Gladstone Investment Corporation Reports Financial Results for the Quarter Ended December 31, 2010
- Net Investment Income for the three and nine months ended December 31, 2010 was $7.6 million and $14.2 million, or $0.34 and $0.65 per share, respectively
- Net Increase in Net Assets Resulting From Operations for the three and nine months ended December 31, 2010 was $15.1 million and $13.6 million, or $0.69 and $0.62 per share, respectively
MCLEAN, Va., Jan. 31, 2011 /PRNewswire/ -- Gladstone Investment Corporation (Nasdaq: GAIN) (the "Company") today announced earnings for the third quarter ended December 31, 2010. All per share references are per basic and diluted weighted average common share outstanding, unless noted otherwise.
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Net Investment Income for 3 Months: Net Investment Income for the quarters ended December 31, 2010 and 2009 was $7.6 million, or $0.34 per share, and $3.1 million, or $0.14 per share, respectively, an increase in Net Investment Income of 147.0%. The increase in Net Investment Income was primarily driven by income recognized during the current quarter from the sale of one of the Company's portfolio companies, Chase II Holding Corp. ("Chase"), which was partially offset by lower interest income resulting from a reduction in the size of the Company's investment portfolio prior to September 30, 2010.
Net Investment Income for 9 Months: Net Investment Income for the nine months ended December 31, 2010 and 2009 was $14.2 million, or $0.65 per share, and $7.9 million, or $0.36 per share, respectively, an increase in Net Investment Income of 80.5%. The increase in Net Investment Income was primarily driven by income recognized during the nine months ended December 31, 2010 from the sales of two portfolio companies, A. Stucki Holding Corp. ("A. Stucki") and Chase, and income recognized from the prepayments of success fees by certain portfolio companies, partially offset by lower interest income resulting from a reduction in the size of the Company's investment portfolio subsequent to December 31, 2009.
Net Increase (Decrease) in Net Assets Resulting from Operations for 3 Months: Net Increase (Decrease) in Net Assets Resulting from Operations for the quarters ended December 31, 2010 and 2009 was $15.1 million, or $0.69 per share, and ($4.4 million), or ($0.20) per share, respectively. The increase in the Net Increase (Decrease) in Net Assets Resulting from Operations between the quarter ended December 31, 2010 and the prior year's period was primarily due to the net gain (loss) on the Company's investment portfolio. The Company recorded a net gain on investments of $7.5 million for the quarter ended December 31, 2010, compared to a net loss of $7.5 million for the prior year period, which was largely impacted by significant devaluations, primarily in the Company's equity holdings of its Control investments.
Net Increase (Decrease) in Net Assets Resulting from Operations for 9 Months: Net Increase (Decrease) in Net Assets Resulting from Operations for the nine months ended December 31, 2010 and 2009 was $13.6 million, or $0.62 per share, and ($31.7) million, or ($1.44) per share, respectively. The increase in the Net Increase (Decrease) in Net Assets Resulting from Operations between the nine months ended December 31, 2010 and the prior year period was primarily due to the large net loss on the Company's investment portfolio during the prior year period. The Company recorded a net loss on investments of $0.1 million for the nine months ended December 31, 2010, compared to a net loss on investments of $39.6 million for the prior year period, which was largely impacted by significant devaluations, primarily in the Company's equity holdings of its Control investments.
Investment Portfolio Fair Value: The aggregate investment portfolio appreciated during the quarter ended December 31, 2010, primarily due to notable appreciations in the equity of certain of the Company's proprietary investments. As of December 31, 2010, the entire portfolio was fair valued at 77.1% of cost, compared to 90.9% as of March 31, 2010. The decrease was primarily due to the monetization of A. Stucki and Chase, both of which had significant unrealized appreciation as of March 31, 2010.
Net Asset Value: Net asset value was $9.00 per share outstanding at December 31, 2010, as compared to $8.74 per share outstanding at March 31, 2010.
