UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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FOR THE QUARTER ENDED JUNE 30, 2008 |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
COMMISSION FILE NUMBER: 000-51233
GLADSTONE INVESTMENT CORPORATION
(Exact name of registrant as specified in its charter)
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DELAWARE (State or other jurisdiction of incorporation or organization) |
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83-0423116 (I.R.S. Employer Identification No.) |
1521 WESTBRANCH DRIVE, SUITE 200
MCLEAN, VIRGINIA 22102
(Address of principal executive office)
(703) 287-5800
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12 b-2 of the Exchange Act.
Large accelerated filer o Accelerated filer ý Non-accelerated filer o Smaller reporting company o.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý .
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. The number of shares of the issuer’s Common Stock, $0.001 par value, outstanding as of August 6, 2008 were 22,080,133.
GLADSTONE INVESTMENT CORPORATION
2
GLADSTONE INVESTMENT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
3
GLADSTONE INVESTMENT CORPORATION
CONDENSED CONSOLIDATED SCHEDULES OF INVESTMENTS
AS OF JUNE 30, 2008
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
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Company (1) |
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Industry |
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Investment (2) |
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Cost |
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Fair Value |
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NON-CONTROL/NON-AFFILIATE INVESTMENTS |
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Syndicated Loans: |
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Activant Solutions, Inc. |
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Service - enterprise software and services |
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Senior Term Debt (4.7%, Due 5/2013) (3) |
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$ |
1,733 |
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$ |
1,517 |
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Advanced Homecare Holdings, Inc. |
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Service - home health nursing services |
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Senior Term Debt (6.6%, Due 8/2014) (3) |
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2,970 |
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2,762 |
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Aeroflex, Inc. |
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Service - provider of highly specialized electronic equipment |
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Senior Term Debt (5.9%, Due 8/2014) (3) |
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1,897 |
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1,866 |
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Compsych Investments Corp. |
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Service - employee assistance programs |
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Senior Term Debt (5.5%, Due 2/2012) (3) (5) |
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3,361 |
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3,065 |
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CRC Health Group, Inc. |
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Service - substance abuse treatment |
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Senior Term Debt (5.1%, Due 2/2012) (3) |
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7,841 |
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7,168 |
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Critical Homecare Solutions, Inc. |
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Service - home therapy and respiratory treatment |
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Senior Term Debt (5.7%, Due 1/2012) (3) (5) |
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4,476 |
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4,429 |
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Generac Acquisition Corp. |
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Manufacturing - standby power products |
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Senior Term Debt (5.2%, Due 11/2013) (3) (5) |
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6,868 |
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5,877 |
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Graham Packaging Holdings Company |
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Manufacturing - plastic containers |
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Senior Term Debt (5.0%, Due 10/2011) (3) |
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3,417 |
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3,149 |
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Hargray Communications Group, Inc. |
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Service - triple-play (cable, phone, internet) provider |
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Senior Term Debt (5.1%, Due 6/2014) (3) |
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911 |
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830 |
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HMTBP Acquisition II Corp. |
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Service - aboveground storage tanks |
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Senior Term Debt (5.1%, Due 5/2014) (3) (5) |
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3,869 |
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3,549 |
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Hudson Products Holdings, Inc. |
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Manufacturing - heat transfer solutions |
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Senior Term Debt (5.8%, Due 12/2013) (3) |
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6,004 |
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5,688 |
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Huish Detergents, Inc. |
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Manufacturing - household cleaning products |
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Senior Term Debt (4.8%, Due 4/2014) (3) |
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1,981 |
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1,792 |
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Hyland Software, Inc. |
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Service - provider of enterprise content management software |
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Senior Term Debt (5.7%, Due 7/2013) (3) |
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3,937 |
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3,573 |
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Interstate Fibernet, Inc. |
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Service - provider of voice and data telecommunications services |
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Senior Term Debt (6.8%, Due 7/2013) (3) |
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9,909 |
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9,652 |
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KIK Custom Products, Inc. |
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Manufacturing - consumer products |
