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. |