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TABLE OF CONTENTS
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One) | ||
ý |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
For the quarterly period ended September 30, 2015 |
||
OR |
||
o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
For the transition period from: to |
Commission File Number: 001-33723
Main Street Capital Corporation
(Exact name of registrant as specified in its charter)
Maryland (State or other jurisdiction of incorporation or organization) |
41-2230745 (I.R.S. Employer Identification No.) |
|
1300 Post Oak Boulevard, 8th floor Houston, TX (Address of principal executive offices) |
77056 (Zip Code) |
(713) 350-6000
(Registrant's telephone number including area code)
n/a
(Former name, former address and former fiscal year, if changed since last report)
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 ý No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ý | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý
The number of shares outstanding of the issuer's common stock as of November 6, 2015 was 50,130,534.
MAIN STREET CAPITAL CORPORATION
Consolidated Balance Sheets
(in thousands, except shares and per share amounts)
|
September 30, 2015 |
December 31, 2014 |
|||||
---|---|---|---|---|---|---|---|
|
(Unaudited) |
|
|||||
ASSETS |
|||||||
Portfolio investments at fair value: |
|||||||
Control investments (cost: $402,302 and $342,847 as of September 30, 2015 and December 31, 2014, respectively) |
$ | 568,025 | $ | 469,846 | |||
Affiliate investments (cost: $312,016 and $266,243 as of September 30, 2015 and December 31, 2014, respectively) |
322,497 | 278,675 | |||||
Non-Control/Non-Affiliate investments (cost: $1,008,980 and $832,312 as of September 30, 2015 and December 31, 2014, respectively) |
976,912 | 814,809 | |||||
| | | | | | | |
Total portfolio investments (cost: $1,723,298 and $1,441,402 as of September 30, 2015 and December 31, 2014, respectively) |
1,867,434 | 1,563,330 | |||||
Marketable securities and idle funds investments (cost: $6,641 and $10,604 as of September 30, 2015 and December 31, 2014, respectively) |
4,583 | 9,067 | |||||
| | | | | | | |
Total investments (cost: $1,729,939 and $1,452,006 as of September 30, 2015 and December 31, 2014, respectively) |
1,872,017 | 1,572,397 | |||||
Cash and cash equivalents |
35,295 |
60,432 |
|||||
Interest receivable and other assets |
27,031 | 23,273 | |||||
Receivable for securities sold |
8,245 | 23,133 | |||||
Deferred financing costs (net of accumulated amortization of $8,324 and $6,462 as of September 30, 2015 and December 31, 2014, respectively) |
12,779 | 14,550 | |||||
| | | | | | | |
Total assets |
$ | 1,955,367 | $ | 1,693,785 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
LIABILITIES |
|||||||
Credit facility |
$ |
346,000 |
$ |
218,000 |
|||
SBIC debentures (par: $225,000 as of September 30, 2015 and December 31, 2014, par of $75,200 is recorded at a fair value of $73,804 and $72,981 as of September 30, 2015 and December 31, 2014, respectively) |
223,604 | 222,781 | |||||
4.50% Notes |
175,000 | 175,000 | |||||
6.125% Notes |
90,740 | 90,823 | |||||
Payable for securities purchased |
5,453 | 14,773 | |||||
Deferred tax liability, net |
663 | 9,214 | |||||
Dividend payable |
9,014 | 7,663 | |||||
Accounts payable and other liabilities |
8,917 | 10,701 | |||||
Interest payable |
4,995 | 4,848 | |||||
| | | | | | | |
Total liabilities |
864,386 | 753,803 | |||||
Commitments and contingencies (Note M) |
|||||||
NET ASSETS |
|||||||
Common stock, $0.01 par value per share (150,000,000 shares authorized; 50,079,178 and 45,079,150 shares issued and outstanding as of September 30, 2015 and December 31, 2014, respectively) |
500 |
451 |
|||||
Additional paid-in capital |
998,123 | 853,606 | |||||
Accumulated net investment income, net of cumulative dividends of $382,083 and $293,789 as of September 30, 2015 and December 31, 2014, respectively |
13,927 | 23,665 | |||||
Accumulated net realized gain from investments (accumulated net realized gain from investments of $31,284 before cumulative dividends of $62,945 as of September 30, 2015 and accumulated net realized gain from investments of $40,321 before cumulative dividends of $60,777 as of December 31, 2014) |
(31,661 | ) | (20,456 | ) | |||
Net unrealized appreciation, net of income taxes |
110,092 | 82,716 | |||||
| | | | | | | |
Total net assets |
1,090,981 | 939,982 | |||||
| | | | | | | |
Total liabilities and net assets |
$ | 1,955,367 | $ | 1,693,785 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
NET ASSET VALUE PER SHARE |
$ | 21.79 | $ | 20.85 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
The accompanying notes are an integral part of these financial statements
1
MAIN STREET CAPITAL CORPORATION
Consolidated Statements of Operations
(in thousands, except shares and per share amounts)
(Unaudited)
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2015 | 2014 | 2015 | 2014 | |||||||||
INVESTMENT INCOME: |
|||||||||||||
Interest, fee and dividend income: |
|||||||||||||
Control investments |
$ | 13,437 | $ | 9,705 | $ | 36,264 | $ | 29,547 | |||||
Affiliate investments |
6,852 | 6,687 | 19,862 | 18,412 | |||||||||
Non-Control/Non-Affiliate investments |
22,090 | 19,839 | 64,124 | 53,488 | |||||||||
| | | | | | | | | | | | | |
Interest, fee and dividend income |
42,379 | 36,231 | 120,250 | 101,447 | |||||||||
Interest, fee and dividend income from marketable securities and idle funds investments |
229 | 120 | 846 | 557 | |||||||||
| | | | | | | | | | | | | |
Total investment income |
42,608 | 36,351 | 121,096 | 102,004 | |||||||||
EXPENSES: |
|||||||||||||
Interest |
(8,302 | ) | (5,954 | ) | (23,755 | ) | (16,713 | ) | |||||
Compensation |
(3,727 | ) | (3,047 | ) | (11,055 | ) | (9,115 | ) | |||||
General and administrative |
(2,212 | ) | (1,871 | ) | (6,271 | ) | (5,279 | ) | |||||
Share-based compensation |
(1,651 | ) | (1,208 | ) | (4,592 | ) | (3,034 | ) | |||||
Expenses charged to the External Investment Manager |
1,145 | 616 | 3,133 | 1,343 | |||||||||
| | | | | | | | | | | | | |
Total expenses |
(14,747 | ) | (11,464 | ) | (42,540 | ) | (32,798 | ) | |||||
| | | | | | | | | | | | | |
NET INVESTMENT INCOME |
27,861 | 24,887 | 78,556 | 69,206 | |||||||||
NET REALIZED GAIN (LOSS): |
|||||||||||||
Control investments |
| | 3,324 | | |||||||||
Affiliate investments |
5,964 | 14,737 | 5,827 | 8,159 | |||||||||
Non-Control/Non-Affiliate investments |
(6,195 | ) | 962 | (16,836 | ) | 2,634 | |||||||
Marketable securities and idle funds investments |
(1,112 | ) | 11 | (1,352 | ) | (4 | ) | ||||||
| | | | | | | | | | | | | |
Total net realized gain (loss) |
(1,343 | ) | 15,710 | (9,037 | ) | 10,789 | |||||||
| | | | | | | | | | | | | |
NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION): |
|||||||||||||
Portfolio investments |
(8,389 | ) | (6,891 | ) | 21,716 | 17,018 | |||||||
Marketable securities and idle funds investments |
(648 | ) | (426 | ) | (521 | ) | 920 | ||||||
SBIC debentures |
(50 | ) | (8,749 | ) | (823 | ) | (10,778 | ) | |||||
| | | | | | | | | | | | | |
Total net change in unrealized appreciation (depreciation) |
(9,087 | ) | (16,066 | ) | 20,372 | 7,160 | |||||||
| | | | | | | | | | | | | |
INCOME TAXES: |
|||||||||||||
Federal and state income, excise and other taxes |
495 | (960 | ) | (1,547 | ) | (1,758 | ) | ||||||
Deferred taxes |
2,742 | (2,002 | ) | 8,551 | (6,643 | ) | |||||||
| | | | | | | | | | | | | |
Income tax benefit (provision) |
3,237 | (2,962 | ) | 7,004 | (8,401 | ) | |||||||
| | | | | | | | | | | | | |
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS |
$ | 20,668 | $ | 21,569 | $ | 96,895 | $ | 78,754 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
NET INVESTMENT INCOME PER SHAREBASIC AND DILUTED |
$ | 0.56 | $ | 0.55 | $ | 1.61 | $ | 1.61 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS PER SHAREBASIC AND DILUTED |
$ | 0.41 | $ | 0.48 | $ | 1.99 | $ | 1.83 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
DIVIDENDS PAID PER SHARE: |
|||||||||||||
Regular monthly dividends |
$ | 0.525 | $ | 0.495 | $ | 1.560 | $ | 1.485 | |||||
Supplemental dividends |
| | 0.275 | 0.275 | |||||||||
| | | | | | | | | | | | | |
Total dividends |
$ | 0.525 | $ | 0.495 | $ | 1.835 | $ | 1.760 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
WEIGHTED AVERAGE SHARES OUTSTANDINGBASIC AND DILUTED |
50,036,776 | 44,910,756 | 48,681,260 | 43,027,105 |
The accompanying notes are an integral part of these financial statements
2
MAIN STREET CAPITAL CORPORATION
Consolidated Statements of Changes in Net Assets
(in thousands, except shares)
(Unaudited)
|
Common Stock | |
|
Accumulated Net Realized Gain From Investments, Net of Dividends |
Net Unrealized Appreciation from Investments, Net of Income Taxes |
|
||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
Accumulated Net Investment Income, Net of Dividends |
|
|||||||||||||||||||
|
Number of Shares |
Par Value |
Additional Paid-In Capital |
Total Net Asset Value |
||||||||||||||||||
Balances at December 31, 2013 |
39,852,604 | $ | 398 | $ | 694,981 | $ | 22,778 | $ | (26,334 | ) | $ | 100,710 | $ | 792,533 | ||||||||
Public offering of common stock, net of offering costs |
4,600,000 |
46 |
139,651 |
|
|
|
139,697 |
|||||||||||||||
Share-based compensation |
| | 3,034 | | | | 3,034 | |||||||||||||||
Purchase of vested stock for employee payroll tax withholding |
(46,507 | ) | | (1,481 | ) | | | | (1,481 | ) | ||||||||||||
Dividend reinvestment |
333,657 | 3 | 10,842 | | | | 10,845 | |||||||||||||||
Amortization of directors' deferred compensation |
| | 229 | | | | 229 | |||||||||||||||
Issuance of restricted stock |
241,578 | 2 | (2 | ) | | | | | ||||||||||||||
Tax benefit related to vesting of restricted shares |
| | 542 | | | | 542 | |||||||||||||||
Forfeited shares of terminated employees |
(36,138 | ) | | | | | | | ||||||||||||||
Dividends to stockholders |
| | | (63,098 | ) | (13,549 | ) | | (76,647 | ) | ||||||||||||
Net increase (loss) resulting from operations |
| | | 69,206 | 10,789 | (1,241 | ) | 78,754 | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Balances at September 30, 2014 |
44,945,194 | $ | 449 | $ | 847,796 | $ | 28,886 | $ | (29,094 | ) | $ | 99,469 | $ | 947,506 | ||||||||
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Balances at December 31, 2014 |
45,079,150 | $ | 451 | $ | 853,606 | $ | 23,665 | $ | (20,456 | ) | $ | 82,716 | $ | 939,982 | ||||||||
Public offering of common stock, net of offering costs |
4,370,000 |
44 |
127,720 |
|
|
|
127,764 |
|||||||||||||||
Share-based compensation |
| | 4,592 | | | | 4,592 | |||||||||||||||
Purchase of vested stock for employee payroll tax withholding |
(54,840 | ) | (1 | ) | (1,739 | ) | | | | (1,740 | ) | |||||||||||
Dividend reinvestment |
444,957 | 4 | 13,654 | | | | 13,658 | |||||||||||||||
Amortization of directors' deferred compensation |
| | 292 | | | | 292 | |||||||||||||||
Issuance of restricted stock |
240,074 | 2 | (2 | ) | | | | | ||||||||||||||
Forfeited shares of terminated employees |
(163 | ) | | | | | | | ||||||||||||||
Dividends to stockholders |
| | | (88,294 | ) | (2,168 | ) | | (90,462 | ) | ||||||||||||
Net increase (loss) resulting from operations |
| | | 78,556 | (9,037 | ) | 27,376 | 96,895 | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Balances at September 30, 2015 |
50,079,178 | $ | 500 | $ | 998,123 | $ | 13,927 | $ | (31,661 | ) | $ | 110,092 | $ | 1,090,981 | ||||||||
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these financial statements
3
MAIN STREET CAPITAL CORPORATION
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
|
Nine Months Ended September 30, |
||||||
---|---|---|---|---|---|---|---|
|
2015 | 2014 | |||||
CASH FLOWS FROM OPERATING ACTIVITIES |
|||||||
Net increase in net assets resulting from operations |
$ | 96,895 | $ | 78,754 | |||
Adjustments to reconcile net increase in net assets resulting from operations to net cash used in operating activities: |
|||||||
Investments in portfolio companies |
(727,099 | ) | (637,843 | ) | |||
Proceeds from sales and repayments of debt investments in portfolio companies |
421,933 | 396,557 | |||||
Proceeds from sales and return of capital of equity investments in portfolio companies |
29,289 | 26,117 | |||||
Investments in marketable securities and idle funds investments |
(4,483 | ) | (17,704 | ) | |||
Proceeds from sales and repayments of marketable securities and idle funds investments |
7,094 | 22,747 | |||||
Net change in net unrealized appreciation |
(20,372 | ) | (7,160 | ) | |||
Net realized (gain) loss |
9,037 | (10,789 | ) | ||||
Accretion of unearned income |
(6,474 | ) | (8,167 | ) | |||
Payment-in-kind interest |
(2,485 | ) | (3,947 | ) | |||
Cumulative dividends |
(1,242 | ) | (1,422 | ) | |||
Share-based compensation expense |
4,592 | 3,034 | |||||
Amortization of deferred financing costs |
1,899 | 1,184 | |||||
Deferred taxes |
(8,551 | ) | 6,643 | ||||
Changes in other assets and liabilities: |
|||||||
Interest receivable and other assets |
(3,493 | ) | (4,480 | ) | |||
Interest payable |
147 | (171 | ) | ||||
Accounts payable and other liabilities |
(1,618 | ) | (1,584 | ) | |||
Deferred fees and other |
1,438 | 1,457 | |||||
| | | | | | | |
Net cash used in operating activities |
(203,493 | ) | (156,774 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES |
|||||||
Proceeds from public offering of common stock, net of offering costs |
127,764 | 139,697 | |||||
Dividends paid |
(75,453 | ) | (64,739 | ) | |||
Proceeds from issuance of SBIC debentures |
| 24,800 | |||||
Proceeds from credit facility |
473,000 | 353,000 | |||||
Repayments on credit facility |
(345,000 | ) | (303,000 | ) | |||
Payment of deferred loan costs and SBIC debenture fees |
(132 | ) | (1,880 | ) | |||
Purchase of vested stock for employee payroll tax withholding |
(1,740 | ) | (1,481 | ) | |||
Other |
(83 | ) | | ||||
| | | | | | | |
Net cash provided by financing activities |
178,356 | 146,397 | |||||
| | | | | | | |
Net decrease in cash and cash equivalents |
(25,137 | ) | (10,377 | ) | |||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
60,432 | 34,701 | |||||
| | | | | | | |
CASH AND CASH EQUIVALENTS AT END OF PERIOD |
$ | 35,295 | $ | 24,324 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
Supplemental cash flow disclosures: |
|||||||
Interest paid |
$ | 21,708 | $ | 15,701 | |||
Taxes paid |
$ | 2,504 | $ | 3,656 | |||
Non-cash financing activities: |
|||||||
Shares issued pursuant to the DRIP |
$ | 13,658 | $ | 10,845 |
The accompanying notes are an integral part of these financial statements
4
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments
September 30, 2015
(in thousands)
(Unaudited)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Control Investments(5) |
|
|
||||||||||||
|
||||||||||||||
Access Media Holdings, LLC(10) |
Private Cable Operator |
|
||||||||||||
|
5.00% Current / 5.00% PIK Secured Debt (MaturityOctober 22, 2018) |
21,284 | 21,284 | 18,784 | ||||||||||
|
Preferred Member Units (12% cumulative) |
3,201 | 3,201 | |||||||||||
|
Member Units (3,307,545 units) |
1 | | |||||||||||
| | | | | | | | | | | | | | |
|
24,486 | 21,985 | ||||||||||||
|
||||||||||||||
ASC Interests, LLC |
Recreational and Educational Shooting Facility |
|
||||||||||||
|
11% Secured Debt (MaturityJuly 31, 2018) |
2,750 | 2,715 | 2,750 | ||||||||||
|
Member Units (1,500 units)(8) |
1,500 | 2,230 | |||||||||||
| | | | | | | | | | | | | | |
|
4,215 | 4,980 | ||||||||||||
|
||||||||||||||
Bond-Coat, Inc. |
Casing and Tubing Coating Services |
|
||||||||||||
|
12% Secured Debt (MaturityDecember 28, 2017) |
11,596 | 11,513 | 11,596 | ||||||||||
|
Common Stock (57,508 shares) |
6,350 | 10,210 | |||||||||||
| | | | | | | | | | | | | | |
|
17,863 | 21,806 | ||||||||||||
|
||||||||||||||
Café Brazil, LLC |
Casual Restaurant Group |
|
||||||||||||
|
Member Units (1,233 units)(8) |
1,742 | 7,330 | |||||||||||
|
||||||||||||||
CBT Nuggets, LLC |
Produces and Sells IT Training Certification Videos |
|
||||||||||||
|
Member Units (416 units)(8) |
1,300 | 38,890 | |||||||||||
|
||||||||||||||
Ceres Management, LLC (Lambs Tire & Automotive) |
Aftermarket Automotive Services Chain |
|
||||||||||||
|
14% Secured Debt (MaturityMay 31, 2018) |
8,070 | 8,070 | 8,070 | ||||||||||
|
Member Units (5,460 units) |
5,273 | 4,420 | |||||||||||
|
9.5% Secured Debt (Lamb's Real Estate Investment I, LLC) (MaturityOctober 1, 2025) |
931 | 931 | 931 | ||||||||||
|
Member Units (Lamb's Real Estate Investment I, LLC) (1,000 units)(8) |
625 | 1,240 | |||||||||||
| | | | | | | | | | | | | | |
|
14,899 | 14,661 | ||||||||||||
|
||||||||||||||
CMS Minerals LLC |
Oil & Gas Exploration & Production |
|
||||||||||||
|
Preferred Member Units (458 units)(8) |
3,246 | 7,193 | |||||||||||
|
5
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
September 30, 2015
(in thousands)
(Unaudited)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Datacom, LLC |
Technology and Telecommunications Provider |
|
||||||||||||
|
10.5% Secured Debt (MaturityMay 31, 2019) |
11,205 | 11,117 | 11,117 | ||||||||||
|
Class A Preferred Member Units (13,154 units)(8) |
1,137 | 1,137 | |||||||||||
|
Class B Preferred Member Units (6,453 units) |
6,030 | 5,570 | |||||||||||
| | | | | | | | | | | | | | |
|
18,284 | 17,824 | ||||||||||||
|
||||||||||||||
Garreco, LLC |
Manufacturer and Supplier of Dental Products |
|
||||||||||||
|
14% Secured Debt (MaturityJanuary 12, 2018) |
5,800 | 5,733 | 5,733 | ||||||||||
|
Member Units (1,200 units)(8) |
1,200 | 1,470 | |||||||||||
| | | | | | | | | | | | | | |
|
6,933 | 7,203 | ||||||||||||
|
||||||||||||||
GRT Rubber Technologies LLC |
Manufacturer of Engineered Rubber Products |
|
||||||||||||
|
LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.00%, Secured Debt (MaturityDecember 19, 2019)(9) |
16,331 | 16,189 | 16,189 | ||||||||||
|
Member Units (5,879 units)(8) |
13,065 | 13,065 | |||||||||||
| | | | | | | | | | | | | | |
|
29,254 | 29,254 | ||||||||||||
|
||||||||||||||
Gulf Manufacturing, LLC |
Manufacturer of Specialty Fabricated Industrial Piping Products |
|
||||||||||||
|
9% PIK Secured Debt (Ashland Capital IX, LLC) (MaturityJune 30, 2017) |
777 | 777 | 777 | ||||||||||
|
Member Units (438 units)(8) |
2,980 | 15,130 | |||||||||||
| | | | | | | | | | | | | | |
|
3,757 | 15,907 | ||||||||||||
|
||||||||||||||
Harrison Hydra-Gen, Ltd. |
Manufacturer of Hydraulic Generators |
|
||||||||||||
|
12% Secured Debt (MaturityDecember 4, 2015) |
5,010 | 5,010 | 5,010 | ||||||||||
|
Preferred Stock (8% cumulative)(8) |
1,336 | 1,336 | |||||||||||
|
Common Stock (107,456 shares) |
718 | 2,300 | |||||||||||
| | | | | | | | | | | | | | |
|
7,064 | 8,646 | ||||||||||||
|
||||||||||||||
Hawthorne Customs and Dispatch Services, LLC |
Facilitator of Import Logistics, Brokerage, and Warehousing |
|
||||||||||||
|
Member Units (500 units)(8) |
589 | 580 | |||||||||||
|
Member Units (Wallisville Real Estate, LLC) (588,210 units)(8) |
1,215 | 2,220 | |||||||||||
| | | | | | | | | | | | | | |
|
1,804 | 2,800 | ||||||||||||
|
6
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
September 30, 2015
(in thousands)
(Unaudited)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
HW Temps LLC |
Temporary Staffing Solutions |
|
||||||||||||
|
LIBOR Plus 9.50% (Floor 1.00%), Current Coupon 10.50%, Secured Debt (Maturity July 2, 2020)(9) |
9,976 | 9,880 | 9,880 | ||||||||||
|
Preferred Member Units (3,200 units)(8) |
3,942 | 3,942 | |||||||||||
| | | | | | | | | | | | | | |
|
13,822 | 13,822 | ||||||||||||
|
||||||||||||||
Hydratec, Inc. |
Designer and Installer of Micro-Irrigation Systems |
|
||||||||||||
|
Common Stock (7,095 shares)(8) |
7,095 | 14,950 | |||||||||||
|
||||||||||||||
IDX Broker, LLC |
Provider of Marketing and CRM Tools for the Real Estate Industry |
|
||||||||||||
|
LIBOR Plus 6.50% (Floor 1.50%), Current Coupon 8.00%, Secured Debt (MaturityNovember 15, 2018)(9) |
25 | 25 | 25 | ||||||||||
|
12.5% Secured Debt (MaturityNovember 15, 2018) |
11,350 | 11,276 | 11,350 | ||||||||||
|
Member Units (5,400 units) |
5,606 | 6,440 | |||||||||||
| | | | | | | | | | | | | | |
|
16,907 | 17,815 | ||||||||||||
|
||||||||||||||
Impact Telecom, Inc. |
Telecommunications Services Provider |
|
||||||||||||
|
LIBOR Plus 6.50% (Floor 2.00%), Current Coupon 8.50%, Secured Debt (MaturityMay 31, 2018)(9) |
1,575 | 1,570 | 1,570 | ||||||||||
|
13% Secured Debt (MaturityMay 31, 2018) |
22,500 | 15,893 | 15,893 | ||||||||||
|
Warrants (5,516,667 equivalent shares) |
8,000 | 4,160 | |||||||||||
| | | | | | | | | | | | | | |
|
25,463 | 21,623 | ||||||||||||
|
||||||||||||||
Indianapolis Aviation Partners, LLC |
Fixed Base Operator |
|
||||||||||||
|
15% Secured Debt (MaturityJanuary 15, 2016) |
3,100 | 3,079 | 3,100 | ||||||||||
|
Warrants (1,046 equivalent units) |
1,129 | 2,540 | |||||||||||
| | | | | | | | | | | | | | |
|
4,208 | 5,640 | ||||||||||||
|
||||||||||||||
Jensen Jewelers of Idaho, LLC |
Retail Jewelry Store |
|
||||||||||||
|
Prime Plus 6.75% (Floor 2.00%), Current Coupon 10.00%, Secured Debt (MaturityNovember 14, 2016)(9) |
4,205 | 4,169 | 4,205 | ||||||||||
|
Member Units (627 units)(8) |
811 | 4,750 | |||||||||||
| | | | | | | | | | | | | | |
|
4,980 | 8,955 | ||||||||||||
|
7
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
September 30, 2015
(in thousands)
(Unaudited)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Lighting Unlimited, LLC |
Commercial and Residential Lighting Products and Design Services |
|
||||||||||||
|
8% Secured Debt (MaturityAugust 22, 2016) |
1,514 | 1,514 | 1,514 | ||||||||||
|
Preferred Equity (non-voting) |
434 | 434 | |||||||||||
|
Warrants (71 equivalent units) |
54 | 40 | |||||||||||
|
Member Units (700 units)(8) |
100 | 420 | |||||||||||
| | | | | | | | | | | | | | |
|
2,102 | 2,408 | ||||||||||||
|
||||||||||||||
Marine Shelters Holdings, LLC (LoneStar Marine Shelters) |
Fabricator of Marine and Industrial Shelters |
|
||||||||||||
|
6% Current / 6% PIK Secured Debt (MaturityDecember 28, 2017) |
8,781 | 8,688 | 8,688 | ||||||||||
|
Preferred Member Units (3,810 units) |
5,352 | 5,352 | |||||||||||
| | | | | | | | | | | | | | |
|
14,040 | 14,040 | ||||||||||||
|
||||||||||||||
Mid-Columbia Lumber Products, LLC |
Manufacturer of Finger-Jointed Lumber Products |
|
||||||||||||
|
10% Secured Debt (MaturityDecember 18, 2017) |
1,750 | 1,750 | 1,750 | ||||||||||
|
12% Secured Debt (MaturityDecember 18, 2017) |
3,900 | 3,900 | 3,900 | ||||||||||
|
Member Units (2,829 units)(8) |
1,244 | 3,980 | |||||||||||
|
9.5% Secured Debt (Mid-Columbia Real Estate, LLC) (MaturityMay 13, 2025) |
893 | 893 | 893 | ||||||||||
|
Member Units (MidColumbia Real Estate, LLC) (250 units)(8) |
250 | 550 | |||||||||||
| | | | | | | | | | | | | | |
|
8,037 | 11,073 | ||||||||||||
|
||||||||||||||
MH Corbin Holding LLC |
Manufacturer and distributor of traffic safety products |
|
||||||||||||
|
10% Secured Debt (MaturityAugust 31, 2020) |
14,000 | 13,864 | 13,864 | ||||||||||
|
Preferred Member Units (4,000 shares) |
6,000 | 6,000 | |||||||||||
| | | | | | | | | | | | | | |
|
19,864 | 19,864 | ||||||||||||
|
||||||||||||||
MSC Adviser I, LLC(16) |
Third Party Investment Advisory Services |
|
||||||||||||
|
Member Units (Fully diluted 100.0%)(8) |
| 32,305 | |||||||||||
|
||||||||||||||
Mystic Logistics, Inc |
Logistics and Distribution Services Provider for Large Volume Mailers |
|
||||||||||||
|
12% Secured Debt (MaturityAugust 15, 2019) |
9,448 | 9,273 | 9,448 | ||||||||||
|
Common Stock (5,873 shares)(8) |
2,720 | 6,580 | |||||||||||
| | | | | | | | | | | | | | |
|
11,993 | 16,028 | ||||||||||||
|
8
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
September 30, 2015
(in thousands)
(Unaudited)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
NAPCO Precast, LLC |
Precast Concrete Manufacturing |
|
||||||||||||
|
Prime Plus 2.00% (Floor 7.00%), Current Coupon 9.00%, Secured Debt (MaturityJanuary 31, 2016)(9) |
625 | 625 | 625 | ||||||||||
|
Prime Plus 2.00% (Floor 7.00%), Current Coupon 9.00%, Secured Debt (MaturityFebruary 1, 2016)(9) |
2,923 | 2,921 | 2,923 | ||||||||||
|
18% Secured Debt (MaturityFebruary 1, 2016) |
4,468 | 4,460 | 4,468 | ||||||||||
|
Member Units (2,955 units)(8) |
2,975 | 8,590 | |||||||||||
| | | | | | | | | | | | | | |
|
10,981 | 16,606 | ||||||||||||
|
||||||||||||||
NRI Clinical Research, LLC |
Clinical Research Service Provider |
|
||||||||||||
|
14% Secured Debt (MaturitySeptember 8, 2017) |
4,740 | 4,650 | 4,650 | ||||||||||
|
Warrants (251,723 equivalent units) |
252 | 190 | |||||||||||
|
Member Units (1,454,167 units) |
765 | 1,052 | |||||||||||
| | | | | | | | | | | | | | |
|
5,667 | 5,892 | ||||||||||||
|
||||||||||||||
NRP Jones, LLC |
Manufacturer of Hoses, Fittings and Assemblies |
|
||||||||||||
|
12% Secured Debt (MaturityDecember 22, 2016) |
13,224 | 12,885 | 12,885 | ||||||||||
|
Warrants (14,331 equivalent units) |
817 | 450 | |||||||||||
|
Member Units (50,877 units)(8) |
2,900 | 1,480 | |||||||||||
| | | | | | | | | | | | | | |
|
16,602 | 14,815 | ||||||||||||
|
||||||||||||||
OMi Holdings, Inc. |
Manufacturer of Overhead Cranes |
|
||||||||||||
|
Common Stock (1,500 shares)(8) |
1,080 | 13,420 | |||||||||||
|
||||||||||||||
Pegasus Research Group, LLC (Televerde) |
Provider of Telemarketing and Data Services |
|
||||||||||||
|
Member Units (460 units)(8) |
1,290 | 6,490 | |||||||||||
|
||||||||||||||
PPL RVs, Inc. |
Recreational Vehicle Dealer |
|
||||||||||||
|
11.1% Secured Debt (MaturityJanuary 1, 2016) |
9,710 | 9,710 | 9,710 | ||||||||||
|
Common Stock (1,962 shares) |
2,150 | 8,710 | |||||||||||
| | | | | | | | | | | | | | |
|
11,860 | 18,420 | ||||||||||||
|
||||||||||||||
Principle Environmental, LLC |
Noise Abatement Service Provider |
|
||||||||||||
|
12% Secured Debt (MaturityApril 30, 2017) |
4,060 | 3,979 | 4,060 | ||||||||||
|
12% Current / 2% PIK Secured Debt (MaturityApril 30, 2017) |
3,294 | 3,288 | 3,294 | ||||||||||
|
Preferred Member Units (19,631 units)(8) |
4,663 | 9,560 | |||||||||||
|
Warrants (1,036 equivalent units) |
1,200 | 530 | |||||||||||
| | | | | | | | | | | | | | |
|
13,130 | 17,444 | ||||||||||||
|
9
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
September 30, 2015
(in thousands)
(Unaudited)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Quality Lease Service, LLC |
Provider of Rigsite Accommodation Unit Rentals and Related Services |
|
||||||||||||
|
8% PIK Secured Debt (MaturityJune 8, 2020) |
6,410 | 6,410 | 6,410 | ||||||||||
|
Member Units (1,000 units) |
568 | 2,638 | |||||||||||
| | | | | | | | | | | | | | |
|
6,978 | 9,048 | ||||||||||||
|
||||||||||||||
River Aggregates, LLC |
Processor of Construction Aggregates |
|
||||||||||||
|
Zero Coupon Secured Debt (MaturityJune 30, 2018) |
750 | 540 | 540 | ||||||||||
|
Member Units (1,150 units)(8) |
1,150 | 3,830 | |||||||||||
|
Member Units (RA Properties, LLC) (1,500 units) |
369 | 2,360 | |||||||||||
| | | | | | | | | | | | | | |
|
2,059 | 6,730 | ||||||||||||
|
||||||||||||||
SoftTouch Medical Holdings LLC |
Home Provider of Pediatric Durable Medical Equipment |
|
||||||||||||
|
LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.00%, Secured Debt (MaturityOctober 31, 2019)(9) |
8,245 | 8,175 | 8,175 | ||||||||||
|
Member Units (4,450 units)(8) |
4,930 | 5,340 | |||||||||||
| | | | | | | | | | | | | | |
|
13,105 | 13,515 | ||||||||||||
|
||||||||||||||
Southern RV, LLC |
Recreational Vehicle Dealer |
|
||||||||||||
|
13% Secured Debt (MaturityAugust 8, 2018) |
11,400 | 11,288 | 11,400 | ||||||||||
|
Member Units (1,680 units)(8) |
1,680 | 11,600 | |||||||||||
|
13% Secured Debt (Southern RV Real Estate, LLC) (MaturityAugust 8, 2018) |
3,250 | 3,218 | 3,250 | ||||||||||
|
Member Units (Southern RV Real Estate, LLC) (480 units) |
480 | 540 | |||||||||||
| | | | | | | | | | | | | | |
|
16,666 | 26,790 | ||||||||||||
|
||||||||||||||
The MPI Group, LLC |
Manufacturer of Custom Hollow Metal Doors, Frames and Accessories |
|
||||||||||||
|
9% Secured Debt (MaturityOctober 2, 2018) |
2,924 | 2,921 | 2,920 | ||||||||||
|
Series A Preferred Units (2,500 units; 10% Cumulative) |
2,500 | 980 | |||||||||||
|
Warrants (1,424 equivalent units) |
1,096 | | |||||||||||
|
Member Units (MPI Real Estate Holdings, LLC) (100% Fully diluted)(8) |
2,300 | 2,230 | |||||||||||
| | | | | | | | | | | | | | |
|
8,817 | 6,130 | ||||||||||||
|
10
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
September 30, 2015
(in thousands)
(Unaudited)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Travis Acquisition LLC |
Manufacturer of Aluminum Trailers |
|
||||||||||||
|
12% Secured Debt (MaturityAugust 30, 2018) |
3,628 | 3,581 | 3,628 | ||||||||||
|
Member Units (7,282 units) |
7,100 | 14,110 | |||||||||||
| | | | | | | | | | | | | | |
|
10,681 | 17,738 | ||||||||||||
|
||||||||||||||
Uvalco Supply, LLC |
Farm and Ranch Supply Store |
|
||||||||||||
|
9% Secured Debt (MaturityJanuary 1, 2019) |
1,418 | 1,418 | 1,418 | ||||||||||
|
Member Units (1,006 units)(8) |
1,113 | 3,210 | |||||||||||
| | | | | | | | | | | | | | |
|
2,531 | 4,628 | ||||||||||||
|
||||||||||||||
Vision Interests, Inc. |
Manufacturer / Installer of Commercial Signage |
|
||||||||||||
|
13% Secured Debt (MaturityDecember 23, 2016) |
3,138 | 3,115 | 3,115 | ||||||||||
|
Series A Preferred Stock (3,000,000 shares) |
3,000 | 3,550 | |||||||||||
|
Common Stock (1,126,242 shares) |
3,706 | 210 | |||||||||||
| | | | | | | | | | | | | | |
|
9,821 | 6,875 | ||||||||||||
|
||||||||||||||
Ziegler's NYPD, LLC |
Casual Restaurant Group |
|
||||||||||||
|
6.5% Secured Debt (MaturityOctober 1, 2019) |
1,000 | 992 | 992 | ||||||||||
|
12% Secured Debt (MaturityOctober 1, 2019) |
500 | 500 | 500 | ||||||||||
|
14% Secured Debt (MaturityOctober 1, 2019) |
2,750 | 2,750 | 2,750 | ||||||||||
|
Warrants (587 equivalent units) |
600 | | |||||||||||
|
Preferred Member Units (10,072 units) |
2,834 | 2,240 | |||||||||||
| | | | | | | | | | | | | | |
|
7,676 | 6,482 | ||||||||||||
| | | | | | | | | | | | | | |
Subtotal Control Investments (30.3% of total investments at fair value) |
402,302 | 568,025 | ||||||||||||
| | | | | | | | | | | | | | |
11
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
September 30, 2015
(in thousands)
(Unaudited)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Affiliate Investments(6) |
|
|
||||||||||||
|
||||||||||||||
AFG Capital Group, LLC |
Provider of Rent-to-Own Financing Solutions and Services |
|
||||||||||||
|
11% Secured Debt (MaturityNovember 7, 2019) |
12,560 | 12,199 | 12,199 | ||||||||||
|
Warrants (42 equivalent units) |
259 | 410 | |||||||||||
|
Member Units (186 units) |
1,200 | 1,700 | |||||||||||
| | | | | | | | | | | | | | |
|
13,658 | 14,309 | ||||||||||||
|
||||||||||||||
Boss Industries, LLC |
Manufacturer and Distributor of Air, Power and Other Industrial Equipment |
|
||||||||||||
|
Preferred Member Units (2,242 units)(8) |
2,203 | 2,543 | |||||||||||
|
||||||||||||||
Bridge Capital Solutions Corporation |
Financial Services and Cash Flow Solutions Provider |
|
||||||||||||
|
13% Secured Debt (MaturityApril 18, 2017) |
7,000 | 6,872 | 6,872 | ||||||||||
|
Warrants (22 equivalent shares) |
200 | 1,020 | |||||||||||
| | | | | | | | | | | | | | |
|
7,072 | 7,892 | ||||||||||||
|
||||||||||||||
Buca C, LLC |
Restaurants |
|
||||||||||||
|
LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.25%, Secured Debt (MaturityJune 30, 2020)(9) |
25,530 | 25,288 | 25,288 | ||||||||||
|
Preferred Member Units (6 units)(8) |
3,656 | 3,656 | |||||||||||
| | | | | | | | | | | | | | |
|
28,944 | 28,944 | ||||||||||||
|
||||||||||||||
CAI Software LLC |
Provider of Specialized Enterprise Resource Planning Software |
|
||||||||||||
|
12% Secured Debt (MaturityOctober 10, 2019) |
4,973 | 4,930 | 4,930 | ||||||||||
|
Member Units (65,356 units) |
654 | 840 | |||||||||||
| | | | | | | | | | | | | | |
|
5,584 | 5,770 | ||||||||||||
|
||||||||||||||
Condit Exhibits, LLC |
Tradeshow Exhibits / Custom Displays Provider |
|
||||||||||||
|
Member Units (3,936 units)(8) |
100 | 770 | |||||||||||
|
||||||||||||||
Congruent Credit Opportunities Funds(12)(13) |
Investment Partnership |
|
||||||||||||
|
LP Interests (Congruent Credit Opportunities Fund II, LP) (Fully diluted 19.8%)(8) |
7,644 | 4,228 | |||||||||||
|
LP Interests (Congruent Credit Opportunities Fund III, LP) (Fully diluted 17.4%) |
12,099 | 12,222 | |||||||||||
| | | | | | | | | | | | | | |
|
19,743 | 16,450 | ||||||||||||
|
12
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
September 30, 2015
(in thousands)
(Unaudited)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Daseke, Inc. |
Specialty Transportation Provider |
|
||||||||||||
|
12% Current / 2.5% PIK Secured Debt (MaturityJuly 31, 2018) |
21,118 | 20,849 | 21,118 | ||||||||||
|
Common Stock (19,467 shares) |
5,213 | 22,660 | |||||||||||
| | | | | | | | | | | | | | |
|
26,062 | 43,778 | ||||||||||||
|
||||||||||||||
Dos Rios Partners(12)(13) |
Investment Partnership |
|
||||||||||||
|
LP Interests (Dos Rios Partners, LP) (Fully diluted 20.2%)(8) |
3,104 | 2,031 | |||||||||||
|
LP Interests (Dos Rios PartnersA, LP) (Fully diluted 6.4%)(8) |
986 | 648 | |||||||||||
| | | | | | | | | | | | | | |
|
4,090 | 2,679 | ||||||||||||
|
||||||||||||||
East Teak Fine Hardwoods, Inc. |
Distributor of Hardwood Products |
|
||||||||||||
|
Common Stock (5,000 shares) |
480 | 860 | |||||||||||
|
||||||||||||||
East West Copolymer & Rubber, LLC |
Manufacturer of Synthetic Rubbers |
|
||||||||||||
|
12% Secured Debt (MaturityOctober 17, 2019) |
9,600 | 9,456 | 9,456 | ||||||||||
|
Warrants (2,014,799 equivalent units) |
50 | 50 | |||||||||||
| | | | | | | | | | | | | | |
|
9,506 | 9,506 | ||||||||||||
|
||||||||||||||
Freeport Financial Funds(12)(13) |
Investment Partnership |
|
||||||||||||
|
LP Interests (Freeport Financial SBIC Fund LP) (Fully diluted 9.9%)(8) |
5,974 | 5,974 | |||||||||||
|
LP Interests (Freeport First Lien Loan Fund III LP) (Fully diluted 6.4%) |
759 | 759 | |||||||||||
| | | | | | | | | | | | | | |
|
6,733 | 6,733 | ||||||||||||
|
||||||||||||||
Gault Financial, LLC (RMB Capital, LLC) |
Purchases and Manages Liquidation of Distressed Assets |
|
||||||||||||
|
10% Secured Debt (MaturityNovember 21, 2016) |
13,046 | 12,858 | 10,891 | ||||||||||
|
Warrants (29,025 equivalent units) |
400 | | |||||||||||
| | | | | | | | | | | | | | |
|
13,258 | 10,891 | ||||||||||||
|
||||||||||||||
Glowpoint, Inc. |
Provider of Cloud Managed Video Collaboration Services |
|
||||||||||||
|
8% Secured Debt (MaturityOctober 18, 2018) |
21 | 18 | 18 | ||||||||||
|
12% Secured Debt (MaturityOctober 18, 2018) |
9,000 | 8,924 | 8,924 | ||||||||||
|
Common Stock (7,711,517 shares) |
3,958 | 4,460 | |||||||||||
| | | | | | | | | | | | | | |
|
12,900 | 13,402 | ||||||||||||
|
||||||||||||||
Guerdon Modular Holdings, Inc. |
Multi-Family and Commercial Modular Construction Company |
|
||||||||||||
|
11% Secured Debt (MaturityAugust 13, 2019) |
10,400 | 10,273 | 10,273 | ||||||||||
|
Common Stock (170,577 shares) |
2,983 | 2,590 | |||||||||||
| | | | | | | | | | | | | | |
|
13,256 | 12,863 | ||||||||||||
|
13
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
September 30, 2015
(in thousands)
(Unaudited)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Houston Plating and Coatings, LLC |
Provider of Plating and Industrial Coating Services |
|
||||||||||||
|
Member Units (248,082 units)(8) |
996 | 10,820 | |||||||||||
|
||||||||||||||
Indianhead Pipeline Services, LLC |
Provider of Pipeline Support Services |
|
||||||||||||
|
12% Secured Debt (MaturityFebruary 6, 2017) |
6,225 | 6,046 | 6,046 | ||||||||||
|
Preferred Member Units (33,819 units; 8% cumulative) |
2,302 | 2,302 | |||||||||||
|
Warrants (31,928 equivalent units) |
459 | | |||||||||||
|
Member Units (14,732 units) |
1 | | |||||||||||
| | | | | | | | | | | | | | |
|
8,808 | 8,348 | ||||||||||||
|
||||||||||||||
KBK Industries, LLC |
Manufacturer of Specialty Oilfield and Industrial Products |
|
||||||||||||
|
12.5% Secured Debt (MaturitySeptember 28, 2017) |
6,200 | 6,170 | 6,200 | ||||||||||
|
Member Units (250 units)(8) |
341 | 4,090 | |||||||||||
| | | | | | | | | | | | | | |
|
6,511 | 10,290 | ||||||||||||
|
||||||||||||||
L.F. Manufacturing Holdings, LLC(10) |
Manufacturer of Fiberglass Products |
|
||||||||||||
|
Member Units (2,000,000 units)(8) |
2,019 | 1,790 | |||||||||||
|
||||||||||||||
MPS Denver, LLC |
Specialty Card Printing |
|
||||||||||||
|
Member Units (13,800 units) |
1,130 | 1,130 | |||||||||||
|
||||||||||||||
OnAsset Intelligence, Inc. |
Provider of Transportation Monitoring / Tracking Products and Services |
|
||||||||||||
|
12% PIK Secured Debt (MaturityDecember 31, 2015) |
3,887 | 3,887 | 3,887 | ||||||||||
|
Preferred Stock (912 shares; 7% cumulative)(8) |
1,981 | 1,380 | |||||||||||
|
Warrants (5,333 equivalent shares) |
1,919 | | |||||||||||
| | | | | | | | | | | | | | |
|
7,787 | 5,267 | ||||||||||||
|
||||||||||||||
OPI International Ltd.(13) |
Provider of Man Camp and Industrial Storage Services |
|
||||||||||||
|
10% Unsecured Debt (MaturityApril 8, 2018) |
244 | 244 | 244 | ||||||||||
|
Common Stock (20,766,317 shares) |
1,371 | 3,200 | |||||||||||
| | | | | | | | | | | | | | |
|
1,615 | 3,444 | ||||||||||||
|
||||||||||||||
PCI Holding Company, Inc. |
Manufacturer of Industrial Gas Generating Systems |
|
||||||||||||
|
Preferred Stock (1,500,000 shares; 20% cumulative)(8) |
2,625 | 4,750 | |||||||||||
|
14
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
September 30, 2015
(in thousands)
(Unaudited)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Radial Drilling Services Inc. |
Oil and Gas Lateral Drilling Technology Provider |
|
||||||||||||
|
12% Secured Debt (MaturityNovember 22, 2016) |
4,200 | 3,936 | 2,000 | ||||||||||
|
Warrants (316 equivalent shares) |
758 | | |||||||||||
| | | | | | | | | | | | | | |
|
4,694 | 2,000 | ||||||||||||
|
||||||||||||||
Rocaceia, LLC (Quality Lease and Rental Holdings, LLC) |
Provider of Rigsite Accommodation Unit Rentals and Related Services |
|
||||||||||||
|
12% Secured Debt (MaturityJanuary 8, 2018)(14)(18) |
30,785 | 30,281 | 250 | ||||||||||
|
Preferred Member Units (250 units) |
2,500 | | |||||||||||
| | | | | | | | | | | | | | |
|
32,781 | 250 | ||||||||||||
|
||||||||||||||
Samba Holdings, Inc. |
Provider of Intelligent Driver Record Monitoring Software and Services |
|
||||||||||||
|
12.5% Secured Debt (MaturityNovember 17, 2016) |
25,665 | 25,522 | 25,665 | ||||||||||
|
Common Stock (170,963 shares) |
2,087 | 20,410 | |||||||||||
| | | | | | | | | | | | | | |
|
27,609 | 46,075 | ||||||||||||
|
||||||||||||||
Tin Roof Acquisition Company |
Casual Restaurant Group |
|
||||||||||||
|
12% Secured Debt (MaturityNovember 13, 2018) |
14,100 | 13,898 | 13,898 | ||||||||||
|
Class C Preferred Stock (Fully diluted 10.0%; 10% cumulative)(8) |
2,415 | 2,415 | |||||||||||
| | | | | | | | | | | | | | |
|
16,313 | 16,313 | ||||||||||||
|
||||||||||||||
Universal Wellhead Services Holdings, LLC(10) |
Provider of Wellhead Equipment, Designs, and Personnel to the Oil & Gas Industry |
|
||||||||||||
|
Class A Units (4,000,000 units; 4.5% cumulative)(8) |
4,000 | 3,091 | |||||||||||
|
||||||||||||||
Volusion, LLC |
Provider of Online Software-as-a-Service eCommerce Solutions |
|
||||||||||||
|
10.5% Secured Debt (MaturityJanuary 26, 2020) |
17,500 | 16,139 | 16,139 | ||||||||||
|
Warrants (950,618 equivalent units) |
1,400 | 1,400 | |||||||||||
|
Preferred Member Units (4,876,670 units) |
14,000 | 14,000 | |||||||||||
| | | | | | | | | | | | | | |
|
31,539 | 31,539 | ||||||||||||
| | | | | | | | | | | | | | |
Subtotal Affiliate Investments (17.2% of total investments at fair value) |
312,016 | 322,497 | ||||||||||||
| | | | | | | | | | | | | | |
15
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
September 30, 2015
(in thousands)
(Unaudited)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Non-Control/Non-Affiliate Investments(7) |
||||||||||||||
|
||||||||||||||
Allflex Holdings III Inc.(11) |
Manufacturer of Livestock Identification Products |
|
||||||||||||
|
LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.00%, Secured Debt (MaturityJuly 19, 2021)(9) |
10,150 | 10,077 | 10,029 | ||||||||||
|
||||||||||||||
AM General LLC(11) |
Specialty Vehicle Manufacturer |
|||||||||||||
|
LIBOR Plus 9.00% (Floor 1.25%), Current Coupon 10.25%, Secured Debt (MaturityMarch 22, 2018)(9) |
2,256 | 2,218 | 1,914 | ||||||||||
|
||||||||||||||
AM3 Pinnacle Corporation(10) |
Provider of Comprehensive Internet, TV and Voice Services for Multi- Dwelling Unit Properties |
|||||||||||||
|
Common Stock (60,240 shares) |
2,000 | | |||||||||||
|
||||||||||||||
American Seafoods Group, LLC(11) |
Catcher-Processor of Alaskan Pollock |
|||||||||||||
|
LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.00%, Secured Debt (MaturityAugust 19, 2021)(9) |
10,000 | 9,988 | 9,950 | ||||||||||
|
||||||||||||||
AmeriTech College, LLC |
For-Profit Nursing and Healthcare College |
|||||||||||||
|
10% Secured Debt (MaturityNovember 30, 2019) |
489 | 489 | 489 | ||||||||||
|
10% Secured Debt (MaturityJanuary 31, 2020) |
3,025 | 3,025 | 2,668 | ||||||||||
| | | | | | | | | | | | | | |
|
3,514 | 3,157 | ||||||||||||
|
||||||||||||||
AMF Bowling Centers, Inc.(11) |
Bowling Alley Operator |
|||||||||||||
|
LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.25%, Secured Debt (MaturitySeptember 18, 2021)(9) |
7,927 | 7,818 | 7,908 | ||||||||||
|
||||||||||||||
Anchor Hocking, LLC(11) |
Household Products Manufacturer |
|||||||||||||
|
LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.00%, Secured Debt (MaturityJune 4, 2018)(9) |
2,312 | 2,312 | 2,323 | ||||||||||
|
Member Units (440,620 units) |
4,928 | 3,415 | |||||||||||
| | | | | | | | | | | | | | |
|
7,240 | 5,738 | ||||||||||||
|
||||||||||||||
AP Gaming I, LLC(10) |
Developer, Manufacturer, and Operator of Gaming Machines |
|||||||||||||
|
LIBOR Plus 8.25% (Floor 1.00%), Current Coupon 9.25%, Secured Debt (MaturityDecember 20, 2020)(9) |
11,343 | 11,128 | 11,210 | ||||||||||
|
16
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
September 30, 2015
(in thousands)
(Unaudited)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Applied Products, Inc.(10) |
Adhesives Distributor |
|||||||||||||
|
LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (MaturitySeptember 30, 2019)(9) |
5,850 | 5,794 | 5,794 | ||||||||||
|
||||||||||||||
Arcus Hunting LLC.(10) |
Manufacturer of Bowhunting and Archery Products and Accessories |
|||||||||||||
|
LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.00%, Secured Debt (MaturityNovember 13, 2019)(9) |
10,875 | 10,758 | 10,758 | ||||||||||
|
||||||||||||||
Artel, LLC(11) |
Provider of Secure Satellite Network and IT Solutions |
|||||||||||||
|
LIBOR Plus 6.00% (Floor 1.25%), Current Coupon 7.25%, Secured Debt (MaturityNovember 27, 2017)(9) |
8,204 | 8,073 | 7,589 | ||||||||||
|
||||||||||||||
ATS Workholding, Inc.(10) |
Manufacturer of Machine Cutting Tools and Accessories |
|||||||||||||
|
LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 8.50%, Secured Debt (MaturityMarch 10, 2019)(9) |
6,571 | 6,528 | 6,528 | ||||||||||
|
||||||||||||||
ATX Networks Corp.(11)(13) |
Provider of Radio Frequency Management Equipment |
|||||||||||||
|
LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (MaturityJune 14, 2021)(9) |
14,963 | 14,673 | 14,888 | ||||||||||
|
||||||||||||||
Barfly Ventures, LLC(10) |
Casual Restaurant Group |
|||||||||||||
|
12% Secured Debt (MaturityAugust 31, 2020) |
4,121 | 4,039 | 4,039 | ||||||||||
|
Warrants (1 equivalent share) |
473 | 473 | |||||||||||
| | | | | | | | | | | | | | |
|
4,512 | 4,512 | ||||||||||||
|
||||||||||||||
Berry Aviation, Inc.(10) |
Airline Charter Service Operator |
|||||||||||||
|
12.00% Current / 1.75% PIK Secured Debt (MaturityJanuary 30, 2020) |
5,627 | 5,576 | 5,576 | ||||||||||
|
Common Stock (553 shares) |
400 | 400 | |||||||||||
| | | | | | | | | | | | | | |
|
5,976 | 5,976 | ||||||||||||
|
||||||||||||||
Bioventus LLC(10) |
Production of Orthopedic Healing Products |
|||||||||||||
|
LIBOR Plus 10.00% (Floor 1.00%), Current Coupon 11.00%, Secured Debt (MaturityApril 10, 2020)(9) |
5,000 | 4,914 | 4,950 | ||||||||||
|
||||||||||||||
Blackbrush Oil and Gas LP(11) |
Oil & Gas Exploration |
|||||||||||||
|
LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (MaturityJuly 30, 2021)(9) |
4,000 | 3,974 | 3,403 | ||||||||||
|
17
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
September 30, 2015
(in thousands)
(Unaudited)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Blackhawk Specialty Tools LLC(11) |
Oilfield Equipment & Services |
|||||||||||||
|
LIBOR Plus 5.25% (Floor 1.25%), Current Coupon 6.50%, Secured Debt (MaturityAugust 1, 2019)(9) |
5,975 | 5,947 | 5,587 | ||||||||||
|
||||||||||||||
Blue Bird Body Company(11) |
School Bus Manufacturer |
|||||||||||||
|
LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 6.50%, Secured Debt (MaturityJune 26, 2020)(9) |
9,845 | 9,724 | 9,827 | ||||||||||
|
||||||||||||||
Bluestem Brands, Inc.(11)(13) |
Multi-Channel Retailer of General Merchandise |
|||||||||||||
|
LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 8.50%, Secured Debt (MaturityNovember 6, 2020)(9) |
13,820 | 13,522 | 13,637 | ||||||||||
|
||||||||||||||
Brainworks Software, LLC(10) |
Advertising Sales and Newspaper Circulation Software |
|||||||||||||
|
Prime Plus 7.25% (Floor 3.25%), Current Coupon 10.50%, Secured Debt (MaturityJuly 22, 2019)(9) |
626 | 619 | 619 | ||||||||||
|
LIBOR Plus 8.25% (Floor 1.00%), Current Coupon 9.25%, Secured Debt (MaturityJuly 22, 2019)(9) |
6,224 | 6,161 | 6,161 | ||||||||||
| | | | | | | | | | | | | | |
|
6,780 | 6,780 | ||||||||||||
|
||||||||||||||
Brightwood Capital Fund III, LP(12)(13) |
Investment Partnership |
|||||||||||||
|
LP Interests (Brightwood Capital Fund III, LP) (Fully diluted 1.6%)(8) |
11,250 | 11,250 | |||||||||||
|
||||||||||||||
Brundage-Bone Concrete Pumping, Inc.(11) |
Construction Services Provider |
|||||||||||||
|
10.375% Secured Debt (MaturitySeptember 1, 2021) |
2,500 | 2,500 | 2,513 | ||||||||||
|
||||||||||||||
Calloway Laboratories, Inc.(10) |
Health Care Testing Facilities |
|||||||||||||
|
17% PIK Secured Debt (MaturitySeptember 30, 2016)(14) |
7,381 | 7,332 | | ||||||||||
|
Warrants (125,000 equivalent shares) |
17 | | |||||||||||
| | | | | | | | | | | | | | |
|
7,349 | | ||||||||||||
|
||||||||||||||
Cengage Learning Acquisitions, Inc.(11) |
Provider of Educational Print and Digital Services |
|||||||||||||
|
LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (MaturityMarch 31, 2020)(9) |
9,744 | 9,705 | 9,683 | ||||||||||
|
18
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
September 30, 2015
(in thousands)
(Unaudited)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cenveo Corporation(11) |
Provider of Commercial Printing, Envelopes, Labels, Printed Office Products |
|||||||||||||
|
6% Secured Debt (MaturityAugust 1, 2019) |
10,000 | 8,639 | 8,400 | ||||||||||
|
||||||||||||||
CGSC of Delaware Holdings Corp.(11)(13) |
Insurance Brokerage Firm |
|||||||||||||
|
LIBOR Plus 7.00% (Floor 1.25%), Current Coupon 8.25%, Secured Debt (MaturityOctober 16, 2020)(9) |
2,000 | 1,978 | 1,700 | ||||||||||
|
||||||||||||||
Charlotte Russe, Inc(11) |
Fast-Fashion Retailer to Young Women |
|||||||||||||
|
LIBOR Plus 5.50% (Floor 1.25%), Current Coupon 6.75%, Secured Debt (MaturityMay 22, 2019)(9) |
14,346 | 14,047 | 11,958 | ||||||||||
|
||||||||||||||
Clarius ASIG, LLC(10) |
Prints & Advertising Film Financing |
|||||||||||||
|
15% PIK Secured Debt (MaturitySeptember 14, 2014)(17) |
615 | 612 | 615 | ||||||||||
|
||||||||||||||
Clarius BIGS, LLC(10) |
Prints & Advertising Film Financing |
|||||||||||||
|
15% PIK Secured Debt (MaturityJanuary 5, 2015)(14)(17) |
3,500 | 3,500 | 888 | ||||||||||
|
||||||||||||||
Compact Power Equipment, Inc. |
Equipment / Tool Rental |
|||||||||||||
|
12% Secured Debt (MaturityOctober 1, 2017) |
4,100 | 4,089 | 4,100 | ||||||||||
|
Series A Preferred Stock (4,298,435 shares)(8) |
1,079 | 2,930 | |||||||||||
| | | | | | | | | | | | | | |
|
5,168 | 7,030 | ||||||||||||
|
||||||||||||||
Compuware Corporation(11) |
Provider of Software and Supporting Services |
|||||||||||||
|
LIBOR Plus 5.25% (Floor 1.00%), Current Coupon 6.25%, Secured Debt (MaturityDecember 15, 2019)(9) |
14,438 | 14,076 | 13,983 | ||||||||||
|
||||||||||||||
Covenant Surgical Partners, Inc.(11) |
Ambulatory Surgical Centers |
|||||||||||||
|
8.75% Secured Debt (MaturityAugust 1, 2019) |
1,000 | 1,000 | 1,002 | ||||||||||
|
||||||||||||||
CRGT Inc.(11) |
Provider of Custom Software Development |
|||||||||||||
|
LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (MaturityDecember 19, 2020)(9) |
14,259 | 14,026 | 14,224 | ||||||||||
|
||||||||||||||
CST Industries Inc.(11) |
Storage Tank Manufacturer |
|||||||||||||
|
LIBOR Plus 6.25% (Floor 1.50%), Current Coupon 7.75%, Secured Debt (MaturityMay 22, 2017)(9) |
8,670 | 8,633 | 8,626 | ||||||||||
|
19
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
September 30, 2015
(in thousands)
(Unaudited)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Darr Equipment LP(10) |
Heavy Equipment Dealer |
|||||||||||||
|
11.75% Current / 2% PIK Secured Debt (MaturityApril 15, 2020) |
20,601 | 20,050 | 20,050 | ||||||||||
|
Warrants (915,734 equivalent units) |
474 | 410 | |||||||||||
| | | | | | | | | | | | | | |
|
20,524 | 20,460 | ||||||||||||
|
||||||||||||||
Digital River, Inc.(11) |
Provider of Outsourced e-Commerce Solutions and Services |
|||||||||||||
|
LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (MaturityFebruary 12, 2021)(9) |
15,000 | 14,831 | 15,000 | ||||||||||
|
||||||||||||||
Digity Media LLC(11) |
Radio Station Operator |
|||||||||||||
|