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Senior Term Debt (5.2%, Due 5/2014) (3) |
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3,971 |
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2,978 |
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Kronos, Inc. |
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Service - workforce management solutions |
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Senior Term Debt (5.1%, Due 6/2014) (3) |
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1,966 |
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1,818 |
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Lexicon Marketing USA, Inc. |
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Service - marketing to Hispanic community |
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Senior Term Debt (non-accrual) (3) (5) |
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2,947 |
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412 |
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Local TV Finance, LLC |
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Service - television station operator |
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Senior Term Debt (4.9%, Due 5/2013) (3) |
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992 |
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859 |
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LVI Services, Inc. |
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Service - asbestos and mold remediation |
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Senior Term Debt (7.9%, Due 11/2010) (3) (5) |
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5,967 |
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4,762 |
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MedAssets, Inc. |
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Service - pharmaceuticals and healthcare GPO |
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Senior Term Debt (6.7%, Due 10/2013) (3) (5) |
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3,994 |
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3,952 |
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Network Solutions, LLC |
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Service - internet domain solutions |
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Senior Term Debt (5.2%, Due 3/2014) (3) |
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8,803 |
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7,306 |
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Open Solutions, Inc. |
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Service - software outsourcing for financial institutions |
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Senior Term Debt (5.1%, Due 1/2014) (3) |
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2,670 |
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2,350 |
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Ozburn-Hessey Holding Co. LLC |
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Service - third party logistics |
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Senior Term Debt (6.2%, Due 8/2012) (3) |
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7,601 |
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6,829 |
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Pinnacle Foods Finance, LLC |
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Manufacturing - branded food products |
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Senior Term Debt (5.4%, Due 4/2014) (3) |
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1,965 |
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1,823 |
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PTS Acquisition Corp. |
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Manufacturing - drug delivery and packaging technologies |
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Senior Term Debt (5.1%, Due 4/2014) (3) |
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6,930 |
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6,194 |
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QTC Acquisition, Inc. |
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Service - outsourced disability evaluations |
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Senior Term Debt (4.7%, Due 11/2012) (3) |
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1,925 |
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1,655 |
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Radio Systems Corporation |
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Service - design electronic pet containment products |
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Senior Term Debt (5.2%, Due 9/2013) (3) |
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1,886 |
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1,773 |
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Rally Parts, Inc. |
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Manufacturing - aftermarket motorcycle parts and accessories |
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Senior Term Debt (5.3%, Due 11/2013) (3) |
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2,479 |
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1,970 |
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RPG Holdings, Inc. |
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Manufacturing and design - greeting cards |
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Senior Term Debt (9.8%, Due 12/2011) (3) |
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4,553 |
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2,048 |
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SafeNet, Inc. |
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Service - chip encryption products |
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Senior Term Debt (5.5%, Due 4/2014) (3) |
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2,972 |
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2,599 |
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SGS International, Inc. |
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Service - digital imaging and graphics |
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Senior Term Debt (5.3%, Due 12/2011) (3) |
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1,590 |
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1,458 |
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Survey Sampling, LLC |
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Service - telecommunications-based sampling |
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Senior Term Debt (8.3%, Due 5/2011) (3) (5) |
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2,806 |
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2,448 |
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Triad Laboratory Alliance, LLC |
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Service - regional medical laboratories |
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Senior Term Debt (5.9%, Due 12/2011) (3) (5) |
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4,887 |
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4,290 |
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Wastequip, Inc. |
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Service - process and transport waste materials |
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Senior Term Debt (5.1%, Due 2/2013) (3) |
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2,915 |
