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Gladstone Investment Corporation Reports Financial Results
for the Third Quarter Ended December 31, 2009
GlobeNewswire
2010-02-08
MCLEAN, Va., Feb. 8, 2010 (GLOBE NEWSWIRE) --
-- Net Investment Income was $3.1 million, or $0.14 per common share
-- Net Decrease in Net Assets Resulting from Operations was $4.4 million,
or $0.20 per common share
Gladstone Investment Corp. (Nasdaq:GAIN) (the "Company") today
announced earnings for the third quarter ended December 31, 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 December 31, 2009 was $3.1
million, or $0.14 per common share, as compared to $3.6 million, or
$0.16 per common share, for the quarter ended December 31, 2008, a
decrease in Net Investment Income of 14.3%. Net Investment Income for
the nine months ended December 31, 2009 was $7.9 million, or $0.36 per
common share, as compared to $10.4 million, or $0.49 per common share,
for the nine months ended December 31, 2008, a decrease in Net
Investment Income of 24.3%. 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
(primarily to pay off its prior line of credit) during the nine months
ended December 31, 2009, partially offset by decreased interest expense
on lower outstanding borrowings when compared to the prior year
periods.
Net Decrease in Net Assets Resulting from Operations for the quarter
ended December 31, 2009 was $4.4 million, or $0.20 per common share, as
compared to $3.9 million, or $0.18 per common share, for the quarter
ended December 31, 2008, an increase in Net Decrease in Net Assets
Resulting from Operations of 12.2%. Net Decrease in Net Assets
Resulting from Operations for the nine months ended December 31, 2009
was $31.7 million, or $1.44 per common share, as compared to $7.5
million, or $0.35 per common share, for the nine months ended December
31, 2008, an increase in Net Decrease in Net Assets Resulting from
Operations of $24.2 million, and an increase of $1.09 per common share.
These differences for both the three and nine month periods ended
December 31, 2009, as compared to their respective prior year periods,
were due to continuing devaluations, primarily in the Company's equity
holdings of its Control investments. The total net losses on
investments, including all realized and unrealized gains and losses,
for the three and nine month periods ended December 31, 2009 were
approximately $7.5 million and $39.6 million, respectively, as compared
to total net losses on investments of $7.5 million and $17.9 million,
respectively, for the three and nine month periods ended December 31,
2008.
Due to continued depreciation in the Company's investments, the entire
portfolio was fair valued at approximately 83% of its cost as of
December 31, 2009. The net 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 to stockholders.
Total assets were $278.3 million at December 31, 2009, as compared to
$326.8 million at March 31, 2009. Net asset value was $7.93 per actual
common share outstanding at December 31, 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 10.68% for the quarter ended
December 31, 2009, as compared to 8.76% for the quarter ended December
31, 2008. 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 nine months ended December 31, 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 December 31, 2009.
During the third quarter ended December 31, 2009, the Company reported
the following significant activity:
-- Completed the sales of one senior syndicated loan and a portion of
another senior syndicated loan. As a result of these sales, the Company
received approximately $5.5 million in aggregate net proceeds and
recorded a corresponding net loss of approximately $1.3 million. The
proceeds from these sales were used to pay down borrowings on the
Company's credit facility;
-- 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 proceeds were used to pay down borrowings on the Company's
credit facility;
-- Assumed 100% ownership of Mathey Investments, Inc., disbursing
approximately $282,000 to buy out Mathey's previous stockholders;
-- Purchased $85.0 million of short-term United States Treasury securities
(the "Treasury 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 0.59%, that matured
on January 7, 2010 (the "Short-Term Loan"); and
-- Paid monthly distributions of $0.04 per share for each of the months of
October, November and December 2009.
At December 31, 2009, the Company held four Non-Control/Non-Affiliate
investments, eight Control investments and four Affiliate investments.
Additionally, approximately 50% of the aggregate fair value of the
Company's investment portfolio at December 31, 2009 was comprised of
senior term debt, approximately 37% was senior subordinated term debt
and approximately 13% was preferred and common equity securities, as
outlined in the following table:
December 31, 2009
------------------
Fair
(in thousands) Cost Value
---------------------------------- -------- --------
Senior Term Debt $103,154 $93,161
Senior Subordinated Term Debt 77,424 70,479
Preferred & Common Equity
Securities 45,322 23,746
-------- --------
Total Investments $225,900 $187,386
======== ========
"We will strive to maintain our portfolio mix of mezzanine and equity
investments and hope to 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 year, we
believe there are increased opportunities for new investments. Our goal
continues to be the maintenance and consistency of our distributions to
stockholders," said Dave Dullum, President.
