Exhibit
99.1
 |
NEWS RELEASE |
|
Contacts:
Main
Street Capital Corporation
Todd
A.
Reppert, President and CFO
treppert@mainstreethouston.com
713-350-6000
Dennard
Rupp Gray and Easterly, LLC
Ken
Dennard
ksdennard@drg-e.com
/ 713-529-6600
Augustine
Okwu
gokwu@drg-e.com
/ 404-532-0086
|
MAIN
STREET CAPITAL ANNOUNCES THIRD QUARTER 2007
FINANCIAL
RESULTS
HOUSTON,
TEXAS,November
12, 2007– Main Street Capital Corporation (NASDAQ-GS: MAIN)
(“Main Street”) announced today its financial results for the third quarter of
2007 and the nine months ended September 30, 2007. The reported
financial results for the third quarter of 2007 and the nine months ended
September 30, 2007, and corresponding 2006 periods, reflect the combined
results
of Main Street Mezzanine Fund, LP and its general partner (together, the
“Existing Portfolio”) prior to the consummation of Main Street’s initial public
offering and related formation transactions in October of 2007.
Third
Quarter 2007 Financial Highlights for the Existing Portfolio
|
·
|
Total
investment income of $3.1 million - 27.6% increase over prior
year
|
|
·
|
Net
investment income of $1.7 million - 41.9% increase over prior
year
|
|
·
|
Net
realized income of $3.9 million - 19.4% increase over prior
year
|
|
·
|
Net
Asset Value of $42.7 million at September 30, 2007 - $0.9 million
increase
over prior quarter end
|
|
·
|
Net
increase in members’ equity and partners’ capital of $2.7 million - 59.8%
decrease over prior year
|
|
·
|
Originated
$9.0 million of new investments
|
|
·
|
Realized
gains of $2.2 million from two
investments
|
Third
Quarter 2007 Results for the Existing Portfolio
Total
investment income increased 27.6% to $3.1 million in the third quarter of
2007
compared to $2.5 million in the corresponding period of 2006. This
comparable period increase was principally attributable to greater interest
income on higher levels of average debt investments and greater cash dividend
income from equity investments. Total investment income did not
materially change on a sequential basis compared with the second quarter
of
2007.
Net
investment income increased 41.9% to $1.7 million in the third quarter of
2007
compared to $1.2 million in the corresponding period of 2006. This
comparable period increase was attributable to higher levels of total investment
income, partially offset by greater interest expense due to higher average
outstanding SBIC debentures. Net investment income also sequentially
increased 79.8% compared with the second quarter of 2007. Net
investment income in the second quarter of 2007 was decreased by $0.7 million
in
professional costs related to the initial public offering.
Net
realized
income increased 19.4% to $3.9 million in the third quarter of 2007 compared
to
$3.3 million in the corresponding period of 2006. This comparable
period increase was attributable to higher levels of net investment income
and
greater net realized gains from investments. Net realized income also
sequentially increased 373.9% compared with the second quarter of
2007. Net realized income for the second quarter of 2007 was
decreased by $0.7 million in professional costs related to the initial public
offering.
Net
increase
in members’ equity and partners’ capital decreased 59.8% to $2.7 million in the
third quarter of 2007 compared to $6.7 million in the same period of
2006. The lower net increase in members’ equity and partners’ capital
was attributable to a decreased level of net change in unrealized appreciation
for the third quarter of 2007. The net change in unrealized
appreciation for the third quarter of 2007 was principally impacted by the
accounting reversal of approximately $1.0 million in previously unrealized
appreciation into realized gains. The net change in unrealized
appreciation during the third quarter of 2007 also included unrealized
appreciation on nine Existing Portfolio investments offset by unrealized
depreciation on four Existing Portfolio investments. The net increase
in members’ equity and partners’ capital also sequentially increased 103.5%
compared with the second quarter of 2007.
Liquidity
and Capital Resources
Based
on the
net cash proceeds from its initial public offering and available cash from
the
Existing Portfolio, Main Street currently estimates that it will be able
to fund
its investment activities for the next 12 months without requiring new debt
or
equity capital. However, this estimate will be impacted by, among
other things, the pace of investment originations and investment redemptions,
the level of cash from operations and amount of cash flow from realized gains,
and the level of dividends paid net of dividend reinvestment plan
participation.