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2,375 |
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WaveDivision Holdings, LLC |
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Service - cable |
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Senior Term Debt (5.4%, Due 6/2014) (3) (5) |
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1,920 |
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1,810 |
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West Corporation |
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Service - business process outsourcing |
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Senior Term Debt (5.1%, Due 10/2013) (3) |
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3,348 |
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3,047 |
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Subtotal - Syndicated Loans |
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$ |
138,261 |
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$ |
119,673 |
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Non-syndicated Loans |
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B-Dry, LLC |
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Service - basement waterproofer |
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Revolving Credit Facility (6.7%, Due 10/2008) (7) |
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$ |
750 |
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$ |
729 |
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Senior Term Debt (10.0%, Due 5/2014) |
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6,715 |
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6,530 |
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Senior Term Debt (10.0%, Due 5/2014) |
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3,950 |
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3,832 |
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Common Stock Warrants (4) |
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300 |
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— |
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11,715 |
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11,091 |
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Total Non-Control/Non-Affiliate Investments |
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$ |
149,976 |
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$ |
130,764 |
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4
GLADSTONE INVESTMENT CORPORATION
CONDENSED CONSOLIDATED SCHEDULES OF INVESTMENTS
AS OF JUNE 30, 2008
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
|
Company (1) |
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Industry |
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Investment (2) |
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Cost |
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Fair Value |
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CONTROL INVESTMENTS |
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A. Stucki Holding Corp. |
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Manufacturing - railroad freight car products |
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Senior Term Debt (7.0%, Due 3/2012) |
|
$ |
12,855 |
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$ |
12,855 |
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Senior Term Debt (9.2%, Due 3/2012) (6) |
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10,863 |
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10,863 |
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||
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Senior Subordinated Term Debt (13% Due 3/2014) |
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5,486 |
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5,486 |
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Preferred Stock (4) |
|
4,387 |
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4,842 |
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Common Stock (4) |
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130 |
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9,577 |
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||
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33,721 |
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43,623 |
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Acme Cryogenics, Inc. |
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Manufacturing - manifolds and pipes for industrial gasses |
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Senior Subordinated Term Debt (11.5% Due 3/2013) |
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14,500 |
|
14,500 |
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||
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|
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Redeemable Preferred Stock (4) |
|
6,984 |
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7,960 |
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||
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Common Stock (4) |
|
1,045 |
|
2,123 |
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||
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|
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Common Stock Warrants (4) |
|
25 |
|
142 |
|
||
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|
|
|
|
|
|
22,554 |
|
24,725 |
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ASH Holdings Corp. |
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Retail and Service - school buses and parts |
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Revolver (non-accrual, Due 3/2010) (8) |
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1,600 |
|
— |
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Senior Subordinated Term Debt (non-accrual, Due 1/2012) |
|
5,250 |
|
— |
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Preferred Stock (4) |
|
2,500 |
|
— |
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||
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|
|
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Common Stock Warrants (4) |
|
4 |
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— |
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||
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|
|
|
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9,354 |
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— |
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Cavert II Holding Corp. |
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Manufacturing - bailing wire |
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Revolving Credit Facility (8.0%, Due 10/2010) (9) |
|
2,700 |
|
2,700 |
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Senior Term Debt (8.3%, Due 10/2012) |
|
6,175 |
|
6,175 |
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Senior Term Debt (10.0%, Due 10/2012) (6) |
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3,000 |
|
3,000 |
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Senior Subordinated Term Debt (13%, Due 10/2014) |
|
4,671 |
|
4,671 |
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Preferred Stock (4) |
|
4,110 |
|
4,334 |
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Common Stock (4) |
|
69 |
|
776 |
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20,725 |
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21,656 |
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Chase II Holdings Corp. |
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Manufacturing - traffic doors |
