Gladstone Investment Corporation Reports Financial Results for the Second Quarter Ended September 30, 2009
* Net Investment Income was $2.4 million, or $0.11 per common share * Net Decrease in Net Assets Resulting from Operations was $18.1 million, or $0.82 per common share
MCLEAN, Va., Nov. 3, 2009 (GLOBE NEWSWIRE) -- Gladstone Investment Corp. (Nasdaq:GAIN) (the "Company") today announced earnings for the second quarter ended September 30, 2009. All per share references are per basic and diluted weighted average common share outstanding, unless otherwise noted.
Net Investment Income for the quarter ended September 30, 2009 was $2.4 million, or $0.11 per common share, as compared to $3.8 million, or $0.17 per common share, for the quarter ended September 30, 2008, a decrease in Net Investment Income of 36.8% and a decrease of 35.3% per common share. Net Investment Income for the six months ended September 30, 2009 was $4.8 million, or $0.22 per common share, as compared to $6.8 million, or $0.33 per common share, for the six months ended September 30, 2008, a decrease in Net Investment Income of 29.4% and a decrease of 33.3% per common share. The decrease in Net Investment Income was primarily driven by a reduction of the Company's investment portfolio as a result of the sale of the majority of its senior syndicated loans during the six months ended September 30, 2009, partially offset by decreased interest expense on lower outstanding borrowings when compared to the prior year periods. The per share results for the six months ended September 30, 2009 were also adversely impacted by the issuance of additional shares in a public offering during the three months ended June 30, 2008.
Net Decrease in Net Assets Resulting from Operations for the quarter ended September 30, 2009 was $18.1 million, or $0.82 per common share, as compared to a Net Increase in Net Assets Resulting from Operations of $956,000, or $0.04 per common share, for the quarter ended September 30, 2008, an increase in Net Decrease in Net Assets Resulting from Operations of $19.1 million, or $0.86 per common share. Net Decrease in Net Assets Resulting from Operations for the six months ended September 30, 2009 was $27.3 million, or $1.24 per share, as compared to a Net Decrease in Net Assets Resulting from Operations of $3.5 million, or $0.17 per share, for the six months ended September 30, 2008, an increase in Net Decrease in Net Assets Resulting from Operations of $23.8 million, or $1.07 per common share. These differences for both the three and six month periods ended September 30, 2009 as compared to their respective prior year periods were due to continuing devaluations, primarily in the Company's equity holdings of its Control and Affiliate investments. The total net losses on investments, including all realized and unrealized gains and losses, for the three and six month periods ended September 30, 2009 were approximately $20.5 million and $32.1 million, respectively, as compared to total net losses on investments of $2.8 million and $10.4 million, respectively, for the three and six month periods ended September 30, 2008. The per share results for the six months ended September 30, 2009 were also adversely impacted by the issuance of additional shares in a public offering during the three months ended June 30, 2008.
Although the aggregate investment portfolio has depreciated, the entire portfolio was fair valued at approximately 86% of cost as of September 30, 2009. The unrealized depreciation of the Company's investments does not have an impact on its current ability to pay distributions to stockholders, although it may be an indication of future realized losses, which could ultimately reduce the Company's income available for distribution.
Total assets were $294.4 million at September 30, 2009, as compared to $326.8 million at March 31, 2009. Net asset value was $8.24 per actual common share outstanding at September 30, 2009, as compared to $9.73 per actual common share outstanding at March 31, 2009.
The annualized weighted average yield on the Company's portfolio, excluding cash and cash equivalents, was 10.01% for the quarter ended September 30, 2009, as compared to 7.98% for the prior year quarter. 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 being accrued. The increase in the weighted average yield for the current quarter resulted primarily from the Company's sale of lower interest-bearing senior syndicated loans during the six months ended September 30, 2009. The effect of continuing reductions in LIBOR has been mitigated by the presence of a rate floor or fixed rate on most of the remaining loans held in the Company's portfolio as of September 30, 2009.
During the second quarter ended September 30, 2009, the Company recorded the following significant activity:
* Entered into agreements to sell one senior syndicated loan and a
portion of another senior syndicated loan (collectively, the
"Syndicated Loan Sales");
* Purchased $85.0 million of short-term United States Treasury
securities (the "Securities") from Jefferies & Company, Inc.
