Main Street Capital CORP
For the period ended Jun 30, 2024. Filed Aug 9, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 9, 2024
MAIN$57.01+0.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-10.
0001396440-24-000082
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-09.
0001396440-24-000154
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 133 previous paragraphs and 163 current paragraphs.
78 unchanged; 48 reworded; 26 added; 6 removed; 1 previous and 11 current paragraphs rearranged.
Tables are not compared: 11 previous and 17 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (26)
Current report
Total investment income for the three months ended June 30, 2024 was $132.2 million, a 4% increase from the $127.6 million of total investment income for the corresponding period of 2023. The following table provides a summary of the changes in the comparable period activity.
Current report
(c)The increase in fee income was primarily related to a $0.7 million increase in fees related to increased investment activity.
Current report
Total expenses for the three months ended June 30, 2024 were $44.9 million, a 7% increase from the $41.9 million in the corresponding period of 2023. The following table provides a summary of the changes in the comparable period activity.
Current report
(b)The increase in general and administrative expense was primarily attributable to an increase in business development activities and professional fees.
Current report
(d)Share-based compensation increased $0.8 million in the second quarter of 2024 from the comparable period of the prior year, principally attributable to an increase in incentive based grants related to incentive compensation awards issued in April 2024.
Current report
The income tax provision for the three months ended June 30, 2023 of $8.6 million principally consisted of (i) a deferred tax provision of $7.0 million and (ii) a current tax provision of $1.6 million primarily related to a $1.1 million provision for excise tax on our estimated undistributed taxable income and a $0.5 million provision for current U.S. federal and state income taxes.
Current report
Comparison of the six months ended June 30, 2024 and 2023
Current report
NM Net change % not meaningful
Current report
Investment Income
Current report
(c)The increase in total investment income includes a net reduction of $3.4 million in the impact of certain income considered less consistent or non-recurring, including a $6.8 million decrease in such dividend income, partially offset by a $3.4 million increase in accelerated prepayment, repricing and other activity related to certain Investment Portfolio debt investments.
Current report
Expenses
Current report
Total expenses for the six months ended June 30, 2024 were $86.7 million, a 7% increase from the $81.1 million in the corresponding period of 2023. The following table provides a summary of the changes in the comparable period activity.
Current report
(a)The increase in compensation expense was primarily related to (i) increased headcount and (ii) increased base compensation rates.
Current report
(b)The increase in general and administrative expense was primarily attributable to an increase in business development activities, professional fees and technology costs.
Current report
(d)The increase in share-based compensation increased $0.8 million in the six months ended June 30, 2024 from the comparable period of the prior year, principally attributable to an increase in incentive based grants related to incentive compensation awards in April 2024.
Current report
Net Investment Income
Current report
Net investment income for the six months ended June 30, 2024 increased 6% to $177.1 million, or $2.07 per share, compared to net investment income of $166.7 million, or $2.08 per share, for the corresponding period of 2023. The increase in net investment income was principally attributable to the increase in total investment income, partially offset by higher operating expenses, both as discussed above. The decrease in net investment income per share reflects these changes and the impact of the increase in weighted average shares outstanding for the six months ended June 30, 2024, primarily due to shares issued through our (i) ATM Program, (ii) dividend reinvestment plan and (iii) equity incentive plans, in each case over the last twelve months. The decrease in net investment income on a per share basis includes a $0.05 per share decrease in investment income considered less consistent or non-recurring in nature.
Current report
Distributable Net Investment Income
Current report
Distributable net investment income for the six months ended June 30, 2024 increased 6% to $186.7 million, or $2.18 per share, compared with $175.8 million, or $2.19 per share, in the corresponding period of 2023. The increase in distributable net investment income was primarily due to the increased level of total investment income, partially offset by higher operating expenses, excluding the impact of share-based compensation expense and deferred compensation expense (benefit), both as discussed above. The decrease in distributable net investment income per share reflects the net impact of the increase in weighted average shares outstanding for the six months ended June 30, 2024, primarily due to shares issued through our (i) ATM Program, (ii) dividend reinvestment plan and (iii) equity incentive plans, in each case over the last twelve months. The decrease in distributable net investment income on a per share basis includes a $0.05 per share decrease in investment income considered less consistent or non-recurring in nature.
Current report
Net Unrealized Appreciation
Current report
The following table provides a summary of the total net unrealized appreciation of $63.7 million for the six months ended June 30, 2024:
Current report
(b)Other includes (i) $12.5 million of unrealized appreciation relating to the External Investment Manager, (ii) $5.0 million of net unrealized appreciation relating to the Other Portfolio and (iii) $0.6 million of net unrealized appreciation relating to the assets of the deferred compensation plan.
Current report
Income Tax Provision
Current report
The income tax provision for the six months ended June 30, 2023 of $16.8 million principally consisted of (i) a deferred tax provision of $13.4 million and (ii) a current tax provision of $3.4 million primarily related to a $1.8 million provision for excise tax in our estimated undistributed taxable income and a $1.6 million provision for current U.S. federal and state income taxes.
Current report
In June 2024, we issued $300.0 million in aggregate principal amount of 6.50% unsecured notes due June 4, 2027 (the “June 2027 Notes”). The outstanding aggregate principal amount of the June 2027 Notes was $300.0 million as of June 30, 2024.
Current report
After quarter end, we received approval from the SBA for $63.8 million of additional SBIC funding which we expect to draw in the third quarter of 2024, at which point the total outstanding amount of SBIC debentures would equal the regulatory maximum amount of $350.0 million.
Removed paragraphs (6)
Previous report
As of March 31, 2024, we had short-term portfolio investments in 11 entities, collectively totaling $103.4 million in fair value and $103.3 million in cost basis and which comprised 2.3% and 2.6% of our Investment Portfolio at fair value and cost, respectively. As of December 31, 2023, we had no short-term portfolio investments.