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Revolving Credit Facility (6.5% Due 3/2008) (10) |
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3,900 |
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3,900 |
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Senior Term Debt (8.8%, Due 3/2011) |
|
9,625 |
|
9,625 |
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Senior Term Debt (12.0% Due 3/2011) (6) |
|
7,800 |
|
7,800 |
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Subordinated Term Debt (13.0% Due 3/2013) |
|
6,168 |
|
6,169 |
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Redeemable Preferred Stock (4) |
|
6,961 |
|
8,665 |
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||
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Common Stock (4) |
|
61 |
|
4,701 |
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||
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|
|
|
|
|
|
34,515 |
|
40,860 |
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Quench Holdings Corp. |
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Service - sales, installation and service of water coolers |
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Revolving Credit Facility (6.5%, Due 3/2009) (11) |
|
1,500 |
|
1,395 |
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Senior Term Debt (6.5%, Due 3/2011) |
|
4,000 |
|
3,720 |
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Senior Subordinated Term Debt (11.5%, Due 3/2011) |
|
7,775 |
|
3,888 |
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Equipment Line Note (12) |
|
1,264 |
|
1,175 |
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Preferred Stock (4) |
|
3,000 |
|
— |
|
||
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|
|
|
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Common Stock Warrants (4) |
|
447 |
|
— |
|
||
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|
|
|
|
|
|
17,986 |
|
10,178 |
|
||
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Total Control Investments |
|
|
|
|
|
$ |
138,855 |
|
$ |
141,042 |
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AFFILIATE INVESTMENTS |
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Danco Acquisition Corp. |
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Manufacturing - machining and sheet metal work |
|
Revolving Credit Facility (9.3%, Due 10/2010) (13) |
|
$ |
1,000 |
|
$ |
970 |
|
|
|
|
|
|
Senior Term Debt (9.3%, Due 10/2012) |
|
5,325 |
|
5,191 |
|
||
|
|
|
|
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Senior Term Debt (11.5%, Due 4/2013) |
|
8,557 |
|
8,299 |
|
||
|
|
|
|
|
Redeemable Preferred Stock (4) |
|
2,500 |
|
2,627 |
|
||
|
|
|
|
|
Common Stock Warrants (4) |
|
3 |
|
840 |
|
||
|
|
|
|
|
|
|
17,385 |
|
17,927 |
|
||
|
|
|
|
|
|
|
|
|
|
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|
Mathey Investments, Inc. |
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Manufacturing - pipe-cutting and pipe-fitting equipment |
|
Revolving Credit Facility (9.0%, Due 3/2011) (14) (15) |
|
— |
|
— |
|
||
|
|
|
|
|
Senior Term Debt (9.0%, Due 3/2013) |
|
2,467 |
|
2,461 |
|
||
|
|
|
|
|
Senior Term Debt (12.0% Due 3/2014) (6) |
|
7,280 |
|
7,262 |
|
||
|
|
|
|
|
Common Stock (4) (16) |
|
500 |
|
545 |
|
||
|
|
|
|
|
Common Stock Warrants (4) (16) |
|
277 |
|
318 |
|
||
|
|
|
|
|
|
|
10,524 |
|
10,586 |
|
||
|
|
|
|
|
|
|
|
|
|
|
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|
Noble Logistics, Inc. |
|
Service - aftermarket auto parts delivery |
|
Revolving Credit Facility (6.5%, Due 12/2009) (14) |
|
2,000 |
|
1,840 |
|
||
|
|
|
|
|
Senior Term Debt (8.5%, Due 12/2011) |
|
6,077 |
|
5,591 |
|
||
|
|
|
|
|
Senior Term Debt (10.5% Due 3/2011) (6) |
|
7,000 |
|
6,300 |
|
||
|
|
|
|
|
Senior Subordinated Term Debt (6.5%, Due 7/2008) |
|
500 |
|
499 |
|
||
|
|
|
|
|
Preferred Stock (4) |
|
1,750 |
|
— |
|
||
|
|
|
|
|
Common Stock (4) |
|
1,500 |
|
— |
|
||
|
|
|
|
|
|
|
18,827 |
|
14,230 |
|
||
|
|
|
|
|
|
|
— |
|
— |
|
||
|
Tread Corp. |
|
Service - regional medical laboratories |
|
Senior Term Debt (12.5%, Due 5/2013) (15) |
|
5,000 |
|
5,000 |
|
||
|
|
|
|
|
Preferred Stock (4) (15) |
|
750 |
|
750 |
|
||
|
|
|
|
|
|
|
5,750 |
|
5,750 |
|
||
|
Total Affiliate Investments |
|
|
|
|
|
$ |
52,486 |
|
$ |
48,493 |
|
|
Total Investments |
|
|
|
|
|
$ |
341,317 |
|
$ |
320,299 |
|
5
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(1) |
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Certain of the listed securities are issued by affiliate(s) of the indicated portfolio company. |
|
(2) |
|
Percentage represents the weighted average interest rates in effect at June 30, 2008 and due date represents the contractual maturity date. |
|
(3) |
|
Marketable securities are valued based on the indicative bid price, on or near June 30, 2008, offered by the respective syndication agent’s trading desk, or secondary desk. |
|
(4) |
|
Security is non-income producing. |
|
(5) |
|
Valued using Standard & Poor’s Securities Evaluations, Inc. opinions of value at June 30, 2008. |
|
(6) |
|
Last out tranche of senior debt, meaning if the portfolio company is liquidated then the holder of the last out tranche is paid after the senior debt. |
|
(7) |
|
Total available under the revolving credit facility is $750 which was fully drawn at June 30, 2008. |
|
(8) |
|
Total available under the revolving credit facility is $2,000 of which $400 remains undrawn at June 30, 2008. |
|
(9) |
|
Total available under the revolving credit facility is $3,000 of which $300 remains undrawn at June 30, 2008. |
|
(10) |
|
Total available under the revolving credit facility is $4,500 of which $600 remains undrawn at June 30, 2008. |
|
(11) |
|
Total available under the revolving credit facility is $1,500 which was fully drawn at June 30, 2008. |
|
(12) |
|
Total available for future borrowing for the purposes of purchasing equipment is $1,500. The undrawn amount of $236 may be drawn to purchase additional equipment through 10/31/2010. The interest rate on all amounts drawn on the equipment line note is 12% except for one draw of $188 whose interest rate is 15%. Each draw on the equipment line note is subject to its own amortization and maturity, typically over a period of 20-24 months. At June 30, 2008, the last amortization payment due under current amounts drawn under the equipment line note is 11/2009. |
|
(13) |
|
Total available under the revolving credit facility is $3,000 of which $2,000 was undrawn at June 30, 2008. |
|
(14) |
|
Total available under the revolving credit facility is $2,000 which was fully drawn at June 30, 2008. |
|
(15) |
|
Valued at cost due to recent acquisition. |
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
6
GLADSTONE INVESTMENT CORPORATION
CONDENSED CONSOLIDATED SCHEDULES OF INVESTMENTS
AS OF MARCH 31, 2008
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
|
Company (1) |
|
Industry |
|
Investment (2) |
|
Cost |
|
Fair Value |
|
||
|
|
|
|
|
|
|
|
|
||||
|
NON-CONTROL/NON-AFFILIATE INVESTMENTS |
|
|
|
|
|
|
|
||||
|
Syndicated Loans: |
|
|
|
|
|
|
|
|
|
||
|
Activant Solutions, Inc. |
|
Service - enterprise software and services |
|
Senior Term Debt (6.7%, Due 5/2013) (3) |
|
$ |
1,734 |
|
$ |
1,478 |
|
|
Advanced Homecare Holdings, Inc. |
|
Service - home health nursing services |
|
Senior Term Debt (6.4%, Due 8/2014) (3) |
|
2,978 |
|
2,829 |
|
||
|
Aeroflex, Inc. |
|
Service - provider of highly specialized electronic equipment |
|
Senior Term Debt (6.4%, Due 8/2014) (3) |
|
1,898 |
|
1,851 |
|
||
|
Compsych Investments Corp. |
|
