Company Quick10K Filing
Quick10K
MVC Capital
10-Q 2019-07-31 Quarter: 2019-07-31
10-Q 2019-04-30 Quarter: 2019-04-30
10-Q 2019-01-31 Quarter: 2019-01-31
10-K 2018-10-31 Annual: 2018-10-31
10-Q 2018-07-31 Quarter: 2018-07-31
10-Q 2018-04-30 Quarter: 2018-04-30
10-Q 2018-01-31 Quarter: 2018-01-31
10-K 2017-10-31 Annual: 2017-10-31
10-Q 2017-07-31 Quarter: 2017-07-31
10-Q 2017-04-30 Quarter: 2017-04-30
10-Q 2017-01-31 Quarter: 2017-01-31
10-K 2016-10-31 Annual: 2016-10-31
10-Q 2016-07-31 Quarter: 2016-07-31
10-Q 2016-04-30 Quarter: 2016-04-30
10-Q 2016-01-31 Quarter: 2016-01-31
10-K 2015-10-31 Annual: 2015-10-31
10-Q 2015-07-31 Quarter: 2015-07-31
10-Q 2015-01-31 Quarter: 2015-01-31
10-Q 2014-10-31 Quarter: 2014-10-31
10-K 2014-10-31 Annual: 2014-10-31
10-Q 2014-07-31 Quarter: 2014-07-31
10-Q 2014-04-30 Quarter: 2014-04-30
10-Q 2014-01-31 Quarter: 2014-01-31
10-K 2013-10-31 Annual: 2013-10-31
8-K 2019-08-30 Enter Agreement, Off-BS Arrangement
8-K 2019-06-24 Shareholder Vote
8-K 2019-06-19 Enter Agreement, Off-BS Arrangement
8-K 2019-04-30 Amend Bylaw, Exhibits
8-K 2019-04-19 Other Events
8-K 2019-01-29 Enter Agreement, Off-BS Arrangement
8-K 2018-12-07 Enter Agreement, Off-BS Arrangement
8-K 2018-10-30 Amend Bylaw, Shareholder Vote, Exhibits
8-K 2018-10-11 Other Events
8-K 2018-09-17 Shareholder Rights, Other Events, Exhibits
8-K 2018-08-10 Enter Agreement, Off-BS Arrangement
8-K 2018-02-26 Enter Agreement
8-K 2018-01-04 Leave Agreement, Exhibits
MITT AG Mortgage Investment Trust 504
CIK Pinnacle Foods 373
PME Pingtan Marine Enterprise 188
SAR Saratoga Investment 0
PFLT Pennantpark Floating Rate Capital 0
DUSA Dusa Pharmaceuticals 0
STK Storage Technology 0
TCPC Blackrock Tcp Capital 0
SAB Grupo Casa Saba 0
TSLX TPG Specialty Lending 0
MVC 2019-07-31
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-10.1 a19-18276_1ex10d1.htm
EX-10.2 a19-18276_1ex10d2.htm
EX-31.1 a19-18276_1ex31d1.htm
EX-32.1 a19-18276_1ex32d1.htm

MVC Capital Earnings 2019-07-31

MVC 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 a19-18276_110q.htm 10-Q

Table of Contents

 

 

 

FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION

Washington D.C.  20549

 

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended July 31, 2019

 

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number 814-00201

 

MVC CAPITAL, INC.

(Exact name of the registrant as specified in its charter)

 

DELAWARE
(State or other jurisdiction of
incorporation or organization)

 

94-3346760
(I.R.S. Employer
Identification No.)

 

 

 

287 Bowman Avenue
2nd Floor
Purchase, New York
(Address of principal
executive offices)

 

10577
(Zip Code)

 

Registrant’s telephone number, including area code:  (914) 701-0310

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which
registered

Common Stock

 

MVC

 

New York Stock Exchange

Senior Notes

 

MVCD

 

New York Stock Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x No £

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  x  No £

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”  “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer £ Accelerated filer x Non-accelerated filer £ Smaller reporting company £ Emerging Growth Company £

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes £ No x

 

There were 17,725,118 shares of the registrant’s common stock, $.01 par value, outstanding as of September 6, 2019.

 

 

 


Table of Contents

 

MVC Capital, Inc.

(A Delaware Corporation)

Index

 

 

Page

Part I. Consolidated Financial Information

 

 

 

 

Item 1.

Consolidated Financial Statements

 

 

 

Consolidated Balance Sheets

 

 

 

-  July 31, 2019 (Unaudited) and October 31, 2018

3

 

 

Consolidated Statements of Operations

 

 

 

-  For the Nine Month Period November 1, 2018 to July 31, 2019 (Unaudited) and

 

 

 

-  For the Nine Month Period November 1, 2017 to July 31, 2018 (Unaudited)

4

 

 

Consolidated Statements of Operations

 

 

 

-  For the Quarter May 1, 2019 to July 31, 2019 (Unaudited) and

 

 

 

-  For the Quarter May 1, 2018 to July 31, 2018 (Unaudited)

5

 

 

Consolidated Statements of Cash Flows

 

 

 

-  For the Nine Month Period November 1, 2018 to July 31, 2019 (Unaudited) and

 

 

 

-  For the Nine Month Period November 1, 2017 to July 31, 2018 (Unaudited)

6

 

 

Consolidated Statements of Changes in Net Assets

 

 

 

-  For the Nine Month Period November 1, 2018 to July 31, 2019 (Unaudited)

 

 

 

-  For the Nine Month Period November 1, 2017 to July 31, 2018 (Unaudited) and

7

 

 

Consolidated Selected Per Share Data and Ratios

 

 

 

-  For the Nine Month Period November 1, 2018 to July 31, 2019 (Unaudited)

 

 

 

-  For the Nine Month Period November 1, 2017 to July 31, 2018 (Unaudited) and

 

 

 

-  For the Year ended October 31, 2018

8

 

 

Consolidated Schedules of Investments

 

 

 

-  July 31, 2019 (Unaudited)

9

 

 

-  October 31, 2018

 

 

 

Notes to Consolidated Financial Statements

13

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

43

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

72

 

Item 4.

