Gladstone Investment Corporation Reports Financial Results for the Quarter Ended June 30, 2012

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-- Net Investment Income for the quarter ended June 30, 2012, was $3.2 million, or $0.15 per share.

-- Net Decrease in Net Assets Resulting From Operations for the quarter ended June 30, 2012, was $3.0 million, or $0.13 per share.

MCLEAN, Va., July 30, 2012 /PRNewswire/ --  Gladstone Investment Corporation (NASDAQ: GAIN) (the "Company") today announced earnings for the quarter ended June 30, 2012.  All per share references are per basic and diluted weighted average common share outstanding, unless noted otherwise.

(Logo: https://photos.prnewswire.com/prnh/20101005/GLADSTONEINVESTMENT)

Net Investment Income for the Quarter:  Net Investment Income for the quarters ended June 30, 2012 and 2011 was $3.2 million, or $0.15 per share, and $3.5 million, or $0.16 per share, respectively, a decrease in Net Investment Income of 7.5%.  The decrease in Net Investment Income was primarily due to an increase in dividend expense on the Company's 7.125% Series A Cumulative Term Preferred Stock ("Term Preferred Stock"), on which the Company made its first distribution in March 2012.  This decrease was partially offset by an increase in total investment income, driven by an increase in the size of the Company's loan portfolio and holding higher-yielding debt investments during the quarter ended June 30, 2012, as compared to the prior year period.

Net (Decrease) Increase in Net Assets Resulting from Operations for the Quarter:  Net (Decrease) Increase in Net Assets Resulting from Operations for the quarters ended June 30, 2012 and 2011 was ($3.0) million, or ($0.13) per share, and $4.2 million, or $0.19 per share, respectively. The Company recorded net unrealized depreciation on investments of $5.7 million for the quarter ended June 30, 2012, primarily due to unrealized depreciation experienced on certain control and affiliate investments. For the quarter ended June 30, 2011, the Company recorded a net realized and unrealized gain on investments of $0.7 million.

Investment Portfolio at Fair Value:  As of June 30, 2012, the Company's portfolio was fair valued at 83.2% of cost, as compared to 84.7% as of March 31, 2012.  The Company's aggregate investment portfolio depreciated during the quarter ended June 30, 2012, primarily due to the net unrealized depreciation experienced in certain control and affiliate investments. 

Net Asset Value:  Net asset value was $9.10 per common share outstanding at June 30, 2012, as compared to $9.38 per common share outstanding at March 31, 2012. 

Asset Characteristics:  Total assets were $350.4 million at June 30, 2012, as compared to $325.3 million at March 31, 2012.  At June 30, 2012, the Company had investments in 18 portfolio companies with an aggregate cost basis of $276.2 million and an aggregate fair value of $229.8 million.  As of June 30, 2012, the fair value of the Company's investment portfolio was comprised of 74.2% in debt securities and 25.8% in equity securities.  Additionally, the Company held $113.4 million in cash and cash equivalents at June 30, 2012, including $76.0 million from a short-term loan that was repaid subsequent to quarter end.

Investment Yield:  The weighted average yield on the Company's interest-bearing portfolio, excluding cash and cash equivalents, was 12.5% for the quarter ended June 30, 2012, as compared to 12.0% for the quarter ended June 30, 2011.  The increase in the weighted average yield for the quarter ended June 30, 2012, resulted primarily from the exits of lower interest-bearing debt investments and the addition of higher-yielding debt investments.

Highlights for the Quarter:  During the quarter ended June 30, 2012, the following significant events occurred:

  • New Investment:  In May 2012, the Company invested $9.5 million in a new affiliate investment, Packerland Whey Products, Inc. ("Packerland"), through a combination of debt and equity.  Packerland, headquartered in Luxemburg, Wisconsin, is a processor of raw fluid whey, specializing in the production of protein supplements for dairy and beef cattle.
  • Recurring Distributions:  The Company paid monthly cash distributions to preferred and common stockholders of $0.1484375 per preferred share and $0.05 per common share, respectively, for each of April, May and June 2012. 