Service - employee assistance programs |
|
Senior Term Debt (5.5%, Due 2/2012) (3) (5) |
|
3,421 |
|
2,966 |
|
||
|
CRC Health Group, Inc. |
|
Service - substance abuse treatment |
|
Senior Term Debt (4.9%, Due 2/2012) (3) |
|
9,878 |
|
8,536 |
|
||
|
Critical Homecare Solutions, Inc. |
|
Service - home therapy and respiratory treatment |
|
Senior Term Debt (6.1%, Due 1/2012) (3) (5) |
|
4,505 |
|
4,480 |
|
||
|
Dealer Computer Services, Inc. |
|
Manufacturing & Service - systems for automotive retailers |
|
Senior Term Debt (6.8%, Due 9/2013) (3) |
|
1,799 |
|
1,595 |
|
||
|
Generac Acquisition Corp. |
|
Manufacturing - standby power products |
|
Senior Term Debt (7.2%, Due 11/2013) (3) (5) |
|
6,874 |
|
5,435 |
|
||
|
Graham Packaging Holdings Company |
|
Manufacturing - plastic containers |
|
Senior Term Debt (5.9%, Due 10/2011) (3) |
|
5,420 |
|
4,938 |
|
||
|
Hargray Communications Group, Inc. |
|
Service - triple-play (cable, phone, internet) provider |
|
Senior Term Debt (4.9%, Due 6/2014) (3) |
|
963 |
|
860 |
|
||
|
HMTBP Acquisition II Corp. |
|
Service - aboveground storage tanks |
|
Senior Term Debt (4.9%, Due 5/2014) (3) (5) |
|
3,879 |
|
3,529 |
|
||
|
Hudson Products Holdings, Inc. |
|
Manufacturing - heat transfer solutions |
|
Senior Term Debt (7.0%, Due 12/2013) (3) |
|
6,020 |
|
5,283 |
|
||
|
Huish Detergents, Inc. |
|
Manufacturing - household cleaning products |
|
Senior Term Debt (4.7%, Due 4/2014) (3) |
|
1,986 |
|
1,653 |
|
||
|
Hyland Software, Inc. |
|
Service - provider of enterprise content management software |
|
Senior Term Debt (5.9%, Due 7/2013) (3) |
|
3,955 |
|
3,671 |
|
||
|
Interstate Fibernet, Inc. |
|
Service - provider of voice and data telecommunications services |
|
Senior Term Debt (6.7%, Due 7/2013) (3) |
|
9,932 |
|
9,676 |
|
||
|
KIK Custom Products, Inc. |
|
Manufacturing - consumer products |
|
Senior Term Debt (4.9%, Due 5/2014) (3) |
|
3,981 |
|
2,746 |
|
||
|
Kronos, Inc. |
|
Service - workforce management solutions |
|
Senior Term Debt (5.0%, Due 6/2014) (3) |
|
1,971 |
|
1,577 |
|
||
|
Lexicon Marketing USA, Inc. |
|
Service - marketing to Hispanic community |
|
Senior Term Debt (non-accrual) (3) (5) |
|
2,947 |
|
412 |
|
||
|
Local TV Finance, LLC |
|
Service - television station operator |
|
Senior Term Debt (5.2%, Due 5/2013) (3) |
|
995 |
|
824 |
|
||
|
LVI Services, Inc. |
|
Service - asbestos and mold remediation |
|
Senior Term Debt (7.5%, Due 11/2010) (3) (5) |
|
6,369 |
|
5,083 |
|
||
|
MedAssets, Inc. |
|
Service - pharmaceuticals and healthcare GPO |
|
Senior Term Debt (5.2%, Due 10/2013) (3) (5) |
|
4,004 |
|
3,702 |
|
||
|
National Mentor Holdings, Inc. |
|
Service - home health care |
|
Senior Term Debt (4.8%, Due 6/2013) (3) |
|
1,968 |
|
1,672 |
|
||
|
Network Solutions, LLC |
|
Service - internet domain solutions |
|
Senior Term Debt (5.2%, Due 3/2014) (3) |
|
9,196 |
|
7,355 |
|
||
|
NPC International Inc. |
|
Service - Pizza Hut franchisee |
|
Senior Term Debt (4.7%, Due 5/2013) (3) |
|
2,895 |
|
2,537 |
|
||
|
Open Solutions, Inc. |
|
Service - software outsourcing for financial institutions |
|
Senior Term Debt (5.8%, Due 1/2014) (3) |
|
2,678 |
|
2,196 |
|
||
|
Ozburn-Hessey Holding Co. LLC |
|
Service - third party logistics |
|
Senior Term Debt (6.3%, Due 8/2012) (3) |
|
7,628 |
|
5,979 |
|
||
|
Pinnacle Foods Finance, LLC |
|
Manufacturing - branded food products |
|
Senior Term Debt (7.4%, Due 4/2014) (3) |
|
3,971 |
|
3,454 |
|
||
|
PTS Acquisition Corp. |
|
Manufacturing - drug delivery and packaging technologies |
|
Senior Term Debt (7.1%, Due 4/2014) (3) |
|
6,948 |
|
5,697 |
|
||
|
QTC Acquisition, Inc. |
|
Service - outsourced disability evaluations |
|
Senior Term Debt (5.4%, Due 11/2012) (3) |
|
1,930 |
|
1,638 |
|
||
|
Radio Systems Corporation |
|
Service - design electronic pet containment products |
|
Senior Term Debt (5.5%, Due 9/2013) (3) |
|
1,966 |
|
1,807 |
|
||
|
Rally Parts, Inc. |
|
Manufacturing - aftermarket motorcycle parts and accessories |
|
Senior Term Debt (5.2%, Due 11/2013) (3) |
|
2,486 |
|
2,074 |
|
||
|
RPG Holdings, Inc. |
|
Manufacturing and design - greeting cards |
|
Senior Term Debt (8.8%, Due 12/2011) (3) |
|
4,553 |
|
3,869 |
|
||
|
SafeNet, Inc. |
|
Service - chip encryption products |
|
Senior Term Debt (7.1%, Due 4/2014) (3) |
|
2,980 |
|
2,382 |
|
||
|
SGS International, Inc. |
|
Service - digital imaging and graphics |
|
Senior Term Debt (6.9%, Due 12/2011) (3) |
|
1,594 |
|
1,430 |
|
||
|
Stolle Machinery Company |
|
Manufacturing - can-making equipment and parts |
|
Senior Term Debt (7.8%, Due 9/2012) (3) |
|
494 |
|
458 |
|
||
|
Survey Sampling, LLC |
|
Service - telecommunications-based sampling |
|
Senior Term Debt (5.2%, Due 5/2011) (3) (5) |
|
2,931 |
|
2,527 |
|
||
|
Synagro Technologies, Inc. |
|
Service - waste treatment and recycling |
|
Senior Term Debt (5.1%, Due 3/2014) (3) |
|
498 |
|
422 |
|
||
|
Triad Laboratory Alliance, LLC |
|
Service - regional medical laboratories |
|
Senior Term Debt (5.9%, Due 12/2011) (3) (5) |
|
4,900 |
|
4,154 |
|
||
|
United Surgical Partners International, Inc. |
|
Service - outpatient surgical provider |
|
Senior Term Debt (5.4%, Due 4/2014) (3) |
|
1,320 |
|
1,152 |
|
||
|
Wastequip, Inc. |
|
Service - process and transport waste materials |
|
Senior Term Debt (4.9%, Due 2/2013) (3) |
|
2,922 |
|
2,337 |
|
||
|
WaveDivision Holdings, LLC |
|
Service - cable |
|
Senior Term Debt (6.7%, Due 6/2014) (3) (5) |
|
1,925 |
|
1,814 |
|
||
|
West Corporation |
|
Service - business process outsourcing |
|
Senior Term Debt (5.3%, Due 10/2013) (3) |
|
3,355 |
|
2,929 |
|
||
|
Subtotal - Syndicated Loans |
|
|
|
|
|
$ |
154,647 |
|
$ |
131,007 |
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Non-syndicated Loans |
|
|
|
|
|
|
|
|
|
||
|
B-Dry, LLC |
|
Service - basement waterproofer |
|
Revolving Credit Facility (7.3%, Due 10/2008) (7) |
|
750 |
|
750 |
|
||
|
|
|
|
|
Senior Term Debt (10.0%, Due 5/2014) |
|
6,749 |
|
6,749 |
|
||
|
|
|
|
|
Senior Term Debt (10.0%, Due 5/2014) |
|
3,970 |
|
3,970 |
|
||
|
|
|
|
|
Common Stock Warrants (4) |
|
300 |
|
265 |
|
||
|
|
|
|
|
|
|
11,769 |
|
11,734 |
|
||
|
Total Non-Control/Non-Affiliate Investments |
|
|
|
$ |
166,416 |
|
$ |
142,741 |
|
||
7
GLADSTONE INVESTMENT CORPORATION
CONDENSED CONSOLIDATED SCHEDULES OF INVESTMENTS
AS OF MARCH 31, 2008
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
|
Company (1) |
|
Industry |
|
Investment (2) |
|
Cost |
|
Fair Value |
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
CONTROL INVESTMENTS |
|
|
|
|
|
|
|
|
|
||
|
A. Stucki Holding Corp. |
|
Manufacturing - railroad freight car products |
|
Senior Term Debt (7.6%, Due 3/2012) |
|
$ |
13,391 |
|
$ |
13,391 |
|
|
|
|
|
|
Senior Term Debt (9.8%, Due 3/2012) (6) |
|
11,000 |
|
11,000 |
|
||
|
|
|
|
|
Senior Subordinated Term Debt (13% Due 3/2014) |
|
5,486 |
|
5,486 |
|
||
|
|
|
|
|
Preferred Stock (4) |
|
4,387 |
|
4,748 |
|
||
|
|
|
|
|
Common Stock (4) |
|
130 |
|
10,062 |
|
||
|
|
|
|
|
|
|
34,394 |
|
44,687 |
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
Acme Cryogenics, Inc. |
|
Manufacturing - manifolds and pipes for industrial gasses |
|
Senior Subordinated Term Debt (11.5% Due 3/2013) |
|
14,500 |
|
14,500 |
|
||
|
|
|
|
|
Redeemable Preferred Stock (4) |
|
6,984 |
|
7,795 |
|
||
|
|
|
|
|
Common Stock (4) |
|
1,045 |
|
2,977 |
|
||
|
|
|
|
|
Common Stock Warrants (4) |
|
25 |
|
291 |
|
||
|
|
|
|
|
|
|
22,554 |
|
25,563 |
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
ASH Holdings Corp. |
|
Retail and Service - school buses and parts |
|
Revolver (non-accrual, Due 3/2010) (8) |
