- Record annual debt and equity
commitments of approximately $705.0 million
- Record annual total investment income
of $139.7 million, up 43.3% from 2012
- Q4 2013 net investment income, or
“NII,” of approximately $18.9 million, or $0.31 per
share, up 44.3% from Q4 2012
- Q4 2013 distributable net operating
income, or “DNOI,” of $20.5 million, or $0.34 per share, up 44.4%
from Q4 2012
- Strong liquidity position with
approximately $373.4 million available as of December 31, 2013
- Recorded gross realized gains on
warrants and equity of $15.1 million in Q4 2013
- 22 announced or completed M&A
events and five (5) portfolio companies completed IPOs in 2013
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 energy & renewable
technology industries, at all stages of development, announced
today its financial results for the fourth quarter and year ended
December 31, 2013.
The Company also announced that its Board of Directors has
declared a fourth quarter cash dividend of $0.31 per share, that
will be payable on March 17, 2014, to shareholders of record as of
March 10, 2014.
Fourth Quarter 2013 Highlights:
- Total investment income of
approximately $33.2 million, an increase of 21.2%, in the fourth
quarter of 2013, compared to $27.4 million for the fourth
quarter of 2012.
- Increased net investment income, or
“NII”, during the quarter by 44.3% to approximately $18.9 million,
as compared to $13.1 million in the fourth quarter of 2012. NII per
share increased 24.0% to $0.31 on approximately 60.7 million basic
weighted average shares outstanding for the fourth quarter of 2013,
as compared to NII of $0.25 per share for the fourth quarter of
2012.
- Increased distributable net operating
income, or “DNOI”, by 44.4% to approximately $20.5 million compared
to $14.2 million in the fourth quarter of 2012. DNOI per share
increased 25.9% to $0.34 on approximately 60.7 million basic
weighted average shares outstanding for the fourth quarter of 2013,
as compared to DNOI of $0.27 per share for the fourth quarter of
2012.
- Received approximately $141.1 million
in principal repayments, including approximately $104.8 million of
early principal repayments and approximately $36.3 million in
scheduled principal payments.
- Announced quarterly dividend of $0.31
per share payable on March 17, 2014, to shareholders of record as
of March 10, 2014; the thirty-fourth consecutive dividend since
inception bringing total dividends declared since inception to
$9.06 per share.
2013 Highlights:
- Record origination of
approximately $705.0 million in debt and equity
commitments to new and existing portfolio companies, the highest in
our history.
- Record total investment income of
approximately $139.7 million, an increase of 43.3% compared to
$97.5 million in 2012.
- Funded approximately $495.0
million of debt and equity investments during 2013.
- Increased NII by 52.0%
to approximately $73.1 million, as compared to $48.1 million
for fiscal year 2012. NII per share increased by approximately
27.1% to $1.22 on 58.8 million basic weighted average shares
outstanding, as compared to $0.96 per share on 49.1 million basic
weighted average shares outstanding for fiscal year 2012.
- Increased DNOI by 51.1% to
approximately $79.0 million, as compared to $52.3 million for
fiscal year 2012. DNOI per share increased by approximately 25.2%
to $1.34 on 58.8 million basic weighted average shares outstanding,
as compared to $1.07 per share on 49.1 million basic weighted
average shares outstanding for fiscal year 2012.
- Total investment assets were
approximately $910.3 million as of December 31, 2013, compared to
$906.3 million as of December 31, 2012, at fair
value.
- Finished 2013 in a strong liquidity
position with approximately $373.4 million in available
liquidity, including $268.4 million in cash and $105.0 million in
bank credit facility availability.
- Hercules' portfolio companies announced
or completed 27 liquidity (M&A and IPOs) events during 2013,
the highest in our history.
- Debt to equity leverage ratio at
December 31, 2013 of approximately 85.8% on a GAAP basis, compared
to a net leverage ratio at December 31, 2013 of 44.5%, which is
calculated as total debt of $557.4 million less approximately
$268.4 million in cash divided by total equity of approximately
$650.0 million.
