Hercules Technology Growth Capital, Inc. (NYSE: HTGC)
(“Hercules” or the “Company”), the leading specialty finance
company focused on providing senior secured loans to venture
capital-backed companies in technology-related markets, including
technology, biotechnology, life science and cleantech industries,
at all stages of development, announced today its financial results
for the fourth quarter and year ended December 31, 2012.
Fourth Quarter 2012 Highlights:
- Originated approximately $259.9 million
in total debt and equity commitments to new and existing portfolio
companies, up 57.2% compared to the fourth quarter of
2011.
- Funded approximately $200.7 million of
debt and equity investments during the fourth quarter, an increase
of 106.5% compared to the fourth quarter of 2011.
- Received approximately $80.6 million in
principal repayments, including approximately $54.7
million of early principal repayments and approximately
$25.9 million in scheduled principal payments.
- Record high total investment income of
approximately $27.4 million, an increase of 29.2%, in the fourth
quarter of 2012, compared to $21.2 million for the fourth
quarter of 2011.
- Increased NII during the quarter by
21.3% to approximately $13.1 million, as compared to $10.8 million
in the fourth quarter of 2011. NII per share was $0.25 on
approximately 51.9 million outstanding shares for the fourth
quarter of 2012.
- Increased DNOI by 23.5% to
approximately $14.2 million compared to $11.5 million in the
fourth quarter of 2011. DNOI per share was $0.27 on approximately
51.9 million outstanding shares for the fourth quarter of
2012.
- Record high total investment assets
increased 38.8% year over year to approximately $906.3 million as
of December 31, 2012, compared to $652.9 million as of December 31,
2011.
- Increased the quarterly dividend by
$0.01, or approximately 4.2%, to $0.25 per share payable on
March 19, 2013, to shareholders of record as of March 11, 2013; the
thirtieth consecutive dividend since inception bringing total
dividends declared since inception to $7.89 per share.
2012 Highlights:
- Originated approximately $636.6
million in total commitments to new and existing portfolio
companies.
- Funded approximately $469.1
million of debt and equity investments during 2012.
- Increased NII by 21.5%
to approximately $48.1 million, as compared to $39.6 million
for fiscal year 2011. NII per share increased by approximately 5.5%
to $0.96 on 49.1 million basic shares outstanding, as compared
to $0.91 per share on 43.0 million shares outstanding for fiscal
year 2011.
- Increased DNOI by 22.2% to
approximately $52.3 million, as compared to $42.8 million for
fiscal year 2011. DNOI per share increased by approximately 7.0% to
$1.07 on 49.1 million basic shares outstanding, as compared to
$1.00 per share on 43.0 million shares outstanding for fiscal year
2011.
- Finished 2012 in a strong liquidity
position with approximately $288.0 million in available
liquidity, including $183.0 million in cash and $105.0 million in
bank credit facility availability.
- Debt to equity leverage ratio at
December 31, 2012 of approximately 115.5%, compared to a net
leverage ratio at December 31, 2012 of 80.1%, which is calculated
as total debt of $596.0 million less approximately $183.0 million
in cash divided by total equity of approximately $516.0
million.
“The fourth quarter concluded an exceptional year for Hercules
in which we executed across all areas of our business, delivering
record gross commitments and fundings and growing our total
investment assets by approximately 39% year over year to over
$900.0 million, our highest level since inception. We generated
strong growth in total and net investment income for the full year
and achieved twelve liquidity events for our warrant and equity
portfolio, in turn creating value for our shareholders,” said
Manuel A. Henriquez, President and Chief Executive Officer of
Hercules.
“Throughout 2012, we strategically diversified our liquidity
sources and positioned our balance sheet and platform to handle the
robust demand for venture debt we saw in the marketplace. In
December 2012, we completed our first Moody's-rated A2 (sf)
securitization of approximately $231.0 million with net proceeds of
approximately $129.0 million, achieving another important milestone
and adding investment grade debt to our balance sheet. We enter
2013 with a strong balance sheet from which to grow our investment
portfolio of America’s most innovative and highly disruptive
venture capital-backed companies and deliver increased earnings and
dividends to our shareholders.”