As
of
September 30, 2007, the Existing Portfolio had $55.0 million of SBIC debenture
leverage outstanding. The SBIC debenture leverage bears an annual
weighted average interest rate of 5.8%, payable semiannually, and matures
ten
years from original issuance. Main Street will also seek to borrow
additional non-SBIC debt as reasonable and necessary to supplement the funding
of its investment activities.
Key
Portfolio Statistics (all as of September 30, 2007)
The
Existing
Portfolio had debt and equity investments in 27 portfolio companies with
the
average portfolio investment equaling less than 4% of the total portfolio
at
cost.
Approximately
89% of the Existing Portfolio’s total investments at cost were in the form of
secured debt investments, and approximately 93% of those secured debt
investments were secured by first priority liens on the assets of portfolio
companies. The annual weighted average effective yield on the
Existing Portfolio debt investments held at September 30, 2007 was 14.7%,
including amortization of deferred debt origination fees and original issue
discounts. Approximately 93% of the Existing Portfolio’s debt
investments were structured at fixed rates of interest with cash interest
payments generally due monthly.
Based
upon the information provided by
our portfolio companies, which we have not independently verified, our portfolio
companies had a weighted average net debt (interest-bearing debt less cash
and
cash equivalents) to EBITDA (Earnings Before Interest, Taxes, Depreciation
and
Amortization) ratio of approximately 3.2 to 1.0 and a total EBITDA to interest
expense ratio of approximately 2.2 to 1.0. (1) Excluding
all debt that was
junior to the Existing Portfolio’s debt position, these ratios were
approximately 2.6 to 1.0 and approximately 2.5 to 1.0, respectively. (1)
The
Existing
Portfolio had equity ownership in approximately 85% of its portfolio companies
and the average fully diluted equity ownership in these portfolio companies
was
approximately 22%.
Based
upon
Main Street’s internal investment rating system, with a rating of “1” being the
highest and a rating of “5” being the lowest, the weighted average investment
rating for the Existing Portfolio was 2.2 compared to 2.1 at June 30,
2007.
Portfolio
Activity in the Third Quarter of 2007
New
Investment Originations:
|
·
|
Main
Street provided “one-stop” financing to Universal Scaffolding &
Equipment, LLC (“Universal”) in the form of approximately $4.3 million in
secured debt and a $1.0 million equity investment, representing
an
approximate 19% fully diluted equity interest. Universal is in
the
business of manufacturing, sourcing and selling scaffolding, forming
and
shoring products, and custom fabricated cast iron products principally
for
the industrial and commercial construction and maintenance
markets.
|
|
·
|
Main
Street provided “one-stop” financing to Gulf Manufacturing, LLC (“Gulf”)
in the form of approximately $3.2 million in secured debt and a
$0.5
million equity investment, which, with nominally-priced equity
warrants
received with the debt investment, represents an approximate 27%
fully
diluted equity interest. Gulf is a manufacturer and distributor
of machined parts for industrial piping systems and energy sector
applications.
|
Key
Realized
Gains:
|
·
|
In
connection with a $20 million equity capital funding transaction,
Turbine
Air Systems, Ltd. (“TAS”) purchased the Existing Portfolio’s equity
warrant position in TAS for approximately $1.1 million in cash
resulting
in a realized gain of approximately $1.0
million.
|
|
·
|
In
connection with a recapitalization financing transaction, Technical
Innovations, LLC redeemed the Existing Portfolio’s equity and equity
warrant interests for approximately $1.6 million in cash resulting
in a
total realized gain of approximately $1.2
million.
|
Portfolio
Activity Subsequent to the Third Quarter of 2007
New
Investment Originations:
|
·
|
In
November 2007, Main Street provided “one-stop” financing to Hydratec
Holdings, LLC (“Hydratec”) in the form of approximately $7.5 million in
secured debt and a $1.8 million equity investment, representing
a 60%
fully diluted equity interest. Hydratec is engaged in the
design, sale and installation of agricultural irrigation products
and
systems throughout California.