Previous report
Total investment income for the three months ended March 31, 2024 was $131.6 million, a 9% increase from the $120.3 million of total investment income for the corresponding period of 2023. The following table provides a summary of the changes in the comparable period activity.
Previous report
(b)Includes the reversal of $6.7 million of prior unrealized depreciation related to the previously noted $7.1 million realized loss on the full exit of an Other Portfolio investment.
Previous report
The income tax provision for the three months ended March 31, 2023 of $8.1 million principally consisted of (i) a deferred tax provision of $6.4 million and (ii) a current tax provision of $1.7 million primarily related to a $1.0 million provision for current U.S. federal and state income taxes and a $0.7 million provision for excise tax on our estimated undistributed taxable income.
Previous report
In April 2019, we issued $250.0 million in aggregate principal amount of 5.20% unsecured notes due May 1, 2024 (the “May 2024 Notes”). In December 2019 and July 2020, we issued an additional $75.0 million and $125.0 million, respectively, in aggregate principal amount of the May 2024 Notes. The outstanding aggregate principal amount of the May 2024 Notes was $450.0 million as of both March 31, 2024 and December 31, 2023.
Previous report
In May 2024, we repaid the entire $450.0 million principal amount of the issued and outstanding May 2024 Notes at par value plus the accrued unpaid interest at maturity. The repayment of the May 2024 Notes was funded through borrowings on Main Street’s Credit Facilities.
Reworded paragraphs (48)
Previous wording
Our principal investment objective is to maximize our portfolio’s total return by generating current income from our debt investments and current income and capital appreciation from our equity and equity-related investments, including warrants, convertible securities and other rights to acquire equity securities in a portfolio company. We seek to achieve our investment objective through our LMM and Private Loan (as defined below) investment strategies. Our LMM investment strategy involves investments in companies that generally have annual revenues between $10 million and $150 million and our LMM portfolio investments generally range in size from $5 million to $100 million. Our private loan (“Private Loan”) investment strategy involves investments in companies that are generally consistent with the size of the companies in our LMM and Middle Market investment strategies, and our Private Loan investments generally range in size from $10 million to $75 million. Our Middle Market investment strategy involves investments in companies that are generally larger in size than our LMM companies, with annual revenues typically between $150 million and $1.5 billion, and our Middle Market investments generally range in size from $3 million to $25 million.
Current wording
Our principal investment objective is to maximize our portfolio’s total return by generating current income from our debt investments and current income and capital appreciation from our equity and equity-related investments, including warrants, convertible securities and other rights to acquire equity securities in a portfolio company. We seek to achieve our investment objective through our LMM and Private Loan (as defined below) investment strategies. Our LMM investment strategy involves investments in companies that generally have annual revenues between $10 million and $150 million and our LMM portfolio investments generally range in size from $5 million to $100 million. Our private loan (“Private Loan”) investment strategy involves investments in companies that are generally consistent with the size of the companies in our LMM and Middle Market investment strategies, and our Private Loan investments generally range in size from $10 million to $100 million. Our Middle Market investment strategy involves investments in companies that are generally larger in size than our LMM companies, with annual revenues typically between $150 million and $1.5 billion, and our Middle Market investments generally range in size from $3 million to $25 million.
Previous wording
Private Loan investments primarily consist of debt securities that have primarily been originated directly by us or, to a lesser extent, through our strategic relationships with other investment funds on a collaborative basis through investments that are often referred to in the debt markets as “club deals” because of the small lender group size. Our Private Loan investments are typically made to support a company owned by or in the process of being acquired by a private equity sponsor. Private Loan investments are typically similar in size, structure, terms and conditions to investments we hold in our LMM portfolio and Middle Market portfolio. Our Private Loan portfolio debt investments are generally secured by a first priority lien on the assets of the portfolio company and typically have a term of between three and seven years from the original investment date. We may also co-invest with the private equity sponsors in the equity securities of our Private Loan portfolio companies.
Current wording
Private Loan investments primarily consist of debt securities that have primarily been originated directly by us or, to a lesser extent, through our strategic relationships with other investment funds on a collaborative basis through investments that are often referred to in the debt markets as “club deals” because of the small lender group size. Our Private Loan investments are typically made to a company owned by or in the process of being acquired by a private equity sponsor. Private Loan investments are typically similar in size, structure, terms and conditions to investments we hold in our LMM portfolio and Middle Market portfolio. Our Private Loan portfolio debt investments are generally secured by a first priority lien on the assets of the portfolio company and typically have a term of between three and seven years from the original investment date. We may also co-invest with the private equity sponsors in the equity securities of our Private Loan portfolio companies.
Previous wording
Our Middle Market portfolio investments primarily consist of direct investments in or secondary purchases of debt securities in privately held companies based in the United States that are generally larger in size than the companies included in our LMM portfolio and that were issued through a syndicated process. Our Middle Market portfolio debt investments are generally secured by a first priority lien on the assets of the portfolio company and typically have an expected duration of between three and seven years from the original investment date. Over the last few years, Main Street has been de-emphasizing this strategy and expects to continue to do so in the future.
Current wording
Our Middle Market portfolio investments primarily consist of direct investments in or secondary purchases of debt securities in privately held companies based in the United States that are generally larger in size than the companies included in our LMM portfolio and that were issued through a syndicated process. Our Middle Market portfolio debt investments are generally secured by a first priority lien on the assets of the portfolio company and typically have an expected duration of between three and seven years from the original investment date. Over the last few years, we have been de-emphasizing this strategy and expect to continue to do so in the future.