Controls and Procedures

87

 

 

Part II. Other Information

87

 

 

 

Item 1.

Legal Proceedings

87

 

Item 1A.

Risk Factors

87

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

87

 

Item 3.

Defaults Upon Senior Securities

87

 

Item 4.

Mine Safety Disclosures

87

 

Item 5.

Other Information

88

 

Item 6.

Exhibits

88

 

 

Exhibits

88

 

 

SIGNATURE

89

 


Table of Contents

 

CONSOLIDATED FINANCIAL STATEMENTS

 

MVC Capital, Inc.

Consolidated Balance Sheets

 

 

 

July 31,

 

October 31,

 

 

 

2019

 

2018

 

 

 

(Unaudited)

 

 

 

ASSETS

Assets

 

 

 

 

 

Cash

 

$

1,651,952

 

$

9,803,800

 

Restricted cash (cost $0 and $5,300,629)

 

 

5,300,629

 

Restricted cash equivalents (cost $5,010,243 and $0)

 

5,010,243

 

 

Cash equivalents (cost $15,190,805 and $783,271)

 

15,190,805

 

783,271

 

Investments at fair value

 

 

 

 

 

Non-control/Non-affiliated investments (cost $245,157,322 and $203,068,014)

 

229,888,718

 

188,919,833

 

Affiliate investments (cost $93,784,009 and $116,062,640)

 

56,352,756

 

70,489,501

 

Control investments (cost $87,399,253 and $90,501,322)

 

53,163,314

 

65,097,978

 

Total investments at fair value (cost $426,340,584 and $409,631,976)

 

339,404,788

 

324,507,312

 

Escrow receivables, net of reserves

 

1,085,000

 

969,000

 

Dividends and interest receivables, net of reserves

 

3,543,559

 

2,913,910

 

Deferred financing fees

 

700,892

 

87,850

 

Fee and other receivables, net of reserves

 

2,365,725

 

2,382,463

 

Prepaid expenses

 

280,171

 

330,071

 

 

 

 

 

 

 

Total assets

 

$

369,233,135

 

$

347,078,306

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

Liabilities

 

 

 

 

 

Senior notes II

 

$

112,517,280

 

$

111,958,650

 

Revolving credit facility IV

 

22,100,000

 

 

Incentive compensation payable

 

2,502,961

 

2,502,961

 

Professional fees payable

 

77,387

 

166,522

 

Management fee payable

 

1,026,831

 

934,813

 

Accrued expenses and liabilities

 

180,423

 

220,447

 

Interest payable

 

668,923

 

656,847

 

Management fee payable - Asset Management

 

326,261

 

107,079

 

Consulting fees payable

 

311,558

 

154,443

 

Portfolio fees payable - Asset Management

 

748,281

 

664,462

 

Guarantees/Letters of Credit

 

848,606

 

2,866,516

 

Payable for shares repurchased

 

 

62,898

 

Transaction fees payable

 

7,840

 

57,166

 

Taxes payable

 

1,887

 

2,056

 

 

 

 

 

 

 

Total liabilities

 

141,318,238

 

120,354,860

 

 

 

 

 

 

 

Commitments and Contingencies (Note 9)

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

Common stock, $0.01 par value; 150,000,000 shares authorized; 28,304,448 shares issued and 17,725,118 and 18,192,804 shares outstanding as of July 31, 2019 and October 31, 2018, respectively

 

283,044

 

283,044

 

Additional paid-in-capital

 

408,583,787

 

408,583,787

 

Accumulated earnings

 

144,065,692

 

135,596,655

 

Dividends paid to stockholders

 

(176,614,317

)

(168,616,544

)

Accumulated net realized gain

 

43,361,980

 

38,778,647

 

Net unrealized depreciation

 

(85,252,420

)

(85,459,198

)

Treasury stock, at cost, 10,579,330 and 10,111,644 shares held, respectively

 

(106,512,869

)

(102,442,945

)

 

 

 

 

 

 

Total shareholders’ equity

 

227,914,897

 

226,723,446

 

 

 

 

 

 

 

Total liabilities and shareholders’ equity

 

$

369,233,135

 

$

347,078,306

 

 

 

 

 

 

 

Net asset value per share

 

$

12.86

 

$

12.46

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

3


Table of Contents

 

MVC Capital, Inc.

Consolidated Statements of Operations

(Unaudited)

 

 

 

For the Nine Month Period

 

For the Nine Month Period

 

 

 

November 1, 2018 to

 

November 1, 2017 to

 

 

 

July 31, 2019

 

July 31, 2018

 

Operating Income:

 

 

 

 

 

Dividend income

 

 

 

 

 

Non-control/Non-affiliated investments

 

$

395,543

 

$

 

Affiliate investments (net of foreign taxes withheld of $154,269 and $179,701, respectively) *

 

698,107

 

1,420,053

 

Control investments

 

542,693

 

 

 

 

 

 

 

 

Total dividend income

 

1,636,343

 

1,420,053

 

 

 

 

 

 

 

Payment-in-kind dividend income

 

 

 

 

 

Non-control/Non-affiliated investments

 

1,196,260

 

 

 

 

 

 

 

 

Total payment-in-kind dividend income

 

1,196,260

 

 

 

 

 

 

 

 

Interest income

 

 

 

 

 

Non-control/Non-affiliated investments

 