Comments from the Company's President, Dave Dullum:  "Our origination platform continues to put quality new investments on the books.  We were able to deploy the capital we received from the Term Preferred Offering in March and expect to continue increasing our investment income over the fiscal year. We are excited about our investment pipeline and hope to deliver strong results during the fiscal year." 

Subsequent Events:  Subsequent to June 30, 2012, the following events occurred:

  • New Investment:  In July 2012, we invested $22.5 million in a new control investment, Ginsey Holdings, Inc. ("Ginsey"), through a combination of debt and equity.  Ginsey, headquartered in Bellmawr, New Jersey, designs and markets a broad line of branded juvenile and adult bath products.
  • Distributions Declared:  In July 2012, the Company's board of directors declared the following monthly cash distributions:

Record Date

Payment Date

Distribution per
Common Share

Distribution per
Term Preferred
Share

July 20, 2012

July 31, 2012

$

0.05

$

0.1484375

August 22, 2012

August 31, 2012

0.05

0.1484375

September 19, 2012

September 28, 2012

0.05

0.1484375

Total for the Quarter:

$

0.15

$

0.4453125










  • Co-Investment Order:  Subsequent to June 30, 2012, the Securities and Exchange Commission granted the Company relief sought in an exemptive application that expands its ability to co-invest in portfolio companies with certain affiliated investment funds, subject to certain circumstances, which the Company believes will enhance its ability to further its investment strategy and objectives.

Summary Information:  The following chart is a summary of some of the information reported above (dollars in thousands, except per share data) (unaudited):



June 30, 2012

June 30, 2011

Variance

% Variance

For the Quarter Ended:











Net investment income

$

3,238

$

3,500

$

(262)

(7.5)

%

Net (decrease) increase in net assets
      resulting from operations

(3,017)

4,187

(7,204)

NM

Weighted average yield on interest-
      bearing investments

12.5

%

12.0

%

0.5

%

4.2

Total dollars invested

$

12,765

$

22,459

$

(9,694)

(43.2)

Total dollars repaid

2,930

3,067

(137)

(4.5)















June 30, 2012

March 31, 2012

Variance

% Variance

As of:











Fair value as a percent of cost

83.2

%

84.7

%

(1.5)

%

(1.8)

%

Net asset value per share

$

9.10

$

9.38

$

(0.28)

(3.0)

Number of portfolio companies

18

17

1

5.9

Total assets at fair value

$

350,357

$

325,297

$

25,060

7.7

Conference Call for Stockholders:  The Company will hold its earnings release conference call Tuesday, July 31, 2012, at 8:30 a.m. EDT.  Please call (800) 860-2442 to enter the conference.  An operator will monitor the call and set a queue for any questions. A replay of the conference call will be available through August 31, 2012.  To hear the replay, please dial (877) 344-7529 and use conference number 10016022.  The replay will be available beginning approximately one hour after the call concludes.

The live audio broadcast of the Company's quarterly conference call will also be available online at www.GladstoneInvestment.com. The event will be archived and available for replay on the Company's website through October 1, 2012.

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 June 30, 2012, including the notes to the financial statements contained therein.  The Company has filed the Form 10-Q today with the Securities and Exchange Commission (the "SEC"), which you can find on the SEC's website at www.sec.gov or from the Company's website at www.GladstoneInvestment.com.  To obtain a paper copy, please contact the Company at 1521 Westbranch Drive, Suite 200, McLean, VA 22102.

About us:  Gladstone Investment Corporation is a publicly traded business development company that seeks to make debt and equity investments in small and mid-sized businesses in the United States in connection with acquisitions, changes in control and recapitalizations.  Including payments made through July 2012, the Company has paid 85 consecutive monthly cash distributions on its common stock, in addition to a bonus dividend paid on its common stock in March 2012.  Information on the business activities of all the Gladstone funds can be found at www.gladstonecompanies.com.

