msif-20230331

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023


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: 814-00939

MSC Income Fund, Inc.

(Exact name of registrant as specified in its charter)


Maryland			45-3999996
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
1300 Post Oak Boulevard, 8th Floor Houston, TX			77056
(Address of principal executive offices)			(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)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol

Name of Each Exchange on Which

Registered

None

N/A

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 x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 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 x

The number of shares outstanding of the issuer’s common stock as of May 12, 2023 was 80,456,816.

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TABLE OF CONTENTS


PART I
FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements
	Consolidated Balance Sheets—March 3 1 , 202 3 (unaudited) and December 31, 20 22	1
	Consolidated Statements of Operations (unaudited)—Three months ended March 3 1 , 202 3 and 2 022	2
	Consolidated Statements of Changes in Net Assets (unaudited)—Three months ended March 31 , 202 3 and 20 22	3
	Consolidated Statements of Cash Flows (unaudited)—Three months ended March 3 1 , 202 3 and 20 22	4
	Consolidated Schedule of Investments (unaudited)—March 31 , 20 23	5
	Consolidated Schedule of Investments—December 31, 20 22	27
	Notes to Consolidated Financial Statements (unaudited)	45
	Consolidated Schedules of Investments in and Advances to Affiliates (unaudited)—Three months ended March 31, 2 023 and 2022	80
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	89
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	101
Item 4.	Controls and Procedures	102
PART II
OTHER INFORMATION
Item 1.	Legal Proceedings	103
Item 1A.	Risk Factors	103
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	103
Item 6.	Exhibits	105
	Signatures	106

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MSC INCOME FUND, INC.

Consolidated Balance Sheets

(in thousands, except shares and per share amounts)


	March 31, 2023		December 31, 2022
ASSETS	(Unaudited)
Investments at fair value:
Control investments (cost: $31,409 and $31,120 as of March 31, 2023 and December 31, 2022, respectively)	$	49,906	$	50,303
Affiliate investments (cost: $242,145 and $241,565 as of March 31, 2023 and December 31, 2022, respectively)	270,841		277,000
Non‑Control/Non‑Affiliate investments (cost: $789,422 and $787,201 as of March 31, 2023 and December 31, 2022, respectively)	746,347		740,840
Total investments (cost: $1,062,976 and $1,059,886 as of March 31, 2023 and December 31, 2022, respectively)	1,067,094		1,068,143
Cash and cash equivalents	27,308		21,312

Interest and dividend receivable	12,666		11,917
Receivable for securities sold	265		464
Deferred financing costs (net of accumulated amortization of $2,715 and $2,413 as of March 31, 2023 and December 31, 2022, respectively)	2,607		2,908
Prepaids and other assets	2,416		2,420
Total assets	$	1,112,356	$	1,107,164
LIABILITIES
Credit Facilities	$	323,688	$	321,688
Series A Notes due 2026 (par: $150,000 as of both March 31, 2023 and December 31, 2022)	148,931		148,856
Accounts payable and other liabilities	894		1,292

Interest payable	7,722		5,443
Dividend payable	14,026		12,816
Management and incentive fees payable	7,575		7,042
Deferred tax liability, net	1,221		362


Total liabilities	504,057		497,499
Commitments and contingencies (Note I)
NET ASSETS
Common stock, $0.001 par value per share (450,000,000 shares authorized; 80,150,887 and 80,105,999 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively)	80		80
Additional paid‑in capital	684,594		684,165



Total overdistributed earnings	(76,375)		(74,580)
Total net assets	608,299		609,665
Total liabilities and net assets	$	1,112,356	$	1,107,164
NET ASSET VALUE PER SHARE	$	7.59	$	7.61

The accompanying notes are an integral part of these consolidated financial statements

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MSC INCOME FUND, INC.