|
Key
Realized
Gains:
|
·
|
In
connection with the previously announced sale in October 2007 of
All Hose
& Specialty, LLC, Main Street recognized a total realized gain of
approximately $2.3 million including structuring
fees.
|
Initial
Quarterly Dividend of $0.33 Per Share
On
November
5, 2007, Main Street declared its initial quarterly dividend of $0.33 per
share,
or the equivalent of an 8.8% annual yield based upon its $15.00 per share
initial public offering price. This initial quarterly dividend is
payable on November 30, 2007 to shareholders of record on November 16,
2007. The initial quarterly dividend is being paid based upon the
accumulated taxable income recognized by Main Street, including the long-term
capital gain realized from the previously announced sale of portfolio company,
All Hose & Specialty, LLC. Main Street estimates that approximately 67% of
this initial quarterly dividend will be designated as long-term capital gain
with the remainder representing ordinary taxable income.
Main
Street
estimates that its 2007 taxable income will exceed the initial quarterly
dividend declared on November 5, 2007. Main Street intends to carry
over (or “spill over”) any undistributed excess 2007 taxable income for
distribution to its shareholders in 2008 as permitted by the applicable
Regulated Investment Company tax provisions. Any undistributed excess
2007 taxable income will be subject to a 4% excise tax. The final
determination of the tax attributes for the initial dividend and the final
amount of any undistributed excess 2007 taxable income will be made after
the
close of the 2007 tax year and may differ from the estimates
above.
Third
Quarter 2007 Financial Results Conference Call / Webcast
Main
Street
has scheduled a conference call for Tuesday, November 13, 2007 at 10:00 a.m.
Eastern Time to discuss the Existing Portfolio’s third quarter 2007 financial
results.
You
can
access the conference call by dialing (303) 262-2140 or (800) 218-4007 and
asking for the Main Street Capital conference call at least 10 minutes prior
to
the start time. You can also access the conference call via a live webcast
by
logging into the investor relations section of the Main Street website at
www.mainstreethouston.com.
A
telephonic
replay of the conference call will be available through November 20, 2007
and
may be accessed by dialing (303) 590-3000 and using the passcode
11100148#. An audio archive will also be available on the investor
relations section of the Main Street website at www.mainstreethouston.com
shortly after the call and will be accessible for approximately 90
days.
For
a more
detailed discussion of the financial and other information included in this
press release, please also refer to the Main Street Form 10-Q to be filed
shortly with the Securities and Exchange Commission (www.sec.gov).
(1)
For purposes of
calculating these ratios, one portfolio company with significant cash in
excess
of its outstanding debt and one portfolio company with a net debt to EBITDA
ratio that exceeds 15.0 to 1.0 have both been excluded.
ABOUT
MAIN STREET CAPITAL CORPORATION
Main
Street
(www.mainstreethouston.com) is a principal investment firm that provides
long-term debt and equity capital to lower middle market companies. Main
Street’s investments are generally made to support management buyouts,
recapitalizations, growth financings and acquisitions of companies that operate
in diverse industry sectors and generally have annual revenues ranging from
$10
to $100 million. Main Street seeks to partner with entrepreneurs, business
owners and management teams and generally provides “one stop” financing
alternatives to its portfolio companies.