|
750 |
|
— |
|
||
|
|
|
|
|
Senior Subordinated Term Debt (non-accrual, Due 1/2012) |
|
5,250 |
|
— |
|
||
|
|
|
|
|
Preferred Stock (4) |
|
2,500 |
|
— |
|
||
|
|
|
|
|
Common Stock Warrants (4) |
|
4 |
|
— |
|
||
|
|
|
|
|
|
|
8,504 |
|
— |
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
Cavert II Holding Corp. |
|
Manufacturing - bailing wire |
|
Revolving Credit Facility (8.0%, Due 10/2010) (9) |
|
2,400 |
|
2,400 |
|
||
|
|
|
|
|
Senior Term Debt (8.3%, Due 10/2012) |
|
6,338 |
|
6,338 |
|
||
|
|
|
|
|
Senior Term Debt (10.0%, Due 10/2012) (6) |
|
3,000 |
|
3,000 |
|
||
|
|
|
|
|
Senior Subordinated Term Debt (13%, Due 10/2014) |
|
4,671 |
|
4,671 |
|
||
|
|
|
|
|
Preferred Stock (4) |
|
4,110 |
|
4,251 |
|
||
|
|
|
|
|
Common Stock (4) |
|
69 |
|
688 |
|
||
|
|
|
|
|
|
|
20,588 |
|
21,348 |
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
Chase II Holdings Corp. |
|
Manufacturing - traffic doors |
|
Revolving Credit Facility (7.1% Due 3/2008) (10) |
|
3,280 |
|
3,280 |
|
||
|
|
|
|
|
Senior Term Debt (8.8%, Due 3/2011) |
|
9,900 |
|
9,900 |
|
||
|
|
|
|
|
Senior Term Debt (12.0% Due 3/2011) (6) |
|
7,840 |
|
7,840 |
|
||
|
|
|
|
|
Subordinated Term Debt (13.0% Due 3/2013) |
|
6,168 |
|
6,167 |
|
||
|
|
|
|
|
Redeemable Preferred Stock (4) |
|
6,959 |
|
8,455 |
|
||
|
|
|
|
|
Common Stock (4) |
|
61 |
|
3,508 |
|
||
|
|
|
|
|
|
|
34,208 |
|
39,150 |
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
Quench Holdings Corp. |
|
Service - sales, installation and service of water coolers |
|
Revolving Credit Facility (7.1%, Due 3/2009) (11) |
|
1,500 |
|
1,500 |
|
||
|
|
|
|
|
Senior Term Debt (7.1%, Due 3/2011) |
|
4,250 |
|
4,250 |
|
||
|
|
|
|
|
Senior Subordinated Term Debt (11.5%, Due 3/2011) |
|
7,820 |
|
7,820 |
|
||
|
|
|
|
|
Equipment Line Note (12) |
|
1,089 |
|
1,089 |
|
||
|
|
|
|
|
Preferred Stock (4) |
|
3,000 |
|
— |
|
||
|
|
|
|
|
Common Stock Warrants (4) |
|
447 |
|
— |
|
||
|
|
|
|
|
|
|
18,106 |
|
14,659 |
|
||
|
Total Control Investments |
|
|
|
|
|
$ |
138,354 |
|
$ |
145,407 |
|
|
|
|
|
|
|
|
|
|
|
|
||
|
AFFILIATE INVESTMENTS |
|
|
|
|
|
|
|
|
|
||
|
Danco Acquisition Corp. |
|
Manufacturing - machining and sheet metal work |
|
Revolving Credit Facility (9.3%, Due 10/2010) (13) |
|
$ |
600 |
|
$ |
600 |
|
|
|
|
|
|
Senior Term Debt (9.3%, Due 10/2012) |
|
5,550 |
|
5,550 |
|
||
|
|
|
|
|
Senior Term Debt (11.5%, Due 4/2013) |
|
8,578 |
|
8,577 |
|
||
|
|
|
|
|
Redeemable Preferred Stock (4) |
|
2,500 |
|
2,576 |
|
||
|
|
|
|
|
Common Stock Warrants (4) |
|
3 |
|
1,045 |
|
||
|
|
|
|
|
|
|
17,231 |
|
18,348 |
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
Mathey Investments, Inc. |
|
Manufacturing - pipe-cutting and pipe-fitting equipment |
|
Revolving Credit Facility (9.0%, Due 3/2011) (15) |
|
— |
|
— |
|
||
|
|
|
|
|
Senior Term Debt (9.0%, Due 3/2013) (15) |
|
2,500 |
|
2,500 |
|
||
|
|
|
|
|
Senior Term Debt (12.0% Due 3/2014) (15) |
|
7,300 |
|
7,300 |
|
||
|
|
|
|
|
Common Stock (4) (15) |
|
500 |
|
500 |
|
||
|
|
|
|
|
Common Stock Warrants (4) (15) |
|
277 |
|
277 |
|
||
|
|
|
|
|
|
|
10,577 |
|
10,577 |
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
Noble Logistics, Inc. |
|
Service - aftermarket auto parts delivery |
|
Revolving Credit Facility (7.1%, Due 12/2009) (14) |
|
1,900 |
|
1,900 |
|
||
|
|
|
|
|
Senior Term Debt (8.5%, Due 12/2011) |
|
6,077 |
|
6,076 |
|
||
|
|
|
|
|
Senior Term Debt (10.5% Due 3/2011) (6) |
|
7,000 |
|
7,000 |
|
||
|
|
|
|
|
Preferred Stock (4) |
|
1,750 |
|
2,108 |
|
||
|
|
|
|
|
Common Stock (4) |
|
1,500 |
|
1,447 |
|
||
|
|
|
|
|
|
|
18,227 |
|
18,531 |
|
||
|
Total Affiliate Investments |
|
|
|
|
|
$ |
46,035 |
|
$ |
47,456 |
|
|
Total Investments |
|
|
|
|
|
$ |
350,805 |
|
$ |
335,604 |
|
8
|
(1) |
|
Certain of the listed securities are issued by affiliate(s) of the indicated portfolio company. |
|
(2) |
|
Percentage represents the weighted average interest rates in effect at March 31, 2008 and due date represents the contractual maturity date. |
|
(3) |
|
Marketable securities are valued based on the indicative bid price, on or near March 31, 2008, offered by the respective syndication agent’s trading desk, or secondary desk. |
|
(4) |
|
Security is non-income producing. |
|
(5) |
|
Valued using Standard & Poor’s Securities Evaluations, Inc. opinions of value at March 31, 2008. |
|
(6) |
|
Last out tranche of senior debt, meaning if the portfolio company is liquidated then the holder of the last out tranche is paid after the senior debt. |
|
(7) |
|
Total available under the revolving credit facility is $750 which was fully drawn at March 31, 2008. |
|
(8) |
|
Total available under the revolving credit facility is $2,000 of which $1,250 remains undrawn at March 31, 2008. |
|
(9) |
|
Total available under the revolving credit facility is $3,000 of which $600 remains undrawn at March 31, 2008. |
|
(10) |
|
Total available under the revolving credit facility is $3,500 of which $220 remains undrawn at March 31, 2008. |
|
(11) |
|
Total available under the revolving credit facility is $1,500, which was fully drawn at March 31, 2008. |
|
(12) |
|
Total available for future borrowing for the purposes of purchasing equipment is $1,500. The undrawn amount of $411 may be drawn to purchase additional equipment through 10/31/2010. The interest rate on all amounts drawn on the equipment line note is 12% except for one draw of $188 whose interest rate is 15%. Each draw on the equipment line note is subject to its own amortization and maturity, typically over a period of 20-24 months. At March 31, 2008, the last amortization payment due under current amounts drawn under the equipment line note is 11/2009. |
|
(13) |
|
Total available under the revolving credit facility is $3,000 of which $2,400 was undrawn at March 31, 2008. |
|
(14) |
|
Total available under the revolving credit facility is $2,000 of which $100 was undrawn at March 31, 2008. |
|
(15) |
|
Valued at cost due to recent acquisition. |
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
9
GLADSTONE INVESTMENT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
|
|
|
Three Months Ended |
|
||||
|
|
|
June 30, |
|
||||
|
|
|
2008 |
|
2007 |
|
||
|
INVESTMENT INCOME |
|
|
|
|
|
||
|
Interest income |
|
|
|
|
|
||
|
Non-Control/Non-Affiliate investments |
|
$ |
2,324 |
|
$ |
3,249 |
|
|
Control investments |
|
2,569 |
|
2,565 |
|
||
|
Affiliate investments |
|
1,111 |
|
426 |
|
||
|
Cash and cash equivalents |
|
24 |
|
54 |
|
||
|
Total interest income |
|
6,028 |
|
6,294 |
|
||
|
Other income |
|
10 |
|
6 |
|
||
|
Total investment income |
|
6,038 |
|
6,300 |
|
||
|
|
|
|
|
|
|
||
|
EXPENSES |
|
|
|
|
|
||
|
Base management fee (Refer to Note 4) |
|
426 |
|
360 |
|
||
|
Loan servicing fee (Refer to Note 4) |
|
1,254 |
|
1,194 |
|
||
|
Administration fee (Refer to Note 4) |
|
235 |
|
208 |
|
||
|
Interest expense |
|
1,102 |
|
1,414 |
|
||
|
Amortization of deferred finance costs |
|
139 |
|
210 |
|
||
|
Professional fees |
|
131 |
|
156 |
|
||
|
Stockholder related costs |
|
100 |
|
38 |
|
||
|
Insurance expense |
|
53 |
|
63 |
|
||
|
Directors fees |
|
47 |
|
55 |
|
||
|
Taxes and licenses |
|
43 |
|
42 |
|
||
|
General and administrative expenses |
|
31 |
|
56 |
|
||
|
Expenses before credit from Adviser |
|
3,561 |
|
3,796 |
|
||
|
Credits to base management fee (Refer to Note 4) |
|
(574 |
) |
(384 |
) |
||
|
Total expenses net of credit to base management fee |
|
2,987 |
|
3,412 |
|
||
|
NET INVESTMENT INCOME |
|
3,051 |
|
2,888 |
|
||
|
|
|
|
|
|
|
||
|
REALIZED AND UNREALIZED (LOSS) GAIN ON INVESTMENTS |
|
|
|
|
|
||
|