Subsequent to December 31, 2009:
-- The Company repaid the Short-Term Loan in full and repaid the amount
drawn on the credit facility upon maturity of the Treasury Securities;
-- The Company declared monthly cash distributions of $0.04 per common
share for each of the months of January, February and March 2010.
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, 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 Tuesday, February 9, 2010 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 March 9, 2010. To hear
the replay, please dial (877) 660-6853, access playback account 286 and
use ID code 342045. 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 May 9, 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.
The statements in this press release regarding the Company's ability 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 renew or extend 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
December 31, 2009, as filed with the SEC on February 8, 2010. 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)
December March
31, 31,
2009 2009
----------- --------
(Unaudited)
ASSETS
Cash and cash equivalents $87,872 $7,236
Investments at fair value
Non-Control/Non-Affiliate
investments (Cost of $22,902
and $134,836, respectively) 19,404 94,740
Control investments (Cost of
$150,107 and $150,081,
respectively) 130,955 166,163
Affiliate investments (Cost
of $52,891 and $64,028,
respectively) 37,027 53,027
----------- --------
Total investments (Cost of
$225,900 and $348,945,
respectively) 187,386 313,930
Interest receivable 1,373 1,500
Due from Custodian 766 2,706
Deferred financing fees 512 1,167
Prepaid assets 300 172
Other assets 70 132
----------- --------
TOTAL ASSETS $278,279 $326,843
=========== ========
LIABILITIES
Accounts payable and accrued
expenses $200 $1,283
Fee due to Administrator 156 179
Fees due to Adviser 793 187
Short-term loan 75,000 --
Borrowings under line of
credit at fair value (Cost of
$26,750 and $110,265,
respectively) 26,883 110,265
Other liabilities 246 127
----------- --------
TOTAL LIABILITIES 103,278 112,041
----------- --------
NET ASSETS $175,001 $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 December 31, 2009 and
March31, 2009 $22 $22
Capital in excess of par value 264,576 257,361
Net unrealized depreciation of
investment portfolio (38,514) (35,015)
Net unrealized depreciation of
derivative (34) (53)
Net unrealized appreciation of
borrowings under line of
credit (133) --
Accumulated net investment
loss (50,916) (7,513)
----------- --------
TOTAL NET ASSETS $175,001 $214,802
=========== ========
NET ASSETS PER SHARE $7.93 $9.73
=========== ========
GLADSTONE INVESTMENT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended Nine Months Ended
December 31, December 31,
---------------------- -------------------------
2009 2008 2009 2008
---------- ---------- ---------- ----------
INVESTMENT INCOME
Interest income
Non-Control/Non-Affiliate
investments $489 $2,339 $1,840 $6,797
Control investments 2,856 3,068 8,593 8,372
Affiliate investments 1,605 1,478 4,533 3,938
Cash and cash equivalents 1 21 1 67
---------- ---------- ---------- ----------
Total interest income 4,951 6,906 14,967 19,174
Other income 970 96 1,066 682
---------- ---------- ---------- ----------
Total investment income 5,921 7,002 16,033 19,856
---------- ---------- ---------- ----------
EXPENSES
Loan servicing fee 886 1,258 2,892 3,769
Base management fee 113 442 588 1,303
Incentive fee 588 -- 588 --
Administration fee 156 195 527 642
Interest expense 385 1,823 1,640 4,009
Amortization of deferred finance
costs 436 46 1,187 324
Professional fees 182 69 502 383
Stockholder related costs 49 112 276 413
Insurance expense 71 57 190 165
Directors' fees 48 50 147 145
Other 61 57 198 246
---------- ---------- ---------- ----------
Expenses before credit from
Adviser 2,975 4,109 8,735 11,399
---------- ---------- ---------- ----------
Credit to base management fee (127) (694) (591) (1,964)
---------- ---------- ---------- ----------
Total expenses net of credit to
base management fee 2,848 3,415 8,144 9,435
---------- ---------- ---------- ----------
NET INVESTMENT INCOME 3,073 3,587 7,889 10,421
---------- ---------- ---------- ----------
REALIZED AND UNREALIZED (LOSS)
GAIN ON:
Realized loss on sale of
Non-Control/Non-Affiliate
investments (1,318) -- (35,922) (4,215)
Realized loss on termination of
derivative -- -- (53) --
Net unrealized appreciation
(depreciation) of
Non-Control/Non-Affiliate
investments 1,383 (6,988) 36,597 (7,714)
