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EX-32.2 - EX-32.2 - GLADSTONE INVESTMENT CORPORATION\DEa09-31253_1ex32d2.htm
EX-31.1 - EX-31.1 - GLADSTONE INVESTMENT CORPORATION\DEa09-31253_1ex31d1.htm
EX-31.2 - EX-31.2 - GLADSTONE INVESTMENT CORPORATION\DEa09-31253_1ex31d2.htm
EX-32.1 - EX-32.1 - GLADSTONE INVESTMENT CORPORATION\DEa09-31253_1ex32d1.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

x      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE QUARTER ENDED SEPTEMBER 30, 2009

 

o         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)

 

DELAWARE

 

83-0423116

(State or other jurisdiction of incorporation or organization)

 

(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 x No o.

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o 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 x

 

 

 

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 x .

 

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 November 2, 2009 was 22,080,133.

 

 

 



 

GLADSTONE INVESTMENT CORPORATION

TABLE OF CONTENTS

 

PART I.

FINANCIAL INFORMATION:

 

 

 

 

Item 1.

Financial Statements (Unaudited)

 

 

 

 

 

Condensed Consolidated Statements of Assets and Liabilities as of September 30, 2009 and March 31, 2009

3

 

Condensed Consolidated Schedules of Investments as of September 30, 2009 and March 31, 2009

4

 

Condensed Consolidated Statements of Operations for the three and six months ended September 30, 2009 and 2008

10

 

Condensed Consolidated Statements of Changes in Net Assets for the six months ended September 30, 2009 and 2008

11

 

Condensed Consolidated Statements of Cash Flows for the six months ended September 30, 2009 and 2008

12

 

Financial Highlights for the three and six months ended September 30, 2009 and 2008

13

 

Notes to Condensed Consolidated Financial Statements

14

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

26

 

Overview

26

 

Results of Operations

29

 

Liquidity and Capital Resources

36

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

46

 

 

 

Item 4.

Controls and Procedures

47

 

 

 

PART II.

OTHER INFORMATION:

 

 

 

 

Item 1.

Legal Proceedings

48

 

 

 

Item 1A.

Risk Factors

48

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

48

 

 

 

Item 3.

Defaults Upon Senior Securities

48

 

 

 

Item 4.

Submission of Matters to a Vote of Security Holders

48

 

 

 

Item 5.

Other Information

49

 

 

 

Item 6.

Exhibits

49

 

 

 

SIGNATURES

50

 



 

GLADSTONE INVESTMENT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(UNAUDITED)

 

 

 

September 30,

 

March 31,

 

 

 

2009

 

2009

 

ASSETS

 

 

 

 

 

Non-Control/Non-Affiliate investments (Cost 9/30/09: $29,886; Cost 3/31/09: $134,836)

 

$

25,004

 

$

94,740

 

Control investments (Cost 9/30/09: $142,698; Cost 3/31/09: $150,081)

 

132,399

 

166,163

 

Affiliate investments (Cost 9/30/09: $64,019; Cost 3/31/09: $64,028)

 

46,900

 

53,027

 

Total investments at fair value (Cost 9/30/09: $236,603; Cost 3/31/09: $348,945)

 

204,303

 

313,930

 

Cash and cash equivalents

 

86,311

 

7,236

 

Interest receivable

 

1,212

 

1,500

 

Due from Custodian

 

932

 

2,706

 

Deferred financing fees

 

963

 

1,167

 

Prepaid assets

 

445

 

172

 

Other assets

 

184

 

132

 

TOTAL ASSETS

 

$

294,350

 

$

326,843

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

Accounts payable and accrued expenses

 

$

460

 

$

1,283

 

Fee due to Administrator (Refer to Note 4)

 

198

 

179

 

Fee due to Adviser (Refer to Note 4)

 

221

 

187

 

Short-term loan

 

75,000

 

 

Borrowings under line of credit (Cost 9/30/09: $36,100; Cost 3/31/09: $110,265)

 

36,278

 

110,265

 

Other liabilities

 

148

 

127

 

TOTAL LIABILITIES

 

112,305

 

112,041

 

NET ASSETS

 

$

182,045

 

$

214,802

 

 

 

 

 

 

 

ANALYSIS OF NET ASSETS:

 

 

 

 

 

Common stock, $0.001 par value, 100,000,000 shares authorized, 22,080,133 shares issued and outstanding at September 30, 2009 and March 31, 2009

 

$

22

 

$

22

 

Capital in excess of par value

 

264,551

 

257,361

 

Net unrealized depreciation of investment portfolio

 

(32,301

)

(35,015

)

Net unrealized depreciation of derivative

 

(27

)

(53

)

Net unrealized appreciation of borrowings under line of credit

 

(178

)

 

Accumulated net investment loss

 

(50,022

)

(7,513

)

TOTAL NET ASSETS

 

$

182,045

 

$

214,802

 

NET ASSETS PER SHARE

 

$

8.24

 

$

9.73

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

3



 

GLADSTONE INVESTMENT CORPORATION

CONDENSED CONSOLIDATED SCHEDULES OF INVESTMENTS

AS OF SEPTEMBER 30, 2009

(DOLLAR AMOUNTS IN THOUSANDS)

(UNAUDITED)

 

Company (1)

 

Industry

 

Investment (2)

 

Cost

 

Fair Value

 

 

 

 

 

 

 

 

 

 

 

NON-CONTROL/NON-AFFILIATE INVESTMENTS:

 

 

 

 

 

 

 

Senior Syndicated Loans:

 

 

 

 

 

 

 

 

 

HMTBP Acquisition II Corp.

