Exhibit 99.1

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Gladstone Investment Corporation Reports Financial Results for the

Quarter Ended December 31, 2011

 

   

Net Investment Income for the three and nine months ended December 31, 2011, was $3.4 million and $10.3 million, or $0.16 and $0.46 per share, respectively.

 

   

Net Increase in Net Assets Resulting From Operations for the three and nine months ended December 31, 2011, was $5.5 million and $22.4 million, or $0.25 and $1.01 per share, respectively.

 

 

McLean, VA, February 1, 2012: Gladstone Investment Corporation (NASDAQ: GAIN) (the “Company”) today announced earnings for the third quarter ended December 31, 2011. All per share references are per basic and diluted weighted average common share outstanding, unless noted otherwise.

Net Investment Income for Three Months: Net Investment Income for the quarters ended December 31, 2011 and 2010 was $3.4 million, or $0.16 per share, and $7.6 million, or $0.34 per share, respectively, a decrease in Net Investment Income of 54.7%. The decrease in Net Investment Income was primarily due to a significant amount of dividend and success fee income recorded in connection with the sale of Chase II Holding Corp. (“Chase”) during the quarter ended December 31, 2010, partially offset by a decrease in the incentive fee paid to Gladstone Management Corporation (the “Adviser”) when compared to the prior year period.

Net Investment Income for Nine Months: Net Investment Income for the nine months ended December 31, 2011 and 2010 was $10.3 million, or $0.46 per share, and $14.2 million, or $0.65 per share, respectively, a decrease in Net Investment Income of 28.0%. The decrease in Net Investment Income was primarily due to a significant amount of dividend and success fee income recorded in the prior year period as part of the exits of A. Stucki Corp. (“A. Stucki”) and Chase, partially offset by a decrease in the incentive fee paid to the Adviser when compared to the prior year period.

Net Increase in Net Assets Resulting from Operations for Three Months: Net Increase in Net Assets Resulting from Operations for the quarters ended December 31, 2011 and 2010 was $5.5 million, or $0.25 per share, and $15.1 million, or $0.69 per share, respectively. The Company recorded a net gain on investments of $1.7 million for the quarter ended December 31, 2011, primarily due to unrealized appreciation experienced on certain control investments. For the quarter ended December 31, 2010, the Company recorded a net gain on investments of $7.5 million, primarily due to the gain realized on the Chase exit, as well as unrealized appreciation experienced on certain control and affiliate investments.

Net Increase in Net Assets Resulting from Operations for Nine Months: Net Increase in Net Assets Resulting from Operations for the nine months ended December 31, 2011 and 2010 was $22.4 million, or $1.01 per share, and $13.6 million, or $0.62 per share, respectively. The Company recorded a net gain on investments of $12.1 million for the nine months ended December 31, 2011, primarily due to the gain realized on the partial exit of the Company’s investment in Cavert II Holding Corp., as well as unrealized appreciation experienced on certain control and affiliate investments. For the nine months ended December 31, 2010, the Company recorded a net loss on investments of $0.6 million, primarily due to the unrealized depreciation recorded related to Galaxy Tool Holding Corp., which experienced decreased performance and went through a restructure, partially offset by unrealized appreciation on certain control and affiliate investments.

Investment Portfolio at Fair Value: The Company’s aggregate investment portfolio appreciated during the quarter ended December 31, 2011, primarily due to the net unrealized appreciation

 

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experienced in certain control investments. As of December 31, 2011, the entire portfolio was fair valued at 86.0% of cost, as compared to 77.7% as of March 31, 2011. The increase was primarily due to net unrealized appreciation experienced on certain control and affiliate investments.

Net Asset Value: Net asset value was $9.58 per share outstanding at December 31, 2011, as compared to $9.00 per share outstanding at March 31, 2011.

Asset Characteristics: Total assets were $318.6 million at December 31, 2011, as compared to $241.1 million at March 31, 2011. At December 31, 2011, the Company had investments in 17 portfolio companies with an aggregate cost basis of $263.6 million and an aggregate fair value of $226.8 million. As of December 31, 2011, the Company’s investment portfolio at fair value was comprised of 74.1% in debt securities and 25.9% in equity securities. Additionally, the Company held $86.5 million in cash and cash equivalents at December 31, 2011, 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 December 31, 2011, as compared to 11.5% for the prior year quarter. The increase in the weighted average yield for the quarter ended December 31, 2011, 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 December 31, 2011, the following significant events occurred:

 

   

New Investment: In December 2011, the Company invested $19.6 million in a new Affiliate investment, Channel Technologies Group, LLC, consisting of senior debt and preferred and common equity.