Net unrealized (depreciation)
appreciation of Control
investments (8,853) 1,755 (35,234) 7,728
Net unrealized appreciation
(depreciation) of Affiliate
investments 1,257 (2,294) (4,862) (13,687)
Net unrealized (depreciation)
appreciation of derivative (7) -- 19 --
Net unrealized depreciation
(appreciation) of borrowings
under line of credit 45 -- (133) --
---------- ---------- ---------- ----------
Net loss on investments and
borrowings under line of
credit (7,493) (7,527) (39,588) (17,888)
---------- ---------- ---------- ----------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS $(4,420) $(3,940) $(31,699) $(7,467)
========== ========== ========== ==========
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS PER
COMMON SHARE:
Basic and Diluted $(0.20) $(0.18) $(1.44) $(0.35)
========== ========== ========== ==========
SHARES OF COMMON STOCK
OUTSTANDING:
Basic and diluted weighted
average shares 22,080,133 22,080,133 22,080,133 21,367,871
GLADSTONE INVESTMENT CORPORATION
FINANCIAL HIGHLIGHTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT AMOUNTS)
(UNAUDITED)
Three Months Ended Nine Months Ended
December 31, December 31,
---------------------- ----------------------
2009 2008 2009 2008
---------- ---------- ---------- ----------
Per Share Data (1)
-------------------------------------
Net asset value at beginning of
period $8.24 $10.57 $9.73 $12.47
Income from investment operations:
Net investment income (2) 0.14 0.16 0.36 0.49
Realized loss on sale of
investments (2) (0.06) -- (1.63) (0.20)
Net unrealized depreciation of
investments (2) (0.28) (0.34) (0.16) (0.64)
Net unrealized appreciation of
borrowings on line of credit (2) -- -- (0.01) --
---------- ---------- ---------- ----------
Total from investment operations (0.20) (0.18) (1.44) (0.35)
---------- ---------- ---------- ----------
Distributions from:
Net investment income (0.12) (0.24) (0.36) (0.72)
---------- ---------- ---------- ----------
Total distributions (3) (0.12) (0.24) (0.36) (0.72)
Effect of shelf offering:
Shelf registration offering costs 0.01 -- -- (0.03)
Effect of distribution of stock
rights offering after record date
(4) -- -- -- (1.22)
---------- ---------- ---------- ----------
Total effect of shelf offering 0.01 -- -- (1.25)
---------- ---------- ---------- ----------
Net asset value at end of period $7.93 $10.15 $7.93 $10.15
========== ========== ========== ==========
Per share market value at beginning
of period $4.83 $6.81 $3.67 $9.32
Per share market value at end of
period 4.56 4.91 4.56 4.91
Total Return (5) (3.18)% (19.59)% 34.06% (41.23)%
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 $175,001 $224,117 $175,001 $224,117
Average net assets (6) 179,155 229,256 194,783 232,053
Senior Securities Data:
-------------------------------------
Borrowings under line of credit and
short-term loan $101,883 $117,864 $101,883 $117,864
Asset coverage ratio (7) 270% 290% 270% 290%
Asset coverage per unit (8) $2,704 $2,901 $2,704 $2,901
Ratios/Supplemental Data:
-------------------------------------
Ratio of expenses to average net
assets (9), (10) 6.64% 7.17% 5.98% 6.55%
Ratio of net expenses to average net
assets (9), (11) 6.36% 5.96% 5.57% 5.42%
Ratio of net investment income to
average net assets (9) 6.86% 6.26% 5.40% 5.99%
(1) Based on actual shares outstanding at the end of the corresponding period.
(2) Based on weighted average basic per share data.
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
(3) America.
The effect of distributions from the stock rights offering after the record date represents the effect on net
(4) asset value of issuing additional shares after the record date of a distribution.
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
(5) plan.
(6) Calculated using the average of the balance of net assets at the end of each month of the reporting period.
As a business development company, the Company is generally required to maintain a ratio of at least 200% of
(7) total assets, less all liabilities and indebtedness not represented by senior securities, to total borrowings.
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 thousand of
(8) indebtedness.
(9) Amounts are annualized.
(10) Ratio of expenses to average net assets is computed using expenses before credits from the Adviser.
Ratio of net expenses to average net assets is computed using total expenses net of credits to the management
(11) fee.
CONTACT: Gladstone Investment Corp.
Investor Relations
703-287-5839
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