:
Net realized gain (loss) on investments
Non-control/Non-affiliated investments 164,945 (25,384,331)
Affiliate investments 82,512 --
Total net realized gain (loss) on investments 247,457 (25,384,331)
Net unrealized appreciation on investments 19,994,333 12,737,773
Net realized and unrealized gain (loss) on investments 20,241,790 (12,646,558)
Net increase (decrease) in net assets resulting from operations $ 18,114,830 $ (10,595,003)
Net increase (decrease) in net assets per share resulting from operations $ 0.79 $ (0.45)
Dividends declared per share $ 0.135 $ 0.120
Weighted average number of shares outstanding (3) 22,859,939 23,916,982
(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 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 10 "Management" for more information.
(3) Please see Note 13 "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 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