LIBOR Plus 4.75% (Floor 1.25%), Current Coupon 6.00%, Secured Debt (MaturityFebruary 8, 2019)(9) |
6,588 | 6,535 | 6,539 | ||||||||||
|
||||||||||||||
Drilling Info, Inc. |
Information Services for the Oil and Gas Industry |
|||||||||||||
|
Common Stock (3,788,865 shares) |
1,335 | 9,920 | |||||||||||
|
||||||||||||||
ECP-PF Holdings Group, Inc.(10) |
Fitness Club Operator |
|||||||||||||
|
LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.00%, Secured Debt (MaturityNovember 26, 2019)(9) |
5,625 | 5,577 | 5,577 | ||||||||||
|
||||||||||||||
EnCap Energy Fund Investments(12)(13) |
Investment Partnership |
|||||||||||||
|
LP Interests (EnCap Energy Capital Fund VIII, L.P.) (Fully diluted 0.1%)(8) |
3,629 | 2,722 | |||||||||||
|
LP Interests (EnCap Energy Capital Fund VIII Co- Investors, L.P.) (Fully diluted 0.4%) |
2,140 | 1,002 | |||||||||||
|
LP Interests (EnCap Energy Capital Fund IX, L.P.) (Fully diluted 0.1%)(8) |
2,850 | 2,420 | |||||||||||
|
LP Interests (EnCap Flatrock Midstream Fund X, L.P.) (Fully diluted 0.1%) |
433 | 433 | |||||||||||
|
LP Interests (EnCap Flatrock Midstream Fund II, L.P.) (Fully diluted 0.8%)(8) |
7,205 | 7,635 | |||||||||||
|
LP Interests (EnCap Flatrock Midstream Fund III, L.P.) (Fully diluted 0.2%) |
423 | 423 | |||||||||||
| | | | | | | | | | | | | | |
|
16,680 | 14,635 | ||||||||||||
|
||||||||||||||
Energy and Exploration Partners, LLC(11) |
Oil & Gas Exploration & Production |
|||||||||||||
|
LIBOR Plus 6.75% (Floor 1.00%), Current Coupon 7.75%, Secured Debt (MaturityJanuary 22, 2019)(9) |
9,390 | 9,048 | 7,168 | ||||||||||
|
20
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
September 30, 2015
(in thousands)
(Unaudited)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Evergreen Skills Lux S.á r.l. (d/b/a Skillsoft)(11)(13) |
Technology-based Performance Support Solutions |
|||||||||||||
|
LIBOR Plus 8.25% (Floor 1.00%), Current Coupon 9.25%, Secured Debt (MaturityApril 28, 2022)(9) |
7,000 | 6,833 | 6,020 | ||||||||||
|
||||||||||||||
Extreme Reach, Inc.(11) |
Integrated TV and Video Advertising Platform |
|||||||||||||
|
LIBOR Plus 5.75% (Floor 1.00%), Current Coupon 6.75%, Secured Debt (MaturityFebruary 7, 2020)(9) |
14,353 | 14,338 | 14,299 | ||||||||||
|
||||||||||||||
Flavors Holdings Inc.(11) |
Global Provider of Flavoring and Sweetening Products and Solutions |
|||||||||||||
|
LIBOR Plus 5.75% (Floor 1.00%), Current Coupon 6.75%, Secured Debt (MaturityApril 3, 2020)(9) |
11,484 | 11,134 | 10,896 | ||||||||||
|
||||||||||||||
Fram Group Holdings, Inc.(11) |
Manufacturer of Automotive Maintenance Products |
|||||||||||||
|
LIBOR Plus 5.50% (Floor 1.50%), Current Coupon 7.00%, Secured Debt (MaturityJuly 29, 2017)(9) |
9,652 | 9,531 | 8,445 | ||||||||||
|
LIBOR Plus 9.50% (Floor 1.50%), Current Coupon 11.00%, Secured Debt (MaturityJanuary 29, 2018)(9) |
700 | 698 | 376 | ||||||||||
| | | | | | | | | | | | | | |
|
10,229 | 8,821 | ||||||||||||
|
||||||||||||||
GI KBS Merger Sub LLC(11) |
Outsourced Janitorial Services to Retail/Grocery Customers |
|||||||||||||
|
LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.00%, Secured Debt (MaturityOctober 29, 2021)(9) |
2,978 | 2,971 | 2,940 | ||||||||||
|
LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.50%, Secured Debt (MaturityApril 29, 2022)(9) |
800 | 785 | 804 | ||||||||||
| | | | | | | | | | | | | | |
|
3,756 | 3,744 | ||||||||||||
|
||||||||||||||
Grace Hill, LLC(10) |
Online Training Tools for the Multi-Family Housing Industry |
|||||||||||||
|
LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.25%, Secured Debt (MaturityAugust 15, 2019)(9) |
9,498 | 9,403 | 9,503 | ||||||||||
|
21
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
September 30, 2015
(in thousands)
(Unaudited)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Great Circle Family Foods, LLC(10) |
Quick Service Restaurant Franchise |
|||||||||||||
|
LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (MaturityOctober 28, 2019)(9) |
7,899 | 7,829 | 7,829 | ||||||||||
|
||||||||||||||
Grupo Hima San Pablo, Inc.(11) |
Tertiary Care Hospitals |
|||||||||||||
|
LIBOR Plus 7.00% (Floor 1.50%), Current Coupon 8.50%, Secured Debt (MaturityJanuary 31, 2018)(9) |
4,875 | 4,823 | 4,534 | ||||||||||
|
13.75% Secured Debt (MaturityJuly 31, 2018) |
2,000 | 1,938 | 1,840 | ||||||||||
| | | | | | | | | | | | | | |
|
6,761 | 6,374 | ||||||||||||
|
||||||||||||||
GST Autoleather, Inc.(11) |
Automotive Leather Manufacturer |
|||||||||||||
|
LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 6.50%, Secured Debt (MaturityJuly 10, 2020)(9) |
9,900 | 9,818 | 9,752 | ||||||||||
|
||||||||||||||
Guitar Center, Inc.(11) |
Musical Instruments Retailer |
|||||||||||||
|
6.5% Secured Debt (MaturityApril 15, 2019) |
9,000 | 8,590 | 8,280 | ||||||||||
|
||||||||||||||
Halcon Resources Corporation(11)(13) |
Oil & Gas Exploration & Production |
|||||||||||||
|
9.75% Unsecured Debt (MaturityJuly 15, 2020) |
6,925 | 6,371 | 2,355 | ||||||||||
|
||||||||||||||
Hojeij Branded Foods, LLC(10) |
Multi-Airport, Multi- Concept Restaurant Operator |
|||||||||||||
|
LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (MaturityJuly 27, 2021)(9) |
5,357 | 5,305 | 5,305 | ||||||||||
|
||||||||||||||
Horizon Global Corporation(11) |
Auto Parts Manufacturer |
|||||||||||||
|
LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (MaturityJune 30, 2021)(9) |
9,875 | 9,684 | 9,801 | ||||||||||
|
||||||||||||||
Hostway Corporation(11) |
Managed Services and Hosting Provider |
|||||||||||||
|
LIBOR Plus 4.75% (Floor 1.25%), Current Coupon 6.00%, Secured Debt (MaturityDecember 13, 2019)(9) |
11,254 | 11,175 | 11,198 | ||||||||||
|
||||||||||||||
Hunter Defense Technologies, Inc.(11) |
Provider of Military and Commercial Shelters and Systems |
|||||||||||||
|
LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 6.50%, Secured Debt (MaturityAugust 5, 2019)(9) |
9,500 | 9,424 | 9,512 | ||||||||||
|
22
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
September 30, 2015
(in thousands)
(Unaudited)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
ICON Health & Fitness, Inc.(11) |
Producer of Fitness Products |
|||||||||||||
|
11.875% Secured Debt (MaturityOctober 15, 2016) |
6,956 | 6,893 | 6,782 | ||||||||||
|
||||||||||||||
iEnergizer Limited(11)(13) |
Provider of Business Outsourcing Solutions |
|||||||||||||
|
LIBOR Plus 6.00% (Floor 1.25%), Current Coupon 7.25%, Secured Debt (MaturityMay 1, 2019)(9) |
8,404 | 8,316 | 7,774 | ||||||||||
|
||||||||||||||
Indivior Finance LLC(11)(13) |
Specialty Pharmaceutical Company Treating Opioid Dependence |
|||||||||||||
|
LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (MaturityDecember 19, 2019)(9) |
7,219 | 6,829 | 6,840 | ||||||||||
|
||||||||||||||
Infinity Acquisition Finance Corp.(11) |
Application Software for Capital Markets |
|||||||||||||
|
7.25% Unsecured Debt (MaturityAugust 1, 2022) |
4,000 | 4,000 | 3,580 | ||||||||||
|
||||||||||||||
Inn of the Mountain Gods Resort and Casino(11) |
Hotel & Casino Owner & Operator |
|||||||||||||
|
9.25% Secured Debt (MaturityNovember 30, 2020) |
3,851 | 3,703 | 3,581 | ||||||||||
|
||||||||||||||
Insurance Technologies, LLC(10) |
Illustration and Sales-automation platforms |
|||||||||||||
|
LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.00%, Secured Debt (MaturityDecember 1, 2019)(9) |
4,870 | 4,821 | 4,821 | ||||||||||
|
||||||||||||||
Intertain Group Limited(11)(13) |
Business-to-Consumer Online Gaming Operator |
|||||||||||||
|
LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (MaturityApril 8, 2022)(9) |
11,700 | 11,510 | 11,759 | ||||||||||
|
||||||||||||||
iPayment, Inc.(11) |
Provider of Merchant Acquisition |
|||||||||||||
|
LIBOR Plus 5.25% (Floor 1.50%), Current Coupon 6.75%, Secured Debt (MaturityMay 8, 2017)(9) |
15,026 | 14,980 | 14,789 | ||||||||||
|
||||||||||||||
iQor US Inc.(11) |
Business Process Outsourcing Services Provider |
|||||||||||||
|
LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.00%, Secured Debt (MaturityApril 1, 2021)(9) |
9,912 | 9,736 | 8,128 | ||||||||||
|
||||||||||||||
irth Solutions, LLC |
Provider of Damage Prevention Information Technology Services |
|||||||||||||
|
Member Units (27,893 units) |
1,441 | 1,441 | |||||||||||
|
23
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
September 30, 2015
(in thousands)
(Unaudited)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jackmont Hospitality, Inc.(10) |
Family-owned TGIF Franchisee |
|||||||||||||
|
LIBOR Plus 6.75% (Floor 1.00%), Current Coupon 7.75%, Secured Debt (MaturityMay 26, 2021)(9) |
4,237 | 4,216 | 4,216 | ||||||||||
|
||||||||||||||
Joerns Healthcare, LLC(11) |
Manufacturer and Distributor of Health Care Equipment & Supplies |
|||||||||||||
|
LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.00%, Secured Debt (MaturityMay 9, 2020)(9) |
14,880 | 14,781 | 14,806 | ||||||||||
|
||||||||||||||
John Deere Landscapes LLC(10) |
Distributor of Landscaping Supplies |
|||||||||||||
|
LIBOR Plus 4.00% (Floor 1.00%), Current Coupon 5.00%, Secured Debt (MaturityDecember 23, 2019)(9) |
8,508 | 8,180 | 8,508 | ||||||||||
|
||||||||||||||
JSS Holdings, Inc.(11) |
Aircraft Maintenance Program Provider |
|||||||||||||
|
LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (MaturityAugust 31, 2021)(9) |
13,500 | 13,233 | 13,298 | ||||||||||
|
||||||||||||||
Kendra Scott, LLC(11) |
Jewelry Retail Stores |
|||||||||||||
|
LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (MaturityJuly 17, 2020)(9) |
10,000 | 9,904 | 9,975 | ||||||||||
|
||||||||||||||
Keypoint Government Solutions, Inc.(11) |
Provider of Pre-Employment Screening Services |
|||||||||||||
|
LIBOR Plus 6.50% (Floor 1.25%), Current Coupon 7.75%, Secured Debt (MaturityNovember 13, 2017)(9) |
6,514 | 6,473 | 6,514 | ||||||||||
|
||||||||||||||
LaMi Products, LLC(10) |
General Merchandise Distribution |
|||||||||||||
|
LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (MaturitySeptember 16, 2020)(9) |
4,563 | 4,532 | 4,532 | ||||||||||
|
||||||||||||||
Lansing Trade Group LLC(11) |
Commodity Merchandiser |
|||||||||||||
|
9.25% Unsecured Debt (MaturityFebruary 15, 2019) |
6,000 | 6,000 | 5,775 | ||||||||||
|
||||||||||||||
Larchmont Resources, LLC(11) |
Oil & Gas Exploration & Production |
|||||||||||||
|
LIBOR Plus 8.75% (Floor 1.00%), Current Coupon 9.75%, Secured Debt (MaturityAugust 7, 2019)(9) |
7,852 | 7,535 | 6,674 | ||||||||||
|
24
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
September 30, 2015
(in thousands)
(Unaudited)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Leadrock Properties, LLC |
Real Estate Investment |
|||||||||||||
|
10% Secured Debt (MaturityMay 4, 2026) |
1,440 | 1,416 | 1,416 | ||||||||||
|
||||||||||||||
Legendary Pictures Funding, LLC(10) |
Producer of TV, Film, and Comic Content |
|||||||||||||
|
LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (MaturityApril 22, 2020)(9) |
7,500 | 7,366 | 7,462 | ||||||||||
|
||||||||||||||
LKCM Headwater Investments I, L.P.(12)(13) |
Investment Partnership |
|||||||||||||
|
LP Interests (Fully diluted 2.3%)(8) |
2,250 | 4,625 | |||||||||||
|
||||||||||||||
Looking Glass Investments, LLC(12)(13) |
Specialty Consumer Finance |
|||||||||||||
|
9% Unsecured Debt (MaturityJune 30, 2020) |
188 | 188 | 188 | ||||||||||
|
Member Units (3 units) |
125 | 125 | |||||||||||
|
Member Units (LGI Predictive Analytics LLC) (190,712 units) |
188 | 188 | |||||||||||
| | | | | | | | | | | | | | |
|
501 | 501 | ||||||||||||
|
||||||||||||||
MediMedia USA, Inc.(11) |
Provider of Healthcare Media and Marketing |
|||||||||||||
|
LIBOR Plus 6.75% (Floor 1.25%), Current Coupon 8.00%, Secured Debt (MaturityNovember 20, 2018)(9) |
7,772 | 7,708 | 7,500 | ||||||||||
|
||||||||||||||
Messenger, LLC(10) |
Supplier of Specialty Stationery and Related Products to the Funeral Industry |
|||||||||||||
|
LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.25%, Secured Debt (MaturityDecember 5, 2019)(9) |
15,772 | 15,666 | 15,772 | ||||||||||
|
||||||||||||||
Milk Specialties Company(11) |
Processor of Nutrition Products |
|||||||||||||
|
LIBOR Plus 7.00% (Floor 1.25%), Current Coupon 8.25%, Secured Debt (MaturityNovember 9, 2018)(9) |
5,200 | 5,177 | 5,202 | ||||||||||
|
||||||||||||||
Minute Key, Inc. |
Operator of Automated Key Duplication Kiosks |
|||||||||||||
|
10% Current / 2% PIK Secured Debt (MaturitySeptember 19, 2019) |
10,122 | 9,770 | 9,770 | ||||||||||
|
Warrants (1,437,409 equivalent units) |
280 | 280 | |||||||||||
| | | | | | | | | | | | | | |
|
10,050 | 10,050 | ||||||||||||
|
||||||||||||||
Miramax Film NY, LLC(11) |
Motion Picture Producer and Distributor |
|||||||||||||
|
Class B Units (12% cumulative)(8) |
864 | 864 | |||||||||||
|
25
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
September 30, 2015
(in thousands)
(Unaudited)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mood Media Corporation(11)(13) |
Provider of Electronic Equipment |
|||||||||||||
|
LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (MaturityMay 1, 2019)(9) |
14,996 | 14,860 | 14,665 | ||||||||||
|
||||||||||||||
Motor Coach Industries International, Inc.(10) |
Motor Coach Manufacturer |
|||||||||||||
|
LIBOR Plus 6.50% (Floor 0.50%), Current Coupon 7.00%, Secured Debt (MaturityJuly 1, 2020)(9) |
10,000 | 9,964 | 9,964 | ||||||||||
|
||||||||||||||
New Media Holdings II LLC(11)(13) |
Local Newspaper Operator |
|||||||||||||
|
LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.25%, Secured Debt (MaturityJune 4, 2020)(9) |
14,813 | 14,570 | 14,761 | ||||||||||
|
||||||||||||||
North Atlantic Trading Company, Inc.(11) |
Marketer/Distributor of Tobacco Products |
|||||||||||||
|
LIBOR Plus 6.50% (Floor 1.25%), Current Coupon 7.75%, Secured Debt (MaturityJanuary 13, 2020)(9) |
10,366 | 10,289 | 10,288 | ||||||||||
|
||||||||||||||
Novitex Intermediate, LLC(11) |
Provider of Document Management Services |
|||||||||||||
|
LIBOR Plus 6.25% (Floor 1.25%), Current Coupon 7.50%, Secured Debt (MaturityJuly 7, 2020)(9) |
8,747 | 8,579 | 8,310 | ||||||||||
|
||||||||||||||
Ospemifene Royalty Sub LLC (QuatRx)(10) |
Estrogen-Deficiency Drug Manufacturer and Distributor |
|||||||||||||
|
11.5% Secured Debt (MaturityNovember 15, 2026) |
5,071 | 5,071 | 5,071 | ||||||||||
|
||||||||||||||
Panolam Industries International, Inc.(11) |
Decorative Laminate Manufacturer |
|||||||||||||
|
LIBOR Plus 6.50% (Floor 1.25%), Current Coupon 7.75%, Secured Debt (MaturityAugust 23, 2017)(9) |
9,613 | 9,564 | 9,517 | ||||||||||
|
||||||||||||||
Paris Presents Incorporated(11) |
Branded Cosmetic and Bath Accessories |
|||||||||||||
|
LIBOR Plus 8.25% (Floor 1.00%), Current Coupon 9.25%, Secured Debt (MaturityDecember 31, 2021)(9) |
2,000 | 1,963 | 2,000 | ||||||||||
|
||||||||||||||
Parq Holdings Limited Partnership(11)(13) |
Hotel & Casino Operator |
|||||||||||||
|
LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 8.50%, Secured Debt (MaturityDecember 17, 2020)(9) |
7,500 | 7,364 | 7,444 | ||||||||||
|
26
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
September 30, 2015
(in thousands)
(Unaudited)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Permian Holdings, Inc.(11) |
Storage Tank Manufacturer |
|||||||||||||
|
10.5% Secured Debt (MaturityJanuary 15, 2018) |
2,755 | 2,737 | 1,529 | ||||||||||
|
||||||||||||||
Pernix Therapeutics Holdings, Inc.(10) |
Pharmaceutical Royalty Anti-Migraine |
|||||||||||||
|
12% Secured Debt (MaturityAugust 1, 2020) |
3,818 | 3,818 | 4,062 | ||||||||||
|
||||||||||||||
PeroxyChem LLC(11) |
Chemical Manufacturer |
|||||||||||||
|
LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (MaturityFebruary 28, 2020)(9) |
8,855 | 8,716 | 8,855 | ||||||||||
|
||||||||||||||
Pike Corporation(11) |
Construction and Maintenance Services for Electric Transmission and Distribution Infrastructure |
|||||||||||||
|
LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.50%, Secured Debt (MaturityJune 22, 2022)(9) |
15,000 | 14,654 | 14,813 | ||||||||||
|
||||||||||||||
Point.360(10) |
Fully Integrated Provider of Digital Media Services |
|||||||||||||
|
Common Stock (163,658 shares) |
273 | 156 | |||||||||||
|
Warrants (65,463 equivalent shares) |
69 | 13 | |||||||||||
| | | | | | | | | | | | | | |
|
342 | 169 | ||||||||||||
|
||||||||||||||
Primesight Limited(10)(13) |
Outdoor Advertising Operator |
|||||||||||||
|
10% Secured Debt (MaturityOctober 22, 2016) |
8,456 | 8,419 | 7,711 | ||||||||||
|
||||||||||||||
Prowler Acquisition Corp.(11) |
Specialty Distributor to the Energy Sector |
|||||||||||||
|
LIBOR Plus 4.50% (Floor 1.00%), Current Coupon 5.50%, Secured Debt (MaturityJanuary 28, 2020)(9) |
2,696 | 2,293 | 2,345 | ||||||||||
|
||||||||||||||
PT Network, LLC(10) |
Provider of Outpatient Physical Therapy and Sports Medicine Services |
|||||||||||||
|
LIBOR Plus 7.75% (Floor 1.50%), Current Coupon 9.25%, Secured Debt (MaturityNovember 1, 2018)(9) |
14,159 | 14,042 | 14,042 | ||||||||||
|
||||||||||||||
QBS Parent, Inc.(11) |
Provider of Software and Services to the Oil & Gas Industry |
|||||||||||||
|
LIBOR Plus 4.75% (Floor 1.00%), Current Coupon 5.75%, Secured Debt (MaturityAugust 7, 2021)(9) |
11,417 | 11,328 | 11,375 | ||||||||||
|
27
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
September 30, 2015
(in thousands)
(Unaudited)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Raley's(11) |
Family-owned Supermarket Chain in California |
|||||||||||||
|
LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.25%, Secured Debt (MaturityMay 18, 2022)(9) |
7,159 | 7,021 | 7,159 | ||||||||||
|
||||||||||||||
RCHP, Inc.(11) |
Regional Non-Urban Hospital Owner/Operator |
|||||||||||||
|
LIBOR Plus 4.25% (Floor 1.00%), Current Coupon 5.25%, Secured Debt (MaturityApril 23, 2019)(9) |
7,462 | 7,429 | 7,403 | ||||||||||
|
LIBOR Plus 9.50% (Floor 1.00%), Current Coupon 10.50%, Secured Debt (MaturityOctober 23, 2019)(9) |
4,000 | 3,951 | 4,035 | ||||||||||
| | | | | | | | | | | | | | |
|
11,380 | 11,438 | ||||||||||||
|
||||||||||||||
Relativity Media, LLC(10) |
Full-Scale Film and Television Production and Distribution |
|||||||||||||
|
17% PIK Secured Debt (MaturityMay 30, 2015)(14)(18) |
7,980 | 7,980 | 2,882 | ||||||||||
|
Class A Units (260,194 units) |
292 | | |||||||||||
| | | | | | | | | | | | | | |
|
8,272 | 2,882 | ||||||||||||
|
||||||||||||||
Relevant Solutions, LLC (f/k/a LKCM Distribution Holdings, L.P.) |
Distributor of Industrial Process Equipment |
|||||||||||||
|
12% Current / 2.5% PIK Secured Debt (Maturity December 23, 2018) |
16,417 | 16,299 | 16,417 | ||||||||||
|
||||||||||||||
Renaissance Learning, Inc.(11) |
Technology-based K-12 Learning Solutions |
|||||||||||||
|
LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.00%, Secured Debt (MaturityApril 11, 2022)(9) |
3,000 | 2,974 | 2,920 | ||||||||||
|
||||||||||||||
RGL Reservoir Operations Inc.(11)(13) |
Oil & Gas Equipment and Services |
|||||||||||||
|
LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.00%, Secured Debt (MaturityAugust 13, 2021)(9) |
3,960 | 3,857 | 1,584 | ||||||||||
|
||||||||||||||
RLJ Entertainment, Inc.(10) |
Movie and TV Programming Licensee and Distributor |
|||||||||||||
|
LIBOR Plus 8.75% (Floor 0.25%), Current Coupon 9.00%, Secured Debt (MaturitySeptember 11, 2019)(9) |
9,455 | 9,449 | 9,449 | ||||||||||
|
||||||||||||||
SAExploration, Inc.(10)(13) |
Geophysical Services Provider |
|||||||||||||
|
Common Stock (6,472 shares) |
65 | 27 | |||||||||||
|
28
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
September 30, 2015
(in thousands)
(Unaudited)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sage Automotive Interiors, Inc(11) |
Automotive Textiles Manufacturer |
|||||||||||||
|
LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 9.00%, Secured Debt (MaturityOctober 8, 2021)(9) |
3,000 | 2,973 | 2,978 | ||||||||||
|
||||||||||||||
Salient Partners L.P.(11) |
Provider of Asset Management Services |
|||||||||||||
|
LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (MaturityJune 9, 2021)(9) |
7,500 | 7,356 | 7,387 | ||||||||||
|
||||||||||||||
Sotera Defense Solutions, Inc.(11) |
Defense Industry Intelligence Services |
|||||||||||||
|
LIBOR Plus 7.50% (Floor 1.50%), Current Coupon 9.00%, Secured Debt (MaturityApril 21, 2017)(9) |
10,156 | 9,882 | 9,395 | ||||||||||
|
||||||||||||||
Stardust Finance Holdings, Inc.(11) |
Manufacturer of Diversified Building Products |
|||||||||||||
|
LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 6.50%, Secured Debt (MaturityMarch 13, 2022)(9) |
12,438 | 12,264 | 12,352 | ||||||||||
|
||||||||||||||
Subsea Global Solutions, LLC(10) |
Underwater Maintenance and Repair Services |
|||||||||||||
|
LIBOR Plus 6.00% (Floor 1.50%), Current Coupon 7.50%, Secured Debt (MaturityMarch 17, 2020)(9) |
4,560 | 4,506 | 4,506 | ||||||||||
|
||||||||||||||
SUNE Utility Bridge Capital LLC(10)(13) |
Renewable Power Developer |
|||||||||||||
|
LIBOR Plus 7.00%, Current Coupon 7.29%, Secured Debt (MaturityMarch 30, 2016) |
5,000 | 4,924 | 4,924 | ||||||||||
|
||||||||||||||
Synagro Infrastructure Company, Inc(11) |
Waste Management Services |
|||||||||||||
|
LIBOR Plus 5.25% (Floor 1.00%), Current Coupon 6.25%, Secured Debt (MaturityAugust 22, 2020)(9) |
4,714 | 4,644 | 4,337 | ||||||||||
|
||||||||||||||
Targus Group International(11) |
Distributor of Protective Cases for Mobile Devices |
|||||||||||||
|
LIBOR Plus 9.50% (Floor 1.50%), Current Coupon 11.00% / 1.00% PIK, Current Coupon Plus PIK 12.00%, Secured Debt (MaturityMay 24, 2016)(9) |
4,258 | 4,263 | 3,193 | ||||||||||
|
29
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
September 30, 2015
(in thousands)
(Unaudited)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
TeleGuam Holdings, LLC(11) |
Cable and Telecom Services Provider |
|||||||||||||
|
LIBOR Plus 4.00% (Floor 1.25%), Current Coupon 5.25%, Secured Debt (MaturityDecember 10, 2018)(9) |
7,995 | 7,981 | 7,985 | ||||||||||
|
LIBOR Plus 7.50% (Floor 1.25%), Current Coupon 8.75%, Secured Debt (MaturityJune 10, 2019)(9) |
2,500 | 2,483 | 2,494 | ||||||||||
| | | | | | | | | | | | | | |
|
10,464 | 10,479 | ||||||||||||
|
||||||||||||||
Templar Energy LLC(11) |
Oil & Gas Exploration & Production |
|||||||||||||
|
LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 8.50%, Secured Debt (MaturityNovember 25, 2020)(9) |
4,000 | 3,960 | 1,817 | ||||||||||
|
||||||||||||||
The Tennis Channel, Inc.(10) |
Television-Based Sports Broadcasting |
|||||||||||||
|
Warrants (114,316 equivalent shares) |
235 | 301 | |||||||||||
|
||||||||||||||
The Topps Company, Inc.(11) |
Trading Cards & Confectionary |
|||||||||||||
|
LIBOR Plus 6.00% (Floor 1.25%), Current Coupon 7.25%, Secured Debt (MaturityOctober 2, 2018)(9) |
1,965 | 1,952 | 1,936 | ||||||||||
|
||||||||||||||
TOMS Shoes, LLC(11) |
Global Designer, Distributor, and Retailer of Casual Footwear |
|||||||||||||
|
LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 6.50%, Secured Debt (MaturityOctober 30, 2020)(9) |
4,975 | 4,539 | 4,652 | ||||||||||
|
||||||||||||||
Travel Leaders Group, LLC(11) |
Travel Agency Network Provider |
|||||||||||||
|
LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (MaturityDecember 7, 2020)(9) |
12,927 | 12,824 | 12,959 | ||||||||||
|
||||||||||||||
UniTek Global Services, Inc.(11) |
Provider of Outsourced Infrastructure Services |
|||||||||||||
|
LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 8.50%, Secured Debt (MaturityJanuary 13, 2019)(9) |
2,826 | 2,826 | 2,812 | ||||||||||
|
LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.50%, Secured Debt (MaturityJanuary 13, 2019)(9) |
1,376 | 1,376 | 1,370 | ||||||||||
|
15% PIK Unsecured Debt (MaturityJuly 13, 2019) |
618 | 618 | 615 | ||||||||||
|
Common Stock (705,054 shares) |
| 290 | |||||||||||
|
Preferred Stock (4,935,377 shares) |
4,935 | 5,430 | |||||||||||
| | | | | | | | | | | | | | |
|
9,755 | 10,517 | ||||||||||||
|
30
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
September 30, 2015
(in thousands)
(Unaudited)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Universal Fiber Systems, LLC(10) |
Manufacturer of Synthetic Fibers |
|||||||||||||
|
LIBOR Plus 4.25% (Floor 1.00%), Current Coupon 5.25%, Secured Debt (MaturityJanuary 31, 2019)(9) |
1,821 | 1,817 | 1,821 | ||||||||||
|
||||||||||||||
US Joiner Holding Company(11) |
Marine Interior Design and Installation |
|||||||||||||
|
LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (MaturityApril 16, 2020)(9) |
7,388 | 7,358 | 7,314 | ||||||||||
|
||||||||||||||
Vantage Oncology, LLC(11) |
Outpatient Radiation Oncology Treatment Centers |
|||||||||||||
|
9.5% Secured Debt (MaturityJune 15, 2017) |
12,050 | 11,920 | 10,785 | ||||||||||
|
||||||||||||||
Virtex Enterprises, LP(10) |
Specialty, Full-Service Provider of Complex Electronic Manufacturing Services |
|||||||||||||
|
12% Secured Debt (MaturityDecember 27, 2018) |
1,667 | 1,507 | 1,507 | ||||||||||
|
Preferred Class A Units (14 units; 5% cumulative)(8) |
333 | 512 | |||||||||||
|
Warrants (11 equivalent units) |
186 | 135 | |||||||||||
| | | | | | | | | | | | | | |
|
2,026 | 2,154 | ||||||||||||
|
||||||||||||||
Vision Solutions, Inc.(11) |
Provider of Information Availability Software |
|||||||||||||
|
LIBOR Plus 8.00% (Floor 1.50%), Current Coupon 9.50%, Secured Debt (MaturityJuly 23, 2017)(9) |
5,000 | 4,984 | 5,000 | ||||||||||
|
||||||||||||||
Western Dental Services, Inc.(11) |
Dental Care Services |
|||||||||||||
|
LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.00%, Secured Debt (MaturityNovember 1, 2018)(9) |
5,355 | 5,351 | 4,699 | ||||||||||
|
||||||||||||||
Wilton Brands LLC(11) |
Specialty Housewares Retailer |
|||||||||||||
|
LIBOR Plus 7.25% (Floor 1.25%), Current Coupon 8.50%, Secured Debt (MaturityAugust 30, 2018)(9) |
1,615 | 1,597 | 1,581 | ||||||||||
|
||||||||||||||
Worley Claims Services, LLC(10) |
Insurance Adjustment Management and Services Provider |
|||||||||||||
|
LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 9.00%, Secured Debt (MaturityOctober 31, 2020)(9) |
6,451 | 6,395 | 6,418 | ||||||||||
|
31
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
September 30, 2015
(in thousands)
(Unaudited)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
YP Holdings LLC(11) |
Online and Offline Advertising Operator |
|||||||||||||
|
LIBOR Plus 6.75% (Floor 1.25%), Current Coupon 8.00%, Secured Debt (MaturityJune 4, 2018)(9) |
3,000 | 2,974 | 2,980 | ||||||||||
|
||||||||||||||
Zilliant Incorporated |
Price Optimization and Margin Management Solutions |
|||||||||||||
|
Preferred Stock (186,777 shares) |
154 | 260 | |||||||||||
|
Warrants (952,500 equivalent shares) |
1,071 | 1,190 | |||||||||||
| | | | | | | | | | | | | | |
|
1,225 | 1,450 | ||||||||||||
| | | | | | | | | | | | | | |
Subtotal Non-Control/Non-Affiliate Investments (52.2% of total investments at fair value) |
1,008,980 | 976,912 | ||||||||||||
| | | | | | | | | | | | | | |
Total Portfolio Investments, September 30, 2015 |
1,723,298 | 1,867,434 | ||||||||||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
|
32
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
September 30, 2015
(in thousands)
(Unaudited)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Marketable Securities and Idle Funds Investments |
||||||||||||||
|
||||||||||||||
PennantPark Investment Corporation(13)(15) |
Business Development Company |
|||||||||||||
|
Common Stock (343,149 shares)(8) |
3,629 | 2,220 | |||||||||||
|
||||||||||||||
Triangle Capital Corporation(13)(15) |
Business Development Company |
|||||||||||||
|
Common Stock (71,481 shares)(8) |
1,606 | 1,178 | |||||||||||
|
||||||||||||||
Other Marketable Securities and Idle Funds Investments(13)(15) |
Investments in Marketable Securities and Diversified, Registered Bond Funds |
|||||||||||||
|
1,406 | 1,185 | ||||||||||||
| | | | | | | | | | | | | | |
Subtotal Marketable Securities and Idle Funds Investments (0.2% of total investments at fair value) |
6,641 | 4,583 | ||||||||||||
| | | | | | | | | | | | | | |
Total Investments, September 30, 2015 |
$ | 1,729,939 | $ | 1,872,017 | ||||||||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
33
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments
December 31, 2014
(in thousands)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Control Investments(5) |
|
|
||||||||||||
|
||||||||||||||
ASC Interests, LLC |
Recreational and Educational Shooting Facility |
|||||||||||||
|
11% Secured Debt (MaturityJuly 31, 2018) |
3,000 | 2,954 | 3,000 | ||||||||||
|
Member Units (1,500 units)(8) |
1,500 | 1,970 | |||||||||||
| | | | | | | | | | | | | | |
|
4,454 | 4,970 | ||||||||||||
|
||||||||||||||
Bond-Coat, Inc. |
Casing and Tubing Coating Services |
|||||||||||||
|
12% Secured Debt (MaturityDecember 28, 2017) |
13,570 | 13,446 | 13,570 | ||||||||||
|
Common Stock (57,508 shares) |
6,350 | 11,210 | |||||||||||
| | | | | | | | | | | | | | |
|
19,796 | 24,780 | ||||||||||||
|
||||||||||||||
Café Brazil, LLC |
Casual Restaurant Group |
|||||||||||||
|
Member Units (1,233 units)(8) |
1,742 | 6,980 | |||||||||||
|
||||||||||||||
California Healthcare Medical Billing, Inc. |
Outsourced Billing and Revenue Cycle Management |
|||||||||||||
|
9% Secured Debt (MaturityOctober 17, 2016) |
8,703 | 8,568 | 8,703 | ||||||||||
|
Warrants (466,947 equivalent shares) |
1,193 | 3,480 | |||||||||||
|
Common Stock (207,789 shares) |
1,177 | 1,460 | |||||||||||
| | | | | | | | | | | | | | |
|
10,938 | 13,643 | ||||||||||||
|
||||||||||||||
CBT Nuggets, LLC |
Produces and Sells IT Training Certification Videos |
|||||||||||||
|
Member Units (416 units)(8) |
1,300 | 27,200 | |||||||||||
|
||||||||||||||
Ceres Management, LLC (Lambs Tire & Automotive) |
Aftermarket Automotive Services Chain |
|||||||||||||
|
14% Secured Debt (MaturityMay 31, 2018) |
3,916 | 3,916 | 3,916 | ||||||||||
|
Class B Member Units (12% cumulative)(8) |
4,048 | 4,048 | |||||||||||
|
Member Units (5,460 units) |
5,273 | 2,510 | |||||||||||
|
9.5% Secured Debt (Lamb's Real Estate Investment I, LLC) (MaturityOctober 1, 2025) |
968 | 968 | 968 | ||||||||||
|
Member Units (Lamb's Real Estate Investment I, LLC) (1,000 units)(8) |
625 | 1,240 | |||||||||||
| | | | | | | | | | | | | | |
|
14,830 | 12,682 | ||||||||||||
|
||||||||||||||
Datacom, LLC |
Technology and Telecommunications Provider |
|||||||||||||
|
10.5% Secured Debt (MaturityMay 31, 2019) |
11,205 | 11,103 | 11,103 | ||||||||||
|
Preferred Member Units (6,453 units) |
6,030 | 6,030 | |||||||||||
| | | | | | | | | | | | | | |
|
17,133 | 17,133 | ||||||||||||
|
34
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
December 31, 2014
(in thousands)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Garreco, LLC |
Manufacturer and Supplier of Dental Products |
|||||||||||||
|
14% Secured Debt (MaturityJanuary 12, 2018) |
5,400 | 5,320 | 5,320 | ||||||||||
|
Member Units (1,200 units)(8) |
1,200 | 1,360 | |||||||||||
| | | | | | | | | | | | | | |
|
6,520 | 6,680 | ||||||||||||
|
||||||||||||||
GRT Rubber Technologies LLC |
Engineered Rubber Product Manufacturer |
|||||||||||||
|
LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.00%, Secured Debt (MaturityDecember 19, 2019)(9) |
16,750 | 16,585 | 16,585 | ||||||||||
|
Member Units (5,879 units) |
13,065 | 13,065 | |||||||||||
| | | | | | | | | | | | | | |
|
29,650 | 29,650 | ||||||||||||
|
||||||||||||||
Gulf Manufacturing, LLC |
Manufacturer of Specialty Fabricated Industrial Piping Products |
|||||||||||||
|
9% PIK Secured Debt (Ashland Capital IX, LLC) (MaturityJune 30, 2017) |
744 | 744 | 744 | ||||||||||
|
Member Units (438 units)(8) |
2,980 | 16,540 | |||||||||||
| | | | | | | | | | | | | | |
|
3,724 | 17,284 | ||||||||||||
|
||||||||||||||
Harrison Hydra-Gen, Ltd. |
Manufacturer of Hydraulic Generators |
|||||||||||||
|
12% Secured Debt (MaturityJune 4, 2015) |
5,487 | 5,409 | 5,487 | ||||||||||
|
Preferred Stock (8% cumulative)(8) |
1,260 | 1,260 | |||||||||||
|
Common Stock (105,880 shares) |
718 | 1,830 | |||||||||||
| | | | | | | | | | | | | | |
|
7,387 | 8,577 | ||||||||||||
|
||||||||||||||
Hawthorne Customs and Dispatch Services, LLC |
Facilitator of Import Logistics, Brokerage, and Warehousing |
|||||||||||||
|
Member Units (500 units)(8) |
589 | 370 | |||||||||||
|
Member Units (Wallisville Real Estate, LLC) (588,210 units)(8) |
1,215 | 2,220 | |||||||||||
| | | | | | | | | | | | | | |
|
1,804 | 2,590 | ||||||||||||
|
||||||||||||||
Hydratec, Inc. |
Designer and Installer of Micro-Irrigation Systems |
|||||||||||||
|
Common Stock (7,095 shares)(8) |
7,095 | 13,720 | |||||||||||
|
||||||||||||||
IDX Broker, LLC |
Provider of Marketing and CRM Tools for the Real Estate Industry |
|||||||||||||
|
LIBOR Plus 6.50% (Floor 1.50%), Current Coupon 8.00%, Secured Debt (MaturityNovember 18, 2018)(9) |
125 | 125 | 125 | ||||||||||
|
12.5% Secured Debt (MaturityNovember 18, 2018) |
10,571 | 10,483 | 10,571 | ||||||||||
|
Member Units (5,029 units) |
5,029 | 5,450 | |||||||||||
| | | | | | | | | | | | | | |
|
15,637 | 16,146 | ||||||||||||
|
35
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
December 31, 2014
(in thousands)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Impact Telecom, Inc. |
Telecommunications Services Provider |
|||||||||||||
|
LIBOR Plus 6.50% (Floor 2.00%), Current Coupon 8.50%, Secured Debt (MaturityMay 31, 2018)(9) |
1,575 | 1,569 | 1,569 | ||||||||||
|
13% Secured Debt (MaturityMay 31, 2018) |
22,500 | 15,515 | 15,515 | ||||||||||
|
Warrants (5,516,667 equivalent shares) |
8,000 | 4,160 | |||||||||||
| | | | | | | | | | | | | | |
|
25,084 | 21,244 | ||||||||||||
|
||||||||||||||
Indianapolis Aviation Partners, LLC |
Fixed Base Operator |
|||||||||||||
|
15% Secured Debt (MaturityJanuary 15, 2015) |
3,100 | 3,100 | 3,100 | ||||||||||
|
Warrants (1,046 equivalent units) |
1,129 | 2,540 | |||||||||||
| | | | | | | | | | | | | | |
|
4,229 | 5,640 | ||||||||||||
|
||||||||||||||
Jensen Jewelers of Idaho, LLC |
Retail Jewelry Store |
|||||||||||||
|
Prime Plus 6.75% (Floor 3.25%), Current Coupon 10.00%, Secured Debt (MaturityNovember 14, 2016)(9) |
3,655 | 3,618 | 3,655 | ||||||||||
|
Member Units (627 units)(8) |
811 | 3,580 | |||||||||||
| | | | | | | | | | | | | | |
|
4,429 | 7,235 | ||||||||||||
|
||||||||||||||
Lighting Unlimited, LLC |
Commercial and Residential Lighting Products and Design Services |
|||||||||||||
|
8% Secured Debt (MaturityAugust 22, 2015) |
1,550 | 1,550 | 1,550 | ||||||||||
|
Preferred Equity (non-voting) |
439 | 439 | |||||||||||
|
Warrants (71 equivalent units) |
54 | 40 | |||||||||||
|
Member Units (700 units)(8) |
100 | 360 | |||||||||||
| | | | | | | | | | | | | | |
|
2,143 | 2,389 | ||||||||||||
|
||||||||||||||
Marine Shelters Holdings, LLC (LoneStar Marine Shelters) |
Fabricator of Marine and Industrial Shelters |
|||||||||||||
|
12% Secured Debt (MaturityDecember 28, 2017) |
10,250 | 10,112 | 10,112 | ||||||||||
|
Preferred Member Units (2,669 units) |
3,750 | 3,750 | |||||||||||
| | | | | | | | | | | | | | |
|
13,862 | 13,862 | ||||||||||||
|
||||||||||||||
Mid-Columbia Lumber Products, LLC |
Manufacturer of Finger-Jointed Lumber Products |
|||||||||||||
|
10% Secured Debt (MaturityDecember 18, 2017) |
1,750 | 1,750 | 1,750 | ||||||||||
|
12% Secured Debt (MaturityDecember 18, 2017) |
3,900 | 3,900 | 3,900 | ||||||||||
|
Member Units (2,829 units)(8) |
1,244 | 10,180 | |||||||||||
|
9.5% Secured Debt (Mid-Columbia Real Estate, LLC) (MaturityMay 13, 2025) |
927 | 927 | 927 | ||||||||||
|
Member Units (Mid-Columbia Real Estate, LLC) (250 units)(8) |
250 | 550 | |||||||||||
| | | | | | | | | | | | | | |
|
8,071 | 17,307 | ||||||||||||
|
36
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
December 31, 2014
(in thousands)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
MSC Adviser I, LLC(16) |
Third Party Investment Advisory Services |
|||||||||||||
|
Member Units (Fully diluted 100.0%)(8) |
| 15,580 | |||||||||||
|
||||||||||||||
Mystic Logistics, Inc |
Logistics and Distribution Services Provider for Large Volume Mailers |
|||||||||||||
|
12% Secured Debt (MaturityAugust 15, 2019) |
10,000 | 9,790 | 9,790 | ||||||||||
|
Common Stock (5,873 shares) |
2,720 | 2,720 | |||||||||||
| | | | | | | | | | | | | | |
|
12,510 | 12,510 | ||||||||||||
|
||||||||||||||
NAPCO Precast, LLC |
Precast Concrete Manufacturing |
|||||||||||||
|
Prime Plus 2.00% (Floor 7.00%), Current Coupon 9.00%, Secured Debt (MaturitySeptember 1, 2015)(9) |
625 | 615 | 625 | ||||||||||
|
Prime Plus 2.00% (Floor 7.00%), Current Coupon 9.00%, Secured Debt (MaturityFebruary 1, 2016)(9) |
2,923 | 2,915 | 2,923 | ||||||||||
|
18% Secured Debt (MaturityFebruary 1, 2016) |
4,468 | 4,440 | 4,468 | ||||||||||
|
Member Units (2,955 units)(8) |
2,975 | 7,560 | |||||||||||
| | | | | | | | | | | | | | |
|
10,945 | 15,576 | ||||||||||||
|
||||||||||||||
NRI Clinical Research, LLC |
Clinical Research Service Provider |
|||||||||||||
|
14% Secured Debt (MaturitySeptember 8, 2016) |
4,889 | 4,779 | 4,779 | ||||||||||
|
Warrants (251,723 equivalent units) |
252 | 160 | |||||||||||
|
Member Units (671,233 units) |
671 | 722 | |||||||||||
| | | | | | | | | | | | | | |
|
5,702 | 5,661 | ||||||||||||
|
||||||||||||||
NRP Jones, LLC |
Manufacturer of Hoses, Fittings and Assemblies |
|||||||||||||
|
12% Secured Debt (MaturityDecember 22, 2016) |
12,100 | 11,590 | 11,590 | ||||||||||
|
Warrants (14,331 equivalent units) |
817 | 970 | |||||||||||
|
Member Units (50,877 units)(8) |
2,900 | 3,190 | |||||||||||
| | | | | | | | | | | | | | |
|
15,307 | 15,750 | ||||||||||||
|
||||||||||||||
OMi Holdings, Inc. |
Manufacturer of Overhead Cranes |
|||||||||||||
|
Common Stock (1,500 shares)(8) |
1,080 | 13,420 | |||||||||||
|
||||||||||||||
Pegasus Research Group, LLC (Televerde) |
Provider of Telemarketing and Data Services |
|||||||||||||
|
Member Units (460 units)(8) |
1,290 | 5,860 | |||||||||||
|
||||||||||||||
PPL RVs, Inc. |
Recreational Vehicle Dealer |
|||||||||||||
|
11.1% Secured Debt (MaturityJune 10, 2015) |
7,860 | 7,848 | 7,860 | ||||||||||
|
Common Stock (1,961 shares) |
2,150 | 8,160 | |||||||||||
| | | | | | | | | | | | | | |
|
9,998 | 16,020 | ||||||||||||
|
37
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
December 31, 2014
(in thousands)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Principle Environmental, LLC |
Noise Abatement Service Provider |
|||||||||||||
|
12% Secured Debt (MaturityApril 30, 2017) |
4,060 | 3,813 | 4,060 | ||||||||||
|
12% Current / 2% PIK Secured Debt (MaturityApril 30, 2017) |
3,244 | 3,227 | 3,244 | ||||||||||
|
Preferred Member Units (19,631 units) |
4,663 | 11,830 | |||||||||||
|
Warrants (1,036 equivalent units) |
1,200 | 720 | |||||||||||
| | | | | | | | | | | | | | |
|
12,903 | 19,854 | ||||||||||||
|
||||||||||||||
River Aggregates, LLC |
Processor of Construction Aggregates |
|||||||||||||
|
Zero Coupon Secured Debt (MaturityJune 30, 2018) |
750 | 468 | 468 | ||||||||||
|
12% Secured Debt (MaturityJune 30, 2018) |
500 | 500 | 500 | ||||||||||
|
Member Units (1,150 units)(8) |
1,150 | 2,570 | |||||||||||
|
Member Units (RA Properties, LLC) (1,500 units) |
369 | 369 | |||||||||||
| | | | | | | | | | | | | | |
|
2,487 | 3,907 | ||||||||||||
|
||||||||||||||
SoftTouch Medical Holdings LLC |
Home Provider of Pediatric Durable Medical Equipment |
|||||||||||||
|
LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.00%, Secured Debt (MaturityOctober 31, 2019)(9) |
8,500 | 8,417 | 8,417 | ||||||||||
|
Member Units (4,526 units) |
5,015 | 5,015 | |||||||||||
| | | | | | | | | | | | | | |
|
13,432 | 13,432 | ||||||||||||
|
||||||||||||||
Southern RV, LLC |
Recreational Vehicle Dealer |
|||||||||||||
|
13% Secured Debt (MaturityAugust 8, 2018) |
11,400 | 11,266 | 11,400 | ||||||||||
|
Member Units (1,680 units)(8) |
1,680 | 4,920 | |||||||||||
|
13% Secured Debt (Southern RV Real Estate, LLC) (MaturityAugust 8, 2018) |
3,250 | 3,212 | 3,250 | ||||||||||
|
Member Units (Southern RV Real Estate, LLC) (480 units) |
480 | 470 | |||||||||||
| | | | | | | | | | | | | | |
|
16,638 | 20,040 | ||||||||||||
|
||||||||||||||
The MPI Group, LLC |
Manufacturer of Custom Hollow Metal Doors, Frames and Accessories |
|||||||||||||
|
9% Secured Debt (MaturityOctober 8, 2018) |
2,724 | 2,724 | 2,724 | ||||||||||
|
Series A Preferred Units (2,500 units; 10% Cumulative) |
2,500 | 980 | |||||||||||
|
Warrants (1,424 equivalent units) |
1,096 | | |||||||||||
|
Member Units (MPI Real Estate Holdings, LLC) (100% Fully diluted)(8) |
2,300 | 2,300 | |||||||||||
| | | | | | | | | | | | | | |
|
8,620 | 6,004 | ||||||||||||
|
38
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
December 31, 2014
(in thousands)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Travis Acquisition LLC |
Manufacturer of Aluminum Trailers |
|||||||||||||
|
12% Secured Debt (MaturityAugust 30, 2018) |
4,693 | 4,617 | 4,693 | ||||||||||
|
Member Units (7,282 units) |
7,100 | 13,650 | |||||||||||
| | | | | | | | | | | | | | |
|
11,717 | 18,343 | ||||||||||||
|
||||||||||||||
Uvalco Supply, LLC |
Farm and Ranch Supply Store |
|||||||||||||
|
9% Secured Debt (MaturityJanuary 1, 2019) |
1,802 | 1,802 | 1,802 | ||||||||||
|
Member Units (1,006 units)(8) |
1,113 | 3,500 | |||||||||||
| | | | | | | | | | | | | | |
|
2,915 | 5,302 | ||||||||||||
|
||||||||||||||
Vision Interests, Inc. |
Manufacturer / Installer of Commercial Signage |
|||||||||||||
|
13% Secured Debt (MaturityDecember 23, 2016) |
3,204 | 3,169 | 3,154 | ||||||||||
|
Series A Preferred Stock (3,000,000 shares) |
3,000 | 3,250 | |||||||||||
|
Common Stock (1,126,242 shares) |
3,706 | 100 | |||||||||||
| | | | | | | | | | | | | | |
|
9,875 | 6,504 | ||||||||||||
|
||||||||||||||
Ziegler's NYPD, LLC |
Casual Restaurant Group |
|||||||||||||
|
Prime Plus 2.00% (Floor 7.00%), Current Coupon 9.00%, Secured Debt (MaturityOctober 1, 2018)(9) |
1,500 | 1,491 | 1,491 | ||||||||||
|
9% Current / 9% PIK Secured Debt (MaturityOctober 1, 2018) |
5,509 | 5,509 | 4,880 | ||||||||||
|
Warrants (587 equivalent units) |
600 | | |||||||||||
| | | | | | | | | | | | | | |
|
7,600 | 6,371 | ||||||||||||
| | | | | | | | | | | | | | |
Subtotal Control Investments (29.9% of total investments at fair value) |
342,847 | 469,846 | ||||||||||||
| | | | | | | | | | | | | | |
|
39
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
December 31, 2014
(in thousands)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Affiliate Investments(6) |
|
|
||||||||||||
|
||||||||||||||
AFG Capital Group, LLC |
Provider of Rent-to-Own Financing Solutions and Services |
|||||||||||||
|
11% Secured Debt (MaturityNovember 7, 2019) |
6,800 | 6,465 | 6,465 | ||||||||||
|
Warrants (42 equivalent units) |
259 | 259 | |||||||||||
|
Member Units (186 units) |
1,200 | 1,200 | |||||||||||
| | | | | | | | | | | | | | |
|
7,924 | 7,924 | ||||||||||||
|
||||||||||||||
Boss Industries, LLC |
Manufacturer and Distributor of Air, Power and Other Industrial Equipment |
|||||||||||||
|
Preferred Member Units (2,242 units) |
2,000 | 2,000 | |||||||||||
|
||||||||||||||
Bridge Capital Solutions Corporation |
Financial Services and Cash Flow Solutions Provider |
|||||||||||||
|
13% Secured Debt (MaturityApril 18, 2017) |
6,000 | 5,837 | 5,837 | ||||||||||
|
Warrants (19 equivalent shares) |
200 | 710 | |||||||||||
| | | | | | | | | | | | | | |
|
6,037 | 6,547 | ||||||||||||
|
||||||||||||||
Brightwood Capital Fund III, LP(12)(13) |
Investment Partnership |
|||||||||||||
|
LP Interests (Brightwood Capital Fund III, LP) (Fully diluted 9.1%)(8) |
8,448 | 8,448 | |||||||||||
|
||||||||||||||
CAI Software LLC |
Provider of Specialized Enterprise Resource Planning Software |
|||||||||||||
|
12% Secured Debt (MaturityOctober 10, 2019) |
5,400 | 5,348 | 5,348 | ||||||||||
|
Member Units (65,356 units) |
654 | 654 | |||||||||||
| | | | | | | | | | | | | | |
|
6,002 | 6,002 | ||||||||||||
|
||||||||||||||
Condit Exhibits, LLC |
Tradeshow Exhibits / Custom Displays Provider |
|||||||||||||
|
Member Units (3,936 units)(8) |
100 | 610 | |||||||||||
|
||||||||||||||
Congruent Credit Opportunities Funds(12)(13) |
Investment Partnership |
|||||||||||||
|
LP Interests (Congruent Credit Opportunities Fund II, LP) (Fully diluted 19.8%)(8) |
18,575 | 18,378 | |||||||||||
|
LP Interests (Congruent Credit Opportunities Fund III, LP) (Fully diluted 17.4%)(8) |
7,734 | 7,734 | |||||||||||
| | | | | | | | | | | | | | |
|
26,309 | 26,112 | ||||||||||||
|
||||||||||||||
Daseke, Inc. |
Specialty Transportation Provider |
|||||||||||||
|
12% Current / 2.5% PIK Secured Debt (MaturityJuly 31, 2018) |
20,723 | 20,403 | 20,723 | ||||||||||
|
Common Stock (19,467 shares) |
5,213 | 13,780 | |||||||||||
| | | | | | | | | | | | | | |
|
25,616 | 34,503 | ||||||||||||
|
40
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
December 31, 2014
(in thousands)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dos Rios Partners(12)(13) |
Investment Partnership |
|||||||||||||
|
LP Interests (Dos Rios Partners, LP) (Fully diluted 20.2%)(8) |
2,325 | 2,325 | |||||||||||
|
LP Interests (Dos Rios PartnersA, LP) (Fully diluted 6.4%)(8) |
738 | 738 | |||||||||||
| | | | | | | | | | | | | | |
|
3,063 | 3,063 | ||||||||||||
|
||||||||||||||
East Teak Fine Hardwoods, Inc. |
Distributor of Hardwood Products |
|||||||||||||
|
Common Stock (5,000 shares)(8) |
480 | 860 | |||||||||||
|
||||||||||||||
East West Copolymer & Rubber, LLC |
Manufacturer of Synthetic Rubbers |
|||||||||||||
|
12% Secured Debt (MaturityOctober 17, 2019) |
9,600 | 9,436 | 9,436 | ||||||||||
|
Warrants (1,823,278 equivalent units) |
50 | 50 | |||||||||||
| | | | | | | | | | | | | | |
|
9,486 | 9,486 | ||||||||||||
|
||||||||||||||
Freeport Financial SBIC Fund LP(12)(13) |
Investment Partnership |
|||||||||||||
|
LP Interests (Fully diluted 9.9%)(8) |
4,677 | 4,677 | |||||||||||
|
||||||||||||||
Gault Financial, LLC (RMB Capital, LLC) |
Purchases and Manages Liquidation of Distressed Assets |
|||||||||||||
|
10% Secured Debt (MaturityNovember 21, 2016) |
13,046 | 12,749 | 10,782 | ||||||||||
|
Warrants (29,025 equivalent units) |
400 | | |||||||||||
| | | | | | | | | | | | | | |
|
13,149 | 10,782 | ||||||||||||
|
||||||||||||||
Glowpoint, Inc. |
Provider of Cloud Managed Video Collaboration Services |
|||||||||||||
|
8% Secured Debt (MaturityOctober 18, 2018) |
400 | 396 | 396 | ||||||||||
|
12% Secured Debt (MaturityOctober 18, 2018) |
9,000 | 8,909 | 8,909 | ||||||||||
|
Common Stock (7,711,517 shares) |
3,958 | 8,480 | |||||||||||
| | | | | | | | | | | | | | |
|
13,263 | 17,785 | ||||||||||||
|
||||||||||||||
Guerdon Modular Holdings, Inc. |
Multi-Family and Commercial Modular Construction Company |
|||||||||||||
|
11% Secured Debt (MaturityAugust 13, 2019) |
11,200 | 11,044 | 11,044 | ||||||||||
|
Common Stock (213,221 shares) |
2,400 | 2,400 | |||||||||||
| | | | | | | | | | | | | | |
|
13,444 | 13,444 | ||||||||||||
|
||||||||||||||
Houston Plating and Coatings, LLC |
Provider of Plating and Industrial Coating Services |
|||||||||||||
|
Member Units (248,082 units)(8) |
996 | 11,470 | |||||||||||
|
41
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
December 31, 2014
(in thousands)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Indianhead Pipeline Services, LLC |
Provider of Pipeline Support Services |
|||||||||||||
|
12% Secured Debt (MaturityFebruary 6, 2017) |
6,900 | 6,625 | 6,625 | ||||||||||
|
Preferred Member Units (28,905 units; 8% cumulative)(8) |
1,960 | 1,960 | |||||||||||
|
Warrants (38,193 equivalent units) |
459 | | |||||||||||
|
Member Units (14,732 units) |
1 | | |||||||||||
| | | | | | | | | | | | | | |
|
9,045 | 8,585 | ||||||||||||
|
||||||||||||||
irth Solutions, LLC |
Provider of Damage Prevention Information Technology Services |
|||||||||||||
|
Member Units (128 units)(8) |
624 | 3,960 | |||||||||||
|
||||||||||||||
KBK Industries, LLC |
Specialty Manufacturer of Oilfield and Industrial Products |
|||||||||||||
|
12.5% Secured Debt (MaturitySeptember 28, 2017) |
8,250 | 8,198 | 8,250 | ||||||||||
|
Member Units (250 units)(8) |
341 | 6,120 | |||||||||||
| | | | | | | | | | | | | | |
|
8,539 | 14,370 | ||||||||||||
|
||||||||||||||
L.F. Manufacturing Holdings, LLC(10) |
Manufacturer of Fiberglass Products |
|||||||||||||
|
Member Units (2,000,000 units)(8) |
2,019 | 2,374 | |||||||||||
|
||||||||||||||
MPS Denver, LLC |
Specialty Card Printing |
|||||||||||||
|
Member Units (13,800 units) |
1,130 | 1,130 | |||||||||||
|
||||||||||||||
OnAsset Intelligence, Inc. |
Provider of Transportation Monitoring / Tracking Products and Services |
|||||||||||||
|
12% PIK Secured Debt (MaturityMarch 31, 2015) |
3,553 | 3,553 | 3,553 | ||||||||||
|
Preferred Stock (912 shares; 7% cumulative)(8) |
1,947 | 2,700 | |||||||||||
|
Warrants (5,333 equivalent shares) |
1,919 | | |||||||||||
| | | | | | | | | | | | | | |
|
7,419 | 6,253 | ||||||||||||
|
||||||||||||||
OPI International Ltd.(13) |
Provider of Man Camp and Industrial Storage Services |
|||||||||||||
|
Common Stock (20,766,317 shares) |
1,371 | 4,971 | |||||||||||
|
||||||||||||||
PCI Holding Company, Inc. |
Manufacturer of Industrial Gas Generating Systems |
|||||||||||||
|
Preferred Stock (1,500,000 shares; 20% cumulative)(8) |
2,259 | 4,430 | |||||||||||
|
42
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
December 31, 2014
(in thousands)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Quality Lease and Rental Holdings, LLC |
Provider of Rigsite Accommodation Unit Rentals and Related Services |
|||||||||||||
|
8% Secured Debt (MaturityOctober 1, 2014)(14)(18) |
157 | 157 | 157 | ||||||||||
|
12% Secured Debt (MaturityJanuary 8, 2018)(14)(18) |
36,577 | 36,073 | 11,500 | ||||||||||
|
Preferred Member Units (Rocaciea, LLC) (250 units) |
2,500 | | |||||||||||
| | | | | | | | | | | | | | |
|
38,730 | 11,657 | ||||||||||||
|
||||||||||||||
Radial Drilling Services Inc. |
Oil and Gas Technology Provider |
|||||||||||||
|
12% Secured Debt (MaturityNovember 22, 2016) |
