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. | |||