("Jefferies") with $10.0 million in funds drawn on the Company's
credit facility and the proceeds from a $75.0 million short-term
loan from Jefferies, with an effective annual interest rate of
approximately 0.65%, that matured on October 2, 2009 (the
"Short-Term Loan"); and
* Paid monthly distributions of $0.04 per share for each of the
months of July, August and September 2009.
At September 30, 2009, the Company held five Non-Control/Non-Affiliate investments, seven Control investments and five Affiliate investments. Additionally, approximately 53% of the aggregate fair value of the Company's investment portfolio at September 30, 2009 was comprised of senior term debt, approximately 32% was senior subordinated term debt, and approximately 15% was preferred and common equity securities, as outlined in the following table:
September 30, 2009
------------------
Fair
Cost Value
------------------
(in thousands)
Senior Term Debt $119,170 $108,205
Senior Subordinated Term Debt 72,111 65,353
Preferred & Common Equity Securities 45,322 30,745
-------- --------
Total Investments $236,603 $204,303
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"We will strive to maintain our portfolio mix of mezzanine and equity investments and grow our overall investment portfolio over the long term. While we continue to worry about the economy which is reflected in our limited investment activity over the past three quarters, we are seeing a pick up in the opportunity for new investments. Our goal continues to be the maintenance and consistency of our distributions to stockholders," said Dave Dullum, President.
Subsequent to September 30, 2009:
* The Company repaid the Short-Term Loan in full and repaid the amount drawn on the credit facility upon maturity of the Securities; * The Company finalized the Syndicated Loans Sales noted above to various investors in the syndicated loan market. As a result of these sales, the Company received approximately $5.5 million in aggregate net proceeds and recorded a corresponding realized loss of approximately $1.3 million, which loss will be reflected in the results of operations for the three months ending December 30, 2009. The proceeds from the Syndicated Loan Sales were used to pay down borrowings on the Company's credit facility; * The Company refinanced its revolving line of credit with Chase Holdings II Corp. to a third party, the outstanding balance of $3.5 million plus accrued interest was repaid in full, and the proceeds were used to pay down borrowings on the Company's credit facility; * One of the Company's portfolio companies entered into an agreement with an investment banker to act as an advisor in assessing strategic investment alternatives; * A. Stucki Holding Corp. declared and paid accrued cash dividends on its preferred stock of which the Company received approximately $953,000; and * The Company declared monthly cash distributions of $0.04 per common share for each of the months of October, November and December 2009.
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, 2009, including the footnotes to the financial statements contained therein. The Company has filed the Form 10-Q with the Securities and Exchange Commission (the "SEC") today, which can be retrieved from the SEC's website at www.sec.gov or from the Company's website at www.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.
The Company will hold a conference call Wednesday, November 4, 2009 at 8:30 am EST. Please call (877) 407-8031 to enter the conference. An operator will monitor the call and set a queue for questions. A replay of the conference call will be available through December 4, 2009. To hear the replay, please dial (877) 660-6853, access playback account 286 and use ID code 334849. 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 www.GladstoneInvestment.com and www.investorcalendar.com. The event will be archived and available for replay on the Company's website through February 5, 2010.
Gladstone Investment Corporation is an investment company that seeks to make debt and equity investments in small and medium-sized private businesses in the U.S. in connection with buyouts and other recapitalizations. For more information please visit the Company's website at http://www.GladstoneInvestment.com.
For further information contact Investor Relations at 703-287-5839.
The statements in this press release regarding the Company's ability to maintain the value of its investment portfolio, to maintain the portfolio mix of investments, to grow the overall investment portfolio, and to continue its current rate of distributions to stockholders 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 could cause actual results to differ materially from the forward-looking statements include, but are not limited to, the duration and potential future effects of the current economic downturn on the Company and its portfolio companies, the Company's ability to raise additional capital, the Company's ability to obtain the commitment of other lenders to join its credit facility, the Company's ability to maintain its status as a regulated investment company and the Company's ability to generate net investment income. Additional factors that may cause the Company's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements also include those factors listed under the caption "Risk Factors" of the Company's prospectus as filed with the SEC on October 14, 2009 and the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2009, as filed with the SEC on November 3, 2009. The Company undertakes no obligation to publicly update or revise any forward-looking statements.
