Gladstone Investment Corporation Reports Financial Results for the Second Quarter Ended September 30, 2008
-- Net Investment Income was $3.8 million or $0.17 per common share
-- Net Increase in Net Assets Resulting from Operations was $1.0 million or $0.04 per common share
MCLEAN, Va.--(BUSINESS WIRE)--
Gladstone Investment Corp. (NASDAQ: GAIN) (the "Company") today announced earnings for the second quarter ended September 30, 2008. All per share references are per basic and diluted weighted average common shares outstanding, unless otherwise noted.
Net Investment Income for the quarter ended September 30, 2008 was $3.8 million, or $0.17 per common share, as compared to $3.0 million, or $0.18 per common share, for the quarter ended September 30, 2007, an increase in Net Investment Income of 26.7%, but a decrease of 5.5% per common share. Net Investment Income for the six months ended September 30, 2008 was $6.8 million, or $0.33 per common share, as compared to $5.9 million, or $0.35 per common share, for the six months ended September 30, 2007, an increase in Net Investment Income of 15.3%, but a decrease of 5.7% per common share. Net Investment Income increased primarily due to lower interest expense on decreased outstanding borrowings under the credit facility as compared to the prior year period, partially offset by reductions in interest rates in the U.S. financial markets (LIBOR rates). The per share results were adversely impacted by the issuance of new shares in a rights offering during the quarter ended June 30, 2008, the proceeds of which were not fully invested in income-producing investments for the entire three and six months ended September 30, 2008.
Net Increase in Net Assets Resulting from Operations for the quarter ended September 30, 2008 was $1.0 million, or $0.04 per share, as compared to the Net Decrease in Net Assets Resulting from Operations of $4.4 million, or ($0.26) per share, for the quarter ended September 30, 2007. The primary reason for the net increase in net assets resulting from operations for the quarter was related to the decrease in net unrealized depreciation on the Company's investment portfolio, which was driven by the unrealized appreciation of the equity of certain of the Company's Control and Affiliate investments, partially offset by the realized loss on a syndicated loan. The per share results were adversely impacted by the increase in weighted average shares as a result of a rights offering completed during the quarter ended June 30, 2008.
Net Decrease in Net Assets Resulting from Operations for the six months ended September 30, 2008 was $3.5 million, or ($0.17) per share, as compared to Net Increase in Net Assets Resulting from Operations of $3.9 million, or $0.24 per share, for the six months ended September 30, 2007. The primary reason for the net decrease in net assets resulting from operations for the six month period was related to an increase in net unrealized depreciation on the Company's investment portfolio from the debt of certain of the Control and Affiliate investments, coupled with realized losses on certain syndicated loans, most notably on the settlement of the Lexicon deal. The per share results were adversely impacted by the increase in weighted average shares as a result of the rights offering completed during the quarter ended June 30, 2008.
Net loss on investments for the three and six months ended September 30, 2008 was $2.8 and $10.4 million, respectively, as compared to $7.4 and $2.0 million for the three and six months ended September 30, 2007, respectively. The Company's investment portfolio was valued as of September 30, 2008 at a depreciated value due primarily to the general instability of the loan markets. The value of the Company's portfolio is determined quarterly by its Board of Directors based, in part, on opinions of value provided by Standard and Poor's Securities Evaluations, Inc. ("SPSE"). The aggregate depreciation of the Company's investment portfolio depreciated only by a nominal amount during the quarter, and the entire portfolio is fair valued at approximately 94% of cost as of September 30, 2008. All but two of the loans in the Company's portfolio were paying as agreed as of September 30, 2008. The unrealized depreciation of the Company's investments does not have an impact on the Company's current ability to pay distributions to stockholders.
Total assets were $365.3 million at September 30, 2008, as compared to $352.3 million at March 31, 2008. Net asset value was $10.57 per actual common share outstanding at September 30, 2008, as compared to $12.47 per actual common share outstanding at March 31, 2008.