"Our results for the fourth quarter of 2013 capped an
outstanding year for Hercules,” said Manuel A. Henriquez, chairman,
president and chief executive officer of Hercules Technology Growth
Capital. "Throughout the course of the year, we delivered
exceptional earnings and dividend growth, while also maintaining a
very strong balance sheet, liquidity position and a high credit
quality portfolio. Our performance is a reflection of our strong
business model, brand awareness within the venture capital and
entrepreneurial communities, ability to execute effectively, as
well as our aptitude for identifying the most promising and
innovative companies to work with.
“Hercules also continues to benefit from the robust equity
markets as demonstrated by the realized M&A and IPO exits from
our existing warrant and equity portfolio, comprised of more than
110 companies. Although only a few weeks into 2014, four of
our portfolio companies have already completed IPOs and an
additional five companies are currently in IPO registration through
February 2014. We are very encouraged by our growing and
anticipated IPO pipeline in the coming year, with the potential to
realize $20.0 million to $60.0 million in gains from our existing
warrant portfolio, assuming the equity capital markets remain
unchanged through year-end 2014. As we look to 2014 and beyond, we
believe our commitment to a disciplined lending and investment
approach will continue to deliver strong returns to our investors,”
he continued.
Fourth Quarter Review and Operating Results
Investment Portfolio
As of December 31, 2013, over 99.9% of the Company’s debt
investments portfolio were in a senior secured first lien position,
and more than 99.0% of the debt investment portfolio was priced at
floating interest rates with a Prime or LIBOR based interest rate
floor, well positioned to benefit when market rates begin move in
either direction.
Hercules entered into commitments to provide debt and equity
financings of approximately $126.0 million to new and existing
portfolio companies during the fourth quarter. The Company funded
approximately $79.0 million of debt and equity investments, to
new and existing portfolio companies during the fourth quarter.
The net decline in Hercules’ investment portfolio of
approximately $76.7 million on a cost basis for the fourth quarter
was due to $141.1 million of principal repayments, $7.8 million due
to the sale of investments and $10.7 million due to the write off
of investments offset by $79.7 million in new debt, equity and
warrant additions and approximately $3.1 million in net fee
accretion. In addition, Hercules recorded approximately $3.6
million of net unrealized appreciation from its loans, warrant and
equity investments during the fourth quarter.
A detail 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 9/30/13 $ 910.4
39.8 $ 32.8 $ 983.0 Net activity
during Q4 2013* (74.5 ) (3.0 ) 0.8
(76.7 )
Balances at Cost at 12/31/13
$ 835.9 $ 36.8 $
33.6 $ 906.3 Q/Q change in cost
-8.2 % -7.5 % 2.4 % -7.8 %
Loans Equity Warrants Total Balances at
Value at 9/30/13 $ 894.5 $ 54.7 $ 34.2 $ 983.4 Net activity during
Q4 2013* (74.5 ) (3.0 ) 0.8
(76.7 ) Net unrealized appreciation 2.0 1.0
0.6 3.6
Balances at Value at
12/31/13 $ 822.0 $ 52.7
$ 35.6 $ 910.3 Q/Q
change in cost -8.3 % -5.5 % 2.3 % -7.8
%
*Net activity includes fee and original
issue discount (OID) collections and amortization during the
quarter
Unfunded Commitments
As of December 31, 2013, Hercules had unfunded debt commitments
of approximately $151.0 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 $77.4 million of these unfunded commitments
are dependent upon the portfolio company reaching certain
milestones before the Hercules debt commitment would become
available. Commitments may include conditions such as reaching
certain milestones before the Hercules debt commitment would become
available which is expected to affect Hercules’ funding levels.
Hercules intends to continue to institute more funding or
performance based milestone requirements to mitigate risk in
connection with its unfunded debt commitments.
Signed Term Sheets
Hercules finished the fourth quarter of 2013 with approximately
$38.0 million in signed non-binding term sheets with four new and
existing companies. These non-binding term sheets generally convert
to contractual commitments in approximately 90 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.
