Announces Federal Tax Treatment of 2023
Dividends
Announces Fourth Quarter and Full Year 2023
Earnings Release and Conference Call Schedule
HOUSTON, Jan. 17,
2024 /PRNewswire/ -- Main Street Capital
Corporation (NYSE: MAIN) ("Main Street" or the "Company") is
pleased to announce its preliminary operating results for the
fourth quarter of 2023, the federal tax treatment of its dividends
paid in 2023 and its fourth quarter and full year 2023 earnings
release and conference call schedule.
In commenting on the Company's operating results for the fourth
quarter of 2023, Dwayne L. Hyzak,
Main Street's Chief Executive Officer, stated, "We are extremely
pleased with our performance in the fourth quarter, which closed
another record year for Main Street across several key financial
metrics. Our fourth quarter performance resulted in net investment
income per share and distributable net investment income per share
at levels near or above our quarterly records, a new record for net
asset value per share for the sixth consecutive quarter and an
estimated return on equity of over 22% for the fourth quarter. Our
strong performance in the fourth quarter continued our positive
performance in the first three quarters of 2023 and resulted in new
annual records for net investment income per share and
distributable net investment income per share and a return on
equity of approximately 19% for the year. These results demonstrate
the continued and sustainable strength of our overall platform, the
benefits of our differentiated and diversified investment
strategies, the unique contributions of our asset management
business and the continued underlying strength and quality of our
portfolio companies. We are further pleased to be able to generate
these returns while intentionally maintaining a very conservative
capital structure and liquidity position during 2023."
Mr. Hyzak continued, "The continued positive momentum across our
platform in 2023 has allowed us to deliver significantly increased
value to our shareholders, with a 25% increase in the total
dividends paid to our shareholders in 2023. Despite this
significant increase, our estimated distributable net investment
income exceeded the monthly dividends paid to our shareholders by
over 55% for both the fourth quarter and the year and the total
dividends paid to our shareholders by over 13% for the fourth
quarter and over 17% for the year. Based upon the continued
strength of our performance in the fourth quarter, we expect
another meaningful supplemental dividend to be paid in the first
quarter of 2024. This would represent our tenth consecutive
quarterly supplemental dividend, to go with the seven increases to
our regular monthly dividends in the same time period, allowing us
to deliver significant value to our shareholders, while continuing
to maintain a conservative dividend policy and retain a meaningful
portion of our income for the future benefit of our
stakeholders."
Preliminary Estimates of Fourth Quarter 2023 Results
Main Street's preliminary estimate of fourth quarter 2023 net
investment income ("NII") is $1.06 to
$1.08 per share and distributable net
investment income ("DNII") is $1.11
to $1.13 per share.(1)
Main Street's preliminary estimate of net asset value ("NAV")
per share as of December 31, 2023 is $29.17 to $29.23,
representing an increase of $0.84 to
$0.90 per share, or 3.0% to 3.2%,
from the NAV per share of $28.33 as
of September 30, 2023, with this
increase after the impact of the supplemental dividend paid in
December 2023 of $0.275 per share. The estimated increase in NAV
per share is primarily due to the net fair value increase on the
investment portfolio resulting from the net unrealized appreciation
and the net realized losses on portfolio investments, including an
increase in the fair value of the wholly-owned asset manager, the
accretive impact of equity issuances during the quarter, the
estimated record NII, which exceeded the regular monthly dividends
of $0.705 per share and supplemental
dividend of $0.275 per share paid in
the fourth quarter, and a net tax benefit for the quarter.
As a result of Main Street's preliminary estimates of NII and
net changes in the fair market value of its investment portfolio as
noted above, Main Street estimates that it generated a quarterly
annualized return on equity of 22% to 23% for the fourth quarter of
2023(2) and approximately 19% for the full
year.(2)
Investment Portfolio Activity
The Company's fourth quarter 2023 operating activities include
the following investment activity in the lower middle market
("LMM"), private loan and middle market investment strategies:
- $92.3 million in total LMM
portfolio investments, which after aggregate repayments of debt
principal and return of invested equity capital from a LMM
portfolio investment resulted in a net increase of $65.7 million in the cost basis of the LMM
investment portfolio;
- $160.4 million in total private
loan investments, which after aggregate repayments from several
private loan portfolio investments and a decrease in cost basis due
to the realized loss on a private loan portfolio investment
resulted in a net decrease of $112.5
million in the cost basis of the private loan investment
portfolio; and
- a net decrease of $50.3 million
in the cost basis of the middle market investment portfolio.