14,347,352

 

11,329,603

 

Affiliate investments

 

 

38,139

 

Control investments

 

325,284

 

267,626

 

 

 

 

 

 

 

Total interest income

 

14,672,636

 

11,635,368

 

 

 

 

 

 

 

Payment-in-kind/Deferred interest income

 

 

 

 

 

Non-control/Non-affiliated investments

 

3,307,666

 

2,215,125

 

Affiliate investments

 

581,846

 

285,110

 

Control investments

 

379,338

 

121,281

 

 

 

 

 

 

 

Total payment-in-kind/Deferred interest income

 

4,268,850

 

2,621,516

 

 

 

 

 

 

 

Fee income

 

 

 

 

 

Non-control/Non-affiliated investments

 

89,299

 

247,864

 

 

 

 

 

 

 

Total fee income

 

89,299

 

247,864

 

 

 

 

 

 

 

Fee income - Asset Management 1

 

 

 

 

 

Portfolio fees

 

347,914

 

542,820

 

Management fees

 

292,243

 

271,178

 

 

 

 

 

 

 

Total fee income - Asset Management

 

640,157

 

813,998

 

 

 

 

 

 

 

Total operating income

 

22,503,545

 

16,738,799

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

Interest and other borrowing costs 2

 

7,277,321

 

8,501,352

 

Management fee

 

4,746,192

 

4,394,066

 

Audit & tax preparation fees

 

979,980

 

594,000

 

Consulting fees

 

821,389

 

708,000

 

Other expenses *

 

448,596

 

540,103

 

Legal fees

 

401,400

 

473,155

 

Directors’ fees

 

282,448

 

248,100

 

Portfolio fees - Asset Management 1

 

260,936

 

407,115

 

Management fee - Asset Management 1

 

219,182

 

203,383

 

Insurance

 

206,334

 

201,656

 

Administration

 

123,411

 

129,945

 

Public relations fees

 

105,094

 

98,365

 

Printing and postage

 

53,100

 

47,785

 

Loss on extinguishment of debt

 

 

1,782,705

 

Net Incentive compensation (Note 11)

 

 

(2,060,992

)

 

 

 

 

 

 

Total operating expenses

 

15,925,383

 

16,268,738

 

 

 

 

 

 

 

Less: Voluntary expense waiver by Adviser 3

 

(112,500

)

(112,500

)

Less: Voluntary management fee waiver by Adviser 4

 

(1,779,822

)

(1,471,399

)

 

 

 

 

 

 

Total waivers

 

(1,892,322

)

(1,583,899

)

 

 

 

 

 

 

Net operating income before taxes

 

8,470,484

 

2,053,960

 

 

 

 

 

 

 

Tax Expenses:

 

 

 

 

 

Current tax expense

 

1,447

 

1,442

 

 

 

 

 

 

 

Total tax expense

 

1,447

 

1,442

 

 

 

 

 

 

 

Net operating income

 

8,469,037

 

2,052,518

 

 

 

 

 

 

 

Net Realized and Unrealized Gain (Loss) on Investments:

 

 

 

 

 

 

 

 

 

 

 

Net realized gain (loss) on investments

 

 

 

 

 

U.S. Treasury obligations

 

104,858

 

(95,355

)

Non-control/Non-affiliated investments

 

3,226,317

 

(3,158,367

)

Affiliate investments

 

(3,727,289

)

3,455,430

 

Control investments

 

4,965,552

 

 

Foreign currency

 

13,895

 

(618

)

 

 

 

 

 

 

Total net realized gain on investments

 

4,583,333

 

201,090

 

 

 

 

 

 

 

Net unrealized appreciation (depreciation) on investments

 

206,778

 

(10,567,061

)

 

 

 

 

 

 

Net realized and unrealized gain (loss) on investments

 

4,790,111

 

(10,365,971

)

 

 

 

 

 

 

Net increase (decrease) in net assets resulting from operations

 

$

13,259,148

 

$

(8,313,453

)

 

 

 

 

 

 

Net increase (decrease) in net assets per share resulting from operations

 

$

0.75

 

$

(0.45

)

 

 

 

 

 

 

Dividends declared per share 5

 

$

0.450

 

$

0.450

 

 

 

 

 

 

 

Weighted average number of shares outstanding

 

17,810,123

 

19,282,604

 

 

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 10 “Management” for more information.

 

2 Interest and other borrowing costs includes $262,705 and $784,969 of interest associated with installment sale treatment on the USG&E note.  Please see Note 12 “Tax Matters” for more information.

 

3 Reflects the nine month period of the TTG Advisers’ voluntary waiver of $150,000 of expenses for the 2019 and 2018 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.

 

4 Reflects the nine month period of the TTG Advisers’ voluntary waiver of the management fee for the 2019 and 2018. Please see Note 10 “Management” for more information.

 

5 Please see Note 13 “Dividends and Distributions to Shareholders, Share Repurchase Program and Tender Offer” for more information.

 

* Amounts from prior year have been reclassified to conform to current year presentation.

 

The accompanying notes are an integral part of these consolidated financial statements.

 

4


Table of Contents

 

MVC Capital, Inc.

