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. | ||