4,200 | 3,792 | 3,792 | ||||||||||
|
Warrants (316 equivalent shares) |
758 | | |||||||||||
| | | | | | | | | | | | | | |
|
4,550 | 3,792 | ||||||||||||
|
||||||||||||||
Samba Holdings, Inc. |
Provider of Intelligent Driver Record Monitoring Software and Services |
|||||||||||||
|
12.5% Secured Debt (MaturityNovember 17, 2016) |
26,418 | 26,188 | 26,418 | ||||||||||
|
Common Stock (170,963 shares) |
2,087 | 6,030 | |||||||||||
| | | | | | | | | | | | | | |
|
28,275 | 32,448 | ||||||||||||
|
||||||||||||||
SYNEO, LLC |
Manufacturer of Automation Machines, Specialty Cutting Tools and Punches |
|||||||||||||
|
12% Secured Debt (MaturityJuly 13, 2016) |
2,700 | 2,674 | 2,674 | ||||||||||
|
Member Units (1,177 units)(8) |
1,097 | 801 | |||||||||||
|
10% Secured Debt (Leadrock Properties, LLC) (MaturityMay 4, 2026) |
1,440 | 1,415 | 1,415 | ||||||||||
| | | | | | | | | | | | | | |
|
5,186 | 4,890 | ||||||||||||
|
||||||||||||||
Tin Roof Acquisition Company |
Casual Restaurant Group |
|||||||||||||
|
12% Secured Debt (MaturityNovember 30, 2018) |
14,100 | 13,861 | 13,861 | ||||||||||
|
Class C Preferred Stock (Fully diluted 10.0%; 10% cumulative)(8) |
2,241 | 2,241 | |||||||||||
| | | | | | | | | | | | | | |
|
16,102 | 16,102 | ||||||||||||
| | | | | | | | | | | | | | |
Subtotal Affiliate Investments (17.7% of total investments at fair value) |
266,243 | 278,675 | ||||||||||||
| | | | | | | | | | | | | | |
43
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
December 31, 2014
(in thousands)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Non-Control/Non-Affiliate Investments(7) |
||||||||||||||
|
||||||||||||||
Accuvant Finance, LLC(11) |
Cyber Security Value Added Reseller |
|||||||||||||
|
LIBOR Plus 4.75% (Floor 1.00%), Current Coupon 5.75%, Secured Debt (MaturityOctober 22, 2020)(9) |
5,597 | 5,546 | 5,583 | ||||||||||
|
||||||||||||||
Allflex Holdings III Inc.(11) |
Manufacturer of Livestock Identification Products |
|||||||||||||
|
LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.00%, Secured Debt (MaturityJuly 19, 2021)(9) |
6,000 | 5,937 | 5,888 | ||||||||||
|
||||||||||||||
AM General LLC(11) |
Specialty Vehicle Manufacturer |
|||||||||||||
|
LIBOR Plus 9.00% (Floor 1.25%), Current Coupon 10.25%, Secured Debt (MaturityMarch 22, 2018)(9) |
2,550 | 2,496 | 2,282 | ||||||||||
|
||||||||||||||
AM3 Pinnacle Corporation(10) |
Provider of Comprehensive Internet, TV and Voice Services for Multi-Dwelling Unit Properties |
|||||||||||||
|
10% Secured Debt (MaturityOctober 22, 2018) |
21,002 | 20,863 | 20,863 | ||||||||||
|
Common Stock (60,240 shares) |
2,000 | 1,840 | |||||||||||
| | | | | | | | | | | | | | |
|
22,863 | 22,703 | ||||||||||||
|
||||||||||||||
AmeriTech College, LLC |
For-Profit Nursing and Healthcare College |
|||||||||||||
|
10% Secured Debt (MaturityNovember 30, 2019) |
979 | 979 | 979 | ||||||||||
|
10% Secured Debt (MaturityJanuary 31, 2020) |
6,050 | 6,050 | 6,050 | ||||||||||
| | | | | | | | | | | | | | |
|
7,029 | 7,029 | ||||||||||||
|
||||||||||||||
AMF Bowling Centers, Inc.(11) |
Bowling Alley Operator |
|||||||||||||
|
LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.25%, Secured Debt (MaturitySeptember 18, 2021)(9) |
4,988 | 4,915 | 4,913 | ||||||||||
|
||||||||||||||
Anchor Hocking, LLC(11) |
Household Products Manufacturer |
|||||||||||||
|
LIBOR Plus 6.50% (Floor 1.25%), Current Coupon 7.75% / 1.75% PIK, Current Coupon Plus PIK 9.50%, Secured Debt (MaturityMay 21, 2020)(9) |
10,916 | 10,842 | 6,559 | ||||||||||
|
||||||||||||||
AP Gaming I, LLC(10) |
Developer, Manufacturer, and Operator of Gaming Machines |
|||||||||||||
|
LIBOR Plus 8.25% (Floor 1.00%), Current Coupon 9.25%, Secured Debt (MaturityDecember 20, 2020)(9) |
6,930 | 6,744 | 6,930 | ||||||||||
|
44
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
December 31, 2014
(in thousands)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Applied Products, Inc.(10) |
Adhesives Distributor |
|||||||||||||
|
LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (MaturitySeptember 30, 2019)(9) |
6,236 | 6,170 | 6,170 | ||||||||||
|
||||||||||||||
Aptean, Inc.(11) |
Enterprise Application Software Provider |
|||||||||||||
|
LIBOR Plus 4.25% (Floor 1.00%), Current Coupon 5.25%, Secured Debt (MaturityFebruary 26, 2020)(9) |
7,667 | 7,642 | 7,450 | ||||||||||
|
||||||||||||||
Artel, LLC(11) |
Land-Based and Commercial Satellite Provider |
|||||||||||||
|
LIBOR Plus 6.00% (Floor 1.25%), Current Coupon 7.25%, Secured Debt (MaturityNovember 27, 2017)(9) |
4,594 | 4,549 | 4,548 | ||||||||||
|
||||||||||||||
ATS Workholding, Inc.(10) |
Manufacturer of Machine Cutting Tools and Accessories |
|||||||||||||
|
LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.00%, Secured Debt (MaturityMarch 10, 2019)(9) |
6,558 | 6,506 | 6,506 | ||||||||||
|
||||||||||||||
Beers Enterprises, Inc.(10) |
Provider of Broadcast Video Transport Services |
|||||||||||||
|
Prime Plus 7.50% (Floor 1.00%), Current Coupon 8.50%, Secured Debt (MaturityMarch 19, 2019)(9) |
6,263 | 6,210 | 6,210 | ||||||||||
|
||||||||||||||
Bioventus LLC(10) |
Production of Orthopedic Healing Products |
|||||||||||||
|
LIBOR Plus 10.00% (Floor 1.00%), Current Coupon 11.00%, Secured Debt (MaturityApril 10, 2020)(9) |
5,000 | 4,903 | 4,987 | ||||||||||
|
||||||||||||||
Blackbrush Oil and Gas LP(11) |
Oil & Gas Exploration |
|||||||||||||
|
LIBOR Plus 6.50%, (Floor 1.00%), Current Coupon 7.50%, Secured Debt (MaturityJuly 30, 2021)(9) |
4,000 | 3,971 | 3,320 | ||||||||||
|
||||||||||||||
Blackhawk Specialty Tools LLC(11) |
Oilfield Equipment & Services |
|||||||||||||
|
LIBOR Plus 5.25% (Floor 1.25%), Current Coupon 6.50%, Secured Debt (MaturityAugust 1, 2019)(9) |
6,224 | 6,189 | 6,131 | ||||||||||
|
||||||||||||||
Blue Bird Body Company(11) |
School Bus Manufacturer |
|||||||||||||
|
LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 6.50%, Secured Debt (MaturityJune 26, 2020)(9) |
11,500 | 11,339 | 11,443 | ||||||||||
|
||||||||||||||
Bluestem Brands, Inc.(11) |
Multi-Channel Retailer of General Merchandise |
|||||||||||||
|
LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 8.50%, Secured Debt (MaturityNovember 6, 2020)(9) |
7,500 | 7,213 | 7,237 | ||||||||||
|
45
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
December 31, 2014
(in thousands)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Brainworks Software, LLC(10) |
Advertising Sales and Production and Newspaper Circulation Software |
|||||||||||||
|
LIBOR Plus 8.25% (Floor 1.00%), Current Coupon 9.25%, Secured Debt (MaturityJuly 22, 2019)(9) |
6,263 | 6,182 | 6,182 | ||||||||||
|
||||||||||||||
Brasa Holdings Inc.(11) |
Upscale Full Service Restaurants |
|||||||||||||
|
LIBOR Plus 9.50% (Floor 1.50%), Current Coupon 11.00%, Secured Debt (MaturityJanuary 20, 2020)(9) |
2,143 | 2,128 | 2,121 | ||||||||||
|
||||||||||||||
Brundage-Bone Concrete Pumping, Inc.(11) |
Construction Services Provider |
|||||||||||||
|
10.375% Secured Debt (MaturitySeptember 1, 2021) |
2,500 | 2,500 | 2,556 | ||||||||||
|
||||||||||||||
Calloway Laboratories, Inc.(10) |
Health Care Testing Facilities |
|||||||||||||
|
12% PIK Secured Debt (MaturitySeptember 30, 2015)(14) |
7,225 | 7,176 | 2,878 | ||||||||||
|
Warrants (125,000 equivalent shares) |
17 | | |||||||||||
| | | | | | | | | | | | | | |
|
7,193 | 2,878 | ||||||||||||
|
||||||||||||||
Cedar Bay Generation Company LP(11) |
Coal-Fired Cogeneration Plant |
|||||||||||||
|
LIBOR Plus 5.00% (Floor 1.25%), Current Coupon 6.25%, Secured Debt (MaturityApril 23, 2020)(9) |
2,476 | 2,457 | 2,458 | ||||||||||
|
||||||||||||||
Cengage Learning Acquisitions, Inc.(11) |
Provider of Educational Print and Digital Services |
|||||||||||||
|
LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (MaturityMarch 31, 2020)(9) |
4,000 | 3,990 | 3,975 | ||||||||||
|
||||||||||||||
CGSC of Delaware Holdings Corp.(11)(13) |
Insurance Brokerage Firm |
|||||||||||||
|
LIBOR Plus 7.00% (Floor 1.25%), Current Coupon 8.25%, Secured Debt (MaturityOctober 16, 2020)(9) |
2,000 | 1,975 | 1,780 | ||||||||||
|
||||||||||||||
Charlotte Russe, Inc(11) |
Fast-Fashion Retailer to Young Women |
|||||||||||||
|
LIBOR Plus 5.50% (Floor 1.25%), Current Coupon 6.75%, Secured Debt (MaturityMay 22, 2019)(9) |
4,938 | 4,900 | 4,822 | ||||||||||
|
||||||||||||||
CHI Overhead Doors, Inc.(11) |
Manufacturer of Overhead Garage Doors |
|||||||||||||
|
LIBOR Plus 9.50%, (Floor 1.50%), Current Coupon 11.00%, Secured Debt (MaturitySeptember 18, 2019)(9) |
2,500 | 2,467 | 2,475 | ||||||||||
|
46
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
December 31, 2014
(in thousands)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Clarius ASIG, LLC(10) |
Prints & Advertising Film Financing |
|||||||||||||
|
12% PIK Secured Debt (MaturitySeptember 14, 2014)(17) |
2,723 | 2,663 | 2,723 | ||||||||||
|
||||||||||||||
Clarius BIGS, LLC(10) |
Prints & Advertising Film Financing |
|||||||||||||
|
12% PIK Secured Debt (MaturityJanuary 5, 2015)(14) |
4,400 | 4,285 | 1,848 | ||||||||||
|
||||||||||||||
Compact Power Equipment, Inc. |
Equipment / Tool Rental |
|||||||||||||
|
12% Secured Debt (MaturityOctober 1, 2017) |
4,100 | 4,085 | 4,100 | ||||||||||
|
Series A Preferred Stock (4,298,435 shares; 8% cumulative)(8) |
1,079 | 2,401 | |||||||||||
| | | | | | | | | | | | | | |
|
5,164 | 6,501 | ||||||||||||
|
||||||||||||||
Covenant Surgical Partners, Inc.(11) |
Ambulatory Surgical Centers |
|||||||||||||
|
8.75% Secured Debt (MaturityAugust 1, 2019) |
2,000 | 2,000 | 2,020 | ||||||||||
|
||||||||||||||
CRGT Inc.(11) |
Provider of Custom Software Development |
|||||||||||||
|
LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (MaturityDecember 19, 2020)(9) |
10,000 | 9,800 | 9,850 | ||||||||||
|
||||||||||||||
CST Industries Inc.(11) |
Storage Tank Manufacturer |
|||||||||||||
|
LIBOR Plus 6.25% (Floor 1.50%), Current Coupon 7.75%, Secured Debt (MaturityMay 22, 2017)(9) |
7,109 | 7,050 | 7,037 | ||||||||||
|
||||||||||||||
Darr Equipment LP(10) |
Heavy Equipment Dealer |
|||||||||||||
|
11.75% Current / 2% PIK Secured Debt (MaturityApril 15, 2020) |
20,291 | 19,676 | 19,676 | ||||||||||
|
Warrants (915,734 equivalent units) |
474 | 474 | |||||||||||
| | | | | | | | | | | | | | |
|
20,150 | 20,150 | ||||||||||||
|
||||||||||||||
Digity Media LLC(11) |
Radio Station Operator |
|||||||||||||
|
LIBOR Plus 5.00% (Floor 1.25%), Current Coupon 6.25%, Secured Debt (MaturityFebruary 10, 2019)(9) |
7,406 | 7,335 | 7,387 | ||||||||||
|
||||||||||||||
Drilling Info, Inc. |
Information Services for the Oil and Gas Industry |
|||||||||||||
|
Common Stock (3,788,865 shares) |
1,335 | 9,920 | |||||||||||
|
||||||||||||||
ECP-PF Holdings Group, Inc.(10) |
Fitness Club Operator |
|||||||||||||
|
LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.00%, Secured Debt (MaturityNovember 26, 2019)(9) |
5,625 | 5,570 | 5,570 | ||||||||||
|
47
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
December 31, 2014
(in thousands)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
EnCap Energy Fund Investments(12)(13) |
Investment Partnership |
|||||||||||||
|
LP Interests (EnCap Energy Capital Fund VIII, L.P.) (Fully diluted 0.1%)(8) |
3,430 | 3,240 | |||||||||||
|
LP Interests (EnCap Energy Capital Fund VIII Co-Investors, L.P.) (Fully diluted 0.4%)(8) |
1,561 | 1,325 | |||||||||||
|
LP Interests (EnCap Energy Capital Fund IX, L.P.) (Fully diluted 0.1%)(8) |
1,654 | 1,477 | |||||||||||
|
LP Interests (EnCap Flatrock Midstream Fund II, L.P.) (Fully diluted 1.0%)(8) |
4,586 | 4,567 | |||||||||||
|
LP Interests (EnCap Flatrock Midstream Fund III, L.P.) (Fully diluted 0.8%) |
184 | 184 | |||||||||||
| | | | | | | | | | | | | | |
|
11,415 | 10,793 | ||||||||||||
|
||||||||||||||
Energy and Exploration Partners, LLC(11) |
Oil & Gas Exploration & Production |
|||||||||||||
|
LIBOR Plus 6.75% (Floor 1.00%), Current Coupon 7.75%, Secured Debt (MaturityJanuary 22, 2019)(9) |
9,461 | 9,054 | 6,788 | ||||||||||
|
||||||||||||||
e-Rewards, Inc.(11) |
Provider of Digital Data Collection |
|||||||||||||
|
LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.00%, Secured Debt (MaturityOctober 29, 2018)(9) |
12,687 | 12,518 | 12,560 | ||||||||||
|
||||||||||||||
Evergreen Skills Lux S.á r.l. (d/b/a Skillsoft)(11) |
Technology-based Performance Support Solutions |
|||||||||||||
|
LIBOR Plus 8.25% (Floor 1.00%), Current Coupon 9.25%, Secured Debt (MaturityApril 28, 2022)(9) |
3,000 | 2,979 | 2,845 | ||||||||||
|
||||||||||||||
FC Operating, LLC(10) |
Christian Specialty Retail Stores |
|||||||||||||
|
LIBOR Plus 10.75% (Floor 1.25%), Current Coupon 12.00%, Secured Debt (MaturityNovember 14, 2017)(9) |
5,400 | 5,330 | 4,132 | ||||||||||
|
||||||||||||||
FishNet Security, Inc.(11) |
Information Technology Value-Added Reseller |
|||||||||||||
|
LIBOR Plus 5.00% (Floor 1.25%), Current Coupon 6.25%, Secured Debt (MaturityNovember 30, 2017)(9) |
7,840 | 7,791 | 7,840 | ||||||||||
|
||||||||||||||
Flavors Holdings Inc.(11) |
Global Provider of Flavoring and Sweetening Products and Solutions |
|||||||||||||
|
LIBOR Plus 5.75% (Floor 1.00%), Current Coupon 6.75%, Secured Debt (MaturityApril 30, 2020)(9) |
4,938 | 4,746 | 4,728 | ||||||||||
|
48
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
December 31, 2014
(in thousands)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Fram Group Holdings, Inc.(11) |
Manufacturer of Automotive Maintenance Products |
|||||||||||||
|
LIBOR Plus 5.00% (Floor 1.50%), Current Coupon 6.50%, Secured Debt (MaturityJuly 29, 2017)(9) |
5,935 | 5,928 | 5,907 | ||||||||||
|
LIBOR Plus 9.00% (Floor 1.50%), Current Coupon 10.50%, Secured Debt (MaturityJanuary 29, 2018)(9) |
700 | 698 | 684 | ||||||||||
| | | | | | | | | | | | | | |
|
6,626 | 6,591 | ||||||||||||
|
||||||||||||||
GI KBS Merger Sub LLC(11) |
Outsourced Janitorial Services to Retail/Grocery Customers |
|||||||||||||
|
LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.50%, Secured Debt (MaturityApril 29, 2022)(9) |
800 | 784 | 796 | ||||||||||
|
||||||||||||||
Grace Hill, LLC(10) |
Online Training Tools for the Multi-Family Housing Industry |
|||||||||||||
|
LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.25%, Secured Debt (MaturityAugust 15, 2019)(9) |
9,546 | 9,436 | 9,436 | ||||||||||
|
||||||||||||||
Grupo Hima San Pablo, Inc.(11) |
Tertiary Care Hospitals |
|||||||||||||
|
LIBOR Plus 7.00% (Floor 1.50%), Current Coupon 8.50%, Secured Debt (MaturityJanuary 31, 2018)(9) |
4,913 | 4,846 | 4,775 | ||||||||||
|
13.75% Secured Debt (MaturityJuly 31, 2018) |
2,000 | 1,925 | 1,920 | ||||||||||
| | | | | | | | | | | | | | |
|
6,771 | 6,695 | ||||||||||||
|
||||||||||||||
GST Autoleather, Inc.(11) |
Automotive Leather Manufacturer |
|||||||||||||
|
LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 6.50%, Secured Debt (MaturityJuly 10, 2020)(9) |
9,975 | 9,882 | 9,825 | ||||||||||
|
||||||||||||||
Guitar Center, Inc.(11) |
Musical Instruments Retailer |
|||||||||||||
|
6.5% Secured Debt (MaturityApril 15, 2019) |
7,000 | 6,817 | 6,020 | ||||||||||
|
||||||||||||||
Halcon Resources Corporation(11)(13) |
Oil & Gas Exploration & Production |
|||||||||||||
|
9.75% Unsecured Debt (MaturityJuly 15, 2020) |
6,925 | 6,335 | 5,194 | ||||||||||
|
||||||||||||||
Hostway Corporation(11) |
Managed Services and Hosting Provider |
|||||||||||||
|
LIBOR Plus 4.75% (Floor 1.25%), Current Coupon 6.00%, Secured Debt (MaturityDecember 13, 2019)(9) |
9,750 | 9,671 | 9,652 | ||||||||||
|
LIBOR Plus 8.75% (Floor 1.25%), Current Coupon 10.00%, Secured Debt (MaturityDecember 11, 2020)(9) |
5,000 | 4,917 | 4,950 | ||||||||||
| | | | | | | | | | | | | | |
|
14,588 | 14,602 | ||||||||||||
|
49
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
December 31, 2014
(in thousands)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Hunter Defense Technologies, Inc.(11) |
Provider of Military and Commercial Shelters and Systems |
|||||||||||||
|
LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 6.50%, Secured Debt (MaturityAugust 5, 2019)(9) |
9,875 | 9,783 | 9,752 | ||||||||||
|
||||||||||||||
ICON Health & Fitness, Inc.(11) |
Producer of Fitness Products |
|||||||||||||
|
11.875% Secured Debt (MaturityOctober 15, 2016) |
4,385 | 4,323 | 4,122 | ||||||||||
|
||||||||||||||
iEnergizer Limited(11)(13) |
Provider of Business Outsourcing Solutions |
|||||||||||||
|
LIBOR Plus 6.00% (Floor 1.25%), Current Coupon 7.25%, Secured Debt (MaturityMay 1, 2019)(9) |
10,029 | 9,905 | 9,277 | ||||||||||
|
||||||||||||||
Infinity Acquisition Finance Corp.(11) |
Application Software for Capital Markets |
|||||||||||||
|
7.25% Unsecured Debt (MaturityAugust 1, 2022) |
4,000 | 4,000 | 3,620 | ||||||||||
|
||||||||||||||
Inn of the Mountain Gods Resort and Casino(11) |
Hotel & Casino Owner & Operator |
|||||||||||||
|
9.25% Secured Debt (MaturityNovember 30, 2020) |
3,851 | 3,687 | 3,697 | ||||||||||
|
||||||||||||||
iQor US Inc.(11) |
Business Process Outsourcing Services Provider |
|||||||||||||
|
LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.00%, Secured Debt (MaturityApril 1, 2021)(9) |
9,987 | 9,789 | 9,288 | ||||||||||
|
||||||||||||||
Jackson Hewitt Tax Service Inc.(11) |
Tax Preparation Service Provider |
|||||||||||||
|
LIBOR Plus 8.50% (Floor 1.50%), Current Coupon 10.00%, Secured Debt (MaturityOctober 16, 2017)(9) |
4,509 | 4,396 | 4,509 | ||||||||||
|
||||||||||||||
Joerns Healthcare, LLC(11) |
Manufacturer and Distributor of Health Care Equipment & Supplies |
|||||||||||||
|
LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.00%, Secured Debt (MaturityMay 9, 2020)(9) |
9,950 | 9,853 | 9,838 | ||||||||||
|
||||||||||||||
John Deere Landscapes LLC(10) |
Distributor of Landscaping Supplies |
|||||||||||||
|
LIBOR Plus 4.00% (Floor 1.00%), Current Coupon 5.00%, Secured Debt (MaturityDecember 23, 2019)(9) |
8,573 | 8,193 | 8,193 | ||||||||||
|
||||||||||||||
Keypoint Government Solutions, Inc.(11) |
Provider of Pre-Employment Screening Services |
|||||||||||||
|
LIBOR Plus 6.50% (Floor 1.25%), Current Coupon 7.75%, Secured Debt (MaturityNovember 13, 2017)(9) |
4,726 | 4,668 | 4,702 | ||||||||||
|
50
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
December 31, 2014
(in thousands)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Lansing Trade Group LLC(11) |
Commodity Merchandiser |
|||||||||||||
|
9.25% Unsecured Debt (MaturityFebruary 15, 2019) |
6,000 | 6,000 | 5,610 | ||||||||||
|
||||||||||||||
Larchmont Resources, LLC(11) |
Oil & Gas Exploration & Production |
|||||||||||||
|
LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.25%, Secured Debt (MaturityAugust 7, 2019)(9) |
6,895 | 6,842 | 6,636 | ||||||||||
|
||||||||||||||
LKCM Distribution Holdings, L.P. |
Distributor of Industrial Process Equipment |
|||||||||||||
|
12% Current / 2.5% PIK Secured Debt (Maturity December 23, 2018) |
16,417 | 16,278 | 16,417 | ||||||||||
|
||||||||||||||
LKCM Headwater Investments I, L.P.(12)(13) |
Investment Partnership |
|||||||||||||
|
LP Interests (Fully diluted 2.3%)(8) |
2,250 | 5,764 | |||||||||||
|
||||||||||||||
MAH Merger Corporation(11) |
Sports-Themed Casual Dining Chain |
|||||||||||||
|
LIBOR Plus 4.50% (Floor 1.25%), Current Coupon 5.75%, Secured Debt (MaturityJuly 19, 2019)(9) |
7,258 | 7,198 | 7,276 | ||||||||||
|
||||||||||||||
MediMedia USA, Inc.(11) |
Provider of Healthcare Media and Marketing |
|||||||||||||
|
LIBOR Plus 6.75% (Floor 1.25%), Current Coupon 8.00%, Secured Debt (MaturityNovember 20, 2018)(9) |
5,411 | 5,292 | 5,289 | ||||||||||
|
||||||||||||||
Messenger, LLC(10) |
Supplier of Specialty Stationary and Related Products to the Funeral Industry |
|||||||||||||
|
LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 8.50%, Secured Debt (MaturityDecember 5, 2019)(9) |
13,639 | 13,518 | 13,518 | ||||||||||
|
||||||||||||||
Milk Specialties Company(11) |
Processor of Nutrition Products |
|||||||||||||
|
LIBOR Plus 6.25% (Floor 1.25%), Current Coupon 7.50%, Secured Debt (MaturityNovember 9, 2018)(9) |
7,847 | 7,806 | 7,670 | ||||||||||
|
||||||||||||||
Minute Key, Inc. |
Operator of Automated Key Duplication Kiosks |
|||||||||||||
|
10% Current / 2% PIK Secured Debt (MaturitySeptember 19, 2019) |
4,023 | 3,985 | 3,985 | ||||||||||
|
||||||||||||||
Miramax Film NY, LLC(11) |
Motion Picture Producer and Distributor |
|||||||||||||
|
Class B Units (12% cumulative)(8) |
792 | 792 | |||||||||||
|
51
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
December 31, 2014
(in thousands)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Modern VideoFilm, Inc.(10) |
Post-Production Film Studio |
|||||||||||||
|
LIBOR Plus 3.50% (Floor 1.50%), Current Coupon 5.00% / 8.50% PIK, Current Coupon Plus PIK 13.50%, Secured Debt (MaturitySeptember 25, 2017)(9)(14) |
6,302 | 6,119 | 1,954 | ||||||||||
|
Warrants (1,375 equivalent shares) |
151 | 1 | |||||||||||
| | | | | | | | | | | | | | |
|
6,270 | 1,955 | ||||||||||||
|
||||||||||||||
Mood Media Corporation(11)(13) |
Provider of Electronic Equipment |
|||||||||||||
|
LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (MaturityMay 1, 2019)(9) |
12,193 | 12,053 | 11,964 | ||||||||||
|
||||||||||||||
MP Assets Corporation(11) |
Manufacturer of Battery Components |
|||||||||||||
|
LIBOR Plus 4.50% (Floor 1.00%), Current Coupon 5.50%, Secured Debt (MaturityDecember 19, 2019)(9) |
4,416 | 4,378 | 4,394 | ||||||||||
|
||||||||||||||
New Media Holdings II LLC(11)(13) |
Local Newspaper Operator |
|||||||||||||
|
LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.25%, Secured Debt (MaturityJune 4, 2020)(9) |
14,925 | 14,649 | 14,776 | ||||||||||
|
||||||||||||||
Nice-Pak Products, Inc.(11) |
Pre-Moistened Wipes Manufacturer |
|||||||||||||
|
LIBOR Plus 6.00% (Floor 1.50%), Current Coupon 7.50%, Secured Debt (MaturityJune 18, 2015)(9) |
12,541 | 12,518 | 12,478 | ||||||||||
|
||||||||||||||
North Atlantic Trading Company, Inc.(11) |
Marketer/Distributor of Tobacco Products |
|||||||||||||
|
LIBOR Plus 6.50% (Floor 1.25%), Current Coupon 7.75%, Secured Debt (MaturityJanuary 13, 2020)(9) |
7,426 | 7,361 | 7,305 | ||||||||||
|
||||||||||||||
Novitex Intermediate, LLC(11) |
Provider of Document Management Services |
|||||||||||||
|
LIBOR Plus 6.25% (Floor 1.25%), Current Coupon 7.50%, Secured Debt (MaturityJuly 7, 2020)(9) |
5,985 | 5,929 | 5,746 | ||||||||||
|
||||||||||||||
Ospemifene Royalty Sub LLC (QuatRx)(10) |
Estrogen-Deficiency Drug Manufacturer and Distributor |
|||||||||||||
|
11.5% Secured Debt (MaturityNovember 15, 2026) |
5,205 | 5,205 | 5,205 | ||||||||||
|
||||||||||||||
Panolam Industries International, Inc.(11) |
Decorative Laminate Manufacturer |
|||||||||||||
|
LIBOR Plus 6.50% (Floor 1.25%), Current Coupon 7.75%, Secured Debt (MaturityAugust 23, 2017)(9) |
6,994 | 6,949 | 6,889 | ||||||||||
|
52
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
December 31, 2014
(in thousands)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Parq Holdings Limited Partnership(11)(13) |
Hotel & Casino Operator |
|||||||||||||
|
LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 8.50%, Secured Debt (MaturityDecember 17, 2020)(9) |
6,226 | 6,078 | 6,108 | ||||||||||
|
||||||||||||||
Permian Holdings, Inc.(11) |
Storage Tank Manufacturer |
|||||||||||||
|
10.5% Secured Debt (MaturityJanuary 15, 2018) |
2,755 | 2,728 | 2,066 | ||||||||||
|
||||||||||||||
Pernix Therapeutics Holdings, Inc.(10)(13) |
Pharmaceutical Royalty Anti-Migraine |
|||||||||||||
|
12% Secured Debt (MaturityAugust 1, 2020) |
4,000 | 4,000 | 4,000 | ||||||||||
|
||||||||||||||
PeroxyChem LLC(11) |
Chemical Manufacturer |
|||||||||||||
|
LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (MaturityFebruary 28, 2020)(9) |
8,933 | 8,774 | 8,843 | ||||||||||
|
||||||||||||||
Philadelphia Energy Solutions Refining and Marketing LLC(11) |
Oil & Gas Refiner |
|||||||||||||
|
LIBOR Plus 5.00% (Floor 1.25%), Current Coupon 6.25%, Secured Debt (MaturityApril 4, 2018)(9) |
2,948 | 2,917 | 2,785 | ||||||||||
|
||||||||||||||
Pike Corporation(11) |
Construction and Maintenance Services for Electric Transmission and Distribution Infrastructure |
|||||||||||||
|
LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.50%, Secured Debt (MaturityJune 22, 2022)(9) |
15,000 | 14,628 | 14,825 | ||||||||||
|
||||||||||||||
Polyconcept Financial B.V.(11) |
Promotional Products to Corporations and Consumers |
|||||||||||||
|
LIBOR Plus 4.75% (Floor 1.25%), Current Coupon 6.00%, Secured Debt (MaturityJune 28, 2019)(9) |
4,325 | 4,311 | 4,309 | ||||||||||
|
||||||||||||||
Primesight Limited(10)(13) |
Outdoor Advertising Operator |
|||||||||||||
|
10% Secured Debt (MaturityOctober 22, 2016) |
8,869 | 8,806 | 8,284 | ||||||||||
|
||||||||||||||
Printpack Holdings, Inc.(11) |
Manufacturer of Flexible and Rigid Packaging |
|||||||||||||
|
LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.00%, Secured Debt (MaturityMay 29, 2020)(9) |
5,468 | 5,417 | 5,450 | ||||||||||
|
||||||||||||||
PT Network, LLC(10) |
Provider of Outpatient Physical Therapy and Sports Medicine Services |
|||||||||||||
|
LIBOR Plus 7.00% (Floor 1.50%), Current Coupon 8.50%, Secured Debt (MaturityNovember 1, 2018)(9) |
11,946 | 11,828 | 11,828 | ||||||||||
|
53
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
December 31, 2014
(in thousands)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
QBS Parent, Inc.(11) |
Provider of Software and Services to the Oil & Gas Industry |
|||||||||||||
|
LIBOR Plus 4.75% (Floor 1.00%), Current Coupon 5.75%, Secured Debt (MaturityAugust 7, 2021)(9) |
10,000 | 9,905 | 9,825 | ||||||||||
|
||||||||||||||
RCHP, Inc.(11) |
Regional Non-Urban Hospital Owner/Operator |
|||||||||||||
|
LIBOR Plus 9.50% (Floor 1.00%), Current Coupon 10.50%, Secured Debt (MaturityOctober 23, 2019)(9) |
4,000 | 3,945 | 3,990 | ||||||||||
|
||||||||||||||
Recorded Books Inc.(11) |
Audiobook and Digital Content Publisher |
|||||||||||||
|
LIBOR Plus 4.25% (Floor 1.00%), Current Coupon 5.25%, Secured Debt (MaturityJanuary 31, 2020)(9) |
12,031 | 11,925 | 11,941 | ||||||||||
|
||||||||||||||
Relativity Media, LLC(10) |
Full-Scale Film and Television Production and Distribution |
|||||||||||||
|
10% Secured Debt (MaturityMay 30, 2015) |
5,787 | 5,772 | 5,801 | ||||||||||
|
15% PIK Secured Debt (MaturityMay 30, 2015) |
7,410 | 7,347 | 7,558 | ||||||||||
|
Class A Units (260,194 units) |
292 | 1,086 | |||||||||||
| | | | | | | | | | | | | | |
|
13,411 | 14,445 | ||||||||||||
|
||||||||||||||
Renaissance Learning, Inc.(11) |
Technology-based K-12 Learning Solutions |
|||||||||||||
|
LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.00%, Secured Debt (MaturityApril 11, 2022)(9) |
3,000 | 2,972 | 2,880 | ||||||||||
|
||||||||||||||
RGL Reservoir Operations Inc.(11)(13) |
Oil & Gas Equipment and Services |
|||||||||||||
|
LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.00%, Secured Debt (MaturityAugust 13, 2021)(9) |
3,990 | 3,876 | 3,219 | ||||||||||
|
||||||||||||||
RLJ Entertainment, Inc.(10) |
Movie and TV Programming Licensee and Distributor |
|||||||||||||
|
LIBOR Plus 8.75% (Floor 0.25%), Current Coupon 9.00%, Secured Debt (MaturitySeptember 11, 2019)(9) |
11,399 | 11,318 | 11,318 | ||||||||||
|
||||||||||||||
SAExploration, Inc.(10)(13) |
Geophysical Services Provider |
|||||||||||||
|
Common Stock (6,472 shares)(8) |
65 | 27 | |||||||||||
|
||||||||||||||
Sage Automotive Interiors, Inc(11) |
Automotive Textiles Manufacturer |
|||||||||||||
|
LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 9.00%, Secured Debt (MaturityOctober 8, 2021)(9) |
3,000 | 2,971 | 2,985 | ||||||||||
|
54
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
December 31, 2014
(in thousands)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sagittarius Restaurants LLC (d/b/a Del Taco)(11) |
Mexican/American QSR Restaurant Chain |
|||||||||||||
|
LIBOR Plus 4.50% (Floor 1.00%), Current Coupon 5.50%, Secured Debt (MaturityOctober 1, 2018)(9) |
4,591 | 4,572 | 4,562 | ||||||||||
|
||||||||||||||
SCE Partners, LLC(10) |
Hotel & Casino Operator |
|||||||||||||
|
LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.25%, Secured Debt (MaturityAugust 14, 2019)(9) |
7,481 | 7,421 | 7,519 | ||||||||||
|
||||||||||||||
Sotera Defense Solutions, Inc.(11) |
Defense Industry Intelligence Services |
|||||||||||||
|
LIBOR Plus 7.50% (Floor 1.50%), Current Coupon 9.00%, Secured Debt (MaturityApril 21, 2017)(9) |
10,984 | 10,564 | 10,160 | ||||||||||
|
||||||||||||||
Symphony Teleca Services, Inc.(11) |
Outsourced Product Development |
|||||||||||||
|
LIBOR Plus 4.75% (Floor 1.00%), Current Coupon 5.75%, Secured Debt (MaturityAugust 7, 2019)(9) |
14,000 | 13,870 | 13,930 | ||||||||||
|
||||||||||||||
Synagro Infrastructure Company, Inc(11) |
Waste Management Services |
|||||||||||||
|
LIBOR Plus 5.25% (Floor 1.00%), Current Coupon 6.25%, Secured Debt (MaturityAugust 22, 2020)(9) |
6,913 | 6,798 | 6,822 | ||||||||||
|
||||||||||||||
Targus Group International(11) |
Distributor of Protective Cases for Mobile Devices |
|||||||||||||
|
LIBOR Plus 9.50% (Floor 1.50%), Current Coupon 11.00% / 1.00% PIK, Current Coupon Plus PIK 12.00%, Secured Debt (MaturityMay 24, 2016)(9) |
4,288 | 4,299 | 3,495 | ||||||||||
|
||||||||||||||
TeleGuam Holdings, LLC(11) |
Cable and Telecom Services Provider |
|||||||||||||
|
LIBOR Plus 4.00% (Floor 1.25%), Current Coupon 5.25%, Secured Debt (MaturityDecember 10, 2018)(9) |
6,830 | 6,813 | 6,796 | ||||||||||
|
LIBOR Plus 7.50% (Floor 1.25%), Current Coupon 8.75%, Secured Debt (MaturityJune 10, 2019)(9) |
2,500 | 2,480 | 2,512 | ||||||||||
| | | | | | | | | | | | | | |
|
9,293 | 9,308 | ||||||||||||
|
||||||||||||||
Templar Energy LLC(11) |
Oil & Gas Exploration & Production |
|||||||||||||
|
LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 8.50%, Secured Debt (MaturityNovember 25, 2020)(9) |
5,000 | 4,945 | 3,615 | ||||||||||
|
||||||||||||||
The Tennis Channel, Inc.(10) |
Television-Based Sports Broadcasting |
|||||||||||||
|
Warrants (114,316 equivalent shares) |
235 | 301 | |||||||||||
|
55
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
December 31, 2014
(in thousands)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
The Topps Company, Inc.(11) |
Trading Cards & Confectionary |
|||||||||||||
|
LIBOR Plus 6.00% (Floor 1.25%), Current Coupon 7.25%, Secured Debt (MaturityOctober 2, 2018)(9) |
1,980 | 1,964 | 1,930 | ||||||||||
|
||||||||||||||
Therakos, Inc.(11) |
Immune System Disease Treatment |
|||||||||||||
|
LIBOR Plus 5.75% (Floor 1.25%), Current Coupon 7.00%, Secured Debt (MaturityDecember 27, 2017)(9) |
6,278 | 6,178 | 6,255 | ||||||||||
|
||||||||||||||
TOMS Shoes, LLC(11) |
Global Designer, Distributor, and Retailer of Casual Footwear |
|||||||||||||
|
LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 6.50%, Secured Debt (MaturityOctober 30, 2020)(9) |
5,000 | 4,511 | 4,625 | ||||||||||
|
||||||||||||||
Travel Leaders Group, LLC(11) |
Travel Agency Network Provider |
|||||||||||||
|
LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (MaturityDecember 5, 2018)(9) |
12,445 | 12,305 | 12,445 | ||||||||||
|
||||||||||||||
UniTek Global Services, Inc.(11) |
Provider of Outsourced Infrastructure Services |
|||||||||||||
|
LIBOR Plus 9.50% (Floor 1.50%), Current Coupon 11.00% / 4.00% PIK, Current Coupon Plus PIK 15.00%, Secured Debt (MaturityApril 15, 2018)(9)(14) |
10,776 | 10,173 | 7,942 | ||||||||||
|
5% Current / 2.25% PIK Secured Debt (MaturityAugust 13, 2019)(14) |
640 | 640 | 640 | ||||||||||
|
Warrants (267,302 equivalent shares) |
449 | | |||||||||||
| | | | | | | | | | | | | | |
|
11,262 | 8,582 | ||||||||||||
|
||||||||||||||
Universal Fiber Systems, LLC(10) |
Manufacturer of Synthetic Fibers |
|||||||||||||
|
LIBOR Plus 4.25% (Floor 1.00%), Current Coupon 5.25%, Secured Debt (MaturityJanuary 31, 2019)(9) |
5,094 | 5,084 | 5,082 | ||||||||||
|
||||||||||||||
Universal Wellhead Services Holdings, LLC(10) |
Provider of Wellhead Equipment, Designs, and Personnel to the Oil & Gas Industry |
|||||||||||||
|
Class A Units (4,000,000 units) |
4,000 | 4,000 | |||||||||||
|
||||||||||||||
US Joiner Holding Company(11) |
Marine Interior Design and Installation |
|||||||||||||
|
LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (MaturityApril 16, 2020)(9) |
7,444 | 7,410 | 7,332 | ||||||||||
|
56
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
December 31, 2014
(in thousands)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Vantage Oncology, LLC(11) |
Outpatient Radiation Oncology Treatment Centers |
|||||||||||||
|
9.5% Secured Debt (MaturityJune 5, 2017) |
7,000 | 7,000 | 6,790 | ||||||||||
|
||||||||||||||
Virtex Enterprises, LP(10) |
Specialty, Full-Service Provider of Complex Electronic Manufacturing Services |
|||||||||||||
|
12% Secured Debt (MaturityDecember 27, 2018) |
1,667 | 1,479 | 1,479 | ||||||||||
|
Preferred Class A Units (14 units; 5% cumulative)(8) |
344 | 344 | |||||||||||
|
Warrants (11 equivalent units) |
186 | 186 | |||||||||||
| | | | | | | | | | | | | | |
|
2,009 | 2,009 | ||||||||||||
|
||||||||||||||
Vision Solutions, Inc.(11) |
Provider of Information Availability Software |
|||||||||||||
|
LIBOR Plus 8.00% (Floor 1.50%), Current Coupon 9.50%, Secured Debt (MaturityJuly 23, 2017)(9) |
5,000 | 4,941 | 4,872 | ||||||||||
|
||||||||||||||
Western Dental Services, Inc.(11) |
Dental Care Services |
|||||||||||||
|
LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.00%, Secured Debt (MaturityNovember 1, 2018)(9) |
5,395 | 5,391 | 5,153 | ||||||||||
|
||||||||||||||
Wilton Brands LLC(11) |
Specialty Housewares Retailer |
|||||||||||||
|
LIBOR Plus 6.25% (Floor 1.25%), Current Coupon 7.50%, Secured Debt (MaturityAugust 30, 2018)(9) |
1,750 | 1,727 | 1,636 | ||||||||||
|
||||||||||||||
Worley Claims Services, LLC(10) |
Insurance Adjustment Management and Services Provider |
|||||||||||||
|
LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 9.00%, Secured Debt (MaturityOctober 31, 2020)(9) |
6,500 | 6,437 | 6,533 | ||||||||||
|
||||||||||||||
Zilliant Incorporated |
Price Optimization and Margin Management Solutions |
|||||||||||||
|
Warrants (952,500 equivalent shares) |
1,071 | 1,071 | |||||||||||
| | | | | | | | | | | | | | |
Subtotal Non-Control/Non-Affiliate Investments (51.8% of total investments at fair value) |
832,312 | 814,809 | ||||||||||||
| | | | | | | | | | | | | | |
Total Portfolio Investments, December 31, 2014 |
1,441,402 | 1,563,330 | ||||||||||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
|
57
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule Of Investments (Continued)
December 31, 2014
(in thousands)
Portfolio Company(1) |
Business Description |
Type of Investment(2)(3) |
Principal(4) |
Cost(4) |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Marketable Securities and Idle Funds Investments |
||||||||||||||
|
||||||||||||||
Solar Senior Capital Ltd.(13)(15) |
Business Development Company |
|||||||||||||
|
Common Stock (39,000 shares)(8) |
742 | 584 | |||||||||||
|
||||||||||||||
Other Marketable Securities and Idle Funds Investments(13)(15) |
Investments in Marketable Securities and Diversified, Registered Bond Funds |
|||||||||||||
|
9,862 | 8,483 | ||||||||||||
| | | | | | | | | | | | | | |
Subtotal Marketable Securities and Idle Funds Investments (0.6% of total investments at fair value) |
10,604 | 9,067 | ||||||||||||
| | | | | | | | | | | | | | |
Total Investments, December 31, 2014 |
$ | 1,452,006 | $ | 1,572,397 | ||||||||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
58
MAIN STREET CAPITAL CORPORATION
Notes to Consolidated Financial Statements
(Unaudited)
NOTE AORGANIZATION AND BASIS OF PRESENTATION
1. Organization
Main Street Capital Corporation ("MSCC") is a principal investment firm primarily focused on providing customized debt and equity financing to lower middle market ("LMM") companies and debt capital to middle market ("Middle Market") companies. The portfolio investments of MSCC and its consolidated subsidiaries are typically made to support management buyouts, recapitalizations, growth financings, refinancings and acquisitions of companies that operate in diverse industry sectors. MSCC seeks to partner with entrepreneurs, business owners and management teams and generally provides "one stop" financing alternatives within its LMM portfolio. MSCC and its consolidated subsidiaries invest primarily in secured debt investments, equity investments, warrants and other securities of LMM companies based in the United States and in secured debt investments of Middle Market companies generally headquartered in the United States.
MSCC was formed in March 2007 to operate as an internally managed business development company ("BDC") under the Investment Company Act of 1940, as amended (the "1940 Act"). MSCC wholly owns several investment funds, including Main Street Mezzanine Fund, LP ("MSMF") and Main Street Capital II, LP ("MSC II" and, together with MSMF, the "Funds"), and each of their general partners. The Funds are each licensed as a Small Business Investment Company ("SBIC") by the United States Small Business Administration ("SBA"). Because MSCC is internally managed, all of the executive officers and other employees are employed by MSCC. Therefore, MSCC does not pay any external investment advisory fees but instead incurs the operating costs associated with employing investment and portfolio management professionals.
MSC Adviser I, LLC (the "External Investment Manager") was formed in November 2013 as a wholly owned subsidiary of MSCC to provide investment management and other services to parties other than MSCC and its subsidiaries ("External Parties") and receive fee income for such services. MSCC has been granted no-action relief by the Securities and Exchange Commission ("SEC") to allow the External Investment Manager to register as a registered investment adviser ("RIA") under Investment Advisers Act of 1940, as amended (the "Advisers Act"). Since the External Investment Manager conducts all of its investment management activities for External Parties, it is accounted for as a portfolio investment of MSCC and is not included as a consolidated subsidiary of MSCC in MSCC's consolidated financial statements.
MSCC has elected to be treated for U.S. federal income tax purposes as a regulated investment company ("RIC") under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). As a result, MSCC generally will not pay corporate-level U.S. federal income taxes on any net ordinary income or capital gains that it distributes to its stockholders.
MSCC has certain direct and indirect wholly owned subsidiaries that have elected to be taxable entities (the "Taxable Subsidiaries"). The primary purpose of the Taxable Subsidiaries is to permit MSCC to hold equity investments in portfolio companies which are "pass-through" entities for tax purposes. The External Investment Manager is also a direct wholly owned subsidiary that has elected to be a taxable entity. The Taxable Subsidiaries and the External Investment Manager are each taxed at their normal corporate tax rates based on their taxable income.
59
MAIN STREET CAPITAL CORPORATION
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
Unless otherwise noted or the context otherwise indicates, the terms "we," "us," "our" and "Main Street" refer to MSCC and its consolidated subsidiaries, which include the Funds and the Taxable Subsidiaries.
2. Basis of Presentation
Main Street's financial statements are prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP"). For each of the periods presented herein, Main Street's consolidated financial statements include the accounts of MSCC and its consolidated subsidiaries. The Investment Portfolio, as used herein, refers to all of Main Street's investments in LMM portfolio companies, investments in Middle Market portfolio companies, Private Loan portfolio investments, Other Portfolio investments, and the investment in the External Investment Manager, but excludes all "Marketable securities and idle funds investments" (see Note CFair Value Hierarchy for Investments and DebenturesPortfolio CompositionPortfolio Investment Composition for additional discussion of Main Street's Investment Portfolio and definitions for the terms LMM, Middle Market, Private Loan and Other Portfolio). "Marketable securities and idle funds investments" are classified as financial instruments and are reported separately on Main Street's consolidated balance sheets and consolidated schedules of investments due to the nature of such investments (see Note B.11.). Main Street's results of operations for the three and nine months ended September 30, 2015 and 2014, cash flows for the nine months ended September 30, 2015 and 2014, and financial position as of September 30, 2015 and December 31, 2014, are presented on a consolidated basis. The effects of all intercompany transactions between Main Street and its consolidated subsidiaries have been eliminated in consolidation. Certain reclassifications have been made to prior period balances to conform to the current presentation, including reclassifying the expenses charged to the External Investment Manager.
The accompanying unaudited consolidated financial statements of Main Street are presented in conformity with U.S. GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain disclosures accompanying annual financial statements prepared in accordance with U.S. GAAP are omitted. In the opinion of management, the unaudited consolidated financial results included herein contain all adjustments, consisting solely of normal recurring accruals, considered necessary for the fair presentation of financial statements for the interim periods included herein. The results of operations for the three and nine months ended September 30, 2015 and 2014 are not necessarily indicative of the operating results to be expected for the full year. Also, the unaudited financial statements and notes should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2014. Financial statements prepared on a U.S. GAAP basis require management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein.
Under regulations pursuant to Article 6 of Regulation S-X applicable to BDCs and Accounting Standards Codification ("Codification" or "ASC") 946, Financial ServicesInvestment Companies ("ASC 946"), Main Street is precluded from consolidating other entities in which Main Street has equity investments, including those in which it has a controlling interest, unless the other entity is another investment company. An exception to this general principle in ASC 946 occurs if Main Street holds a controlling interest in an operating company that provides all or substantially all of its services directly to Main Street or to its portfolio companies. Accordingly, as noted above, MSCC's consolidated financial statements include the financial position and operating results for the Funds and the Taxable
60
MAIN STREET CAPITAL CORPORATION
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
Subsidiaries. MSCC's consolidated financial statements also include the financial position and operating results for MSCC's wholly owned operating subsidiary, Main Street Capital Partners, LLC, ("MSCP"), as the wholly owned subsidiary provides all of its services directly or indirectly to Main Street or its portfolio companies. Main Street has determined that all of its portfolio investments do not qualify for this exception, including the investment in the External Investment Manager. Therefore, Main Street's Investment Portfolio is carried on the consolidated balance sheet at fair value, as discussed further in Note B, with any adjustments to fair value recognized as "Net Change in Unrealized Appreciation (Depreciation)" on the consolidated statements of operations until the investment is realized, usually upon exit, resulting in any gain or loss being recognized as a "Net Realized Gain (Loss)."
Portfolio Investment Classification
Main Street classifies its Investment Portfolio in accordance with the requirements of the 1940 Act. Under the 1940 Act, (a) "Control Investments" are defined as investments in which Main Street owns more than 25% of the voting securities or has rights to maintain greater than 50% of the board representation, (b) "Affiliate Investments" are defined as investments in which Main Street owns between 5% and 25% of the voting securities and does not have rights to maintain greater than 50% of the board representation, and (c) "Non-Control/Non-Affiliate Investments" are defined as investments that are neither Control Investments nor Affiliate Investments.
NOTE BSUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Valuation of the Investment Portfolio
Main Street accounts for its Investment Portfolio at fair value. As a result, Main Street follows the provisions of the Financial Accounting Standards Board ("FASB") ASC 820, Fair Value Measurements and Disclosures ("ASC 820"). ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value and enhances disclosure requirements for fair value measurements. ASC 820 requires Main Street to assume that the portfolio investment is to be sold in the principal market to independent market participants, which may be a hypothetical market. Market participants are defined as buyers and sellers in the principal market that are independent, knowledgeable and willing and able to transact.
Main Street's portfolio strategy calls for it to invest primarily in illiquid debt and equity securities issued by private, LMM companies and more liquid debt securities issued by Middle Market companies that are generally larger in size than the LMM companies. Main Street categorizes some of its investments in LMM companies and Middle Market companies as Private Loan portfolio investments, which are primarily debt securities which have been originated through strategic relationships with other investment funds on a collaborative basis, and are often referred to in the debt markets as "club deals." Private Loan investments are typically similar in size, structure, terms and conditions to investments Main Street holds in its LMM portfolio and Middle Market portfolio. Main Street's portfolio also includes Other Portfolio investments which primarily consist of investments that are not consistent with the typical profiles for its LMM portfolio investments, Middle Market portfolio investments or Private Loan portfolio investments, including investments which may be managed by third parties. Main Street's portfolio investments may be subject to restrictions on resale.
LMM investments and Other Portfolio investments generally have no established trading market while Middle Market securities generally have established markets that are not active. Private Loan investments may include investments which have no established trading market or have established
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Notes to Consolidated Financial Statements (Continued)
(Unaudited)
markets that are not active. Main Street determines in good faith the fair value of its Investment Portfolio pursuant to a valuation policy in accordance with ASC 820 and a valuation process approved by its Board of Directors and in accordance with the 1940 Act. Main Street's valuation policies and processes are intended to provide a consistent basis for determining the fair value of Main Street's Investment Portfolio.
For LMM portfolio investments, Main Street generally reviews external events, including private mergers, sales and acquisitions involving comparable companies, and includes these events in the valuation process by using an enterprise value waterfall methodology ("Waterfall") for its LMM equity investments and an income approach using a yield-to-maturity model ("Yield-to-Maturity") for its LMM debt investments. For Middle Market portfolio investments, Main Street primarily uses quoted prices in the valuation process. Main Street determines the appropriateness of the use of third-party broker quotes, if any, in determining fair value based on its understanding of the level of actual transactions used by the broker to develop the quote and whether the quote was an indicative price or binding offer, the depth and consistency of broker quotes and the correlation of changes in broker quotes with underlying performance of the portfolio company and other market indices. For Middle Market and Private Loan portfolio investments in debt securities for which it has determined that third-party quotes or other independent pricing are not available or appropriate, Main Street generally estimates the fair value based on the assumptions that it believes hypothetical market participants would use to value the investment in a current hypothetical sale using the Yield-to-Maturity valuation method. For its Other Portfolio equity investments, Main Street generally calculates the fair value of the investment primarily based on the net asset value ("NAV") of the fund. All of the valuation approaches for Main Street's portfolio investments estimate the value of the investment as if Main Street were to sell, or exit, the investment as of the measurement date.
These valuation approaches consider the value associated with Main Street's ability to control the capital structure of the portfolio company, as well as the timing of a potential exit. For valuation purposes, "control" portfolio investments are composed of debt and equity securities in companies for which Main Street has a controlling interest in the equity ownership of the portfolio company or the ability to nominate a majority of the portfolio company's board of directors. For valuation purposes, "non-control" portfolio investments are generally composed of debt and equity securities in companies for which Main Street does not have a controlling interest in the equity ownership of the portfolio company or the ability to nominate a majority of the portfolio company's board of directors.
