MCLEAN, Va., Nov. 2, 2010 /PRNewswire-FirstCall/ -- Gladstone
Investment Corporation (Nasdaq: GAIN) (the "Company") today
announced earnings for the second quarter ended September 30, 2010. All per share
references are per basic and diluted weighted average common share
outstanding, unless noted otherwise.
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Net Investment Income for 3 Months: Net Investment
Income for the quarters ended September 30,
2010 and 2009 was $2.4
million, or $0.11 per share.
The net investment income was driven by income recognized
during the current quarter from the prepayment of success fees by
one of the Company's portfolio companies, Cavert II Holding
Corporation ("Cavert"), which was offset by lower interest income
resulting from a reduction in the size of the Company's investment
portfolio subsequent to September 30,
2009.
Net Investment Income for 6 Months: Net Investment
Income for the six months ended September
30, 2010 and 2009 was $6.6
million, or $0.30 per share,
and $4.8 million, or $0.22 per share, respectively, an increase in Net
Investment Income of 38.0%, or 36.4% per share. The increase in Net
Investment Income was primarily driven by income recognized during
the six months ended September 30,
2010 from the sale of one of the Company's portfolio
companies, A. Stucki Holding Corp., and income recognized from the
prepayment of success fees by Cavert, partially offset by lower
interest income resulting from a reduction in the size of the
Company's investment portfolio subsequent to September 30, 2009.
Net Decrease in Net Assets Resulting from Operations for 3
Months: Net Decrease in Net Assets Resulting from
Operations for the quarters ended September
30, 2010 and 2009 was $6.9
million, or $0.31 per share,
and $18.1 million, or $0.82 per share, respectively. The decrease in
the Net Decrease in Net Assets Resulting from Operations between
the quarter ended September 30, 2010
and the prior year's period was primarily due to the significant
unrealized depreciation recorded on the Company's investment
portfolio in the prior year period. The Company recorded
unrealized depreciation on investments of $9.3 million for the quarter ended September 30, 2010, compared to unrealized
depreciation of $20.3 million for the
prior year period, which was largely impacted by significant
devaluations, primarily in the Company's equity holdings of its
control investments.
Net Decrease in Net Assets Resulting from Operations for 6
Months: Net Decrease in Net Assets Resulting from
Operations for the six months ended September 30, 2010 and 2009 was $1.5 million, or $0.07 per share, and $27.3
million, or $1.24 per share,
respectively. The decrease in the Net Decrease in Net Assets
Resulting from Operations between the six months ended September 30, 2010 and the prior year period was
primarily due to the large net loss on the Company's investment
portfolio during the prior year period. The Company recorded
a net loss on investments of $8.1
million for the six months ended September 30, 2010, compared to a net loss on
investments of $31.9 million for the
prior year period, which was largely impacted by significant
devaluations, primarily in the Company's equity holdings of its
Control investments.
Estimated Fair Value: The aggregate investment
portfolio depreciated during the quarter ended September 30, 2010, primarily due to Galaxy Tool
Holding Corp., which underwent a restructuring that converted the
Company's senior subordinated term debt, with a fair value of
$12.1 million as of June 30, 2010, into preferred equity securities,
which subsequently were valued at $0.1
million as of September 30,
2010. As of September 30,
2010, the entire portfolio was fair valued at 75.6% of cost,
down from 90.9% as of March 31,
2010.
Net Asset Value: Net asset value was $8.43 per share outstanding at September 30, 2010, as compared to $8.74 per share outstanding at March 31, 2010.
Asset Characteristics: Total assets were
$213.3 million at September 30, 2010, as compared to $297.2 million at March
31, 2010. At September 30,
2010, the Company had investments in 15 portfolio companies
with an aggregate cost basis of $187.4
million and an aggregate fair value of $141.6 million. As of September 30, 2010, the Company's investment
portfolio at fair value was comprised of 81.4% in debt securities
and 18.6% in equity securities. Additionally, the Company
held $64.3 million in cash and cash
equivalents at September 30, 2010,
including $25.0 million from a
short-term loan that was subsequently repaid.
Investment Yield: The annualized weighted average
yield on the Company's portfolio, excluding cash and cash
equivalents, was 10.6% for the quarter ended September 30, 2010, as compared to 10.0% for the
quarter ended September 30, 2009.
The weighted average yield varies from period to period based
on the current stated interest rate on interest-bearing investments
and the amounts of loans for which interest is not accruing.