 

Service — aboveground storage tanks

 

Senior Term Debt (2.6%, Due 5/2014) (7), (8)

 

$

3,819

 

$

3,064

 

Interstate Fibernet, Inc.

 

Service — provider of voice and data telecommunications services

 

Senior Term Debt (4.3%, Due 7/2013) (7), (9)

 

9,758

 

7,929

 

Survey Sampling, LLC

 

Service — telecommunications-based sampling

 

Senior Term Debt (9.5%, Due 5/2011) (3)

 

2,409

 

958

 

Subtotal - Syndicated Loans

 

 

 

 

 

$

15,986

 

$

11,951

 

 

 

 

 

 

 

 

 

 

 

Non-syndicated Loans:

 

 

 

 

 

 

 

 

 

American Greetings Corporation

 

Manufacturing and design — greeting cards

 

Senior Notes (7.4%, Due 6/2016) (3)

 

$

3,043

 

$

2,588

 

 

 

 

 

 

 

 

 

 

 

B-Dry, LLC

 

Service — basement waterproofer

 

Senior Term Debt (13.0%, Due 5/2014) (5)

 

6,647

 

6,589

 

 

 

 

 

Senior Term Debt (13.0%, Due 5/2014) (5)

 

3,910

 

3,876

 

 

 

 

 

Common Stock Warrants (4)

 

300

 

 

 

 

 

 

 

 

10,857

 

10,465

 

 

 

 

 

 

 

 

 

 

 

Total Non-Control/Non-Affiliate Investments

 

 

 

$

29,886

 

$

25,004

 

 

 

 

 

 

 

 

 

 

 

CONTROL INVESTMENTS:

 

 

 

 

 

 

 

 

 

A. Stucki Holding Corp.

 

Manufacturing — railroad freight car products

 

Senior Term Debt (4.8%, Due 3/2012)

 

$

9,101

 

$

9,101

 

 

 

 

 

Senior Term Debt (7.0%, Due 3/2012) (6)

 

9,900

 

9,900

 

 

 

 

 

Senior Subordinated Term Debt (13.0%, Due 3/2014)

 

8,586

 

8,586

 

 

 

 

 

Preferred Stock (4)

 

4,387

 

5,333

 

 

 

 

 

Common Stock (4)

 

130

 

3,511

 

 

 

 

 

 

 

32,104

 

36,431

 

 

 

 

 

 

 

 

 

 

 

Acme Cryogenics, Inc.

 

Manufacturing — manifolds and pipes for industrial gasses

 

Senior Subordinated Term Debt (11.5%, Due 3/2012)

 

14,500

 

14,500

 

 

 

 

 

Preferred Stock (4)

 

6,984

 

3,828

 

 

 

 

 

Common Stock (4)

 

1,045

 

 

 

 

 

 

Common Stock Warrants (4)

 

24

 

 

 

 

 

 

 

 

22,553

 

18,328

 

 

 

 

 

 

 

 

 

 

 

ASH Holdings Corp.

 

Retail and Service — school buses and parts

 

Revolver, $1,500 available (non-accrual, Due 3/2010) (5)

 

500

 

150

 

 

 

 

 

Senior Subordinated Term Debt (non-accrual, Due 1/2012) (5)

 

5,937

 

1,484

 

 

 

 

 

Preferred Stock (4)

 

2,500

 

 

 

 

 

 

Common Stock Warrants (4)

 

4

 

 

 

 

 

 

 

 

8,941

 

1,634

 

 

 

 

 

 

 

 

 

 

 

Cavert II Holdings Corp.

 

Manufacturing — bailing wire

 

Senior Term Debt (8.3%, Due 10/2012)

 

2,875

 

2,875

 

 

 

 

 

Senior Term Debt (10.0%, Due 10/2012) (6)

 

2,700

 

2,700

 

 

 

 

 

Senior Subordinated Term Debt (13.0%, Due 10/2014)

 

4,671

 

4,671

 

 

 

 

 

Preferred Stock (4)

 

4,110

 

4,769

 

 

 

 

 

Common Stock (4)

 

69

 

1,334

 

 

 

 

 

 

 

14,425

 

16,349

 

 

 

 

 

 

 

 

 

 

 

Chase II Holdings Corp.