Fourth Quarter Review and Operating Results
Investment Portfolio
As of December 31, 2012, over 98.4% of the Company’s debt
investments were in a senior secured first lien position, and 98.5%
of the debt investment portfolio was priced at floating interest
rates or floating interest rates with a Prime or LIBOR based
interest rate floor, well positioned to benefit should market rates
move in either direction.
Hercules entered into commitments to provide debt and equity
financings of approximately $259.9 million to new and existing
portfolio companies.
The Company funded approximately $200.7 million of
debt and equity investments to new and existing portfolio companies
during the fourth quarter.
Hercules received approximately $80.6 million of
principal repayments, including approximately $54.7 million of
early principal repayments and approximately
$25.9 million in scheduled principal payments in the
fourth quarter.
Net investment growth on Hercules’ portfolio was approximately
$121.5 million on a cost basis for the fourth quarter, which
includes approximately $1.4 million of net fee accretion.
Hercules recorded approximately $10.3 million of net unrealized
appreciation from its loans, warrant and equity investments during
the fourth quarter.
A break-down of the Company’s total investment portfolio valued
at cost and fair value by category, quarter over quarter, is
highlighted below:
(in millions) Loans Equity Warrants
Total
Balances at Cost at 9/30/2012 $ 711.2
$ 47.4 $ 34.2
$ 792.8 Net activity during Q4 2012*
122.0 1.6 (2.1 ) 121.5
Balances at Cost at 12/31/2012 833.2
49.0 32.1
914.3 Q/Q Change 17.2 % 3.6 % (6.1 %) 15.3 %
Balances at Value at 9/30/2012 $
693.8 $ 47.8 $
32.9 $ 774.5 Net activity during
Q4 2012* 122.0 1.7 (2.1 ) 121.5 Net unrealized
appreciation/(depreciation) 11.7 (0.3 )
(1.2 ) 10.3
Balances at Value at 12/31/12
827.5 49.2
29.6 906.3 Q/Q Change 19.3 % 2.9
% (10.3 %) 17.0 % *Net activity includes fee and OID
collections and amortization during the quarter
Unfunded Commitments
As of December 31, 2012, Hercules had unfunded debt commitments
of approximately $61.9 million. Since these commitments may expire
without being drawn upon, unfunded commitments do not necessarily
represent future cash requirements or future earning assets for
Hercules. Approximately $35.6 million of these unfunded commitments
are dependent upon the portfolio company reaching certain
milestones before the Hercules debt commitment would become
available.
Signed Term Sheets
Hercules finished the fourth quarter of 2012 with approximately
$70.0 million in signed non-binding term sheets with seven new and
existing companies. These non-binding term sheets generally convert
to contractual commitments in approximately 45 to 60 days from
signing. Non-binding outstanding term sheets are subject to
completion of Hercules’ due diligence and final approval process as
well as negotiation of definitive documentation with the
prospective portfolio companies. It is important to note that not
all non-binding term sheets are expected to close and do not
necessarily represent future cash requirements. Closed commitments
generally fund 70-80% of the committed amount in aggregate over the
life of the commitment.
Portfolio Effective Yield
The effective yield on the Company’s debt portfolio investments
during the fourth quarter was 14.3%. Excluding the effect of fee
accelerations that occurred from early payoffs and one-time events,
the adjusted effective yield for the fourth quarter of 2012 was
13.6%, down approximately 30 basis points from the adjusted
effective yield in the third quarter of 2012 of 13.9%. The
effective yield is derived by dividing total investment income by
the weighted average earning investment portfolio assets
outstanding during the quarter which exclude non-interest earning
assets such as warrants and equity investments.
Existing Warrants Portfolio and Potential Future
Gains
Hercules held warrant positions in approximately 116 portfolio
companies, with a fair value of approximately $29.5 million at
December 31, 2012.
As of December 31, 2012, two portfolio companies had filed
Form S-1 Registration Statements with the SEC in contemplation of a
potential IPO:
- iWatt, Inc.
- Paratek Pharmaceuticals, Inc
There can be no assurances that these companies will complete
their IPOs in a timely manner or at all.
During the fourth quarter, Glori Energy, Inc. and one company
which had previously filed a Form S-1 Registration confidentially
under the JOBS Act withdrew their Registration Statement for their
IPO.
Income Statement
Total investment income in the fourth quarter of 2012 was
approximately $27.4 million compared to approximately $21.2 million
in the fourth quarter of 2011.