Under the Waterfall valuation method, Main Street estimates the enterprise value of a portfolio company using a combination of market and income approaches or other appropriate valuation methods, such as considering recent transactions in the equity securities of the portfolio company or third-party valuations of the portfolio company, and then performs a waterfall calculation by using the enterprise value over the portfolio company's securities in order of their preference relative to one another. The enterprise value is the fair value at which an enterprise could be sold in a transaction between two willing parties, other than through a forced or liquidation sale. Typically, private companies are bought and sold based on multiples of earnings before interest, taxes, depreciation and amortization ("EBITDA"), cash flows, net income, revenues, or in limited cases, book value. There is no single methodology for estimating enterprise value. For any one portfolio company, enterprise value is generally described as a range of values from which a single estimate of enterprise value is derived. In estimating the enterprise value of a portfolio company, Main Street analyzes various factors including the portfolio company's historical and projected financial results. The operating results of a portfolio company may include unaudited, projected, budgeted or pro forma financial information and
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Notes to Consolidated Financial Statements (Continued)
(Unaudited)
may require adjustments for non-recurring items or to normalize the operating results that may require significant judgment in its determination. In addition, projecting future financial results requires significant judgment regarding future growth assumptions. In evaluating the operating results, Main Street also analyzes the impact of exposure to litigation, loss of customers or other contingencies. After determining the appropriate enterprise value, Main Street allocates the enterprise value to investments in order of the legal priority of the various components of the portfolio company's capital structure. In applying the Waterfall valuation method, Main Street assumes the loans are paid off at the principal amount in a change in control transaction and are not assumed by the buyer, which Main Street believes is consistent with its past transaction history and standard industry practices.
Under the Yield-to-Maturity valuation method, Main Street also uses the income approach to determine the fair value of debt securities based on projections of the discounted future free cash flows that the debt security will likely generate, including analyzing the discounted cash flows of interest and principal amounts for the debt security, as set forth in the associated loan agreements, as well as the financial position and credit risk of the portfolio investments. Main Street's estimate of the expected repayment date of its debt securities is generally the legal maturity date of the instrument, as Main Street generally intends to hold its loans and debt securities to maturity. The Yield-to-Maturity analysis also considers changes in leverage levels, credit quality, portfolio company performance and other factors. Main Street will generally use the value determined by the Yield-to-Maturity analysis as the fair value for that security; however, because of Main Street's general intent to hold its loans to maturity, the fair value will not exceed the principal amount of the debt security valued using the Yield-to-Maturity valuation method. A change in the assumptions that Main Street uses to estimate the fair value of its debt securities using the Yield-to-Maturity valuation method could have a material impact on the determination of fair value. If there is deterioration in credit quality or if a debt security is in workout status, Main Street may consider other factors in determining the fair value of the debt security, including the value attributable to the debt security from the enterprise value of the portfolio company or the proceeds that would most likely be received in a liquidation analysis.
Under the NAV valuation method, for an investment in an investment fund that does not have a readily determinable fair value, Main Street measures the fair value of the investment predominately based on the NAV of the investment fund as of the measurement date. However, in determining the fair value of the investment, Main Street may consider whether adjustments to the NAV are necessary in certain circumstances, based on the analysis of any restrictions on redemption of Main Street's investment as of the measurement date, recent actual sales or redemptions of interests in the investment fund, and expected future cash flows available to equity holders, including the rate of return on those cash flows compared to an implied market return on equity required by market participants, or other uncertainties surrounding Main Street's ability to realize the full NAV of its interests in the investment fund.
Pursuant to its internal valuation process and the requirements under the 1940 Act, Main Street performs valuation procedures on each of its portfolio investments quarterly. In addition to its internal valuation process, in arriving at estimates of fair value for its investments in its LMM portfolio companies, Main Street, among other things, consults with a nationally recognized independent financial advisory services firm. The nationally recognized independent financial advisory services firm analyzes and provides observations and recommendations regarding the Company's determinations of the fair value of its LMM portfolio company investments. The nationally recognized independent financial advisory services firm is generally consulted relative to Main Street's investments in each LMM portfolio company at least once every calendar year, and for Main Street's investments in new
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Notes to Consolidated Financial Statements (Continued)
(Unaudited)
LMM portfolio companies, at least once in the twelve-month period subsequent to the initial investment. In certain instances, Main Street may determine that it is not cost-effective, and as a result is not in its stockholders' best interest, to consult with the nationally recognized independent financial advisory services firm on its investments in one or more LMM portfolio companies. Such instances include, but are not limited to, situations where the fair value of Main Street's investment in a LMM portfolio company is determined to be insignificant relative to the total Investment Portfolio. Main Street consulted with its independent financial advisory services firm in arriving at Main Street's determination of fair value on its investments in a total of 44 LMM portfolio companies for the nine months ended September 30, 2015, representing approximately 75% of the total LMM portfolio at fair value as of September 30, 2015, and on a total of 42 LMM portfolio companies for the nine months ended September 30, 2014, representing approximately 74% of the total LMM portfolio at fair value as of September 30, 2014. Excluding investments in new LMM portfolio companies which have not been in the Investment Portfolio for at least twelve months subsequent to the initial investment as of September 30, 2015 and 2014, as applicable, and investments in the LMM portfolio companies that were not reviewed because their equity is publicly traded, the percentage of the LMM portfolio reviewed by the independent financial advisory services firm for the nine months ended September 30, 2015 and 2014 was 82% and 83% of the total LMM portfolio at fair value as of September 30, 2015 and 2014, respectively.
For valuation purposes, all of Main Street's Middle Market portfolio investments are non-control investments. To the extent sufficient observable inputs are available to determine fair value, Main Street uses observable inputs to determine the fair value of these investments through obtaining third-party quotes or other independent pricing. For Middle Market portfolio investments for which it has determined that third-party quotes or other independent pricing are not available or appropriate, Main Street generally estimates the fair value based on the assumptions that it believes hypothetical market participants would use to value such Middle Market debt investments in a current hypothetical sale using the Yield-to-Maturity valuation method and such Middle Market equity investments in a current hypothetical sale using the Waterfall valuation method. The Company does not generally consult with any financial advisory services firms in connection with determining the fair value of its Middle Market debt investments.
For valuation purposes, all of Main Street's Private Loan portfolio investments are non-control investments. For Private Loan portfolio investments for which it has determined that third-party quotes or other independent pricing are not available or appropriate, Main Street generally estimates the fair value based on the assumptions that it believes hypothetical market participants would use to value such Private Loan debt investments in a current hypothetical sale using the Yield-to-Maturity valuation method and such Private Loan equity investments in a current hypothetical sale using the Waterfall valuation method. The nationally recognized independent financial advisory services firm analyzes and provides observations and recommendations regarding the Company's determinations of the fair value of its Private Loan portfolio company investments.
For valuation purposes, all of Main Street's Other Portfolio investments are non-control investments. Main Street's Other Portfolio investments comprised approximately 3.0% and 3.8%, respectively, of Main Street's Investment Portfolio at fair value as of September 30, 2015 and December 31, 2014. Similar to the LMM investment portfolio, market quotations for Other Portfolio equity investments are generally not readily available. For its Other Portfolio equity investments, Main Street generally determines the fair value of its investments using the NAV valuation method. For Other Portfolio debt investments for which it has determined that third-party quotes or other
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Notes to Consolidated Financial Statements (Continued)
(Unaudited)
independent pricing are not available or appropriate, Main Street generally estimates the fair value based on the assumptions that it believes hypothetical market participants would use to value such Other Portfolio debt investments in a current hypothetical sale using the Yield-to-Maturity valuation method. For Other Portfolio debt investments for which third-party quotes or other independent pricing are available and appropriate, Main Street determines the fair value of these investments through obtaining third party quotes or other independent pricing to the extent that these inputs are available and appropriate to determine fair value.
For valuation purposes, Main Street's investment in the External Investment Manager is a control investment. Market quotations are not readily available for this investment, and as a result, Main Street determines the fair value of the External Investment Manager using the Waterfall valuation method under the market approach. In estimating the enterprise value, Main Street analyzes various factors, including the entity's historical and projected financial results, as well as its size, marketability and performance relative to the population of market comparables. This valuation approach estimates the value of the investment as if Main Street were to sell, or exit, the investment. In addition, Main Street considers the value associated with Main Street's ability to control the capital structure of the company, as well as the timing of a potential exit.
Due to the inherent uncertainty in the valuation process, Main Street's determination of fair value for its Investment Portfolio may differ materially from the values that would have been determined had a ready market for the securities existed. In addition, changes in the market environment, portfolio company performance and other events that may occur over the lives of the investments may cause the gains or losses ultimately realized on these investments to be materially different than the valuations currently assigned. Main Street determines the fair value of each individual investment and records changes in fair value as unrealized appreciation or depreciation.
Main Street uses a standard internal portfolio investment rating system in connection with its investment oversight, portfolio management and analysis and investment valuation procedures for its LMM portfolio companies. This system takes into account both quantitative and qualitative factors of the LMM portfolio company and the investments held therein.
The Board of Directors of Main Street has the final responsibility for overseeing, reviewing and approving, in good faith, Main Street's determination of the fair value for its Investment Portfolio, as well as its valuation procedures, consistent with 1940 Act requirements. Main Street believes its Investment Portfolio as of September 30, 2015 and December 31, 2014 approximates fair value as of those dates based on the markets in which Main Street operates and other conditions in existence on those reporting dates.
2. Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results may differ from these estimates under different conditions or assumptions. Additionally, as explained in Note B.1., the financial statements include investments in the Investment Portfolio whose values have been estimated by Main Street with the oversight, review and approval by Main Street's Board of Directors in the absence of readily ascertainable market values. Because of the inherent uncertainty of the Investment Portfolio valuations, those estimated values may differ significantly from the values that would have been determined had a readily available market for the investments existed, and it is reasonably possible that the differences could be material.
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Notes to Consolidated Financial Statements (Continued)
(Unaudited)
3. Cash and Cash Equivalents
Cash and cash equivalents consist of cash and highly liquid investments with an original maturity of three months or less at the date of purchase. Cash and cash equivalents are carried at cost, which approximates fair value.
At September 30, 2015, cash balances totaling $31.4 million exceeded FDIC insurance protection levels, subjecting the Company to risk related to the uninsured balance. All of the Company's cash deposits are held at large, established, high credit quality financial institutions and management believes that the risk of loss associated with any uninsured balances is remote.
4. Marketable Securities and Idle Funds Investments
Marketable securities and idle funds investments include intermediate-term secured debt investments, independently rated debt investments and publicly traded debt and equity investments. See the consolidated schedule of investments for more information on Marketable securities and idle funds investments.
5. Interest, Dividend and Fee Income (Structuring and Advisory Services)
Main Street records interest and dividend income on the accrual basis to the extent amounts are expected to be collected. Dividend income is recorded as dividends are declared by the portfolio company or at the point an obligation exists for the portfolio company to make a distribution. In accordance with Main Street's valuation policy, Main Street evaluates accrued interest and dividend income periodically for collectability. When a loan or debt security becomes 90 days or more past due, and if Main Street otherwise does not expect the debtor to be able to service all of its debt or other obligations, Main Street will generally place the loan or debt security on non-accrual status and cease recognizing interest income on that loan or debt security until the borrower has demonstrated the ability and intent to pay contractual amounts due. If a loan or debt security's status significantly improves regarding the debtor's ability to service the debt or other obligations, or if a loan or debt security is fully impaired, sold or written off, Main Street removes it from non-accrual status.
Main Street holds certain debt and preferred equity instruments in its Investment Portfolio that contain payment-in-kind ("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.9. below), these non-cash sources of income may need to be paid out to stockholders in the form of distributions, even though Main Street may not have collected the PIK interest and cumulative dividends in cash. Main Street stops accruing PIK interest and cumulative dividends and writes off any accrued and uncollected interest and dividends in arrears when it determines that such PIK interest and dividends in arrears are no longer collectible. For the three months ended September 30, 2015 and 2014, (i) approximately 2.2% and 2.5%, respectively, of Main Street's total investment income was attributable to PIK interest income not paid currently in cash and (ii) approximately 1.2% and 1.8%, respectively, of Main Street's total investment income was attributable to cumulative dividend income
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Notes to Consolidated Financial Statements (Continued)
(Unaudited)
not paid currently in cash. For the nine months ended September 30, 2015 and 2014, (i) approximately 2.1% and 3.9%, respectively, of Main Street's total investment income was attributable to PIK interest income not paid currently in cash and (ii) approximately 1.0% and 1.4%, respectively, of Main Street's total investment income was attributable to cumulative dividend income not paid currently in cash.
As of September 30, 2015, Main Street's total Investment Portfolio had four investments on non-accrual status, which included one fully-impaired debt investment and comprised approximately 0.2% of its fair value and 3.0% of its cost. As of December 31, 2014, Main Street's total Investment Portfolio had five investments with positive fair value on non-accrual status, which comprised approximately 1.7% of its fair value and 4.7% of its cost.
Main Street may periodically provide services, including structuring and advisory services, to its portfolio companies or other third parties. For services that are separately identifiable and evidence exists to substantiate fair value, fee income is recognized as earned, which is generally when the investment or other applicable transaction closes. Fees received in connection with debt financing transactions for services that do not meet these criteria are treated as debt origination fees and are deferred and accreted into interest income over the life of the financing.
A presentation of the investment income Main Street received from its Investment Portfolio in each of the periods presented is as follows:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
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|
2015 | 2014 | 2015 | 2014 | |||||||||
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(in thousands) |
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Interest, fee and dividend income: |
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Interest income |
$ | 34,167 | $ | 27,669 | $ | 97,010 | $ | 81,332 | |||||
Dividend income |
6,939 | 5,935 | 17,353 | 15,411 | |||||||||
Fee income |
1,273 | 2,627 | 5,887 | 4,704 | |||||||||
| | | | | | | | | | | | | |
Total interest, fee and dividend income |
$ | 42,379 | $ | 36,231 | $ | 120,250 | $ | 101,447 |
6. Deferred Financing Costs
Deferred financing costs include SBIC debenture commitment fees and SBIC debenture leverage fees on the SBIC debentures which are not accounted for under the fair value option under ASC 825 (as discussed further in Note B.11.). These fees are approximately 3.4% of the total commitment and draw amounts, as applicable. These deferred financing costs have been capitalized and are being amortized into interest expense over the ten year term of each debenture agreement.
Deferred financing costs also include commitment fees and other costs related to Main Street's multi-year investment credit facility (the "Credit Facility", as discussed further in Note F) and its notes (as discussed further in Note G). These costs have been capitalized and are amortized into interest expense over the term of the individual instrument.
7. Unearned IncomeDebt Origination Fees and Original Issue Discount and Discounts / Premiums to Par Value
Main Street capitalizes debt origination fees received in connection with financings and reflects such fees as unearned income netted against the applicable debt investments. The unearned income
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Notes to Consolidated Financial Statements (Continued)
(Unaudited)
from the fees is accreted into interest income based on the effective interest method over the life of the financing.
In connection with its portfolio debt investments, Main Street sometimes receives nominal cost warrants ("nominal cost equity") that are valued as part of the negotiation process with the particular portfolio company. When Main Street receives nominal cost equity, Main Street allocates its cost basis in its investment between its debt security and its nominal cost equity at the time of origination based on amounts negotiated with the particular portfolio company. The allocated amounts are based upon the fair value of the nominal cost equity, which is then used to determine the allocation of cost to the debt security. Any discount recorded on a debt investment resulting from this allocation is reflected as unearned income, which is netted against the applicable debt investment, and accreted into interest income based on the effective interest method over the life of the debt investment. The actual collection of this interest is deferred until the time of debt principal repayment.
Main Street may also purchase debt securities at a discount or at a premium to the par value of the debt security. In the case of a purchase at a discount, Main Street records the investment at the par value of the debt security net of the discount, and the discount is accreted into interest income based on the effective interest method over the life of the debt investment. In the case of a purchase at a premium, Main Street records the investment at the par value of the debt security plus the premium, and the premium is amortized as a reduction to interest income based on the effective interest method over the life of the debt investment.
To maintain RIC tax treatment (as discussed in Note B.9.), these non-cash sources of income may need to be paid out to stockholders in the form of distributions, even though Main Street may not have collected the interest income. For the three months ended September 30, 2015 and 2014, approximately 2.3% and 2.3%, respectively, of Main Street's total investment income was attributable to interest income for the accretion of discounts associated with debt investments, net of any premium reduction. For the nine months ended September 30, 2015 and 2014, approximately 2.7% and 3.4%, respectively, of Main Street's total investment income was attributable to interest income for the accretion of discounts associated with debt investments, net of any premium reduction.
8. Share-Based Compensation
Main Street accounts for its share-based compensation plans using the fair value method, as prescribed by ASC 718, CompensationStock Compensation. Accordingly, for restricted stock awards, Main Street measures the grant date fair value based upon the market price of its common stock on the date of the grant and amortizes the fair value of the awards as share-based compensation expense over the requisite service period, which is generally the vesting term.
9. Income Taxes
MSCC has elected to be treated for U.S. federal income tax purposes as a RIC. MSCC's taxable income includes the taxable income generated by MSCC and certain of its subsidiaries, including the Funds, which are treated as disregarded entities for tax purposes. As a RIC, MSCC generally will not pay corporate-level U.S. federal income taxes on any net ordinary income or capital gains that MSCC distributes to its stockholders. MSCC must generally distribute at least 90% of its investment company taxable income to qualify for pass-through tax treatment and maintain its RIC status. As part of maintaining RIC status, undistributed taxable income (subject to a 4% U.S Federal excise tax) pertaining to a given fiscal year may be distributed up to 12 months subsequent to the end of that fiscal
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Notes to Consolidated Financial Statements (Continued)
(Unaudited)
year, provided such dividends are declared prior to the filing of the U.S federal income tax return for the applicable fiscal year.
The Taxable Subsidiaries hold certain portfolio investments for Main Street. The Taxable Subsidiaries permit Main Street to hold equity investments in portfolio companies which are "pass-through" entities for tax purposes and to continue to comply with the "source-income" requirements contained in the RIC tax provisions of the Code. The Taxable Subsidiaries are consolidated with Main Street for U.S. GAAP financial reporting purposes, and the portfolio investments held by the Taxable Subsidiaries are included in Main Street's consolidated financial statements as portfolio investments and recorded at fair value. The Taxable Subsidiaries are not consolidated with MSCC for income tax purposes and may generate income tax expense, or benefit, and tax assets and liabilities, as a result of their ownership of certain portfolio investments. The taxable income, or loss, of the Taxable Subsidiaries may differ from its book income, or loss, due to temporary book and tax timing differences and permanent differences. This income tax expense, or benefit, if any, and the related tax assets and liabilities, are reflected in Main Street's consolidated financial statements.
MSCC's wholly owned subsidiary MSCP is included in Main Street's consolidated financial statements for financing reporting purposes. For tax purposes, MSCP has elected to be treated as a taxable entity, and therefore is not consolidated with MSCC for income tax purposes and is taxed at normal corporate tax rates based on its taxable income and, as a result of its activities, may generate income tax expense or benefit. The taxable income, or loss, of MSCP may differ from its book income, or loss, due to temporary book and tax timing differences and permanent differences. This income tax expense, or benefit, if any, and the related tax assets and liabilities, are reflected in Main Street's consolidated financial statements.
The Taxable Subsidiaries and MSCP use the liability method in accounting for income taxes. Deferred tax assets and liabilities are recorded for temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, using statutory tax rates in effect for the year in which the temporary differences are expected to reverse. A valuation allowance is provided against deferred tax assets when it is more likely than not that some portion or all of the deferred tax asset will not be realized.
Taxable income generally differs from net income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses. Taxable income generally excludes net unrealized appreciation or depreciation, as investment gains or losses are not included in taxable income until they are realized.
10. Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation
Realized gains or losses are measured by the difference between the net proceeds from the sale or redemption of an investment or a financial instrument and the cost basis of the investment or financial instrument, without regard to unrealized appreciation or depreciation previously recognized, and includes investments written-off during the period net of recoveries and realized gains or losses from in-kind redemptions. Net change in unrealized appreciation or depreciation reflects the net change in the fair value of the Investment Portfolio and financial instruments and the reclassification of any prior period unrealized appreciation or depreciation on exited investments and financial instruments to realized gains or losses.
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Notes to Consolidated Financial Statements (Continued)
(Unaudited)
11. Fair Value of Financial Instruments
Fair value estimates are made at discrete points in time based on relevant information. These estimates may be subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Main Street believes that the carrying amounts of its financial instruments, consisting of cash and cash equivalents, receivables, payables and other liabilities approximate the fair values of such items due to the short term nature of these instruments. Marketable securities and idle funds investments may include investments in certificates of deposit, U.S. government agency securities, independently rated debt investments, diversified bond funds and publicly traded debt and equity investments and the fair value determination for these investments under the provisions of ASC 820 generally consists of Level 1 and 2 observable inputs, similar in nature to those discussed further in Note C.
As part of Main Street's acquisition of the majority of the equity interests of MSC II in January 2010 (the "MSC II Acquisition"), Main Street elected the fair value option under ASC 825, Financial Instruments ("ASC 825") relating to accounting for debt obligations at their fair value, for the MSC II SBIC debentures acquired (the "Acquired Debentures") as part of the acquisition accounting related to the MSC II Acquisition and values those obligations as discussed further in Note C. In order to provide for a more consistent basis of presentation, Main Street has continued to elect the fair value option for SBIC debentures issued by MSC II subsequent to the MSC II Acquisition. When the fair value option is elected for a given SBIC debenture, the deferred loan costs associated with the debenture are fully expensed in the current period to "Net Change in Unrealized Appreciation (Depreciation)SBIC debentures" as part of the fair value adjustment. Interest incurred in connection with SBIC debentures which are valued at fair value is included in interest expense.
12. Earnings per Share
Basic and diluted per share calculations are computed utilizing the weighted- average number of shares of common stock outstanding for the period. In accordance with ASC 260, Earnings Per Share, the unvested shares of restricted stock awarded pursuant to Main Street's equity compensation plans are participating securities and are included in the basic earnings per share calculation. As a result, for all periods presented, there is no difference between diluted earnings per share and basic earnings per share amounts.
13. Recently Issued or Adopted Accounting Standards
In May 2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-9 supersedes the revenue recognition requirements under ASC Topic 605, Revenue Recognition, and most industry-specific guidance throughout the Industry Topics of the ASC. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. Under the new guidance, an entity is required to perform the following five steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The new guidance will significantly enhance comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets. Additionally, the guidance requires improved disclosures as to the nature, amount,
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Notes to Consolidated Financial Statements (Continued)
(Unaudited)
timing and uncertainty of revenue that is recognized. The FASB tentatively decided to defer the effective date of the new revenue standard for public entities under U.S. GAAP for one year. If finalized, the new guidance will be effective for the annual reporting period beginning after December 15, 2017, including interim periods within that reporting period. Early adoption would be permitted for annual reporting periods beginning after December 15, 2016. Main Street is currently evaluating the impact the adoption of this new accounting standard will have on its financial statements.
In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, which changes the presentation of debt issuance costs in financial statements. ASU 2015-03 requires an entity to present such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs will continue to be reported as interest expense. It is effective for annual reporting periods beginning after December 15, 2016. Early adoption is permitted. The new guidance will be applied retrospectively to each prior period presented. The impact of the adoption of this new accounting standard on Main Street's consolidated financial statements is currently being evaluated.
In May 2015, the FASB issued ASU 2015-07, Fair Value MeasurementsDisclosures for Certain Entities that Calculate Net Asset Value per Share. This amendment updates guidance intended to eliminate the diversity in practice surrounding how investments measured at net asset value under the practical expedient with future redemption dates have been categorized in the fair value hierarchy. Under the updated guidance, investments for which fair value is measured at net asset value per share using the practical expedient should no longer be categorized in the fair value hierarchy, while investments for which fair value is measured at net asset value per share but the practical expedient is not applied should continue to be categorized in the fair value hierarchy. The updated guidance requires retrospective adoption for all periods presented and is effective for interim and annual reporting periods beginning after December 15, 2015, with early adoption permitted. The impact of the adoption of this new accounting standard on Main Street's consolidated financial statements is currently being evaluated.
From time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies that are adopted by Main Street as of the specified effective date. Main Street believes that the impact of recently issued standards and any that are not yet effective will not have a material impact on its financial statements upon adoption.
NOTE CFAIR VALUE HIERARCHY FOR INVESTMENTS AND DEBENTURESPORTFOLIO COMPOSITION
ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value, and enhances disclosure requirements for fair value measurements. Main Street accounts for its investments at fair value.
Fair Value Hierarchy
In accordance with ASC 820, Main Street has categorized its investments based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical investments (Level 1) and the lowest priority to unobservable inputs (Level 3).
71
MAIN STREET CAPITAL CORPORATION
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
Investments recorded on Main Street's balance sheet are categorized based on the inputs to the valuation techniques as follows:
Level 1Investments whose values are based on unadjusted quoted prices for identical assets in an active market that Main Street has the ability to access (examples include investments in active exchange-traded equity securities and investments in most U.S. government and agency securities).
Level 2Investments whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the investment. Level 2 inputs include the following:
Level 3Investments whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement (for example, investments in illiquid securities issued by private companies). These inputs reflect management's own assumptions about the assumptions a market participant would use in pricing the investment.
As required by ASC 820, when the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. For example, a Level 3 fair value measurement may include inputs that are observable (Levels 1 and 2) and unobservable (Level 3). Therefore, unrealized appreciation and depreciation related to such investments categorized within the Level 3 tables below may include changes in fair value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3). Main Street conducts reviews of fair value hierarchy classifications on a quarterly basis. During the classification process, Main Street may determine that it is appropriate to transfer investments between fair value hierarchy Levels. These transfers occur when Main Street has concluded that it is appropriate for the classification of an individual asset to be changed due to a change in the factors used to determine the selection of the Level. Any such changes are deemed to be effective during the quarter in which the transfer occurs.
As of September 30, 2015 and December 31, 2014, all except for one of Main Street's LMM portfolio investments consisted of illiquid securities issued by private companies. The remaining investment was a publicly traded equity security. As a result, the fair value determination for the LMM portfolio investments primarily consisted of unobservable inputs. The fair value determination for the publicly traded equity security consisted of observable inputs in non-active markets for which sufficient observable inputs were available to determine the fair value. As a result, all of Main Street's LMM
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MAIN STREET CAPITAL CORPORATION
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
portfolio investments were categorized as Level 3 as of September 30, 2015 and December 31, 2014, except for the one publicly traded equity security which was categorized as Level 2.
As of September 30, 2015 and December 31, 2014, Main Street's Middle Market portfolio investments consisted primarily of investments in secured and unsecured debt investments and independently rated debt investments. The fair value determination for these investments consisted of a combination of observable inputs in non-active markets for which sufficient observable inputs were not available to determine the fair value of these investments and unobservable inputs. As a result, all of Main Street's Middle Market portfolio investments were categorized as Level 3 as of September 30, 2015 and December 31, 2014.
As of September 30, 2015 and December 31, 2014, Main Street's Private Loan portfolio investments primarily consisted of investments in interest-bearing secured debt investments. The fair value determination for these investments consisted of a combination of observable inputs in non-active markets for which sufficient observable inputs were not available to determine the fair value of these investments and unobservable inputs. As a result, all of Main Street's Private Loan portfolio investments were categorized as Level 3 as of September 30, 2015 and December 31, 2014.
As of September 30, 2015 and December 31, 2014, Main Street's Other Portfolio investments consisted of illiquid securities issued by private companies. The fair value determination for these investments primarily consisted of unobservable inputs. As a result, all of Main Street's Other Portfolio investments were categorized as Level 3 as of September 30, 2015 and December 31, 2014.
As of September 30, 2015 and December 31, 2014, Main Street's Marketable securities and idle funds investments consisted primarily of investments in publicly traded debt and equity investments. The fair value determination for these investments consisted of a combination of observable inputs in active markets for which sufficient observable inputs were available to determine the fair value of these investments. As a result, all of Main Street's Marketable securities and idle funds investments were categorized as Level 1 as of September 30, 2015 and December 31, 2014.
The fair value determination of each portfolio investment categorized as Level 3 required one or more of the following unobservable inputs:
73
MAIN STREET CAPITAL CORPORATION
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
The significant unobservable inputs used in the fair value measurement of Main Street's LMM equity securities, which are generally valued through an average of the discounted cash flow technique and the market comparable/enterprise value technique (unless one of these approaches is determined to not be appropriate), are (i) EBITDA multiples and (ii) the weighted-average cost of capital ("WACC"). Significant increases (decreases) in EBITDA multiple inputs in isolation would result in a significantly higher (lower) fair value measurement. On the contrary, significant increases (decreases) in WACC inputs in isolation would result in a significantly lower (higher) fair value measurement. The significant unobservable inputs used in the fair value measurement of Main Street's LMM, Middle Market, Private Loan and Other Portfolio debt securities are (i) risk adjusted discount rates used in the Yield-to-Maturity valuation technique (described in Note B.1.Valuation of the Investment Portfolio) and (ii) the percentage of expected principal recovery. Significant increases (decreases) in any of these discount rates in isolation would result in a significantly lower (higher) fair value measurement. Significant increases (decreases) in any of these expected principal recovery percentages in isolation would result in a significantly higher (lower) fair value measurement. However, due to the nature of certain investments, fair value measurements may be based on other criteria, such as third-party appraisals of collateral and fair values as determined by independent third parties, which are not presented in the tables below.
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MAIN STREET CAPITAL CORPORATION
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
The following table provides a summary of the significant unobservable inputs used to fair value Main Street's Level 3 portfolio investments as of September 30, 2015:
Type of Investment
|
Fair Value as of September 30, 2015 (in thousands) |
Valuation Technique | Significant Unobservable Inputs | Range(3) | Weighted Average(3) |
||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity investments |
$ | 506,285 | Discounted cash flow | Weighted average cost of capital | 10.9% - 19.4% | 13.0% | |||||||
|
Market comparable / Enterprise Value | EBITDA multiple(1) | 4.0x - 8.5x(2) | 6.8x | |||||||||
Debt investments |
$ |
656,173 |
Discounted cash flow |
Risk adjusted discount factor |
7.6% - 15.3%(2) |
11.5% |
|||||||
|
Expected principal recovery percentage | 25.4% - 100.0% | 99.7% | ||||||||||
Debt investments |
$ |
700,516 |
Market approach |
Third party quote |
34.0 - 106.4 |
||||||||
| | | | | | | | | | | | | |
Total Level 3 investments |
$ | 1,862,974 |
The following table provides a summary of the significant unobservable inputs used to fair value Main Street's Level 3 portfolio investments as of December 31, 2014:
Type of Investment
|
Fair Value as of December 31, 2014 (in thousands) |
Valuation Technique | Significant Unobservable Inputs | Range(3) | Weighted Average(3) |
||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity investments |
$ | 407,569 | Discounted cash flow | Weighted average cost of capital | 11.4% - 23.4% | 13.9% | |||||||
|
Market comparable / Enterprise Value | EBITDA multiple(1) | 4.0x - 7.8x(2) | 6.4x | |||||||||
Debt investments |
$ |
557,604 |
Discounted cash flow |
Risk adjusted discount factor |
7.5% - 15.8%(2) |
12.1% |
|||||||
|
Expected principal recovery percentage | 42.0% - 100.0% | 99.3% | ||||||||||
Debt investments |
$ |
589,677 |
Market approach |
Third party quote |
60.1 - 102.3 |
||||||||
| | | | | | | | | | | | | |
Total Level 3 investments |
$ | 1,554,850 |
The following table provides a summary of changes in fair value of Main Street's Level 3 portfolio investments for the nine months ended September 30, 2015 (amounts in thousands). Net unrealized
75
MAIN STREET CAPITAL CORPORATION
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
appreciation (depreciation) is included in the Net change in unrealized appreciation (depreciation)portfolio investments on the consolidated statements of operations.
Type of Investment
|
Fair Value as of December 31, 2014 |
Transfers Into Level 3 Hierarchy |
Redemptions/ Repayments |
New Investments |
Net Changes from Unrealized to Realized |
Net Unrealized Appreciation (Depreciation) |
Other(1) | Fair Value as of September 30, 2015 |
|||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Debt |
$ | 1,147,281 | $ | | $ | (439,158 | ) | $ | 672,305 | $ | 19,844 | $ | (32,804 | ) | $ | (10,779 | ) | $ | 1,356,689 | ||||||
Equity |
391,933 | | (16,475 | ) | 58,728 | (8,250 | ) | 55,865 | 10,376 | 492,177 | |||||||||||||||
Equity Warrant |
15,636 | | (1,723 | ) | 2,153 | (1,687 | ) | (271 | ) | | 14,108 | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
|
$ | 1,554,850 | $ | | $ | (457,356 | ) | $ | 733,186 | $ | 9,907 | $ | 22,790 | $ | (403 | ) | $ | 1,862,974 | |||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
The following table provides a summary of changes in fair value of Main Street's Level 3 portfolio investments for the nine months ended September 30, 2014 (amounts in thousands). All transfers that occurred between fair value hierarchy levels during the nine months ended September 30, 2014 were transfers out of Level 2 into Level 3 as certain investments were deemed to trade infrequently. Net unrealized appreciation (depreciation) is included in the Net change in unrealized appreciation (depreciation)portfolio investments on the consolidated statements of operations.
Type of Investment
|
Fair Value as of December 31, 2013 |
Transfers Into Level 3 Hierarchy |
Redemptions/ Repayments |
New Investments |
Net Changes from Unrealized to Realized |
Net Unrealized Appreciation (Depreciation) |
Other(1) | Fair Value as of September 30, 2014 |
|||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Debt |
$ | 897,568 | $ | 55,102 | $ | (411,801 | ) | $ | 575,644 | $ | 6,811 | $ | (19,144 | ) | $ | (2,738 | ) | $ | 1,101,442 | ||||||
Equity |
270,764 | | (12,305 | ) | 41,338 | 1,050 | 53,616 | 2,078 | 356,541 | ||||||||||||||||
Equity Warrant |
36,558 | | (650 | ) | 771 | (9,800 | ) | (6,931 | ) | 83 | 20,031 | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
|
$ | 1,204,890 | $ | 55,102 | $ | (424,756 | ) | $ | 617,753 | $ | (1,939 | ) | $ | 27,541 | $ | (577 | ) | $ | 1,478,014 | ||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
As of September 30, 2015 and December 31, 2014, the fair value determination for the SBIC debentures recorded at fair value primarily consisted of unobservable inputs. As a result, the SBIC debentures which are recorded at fair value were categorized as Level 3. Main Street determines the fair value of these instruments primarily using a Yield-to-Maturity approach that analyzes the discounted cash flows of interest and principal for each SBIC debenture recorded at fair value based on estimated market interest rates for debt instruments of similar structure, terms, and maturity. Main Street's estimate of the expected repayment date of principal for each SBIC debenture recorded at fair value is the legal maturity date of the instrument. The significant unobservable inputs used in the fair value measurement of Main Street's SBIC debentures recorded at fair value are the estimated market interest rates used to fair value each debenture using the yield valuation technique described above. Significant increases (decreases) in the Yield- to-Maturity valuation inputs in isolation would result in a significantly lower (higher) fair value measurement.
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MAIN STREET CAPITAL CORPORATION
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
The following table provides a summary of the significant unobservable inputs used to fair value Main Street's Level 3 SBIC debentures as of September 30, 2015 (amounts in thousands):
Type of Instrument
|
Fair Value as of September 30, 2015 |
Valuation Technique | Significant Unobservable Inputs | Range | Weighted Average |
||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
SBIC debentures |
$ | 73,804 | Discounted cash flow | Estimated market interest rates | 4.1% - 5.9% | 4.9 | % |
The following table provides a summary of the significant unobservable inputs used to fair value Main Street's Level 3 SBIC debentures as of December 31, 2014 (amounts in thousands):
Type of Instrument
|
Fair Value as of December 31, 2014 |
Valuation Technique | Significant Unobservable Inputs | Range | Weighted Average |
||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
SBIC debentures |
$ | 72,981 | Discounted cash flow | Estimated market interest rates | 4.6% - 6.0% | 5.3% |
The following table provides a summary of changes for the Level 3 SBIC debentures recorded at fair value for the nine months ended September 30, 2015 (amounts in thousands):
Fair Value as of December 31, 2014 |
Repayments | New SBIC Debentures |
Net Unrealized (Appreciation) Depreciation |
Fair Value as of September 30, 2015 |
||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
$ | 72,981 | $ | | $ | | $ | 823 | $ | 73,804 | |||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
The following table provides a summary of changes for the Level 3 SBIC debentures recorded at fair value for the nine months ended September 30, 2014 (amounts in thousands):
Fair Value as of December 31, 2013 |
Repayments | New SBIC Debentures |
Net Unrealized (Appreciation) Depreciation |
Fair Value as of September 30, 2014 |
||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
$ | 62,050 | $ | | $ | | $ | 10,779 | $ | 72,829 | |||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
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MAIN STREET CAPITAL CORPORATION
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
At September 30, 2015 and December 31, 2014, Main Street's investments and SBIC debentures at fair value were categorized as follows in the fair value hierarchy for ASC 820 purposes:
|
|
Fair Value Measurements | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
(in thousands) |
|||||||||||
At September 30, 2015
|
Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
|||||||||
LMM portfolio investments |
$ | 856,371 | $ | | $ | 4,460 | $ | 851,911 | |||||
Middle Market portfolio investments |
669,519 | | | 669,519 | |||||||||
Private Loan portfolio investments |
252,366 | | | 252,366 | |||||||||
Other Portfolio investments |
56,873 | | | 56,873 | |||||||||
External Investment Manager |
32,305 | | | 32,305 | |||||||||
| | | | | | | | | | | | | |
Total portfolio investments |
1,867,434 | | 4,460 | 1,862,974 | |||||||||
Marketable securities and idle funds investments |
4,583 | 4,583 | | | |||||||||
| | | | | | | | | | | | | |
Total investments |
$ | 1,872,017 | $ | 4,583 | $ | 4,460 | $ | 1,862,974 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
SBIC debentures at fair value |
$ | 73,804 | $ | | $ | | $ | 73,804 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
|
|
Fair Value Measurements | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
(in thousands) |
|||||||||||
At December 31, 2014
|
Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
|||||||||
LMM portfolio investments |
$ | 733,191 | $ | | $ | 8,480 | $ | 724,711 | |||||
Middle Market portfolio investments |
542,688 | | | 542,688 | |||||||||
Private Loan portfolio investments |
213,015 | | | 213,015 | |||||||||
Other Portfolio investments |
58,856 | | | 58,856 | |||||||||
External Investment Manager |
15,580 | | | 15,580 | |||||||||
| | | | | | | | | | | | | |
Total portfolio investments |
1,563,330 | | 8,480 | 1,554,850 | |||||||||
Marketable securities and idle funds investments |
9,067 | 9,067 | | | |||||||||
| | | | | | | | | | | | | |
Total investments |
$ | 1,572,397 | $ | 9,067 | $ | 8,480 | $ | 1,554,850 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
SBIC debentures at fair value |
$ | 72,981 | $ | | $ | | $ | 72,981 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Investment Portfolio Composition
Main Street's lower middle market ("LMM") portfolio investments primarily consist of secured debt, equity warrants and direct equity investments in privately held, LMM companies based in the United States. Main Street's LMM portfolio companies generally have annual revenues between $10 million and $150 million, and its LMM investments generally range in size from $5 million to $50 million. The LMM debt investments are typically secured by either a first or second priority lien on
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MAIN STREET CAPITAL CORPORATION
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
the assets of the portfolio company, primarily bear interest at fixed rates, and generally have a term of between five and seven years from the original investment date. In most LMM portfolio investments, Main Street receives nominally priced equity warrants and/or makes direct equity investments in connection with a debt investment.
Main Street's middle market ("Middle Market") portfolio investments primarily consist of direct investments in or secondary purchases of interest- bearing debt securities in privately held companies based in the United States that are generally larger in size than the companies included in Main Street's LMM portfolio. Main Street's Middle Market portfolio companies generally have annual revenues between $150 million and $1.5 billion, and its Middle Market investments generally range in size from $3 million to $15 million. Main Street's Middle Market portfolio debt investments are generally secured by either a first or second 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.
Main Street's private loan ("Private Loan") portfolio investments are primarily debt securities which have been originated through strategic relationships with other investment funds on a collaborative basis, and are often referred to in the debt markets as "club deals." Private Loan investments are typically similar in size, structure, terms and conditions to investments Main Street holds in its LMM portfolio and Middle Market portfolio. Main Street's Private Loan portfolio debt investments are generally secured by either a first or second 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.
Main Street's other portfolio ("Other Portfolio") investments primarily consist of investments which are not consistent with the typical profiles for LMM, Middle Market and Private Loan portfolio investments, including investments which may be managed by third parties. In the Other Portfolio, Main Street may incur indirect fees and expenses in connection with investments managed by third parties, such as investments in other investment companies or private funds.
Main Street's external asset management business is conducted through its External Investment Manager. The External Investment Manager earns management fees based on the assets of the funds under management and may earn incentive fees, or a carried interest, based on the performance of the funds managed. Main Street has entered into an agreement to provide the External Investment Manager with asset management service support in connection with its asset management business generally, and specifically for its relationship with HMS Income Fund, Inc. ("HMS Income"). Through this agreement, Main Street provides management and other services to the External Investment Manager, as well as access to Main Street's employees, infrastructure, business relationships, management expertise and capital raising capabilities. In the first quarter of 2014, Main Street began charging the External Investment Manager the cost for these services. Main Street's total expenses for the three months ended September 30, 2015 and 2014 are net of expenses charged to the External Investment Manager of $1.1 million and $0.6 million, respectively. Main Street's total expenses for the nine months ended September 30, 2015 and 2014 are net of expenses charged to the External Investment Manager of $3.1 million and $1.3 million, respectively.
Investment income, consisting of interest, dividends and fees, can fluctuate dramatically due to various factors, including the level of new investment activity, repayments of debt investments or sales of equity interests. Investment income in any given year could also be highly concentrated among several portfolio companies. For the three and nine months ended September 30, 2015 and 2014, Main Street did not record investment income from any single portfolio company in excess of 10% of total investment income.
79
MAIN STREET CAPITAL CORPORATION
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
The following tables provide a summary of Main Street's investments in the LMM, Middle Market and Private Loan portfolios as of September 30, 2015 and December 31, 2014 (this information excludes the Other Portfolio investments and the External Investment Manager which are discussed further below):
|
As of September 30, 2015 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
LMM(a) | Middle Market |
Private Loan |
|||||||
|
(dollars in millions) |
|||||||||
Number of portfolio companies |
71 | 86 | 41 | |||||||
Fair value |
$ | 856.4 | $ | 669.5 | $ | 252.4 | ||||
Cost |
$ | 693.7 | $ | 695.2 | $ | 273.1 | ||||
% of portfolio at costdebt |
70.4% | 98.5% | 94.9% | |||||||
% of portfolio at costequity |
29.6% | 1.5% | 5.1% | |||||||
% of debt investments at cost secured by first priority lien |
89.6% | 87.8% | 87.6% | |||||||
Weighted-average annual effective yield(b) |
12.3% | 8.0% | 9.5% | |||||||
Average EBITDA(c) |
$ | 6.1 | $ | 97.9 | $ | 17.1 |
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MAIN STREET CAPITAL CORPORATION
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
portfolio companies, and those portfolio companies whose primary purpose is to own real estate.
|
As of December 31, 2014 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
LMM(a) | Middle Market |
Private Loan |
|||||||
|
(dollars in millions) |
|||||||||
Number of portfolio companies |
66 | 86 | 31 | |||||||
Fair value |
$ | 733.2 | $ | 542.7 | $ | 213.0 | ||||
Cost |
$ | 599.4 | $ | 561.8 | $ | 224.0 | ||||
% of portfolio at costdebt |
71.5% | 99.8% | 95.6% | |||||||
% of portfolio at costequity |
28.5% | 0.2% | 4.4% | |||||||
% of debt investments at cost secured by first priority lien |
89.6% | 85.1% | 87.8% | |||||||
Weighted-average annual effective yield(b) |
13.2% | 7.8% | 10.1% | |||||||
Average EBITDA(c) |
$ | 5.0 | $ | 77.2 | $ | 18.1 |
As of September 30, 2015, Main Street had Other Portfolio investments in seven companies, collectively totaling approximately $56.9 million in fair value and approximately $61.2 million in cost basis and which comprised approximately 3.0% of Main Street's Investment Portfolio at fair value. As of December 31, 2014, Main Street had Other Portfolio investments in six companies, collectively totaling approximately $58.9 million in fair value and approximately $56.2 million in cost basis and which comprised approximately 3.8% of Main Street's Investment Portfolio at fair value.
As discussed further in Note A.1., Main Street holds an investment in the External Investment Manager, a wholly owned subsidiary that is treated as a portfolio investment. As of September 30, 2015, there was no cost basis in this investment and the investment had a fair value of $32.3 million, which comprised 1.7% of Main Street's Investment Portfolio at fair value. As of December 31, 2014, there was no cost basis in this investment and the investment had a fair value of $15.6 million, which comprised 1.0% of Main Street's Investment Portfolio at fair value.
81
MAIN STREET CAPITAL CORPORATION
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
The following tables summarize the composition of Main Street's total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments at cost and fair value by type of investment as a percentage of the total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments, as of September 30, 2015 and December 31, 2014 (this information excludes the Other Portfolio investments and the External Investment Manager).
Cost:
|
September 30, 2015 |
December 31, 2014 |
|||||
---|---|---|---|---|---|---|---|
First lien debt |
76.1% | 75.7% | |||||
Equity |
12.6% | 11.6% | |||||
Second lien debt |
9.0% | 10.0% | |||||
Equity warrants |
1.3% | 1.5% | |||||
Other |
1.0% | 1.2% | |||||
| | | | | | | |
|
100.0% | 100.0% | |||||
| | | | | | | |
| | | | | | | |
| | | | | | | |
Fair Value:
|
September 30, 2015 |
December 31, 2014 |
|||||
---|---|---|---|---|---|---|---|
First lien debt |
67.3% | 66.9% | |||||
Equity |
23.0% | 21.9% | |||||
Second lien debt |
8.2% | 9.2% | |||||
Equity warrants |
0.8% | 1.0% | |||||
Other |
0.7% | 1.0% | |||||
| | | | | | | |
|
100.0% | 100.0% | |||||
| | | | | | | |
| | | | | | | |
| | | | | | | |
The following tables summarize the composition of Main Street's total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments by geographic region of the United States and other countries at cost and fair value as a percentage of the total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments, as of September 30, 2015 and December 31, 2014 (this information excludes the Other Portfolio investments and the External Investment Manager). The geographic composition is determined by the location of the corporate headquarters of the portfolio company.
Cost:
|
September 30, 2015 |
December 31, 2014 |
|||||
---|---|---|---|---|---|---|---|
Southwest |
32.2% | 29.6% | |||||
Northeast |
19.7% | 19.9% | |||||
Midwest |
16.1% | 13.5% | |||||
West |
14.3% | 18.7% | |||||
Southeast |
13.5% | 15.4% | |||||
Canada |
2.4% | 0.7% | |||||
Other Non-United States |
1.8% | 2.2% | |||||
| | | | | | | |
|
100.0% | 100.0% | |||||
| | | | | | | |
| | | | | | | |
| | | | | | | |
82
MAIN STREET CAPITAL CORPORATION
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
Fair Value:
|
September 30, 2015 |
December 31, 2014 |
|||||
---|---|---|---|---|---|---|---|
Southwest |
35.5% | 33.7% | |||||
Northeast |
18.0% | 18.3% | |||||
West |
15.4% | 20.4% | |||||
Midwest |
14.8% | 12.7% | |||||
Southeast |
12.6% | 12.4% | |||||
Canada |
2.1% | 0.6% | |||||
Other Non-United States |
1.6% | 1.9% | |||||
| | | | | | | |
|
100.0% | 100.0% | |||||
| | | | | | | |
| | | | | | | |
| | | | | | | |
Main Street's LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments are in companies conducting business in a variety of industries. The following tables summarize the composition of Main Street's total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments by industry at cost and fair value
83
MAIN STREET CAPITAL CORPORATION
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
as of September 30, 2015 and December 31, 2014 (this information excludes the Other Portfolio investments and the External Investment Manager).
Cost:
|
September 30, 2015 |
December 31, 2014 |
|||||
---|---|---|---|---|---|---|---|
Hotels, Restaurants & Leisure |
7.7% | 5.6% | |||||
Energy Equipment & Services |
7.0% | 8.3% | |||||
Media |
6.0% | 8.3% | |||||
Machinery |
5.4% | 6.5% | |||||
IT Services |
5.2% | 5.9% | |||||
Specialty Retail |
5.0% | 4.7% | |||||
Software |
4.7% | 5.4% | |||||
Construction & Engineering |
4.3% | 5.3% | |||||
Diversified Telecommunication Services |
4.3% | 4.0% | |||||
Health Care Providers & Services |
4.2% | 4.9% | |||||
Internet Software & Services |
3.6% | 1.9% | |||||
Electronic Equipment, Instruments & Components |
3.3% | 3.0% | |||||
Diversified Consumer Services |
3.1% | 2.9% | |||||
Auto Components |
2.6% | 2.3% | |||||
Food Products |
2.5% | 1.8% | |||||
Commercial Services & Supplies |
2.2% | 1.0% | |||||
Oil, Gas & Consumable Fuels |
2.1% | 2.5% | |||||
Diversified Financial Services |
2.1% | 1.0% | |||||
Pharmaceuticals |
1.8% | 1.8% | |||||
Building Products |
1.8% | 1.1% | |||||
Health Care Equipment & Supplies |
1.8% | 2.1% | |||||
Professional Services |
1.8% | 1.1% | |||||
Road & Rail |
1.6% | 1.8% | |||||
Aerospace & Defense |
1.2% | 1.2% | |||||
Leisure Equipment & Products |
1.2% | 0.5% | |||||
Automobile |
1.2% | 0.8% | |||||
Chemicals |
1.1% | 1.3% | |||||
Air Freight & Logistics |
1.1% | 0.9% | |||||
Distributors |
1.1% | 1.0% | |||||
Trading Companies & Distributors |
1.0% | 1.2% | |||||
Textiles, Apparel & Luxury Goods |
0.6% | 1.3% | |||||
Other(1) |
7.4% | 8.6% | |||||
| | | | | | | |
|
100.0% | 100.0% | |||||
| | | | | | | |
| | | | | | | |
| | | | | | | |
84
MAIN STREET CAPITAL CORPORATION
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
Fair Value:
|
September 30, 2015 |
December 31, 2014 |
|||||
---|---|---|---|---|---|---|---|
Hotels, Restaurants & Leisure |
7.5% | 5.6% | |||||
Machinery |
6.5% | 8.1% | |||||
Energy Equipment & Services |
6.1% | 7.9% | |||||
Specialty Retail |
5.7% | 4.9% | |||||
Software |
5.5% | 5.5% | |||||
Media |
5.2% | 7.7% | |||||
Diversified Consumer Services |
5.0% | 4.4% | |||||
Construction & Engineering |
4.9% | 5.5% | |||||
IT Services |
4.8% | 5.4% | |||||
Diversified Telecommunication Services |
3.8% | 3.8% | |||||
Health Care Providers & Services |
3.5% | 4.4% | |||||
Internet Software & Services |
3.3% | 2.3% | |||||
Auto Components |
2.8% | 2.5% | |||||
Electronic Equipment, Instruments & Components |
2.7% | 2.5% | |||||
Road & Rail |
2.5% | 2.3% | |||||
Food Products |
2.4% | 1.6% | |||||
Diversified Financial Services |
2.1% | 1.0% | |||||
Commercial Services & Supplies |
2.1% | 1.0% | |||||
Pharmaceuticals |
1.7% | 1.7% | |||||
Health Care Equipment & Supplies |
1.7% | 1.9% | |||||
Professional Services |
1.7% | 1.0% | |||||
Oil, Gas & Consumable Fuels |
1.6% | 1.9% | |||||
Building Products |
1.6% | 0.9% | |||||
Air Freight & Logistics |
1.2% | 0.8% | |||||
Aerospace & Defense |
1.1% | 1.1% | |||||
Leisure Equipment & Products |
1.1% | 0.4% | |||||
Distributors |
1.1% | 1.0% | |||||
Automobile |
1.1% | 0.8% | |||||
Chemicals |
1.0% | 1.2% | |||||
Trading Companies & Distributors |
0.9% | 1.1% | |||||
Paper & Forest Products |
0.7% | 1.2% | |||||
Textiles, Apparel & Luxury Goods |
0.5% | 1.2% | |||||
Other(1) |
6.6% | 7.4% | |||||
| | | | | | | |
|
100.0% | 100.0% | |||||
| | | | | | | |
| | | | | | | |
| | | | | | | |
At September 30, 2015 and December 31, 2014, Main Street had no portfolio investment that was greater than 10% of the Investment Portfolio at fair value.
85
MAIN STREET CAPITAL CORPORATION
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
NOTE DEXTERNAL INVESTMENT MANAGER
As discussed further in Note A.1., the External Investment Manager provides investment management and other services to External Parties. The External Investment Manager is accounted for as a portfolio investment of MSCC since the External Investment Manager conducts all of its investment management activities for parties outside of MSCC and its consolidated subsidiaries.
During May 2012, Main Street entered into an investment sub-advisory agreement with HMS Adviser, LP ("HMS Adviser"), which is the investment advisor to HMS Income Fund, Inc. ("HMS Income"), a non-publicly traded BDC whose registration statement on Form N-2 was declared effective by the SEC in June 2012, to provide certain investment advisory services to HMS Adviser. In December 2013, after obtaining required no-action relief from the SEC to allow it to own a registered investment adviser, Main Street assigned the sub-advisory agreement to the External Investment Manager since the fees received from such arrangement could otherwise have negative consequences on MSCC's ability to meet the source-of-income requirement necessary for it to maintain its RIC tax treatment. Under the investment sub-advisory agreement, the External Investment Manager is entitled to 50% of the base management fee and the incentive fees earned by HMS Adviser under its advisory agreement with HMS Income. Based upon several fee waiver agreements with HMS Income and HMS Adviser, the External Investment Manager did not begin accruing the base management fee and incentive fees, if any, until January 1, 2014. Beginning January 1, 2015, the External Investment Manager conditionally agreed to waive a limited amount of the base management fee and incentive fees otherwise earned during the year ended December 31, 2015. During the three months ended September 30, 2015 and 2014, the External Investment Manager earned $2.1 million and $0.8 million, respectively, of management fees (net of fees waived, if any) under the sub-advisory agreement with HMS Adviser. During the nine months ended September 30, 2015 and 2014, the External Investment Manager earned $5.5 million and $1.7 million, respectively, of management fees (net of fees waived, if any) under the sub-advisory agreement with HMS Adviser.
The investment in the External Investment Manager is accounted for using fair value accounting, with the fair value determined by Main Street and approved, in good faith, by Main Street's Board of Directors. Main Street determines the fair value of the External Investment Manager using the Waterfall valuation method under the market approach (see further discussion in Note B.1.). Any change in fair value of the investment in the External Investment Manager is recognized on Main Street's consolidated statement of operations in "Net Change in Unrealized Appreciation (Depreciation)Portfolio investments".
The External Investment Manager has elected, for tax purposes, to be treated as a taxable entity, is not consolidated with Main Street for income tax purposes and is taxed at normal corporate tax rates based on its taxable income and, as a result of its activities, may generate income tax expense or benefit. The External Investment Manager has elected to be treated as a taxable entity to enable it to receive fee income and to allow MSCC to continue to comply with the "source-income" requirements contained in the RIC tax provisions of the Code. The taxable income, or loss, of the External Investment Manager may differ from its book income, or loss, due to temporary book and tax timing differences and permanent differences. The External Investment Manager provides for any income tax expense, or benefit, and any tax assets or liabilities in its separate financial statements.
Main Street provides services to the External Investment Manager and charges the expenses necessary to perform these services to the External Investment Manager generally based on a
86
MAIN STREET CAPITAL CORPORATION
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
combination of the direct time spent, new investment origination activity and assets under management, depending on the nature of the expense. For the three months ended September 30, 2015 and 2014, Main Street charged $1.1 million and $0.6 million of total expenses, respectively, to the External Investment Manager. For the nine months ended September 30, 2015 and 2014, Main Street charged $3.1 million and $1.3 million of total expenses, respectively, to the External Investment Manager. The total contribution of the External Investment Manager to Main Street's net investment income consists of the combination of the expenses charged to the External Investment Manager and dividend income from the External Investment Manager. For the three months ended September 30, 2015 and 2014, the total contribution to net investment income was $1.8 million and $0.7 million, respectively. For the nine months ended September 30, 2015 and 2014, the total contribution to net investment income was $4.7 million and $1.5 million, respectively.
Summarized financial information from the separate financial statements of the External Investment Manager as of September 30, 2015 and December 31, 2014 and for the three and nine months ended September 30, 2015 and 2014 is as follows:
|
As of September 30, |
As of December 31, |
|||||
---|---|---|---|---|---|---|---|
|
2015 | 2014 | |||||
|
(in thousands) |
||||||
Cash |
$ | 31 | $ | 130 | |||
Taxes receivable |
105 | | |||||
Accounts receivableHMS Income |
2,134 | 1,120 | |||||
| | | | | | | |
Total assets |
$ | 2,270 | $ | 1,250 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
Accounts payable to MSCC and its subsidiaries |
$ | 1,660 | $ | 699 | |||
Dividend payable to MSCC |
610 | 253 | |||||
Taxes payable |
| 298 | |||||
Equity |
| | |||||
| | | | | | | |
Total liabilities and equity |
$ | 2,270 | $ | 1,250 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2015 | 2014 | 2015 | 2014 | |||||||||
|
(in thousands) |
||||||||||||
Management fee income |
$ | 2,105 | $ | 834 | $ | 5,500 | $ | 1,668 | |||||
Expenses allocated from MSCC or its subsidiaries: |
|||||||||||||
Salaries, share-based compensation and other personnel costs |
(764 | ) | (439 | ) | (2,146 | ) | (994 | ) | |||||
Other G&A expenses |
(381 | ) | (177 | ) | (987 | ) | (349 | ) | |||||
| | | | | | | | | | | | | |
Total allocated expenses |
(1,145 | ) | (616 | ) | (3,133 | ) | (1,343 | ) | |||||
Other direct G&A expenses |
| | | (2 | ) | ||||||||
| | | | | | | | | | | | | |
Total expenses |
(1,145 | ) | (616 | ) | (3,133 | ) | (1,345 | ) | |||||
| | | | | | | | | | | | | |
Pre-tax income |
960 | 218 | 2,367 | 323 | |||||||||
Tax expense |
(350 | ) | (87 | ) | (847 | ) | (129 | ) | |||||
| | | | | | | | | | | | | |
Net income |
$ | 610 | $ | 131 | $ | 1,520 | $ | 194 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
87
MAIN STREET CAPITAL CORPORATION
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
NOTE ESBIC DEBENTURES
SBIC debentures payable were $225.0 million at both September 30, 2015 and December 31, 2014, respectively. SBIC debentures provide for interest to be paid semi-annually, with principal due at the applicable 10-year maturity date of each debenture. The weighted-average annual interest rate on the SBIC debentures was 4.2% as of both September 30, 2015 and December 31, 2014. The first principal maturity due under the existing SBIC debentures is in 2017, and the remaining weighted-average duration as of September 30, 2015 was approximately 5.8 years. For the three months ended September 30, 2015 and 2014, Main Street recognized interest expense attributable to the SBIC debentures of $2.5 million in each period, respectively. For the nine months ended September 30, 2015 and 2014, Main Street recognized interest expense attributable to the SBIC debentures of $7.4 million and $7.0 million, respectively. Main Street has incurred upfront leverage and other miscellaneous fees of approximately 3.4% of the debenture principal amount. In accordance with SBA regulations, the Funds are precluded from incurring additional non-SBIC debt without the prior approval of the SBA. The Funds are subject to annual compliance examinations by the SBA. There have been no historical findings resulting from these examinations.