Consolidated Statements of Operations

(Unaudited)

 

 

 

For the Quarter

 

For the Quarter

 

 

 

May 1, 2019 to

 

May 1, 2018 to

 

 

 

July 31, 2019

 

July 31, 2018

 

Operating Income:

 

 

 

 

 

Dividend income

 

 

 

 

 

Affiliate investments (net of foreign taxes withheld of $0 and $59,405, respectively) *

 

$

 

$

467,100

 

 

 

 

 

 

 

Total dividend income

 

 

467,100

 

 

 

 

 

 

 

Payment-in-kind dividend income

 

 

 

 

 

Non-control/Non-affiliated investments

 

 

 

 

 

 

 

 

 

Total payment-in-kind dividend income

 

 

 

 

 

 

 

 

 

Interest income

 

 

 

 

 

Non-control/Non-affiliated investments

 

5,924,050

 

4,160,019

 

Affiliate investments

 

 

14,439

 

Control investments

 

109,618

 

105,135

 

 

 

 

 

 

 

Total interest income

 

6,033,668

 

4,279,593

 

 

 

 

 

 

 

Payment-in-kind/Deferred interest income

 

 

 

 

 

Non-control/Non-affiliated investments

 

899,710

 

806,603

 

Affiliate investments

 

140,621

 

175,031

 

Control investments

 

132,648

 

65,766

 

 

 

 

 

 

 

Total payment-in-kind/Deferred interest income

 

1,172,979

 

1,047,400

 

 

 

 

 

 

 

Fee income

 

 

 

 

 

Non-control/Non-affiliated investments

 

38,101

 

114,406

 

 

 

 

 

 

 

Total fee income

 

38,101

 

114,406

 

 

 

 

 

 

 

Fee income - Asset Management 1

 

 

 

 

 

Portfolio fees

 

119,248

 

149,156

 

Management fees

 

104,944

 

94,210

 

 

 

 

 

 

 

Total fee income - Asset Management

 

224,192

 

243,366

 

 

 

 

 

 

 

Total operating income

 

7,468,940

 

6,151,865

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

Interest and other borrowing costs 2

 

2,510,677

 

2,402,894

 

Management fee

 

1,642,930

 

1,487,189

 

Audit & tax preparation fees

 

151,300

 

84,000

 

Consulting fees

 

334,519

 

257,000

 

Other expenses *

 

140,763

 

129,624

 

Legal fees

 

123,000

 

290,836

 

Directors’ fees

 

94,000

 

85,100

 

Portfolio fees - Asset Management 1

 

89,436

 

111,867

 

Management fee - Asset Management 1

 

78,708

 

70,657

 

Insurance

 

69,516

 

67,320

 

Administration

 

41,589

 

43,135

 

Public relations fees

 

26,000

 

36,120

 

Printing and postage

 

16,800

 

17,300

 

Net Incentive compensation (Note 11)

 

 

(1,316,475

)

 

 

 

 

 

 

Total operating expenses

 

5,319,238

 

3,766,567

 

 

 

 

 

 

 

Less: Voluntary expense waiver by Adviser 3

 

(37,500

)

(37,500

)

Less: Voluntary management fee waiver by Adviser 4

 

(616,099

)

(557,696

)

 

 

 

 

 

 

Total waivers

 

(653,599

)

(595,196

)

 

 

 

 

 

 

Net operating income before taxes

 

2,803,301

 

2,980,494

 

 

 

 

 

 

 

Tax Expenses:

 

 

 

 

 

Current tax expense

 

485

 

482

 

 

 

 

 

 

 

Total tax expense

 

485

 

482

 

 

 

 

 

 

 

Net operating income

 

2,802,816

 

2,980,012

 

 

 

 

 

 

 

Net Realized and Unrealized Gain (Loss) on Investments:

 

 

 

 

 

 

 

 

 

 

 

Net realized gain (loss) on investments

 

 

 

 

 

U.S. Treasury obligations

 

84,375

 

(95,355

)

Non-control/Non-affiliated investments

 

2,910

 

(257,077

)

Affiliate investments

 

(3,795,709

)

3,455,430

 

Control investments

 

(218,992

)

 

Foreign currency

 

11,733

 

(985

)

 

 

 

 

 

 

Total net realized gain (loss) on investments

 

(3,915,683

)

3,102,013

 

 

 

 

 

 

 

Net unrealized appreciation (depreciation) on investments

 

1,460,783

 

(11,951,877

)

 

 

 

 

 

 

Net realized and unrealized loss on investments

 

(2,454,900

)

(8,849,864

)

 

 

 

 

 

 

Net increase (decrease) in net assets resulting from operations

 

$

347,916

 

$

(5,869,852

)

 

 

 

 

 

 

Net increase (decrease) in net assets per share resulting from operations

 

$

0.02

 

$

(0.32

)

 

 

 

 

 

 

Dividends declared per share 5

 

$

0.150

 

$

0.150

 

 

 

 

 

 

 

Weighted average number of shares outstanding

 

17,725,118

 

18,820,528

 

 

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 10 “Management” for more information.

 

2 Interest and other borrowing costs includes $86,285 and $699,979 of interest associated with installment sale treatment on the USG&E note.  Please see Note 12 “Tax Matters” for more information.

 

3 Reflects the quarterly portion of the TTG Advisers’ voluntary waiver of $150,000 of expenses for the 2019 and 2018 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.

 

4 Reflects the quarterly portion of the TTG Advisers’ voluntary waiver of the management fee for the 2019 and 2018 Please see Note 10 “Management” for more information.

 

5 Please see Note 13 “Dividends and Distributions to Shareholders, Share Repurchase Program and Tender Offer”

 

* Amounts from prior year have been reclassified to conform to current year presentation.

 

The accompanying notes are an integral part of these consolidated financial statements.