Interest expense and loan fees were approximately $7.5 million
during the fourth quarter of 2012 as compared to $4.6 million in
the fourth quarter of 2011.
The Company had a weighted average cost of debt comprised of
interest and fees of approximately 6.29% in the fourth quarter of
2012 versus 6.23% during the fourth quarter of 2011. The slight
increase is due to the $170.4 million 7.0% Senior Unsecured Notes
due 2019 issued in April and September of 2012, offset by a lower
weighted average cost of SBA debentures of 4.3% in the fourth
quarter of 2012 compared to 5.0% in the fourth quarter of 2011.
Total operating expenses, excluding interest expense and loan
fees, for the fourth quarter of 2012 was $6.9 million as compared
to $5.8 million for the fourth quarter of 2011.
During the fourth quarter of 2012, the Company recorded
approximately $10.3 million of net unrealized appreciation from its
loans, warrant and equity investments bringing cumulative net
depreciation to approximately $8.0 million. Of the $10.3 million of
unrealized appreciation, $900,000 of appreciation was due to market
or yield adjustments in fair value determinations, $2.1 million of
depreciation was primarily attributable to collateral based
impairments on investments in three portfolio companies, $9.9
million of appreciation was related to reversals of prior period
collateral based impairments and $1.6 million of appreciation was
related to the reversal of net unrealized depreciation due to loan
payoffs and sales of warrant and equity investments.
A break-down of the net unrealized appreciation in the
investment portfolio is highlighted below:
(in millions) Three Months Ended December 31, 2012 Q4-12
Unrealized Appreciation/(Depreciation) Loans Equity
Warrants Other Assets Total Collateral based
impairments $ (2.1 ) $ - $ - $ - $ (2.1 ) Reversals of Prior Period
Collateral based impairments 8.7 0.5 0.7 - 9.9 Reversals due
to Loan Payoffs & Warrant/Equity sales 0.4 0.2 1.0 - 1.6
Fair Value Market/Yield Adjustments* Level 1 & 2 Assets - (0.8
) (0.2 ) - (1.0 ) Level 3 Assets 4.7 (0.2 )
(2.6 ) - 1.9 Total Fair Value
Market/Yield Adjustments 4.7 (1.0 ) (2.8 ) - 0.9
Total Unrealized Appreciation/(Depreciation) $
11.7 $ (0.3 ) $ (1.1 ) $ - $ 10.3
Hercules recognized net realized gains of approximately $1.1
million on its investment portfolio in the fourth quarter.
Cumulative net realized losses on investments since October 2004
to date total approximately $47.0 million, on a GAAP basis. When
compared to total commitments of approximately $3.4 billion over
the same period, the net realized loss since inception represents
approximately 1.4% of total commitments or an annualized loss rate
of approximately 17 basis points.
NII – Net Investment Income
NII for the fourth quarter of 2012 was approximately $13.1
million, compared to $10.8 million in the fourth quarter of
2011, representing an increase of approximately 21.3%. NII per
share for the fourth quarter of 2012 was $0.25 based on 51.9
million basic weighted shares outstanding, compared to $0.25 based
on 43.2 million basic weighted shares outstanding in the fourth
quarter 2011.
DNOI - Distributable Net Operating Income
DNOI for the fourth quarter was approximately $14.2 million or
$0.27 per share, as compared to $11.5 million or $0.27 per share in
the fourth quarter of 2011. DNOI measures Hercules’ operating
performance exclusive of employee stock compensation, which
represents expense to the Company but does not require settlement
in cash. DNOI does include paid-in-kind, or “PIK”, and back-end
fees that generally are not payable in cash on a regular basis but
rather at investment maturity. Hercules believes disclosing DNOI
and the related per share measures are useful and appropriate
supplements and not alternatives to GAAP measures for net operating
income, net income, earnings per share and cash flows from
operating activities.
Dividends
The Board of Directors increased the quarterly dividend by
$0.01, or approximately 4.2%, and has declared a fourth quarter
cash dividend of $0.25 per share that will be payable
on March 19, 2013 to shareholders of record as of March
11, 2013. This dividend would represent the Company’s thirtieth
consecutive dividend declaration since its initial public offering,
bringing the total cumulative dividend declared to date to $7.89
per share.
The Company intends to distribute approximately $1.5 million, or
approximately $0.03 per share, of spillover earnings from 2012 to
its shareholders in 2013.