For Investor Relations inquiries related to any of the monthly dividend paying Gladstone funds, please visit www.gladstone.com.

The statements in this press release regarding the longer-term prospects of the Company and its management team may be deemed "forward-looking statements," as that term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  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 the current economic instability, the Company's ability to access debt and equity capital and those other factors listed under the caption "Risk Factors" in the Company's registration statement on Form N-2 (File No. 333-181879), filed with the SEC on June 6, 2012, as amended by pre-effective amendment no. 1 to the registration statement filed with the SEC on July 17, 2012. The risk factors set forth in the Form N-2 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
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)








June 30,

March 31,


2012

2012

ASSETS




Investments at fair value




     Control investments (Cost of $187,278 and $186,743, respectively)

$

160,434

$

157,544

     Affiliate investments (Cost of $79,342 and $70,015, respectively)

60,445

58,831

     Non-Control/Non-Affiliate investments (Cost of $9,610 and $9,637, respectively)

8,891

9,277

          Total investments at fair value (Cost of $276,230 and $266,395, respectively)

229,770

225,652

Cash and cash equivalents

113,431

91,546

Restricted cash

1,312

1,928

Interest receivable

981

1,250

Due from custodian

1,563

1,527

Deferred financing costs

2,592

2,792

Other assets

708

602

TOTAL ASSETS

$

350,357

$

325,297






LIABILITIES




Borrowings at fair value:




Short-term loan (Cost of $76,010 and $76,005, respectively)

$

76,010

$

76,005

Line of credit (Cost of $31,000 and $0, respectively)

31,492

—

Total borrowings (Cost of $107,010 and $76,005, respectively)

107,502

76,005

Mandatorily redeemable preferred stock, $0.001 par value per share, $25 liquidation
    preference  per share; 1,610,000 shares authorized, 1,600,000 shares issued and
    outstanding at June 30 and March 31, 2012

40,000

40,000

Accounts payable and accrued expenses

628

506

Fees due to Adviser

353

496

Fee due to Administrator

183

218

Other liabilities

804

856

TOTAL LIABILITIES

149,470

118,081

Commitments and contingencies




NET ASSETS

$

200,887

$

207,216






ANALYSIS OF NET ASSETS




Common stock, $0.001 par value per share, 100,000,000 shares authorized,
    22,080,133 shares issued and outstanding at June 30 and March 31, 2012,
    respectively

$

22

$

22

Capital in excess of par value

257,131

257,131

Cumulative net unrealized depreciation of investments

(46,460)

(40,743)

Cumulative net unrealized depreciation of other

(519)

(68)

Net investment income in excess of distributions

321

321

Accumulated net realized loss

(9,608)

(9,447)

TOTAL NET ASSETS

$

200,887

$

207,216






NET ASSET VALUE PER SHARE AT END OF PERIOD

$

9.10

$

9.38

 

GLADSTONE INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)






Three Months Ended June 30,


2012

2011

INVESTMENT INCOME




Interest income:




Control investments

$

3,430

$

2,634

Affiliate investments

1,771

1,368

Non-Control/Non-Affiliate investments

308

405

Cash and cash equivalents

2

4

Total interest income

5,511

4,411

Other income:




Control investments

394

835

Non-Control/Non-Affiliate investments

—

16

Total other income

394

851

Total investment income

5,905

5,262






EXPENSES




Base management fee

1,191

1,008

Incentive fee

—

19

Administration fee

183

151

Interest expense on borrowings

92

132

Dividends on mandatorily redeemable preferred stock

713

—

Amortization of deferred financing costs

200

108

Professional fees

194

209

Other general and administrative expenses

278

350

Expenses before credits from Adviser

2,851

1,977

Credits to fees

(184)

(215)