 

Manufacturing — traffic doors

 

Revolving Credit Facility, $0 available (4.3%, Due 7/2010) (10)

 

3,500

 

3,500

 

 

 

 

 

Senior Term Debt (8.8%, Due 3/2011)

 

8,250

 

8,250

 

 

 

 

 

Senior Term Debt (12.0%, Due 3/2011) (6)

 

7,600

 

7,600

 

 

 

 

 

Senior Subordinated Term Debt (13.0%, Due 3/2013)

 

6,168

 

6,168

 

 

 

 

 

Preferred Stock (4)

 

6,961

 

9,765

 

 

 

 

 

Common Stock (4)

 

61

 

670

 

 

 

 

 

 

 

32,540

 

35,953

 

 

4



 

GLADSTONE INVESTMENT CORPORATION

CONDENSED CONSOLIDATED SCHEDULES OF INVESTMENTS (Continued)

AS OF SEPTEMBER 30, 2009

(DOLLAR AMOUNTS IN THOUSANDS)

(UNAUDITED)

 

Company (1)

 

Industry

 

Investment (2)

 

Cost

 

Fair Value

 

 

 

 

 

 

 

 

 

 

 

CONTROL INVESTMENTS (Continued):

 

 

 

 

 

 

 

Country Club Enterprises, LLC

 

Service — golf cart distribution

 

Subordinated Term Debt (14.0%, Due 11/2014) (5)

 

$

7,000

 

$

6,842

 

 

 

 

 

Preferred Stock (4)

 

3,725

 

 

 

 

 

 

 

 

10,725

 

6,842

 

 

 

 

 

 

 

 

 

 

 

Galaxy Tool Holding Corp.

 

Manufacturing — aerospace and plastics

 

Senior Subordinated Term Debt (13.5%, Due 8/2013) (5)

 

17,250

 

16,862

 

 

 

 

 

Preferred Stock (4)

 

4,112

 

 

 

 

 

 

Common Stock (4)

 

48

 

 

 

 

 

 

 

 

21,410

 

16,862

 

 

 

 

 

 

 

 

 

 

 

Total Control Investments

 

 

 

 

 

$

142,698

 

$

132,399

 

 

 

 

 

 

 

 

 

 

 

AFFILIATE INVESTMENTS:

 

 

 

 

 

 

 

 

 

Danco Acquisition Corp.

 

Manufacturing — machining and sheet metal work

 

Revolving Credit Facility, $2,100 available (9.3%, Due 10/2010) (5)

 

$

900

 

$

878

 

 

 

 

 

Senior Term Debt (9.3%, Due 10/2012) (5)

 

4,312

 

4,215

 

 

 

 

 

Senior Term Debt (11.5%, Due 4/2013) (5)

 

9,067

 

8,727

 

 

 

 

 

Preferred Stock (4)

 

2,500

 

 

 

 

 

 

Common Stock Warrants (4)

 

2

 

 

 

 

 

 

 

 

16,781

 

13,820

 

 

 

 

 

 

 

 

 

 

 

Mathey Investments, Inc.

 

Manufacturing — pipe-cutting and pipe-fitting equipment

 

Revolving Credit Facility, $250 available (10.0%, Due 3/2011) (5)

 

750

 

747

 

 

 

 

 

Senior Term Debt (10.0%, Due 3/2013) (5)

 

2,375

 

2,366

 

 

 

 

 

Senior Term Debt (13.5%, Due 3/2014) (5), (6)

 

7,227

 

7,137

 

 

 

 

 

Common Stock (4)

 

500

 

 

 

 

 

 

Common Stock Warrants (4)

 

277

 

 

 

 

 

 

 

 

11,129

 

10,250

 

 

 

 

 

 

 

 

 

 

 

Noble Logistics, Inc.

 

Service — aftermarket auto parts delivery

 

Revolving Credit Facility, $0 available (4.3%, Due 12/2009) (5)

 

2,000

 

1,300

 

 

 

 

 

Senior Term Debt (9.3%, Due 12/2011) (5)

 

6,227

 

4,048

 

 

 

 

 

Senior Term Debt (10.5%, Due 12/2011) (5) (6)

 

7,300

 

4,745

 

 

 

 

 

Preferred Stock (4)

 

1,750

 

 

 

 

 

 

Common Stock (4)

 

1,682

 

 

 

 

 

 

 

 

18,959

 

10,093

 

 

 

 

 

 

 

 

 

 

 

Quench Holdings Corp.

 

Service — sales, installation and service of water coolers

 

Senior Subordinated Term Debt (10.0%, Due 8/2013) (5)

 

8,000

 

6,240

 

 

 

 

 

Preferred Stock (4)

 

2,950

 

1,378

 

 

 

 

 

Common Stock (4)

 

447

 

 

 

 

 

 

 

 

11,397

 

7,618

 

 

 

 

 

 

 

 

 

 

 

Tread Corp.

 

Manufacturing — storage and transport equipment

 

Senior Term Debt (12.5%, Due 5/2013) (5)

 

5,000

 

4,962

 

 

 

 

 

Preferred Stock (4)

 

750

 

157

 

 

 

 

 

Common Stock & Debt Warrants (4)

 

3

 

 

 

 

 

 

 

 

5,753

 

5,119

 

 

 

 

 

 

 

 

 

 

 

Total Affiliate Investments

 

 

 

 

 

$

64,019

 

$

46,900

 

 

 

 

 

 

 

 

 

 

 

TOTAL INVESTMENTS

 

 

 

 

 

$

236,603

 

$

204,303

 

 

5



 


(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 September 30, 2009, and due date represents the contractual maturity date.

