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Main Street Announces 2020 Fourth Quarter And Annual Results

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PR Newswire

HOUSTON, Feb. 25, 2021

HOUSTON, Feb. 25, 2021 /PRNewswire/ -- Main Street Capital Corporation (NYSE: MAIN) ("Main Street") is pleased to announce its financial results for the fourth quarter and full year ended December 31, 2020.

Fourth Quarter 2020 Highlights

Net investment income of $39.6 million (or $0.59 per share)
Distributable net investment income⁽¹⁾ of $42.3 million (or $0.63 per share)
Total investment income of $62.5 million
Industry leading ratio of total non-interest operating expenses as a percentage of quarterly average total assets ("Operating Expenses to Assets Ratio") of 1.5% on an annualized basis
Net increase in net assets resulting from operations of $79.3 million (or $1.19 per share)
Net asset value of $22.35 per share at December 31, 2020, representing an increase of $0.83 per share, or 3.9%, compared to $21.52 per share at September 30, 2020
Declared monthly dividends totaling $0.615 per share for the first quarter of 2021, or $0.205 per share for each of January, February and March 2021, consistent with the monthly dividends paid for the first quarter of 2020 and the fourth quarter of 2020
Completed $97.8 million in total lower middle market ("LMM") portfolio investments, including investments totaling $68.7 million in two new LMM portfolio companies, which after aggregate repayments of debt principal and return of invested equity capital from several LMM portfolio investments resulted in a net increase of $40.3 million in total LMM portfolio investments
Completed $98.5 million in total private loan portfolio investments, which after aggregate repayments of debt principal and exits of equity investments from several private loan portfolio investments resulted in a net decrease of $58.3 million in total private loan portfolio investments
Net decrease of $29.3 million in middle market portfolio investments
The External Investment Manager (as defined below) became the sole investment adviser to MSC Income Fund, LLC ("MSC Income"), formerly known as HMS Income Fund, Inc., a non-listed business development company
The External Investment Manager successfully launched and closed its first private fund, MS Private Loan Fund I, LP

Full Year 2020 Highlights

Net investment income of $137.9 million (or $2.10 per share)
Distributable net investment income⁽¹⁾ of $148.8 million (or $2.26 per share)
Total investment income of $222.6 million
Industry leading Operating Expenses to Assets Ratio of 1.3%
Paid monthly dividends totaling $2.460 per share, representing a 1.9% increase compared to $2.415 for 2019
Completed $294.4 million in total LMM portfolio investments, including investments totaling $199.6 million in six new LMM portfolio companies, which after aggregate repayments of debt principal and return of invested equity capital from several LMM portfolio investments resulted in a net increase of $102.5 million in total LMM portfolio investments
Completed $269.4 million in total private loan portfolio investments, which after aggregate repayments of debt principal and exits of equity investments from several private loan portfolio investments resulted in a net increase of $24.4 million in private loan portfolio investments
Net decrease of $88.7 million in middle market portfolio investments
Amended our revolving credit facility ("Credit Facility") in March and November 2020 to increase the total commitments from $705.0 million to $780.0 million and add two new lender relationships
Further diversified capital structure by issuing an additional $125.0 million of our existing 5.20% investment grade notes due 2024 at a premium resulting in an estimated yield-to-maturity of 4.42%

In commenting on Main Street's results, Dwayne L. Hyzak, Main Street's Chief Executive Officer, stated, "We are pleased with our fourth quarter results, which we believe represented a strong finish to a difficult and unusual year and which continue to illustrate the strength of our portfolio companies and evidence of their ongoing recovery from the impacts of the COVID-19 pandemic. We also continued our investment origination success in both our lower middle market and private loan investment strategies with the two portfolios combining for almost $200 million in investment originations in the fourth quarter and $564 million in investment originations for the full year. Additionally, we are pleased that we generated distributable net investment income per share in excess of our monthly dividends for the fourth quarter, representing significant progress in our efforts to return to consistently generating distributable net investment income in excess of our monthly dividends on a quarterly basis consistent with our long-term historical practice. We believe that our conservative capital structure and significant liquidity position which we further enhanced by our new investment grade notes issuance in January, will allow us to continue to manage the recovery from the pandemic from a position of strength and to successfully execute on our pipeline of attractive lower middle market and private loan investment opportunities."

Fourth Quarter 2020 Operating Results

The following table provides a summary of our operating results for the fourth quarter of 2020:

Three months ended December 31,

ARIVA.DE Börsen-Geflüster

Kurse

Main Street Capital

48,69 $

0,00%

2020

2019

Change ($)

Change (%)

Interest income

$ 45,088

$ 46,649

$ (1,561)

(3%)

Dividend income

12,431

12,031

400

Fee income

4,985

1,969

3,016

153%

Total investment income

$ 62,504

$ 60,649

$ 1,855

Net investment income

$ 39,643

$ 39,247

$ 396

Net investment income per share

$ 0.59

$ 0.62

$ (0.03)

(5%)

Distributable net investment income ⁽¹⁾

$ 42,255

$ 42,050

$ 205

Distributable net investment income per share ⁽¹⁾

$ 0.63

$ 0.66

$ (0.03)

