Ladies and gentlemen, thank you for standing by, and welcome to the Main Street Capital's Fourth Quarter Earnings Conference Call. [Operator Instructions] Today's conference is being recorded, March 8, 2013. I would now like to turn the conference over to Ben Burnham with Dennard-Lascar Associates. Please go ahead.

Thank you, Alicia, and good morning, everyone. Thanks for joining us for the Main Street Capital Corporation Fourth Quarter and Year-End 2012 Earnings Conference Call. Joining me today on the call are Chairman, President and CEO, Vince Foster; Vice Chairman, Todd Reppert; and Chief Financial Officer, Dwayne Hyzak. Main Street issued a press release yesterday afternoon that details the company's quarterly and year-end financial and operating results. This document is available on the Investor Relations section of the company's website at www.mainstcapital.com. If you would like to be added to the company's e-mail list to receive press releases, please call Dennard-Lascar Associates at (713) 529-6600. A replay of today's call will be available beginning about an hour after the completion of the call and will remain available until March 15. Information on how to access the replay is included in yesterday's press release. We also advise you that this conference call is being broadcast live through an Internet webcast that can be accessed through the company's web page. Please note that information reported on this call speaks only as of today, March 8, 2013. And therefore, you are advised that time-sensitive information may no longer be accurate as of the time of any replay listening. Our conference call today will contain forward-looking statements. Many of these forward-looking statements can be identified by the use of the words such as anticipates, believes, expects, intends, will, should, may and similar expressions. These statements are based on management's estimates, assumptions and projections as of the date of this call, and they are not guarantees of future performance. Actual results may differ materially from the results expressed or implied in these statements as a result of risks, uncertainties and other factors, including, but not limited to, the factors set forth in the company's filings with the Securities and Exchange Commission, which can be found on the company's website or at www.sec.gov. Main Street assumes no obligation to update any of these statements unless required by law. During today's call, management will discuss non-GAAP financial measures, including distributable net investment income and distributable net realized income. Please refer to yesterday's press release, which can be found on the company's website for a reconciliation of these measures to the most directly comparable GAAP financial measures. Certain information discussed in this call including information relating to portfolio companies was derived from third-party sources and has not been independently verified. And now with that, I'd like to turn the call over to Vince.

Thanks, Ben, and thank you all for joining us today. I will comment on the performance of our investment portfolio, discuss our recent special dividend and our dividend outlook, highlight our origination activity and conclude by commenting on the current investing environment in our markets. Following my comments, Todd will cover our fourth quarter portfolio activity in more detail. Then, Dwayne will comment on our fourth quarter financial results, our current liquidity position and certain key portfolio statistics. After which, we will take your questions. Our investment portfolio continued to deliver strong performance during the fourth quarter. Our lower middle market investments appreciated during the quarter by $12.1 million on a net basis, with 27 of our investments appreciating during the quarter and 9 depreciating, and our middle market investments appreciated by $900,000 during the quarter. We finished the quarter with a net asset value per share of $18.59, a sequential increase of $1.10 per share over the last quarter. Our lower middle market portfolio companies ended the quarter with $118 million -- over $118 million in cash on their balance sheets and averaged a very conservative net debt-to-EBITDA ratio of 2x through our debt position and 2.2:1 including all debt. Earlier this week, we announced that our Board declared our regular monthly dividends for the second quarter of $0.155 a share payable in April, May and June, respectively. The second quarter dividends represent an increase of $0.015 or 3.3% over the first quarter and a 10.7% increase over the second quarter of last year. In setting our dividends and determining dividend increases, our Board targeted a payout percentage of recurring or core net investment income in the 90% to 95% range. In other words, while we generally expect to receive some level of extraordinary dividends, prepayment fees and similar…