(3)

Valued based on the indicative bid price on or near September 30, 2009, offered by the respective syndication agent’s trading desk or secondary desk.

(4)

Security is non-income producing.

(5)

Fair value based on opinions of value submitted by Standard & Poor’s Securities Evaluations, Inc. at September 30, 2009.

(6)

Last Out Tranche of senior debt, meaning if the portfolio company is liquidated, the holder of the Last Out Tranche is paid after the senior debt.

(7)

Security valued based on the sale price obtained at or subsequent to September 30, 2009, as the security, or a portion of it, was sold.

(8)

Security was sold subsequent to quarter-end; approximately $3.1 million of cash proceeds was received, and a realized loss of $757 was recorded.

(9)

A portion of this security, approximately $3.0 million in principal, was sold subsequent to quarter-end. Approximately $2.4 million of cash proceeds was received, and a realized loss of $561 was recorded.

(10)

Revolving credit facility was repaid in full and sold to a third party subsequent to quarter-end.

 

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, 2009

(DOLLAR AMOUNTS IN THOUSANDS)

 

Company (1)

 

Industry

 

Investment (2)

 

Cost

 

Fair Value

 

 

 

 

 

 

 

 

 

 

 

NON-CONTROL/NON-AFFILIATE INVESTMENTS:

 

 

 

 

 

 

 

Senior Syndicated Loans:

 

 

 

 

 

 

 

 

 

Activant Solutions, Inc.

 

Service - enterprise software and services

 

Senior Term Debt (3.4%, Due 5/2013) (7)

 

$

1,658

 

$

904

 

Advanced Homecare Holdings, Inc.

 

Service - home health nursing services

 

Senior Term Debt (4.3%, Due 8/2014) (7)

 

2,947

 

2,019

 

Aeroflex, Inc.

 

Service - provider of highly specialized electronic equipment

 

Senior Term Debt (4.5%, Due 8/2014) (7)

 

1,892

 

1,083

 

Compsych Investments Corp.

 

Service - employee assistance programs

 

Senior Term Debt (3.8%, Due 2/2012) (7)

 

3,083

 

2,405

 

CRC Health Group, Inc.

 

Service - substance abuse treatment

 

Senior Term Debt (3.5%, Due 2/2012) (7)

 

7,772

 

5,026

 

Critical Homecare Solutions, Inc.

 

Service - home therapy and respiratory treatment

 

Senior Term Debt (3.8%, Due 1/2012) (7)

 

4,359

 

3,632

 

Generac Acquisition Corp.

 

Manufacturing - standby power products

 

Senior Term Debt (3.0%, Due 11/2013) (7)

 

6,799

 

3,820

 

Graham Packaging Holdings Company

 

Manufacturing - plastic containers

 

Senior Term Debt (3.6%, Due 10/2011) (7)

 

3,348

 

2,813

 

HMTBP Acquisition II Corp.

 

Service - aboveground storage tanks

 

Senior Term Debt (3.5%, Due 5/2014) (3)

 

3,838

 

2,942

 

Huish Detergents, Inc.

 

Manufacturing - household cleaning products

 

Senior Term Debt (2.3%, Due 4/2014) (7)

 

1,966

 

1,690

 

Hyland Software, Inc.

 

Service - provider of enterprise content management software

 

Senior Term Debt (3.6%, Due 7/2013) (7)

 

3,912

 

2,990

 

Interstate Fibernet, Inc.

 

Service - provider of voice and data telecommunications services

 

Senior Term Debt (5.2%, Due 7/2013) (3)

 

9,804

 

6,698

 

KIK Custom Products, Inc.

 

Manufacturing - consumer products

 

Senior Term Debt (2.8%, Due 5/2014) (7)

 

3,941

 

1,862

 

Kronos, Inc.

 

Service - workforce management solutions

 

Senior Term Debt (3.5%, Due 6/2014) (7)

 

1,899

 

1,291

 

Local TV Finance, LLC

 

Service - television station operator

 

Senior Term Debt (2.5%, Due 5/2013) (7)

 

985

 

359

 

LVI Services, Inc.

 

Service - asbestos and mold remediation

 

Senior Term Debt (4.5%, Due 11/2010) (7)

 

5,916

 

2,673

 

MedAssets, Inc.

 

Service - pharmaceuticals and healthcare GPO

 

Senior Term Debt (5.1%, Due 10/2013) (7)

 

3,517

 

3,129

 

Network Solutions, LLC

 

Service - internet domain solutions

 

Senior Term Debt (3.2%, Due 3/2014) (7)

 

8,672

 

5,506

 

Open Solutions, Inc.

 

Service - software outsourcing for financial institutions

 

Senior Term Debt (3.3%, Due 1/2014) (7)

 

2,648

 

1,206

 

Ozburn-Hessey Holding Co. LLC

 

Service — third party logistics

 

Senior Term Debt (4.4%, Due 8/2012) (7)

 

7,523

 

5,975

 

Pinnacle Foods Finance, LLC

 

Manufacturing - branded food products

 

Senior Term Debt (3.2%, Due 4/2014) (7)

 

1,950

 

1,570

 

PTS Acquisition Corp.