Realized loss on sale of Non-Control/Non-Affiliate investments |
|
(1,718 |
) |
(48 |
) |
||
|
Net unrealized appreciation (depreciation) of Non-Control/Non-Affiliate investments |
|
4,465 |
|
(529 |
) |
||
|
Net unrealized (depreciation) appreciation of Control investments |
|
(4,867 |
) |
5,274 |
|
||
|
Net unrealized (depreciation) appreciation of Affiliate investments |
|
(5,415 |
) |
685 |
|
||
|
Net (loss) gain on investments |
|
(7,535 |
) |
5,382 |
|
||
|
|
|
|
|
|
|
||
|
NET (DECREASE) INCREASE IN NET ASSETS RESULTING FROM OPERATIONS |
|
$ |
(4,484 |
) |
$ |
8,270 |
|
|
|
|
|
|
|
|
||
|
NET (DECREASE) INCREASE IN NET ASSETS RESULTING FROM OPERATIONS PER COMMON SHARE: |
|
|
|
|
|
||
|
Basic and Diluted |
|
$ |
(0.22 |
) |
$ |
0.50 |
|
|
|
|
|
|
|
|
||
|
SHARES OF COMMON STOCK OUTSTANDING: |
|
|
|
|
|
||
|
Basic and diluted weighted average shares |
|
19,943,346 |
|
16,560,100 |
|
||
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
10
GLADSTONE INVESTMENT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
|
|
|
Three Months Ended June 30, |
|
||||
|
|
|
2008 |
|
2007 |
|
||
|
Operations: |
|
|
|
|
|
||
|
Net investment income |
|
$ |
3,051 |
|
$ |
2,888 |
|
|
Realized loss on sale of investments |
|
(1,718 |
) |
(48 |
) |
||
|
Net unrealized (depreciation) appreciation of portfolio |
|
(5,817 |
) |
5,430 |
|
||
|
Net (decrease) increase in net assets from operations |
|
(4,484 |
) |
8,270 |
|
||
|
|
|
|
|
|
|
||
|
Capital transactions: |
|
|
|
|
|
||
|
Issuance of common stock |
|
41,290 |
|
— |
|
||
|
Shelf offering registration costs |
|
(637 |
) |
(29 |
) |
||
|
Distributions to stockholders |
|
(4,858 |
) |
(3,726 |
) |
||
|
Increase (decrease) in net assets from capital transactions |
|
35,795 |
|
(3,755 |
) |
||
|
|
|
|
|
|
|
||
|
Total increase in net assets |
|
31,311 |
|
4,515 |
|
||
|
|
|
|
|
|
|
||
|
Net Assets |
|
|
|
|
|
||
|
Beginning of period |
|
206,445 |
|
222,819 |
|
||
|
End of period |
|
$ |
237,756 |
|
$ |
227,334 |
|
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
11
GLADSTONE INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
|
|
|
Three Months Ended June 30, |
|
||||
|
|
|
2008 |
|
2007 |
|
||
|
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
||
|
Net (decrease) increase in net assets resulting from operations |
|
$ |
(4,484 |
) |
$ |
8,270 |
|
|
Adjustments to reconcile net (decrease) increase in net assets resulting from operations to net cash (used in) provided by operating activities: |
|
|
|
|
|
||
|
Purchase of investments |
|
(8,978 |
) |
(72,601 |
) |
||
|
Principal repayments of investments |
|
3,493 |
|
21,358 |
|
||
|
Proceeds from the sale of investments |
|
13,246 |
|
5,809 |
|
||
|
Net unrealized depreciation (appreciation) of investment portfolio |
|
5,817 |
|
(5,430 |
) |
||
|
Net unrealized depreciation of derivative |
|
— |
|
— |
|
||
|
Net realized loss on sales of investments |
|
1,718 |
|
48 |
|
||
|
Net amortization of premiums and discounts |
|
9 |
|
137 |
|
||
|
Amortization of deferred finance costs |
|
139 |
|
210 |
|
||
|
Increase (decrease) in interest receivable |
|
322 |
|
(533 |
) |
||
|
Decrease in due from custodian |
|
1,504 |
|
8,305 |
|
||
|
Decrease (increase) in prepaid assets |
|
333 |
|
(39 |
) |
||
|
Increase (decrease) in other assets |
|
(79 |
) |
39 |
|
||
|
Increase in other liabilities |
|
11 |
|
13 |
|
||
|
Increase in administration fee payable to Administrator (See Note 4) |
|
27 |
|
46 |
|
||
|
Increase in base management fee payable to Adviser (See Note 4) |
|
236 |
|
279 |
|
||
|
Increase in loan servicing fee payable to Adviser (See Note 4) |
|
(7 |
) |
27 |
|
||
|
(Decrease) increase in accrued expenses |
|
(331 |
) |
230 |
|
||
|
Net cash provided by (used in) operating activities |
|
12,976 |
|
(33,832 |
) |
||
|
|
|
|
|
|
|
||
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
||
|
Net proceeds from the issuance of common stock |
|
40,652 |
|
— |
|
||
|
Borrowings from line of credit |
|
52,750 |
|
89,100 |
|
||
|
Repayments of line of credit |
|
(68,300 |
) |
(54,700 |
) |
||
|
Distributions paid |
|
(4,858 |
) |
(3,726 |
) |
||
|
Other |
|
— |
|
(34 |
) |
||
|
Net cash provided by financing activities |
|
20,244 |
|
30,640 |
|
||
|
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
|
33,220 |
|
(3,192 |
) |
||
|
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
|
9,360 |
|
37,789 |
|
||
|
CASH AND CASH EQUIVALENTS, END OF PERIOD |
|
$ |
42,580 |
|
$ |
34,597 |
|
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
12
GLADSTONE INVESTMENT CORPORATION
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
|
|
|
Three Months Ended June 30, |
|
||||
|
|
|
2008 |
|
2007 |
|
||
|
Per Share Data (1) |
|
|
|
|
|
||
|
Balance at beginning of period |
|
$ |
12.47 |
|
$ |
13.46 |
|
|
|
|
|
|
|
|
||
|
Income from investment operations: |
|
|
|
|
|
||
|
Net investment income (2) |
|
0.15 |
|
0.17 |
|
||
|
Realized loss on sale of investments (2) |
|
(0.08 |
) |
— |
|
||
|
Net unrealized (depreciation) appreciation of investments (2) |
|
(0.29 |
) |
0.33 |
|
||
|
Total from investment operations |
|
(0.22 |
) |
0.50 |
|
||
|
|
|
|
|
|
|
||
|
Distributions from: |
|
|
|
|
|
||
|
Net investment income |
|
(0.24 |
) |
(0.23 |
) |
||
|
Total distributions (3) |
|
(0.24 |
) |
(0.23 |
) |
||
|
Shelf registration offering costs |
|
(0.03 |
) |
— |
|
||
|
Effect on distribution of stock rights offering after record date (4) |
|
(1.21 |
) |
— |
|
||
|
Net asset value at end of period |
|
$ |
10.77 |
|
$ |
13.73 |
|
|
|
|
|
|
|
|
||
|
Per share market value at beginning of period |
|
$ |
9.41 |
|
$ |
14.87 |
|
|
Per share market value at end of period |
|
$ |
6.43 |
|
$ |
14.21 |
|
|
Total Return (5) |
|
-29.57 |
% |
-2.93 |
% |
||
|
Shares outstanding at end of period |
|
22,080,133 |
|
16,560,100 |
|
||
|
|
|
|
|
|
|
||
|
Statement of Assets and Liabilities Data: |
|
|
|
|
|
||
|
Net assets at end of period |
|
$ |
237,756 |
|
$ |
227,334 |
|
|
Average net assets (6) |
|
$ |
242,655 |
|
$ |
222,928 |
|
|
|
|
|
|
|
|
||
|
Senior Securities Data: |
|
|
|
|
|
||
|
Borrowings under line of credit |
|
$ |
129,285 |
|
$ |
134,400 |
|
|
Asset coverage ratio (7) |
|
284 |
% |
270 |
% |
||
|
Asset coverage per unit (8) |
|
$ |
3,670 |
|
$ |
3,617 |
|
|
|
|
|
|
|
|
||
|
Ratios/Supplemental Data: |
|
|
|
|
|
||
|
Ratio of expenses to average net assets (9) (10) |
|
5.87 |
% |
6.81 |
% |
||
|
Ratio of net expenses to average net assets (9) (11) |
|
4.93 |
% |
6.12 |
% |
||
|
Ratio of net investment income to average net assets (9) |
|
5.03 |
% |
5.18 |
% |
||
|
(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 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. |
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
13
GLADSTONE INVESTMENT CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA AND AS OTHERWISE INDICATED)
JUNE 30, 2008
(UNAUDITED)
NOTE 1. ORGANIZATION
Gladstone Investment Corporation (the “Company”) was incorporated under the General Corporation Laws of the State of Delaware on February 18, 2005, and completed an initial public offering on June 22, 2005. The Company is a closed-end, non-diversified management investment company that has elected to be treated as a business development company under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, the Company has elected to be treated for tax purposes as a regulated investment company (“RIC”) under the Internal Revenue Code of 1986, as amended (the “Code”). The Company’s investment objectives are to achieve a high level of current income and capital gains by investing in debt and equity securities of established private businesses.