Share Repurchases
Hercules’ share repurchase program expired in February 2013.
During the fourth quarter of 2012 the Company did not repurchase
shares of its common stock under this program.
Liquidity and Capital Resources
The Company ended the fourth quarter with
approximately $288.0 million in available liquidity, including
$183.0 million in cash and $105.0 million in credit facility
availability.
In October 2012, Hercules closed a public offering of 3.1
million shares of its common stock at a price of $10.85 per
share, resulting in proceeds of approximately $33.6
million, excluding other offering expenses.
Also in October 2012, in connection with the public offering
of $75.0 million in aggregate principal amount of 7.00%
Senior Notes due 2019 (the “September 2019 Notes”), the
underwriters exercised their over-allotment option for an
additional $10.9 million in aggregate principal amount of the
September 2019 Notes, bringing the total size of the offering to
approximately $85.9 million.
In December 19, 2012, Hercules Capital Funding Trust 2012-1, a
newly-formed wholly owned subsidiary of Hercules, issued
approximately $129.0 million in aggregate principal amount of
Asset-Backed Notes (the “Notes”) rated A2 (sf) by Moody’s Investors
Service, Inc. (“Moody's”) backed by approximately $231.0 million of
senior secured loans originated by Hercules. The Notes bear
interest at a fixed rate of 3.32%. The Notes have a stated maturity
date of December 16, 2017 and an expected weighted average life of
1.15 years.
As of December 31, 2012, Hercules did not have any outstanding
borrowings under the Wells Fargo credit facility. Hercules has
a committed credit facility with Wells Fargo for
approximately $75.0 million in initial credit capacity under
a $300.0 million accordion credit facility. Additional
lenders may be added to the facility over time to reach up to an
aggregate of $300.0 million. We expect to continue discussions
with various other potential lenders to join the Wells facility;
however, there can be no assurances that additional lenders will
join the facility.
Pricing at December 31, 2012 under the Wells
Fargo credit facility was LIBOR+3.50% with a floor of
4.25%.
In December, Hercules amended the Union Bank credit facility
under which Union Bank and RBC Capital Markets had made
commitments of $30.0 million and $25.0 million,
respectively. The amended facility removes RBC Capital Markets and
thereby reduces the facility from $55.0 million to $30.0 million.
As of December 31, 2012, Hercules did not have any outstanding
borrowings under the Union Bank credit facility.
Pricing at December 31, 2012 under the Union Bank
credit facility is LIBOR+2.25% with a floor of 4.0%.
At December 31, 2012, Hercules had
approximately $225.0 million in outstanding debentures
under the SBIC program, which is the maximum amount of debentures
allowed under the SBIC program.
Hercules’ debt to equity, or leverage, ratio at December 31,
2012 was approximately 115.5%. However, if the outstanding cash at
December 31, 2012 of approximately $183.0 million was deducted from
total debt of approximately $596.0 million and divided by total
equity of approximately $516.0 million, then the net leverage ratio
would be approximately 80.1%. Hercules has an SEC exemptive order
to exclude all SBA debentures from its regulatory leverage
calculations. Given the SEC exemptive order relief, the Company has
the potential capacity on its balance sheet to leverage an
additional $145.0 million, bringing the maximum potential leverage
to $741.0 million, or approximately 143.6%, as of December 31,
2012.
As of December 31, 2012, the Company’s asset coverage ratio
under our regulatory requirements as a business development company
was 296.8%, excluding the SBIC debentures as a result of our
exemptive order from the SEC.
Net Asset Value
At December 31, 2012, the Company’s net assets were
approximately $516.0 million, an increase of 19.7% as compared to
$431.0 million as of December 30, 2011 and $469.1 million as of
September 30, 2012.
As of December 31, 2012, net asset value per share was $9.75 on
52.9 million outstanding shares, compared to $9.83 on 43.9 million
outstanding shares and $9.42 on 49.8 million shares as of December
31, 2011 and September 30, 2012, respectively.