 

Manufacturing - drug delivery and packaging technologies

 

Senior Term Debt (2.8%, Due 4/2014) (7)

 

6,877

 

4,264

 

QTC Acquisition, Inc.

 

Service - outsourced disability evaluations

 

Senior Term Debt (2.8%, Due 11/2012) (7)

 

1,763

 

1,356

 

Radio Systems Corporation

 

Service - design electronic pet containment products

 

Senior Term Debt (3.3%, Due 9/2013) (7)

 

1,644

 

1,308

 

Rally Parts, Inc.

 

Manufacturing - aftermarket motorcycle parts and accessories

 

Senior Term Debt (3.5%, Due 11/2013) (7)

 

2,458

 

1,073

 

SafeNet, Inc.

 

Service — chip encryption products

 

Senior Term Debt (4.2%, Due 4/2014) (7)

 

2,949

 

2,008

 

SGS International, Inc.

 

Service - digital imaging and graphics

 

Senior Term Debt (4.0%, Due 12/2011) (7)

 

1,475

 

978

 

Survey Sampling, LLC

 

Service - telecommunications-based sampling

 

Senior Term Debt (9.5%, Due 5/2011) (3)

 

2,596

 

2,441

 

Triad Laboratory Alliance, LLC

 

Service - regional medical laboratories

 

Senior Term Debt (4.5%, Due 12/2011) (7)

 

4,120

 

3,432

 

Wastequip, Inc.

 

Service - process and transport waste materials

 

Senior Term Debt (2.8%, Due 2/2013) (7)

 

2,893

 

1,530

 

WaveDivision Holdings, LLC

 

Service - cable

 

Senior Term Debt (3.5%, Due 6/2014) (7)

 

1,905

 

1,575

 

West Corporation

 

Service - business process outsourcing

 

Senior Term Debt (2.9%, Due 10/2013) (7)

 

3,323

 

2,293

 

Subtotal - Senior Syndicated Loans

 

 

 

 

 

$

120,432

 

$

81,851

 

 

 

 

 

 

 

 

 

 

 

Non-Syndicated Loans

 

 

 

 

 

 

 

 

 

American Greetings Corporation

 

Manufacturing and design - greeting cards

 

Senior Notes (7.4%, Due 6/2016) (3) (10)

 

$

3,043

 

$

2,180

 

 

 

 

 

 

 

 

 

 

 

B-Dry, LLC

 

Service - basement waterproofer

 

Revolving Credit Facility, $300 available (10.5%, Due 10/2009) (5)

 

450

 

443

 

 

 

 

 

Senior Term Debt (10.0%, Due 5/2014) (5)

 

6,681

 

6,464

 

 

 

 

 

Senior Term Debt (10.0%, Due 5/2014) (5)

 

3,930

 

3,802

 

 

 

 

 

Common Stock Warrants (4)

 

300

 

 

 

 

 

 

 

 

11,361

 

10,709

 

 

 

 

 

 

 

 

 

 

 

Total Non-Control/Non-Affiliate Investments

 

 

 

$

134,836

 

$

94,740

 

 

7



 

GLADSTONE INVESTMENT CORPORATION

CONDENSED CONSOLIDATED SCHEDULES OF INVESTMENTS (Continued)

AS OF MARCH 31, 2009

(DOLLAR AMOUNTS IN THOUSANDS)

 

Company (1)

 

Industry

 

Investment (2)

 

Cost

 

Fair Value

 

 

 

 

 

 

 

 

 

 

 

CONTROL INVESTMENTS:

 

 

 

 

 

 

 

 

 

A. Stucki Holding Corp.

 

Manufacturing - railroad freight car products

 

Senior Term Debt (5.0%, Due 3/2012)

 

$

11,246

 

$

11,246

 

 

 

 

 

Senior Term Debt (7.2%, Due 3/2012) (6)

 

10,450

 

10,450

 

 

 

 

 

Senior Subordinated Term Debt (13%, Due 3/2014)

 

8,586

 

8,586

 

 

 

 

 

Preferred Stock (4)

 

4,387

 

5,128

 

 

 

 

 

Common Stock (4)

 

130

 

14,021

 

 

 

 

 

 

 

34,799

 

49,431

 

 

 

 

 

 

 

 

 

 

 

Acme Cryogenics, Inc.

 

Manufacturing - manifolds and pipes for industrial gasses

 

Senior Subordinated Term Debt (11.5%, Due 3/2012)

 

14,500

 

14,500

 

 

 

 

 

Redeemable Preferred Stock (4)

 

6,984

 

6,920

 

 

 

 

 

Common Stock (4)

 

1,045

 

 

 

 

 

 

Common Stock Warrants (4)

 

25

 

 

 

 

 

 

 

 

22,554

 

21,420

 

 

 

 

 

 

 

 

 

 

 

ASH Holdings Corp.