Previous wording
Because we are internally managed, we do not pay any external investment advisory fees, but instead directly incur the operating costs associated with employing investment and portfolio management professionals. We believe that our internally managed structure provides us with a better alignment of interests between our management team and our employees and our shareholders and a beneficial operating expense structure when compared to other publicly traded and privately held investment firms which are externally managed, and our internally managed structure allows us the opportunity to leverage our non-interest operating expenses as we grow our Investment Portfolio and our External Investment Manager’s asset management business (as defined below). The ratio of our total operating expenses, excluding interest expense, as a percentage of our quarterly average total assets was 1.3% and 1.4% for the trailing twelve months ended March 31, 2024 and 2023, respectively, and 1.3% for the year ended December 31, 2023. The ratio of our total operating expenses, including interest expense, as a percentage of our quarterly average total assets was 3.7% and 3.5% for the trailing twelve months ended March 31, 2024 and 2023, respectively, and 3.7% for the year ended December 31, 2023. Our ratio of expenses as a percentage of our average net asset value is described in greater detail in Note F – Financial Highlights to the consolidated financial statements included in Item 1. Consolidated Financial Statements of this Quarterly Report on Form 10-Q.
Current wording
Because we are internally managed, we do not pay any external investment advisory fees, but instead directly incur the operating costs associated with employing investment and portfolio management professionals. We believe that our internally managed structure provides us with a better alignment of interests between our management team and our employees and our shareholders and a beneficial operating expense structure when compared to other publicly traded and privately held investment firms which are externally managed, and our internally managed structure allows us the opportunity to leverage our non-interest operating expenses as we grow our Investment Portfolio and our External Investment Manager’s asset management business (as defined below). The ratio of our total operating expenses, excluding interest expense, as a percentage of our quarterly average total assets was 1.3% and 1.4% for the trailing twelve months ended June 30, 2024 and 2023, respectively, and 1.3% for the year ended December 31, 2023. The ratio of our total operating expenses, including interest expense, as a percentage of our quarterly average total assets was 3.6% and 3.7% for the trailing twelve months ended June 30, 2024 and 2023, respectively, and 3.7% for the year ended December 31, 2023. Our ratio of expenses as a percentage of our average net asset value is described in greater detail in Note F – Financial Highlights to the consolidated financial statements included in Item 1. Consolidated Financial Statements of this Quarterly Report on Form 10-Q.
Previous wording
The External Investment Manager earns management fees based on the assets of the funds and accounts under management and may earn incentive fees, or a carried interest, based on the performance of the funds and accounts managed. For the three months ended March 31, 2024 and 2023, the External Investment Manager earned $5.7 million and $5.5 million in base management fees, respectively, $3.9 million and $3.3 million in incentive fees, respectively, and $0.2 million of administrative service fee income for each of the three months ended March 31, 2024 and 2023.
Current wording
The External Investment Manager earns management fees based on the assets of the funds and accounts under management and may earn incentive fees, or a carried interest, based on the performance of the funds and accounts managed. For the three months ended June 30, 2024 and 2023, the External Investment Manager earned $5.9 million and $5.5 million in base management fees, respectively, $4.1 million and $3.7 million in incentive fees, respectively, and $0.2 million of administrative service fee income for each of the three months ended June 30, 2024 and 2023. For the six months ended June 30, 2024 and 2023, the External Investment Manager earned $11.6 million and $11.0 million in base management fees, respectively, $8.0 million and $7.0 million in incentive fees, respectively, and $0.3 million of administrative service fee income for each of the six months ended June 30, 2024 and 2023.
Previous wording
We have entered into an agreement with the External Investment Manager to share employees in connection with its asset management business generally, and specifically for its relationship with MSC Income and its other clients. Through this agreement, we share employees with the External Investment Manager, including their related infrastructure, business relationships, management expertise and capital raising capabilities, and we allocate the related expenses to the External Investment Manager pursuant to the sharing agreement. Our total expenses for the three months ended March 31, 2024 and 2023 are net of expenses allocated to the External Investment Manager of $5.6 million and $5.0 million, respectively.
Current wording
We have entered into an agreement with the External Investment Manager to share employees in connection with its asset management business generally, and specifically for its relationship with MSC Income and its other clients. Through this agreement, we share employees with the External Investment Manager, including their related infrastructure, business relationships, management expertise and capital raising capabilities, and we allocate the related expenses to the External Investment Manager pursuant to the sharing agreement. Our total expenses for the three months ended June 30, 2024 and 2023 are net of expenses allocated to the External Investment Manager of $5.9 million and $5.7 million, respectively. Our total expenses for the six months ended June 30, 2024 and 2023 are net of expenses allocated to the External Investment Manager of $11.4 million and $10.7 million, respectively.
Previous wording
The total contribution of the External Investment Manager to our net investment income consists of the combination of the expenses allocated to the External Investment Manager and the dividend income earned from the External Investment Manager For the three months ended March 31, 2024 and 2023, dividends paid to us by the External Investment Manager were $3.0 million and $3.1 million, respectively. For the three months ended March 31, 2024 and 2023, the total contribution of the External Investment Manager to our net investment income was $8.6 million and $8.1 million, respectively.
Current wording
The total contribution of the External Investment Manager to our net investment income consists of the combination of the expenses allocated to the External Investment Manager and the dividend income earned from the External Investment Manager. For the three months ended June 30, 2024 and 2023, dividends accrued by us from the External Investment Manager were $3.3 million and $2.9 million, respectively. For the three months ended June 30, 2024 and 2023, the total contribution of the External Investment Manager to our net investment income was $9.2 million and $8.5 million, respectively. For the six months ended June 30, 2024 and 2023, dividends accrued by us from the External Investment Manager were $6.3 million and $5.9 million, respectively. For the six months ended June 30, 2024 and 2023, the total contribution of the External Investment Manager to our net investment income was $17.8 million and $16.6 million, respectively.
Previous wording
The following tables provide a summary of our investments in the LMM, Private Loan and Middle Market portfolios as of March 31, 2024 and December 31, 2023 (this information excludes Other Portfolio investments, short-term portfolio investments and the External Investment Manager which are discussed further below).