The increase in the weighted average yield for the quarter
ended September 30, 2010 resulted
primarily from the Company's sales of lower interest-bearing senior
loans subsequent to September 30,
2009.
Highlights for Quarter: During the quarter ended
September 30, 2010, the following
significant events occurred:
- Cavert Success Fees: Received from Cavert a
$0.8 million prepayment of success
fees, which is recognized into income, related to the senior term
debt and senior subordinated term debt investments.
- Investment Activity: Funded approximately
$3.6 million of additional
investments to existing portfolio companies and received scheduled
principal repayments of approximately $1.0
million.
- Short Term Investment: Purchased $25.0 million of short-term U. S. Treasury
securities on September 29, 2010
which matured on October 7,
2010.
- Distributions: Paid monthly distributions to
stockholders of $0.04 per share for
each of July, August and September
2010.
Comments from President Dave
Dullum: "We continue to devote management
resources to our existing portfolio as we explore further liquidity
events and provide financial support to those companies where
necessary. As a result, we believe our portfolio is sound with a
good mix of investments. We have a backlog of new investment
opportunities and hope to close on some of these, as demonstrated
by our recent investment in Venyu on October
29, during the rest of our fiscal year ending March 31, 2011."
Subsequent Events: After September 30, 2010, the following occurred:
- New Investment: On October 29,
2010, the Company invested $25.0
million in subordinated debt, preferred equity and common
equity in connection with the management-led buyout of Venyu
Solutions, Inc.
- Dividends Declared: Declared monthly cash
distributions to stockholders of $0.04 per common share for each of October,
November and December 2010.
Summary Information: The following chart is a
summary of some of the information reported above (dollars in
thousands, except per share data):
|
|
September
30, 2010
|
|
September
30, 2009
|
|
For quarter
ended:
|
|
|
|
|
|
|
Net investment income
|
|
$2,441
|
|
$2,371
|
|
Results of operation
|
|
(6,859)
|
|
(18,090)
|
|
Average yield on
portfolio
|
|
10.60%
|
|
10.03%
|
|
Total dollars
invested
|
|
$ 3,640
|
|
$318
|
|
Total dollars repaid
|
|
985
|
|
2,757
|
|
|
|
|
|
|
|
For 6 months
ended:
|
|
|
|
|
|
Net investment income
|
|
$6,647
|
|
$4,816
|
|
Results of operation
|
|
(1,492)
|
|
(27,280)
|
|
Average yield on
portfolio
|
|
10.51%
|
|
10.02%
|
|
Total dollars
invested
|
|
$4,479
|
|
$968
|
|
Total dollars repaid
|
|
40,415
|
|
9,482
|
|
|
|
|
|
|
|
|
|
September
30, 2010
|
|
March 31,
2010
|
|
As
of:
|
|
|
|
|
|
Fair value as a percent of
cost
|
|
75.60%
|
|
90.88%
|
|
Net asset value per
share
|
|
$ 8.43
|
|
$8.74
|
|
Number of investments
|
|
15
|
|
16
|
|
Total assets
|
|
$ 213,309
|
|
$297,161
|
|
|
|
|
|
|
|
Conference Call for Stockholders: The Company will hold a
conference call Wednesday, November 3,
2010 at 8:30 am EDT.
Please call (800) 860-2442 to enter the conference. An
operator will monitor the call and set a queue for the questions. A
replay of the conference call will be available through
December 3, 2010. To hear the
replay, please dial (877) 344-7529 and use playback conference
number 445298. The replay will be available approximately two
hours after the call concludes.
The live audio broadcast of Gladstone Investment's quarterly
conference call will be available online at
GladstoneInvestment.com. The event will be archived and available
for replay on the Company's website through January 2, 2011.
Warning: The financial statements below are without
footnotes, so readers should obtain and carefully review the
Company's Form 10-Q for the quarter ended September 30, 2010, including the footnotes to
the financial statements contained therein. The Company has filed
the Form 10-Q today with the SEC, which can be retrieved from the
SEC's website at sec.gov or from the Company's website at
GladstoneInvestment.com. A paper copy can be obtained free of
charge by writing to the Company at 1521 Westbranch Drive, Suite
200, McLean, VA 22102.
For further information contact Investor Relations at
703-287-5893.
