MVC Capital Announces Fourth Quarter and Full Year Fiscal 2012 Results

PURCHASE, N.Y., Dec. 27, 2012 (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 fourth quarter and year ended October 31, 2012.

Fourth Fiscal Quarter 2012 Financial Highlights

  • Interest and dividend income of $5.1 million, compared with $2.9 million in Q4 FY 2011
  • Fee and other income of $1.0 million, compared with $566,000 in Q4 FY 2011
  • Net operating income of $3.6 million, compared to a loss of $4.1 million in Q4 FY 2011
  • Increased quarterly dividend by 12.5% in the fourth quarter to $0.135 per share; paid 30th consecutive quarterly dividend
  • Completed sale of SHL Group Ltd. in August for gross proceeds of $15.3 million

"During the fourth quarter, MVC successfully took advantage of opportunities to harvest returns from our investment portfolio," noted Michael Tokarz, Chairman and Portfolio Manager. "In the case of SHL Group, we monetized our investment for a realized gain of approximately $9.2 million or a 2.5X return on invested cash. As it pertains to USG&E, we received a significant dividend that was supported by the Company's strong cash flows. Combined, these transactions highlight the strength of our diversified investment portfolio and our ability to generate favorable returns for shareholders."

Operating Results

    
Unaudited, except for FY results (in thousands, except per share data)Qtr 4 2012Qtr 4 2011FY 2012FY 2011
Total operating income $6,148 $3,421 $29,887 $15,971
     
Management fee 2,027 2,155 8,588 8,845
Portfolio fees - asset management 106 -- 968 --
Management fee - asset management 140 -- 757 297
Administrative 862 1,105 3,573 4,320
Interest and other borrowing costs 886 783 3,367 3,082
Net incentive compensation (1,410) 3,483 (5,937) 1,948
Total waiver by adviser (38) (38) (2,554) (251)
Tax expense 3 2 4 14
     
Net operating income (loss) 3,572 (4,069) 21,121 (2,284)
Net (decrease) increase in net assets resulting from operations ($3,557) $13,282 ($21,655) $6,971
Net (decrease) increase in net assets resulting from operations per share ($0.14) $0.56 ($0.90) $0.30
Net Asset value per share $16.14 $17.54 $16.14 $17.54

In the fourth quarter of 2012, the Company earned approximately $5.1 million in interest and dividend income, and approximately $1.0 million in fee and other income. Combined, this resulted in an increase in total operating income of approximately $2.7 million to $6.1 million, as compared to the same quarter in 2011.

The Company reported net operating income of approximately $3.6 million for the fourth quarter, as compared to a net operating loss of approximately ($4.1) million for the same quarter in 2011.

In fiscal 2012, the Company earned approximately $25.2 million in interest and dividend income, and approximately $4.7 million in fee and other income. Combined, this resulted in an increase in total operating income of approximately $13.9 million to $29.9 million, as compared to fiscal 2011.

The Company reported net operating income of approximately $21.1 million for fiscal 2012, as compared to a net operating loss of approximately ($2.3) million for fiscal 2011.

Fourth Quarter 2012 Portfolio Adjustments

Active DealsStatusWrite up (Write down)
 Velocitius B.V.  Write-up $2,452,000
 Vestal Manufacturing Enterprises, Inc. Write-up $1,750,000
 Octagon Credit Investors, LLC  Write-up $700,000
 Turf Products Corporation  Write-up $271,000
 SGDA Europe B.V. Write-up $239,000
 SIA Tekers Invest Write-up $139,000
 MVC Private Equity Fund L.P. Write-up $12,640
 Ohio Medical Corp. & Guarantee Write-down ($8,525,000)
 Security Holdings B.V. Write-down ($2,959,000)
 NPWT Corporation  Write-down ($465,000)
 MVC Automotive Group B.V. Write-down ($362,000)
 Harmony Health & Beauty, Inc. Write-down ($150,000)
 MVC Partners LLC Write-down ($71,360)
 Centile Holdings B.V.  Write-down ($34,376)
 Total  ($7,003,096)

As of October 31, 2012, the Company's net assets were approximately $386.0 million or $16.14 per share, compared with net assets of approximately $392.8 million, or $16.42 per share, at the beginning of the quarter and $419.5 million, or $17.54 per share, at the end of the same period last year. During the quarter, the Company received gross proceeds of approximately $15.3 million from the sale of SHL Group Limited ("SHL") to the Corporate Executive Board. In addition the Company also received a dividend of $2.4 million from U.S. Gas & Electric ("USG&E").

Quarterly Investment Activity

During the quarter, the Company made two follow-on investments and no new investments. The follow-on investments were made in SGDA Sanierungsgesellschaft fur Deponien und Altasten GmbH ("SGDA") for approximately $360,000 and Centile Holdings, B.V. ("Centile") for approximately $173,000. 

During the quarter, the Company sold its common shares of SHL to the Corporate Executive Board and received gross proceeds of approximately $15.3 million, resulting in a 2.5X return on invested cash.