Asset Characteristics: Total assets were $277.9 million at December 31, 2010, as compared to $297.2 million at March 31, 2010. At December 31, 2010, the Company had investments in 17 portfolio companies with an aggregate cost basis of $195.9 million and an aggregate fair value of $151.1 million. As of December 31, 2010, the Company's investment portfolio at fair value was comprised of 79.7% in debt securities and 20.3% in equity securities. Additionally, the Company held $80.0 million in cash and cash equivalents at December 31, 2010, including $67.4 million from a short-term loan that was subsequently repaid.
Investment Yield: The annualized weighted average yield on the Company's portfolio, excluding cash and cash equivalents, was 10.8% for the quarter ended December 31, 2010, as compared to 10.7% for the quarter ended December 31, 2009. 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 accruing. The increase in the weighted average yield for the quarter ended December 31, 2010 resulted primarily from the Company's sales and exits of lower interest-bearing loans.
Highlights for Quarter: During the quarter ended December 31, 2010, the following significant events occurred:
-- Chase Sale: In December 2010, the Company sold its equity investment and
received full repayment of its debt investment in Chase. The net cash
proceeds to the Company from the sale of its equity in Chase were $13.9
million, resulting in a realized gain of $6.9 million. In connection
with the equity sale, the company accrued and received cash dividend
proceeds of $4.0 million from its preferred stock investment in Chase.
At the same time, the Company also received $22.9 million in repayment
of its principal, accrued interest and success fees on the loans to
Chase.
-- New Control Investments: In October 2010, the Company invested $25.0
million in senior subordinated debt and preferred equity of Venyu
Solutions, Inc. In December 2010, the Company invested $10.8 million in
senior debt and preferred and common equity in connection with the
management-led buyout of Precision Southeast, Inc.
-- Short Term Investment: On December 30, 2010, the Company purchased $75.0
million of short-term U. S. Treasury securities, which matured on
January 6, 2011.
-- Distributions: The Company paid monthly cash distributions to
stockholders of $0.04 per common share for each of October, November and
December 2010.
Comments from President Dave Dullum: "We are finding an increase in the number of new investment opportunities consistent with our investing strategy, as demonstrated by our new investments in Venyu and Precision during the quarter. Additionally, we continue to devote management resources to our existing portfolio, which is performing well, and, where prudent, we are seeking to execute on strategic liquidity events, as we did with Chase. We hope to finish out the current fiscal year ending March 31, 2011 with continued investment activity and to carry that momentum into the next fiscal year."
Subsequent Events: After December 31, 2010, the following occurred:
-- Dividends Declared:
Declared X-Date Record Date Payment Date Cash Distribution January 11 January 19 January 21 January 31 $0.04 January 11 February 16* February 21 February 28 0.04 January 11 March 17 March 21 March 31 0.04 Total for the Quarter: 0.12 *Please note that the Company's press release, dated January 11, 2011, had erroneously used an ex-dividend date of February 17, 2011. The proper ex-dividend date for the February dividend is February 16, 2011.
Summary Information:The following chart is a summary of some of the information
reported above (dollars in thousands, except per share data):
December 31, 2010 December 31, 2009
For quarter ended:
Net investment income $ 7,591 $ 3,073
Net increase (decrease) in net assets from
operations 15,135 (4,420)
Average yield on portfolio 10.81% 10.68%
Total dollars invested $ 36,622 $ 595
Total dollars repaid 21,130 4,496
For 9 months ended:
Net investment income 14,238 7,889
Net increase (decrease) in net assets from
operations 13,643 (31,699)
Average yield on portfolio 10.61% 10.16%
Total dollars invested $ 41,616 $ 2,413
Total dollars repaid 61,774 14,828
As of: December 31, 2010 March 31, 2010
Fair value as a percent of cost 77.1% 90.9%
Net asset value per share $ 9.00 $ 8.74
Number of investments 17 16
Total assets $ 277,940 $ 297,161
Conference Call for Stockholders: The Company will hold a conference call Tuesday, February 1, 2011 at 8:30 am 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 3, 2011. To hear the replay, please dial (877) 344-7529 and use conference number 447110. The replay will be available approximately one hour after the call concludes.