Okay. Thanks, Vince, and good morning, everyone. We are very pleased to report another strong quarter and full year, which reflect our key long-term goals for sustainable growth and dividends per share, while also generating meaningful growth and book value per share. We think the combination of steady long-term growth in our regular dividend payout and meaningful book value per share growth are a two-pronged value proposition that differentiates Main Street and has a generated a premium total return realized by our investors. In the 5 years since our IPO, Main Street's performance has supported this value proposition in that Main Street has been able to cumulatively grow its announced quarterly dividends per share by 41% while also growing NAV per share from approximately $12.85 to $18.59 at December 31. These increases are even more notable given that 2 of the first 5 years as a public company involved a recessionary economic environment, and substantially all of the BDC sector experienced reductions in book value per share over this time frame. The cumulative dividend growth includes 11% growth and run rate regular dividends per share during calendar 2012, which followed 8% growth during 2011. In addition, as Vince discussed, Main Street has excess undistributed taxable income or spillover of approximately $1.28 per share at December 31, 2012, which allowed us to pay a $0.35 per share special dividend in January 2013. This is in addition to almost $3 per share of net unrealized appreciation within our investment portfolio at year end. Large spillover amount means that in addition to growing our regular dividends since the IPO, we have significantly outearned those dividends on a realized basis, which provides flexibility for additional future special dividends or other corporate uses. The cumulative NAV per share growth, since our IPO, includes 22% growth…

Thanks, Todd. As Vince and Todd previously mentioned, we're very happy to report our fourth quarter and full year 2012 results representing significant improvement from the prior year in all of our key financial metrics, including total investment income, net investment income, net asset value, realized gains and unrealized appreciation and the ratio of our operating expenses as a percentage of total assets. Our total investment income increased by 33% for the fourth quarter and 37% for the full year over the same periods in 2011 to a total of $26.2 million for the quarter and $90.5 million for the year. The increases were primarily driven by increased amounts of interest income associated with higher levels of portfolio debt investments, increased dividend activity from portfolio equity investments and increased fee income due to higher levels of transaction activity. The increase in investment income in the fourth quarter included an increase of approximately $1.7 million in investment income associated with higher levels of accelerated prepayment activity for certain middle market debt investments in comparison to prior year and special dividend activity of $1.4 million. Fourth quarter 2012 operating expenses, excluding noncash share-based compensation expense, increased by $100,000 over the fourth quarter prior year to a total of $7.3 million. The operating expense increase was a result of higher personnel costs and accrued incentive compensation, which were partially offset by decreases in other operating expenses compared to the fourth quarter of the prior year. Our total operating expenses, excluding interest expense as a percentage of our average total assets, which we believe is a key metric in evaluating our operating efficiency, was 1.8% on an annualized basis for the fourth quarter of 2012 compared to 2.3% on an annualized basis for the fourth quarter of 2011 and 1.8% for the full year…

[Operator Instructions] And our first question comes from the line of Robert Dodd with Raymond James Financial.

This is Bill. I appreciate you all taking my questions here. One, on the HMS income fund, could you give us an idea of how marketing efforts are going and capital raising activity is going for that fund, particularly compared to what you'd expected?

Yes. I'd have to say, it's definitely slower than what we expected. I think there's probably a number of reasons for it, and I think that it's not -- probably not unique to their efforts. And I think that historically, these types of fundraising activities always start out slow. So that's really about all we can say. We're really not all that close to the marketing. We're just kind of observing from afar. But it's definitely slow, and that's why we don't expect any meaningful activity at all in terms of fee income in calendar 2013. I believe that's correct in our model, right?

That's correct.

Yes. Because I think the story there is more 2014, Bill.

2014, okay. Good deal. And then as a follow-up, you said you had a portfolio of, I thought you said $118 million in cash on the balance sheet. I think that's up about $25 million from Q3. Could you walk us through the owners' psychology, if you could, about keeping more cash on hand versus paying down debt versus investing in their business?

Yes. As I think I've covered before, it's really something they don't have much choice about when you consider the lower middle market. We typically are the bank. Our credit facilities are typically unitranche, first lien, and we don't -- we're not really in the business of providing them revolvers where they can -- we can sweep their cash every day to pay down our lines. We typically have a provision that says if you want to pay down the credit line, we need you to do it in $250,000 chunks just because we don't really want or have that kind of back-office activity. So as a result, if you don't have a revolver, you really have to use a pile of cash and use that as a revolver. Would you guys describe it any differently?