Current wording
The following tables provide a summary of our investments in the LMM, Private Loan and Middle Market portfolios as of June 30, 2024 and December 31, 2023 (this information excludes Other Portfolio investments and the External Investment Manager which are discussed further below).
Previous wording
(a)At December 31, 2023, we had equity ownership in all of our LMM portfolio companies, and the average fully diluted equity ownership in those portfolio companies was 40%.
Current wording
(a)At June 30, 2024, we had equity ownership in all of our LMM portfolio companies, and the average fully diluted equity ownership in those portfolio companies was 39%.
Previous wording
(b)The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost as of March 31, 2024, including amortization of deferred debt origination fees and accretion of original issue discount but excluding fees payable upon repayment of the debt instruments and any debt investments on non-accrual status. The weighted-average annual effective yield on our debt portfolio as of March 31, 2024 including debt investments on non-accrual status was 12.7% for our LMM portfolio, 12.4% for our Private Loan portfolio and 11.4% for our Middle Market portfolio. The weighted-average annual effective yield is not reflective of what an investor in shares of our common stock will realize on its investment because it does not reflect changes in the market value of our stock, our utilization of debt capital in our capital structure, our expenses or any sales load paid by an investor.
Current wording
(b)The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost as of June 30, 2024, including amortization of deferred debt origination fees and accretion of original issue discount but excluding fees payable upon repayment of the debt instruments and any debt investments on non-accrual status. The weighted-average annual effective yield on our debt portfolio as of June 30, 2024 including debt investments on non-accrual status was 12.5% for our LMM portfolio, 12.4% for our Private Loan portfolio and 11.0% for our Middle Market portfolio. The weighted-average annual effective yield is not reflective of what an investor in shares of our common stock will realize on its investment because it does not reflect changes in the market value of our stock, our utilization of debt capital in our capital structure, our expenses or any sales load paid by an investor.
Previous wording
(c)The average EBITDA is calculated using a simple average for the LMM portfolio and a weighted-average for the Private Loan and Middle Market portfolios. These calculations exclude certain portfolio companies, including four LMM portfolio companies, two Private Loan portfolio companies and one Middle Market portfolio company, as EBITDA is not a meaningful valuation metric for our investments in these portfolio companies, and those portfolio companies whose primary purpose is to own real estate.
Current wording
(c)The average EBITDA is calculated using a simple average for the LMM portfolio and a weighted-average for the Private Loan and Middle Market portfolios. These calculations exclude certain portfolio companies, including four LMM portfolio companies, four Private Loan portfolio companies and three Middle Market portfolio companies, as EBITDA is not a meaningful valuation metric for our investments in these portfolio companies, and those portfolio companies whose primary purpose is to own real estate.
Previous wording
For the three months ended March 31, 2024 and 2023, we achieved an annualized total return on investments of 16.7% and 13.4%, respectively. For the year ended December 31, 2023, we achieved a total return on investments of 16.3%. Total return on investments is calculated using the interest, dividend and fee income, as well as the realized and unrealized change in fair value of the Investment Portfolio for the specified period. Our total return on investments is not reflective of what an investor in shares of our common stock will realize on its investment because it does not reflect changes in the market value of our stock, our utilization of debt capital in our capital structure, our expenses or any sales load paid by an investor.
Current wording
For the three months ended June 30, 2024 and 2023, we achieved an annualized total return on investments of 15.7% and 16.7%, respectively. For the six months ended June 30, 2024 and 2023, we achieved an annualized total return on investments of 16.2% and 15.1%, respectively. For the year ended December 31, 2023, we achieved a total return on investments of 16.3%. Total return on investments is calculated using the interest, dividend and fee income, as well as the realized and unrealized change in fair value of the Investment Portfolio for the specified period. Our total return on investments is not reflective of what an investor in shares of our common stock will realize on its investment because it does not reflect changes in the market value of our stock, our utilization of debt capital in our capital structure, our expenses or any sales load paid by an investor.
Previous wording
As of March 31, 2024, we had Other Portfolio investments in 14 entities, collectively totaling $139.8 million in fair value and $141.2 million in cost basis and which comprised 3.1% and 3.6% of our Investment Portfolio at fair value and cost, respectively. As of December 31, 2023, we had Other Portfolio investments in 15 entities, collectively totaling $142.0 million in fair value and $149.1 million in cost basis and which comprised 3.3% and 4.0% of our Investment Portfolio at fair value and cost, respectively.
Current wording
As of June 30, 2024, we had Other Portfolio investments in 14 entities, collectively totaling $179.5 million in fair value and $175.0 million in cost basis and which comprised 3.8% and 4.3% of our Investment Portfolio at fair value and cost, respectively. As of December 31, 2023, we had Other Portfolio investments in 15 entities, collectively totaling $142.0 million in fair value and $149.1 million in cost basis and which comprised 3.3% and 4.0% of our Investment Portfolio at fair value and cost, respectively.
Previous wording
As previously discussed, the External Investment Manager is a wholly-owned subsidiary that is treated as a portfolio investment. As of March 31, 2024, this investment had a fair value of $185.3 million and a cost basis of $29.5 million, which comprised 4.1% and 0.7% of our Investment Portfolio at fair value and cost, respectively. As of December 31, 2023, this investment had a fair value of $174.1 million and a cost basis of $29.5 million, which comprised 4.1% and 0.8% of our Investment Portfolio at fair value and cost, respectively.
Current wording
As previously discussed, the External Investment Manager is a wholly-owned subsidiary that is treated as a portfolio investment. As of June 30, 2024, this investment had a fair value of $186.6 million and a cost basis of $29.5 million, which comprised 3.9% and 0.7% of our Investment Portfolio at fair value and cost, respectively. As of December 31, 2023, this investment had a fair value of $174.1 million and a cost basis of $29.5 million, which comprised 4.1% and 0.8% of our Investment Portfolio at fair value and cost, respectively.