Federal Tax Treatment of 2023 Dividends
Main Street has posted information regarding the U.S. federal
income tax characteristics of its dividends paid in 2023 on its
website under "2023 Form 1099 Information"
(https://www.mainstcapital.com/tax-information).(3) Main
Street paid dividends totaling $3.695
per share in 2023, with approximately 8% of such dividends
taxed as qualified dividends and approximately 92% taxed as
ordinary income. Qualified dividends paid to non-corporate
taxpayers (including individuals) qualify for favorable tax
treatment under the Internal Revenue Code ("IRC") and, for 2023,
will generally be subject to a maximum 20% U.S. federal income tax
rate (plus a 3.8% Medicare surtax, if applicable).
Federal Tax Treatment of 2023 Dividends – Non-U.S.
Shareholders
Non-U.S. resident and foreign corporation shareholders
("Non-U.S. Shareholders") in a Regulated Investment Company
("RIC"), such as Main Street, are exempt from U.S. withholding tax
on both "interest-related" dividends and short-term capital gains
in accordance with the IRC Sections 871(k) and 881(e). In addition,
Non-U.S. Shareholders in a RIC are also exempt from U.S.
withholding tax on long-term capital gains. Main Street paid
dividends totaling $3.695 per share
in 2023, with approximately 49% of such dividends relating to
"interest-related" dividends and short-term capital gains. See the
"Tax Treatment of 2023 Dividends for Non-U.S. Shareholders" posted
on Main Street's website for more details
(https://www.mainstcapital.com/tax-information).(3)
To the extent Non-U.S. Shareholder taxes were withheld on
dividends distributed, this information may be considered in
connection with any claims for refund on taxes made with the U.S.
Internal Revenue Service. Non-U.S. Shareholders should contact
their tax advisor with any questions regarding this
information.
Fourth Quarter and Full Year 2023 Earnings Release and
Conference Call Scheduled
Main Street's fourth quarter and full year 2023 results will be
released on Thursday, February 22, 2024, after the financial
markets close. In conjunction with the release, Main Street has
scheduled a conference call, which will be broadcast live via phone
and over the Internet, on Friday, February 23, 2024, at
10:00 a.m. Eastern time. Investors
may participate either by phone or audio webcast.(3)
By Phone:
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Dial 412-902-0030 at
least 10 minutes before the call. A replay will be available
through March 1, 2024 by dialing 201-612-7415 and using the
access code 13743850#.
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By Webcast:
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Connect to the webcast
via the Investor Relations section of Main Street's website at
www.mainstcapital.com. Please log in at least 10 minutes in advance
to register and download any necessary software. A replay of the
conference call will be available on Main Street's website shortly
after the call and will be accessible until the date of Main
Street's earnings release for the next quarter.
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ABOUT MAIN STREET CAPITAL CORPORATION
Main Street (www.mainstcapital.com) is a principal investment
firm that primarily provides long-term debt and equity capital to
lower middle market companies and debt capital to middle market
companies. Main Street's portfolio investments are typically made
to support management buyouts, recapitalizations, growth
financings, refinancings and acquisitions of companies that operate
in diverse industry sectors. Main Street seeks to partner with
entrepreneurs, business owners and management teams and generally
provides "one stop" financing alternatives within its lower middle
market investment strategy. Main Street's lower middle market
companies generally have annual revenues between $10 million and $150
million. Main Street's middle market debt investments are
made in businesses that are generally larger in size than its lower
middle market portfolio companies.
Main Street, through its wholly owned portfolio company MSC
Adviser I, LLC ("MSC Adviser"), also maintains an asset management
business through which it manages investments for external parties.
MSC Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended.
FORWARD-LOOKING STATEMENTS AND OTHER MATTERS
Main Street cautions that statements in this press release which
are forward-looking and provide other than historical information,
including but not limited to the preliminary estimates of fourth
quarter and full year 2023 financial information and results and
the declaration and payment of future dividends, are based on
current conditions and information available to Main Street as of
the date hereof. Although its management believes that the
expectations reflected in those forward-looking statements are
reasonable, Main Street can give no assurance that those
expectations will prove to be correct. Those forward-looking
statements are made based on various underlying assumptions and are
subject to numerous uncertainties and risks, including, without
limitation, such factors described under the captions "Cautionary
Statement Concerning Forward-Looking Statements" and "Risk Factors"
included in Main Street's filings with the Securities and Exchange
Commission (the "SEC") (www.sec.gov). Main Street undertakes no
obligation to update the information contained herein to reflect
subsequently occurring events or circumstances, except as required
by applicable securities laws and regulations.