 

   

Line of Credit Increase and Extension: In October 2011, the Company entered into an agreement to increase its line of credit (the “Credit Facility”) from $50.0 million to $60.0 million. The Credit Facility was arranged by Branch Banking and Trust Company as administrative agent and Key Equipment Finance, Inc., and may be expanded up to a total of $175.0 million through the addition of other lenders. The Credit Facility matures on October 25, 2014, and, if not renewed or extended by that date, all principal and interest will be due and payable on or before October 25, 2015. Advances under the Credit Facility will generally bear interest at 30-day LIBOR plus 3.75% per annum.

 

   

Investment Payoffs:

 

   

In October 2011, the Company received full repayment of its senior subordinated loan to Quench Holdings Corp. (“Quench”), resulting in gross proceeds of $8.0 million. At June 30, 2011, this loan was valued at 74.0% of cost. The Company still holds preferred and common equity in Quench.

 

   

In December 2011, the Company received full repayment of senior notes it held of American Greetings Corporation, as well as a prepayment penalty, resulting in gross proceeds of $3.1 million. The Company no longer holds any non-proprietary investments.

 

   

Investment Sale: In November 2011, the Company sold its investment in Neville Limited (“Neville”) for gross proceeds of approximately $0.3 million, resulting in a realized loss of $0.3 million on the sale. Neville owned property the Company received in connection with the A. Stucki sale in June 2010.

 

   

Investment Restructure: In December 2011, the Company restructured its investment in Country Club Enterprises (“CCE”), converting $4.0 million of senior subordinated debt into preferred shares of CCE in a non-cash transaction. The Company also received additional preferred shares as consideration for past-due interest and other receivables owed from CCE. No income was recognized with this transaction and CCE remains on non-accrual.

 

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Distributions: The Company paid monthly cash distributions to stockholders of $0.05 per common share for each of October, November and December 2011.

Comments from the Company’s President, Dave Dullum: “We continue to be pleased with our overall liquidity and availability for new investments. Our investment activity is steady, and we are excited about the new investment this past quarter in Channel Technologies Group. Through the activity and effort this past year, we have been able to increase the monthly dividend by 25%. We look to continue healthy investment activity and to carry this momentum throughout the last quarter of our fiscal year.”

Subsequent Events: After December 31, 2011, the following occurred:

 

   

Distributions Declared: The Company’s board of directors declared the following monthly, per-share distributions to stockholders:

 

Declaration Date

  

Record Date

  

Payment Date

   Cash Distribution  

January 10, 2012

   January 23, 2012    January 31, 2012    $ 0.05   

January 10, 2012

   February 21, 2012    February 29, 2012      0.05   

January 10, 2012

   March 22, 2012    March 30, 2012      0.05   
        

 

 

 

Total for the Quarter:

   $ 0.15   

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

 

     December 31,
2011
    December31,
2010
 

For the Three Months Ended:

    

Net investment income

   $ 3,442      $ 7,591   

Net increase in net assets resulting from operations

     5,495        15,135   

Average yield on interest-bearing investments

     12.53     11.50

Total dollars invested

   $ 18,949      $ 36,622   

Total dollars repaid

     11,393        21,128   

For the Nine Months Ended:

    

Net investment income

     10,252        14,238   

Net increase in net assets resulting from operations

     22,377        13,643   

Average yield on interest-bearing investments

     12.27     11.21

Total dollars invested

   $ 86,327      $ 41,616   

Total dollars repaid

     16,953        61,774   

 

     December 31,
2011
    March 31,
2011
 

As of:

    

Fair value as a percent of cost

     86.0     77.7

Net asset value per share

   $ 9.58      $ 9.00   

Number of portfolio companies

     17        17   

Total assets at fair value

   $ 318,621      $ 241,109   

Conference Call for Stockholders: The Company will hold a conference call Thursday, February 2, 2012, at 8:30 a.m. EST. 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 March 1, 2012. To hear the replay, please dial (877) 344-7529 and use conference number 10008753. 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 April 2, 2012.