The annualized weighted average yield on the Company's portfolio of investments, excluding cash and cash equivalents, was 7.98% for the three months ended September 30, 2008, as compared to 9.08% for the three months ended September 30, 2007. The annualized weighted average yield on the Company's portfolio for the six months ended September 30, 2008 was 7.81%, as compared to 9.12% for the six months ended September 30, 2007. The primary reason for the decrease in the annualized weighted average yield was related to the decrease in the U.S. financial markets (LIBOR rates), partially offset by an increase in the Company's aggregate portfolio size.
During the second quarter ended September 30, 2008, the Company recorded the following significant activity:
-- Invested approximately $21.4 million in Galaxy Tool
Corporation, including $17.2 million in senior subordinated
term debt and $4.2 million in preferred and common stock;
-- Recorded a realized loss of approximately $2.5 million on the
settlement of two syndicated loans;
-- Received $6.0 million in repayment of one syndicated loan
participation due to a third-party acquisition and recorded a
nominal realized loss of $16,000;
-- Received a repayment of approximately $7.0 million and
acquired a 4.5% equity interest in connection with the
restructuring of the Company's investment in Quench Holdings
Corporation, which resulted in the re-classification of the
investment from a Control to an Affiliate investment; and
-- Paid monthly dividends of $0.08 per share for each of the
months of July, August, and September.
At September 30, 2008, the Company held 35 Non-Control/Non-Affiliate investments, six Control investments, and five Affiliate investments, with an aggregate cost basis of approximately $347.6 million and an aggregate fair value of approximately $326.3 million, as noted in the following table.
September 30, 2008
--------------------------
Cost Fair Value
------------ ------------
(in thousands)
Senior Term Debt $ 234,082 $ 206,400
Senior Subordinated Term Debt 71,924 61,952
Preferred & Common Equity Securities 41,597 57,904
------------ ------------
Total Investments $ 347,603 $ 326,256
============ ============
"Our investing activity continues to provide junior capital in partnership with and support of equity sponsors, where we provide mezzanine financing, including equity co-investments. We are also pursuing our efforts in the control investment category, as evidenced by our investment of $21.4 million in Galaxy Tool Holding Corporation, consisting of debt, preferred and common equity during the quarter," said Dave Dullum, President.
Subsequent to September 30, 2008, the Company:
-- Renewed its credit facility with Deutsche Bank. The credit
facility, which previously provided a maximum of $200 million,
was renewed to provide for an aggregate of $125 million of
borrowings with a maturity date of April 16, 2009. Any
advances under the credit facility will generally bear
interest at the commercial paper rate plus 3.5% per annum,
with a commitment fee of 0.75% per annum on the undrawn
amounts. No fee was paid in connection with the renewal.
-- Declared monthly cash dividends of $0.08 per common share for
each of the months of October, November and December 2008.
The financial statements below are without footnotes. The Company has filed a Form 10-Q on November 4, 2008 for the second quarter ended September 30, 2008 with the Securities and Exchange Commission (the "SEC"), which can be retrieved from the SEC's website at www.sec.gov or from the Company's web site at www.GladstoneInvestment.com. A paper copy can be obtained free of charge by writing to us at 1521 Westbranch Drive, Suite 200, McLean, VA 22102.
The Company will hold a conference call on Wednesday, November 5, 2008 at 8:30 am ET to discuss fiscal second quarter earnings. Please call (877) 407-8031 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 5, 2008. To hear the replay, please dial (877) 660-6853, access playback account 286 and use ID code 299198. 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 online replay will follow shortly after the call and will be available for replay on the Company's website through February 5, 2009.
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. Additional information can be found at http://www.GladstoneInvestment.com.
For further information, contact Kerry Finnegan at 703-287-5893.