The statements in this press release regarding the soundness
and mix of the Company's portfolio, the Company's projected
investment activities, the Company's ability to generate liquidity
events and provide financial support to existing portfolio
companies and other such statements are "forward-looking
statements." These forward-looking statements inherently involve
certain risks and uncertainties, although they are based on the
Company's current plans that are believed to be reasonable as of
the date of this press release. Factors that may cause the
Company's actual results to differ from these forward-looking
statements include, among others, the duration and effects of
current economic instability, the Company's ability to access debt
and equity capital and those factors listed under the caption "Risk
Factors" of the Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 2010, as filed
with the SEC on May 24, 2010
and the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2010, as filed
with the SEC on August 2, 2010. The
risk factors set forth in the Annual Report on Form 10-K and Form
10-Q under the caption "Risk Factors" are specifically incorporated
by reference into this press release. The Company undertakes no
obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise.
GLADSTONE
INVESTMENT CORPORATION
CONDENSED
CONSOLIDATED STATEMENTS OF ASSETS AND
LIABILITIES
(DOLLAR
AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
|
|
|
|
September
30,
|
|
March 31,
|
|
|
|
|
2010
|
|
2010
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
64,299
|
|
$
|
87,717
|
|
|
Investments at fair
value
|
|
|
|
|
|
|
Non-Control/Non-Affiliate investments (Cost of
$15,332 and $22,674,
respectively)
|
|
14,060
|
|
20,946
|
|
|
Control
investments (Cost of $126,153 and
$152,166, respectively)
|
|
95,050
|
|
148,248
|
|
|
Affiliate
investments (Cost of $45,928 and $52,727,
respectively)
|
|
32,504
|
|
37,664
|
|
|
Total investments (Cost of $187,413 and
$227,567, respectively)
|
|
141,614
|
|
206,858
|
|
|
Interest receivable
|
|
969
|
|
1,234
|
|
|
Due from Custodian
|
|
1,323
|
|
935
|
|
|
Deferred financing
fees
|
|
559
|
|
83
|
|
|
Prepaid assets
|
|
457
|
|
221
|
|
|
Other assets
|
|
4,088
|
|
113
|
|
|
TOTAL ASSETS
|
|
$
|
213,309
|
|
$
|
297,161
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
Borrowings at fair
value
|
|
|
|
|
|
|
Short-term loan (Cost
of $25,000 and $75,000,
respectively)
|
|
$
|
25,000
|
|
$
|
75,000
|
|
|
Line of credit (Cost
of $0 and $27,800,
respectively)
|
|
—
|
|
27,812
|
|
|
Total borrowings (Cost
of $25,000 and
$102,800, respectively)
|
|
25,000
|
|
102,812
|
|
|
Accounts payable and accrued
expenses
|
|
203
|
|
206
|
|
|
Fee due to
Administrator
|
|
261
|
|
149
|
|
|
Fees due to Adviser
|
|
395
|
|
721
|
|
|
Other liabilities
|
|
1,253
|
|
295
|
|
|
TOTAL LIABILITIES
|
|
27,112
|
|
104,183
|
|
|
NET ASSETS
|
|
$
|
186,197
|
|
$
|
192,978
|
|
|
|
|
|
|
|
|
|
ANALYSIS OF NET
ASSETS:
|
|
|
|
|
|
|
Common stock, $0.001 par value,
100,000,000 shares authorized, 22,080,133 shares issued and
outstanding at September 30, 2010 and March 31,
2010
|
|
$
|
22
|
|
$
|
22
|
|
|
Capital in excess of par
value
|
|
257,216
|
|
257,206
|
|
|
Net unrealized depreciation of
investment portfolio
|
|
(45,799)
|
|
(20,710)
|
|
|
Net unrealized depreciation of
derivatives
|
|
(77)
|
|
(39)
|
|
|
Net unrealized appreciation of
borrowings
|
|
—
|
|
(12)
|
|
|
Accumulated net realized
investment loss
|
|
(25,165)
|
|
(43,489)
|
|
|
TOTAL NET ASSETS
|
|
$
|
186,197
|
|
$
|
192,978
|
|
|
|
|
|
|
|
|
|
NET ASSETS PER
SHARE
|
|
$
|
8.43
|
|
$
|
8.74
|
|
|
|
|
|
|
|
|
|
|
|
|
GLADSTONE
INVESTMENT CORPORATION
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLAR
AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
|
|
|
|
Three Months
Ended
September
30,
|
|
Six Months
Ended
September
30,
|
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
INVESTMENT INCOME
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
|
|
|
|
|
|
|
|
Non-Control/Non-Affiliate
investments
|
|
$
|
380
|
|
$
|
619
|
|
$
|
784
|
|
$
|
1,436
|
|
|
Control
investments
|
|
2,124
|
|
2,870
|
|
5,144
|
|
5,741
|
|
|
Affiliate
investments
|
|
978
|
|
1,453
|
|
2,061
|
|
2,934
|
|
|
Cash and cash
equivalents
|
|
14
|
|
1
|
|
15
|
|
1
|
|
|
Total interest
income
|
|
3,496
|
|
4,943
|
|
8,004
|
|
10,012
|
|
|
Other income
|
|
805
|
|
—
|
|
3,546
|
|
—
|
|
|
Total investment
income
|
|
4,301
|
|
4,943
|
|
11,550
|
|
10,112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
Loan servicing
fee
|
|
666
|
|
938
|
|
1,490
|
|
2,006
|
|
|
Base management
fee
|
|
303
|
|
164
|
|
503
|
|
477
|
|
|
Incentive fee
|
|
—
|
|
—
|
|
1,052
|
|
—
|
|
|
Administration
fee
|
|
261
|
|
198
|
|
439
|
|
371
|
|
|
Interest
expense
|
|
149
|
|
552
|
|
423
|
|
1,255
|
|
|
Amortization of deferred
financing fees
|
|
103
|
|
438
|
|
267
|
|
751
|
|
|
Professional
fees
|
|
98
|
|
118
|
|
222
|
|
320
|
|
|
Stockholder related
costs
|
|
115
|
|
146
|
|
220
|
|
227
|
|
|
Insurance
expense
|
|
72
|
|
62
|
|
144
|
|
119
|
|
|
Directors fees
|
|
59
|
|
48
|
|
109
|
|
99
|
|
|
Other expenses
|
|
95
|
|
73
|
|
214
|
|
137
|
|
|
Expenses before credits
from Adviser
|
|
1,921
|
|
2,737
|
|
5,083
|
|
5,762
|
|
|
Credits to fees from
Adviser
|
|
(61)
|
|
(165)
|
|
(180)
|
|
(466)
|
|
|
Total expenses net of
credits to fees
|
|
1,860
|
|
2,572
|
|
4,903
|
|
5,296
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INVESTMENT INCOME
|
|
2,441
|
|
2,371
|
|
6,647
|
|
4,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REALIZED AND UNREALIZED GAIN
(LOSS) ON:
|
|
|
|
|
|
|
|
|
|
|
Realized gain (loss) on
sale of investments
|
|
—
|
|
—
|
|
16,976
|
|
(34,605)
|
|
|
Realized loss on
termination of derivative
|
|
—
|
|
—
|
|
—
|
|
(53)
|
|
|
Net unrealized
appreciation (depreciation) of Non-Control/Non-Affiliate
investments
|
|
31
|
|
(1,514)
|
|
456
|
|
35,214
|
|
|
Net unrealized
depreciation of Control investments
|
|
(9,723)
|
|
(14,900)
|
|
(27,184)
|
|
(26,381)
|
|
|
Net unrealized
appreciation (depreciation) of Affiliate investments
|
|
401
|
|
(3,853)
|
|
1,639
|
|
(6,119)
|
|
|
Net unrealized
(depreciation) appreciation of derivatives
|
|
(9)
|
|
(16)
|
|
(38)
|
|
26
|
|
|
Net unrealized
(depreciation) appreciation of borrowings
|
|
—
|
|
(178)
|
|
12
|
|
(178)
|
|
|
Net loss on investments,
derivatives and borrowings
|
|
(9,300)
|
|
(20,461)
|
|
(8,139)
|
|
(32,096)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS
|
|
$
|
(6,859)
|
|
$
|
(18,090)
|
|
$
|
(1,492)
|
|
$
|
(27,280)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS PER COMMON SHARE:
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted
|
|
$
|
(0.31)
|
|
$
|
(0.82)
|
|
$
|
(0.07)
|
|
$
|
(1.24)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE SHARES OF
COMMON STOCK OUTSTANDING:
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted
average shares
|
|
22,080,133
|
|
22,080,133
|
|
22,080,133
|
|
22,080,133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GLADSTONE
INVESTMENT CORPORATION
CONDENSED
CONSOLIDATED FINANCIAL HIGHLIGHTS
(DOLLAR
AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT
DATA)
(UNAUDITED)
|
|
|
Three Months
Ended
September 30,
|
|
Six Months
Ended
September 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
Per Share Data
(1)
|
|
|
|
|
|
|
|
|
|
Net asset value at beginning of
period
|
$
|
8.86
|
|
$
|
9.19
|
|
$
|
8.74
|
|
$
|
9.73