Previous wording
We hold certain debt and preferred equity instruments in our Investment Portfolio that contain PIK interest and cumulative dividend provisions. The PIK interest, computed at the contractual rate specified in each debt agreement, is periodically added to the principal balance of the debt and is recorded as interest income. Thus, the actual collection of this interest may be deferred until the time of debt principal repayment. Cumulative dividends are recorded as dividend income, and any dividends in arrears are added to the balance of the preferred equity investment. The actual collection of these dividends in arrears may be deferred until such time as the preferred equity is redeemed or sold. To maintain RIC tax treatment (as discussed in Note B.10. — Summary of Significant Accounting Policies — Income Taxes included in Item 1. Consolidated Financial Statements of this Quarterly Report on Form 10-Q), these non-cash sources of income may need to be paid out to stockholders in the form of distributions, even though we may not have collected the PIK interest and cumulative dividends in cash. We stop accruing PIK interest and cumulative dividends and write off any accrued and uncollected interest and dividends in arrears when we determine that such PIK interest and dividends in arrears are no longer collectible. For the three months ended March 31, 2024 and 2023, 3.2% and 2.4%, respectively, of our total investment income was attributable to PIK interest income not paid currently in cash. For each of the three months ended March 31, 2024 and 2023, 0.3% of our total investment income was attributable to cumulative dividend income not paid currently in cash.
Current wording
We hold certain debt and preferred equity instruments in our Investment Portfolio that contain PIK interest and cumulative dividend provisions. The PIK interest, computed at the contractual rate specified in each debt agreement, is periodically added to the principal balance of the debt and is recorded as interest income. Thus, the actual collection of this interest may be deferred until the time of debt principal repayment. Cumulative dividends are recorded as dividend income, and any dividends in arrears are added to the balance of the preferred equity investment. The actual collection of these dividends in arrears may be deferred until such time as the preferred equity is redeemed or sold. To maintain RIC tax treatment (as discussed in Note B.10. — Summary of Significant Accounting Policies — Income Taxes included in Item 1. Consolidated Financial Statements of this Quarterly Report on Form 10-Q), these non-cash sources of income may need to be paid out to stockholders in the form of distributions, even though we may not have collected the PIK interest and cumulative dividends in cash. We stop accruing PIK interest and cumulative dividends and write off any accrued and uncollected interest and dividends in arrears when we determine that such PIK interest and dividends in arrears are no longer collectible. For the three months ended June 30, 2024 and 2023, 3.7% and 1.8%, respectively, of our total investment income was attributable to PIK interest income not paid currently in cash. For the three months ended June 30, 2024 and 2023, 0.5% and 0.2%, respectively, of our total investment income was attributable to cumulative dividend income not paid currently in cash. For the six months ended June 30, 2024 and 2023, 3.5% and 2.1%, respectively, of our total investment income was attributable to PIK interest income not paid currently in cash. For the six months ended June 30, 2024 and 2023, 0.4% and 0.3% of our total investment income was attributable to cumulative dividend income not paid currently in cash.
Previous wording
The following tables summarize the composition of our total combined LMM, Private Loan and Middle Market portfolio investments at cost and fair value by type of investment as a percentage of the total combined LMM, Private Loan and Middle Market portfolio investments as of March 31, 2024 and December 31, 2023 (this information excludes Other Portfolio investments, short-term portfolio investments and the External Investment Manager).
Current wording
The following tables summarize the composition of our total combined LMM, Private Loan and Middle Market portfolio investments at cost and fair value by type of investment as a percentage of the total combined LMM, Private Loan and Middle Market portfolio investments as of June 30, 2024 and December 31, 2023 (this information excludes Other Portfolio investments and the External Investment Manager).
Previous wording
As of March 31, 2024, investments on non-accrual status comprised 0.5% of our total Investment Portfolio at fair value and 2.0% at cost. As of December 31, 2023, investments on non-accrual status comprised 0.6% of our total Investment Portfolio at fair value and 2.3% at cost.
Current wording
As of June 30, 2024, investments on non-accrual status comprised 1.2% of our total Investment Portfolio at fair value and 3.6% at cost. As of December 31, 2023, investments on non-accrual status comprised 0.6% of our total Investment Portfolio at fair value and 2.3% at cost.
Previous wording
The operating results of our portfolio companies are impacted by changes in the broader fundamentals of the United States economy. In periods during which the United States economy contracts, it is likely that the financial results of small to mid-sized companies, like those in which we invest, could experience deterioration or limited growth from current levels, which could ultimately lead to difficulty in meeting their debt service requirements, to an increase in defaults on our debt investments or in realized losses on our investments and to difficulty in maintaining historical dividend payment rates and unrealized appreciation on our equity investments. Consequently, we can provide no
Current wording
The operating results of our portfolio companies are impacted by changes in the broader fundamentals of the United States economy. In periods during which the United States economy contracts, it is likely that the financial results of small to mid-sized companies, like those in which we invest, could experience deterioration or limited growth from current levels, which could ultimately lead to difficulty in meeting their debt service requirements, to an increase in defaults on our debt investments or in realized losses on our investments and to difficulty in maintaining historical dividend payment rates and unrealized appreciation on our equity investments. Consequently, we can provide no assurance that the performance of certain portfolio companies will not be negatively impacted by future economic cycles or other conditions, which could also have a negative impact on our future results.
Previous wording
(a)The increase in interest income was primarily due to an increase in interest rates on floating rate Investment Portfolio debt investments primarily resulting from increases in benchmark index rates and from higher average levels of income producing Investment Portfolio debt investments.
Current wording
(a)The increase in interest income was primarily due to (i) higher average levels of income producing Investment Portfolio debt investments and (ii) an increase in interest rates on floating rate Investment Portfolio debt investments primarily resulting from increases in benchmark index rates, partially offset by an increase in non-accrual investments.
