Gladstone Investment Corporation Reports Financial Results for the Quarter Ended June 30, 2011

MCLEAN, Va., Aug. 1, 2011 /PRNewswire/ -- Gladstone Investment Corporation (Nasdaq: GAIN) (the "Company") today announced earnings for the quarter ended June 30, 2011.  All per share references are per basic and diluted weighted average common share outstanding, unless noted otherwise.

(Logo:  http://photos.prnewswire.com/prnh/20101005/GLADSTONEINVESTMENT )

Net Investment Income for the Quarter:  Net Investment Income for the quarters ended June 30, 2011 and 2010 was $3.5 million, or $0.16 per share, and $4.2 million, or $0.19 per share, respectively, a decrease in Net Investment Income of 16.8%.  The decrease in Net Investment Income was primarily due to a significant amount of other income, including success fees and dividend income, recorded in the prior-year period as part of the A. Stucki Holding Corp. ("A. Stucki") exit in June 2010.

Net Increase in Net Assets Resulting from Operations for the Quarter:  Net Increase in Net Assets Resulting from Operations for the quarters ended June 30, 2011 and 2010 was $4.2 million, or $0.19 per share, and $5.4 million, or $0.24 per share, respectively, a decrease of 22%. A net gain on investments of $0.7 million was recorded for the quarter ended June 30, 2011, primarily due to appreciation experienced in certain control investments, as compared to a $1.2 million net gain in the prior-year period, due primarily to appreciation experienced in certain equity investments.

Investment Portfolio Fair Value:  As of June 30, 2011, the entire portfolio was fair valued at 77.1% of cost, as compared to 77.7% as of March 31, 2011.  The aggregate investment portfolio depreciated during the quarter ended June 30, 2011, due primarily to the recapitalization of Cavert II Holding Corp. ("Cavert"), which resulted in a realized gain and the reversal of unrealized appreciation that was reflected in the portfolio's fair value at March 31, 2011.  Excluding reversals, net unrealized appreciation for the quarter was $1.1 million.

Net Asset Value:  Net asset value was $9.06 per share outstanding at June 30, 2011, as compared to $9.00 per share outstanding at March 31, 2011.  

Asset Characteristics:  Total assets were $242.1 million at June 30, 2011, as compared to $241.1 million at March 31, 2011. At June 30, 2011, the Company had investments in 17 portfolio companies with an aggregate cost basis of $214.3 million and an aggregate fair value of $165.3 million.  As of June 30, 2011, the Company's investment portfolio at fair value was comprised of 80.9% in debt securities and 19.1% in equity securities.  Additionally, the Company held $68.9 million in cash and cash equivalents at June 30, 2011, including $40.0 million from a short-term loan that was repaid subsequent to quarter end.

Investment Yield:  The weighted average yield on the Company's interest-bearing portfolio, excluding cash and cash equivalents, was 12.0% for the quarter ended June 30, 2011, as compared to 10.3% for the prior-year quarter.  The increase in the weighted average yield for the quarter ended June 30, 2011, resulted primarily from the exits of lower interest-bearing debt investments and the addition of higher-yielding debt investments subsequent to June 30, 2010.

Highlights for the Quarter:  During the quarter ended June 30, 2011, the following significant events occurred:

• Investment Recapitalization:  In April 2011, the Company recapitalized its investment in Cavert, from which the Company received gross cash proceeds of $5.6 million from the sale of its common equity, resulting in a realized gain of $5.5 million, $2.3 million in a partial redemption of its preferred stock and $0.7 million in preferred dividends.  At the same time, the Company invested $5.7 million in new subordinated debt in Cavert.

• New Investment:  In April 2011, the Company invested $16.4 million in a new control investment, Mitchell Rubber Products, Inc. ("Mitchell"), consisting of subordinated debt and preferred and common equity.  Mitchell, headquartered in Mira Loma, California, develops, mixes and molds rubber compounds for specialized applications in the non-tire rubber market.

• Distributions:  The Company paid monthly cash distributions to stockholders of $0.045 per common share for each of April, May and June 2011, an increase of 12.5% over January, February and March 2011.

Comments from our President, Dave Dullum:  "We achieved realized gains through a recapitalization of our investment in Cavert, the third such successful realized event over the past year in our proprietary portfolio.  These exits have collectively resulted in $29.2 million in realized gains and $9.7 million in investment income.  We are continuing to strive to put these proceeds to work, as demonstrated with our $16.4 million investment in Mitchell in April.  All of this activity and effort enabled us to increase the monthly dividend by 25% over the past two quarters. We hope to continue this healthy investment activity and to carry that momentum throughout the fiscal year."

Subsequent Events:  After June 30, 2011, the following occurred:

• Investment Payoff: In July 2011, the Company received full repayment of its senior syndicated loan to Survey Sampling, LLC, resulting in gross proceeds of $2.3 million.

• Distributions Declared:  The Company's board of directors increased the monthly distribution from $0.045 to $0.05 per share, or 11.1%, and declared the following monthly distributions to stockholders:

Summary Information:  The following chart is a summary of some of the information reported above (dollars in thousands, except per share data)(unaudited):

Conference Call for Stockholders: The Company will hold a conference call Tuesday, August 2, 2011, at 8:30 a.m. EDT.  Please call (800) 860-2442 to enter the conference.  An operator will monitor the call and set a queue for the questions. A replay of the conference call will be available through September 1, 2011.  To hear the replay, please dial (877) 344-7529 and use conference number 10001384.  The replay will be available beginning approximately one hour after the call concludes.

The live audio broadcast of the Company's quarterly conference call will also be available online at www.GladstoneInvestment.com. The event will be archived and available for replay on the Company's website through October 3, 2011.

Warning: The financial statements below are without footnotes, so readers should obtain and carefully review the Company's Form 10-Q for the quarter ended June 30, 2011, including the footnotes to the financial statements contained therein. The Company has filed the Form 10-Q today with the SEC, which can be retrieved from the SEC's website at www.sec.gov or from the Company's website at www.GladstoneInvestment.com. To obtain a paper copy from us, please contact us at 1521 Westbranch Drive, Suite 200, McLean, VA 22102.

About us:  Gladstone Investment Corporation is a publicly traded business development company that seeks to make debt and equity investments in small and mid-sized businesses in the United States in connection with acquisitions, changes in control and recapitalizations. Information on the business activities of all the Gladstone funds can be found at www.gladstonecompanies.com.

For Investor Relations inquiries related to any of the monthly dividend paying Gladstone funds, please visit www.gladstone.com.

The statements in this press release regarding the Company's ability to make additional investments, the Company's other projected investment activities and other such statements are "forward-looking statements." These forward-looking statements inherently involve certain risks and uncertainties, although they are based on the Company's current plans that are believed to be reasonable as of the date of this press release. Factors that may cause the Company's actual results to differ from these forward-looking statements include, among others, the duration and effects of current economic instability, the Company's ability to access debt and equity capital and those factors listed under the caption "Risk Factors" of the post-effective amendment of the Company's registration statement on Form N-2(file No. 333-160720), filed with the SEC on June 17, 2011 (the "Form N-2") and the Company's Quarterly Report on Form 10-Q  for the quarter ended June 30, 2010, filed with the SEC on August 1, 2011 (the "Form 10-Q"). The risk factors set forth in the Form N-2 and Form   10-Q under the caption "Risk Factors" are specifically incorporated by reference into this press release. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

SOURCE Gladstone Investment Corporation