Consolidated Statements of Operations

(in thousands, except shares and per share amounts)

(Unaudited)


	Three Months Ended March 31,
	2023		2022
INVESTMENT INCOME:
Interest, fee and dividend income:
Control investments	$	809	$	1,001
Affiliate investments	7,894		5,206
Non‑Control/Non‑Affiliate investments	22,343		17,194
Total investment income	31,046		23,401
EXPENSES:
Interest	(8,334)		(4,529)
Base management fees	(4,855)		(4,990)
Incentive fees	(2,720)		—
Internal administrative services expenses	(2,038)		(1,181)




General and administrative	(880)		(1,038)
Total expenses before expense waivers	(18,827)		(11,738)
Waiver of internal administrative services expenses	1,889		1,030
Total expenses, net of expense waivers	(16,938)		(10,708)
NET INVESTMENT INCOME	14,108		12,693
NET REALIZED GAIN (LOSS):
Control investments	631		—
Affiliate investments	1,637		446
Non‑Control/Non‑Affiliate investments	1,164		(193)

Total net realized gain	3,432		253
NET UNREALIZED APPRECIATION (DEPRECIATION):
Control investments	(686)		177
Affiliate investments	1,321		77
Non‑Control/Non‑Affiliate investments	(4,774)		3,477
Total net unrealized appreciation (depreciation)	(4,139)		3,731
INCOME TAXES:
Federal and state income, excise and other taxes	(310)		(343)
Deferred taxes	(860)		(121)
Income tax provision	(1,170)		(464)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	12,231	$	16,213
NET INVESTMENT INCOME PER SHARE—BASIC AND DILUTED	$	0.18	$	0.16
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS PER SHARE—BASIC AND DILUTED	$	0.15	$	0.20
WEIGHTED-AVERAGE SHARES OUTSTANDING—BASIC AND DILUTED	80,135,988		79,861,392

The accompanying notes are an integral part of these consolidated financial statements

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MSC INCOME FUND, INC.

Consolidated Statements of Changes in Net Assets

(in thousands, except shares)

(Unaudited)


	Common Stock			Additional Paid-In Capital		Total Overdistributed Earnings		Total Net Asset Value
	Number of Shares	Par Value
Balances at December 31, 2021	79,826,605	$	80	$	682,426	$	(69,336)	$	613,170

Dividend reinvestment	533,062	—		4,212		—		4,212
Common stock repurchased	(489,031)	—		(3,790)		—		(3,790)
Net increase resulting from operations	—	—		—		16,213		16,213
Dividends to stockholders	—	—		—		(13,178)		(13,178)

Balances at March 31, 2022	79,870,636	$	80	$	682,848	$	(66,301)	$	616,627





















Balances at December 31, 2022	80,105,999	$	80	$	684,165	$	(74,580)	$	609,665

Dividend reinvestment	564,377	1		4,413		—		4,414
Common stock repurchased	(519,489)	(1)		(3,984)		—		(3,985)
Net increase resulting from operations	—	—		—		12,231		12,231
Dividends to stockholders	—	—		—		(14,026)		(14,026)

Balances at March 31, 2023	80,150,887	$	80	$	684,594	$	(76,375)	$	608,299

The accompanying notes are an integral part of these consolidated financial statements

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MSC INCOME FUND, INC.

Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)


	Three Months Ended March 31,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net increase in net assets resulting from operations	$	12,231	$	16,213
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:

Investments in portfolio companies	(24,971)		(53,859)
Proceeds from sales and repayments of debt investments in portfolio companies	23,663		73,498
Proceeds from sales and return of capital of equity investments in portfolio companies	6,290		—
Net unrealized (appreciation) depreciation	4,139		(3,731)
Net realized gain on the sale of portfolio investments	(3,432)		(253)

Amortization of deferred financing costs	376		325
Amortization of deferred offering costs	66		—
Accretion of unearned income	(2,711)		(1,337)
Payment-in-kind interest	(1,685)		(1,009)
Cumulative dividends	(45)		—
Deferred tax provision	860		121
Changes in other assets and liabilities:
Interest and dividend receivable	(749)		2,566

Prepaid and other assets	4		320

Management and incentive fees payable	533		(198)


Interest payable	2,279		1,217
Accounts payable and other liabilities	(398)		(1,270)
Net cash provided by operating activities	16,450		32,603
CASH FLOWS FROM FINANCING ACTIVITIES

Redemption of common stock	(3,984)		(3,790)
Payment of offering costs	(66)		—
Dividends paid	(8,404)		(7,762)
Proceeds from Credit Facilities	13,000		32,000
Repayments on Credit Facilities	(11,000)		(112,000)
Proceeds from Series A Notes due 2026	—