 

5


Table of Contents

 

MVC Capital, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

For the Nine Month Period

 

For the Nine Month Period

 

 

 

November 1, 2018 to

 

November 1, 2017 to

 

 

 

July 31, 2019

 

July 31, 2018

 

Cash flows from Operating Activities:

 

 

 

 

 

Net increase (decrease) in net assets resulting from operations

 

$

13,259,148

 

$

(8,313,453

)

Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:

 

 

 

 

 

Net realized (gain) loss

 

(4,583,333

)

(201,090

)

Net change in unrealized depreciation (appreciation)

 

(206,778

)

10,567,061

 

Amortization of discounts and fees

 

(232,955

)

(224,152

)

Increase in accrued payment-in-kind dividends and interest

 

(5,143,943

)

(2,244,828

)

Amortization of deferred financing fees

 

968,257

 

954,998

 

Loss on extinguishment of debt

 

 

1,782,705

 

Changes in operating assets and liabilities:

 

 

 

 

 

Dividends, interest and fees receivable

 

(629,649

)

(533,035

)

Fee and other receivables

 

16,738

 

(676,727

)

Escrow receivables, net of reserves

 

(116,000

)

(935,000

)

Receivable for Investment Sold

 

 

(5,787,729

)

Prepaid expenses

 

49,900

 

35,704

 

Incentive compensation (Note 5)

 

 

(3,945,297

)

Other liabilities

 

322,658

 

(1,286,021

)

Purchases of equity investments

 

(4,268,340

)

(468,562

)

Purchases of debt instruments

 

(36,751,624

)

(50,398,591

)

Purchases of short-term investments

 

(49,991,103

)

(24,996,182

)

Proceeds from equity investments

 

30,803,643

 

6,722,729

 

Proceeds from debt instruments

 

3,395,440

 

12,243,683

 

Sales/maturities of short-term investments

 

50,094,859

 

24,901,266

 

 

 

 

 

 

 

Net cash used in operating activities

 

(3,013,082

)

(42,802,521

)

 

 

 

 

 

 

Cash flows from Financing Activities:

 

 

 

 

 

Borrowings from senior notes

 

 

115,000,000

 

Repayments from senior notes

 

 

(114,408,750

)

Borrowings from revolving credit facility II

 

50,000,000

 

 

Repayments from revolving credit facility II

 

(50,000,000

)

 

Borrowings from revolving credit facility IV

 

26,100,000

 

 

Repayments from revolving credit facility IV

 

(4,000,000

)

 

Repurchase of common stock

 

(4,069,924

)

(25,100,502

)

Financing fees paid

 

(1,053,921

)

(3,707,369

)

Distributions paid to shareholders

 

(7,728,062

)

(8,215,867

)

Repurchases of common stock under dividend reinvestment plan

 

(269,711

)

(253,371

)

 

 

 

 

 

 

Net cash provided by (used in) financing activities

 

8,978,382

 

(36,685,859

)

 

 

 

 

 

 

Net change in cash, cash equivalents, restricted cash and restricted cash equivalents, for the period

 

5,965,300

 

(79,488,380

)

 

 

 

 

 

 

Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of period

 

$

15,887,700

 

$

106,674,568

 

 

 

 

 

 

 

Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period

 

$

21,853,000

 

$

27,186,188

 

 

During the nine month periods ended July 31, 2019 and 2018 MVC Capital, Inc. paid $6,018,487 and $7,143,752 in interest expense, respectively.

 

During the nine month periods ended July 31, 2019 and 2018 MVC Capital, Inc. paid $1,616 and $1,920 in income taxes, respectively.

 

Non-cash activity:

During the nine month periods ended July 31, 2019 and 2018, MVC Capital, Inc. recorded payment in-kind dividend and interest of $5,143,943 and $2,244,828, respectively. This amount was added to the principal balance of the investments and recorded as dividend/interest income.

 

During the nine month periods ended July 31, 2019 and 2018, the Plan Agent purchased 29,543 and 25,043 shares of common stock in the open market in order to satisfy the reinvestment portion of our dividends.

 

During the nine month period ended July 31, 2018, all assets and liabilities of SGDA Europe were transferred to a new Austrian holding company, Trientis GmbH, to achieve operating efficiencies.

 

On November 28, 2017, the Company restructured the Custom Alloy second lien loan and unsecured subordinated loan.  The second lien loan was restructured into a $3.5 million second lien loan with an interest rate of 10% and a maturity date of December 31, 2020, 6,500 shares of Series B Preferred Stock with a 10% PIK coupon and a maturity date of December 31, 2020 and 17,935 shares of Series C Preferred Stock.  The unsecured subordinated loan was restructured into 3,617 shares of Series A Preferred Stock with a 12% PIK coupon and a maturity date of April 30, 2020.

 

Effective January 1, 2018, the cost basis of the U.S. Gas second lien loan was decreased by approximately $3.0 million due to a working capital adjustment, resulting in a realized loss of approximately $3.0 million.  The second lien loan is still subject to indemnification adjustments.

 

On April 30, 2019, Custom Alloy redeemed its series A, B and C preferred shares and consolidated its second lien loans in exchange for two second lien loans of approximately $32.5 million and $6.1 million with interest rates of 15% and maturity dates of April 30, 2022.  The Company realized a gain of approximately $3.2 million associated with the transaction.

 

The accompanying notes are an integral part of these consolidated financial statements.

 

6


Table of Contents

 

MVC Capital, Inc.