GLADSTONE INVESTMENT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Sept. 30, March 31,
2009 2009
-------- --------
ASSETS
Non-Control/Non-Affiliate investments (Cost
9/30/09: $29,886; Cost 3/31/09: $134,836) $ 25,004 $ 94,740
Control investments (Cost 9/30/09: $142,698;
Cost 3/31/09: $150,081) 132,399 166,163
Affiliate investments (Cost 9/30/09: $64,019;
Cost 3/31/09: $64,028) 46,900 53,027
-------- --------
Total investments at fair value (Cost 9/30/09:
$236,603; Cost 3/31/09: $348,945) 204,303 313,930
Cash and cash equivalents 86,311 7,236
Interest receivable 1,212 1,500
Due from Custodian 932 2,706
Deferred financing fees 963 1,167
Prepaid assets 445 172
Other assets 184 132
-------- --------
TOTAL ASSETS $294,350 $326,843
======== ========
LIABILITIES
Accounts payable and accrued expenses $ 460 $ 1,283
Fee due to Administrator 198 179
Fee due to Adviser 221 187
Short-term loan 75,000 --
Borrowings under line of credit (Cost 9/30/09:
$36,100; Cost 3/31/09: $110,265) 36,278 110,265
Other liabilities 148 127
-------- --------
TOTAL LIABILITIES 112,305 112,041
-------- --------
NET ASSETS $182,045 $214,802
======== ========
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, 2009 and
March 31, 2009 $ 22 $ 22
Capital in excess of par value 264,551 257,361
Net unrealized depreciation of investment portfolio (32,301) (35,015)
Net unrealized depreciation of derivative (27) (53)
Net unrealized appreciation of borrowings under
line of credit (178) --
Accumulated net investment loss (50,022) (7,513)
-------- --------
TOTAL NET ASSETS $182,045 $214,802
======== ========
NET ASSETS PER SHARE $ 8.24 $ 9.73
======== ========
GLADSTONE INVESTMENT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended Six Months Ended
September 30, September 30,
------------------------ ------------------------
2009 2008 2009 2008
----------- ----------- ----------- -----------
INVESTMENT INCOME
Interest income
Non-Control/
Non-Affiliate
investments $ 615 $ 2,134 $ 1,351 $ 4,458
Control
investments 2,868 2,735 5,736 5,304
Affiliate
investments 1,448 1,349 2,928 2,460
Cash and cash
equivalents 1 22 1 46
----------- ----------- ----------- -----------
Total interest
income 4,932 6,240 10,016 12,268
Other income 11 576 96 586
----------- ----------- ----------- -----------
Total investment
income 4,943 6,816 10,112 12,854
----------- ----------- ----------- -----------
EXPENSES
Loan servicing fee 938 1,258 2,006 2,511
Base management
fee 164 435 477 861
Administration fee 198 212 371 447
Interest expense 552 1,084 1,255 2,186
Amortization of
deferred finance
costs 438 140 751 278
Professional fees 118 183 320 314
Stockholder
related costs 146 200 227 301
Insurance expense 62 55 119 108
Directors fees 48 48 99 95
Other 73 114 137 189
----------- ----------- ----------- -----------
Expenses before
credit from
Adviser 2,737 3,729 5,762 7,290
----------- ----------- ----------- -----------
Credits to base
management fee (165) (696) (466) (1,270)
----------- ----------- ----------- -----------
Total expenses
net of credit
to base
management fee 2,572 3,033 5,296 6,020
----------- ----------- ----------- -----------
NET INVESTMENT
INCOME 2,371 3,783 4,816 6,834
----------- ----------- ----------- -----------
REALIZED AND
UNREALIZED (LOSS)
GAIN ON:
Realized loss on
sale of
Non-Control/
Non-Affiliate
investments -- (2,498) (34,605) (4,215)
Realized loss on
termination of
derivative -- -- (53) --
Net unrealized
(depreciation)
appreciation of
Non-Control/
Non-Affiliate
investments (1,514) (5,191) 35,214 (726)
Net unrealized
(depreciation)
appreciation of
Control
investments (14,900) 10,840 (26,381) 5,973
Net unrealized
depreciation of
Affiliate
investments (3,853) (5,978) (6,119) (11,393)
Net unrealized
(depreciation)
appreciation of
derivative (16) -- 26 --
Net unrealized
appreciation of
borrowings under
line of credit (178) -- (178) --
----------- ----------- ----------- -----------
Net loss on
investments and
borrowings
under line of
credit (20,461) (2,827) (32,096) (10,361)