FORWARD-LOOKING
STATEMENTS
Main
Street
cautions that statements in this press release that are forward-looking and
provide other than historical information involve risks and uncertainties
that
may impact our future results of operations. The forward-looking
statements in this press release are based on current conditions and include
statements regarding our goals, beliefs, strategies and future operating
results
and cash flows, including but not limited to the equivalent annual yield
represented by our initial quarterly dividend; our estimates of allocation
of
our initial quarterly dividend between long-term capital gain and ordinary
taxable income; our estimate that 2007 taxable income will exceed our initial
quarterly dividend; our intention to carry over any excess 2007 taxable income
for distribution to shareholders in 2008; and our estimate regarding the
ability
to fund investment activities for the next 12 months. Although our management
believes that the expectations reflected in those forward-looking statements
are
reasonable, we can give no assurance that those expectations will prove to
have
been correct. Those statements are made based on various underlying
assumptions and are subject to numerous uncertainties and risks, including,
without limitation: our continued effectiveness in raising, deploying and
managing capital; adverse changes in the economy generally or in the industries
in which our portfolio companies operate; changes in laws and regulations
that
may adversely impact our operations or the operations of one or more of our
portfolio companies; the operating and financial performance of our portfolio
companies; retention of key investment personnel; competitive factors; and
such
other factors described under the captions “Special Note Regarding
Forward-Looking Statements” and “Risk Factors” included in our filings with the
Securities and Exchange Commission. We undertake no obligation to
update the information contained herein to reflect subsequently occurring
events
or circumstances, except as required by applicable securities laws and
regulations.
#
#
#
|
Main
Street Mezzanine Fund, LP
|
||||||||
|
Combined
Balance Sheets
|
||||||||
|
September
30,
|
December
31,
|
|||||||
|
2007
|
2006
|
|||||||
|
ASSETS
|
(Unaudited)
|
|||||||
|
Investments
at fair value:
|
||||||||
|
Control
investments (cost: $35,430,945 and $33,312,337 as of
|
||||||||
|
September
30, 2007 and December 31, 2006, respectively)
|
$ |
41,491,608
|
$ |
42,429,000
|
||||
|
Affiliate
investments (cost: $36,658,701 and $24,328,596 as of
|
||||||||
|
September
30, 2007 and December 31, 2006, respectively)
|
43,014,921
|
28,822,245
|
||||||
|
Non-Control/Non-Affiliate
investments (cost: $3,427,940 and
|
||||||||
|
$4,983,015
as of September 30, 2007 and December 31, 2006,
respectively)
|
3,787,940
|
4,958,183
|
||||||
|
Total
investments (cost: $75,517,586 and $62,623,948 as of
|
||||||||
|
September
30, 2007 and December 31, 2006, respectively)
|
88,294,469
|
76,209,428
|
||||||
|
Accumulated
unearned income
|
(2,613,344 | ) | (2,498,427 | ) | ||||
|
Total
investments net of accumulated unearned income
|
85,681,125
|
73,711,001
|
||||||
|
Cash
and cash equivalents
|
9,564,003
|
13,768,719
|
||||||
|
Deferred
costs related to initial public offering
|
1,399,206
|
-
|
||||||
|
Interest
receivable
|
596,538
|
527,597
|
||||||
|
Other
assets
|
109,396
|
102,461
|
||||||
|
Deferred
financing costs (net of accumulated amortization of $482,013
and
|
||||||||
|
$
343,846 as of September 30, 2007 and December 31, 2006,
respectively)…
|
1,435,562
|
1,333,654
|
||||||
|
Total assets
|
$ |
98,785,830
|
$ |
89,443,432
|
||||
|
LIABILITIES,