No, I think -- Bill, this is Todd. I mean, to put it in perspective, $118 million over 59 companies on average is about $2 million per company. And so some are more, and some are less. But the $118 million is a bigger number probably than it is on any 1 balance sheet just for a little perspective. So it's...

It's really structural than psychological, I'd say.

And they can -- to go into my comments, I mean, they do -- it is a seasoned portfolio, so they do continue to deleverage and generate more and more free cash flow as time goes on. And so there will be questions of what they do with their free cash flow, but we think that's a good situation. It'll either increase our dividend income, it'll repay the debt and deleverage and de-risk the situation or they'll have growth opportunities for it, and we just think that's -- those kind of options are a great position for companies to be in.

[Operator Instructions] And our next question comes from the line of Bryce Rowe with Robert W. Baird. Bryce W. Rowe - Robert W. Baird & Co. Incorporated, Research Division: Just a couple questions. One, I think a couple of quarters ago, you guys talked about the mix between the middle market portfolio and the lower middle market portfolio being about 50-50 or that was the target. I think on a cost basis, we're roughly there today. Wanted to get any update from you as to what -- if there's any change in targeted mix from an investment portfolio perspective?

Yes. I mean, I think that we would view 50% as the upper limit for middle market that we would not expect to achieve. Right now, we're probably in the low- to mid-40s, I think.

It's in the high-40s.

High 40s, yes.

On a cost basis.

On a cost basis. On a cost basis?

Yes.

So -- but we're -- we want to be majority lower middle market, period. We think the middle market depending upon the market and that's both on the liability side and the asset side is a profitable place for us to operate in. But we never see it really getting to -- on a sustained basis, getting to half or certainly never seeing it getting over half.

Yes. And Bryce, just to put some numbers behind Vince's comments, if you look at the split between lower middle market and middle market at 12/31, on a cost basis, it's 52% lower middle market, 48% middle market, and fair value, it's 57% and 43%.

Yes. I don't -- to me, cost is not relevant. Yes. Bryce W. Rowe - Robert W. Baird & Co. Incorporated, Research Division: When you say, Vince, cost is irrelevant [ph] ...

The way we manage the business is what are the assets worth. Some of them are now 13 years old, so... Bryce W. Rowe - Robert W. Baird & Co. Incorporated, Research Division: Right, okay. And the second question was on investment pricing. Just wanted to get a sense for what you're seeing especially in the lower middle market there from an investment pricing perspective.

Sure. In the lower middle market, the answer is we're really not seeing much different pricing than we have historically. What you do find in the lower middle market, which is we're looking at companies with EBITDA from $3 million to $15 million, the $15 million EBITDA companies, because they start to be senior cash flow eligible from commercial banks, et cetera, the pricing gets more aggressive as you get to the top end of the lower middle market scale. But that's kind of always been the case, so we don't really see much difference there. We don't see much more competition. We continue to not really see the strategics as a meaningful threat because of Sarbanes or the public ones, et cetera, it's just really difficult for them to transact to lower middle market. What competition we do see that might drive valuations up is one of our -- is evidenced by the exits of some of our portfolio companies last year. Our companies, particularly the large ones, make nice add-ons for other sponsors' platform companies that they feel like they need to grow by acquisition in order to exit, and we're happy to oblige there. But we really don't see much difference in terms of the pricing we're -- we'd expect we're able to achieve. Bryce W. Rowe - Robert W. Baird & Co. Incorporated, Research Division: Okay. And then this is the last question, and I think you guys talked about earnings, 1Q earnings being $0.03 to $0.05 as fair above the dividend for the quarter. Just wondering does that include any kind of expectation of dividend or nonrecurring income? Or is that purely just accrued interest revenue, interest income?

I'd say it's our current expectation from what we've seen in the portfolio activity through today with an estimate for the month of March, so it includes our full expectations for the income statement for that quarter.