As of September 30, 2015, the recorded value of the SBIC debentures was $223.6 million which consisted of (i) $73.8 million recorded at fair value, or $1.4 million less than the $75.2 million face value of the SBIC debentures held in MSC II, and (ii) $149.8 million reported at face value and held in MSMF. As of September 30, 2015, if Main Street had adopted the fair value option under ASC 825 for all of its SBIC debentures, Main Street estimates the fair value of its SBIC debentures would be approximately $211.1 million, or $13.9 million less than the $225.0 million face value of the SBIC debentures.
NOTE FCREDIT FACILITY
Main Street maintains the Credit Facility to provide additional liquidity to support its investment and operational activities. The Credit Facility provides for commitments from a diversified group of fifteen lenders, matures in September 2019 and was amended during April 2015 to increase the total commitments from $572.5 million to $597.5 million and increase the accordion feature of the Credit Facility from $650.0 million to $750.0 million. The accordion feature allows Main Street to increase the total commitments under the facility from new and existing lenders on the same terms and conditions as the existing commitments.
Borrowings under the Credit Facility bear interest, subject to Main Street's election, on a per annum basis equal to (i) the applicable LIBOR rate (0.20% as of September 30, 2015) plus 2.00%, as long as Main Street maintains an investment grade rating (or 2.25% if Main Street does not maintain an investment grade rating) or (ii) the applicable base rate (Prime Rate of 3.25% as of September 30, 2015) plus 1.00%, as long as Main Street maintains an investment grade rating (or 1.25% if Main Street does not maintain an investment grade rating). Main Street pays unused commitment fees of 0.25% per annum on the unused lender commitments under the Credit Facility. The Credit Facility is secured by a first lien on the assets of MSCC and its subsidiaries, excluding the equity ownership and assets of the Funds and the External Investment Manager. The Credit Facility contains certain affirmative and negative covenants, including: (i) maintaining a minimum availability of at least 10% of the borrowing base, (ii) maintaining an interest coverage ratio of at least 2.0 to 1.0, (iii) maintaining an asset coverage ratio of at least 1.5 to 1.0, and (iv) maintaining a minimum tangible net worth. The Credit Facility is provided on a revolving basis through its final maturity date in September 2019, and
88
MAIN STREET CAPITAL CORPORATION
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
contains two, one-year extension options which could extend the final maturity by up to two years, subject to certain conditions, including lender approval.
At September 30, 2015, Main Street had $346.0 million in borrowings outstanding under the Credit Facility. As of September 30, 2015, if Main Street had adopted the fair value option under ASC 825 for its Credit Facility, Main Street estimates its fair value would approximate its recorded value. Main Street recognized interest expense related to the Credit Facility, including unused commitment fees and amortization of deferred loan costs, of $2.2 million and $2.0 million for the three months ended September 30, 2015 and 2014, respectively and of $5.5 million and $5.3 million, respectively, for the nine months ended September 30, 2015 and 2014. As of September 30, 2015, the interest rate on the Credit Facility was 2.2%, which is consistent with the average rate for the three months ended September 30, 2015. Main Street was in compliance with all financial covenants of the Credit Facility.
NOTE GNOTES
6.125% Notes
In April 2013, Main Street issued $92.0 million, including the underwriters full exercise of their option to purchase additional principal amounts to cover over-allotments, in aggregate principal amount of 6.125% Notes due 2023 (the "6.125% Notes"). The 6.125% Notes are unsecured obligations and rank pari passu with Main Street's current and future unsecured indebtedness; senior to any of its future indebtedness that expressly provides it is subordinated to the 6.125% Notes; effectively subordinated to all of its existing and future secured indebtedness, to the extent of the value of the assets securing such indebtedness, including borrowings under its Credit Facility; and structurally subordinated to all existing and future indebtedness and other obligations of any of its subsidiaries, including without limitation, the indebtedness of the Funds. The 6.125% Notes mature on April 1, 2023, and may be redeemed in whole or in part at any time or from time to time at Main Street's option on or after April 1, 2018. The 6.125% Notes bear interest at a rate of 6.125% per year payable quarterly on January 1, April 1, July 1 and October 1 of each year. The total net proceeds to Main Street from the 6.125% Notes, after underwriting discounts and estimated offering expenses payable by Main Street, were approximately $89.0 million. Main Street has listed the 6.125% Notes on the New York Stock Exchange under the trading symbol "MSCA". Main Street may from time to time repurchase the 6.125% Notes in accordance with the 1940 Act and the rules promulgated thereunder. As of September 30, 2015, the outstanding balance of the 6.125% Notes was $90.7 million. As of September 30, 2015, if Main Street had adopted the fair value option under ASC 825 for the 6.125% Notes, Main Street estimates the fair value would be approximately $92.0 million. Main Street recognized interest expense related to the 6.125% Notes, including amortization of deferred loan costs, of $1.5 million for each of the three months ended September 30, 2015 and 2014. Main Street recognized interest expense related to the 6.125% Notes, including amortization of deferred loan costs, of $4.4 million for each of the nine months ended September 30, 2015 and 2014.
The indenture governing the 6.125% Notes (the "6.125% Notes Indenture") contains certain covenants, including covenants requiring Main Street's compliance with (regardless of whether Main Street is subject to) the asset coverage requirements set forth in Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act, as well as covenants requiring Main Street to provide financial information to the holders of the 6.125% Notes and the Trustee if Main Street ceases to be subject to the reporting requirements of the Securities Exchange Act of 1934. These covenants are subject to limitations and exceptions that are described in the 6.125% Notes Indenture.
89
MAIN STREET CAPITAL CORPORATION
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
4.50% Notes
In November 2014, Main Street issued $175.0 million in aggregate principal amount of 4.50% unsecured notes due 2019 (the "4.50% Notes") at an issue price of 99.53%. The 4.50% Notes are unsecured obligations and rank pari passu with Main Street's current and future unsecured indebtedness; senior to any of its future indebtedness that expressly provides it is subordinated to the 4.50% Notes; effectively subordinated to all of its existing and future secured indebtedness, to the extent of the value of the assets securing such indebtedness, including borrowings under its Credit Facility; and structurally subordinated to all existing and future indebtedness and other obligations of any of its subsidiaries, including without limitation, the indebtedness of the Funds. The 4.50% Notes mature on December 1, 2019, and may be redeemed in whole or in part at any time at Main Street's option subject to certain make whole provisions. The 4.50% Notes bear interest at a rate of 4.50% per year payable semi-annually on June 1 and December 1 of each year. The total net proceeds from the 4.50% Notes, resulting from the issue price and after underwriting discounts and estimated offering expenses payable by us, were approximately $171.2 million. Main Street may from time to time repurchase the 4.50% Notes in accordance with the 1940 Act and the rules promulgated thereunder. As of September 30, 2015, the outstanding balance of the 4.50% Notes was $175.0 million. As of September 30, 2015, if Main Street had adopted the fair value option under ASC 825 for the 4.50% Notes, Main Street estimates its fair value would be approximately $179.4 million. Main Street recognized interest expense related to the 4.50% Notes, including amortization of deferred loan costs, of $2.1 million and $6.4 million for the three months and nine months ended September 30, 2015, respectively.
The indenture governing the 4.50% Notes (the "4.50% Notes Indenture") contains certain covenants, including covenants requiring Main Street's compliance with (regardless of whether Main Street is subject to) the asset coverage requirements set forth in Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act, as well as covenants requiring Main Street to provide financial information to the holders of the 4.50% Notes and the Trustee if Main Street ceases to be subject to the reporting requirements of the Securities Exchange Act of 1934. These covenants are subject to limitations and exceptions that are described in the 4.50% Notes Indenture.
90
MAIN STREET CAPITAL CORPORATION
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
NOTE HFINANCIAL HIGHLIGHTS
|
Nine Months Ended September 30, |
||||||
---|---|---|---|---|---|---|---|
|
2015 | 2014 | |||||
Per Share Data: |
|||||||
NAV at the beginning of the period |
$ | 20.85 | $ | 19.89 | |||
Net investment income(1) |
1.61 |
1.61 |
|||||
Net realized gain (loss)(1)(2) |
(0.19 | ) | 0.25 | ||||
Net change in net unrealized appreciation(1)(2) |
0.42 | 0.17 | |||||
Income tax benefit (provision)(1)(2) |
0.15 | (0.20 | ) | ||||
| | | | | | | |
Net increase in net assets resulting from operations(1) |
1.99 | 1.83 | |||||
Dividends paid to stockholders from net investment income |
(1.79 |
) |
(1.46 |
) |
|||
Distributions from capital gains |
(0.05 | ) | (0.30 | ) | |||
| | | | | | | |
Total dividends paid |
(1.84 | ) | (1.76 | ) | |||
Impact of the net change in monthly dividends declared prior to the end of the period and paid in the subsequent period |
(0.01 | ) | (0.01 | ) | |||
Accretive effect of public stock offerings (issuing shares above NAV per share) |
0.71 | 1.07 | |||||
Accretive effect of DRIP issuance (issuing shares above NAV per share) |
0.08 | 0.09 | |||||
Other(3) |
0.01 | (0.03 | ) | ||||
| | | | | | | |
NAV at the end of the period |
$ | 21.79 | $ | 21.08 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
Market value at the end of the period |
$ | 26.66 | $ | 30.64 | |||
Shares outstanding at the end of the period |
50,079,178 | 44,945,194 |
91
MAIN STREET CAPITAL CORPORATION
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
certain per share data based on the shares outstanding as of a period end or transaction date.
|
Nine Months Ended September 30, |
||||||
---|---|---|---|---|---|---|---|
|
2015 | 2014 | |||||
|
(in thousands, except percentages) |
||||||
NAV at end of period |
$ | 1,090,981 | $ | 947,506 | |||
Average NAV |
$ | 1,051,418 | $ | 871,964 | |||
Average outstanding debt |
$ | 742,993 | $ | 553,622 | |||
Ratio of total expenses, including income tax expense, to average NAV(1)(2) |
3.38% | 4.72% | |||||
Ratio of operating expenses to average NAV(2)(3) |
4.05% | 3.76% | |||||
Ratio of operating expenses, excluding interest expense, to average NAV(2)(3) |
1.79% | 1.84% | |||||
Ratio of net investment income to average NAV(2) |
7.47% | 7.94% | |||||
Portfolio turnover ratio(2) |
16.68% | 27.24% | |||||
Total investment return(2)(4) |
6.74% | 1.06% | |||||
Total return based on change in NAV(2)(5) |
10.31% | 9.94% |
NOTE IDIVIDENDS, DISTRIBUTIONS AND TAXABLE INCOME
Main Street paid regular monthly dividends of $0.170 per share for each month of January through March 2015 and $0.175 for each month of April through September 2015, totaling approximately $26.2 million, or $0.525 per share, for the three months ended September 30, 2015, and $75.4 million, or $1.560 per share, for the nine months ended September 30, 2015. The third quarter 2015 regular
92
MAIN STREET CAPITAL CORPORATION
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
monthly dividends represent a 6.1% increase from the regular monthly dividends paid for the third quarter of 2014. Additionally, Main Street paid a $0.275 per share supplemental semi-annual dividend, totaling $13.7 million, in June 2015 compared to $12.3 million, or $0.275 per share, paid in June 2014. The regular monthly dividends equaled a total of approximately $22.2 million, or $0.495 per share, for the three months ended September 30, 2014, and $63.3 million, or $1.485 per share, for the nine months ended September 30, 2014.
MSCC has elected to be treated for U.S. federal income tax purposes as a RIC. MSCC's taxable income includes the taxable income generated by MSCC and certain of its subsidiaries, including the Funds, which are treated as disregarded entities for tax purposes. As a RIC, MSCC generally will not pay corporate-level U.S. federal income taxes on any net ordinary income or capital gains that MSCC distributes to its stockholders. MSCC must generally distribute at least 90% of its investment company taxable income to qualify for pass-through tax treatment and maintain its RIC status. As part of maintaining RIC status, undistributed taxable income (subject to a 4% U.S Federal excise tax) pertaining to a given fiscal year may be distributed up to 12 months subsequent to the end of that fiscal year, provided such dividends are declared prior to the filing of the U.S federal income tax return for the applicable fiscal year.
The determination of the tax attributes for Main Street's distributions is made annually, based upon its taxable income for the full year and distributions paid for the full year. Therefore, a determination made on an interim basis may not be representative of the actual tax attributes of distributions for a full year. Ordinary dividend distributions from a RIC do not qualify for the 20% maximum tax rate (plus a 3.8% Medicare surtax, if applicable) on dividend income from domestic corporations and qualified foreign corporations, except to the extent that the RIC received the income in the form of qualifying dividends from domestic corporations and qualified foreign corporations. The tax attributes for distributions will generally include both ordinary income and capital gains, but may also include qualified dividends or return of capital.
93
MAIN STREET CAPITAL CORPORATION
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
Listed below is a reconciliation of "Net increase in net assets resulting from operations" to taxable income and to total distributions declared to common stockholders for the nine months ended September 30, 2015 and 2014.
|
Nine Months Ended September 30, |
||||||
---|---|---|---|---|---|---|---|
|
2015 | 2014 | |||||
|
(estimated, amounts in thousands) |
||||||
Net increase in net assets resulting from operations |
$ | 96,895 | $ | 78,754 | |||
Book tax difference share-based compensation expense |
(662 | ) | 3,034 | ||||
Net change in net unrealized appreciation |
(20,372 | ) | (7,160 | ) | |||
Income tax provision (benefit) |
(7,004 | ) | 8,401 | ||||
Pre-tax book (income) loss not consolidated for tax purposes |
15,240 | (2,217 | ) | ||||
Book income and tax income differences, including debt origination, structuring fees, dividends, realized gains and changes in estimates |
992 | 332 | |||||
| | | | | | | |
Estimated taxable income(1) |
85,089 | 81,144 | |||||
Taxable income earned in prior year and carried forward for distribution in current year |
38,638 | 37,046 | |||||
Taxable income earned prior to period end and carried forward for distribution next period |
(42,279 | ) | (49,184 | ) | |||
Dividend payable as of period end and paid in the following period |
9,014 | 7,641 | |||||
| | | | | | | |
Total distributions accrued or paid to common stockholders |
$ | 90,462 | $ | 76,647 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
The Taxable Subsidiaries hold certain portfolio investments for Main Street. The Taxable Subsidiaries permit Main Street to hold equity investments in portfolio companies which are "pass-through" entities for tax purposes and to continue to comply with the "source-income" requirements contained in the RIC tax provisions of the Code. The Taxable Subsidiaries are consolidated with Main Street for U.S. GAAP financial reporting purposes, and the portfolio investments held by the Taxable Subsidiaries are included in Main Street's consolidated financial statements as portfolio investments and recorded at fair value. The Taxable Subsidiaries are not consolidated with MSCC for income tax purposes and may generate income tax expense, or benefit, and tax assets and liabilities, as a result of their ownership of certain portfolio investments. The taxable income, or loss, of the Taxable Subsidiaries may differ from its book income, or loss, due to temporary book and tax timing differences and permanent differences. This income tax expense, or benefit, if any, and the related tax assets and liabilities, are reflected in Main Street's consolidated financial statements.
MSCC's wholly owned subsidiary MSCP is included in Main Street's consolidated financial statements for financing reporting purposes. For tax purposes, MSCP has elected to be treated as a
94
MAIN STREET CAPITAL CORPORATION
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
taxable entity, and therefore is not consolidated with MSCC for income tax purposes and is taxed at normal corporate tax rates based on its taxable income and, as a result of its activities, may generate income tax expense or benefit. The taxable income, or loss, of MSCP may differ from its book income, or loss, due to temporary book and tax timing differences and permanent differences. This income tax expense, or benefit, if any, and the related tax assets and liabilities, are reflected in Main Street's consolidated financial statements.
The income tax expense, or benefit, and the related tax assets and liabilities, generated by the Taxable Subsidiaries and MSCP, if any, are reflected in Main Street's consolidated financial statements. For the three months ended September 30, 2015, Main Street recognized a net income tax benefit of $3.2 million, principally consisting of deferred tax benefit of $2.7 million which is primarily the result of the net activity relating to the portfolio investments held in the Taxable Subsidiaries including changes in net operating loss carryforwards, changes in net unrealized appreciation or depreciation and other temporary book tax differences and a $0.5 million benefit in other current taxes which is primarily related to a $0.7 million benefit for current U.S. federal income and state taxes, partially offset by $0.2 million accrual for excise tax on our estimated spillover taxable income. For the nine months ended September 30, 2015, Main Street recognized a net income tax benefit of $7.0 million, which principally consisted of deferred tax benefit of $8.5 million primarily the result of the net activity relating to the portfolio investments held in the Taxable Subsidiaries including changes in net operating loss carryforwards, changes in net unrealized appreciation or depreciation and temporary book tax differences, offset by $1.5 million in other current taxes, which principally consists of $0.8 million of accruals for current U.S. federal income and state taxes, and a $0.7 million accrual for excise tax. For the three months ended September 30, 2014, Main Street recognized a net income tax provision of $3.0 million, which principally consisted of deferred taxes of $2.0 million, and $1.0 million of accruals for current U.S. federal income and excise taxes, state and other taxes. For the nine months ended September 30, 2014, Main Street recognized a net income tax provision of $8.4 million, related to deferred taxes of $6.6 million, which is primarily the result of deferred taxes on net unrealized appreciation on several of the portfolio investments held in our Taxable Subsidiaries and other taxes of $1.8 million. As of September 30, 2015, Main Street had a capital loss carryforward of $5.5 million. For federal income tax purposes, the capital loss carryforward will expire in 2020. The timing and manner in which Main Street will utilize any net loss carryforwards in any year, or in total, may be limited in the future under the provisions of the Code.
The net deferred tax liability at September 30, 2015 and December 31, 2014 was $0.7 million and $9.2 million, respectively, primarily related to timing differences from net unrealized appreciation of portfolio investments held by the Taxable Subsidiaries, partially offset by net loss carryforwards (primarily resulting from historical realized losses on portfolio investments held by the Taxable Subsidiaries), basis differences of portfolio investments held by the Taxable Subsidiaries which are "pass-through" entities for tax purposes and excess deductions resulting from the restricted stock plans (see further discussion in Note L).
95
MAIN STREET CAPITAL CORPORATION
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
In accordance with the realization requirements of ASC 718, CompensationStock Compensation, Main Street uses tax law ordering when determining when tax benefits related to equity compensation greater than equity compensation recognized for financial reporting should be realized. For the nine months ended September 30, 2015, Main Street realized no increase to paid-in capital due to tax deductions related to equity compensation greater than equity compensation recognized for financial reporting compared to a $0.5 million increase for the corresponding period in 2014. Paid-in capital increases of $1.8 million will be recognized in future periods when such tax benefits are ultimately realized by reducing taxes payable.
NOTE JCOMMON STOCK
During March 2015, Main Street completed a follow-on public equity offering of 4,370,000 shares of common stock, including the underwriters' full exercise of their option to purchase 570,000 additional shares, resulting in total net proceeds, including exercise of the underwriters' option to purchase additional shares and after deducting underwriting discounts and estimated offering expenses payable by Main Street, of approximately $127.8 million.
During April 2014, Main Street completed a follow-on public equity offering of 4,600,000 shares of common stock, including the underwriters' full exercise of their option to purchase 600,000 additional shares, at a price to the public of $31.50 per share, resulting in total net proceeds, including exercise of the underwriters' option to purchase additional shares and after deducting underwriting discounts and estimated offering expenses payable by Main Street, of approximately $139.7 million.
NOTE KDIVIDEND REINVESTMENT PLAN ("DRIP")
Main Street's DRIP provides for the reinvestment of dividends on behalf of its stockholders, unless a stockholder has elected to receive dividends in cash. As a result, if Main Street declares a cash dividend, the company's stockholders who have not "opted out" of the DRIP by the dividend record date will have their cash dividend automatically reinvested into additional shares of MSCC common stock. The share requirements of the DRIP may be satisfied through the issuance of shares of common stock or through open market purchases of common stock. Newly issued shares will be valued based upon the final closing price of MSCC's common stock on the valuation date determined for each dividend by Main Street's Board of Directors. Shares purchased in the open market to satisfy the DRIP requirements will be valued based upon the average price of the applicable shares purchased, before any associated brokerage or other costs. Main Street's DRIP is administered by its transfer agent on behalf of Main Street's record holders and participating brokerage firms. Brokerage firms and other financial intermediaries may decide not to participate in Main Street's DRIP but may provide a similar dividend reinvestment plan for their clients.
For the nine months ended September 30, 2015, $13.7 million of the total $89.1 million in dividends paid to stockholders represented DRIP participation. During this period, the DRIP participation requirements were satisfied with the issuance of 444,957 newly issued shares and with the purchase of 3,131 shares of common stock in the open market. For the nine months ended September 30, 2014, $11.8 million of the total $75.6 million in dividends paid to stockholders represented DRIP participation. During this period, the DRIP participation requirements were satisfied with the issuance of 333,657 newly issued shares and with the purchase of 31,825 shares of common stock in the open market. The shares disclosed above relate only to Main Street's DRIP and exclude any activity related to broker-managed dividend reinvestment plans.
96
MAIN STREET CAPITAL CORPORATION
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
NOTE LSHARE-BASED COMPENSATION
Main Street accounts for its share-based compensation plans using the fair value method, as prescribed by ASC 718, CompensationStock Compensation. Accordingly, for restricted stock awards, Main Street measured the grant date fair value based upon the market price of its common stock on the date of the grant and amortizes the fair value of the awards as share-based compensation expense over the requisite service period, which is generally the vesting term.
Main Street's Board of Directors approves the issuance of shares of restricted stock to Main Street employees pursuant to the Main Street Capital Corporation 2015 Equity and Incentive Plan. These shares generally vest over a three-year period from the grant date. The fair value is expensed over the service period, starting on the grant date. The following table summarizes the restricted stock issuances approved by Main Street's Board of Directors, net of shares forfeited, and the remaining shares of restricted stock available for issuance as of September 30, 2015.
Restricted stock authorized under the plan |
3,000,000 | |||
Less net restricted stock granted during: |
||||
Nine months ended September 30, 2015 |
| |||
| | | | |
Restricted stock available for issuance as of September 30, 2015 |
3,000,000 | |||
| | | | |
| | | | |
| | | | |
As of September 30, 2015, the following table summarizes the restricted stock issued to Main Street's independent directors and the remaining shares of restricted stock available for issuance pursuant to the Main Street Capital Corporation 2015 Non-Employee Director Restricted Stock Plan. These shares are granted upon appointment or election to the board and vest on the day immediately preceding the annual meeting of stockholders following the respective grant date and are expensed over such service period.
Restricted stock authorized under the plan |
300,000 | |||
Less net restricted stock granted during: |
||||
Nine months ended September 30, 2015 |
(4,830 | ) | ||
| | | | |
Restricted stock available for issuance as of September 30, 2015 |
295,170 | |||
| | | | |
| | | | |
| | | | |
For the three months ended September 30, 2015 and 2014, Main Street recognized total share-based compensation expense of $1.7 million and $1.2 million, respectively, related to the restricted stock issued to Main Street employees and independent directors, and for the nine months ended September 30, 2015 and 2014, Main Street recognized total share-based compensation expense of $4.6 million and $3.0 million, respectively, related to the restricted stock issued to Main Street employees and independent directors.
As of September 30, 2015, there was $13.7 million of total unrecognized compensation expense related to Main Street's non-vested restricted shares. This compensation expense is expected to be recognized over a remaining weighted-average period of approximately 2.3 years as of September 30, 2015.
97
MAIN STREET CAPITAL CORPORATION
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
NOTE MCOMMITMENTS AND CONTINGENCIES
At September 30, 2015, Main Street had the following outstanding commitments (in thousands):
|
Amount | |||
---|---|---|---|---|
Investments with equity capital commitments that have not yet funded: |
||||
Encap Energy Fund Investments |
||||
EnCap Energy Capital Fund VIII, L.P. |
$ | 1,100 | ||
EnCap Energy Capital Fund VIII Co-Investors, L.P. |
243 | |||
EnCap Energy Capital Fund IX, L.P. |
2,150 | |||
EnCap Energy Capital Fund X, L.P. |
9,587 | |||
EnCap Flatrock Midstream Fund II, L.P. |
7,587 | |||
EnCap Flatrock Midstream Fund III, L.P. |
7,077 | |||
| | | | |
|
$ | 27,744 | ||
Congruent Credit Opportunities Funds |
||||
Congruent Credit Opportunities Fund II, LP |
$ | 8,488 | ||
Congruent Credit Opportunities Fund III, LP |
17,901 | |||
| | | | |
|
$ | 26,389 | ||
I-45 SLF LLC |
$ |
17,000 |
||
Freeport Fund Investments |
||||
Freeport First Lien Loan Fund III LP |
$ | 11,741 | ||
Freeport Financial SBIC Fund LP |
1,375 | |||
| | | | |
|
$ | 13,116 | ||
Dos Rios Partners |
||||
Dos Rios Partners, LP |
$ | 4,486 | ||
Dos Rios PartnersA, LP |
1,424 | |||
| | | | |
|
$ | 5,910 | ||
Brightwood Capital Fund III, LP |
$ |
3,750 |
||
LKCM Headwater Investments I, L.P. |
$ |
2,750 |
||
Access Media Holdings, LLC |
$ |
1,299 |
||
| | | | |
Total equity commitments |
$ | 97,958 | ||
Investments with commitments to fund revolving loans that have not been fully drawn or term loans with additional commitments not yet funded: |
||||
Volusion, LLC |
$ |
7,000 |
||
Minute Key, Inc. |
6,000 | |||
Barfly Ventures, LLC |
4,594 | |||
Buca C, LLC |
2,670 | |||
Applied Products, Inc. |
2,000 |
98
MAIN STREET CAPITAL CORPORATION
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
|
Amount | |||
---|---|---|---|---|
Mid-Columbia Lumber Products, LLC |
2,000 | |||
Glowpoint, Inc. |
1,979 | |||
Datacom, LLC |
1,800 | |||
LaMi Products, LLC |
1,688 | |||
Guerdon Modular Holdings, Inc. |
1,600 | |||
IDX Broker, LLC |
1,475 | |||
Subsea Global Solutions, LLC |
1,428 | |||
Messenger, LLC |
1,228 | |||
Arcus Hunting LLC |
1,080 | |||
Ceres Management, LLC (Lambs Tire & Automotive) |
1,000 | |||
HW Temps LLC |
800 | |||
Mystic Logistics, Inc. |
800 | |||
PT Network, LLC |
769 | |||
Jackmont Hospitality, Inc. |
666 | |||
Vision Interests, Inc. |
524 | |||
Insurance Technologies, LLC |
522 | |||
Jensen Jewelers of Idaho, LLC |
500 | |||
UniTek Global Services, Inc. |
483 | |||
ATS Workholding, Inc. |
168 | |||
Brainworks Software, LLC |
111 | |||
| | | | |
Total loan commitments |
$ | 42,885 | ||
| | | | |
Total commitments |
$ | 140,843 | ||
| | | | |
| | | | |
| | | | |
Main Street may, from time to time, be involved in litigation arising out of its operations in the normal course of business or otherwise. Furthermore, third parties may try to impose liability on Main Street in connection with the activities of its portfolio companies. While the outcome of any current legal proceedings cannot at this time be predicted with certainty, Main Street does not expect any current matters will materially affect its financial condition or results of operations; however, there can be no assurance whether any pending legal proceedings will have a material adverse effect on Main Street's financial condition or results of operations in any future reporting period.
NOTE NRELATED PARTY TRANSACTIONS
As discussed further in Note D, the External Investment Manager is treated as a wholly owned portfolio company of MSCC and is included as part of Main Street's Investment Portfolio. At September 30, 2015, Main Street had a receivable of $2.3 million due from the External Investment Manager which included approximately $1.7 million related primarily to operating expenses incurred by MSCC or its subsidiaries required to support the External Investment Manager's business, along with dividends declared but not paid by the External Investment Manager of approximately $0.6 million.
In June 2013, Main Street adopted a deferred compensation plan for the non-employee members of its board of directors, which allows the directors at their option to defer all or a portion of the fees paid for their services as directors and have such deferred fees paid in shares of Main Street common stock within 90 days following the termination of a participant's service as a director. As of September 30, 2015, $1.0 million of directors' fees had been deferred under this plan. These deferred
99
MAIN STREET CAPITAL CORPORATION
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
fees represented 32,190 shares of Main Street common shares. These shares will not be issued or included as outstanding on the consolidated statement of changes in net assets until each applicable participant's end of service as a director, but are included in operating expenses and weighted-average shares outstanding on Main Street's consolidated statement of operations as earned.
NOTE OSUBSEQUENT EVENTS
During October 2015, Main Street declared a semi-annual supplemental cash dividend of $0.275 per share payable in December 2015. This supplemental cash dividend is in addition to the previously announced regular monthly cash dividends that Main Street declared for the fourth quarter of 2015 of $0.180 per share for each of October, November and December 2015.
In October 2015, Main Street led a new portfolio investment totaling $15.5 million of invested capital in Apex Linen Service, Inc. ("Apex Linen") to fund Apex Linen's near-term growth opportunities, with Main Street funding $12.4 million of the investment. Main Street's investment in Apex Linen included a first-lien, senior secured term debt investment and a revolving line of credit. Main Street and its co-investor also provided a commitment for $2.5 million of additional first-lien, senior secured term debt in the near-term future upon the completion of certain conditions. In addition, Main Street and its co-investor are providing Apex Linen a conditional commitment beyond the $2.5 million of additional first-lien, senior secured term debt for additional capital to support its future growth opportunities. Headquartered in Las Vegas, Nevada, and founded in 2010 by long-established industry experts, Apex Linen provides commercial laundry and linen services to the hotel and gaming industry in the Las Vegas metropolitan area.
In November 2015, Main Street declared regular monthly dividends of $0.180 per share for each month of January, February and March of 2016. These regular monthly dividends equal a total of $0.540 per share for the first quarter of 2016 and represent a 5.9% increase from the regular monthly dividends declared for the first quarter of 2015. Including the regular monthly dividends declared for the first quarter of 2016, Main Street will have paid $16.420 per share in cumulative dividends since its October 2007 initial public offering.
100
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments in and Advances to Affiliates
Nine Months Ended September 30, 2015
Company
|
Investments(1)
|
Amount of Interest or Dividends Credited to Income(2) |
December 31, 2014 Value |
Gross Additions(3) |
Gross Reductions(4) |
September 30, 2015 Fair Value |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Control Investments |
||||||||||||||||||
Access Media |
5.00% Current / 5.00% PIK Secured Debt | | 21,284 | 2,500 | 18,784 | |||||||||||||
Holdings, LLC |
Preferred Member Units | | 3,201 | | 3,201 | |||||||||||||
|
Member Units | | 1 | 1 | | |||||||||||||
| | | | | | | | | | | | | | | | | | |
ASC Interests, LLC |
11% Secured Debt | 247 | 3,000 | 11 | 261 | 2,750 | ||||||||||||
|
Member Units | 90 | 1,970 | 260 | | 2,230 | ||||||||||||
| | | | | | | | | | | | | | | | | | |
Bond-Coat, Inc. |
12% Secured Debt | 1,116 | 13,570 | 41 | 2,015 | 11,596 | ||||||||||||
|
Common Stock | 11,210 | | 1,000 | 10,210 | |||||||||||||
| | | | | | | | | | | | | | | | | | |
Café Brazil, LLC |
Member Units | 814 | 6,980 | 350 | | 7,330 | ||||||||||||
California Healthcare |
9% Secured Debt | 361 | 8,703 | 135 | 8,838 | | ||||||||||||
Medical Billing, Inc. |
Warrants | 3,480 | | 3,480 | | |||||||||||||
|
Common Stock | 1,460 | | 1,460 | | |||||||||||||
| | | | | | | | | | | | | | | | | | |
CBT Nuggets, LLC |
Member Units | 3,517 | 27,200 | 11,690 | | 38,890 | ||||||||||||
| | | | | | | | | | | | | | | | | | |
Ceres Management, LLC |
14% Secured Debt | 415 | 3,916 | 4,424 | 270 | 8,070 | ||||||||||||
(Lambs Tire & |
Class B Member Units | 376 | 4,048 | 376 | 4,424 | | ||||||||||||
Automotive) |
Member Units | 2,510 | 1,910 | | 4,420 | |||||||||||||
|
9.5% Secured Debt | 68 | 968 | | 37 | 931 | ||||||||||||
|
Member Units | 56 | 1,240 | | | 1,240 | ||||||||||||
| | | | | | | | | | | | | | | | | | |
CMS Minerals LLC |
Preferred Member Units | 896 | | 7,672 | 479 | 7,193 | ||||||||||||
| | | | | | | | | | | | | | | | | | |
Datacom, LLC |
10.5% Secured Debt | 950 | 11,103 | 14 | | 11,117 | ||||||||||||
|
8% Secured Debt | 21 | | 900 | 900 | | ||||||||||||
|
Preferred Member Units | 10 | 6,030 | 1,137 | 460 | 6,707 | ||||||||||||
| | | | | | | | | | | | | | | | | | |
Garreco, LLC |
14% Secured Debt | 618 | 5,320 | 413 | | 5,733 | ||||||||||||
|
Member Units | (45 | ) | 1,360 | 110 | | 1,470 | |||||||||||
| | | | | | | | | | | | | | | | | | |
GRT Rubber |
LIBOR Plus 9.00% (Floor 1.00%) | 1,363 | 16,585 | 23 | 419 | 16,189 | ||||||||||||
Technologies LLC |
Member Units | 42 | 13,065 | | | 13,065 | ||||||||||||
| | | | | | | | | | | | | | | | | | |
Gulf Manufacturing, LLC |
9% PIK Secured Debt | 51 | 744 | 33 | | 777 | ||||||||||||
|
Member Units | 543 | 16,540 | | 1,410 | 15,130 | ||||||||||||
| | | | | | | | | | | | | | | | | | |
Harrison Hydra-Gen, Ltd. |
12% Secured Debt | 546 | 5,487 | 78 | 555 | 5,010 | ||||||||||||
|
Preferred Stock | 76 | 1,260 | 76 | | 1,336 | ||||||||||||
|
Common Stock | 1,830 | 470 | | 2,300 | |||||||||||||
| | | | | | | | | | | | | | | | | | |
Hawthorne Customs and |
Member Units | 54 | 370 | 210 | | 580 | ||||||||||||
Dispatch Services, LLC |
Member Units | 132 | 2,220 | | | 2,220 | ||||||||||||
| | | | | | | | | | | | | | | | | | |
HW Temps LLC |
LIBOR Plus 9.50% (Floor 1.00%) | 369 | | 9,880 | | 9,880 | ||||||||||||
|
Preferred Member Units | 184 | | 3,942 | | 3,942 | ||||||||||||
| | | | | | | | | | | | | | | | | | |
Hydratec, Inc. |
Common Stock | 1,535 | 13,720 | 1,230 | | 14,950 | ||||||||||||
|
9% Secured Debt | 4 | | 500 | 500 | | ||||||||||||
| | | | | | | | | | | | | | | | | | |
IDX Broker, LLC |
LIBOR Plus 6.50% (Floor 1.50%) | 10 | 125 | | 100 | 25 | ||||||||||||
|
12.5% Secured Debt | 1,088 | 10,571 | 793 | 14 | 11,350 | ||||||||||||
|
Member Units | 5,450 | 990 | | 6,440 | |||||||||||||
| | | | | | | | | | | | | | | | | | |
Impact Telecom, Inc. |
LIBOR Plus 6.50% (Floor 2.00%) | 118 | 1,569 | 1 | | 1,570 | ||||||||||||
|
13% Secured Debt | 2,596 | 15,515 | 378 | | 15,893 | ||||||||||||
|
Warrants | 4,160 | | | 4,160 | |||||||||||||
| | | | | | | | | | | | | | | | | | |
Indianapolis Aviation |
15% Secured Debt | 432 | 3,100 | | | 3,100 | ||||||||||||
Partners, LLC |
Warrants | 2,540 | | | 2,540 | |||||||||||||
| | | | | | | | | | | | | | | | | | |
Jensen Jewelers of |
Prime Plus 6.75% (Floor 2.00%) | 345 | 3,655 | 1,002 | 452 | 4,205 | ||||||||||||
Idaho, LLC |
Member Units | 916 | 3,580 | 1,170 | | 4,750 | ||||||||||||
| | | | | | | | | | | | | | | | | | |
Lighting Unlimited, LLC |
8% Secured Debt | 92 | 1,550 | | 36 | 1,514 | ||||||||||||
|
Preferred Equity | 439 | | 5 | 434 | |||||||||||||
|
Warrants | 40 | | | 40 | |||||||||||||
|
Member Units | 100 | 360 | 60 | | 420 | ||||||||||||
| | | | | | | | | | | | | | | | | | |
Marine Shelters |
12% Secured Debt | 930 | 10,112 | 178 | 1,602 | 8,688 | ||||||||||||
Holdings, LLC (LoneStar |
Preferred Member Units | 3,750 | 1,602 | | 5,352 | |||||||||||||
Marine Shelters) |
||||||||||||||||||
| | | | | | | | | | | | | | | | | | |
|
101
Company
|
Investments(1)
|
Amount of Interest or Dividends Credited to Income(2) |
December 31, 2014 Value |
Gross Additions(3) |
Gross Reductions(4) |
September 30, 2015 Fair Value |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
MH Corbin Holding LLC |
10% Secured Debt | 124 | | 13,864 | | 13,864 | ||||||||||||
|
Preferred Member Units | 12 | | 6,000 | | 6,000 | ||||||||||||
| | | | | | | | | | | | | | | | | | |
Mid-Columbia Lumber |
10% Secured Debt | 133 | 1,750 | | | 1,750 | ||||||||||||
Products, LLC |
12% Secured Debt | 355 | 3,900 | | | 3,900 | ||||||||||||
|
Member Units | (56 | ) | 10,180 | | 6,200 | 3,980 | |||||||||||
|
9.5% Secured Debt | 65 | 927 | | 34 | 893 | ||||||||||||
|
Member Units | 18 | 550 | | | 550 | ||||||||||||
| | | | | | | | | | | | | | | | | | |
MSC Adviser I, LLC |
Member Units | 1,519 | 15,580 | 16,725 | | 32,305 | ||||||||||||
| | | | | | | | | | | | | | | | | | |
Mystic Logistics, Inc |
12% Secured Debt | 940 | 9,790 | 210 | 552 | 9,448 | ||||||||||||
|
Common Stock | 112 | 2,720 | 3,860 | | 6,580 | ||||||||||||
| | | | | | | | | | | | | | | | | | |
NAPCO Precast, LLC |
Prime Plus 2.00% (Floor 7.00%) | 257 | 625 | 10 | 10 | 625 | ||||||||||||
|
Prime Plus 2.00% (Floor 7.00%) | 629 | 2,923 | 5 | 5 | 2,923 | ||||||||||||
|
18% Secured Debt | 4,468 | 13 | 13 | 4,468 | |||||||||||||
|
Member Units | 658 | 7,560 | 1,030 | | 8,590 | ||||||||||||
| | | | | | | | | | | | | | | | | | |
NRI Clinical |
14% Secured Debt | 590 | 4,779 | 19 | 148 | 4,650 | ||||||||||||
Research, LLC |
Warrants | 160 | 30 | | 190 | |||||||||||||
|
Member Units | 722 | 380 | 50 | 1,052 | |||||||||||||
| | | | | | | | | | | | | | | | | | |
NRP Jones, LLC |
12% Secured Debt | 1,370 | 11,590 | 1,471 | 176 | 12,885 | ||||||||||||
|
Warrants | 970 | | 520 | 450 | |||||||||||||
|
Member Units | 3,190 | | 1,710 | 1,480 | |||||||||||||
| | | | | | | | | | | | | | | | | | |
OMi Holdings, Inc. |
Common Stock | 13,420 | | | 13,420 | |||||||||||||
| | | | | | | | | | | | | | | | | | |
Pegasus Research |
Member Units | 336 | 5,860 | 630 | | 6,490 | ||||||||||||
Group, LLC (Televerde) |
||||||||||||||||||
| | | | | | | | | | | | | | | | | | |
PPL RVs, Inc. |
11.1% Secured Debt | 865 | 7,860 | 2,112 | 262 | 9,710 | ||||||||||||
|
Common Stock | 8,160 | 550 | | 8,710 | |||||||||||||
| | | | | | | | | | | | | | | | | | |
Principle |
12% Secured Debt | 536 | 4,060 | 166 | 166 | 4,060 | ||||||||||||
Environmental, LLC |
12% Current / 2% PIK Secured Debt | 356 | 3,244 | 61 | 11 | 3,294 | ||||||||||||
|
Preferred Member Units | 262 | 11,830 | | 2,270 | 9,560 | ||||||||||||
|
Warrants | 720 | | 190 | 530 | |||||||||||||
| | | | | | | | | | | | | | | | | | |
QLS Holdings, LLC |
8% Secured Debt | 160 | | 6,410 | | 6,410 | ||||||||||||
|
Member Units | | 2,638 | | 2,638 | |||||||||||||
| | | | | | | | | | | | | | | | | | |
River Aggregates, LLC |
Zero Coupon Secured Debt | 72 | 468 | 72 | | 540 | ||||||||||||
|
12% Secure Debt | 16 | 500 | | 500 | | ||||||||||||
|
Member Units | 154 | 2,570 | 1,260 | | 3,830 | ||||||||||||
|
Member Units | 369 | 1,991 | | 2,360 | |||||||||||||
| | | | | | | | | | | | | | | | | | |
SoftTouch Medical |
LIBOR Plus 9.00% (Floor 1.00%) | 748 | 8,417 | 13 | 255 | 8,175 | ||||||||||||
Holdings LLC |
Member Units | 525 | 5,015 | 410 | 85 | 5,340 | ||||||||||||
| | | | | | | | | | | | | | | | | | |
Southern RV, LLC |
13% Secured Debt | 1,146 | 11,400 | 22 | 22 | 11,400 | ||||||||||||
|
Member Units | 933 | 4,920 | 6,680 | | 11,600 | ||||||||||||
|
13% Secured Debt | 327 | 3,250 | 6 | 6 | 3,250 | ||||||||||||
|
Member Units | 470 | 70 | | 540 | |||||||||||||
| | | | | | | | | | | | | | | | | | |
The MPI Group, LLC |
9% Secured Debt | 279 | 2,724 | 196 | | 2,920 | ||||||||||||
|
Series A Preferred Units | 980 | | | 980 | |||||||||||||
|
Warrants | | | | | |||||||||||||
|
Member Units | 2,300 | | 70 | 2,230 | |||||||||||||
| | | | | | | | | | | | | | | | | | |
Travis Acquisition LLC |
12% Secured Debt | 498 | 4,693 | 28 | 1,093 | 3,628 | ||||||||||||
|
Member Units | 13,650 | 460 | | 14,110 | |||||||||||||
| | | | | | | | | | | | | | | | | | |
Uvalco Supply, LLC |
9% Secured Debt | 107 | 1,802 | | 384 | 1,418 | ||||||||||||
|
Member Units | 106 | 3,500 | | 290 | 3,210 | ||||||||||||
| | | | | | | | | | | | | | | | | | |
Vision Interests, Inc. |
13% Secured Debt | 325 | 3,154 | 27 | 66 | 3,115 | ||||||||||||
|
Series A Preferred Stock | 3,250 | 300 | | 3,550 | |||||||||||||
|
Common Stock | 100 | 110 | | 210 | |||||||||||||
| | | | | | | | | | | | | | | | | | |
Ziegler's NYPD, LLC |
6.5% Secured Debt | 75 | 1,491 | 1 | 500 | 992 | ||||||||||||
|
14% Secured Debt | 296 | 4,880 | 629 | 2,759 | 2,750 | ||||||||||||
|
12% Secured Debt | 41 | | 500 | | 500 | ||||||||||||
|
Warrants | | | | | |||||||||||||
|
Member Units | | 2,909 | 669 | 2,240 | |||||||||||||
| | | | | | | | | | | | | | | | | | |
Other |
||||||||||||||||||
Amounts from investments transferred from other 1940 Act classification during the period |
339 | | | | | |||||||||||||
| | | | | | | | | | | | | | | | | | |
|
36,264 | 469,846 | 148,413 | 50,234 | 568,025 | |||||||||||||
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
102
Company
|
Investments(1)
|
Amount of Interest or Dividends Credited to Income(2) |
December 31, 2014 Value |
Gross Additions(3) |
Gross Reductions(4) |
September 30, 2015 Fair Value |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Affiliate Investments |
||||||||||||||||||
AFG Capital Group, LLC |
11% Secured Debt | 1,069 | 6,465 | 5,734 | | 12,199 | ||||||||||||
|
Warrants | 259 | 151 | | 410 | |||||||||||||
|
Member Units | 1,200 | 500 | | 1,700 | |||||||||||||
| | | | | | | | | | | | | | | | | | |
Boss Industries, LLC |
Preferred Member Units | 280 | 2,000 | 543 | | 2,543 | ||||||||||||
| | | | | | | | | | | | | | | | | | |
Bridge Capital Solutions |
13% Secured Debt | 706 | 5,837 | 1,035 | | 6,872 | ||||||||||||
Corporation |
Warrants | 710 | 310 | | 1,020 | |||||||||||||
| | | | | | | | | | | | | | | | | | |
Buca C, LLC |
LIBOR Plus 7.25% (Floor 1.00%) | 815 | | 25,288 | | 25,288 | ||||||||||||
|
Preferred Member Units | 56 | | 3,656 | | 3,656 | ||||||||||||
| | | | | | | | | | | | | | | | | | |
CAI Software LLC |
12% Secured Debt | 493 | 5,348 | 10 | 428 | 4,930 | ||||||||||||
|
Member Units | | 654 | 186 | | 840 | ||||||||||||
| | | | | | | | | | | | | | | | | | |
Condit Exhibits, LLC |
Member Units | 18 | 610 | 160 | | 770 | ||||||||||||
| | | | | | | | | | | | | | | | | | |
Congruent Credit |
LP Interests (Fund II, LP) | 1,081 | 18,378 | | 14,150 | 4,228 | ||||||||||||
Opportunities Funds |
LP Interests (Fund III, LP) | | 7,734 | 4,488 | | 12,222 | ||||||||||||
| | | | | | | | | | | | | | | | | | |
Daseke, Inc. |
12% Current / 2.5% PIK Secured Debt | 2,364 | 20,723 | 446 | 51 | 21,118 | ||||||||||||
|
Common Stock | 13,780 | 8,880 | | 22,660 | |||||||||||||
| | | | | | | | | | | | | | | | | | |
Dos Rios Partners |
LP Interests (Fund) | | 2,325 | 779 | 1,073 | 2,031 | ||||||||||||
|
LP Interests (Fund A) | | 738 | 247 | 337 | 648 | ||||||||||||
| | | | | | | | | | | | | | | | | | |
East Teak Fine |
Common Stock | 12 | 860 | | | 860 | ||||||||||||
Hardwoods, Inc. |
||||||||||||||||||
| | | | | | | | | | | | | | | | | | |
East West Copolymer & |
12% Secured Debt | 893 | 9,436 | 20 | | 9,456 | ||||||||||||
Rubber, LLC |
Warrants | 50 | | | 50 | |||||||||||||
| | | | | | | | | | | | | | | | | | |
Freeport Financial SBIC |
LP Interests | 150 | | 759 | | 759 | ||||||||||||
Fund LP |
LP Interests | 313 | 4,677 | 1,297 | | 5,974 | ||||||||||||
| | | | | | | | | | | | | | | | | | |
Gault Financial, LLC |
10% Secured Debt | 1,140 | 10,782 | 109 | | 10,891 | ||||||||||||
(RMB Capital, LLC) |
Warrants | | | | | |||||||||||||
| | | | | | | | | | | | | | | | | | |
Glowpoint, Inc. |
8% Secured Debt | 17 | 396 | 87 | 465 | 18 | ||||||||||||
|
12% Secured Debt | 838 | 8,909 | 15 | | 8,924 | ||||||||||||
|
Common Stock | 8,480 | 158 | 4,178 | 4,460 | |||||||||||||
| | | | | | | | | | | | | | | | | | |
Guerdon Modular |
11% Secured Debt | 992 | 11,044 | 29 | 800 | 10,273 | ||||||||||||
Holdings, Inc. |
Common Stock | 2,400 | 583 | 393 | 2,590 | |||||||||||||
| | | | | | | | | | | | | | | | | | |
Houston Plating and |
Member Units | 230 | 11,470 | | 650 | 10,820 | ||||||||||||
Coatings, LLC |
||||||||||||||||||
| | | | | | | | | | | | | | | | | | |
Indianhead Pipeline |
12% Secured Debt | 690 | 6,625 | 96 | 675 | 6,046 | ||||||||||||
Services, LLC |
Preferred Member Units | 52 | 1,960 | 342 | | 2,302 | ||||||||||||
|
Warrants | | | | | |||||||||||||
|
Member Units | | | | | |||||||||||||
| | | | | | | | | | | | | | | | | | |
KBK Industries, LLC |
12.5% Secured Debt | 720 | 8,250 | 22 | 2,072 | 6,200 | ||||||||||||
|
Member Units | 159 | 6,120 | | 2,030 | 4,090 | ||||||||||||
| | | | | | | | | | | | | | | | | | |
L.F. Manufacturing |
Member Units | 68 | 2,374 | | 584 | 1,790 | ||||||||||||
Holdings, LLC |
||||||||||||||||||
| | | | | | | | | | | | | | | | | | |
MPS Denver, LLC |
Member Units | 1,130 | | | 1,130 | |||||||||||||
| | | | | | | | | | | | | | | | | | |
OnAsset Intelligence, Inc. |
12% PIK Secured Debt | 335 | 3,553 | 334 | 3,887 | |||||||||||||
|
Preferred Stock | 34 | 2,700 | 34 | 1,354 | 1,380 | ||||||||||||
|
Warrants | | | | | |||||||||||||
| | | | | | | | | | | | | | | | | | |
OPI International Ltd. |
10% Unsecured Debt | 12 | | 244 | | 244 | ||||||||||||
|
Common Stock | 4,971 | | 1,771 | 3,200 | |||||||||||||
| | | | | | | | | | | | | | | | | | |
PCI Holding Company, Inc. |
Preferred Stock | 367 | 4,430 | 366 | 46 | 4,750 | ||||||||||||
| | | | | | | | | | | | | | | | | | |
Rocaceia, LLC (Quality |
12% Secured Debt | 11,500 | 300 | 11,550 | 250 | |||||||||||||
Lease and Rental |
8% Secured Debt | 157 | | 157 | | |||||||||||||
Holdings, LLC) |
Preferred Member Units | | | | | |||||||||||||
| | | | | | | | | | | | | | | | | | |
Radial Drilling |
12% Secured Debt | 526 | 3,792 | 144 | 1,936 | 2,000 | ||||||||||||
Services Inc. |
Warrants | | | | | |||||||||||||
| | | | | | | | | | | | | | | | | | |
Samba Holdings, Inc. |
12.5% Secured Debt | 2,570 | 26,418 | 88 | 841 | 25,665 | ||||||||||||
|
Common Stock | 6,030 | 14,380 | | 20,410 | |||||||||||||
| | | | | | | | | | | | | | | | | | |
SYNEO, LLC |
12% Secured Debt | 182 | 2,674 | 26 | 2,700 | | ||||||||||||
|
Member Units | (27 | ) | 801 | | 801 | | |||||||||||
| | | | | | | | | | | | | | | | | | |
103
Company
|
Investments(1)
|
Amount of Interest or Dividends Credited to Income(2) |
December 31, 2014 Value |
Gross Additions(3) |
Gross Reductions(4) |
September 30, 2015 Fair Value |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Tin Roof Acquisition |
12% Secured Debt | 1,420 | 13,861 | 37 | | 13,898 | ||||||||||||
Company |
Class C Preferred Stock | 174 | 2,241 | 174 | | 2,415 | ||||||||||||
| | | | | | | | | | | | | | | | | | |
Universal Wellhead Services |
Class A Units | 119 | | 4,000 | 909 | 3,091 | ||||||||||||
Holdings, LLC |
||||||||||||||||||
| | | | | | | | | | | | | | | | | | |
Volusion, LLC |
10.5% Secured Debt | 1,049 | | 16,139 | | 16,139 | ||||||||||||
|
Warrants | | 1,400 | | 1,400 | |||||||||||||
|
Preferred Member Units | | 14,000 | | 14,000 | |||||||||||||
| | | | | | | | | | | | | | | | | | |
Other |
||||||||||||||||||
Amounts from investments transferred from other 1940 Act classification during the period |
(55 | ) | 13,823 | | | | ||||||||||||
|
19,862 | 278,675 | 107,596 | 49,951 | 322,497 | |||||||||||||
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
This schedule should be read in conjunction with Main Street's consolidated financial statements, including the consolidated schedule of investments and notes to the consolidated financial statements.
104
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information in this section contains forward-looking statements that involve risks and uncertainties. Please see "Risk Factors" and "Cautionary Statement Concerning Forward-Looking Statements" in our Annual Report on Form 10-K for the year ended December 31, 2014, filed with the Securities and Exchange Commission (the "SEC") on February 27, 2015, and "Risk Factors" in our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015, filed with the SEC on August 7, 2015, for a discussion of the uncertainties, risks and assumptions associated with these statements. You should read the following discussion in conjunction with the consolidated financial statements and related notes and other financial information included in the Annual Report on Form 10-K for the year ended December 31, 2014.
ORGANIZATION
Main Street Capital Corporation ("MSCC") is a principal investment firm primarily focused on providing customized debt and equity financing to lower middle market ("LMM") companies and debt capital to middle market ("Middle Market") companies. The portfolio investments of MSCC and its consolidated subsidiaries are typically made to support management buyouts, recapitalizations, growth financings, refinancings and acquisitions of companies that operate in diverse industry sectors. MSCC seeks to partner with entrepreneurs, business owners and management teams and generally provide "one stop" financing alternatives within its LMM portfolio. MSCC and its consolidated subsidiaries invest primarily in secured debt investments, equity investments, warrants and other securities of LMM companies based in the United States and in secured debt investments of Middle Market companies generally headquartered in the United States.
MSCC was formed in March 2007 to operate as an internally managed business development company ("BDC") under the Investment Company Act of 1940, as amended (the "1940 Act"). MSCC wholly owns several investment funds, including Main Street Mezzanine Fund, LP ("MSMF") and Main Street Capital II, LP ("MSC II" and, together with MSMF, the "Funds"), and each of their general partners. The Funds are each licensed as a Small Business Investment Company ("SBIC") by the United States Small Business Administration ("SBA"). Because MSCC is internally managed, all of the executive officers and other employees are employed by MSCC. Therefore, MSCC does not pay any external investment advisory fees but instead incurs the operating costs associated with employing investment and portfolio management professionals.
MSC Adviser I, LLC (the "External Investment Manager") was formed in November 2013 as a wholly owned subsidiary of MSCC to provide investment management and other services to parties other than MSCC and its subsidiaries ("External Parties") and receive fee income for such services. MSCC has been granted no-action relief by the Securities and Exchange Commission ("SEC") to allow the External Investment Manager to register as a registered investment adviser ("RIA") under Investment Advisers Act of 1940, as amended (the "Advisers Act"). Since the External Investment Manager conducts all of its investment management activities for parties outside of MSCC and its consolidated subsidiaries, it is accounted for as a portfolio investment of MSCC and is not included as a consolidated subsidiary of MSCC in MSCC's consolidated financial statements.
MSCC has elected to be treated for U.S. federal income tax purposes as a regulated investment company ("RIC") under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). As a result, MSCC generally will not pay corporate-level U.S. federal income taxes on any net ordinary income or capital gains that it distributes to its stockholders.
MSCC has certain direct and indirect wholly owned subsidiaries that have elected to be taxable entities (the "Taxable Subsidiaries"). The primary purpose of the Taxable Subsidiaries is to permit MSCC to hold equity investments in portfolio companies which are "pass-through" entities for tax purposes. The External Investment Manager is also a direct wholly owned subsidiary that has elected to
105
be a taxable entity. The Taxable Subsidiaries and the External Investment Manager are each taxed at their normal corporate tax rates based on their taxable income.
Unless otherwise noted or the context otherwise indicates, the terms "we," "us," "our" and "Main Street" refer to MSCC and its consolidated subsidiaries, which include the Funds and the Taxable Subsidiaries.
OVERVIEW
Our principal investment objective is to maximize our portfolio's total return by generating current income from our debt investments 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. Our LMM companies generally have annual revenues between $10 million and $150 million, and our LMM portfolio investments generally range in size from $5 million to $50 million. Our Middle Market investments are made in businesses that are generally larger in size than our LMM portfolio 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 $15 million. Our private loan ("Private Loan") portfolio investments are primarily debt securities which have been originated through strategic relationships with other investment funds on a collaborative basis. 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 other portfolio ("Other Portfolio") investments primarily consist of investments which are not consistent with the typical profiles for our LMM, Middle Market or Private Loan portfolio investments, including investments which may be managed by third parties. In our Other Portfolio, we may incur indirect fees and expenses in connection with investments managed by third parties, such as investments in other investment companies or private funds.
Our external asset management business is conducted through our External Investment Manager. The External Investment Manager earns management fees based on the assets of the funds under management and may earn incentive fees, or a carried interest, based on the performance of the funds managed. We have entered into an agreement to provide the External Investment Manager with asset management service support in connection with its asset management business generally, and specifically for its relationship with HMS Income Fund, Inc. ("HMS Income"). Through this agreement, we provide management and other services to the External Investment Manager, as well as access to our employees, infrastructure, business relationships, management expertise and capital raising capabilities. In the first quarter of 2014, we began charging the External Investment Manager for these services. Our total expenses for the three months ended September 30, 2015 and 2014 are net of expenses charged to the External Investment Manager of $1.1 million and $0.6 million, respectively. Our total expenses for the nine months ended September 30, 2015 and 2014 are net of expenses charged to the External Investment Manager of $3.1 million and $1.3 million, respectively. The total contribution of the External Investment Manager to our net investment income consists of the combination of the expenses charged to the External Investment Manager and dividend income from the External Investment Manager. For the three months ended September 30, 2015 and 2014, the total contribution to net investment income was $1.8 million and $0.7 million, respectively. For the nine months ended September 30, 2015 and 2014, the total contribution to net investment income was $4.7 million and $1.5 million, respectively.