Previous wording
(b)The decrease in dividend income from Investment Portfolio equity investments was primarily a result of a decrease of $1.8 million in dividend income from certain of our LMM portfolio companies, partially offset by an increase in dividend income from the Other Portfolio companies. The decrease includes a $5.3 million decrease in dividend income considered less consistent or non-recurring.
Current wording
(b)The increase in dividend income from Investment Portfolio equity investments was primarily a result of (i) an increase of $1.0 million in dividend income from certain of our LMM portfolio companies and (ii) an increase of $0.5 million in dividend income from the External Investment Manager, partially offset by a decrease of $0.5 million in dividend income from certain of our Private Loan portfolio companies. The increase includes a $1.6 million decrease in dividend income considered less consistent or non-recurring.
Previous wording
(d)The increase in total investment income includes a net reduction of $1.8 million in certain income considered less consistent or non-recurring, as described above.
Current wording
(d)The increase in total investment income includes a net reduction of $1.6 million in certain income considered less consistent or non-recurring, as described above.
Previous wording
(a)The increase in cash compensation expense was primarily related to increased incentive compensation accruals and increased headcount to support our growing Investment Portfolio and asset management activities.
Current wording
(a)The decrease in cash compensation expense was primarily related to decreased incentive compensation accruals, partially offset by (i) increased headcount to support our growing Investment Portfolio and asset management activities and (ii) increased base compensation rates.
Previous wording
(b)The increase in interest expense was primarily related to (i) an increased weighted average interest rate on our debt obligations resulting from the issuance of the $350.0 million in aggregate principal amount of 6.95% unsecured notes due March 1, 2029 (the “March 2029 Notes”) in January 2024 and an increased average interest rate on our floating rate multi-year revolving credit facility (the “Corporate Facility”) and special purpose vehicle revolving credit facility (the “SPV Facility” and, together with the Corporate Facility, the “Credit Facilities”) due to increases in benchmark index rates and (ii) increased average outstanding borrowings.
Current wording
(c)The increase in interest expense was primarily related to (i) an increased weighted average interest rate on our debt obligations resulting from the issuance of the March 2029 Notes and the June 2027 Notes, combined with the repayment of the May 2024 Notes (each as defined in the Liquidity and Capital Resources section below) and (ii) an increased average interest rate on our floating rate multi-year revolving credit facility (the “Corporate Facility”) and special purpose vehicle revolving credit facility (the “SPV Facility” and, together with the Corporate Facility, the “Credit Facilities”) due to increases in benchmark index rates.
Previous wording
Net investment income for the three months ended March 31, 2024 increased 11% to $89.8 million, or $1.05 per share, compared to net investment income of $81.0 million, or $1.02 per share, in the corresponding period of 2023. The increase in net investment income was principally attributable to the increase in total investment income, partially offset by higher operating expenses, both as discussed above. The increase in net investment income per share also reflects the impact of the increase in weighted average shares outstanding for the three months ended March 31, 2024, primarily due to shares issued since the beginning of the prior year through our (i) at-the-market program (“ATM Program”), (ii) dividend reinvestment plan and (iii) equity incentive plans. The increase in net investment income on a per share basis is after a $0.03 per share decrease in investment income considered less consistent or non-recurring in nature.
Current wording
Net investment income for the three months ended June 30, 2024 increased 2% to $87.3 million, or $1.01 per share, compared to net investment income of $85.7 million, or $1.06 per share, in the corresponding period of 2023. The increase in net investment income was principally attributable to the increase in total investment income, partially offset by higher operating expenses, both as discussed above. The decrease in net investment income per share also reflects the impact of the increase in weighted average shares outstanding for the three months ended June 30, 2024, primarily due to shares issued since the beginning of the prior year through our (i) at-the-market program (“ATM Program”), (ii) dividend reinvestment plan and (iii) equity incentive plans. The decrease in net investment income on a per share basis includes a $0.02 per share decrease in investment income considered less consistent or non-recurring in nature.
Previous wording
Distributable net investment income for the three months ended March 31, 2024 increased 10% to $94.4 million, or $1.11 per share, compared with $85.4 million, or $1.07 per share, in the corresponding period of 2023. The increase in distributable net investment income was primarily due to the increased level of total investment income, partially offset by higher operating expenses, excluding the impact of share-based compensation expense and deferred compensation expense, both as discussed above. The increase in distributable net investment income per share reflects the impact of the increase in weighted average shares outstanding for the three months ended March 31, 2024 as discussed above. The increase in distributable net investment income on a per share basis is after a $0.03 per share decrease in investment income considered less consistent or non-recurring in nature.
Current wording
Distributable net investment income for the three months ended June 30, 2024 increased 2% to $92.3 million, or $1.07 per share, compared with $90.3 million, or $1.12 per share, in the corresponding period of 2023. The increase in distributable net investment income was primarily due to the increased level of total investment income, partially offset by higher operating expenses, excluding the impact of share-based compensation expense and deferred compensation expense, both as discussed above. The decrease in distributable net investment income per share reflects the impact of the increase in weighted average shares outstanding for the three months ended June 30, 2024, as discussed above. The decrease in distributable net investment income on a per share basis includes a $0.02 per share decrease in investment income considered less consistent or non-recurring in nature.
Previous wording
The following table provides a summary of the primary components of the total net realized loss on investments of $12.4 million for the three months ended March 31, 2024.
Current wording
The following table provides a summary of the primary components of the total net realized gain on investments of $3.4 million for the three months ended June 30, 2024.
Previous wording
(a)Other activity includes realized gains and losses from transactions involving 11 portfolio companies which are not considered to be significant individually or in the aggregate.
Current wording
(a)Other activity includes realized gains and losses from transactions involving 16 portfolio companies which are not considered to be significant individually or in the aggregate.
Previous wording
The following table provides a summary of the total net unrealized appreciation of $40.6 million for the three months ended March 31, 2024.