MEMBERS' EQUITY AND PARTNERS' CAPITAL
|
||||||||
|
SBIC
debentures
|
$ |
55,000,000
|
$ |
45,100,000
|
||||
|
Interest
payable
|
261,313
|
854,941
|
||||||
|
Accounts
payable related to initial public offering costs
|
619,431
|
-
|
||||||
|
Other
liabilities
|
246,895
|
215,960
|
||||||
|
Total liabilities
|
56,127,639
|
46,170,901
|
||||||
|
Members'
equity (General Partner)
|
3,709,906
|
3,849,796
|
||||||
|
Limited
Partners' capital
|
38,948,285
|
39,422,735
|
||||||
|
Total
members' equity and partners' capital
|
42,658,191
|
43,272,531
|
||||||
|
Total liabilities,
members' equity and partners' capital
|
$ |
98,785,830
|
$ |
89,443,432
|
||||
|
Main
Street Mezzanine Fund, LP
|
||||||||||||||||
|
Combined
Statement of Operations
|
||||||||||||||||
|
(Unauidited)
|
||||||||||||||||
|
For
the
Three Months
|
For
the
Nine Months
|
|||||||||||||||
|
Ended
September 30,
|
Ended
September 30,
|
|||||||||||||||
|
2007
|
2006
|
2007
(1)
|
2006
|
|||||||||||||
|
INVESTMENT
INCOME:
|
||||||||||||||||
|
Interest,
fee and dividend income:
|
||||||||||||||||
|
Control
investments
|
$ |
1,454,790
|
$ |
1,192,052
|
$ |
3,709,221
|
$ |
3,615,494
|
||||||||
|
Affiliate
investments
|
1,362,521
|
860,692
|
3,871,178
|
2,271,673
|
||||||||||||
|
Non-Control/Non-Affiliate
investments
|
151,114
|
202,426
|
568,527
|
941,657
|
||||||||||||
|
Total
interest, fee and dividend income
|
2,968,425
|
2,255,170
|
8,148,926
|
6,828,824
|
||||||||||||
|
Interest
from idle funds and other
|
158,958
|
196,709
|
533,318
|
565,410
|
||||||||||||
|
Total
investment income
|
3,127,383
|
2,451,879
|
8,682,244
|
7,394,234
|
||||||||||||
|
EXPENSES:
|
||||||||||||||||
|
Management
fees to affiliate
|
499,979
|
486,546
|
1,499,937
|
1,454,053
|
||||||||||||
|
Interest
|
849,299
|
684,172
|
2,396,541
|
2,033,063
|
||||||||||||
|
General
and administrative
|
32,961
|
51,008
|
204,296
|
155,655
|
||||||||||||
|
Professional
costs related to initial public offering
|
-
|
-
|
695,250
|
-
|
||||||||||||
|
Total
expenses
|
1,382,239
|
1,221,726
|
4,796,024
|
3,642,771
|
||||||||||||
|
NET
INVESTMENT INCOME
|
1,745,144
|
1,230,153
|
3,886,220
|
3,751,463
|
||||||||||||
|
NET
REALIZED GAIN (LOSS) FROM
|
||||||||||||||||
|
INVESTMENTS:
|
||||||||||||||||
|
Control
investments
|
1,191,463
|
87,816
|
1,802,713
|
263,449
|
||||||||||||
|
Affiliate
investments
|
953,334
|
1,940,794
|
1,209,513
|
1,940,794
|
||||||||||||
|
Non-Control/Non-Affiliate
investments
|
-
|
-
|
(270,538 | ) |
5,478
|
|||||||||||
|
Total
net realized gain (loss) from investments
|
2,144,797
|
2,028,610
|
2,741,688
|
2,209,721
|
||||||||||||
|
NET
REALIZED INCOME
|
3,889,941
|
3,258,763
|
6,627,908
|
5,961,184
|
||||||||||||
|
NET
CHANGE IN UNREALIZED
|
||||||||||||||||
|
APPRECIATION
(DEPRECIATION )
|
||||||||||||||||
|
FROM
INVESTMENTS:
|
||||||||||||||||
|
Control
investments
|
(1,366,000 | ) |
2,904,700
|
(2,007,250 | ) |
6,743,602
|
||||||||||
|
Affiliate
investments
|
150,000
|
413,000
|
813,822
|
263,827
|
||||||||||||
|
Non-Control/Non-Affiliate
investments
|
35,000
|
155,000
|
384,832
|
163,498
|
||||||||||||
|
Total
net change in unrealized appreciation
|
||||||||||||||||
|
(depreciation)
from investments
|
(1,181,000 | ) |
3,472,700
|
(808,596 | ) |
7,170,927
|
||||||||||
|
NET
INCREASE IN MEMBERS' EQUITY
|
||||||||||||||||
|
AND
PARTNERS' CAPITAL RESULTING
|
||||||||||||||||
|
FROM
OPERATIONS
|
$ |
2,708,941
|
$ |
6,731,463
|
$ |
5,819,312
|
$ |
13,132,111
|
||||||||
|
(1)
The
nine months ended September 30, 2007 operating results include
professional costs related the initial public
offering. These
|
||||||||||||||||
|
costs
were 29.0% of operating expenses for that period.
|
||||||||||||||||