Gladstone Business Investment, LLC (“Business Investment”) a wholly-owned subsidiary of the Company, was established on August 11, 2006, for the sole purpose of owning the Company’s portfolio of investments in connection with the establishment of its line of credit facility with Deutsche Bank AG. The financial statements of Business Investment are consolidated with those of the Company.
The Company is externally managed by Gladstone Management Corporation (the “Adviser”), an unconsolidated affiliate of the Company.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Unaudited Interim Financial Statements
Interim financial statements of the Company are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain disclosures accompanying annual financial statements prepared in accordance with GAAP are omitted. In the opinion of management, all adjustments, consisting solely of normal recurring accruals, necessary for the fair statement of financial statements for the interim periods have been included. The current period’s results of operations are not necessarily indicative of results that ultimately may be achieved for the year. The interim financial statements and notes thereto should be read in conjunction with the financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended March 31, 2008, as filed with the Securities and Exchange Commission (“SEC”) on May 21, 2008.
The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all of the disclosures required by GAAP.
Reclassifications
Certain amounts in the prior year’s financial statements have been reclassified to conform to the current year presentation with no effect to net (decrease) increase in net assets resulting from operations.
Investment Valuation
In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157—Fair Value Measurements (“SFAS 157”), which, for financial assets, is effective for fiscal years beginning after November 15, 2007, with early adoption permitted. The Company adopted SFAS 157 on April 1, 2008. In part, SFAS 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about assets and liabilities measured at fair value. The new standard provides a consistent definition of fair value that focuses on exit price in the principal, or most advantageous, market and prioritizes, within a measurement of fair value, the use of market-based inputs over entity-specific inputs. The standard also establishes the following three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date.
|
|
|
· |
|
Level 1 —inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets; |
14
|
|
|
· |
|
Level 2 —inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Level 2 inputs are in those markets for which there are few transactions, the prices are not current, little public information exists or instances where prices vary substantially over time or among brokered market makers; and |
|
|
|
|
|
|
|
|
|
· |
|
Level 3 —inputs to the valuation methodology are unobservable and significant to the fair value measurement. Unobservable inputs are those inputs that reflect the Company’s own assumptions that market participants would use to price the asset or liability based upon the best available information. |
The following table presents the financial instruments carried at fair value as of June 30, 2008, by caption on the accompanying condensed consolidated statement of assets and liabilities for each of the three levels of hierarchy established by SFAS 157:
|
|
|
As of June 30, 2008 |
|
||||||||||
|
|
|
|
|
|
|
|
|
Total Fair Value |
|
||||
|
|
|
|
|
|
|
|
|
Reported in Condensed |
|
||||
|
|
|
|
|
|
|
|
|
Consolidated Statement of |
|
||||
|
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Assets and Liabilities |
|
||||
|
Non-Control/Non-Affiliate investments |
|
$ |
— |
|
$ |
— |
|
$ |
130,764 |
|
$ |
130,764 |
|
|
Control investments |
|
— |
|
— |
|
141,042 |
|
141,042 |
|
||||
|
Affiliate investments |
|
— |
|
— |
|
48,493 |
|
48,493 |
|
||||
|
Total investments at fair value |
|
$ |
— |
|
$ |
— |
|
$ |
320,299 |
|
$ |
320,299 |
|
Changes in Level 3 Fair Value Measurements
The following table provides a roll-forward in the changes in fair value from March 31, 2008 to June 30, 2008, for all investments for which the Company determines fair value using unobservable (Level 3) factors. When a determination is made to classify a financial instrument within Level 3 of the valuation hierarchy, the determination is based upon the significance of the unobservable factors to the overall fair value measurement. However, Level 3 financial instruments typically include, in addition to the unobservable or Level 3 components, observable components (that is, components that are actively quoted and can be validated to external sources). Accordingly, the gains and losses in the table below include changes in fair value due in part to observable factors that are part of the valuation methodology.
|
Fair value measurements using unobservable data inputs (Level 3) |
|
||||||||||||
|
|
|
Non-Control/ |
|
|
|
|
|
|
|
||||
|
|
|
Non-Affiliate |
|
Control |
|
Affiliate |
|
|
|
||||
|
|
|
Investments |
|
Investments |
|
Investments |
|
Total |
|
||||
|
Fair value at March 31, 2008 |
|
$ |
142,741 |
|
$ |
145,407 |
|
$ |
47,456 |
|
$ |
335,604 |
|
|
Total realized/unrealized losses (a) |
|
2,747 |
|
(4,867 |
) |
(5,415 |
) |
(7,535 |
) |
||||
|
New investments, repayments, settlements net |
|
(14,724 |
) |
502 |
|
6,452 |
|
(7,770 |
) |
||||
|
Transfer in (out) of Level 3 |
|
— |
|
— |
|
— |
|
— |
|
||||
|
Fair value as of June 30, 2008 |
|
$ |
130,764 |
|
$ |
||||||||