 

Retail and Service - school buses and parts

 

Revolver, $400 available (non—accrual, Due 3/2010) (5)

 

1,600

 

560

 

 

 

 

 

Senior Subordinated Term Debt (non—accrual, Due 1/2012) (5)

 

5,937

 

2,078

 

 

 

 

 

Preferred Stock (4)

 

2,500

 

 

 

 

 

 

Common Stock Warrants (4)

 

4

 

 

 

 

 

 

 

 

10,041

 

2,638

 

 

 

 

 

 

 

 

 

 

 

Cavert II Holding Corp.

 

Manufacturing - bailing wire

 

Revolving Credit Facility, $3,000 available (8.0%, Due 10/2010) (8)

 

 

 

 

 

 

 

Senior Term Debt (8.3%, Due 10/2012)

 

5,687

 

5,687

 

 

 

 

 

Senior Term Debt (10.0%, Due 10/2012) (6)

 

2,950

 

2,950

 

 

 

 

 

Senior Subordinated Term Debt (13.0%, Due 10/2014)

 

4,671

 

4,671

 

 

 

 

 

Preferred Stock (4)

 

4,110

 

4,591

 

 

 

 

 

Common Stock (4)

 

69

 

733

 

 

 

 

 

 

 

17,487

 

18,632

 

 

 

 

 

 

 

 

 

 

 

Chase II Holdings Corp.

 

Manufacturing - traffic doors

 

Revolving Credit Facility, $1,105 available (4.5%, Due 7/2010)

 

3,395

 

3,395

 

 

 

 

 

Senior Term Debt (8.8%, Due 3/2011)

 

8,800

 

8,800

 

 

 

 

 

Senior Term Debt (12.0%, Due 3/2011) (6)

 

7,680

 

7,680

 

 

 

 

 

Senior Subordinated Term Debt (13.0%, Due 3/2013)

 

6,168

 

6,168

 

 

 

 

 

Redeemable Preferred Stock (4)

 

6,961

 

9,300

 

 

 

 

 

Common Stock (4)

 

61

 

5,537

 

 

 

 

 

 

 

33,065

 

40,880

 

 

 

 

 

 

 

 

 

 

 

Country Club Enterprises, LLC

 

Service - golf cart distribution

 

Subordinated Term Debt (14.0% Due 11/2014)

 

7,000

 

7,000

 

 

 

 

 

Preferred Stock (4)

 

3,725

 

3,725

 

 

 

 

 

 

 

10,725

 

10,725

 

 

 

 

 

 

 

 

 

 

 

Galaxy Tool Holding Corp.

 

Manufacturing - aerospace and plastics

 

Senior Subordinated Term Debt (13.5%, Due 8/2013)

 

17,250

 

17,250

 

 

 

 

 

Preferred Stock (4)

 

4,112

 

4,486

 

 

 

 

 

Common Stock (4)

 

48

 

701

 

 

 

 

 

 

 

21,410

 

22,437

 

 

 

 

 

 

 

 

 

 

 

Total Control Investments

 

 

 

 

 

$

150,081

 

$

166,163

 

 

8



 

GLADSTONE INVESTMENT CORPORATION

CONDENSED CONSOLIDATED SCHEDULES OF INVESTMENTS (Continued)

AS OF MARCH 31, 2009

(DOLLAR AMOUNTS IN THOUSANDS)

 

Company (1)

 

Industry

 

Investment (2)

 

Cost

 

Fair Value

 

 

 

 

 

 

 

 

 

 

 

AFFILIATE INVESTMENTS:

 

 

 

 

 

 

 

 

 

Danco Acquisition Corp.

 

Manufacturing - machining and sheet metal work

 

Revolving Credit Facility, $2,600 available (9.3%, Due 10/2010) (5) (9)

 

$

400

 

$

378

 

 

 

 

 

Senior Term Debt (9.3%, Due 10/2012) (5)

 

4,837

 

4,584

 

 

 

 

 

Senior Term Debt (11.5%, Due 4/2013) (5)

 

9,113

 

8,544

 

 

 

 

 

Redeemable Preferred Stock (4)

 

2,500

 

2,558

 

 

 

 

 

Common Stock Warrants (4)

 

3

 

 

 

 

 

 

 

 

16,853

 

16,064

 

 

 

 

 

 

 

 

 

 

 

Mathey Investments, Inc.

 

Manufacturing - pipe-cutting and pipe-fitting equipment

 

Revolving Credit Facility, $1,463 available (9.0%, Due 3/2011) (5) (9)

 

537

 

529

 

 

 

 

 

Senior Term Debt (9.0%, Due 3/2013) (5)

 

2,375

 

2,339

 

 

 

 

 

Senior Term Debt (12.0%, Due 3/2014) (5)(6)

 

7,227

 

7,082

 

 

 

 

 

Common Stock (4)

 

500

 

446

 

 

 

 

 

Common Stock Warrants (4)

 

277

 

260

 

 

 

 

 

 

 

10,916

 

10,656

 

 

 

 

 

 

 

 

 

 

 

Noble Logistics, Inc.