This press release may include statements that may constitute "forward-looking statements," including statements with regard to the future performance of the Company. Words such as "should," "believes," "feel," "expects," "projects," "strive," "goals," and "future" or similar expressions are intended to identify 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, 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 include, among others, those factors listed under the caption "Risk Factors" of the Company's Annual Report on Form 10-K for the year ended March 31, 2008, as filed with the SEC on May 21, 2008 and the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2008, as filed on November 4, 2008. The risk factors set forth in the 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.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Ended Six Months Ended
September 30, September 30,
------------------------- -------------------------
2008 2007 2008 2007
------------ ------------ ------------ ------------
INVESTMENT INCOME
Interest income
Non-Control /
Non-Affiliate
investments $ 2,134 $ 4,080 $ 4,458 $ 7,329
Control
investments 2,735 2,612 5,304 5,177
Affiliate
investments 1,349 375 2,460 801
Cash and cash
equivalents 22 61 46 114
------------ ------------ ------------ ------------
Total interest
income 6,240 7,128 12,268 13,421
Other income 576 28 586 35
------------ ------------ ------------ ------------
Total
investment
income 6,816 7,156 12,854 13,456
------------ ------------ ------------ ------------
EXPENSES
Loan servicing
fee 1,258 1,260 2,511 2,454
Base management
fee 435 453 861 812
Administration
fee 212 228 447 436
Interest expense 1,084 2,023 2,186 3,438
Amortization of
deferred
finance costs 140 216 278 426
Professional
fees 183 110 314 266
Stockholder
related costs 200 157 301 195
Insurance
expense 55 73 108 136
Directors fees 48 68 95 122
Taxes and
licenses 24 41 67 83
General and
administrative
expenses 90 35 122 92
------------ ------------ ------------ ------------
Expenses
before credit
from Adviser 3,729 4,664 7,290 8,460
------------ ------------ ------------ ------------
Credits to base
management fee (696) (503) (1,270) (887)
------------ ------------ ------------ ------------
Total expenses
net of credit
to base
management
fee 3,033 4,161 6,020 7,573
------------ ------------ ------------ ------------
NET INVESTMENT
INCOME 3,783 2,995 6,834 5,883
------------ ------------ ------------ ------------
REALIZED AND
UNREALIZED (LOSS)
GAIN ON
INVESTMENTS
Realized loss on
sale of Non-
Control / Non-
Affiliate
investments (2,498) (3) (4,215) (52)
Net unrealized
depreciation of
Non-Control /
Non-Affiliate
investments (5,191) (7,308) (726) (7,836)
Net unrealized
appreciation of
Control
investments 10,840 180 5,973 5,454
Net unrealized
(depreciation)
appreciation of
Affiliate
investments (5,978) (231) (11,393) 454
------------ ------------ ------------ ------------
Net (loss)
gain on
investments (2,827) (7,362) (10,361) (1,980)
------------ ------------ ------------ ------------
NET INCREASE
(DECREASE) IN NET
ASSETS RESULTING
FROM OPERATIONS $ 956 $ (4,367) $ (3,527) $ 3,903
============ ============ ============ ============
NET INCREASE
(DECREASE) IN NET
ASSETS RESULTING
FROM OPERATIONS
PER COMMON SHARE:
Basic and
Diluted $ 0.04 $ (0.26) $ (0.17) $ 0.24
============ ============ ============ ============
SHARES OF COMMON
STOCK
OUTSTANDING:
Basic and
diluted
weighted
average
shares 22,080,133 16,560,100 21,011,740 16,560,100
GLADSTONE INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
September 30, March 31,
2008 2008
-------------- --------------
ASSETS
Non-Control/Non-Affiliate investments
(Cost 9/30/08: $139,536; Cost 3/31/08:
$166,416) $ 115,133 $ 142,739
Control investments (Cost 9/30/08:
$144,221; Cost 3/31/08: $138,354) 157,246 145,407
Affiliate investments (Cost 9/30/08:
$63,846; Cost 3/31/08: $46,035) 53,877 47,458
-------------- --------------
Total investments at fair value (Cost
9/30/08: $347,603; Cost 3/31/08:
$350,805) 326,256 335,604
Cash and cash equivalents 33,900 9,360
Interest receivable 1,353 1,662
Prepaid insurance 204 90
Deferred finance costs 46 324
Due from Custodian 3,048 4,399
Due from Adviser - 89
Other assets 456 765
-------------- --------------
TOTAL ASSETS $ 365,263 $ 352,293
============== ==============
LIABILITIES
Fee due to Administrator $ 212 $ 208
Fee due to Adviser 27 -
Borrowings under line of credit 130,965 144,835
Accrued expenses 549 716
Other liabilities 102 89
-------------- --------------
TOTAL LIABILITIES 131,855 145,848
-------------- --------------
NET ASSETS $ 233,408 $ 206,445
============== ==============
ANALYSIS OF NET ASSETS:
Common stock, $0.001 par value,
100,000,000 shares authorized,
22,080,133 and 16,560,100 shares
issued and outstanding at September
30, 2008 and March 31, 2008,
respectively $ 22 $ 17
Capital in excess of par value 264,814 224,173
Net unrealized depreciation of
investment portfolio (21,346) (15,201)
Net unrealized depreciation of
derivative (53) (53)
Accumulated net investment loss (10,029) (2,491)
-------------- --------------
TOTAL NET ASSETS $ 233,408 $ 206,445
============== ==============
NET ASSETS PER SHARE $ 10.57 $ 12.47
============== ==============
GLADSTONE INVESTMENT CORPORATION
CONSOLIDATED FINANCIAL HIGHLIGHTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Ended Six Months Ended
September 30, September 30,
------------------------- -------------------------
2008 2007 2008 2007
------------ ------------ ------------ ------------
Per Share Data (1)
------------------
Balance at
beginning of
period $ 10.77 $ 13.73 $ 12.47 $ 13.46
Income from
investment
operations:
Net investment
income (2) 0.17 0.18 0.33 0.35
Realized loss on
sale of
investments (2) (0.11) - (0.20) -
Net unrealized
depreciation of
investments (2) (0.02) (0.44) (0.30) (0.12)
------------ ------------ ------------ ------------
Total from
investment
operations 0.04 (0.26) (0.17) 0.23
------------ ------------ ------------ ------------
Distributions
from:
Net investment
income (0.24) (0.23) (0.48) (0.45)
------------ ------------ ------------ ------------
Total
distributions (3) (0.24) (0.23) (0.48) (0.45)
Rights offering
costs - - (0.03) -
Effect on
distribution of
stock rights
offering after
record date (4) - - (1.22) -
------------ ------------ ------------ ------------
Net asset value
at end of
period $ 10.57 $ 13.24 $ 10.57 $ 13.24
============ ============ ============ ============
Per share market
value at
beginning of
period $ 6.38 $ 14.21 $ 9.32 $ 14.87
Per share market
value at end of
period $ 6.88 12.84 $ 6.88 $ 12.84
Total Return (5) 14.79% -8.04% -21.39% -10.73%
Shares outstanding
at end of period 22,080,133 16,560,100 22,080,133 16,560,100
Statement of
Assets and
Liabilities Data:
------------------
Net assets at end
of period $ 233,408 $ 219,238 $ 233,408 $ 219,238
Average net assets
(6) $ 234,165 $ 223,254 $ 238,410 $ 223,091
Senior Securities
Data:
------------------
Borrowings under
line of credit $ 130,965 $ 146,050 $ 130,965 $ 146,050
Asset coverage
ratio (7) 279% 251% 279% 251%
Asset coverage per
unit (8) $ 3,644 $ 3,653 $ 3,644 $ 3,653
Ratios /
Supplemental
Data:
------------------
Ratio of expenses
to average net
assets (9), (10) 6.37% 8.36% 6.11% 7.58%
Ratio of net
expenses to
average net
assets (9), (11) 5.18% 7.46% 5.05% 6.79%
Ratio of net
investment income
to average net
assets (9) 6.46% 5.37% 5.73% 5.27%
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 ending monthly net assets for
the respective periods.
7 As a business development company, we are generally required to
maintain a ratio of at least 200% of total assets to total
borrowings.
8 Asset coverage per unit is the ratio of the carrying value of our
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 $100 of
indebtedness.
9 Amounts are annualized.
10 Ratio of expenses to average net assets is computed using expenses
before credit from the Adviser.
11 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 November 4, 2008