We seek to fill the financing gap for LMM businesses, which, historically, have had more limited access to financing from commercial banks and other traditional sources. The underserved nature of the LMM creates the opportunity for us to meet the financing needs of LMM companies while also negotiating favorable transaction terms and equity participations. Our ability to invest across a company's capital structure, from secured loans to equity securities, allows us to offer portfolio
106
companies a comprehensive suite of financing options, or a "one stop" financing solution. Providing customized, "one stop" financing solutions is important to LMM portfolio companies. We generally seek to partner directly with entrepreneurs, management teams and business owners in making our investments. Our LMM portfolio debt investments are generally secured by a first lien on the assets of the portfolio company and typically have a term of between five and seven years from the original investment date. We believe that our LMM investment strategy has limited correlation to the broader debt and equity markets.
In addition to our LMM investment strategy, we pursue investments in Middle Market companies. Our Middle Market portfolio investments primarily consist of direct investments in or secondary purchases of interest bearing debt securities in privately held companies that are generally larger in size than the companies included in our LMM portfolio. Our Middle Market portfolio debt investments are generally secured by either a first or second 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.
Private Loan portfolio investments are primarily debt securities which have been originated through strategic relationships with other investment funds on a collaborative basis, and are often referred to in the debt markets as "club deals." 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 either a first or second 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.
The following tables provide a summary of our investments in the LMM, Middle Market and Private Loan portfolios as of September 30, 2015 and December 31, 2014 (this information excludes the Other Portfolio investments and the External Investment Manager which are discussed further below):
|
As of September 30, 2015 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
LMM(a) | Middle Market |
Private Loan |
|||||||
|
(dollars in millions) |
|||||||||
Number of portfolio companies |
71 | 86 | 41 | |||||||
Fair value |
$ | 856.4 | $ | 669.5 | $ | 252.4 | ||||
Cost |
$ | 693.7 | $ | 695.2 | $ | 273.1 | ||||
% of portfolio at costdebt |
70.4% | 98.5% | 94.9% | |||||||
% of portfolio at costequity |
29.6% | 1.5% | 5.1% | |||||||
% of debt investments at cost secured by first priority lien |
89.6% | 87.8% | 87.6% | |||||||
Weighted-average annual effective yield(b) |
12.3% | 8.0% | 9.5% | |||||||
Average EBITDA(c) |
$ | 6.1 | $ | 97.9 | $ | 17.1 |
107
|
As of December 31, 2014 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
LMM(a) | Middle Market |
Private Loan |
|||||||
|
(dollars in millions) |
|||||||||
Number of portfolio companies |
66 | 86 | 31 | |||||||
Fair value |
$ | 733.2 | $ | 542.7 | $ | 213.0 | ||||
Cost |
$ | 599.4 | $ | 561.8 | $ | 224.0 | ||||
% of portfolio at costdebt |
71.5% | 99.8% | 95.6% | |||||||
% of portfolio at costequity |
28.5% | 0.2% | 4.4% | |||||||
% of debt investments at cost secured by first priority lien |
89.6% | 85.1% | 87.8% | |||||||
Weighted-average annual effective yield(b) |
13.2% | 7.8% | 10.1% | |||||||
Average EBITDA(c) |
$ | 5.0 | $ | 77.2 | $ | 18.1 |
As of September 30, 2015, we had Other Portfolio investments in seven companies, collectively totaling approximately $56.9 million in fair value and approximately $61.2 million in cost basis and which comprised approximately 3.0% of our Investment Portfolio (as defined in "Critical Accounting PoliciesBasis of Presentation" below) at fair value. As of December 31, 2014, we had Other Portfolio investments in six companies, collectively totaling approximately $58.9 million in fair value and approximately $56.2 million in cost basis and which comprised approximately 3.8% of our Investment Portfolio at fair value.
As previously discussed, the External Investment Manager is a wholly owned subsidiary that is treated as a portfolio investment. As of September 30, 2015, there was no cost basis in this investment and the investment had a fair value of $32.3 million, which comprised 1.7% of our Investment Portfolio at fair value. As of December 31, 2014, there was no cost basis in this investment and the investment had a fair value of $15.6 million, which comprised 1.0% of our Investment Portfolio at fair value.
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Our portfolio investments are generally made through MSCC and the Funds. MSCC and the Funds share the same investment strategies and criteria, although they are subject to different regulatory regimes. An investor's return in MSCC will depend, in part, on the Funds' investment returns as they are wholly owned subsidiaries of MSCC.
The level of new portfolio investment activity will fluctuate from period to period based upon our view of the current economic fundamentals, our ability to identify new investment opportunities that meet our investment criteria, and our ability to consummate the identified opportunities. The level of new investment activity, and associated interest and fee income, will directly impact future investment income. In addition, the level of dividends paid by portfolio companies and the portion of our portfolio debt investments on non-accrual status will directly impact future investment income. While we intend to grow our portfolio and our investment income over the long term, our growth and our operating results may be more limited during depressed economic periods. However, we intend to appropriately manage our cost structure and liquidity position based on applicable economic conditions and our investment outlook. The level of realized gains or losses and unrealized appreciation or depreciation on our investments will also fluctuate depending upon portfolio activity, economic conditions and the performance of our individual portfolio companies. The changes in realized gains and losses and unrealized appreciation or depreciation could have a material impact on our operating results.
Because we are internally managed, we do not pay any external investment advisory fees, but instead incur the operating costs associated with employing investment and portfolio management professionals ourselves. We believe that our internally managed structure provides us with 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. For the three months ended September 30, 2015 and 2014, 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%, respectively, on an annualized basis. For the nine months ended September 30, 2015 and 2014, the ratio of our total operating expenses, excluding interest expense as a percentage of our quarterly average total assets was 1.4% and 1.5%, respectively, on an annualized basis and 1.4% for the year ended December 31, 2014.
The total investment return on our shares of common stock for the nine months ended September 30, 2015 and 2014 was (6.74%) and (1.06%), respectively. Total investment return is based on the purchase of our stock at the current market price on the first day and a sale at the current market price on the last day of each period reported and assumes reinvestment of dividends at prices obtained by our dividend reinvestment plan during the period. The return does not reflect any sales load that may be paid by an investor.
During May 2012, we entered into an investment sub-advisory agreement with HMS Adviser, LP ("HMS Adviser"), which is the investment advisor to HMS Income Fund, Inc. ("HMS Income"), a non-publicly traded BDC whose registration statement on Form N-2 was declared effective by the SEC in June 2012, to provide certain investment advisory services to HMS Adviser. In December 2013, after obtaining required no-action relief from the SEC to allow us to own a registered investment adviser, we assigned the sub-advisory agreement to the External Investment Manager since the fees received from such arrangement could otherwise have negative consequences on MSCC's ability to meet the source-of-income requirement necessary for us to maintain our RIC tax treatment. Under the investment sub-advisory agreement, the External Investment Manager is entitled to 50% of the base management fee and the incentive fees earned by HMS Adviser under its advisory agreement with HMS Income. Based upon several fee waiver agreements with HMS Income and HMS Adviser, the External Investment Manager did not begin accruing the base management fee and incentive fees, if any, until January 1, 2014. Beginning January 1, 2015, the External Investment Manager conditionally agreed to waive a limited amount of the base management fee and incentive fees otherwise earned during the year ended December 31, 2015. During the three months ended September 30, 2015 and
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2014, the External Investment Manager earned $2.1 million and $0.8 million, respectively, of management fees (net of fees waived, if any) under the sub-advisory agreement with HMS Adviser. During the nine months ended September 30, 2015 and 2014, the External Investment Manager earned $5.5 million and $1.7 million, respectively, of management fees (net of fees waived, if any) under the sub-advisory agreement with HMS Adviser.
During April 2014, we received an exemptive order from the SEC permitting co-investments by us and HMS Income in certain negotiated transactions where co-investing would otherwise be prohibited under the 1940 Act. We have made, and in the future intend to continue to make, such co-investments with HMS Income in accordance with the conditions of the order. The order requires, among other things, that we and the External Investment Manager consider whether each such investment opportunity is appropriate for HMS Income and, if it is appropriate, to propose an allocation of the investment opportunity between us and HMS Income. Because the External Investment Manager may receive performance-based fee compensation from HMS Income, this may provide it an incentive to allocate opportunities to HMS Income instead of us.
CRITICAL ACCOUNTING POLICIES
Basis of Presentation
Our financial statements are prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP"). For each of the periods presented herein, our consolidated financial statements include the accounts of MSCC and its consolidated subsidiaries. The Investment Portfolio, as used herein, refers to all of our investments in LMM portfolio companies, investments in Middle Market portfolio companies, Private Loan portfolio investments, Other Portfolio investments, and the investment in the External Investment Manager, but excludes all "Marketable securities and idle funds investments". "Marketable securities and idle funds investments" are classified as financial instruments and are reported separately on our consolidated balance sheets and consolidated schedules of investments due to the nature of such investments. Our results of operations for the three and nine months ended September 30, 2015 and 2014, cash flows for the nine months ended September 30, 2015 and 2014, and financial position as of September 30, 2015 and December 31, 2014, are presented on a consolidated basis. The effects of all intercompany transactions between us and our consolidated subsidiaries have been eliminated in consolidation. Certain reclassifications have been made to prior period balances to conform to the current presentation, including reclassifying the expenses charged to the External Investment Manager.
Our accompanying unaudited consolidated financial statements are presented in conformity with U.S. GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain disclosures accompanying annual financial statements prepared in accordance with U.S. GAAP are omitted. In the opinion of management, the unaudited consolidated financial results included herein contain all adjustments, consisting solely of normal recurring accruals, considered necessary for the fair presentation of financial statements for the interim periods included herein. The results of operations for the three and nine months ended September 30, 2015 and 2014 are not necessarily indicative of the operating results to be expected for the full year. Also, the unaudited financial statements and notes should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2014. Financial statements prepared on a U.S. GAAP basis require management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein.
Under regulations pursuant to Article 6 of Regulation S-X applicable to BDCs and Accounting Standards Codification ("Codification" or "ASC") 946, Financial ServicesInvestment Companies
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("ASC 946"), we are precluded from consolidating other entities in which we have equity investments, including those in which we have a controlling interest, unless the other entity is another investment company. An exception to this general principle in ASC 946 occurs if we hold a controlling interest in an operating company that provides all or substantially all of its services directly to us or to one of our portfolio companies. Accordingly, as noted above, our consolidated financial statements include the financial position and operating results for the Funds and the Taxable Subsidiaries. Our consolidated financial statements also include the financial position and operating results for our wholly owned operating subsidiary, Main Street Capital Partners, LLC, ("MSCP"), as the wholly owned subsidiary provides all of its services directly or indirectly to Main Street or our portfolio companies. We have determined that all of our portfolio investments do not qualify for this exception, including the investment in the External Investment Manager. Therefore, our Investment Portfolio is carried on the consolidated balance sheet at fair value with any adjustments to fair value recognized as "Net Change in Unrealized Appreciation (Depreciation)" on the consolidated statements of operations until the investment is realized, usually upon exit, resulting in any gain or loss being recognized as a "Net Realized Gain (Loss)."
Investment Portfolio Valuation
The most significant determination inherent in the preparation of our consolidated financial statements is the valuation of our Investment Portfolio and the related amounts of unrealized appreciation and depreciation. As of September 30, 2015 and December 31, 2014, our Investment Portfolio valued at fair value represented approximately 96% and 92% of our total assets, respectively. We are required to report our investments at fair value. We follow the provisions of FASB ASC 820, Fair Value Measurements and Disclosures ("ASC 820"). ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value, and enhances disclosure requirements for fair value measurements. ASC 820 requires us to assume that the portfolio investment is to be sold in the principal market to independent market participants, which may be a hypothetical market. Market participants are defined as buyers and sellers in the principal market that are independent, knowledgeable and willing and able to transact.
Our portfolio strategy calls for us to invest primarily in illiquid debt and equity securities issued by private, LMM companies and more liquid debt securities issued by Middle Market companies that are generally larger in size than the LMM companies. We categorize some of our investments in LMM companies and Middle Market companies as Private Loan investments which are investments, generally in debt instruments, that we originate on a collaborative basis with other investment funds, and are often referred to in the debt markets as "club deals." 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 portfolio also includes Other Portfolio investments which primarily consist of investments that are not consistent with the typical profiles for our LMM portfolio investments, Middle Market portfolio investments or Private Loan portfolio investments, including investments which may be managed by third parties. Our portfolio investments may be subject to restrictions on resale.
LMM investments and Other Portfolio investments generally have no established trading market while Middle Market securities generally have established markets that are not active. Private Loan investments may include investments which have no established trading market or have established markets that are not active. We determine in good faith the fair value of our Investment Portfolio pursuant to a valuation policy in accordance with ASC 820 and a valuation process approved by our Board of Directors and in accordance with the 1940 Act. Our valuation policies and processes are intended to provide a consistent basis for determining the fair value of our Investment Portfolio.
For LMM portfolio investments, we generally review external events, including private mergers, sales and acquisitions involving comparable companies, and include these events in the valuation
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process by using an enterprise value waterfall methodology ("Waterfall") for our LMM equity investments and an income approach using a yield-to-maturity model ("Yield-to-Maturity") for our LMM debt investments. For Middle Market portfolio investments, we primarily use quoted prices in the valuation process. We determine the appropriateness of the use of third-party broker quotes, if any, in determining fair value based on our understanding of the level of actual transactions used by the broker to develop the quote and whether the quote was an indicative price or binding offer, the depth and consistency of broker quotes and the correlation of changes in broker quotes with underlying performance of the portfolio company and other market indices. For Middle Market and Private Loan portfolio investments in debt securities for which we have determined that third-party quotes or other independent pricing are not available or appropriate, we generally estimate the fair value based on the assumptions that we believe hypothetical market participants would use to value the investment in a current hypothetical sale using the Yield-to-Maturity valuation method. For our Other Portfolio equity investments, we generally calculate the fair value of the investment primarily based on the net asset value ("NAV") of the fund. All of the valuation approaches for our portfolio investments estimate the value of the investment as if we were to sell, or exit, the investment as of the measurement date.
These valuation approaches consider the value associated with our ability to control the capital structure of the portfolio company, as well as the timing of a potential exit. For valuation purposes, "control" portfolio investments are composed of debt and equity securities in companies for which we have a controlling interest in the equity ownership of the portfolio company or the ability to nominate a majority of the portfolio company's board of directors. For valuation purposes, "non-control" portfolio investments are generally composed of debt and equity securities in companies for which we do not have a controlling interest in the equity ownership of the portfolio company or the ability to nominate a majority of the portfolio company's board of directors.
Under the Waterfall valuation method, we estimate the enterprise value of a portfolio company using a combination of market and income approaches or other appropriate valuation methods, such as considering recent transactions in the equity securities of the portfolio company or third-party valuations of the portfolio company, and then perform a waterfall calculation by using the enterprise value over the portfolio company's securities in order of their preference relative to one another. The enterprise value is the fair value at which an enterprise could be sold in a transaction between two willing parties, other than through a forced or liquidation sale. Typically, private companies are bought and sold based on multiples of EBITDA, cash flows, net income, revenues, or in limited cases, book value. There is no single methodology for estimating enterprise value. For any one portfolio company, enterprise value is generally described as a range of values from which a single estimate of enterprise value is derived. In estimating the enterprise value of a portfolio company, we analyze various factors including the portfolio company's historical and projected financial results. The operating results of a portfolio company may include unaudited, projected, budgeted or pro forma financial information and may require adjustments for non-recurring items or to normalize the operating results that may require significant judgment in our determination. In addition, projecting future financial results requires significant judgment regarding future growth assumptions. In evaluating the operating results, we also analyze the impact of exposure to litigation, loss of customers or other contingencies. After determining the appropriate enterprise value, we allocate the enterprise value to investments in order of the legal priority of the various components of the portfolio company's capital structure. In applying the Waterfall valuation method, we assume the loans are paid off at the principal amount in a change in control transaction and are not assumed by the buyer, which we believe is consistent with our past transaction history and standard industry practices.
Under the Yield-to-Maturity valuation method, we use the income approach to determine the fair value of debt securities, based on projections of the discounted future free cash flows that the debt security will likely generate, including analyzing the discounted cash flows of interest and principal amounts for the debt security, as set forth in the associated loan agreements, as well as the financial
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position and credit risk of each of these portfolio investments. Our estimate of the expected repayment date of our debt securities is generally the legal maturity date of the instrument, as we generally intend to hold our loans and debt securities to maturity. The Yield-to-Maturity analysis considers changes in leverage levels, credit quality, portfolio company performance and other factors. We will use the value determined by the Yield-to-Maturity analysis as the fair value for that security; however, because of our general intent to hold our loans to maturity, the fair value will not exceed the principal amount of the debt security valued using the Yield-to-Maturity valuation method. A change in the assumptions that we use to estimate the fair value of our debt securities using the Yield-to-Maturity valuation method could have a material impact on the determination of fair value. If there is deterioration in credit quality or if a debt security is in workout status, we may consider other factors in determining the fair value of the debt security, including the value attributable to the debt security from the enterprise value of the portfolio company or the proceeds that would most likely be received in a liquidation analysis.
Under the NAV valuation method, for an investment in an investment fund that does not have a readily determinable fair value, we measure the fair value of the investment predominately based on the NAV of the investment fund as of the measurement date. However, in determining the fair value of the investment, we may consider whether adjustments to the NAV are necessary in certain circumstances, based on the analysis of any restrictions on redemption of our investment as of the measurement date, recent actual sales or redemptions of interests in the investment fund, and expected future cash flows available to equity holders, including the rate of return on those cash flows compared to an implied market return on equity required by market participants, or other uncertainties surrounding our ability to realize the full NAV of our interests in the investment fund.
Pursuant to our internal valuation process and the requirements under the 1940 Act, we perform valuation procedures on our portfolio investments quarterly. In addition to our internal valuation process, in determining the estimates of fair value for our investments in LMM portfolio companies, we, among other things, consult with a nationally recognized independent financial advisory services firm. The nationally recognized independent financial advisory services firm analyzes and provides observations and recommendations regarding our determinations of the fair value of our LMM portfolio company investments. The nationally recognized independent financial advisory services firm is generally consulted relative to our investments in each LMM portfolio company at least once in every calendar year, and for our investments in new LMM portfolio companies, at least once in the twelve-month period subsequent to the initial investment. In certain instances, we may determine that it is not cost-effective, and as a result is not in our stockholders' best interest, to consult with the nationally recognized independent financial advisory services firm on our investments in one or more LMM portfolio companies. Such instances include, but are not limited to, situations where the fair value of our investment in a LMM portfolio company is determined to be insignificant relative to the total Investment Portfolio. We consulted with our independent financial advisory services firm in arriving at our determination of fair value on our investments in a total of 44 LMM portfolio companies for the nine months ended September 30, 2015, representing approximately 75% of the total LMM portfolio at fair value as of September 30, 2015, and on a total of 42 LMM portfolio companies for the nine months ended September 30, 2014, representing approximately 74% of the total LMM portfolio at fair value as of September 30, 2014. Excluding our investments in new LMM portfolio companies which have not been in the Investment Portfolio for at least twelve months subsequent to the initial investment as of September 30, 2015 and 2014, as applicable, and our investments in the LMM portfolio companies that were not reviewed because their equity is publicly traded, the percentage of the LMM portfolio reviewed by our independent financial advisory services firm for the nine months ended September 30, 2015 and 2014 was 82% and 83% of the total LMM portfolio at fair value as of September 30, 2015 and 2014, respectively.
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For valuation purposes, all of our Middle Market portfolio investments are non-control investments. To the extent sufficient observable inputs are available to determine fair value, we use observable inputs to determine the fair value of these investments through obtaining third-party quotes or other independent pricing. For Middle Market portfolio investments for which we have determined that third-party quotes or other independent pricing are not available or appropriate, we generally estimate the fair value based on the assumptions that we believe hypothetical market participants would use to value such Middle Market debt investments in a current hypothetical sale using the Yield-to-Maturity valuation method and such Middle Market equity investments in a current hypothetical sale using the Waterfall valuation method. We do not generally consult with any financial advisory services firms in connection with determining the fair value of our Middle Market debt investments.
For valuation purposes, all of our Private Loan portfolio investments are non-control investments. For Private Loan portfolio investments for which we have determined that third-party quotes or other independent pricing are not available or appropriate, we generally estimate the fair value based on the assumptions that we believe hypothetical market participants would use to value such Private Loan debt investments in a current hypothetical sale using the Yield-to-Maturity valuation method and such Private Loan equity investments in a current hypothetical sale using the Waterfall valuation method. The nationally recognized independent financial advisory services firm analyzes and provides observations and recommendations regarding our determinations of the fair value of our Private Loan portfolio company investments.
For valuation purposes, all of our Other Portfolio investments are non-control investments. Our Other Portfolio investments comprised approximately 3.0% and 3.8%, respectively, of our Investment Portfolio at fair value as of September 30, 2015 and December 31, 2014. Similar to the LMM investment portfolio, market quotations for Other Portfolio equity investments are generally not readily available. For our Other Portfolio equity investments, we generally determine the fair value of our investments using the NAV valuation method. For Other Portfolio debt investments, we generally determine the fair value of these investments through obtaining third-party quotes or other independent pricing to the extent that these inputs are available and appropriate to determine fair value. For Other Portfolio debt investments for which we have determined that third-party quotes or other independent pricing are not available or appropriate, we generally estimate the fair value based on the assumptions that we believe hypothetical market participants would use to value such Other Portfolio debt investments in a current hypothetical sale using the Yield-to-Maturity valuation method.
For valuation purposes, our investment in the External Investment Manager is a control investment. Market quotations are not readily available for this investment, and as a result, we determine the fair value of the External Investment Manager using the Waterfall valuation method under the market approach. In estimating the enterprise value, we analyze various factors, including the entity's historical and projected financial results, as well as its size, marketability and performance relative to the population of market comparables. This valuation approach estimates the value of the investment as if we were to sell, or exit, the investment. In addition, we consider the value associated with our ability to control the capital structure of the company, as well as the timing of a potential exit.
Due to the inherent uncertainty in the valuation process, our determination of fair value for our Investment Portfolio may differ materially from the values that would have been determined had a ready market for the securities existed. In addition, changes in the market environment, portfolio company performance and other events that may occur over the lives of the investments may cause the gains or losses ultimately realized on these investments to be materially different than the valuations currently assigned. We determine the fair value of each individual investment and record changes in fair value as unrealized appreciation or depreciation.
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Our Board of Directors has the final responsibility for overseeing, reviewing and approving, in good faith, our determination of the fair value for our Investment Portfolio and our valuation procedures, consistent with 1940 Act requirements. We believe our Investment Portfolio as of September 30, 2015 and December 31, 2014 approximates fair value as of those dates based on the markets in which we operate and other conditions in existence on those reporting dates.
Revenue Recognition
Interest and Dividend Income
We record interest and dividend income on the accrual basis to the extent amounts are expected to be collected. Dividend income is recorded as dividends are declared by the portfolio company or at the point an obligation exists for the portfolio company to make a distribution. In accordance with our valuation policies, we evaluate accrued interest and dividend income periodically for collectability. When a loan or debt security becomes 90 days or more past due, and if we otherwise do not expect the debtor to be able to service all of its debt or other obligations, we will generally place the loan or debt security on non-accrual status and cease recognizing interest income on that loan or debt security until the borrower has demonstrated the ability and intent to pay contractual amounts due. If a loan or debt security's status significantly improves regarding the debtor's ability to service the debt or other obligations, or if a loan or debt security is fully impaired, sold or written off, we remove it from non-accrual status.
Fee Income
We may periodically provide services, including structuring and advisory services, to our portfolio companies or other third parties. For services that are separately identifiable and evidence exists to substantiate fair value, fee income is recognized as earned, which is generally when the investment or other applicable transaction closes. Fees received in connection with debt financing transactions for services that do not meet these criteria are treated as debt origination fees and are deferred and accreted into interest income over the life of the financing.
Payment-in-Kind ("PIK") Interest and Cumulative Dividends
We hold certain debt and preferred equity instruments in our Investment Portfolio that contain payment-in-kind ("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 below), 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 September 30, 2015 and 2014, (i) approximately 2.2% and 2.5%, respectively, of our total investment income was attributable to PIK interest income not paid currently in cash and (ii) approximately 1.2% and 1.8%, respectively, of our total investment income was attributable to cumulative dividend income not paid currently in cash. For the nine months ended September 30, 2015 and 2014, (i) approximately 2.1% and 3.9%, respectively, of our total investment income was attributable to PIK interest income not paid currently in cash and (ii) approximately 1.0% and 1.4%, respectively, of our total investment income was attributable to cumulative dividend income not paid currently in cash.
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Share-Based Compensation
We account for our share-based compensation plans using the fair value method, as prescribed by ASC 718, CompensationStock Compensation. Accordingly, for restricted stock awards, we measure the grant date fair value based upon the market price of our common stock on the date of the grant and amortize the fair value of the awards as share-based compensation expense over the requisite service period, which is generally the vesting term.
Income Taxes
MSCC has elected to be treated for U.S. federal income tax purposes as a RIC. MSCC's taxable income includes the taxable income generated by MSCC and certain of its subsidiaries, including the Funds, which are treated as disregarded entities for tax purposes. As a RIC, MSCC generally will not pay corporate-level U.S. federal income taxes on any net ordinary income or capital gains that MSCC distributes to its stockholders. MSCC must generally distribute at least 90% of its investment company taxable income to qualify for pass-through tax treatment and maintain its RIC status. As part of maintaining RIC status, undistributed taxable income (subject to a 4% U.S Federal excise tax) pertaining to a given fiscal year may be distributed up to 12 months subsequent to the end of that fiscal year, provided such dividends are declared prior to the filing of the U.S federal income tax return for the applicable fiscal year.
The Taxable Subsidiaries hold certain portfolio investments for us. The Taxable Subsidiaries permit us to hold equity investments in portfolio companies which are "pass-through" entities for tax purposes and to continue to comply with the "source-income" requirements contained in the RIC tax provisions of the Code. The Taxable Subsidiaries are consolidated with us for U.S. GAAP financial reporting purposes, and the portfolio investments held by the Taxable Subsidiaries are included in our consolidated financial statements as portfolio investments and recorded at fair value. The Taxable Subsidiaries are not consolidated with MSCC for income tax purposes and may generate income tax expense, or benefit, and tax assets and liabilities, as a result of their ownership of certain portfolio investments. The taxable income, or loss, of the Taxable Subsidiaries may differ from their book income, or loss, due to temporary book and tax timing differences and permanent differences. This income tax expense, or benefit, if any, and the related tax assets and liabilities, are reflected in our consolidated financial statements.
MSCC's wholly owned subsidiary MSCP is included in our consolidated financial statements for financing reporting purposes. For tax purposes, MSCP has elected to be treated as a taxable entity, and therefore is not consolidated with MSCC for income tax purposes and is taxed at normal corporate tax rates based on its taxable income and, as a result of its activities, may generate income tax expense or benefit. The taxable income, or loss, of MSCP may differ from its book income, or loss, due to temporary book and tax timing differences and permanent differences. This income tax expense, or benefit, if any, and the related tax assets and liabilities, are reflected in our consolidated financial statements.
The Taxable Subsidiaries and MSCP use the liability method in accounting for income taxes. Deferred tax assets and liabilities are recorded for temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, using statutory tax rates in effect for the year in which the temporary differences are expected to reverse. A valuation allowance is provided against deferred tax assets when it is more likely than not that some portion or all of the deferred tax asset will not be realized.
Taxable income generally differs from net income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses. Taxable income generally excludes net unrealized appreciation or depreciation, as investment gains or losses are not included in taxable income until they are realized.
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INVESTMENT PORTFOLIO COMPOSITION
Our LMM portfolio investments primarily consist of secured debt, equity warrants and direct equity investments in privately held, LMM companies based in the United States. Our LMM portfolio companies generally have annual revenues between $10 million and $150 million, and our LMM investments generally range in size from $5 million to $50 million. The LMM debt investments are typically secured by either a first or second priority lien on the assets of the portfolio company, generally bear interest at fixed rates, and generally have a term of between five and seven years from the original investment date. In most LMM portfolio companies, we receive nominally priced equity warrants and/or make direct equity investments in connection with a debt investment.
Our Middle Market portfolio investments primarily consist of direct investments in or secondary purchases of interest-bearing 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. Our Middle Market portfolio companies generally have annual revenues between $150 million and $1.5 billion, and our Middle Market investments generally range in size from $3 million to $15 million. Our Middle Market portfolio debt investments are generally secured by either a first or second 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.
Our Private Loan portfolio investments are primarily debt securities which have been originated through strategic relationships with other investment funds on a collaborative basis, and are often referred to in the debt markets as "club deals." 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 either a first or second 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.
Our Other Portfolio investments primarily consist of investments which are not consistent with the typical profiles for LMM, Middle Market and Private Loan portfolio investments, including investments which may be managed by third parties. In the Other Portfolio, we may incur indirect fees and expenses in connection with investments managed by third parties, such as investments in other investment companies or private funds.
Our external asset management business is conducted through our External Investment Manager. We have entered into an agreement to provide the External Investment Manager with asset management service support in connection with its asset management business generally, and specifically for its relationship with HMS Income Fund, Inc. ("HMS Income"). Through this agreement, we provide management and other services to the External Investment Manager, as well as access to our employees, infrastructure, business relationships, management expertise and capital raising capabilities. In the first quarter of 2014, we began charging the External Investment Manager for these services. Our total expenses for the three months ended September 30, 2015 and 2014 are net of expenses charged to the External Investment Manager of $1.1 million and $0.6 million, respectively. Our total expenses for the nine months ended September 30, 2015 and 2014 are net of expenses charged to the External Investment Manager of $3.1 million and $1.3 million, respectively. The External Investment Manager earns management fees based on the assets of the funds under management and may earn incentive fees, or a carried interest, based on the performance of the funds managed.
The following tables summarize the composition of our total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments at cost and fair value by type of investment as a percentage of the total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments as of September 30, 2015
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and December 31, 2014 (this information excludes the Other Portfolio investments and the External Investment Manager).
Cost:
|
September 30, 2015 |
December 31, 2014 |
|||||
---|---|---|---|---|---|---|---|
First lien debt |
76.1% | 75.7% | |||||
Equity |
12.6% | 11.6% | |||||
Second lien debt |
9.0% | 10.0% | |||||
Equity warrants |
1.3% | 1.5% | |||||
Other |
1.0% | 1.2% | |||||
| | | | | | | |
|
100.0% | 100.0% | |||||
| | | | | | | |
| | | | | | | |
| | | | | | | |
Fair Value:
|
September 30, 2015 |
December 31, 2014 |
|||||
---|---|---|---|---|---|---|---|
First lien debt |
67.3% | 66.9% | |||||
Equity |
23.0% | 21.9% | |||||
Second lien debt |
8.2% | 9.2% | |||||
Equity warrants |
0.8% | 1.0% | |||||
Other |
0.7% | 1.0% | |||||
| | | | | | | |
|
100.0% | 100.0% | |||||
| | | | | | | |
| | | | | | | |
| | | | | | | |
Our LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments carry a number of risks including: (1) investing in companies which may have limited operating histories and financial resources; (2) holding investments that generally are not publicly traded and which may be subject to legal and other restrictions on resale; and (3) other risks common to investing in below investment grade debt and equity investments in our Investment Portfolio. Please see "Risk FactorsRisks Related to Our Investments" contained in our Form 10-K for the fiscal year ended December 31, 2014 and "Risk Factors" below for a more complete discussion of the risks involved with investing in our Investment Portfolio.
PORTFOLIO ASSET QUALITY
We utilize an internally developed investment rating system to rate the performance of each LMM portfolio company and to monitor our expected level of returns on each of our LMM investments in relation to our expectations for the portfolio company. The investment rating system takes into consideration various factors, including each investment's expected level of returns and the collectability of our debt investments, comparisons to competitors and other industry participants and the portfolio company's future outlook.
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All new LMM portfolio investments receive an initial Investment Rating of 3.
The following table shows the distribution of our LMM portfolio investments on the 1 to 5 investment rating scale at fair value as of September 30, 2015 and December 31, 2014:
|
As of September 30, 2015 | As of December 31, 2014 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Investment Rating
|
Investments at Fair Value |
Percentage of Total Portfolio |
Investments at Fair Value |
Percentage of Total Portfolio |
|||||||||
|
|
(in thousands, except percentages) |
|
||||||||||
1 |
$ | 308,947 | 36.1% | $ | 287,693 | 39.2% | |||||||
2 |
149,100 | 17.4% | 133,266 | 18.2% | |||||||||
3 |
280,574 | 32.8% | 239,100 | 32.6% | |||||||||
4 |
117,500 | 13.7% | 61,475 | 8.4% | |||||||||
5 |
250 | 0.0% | 11,657 | 1.6% | |||||||||
| | | | | | | | | | | | | |
Total |
$ | 856,371 | 100.0% | $ | 733,191 | 100.0% | |||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Based upon our investment rating system, the weighted-average rating of our LMM portfolio was approximately 2.2 as of both September 30, 2015 and December 31, 2014.
As of September 30, 2015, our total Investment Portfolio had four investments on non-accrual status, which included one fully-impaired debt investment and comprised approximately 0.2% of its fair value and 3.0% of our cost. As of December 31, 2014, our total Investment Portfolio had five investments with positive fair value on non-accrual status, which comprised approximately 1.7% of its fair value and 4.7% of its cost.
The operating results of our portfolio companies are impacted by changes in the broader fundamentals of the United States economy. In the event that 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 and an increase in defaults. Consequently, we can provide no assurance that the performance of certain portfolio companies will not be negatively impacted by economic cycles or other conditions, which could also have a negative impact on our future results.
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DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
Comparison of the three months ended September 30, 2015 and September 30, 2014
|
Three Months Ended September 30, |
Net Change | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2015 | 2014 | Amount | % | |||||||||
|
(in thousands) |
||||||||||||
Total investment income |
$ | 42,608 | $ | 36,351 | $ | 6,257 | 17% | ||||||
Total expenses |
(14,747 | ) | (11,464 | ) | (3,283 | ) | 29% | ||||||
| | | | | | | | | | | | | |
Net investment income |
27,861 | 24,887 | 2,974 | 12% | |||||||||
Net realized gain (loss) from investments |
(1,343 | ) | 15,710 | (17,053 | ) | ||||||||
Net change in net unrealized appreciation (depreciation) from: |
|||||||||||||
Portfolio investments |
(8,389 | ) | (6,891 | ) | (1,498 | ) | |||||||
SBIC debentures and marketable securities and idle funds |
(698 | ) | (9,175 | ) | 8,477 | ||||||||
| | | | | | | | | | | | | |
Total net change in net unrealized appreciation (depreciation) |
(9,087 | ) | (16,066 | ) | 6,979 | ||||||||
Income tax benefit (provision) |
3,237 | (2,962 | ) | 6,199 | |||||||||
| | | | | | | | | | | | | |
Net increase in net assets resulting from operations |
$ | 20,668 | $ | 21,569 | $ | (901 | ) | (4% | ) | ||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
|
Three Months Ended September 30, |
Net Change | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2015 | 2014 | Amount | % | |||||||||
|
(in thousands, except per share amounts) |
||||||||||||
Net investment income |
$ | 27,861 | $ | 24,887 | $ | 2,974 | 12% | ||||||
Share-based compensation expense |
1,651 | 1,208 | 443 | 37% | |||||||||
| | | | | | | | | | | | | |
Distributable net investment income(a) |
$ | 29,512 | $ | 26,095 | $ | 3,417 | 13% | ||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Distributable net investment income per shareBasic and diluted(a) |
$ | 0.59 | $ | 0.58 | $ | 0.01 | 2% | ||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Investment Income
For the three months ended September 30, 2015, total investment income was $42.6 million, a 17% increase over the $36.4 million of total investment income for the corresponding period of 2014. This comparable period increase was principally attributable to (i) a $6.5 million increase in interest income primarily from higher average levels of portfolio debt investments and (ii) a $1.0 million increase in dividend income from Investment Portfolio equity investments, with these increases partially offset by a $1.4 million decrease in fee income. The $6.3 million increase in total investment income in the three
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months ended September 30, 2015 includes a $1.1 million net decrease in investment income related to accelerated prepayment and repricing activity and other one-time fees for certain Investment Portfolio debt investments and a decrease of $0.4 million related to unusual dividend income activity during the period when compared to the same period in 2014.
Expenses
For the three months ended September 30, 2015, total expenses increased to $14.7 million from $11.5 million for the corresponding period of 2014. This comparable period increase in operating expenses was principally attributable to (i) a $2.3 million increase in interest expense, primarily as a result of the issuance of our 4.50% Notes due 2019 (the "4.50% Notes") in November 2014, (ii) a $0.7 million increase in compensation expense related to increases in the number of personnel, base compensation levels and incentive compensation accruals, (iii) a $0.4 million increase in share-based compensation expense, and (iv) a $0.3 million increase in general and other administrative expenses, with these increases partially offset by a $0.5 million increase in the expenses charged to the External Investment Manager (see further discussion in "Overview"), in each case when compared to the prior year. For the three months ended September 30, 2015, the ratio of our total operating expenses, excluding interest expense, as a percentage of our quarterly average total assets was 1.3% on an annualized basis, compared to 1.4% on an annualized basis for the three months ended September 30, 2014 and 1.4% for the year ended December 31, 2014.
Distributable Net Investment Income
For the three months ended September 30, 2015, distributable net investment income increased 13% to $29.5 million, or $0.59 per share, compared with $26.1 million, or $0.58 per share, in the corresponding period of 2014. The increase in distributable net investment income was primarily due to the higher level of total investment income, partially offset by higher operating expenses as discussed above. Distributable net investment income on a per share basis for the three months ended September 30, 2015 reflects (i) a decrease of approximately $0.03 per share from the comparable period in 2014 attributable to the net decrease in the comparable levels of accelerated prepayment and repricing activity for certain Investment Portfolio debt investments, (ii) a decrease of approximately $0.01 per share attributable to the change in the unusual dividend income as discussed above and (iii) a greater number of average shares outstanding compared to the corresponding period in 2014 primarily due to the March 2015 equity offering.
Net Investment Income
Net investment income for the three months ended September 30, 2015 was $27.9 million, or a 12% increase, compared to net investment income of $24.9 million for the corresponding period of 2014. The increase in net investment income was principally attributable to the increase in total investment income, partially offset by higher operating expenses as discussed above.
Net Increase in Net Assets Resulting from Operations
The net increase in net assets resulting from operations during the three months ended September 30, 2015 was $20.7 million, or $0.41 per share, compared with $21.6 million, or $0.48 per share, during the three months ended September 30, 2014. This decrease from the prior year period was primarily the result of a $17.1 million change in the net realized gain/loss from investments from a net realized gain of $15.7 million during the three months ended September 30, 2014 to a net realized loss of $1.3 million for the three months ended September 30, 2015, partially offset by (i) a $3.0 million increase in net investment income as discussed above, (ii) a $7.0 million improvement in the net change in unrealized depreciation to net unrealized depreciation of $9.1 million for the three months ended September 30, 2015, and (iii) a $6.2 million change in the income tax benefit/provision from the prior
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year period to an income tax benefit of $3.2 million for the three months ended September 30, 2015. The net realized loss of $1.3 million for the three months ended September 30, 2015 was primarily the result of the net realized losses on the restructure of a Private Loan investment of $6.0 million and on the exits of Marketable securities and idle funds investments of $1.1 million, partially offset by the net realized gain on the exit of a LMM investment of $6.0 million.
The following table provides a summary of the total net change in unrealized depreciation of $9.1 million for the three months ended September 30, 2015:
|
Three Months Ended September 30, 2015 | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
LMM(a) | Middle Market | Private Loan | Other(b) | Total | |||||||||||
|
(dollars in millions) |
|||||||||||||||
Accounting reversals of net unrealized (appreciation) depreciation recognized in prior periods due to net realized gains/(losses) recognized during period |
$ | (5.7 | ) | $ | (0.3 | ) | $ | 5.4 | $ | (0.1 | ) | $ | (0.7 | ) | ||
Net unrealized appreciation (depreciation) relating to portfolio investments |
17.0 | (15.6 | ) | (8.3 | ) | (0.7 | ) | (7.6 | ) | |||||||
| | | | | | | | | | | | | | | | |
Total net unrealized appreciation (depreciation) relating to portfolio investments |
$ | 11.3 | $ | (15.9 | ) | $ | (2.9 | ) | $ | (0.8 | ) | $ | (8.3 | ) | ||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Net unrealized depreciation relating to marketable securities |
(0.7 | ) | ||||||||||||||
Unrealized depreciation relating to SBIC debentures(c) |
(0.1 | ) | ||||||||||||||
| | | | | | | | | | | | | | | | |
Total net unrealized depreciation |
$ | (9.1 | ) | |||||||||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
The income tax benefit for the three months ended September 30, 2015 of $3.2 million principally consisted of (i) a deferred tax benefit of $2.7 million, which is primarily the result of the net activity relating to our portfolio investments held in our Taxable Subsidiaries, including changes in net operating loss carryforwards, changes in net unrealized appreciation/depreciation and other temporary book tax differences, and an other current tax benefit of $0.5 million, which is primarily related to a $0.7 million benefit for U.S. federal income, state and other taxes, partially offset by $0.2 million in excise taxes.
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Comparison of the nine months ended September 30, 2015 and September 30, 2014
|
Nine Months Ended September 30, |
Net Change | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2015 | 2014 | Amount | % | |||||||||
|
(in thousands) |
||||||||||||
Total investment income |
$ | 121,096 | $ | 102,004 | $ | 19,092 | 19% | ||||||
Total expenses |
(42,540 | ) | (32,798 | ) | (9,742 | ) | 30% | ||||||
| | | | | | | | | | | | | |
Net investment income |
78,556 | 69,206 | 9,350 | 14% | |||||||||
Net realized gain (loss) from investments |
(9,037 | ) | 10,789 | (19,826 | ) | (184% | ) | ||||||
Net change in net unrealized appreciation (depreciation) from: |
|||||||||||||
Portfolio investments |
21,716 | 17,018 | 4,698 | ||||||||||
SBIC debentures and marketable securities and idle funds |
(1,344 | ) | (9,858 | ) | 8,514 | ||||||||
| | | | | | | | | | | | | |
Total net change in net unrealized appreciation (depreciation) |
20,372 | 7,160 | 13,212 | ||||||||||
Income tax benefit (provision) |
7,004 | (8,401 | ) | 15,405 | |||||||||
| | | | | | | | | | | | | |
Net increase in net assets resulting from operations |
$ | 96,895 | $ | 78,754 | $ | 18,141 | 23% | ||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
|
Nine Months Ended September 30, |
Net Change | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2015 | 2014 | Amount | % | |||||||||
|
(in thousands, except per share amounts) |
||||||||||||
Net investment income |
$ | 78,556 | $ | 69,206 | $ | 9,350 | 14% | ||||||
Share-based compensation expense |
4,592 | 3,034 | 1,558 | 51% | |||||||||
| | | | | | | | | | | | | |
Distributable net investment income(a) |
83,148 | 72,240 | 10,908 | 15% | |||||||||
Distributable net investment income per shareBasic and diluted(a) |
$ | 1.71 | $ | 1.68 | $ | 0.03 | 2% | ||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Investment Income
For the nine months ended September 30, 2015, total investment income was $121.1 million, a 19% increase over the $102.0 million of total investment income for the corresponding period of 2014. This comparable period increase was principally attributable to (i) a $15.7 million increase in interest income primarily related to $17.6 million of interest income from higher average levels of portfolio debt investments, (ii) a $1.2 million increase in fee income and (iii) a $1.9 million increase in dividend income from Investment Portfolio equity investments. The $19.1 million increase in total investment income in the nine months ended September 30, 2015 includes a decrease of $1.5 million of total
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investment income related to higher accelerated prepayment and repricing activity and other one-time fees for certain Investment Portfolio debt investments when compared to the same period in 2014, which such decrease consisting of a decrease in interest income of $1.8 million relating to accelerated prepayments or repricing activity, partially offset by an increase in fee income of $0.3 million relating to such activity and other one-time transactions, and a decrease of $0.9 million related to unusual dividend income activity during the period when compared to the same period in 2014.
Expenses
For the nine months ended September 30, 2015, total expenses increased to $42.5 million from $32.8 million for the corresponding period of 2014. This comparable period increase in operating expenses was principally attributable to (i) a $7.0 million increase in interest expense, primarily as a result of the issuance of our 4.50% Notes in November 2014 when compared to the prior year period, (ii) a $1.9 million increase in compensation expense related to increases in the number of personnel, base compensation levels and incentive compensation accruals, (iii) a $1.6 million increase in share-based compensation expense and (iv) a $1.0 million increase in general and other administrative expenses, with these increases partially offset by a $1.8 million increase in the expenses charged to the External Investment Manager (see further discussion in "Overview"), in each case when compared to the prior year. For the nine months ended September 30, 2015, the ratio of our total operating expenses, excluding interest expense, as a percentage of our quarterly average total assets was 1.4% on an annualized basis, compared to 1.5% on an annualized basis for the nine months ended September 30, 2014 and 1.4% for the year ended December 31, 2014.
Distributable Net Investment Income
For the nine months ended September 30, 2015, distributable net investment income increased 15% to $83.1 million, or $1.71 per share, compared with $72.2 million, or $1.68 per share, in the corresponding period of 2014. The increase in distributable net investment income was primarily due to the higher level of total investment income, partially offset by higher operating expenses as discussed above. Distributable net investment income on a per share basis for the nine months ended September 30, 2015 reflects (i) a decrease of approximately $0.04 per share from the comparable period in 2014 attributable to the net decrease in the comparable levels of accelerated prepayment and repricing activity for certain Investment Portfolio debt investments as discussed above, (ii) a decrease of approximately $0.02 per share attributable to the change in the unusual dividend income as discussed above and (iii) a greater number of average shares outstanding compared to the corresponding period in 2014 primarily due to the April 2014 and March 2015 equity offerings.
Net Investment Income
Net investment income for the nine months ended September 30, 2015 was $78.6 million, or a 14% increase, compared to net investment income of $69.2 million for the corresponding period of 2014. The increase in net investment income was principally attributable to the increase in total investment income, partially offset by higher operating expenses as discussed above.
Net Increase in Net Assets Resulting from Operations
The net increase in net assets resulting from operations during the nine months ended September 30, 2015 was $96.9 million, or $1.99 per share, compared with $78.8 million, or $1.83 per share, during the nine months ended September 30, 2014. This increase from the prior year period was primarily the result of (i) a $9.4 million increase in net investment income as discussed above and (ii) a $13.2 million increase in net change in unrealized appreciation to net unrealized appreciation of $20.4 million for the nine months ended September 30, 2015 and (iii) a $15.4 million change in the income tax benefit/provision from the prior year period to an income tax benefit of $7.0 million for the
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nine months ended September 30, 2015, with these changes partially offset by a $19.8 million change in the net realized gain/loss from investments from a net realized gain of $10.8 million during the nine months ended September 30, 2014 to a net realized loss of $9.0 million for the nine months ended September 30, 2015. The net realized loss of $9.0 million for the nine months ended September 30, 2015 was primarily the result of the net realized losses on the restructure of two Middle Market investments of $9.1 million and of a Private Loan investment of $6.0 million, the exit of Private Loan investment of $4.7 million and exits of several Marketable securities and idle funds investments of $1.1 million, partially offset by the net realized gains on two exits of LMM investments totaling $9.3 million and from an Other Portfolio investment of $2.5 million.
The following table provides a summary of the total net change in unrealized appreciation of $20.4 million for the nine months ended September 30, 2015:
|
Nine Months Ended September 30, 2015 | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
LMM(a) | MM | PL | Other(b) | Total | |||||||||||
|
(dollars in millions) |
|||||||||||||||
Accounting reversals of net unrealized (appreciation) depreciation recognized in prior periods due to net realized (gains)/losses recognized during period |
$ | (8.6 | ) | $ | 7.3 | $ | 7.4 | $ | (2.6 | ) | $ | 3.5 | ||||
Net unrealized appreciation (depreciation) relating to portfolio investments |
37.5 | (13.9 | ) | (17.6 | ) | 12.2 | 18.2 | |||||||||
| | | | | | | | | | | | | | | | |
Total net unrealized appreciation (depreciation) relating to portfolio investments |
$ | 28.9 | $ | (6.6 | ) | $ | (10.2 | ) | $ | 9.6 | $ | 21.7 | ||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Net unrealized depreciation relating to marketable securities |
(0.5 | ) | ||||||||||||||
Unrealized depreciation relating to SBIC debentures(c) |
(0.8 | ) | ||||||||||||||
| | | | | | | | | | | | | | | | |
Total net unrealized appreciation |
$ | 20.4 | ||||||||||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
The income tax benefit for the nine months ended September 30, 2015 of $7.0 million principally consisted of a deferred tax benefit of $8.5 million, which is primarily the result of the net activity relating to our portfolio investments held in our Taxable Subsidiaries including changes in net operating loss carryforwards, changes in net unrealized appreciation/depreciation and temporary book tax differences, partially offset by other current taxes of $1.5 million, which includes $0.8 million related to accruals for U.S. federal income, state and other taxes and $0.7 million for excise taxes.
Liquidity and Capital Resources
Cash Flows
For the nine months ended September 30, 2015, we experienced a net decrease in cash and cash equivalents in the amount of $25.1 million, which is the net result of $203.5 million of cash used for our operating activities and $178.4 million of cash provided by financing activities.
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During the period, we used $203.5 million of cash for our operating activities, which resulted primarily from (i) cash flows we generated from the operating profits earned through our operating activities totaling $74.8 million, which is our $83.1 million of distributable net investment income, excluding the non-cash effects of the accretion of unearned income of $6.5 million, payment-in-kind interest income of $2.5 million, cumulative dividends of $1.2 million and the amortization expense for deferred financing costs of $1.9 million, (ii) cash uses totaling $736.6 million which primarily resulted from (a) the funding of new portfolio company investments and settlement of accruals for portfolio investments existing as of December 31, 2014, which together total $727.1 million, (b) the funding of new Marketable securities and idle funds investments and settlement of accruals for Marketable securities and idle funds investments existing as of December 31, 2014, which together total $4.5 million, (c) $2.9 million related to decreases in payables and accruals and (d) increases in other assets of $2.1 million, and (iii) cash proceeds totaling $458.3 million from (a) $451.2 million in cash proceeds from the repayments of debt investments and sales of equity investments and (b) $7.1 million of cash proceeds from the sale of Marketable securities and idle funds investments.
During the nine months ended September 30, 2015, $178.4 million in cash was provided by financing activities, which principally consisted of (i) $127.8 million in net cash proceeds from a public equity offering in March 2015 and (ii) $128.0 million in net cash proceeds from the Credit Facility, partially offset by (iii) $75.5 million in cash dividends paid to stockholders and (iv) $1.7 million for the purchase of vested restricted stock from employees to satisfy their tax withholding requirements and (v) $0.2 million for payment of deferred loan costs, SBIC debenture fees and other costs.
Capital Resources
As of September 30, 2015, we had $35.3 million in cash and cash equivalents, $4.6 million in Marketable securities and idle funds investments and $251.5 million of unused capacity under the Credit Facility, which we maintain to support our investment and operating activities. As of September 30, 2015, our net asset value totaled $1,091.0 million, or $21.79 per share.
The Credit Facility provides for commitments from a diversified group of fifteen lenders, matures in September 2019 and was amended during April 2015 to increase the total commitments from $572.5 million to $597.5 million and increase the accordion feature of the Credit Facility from $650.0 million to $750.0 million. The accordion feature allows us to increase the total commitments under the facility from new and existing lenders on the same terms and conditions as the existing commitments.
Borrowings under the Credit Facility bear interest, subject to our election, on a per annum basis equal to (i) the applicable LIBOR rate (0.20% as of September 30, 2015) plus 2.00%, as long as we maintain an investment grade rating (or 2.25% if we do not maintain an investment grade rating) or (ii) the applicable base rate (Prime Rate of 3.25% as of September 30, 2015) plus 1.00%, as long as we maintain an investment grade rating (or 1.25% if we do not maintain an investment grade rating). We pay unused commitment fees of 0.25% per annum on the unused lender commitments under the Credit Facility. The Credit Facility is secured by a first lien on the assets of MSCC and its subsidiaries, excluding the equity ownership or assets of the Funds and the External Investment Manager. The Credit Facility contains certain affirmative and negative covenants, including: (i) maintaining a minimum availability of at least 10% of the borrowing base, (ii) maintaining an interest coverage ratio of at least 2.0 to 1.0, (iii) maintaining an asset coverage ratio of at least 1.5 to 1.0, and (iv) maintaining a minimum tangible net worth. The Credit Facility is provided on a revolving basis through its final maturity date in September 2019, and contains two, one-year extension options which could extend the final maturity by up to two years, subject to certain conditions, including lender approval. As of September 30, 2015, we had $346.0 million in borrowings outstanding under the Credit Facility, the interest rate on the Credit Facility was 2.2% and we were in compliance with all financial covenants of
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the Credit Facility. During the three months ended September 30, 2015, the average interest rate on the Credit Facility was 2.2%.
Due to each of the Funds' status as a licensed SBIC, we have the ability to issue, through the Funds, debentures guaranteed by the SBA at favorable interest rates. Under the regulations applicable to SBIC funds, an SBIC can have outstanding debentures guaranteed by the SBA subject to a regulatory leverage limit, up to a regulatory maximum amount of debentures of $225.0 million. Debentures guaranteed by the SBA have fixed interest rates that equal prevailing 10-year Treasury Note rates plus a market spread and have a maturity of ten years with interest payable semi-annually. The principal amount of the debentures is not required to be paid before maturity, but may be pre-paid at any time with no prepayment penalty. On September 30, 2015, through our two wholly owned SBICs, we had $225.0 million of outstanding SBIC debentures guaranteed by the SBA, which bear a weighted average annual fixed interest rate of approximately 4.2%, paid semi-annually, and mature ten years from issuance. The first maturity related to our SBIC debentures does not occur until 2017, and the remaining weighted average duration is approximately 5.8 years as of September 30, 2015.
In April 2013, we issued $92.0 million, including the underwriters' full exercise of their over-allotment option, in aggregate principal amount of the 6.125% Notes. The 6.125% Notes are unsecured obligations and rank pari passu with our current and future senior unsecured indebtedness; senior to any of our future indebtedness that expressly provides it is subordinated to the 6.125% Notes; effectively subordinated to all of our existing and future secured indebtedness, to the extent of the value of the assets securing such indebtedness, including borrowings under our Credit Facility; and structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries, including without limitation, the indebtedness of the Funds. The 6.125% Notes mature on April 1, 2023, and may be redeemed in whole or in part at any time or from time to time at our option on or after April 1, 2018. We may from time to time repurchase 6.125% Notes in accordance with the 1940 Act and the rules promulgated thereunder. As of September 30, 2015, the outstanding balance of the 6.125% Notes was $90.7 million.
The indenture governing the 6.125% Notes (the "6.125% Notes Indenture") contains certain covenants, including covenants requiring our compliance with (regardless of whether we are subject to) the asset coverage requirements set forth in Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act, as well as covenants requiring us to provide financial information to the holders of the 6.125% Notes and the Trustee if we cease to be subject to the reporting requirements of the Securities Exchange Act of 1934. These covenants are subject to limitations and exceptions that are described in the 6.125% Notes Indenture.
In November 2014, we issued $175.0 million in aggregate principal amount of the 4.50% Notes at an issue price of 99.53%. The 4.50% Notes are unsecured obligations and rank pari passu with our current and future senior unsecured indebtedness; senior to any of our future indebtedness that expressly provides it is subordinated to the 4.50% Notes; effectively subordinated to all of our existing and future secured indebtedness, to the extent of the value of the assets securing such indebtedness, including borrowings under our Credit Facility; and structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries, including without limitation, the indebtedness of the Funds. The 4.50% Notes mature on December 1, 2019, and may be redeemed in whole or in part at any time at our option subject to certain make whole provisions. The 4.50% Notes bear interest at a rate of 4.50% per year payable semi-annually on June 1 and December 1 of each year, beginning June 1, 2015. We may from time to time repurchase 4.50% Notes in accordance with the 1940 Act and the rules promulgated thereunder. As of September 30, 2015, the outstanding balance of the 4.50% Notes was $175.0 million.
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The indenture governing the 4.50% Notes (the "4.50% Notes Indenture") contains certain covenants, including covenants requiring our compliance with (regardless of whether we are subject to) the asset coverage requirements set forth in Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act, as well as covenants requiring us to provide financial information to the holders of the 4.50% Notes and the Trustee if we cease to be subject to the reporting requirements of the Securities Exchange Act of 1934. These covenants are subject to limitations and exceptions that are described in the 4.50% Notes Indenture.
During April 2014, we completed a follow-on public equity offering of 4,600,000 shares of common stock, including the underwriters' full exercise of their option to purchase 600,000 additional shares, at a price to the public of $31.50 per share, resulting in total net proceeds, including exercise of the underwriters' option to purchase additional shares and after deducting underwriting discounts and estimated offering expenses payable by us, of approximately $139.7 million.
During March 2015, we completed a follow-on public equity offering of 4,370,000 shares of common stock, including the underwriters' full exercise of their option to purchase 570,000 additional shares, resulting in total net proceeds, including exercise of the underwriters' option to purchase additional shares and after deducting underwriting discounts and estimated offering expenses payable by us, of approximately $127.8 million.
We anticipate that we will continue to fund our investment activities through existing cash and cash equivalents, the liquidation of Marketable securities and idle funds investments, and a combination of future debt and equity capital. Our primary uses of funds will be investments in portfolio companies, operating expenses and cash distributions to holders of our common stock.
We periodically invest excess cash balances into Marketable securities and idle funds investments. The primary investment objective of Marketable securities and idle funds investments is to generate incremental cash returns on excess cash balances prior to utilizing those funds for investment in our LMM, Middle Market and Private Loan portfolio investments. Marketable securities and idle funds investments generally consist of debt investments, independently rated debt investments, certificates of deposit with financial institutions, diversified bond funds and publicly traded debt and equity investments. The composition of Marketable securities and idle funds investments will vary in a given period based upon, among other things, changes in market conditions, the underlying fundamentals in our Marketable securities and idle funds investments, our outlook regarding future LMM, Middle Market and Private Loan portfolio investment needs, and any regulatory requirements applicable to us.
If our common stock trades below our net asset value per share, we will generally not be able to issue additional common stock at the market price unless our stockholders approve such a sale and our Board of Directors makes certain determinations. We did not seek stockholder authorization to sell shares of our common stock below the then current net asset value per share of our common stock at our 2015 annual meetings of stockholders because our common stock price per share had been trading significantly above the current net asset value per share of our common stock. We would therefore need future approval from our stockholders to issue shares below the then current net asset value per share.
In order to satisfy the Code requirements applicable to a RIC, we intend to distribute to our stockholders, after consideration and application of our ability under the Code to spillover certain excess undistributed taxable income from one tax year into the next tax year, substantially all of our taxable income. In addition, as a BDC, we generally are required to meet a coverage ratio of total assets to total senior securities, which include borrowings and any preferred stock we may issue in the future, of at least 200%. This requirement limits the amount that we may borrow. In January 2008, we received an exemptive order from the SEC to exclude SBA guaranteed debt securities issued by MSMF and any other wholly owned subsidiaries of ours which operate as SBICs from the asset coverage
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requirements of the 1940 Act as applicable to us, which, in turn, enables us to fund more investments with debt capital.