Annual Investment Activity

During the fiscal year, the Company continued to increase liquidity while making two new investments in Freshii USA, Inc. and Biovation Holdings, Inc. ("Biovations") totaling $2.5 million. In addition, the Company made nine follow on investments in five existing portfolio companies totaling $8.8 million.

The Company, through MVC Partners Limited Partnership interest and MVCFS' General Partnership interest, contributed approximately $8.2 million of its $20.1 million capital commitment to the MVC Private Equity Fund L.P., which as of October 31, 2012, has invested in Plymouth Rock Energy, LLC, Gibdock Limited and Focus Pointe Holdings, Inc. Additionally, the Company invested $48,000 for an additional 9,568 shares of SHL's common stock. MVC loaned SGDA an additional $360,000 and extended the maturity date of its debt to August 31, 2014. Lastly, the Company made a follow-on investment of $173,000 in Centile.  

Dividends

The board of directors increased the fourth quarter dividend to $0.135 per share, or a total of approximately $3.2 million, to be distributed to shareholders. This represents an increase of 12.5% over the prior dividend. The dividend was paid on October 31, 2012 to shareholders of record on October 25, 2012.

For fiscal 2012, the Company paid dividends totaling $0.495 per share, or a total of approximately $11.8 million. The dividends issued under current management have resulted in approximately $85.6 million in distributions to the Fund's shareholders through October 31, 2012.

Liquidity

As of October 31, 2012, the Company had investments in portfolio companies with a fair value of approximately $404.2 million with a cost basis of $332.4 million, and cash and cash equivalents of approximately $42.6 million. Of the $42.6 million of cash on the balance sheet, $6.5 million is restricted cash. 

In the fourth quarter, the Company received a dividend from USG&E of approximately $2.4 million. USG&E's board approved an initial dividend to its shareholders, with future distributions projected to be paid quarterly, as long as cash flows support the dividend. Each quarterly dividend must be approved by USG&E's board of directors and be permissible under its gas and electric supply credit documentation.

Subsequent Events

On November 26, 2012, the Company loaned an additional $8.0 million to JSC Tekers, increasing the loan amount to $12.0 million. The interest rate remains at 8% per annum and the maturity date was extended to December 31, 2014.

On December 14, 2012, the Company loaned an additional $500,000 to Biovations, increasing the loan amount to $2.0 million. Both the interest rate and the maturity date on the loan will remain the same. 

On December 17, 2012, the Company declared its first quarter of 2013 dividend in the amount of $0.135 per share, or a total of approximately $3.2 million. The dividend is payable on January 7, 2013 to shareholders of record on December 31, 2012 and will therefore be taxed at 2012 rates.

Also on December 17, 2012, the Company received an approximate $426,000 dividend from Vestal Manufacturing Enterprises, Inc. 

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.

About Our Distributions

The amount and specific timing of any future dividends paid pursuant to the Fund's dividend policy will be determined by its board of directors. At this time, the Fund is unable to make a conclusive determination as to the characteristics of the distributions announced herein. In January, a Form 1099 DIV will be sent to shareholders that will state the aggregate amount and actual tax characterization of distributions for the preceding year.

Forward-Looking Statements

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.

MVC Capital, Inc.
Consolidated Balance Sheets
   
 October 31,October 31,
 2012 2011
   
ASSETS  
   
Assets  
Cash and cash equivalents $ 36,160,558 $ 28,317,460
Restricted cash and cash equivalents 6,480,000 6,925,000
Investments at fair value  
Non-control/Non-affiliated investments (cost $54,629,419 and $90,292,464) 34,197,990 51,182,558
Affiliate investments (cost $128,521,214 and $126,356,770) 178,396,856 187,953,099
Control investments (cost $149,281,248 and $141,569,773) 191,575,802 213,079,430
Total investments at fair value (cost $332,431,881 and $358,219,007) 404,170,648 452,215,087
Dividends and interest receivables, net of reserves 4,559,703 3,277,126
Fee and other receivables 3,314,116 4,595,741
Escrow receivables 991,563 1,146,899
Prepaid expenses 753,501 629,868
Prepaid taxes 591 --
   
Total assets $ 456,430,680 $ 497,107,181
   
LIABILITIES AND SHAREHOLDERS' EQUITY
   
Liabilities   
Term loan $ 50,000,000 $ 50,000,000
Provision for incentive compensation (Note 5) 15,655,438 23,938,058
Management fee payable 2,027,571 2,303,655
Management fee payable - Asset Management 1,054,433 297,250
Professional fees payable 767,835 703,293
Other accrued expenses and liabilities  734,501 288,111
Portfolio fees payable - Asset Management 140,293 --
Consulting fees payable 34,476 64,999
Taxes payable -- 2,099
   
Total liabilities 70,414,547 77,597,465
   
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 425,651,660 428,428,139
Accumulated earnings 64,524,665 40,499,006
Dividends paid to stockholders (92,010,775) (80,171,868)
Accumulated net realized loss (46,401,983) (25,755,440)
Net unrealized appreciation 71,738,767 93,996,080
Treasury stock, at cost, 4,387,466 and 4,387,466 shares held, respectively (37,769,245) (37,769,245)
   
Total shareholders' equity 386,016,133 419,509,716
   
Total liabilities and shareholders' equity $ 456,430,680 $ 497,107,181
   
Net asset value per share $ 16.14 $ 17.54
   
The accompanying notes are an integral part of these consolidated financial statements.  