 

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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 December 31, 2011, including the footnotes 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 from us, please contact us 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 January 2012, the Company has paid 79 consecutive monthly cash distributions on its common stock. 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.

SOURCE: Gladstone Investment Corporation, +1-703-287-5893

The statements in this press release regarding the Company’s overall liquidity, ability to make additional investments, ability to make future dividend payments 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 it believes 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 other factors listed under the caption “Risk Factors” of post-effective amendment no. 4 to the registration statement on Form N-2(file No. 333-160720), filed with the SEC on August 17, 2011 (the “Form N-2”), and the Company’s Quarterly Report on Form10-Q for the quarter ended September 30, 2011, filed with the SEC on November 2, 2011 (the “Form 10-Q”). The risk factors set forth in the Form N-2 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.

 

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GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

 

     December 31,
2011
    March 31,
2011
 

ASSETS

    

Investments at fair value

    

Control investments (Cost of $184,221 and $136,306, respectively)

   $ 156,345      $ 104,062   

Affiliate investments (Cost of $69,739 and $45,145, respectively)

     61,183        34,556   

Non-Control/Non-Affiliate investments (Cost of $9,664 and $15,741, respectively)

     9,243        14,667   
  

 

 

   

 

 

 

Total investments (Cost of $263,624 and $197,192, respectively)

     226,771        153,285   

Cash and cash equivalents

     86,470        80,580   

Restricted cash

     1,960        4,499   

Interest receivable

     1,142        737   

Due from custodian

     722        859   

Deferred financing fees

     953        373   

Prepaid assets

     297        224   

Other assets

     306        552   
  

 

 

   

 

 

 

TOTAL ASSETS

   $ 318,621      $ 241,109   
  

 

 

   

 

 

 

LIABILITIES

    

Borrowings at fair value

    

Short-term loan (Cost of $76,001 and $40,000, respectively)

   $ 76,001      $ 40,000   

Credit Facility (Cost of $29,300 and $0, respectively)

     29,300        —     
  

 

 

   

 

 

 

Total borrowings (Cost of $105,301 and $40,000, respectively)

     105,301        40,000   

Accounts payable and accrued expenses

     491        201   

Fees due to Adviser

     187        499   

Fee due to Administrator

     183        171   

Other liabilities

     858        1,409   
  

 

 

   

 

 

 

TOTAL LIABILITIES

     107,020        42,280   
  

 

 

   

 

 

 

NET ASSETS

   $ 211,601      $ 198,829   
  

 

 

   

 

 

 

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 December 31, 2011 and March 31, 2011

   $ 22      $ 22   

Capital in excess of par value

     257,192        257,192   

Cumulative net unrealized depreciation on investments

     (36,853     (43,907

Cumulative net unrealized depreciation on other

     (56     (76

Undistributed net investment income

     812        165   

Accumulated net realized losses

     (9,516     (14,567
  

 

 

   

 

 

 

TOTAL NET ASSETS

   $ 211,601      $ 198,829   
  

 

 

   

 

 

 

NET ASSET VALUE PER SHARE AT END OF PERIOD

   $ 9.58      $ 9.00   
  

 

 

   

 

 

 

 

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GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

 

     Three Months Ended
December 31,
    Nine Months Ended
December 31,
 
     2011     2010     2011     2010  

INVESTMENT INCOME

        

Interest income

        

Control investments

   $ 3,515      $ 2,557      $ 9,075      $ 7,701   

Affiliate investments

     1,226        970        3,958        3,031   

Non-Control/Non-Affiliate investments

     343        391        1,148        1,175   

Cash and cash equivalents

     1        7        7        21   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest income

     5,085        3,925        14,188        11,928   

Other income

        

Control investments

     25        6,812        1,201        10,358   

Non-Control/Non-Affiliate investments

     59        —          77        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income

     84        6,812        1,278        10,358   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total investment income

     5,169        10,737        15,466        22,286   
  

 

 

   

 

 

   

 

 

   

 

 

 

EXPENSES

        