Although we have been able to secure access to additional liquidity, including recent public equity and debt offerings, our $597.5 million Credit Facility, and the available leverage through the SBIC program, there is no assurance that debt or equity capital will be available to us in the future on favorable terms, or at all.
Recently Issued or Adopted Accounting Standards
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-9 supersedes the revenue recognition requirements under ASC Topic 605, Revenue Recognition, and most industry-specific guidance throughout the Industry Topics of the ASC. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. Under the new guidance, an entity is required to perform the following five steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The new guidance will significantly enhance comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets. Additionally, the guidance requires improved disclosures as to the nature, amount, timing and uncertainty of revenue that is recognized. The FASB tentatively decided to defer the effective date of the new revenue standard for public entities under U.S. GAAP for one year. If finalized, the new guidance will be effective for the annual reporting period beginning after December 15, 2017, including interim periods within that reporting period. Early adoption would be permitted for annual reporting periods beginning after December 15, 2016. We are currently evaluating the impact the adoption of this new accounting standard will have on our financial statements.
In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, which changes the presentation of debt issuance costs in financial statements. ASU 2015-03 requires an entity to present such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs will continue to be reported as interest expense. It is effective for annual reporting periods beginning after December 15, 2016. Early adoption is permitted. The new guidance will be applied retrospectively to each prior period presented. The impact of the adoption of this new accounting standard on our consolidated financial statements is currently being evaluated.
In May 2015, the FASB issued ASU 2015-07, Fair Value MeasurementsDisclosures for Certain Entities that Calculate Net Asset Value per Share. This amendment updates guidance intended to eliminate the diversity in practice surrounding how investments measured at net asset value under the practical expedient with future redemption dates have been categorized in the fair value hierarchy. Under the updated guidance, investments for which fair value is measured at net asset value per share using the practical expedient should no longer be categorized in the fair value hierarchy, while investments for which fair value is measured at net asset value per share but the practical expedient is not applied should continue to be categorized in the fair value hierarchy. The updated guidance requires retrospective adoption for all periods presented and is effective for interim and annual reporting periods beginning after December 15, 2015, with early adoption permitted. The impact of the adoption of this new accounting standard on our consolidated financial statements is currently being evaluated.
From time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies that are adopted by us as of the specified effective date. We believe that the impact of
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recently issued standards and any that are not yet effective will not have a material impact on our financial statements upon adoption.
Inflation
Inflation has not had a significant effect on our results of operations in any of the reporting periods presented herein. However, our portfolio companies have experienced, and may in the future experience, the impacts of inflation on their operating results, including periodic escalations in their costs for labor, raw materials and third party services and required energy consumption.
Off-Balance Sheet Arrangements
We may be a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of our portfolio companies. These instruments include commitments to extend credit and involve, to varying degrees, elements of liquidity and credit risk in excess of the amount recognized in the balance sheet. At September 30, 2015, we had a total of $140.8 million in outstanding commitments comprised of (i) 25 investments with commitments to fund revolving loans that had not been fully drawn or term loans with additional commitments not yet funded and (ii) eight investments with capital commitments that had not been fully called.
Contractual Obligations
As of September 30, 2015, the future fixed commitments for cash payments in connection with our SBIC debentures and the 4.50% Notes and the 6.125% Notes for each of the next five years and thereafter are as follows:
|
2015 | 2016 | 2017 | 2018 | 2019 | 2020 and thereafter |
Total | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
(dollars in thousands) |
|||||||||||||||||||||
SBIC debentures |
$ | | $ | | $ | 15,000 | $ | 10,200 | $ | 20,000 | $ | 179,800 | 225,000 | |||||||||
Interest due on SBIC debentures |
| 9,446 | 9,423 | 8,130 | 7,807 | 17,601 | 52,407 | |||||||||||||||
Notes 6.125% |
| | | | | 90,740 | 90,740 | |||||||||||||||
Interest due on 6.125% Notes |
1,388 | 5,558 | 5,558 | 5,558 | 5,558 | 19,453 | 43,073 | |||||||||||||||
4.50% Notes |
| | | | 175,000 | | 175,000 | |||||||||||||||
Interest due on 4.50% Notes |
3,938 | 7,875 | 7,875 | 7,875 | 7,875 | | 35,438 | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Total |
$ | 5,326 | $ | 22,879 | $ | 37,856 | $ | 31,763 | $ | 216,240 | $ | 307,594 | 621,658 | |||||||||
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
As of September 30, 2015, we had $346.0 million in borrowings outstanding under our Credit Facility, and the Credit Facility is currently scheduled to mature in September 2019. The Credit Facility contains two, one-year extension options which could extend the maturity to September 2021. See further discussion of the Credit Facility terms in "Liquidity and Capital ResourcesCapital Resources".
Related Party Transactions
As discussed further above, the External Investment Manager is treated as a wholly owned portfolio company of MSCC and is included as part of our Investment Portfolio. At September 30, 2015, we had a receivable of $2.3 million due from the External Investment Manager which included approximately $1.7 million primarily related to operating expenses incurred by us required to support the External Investment Manager's business, along with dividends declared but not paid by the External Investment Manager of approximately $0.6 million.
In June 2013, we adopted a deferred compensation plan for the non-employee members of our board of directors, which allows the directors at their option to defer all or a portion of the fees paid
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for their services as directors and have such deferred fees paid in shares of our common stock within 90 days after the participant's end of service as a director. As of September 30, 2015, $1.0 million of directors' fees had been deferred under this plan. These deferred fees represented 32,190 shares of our common shares. These shares will not be issued or included as outstanding on the consolidated statement of changes in net assets until each applicable participant's end of service as a director, but are included in operating expenses and weighted-average shares outstanding on our consolidated statement of operations as earned.
Recent Developments
During October 2015, we declared a semi-annual supplemental cash dividend of $0.275 per share payable in December 2015. This supplemental cash dividend is in addition to the previously announced regular monthly cash dividends that we declared for the fourth quarter of 2015 of $0.180 per share for each of October, November and December 2015.
In October 2015, we led a new portfolio investment totaling $15.5 million of invested capital in Apex Linen Service, Inc. ("Apex Linen") to fund Apex Linen's near-term growth opportunities, with us funding $12.4 million of the investment. Our investment in Apex Linen included a first-lien, senior secured term debt investment and a revolving line of credit. We and our co-investor also provided a commitment for $2.5 million of additional first-lien, senior secured term debt in the near-term future upon the completion of certain conditions. In addition, we and our co-investor are providing Apex Linen a conditional commitment beyond the $2.5 million of additional first-lien, senior secured term debt for additional capital to support its future growth opportunities. Headquartered in Las Vegas, Nevada, and founded in 2010 by long-established industry experts, Apex Linen provides commercial laundry and linen services to the hotel and gaming industry in the Las Vegas metropolitan area.
In November 2015, we declared regular monthly dividends of $0.180 per share for each month of January, February and March of 2016. These regular monthly dividends equal a total of $0.540 per share for the first quarter of 2016 and represent a 5.9% increase from the regular monthly dividends declared for the first quarter of 2015. Including the regular monthly dividends declared for the first quarter of 2016, we will have paid $16.420 per share in cumulative dividends since our October 2007 initial public offering.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are subject to financial market risks, including changes in interest rates. Changes in interest rates may affect both our cost of funding and our interest income from portfolio investments and Marketable securities and idle funds investments. Our risk management systems and procedures are designed to identify and analyze our risk, to set appropriate policies and limits and to continually monitor these risks. Our investment income will be affected by changes in various interest rates, including LIBOR and prime rates, to the extent of any debt investments that include floating interest rates. The majority of our debt investments are made with either fixed interest rates or floating rates that are subject to contractual minimum interest rates for the term of the investment. As of September 30, 2015, approximately 60% of our debt investment portfolio (at cost) bore interest at floating rates, 99% of which were subject to contractual minimum interest rates. As of September 30, 2015, none of our Marketable securities and idle funds investments (at cost) bore interest at floating rates. Our interest expense will be affected by changes in the published LIBOR rate in connection with our Credit Facility; however, the interest rates on our outstanding SBIC debentures and our 4.50% Notes and 6.125% Notes, which comprise the majority of our outstanding debt, are fixed for the life of such debt. As of September 30, 2015, we had not entered into any interest rate hedging arrangements. The following table shows the approximate annualized increase (decrease) in the components of net
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investment income due to hypothetical base rate changes in interest rates, assuming no changes in our investments and borrowings as of September 30, 2015.
Basis Point Change
|
Increase in Interest Income |
Increase in Interest Expense |
Increase (Decrease) in Net Investment Income |
Increase (Decrease) in Net Investment Income per Share |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
(dollars in thousands) |
|
|
|||||||||
50 |
$ | 129 | $ | (1,730 | ) | $ | (1,601 | ) | $ | (0.03 | ) | ||
100 |
2,430 | (3,460 | ) | (1,030 | ) | (0.02 | ) | ||||||
150 |
6,619 | (5,190 | ) | 1,429 | 0.03 | ||||||||
200 |
10,949 | (6,920 | ) | 4,029 | 0.08 | ||||||||
300 |
19,613 | (10,380 | ) | 9,233 | 0.18 | ||||||||
400 |
28,287 | (13,840 | ) | 14,447 | 0.29 | ||||||||
500 |
36,987 | (17,300 | ) | 19,687 | 0.39 |
The hypothetical results would also be impacted by the changes in the amount of debt outstanding under our Credit Facility (with an increase (decrease) in the debt outstanding under the Credit Facility resulting in an (increase) decrease in the hypothetical interest expense).
Item 4. Controls and Procedures
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chairman, Chief Executive Officer and President, our Chief Financial Officer, our Chief Compliance Officer and our Chief Accounting Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15 of the Securities Exchange Act of 1934). Based on that evaluation, our Chairman, Chief Executive Officer and President, our Chief Financial Officer, our Chief Compliance Officer and our Chief Accounting Officer, have concluded that our current disclosure controls and procedures are effective in timely alerting them of material information relating to us that is required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934. There have been no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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We may, from time to time, be involved in litigation arising out of our operations in the normal course of business or otherwise. Furthermore, third parties may try to seek to impose liability on us in connection with the activities of our portfolio companies. While the outcome of any current legal proceedings cannot at this time be predicted with certainty, we do not expect any current matters will materially affect our financial condition or results of operations; however, there can be no assurance whether any pending legal proceedings will have a material adverse effect on our financial condition or results of operations in any future reporting period.
There have been no material changes to the risk factors as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2014 that we filed with the SEC on February 27, 2015 and in our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015, filed with the SEC on August 7, 2015.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the three months ended September 30, 2015, we issued 140,857 shares of our common stock under our dividend reinvestment plan. These issuances were not subject to the registration requirements of the Securities Act of 1933, as amended. The aggregate value of the shares of common stock issued during the three months ended September 30, 2015 under the dividend reinvestment plan was approximately $4.3 million.
Expansion of Board of Directors and Appointment of Directors
On November 3, 2015, our Board of Directors increased the size of the Board from six to eight directors and appointed Brian E. Lane and Stephen B. Solcher as directors to fill the vacancies created by the increase to serve until our 2016 Annual Meeting of Stockholders. Mr. Lane was also appointed to serve on the Nominating and Corporate Governance Committee of the Board, and Mr. Solcher was also appointed to serve on the Audit Committee of the Board.
Mr. Lane, age 58, has served as Chief Executive Officer and President of Comfort Systems USA, Inc. (NYSE: FIX) since December 2011 and as a director of Comfort Systems since November 2010. Mr. Lane served as Comfort Systems' President and Chief Operating Officer from March 2010 until December 2011. Mr. Lane joined Comfort Systems in October 2003 and served as Vice President and then Senior Vice President for Region One until he was named Executive Vice President and Chief Operating Officer in January 2009. Prior to joining Comfort Systems, Mr. Lane spent fifteen years at Halliburton Company (NYSE: HAL), a global service and equipment company devoted to energy, industrial, and government customers. During his tenure at Halliburton, he held various positions in business development, strategy and project initiatives, and he departed as the Regional Director of Europe and Africa. Mr. Lane's additional experience included serving as a Regional Director of Capstone Turbine Corporation (NASDAQ: CPST), a distributed power manufacturer. He also was a Vice President of Kvaerner, an international engineering and construction company, where he focused on the chemical industry. Mr. Lane is also a member of the Board of Directors of Griffen Dewatering Corporation, a privately held company. Mr. Lane earned a Bachelor of Science in Chemistry from the University of Notre Dame and his MBA from Boston College.
Mr. Solcher, age 55, has served as the Senior Vice President of Finance and Business Operations and Chief Financial Officer of BMC Software, Inc., a privately held company, since 2005. Previously,
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Mr. Solcher served as BMC's Treasurer and Vice President of Finance. He joined BMC in 1991 as Assistant Treasurer and became Treasurer the following year. During Mr. Solcher's tenure, BMC grew from nearly $130 million in annual revenue to $2.2 billion in annual revenue in 2013, its last year operating as a public company. In addition to leading many M&A transactions as Chief Financial Officer, Mr. Solcher was instrumental in BMC's transition from being a publicly traded company to becoming a private held company in 2013. Prior to joining BMC, he was employed by Arthur Andersen as a certified public accountant. Mr. Solcher also serves on the development board of the Mays Business School at Texas A&M University and has served on the board of numerous nonprofit organizations. He was recognized by Institutional Investor magazine as part of the "All American Executive Team" in 2010 and 2012 and by Houston Business Journal as 2012 Best CFOLarge Public Company.
Messrs. Lane and Solcher will be entitled to receive compensation for their service on the Board consistent with our director compensation program for non-employee directors. In connection with their appointment to the Board, we entered into our standard form of indemnification agreement with Messrs. Lane and Solcher, the form of which was previously filed as Exhibit (k)(13) to our Pre-Effective Amendment No. 3 to Registration Statement on Form N-2 (Reg. No. 333-142879) filed on September 21, 2007.
The Board has determined that each of Messrs. Lane and Solcher qualifies as an independent director under the 1940 Act and the listing standards of the New York Stock Exchange, and Mr. Solcher also qualifies as an "audit committee financial expert" under the SEC's rules. There are no arrangements or understandings between Mr. Lane or Mr. Solcher and any other persons pursuant to which they were selected as directors. There are no current or proposed transactions between us and either of Mr. Lane or Mr. Solcher or their immediate family members that would require disclosure under Item 404(a) of Regulation S-K promulgated by the SEC.
Executive Management Changes
On November 3, 2015, the Board of Directors promoted certain senior executive officers to the following additional roles at Main Street: Dwayne L. Hyzak as President, Curtis L. Hartman as Vice Chairman, and David L. Magdol as Vice Chairman, effective immediately. Mr. Hyzak has served as Main Street's Chief Operating Officer and Senior Managing Director since November 2014; Mr. Hartman has served as Main Street's Chief Credit Officer and Senior Managing Director since 2011; and Mr. Magdol has served as Main Street's Chief Investment Officer and Senior Managing Director since 2011. In addition, Messrs. Hyzak, Hartman and Magdol also serve as members of Main Street's investment committee and have served in various executive roles at Main Street and its predecessor funds since the early 2000's.
Messrs. Hyzak, Hartman and Magdol will retain their former titles in addition to the new roles and will also continue to serve as members of Main Street's investment committee. Mr. Foster, who was previously Main Street's President, will retain the title of Chief Executive Officer and the ongoing responsibilities as the principal executive officer at Main Street along with remaining Chairman of the Board. Reference is made to the biographical information with respect to Messrs. Foster, Hyzak, Hartman and Magdol set forth under the headings "Election of Directors" and "Executive Officers" in our 2015 Proxy Statement, which description is incorporated herein by reference.
Deferred Compensation Plan
On November 3, 2015, the Board of Directors approved and adopted the Main Street Capital Corporation Deferred Compensation Plan (the "Plan"). The Plan will be effective on January 1, 2016 and at such time will replace the existing Main Street Capital Corporation Deferred Compensation Plan for Non-Employee Directors. Under the Plan, non-employee directors and certain key employees
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may defer receipt of some or all of their cash compensation, subject to certain limitations. Main Street may also make discretionary employer contributions to the Plan. Individuals participating in the Plan receive distributions of their respective balances based on predetermined payout schedules or other events, as defined by the Plan and are also able to direct investments made on their behalf among investment alternatives permitted from time to time under the Plan, including phantom Main Street stock units. The above summary is not complete and is qualified in its entirety to the full text of the Plan attached as Exhibit 10.1 hereto and are incorporated herein by reference.
Listed below are the exhibits which are filed as part of this report (according to the number assigned to them in Item 601 of Regulation S-K):
Exhibit Number |
Description of Exhibit | ||
---|---|---|---|
10.1 | | Form of Main Street Capital Corporation Deferred Compensation Plan Adoption Agreement and Plan Document. | |
31.1 |
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. |
||
31.2 |
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. |
||
32.1 |
Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350). |
||
32.2 |
Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350). |
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Main Street Capital Corporation | ||
Date: November 6, 2015 |
/s/ VINCENT D. FOSTER Vincent D. Foster Chairman and Chief Executive Officer (principal executive officer) |
|
Date: November 6, 2015 |
/s/ BRENT D. SMITH Brent D. Smith Chief Financial Officer and Treasurer (principal financial officer) |
|
Date: November 6, 2015 |
/s/ SHANNON D. MARTIN Shannon D. Martin Vice President and Chief Accounting Officer (principal accounting officer) |
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Exhibit Number |
Description of Exhibit | ||
---|---|---|---|
10.1 | | Form of Main Street Capital Corporation Deferred Compensation Plan Adoption Agreement and Plan Document. | |
31.1 |
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. |
||
31.2 |
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. |
||
32.1 |
Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350). |
||
32.2 |
Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350). |
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Exhibit 10.1
NONQUALIFIED SUPPLEMENTAL
DEFERRED COMPENSATION PLAN
ADOPTION AGREEMENT
This adoption agreement and the accompanying plan document have not been approved by the Department of Labor, Internal Revenue Service, Securities Exchange Commission, or any other governmental entity. Employers may not rely on this document or the accompanying plan document to ensure any particular tax consequences with respect to the Employers particular situation, nor do these documents constitute legal or tax advice. Pen-Cal and its employees cannot provide legal or tax advice in connection with these documents. Employers must determine the extent to which the Plan is subject to Federal or state securities laws. You should have your attorney review this document and the accompanying plan document before adopting the documents. This adoption agreement and accompanying plan document cannot be used in order to avoid penalties that may be imposed on the taxpayer.
NONQUALIFIED SUPPLEMENTAL
DEFERRED COMPENSATION PLAN
ADOPTION AGREEMENT
ADOPTION OF PLAN [Select one]
x Adoption - The undersigned Main Street Capital Corporation (the Employer) hereby adopts as a Nonqualified Deferred Compensation Plan for the individuals identified in Item 5 herein the form of Plan known as the Nonqualified Supplemental Deferred Compensation Plan.
o Amendment of Previous Nonqualified Deferred Compensation Plan With Grandfathered Amounts (the Employer) previously has adopted a Nonqualified Deferred Compensation Plan, known as the [enter name of previous plan], and the execution of this Adoption Agreement constitutes an amendment to that Plan, effective only for Deferrals, Contributions, earnings, gains, losses, depreciation and appreciation vested and credited thereto or debited therefrom on and after the Effective Date listed in Section 2 below, or, if otherwise determined by the Employer, on and after January 1, 2005 with respect to Plan provisions required under Section 409A of the Internal Revenue Code and the regulations thereunder. All other amounts in the plan shall be subject to the provisions of the previous plan document. This option is appropriate if the previous plan contains grandfathered amounts not subject to Section 409A of the Internal Revenue Code. Grandfathered amounts were contributed to the plan prior to January 1, 2005 under the terms of the plan in effect prior to October 4, 2004, and those plan terms have not since been materially modified. Grandfathered amounts and earnings will be administered under the terms of the prior plan document.
x Restatement of Previous Nonqualified Deferred Compensation Plan Main Street Capital Corporation (the Employer) previously has adopted a Nonqualified Deferred Compensation Plan, known as the Main Street Capital Corporation Deferred Compensation Plan for Non-Employee Directors [enter name of previous plan], and the execution of this Adoption Agreement constitutes a restatement of that Plan, effective as of the Effective Date listed in Section 2 below for all funds under the Plan. This option is appropriate if the previous plan does not contain grandfathered amounts (see description above), or if Employer wishes to apply Section 409A rules to all amounts in the plan (even pre-2005 amounts), or if previous plan has been materially modified and thus become subject to Section 409A. Notwithstanding anything in this Adoption Agreement or in the Plan to the contrary, with respect to account balances as of December 31, 2015 and any future earnings thereon, the distribution provisions of the Main Street Capital Corporation Deferred Compensation Plan for Non-Employee Directors as in effect on December 31, 2015 shall continue to apply to such amounts.
NAME OF PLAN
The name of this Plan as adopted by the Employer is the Main Street Capital Corporation Deferred Compensation Plan (the Plan).
INDIVIDUALIZED PLAN INFORMATION
With respect to the variable features contained in the Plan, the Employer hereby makes the following selections granted under the provisions of the Plan:
1. Adopting Entity. The Employer adopts the Plan as:
List type of business entity (corporation, partnership, controlled group of corporations, etc.) Corporation
List each Employer adopting the Plan and Employer Identification Number (EIN):
Name of Employer: |
Main Street Capital Corporation |
EIN: 41-2230745 |
Name of Employer: |
|
EIN: |
Name of Employer: |
|
EIN: |
Name of Employer: |
|
EIN: |
Name of Employer: |
|
EIN: |
(attach additional lists as necessary)
The adopting Employers and the Employer are referred to herein collectively as the Employer.
Select state of controlling law (see Section 10.7 of Plan Document):
o State of incorporation;
x State of domicile Texas
2. Effective Date. The Effective Date of the adoption of this Plan, this Plan amendment or this Plan restatement is January 1, 2016.
3. Plan Year. The Plan year of the Plan shall be [select one]:
x (a) the calendar year.
o (b) the fiscal year or other 12-month period ending on the last day of [specify month].
o a short Plan year beginning on , and ending on , ; and thereafter the Plan year shall be as indicated in (a) or (b) above.
4. Plan Administrator. The Administrator of the Plan is the Company
[fill in the name(s) of the individual(s) or job title(s) or entity (such as a committee) that is (are) responsible for administration of the Plan], and such other person(s) or entity as the Employer shall appoint from time to time.
5. Eligible Individuals. The following shall be eligible to participate in the Plan: [select all that apply do not list individual names]:
x A select group of management or highly-compensated Employees as designated by the Employer in separate resolutions or agreements;
o Employee Board Members;
x Non-Employee Board Members;
o Other Service Providers (i.e., independent contractors, consultants, etc.)
o Employees or other Service Providers above the following Compensation threshold: [enter dollar amount] $ ;
o Employees with the following job titles: [enter job title(s); for example, Vice President and above]
o Other: [enter description]
6. Eligibility Timing. Eligibility timing selected below shall apply uniformly to all Participant Deferrals (including Performance-Based Bonus Deferrals), as well as Employer Matching Contributions and Other Employer Contributions, unless otherwise indicated. If the Employer wishes to provide for separate eligibility rules for different types of Compensation (for example, Salary vs. Bonus), or for types of Contributions (for example, Employer Matching Contributions vs. Participant Deferrals), mark Other below and attach exhibits as necessary [select one]:
x Eligible immediately upon properly completed designation by the Plan administrator or Employer;
o Eligible after the following period of employment, Board service, etc. [enter number of days, months or years, for example, 90 days] ;
o Other [enter description]:
7. Types and Amounts of Participant Deferrals [select all that apply and enter minimum and maximum percentages in increments of one percent (for example, Salary minimum 0% maximum 100%). Note that no Deferral election can reduce a Participants Compensation below the amount necessary to satisfy required withholding for FICA/Medicare/income taxes, required Participant Contributions into another Employer-sponsored benefit plan such as medical insurance, 401(k) loan repayments, etc.]:
x Salary [select one]:
x percentage [enter minimum 0% and maximum 100%]
or
o fixed dollar amount [enter minimum $ ].
x Non-Performance-Based Bonus [select one]:
x percentage [enter minimum 0% and maximum 100%]
or
o fixed dollar amount [enter minimum $ ].
x Performance-Based Bonus [select one and enter performance period (for example, 12-month period ending each March 31 ]: performance period from January 1 to December 31.
x percentage [enter minimum 0% and maximum 100%]
or
o fixed dollar amount [enter minimum $ ].
o Commissions [select one]:
o percentage [enter minimum % and, maximum %]
or
o fixed dollar amount [enter minimum $ ].
x Board of Directors Fees/Retainer (note should not include expense reimbursements):
x percentage [enter minimum 0% and, maximum 100%]
or
o fixed dollar amount [enter minimum $ ].
o Other Service Provider Fees or other earned income from the Employer:
o percentage [enter minimum % and, maximum %]
or
o fixed dollar amount [enter minimum $ ].
o 401(k) Refund (amount deferred from Participants regular Compensation equal in value to any refund paid to Participant in that year resulting from excess deferrals in Employers 401(k) plan see Subsection 2.9 of Plan document for definition.)
x Social Security Trigger (amount deferred pursuant to an election by the Participant to defer a separate percentage of Compensation only from that portion of Compensation that exceeds the Social Security Taxable Wage Base for the upcoming year).
x Other [enter description]: Dividends paid on shares of unvested Company stock. Any such deferral election must be made in the year before the year in which the unvested Company stock is granted.
x Deferral of restricted stock units.
NOTE: Special Rules for Multi-Year RSU Grants Structured To Provide For Annual Vesting of a Specified Portion of the Total Grant:
x Check this box if the Employer wishes to allow for deferral of restricted stock units that are structured so that a specified portion of the RSU grant vests annually (for example, an RSU grant over a four-year period vesting 25% annually). Under this type of grant, the election to defer may be made separately with respect to each portion of the grant that vests in a given year. However, each election for each portion of the grant must be made either: (i) within 30 days of the date of grant, and only if the RSU is structured so that vesting is contingent on the employee performing services for at least an additional 12 months subsequent to the election; or (ii) 12 months before the payment date of the RSU (vesting date is treated as the payment date for these purposes), but the election will not take effect for 12 months, and the subsequent payout date must be at least five years later than the previous payment date).
8. Definition of Compensation for Purposes of Making Plan Contributions [select one]:
o Same definition of Compensation as in Employers 401(k) or other applicable qualified retirement plan.
x Participants total wages, salary, commissions, overtime, bonus, etc. for a given year which the Employer is required to report on Form W-2 or other appropriate form, (or, in the case of Board members, Board fees and retainer only, but not including expense reimbursements)(or, in the case of Other Service Providers, the Participants total remuneration from the Employer for a given year pursuant to the agreement to provide services to the Employer), earned while the Participant is an Eligible Individual as determined by the Employer.
o Other [enter description]:
9. Expiration of Participants Deferral Elections [select all that apply]:
x Renewed Each Year: Participants Deferral Elections must be renewed each year during the open enrollment period ending no later than December 31 prior to the effective Plan year (or, in the case of Performance-Based Bonuses, no less than 6 months prior to the end of the applicable performance period).
x For all types of Compensation Deferrals.
o For Salary Deferrals only other types of Deferrals are evergreen.
o For Performance-Based Bonus only other types of Deferrals are ever-green.
o Other: [specify]
o Evergreen: Participants Deferral Elections will be evergreen (i.e., will continue indefinitely until the Participants Termination Date unless changed by the
Participant so each year the Participant will be deemed to have the same election in place as the prior year unless actively changed by the Participant during the open enrollment period ending no later than December 31 prior to the effective Plan year or, in the case of Performance-Based Bonuses, no less than 6 months prior to the end of the applicable performance period).
o For all types of Compensation Deferrals.
o For Salary Deferrals only other types of Deferrals are renewed each year.
o For Performance-Based Bonus only other types of Deferrals are renewed each year.
o Other: [specify]
10. Employer Contributions [select all that apply]:.
o (a) No Employer Contributions.
o (b) Matching Contributions [enter description of matching formula below and also complete Items 11 and 12]
x (c) Employer Contributions other than Matching Contributions [enter description of Employer Contribution formula below and complete Item 13 ]
For any Plan Year, the Employer may elect to make a Discretionary Employer Contribution for any Participant
11. Employees Eligible to Receive Employer Matching Contributions. Matching Contributions made for each Plan Year (if applicable) shall be allocated and credited to the Accounts of the following Participants: [Select one if applicable]
o Participants who were employed by the Employer (or, in the case of non-Employee Board Members, served on the Board) during that Plan Year, or, in the case of Other Service Providers, who provided services to the Employer during that Plan Year.
o Participants who were employed by the Employer (or, in the case of non-Employee Board Members, served on the Board) on the last day of the Plan Year, or, in the case of Other Service Providers, who provided services to the Employer on the last day of the Plan Year.
o Participants who were employed by the Employer (or, in the case of non-Employee Board Members, served on the Board) on the last day of the Plan Year or who retired, died or were Disabled during the Plan Year, or, in the case of Other Service Providers, who provided services to the Employer on the last day
of the Plan Year or who died or were Disabled during the Plan Year. [If this option is selected, complete Item 29 definition of Disability.]
12. Vesting Schedule of Employer Matching Contributions. If Matching Contributions are made to the Plan, select the rate at which such Contributions will vest [select one]:
o Immediate 100% vesting for all Participants.
o Cliff vesting (0% up to cliff; 100% after cliff) [select one]:
o 1 year cliff (less than 1 year 0%; 1 or more years 100%)
o 2 year cliff (less than 2 years 0%; 2 or more years 100%)
o Other cliff (enter number of years: less than years 0%; or more years 100%)
o Graded vesting [enter vesting percentages]:
1 year % |
6 years % |
11 years % |
2 years % |
7 years % |
12 years % |
3 years % |
8 years % |
13 years % |
4 years % |
9 years % |
14 years % |
5 years % |
10 years % |
15 years % |
o Other vesting schedule: [describe schedule subject to approval]
13. Vesting Schedule of Employer Contributions (Other Than Matching Contributions). If Employer Contributions (other than Matching Contributions) are made to the Plan, select the rate at which such Contributions will vest [select one]:
o Immediate 100% vesting for all Participants.
o Cliff vesting (0% up to cliff; 100% after cliff) [select one]:
o 1 year cliff (less than 1 year 0%; 1 or more years 100%)
o 2 year cliff (less than 2 years 0%; 2 or more years 100%)
o Other cliff (enter number of years: less than years 0%; or more years 100%)
o Graded vesting [enter vesting percentages]:
1 year % |
6 years % |
11 years % |
2 years % |
7 years % |
12 years % |
3 years % |
8 years % |
13 years % |
4 years % |
9 years % |
14 years % |
5 years % |
10 years % |
15 years % |
x Other vesting schedule: [describe schedule subject to approval] To be determined at the time of the contribution
14. Vesting Years. A Vesting Year described above for purposes of determining vesting under the Plan shall be computed in accordance with: [select one if this is an amendment or restatement of a prior plan, definition from prior plan will override this definition.]
o Years of service (12-consecutive-month periods) with the Employer since date of hire (or date of commencement of Board service).
o Years of participation in the Plan (12-consecutive-month period between date Participant enters Plan and anniversary of such date) (if this is an amendment or restatement of a prior Plan, years of participation in prior plan will be included) (additional fees will apply if this item is selected).
o Plan Years since each Plan Years total Contributions were made (rolling vesting) (additional fees will apply if this item is selected). [If this option is selected, select either (a) or (b) below:]
o (a) Vesting will be credited/updated on the last day of the Plan year.
o (b) Vesting will be credited/updated on the anniversary of the date the Contribution is credited.
15. Full Vesting Upon Occurrence of Specific Event. [select all that apply]
x 100% vesting upon Normal Retirement [describe criteria such as age (can be partial year), years of service with the Employer (must be whole years of service), or years of participation in the Plan (must be whole years of participation)]
Retirement when Age plus Years of Service is equal to or greater than 70
o 100% vesting upon Early Retirement [describe criteria such as age (must be whole years), years of service with the Employer (must be whole years of service), or years of participation in the Plan (must be whole years of participation)]
x 100% vesting upon Death.
x 100% vesting upon Disability [complete Item 29 definition of Disability].
x 100% vesting upon Change in Control of the Employer [complete Items 27 and 28 definition of Change in Control]
o 100% vesting upon occurrence of other event: [describe event]
16. Service Before Plans Establishment Excluded. Years of service earned prior to establishment of the Plan shall be disregarded for purposes of determining vesting under the Plan:
o Yes (this may be elected only if this is the establishment of a new Plan).
x No.
17. Forfeitures for Misconduct or Violation of Non-Compete. Participants terminating employment prior to becoming 100% vested will forfeit the forfeitable percentage of their Accounts as indicated in accordance with the vesting schedule selected in Items 12 and/or 13. Participants may also forfeit 100% of their Matching and Employer Contribution Accounts (if applicable) under the following circumstances: [select any that apply]:
x Misconduct (termination for Cause). [enter definition of Misconduct or Cause below]
Termination for Cause means termination by the Company of the Participants employment with the Company or one of its subsidiaries for the Participants (as determined by the Board in its sole discretion):
(i) willful failure to substantially perform the Participants duties to the Company or any of its subsidiaries;
(ii) breach of the Participants duty of loyalty to the Company or any of its subsidiaries;
(iii) commission of an act of dishonesty toward the Company or any of its subsidiaries, theft of corporate property of the Company or any of its subsidiaries, or usurpation of the corporate opportunities of the Company or any of its subsidiaries;
(iv) unethical business conduct including any violation of law connected with the Participants employment at the Company or any of its subsidiaries; or
(v) conviction of any felony involving dishonest or immoral conduct.
For purposes of this definition of Cause, an act or failure to act by the Participant shall be considered willful only if the Participants conduct was not in good faith and the Participant lacked a reasonable belief that the Participants act or omission was in the best interests of the Company.
x Engaging in competition with the Employer. [enter definition of engaging in competition below]
Engaging in competition means an employee-Participant, during his or her employment with the Company or any of its subsidiaries, directly or indirectly, per- sonally, or as an employee, officer, director, principal of or investor in, or consultant
or independent contractor with, another entity, engaging in business with, being employed by, or rendering any consultation or business advice or other services with respect to, any business in the United States which competes with the Company Business, as determined by the Board in its sole discretion; provided, however, that Participant may invest in (i) up to (but not more than) one percent (1%) of any class of securities of any enterprise (but without otherwise participating in the management or activities of such enterprise) if such securities are listed on any national or regional securities exchange or have been registered under Section 12(g) of the Securities Exchange Act of 1934 or (ii) up to (but not more than) ten percent (10%) of any class of securities of any private fund (but without otherwise participating in the management or activities of such enterprise). For purposes of this provision, the term Company Business means investing through equity capital or long-term debt in lower middle-market businesses, or investing through long-term debt in middle-market businesses.
18. Employer Stock as Deemed Investment Option. If Employer stock will be a deemed investment option, indicate below how shares are to be tracked: [select one]
x Partial and whole shares.
o Unitized fund.
NOTE: Distributions of Employer Stock investments under the Plan shall be made in whole shares of Employers common stock for each whole share of Employer Stock under the Plan, and in cash for any fractional share of Employer Stock under the Plan.
19. In-Service Distributions. If the Employer elects below, the Plan will allow distributions of Participant Deferral Contributions to be made to Participants while they are still employed (In-Service Distributions), if they elect a fixed distribution date during the regular election period. [Select one]
o No, In-Service Distributions will not be permitted.
x Yes, In-Service Distributions will be permitted. [select one].
x For All Participant Deferral Contributions
o For Participant Compensation Deferral Contributions (other than Performance-Based Bonus) only.
o For Participant Performance-Based Bonus Deferral Contributions.
o For Employer Contributions. [if selected, employer contributions must be 100% vested, and additional fees may apply]. If Employer wishes to limit in-service withdrawals to specific types of Employer Contributions, enter details below:
[Note if Yes is elected above and the Plan will allow In-Service Distributions, please indicate if Participant will be permitted to make a pushback subsequent election to defer the original distribution date at least five years in accordance with Plan provisions (see subsection 9.1 of Plan document note that election must be made 12 months prior to original distribution date and election will not take effect for 12 months) x Yes o No]
Please indicate the number of years a Participant must defer payment(s) until In-Service Distribution(s) may begin:
x 2 Years after the Calendar Year for which the deferral is effective
o Years after the Calendar Year for which the deferral is effective
Please indicate if separate In-Service Distribution Dates are allowed for each Type of Participant Deferral selected in Item 7:
o No (single distribution date allowed per Plan Year)
x Yes (requires additional tracked sources per Plan Year)
20. In-Service Distributions Form and Timing of Payment. In-Service Distributions shall be made to Participants in the following form: [Select one]
o Lump Sums Only (allows a percentage up to 100% to be elected for distribution)
x Either 100% in Lump Sums or 100% in Installments.
[Note if Installments are elected above, please indicate if Participant will be permitted to make a subsequent election to change the installments in accordance with Plan provisions (see subsection 9.2 of Plan document) x Yes o No]
21. Unforeseeable Emergency Distributions Dates. If the Employer elects below, the Plan will allow distributions to be made to Participants while they are still employed if they meet the criteria for an unforeseeable emergency financial hardship (Unforeseeable Emergency Distributions). Both Participant Deferral Contributions and Vested Employer Contributions can be distributed in the event of an eligible Unforeseeable Emergency Distribution event. [Select one]
o No, Unforeseeable Emergency Distributions will not be permitted.
x Yes, Unforeseeable Emergency Distributions will be permitted. [select one below].
o For active Participants only.
x For active Participants, terminated Participants and Beneficiaries.
22. Form of Distributions (at Termination of Employment or Death). Distributions will be made to Participants upon Termination of Employment with the Employer or Death of the Participant as follows [select one]
o Lump sum only.
o Lump sum unless installments elected, but can only receive installments if Participant meets the following criteria [select all that apply if item not selected below, then Participants in that category will receive lump sum only]:
o Retirement [describe criteria such as age (can be partial year), years of service with the Employer (must be whole years of service), or years of participation in the Plan (must be whole years of participation)]
o Early Retirement [describe criteria such as age (must be whole years), years of service with the Employer (must be whole years of service), or years of participation in the Plan (must be whole years of participation)]
o Termination (other than for Misconduct, Cause or Violation of Non-Compete)
x Lump sum unless installments elected, and Participant may receive installments regardless of reason for Termination of Employment.
[Note if Installments are elected above, please complete Item 26 and indicate if Participant will be permitted to make a subsequent election to change the number of installments in accordance with Plan provisions (see subsection 9.2 of Plan document) x Yes o No]
23. Distribution Upon Disability. If the Employer selects below, the Plan will allow distributions to be made to Participants upon Disability but while they are still employed if they meet the criteria for Disability in Item 29 below. The form of distribution will be the same as for Termination of Employment, or as elected by the Participant.
o No, distribution upon Disability will not be permitted.
x Yes, distributions upon Disability will be permitted. [complete Item 29 definition of Disability].
24. Expiration of Participants Distribution Elections [select one]:
x Renewed Each Year: Participants Distribution Election must be selected each year during the open enrollment period for the following years contributions if no new election is made, that years contributions default to payment in the form of a lump sum. In-Service Distribution Elections must be made by participants each year.
o Evergreen: Participants Distribution Election will be evergreen (i.e., will continue indefinitely for each years contributions until the Participants Termination Date unless changed by the Participant so each year the Participant will be deemed to have the same distribution election in place as the prior year unless actively changed by the Participant at open enrollment, and the change will only be applicable to future contributions). In-Service Distribution Elections may not be treated as evergreen.
25. Distributions Upon Change in Control: If Employer elects below, distributions will be made to Participants upon Change in Control of the Employer (without a termination of employment of the Participant), as follows [select one, and complete Items 27 and 28 below (definition of Change in Control)]
x No, Distributions upon Change in Control will not be permitted.
o Yes, Distributions upon Change in Control will be permitted, in a lump sum only.
o Yes, Distributions upon Change in Control will be permitted, in a lump sum or in installments as elected by the Participant.
26. Length of Installments (if Installment Distributions permitted in Item 20, 22 and/or Item 25 above) [indicate length below]:
Annual installments over no fewer than 2 [enter minimum number of years must be at least 2] and no more than 20 years at Participants election [enter maximum number of years].
27. Change in Control Dates of Distribution. Distributions upon a Change in Control shall occur upon the date that [select all that apply see Subsection 9.9 of the Plan document for more details]:
x A person or group acquires more than 50% of the total fair market value or voting power of the stock of the corporation (select definition of corporation in Item 28 below).
x A person or group acquires ownership of stock of the corporation with at least 30% of the total voting power of the corporation (select definition of corporation in Item 28 below).
x A person or group acquires assets from the corporation having a total fair market value of at least 40% of the value of all assets of the corporation immediately prior to such acquisition. (select definition of corporation in Item 28 below).
x A majority of the corporations board of directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the board as constituted prior to the appointment or election (select definition of corporation in Item 28 below).
28. Change in Control Which Corporation the Change Relates. Distributions upon a Change in Control shall be made only if the Change in Control relates to the corporation selected below: [select all that apply]:
o (a) The corporation for whom the Participant is performing services at the time of the Change In Control event.
x (b) The corporation liable for payments from the Plan to the Participant.
o (c) A corporation that is a majority shareholder of a corporation described in (a) or (b) above.
o (d) Any corporation in the chain of corporations in which each corporation is a majority shareholder of another corporation in the chain, ending in a corporation described in (a) or (b) above.
29. Definition of Disability. A Participant shall be considered Disabled if [select one]:
x by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of at least 12 months;
o the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months;
o the Participant is deemed to be totally disabled by the Social Security Administration;
o the Participant is determined to be disabled in accordance with a disability insurance program, provided that the definition of disability under such disability insurance program complies with the requirements of one of the three preceding definitions above.
30. Distributions to Key Employees Investment. In order to comply with Internal Revenue Code Section 409A, distributions to key employees (see subsection 9.3 of the Plan Document for definition) of publicly traded companies made due to employment termination cannot be made within 6 months of the employment termination date. If distribution to a key employee must be delayed to comply with this 6-month rule, indicate
below how Account balances of such a Participant will be invested during the period of delay [select one]:
o Valued as of most recent Valuation Date and held at the Employer without allocation of additional gains or losses after such Valuation Date until payment can be made.
x Remain invested as if termination date had not occurred, then valued as of most recent Valuation Date and distributed.
31. QDRO Distributions. The Employer may elect whether distributions from a Participants Account shall be permitted upon receipt by the Plan Administrator of a Qualified Domestic Relations Order relating to a marital dissolution or separation that provides for payment of all or a portion of a Participants Accounts to an alternate payee (spouse, former spouse, children, etc.). [Indicate below whether QDRO distributions will be permitted]:
o No, QDRO Distributions will not be permitted.
x Yes, QDRO Distributions will be permitted.
32. Additional Survivor Death Benefit from Life Insurance. In the event that life insurance is utilized as a funding vehicle for the Plan, the Employer may wish to provide additional Survivor Benefit from the following options: [select one]
x No additional Survivor Benefit offered, but rather Participants vested Account balance.
o Face value of life insurance policy of Participant, if any.
o Greater of (a) face value of life insurance policy of Participant, if any, or (b) Participants vested Account balance.
o Other: [enter amount or formula]
33. Payment of Plan Expenses. Plan expenses may be paid as follows: [select one]
x Directly by the Employer.
o Deducted from the Participant accounts and Plans trust or other custodial account (mutual fund plans only, if applicable).
34. De Minimis Small Amount Cashouts. If selected by the Employer, Participant account balances that do not exceed a certain threshold amount will be automatically cashed out upon the Participants Termination of Employment or Death, as provided below [select one]
x Yes, amounts that do not exceed a threshold dollar amount will automatically be cashed out: IRS 402(g) limit
o No, no de minimis small amounts will be cashed out.
By signing this Adoption Agreement, the Employer certifies that it has consulted with legal counsel regarding the effects of the Plan, as applicable, on all parties. The Employer further certifies that it has and will limit participation in the Plan to a select group of management or highly compensated Employees, Board Members or Other Service Providers, as determined by the Employer in consultation with legal counsel. The Employer further certifies that it is the Employers sole responsibility to ensure that each Participant with the right to direct deemed investments under the Plan that are based on securities issued by the Employer or a member of its controlled group (as defined in Code Section 414(b) and (c)) will receive a prospectus for any such deemed investment option based on such Employer securities.
The Employer is solely responsible for its compliance with applicable laws, including Federal and state securities and other applicable laws.
Only those elections that are completed shall be considered as provisions applicable to and forming a part of the Plan.
This Adoption Agreement may only be used in conjunction with the Plan document. All selections in the Adoption Agreement providing for customized or other plan provisions are subject to review for administrative feasibility, and may be subject to additional fees.
Terms used in this Adoption Agreement which are defined in the Plan document shall have the meaning given them therein.
The Employer hereby acknowledges that it is adopting this Nonqualified Supplemental Deferred Compensation Plan. Federal legislation or other changes in the law relating to nonqualified deferred compensation or other employee benefit plans may require that the Plan be amended.
* * *
The undersigned duly authorized owner, or officer of the Employer hereby executes the Plan on behalf of the Employer.
Dated this day of , .
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NONQUALIFIED
SUPPLEMENTAL DEFERRED COMPENSATION PLAN
- PLAN DOCUMENT -
This document and the accompanying adoption agreement have not been approved by the Department of Labor, Internal Revenue Service, Securities Exchange Commission, or any other governmental entity. Employers may not rely on this document or the accompanying adoption agreement to ensure any particular tax consequences with respect to the Employers particular situation, nor do these documents constitute legal or tax advice. Pen-Cal and its employees cannot provide legal or tax advice in connection with these documents. Employers must determine the extent to which the Plan is subject to Federal or state securities laws. You should have your attorney review this document and the accompanying adoption agreement before adopting the documents. This document and the accompanying adoption agreement cannot be used in order to avoid penalties that may be imposed on the taxpayer.
NONQUALIFIED
SUPPLEMENTAL DEFERRED COMPENSATION PLAN
- PLAN DOCUMENT -
SECTION 1 INTRODUCTION
1.1 Adoption of Plan and Purpose
This Plan is an unfunded, nonqualified deferred compensation plan. With the consent of the Employer (as defined in subsection 2.16) the plan may be adopted by executing the Adoption Agreement (as defined in subsection 2.3) in the form attached hereto. The Plan contains certain variable features which the Employer has specified in the Adoption Agreement. Only those variable features specified by the Employer in the Adoption Agreement will be applicable to the Employer.
The purpose of the Plan is to provide certain supplemental benefits under the Plan to a select group of management or highly compensated Employees of the Employer (in accordance with Sections 201, 301 and 401 of ERISA), Members of the Board(s) of the Employer, or Other Service Providers to the Employer (as defined below), and to allow such Employees, Board Members or Other Service Providers the opportunity to defer a portion of their salaries, bonuses and other compensation, subject to the terms of the Plan. Participants (and their Beneficiaries) shall have only those rights to payments as set forth in the Plan and shall be considered general, unsecured creditors of the Employer with respect to any such rights. The Plan is designed to comply with Code Section 409A and all guidance issued in connection with Code Section 409A. It is intended that the Plan be interpreted according to a good faith interpretation of Code Section 409A, and consistent with published IRS guidance, including proposed and final IRS regulations under Code Section 409A. Treatment of amounts in the Plan under any transition rules provided under all IRS and other guidance in connection with Code Section 409A shall be expressly authorized hereunder in accordance with procedures developed by the Administrator. In the event of any inconsistency between the terms of the Plan and Code Section 409A (and regulations thereunder), the terms of Code Section 409A (and the regulations thereunder) shall control. The Plan is intended to constitute an account balance plan (as defined in Treasury Regulation Section 1.409A-1(c)).
By becoming a Participant and making deferrals under this Plan, each Participant agrees to be bound by the provisions of the Plan and the determinations of the Employer and the Administrator hereunder.
1.2 Adoption of the Plan
The Employer may adopt the Plan by completing and signing the Adoption Agreement in the form attached hereto.
1.3 Plan Year
The Plan is administered on the basis of a Plan Year, as defined in subsection 2.27.
1.4 Plan Administration
The plan shall be administered by a plan administrator (the Administrator, as that term is defined in Section 3(16)(A) of ERISA) designated by the Employer in the Adoption Agreement. The Administrator has full discretionary authority to construe and interpret the provisions of the Plan and make factual determinations thereunder, including the power to determine the rights or eligibility of employees or participants and any other persons, and the amounts of their benefits under the plan, and to remedy ambiguities, inconsistencies or omissions, and such determinations shall be binding on all parties. The Administrator from time to time may adopt such rules and regulations as may be necessary or desirable for the proper and efficient administration of the Plan and as are consistent with the terms of the Plan. The administrator may delegate all or any part of its powers, rights, and duties under the Plan to such person or persons as it may deem advisable, and may engage agents to provide certain administrative services with respect to the Plan. Any notice or document relating to the Plan which is to be filed with the Administrator may be delivered, or mailed by registered or certified mail, postage pre-paid, to the Administrator, or to any designated representative of the Administrator, in care of the Employer, at its principal office.
SECTION 2 DEFINITIONS
2.1 Account
Account means all notional accounts and subaccounts maintained for a Participant in order to reflect his interest under the Plan, as described in Section 6.
2.2 Administrator
Administrator means the individual or individuals (if any) delegated authority by the Employer to administer the Plan, as defined in subsection 1.4.
2.3 Adoption Agreement
Adoption Agreement shall mean the form executed by the Employer and attached hereto, which Agreement shall constitute a part of the Plan.
2.4 Beneficiary
Beneficiary means the person or persons to whom a deceased Participants benefits are payable under subsection 9.5.
2.5 Board
Board means the Board of Directors of the Employer (if applicable), as from time to time constituted.
2.6 Board Member
Board Member means a member of the Board.
2.7 Bonus
Bonus (also referred to herein as a Non-Performance-Based Bonus) means an award of cash that is not a Performance-Based Bonus (as defined in subsection 2.25) that is payable to an Employee (or Board Member or Other Service Provider, as applicable) in a given year, with respect to the immediately preceding Bonus performance period, which may or may not be contingent upon the achievement of specified performance goals.
2.8 Code
Code means the Internal Revenue Code of 1986, as amended. Reference to a specific section of the Code shall include such section, any valid regulation promulgated thereunder, and any comparable provision of any future legislation amending, supplementing, or superseding such section.
2.9 Compensation
Compensation shall mean the amount of a Participants remuneration from the Employer designated in the Adoption Agreement for the Plan Year (or, as determined in accordance with procedures established by the Employer, for the period during which the Participant remains an Eligible Individual). Notwithstanding the foregoing, the Compensation of an Other Service Provider (as defined in subsection 2.22) shall mean his remuneration from the Employer pursuant to an agreement to provide services to the Employer. With respect to any Participant who is a Member of the Board (if applicable), Compensation means all cash remuneration which, absent a deferral election under the Plan, would have otherwise been received by the Board Member in the taxable year, payable to the Board Member for service on the Board and on Board committees, including any cash payable for attendance at Board meetings and Board committee meetings, but not including any amounts constituting reimbursements of expenses to Board Members. To the extent the Employer has designated 401(k) Refunds in the Adoption Agreement (and to the extent elected by the Participant), an amount equal to the Participants 401(k) Refund shall be deferred from the Participants Compensation otherwise payable to the Participant in the next subsequent Compensation pay period (or such later pay period in the same calendar year as the Administrator determines shall be administratively feasible), and shall be credited to the Participants Compensation Deferral Account in accordance with subsection 4.1. For purposes of this subsection, 401(k) Refund means any amount distributed to the applicable Participant from the Employers qualified retirement plan intended to comply with Section 401(k) of the Code that is in excess of the maximum deferral for the prior calendar year allowable under such qualified retirement plan. Notwithstanding the foregoing, the definition of compensation for purposes of determining key employees under subsection 9.3 of the Plan shall be determined solely in accordance with subsection 9.3. To the extent not otherwise designated by the Employer in a separate document forming part of the Plan, Compensation payable after December 31 of a given year solely for services performed during the Employers final payroll period containing December 31, is treated as Compensation payable for services performed in the subsequent year in which the non-deferred portion of the payroll payment is actually made.
2.10 Compensation Deferrals
Compensation Deferrals means the amounts credited to a Participants Compensation Deferral Account pursuant to the Participants election made in accordance with subsection 4.1.
2.11 Deferral Election
Deferral Election means an election by a Participant to make Compensation Deferrals or Performance-Based Bonus Deferrals in accordance with Section 4.
2.12 Disability
Disability for purposes of this Plan shall mean the occurrence of an event as a result of which the Participant is considered disabled, as designated by the Employer in the Adoption Agreement.
2.13 Effective Date
Effective Date means the Effective Date of the Plan, as indicated in the Adoption Agreement.
2.14 Eligible Individual
Eligible Individual means each Board Member, Other Service Provider, or Employee of an Employer who satisfies the eligibility requirements set forth in the Adoption Agreement, for the period during which he is determined by the Employer to satisfy such requirements.
2.15 Employee
Employee means a person who is employed by an Employer and is treated and/or classified by the Employer as a common law employee for purposes of wage withholding for Federal income taxes. If a person is not considered to be an Employee of the Employer in accordance with the preceding sentence, a subsequent determination by the Employer, any governmental agency, or a court that the person is a common law employee of the Employer, even if such determination is applicable to prior years, will not have a retroactive effect for purposes of eligibility to participate in the Plan.
2.16 Employer
Employer means the business entity designated in the Adoption Agreement, and its successors and assigns unless otherwise herein provided, or any other corporation or business organization which, with the consent of the Employer, or its successors or assigns, assumes the Employers obligations hereunder, and any affiliate or subsidiary of the Employer or other corporation or business organization in the Employers controlled group (as defined in Subsections 414(b) and (c) of the Code and Section 1.409A-1(h) of the Treasury Regulations), that has adopted the Plan on behalf of its Eligible Individuals with the consent of the Employer.
2.17 Employer Contributions
Employer Contributions means the amounts other than Matching Contributions that are credited to a Participants Employer Contributions Account under the Plan by the Employer in accordance with subsection 4.4.
2.18 ERISA
ERISA means the Employee Retirement Income Security Act of 1974, as amended. Reference to a specific section of ERISA shall include such section, any valid regulation promulgated thereunder, and any comparable provision of any future legislation amending, supplementing, or superseding such section.
2.19 Fiscal Year Compensation
Fiscal Year Compensation means Compensation relating to a period of service coextensive with one or more consecutive non-calendar-year fiscal years of the Employer, where no amount of such Compensation is paid or payable during the service period. For example, a Bonus based upon a service period of two consecutive fiscal years payable after the completion of the second fiscal year would be Fiscal Year Compensation, but periodic salary payments or Bonuses based on service periods other than the Employers fiscal year would not be Fiscal Year Compensation.
2.20 Investment Funds
Investment Funds means the notional funds or other investment vehicles designated pursuant to subsection 5.1.
2.21 Matching Contributions
Matching Contributions means the amounts credited to a Participants Employer Contribution Account under the Plan by the Employer that are based on the amount of Participant Deferrals made by the Participant under the Plan, or that are based upon such other formula as designated by the Employer in the Adoption Agreement, in accordance with subsection 4.3.
2.22 Other Service Providers
Other Service Providers shall mean independent contractors, consultants, or other similar providers of services to the Employer, other than Employees and Board Members. To the extent that an Other Service Provider is unrelated to the Employer and satisfies the other requirements of Treasury Regulation Section 1.409A-1(f)(2)(i) as described therein and in Code Section 409A and other applicable regulations, guidance, etc. thereunder, the provisions of such guidance shall not apply. To the extent that an Other Service Provider uses an accrual method of accounting for a given taxable year, amounts deferred under the Plan in such taxable year shall not be subject to Code Section 409A and other applicable guidance thereunder, notwithstanding any provision of the Plan to the contrary.
2.23 Participant
Participant means an Eligible Individual who meets the requirements of Section 3 and elects to make Compensation Deferrals pursuant to Section 4, or who receives Employer Contributions or Matching Contributions pursuant to subsection 4.3 or 4.4. A Participant shall cease being a Participant in accordance with subsection 3.2 herein.
2.24 Participant Deferrals
Participant Deferrals means all amounts deferred by a Participant under this Plan, including Participant Compensation Deferrals and Participant Performance-Based Bonus Deferrals.
2.25 Performance-Based Bonus
Performance-Based Bonus generally means Compensation where the amount of, or entitlement to, the compensation is contingent on the satisfaction of previously established organizational or individual performance criteria relating to a performance period of at least 12 consecutive months in which the Eligible Individual performs services, pursuant to rules described in Treasury Regulation Section 1.409A-1(e).
2.26 Performance-Based Bonus Deferrals
Performance-Based Bonus Deferrals means the amounts credited to a Participants Compensation Deferral Account from the Participants Performance-Based Bonus pursuant to the Participants election made in accordance with subsection 4.2.
2.27 Plan Year
Plan Year means each 12-month period specified in the Adoption Agreement, on the basis of which the Plan is administered.
2.28 Retirement
Retirement for purposes of this Plan means the Participants Termination Date, as defined in subsection 2.30, after attaining any age and/or service minimums with respect to Retirement or Early Retirement as designated by the Employer in the Adoption Agreement.
2.29 Spouse
Spouse means the person to whom a Participant is legally married under applicable state law at the earlier of the date of the Participants death or the date payment of the Participants benefits commenced and who is living on the date of the Participants death.
2.30 Termination Date
Termination Date means (i) with respect to an Employee Participant, the Participants separation from service (within the meaning of Section 409A of the Code and the regulations, notices and other guidance thereunder, including death or Disability) with the Employer, and any subsidiary or affiliate of the Employer as defined in Sections 414(b) and (c) of the Code and Section 1.409A-1(h) of the Treasury Regulations; (ii) with respect to a Board Member Participant, the Participants resignation or removal from the Board (for any reason, including death or
following Disability); and (iii) with respect to any Other Service Provider, the expiration of all agreements to provide services to the Employer (for any reason, including death or following Disability). The date that an Employees, Board Members, or Other Service Providers performance of services for all the Employers is reduced to a level less than 20% of the average level of services performed in the preceding 36-month period, shall be considered a Termination Date, and the performance of services at a level of 50% or more of the average level of services performed in the preceding 36-month period shall not be considered a Termination Date, based on the parties reasonable expectations as of the applicable date. A Participants Termination Date shall not be deemed to have occurred if the Employees, Board Members or Other Service Providers average level of service performed in the preceding 36-month period drops below 50% but not less than 20%, unless the Employer: (i) has designated in a writing forming part of the Plan that a level between 20% and 50% will be deemed to trigger a Termination Date, and (ii) such writing was in place at or prior to the date required under Code Section 409A and the regulations and other guidance thereunder. If such designation is subsequently changed, the change must comply with the rules regarding subsequent deferrals and the acceleration of payments described in Code Section 409A and the regulations, notices, rulings and other guidance thereunder. If a Participant is both a Board Member Participant and an Employee Participant, Termination Date means the date the Participant satisfies both criteria (i) and (ii) above.
2.31 Valuation Date
Valuation Date means the last day of each Plan Year and any other date that the Employer, in its sole discretion, designates as a Valuation Date, as of which the value of an Investment Fund is adjusted for notional deferrals, contributions, distributions, gains, losses, or expenses.