The preliminary estimates of fourth quarter and full year 2023
financial information and results furnished above are based on Main
Street management's preliminary determinations and current
expectations, and such information is inherently uncertain. The
preliminary estimates are subject to completion of Main Street's
customary year-end closing and review procedures and third-party
audit, including the determination of the fair value of Main
Street's portfolio investments. As a result, actual results could
differ materially from the current preliminary estimates based on
adjustments made during Main Street's year-end closing and review
procedures and third-party audit, and Main Street's reported
information in its Annual Report on Form 10-K for the year ended
December 31, 2023 may differ from this information, and any
such differences may be material. In addition, the information
furnished above does not include all of the information regarding
Main Street's financial condition and results of operations for the
quarter and full year periods ended December 31, 2023 that may
be important to readers. As a result, readers are cautioned not to
place undue reliance on the information furnished in this press
release and should view this information in the context of Main
Street's full fourth quarter and full year 2023 results when such
results are disclosed by Main Street in its Annual Report on Form
10-K for the year ended December 31, 2023. The information
furnished in this press release is based on current Main Street
management expectations that involve substantial risks and
uncertainties that could cause actual results to differ materially
from the results expressed in, or implied by, such information.
Neither this press release nor the 2023 Form 1099 Information or
the Tax Treatment of 2023 Dividends for Non-U.S. Shareholders
information referenced above is intended to constitute tax, legal,
investment or other professional advice. This is general
information and reference should be made to your 2023 Form 1099-DIV
for tax reporting purposes. Shareholders should receive their 2023
Form 1099-DIVs by mid-February 2024
(generally from their brokers) and should consult a tax advisor for
tax guidance pertinent to their specific facts and circumstances.
If you did not hold Main Street stock for all of calendar year
2023, your 1099-DIV will only reflect the tax characteristics for
the portion of the year you owned Main Street stock.
Main Street has an existing effective shelf registration
statement on Form N-2 on file with the SEC relating to the offer
and sale from time to time of its securities. Investors are advised
to carefully consider the investment objective, risks and charges
and expenses of Main Street before investing in any of Main
Street's securities. The prospectus included in the shelf
registration statement, together with any related prospectus
supplement, contain this and other information about Main Street
and should be read carefully before investing. A copy of the
prospectus and any related prospectus supplement may be obtained by
contacting Main Street.
End Notes
(1)
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Distributable net
investment income is net investment income as determined in
accordance with U.S. Generally Accepted Accounting Principles, or
U.S. GAAP, excluding the impact of non-cash compensation expenses,
which includes both share-based compensation expenses and deferred
compensation expense or benefit. Main Street believes presenting
distributable net investment income per share is useful and
appropriate supplemental disclosure for analyzing its 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 and other earnings measures presented in
accordance with U.S. GAAP. Instead, distributable net investment
income should be reviewed only in connection with such U.S. GAAP
measures in analyzing Main Street's financial performance. In order
to reconcile estimated distributable net investment income per
share to estimated net investment income per share in accordance
with U.S. GAAP for the fourth quarter of 2023, an estimated $0.05
to $0.06 per share of non-cash compensation expenses are added back
to calculate estimated distributable net investment income per
share.
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(2)
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Return on equity equals
the net increase in net assets resulting from operations divided by
the average quarterly total net assets for the three-month and
trailing twelve-month periods ended December 31, 2023.
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(3)
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No information
contained on the Company's website or disclosed on the
February 23, 2024 conference call, including the webcast and
the archived versions, is incorporated by reference in this press
release or any of the Company's filings with the SEC, and you
should not consider that information to be part of this press
release or any other such filing.
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Contacts:
Main Street Capital Corporation
Dwayne L. Hyzak, CEO,
dhyzak@mainstcapital.com
Jesse E. Morris, CFO and COO,
jmorris@mainstcapital.com
713-350-6000
Dennard Lascar Investor
Relations
Ken Dennard /
ken@dennardlascar.com
Zach Vaughan /
zvaughan@dennardlascar.com
713-529-6600
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SOURCE Main Street Capital Corporation