 

Service - aftermarket auto parts delivery

 

Revolving Credit Facility, $-0- available (6.5%, Due 12/2009) (5)

 

2,000

 

1,500

 

 

 

 

 

Senior Term Debt (10.5%, Due 12/2011) (5)

 

5,727

 

4,295

 

 

 

 

 

Senior Term Debt (12.5%, Due 12/2011) (5)(6)

 

7,300

 

5,475

 

 

 

 

 

Senior Subordinated Term Debt (18.0%, Due 12/2011)

 

500

 

375

 

 

 

 

 

Senior Subordinated Term Debt (14.0%, Due 5/2009)

 

150

 

149

 

 

 

 

 

Preferred Stock (4)

 

1,750

 

 

 

 

 

 

Common Stock (4)

 

1,682

 

 

 

 

 

 

 

 

19,109

 

11,794

 

 

 

 

 

 

 

 

 

 

 

Quench Holdings Corp.

 

Service - sales, installation and service of water coolers

 

Senior Subordinated Term Debt (10.0%, Due 8/2013) (5)

 

8,000

 

5,800

 

 

 

 

 

Preferred Stock (4)

 

2,950

 

2,542

 

 

 

 

 

Common Stock Warrants (4)

 

447

 

 

 

 

 

 

 

 

11,397

 

8,342

 

 

 

 

 

 

 

 

 

 

 

Tread Corp.

 

Manufacturing - storage and transport equipment

 

Senior Term Debt (12.5%, Due 5/2013) (5)

 

5,000

 

4,925

 

 

 

 

 

Preferred Stock (4)

 

750

 

793

 

 

 

 

 

Common Stock Warrants (4)

 

3

 

453

 

 

 

 

 

 

 

5,753

 

6,171

 

 

 

 

 

 

 

 

 

 

 

Total Affiliate Investments

 

 

 

 

 

$

64,028

 

$

53,027

 

 

 

 

 

 

 

 

 

 

 

Total Investments

 

 

 

 

 

$

348,945

 

$

313,930

 

 


(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, 2009, and due date represents the contractual maturity date.

(3)

Security valued using internally-developed, risk-adjusted discounted cash flow methodologies as of March 31, 2009.

(4)

Security is non-income producing.

(5)

Fair value based on opinions of value submitted by Standard & Poor’s Securities Evaluations, Inc. at March 31, 2009.

(6)

Last Out Tranche of senior debt, meaning if the portfolio company is liquidated, the holder of the Last Out Tranche is paid after the senior debt.

(7)

Security valued based on the sale price obtained at or subsequent to March 31, 2009, since the security was sold.

(8)

Revolver was sold to third party subsequent to March 31, 2009.

(9)

Terms of agreement were refinanced and revolver limit was reduced.

(10)

The Company received non-cash assumption of $3,043 worth of senior notes received from American Greetings Corporation for the Company’s agreement to the RPG bankruptcy settlement in which the Company received the aforementioned notes and $909 in cash and recognized a loss on the settlement of approximately $601.

 

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

 

Six Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2009

 

2008

 

2009

 

2008

 

INVESTMENT INCOME

 

 

 

 

 

 

 

 

 

Interest income

 

 

 

 

 

 

 

 

 

Non-Control/Non-Affiliate investments

 

$

615

 

$

2,134

 

$

1,351

 

$

4,458

 

Control investments

 

2,868

 

2,735

 

5,736

 

5,304

 

Affiliate investments

 

1,448

 

1,349

 

2,928

 

2,460

 

Cash and cash equivalents

 

1

 

22

 

1

 

46

 

Total interest income

 

4,932

 

6,240

 

10,016

 

12,268

 

Other income

 

11

 

576

 

96

 

586

 

Total investment income

 

4,943

 

6,816

 

10,112

 

12,854

 

 

 

 

 

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

 

 

 

 

Loan servicing fee (Refer to Note 4)

 

938

 

1,258

 

2,006

 

2,511

 

Base management fee (Refer to Note 4)

 

164

 

435

 

477

 

861

 

Administration fee (Refer to Note 4)

 

198

 

212

 

371

 

447

 

Interest expense

 

552

 

1,084

 

1,255

 

2,186

 

Amortization of deferred finance costs

 

438

 

140

 

751

 

278

 

Professional fees

 

118

 

183

 

320

 

314

 

Stockholder related costs

 

146

 

200

 

227

 

301

 

Insurance expense

 

62

 

55

 

119

 

108

 

Directors’ fees

 

48

 

48

 

99

 

95

 

Other

 

73

 

114

 

137

 

189

 

Expenses before credit from Adviser

 

2,737

 

3,729

 

5,762

 

7,290

 

Credits to base management fee (Refer to Note 4)

 

(165

)

(696

)

(466

)

(1,270

)

Total expenses net of credit to base management fee

 

2,572

 

3,033

 

5,296

 

6,020

 

NET INVESTMENT INCOME

 

2,371

 

3,783

 

4,816

 

6,834

 

 

 

 

 

 

 

 

 

 

 

REALIZED AND UNREALIZED (LOSS) GAIN ON:

 

 

 

 

 

 

 

 

 

Realized loss on sale of Non-Control/Non-Affiliate investments

 

 

(2,498

)

(34,605

)

(4,215

)

Realized loss on termination of derivative

 

 

 

(53

)

 