Current wording
The following table provides a summary of the total net unrealized appreciation of $23.0 million for the three months ended June 30, 2024.
Previous wording
(c)Includes (i) $11.2 million of unrealized appreciation related to the External Investment Manager and (ii) $0.5 million of net unrealized appreciation related to the assets of the deferred compensation plan, partially offset by $1.1 million of net unrealized depreciation related to the Other Portfolio.
Current wording
(b)Includes (i) $6.1 million of net unrealized appreciation related to the Other Portfolio, (ii) $1.3 million of unrealized appreciation related to the External Investment Manager and (iii) $0.1 million of net unrealized appreciation related to the assets of the deferred compensation plan.
Previous wording
The income tax provision for the three months ended March 31, 2024 of $10.9 million principally consisted of (i) a deferred tax provision of $8.8 million, which is primarily the result of the net activity relating to our portfolio investments held in our Taxable Subsidiaries, including changes in loss carryforwards, changes in net unrealized appreciation/depreciation and other temporary book-tax differences and (ii) a current tax provision of $2.1 million, related to a $1.2 million provision for current U.S. federal and state income taxes and a $0.9 million provision for excise tax on our estimated undistributed taxable income.
Current wording
The income tax provision for the three months ended June 30, 2024 of $11.1 million principally consisted of (i) a deferred tax provision of $9.5 million, which is primarily the result of the net activity relating to our portfolio investments held in our Taxable Subsidiaries, including changes in loss carryforwards, changes in net unrealized appreciation/depreciation and other temporary book-tax differences and (ii) a current tax provision of $1.6 million, related to a $1.3 million provision for current U.S. federal and state income taxes and a $0.3 million provision for excise tax on our estimated undistributed taxable income.
Previous wording
The net increase in net assets resulting from operations for the three months ended March 31, 2024 was $107.1 million, or $1.26 per share, compared with $79.6 million, or $1.00 per share, during the three months ended March 31, 2023. The tables above provide a summary of the reasons for the change in net increase in net assets resulting from operations for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023.
Current wording
The net increase in net assets resulting from operations for the three months ended June 30, 2024 was $102.7 million, or $1.19 per share, compared with $106.5 million, or $1.32 per share, during the three months ended June 30, 2023. The tables above provide a summary of the reasons for the change in net increase in net assets resulting from operations for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023.
Previous wording
Total expenses for the three months ended March 31, 2024 were $41.8 million, a 6% increase from the $39.3 million in the corresponding period of 2023. The following table provides a summary of the changes in the comparable period activity.
Current wording
Total investment income for the six months ended June 30, 2024 was $263.8 million, a 6% increase from the $247.8 million of total investment income for the corresponding period of 2023. The following table provides a summary of the changes in the comparable period activity.
Previous wording
(c)The increase in fee income was primarily related to (i) a $3.7 million increase in fees received from the refinancing and prepayment of debt investments and (ii) a $1.8 million increase related to higher investment activities. The increase includes a $3.8 million increase in fee income considered less consistent or non-recurring.
Current wording
(b)The increase in fee income was primarily related to (i) a $3.7 million increase from refinancing and prepayment of debt investments and (ii) a $2.9 million increase in fees related to increased investment activity.
Previous wording
(a)Includes unrealized appreciation on 30 LMM portfolio investments and unrealized depreciation on 18 LMM portfolio investments.
Current wording
(a)Includes unrealized appreciation on 35 LMM portfolio investments and unrealized depreciation on 30 LMM portfolio investments.
Previous wording
For the three months ended March 31, 2024, we realized a net increase in cash and cash equivalents of $54.9 million, which is the net result of $118.1 million of cash used in our operating activities and $173.0 million of cash provided by our financing activities.
Current wording
For the six months ended June 30, 2024, we realized a net decrease in cash and cash equivalents of $29.6 million, which is the net result of $304.6 million of cash used in our operating activities and $274.9 million of cash provided by our financing activities.
Previous wording
The $118.1 million of cash used in our operating activities resulted primarily from cash uses totaling $372.6 million for the funding of new and follow-on portfolio investments, partially offset by (i) cash proceeds totaling $175.0 million from the sales and repayments of debt investments and sales of and return on capital from equity investments and (ii) cash flows that we generated from the operating profits earned totaling $86.0 million, which is our distributable net investment income, excluding the non-cash effects of the accretion of unearned income, payment-in-kind interest income, cumulative dividends and the amortization expense for deferred financing costs.
Current wording
The $304.6 million of cash used in our operating activities resulted primarily from (i) cash uses totaling $915.2 million for the funding of new and follow-on portfolio investments and (ii) $29.9 million in cash payments related to other assets and liabilities, partially offset by (i) cash proceeds totaling $472.3 million from the sales and repayments of debt investments and sales of and return on capital from equity investments and (ii) cash flows that we generated from the operating profits earned totaling $168.2 million, which is our distributable net investment income, excluding the non-cash effects of the accretion of unearned income, payment-in-kind interest income, cumulative dividends and the amortization expense for deferred financing costs.
Previous wording
The $173.0 million of cash provided by our financing activities principally consisted of (i) $350.0 million in cash proceeds from the issuance of the March 2029 Notes and (ii) $5.7 million in net cash proceeds from equity offerings from our ATM Program, partially offset by (i) $78.2 million in dividends paid to our stockholders, (ii) $63.8 million in repayments of SBIC debentures, (iii) $37.0 million in net repayments on our Credit Facilities and (iv) $3.7 million in debt issuance costs.
Current wording
The $274.9 million of cash provided by our financing activities principally consisted of (i) $350.0 million in cash proceeds from the issuance of the March 2029 Notes, (ii) $300.0 million in cash proceeds from the issuance of the June 2027 Notes, (iii) $265.0 million in net borrowings from our Credit Facilities and (iv) $47.9 million in net cash proceeds from equity offerings from our ATM Program, partially offset by (i) $450.0 million on the repayment of the May 2024 Notes, (ii) $157.2 million in dividends paid to our stockholders, (iii) $63.8 million in repayments of SBIC debentures, (iv) $9.6 million in debt issuance costs and (v) $7.4 million in purchases of vested stock for employee payroll tax withholdings.