Consolidated Statements of Changes in Net Assets

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

Net Unrealized

 

 

 

 

 

For the Nine Month Period November 1, 2017 to

 

Common

 

Additional

 

Accumulated

 

Dividends Paid

 

Net Realized

 

Appreciation

 

Treasury

 

Total Net

 

July 31, 2018 (Unaudited)

 

Stock

 

Paid-In-Capital

 

Earnings

 

to Stockholders

 

Gain (Loss)

 

(Depreciation)

 

Stock

 

Asset Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at October 31, 2017

 

$

283,044

 

$

418,208,458

 

$

122,455,573

 

$

(157,414,605

)

$

38,434,807

 

$

(70,965,264

)

$

(71,512,945

)

$

279,489,068

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) resulting from operations

 

 

 

2,052,518

 

 

201,090

 

(10,567,061

)

 

(8,313,453

)

Distributions from Income

 

 

 

 

 

 

 

 

 

Distributions from return of capital

 

 

 

 

(8,469,238

)

 

 

 

(8,469,238

)

Issuance of common stock under dividend reinvestment plan

 

253,371

 

 

 

 

 

 

 

253,371

 

Repurchase of common stock under dividend reinvestment plan

 

(253,371

)

 

 

 

 

 

 

(253,371

)

Repurchase expenses

 

 

(100,513

)

 

 

 

 

 

(100,513

)

Repurchase of common stock

 

 

 

 

 

 

 

(24,999,989

)

(24,999,989

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at July 31, 2018

 

$

283,044

 

$

418,107,945

 

$

124,508,091

 

$

(165,883,843

)

$

38,635,897

 

$

(81,532,325

)

$

(96,512,934

)

$

237,605,875

 

 

For the Nine Month Period November 1, 2018 to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

July 31, 2019(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at October 31, 2018

 

$

283,044

 

$

408,583,787

 

$

135,596,655

 

$

(168,616,544

)

$

38,778,647

 

$

(85,459,198

)

$

(102,442,945

)

$

226,723,446

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) resulting from operations

 

 

 

8,469,037

 

 

4,583,333

 

206,778

 

 

13,259,148

 

Distributions from Income

 

 

 

 

(7,997,773

)

 

 

 

(7,997,773

)

Issuance of common stock under dividend reinvestment plan

 

269,711

 

 

 

 

 

 

 

269,711

 

Repurchase of common stock under dividend reinvestment plan

 

(269,711

)

 

 

 

 

 

 

(269,711

)

Repurchase of common stock

 

 

 

 

 

 

 

(4,069,924

)

(4,069,924

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at July 31, 2019

 

$

283,044

 

$

408,583,787

 

$

144,065,692

 

$

(176,614,317

)

$

43,361,980

 

$

(85,252,420

)

$

(106,512,869

)

$

227,914,897

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

7


Table of Contents

 

MVC Capital, Inc.

Consolidated Selected Per Share Data and Ratios

 

 

 

For the Nine Month Period

 

For the Nine Month Period

 

For the

 

 

 

November 1, 2018 to

 

November 1, 2017 to

 

Year Ended

 

 

 

July 31, 2019

 

July 31, 2018

 

October 31, 2018

 

 

 

(Unaudited)

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Net asset value, beginning of period/year

 

$

12.46

 

$

13.24

 

$

13.24

 

 

 

 

 

 

 

 

 

Income from operations:

 

 

 

 

 

 

 

Net operating income (loss)

 

0.48

 

0.10

 

0.20

 

Net realized and unrealized gain (loss) on investments

 

0.27

 

(0.55

)

(0.75

)

 

 

 

 

 

 

 

 

Total gain (loss) from investment operations

 

0.75

 

(0.45

)

(0.55

)

 

 

 

 

 

 

 

 

Less distributions from:

 

 

 

 

 

 

 

Income

 

(0.45

)

 

(0.02

)

Realized gain

 

 

 

(0.13

)

Return of capital

 

 

(0.45

)

(0.45

)

 

 

 

 

 

 

 

 

Total distributions

 

(0.45

)

(0.45

)

(0.60

)

 

 

 

 

 

 

 

 

Capital share transactions

 

 

 

 

 

 

 

Anti-dilutive effect of share repurchase program

 

0.10

 

0.28

 

0.37

 

 

 

 

 

 

 

 

 

Total capital share transactions

 

0.10

 

0.28

 

0.37

 

 

 

 

 

 

 

 

 

Net asset value, end of period/year

 

$

12.86

 

$

12.62

 

$

12.46

 

 

 

 

 

 

 

 

 

Market value, end of period/year

 

$

9.57

 

$

9.38

 

$

9.05

 

 

 

 

 

 

 

 

 

Market discount

 

(25.58

)%

(25.67

)%

(27.37

)%

 

 

 

 

 

 

 

 

Total Return - At NAV (a)

 

6.91

%

(1.35

)%

(1.46

)%

 

 

 

 

 

 

 

 

Total Return - At Market (a)

 

10.94

%

(8.30

)%

(10.06

)%

 

 

 

 

 

 

 

 

Ratios and Supplemental Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Portfolio turnover ratio

 

10.04

%

6.10

%

7.21

%

 

 

 

 

 

 

 

 

Net assets, end of period/year (in thousands)

 

$

227,915

 

$

237,606

 

$

226,723

 

 

 

 

 

 

 

 

 

Ratios to average net assets:

 

 

 

 

 

 

 

Expenses including tax expense

 

8.32

%(c)

7.73

%(c)

7.70

%

Expenses excluding tax expense

 

8.32

%(c)

7.73

%(c)

7.70

%

 

 

 

 

 

 

 

 

Net operating income (loss) before tax expense

 

5.02

%(c)

1.08

%(c)

1.51

%

Net operating income (loss) after tax expense

 

5.02

%(c)

1.08

%(c)

1.51

%

 

 

 

 

 

 

 

 

Ratios to average net assets excluding waivers:

 

 

 

 

 

 

 

Expenses including tax expense

 

9.44

%(c)

8.56

%(c)

8.58

%

Expenses excluding tax expense

 

9.44

%(c)

8.56

%(c)

8.57

%

 

 

 

 

 

 

 

 

Net operating income (loss) before tax expense

 

3.90

%(c)

0.25

%(c)

0.63

%

Net operating income (loss) after tax expense

 

3.90

%(c)

0.25

%(c)

0.63

%

 


(a) Total annual return is historical and assumes changes in share price, reinvestments of all dividends and distributions, and no sales charge for the period/year.