Net unrealized (depreciation) appreciation of Non-Control/Non-Affiliate investments

 

(1,514

)

(5,191

)

35,214

 

(726

)

Net unrealized (depreciation) appreciation of Control investments

 

(14,900

)

10,840

 

(26,381

)

5,973

 

Net unrealized depreciation of Affiliate investments

 

(3,853

)

(5,978

)

(6,119

)

(11,393

)

Net unrealized (depreciation) appreciation of derivative

 

(16

)

 

26

 

 

Net unrealized appreciation of borrowings under line of credit

 

(178

)

 

(178

)

 

Net loss on investments and borrowings under line of credit

 

(20,461

)

(2,827

)

(32,096

)

(10,361

)

 

 

 

 

 

 

 

 

 

 

NET (DECREASE) INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

 

$

(18,090

)

$

956

 

$

(27,280

)

$

(3,527

)

 

 

 

 

 

 

 

 

 

 

NET (DECREASE) INCREASE IN NET ASSETS RESULTING FROM OPERATIONS PER COMMON SHARE:

 

 

 

 

 

 

 

 

 

Basic and Diluted

 

$

(0.82

)

$

0.04

 

$

(1.24

)

$

(0.17

)

 

 

 

 

 

 

 

 

 

 

SHARES OF COMMON STOCK OUTSTANDING:

 

 

 

 

 

 

 

 

 

Basic and diluted weighted average shares

 

22,080,133

 

22,080,133

 

22,080,133

 

21,011,740

 

 

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)

 

 

 

Six Months Ended September 30,

 

 

 

2009

 

2008

 

Operations:

 

 

 

 

 

Net investment income

 

$

4,816

 

$

6,834

 

Realized loss on sale of investments

 

(34,605

)

(4,215

)

Realized loss on termination of derivative

 

(53

)

 

Net unrealized appreciation (depreciation) of portfolio

 

2,714

 

(6,146

)

Net unrealized appreciation of derivative

 

26

 

 

Net unrealized appreciation of borrowings under line of credit

 

(178

)

 

Net decrease in net assets from operations

 

(27,280

)

(3,527

)

 

 

 

 

 

 

Capital transactions:

 

 

 

 

 

Issuance of common stock

 

 

41,290

 

Shelf offering registration costs

 

(178

)

(643

)

Distributions to stockholders

 

(5,299

)

(10,157

)

Net (decrease) increase in net assets from capital transactions

 

(5,477

)

30,490

 

 

 

 

 

 

 

Total (decrease) increase in net assets

 

(32,757

)

26,963

 

Net assets at beginning of period

 

214,802

 

206,445

 

 

 

 

 

 

 

Net assets at end of period

 

$

182,045

 

$

233,408

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

 

11



 

GLADSTONE INVESTMENT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(DOLLAR AMOUNTS IN THOUSANDS)

(UNAUDITED)

 

 

 

Six Months Ended September 30,

 

 

 

2009

 

2008

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

Net decrease in net assets resulting from operations

 

$

(27,280

)

$

(3,527

)

Adjustments to reconcile net decrease in net assets resulting from operations to net cash provided by operating activities:

 

 

 

 

 

Purchase of investments

 

(968

)

(36,612

)

Principal repayments of investments

 

9,482

 

22,284

 

Proceeds from sales of investments

 

69,222

 

13,296

 

Proceeds from short-term borrowings

 

75,000

 

 

Net realized loss on sales of investments

 

34,605

 

4,215

 

Net realized loss on termination of derivative

 

53

 

 

Net unrealized (appreciation) depreciation of investment portfolio

 

(2,714

)

6,146

 

Net unrealized appreciation of derivative

 

(26

)

 

Net unrealized appreciation of borrowings under line of credit

 

178

 

 

Net amortization of premiums and discounts

 

 

19

 

Amortization of deferred financing costs

 

751

 

278

 

Decrease in interest receivable

 

288

 

309

 

Decrease in due from custodian

 

1,774

 

1,351

 

Increase in prepaid assets

 

(273

)

(114

)

(Increase) decrease in other assets

 

(40

)

309

 

Decrease in accounts payable and accrued liabilities

 

(823

)

(167

)

Increase in administration fee payable to Administrator (See Note 4)

 

19

 

4

 

Increase in base management fee payable to Adviser (See Note 4)

 

113

 

123

 

Decrease in loan servicing fee payable to Adviser (See Note 4)

 

(79

)

(7

)

Increase in other liabilities

 

21

 

13

 

Net cash provided by operating activities

 

159,303

 

7,920

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

Net proceeds from the issuance of common stock

 

(178

)

40,647

 

Borrowings from line of credit

 

79,000

 

129,000

 

Repayments of line of credit

 

(153,165

)

(142,870

)

Purchase of derivative

 

(39

)

 

Deferred financing costs

 

(547

)

 

Distributions paid

 

(5,299

)

(10,157

)

Net cash (used in) provided by financing activities

 

(80,228

)

16,620

 

 

 

 

 

 

 

NET INCREASE IN CASH AND CASH EQUIVALENTS

 

79,075

 

24,540

 

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

 

7,236