(5%)

Net increase (decrease) in net assets resulting from operations

$ 79,256

$ 16,014

$ 63,242

395%

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

$ 1.19

$ 0.25

$ 0.94

376%

The $1.9 million increase in total investment income in the fourth quarter of 2020 from the comparable period of the prior year was principally attributable to (i) a $3.0 million increase in fee income from origination of new debt investments and fees from exit and other prepayment activities and (ii) a $0.4 million increase in dividend income from investment portfolio equity investments, partially offset by a $1.6 million decrease in interest income, which was primarily due to lower floating interest rates on investment portfolio debt investments, based upon the decline in the London Interbank Offered Rate ("LIBOR"). The $1.9 million increase in total investment income in the fourth quarter of 2020 also includes the impact of a $2.9 million increase related to accelerated prepayment, repricing and other income activity considered less consistent or non-recurring when compared to the same period in 2019.

Cash operating expenses (total operating expenses excluding non-cash, share-based compensation expense) increased to $20.2 million in the fourth quarter of 2020 from $18.6 million for the corresponding period of 2019. This increase in cash operating expenses was principally attributable to (i) a $2.8 million increase in compensation expense, partially offset by (i) a $0.4 million decrease in general and administrative expense, (ii) a $0.4 million decrease in interest expense and (iii) a $0.4 million increase in expenses allocated to the External Investment Manager. The increase in compensation expense is primarily related to a $2.8 million increase in incentive compensation. For the full year, total compensation expense was down $0.8 million and incentive compensation was down $1.8 million compared to prior year. Our Operating Expenses to Assets Ratio for the fourth quarter of 2020 was 1.5%, compared to 1.2% for the fourth quarter of 2019, both on an annualized basis, and 1.3% for the full year compared to 1.4% in 2019.

The $0.4 million increase in net investment income and the $0.2 million increase in distributable net investment income⁽¹⁾, which is net investment income before non-cash, share-based compensation expense, in the fourth quarter of 2020 were both principally attributable to the increase in total investment income, partially offset by higher operating expenses, both as discussed above.

Net investment income and distributable net investment income on a per share basis⁽¹⁾ for the fourth quarter of 2020 both include the impact of a greater number of average shares outstanding compared to the corresponding period in 2019 primarily due to (i) shares issued through our at-the-market, or ATM, program, (ii) shares issued pursuant to our equity incentive plans and (iii) shares issued pursuant to our dividend reinvestment plan. Net investment income and distributable net investment income in the fourth quarter on a per share basis also both include an increase of $0.04 per share due to the increase in investment income from accelerated prepayment, repricing and other income activity considered less consistent or non-recurring when compared to the fourth quarter of 2019.

The $79.3 million net increase in net assets resulting from operations in the fourth quarter of 2020 represents a $63.2 million improvement from the fourth quarter of 2019. This was primarily the result of (i) a $135.5 million improvement in net unrealized appreciation (depreciation) from portfolio investments, including the impact of accounting reversals relating to realized gains/income (losses) and (ii) a $0.4 million increase in net investment income as discussed above, partially offset by (i) a $70.7 million increase in net realized loss from investments and (ii) a $2.0 million increase in income tax provision. The $71.6 million net realized loss from investments for the fourth quarter of 2020 was primarily the result of (i) a $29.1 million realized loss from the full exit of one private loan investment that had been on non-accrual since the first quarter of 2018, (ii) a $25.9 million realized loss from the restructure of three middle market investments, (iii) a $14.9 million realized loss from the restructure of two private loan investments and (iv) a $6.9 million realized loss from the full exit of two LMM investments, partially offset by (i) a $2.6 million realized gain resulting from the partial exit of one LMM investment and (ii) a $1.3 million realized gain resulting from the sale of certain assets at one LMM investment. The total net realized losses in the fourth quarter had little to no net impact on the change in our net asset value during the quarter due to the total net realized loss amount being consistent with the related amount of previously recognized net unrealized depreciation.

The following table provides a summary of the total net unrealized appreciation of $112.0 million for the fourth quarter of 2020:

	Three Months Ended December 31, 2020
	LMM (a)	Middle Market	Private Loan	Other		Total
			(dollars in millions)
Accounting reversals of net unrealized (appreciation) depreciation recognized in prior periods due to net realized (gains / income) losses recognized during the current period	$ 3.2	$ 23.0	$ 45.1	$ -		$ 71.3
Net unrealized appreciation relating to portfolio investments	13.3	8.0	5.1	14.4	(b)	40.8
Total net unrealized appreciation relating to portfolio investments	$ 16.5	$ 31.0	$ 50.2	$ 14.4		$ 112.0



(a)	LMM includes unrealized appreciation on 38 LMM portfolio investments and unrealized depreciation on 19 LMM portfolio investments.
(b)	Other includes (i) $16.2 million of unrealized appreciation relating to the External Investment Manager, as defined below, and (ii) $0.6 million of unrealized appreciation relating to our deferred compensation plan assets, partially offset by $2.4 million of net unrealized depreciation relating to the other portfolio.

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