----------- ----------- ----------- -----------
NET (DECREASE)
INCREASE IN NET
ASSETS RESULTING
FROM OPERATIONS $ (18,090) $ 956 $ (27,280) $ (3,527)
=========== =========== =========== ===========
NET (DECREASE)
INCREASE IN NET
ASSETS RESULTING
FROM OPERATIONS
PER COMMON SHARE:
Basic and
Diluted $ (0.82) $ 0.04 $ (1.24) $ (0.17)
=========== =========== =========== ===========
SHARES OF COMMON
STOCK OUTSTANDING:
Basic and diluted
weighted average
shares 22,080,133 22,080,133 22,080,133 21,011,740
GLADSTONE INVESTMENT CORPORATION
FINANCIAL HIGHLIGHTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended Six Months Ended
September 30, September 30,
------------------------ ------------------------
2009 2008 2009 2008
----------- ----------- ----------- -----------
Per Share Data (1)
------------------
Net asset value
at beginning
of period $ 9.19 $ 10.77 $ 9.73 $ 12.47
Income from
investment
operations:
Net investment
income (2) 0.11 0.17 0.22 0.33
Realized loss on
sale of
investments (2) -- (0.11) (1.57) (0.20)
Net unrealized
depreciation of
investments (2) (0.92) (0.02) 0.12 (0.30)
Net unrealized
appreciation of
borrowings on
line of credit
(2) (0.01) -- (0.01) --
----------- ----------- ----------- -----------
Total from
investment
operations (0.82) 0.04 (1.24) (0.17)
----------- ----------- ----------- -----------
Distributions
from:
Net investment
income (0.12) (0.24) (0.24) (0.48)
----------- ----------- ----------- -----------
Total
distributions (3) (0.12) (0.24) (0.24) (0.48)
Effect of shelf
offering:
Shelf
registration
offering costs (0.01) -- (0.01) (0.03)
Effect of
distribution of
stock rights
offering after
record date (4) -- -- -- (1.22)
----------- ----------- ----------- -----------
Total effect of
shelf offering (0.01) -- (0.01) (1.25)
----------- ----------- ----------- -----------
Net asset value at
end of period $ 8.24 $ 10.57 $ 8.24 $ 10.57
=========== =========== =========== ===========
Per share market
value at
beginning of
period $ 4.88 $ 6.38 $ 3.67 $ 9.32
Per share market
value at end
of period 4.85 6.88 4.85 6.88
Total Return (5) 1.75% 14.79% 39.03% (21.39%)
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 $ 182,045 $ 233,408 $ 182,045 $ 233,408
Average net
assets (6) 195,005 234,165 202,596 238,410
Senior Securities
Data:
-----------------
Borrowings under
line of credit $ 36,278 $ 130,965 $ 36,278 $ 130,965
Asset coverage
ratio (7) 602% 278% 602% 278%
Asset coverage
per unit (8) $ 6,018 $ 2,782 $ 6,018 $ 2,782
Ratios/Supplemental
Data:
-------------------
Ratio of expenses
to average net
assets (9), (10) 5.61% 6.37% 5.69% 6.11%
Ratio of net
expenses to
average net
assets (9), (11) 5.28% 5.18% 5.23% 5.05%
Ratio of net
investment income
to average net
assets (9) 4.86% 6.46% 4.75% 5.73%
------------------------
(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) The effect of distributions from the stock rights offering after
the record date represents the effect on net asset value of
issuing additional shares after the record date of a
distribution.
(5) 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 our dividend reinvestment plan.
(6) Calculated using the average of the balance of net assets at the
end of each month of the reporting period.
(7) As a business development company, the Company is generally
required to maintain a ratio of at least 200% of total assets,
less all liabilities and indebtedness not represented by senior
securities, to total borrowings.
(8) Asset coverage per unit 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.
Asset coverage per unit is expressed in terms of dollar amounts
per $1,000 of indebtedness.
(9) Amounts are annualized.
(10) Ratio of expenses to average net assets is computed using
expenses before credits from the Adviser.
(11) Ratio of net expenses to average net assets is computed using
total expenses net of credits to the management fee.
CONTACT: Gladstone Investment Corporation
Investor Relations
703-287-5839
Released November 3, 2009