MVC Capital, Inc.
Consolidated Statements of Operations
    
    
 For the Year EndedFor the Year Ended For the Year Ended
 October 31, 2012October 31, 2011October 31, 2010
Operating Income:   
Dividend income   
Non-control/Non-affiliated investments $ 7,755 $ 246,234 $  --
Affiliate investments 2,481,234 341,043 1,893,133
Control investments 12,000,000 --  --
    
Total dividend income 14,488,989 587,277 1,893,133
    
Payment-in-kind dividend income   
Affiliate investments  249,347 230,358 382,398
    
Total payment-in-kind dividend income 249,347 230,358 382,398
    
Interest income   
Non-control/Non-affiliated investments 2,050,801 2,356,210 6,720,255
Affiliate investments 3,111,318  2,978,289 2,751,668
Control investments 2,423,174 2,353,376 2,388,872
    
Total interest income 7,585,293  7,687,875 11,860,795
    
Payment-in-kind interest income   
Non-control/Non-affiliated investments 44,304 268,423 1,972,985
Affiliate investments 2,024,462 1,920,686 2,256,028
Control investments 812,929 755,254 949,897
    
Total payment-in-kind interest income 2,881,695 2,944,363 5,178,910
    
Fee income   
Non-control/Non-affiliated investments  68,056 1,086,961 352,679
Affiliate investments 1,105,226 1,130,131 2,717,090
Control investments  766,631 566,426 626,780
    
Total fee income 1,939,913 2,783,518 3,696,549
    
Fee income - Asset Management 1   
Portfolio fees 1,290,160 -- --
Management fees 1,009,577 396,333  --
    
Total fee income - Asset Management 2,299,737 396,333 --
    
Other income 442,138  1,341,241 509,712
    
Total operating income 29,887,112 15,970,965 23,521,497
    
Operating Expenses:   
Management fee  8,587,992 8,844,572 9,329,809
Interest and other borrowing costs 3,366,756 3,082,125 2,824,788
Portfolio fees - Asset Management 1 967,620 -- --
Management fee - Asset Management 1 757,183 297,250  --
Audit & tax preparation fees 769,500 560,800 548,500
Legal fees 635,238 884,472 487,000
Other expenses 590,859 1,209,693 832,391
Consulting fees 384,104 550,271  366,200
Directors' fees 348,833 329,000 346,800
Insurance 333,752 348,027  353,135
Administration 261,914 268,146 273,986
Printing and postage 129,942 80,280  103,396
Public relations fees 119,700 89,800 84,000
Net Incentive compensation (Note 5) (5,937,431) 1,947,744 2,479,167
    
Total operating expenses 11,315,962 18,492,180 18,029,172
    
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 (2,553,917) (250,635) (150,000)
    
Net operating income (loss) before taxes 21,125,067 (2,270,580) 5,642,325
    
Tax Expenses:   
Current tax expense  3,997 13,557 8,476
    
Total tax expense 3,997 13,557 8,476
    
Net operating income (loss) 21,121,070 (2,284,137) 5,633,849
    
    
Net Realized and Unrealized Gain (Loss) on Investments and foreign currency:   
    
Net realized (loss) gain on investments and foreign currency   
    
Non-control/Non-affiliated investments (19,209,277) (16,339,803) (205,245)
Affiliate investments  -- (10,081,806) 36,111,253
Control investments (1,309,156) -- (3,717,209)
Foreign currency  -- -- (389)
    
Total net realized (loss) gain on investments and foreign currency (20,518,433) (26,421,609)  32,188,410
    
Net change in unrealized (depreciation) appreciation on investments (22,257,313) 35,676,725 (21,689,497)
    
Net realized (loss) gain and net change in unrealized (depreciation) appreciation on investments and foreign currency (42,775,746) 9,255,116 10,498,913
    
Net (decrease) increase in net assets resulting from operations $ (21,654,676) $ 6,970,979 $ 16,132,762
    
Net (decrease) increase in net assets per share resulting from operations $ (0.90) $  0.30 $ 0.66
    
Dividends declared per share $ 0.495 $ 0.480 $ 0.480
    
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 2012, 2011 and 2010 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.
CONTACT: Investor Relations
         Jackie Rothchild
         MVC Capital
         914-510-9400
         or
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         KCSA Strategic Communications
         212-896-1249
         
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         Nathaniel Garnick
         Sard Verbinnen & Co
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