Our next question comes from the line of J.T. Rogers with Janney Capital Markets.

A quick question on when you guys are underwriting a new lower middle market investment, how does the pricing -- I guess first off, what kind of rate of return are you guys looking for on your equity investments? And how does the current lower middle market from an equity investment perspective look versus, say, where you where 5 years ago?

Right. So the pricing on the debt pretty much is 12% fixed is kind of what we start off with. And when we look at the investment and we say what kind of overall composite return would we need to take into account our debt equity, that's when we factor in the warrant percentage that we're demanding or the equity coinvestment that we're demanding. We're kind of agnostic as between the 2, and that's kind of how we approach it. And I would say, at the lower end of our lower middle market range, we want to be in the 20% or higher IRR. At the higher end of the range, we might end up in the high teens. Would you say that's accurate, Todd?

Yes. And it's -- now we do the models, J.T., but it's -- they're almost worthless the quarter after you close the deal. I mean, you...

You model like you project it.

Exactly. So I mean, we kind of look at it like what's the right balance of the right ownership percentage given the situation because we do customize versus expected IRRs and in many cases, lower cases, management cases, et cetera and then we kind of negotiate a number that we feel comfortable with. So we're not driven exclusively by a model that, I would say, Vince's numbers are right or, in our minds, trying to target.

And I would say, we've now hit the century mark in terms of lower middle market investments, and we went back and did some analysis because now we're in our second decade of doing this. Some of them are still in the portfolio, and what we found is maybe 1/4 of the companies underperform our return expectations and maybe 3/4 overperform. But it's -- you don't end up with necessarily a higher yield than you target because the ones that underperform take you down more significantly than the ones that overperform take you up. So we've been reasonably good at it taking into account the 100 deals, but we're not very -- we're not particularly good at hitting a target, taking into account 1 deal. That's just kind of the nature of the beast.

That's great. And then I guess the market right now, have you seen any change in pricing that sellers are demanding in the lower middle market? I think there's talk of -- there's been some multiple expansion in the upper middle market.

No. I mean, I said we're -- we've been transacting in the 4 to 5, 4 to 6x enterprise value range for a long time. And what determines where we fall within that range is if we're closing companies with $4 million of EBITDA or $12 million. That's kind of what we're seeing. Would you say that's right?

Yes, that's correct. I mean, the other thing you'd -- that you would take into consideration is that we offer a very customized financing solution, so it's not a situation where we are out actively competing in auctions for deals. We're providing a very customized solution that is specific to each individual company where valuation is not, just not the key metric that they're looking at.

So a lot of times, it's -- they're event-driven, time-sensitive transactions. Whoever can get there with the financing solution the fastest will frequently get the deal so...

Okay great. And then just one last question I guess. In the middle market, just wondering what you guys are seeing there from a competitive perspective. It sounds like things have gotten tighter. Credits spreads are falling and leverage levels are up. Just wondering if those trends have continued sort of into March or if they look to be going in the other direction.

We don't see it going in the other direction. I mean, we monitor it every day. The more liquid CLO-eligible end of that market is very, very competitive. There's several new -- I mean, there are all kinds of new entrants, as you read about the new CLOs being launched almost daily. So we're trying to seek refuge in the less liquid to illiquid smaller companies, smaller facility size end of that market, and we've been pretty successful there. We see less spread compression. We still do -- we still see spread compression on the new issues. You still see a lot of repricings. You see aggressive structures. I don't know when it's going to end. These things always tend to cycle back and forth. But I don't see it -- I don't really see it reversing. You hear some rumors that with some of these megadeals that they all [ph] -- gets [ph] done and some of this other stuff that might alter the supply-demand balance right now, or equation, but I haven't seen any evidence of it.

[Operator Instructions] And I'm showing no further questions in the queue at this time. I would like to turn the conference back to management for any closing remarks.

Great. Well, thank you all for joining us and supporting us, and we will see you again or talk to you again in about 60 days.

Ladies and gentlemen, this concludes our conference for today. Thank you for your participation. You may now disconnect.