 

 

 

 

 

 

 

 

(b) Supplemental Ratio information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios to average net assets: (b)

 

 

 

 

 

 

 

Expenses excluding incentive compensation

 

8.32

%(c)

8.81

%(c)

8.53

%

Expenses excluding incentive compensation, interest and other borrowing costs

 

4.00

%(c)

4.34

%(c)

4.20

%

 

 

 

 

 

 

 

 

Net operating income (loss) before incentive compensation

 

5.02

%(c)

%(c)

0.68

%

Net operating income before incentive compensation, interest and other borrowing costs

 

9.34

%(c)

4.47

%(c)

5.00

%

 

 

 

 

 

 

 

 

Ratios to average net assets excluding waivers: (b)

 

 

 

 

 

 

 

Expenses excluding incentive compensation

 

9.44

%(c)

9.65

%(c)

9.40

%

Expenses excluding incentive compensation, interest and other borrowing costs

 

5.13

%(c)

5.17

%(c)

5.08

%

 

 

 

 

 

 

 

 

Net operating income (loss) before incentive compensation

 

3.90

%(c)

(0.84

)%(c)

(0.20

)%

Net operating income before incentive compensation, interest and other borrowing costs

 

8.21

%(c)

3.64

%(c)

4.13

%

 

 

 

 

 

 

 

 

(c) Annualized.

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

8


Table of Contents

 

MVC Capital, Inc.

Consolidated Schedule of Investments

July 31, 2019

(Unaudited)

 

Company

 

Industry

 

Investment

 

Principal

 

Cost

 

Fair Value/Market
Value

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-control/Non-affiliated investments- 100.87% (a), (c), (f), (g)

 

 

 

 

 

 

 

Apex Industrial Technologies, LLC

 

Supply Chain Equipment Manufacturer

 

First Lien Loan 12.0000% Cash, 12/31/2019 (k), (n)

 

$

15,000,000

 

$

14,891,774

 

$

15,000,000

 

Array Information Technology, Inc.

 

Information Technology Products and Services

 

Second Lien Loan 12.0000% Cash, 4.0000% PIK, 10/03/2023 (b), (k), (n), (p)

 

6,196,094

 

6,106,983

 

6,258,040

 

 

 

 

 

Warrants (d), (n)

 

1

 

 

 

 

 

 

 

 

 

 

 

6,106,983

 

6,258,040

 

Black Diamond Equipment Rentals, LLC

 

Equipment Rental

 

Second Lien Loan 12.5000% Cash, 06/27/2022 (k), (n)

 

7,500,000

 

7,144,062

 

7,575,000

 

 

 

 

 

Warrants (d), (n)

 

1

 

400,847

 

952,000

 

 

 

 

 

 

 

 

 

7,544,909

 

8,527,000

 

Custom Alloy Corporation

 

Manufacturer of Pipe Fittings and Forgings

 

Second Lien Loan 12.0000% Cash, 3.0000% PIK, 04/30/2022 (b), (k), (n)

 

32,471,814

 

32,471,814

 

32,143,980

 

 

 

 

 

Second Lien Loan 12.0000% Cash, 3.0000% PIK, 04/30/2022 (b), (k), (n)

 

6,128,187

 

6,128,187

 

6,066,316

 

 

 

 

 

Revolver 12.0000% Cash, 3.0000% PIK, 04/30/2020 (b), (k), (n)

 

800,000

 

800,000

 

800,000

 

 

 

 

 

 

 

 

 

39,400,001

 

39,010,296

 

Dukane IAS,LLC

 

Welding Equipment Manufacturer

 

Second Lien Note 10.5000% Cash, 2.5000% PIK, 11/17/2020 (b), (k), (n)

 

4,460,683

 

4,422,486

 

4,515,007

 

Essner Manufacturing, LP

 

Defense/Aerospace Parts Manufacturing

 

First Lien Loan 11.5000% Cash, 12/20/2022 (k), (n), (o)

 

3,588,607

 

3,540,073

 

3,588,607

 

FOLIOfn, Inc.

 

Technology Investment - Financial Services

 

Preferred Stock (5,802,259 shares) (d), (i), (n)

 

 

 

15,000,000

 

5,783,000

 

GTM Intermediate Holdings, Inc.

 

Medical Equipment/Manufacturer

 

Second Lien Loan 11.0000% Cash, 1.0000% PIK, 12/7/2024 (b), (k), (n)

 

5,051,161

 

4,956,057

 

5,051,161

 

 

 

 

 

Common Stock (2 shares) (d), (n), (t)

 

 

 

766,122

 

766,122

 

 

 

 

 

 

 

 

 

5,722,179

 

5,817,283

 

Highpoint Global LLC

 

Government Services

 

Second Lien Note 12.0000% Cash, 2.0000% PIK, 09/30/2022 (b), (k), (n)

 

5,174,783

 

5,110,825

 

5,174,784

 

HTI Technologies and Industries, Inc.

 

Electronic Component Manufacturing

 

Second Lien Note 12.0000% Cash, 3.7500% PIK, 9/15/2024 (b), (k), (n)

 

11,313,881

 

11,294,050

 

11,313,881

 

Initials, Inc.

 

Consumer Products

 

Senior Subordinated Debt 8.0000% Cash, 7.0000% PIK, 06/23/2020 (b), (h), (k), (n)

 

5,642,913

 

5,642,913

 

1,987,512

 

International Precision Components Corporation

 

Plastic Injection Molding

 

Second Lien Loan 12.0000% Cash, 3.5000% PIK, 10/3/2024 (b), (k), (n), (u)

 

8,000,000

 

7,846,731

 

8,000,000

 

Jedson Engineering, Inc.