Portfolio Asset Quality
As of December 31, 2012, grading of the debt portfolio at fair
value, excluding warrants and equity investments, was as
follows:
Grade 1 $134.2 million or 16.2% of the total
portfolio Grade 2 $542.9 million or 65.6% of the total portfolio
Grade 3 $127.5 million or 15.4% of the total portfolio Grade 4
$22.9 million or 2.8% of the total portfolio Grade 5 $0.0 million
or 0.0% of the total portfolio
At December 31, 2012, the weighted average loan grade of the
portfolio was 2.06 on a scale of 1 to 5, with 1 being the highest
quality, compared with 2.12 as of September 30, 2012 and 2.01 as of
December 31, 2011. Hercules’ policy is to generally adjust the
grading down on its portfolio companies as they approach the need
for additional equity capital.
Subsequent Events
1. As of February 25, 2013, Hercules has:
a. Closed commitments of approximately $115.6
million to new and existing portfolio companies, and funded
approximately $90.0 million since the close of the fourth quarter,
which includes a $35.0 million renewal of an existing debt
investment, for net new fundings of approximately $55.0 million
quarter-to-date.
b. Pending commitments (signed non-binding
term sheets) of approximately $126.5 million.
The table below summarizes our year-to-date closed and pending
commitments as follows:
Closed Commitments and Pending Commitments (in
millions) Q1-13 Closed Commitments (as of February 25, 2013)
$115.6 Pending Commitments (as of February 25, 2013)(b)
$126.5
Year-to-date 2013 Closed and Pending
Commitments $242.1
Notes:
a. Closed Commitments may include renewals of
existing credit facilities. Not all Closed Commitments result in
future cash requirements. Commitments generally fund over the two
succeeding quarters from close.
b. Not all pending commitments (signed
non-binding term sheets) are expected to close and do not
necessarily represent any future cash requirements.
Conference Call
Hercules has scheduled its 2012 fourth quarter and fiscal year
financial results conference call for February 28, 2013 at 2:00
p.m. PST (5:00 p.m. EST). To listen to the call, please dial (877)
304-8957 or (408) 427-3709 approximately 10 minutes prior to the
start of the call. A taped replay will be made available
approximately three hours after the conclusion of the call and will
remain available for seven days. To access the replay, please dial
(855) 859-2056 or (404) 537-3406 and enter the passcode
93837518.
About Hercules Technology Growth Capital, Inc.:
Hercules Technology Growth Capital, Inc. (NYSE: HTGC)
(“Hercules”) is the leading specialty finance company focused on
providing senior secured loans to venture capital-backed companies
in technology-related markets, including technology, biotechnology,
life science and cleantech industries at all stages of development.
Since inception (December 2003), Hercules has committed more than
$3.4 billion to over 220 companies and is the lender of choice for
entrepreneurs and venture capital firms seeking growth capital
financing.
Hercules’ common stock trades on the New York Stock Exchange
(NYSE) under the ticker symbol "HTGC."
In addition, Hercules has two outstanding bond issuances of
7.00% Senior Notes due 2019—the April 2019 Notes and September 2019
Notes—which trade on the NYSE under the symbols “HTGZ” and “HTGY,”
respectively.
Companies interested in learning more about financing
opportunities should contact info@htgc.com, or call
650.289.3060.
Forward-Looking Statements:
The information disclosed in this release is made as of the date
hereof and reflects Hercules most current assessment of its
historical financial performance. Actual financial results filed
with the Securities and Exchange Commission may differ from those
contained herein due to timing delays between the date of this
release and confirmation of final audit results. These
forward-looking statements are not guarantees of future performance
and are subject to uncertainties and other factors that could cause
actual results to differ materially from those expressed in the
forward-looking statements including, without limitation, the
risks, uncertainties, including the uncertainties surrounding the
current market volatility, and other factors we identify from time
to time in our filings with the Securities and Exchange Commission.
Although we believe that the assumptions on which these
forward-looking statements are based are reasonable, any of those
assumptions could prove to be inaccurate and, as a result, the
forward-looking statements based on those assumptions also could be
incorrect. You should not place undue reliance on these
forward-looking statements. The forward-looking statements
contained in this release are made as of the date hereof, and
Hercules assumes no obligation to update the forward-looking
statements for subsequent events.
HERCULES TECHNOLOGY GROWTH CAPITAL, INC.