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from investment
operations
|
|
|
|
|
|
|
|
|
|
Net investment
income(2)
|
0.11
|
|
0.11
|
|
0.30
|
|
0.22
|
|
|
Realized gain (loss) on
exit(2)
|
—
|
|
—
|
|
0.77
|
|
(1.57)
|
|
|
Net unrealized
depreciation(2)
|
(0.42)
|
|
(0.93)
|
|
(1.14)
|
|
(0.11)
|
|
|
Total from investment
operations
|
(0.31)
|
|
(0.82)
|
|
(0.07)
|
|
(1.24)
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions
from:
|
|
|
|
|
|
|
|
|
|
Net investment
income
|
(0.12)
|
|
(0.12)
|
|
(0.24)
|
|
(0.24)
|
|
|
Total
distributions(3)
|
(0.12)
|
|
(0.12)
|
|
(0.24)
|
|
(0.24)
|
|
|
|
|
|
|
|
|
|
|
|
|
Shelf registration offering
costs
|
|
—
|
|
|
(0.01)
|
|
|
—
|
|
|
(0.01)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value at end of
period
|
$
|
8.43
|
|
$
|
8.24
|
|
$
|
8.43
|
|
$
|
8.24
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share market value at
beginning of period
|
$
|
5.62
|
|
|
4.88
|
|
$
|
6.01
|
|
$
|
3.67
|
|
|
Per share market value at end of
period
|
6.70
|
|
4.85
|
|
6.70
|
|
4.85
|
|
|
Total return(4)
|
21.47%
|
|
1.75%
|
|
15.93%
|
|
39.03%
|
|
|
Shares outstanding at end of
period
|
22,080,133
|
|
22,080,133
|
|
22,080,133
|
|
22,080,133
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Assets and
Liabilities Data:
|
|
|
|
|
|
|
|
|
|
Net assets at end of
period
|
$
|
186,197
|
|
$
|
182,045
|
|
$
|
186,197
|
|
$
|
182,045
|
|
|
Average net assets(5)
|
191,384
|
|
195,005
|
|
192,239
|
|
202,596
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Securities
Data:
|
|
|
|
|
|
|
|
|
|
Total borrowings
|
$
|
25,000
|
|
$
|
111,278
|
|
$
|
25,000
|
|
$
|
111,278
|
|
|
Asset coverage
ratio(6)
|
715%
|
|
262%
|
|
715%
|
|
262%
|
|
|
Asset coverage per
unit(7)
|
$
|
7,153
|
|
$
|
2,622
|
|
$
|
7,153
|
|
$
|
2,622
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios/Supplemental
Data:
|
|
|
|
|
|
|
|
|
|
Ratio of expenses to average net
assets(8), (9)
|
4.01%
|
|
5.61%
|
|
5.29%
|
|
5.69%
|
|
|
Ratio of net expenses to average
net assets(8), (10)
|
3.89%
|
|
5.28%
|
|
5.10%
|
|
5.23%
|
|
|
Ratio of net investment income
to average net assets(8)
|
5.10%
|
|
4.86%
|
|
6.92%
|
|
4.75%
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Based on actual shares
outstanding at the end of the corresponding period.
|
|
(2) Based on weighted average
basic per share data.
|
|
(3) Distributions are determined
based on taxable income calculated in accordance with income tax
regulations which may differ from amounts determined under
accounting principles generally accepted in the United States of
America.
|
|
(4) Total return equals the
change in the market value of the Company's common stock from the
beginning of the period, taking into account dividends reinvested
in accordance with the terms of the Company's dividend reinvestment
plan.
|
|
(5) Calculated using the average
of the balance of net assets at the end of each month of the
reporting period.
|
|
(6) As a business development
company, the Company is generally required to maintain an asset
coverage ratio of at least 200% of total consolidated assets, less
all liabilities and indebtedness not represented by senior
securities, to total borrowings and guaranty
commitments.
|
|
(7) Asset coverage per unit is
the asset coverage ratio expressed in terms of dollar amounts per
one thousand dollars of indebtedness.
|
|
(8) Amounts are
annualized.
|
|
(9) Ratio of expenses to average
net assets is computed using expenses before credits from the
Adviser.
|
|
(10) Ratio of net expenses to
average net assets is computed using total expenses net of credits
to the management fee.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SOURCE Gladstone Investment Corporation