The live audio broadcast of the Company's quarterly conference call will be available online at www.GladstoneInvestment.com. The event will be archived and available for replay on the Company's website through April 2, 2011.
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, 2010, including the footnotes to the financial statements contained therein. The Company has filed the Form 10-Q today with the SEC, 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.
Who we are: 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. 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 soundness and performance of the Company's portfolio, the Company's projected investment activities, the Company's ability to generate liquidity events and provide financial support to existing portfolio companies 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 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 current economic instability, the Company's ability to access debt and equity capital and those factors listed under the caption "Risk Factors" of the Company's Post-Effective Amendment No. 2 to the Registration Statement on Form N-2 (No. 333-160720) as filed with the SEC on November 22, 2010. 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
CONDENSED CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
December 31, March 31,
2010 2010
ASSETS
Cash and cash equivalents $ 79,963 $ 87,717
Investments at fair value
Non-Control/Non-Affiliate investments (Cost of $15,784
and $22,674, respectively) 14,565 20,946
Control investments (Cost of $134,293 and $152,166,
respectively) 101,791 148,248
Affiliate investments (Cost of $45,805 and $52,727,
respectively) 34,754 37,664
Total investments (Cost of $195,882 and $227,567,
respectively) 151,110 206,858
Interest receivable 748 1,234
Due from custodian 40,289 935
Deferred financing fees 480 83
Prepaid assets 319 221
Other assets 5,031 113
TOTAL ASSETS $ 277,940 $ 297,161
LIABILITIES
Borrowings at fair value
Short-term loan (Cost of $67,400and $75,000,
respectively) $ 67,400 $ 75,000
Credit Facility (Cost of $8,000 and $27,800,
respectively) 8,000 27,812
Total borrowings (Cost of $75,400 and $102,800,
respectively) 75,400 102,812
Accounts payable and accrued expenses 198 206
Fee due to Administrator 143 149
Fees due to Adviser 2,184 721
Other liabilities 1,333 295
TOTAL LIABILITIES 79,258 104,183
NET ASSETS $ 198,682 $ 192,978
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, 2010 and
March 31, 2010 $ 22 $ 22
Capital in excess of par value 257,216 257,206
Net unrealized depreciation of investment portfolio (44,772) (20,710)
Net unrealized depreciation of derivatives (74) (39)
Net unrealized appreciation of borrowings - (12)
Accumulated net realized investment loss (13,710) (43,489)
TOTAL NET ASSETS $ 198,682 $ 192,978
NET ASSETS PER SHARE $ 9.00 $ 8.74
GLADSTONE INVESTMENT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended Nine Months Ended December
December 31, 31,
2010 2009 2010 2009
INVESTMENT INCOME
Interest income
Non-Control/Non-Affiliate
investments $ 391 $ 489 $ 1,175 $ 1,840
Control investments 2,557 2,856 7,701 8,593
Affiliate investments 970 1,605 3,031 4,533
Cash and cash equivalents 7 1 21 1
Total interest income 3,925 4,951 11,928 14,967
Other income 6,812 970 10,358 1,066
Total investment income 10,737 5,921 22,286 16,033
EXPENSES
Loan servicing fee 634 886 2,124 2,892
Base management fee 343 113 846 588
Incentive fee 1,898 588 2,949 588
Administration fee 142 156 582 527
Interest expense 135 385 558 1,640
Amortization of deferred
financing fees 116 436 383 1,187