Previous wording
As of March 31, 2024, we had $115.0 million in cash and cash equivalents and $1,102.0 million of unused capacity under the Credit Facilities which we maintain to support our investment and operating activities. As of March 31, 2024, our NAV totaled $2,516.0 million, or $29.54 per share.
Current wording
As of June 30, 2024, we had $30.5 million in cash and cash equivalents and $915.0 million of unused capacity under the Credit Facilities which we maintain to support our investment and operating activities. As of June 30, 2024, our NAV totaled $4,957.3 million, or $29.80 per share.
Previous wording
As of March 31, 2024, we had $313.0 million outstanding and $682.0 million of undrawn commitments under the Corporate Facility, and $10.0 million outstanding and $420.0 million of undrawn commitments under our SPV Facility, both of which we estimated approximated fair value. Availability under our Credit Facilities is subject to certain leverage and borrowing base limitations, various covenants, reporting requirements and other customary requirements for similar credit facilities. For further information on our Credit Facilities, including key terms and financial covenants, refer to Note E — Debt included in Item 1. Consolidated Financial Statements of this Quarterly Report on Form 10-Q.
Current wording
As of June 30, 2024, we had $465.0 million outstanding and $645.0 million of undrawn commitments under the Corporate Facility, and $160.0 million outstanding and $270.0 million of undrawn commitments under our SPV Facility, both of which we estimated approximated fair value. Availability under our Credit Facilities is subject to certain leverage and borrowing base limitations, various covenants, reporting requirements and other customary requirements for similar credit facilities. For further information on our Credit Facilities, including key terms and financial covenants, refer to Note E — Debt included in Item 1. Consolidated Financial Statements of this Quarterly Report on Form 10-Q.
Previous wording
In January 2024, we issued the March 2029 Notes. The outstanding aggregate principal amount of the March 2029 Notes was $350.0 million as of March 31, 2024.
Current wording
In January 2024, we issued $350.0 million in aggregate principal amount of 6.95% unsecured notes due March 1, 2029 (the “March 2029 Notes”). The outstanding aggregate principal amount of the March 2029 Notes was $350.0 million as of June 30, 2024.
Showing the first 40 of 48 pairs. Open the source sections for the rest.
Rearranged current paragraphs (11)
Current report — wording carried from elsewhere
(a)Includes unrealized appreciation on 33 LMM portfolio investments and unrealized depreciation on 26 LMM portfolio investments.
Current report — wording carried from elsewhere
Set forth below is a comparison of the results of operations, and a reconciliation of net investment income to distributable net investment income, for the six months ended June 30, 2024 and 2023.
Current report — wording carried from elsewhere
(a)Distributable net investment income is net investment income as determined in accordance with U.S. GAAP, excluding the impacts of share-based compensation expense and deferred compensation expense or benefit. We believe presenting distributable net investment income and the related per share amounts is useful and appropriate supplemental disclosure for analyzing our financial performance since share-based compensation does not require settlement in cash and deferred compensation expense or benefit does not result in a net cash impact to Main Street upon settlement. However, distributable net investment income is a non-U.S. GAAP measure and should not be considered as a replacement for net investment income or other earnings measures presented in accordance with U.S. GAAP and should be reviewed only in connection with such U.S. GAAP measures in analyzing our financial performance. A reconciliation of net investment income in accordance with U.S. GAAP to distributable net investment income is detailed in the table above.
Current report — wording carried from elsewhere
(a)The increase in interest income was primarily due to (i) higher average levels of income producing Investment Portfolio debt investments and (ii) an increase in interest rates on floating rate Investment Portfolio debt investments primarily resulting from increases in benchmark index rates, partially offset by an increase in non-accrual investments.
Current report — wording carried from elsewhere
(c)The increase in interest expense is primarily related to (i) an increased weighted average interest rate on our debt obligations resulting from the issuance of the March 2029 Notes and the June 2027 Notes, combined with the repayment of the May 2024 Notes (each as defined in the Liquidity and Capital Resources section below) and (ii) an increased average interest rate on our Credit Facilities due to increases in benchmark index rates.
Current report — wording carried from elsewhere
Net Realized Gain (Loss) from Investments
Current report — wording carried from elsewhere
The following table provides a summary of the primary components of the total net realized loss on investments of $9.0 million for the six months ended June 30, 2024:
Current report — wording carried from elsewhere
(a)Other activity includes realized gains and losses from transactions involving 24 portfolio companies which are not considered to be significant individually or in the aggregate.
Current report — wording carried from elsewhere
The income tax provision for the six months ended June 30, 2024 of $22.0 million principally consisted of (i) a deferred tax provision of $18.3 million, which is primarily the result of the net activity relating to our portfolio investments held in our Taxable Subsidiaries, including changes in loss carryforwards, changes in net unrealized appreciation/depreciation and other temporary book-tax differences and (ii) a current tax provision of $3.7 million related to a $2.5 million provision for current U.S. federal and state income taxes and a $1.2 million provision for excise tax on our estimated undistributed taxable income.
Current report — wording carried from elsewhere
Net Increase in Net Assets Resulting from Operations
Current report — wording carried from elsewhere
The net increase in net assets resulting from operations for the six months ended June 30, 2024 was $209.8 million, or $2.45 per share, compared with $186.1 million, or $2.32 per share, during the six months ended June 30, 2023. The tables above provide a summary of the reasons for the change in net increase in net assets resulting from operations for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
assurance that the performance of certain portfolio companies will not be negatively impacted by future economic cycles or other conditions, which could also have a negative impact on our future results.