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES (dollars
in thousands, except per share data) December 31,
2012 2011 Assets
Investments: Non-control/Non-affiliate investments (cost of
$896,031 and $642,038, respectively) $ 894,428
$ 651,843 Affiliate investments (cost of $18,307 and $3,236,
respectively) 11,872 - Control investments (cost of $0 and $11,266,
respectively) - 1,027 Total
investments, at value (cost of $914,338 and $656,540, respectively)
906,300 652,870 Cash and cash equivalents 182,994 64,474 Interest
receivable 9,635 5,820 Other assets 24,714
24,230 Total assets $ 1,123,643
$ 747,394
Liabilities Accounts payable and
accrued liabilities $ 11,575
$ 10,813 Wells Fargo Loan -
10,187 Long-term Liabilities (Convertible Senior Notes) 71,436
70,353 Asset-Backed Notes 129,300 - 2019 Notes 170,364 - Long-term
SBA Debentures 225,000
225,000 Total liabilities $ 607,675
$ 316,353 Commitments and Contingencies (Note 9)
Net
assets consist of: Common stock, par value 53 44 Capital in
excess of par value 564,508 484,244 Unrealized depreciation on
investments (7,947 ) (3,431 ) Accumulated realized losses on
investments (36,916 ) (43,042 ) Distributions in excess of
investment income (3,730 ) (6,774 )
Total net
assets $ 515,968
$ 431,041
Total liabilities and net
assets
$ 1,123,643
$ 747,394
Shares of common stock outstanding
($0.001 par value, 100,000,000 authorized) 52,925 43,853
Net
asset value per share $ 9.75
$ 9.83
HERCULES TECHNOLOGY GROWTH CAPITAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands,
except per share data) Three
Months Ended December 31, Twelve Months Ended
December 31, 2012 2011
2012 2011 Investment
Income: Interest Income Non Control/Non Affiliate investments $
23,561 $ 18,515 $ 85,258 $ 69,552 Affiliate investments 854 14
2,345 - Control investments - 884 -
794
Total interest income
24,415 19,413 87,603
70,346
Fees
Non Control/Non Affiliate investments 2,974 1,781 9,897 9,400
Affiliate investments 6 - 20 14 Control investments -
5 - 95
Total fees
2,980 1,786 9,917 9,509
Total investment income
27,395 21,199 97,520
79,855 Operating expenses: Interest 6,526 3,681 19,835
13,252 Loan fees 940 909 3,917 2,635 General and administrative
1,982 1,778 8,108 7,992 Employee Compensation: Compensation and
benefits 3,760 3,372 13,326 13,260 Stock-based compensation
1,116 628 4,227 3,128
Total employee compensation 4,876 4,000
17,553 16,388 Total operating expenses
14,324 10,368 49,413 40,267
Net investment income 13,071 10,831 48,107 39,588
Net realized (losses) gains on
investments
Non Control/Non Affiliate investments 1,119 (688 )
3,168 2,741
Total net realized (loss) gain on
investments
1,119 (688 ) 3,168 2,741
Net increase (decrease) in unrealized appreciation on
investments Non Control/Non Affiliate investments $ 4,865 $ 5,818 $
(2,448 ) $ (3,976 ) Affiliate investments 5,806 - (2,068 ) 3,425
Control investments - 1,612 -
5,158 Total net unrealized (depreciation)
appreciation on investments 10,671 7,430
(4,516 ) 4,607 Total net realized (unrealized)
gain 11,790 6,742 (1,348 ) 7,348
Net increase in net assets resulting from operations $
24,861 $ 17,573 $ 46,759 $ 46,936
Net investment income before provision for
income taxes and investment gains and losses per common share:
Basic $ 0.25 $ 0.25 $ 0.96 $ 0.91
Change in net assets per common share: Basic $ 0.47 $ 0.41 $
0.93 $ 1.08 Diluted $ 0.47 $ 0.40 $ 0.93
$ 1.07 Weighted average shares outstanding
Basic 51,862 43,190 49,068
42,988 Diluted 51,895 43,442
49,156 43,299
HERCULES
TECHNOLOGY GROWTH CAPITAL, INC.