2.32 Other Definitions
Other defined terms used in the Plan shall have the meanings given such terms elsewhere in the Plan.
SECTION 3 ELIGIBILITY AND PARTICIPATION
3.1 Eligibility
Each Eligible Individual on the Effective Date of the Plan shall be eligible to become a Participant by properly making a Deferral Election on a timely basis as described in Section 4, or, if applicable and eligible as designated by the Employer in the Adoption Agreement, by receiving a Matching Contribution or other Employer Contribution under the Plan. Each other Eligible Individual may become a Participant by making a Deferral Election on a timely basis as described in Section 4 or, if applicable and eligible as designated by the Employer in the Adoption Agreement, by receiving a Matching Contribution or other Employer Contribution under the Plan. Each Eligible Individuals decision to become a Participant by making a Deferral Election shall be entirely voluntary. The Employer may require the Participant to complete any necessary forms or other information as it deems necessary or advisable prior to permitting the Eligible Individual to commence participation in the Plan.
3.2 Cessation of Participation
If a Termination Date occurs with respect to a Participant, or if a Participant otherwise ceases to be an Eligible Individual, no further Compensation Deferrals, Performance-Based Bonus Deferrals, Matching Contributions or other Employer Contributions shall be credited to the Participants Accounts after the Participants Termination Date or date the Participant ceases to be eligible (or as soon as administratively feasible after the date the Participant ceases to be eligible or, if applicable, the end of the then-current Plan Year or performance period with respect to Performance-Based Bonuses), unless he is again determined to be an Eligible Individual, but the balance credited to his Accounts shall continue to be adjusted for notional investment gains and losses under the terms of the Plan and shall be distributed to him at the time and manner set forth in Section 9. An Employee, Board Member or Other Service Provider shall cease to be a Participant after his Termination Date or other loss of eligibility as soon as his entire Account balance has been distributed.
3.3 Eligibility for Matching or Employer Contributions
An Employee Participant who has satisfied the requirements necessary to become an Eligible Individual with respect to Matching Contributions as specified in the Adoption Agreement, and who has made a Compensation Deferral election pursuant to subsection 4.1 herein or who has satisfied such other criteria as specified in the Adoption Agreement, shall be eligible to receive Matching Contributions described in subsection 4.3. An Employee Participant who has satisfied the requirements necessary to become an Eligible Individual with respect to Employer Contributions other than Matching Contributions as specified in the Adoption Agreement, shall be eligible to receive Employer Contributions described in subsection 4.4.
SECTION 4 DEFERRALS AND CONTRIBUTIONS
4.1 Compensation Deferrals Other Than Performance-Based Bonus Deferrals
Each Plan Year, an Eligible Individual may elect to defer receipt of no less than the minimum and no greater than the maximum percentage or amount selected by the Employer in the Adoption Agreement with respect to each type of Compensation (other than Performance-Based Bonuses) earned with respect to pay periods beginning on and after the effective date of the election; provided, however, that Compensation earned prior to the date the Participant satisfies the eligibility requirements of Section 3 shall not be eligible for deferral under this Plan. Except as otherwise provided in this subsection, a Participants Deferral Election for a Plan Year under this subsection must be made not later than December 31 of the preceding Plan Year (or such earlier date as determined by the Administrator) with respect to Compensation (other than Performance-Based Bonuses) earned in pay periods beginning on or after the following January 1 in accordance with rules established by the Administrator. An election to defer restricted stock units (RSUs) into the Plan must be made by one of the following deadlines: (i) the end of the calendar year prior to the date of grant of the RSU; (ii) 12 months before the payment date of the RSU (vesting date is treated as the payment date for these purposes), but the election will not take effect for 12 months, and the subsequent payout date must be at least five years later than the original payment date); (iii) within 30 days of the date of grant (but only if the RSU is structured so that vesting is contingent on the Participant performing services for at least an additional 12 months); or (iv) within 6 months of the payment (vesting) date, but only if the RSU is performance-based under Code Section 409A, and only if the performance period must be at least 12 months long and either: (a) the amount of the compensation cannot be reasonably ascertained at the time of the election, or (b) the performance requirement is still not substantially certain to be met at the time of the election. If the Employer allows for deferral of RSUs structured so that a specified portion of the RSU grant vests periodically (for example, an RSU grant over a four-year period vesting 25% annually), then the election to defer may be made separately with respect to each portion of the grant that vests in a given year, if permitted by the Employer. However, each election for each portion of the grant must be made either: (i) within thirty days of the date of grant or each anniversary thereof, and only if the RSU is structured so that vesting is contingent on the employee performing services for at least an additional 12 months subsequent to the election; or (ii) 12 months before the payment date of the RSU (vesting date is treated as the payment date for these purposes), but the election will not take effect for 12 months, and the subsequent payout date must be at least five years later than the previous payment date.
An Employee, Board Member or Other Service Provider who first becomes an Eligible Individual during a Plan Year (by virtue of a promotion, Compensation increase, commencement of employment with the Employer, commencement of Board service, execution of an agreement to provide services to an Employer, or any other reason) shall be provided enrollment documents (including Deferral Election forms) as soon as administratively feasible following such initial notification of eligibility. Such Eligible Individual must make his Deferral Elections within 30 days after first becoming an Eligible Individual, with respect to his Compensation (other than Performance-Based Bonuses) earned on or after the effective date of the Deferral Election
(provided, however, that if such Eligible Individual is participating in any other account balance plan maintained by the Employer or any member of the Employers controlled group (as defined in subsections 414(b) and (c) of the Code), such Eligible Individual must make his Compensation Deferral Election no later than December 31 of the preceding Plan Year (or such earlier date as determined by the Administrator), or he may not elect to make Compensation Deferrals for that initial Plan Year). If an Eligible Individual does not elect to make Compensation Deferrals during that initial 30-day period, he may not later elect to make Compensation Deferrals for that year under this subsection. In the event that an Eligible Individual first becomes eligible during a Plan Year with respect to which Fiscal Year Compensation is payable, such Eligible Individual must make his Fiscal Year Compensation Deferral Election on or before the end of the fiscal year of the Employer immediately preceding the first fiscal year in which any services are performed for which the Fiscal Year Compensation is payable.
In the case of an Employee, Board Member or Other Service Provider who is rehired (or who recommences Board Service or recommences providing services to an Employer as an Other Service Provider) after having previously been an Eligible Individual, the phrase first becomes an Eligible Individual in the first sentence of the preceding paragraph shall be interpreted to apply only where the Eligible Individual either (i) previously received payment of his total Account balances under the Plan, or (ii) did not previously receive payment of his total Account balances under the Plan, but is rehired (or recommences Board Service or recommences providing services to an Employer as an Other Service Provider) at least 24 months after his last day as a previously Eligible Individual prior to again becoming such an Eligible Individual. In all other cases such rehired Employee, Board Member or Other Service Provider may not elect to make Compensation Deferrals until the next date determined by the Administrator with respect to Compensation earned after the following January 1. Similarly, in the case of an Employee who recommences status as an Eligible Individual for any other reason after having previously lost his status as an Eligible Individual (due to Compensation fluctuations, transfer from an ineligible location or job classification, or otherwise), the phrase first becomes an Eligible Individual shall be interpreted to apply only where the Eligible Individual either: (i) previously received payment of his total Account balances under the Plan, or (ii) did not previously receive payment of his total Account balances under the Plan, but regains his status as an Eligible Individual at least 24 months after his last day as a previously Eligible Individual prior to again becoming such an Eligible Individual. In all other cases such Re-Eligible Participant may not elect to make Compensation Deferrals until the next date determined by the Administrator with respect to Compensation earned after the following January 1.
An election to make Compensation Deferrals under this subsection 4.1 shall remain in effect through the last pay period commencing in the calendar year to which the election applies (except as provided in subsections 2.9 or 4.5), shall apply with respect to the applicable type of Compensation (other than Performance-Based Bonuses) to which the Deferral Election relates earned for pay periods commencing in the applicable calendar year to which the election applies, and shall be irrevocable (provided, however, that a Participant making a Deferral Election under this subsection may change his election at any time prior to December 31 of the year preceding the year for which the Deferral Election is applicable, subject to rules established by the
Administrator). If a Participant fails to make a Compensation Deferral election for a given Plan Year, such Participants Compensation Deferral Election for that Plan Year shall be deemed to be zero; provided, however, that if the Employer has elected in the Adoption Agreement that a Participants Compensation Deferral Election shall be evergreen, then such Participants Compensation Deferral Election shall be deemed to be identical to the most recent applicable Deferral Election on file with the Administrator with respect to the applicable type of Compensation; provided, however, that no In-Service Distribution shall be applicable to any amounts deferred in a year in which the Participant fails to make an affirmative election, and payment of such amounts for such year shall be made in accordance with his most recent election on file with the Administrator (if no election is on file, then such amounts shall be paid to him in a single lump sum).
Compensation Deferrals shall be credited to the Participants Compensation Deferral Account as soon as administratively feasible after such amounts would have been payable to the Participant.
4.2 Performance-Based Bonus Deferrals
Each Plan Year, an Eligible Individual may elect to defer receipt of no less than the minimum and no greater than the maximum percentage or amount selected by the Employer in the Adoption Agreement with respect to Performance-Based Bonuses earned with respect to the performance period for which the Performance-Based Bonus is earned; provided, however, that the Eligible Individual performed services continuously from a date no later than the date upon which the performance criteria are established through a date no earlier than the date upon which the Eligible Individual makes a Performance-Based Bonus Deferral Election; and further provided that in no event may an election to defer Performance-Based Bonuses be made after such Bonuses have become readily ascertainable. Except as otherwise provided in this subsection, a Participants Performance-Based Bonus Deferral Election under this subsection must be made not later than six months (or such earlier date as determined by the Administrator) prior to the end of the performance period.
An Employee, Board Member or Other Service Provider who first becomes an Eligible Individual during a Plan Year (by virtue of a promotion, Compensation increase, commencement of employment with the Employer, commencement of Board service, execution of an agreement to provide services to an Employer, or any other reason) shall be provided enrollment documents (including Deferral Election forms) as soon as administratively feasible following such initial notification of eligibility. Such Eligible Individual must make his Performance-Based Bonus Deferral Election within 30 days after first becoming an Eligible Individual (provided, however, that if such Eligible Individual is participating in any other account balance plan maintained by the Employer or any member of the Employers controlled group (as defined in subsections 414(b) and (c) of the Code), such Eligible Individual must perform services continuously from a date no later than the date the performance criteria are established, and must make his Performance-Based Bonus Deferral Election no later than six months (or such earlier date as determined by the Administrator) prior to the end of the performance period, and at a time when the Performance-Based Bonus is not readily ascertainable, or he may not elect to make
Performance-Based Bonus Deferrals for such initial Plan Year. In the case of a Deferral Election in the first year of eligibility that is made after the beginning of the Performance-Based Bonus performance period, the Deferral Election will apply to the portion of the Performance-Based Bonus equal to the total amount of the Performance-Based Bonus for the performance period multiplied by the ratio of the number of days remaining in the performance period after the effective date of the Deferral Election over the total number of days in the Performance Period. If an Eligible Individual does not elect to make a Performance-Based Bonus Deferral during that initial 30-day period, he may not later elect to make a Performance-Based Bonus Deferral for that performance period under this subsection. Rules relating to the timing of elections to make a Performance-Based Bonus Deferral with respect to an Employee, Board Member or Other Service Provider who becomes an Eligible Individual (due to rehire or other similar event) after having previously been an Eligible Individual shall be applied in a manner similar to rules described applicable to rehired and other Re-Eligible Participants in subsection 4.1 above.
An election to make Performance-Based Bonus Deferrals under this subsection 4.2 shall remain in effect through the end of the performance period to which the election applies (except as provided in subsection 4.5), and shall be irrevocable (provided, however, that a Participant making a Performance-Based Bonus Deferral Election under this subsection with respect to a Performance-Based Bonus that is not yet readily ascertainable, may change his election at any time prior to the first day of the six-month period ending on the last day of the performance period for which the Performance-Based Bonus Deferral Election is applicable, subject to rules established by the Administrator). If a Participant fails to make a Performance-Based Bonus Deferral Election for a given performance period, such Participants Performance-Based Bonus Deferral Election for that performance period shall be deemed to be zero; provided, however, that if the Employer has elected in the Adoption Agreement that a Participants Performance-Based Deferral Election shall be evergreen, then such Participants Performance-Based Bonus Deferral Election shall be deemed to be identical to the most recent applicable Performance-Based Bonus Deferral Election on file with the Administrator; provided, however, that no In-Service Distribution shall be applicable to any amounts deferred in a year in which the Participant fails to make an affirmative election, and payment of such amounts for such year shall be made in accordance with his most recent election on file with the Administrator (if no election is on file, then such amounts shall be paid to him in a single lump sum).
Performance-Based Bonus Deferrals shall be credited to the Participants Compensation Deferral Account as soon as administratively feasible after such amounts would have been payable to the Participant.
4.3 Matching Contributions
Matching Contributions shall be determined in accordance with the formula specified in the Adoption Agreement, and shall be credited to the Employer Contribution Accounts of Participants who have satisfied the eligibility requirements for Matching Contributions specified in the Adoption Agreement. Matching Contributions under this Plan shall be credited to such Participants Employer Contribution Accounts as soon as administratively feasible after the
Applicable Period selected in the Adoption Agreement, but only with respect to Participants eligible to receive such Matching Contributions as described in the Adoption Agreement.
4.4 Other Employer Contributions
Employer Contributions other than Matching Contributions shall be discretionary from year to year, and shall be credited to the Employer Contribution Accounts of Participants who have satisfied the eligibility requirements for Employer Contributions, all as determined by the Employer and documented in writing, and such writings will form part of the Plan, as specified in the Adoption Agreement. Employer Contributions under this Plan shall be credited to such Participants Employer Contributions Accounts as soon as administratively feasible.
4.5 No Election Changes During Plan Year
A Participant shall not be permitted to change or revoke his Deferral Elections (except as otherwise described in subsections 4.1 and 4.2), except that, if a Participants status changes such that he becomes ineligible for the Plan, the Participants Deferrals under the Plan shall cease as described in subsection 3.2. Notwithstanding the foregoing, in the event the Employer maintains a qualified plan designed to comply with the requirements of Code Section 401(k) that requires the cessation of all deferrals in the event of a hardship withdrawal under such plan, the Participants Deferrals under this Plan shall cease as soon as administratively feasible upon notification to the Administrator that the participant has taken such a hardship withdrawal. Notwithstanding the foregoing, if the Employer has elected in the Adoption Agreement to permit Unforeseeable Emergency Withdrawals pursuant to subsection 9.8, the Participants Deferrals under this Plan shall cease as soon as administratively feasible upon approval by the Administrator of a Participants properly submitted request for an Unforeseeable Emergency Withdrawal under subsection 9.8.
4.6 Crediting of Deferrals
The amount of deferrals pursuant to subsections 4.1 and 4.2 shall be credited to the Participants Accounts as of a date determined to be administratively feasible by the Administrator.
4.7 Reduction of Deferrals or Contributions
Any Participant Deferrals or Employer Contributions to be credited to a Participants Account under this Section may be reduced by an amount equal to the Federal or state, local or foreign income, payroll, or other taxes required to be withheld on such deferrals or contributions or to satisfy any necessary contributions under an employee welfare benefit plan described under Section 125 of the Code. A Participant shall be entitled only to the net amount of such deferral or contribution (as adjusted from time to time pursuant to the terms of the Plan). The Administrator may notify a Participant of limitations on his Deferral Election if, as a result of any election, a Participants Compensation from the Employer would be insufficient to cover taxes, withholding, and other required deductions applicable to the Participant.
SECTION 5 NOTIONAL INVESTMENTS
5.1 Investment Funds
The Employer may designate, in its discretion, one or more Investment Funds for the notional investment of Participants Accounts. The Employer, in its discretion, may from time to time establish new Investment Funds or eliminate existing Investment Funds. The Investment Funds are for recordkeeping purposes only and do not allow Participants to direct any Employer assets (including, if applicable, the assets of any trust related to the Plan). Each Participants Accounts shall be adjusted pursuant to the Participants notional investment elections made in accordance with this Section 5, except as otherwise determined by the Employer or Administrator in their sole discretion.
5.2 Investment Fund Elections
The Employer shall have full discretion in the direction of notional investments of Participants Accounts under the Plan; provided, however, that if the Employer so elects in the Adoption Agreement, each Participant may elect from among the Investment Funds for the notional investment of such of his Accounts as are permitted under the Adoption Agreement from time to time in accordance with procedures established by the Employer. The Administrator, in its discretion, may adopt (and may modify from time to time) such rules and procedures as it deems necessary or appropriate to implement the notional investment of the Participants Accounts. Such procedures may differ among Participants or classes of Participants, as determined by the Employer or the Administrator in its discretion. The Employer or Administrator may limit, delay or restrict the notional investment of certain Participants Accounts, or restrict allocation or reallocation into specified notional investment options, in accordance with rules established in order to comply with Employer policy and applicable law, to minimize regulated filings and disclosures, or under any other circumstances in the discretion of the Employer. Any deferred amounts subject to a Participants investment election that must be so limited, delayed or restricted under such circumstances may be notionally invested in an Investment Fund designated by the Administrator, or may be credited with earnings at a rate determined by the Administrator, which rate may be zero. A Participants notional investment election shall remain in effect until later changed in accordance with the rules of the Administrator. If a Participant does not make a notional investment election, all deferrals by the Participant and contributions on his behalf will be deemed to be notionally invested in the Investment Fund designated by the Employer for such purpose, or, at the Employers election, may remain uninvested until such time as the Administrator receives proper direction, or may be credited with earnings at a rate determined by the Administrator or Employer, which rate may be zero.
5.3 Investment Fund Transfers
A Participant may elect that all or a part of his notional interest in an Investment Fund shall be transferred to one or more of the other Investment Funds. A Participant may make such notional Investment Fund transfers in accordance with rules established from time to time by the Employer or the Administrator, and in accordance with subsection 5.2.
SECTION 6 ACCOUNTING
6.1 Individual Accounts
Bookkeeping Accounts shall be maintained under the Plan in the name of each Participant, as applicable, along with any subaccounts under such Accounts deemed necessary or advisable from time to time, including a subaccount for each Plan Year that a Participants Deferral Election is in effect. Each such subaccount shall reflect (i) the amount of the Participants Deferral during that year, any Matching Contributions or Employer Contributions credited during that year, and the notional gains, losses, expenses, appreciation and depreciation attributable thereto.
Rules and procedures may be established relating to the maintenance, adjustment, and liquidation of Participants Accounts, the crediting of deferrals and contributions and the notional gains, losses, expenses, appreciation, and depreciation attributable thereto, as are considered necessary or advisable.
6.2 Adjustment of Accounts
Pursuant to rules established by the Employer, Participants Accounts will be adjusted on each Valuation Date, except as provided in Section 9, to reflect the notional value of the various Investment Funds as of such date, including adjustments to reflect any deferrals and contributions, notional transfers between Investment Funds, and notional gains, losses, expenses, appreciation, or depreciation with respect to such Accounts since the previous Valuation Date. The value of an Investment Fund at any Valuation Date may be based on the fair market value of the Investment Fund, as determined by the Administrator in its sole discretion.
6.3 Accounting Methods
The accounting methods or formulae to be used under the Plan for purposes of monitoring Participants Accounts, including the calculation and crediting of notional gains, losses, expenses, appreciation, or depreciation, shall be determined by the Administrator in its sole discretion. The accounting methods or formulae selected by the Administrator may be revised from time to time.
6.4 Statement of Account
At such times and in such manner as determined by the Administrator, but at least annually, each Participant will be furnished with a statement reflecting the condition of his Accounts.
SECTION 7 VESTING
A Participant shall be fully vested at all times in his Compensation Deferral Account (if applicable). A Participant shall be vested in his Matching Contributions and/or Employer Contributions (if applicable), in accordance with the vesting schedule elected by the Employer under the Adoption Agreement. Vesting Years of Service shall be determined in accordance with the election made by the Employer in the Adoption Agreement. Amounts in a Participants Accounts that are not vested upon the Participants Termination Date (forfeitures) may be used to reinstate amounts previously forfeited by other Participants who are subsequently rehired, or may be returned to the Employer, in the discretion of the Employer or the Administrator.
If a Participant has a Termination Date with the Employer as a result of the Participants Misconduct (as defined by the Employer in the Adoption Agreement), or if the Participant engages in Competition with the Employer (as defined by the Employer in the Adoption Agreement), and the Employer has so elected in the Adoption Agreement, the Participant shall forfeit all amounts allocated to his or her Matching Contribution Account and/or Employer Contribution Accounts (if applicable). Such forfeitures shall be returned to the Employer.
Neither the Administrator nor the Employer in any way guarantee the Participants Account balance from loss or depreciation. Notwithstanding any provision of the Plan to the contrary, the Participants Account balance is subject to Section 8.
Vesting Years of Service in the event of the rehire of a Participant shall be reinstated, and amounts previously forfeited by such Participants may be reinstated from forfeitures made by other Participants, or may be reinstated by the Employer.
SECTION 8 FUNDING
No Participant or other person shall acquire by reason of the Plan any right in or title to any assets, funds, or property of the Employer whatsoever, including, without limiting the generality of the foregoing, any specific funds, assets, or other property of the Employer. Benefits under the Plan are unfunded and unsecured. A Participant shall have only an unfunded, unsecured right to the amounts, if any, payable hereunder to that Participant. The Employers obligations under this Plan are not secured or funded in any manner, even if the Employer elects to establish a trust with respect to the Plan. Even though benefits provided under the Plan are not funded, the Employer may establish a trust to assist in the payment of benefits. All investments under this Plan are notional and do not obligate the Employer (or its delegates) to invest the assets of the Employer or of any such trust in a similar manner.
SECTION 9 DISTRIBUTION OF ACCOUNTS
9.1 Distribution of Accounts
With respect to any Participant who has a Termination Date that precedes his Retirement date, an amount equal to the Participants vested Account balances shall be distributed to the Participant (or, in the case of the Participants death, to the Participants Beneficiary), in the form of a single lump sum payment, or, if subsection 9.2 applies, in the form of installment payments as designated by the Employer in the Adoption Agreement. Subject to subsection 9.3 hereof, distribution of a Participants Accounts shall be made or begin within the 90-day period following the Participants Termination Date (provided, however, that if calculation of the amount of the payment is not administratively practicable due to events beyond the control of the Participant, the payment will be made as soon as administratively practicable for the Administrator to make such payment). Notwithstanding any provision of the Plan to the contrary, for purposes of this subsection, a Participants Accounts shall be valued as of a Valuation Date as soon as administratively feasible preceding the date such distribution is made, in accordance with rules established by the Administrator. A Participants Accounts may be offset by any amounts owed by the Participant to the Employer, but such offset shall not occur in excess of or prior to the date distribution of the amount would otherwise be made to the Participant.
Notwithstanding the foregoing, to the extent designated by the Employer in the Adoption Agreement, a Participant may elect, in accordance with this subsection, a distribution date for his Compensation Deferral Accounts and/or his Employer Contributions and Matching Contributions Accounts that is prior to his Termination Date (an In-Service Distribution). A Participants election of an In-Service Distribution date must: (i) be made at the time of his Deferral Election for a Plan Year; and (ii) apply only to amounts deferred pursuant to that election, and any earnings, gains, losses, appreciation, and depreciation credited thereto or debited therefrom with respect to such amounts. To the extent permitted by the Employer, a Participant may elect an In-Service Distribution date with respect to Performance-Based Bonus Deferrals that is separate from an In-Service Distribution date with respect to Compensation Deferrals other than Performance-Based Bonus Deferrals for the same year, provided that the applicable In-Service Distribution date may not be earlier than the number of years designated by the Employer in the Adoption Agreement following the year in which the applicable Compensation would have been paid absent the deferral, or as further determined or limited in accordance with rules established by the Administrator. Payments made pursuant to an In-Service Distribution election shall be made in a lump sum (or, if elected by the Employer in the Adoption Agreement, any applicable other form of payment to the extent permitted by the Employer and elected by the Participant in accordance with the terms of the Plan). Each such payment shall be made as soon as administratively feasible following January 1 of the calendar year in which the payment was elected to be made, but in no event later than the end of the calendar year in which the payment was elected to be made (provided, however, that if calculation of the amount of the payment is not administratively practicable due to events beyond the control of the Participant, the payment will be made as soon as administratively practicable for the Administrator to make such payment). For purposes of such payment, the value of the
Participants Accounts for the applicable Plan Year shall be determined as of a Valuation Date preceding the date that such distribution is made, in accordance with rules established by the Administrator. In the event a Participants Termination Date occurs (or, if elected by the Employer in the Adoption Agreement, in the event a Change in Control of the Employer occurs) prior to the date the Participant had previously elected to have an In-Service Distribution payment made to him, such amount shall be paid to the Participant under the rules applicable for payment on Termination of Employment in accordance with this subsection 9.1 and subsection 9.2. Participants must make an affirmative election with respect to payment of their In-Service Distributions, and no default or evergreen election shall be allowed with respect to In-Service Distributions.
To the extent elected by the Employer in the Adoption Agreement, Participants whose Termination Date has not yet occurred may elect to defer payment of any In-Service Distribution, provided that such election is made in accordance with procedures established by the Administrator, and further provided that any such election must be made no later than 12 calendar months prior to the previously elected In-Service Distribution Date (which for these purposes shall be January 1 of the calendar year in which the payment was elected to be made). Participants may elect any deferred payment date, but such date must be no fewer than five years from the previously elected In-Service Distribution Date (which for these purposes shall be January 1 of the calendar year in which the payment was elected to be made).
9.2 Installment Distributions
To the extent elected by the Employer in the Adoption Agreement, a Participant may elect to receive payments from his Accounts in the form of a single lump sum, as described in Section 9.1, or in annual installments over a period elected by the Employer in the Adoption Agreement. To the extent a Participant fails to make an election, the Participant shall be deemed to have elected to receive his distribution for that Plan Year in the form of a single lump sum. To the extent elected by the Employer in the Adoption Agreement, a Participant may make a separate election with respect to his Performance-Based Bonus Deferrals for each year (as adjusted for gains and losses thereon) that provides for a different method of distribution from the method of distribution he elects with respect to his Compensation Deferrals (as adjusted for gains and losses thereon) for that year. The Participants Employer Contributions Account attributable to such year, if any (as adjusted for gains and losses thereon), shall be distributed in the same manner as his Compensation Deferral Account for such year (or in a lump sum upon his Termination Date if no election has been made).
(a) Installment Elections. A Participant will be required to make his distribution election prior to the commencement of each calendar year (or, in the event of an election with respect to Performance-Based Bonuses, prior to six months before the end of the applicable performance period), or such earlier date as determined by the Administrator.
(b) Installment Payments. The first installment payment shall generally be within the 90-day period following the Participants Termination Date (provided, however, that if calculation of the amount of the payment is not administratively practicable
due to events beyond the control of the Participant, the payment will be made as soon as administratively practicable for the Administrator to make such payment). Succeeding payments shall generally be made by January 1 of each succeeding calendar year, but in no event later than the end of each succeeding calendar year (provided, however, that if calculation of the amount of the payment is not administratively practicable due to events beyond the control of the Participant, the payment will be made as soon as administratively practicable for the Administrator to make such payment). The amount to be distributed in each installment payment shall be determined by dividing the value of the Participants Accounts being paid in installments as of a Valuation Date preceding the date of each distribution by the number of installment payments remaining to be made, in accordance with rules established by the Administrator. In the event of the death of the Participant prior to the full payment of his Accounts being paid in installments, payments will continue to be made to his Beneficiary in the same manner and at the same time as would have been payable to the Participant.
To the extent elected by the Employer in the Adoption Agreement, Participants who have elected payment in installments may make a subsequent election to elect payment of that amount in the form of a lump sum, if payment of installments with respect to that years deferrals has not yet commenced. Such election must be made in accordance with procedures established by the Administrator, and any such election must be made no later than 12 calendar months prior to the originally elected payment date of the first installment. The new payment date for the installment with respect to which such election is made must be deferred to the later of: (i) five years from the date such payment would otherwise have been made, or (ii) the last payment date of the last installment with respect to that years deferrals. To the extent elected by the Employer in the Adoption Agreement, Participants who have elected payment in installments may make a subsequent election to change the number of such installment payments so long as no acceleration of distribution payments occurs (but no fewer than the minimum number, and not to exceed the maximum number of installments elected by the Employer in the Adoption Agreement), if payment of installments with respect to that years Deferral Elections has not yet commenced. Such election must be made in accordance with procedures established by the Administrator, and any such election must be made no later than 12 calendar months prior to the originally elected payment date of the first installment. The new payment date for any installment with respect to which such election is made must be deferred for a period of not less than five years from the date such payment would otherwise have been made. In the event payment has been elected by the Participant in the form of installments (to the extent elected by the Employer in the Adoption Agreement), each installment payment shall be considered a separately identifiable payment. In the event payment has been elected by the Participant in the form of a lump sum (or in the event payment shall be made to the Participant in the form of a lump sum under the terms of the Plan in the absence of or in lieu of the Participants election), then the lump sum form shall be deemed to be a separately identifiable form of payment, and the Participant may make a subsequent deferral election to elect payment of that amount in the form of installments (to the extent elected by the Employer in the Adoption Agreement) in accordance with the procedures described above for changing installment payment elections. Participants will be permitted to make such a change only once with respect to any years Deferral Elections.
9.3 Key Employees
Notwithstanding anything herein to the contrary, and subject to Code Section 409A, except in the case of the Participants death, payment under the Plan shall not be made or commence as a result of the Participants Termination Date to any Participant who is a key employee (defined below) before the date that is not less than six months after the Participants Termination Date. For this purpose, a key employee includes a specified employee (as defined in Treasury Regulation Section 1.409A-1(i)) during the entire 12-month period determined by the Administrator ending with the annual date upon which key employees are identified by the Administrator, and also including any Employee identified by the Administrator in good faith with respect to any distribution as belonging to the group of identified key employees, to a maximum of 200 such key employees, regardless of whether such Employee is subsequently determined by the Employer, any governmental agency, or a court not to be a key employee. In the event amounts are payable to a key employee in installments in accordance with subsection 9.2, any installment to be paid in the first six months shall be delayed by six months, with all other installment payments payable as originally scheduled. To the extent not otherwise designated by the Employer in a separate document forming a part of the Plan applicable to all its nonqualified deferred compensation plans, the identification date for determining the Employers key employees is each December 31 (and the new key employee list is updated and effective each subsequent April 1). To the extent not otherwise designated by the Employer in a separate document forming a part of the Plan, the definition of compensation used to determine key employee status shall be determined under Treasury Regulation Section 1.415(c)-2(a). This subsection 9.3 is applicable only with respect to Employers whose stock is publicly traded on an established securities market (as defined in Treasury Regulation Section 1.409A-1(k)), and is not applicable to privately held Employers unless and until such Employers become publicly traded as defined in the Treasury regulations.
9.4 Mandatory Cash-Outs of Small Amounts
If the value of a Participants total Accounts at his Termination Date (or his death or other applicable distribution date), or at any time thereafter, together with the value of the Participants accounts under any other account balance plan maintained by the Employer or any member of the Employers controlled group (as defined in subsections 414(b) and (c) of the Code) is equal to or less than such amount as stated in the Adoption Agreement (which amount shall not exceed the limit described in Section 402(g) of the Code from time to time), the Accounts will be paid to the Participant (or, in the event of his death, his Beneficiary) in a single lump sum, notwithstanding any election by the Participant otherwise. Payments made under this subsection 9.4 on account of the Participants Termination Date shall be made within the 90-day period following the Participants Termination Date (provided, however, that if calculation of the amount of the payment is not administratively practicable due to events beyond the control of the Participant, the payment will be made as soon as administratively practicable for the Administrator to make such payment).
9.5 Designation of Beneficiary
Each Participant from time to time may designate any individual, trust, charity or other person or persons to whom the value of the Participants Accounts (plus any applicable Survivor Benefit, if elected by the Employer in the Adoption Agreement) will be paid in the event the Participant dies before receiving the value of all of his Accounts. A Beneficiary designation must be made in the manner required by the Administrator for this purpose. Primary and secondary Beneficiaries are permitted. A married participant designating a Beneficiary other than his Spouse must obtain the consent of his Spouse to such designation (in accordance with rules determined by the Administrator). Payments to the Participants Beneficiary(ies) shall be made in accordance with subsection 9.1, 9.2 or 9.4, as applicable, after the Administrator has received proper notification of the Participants death.
A Beneficiary designation will be effective only when the Beneficiary designation is filed with the Administrator while the Participant is alive, and a subsequent Beneficiary designation will cancel all of the Participants Beneficiary designations previously filed with the Administrator. Any designation or revocation of a Beneficiary shall be effective as only if it is received by the Administrator. Once received, such designation shall be effective as of the date the designation was executed, but without prejudice to the Administrator on account of any payment made before the change is recorded by the Administrator. If a Beneficiary dies before payment of the Participants Accounts have been made, the Participants Accounts shall be distributed in accordance with the Participants Beneficiary designation and pursuant to rules established by the Administrator. If a deceased Participant failed to designate a Beneficiary, or if the designated Beneficiary predeceases the Participant, the value of the Participants Accounts shall be payable to the Participants Spouse or, if there is none, to the Participants estate, or in accordance with such other equitable procedures as determined by the Administrator.
9.6 Reemployment
If a former Participant is rehired by an Employer, or any affiliate or subsidiary of the Employer described in Section 414(b) and (c) of the Code and Treasury Regulation Section 1.409A-1(h), regardless of whether he is rehired as an Eligible Individual (with respect to an Employee Participant), or a former Participant returns to service as a Board member, any payments being made to such Participant hereunder by virtue of his previous Termination Date shall continue to be made to him without regard to such rehire. If a former Participant is rehired by the Employer (with respect to an Employee Participant) or returns to service as a Board member, and in either case any payments to be made to the Participant by virtue of his previous Termination Date have not been made or commenced, any payments being made to such Participant hereunder by virtue of his previous Termination Date shall continue to be made to him without regard to such rehire or return to service. See subsections 4.1 and 4.2 of the Plan for special rules applicable to deferral elections for rehired or Re-Eligible Participants.
9.7 Special Distribution Rules
Except as otherwise provided herein and in Section 12, Account balances of Participants in this Plan shall not be distributed earlier than the applicable date or dates described in this
Section 9. Notwithstanding the foregoing, in the case of payments: (i) the deduction for which would be limited or eliminated by the application of Section 162(m) of the Code; (ii) that would violate securities or other applicable laws; or (iii) that would jeopardize the ability of the Employer to continue as a going concern in accordance with Code Section 409A and the regulations thereunder, deferral of such payments on a reasonably consistent basis for similarly situated Participants may be made by the Employer at the Employers discretion. In the case of a payment described in (i) above, the payment must be deferred either to a date in the first year in which the Employer or Administrator reasonably anticipates that a payment of such amount would not result in a limitation of a deduction with respect to the payment of such amount under Section 162(m), or the year in which the Participants Termination Date occurs. In the case of a payment described in (ii) or (iii) above, payment will be made at the earliest date in the first taxable year of the Employer in which the Employer or Administrator reasonably anticipates that the payment would not jeopardize the ability of the Employer to continue as a going concern in accordance with Code Section 409A and the regulations thereunder, or the payment would not result in a violation of securities or other applicable laws. Payments intended to pay employment taxes or payments made as a result of income inclusion of an amount in a Participants Accounts as a result of a failure to satisfy Section 409A of the Code shall be permitted at the Employer or Administrators discretion at any time and to the extent provided in Treasury Regulations under Section 409A of the Code and IRS Notice 2005-1, Q&A-15, and any applicable subsequent guidance. Employment taxes shall include Federal Insurance Contributions Act (FICA) tax imposed under Sections 3101, 3121(a) and 3121(v)(2) of the Code on compensation deferred under the Plan (the FICA Amount), the income tax imposed under Section 3401 of the Code or corresponding provisions of applicable state, local or foreign tax laws on the FICA Amount, and to pay the additional income tax under Section 3401 of the Code or corresponding provisions of applicable state, local or foreign tax laws attributable to the pyramiding Section 3401 wages and taxes. A distribution may be accelerated as may be necessary to comply with certain conflict of interest rules in accordance with Treasury Regulation Section 1.409A-3(j)(4)(iii). With respect to a subchapter S corporation, a distribution may be accelerated to avoid a nonallocation year under Code Section 409(p) in the discretion of the Employer or Administrator, provided that the amount distributed does not exceed 125 percent of the minimum amount of distribution necessary to avoid the occurrence of a nonallocation year, in accordance with Treasury Regulation Section 1.409A-3(j)(4)(x).
9.8 Distribution on Account of Unforeseeable Emergency
If elected by the Employer in the Adoption Agreement, if a Participant or Beneficiary incurs a severe financial hardship of the type described below, he may request an Unforeseeable Emergency Withdrawal, provided that the withdrawal is necessary in light of severe financial needs of the Participant. To the extent elected by the Employer in the Adoption Agreement, the ability to apply for an Unforeseeable Emergency Withdrawal may be restricted to Participants whose Termination Date has not yet occurred. Such a withdrawal shall not exceed the amount required (including anticipated taxes on the withdrawal) to meet the severe financial need and not reasonably available from other resources of the Participant (including reimbursement or compensation by insurance, cessation of deferrals under this Plan for the remainder of the Plan Year, and liquidation of the Participants assets, to the extent liquidation itself would not cause
severe financial hardship; provided, however, that the Participant is not required to take into account for these purposes any available distribution or loan from a qualified plan or another nonqualified deferred compensation plan). Each such withdrawal election shall be made at such time and in such manner as the Administrator shall determine, and shall be effective in accordance with such rules as the Administrator shall establish and publish from time to time. Severe financial needs are limited to amounts necessary for:
(a) A sudden unexpected illness or accident incurred by the Participant, his Spouse, Beneficiary under the Plan, or dependents (as defined in Code Section 152(a)).
(b) Uninsured casualty loss pertaining to property owned by the Participant.
(c) Other similar extraordinary and unforeseeable circumstances involving an uninsured loss arising from an event outside the control of the Participant.
Withdrawals of amounts under this subsection shall be paid to the Participant in a lump sum as soon as administratively feasible following receipt of the appropriate forms and information required by and acceptable to the Administrator.
9.9 Distribution Upon Change in Control
In the event of the occurrence of a Change in Control of the Employer or a member of the Employers controlled group (as designated by the Employer in the Adoption Agreement) to the extent permitted under Section 409A of the Code and the regulations and other guidance thereunder, distributions shall be made to Participants to the extent elected by the Employer in the Adoption Agreement, in the form elected by the Participants as if a Termination Date had occurred with respect to each Participant, or as otherwise specified by the Employer in the Adoption Agreement. The Change in Control shall relate to: (i) the corporation for whom the Participant is performing services at the time of the Change in Control event; (ii) the corporation that is liable for the payment from the Plan to the Participant (or all corporations so liable if more than one corporation is liable); (iii) a corporation that is a majority shareholder of a corporation described in (i) or (ii) above; or (iv) any corporation in a chain of corporations in which each such corporation is a majority shareholder of another corporation in the chain, ending in a corporation described in (i) or (ii) above, as elected by the Employer in the Adoption Agreement. A majority shareholder for these purposes is a shareholder owning more than 50% of the total fair market value and total voting power of such corporation. Attribution rules described in section 318(a) of the Code apply to determine stock ownership. Stock underlying a vested option is considered owned by the individual who holds the vested option. Notwithstanding the foregoing, if a vested option is exercisable for stock that is not substantially vested (as defined in section 1.83-3(b) and (j) of the Code), the stock underlying the option is not treated as owned by the individual who holds the option. If plan payments are made on account of a Change in Control and are calculated by reference to the value of the Employers stock, such payments shall be completed not later than 5 years after the Change in Control event. To the extent designated by the Employer in the Adoption Agreement, the Change in Control shall occur upon the date that: (v) a person or Group (as defined in Treasury Regulation Sections 1.409A-3(i)(5)(v)(B) and (vi)(D)) acquires more than 50% of the total fair market value or voting power
of stock of the corporation designated in (i) through (iv) above; (vi) a person or Group acquires ownership (effective control) of stock of the corporation with at least 30% of the total voting power of the corporation designated in (i) through (iv) above and as further limited by Treasury Regulation Section 1.409A-3(i)(5)(vi)); (vii) a majority of the board of directors of any corporation designated in (i) through (iv) above in which no other corporation is a majority shareholder is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the board as constituted prior to the appointment or election; or (viii) a person or Group acquires assets from the corporation designated in (i) through (iv) above having a total fair market value of at least 40% of the value of all assets of the corporation immediately prior to such acquisition; as designated by the Employer in the Adoption Agreement. For purposes of (vi) above, if any one person, or more than one person acting as a Group, is considered to own more than 50 percent of the total fair market value or total voting power of the stock of a corporation, the acquisition of additional stock by the same person or persons is not considered to cause a change in the ownership of the corporation (or to cause a change in the effective control of the corporation under (vi) above). An increase in the percentage of stock owned by any one person, or persons acting as a Group, as a result of a transaction in which the corporation acquires its stock in exchange for property will be treated as an acquisition of stock for purposes of this subsection. For purposes of (v) through (viii) above, a Change in Control shall be further limited in accordance with Treasury Regulation Sections 1.409A-3(i)(5)(v), (vi) and (vii). Distributions under this subsection shall be made as soon as administratively feasible following such Change in Control.
9.10 Supplemental Survivor Death Benefit
A supplemental survivor death benefit shall be paid to the Beneficiary of an eligible Participant who has satisfied the following criteria prior to his death:
(a) The Participant is eligible to participate in the Plan and, at the time of his death, had a current Account balance (regardless of whether or not the Participant actually was making Compensation Deferrals at the time of his death);
(b) The Participant was an active Employee with the Employer at the time of his death;
(c) The Participant completed and submitted an insurance application to the Administrator; and
(d) The Employer subsequently purchased an insurance policy on the life of the Participant, with a death benefit payable, which policy is in effect at the time of the Participants death.
Notwithstanding any provision of this Plan or any other document to the contrary, the supplemental survivor death benefit payable pursuant to this Subsection 9.10 shall be paid only if an insurance policy has been issued on the Participants life and such policy is in force at the time of the Participants death and the Employer shall have no obligation with respect to the payment of the supplemental survivor death benefit, or to maintain an insurance policy for any Participants.
SECTION 10 GENERAL PROVISIONS
10.1 Interests Not Transferable
The interests of persons entitled to benefits under the Plan are not subject to their debts or other obligations and, except as may be required by the tax withholding provisions of the Code or any states income tax act, may not be voluntarily or involuntarily sold, transferred, alienated, assigned, or encumbered; provided, however, that a Participants interest in the Plan may be transferable pursuant to a qualified domestic relations order, as defined in Section 414(p) of the Code to the extent designated by the Employer in the Adoption Agreement.
10.2 Employment Rights
The Plan does not constitute a contract of employment, and participation in the Plan shall not give any Employee the right to be retained in the employ of an Employer, nor any right or claim to any benefit under the Plan, unless such right or claim has specifically accrued under the terms of the Plan. The Employer expressly reserves the right to discharge any Employee at any time.
10.3 Litigation by Participants or Other Persons
If a legal action begun against the Administrator (or any member or former member thereof), an Employer, or any person or persons to whom an Employer or the Administrator has delegated all or part of its duties hereunder, by or on behalf of any person results adversely to that person, or if a legal action arises because of conflicting claims to a Participants or other persons benefits, the cost to the Administrator (or any member or former member thereof), the Employer or any person or persons to whom the Employer or the Administrator has delegated all or part of its duties hereunder of defending the action may be charged to the extent permitted by law to the sums, if any, which were involved in the action or were payable to the Participant or other person concerned.
10.4 Indemnification
To the extent permitted by law, the Employer shall indemnify each member of the Administrator committee, and any other employee or member of the Board with duties under the Plan, against losses and expenses (including any amount paid in settlement) reasonably incurred by such person in connection with any claims against such person by reason of such persons conduct in the performance of duties under the Plan, except in relation to matters as to which such person has acted fraudulently or in bad faith in the performance of duties. Notwithstanding the foregoing, the Employer shall not indemnify any person for any expense incurred through any settlement or compromise of any action unless the Employer consents in writing to the settlement or compromise.
10.5 Evidence
Evidence required of anyone under the Plan may be by certificate, affidavit, document, or other information which the person acting on it considers pertinent and reliable, and signed, made, or presented by the proper party or parties.
10.6 Waiver of Notice
Any notice required under the Plan may be waived by the person entitled to such notice.
10.7 Controlling Law
Except to the extent superseded by laws of the United States, the laws of the state indicated by the Employer in the Adoption Agreement shall be controlling in all matters relating to the Plan.
10.8 Statutory References
Any reference in the Plan to a Code section or a section of ERISA, or to a section of any other Federal law, shall include any comparable section or sections of any future legislation that amends, supplements, or supersedes that section.
10.9 Severability
In case any provision of the Plan shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining provisions of the Plan, and the Plan shall be construed and enforced as if such illegal and invalid provision had never been set forth in the Plan.
10.10 Action By the Employer or the Administrator
Any action required or permitted to be taken by the Employer under the Plan shall be by resolution of its Board of Directors (which term shall include any similar governing body for any Employer that is not a corporation), by resolution or other action of a duly authorized committee of its Board of Directors, or by action of a person or persons authorized by resolution of its Board of Directors or such committee. Any action required or permitted to be taken by the Administrator under the Plan shall be by resolution or other action of the Administrator or by a person or persons duly authorized by the Administrator.
10.11 Headings and Captions
The headings and captions contained in this Plan are inserted only as a matter of convenience and for reference, and in no way define, limit, enlarge, or describe the scope or intent of the Plan, nor in any way shall affect the construction of any provision of the Plan.
10.12 Gender and Number
Where the context permits, words in the masculine gender shall include the feminine and neuter genders, the singular shall include the plural, and the plural shall include the singular.
10.13 Examination of Documents
Copies of the Plan and any amendments thereto are on file at the office of the Employer where they may be examined by any Participant or other person entitled to benefits under the Plan during normal business hours.
10.14 Elections
Each election or request required or permitted to be made by a Participant (or a Participants Spouse or Beneficiary) shall be made in accordance with the rules and procedures established by the Employer or Administrator and shall be effective as determined by the Administrator. The Administrators rules and procedures may address, among other things, the method and timing of any elections or requests required or permitted to be made by a Participant (or a Participants Spouse or Beneficiary). All elections under the Plan shall comply with the requirements of the Uniformed Services Employment and Reemployment Rights Act of 1994, as amended (USERRA).
10.15 Manner of Delivery
Each notice or statement provided to a Participant shall be delivered in any manner established by the Administrator and in accordance with applicable law, including, but not limited to, electronic delivery.
10.16 Facility of Payment
When a person entitled to benefits under the Plan is a minor, under legal disability, or is in any way incapacitated so as to be unable to manage his financial affairs, the Administrator may cause the benefits to be paid to such persons guardian or legal representative. If no guardian or legal representative has been appointed, or if the Administrator so determines in its sole discretion, payment may be made to any person as custodian for such individual under any applicable state law, or to the legal representative of such person for such persons benefit, or the Administrator may direct the application of such benefits for the benefit of such person. Any payment made in accordance with the preceding sentence shall be a full and complete discharge of any liability for such payment under the Plan.
10.17 Missing Persons
The Employer and the Administrator shall not be required to search for or locate a Participant, Spouse, or Beneficiary. Each Participant, Spouse, and Beneficiary must file with the Administrator, from time to time, in writing the Participants, Spouses, or Beneficiarys post office address and each change of post office address. Any communication, statement, or notice
addressed to a Participant, Spouse, or Beneficiary at the last post office address filed with the Administrator, or if no address is filed with the Administrator, then in the case of a Participant, at the Participants last post office address as shown on the Employers records, shall be considered a notification for purposes of the Plan and shall be binding on the Participant and the Participants Spouse and Beneficiary for all purposes of the Plan.
If the Administrator is unable to locate the Participant, Spouse, or Beneficiary to whom a Participants Accounts are payable, the Participants Accounts shall be frozen as of the date on which distribution would have been completed under the terms of the Plan, and no further notional investment returns shall be credited thereto.
If a Participant whose Accounts were frozen (or his Beneficiary) files a claim for distribution of the Accounts within 7 years after the date the Accounts are frozen, and if the Administrator or Employer determines that such claim is valid, then the frozen balance that has become payable shall be paid by the Employer to the Participant or Beneficiary in a lump sum cash payment as soon as practicable thereafter. If the Administrator notifies a Participant, Spouse, or Beneficiary of the provisions of this Subsection, and the Participant, Spouse, or Beneficiary fails to claim the Participants, Spouses, or Beneficiarys benefits or make such persons whereabouts known to the Administrator within 7 years after the date the Accounts are frozen, the benefits of the Participant, Spouse, or Beneficiary may be disposed of, to the extent permitted by applicable law, by one or more of the following methods:
(a) By retaining such benefits in the Plan.
(b) By paying such benefits to a court of competent jurisdiction for judicial determination of the right thereto.
(c) By forfeiting such benefits in accordance with procedures established by the Administrator. If a Participant, Spouse, or Beneficiary is subsequently located, such benefits may be restored (without adjustment) to the Participant, Spouse, or Beneficiary under the Plan.
(d) By any equitable manner permitted by law under rules adopted by the Administrator.
10.18 Recovery of Benefits
In the event a Participant, Spouse, or Beneficiary receives a benefit payment from the Plan that is in excess of the benefit payment that should have been made to such Participant, Spouse, or Beneficiary, or in the event a person other than a Participant, Spouse, or Beneficiary receives an erroneous payment from the Plan, the Administrator or Employer shall have the right, on behalf of the Plan, to recover the amount of the excess or erroneous payment from the recipient. To the extent permitted under applicable law, the Administrator or Employer may, at its option, deduct the amount of such excess or erroneous payment from any future benefits payable to the applicable Participant, Spouse, or Beneficiary.
10.19 Effect on Other Benefits
Except as otherwise specifically provided under the terms of any other employee benefit plan of the Employer, a Participants participation in this Plan shall not affect the benefits provided under such other employee benefit plan.
10.20 Tax and Legal Effects
The Employer, the Administrator, and their representatives and delegates do not in any way guarantee the tax treatment of benefits for any Participant, Spouse, or Beneficiary, and the Employer, the Administrator, and their representatives and delegates do not in any way guarantee or assume any responsibility or liability for the legal, tax, or other implications or effects of the Plan. In the event of any legal, tax, or other change that may affect the Plan, the Employer may, in its sole discretion, take any actions it deems necessary or desirable as a result of such change.
SECTION 11 THE ADMINISTRATOR
11.1 Information Required by Administrator
Each person entitled to benefits under the Plan must file with the Administrator from time to time in writing such persons mailing address and each change of mailing address. Any communication, statement, or notice addressed to any person at the last address filed with the Administrator will be binding upon such person for all purposes of the Plan. Each person entitled to benefits under the Plan also shall furnish the Administrator with such documents, evidence, data, or information as the Administrator considers necessary or desirable for the purposes of administering the Plan. The Employer shall furnish the Administrator with such data and information as the Administrator may deem necessary or desirable in order to administer the Plan. The records of the Employer as to an Employees or Participants period of employment or membership on the Board, termination of employment or membership and the reason therefor, leave of absence, reemployment, and Compensation will be conclusive on all persons unless determined to the Administrators or Employers satisfaction to be incorrect.
11.2 Uniform Application of Rules
The Administrator shall administer the Plan on a reasonable basis. Any rules, procedures, or regulations established by the Administrator shall be applied uniformly to all persons similarly situated.
11.3 Review of Benefit Determinations
Benefits will be paid to Participants and their beneficiaries without the necessity of formal claims. Participants or their beneficiaries, however, may make a written request to the Administrator for any Plan benefits to which they may be entitled. Participants written request for Plan benefits will be considered a claim for Plan benefits, and will be subject to a full and fair review. If the claim is wholly or partially denied, the Administrator will furnish the claimant with a written notice of this denial. This written notice will be provided to the claimant within 90 days after the receipt of the claim by the Administrator. If notice of the denial of a claim is not furnished to the claimant in accordance with the above within 90 days, the claim will be deemed denied. The claimant will then be permitted to proceed to the review stage described in the following paragraphs.
Upon the denial of the claim for benefits, the claimant may file a claim for review, in writing, with the Administrator. The claim for review must be filed no later than 60 days after the claimant has received written notification of the denial of the claim for benefits or, if no written denial of the claim was provided, no later than 60 days after the deemed denial of the claim. The claimant may review all pertinent documents relating to the denial of the claim and submit any issues and comments, in writing, to the Administrator. If the claim is denied, the Administrator must provide the claimant with written notice of this denial within 60 days after the Administrators receipt of the claimants written claim for review. The Administrators decision on the claim for review will be communicated to the claimant in writing and will include specific references to the pertinent Plan provisions on which the decision was based. If
the Administrators decision on review is not furnished to the claimant within the time limitations described above, the claim will be deemed denied on review. If the claim for Plan benefits is finally denied by the Administrator (or deemed denied), then the claimant may bring suit in federal court. The claimant may not commence a suit in a court of law or equity for benefits under the Plan until the Plans claim process and appeal rights have been exhausted and the Plan benefits requested in that appeal have been denied in whole or in part. However, the claimant may only bring a suit in court if it is filed within 90 days after the date of the final denial of the claim by the Administrator.
With respect to claims for benefits payable as a result of a Participant being determined to be disabled, the Administrator will provide the claimant with notice of the status of his claim for disability benefits under the Plan within a reasonable period of time after a complete claim has been filed, but no later than 45 days after receipt of the claim for benefits. The Administrator may request an additional 30-day extension if special circumstances warrant by notifying the claimant of the extension before the expiration of the initial 45-day period. If a decision still cannot be made within this 30-day extension period due to circumstances outside the Plans control, the time period may be extended for an additional 30 days, in which case the claimant will be notified before the expiration of the original 30-day extension.
If the claimant has not submitted sufficient information to the Administrator to process his disability benefit claim, he will be notified of the incomplete claim and given 45 days to submit additional information. This will extend the time in which the Administrator has to respond to the claim from the date the notice of insufficient information is sent to the claimant until the date the claimant responds to the request. If the claimant does not submit the requested missing information to the Administrator within 45 days of the date of the request, the claim will be denied.
If a disability benefit claim is denied, the claimant will receive a notice which will include: (i) the specific reasons for the denial, (ii) reference to the specific Plan provisions upon which the decision is based, (iii) a description of any additional information the claimant might be required to provide with an explanation of why it is needed, and (iv) an explanation of the Plans claims review and appeal procedures, and (v) a statement regarding the claimants right to bring a civil action under Section 502(a) of ERISA following a denial on appeal.
The claimant may appeal a denial of a disability benefit claim by filing a written request with the Administrator within 180 days of the claimants receipt of the initial denial notice. In connection with the appeal, the claimant may request that the Plan provide him, free of charge, copies of all documents, records and other information relevant to the claim. The claimant may also submit written comments, records, documents and other information relevant to his appeal, whether or not such documents were submitted in connection with the initial claim. The Administrator may consult with medical or vocational experts in connection with deciding the claimants claim for benefits.
The Administrator will conduct a full and fair review of the documents and evidence submitted and will ordinarily render a decision on the disability benefit claim no later than 45
days after receipt of the request for review on appeal. If there are special circumstances, the decision will be made as soon as possible, but not later than 90 days after receipt of the request for review on appeal. If such an extension of time is needed, the claimant will be notified in writing prior to the end of the first 45-day period. The Administrators final written decision will set forth: (i) the specific reasons for the decision, (ii) references to the specific Plan provisions on which the decision is based, (iii) a statement that the claimant is entitled to receive, upon request and free of charge, access to and copies of all documents, records and other information relevant to the benefit claim, and (iv) a statement regarding the claimants right to bring a civil action under Section 502(a) of ERISA following a denial on appeal. The Administrators decision made in good faith will be final and binding.
11.4 Administrators Decision Final
Benefits under the Plan will be paid only if the Administrator decides in its sole discretion that a Participant or Beneficiary (or other claimant) is entitled to them. Subject to applicable law, any interpretation of the provisions of the Plan and any decisions on any matter within the discretion of the Administrator made by the Administrator or its delegate in good faith shall be binding on all persons. A misstatement or other mistake of fact shall be corrected when it becomes known and the Administrator shall make such adjustment on account thereof as it considers equitable and practicable.
SECTION 12 AMENDMENT AND TERMINATION
While the Employer expects and intends to continue the Plan, the Employer and the Administrator each reserve the right to amend the Plan at any time and for any reason, including the right to amend this Section 12 and the Plan termination rules herein; provided, however, that each Participant will be entitled to the amount credited to his Accounts immediately prior to such amendment. The power to amend the Plan includes (without limitation) the power to change the Plan provisions regarding eligibility, contributions, notional investments, vesting, and distribution forms, and timing of payments, including changes applicable to benefits accrued prior to the effective date of any such amendment; provided, however, that amendments to the Plan (other than amendments relating to Plan termination) shall not cause the Plan to provide for acceleration of distributions in violation of Section 409A of the Code and applicable regulations thereunder.
The Employer reserves the right to terminate the Plan at any time and for any reason; provided, however, that each Participant will be entitled to the amount credited to his Accounts immediately prior to such termination (as adjusted for notional income, losses, expenses, appreciation and depreciation occurring from the date of such termination until the date of distribution).
In the event that the Plan is terminated pursuant to this Section 12, the balances in affected Participants Accounts shall be distributed at the time and in the manner set forth in Section 9. Notwithstanding the foregoing, the Employer and the Administrator reserve the right to make all such distributions within the second twelve-month period commencing with the date of termination of the Plan; provided, however, that no such distribution will be made during the first twelve-month period following such date of Plan termination other than those that would otherwise be payable under Section 9 absent the termination of the Plan. In the event of a Plan termination due to a Change in Control of the Employer, distributions shall be made within 12 months of the date of the termination of the Plan.
I, Vincent D. Foster, certify that:
Dated this November 6, 2015.
By: | /s/ VINCENT D. FOSTER Vincent D. Foster Chairman and Chief Executive Officer |
I, Brent D. Smith, certify that:
Dated this November 6, 2015.
By: | /s/ BRENT D. SMITH Brent D. Smith Chief Financial Officer and Treasurer |
Certification of Chief Executive Officer
Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
In connection with the Quarterly Report of Main Street Capital Corporation (the "Registrant") on Form 10-Q for the quarter ended September 30, 2015 (the "Report"), as filed with the Securities and Exchange Commission on the date hereof, I, Vincent D. Foster, the Chairman and Chief Executive Officer of the Registrant, hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
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/s/ VINCENT D. FOSTER |
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Name: | Vincent D. Foster | ||
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Date: | November 6, 2015 |
Certification of Chief Financial Officer
Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
In connection with the Quarterly Report of Main Street Capital Corporation (the "Registrant") on Form 10-Q for the quarter ended September 30, 2015 (the "Report"), as filed with the Securities and Exchange Commission on the date hereof, I, Brent D. Smith, the Chief Financial Officer of the Registrant, hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
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/s/ BRENT D. SMITH |
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Name: | Brent D. Smith | ||
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Date: | November 6, 2015 |