Loan servicing fee

     811        634        2,204        2,124   

Base management fee

     329        343        1,008        846   

Incentive fee

     —          1,898        19        2,949   

Administration fee

     182        142        468        582   

Interest expense

     185        135        550        558   

Amortization of deferred financing fees

     106        116        321        383   

Professional fees

     139        84        453        306   

Stockholder related costs

     31        26        403        245   

Other expenses

     289        218        859        685   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses before credits from Adviser

     2,072        3,596        6,285        8,678   

Credits to fees from Adviser

     (345     (450     (1,071     (630
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses net of credits to fees

     1,727        3,146        5,214        8,048   
  

 

 

   

 

 

   

 

 

   

 

 

 

NET INVESTMENT INCOME

     3,442        7,591        10,252        14,238   
  

 

 

   

 

 

   

 

 

   

 

 

 

REALIZED AND UNREALIZED GAIN (LOSS)

        

Net realized (loss) gain on investments

     (105     6,514        5,091        23,489   

Net realized loss on other

     —          —          (40     —     

Net unrealized appreciation (depreciation) on investments

     1,769        1,026        7,053        (24,063

Net unrealized appreciation (depreciation) on other

     389        4        21        (21
  

 

 

   

 

 

   

 

 

   

 

 

 

Net gain (loss) on investments and other

     2,053        7,544        12,125        (595
  

 

 

   

 

 

   

 

 

   

 

 

 

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

   $ 5,495      $ 15,135      $ 22,377      $ 13,643   
  

 

 

   

 

 

   

 

 

   

 

 

 

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS PER SHARE

        

Basic and diluted

   $ 0.25      $ 0.69      $ 1.01      $ 0.62   
  

 

 

   

 

 

   

 

 

   

 

 

 

WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING

        

Basic and diluted

     22,080,133        22,080,133        22,080,133        22,080,133   

 

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GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED FINANCIAL HIGHLIGHTS

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

 

     Three Months Ended
December 31,
    Nine Months Ended
December 31,
 
     2011     2010     2011     2010  

Per Share Data(A)

        

Net asset value at beginning of period

   $ 9.48      $ 8.43      $ 9.00      $ 8.74   

Income from investment operations(B):

        

Net investment income

     0.16        0.34        0.46        0.65   

Realized (loss) gain on investments and other

     (0.01     0.30        0.23        1.06   

Net unrealized appreciation (depreciation) on investments and other

     0.10        0.05        0.32        (1.09
  

 

 

   

 

 

   

 

 

   

 

 

 

Total from investment operations

     0.25        0.69        1.01        0.62   
  

 

 

   

 

 

   

 

 

   

 

 

 

Distributions from:

        

Net investment income

     (0.15     (0.12     (0.44     (0.36
  

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions(C)

     (0.15     (0.12     (0.44     (0.36
  

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value at end of period

   $ 9.58      $ 9.00      $ 9.58      $ 9.00   
  

 

 

   

 

 

   

 

 

   

 

 

 

Per share market value at beginning of period

   $ 6.76      $ 6.75      $ 7.79      $ 6.01   

Per share market value at end of period

     7.27        7.65        7.27        7.65   

Total return(D)

     9.73     15.14     -0.91     34.48

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

   $ 211,601      $ 198,682      $ 211,601      $ 198,682   

Average net assets(E)

     208,883        189,420        203,103        191,299   

Senior Securities Data:

        

Total borrowings

   $ 105,301      $ 75,400      $ 105,301      $ 75,400   

Asset coverage ratio(F)

     288     343     288     343

Average coverage per unit(G)

   $ 2,879      $ 3,429      $ 2,879      $ 3,429   

Ratios/Supplemental Data:

        

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

     3.97     7.59     4.13     6.05

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

     3.31        6.64        3.42        5.61   

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

     6.59        16.03        6.73        9.92   

 

(A) 

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

(B) 

Based on weighted average basic per 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.

(E) 

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

(F) 

As a BDC, 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. Asset coverage ratio is the ratio of the carrying value of the Company’s total consolidated assets, less all liabilities and indebtedness not represented by senior securities, to the aggregate amount of senior securities representing indebtedness.

(G) 

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

(H) 

Amounts are annualized.

(I) 

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

(J) 

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

 

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