NON GAAP FINANCIAL MEASURES
(in thousands, except per share
data)
Three Months Ended December 31, 2012
2011 Reconciliation of
Adjusted NII to Net Investment Income Net Investment Income $
13,071 $ 10,831 Dividends paid on unvested restricted shares (1)
(227 ) (143 ) Net investment income, net of dividends
paid on unvested restricted shares $ 12,844 $ 10,688
Net investment income before investment
gains and losses per common share: (2)
Basic $ 0.25 $ 0.25
Adjusted net investment income before
investment gains and losses per common share: (3)
Basic $ 0.25 $ 0.25 Weighted average shares
outstanding Basic 51,862 43,190
(1) Unvested restricted shares as of the dividend record date in
the fourth quarter of 2012 and 2011 was approximately 947,500 and
649,000 respectively (2) Net investment income per share is
calculated as the ratio of income and losses allocated to common
shareholders divided by shares outstanding. (3) Adjusted net income
per share is calculated as Net investment income per share, adding
dividends paid on unvested restricted shares to the amounts of
income and losses allocated to common shareholders.
Adjusted net investment income per basic and diluted share,
”Adjusted NII” consists of GAAP net investment income, excluding
the impact of dividends paid on unvested restricted common stock
divided by the weighted average basic and fully diluted share
outstanding for the period under measurement. For reporting
purposes, Hercules calculates net investment income per share and
change in net assets per share on a basic and fully diluted basis
by applying the two-class method, under GAAP. This GAAP method
excludes unvested restricted shares and the pro rata earnings
associated with the shares from per share calculations.
Hercules believes that providing Adjusted NII affords investors
a view of results that may be more easily compared to other
companies and enables investors to consider the Company’s results
on both a GAAP and Adjusted basis. Adjusted NII should not be
considered as an alternative to, as an independent indicator of the
Company’s operating performance, or as a substitute for Net
Investment Income per basic and diluted share (each computed in
accordance with GAAP). Instead, Adjusted NII should be reviewed in
connection with Hercules’ consolidated financial statements, to
help analyze how the Company is performing. Investors should use
Non-GAAP measures only in conjunction with its reported GAAP
results.
HERCULES TECHNOLOGY GROWTH CAPITAL, INC.
NON GAAP FINANCIAL MEASURES
(in thousands, except per share
data)
Three Months Ended December 31,
Year Ended December 31, Reconciliation of DNOI to Net
investment income 2012 2011 2012
2011 Net investment income $ 13,071 $ 10,831 $ 48,107 $
39,588 Stock-based compensation 1,116 628
4,227 3,195 DNOI $ 14,187 $ 11,459 $ 52,334 $ 42,783
DNOI per share-weighted average common shares Basic $ 0.27 $ 0.27 $
1.07 $ 1.00 Weighted average shares outstanding Basic
51,862 43,190 49,068 42,988
Distributable Net Operating Income, “DNOI” represents net
investment income as determined in accordance with U.S. generally
accepted accounting principles, or GAAP, adjusted for amortization
of employee restricted stock awards and stock options. Hercules
views DNOI and the related per share measures as useful and
appropriate supplements to net operating income, net income,
earnings per share and cash flows from operating activities. These
measures serve as an additional measure of Hercules’ operating
performance exclusive of employee restricted stock amortization,
which represents expenses of the Company but does not require
settlement in cash. DNOI does include paid-in-kind, or PIK,
interest and back end fee income which are generally not payable in
cash on a regular basis, but rather at investment maturity or when
declared. DNOI should not be considered as an alternative to net
operating income, net income, earnings per share and cash flows
from operating activities (each computed in accordance with GAAP).
Instead, DNOI should be reviewed in connection with net operating
income, net income (loss), earnings (loss) per share and cash flows
from operating activities in Hercules’ consolidated financial
statements, to help analyze how Hercules’ business is
performing.
HERCULES TECHNOLOGY GROWTH CAPITAL, INC.
NON GAAP FINANCIAL MEASURES
(in thousands, except per share
data)
Three Months Ended December 31, 2012 Total Debt $ 596,099
Cash and cash equivalents 182,994 Numerator: net debt
(total debt less cash and cash equivalents) $ 413,105
Denominator: Total net assets $ 515,968 Net Leverage Ratio 80.1 %
Net leverage ratio is calculated by deducting the outstanding
cash at December 31, 2012 of approximately $183.0 million from
total debt of approximately $596.0 million divided by our total
equity of approximately $516.0 million, resulting in a net leverage
ratio of 80.1%. These measures are not intended to replace
financial performance measures determined in accordance with GAAP.
Rather, they are presented as additional information because
management believes they are useful indicators of the current
financial performance of the Company’s core businesses.
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