Professional fees 84 182 306 502
Stockholder related costs 26 49 245 276
Insurance expense 74 71 219 190
Directors fees 43 48 152 147
Other expenses 101 61 314 198
Expenses before credits
from Adviser 3,596 2,975 8,678 8,735
Credits to fees from
Adviser (450) (127) (630) (591)
Total expenses net of
credits to fees 3,146 2,848 8,048 8,144
NET INVESTMENT INCOME 7,591 3,073 14,238 7,889
REALIZED AND UNREALIZED
GAIN (LOSS) ON:
Realized gain (loss) on
sale of investments 6,514 (1,318) 23,489 (35,922)
Realized loss on
termination of derivative - - - (53)
Net unrealized
appreciation of
Non-Control/Non-Affiliate
investments 52 1,383 509 36,597
Net unrealized
depreciation of Control
investments (1,399) (8,853) (28,583) (35,234)
Net unrealized
appreciation
(depreciation) of
Affiliate investments 2,373 1,257 4,011 (4,862)
Net unrealized
appreciation
(depreciation) of
derivatives 4 (7) (34) 19
Net unrealized
depreciation
(appreciation) of
borrowings - 45 13 (133)
Net gain (loss) on
investments, derivatives
and borrowings 7,544 (7,493) (595) (39,588)
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS $ 15,135 $ (4,420) $ 13,643 $ (31,699)
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS PER
COMMON SHARE:
Basic and diluted $ 0.69 $ (0.20) $ 0.62 $ (1.44)
WEIGHTED AVERAGE SHARES
OF COMMON STOCK
OUTSTANDING:
Basic and diluted
weighted average shares 22,080,133 22,080,133 22,080,133 22,080,133
GLADSTONE INVESTMENT CORPORATION
CONDENSED CONSOLIDATED FINANCIAL HIGHLIGHTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT DATA)
(UNAUDITED)
Three months ended December
31, Nine months ended December 31,
2010 2009 2010 2009
Per Share Data (1)
Net asset value at
beginning of period $ 8.43 $ 8.24 $ 8.74 $ 9.73
Income from
investment
operations
Net investment
income(2) 0.34 0.14 0.65 0.36
Realized gain
(loss) on exit(2) 0.30 (0.05) 1.06 (1.63)
Net unrealized
appreciation
(depreciation)(2) 0.05 (0.28) (1.09) (0.17)
Total from
investment
operations 0.69 (0.19) 0.62 (1.44)
Distributions from:
Net investment
income (0.12) (0.12) (0.36) (0.36)
Total distributions
(3) (0.12) (0.12) (0.36) (0.36)
Net asset value at
end of period $ 9.00 $ 7.93 $ 9.00 $ 7.93
Per share market
value at beginning
of period $ 6.75 $ 4.83 $ 6.01 $ 3.67
Per share market
value at end of
period 7.65 4.56 7.65 4.56
Total return(4) 15.14% (3.18)% 34.48% 34.06%
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 $ 198,682 $ 175,001 $ 198,682 $ 175,001
Average net assets
(5) 189,420 179,155 191,299 194,783
Senior Securities
Data:
Total borrowings $ 75,400 $ 101,883 $ 75,400 $ 101,883
Asset coverage
ratio(6) 343% 270% 343% 270%
Asset coverage per
unit(7) $ 3,429 $ 2,703 $ 3,429 $ 2,703
Ratios/Supplemental
Data:
Ratio of expenses
to average net
assets(8), (9) 7.59% 6.64% 6.05% 5.98%
Ratio of net
expenses to average
net assets(8), (10) 6.64 6.36 5.61 5.57
Ratio of net
investment income
to average net
assets(8) 16.03 6.86 9.92 5.40
(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) 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.
(5) Calculated using the average of the balance of net assets at the end of
each month of the reporting period.
(6) As a business development company, 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.
(7) Asset coverage per unit is the asset coverage ratio expressed in terms of
dollar amounts per one thousand dollars of indebtedness.
(8) Amounts are annualized.
(9) Ratio of expenses to average net assets is computed using expenses before
credits from the Adviser.
(10) 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 January 31, 2011