Total expenses net of credits to fees

2,667

1,762

NET INVESTMENT INCOME

$

3,238

$

3,500






REALIZED AND UNREALIZED (LOSS) GAIN




Net realized (loss) gain:




Control investments

(46)

5,734

Non-Control/Non-Affiliate investments

—

5

Other

(41)

(39)

Total net realized (loss) gain


(87)

5,700

Net unrealized appreciation (depreciation):




Control investments

2,354

(7,951)

Affiliate investments

(7,712)

2,079

Non-Control/Non-Affiliate investments

(359)

820

Other

(451)

39

Total net unrealized depreciation

(6,168)

(5,013)

Net realized and unrealized (loss) gain

(6,255)

687






NET (DECREASE) INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

$

(3,017)

$

4,187






NET (DECREASE) INCREASE IN NET ASSETS RESULTING FROM OPERATIONS PER COMMON SHARE:




Basic and Diluted

$

(0.13)

$

0.19






WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING:




Basic and diluted

22,080,133

22,080,133

 

GLADSTONE INVESTMENT CORPORATION
CONSOLIDATED FINANCIAL HIGHLIGHTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT DATA)
(UNAUDITED)






Three months ended June 30,


2012

2011

Per Common Share Data




Net asset value at beginning of period(A)

$

9.38

$

9.00

Net investment income(B)

0.15

0.16

Realized gain on sale of investments and other(B)

—

0.26

Net unrealized depreciation of investments and other(B)

(0.28)

(0.23)

Total from investment operations(B)

(0.13)

0.19

Cash distributions from net investment income(B)(C)

(0.15)

(0.13)

Net asset value at end of period(A)

$

9.10

$

9.06






Per share market value at beginning of period

$

7.57

$

7.79

Per share market value at end of period

7.39

7.14

Total return(D)

(0.38)

%

(6.67)

%

Shares outstanding at end of period

22,080,133

22,080,133






Statement of Assets and Liabilities Data:




Net assets at end of period

$

200,887

$

200,035

Average net assets(E)

204,858

198,324






Senior Securities Data(F):




Total borrowings, at cost

$

107,010

$

—

Mandatorily redeemable preferred stock

40,000

40,000

Asset coverage ratio(G)

230

%

537

%

Average coverage per unit(H)

$

2,300

$

5,371






Ratios/Supplemental Data:




Ratio of expenses to average net assets(I)(J)

5.57

%

3.99

%

Ratio of net expenses to average net assets(I)(K)

5.21

%

3.55

%

Ratio of net investment income to average net assets(I)

6.32

%

7.06

%







(A)

Based on actual shares of common stock outstanding at the end of the corresponding period.

(B)

Based on weighted average per basic share data.

(C)

Distributions are determined based on taxable income calculated in accordance with income tax regulations, which may differ from amounts determined under GAAP.

(D)

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. Total return does not take into account distributions that may be characterized as a return of capital.

(E)

Calculated using the average balance of net assets at the end of each month of the reporting period.

(F)

The Investment Company Act of 1940, as amended (the "1940 Act"), currently permits the Company to issue senior securities representing indebtedness and senior securities that are stock, to which the Company refers to as "senior securities."

(G)

As a business development company, the Company is generally required to maintain an asset coverage ratio (as defined in Section 18(h) of the 1940 Act) of at least 200% on its senior securities representing indebtedness and its senior securities that are stock.  The Company's mandatorily redeemable Term Preferred Stock is a senior security that is stock.

(H)

Asset coverage per unit is the asset coverage ratio expressed in terms of dollar amounts per one thousand dollars of indebtedness.

(I)

Amounts are annualized.

(J)

Ratio of expenses to average net assets is computed using expenses before credits from the Adviser.

(K)

Ratio of net expenses to average net assets is computed using total expenses net of credits to the management fee.










SOURCE Gladstone Investment Corporation

Released July 30, 2012