 

Engineering and Construction Management

 

First Lien Loan 12.0000% Cash, 3.0000% PIK, 06/21/2024 (b), (k), (n)

 

6,001,500

 

5,882,852

 

6,001,500

 

Legal Solutions Holdings, Inc.

 

Business Services

 

Senior Subordinated Debt 12.0000% Cash, 4.0000% PIK, 03/18/2020 (b), (k), (n)

 

12,090,053

 

12,090,053

 

12,090,053

 

Morey’s Seafood International, LLC

 

Food Services

 

Second Lien Loan 10.0000% Cash, 3.0000% PIK, 08/12/2022 (b), (k), (n), (q)

 

16,361,251

 

16,361,251

 

16,361,251

 

Powers Equipment Acquisition Company, LLC

 

Equipment Manufacturer

 

First Lien Note 13.500% Cash, 04/30/2024 (k), (n), (v)

 

6,500,000

 

6,376,550

 

6,500,000

 

SMA Holdings, Inc.

 

Consulting

 

First Lien Loan 11.0000% Cash, 06/26/2024 (k), (n)

 

7,000,000

 

6,395,594

 

6,505,387

 

 

 

 

 

Warrants (d), (n)

 

2

 

504,555

 

504,555

 

 

 

 

 

 

 

 

 

6,900,149

 

7,009,942

 

Tin Roof Software, LLC

 

Software

 

Second Lien Loan 11.0000% Cash, 3.5000% PIK, 04/01/2024 (b), (k), (n)

 

3,750,000

 

3,687,550

 

3,750,000

 

Trientis GmbH

 

Environmental Services

 

First Lien Note 5.0000% PIK, 10/26/2024 (b), (e), (h), (m), (n), (r)

 

1,248,632

 

1,248,632

 

263,034

 

 

 

 

 

Warrants (d), (e), (r), (n)

 

1

 

67,715

 

 

 

 

 

 

 

 

 

 

1,316,347

 

263,034

 

Tuf-Tug Inc.

 

Safety Equipment Manufacturer

 

Second Lien Loan 11.0000% Cash, 2.0000% PIK, 02/24/2024 (b), (k), (n)

 

4,959,890

 

4,919,436

 

4,959,890

 

 

 

 

 

Common Stock (24.6 shares) (d), (n), (s)

 

 

 

750,000

 

750,000

 

 

 

 

 

 

 

 

 

5,669,436

 

5,709,890

 

Turf Products, LLC

 

Distributor - Landscaping and Irrigation Equipment

 

Senior Subordinated Debt 10.0000% Cash, 08/07/2020 (k), (n)

 

7,717,056

 

7,717,056

 

7,502,063

 

 

 

 

 

Third Lien Loan 10.0000% Cash, 08/07/2020 (k), (n)

 

1,120,000

 

1,120,000

 

1,094,447

 

 

 

 

 

 

 

 

 

8,837,056

 

8,596,510

 

U.S. Gas & Electric, Inc.

 

Energy Services

 

Second Lien Loan, 9.5000% Cash, 07/05/2025 (l), (n)

 

37,527,881

 

37,527,881

 

37,831,128

 

U.S. Spray Drying Holding Company

 

Specialty Chemicals

 

Class B Common Stock (784 shares) (d), (n)

 

 

 

5,488,000

 

2,300,000

 

 

 

 

 

Secured Loan 12.0000% Cash, 04/30/2021 (k), (n)

 

1,500,000

 

1,500,000

 

1,500,000

 

 

 

 

 

Senior Secured Loan 12.0000% Cash, 04/30/2021 (k), (n)

 

1,500,000

 

1,500,000

 

1,500,000

 

 

 

 

 

 

 

 

 

8,488,000

 

5,300,000

 

United States Technologies, Inc.

 

Electronics Manufacturing and Repair

 

Senior Lien Loan 10.5000% Cash, 07/17/2020 (k), (n)

 

5,500,000

 

5,497,273

 

5,500,000

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub Total Non-control/Non-affiliated investments

 

 

 

$

245,157,322

 

$

229,888,718

 

 

 

 

 

 

 

 

 

 

 

 

 

Affiliate investments - 24.72% (a), (c), (f), (g)

 

 

 

 

 

 

 

Advantage Insurance, Inc.

 

Insurance

 

Preferred Stock (750,000 shares) (d), (e), (n)

 

 

 

7,500,000

 

7,917,096

 

JSC Tekers Holdings

 

Real Estate Management

 

Common Stock (3,201 shares) (d), (e), (n)

 

 

 

4,500

 

 

 

 

 

 

Preferred Stock (9,159,085 shares) (d), (e), (n)

 

 

 

11,810,188

 

4,173,000

 

 

 

 

 

 

 

 

 

11,814,688

 

4,173,000

 

MVC Environmental, Inc.

 

Environmental Services

 

Senior Secured Loan 9.0000% PIK, 12/22/2020 (b), (h), (k), (n)

 

6,869,353

 

6,869,353

 

 

 

 

 

 

Common Stock (980 shares) (d), (n)

 

 

 

6,063,038

 

 

 

 

 

 

 

 

 

 

12,932,391

 

 

Security Holdings B.V.

 

Electrical Engineering

 

Common Equity Interest (d), (e), (n)

 

 

 

51,204,270

 

33,930,000

 

 

 

 

 

Bridge Loan 5.0000% PIK, 12/31/2019 (b), (e), (k), (n)

 

4,937,218

 

4,937,218

 

4,937,218

 

 

 

 

 

Senior Subordinated Loan 4.5000% PIK, 05/31/2020 (b), (e), (k), (n)

 

5,395,442

 

5,395,442

 

5,395,442

 

 

 

 

 

 

 

 

 

61,536,930

 

44,262,660

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub Total Affiliate investments