Portfolio Effective Yield
The effective yield on the Company’s debt investments portfolio
during the fourth quarter was 15.1%. Excluding the effect of fee
accelerations that occurred from early payoffs and one-time events,
the adjusted effective yield for the fourth quarter of 2013 was
14.7%, up approximately 40 basis points from the adjusted effective
yield in the third quarter of 2013 of 14.3%. 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 Equity and Warrant Portfolio and Potential Future
Gains
Hercules held warrant positions in approximately 113 portfolio
companies, with a fair value of approximately $35.6 million and
$33.6 million on a cost basis and equity positions in 37 portfolio
companies with a fair value of approximately $52.7 million and
$36.8 million on a cost basis at December 31, 2013.
As of December 31, 2013, Hercules had held warrant
positions in five (5) portfolio companies that had filed
registration statements in contemplation of a potential IPO
confidentially under the JOBS Act.
Subsequent to December 31, 2013, four (4) portfolio companies
completed their initial public offerings or “IPOs.”
- Dicerna Pharmaceuticals, Inc.
(DRNA)
- Concert Pharmaceuticals, Inc.
(CNCE)
- Revance Therapeutics, Inc. (RVNC)
- Uniqure B.V. (QURE)
Three (3) of these portfolio companies had filed confidentially
under the JOBS Act as of December 31, 2013.
Additionally, Dicerna Pharmaceuticals, Inc. filed an S-1
Registration Statement and then completed its IPO in January
2014.
In addition and subsequent to year-end, as of February 26, 2014,
we currently have five (5) companies who have filed Form S-1
Registration Statements with the SEC in contemplation of a
potential initial public offering:
- Four (4) portfolio companies filed
confidentially under the JOBS Act
- One (1) portfolio company, Everyday
Health Inc. filed an S-1 registration Statement.
Refer to the Subsequent Events section for more details.
There can be no assurances that these companies will complete
their IPOs in a timely manner or at all.
Income Statement
Total investment income in the fourth quarter of 2013 was
approximately $33.2 million, an increase of 21.2%, compared to
approximately $27.4 million in the fourth quarter of 2012.
Interest expense and loan fees were approximately $9.0 million
during the fourth quarter of 2013 as compared to $7.5 million in
the fourth quarter of 2012, attributed to an increase of $90.4
million in weighted average debt outstanding from the fourth
quarter of 2013 versus the fourth quarter of 2012.
The Company had a weighted average cost of debt comprised of
interest and fees of approximately 6.4% in the fourth quarter of
2013 versus 6.3% during the fourth quarter of 2012.
Total operating expenses, excluding interest expense and loan
fees, for the fourth quarter of 2013 was $5.3 million as compared
to $6.9 million for the fourth quarter of 2012. This decrease is
primarily due to a decrease in variable compensation and is offset
by fees related to work-out expenses.
Realized Gains/(Losses)
Hercules recognized gross gains of $15.1 million primarily from
the sale of equity and warrant investments in six portfolio
companies. These gains were offset by gross realized losses of
approximately $11.6 million resulting from the liquidation of debt,
equity and warrant investments in portfolio companies. This
resulted in recognition of approximately $3.5 million of net
realized gains during the fourth quarter of 2013.
Unrealized Gains/(Losses)
During the fourth quarter of 2013, the Company recorded
approximately $3.6 million of net unrealized appreciation from its
loans, warrant and equity investments. Of the $3.6 million of
unrealized appreciation, $13.9 million of appreciation was due to
market or yield adjustments in fair value determinations,
approximately $0.6 million of appreciation was related to reversals
due to loan payoffs and sales of warrant and equity investments,
and $10.9 million of depreciation was primarily attributable to a
collateral based impairment on debt investments with an Internet
Consumer & Business Services portfolio company.
A break-down of the net unrealized appreciation/(depreciation)
in the investment portfolio is highlighted below:
Three Months Ended December 31, 2013
(in millions) Loans Equity Warrants
Total Collateral based impairments $ (10.9) $ - $ - $ (10.9)
Reversals due to Loan Payoffs & Warrant/Equity sales
11.4 (8.5) (2.3) 0.6 Fair Value Market/Yield Adjustments
Level 1 & 2 Assets - 5.6 0.2 5.8 Level 3 Assets 1.5 3.9 2.7 8.1
Total Fair Value Market/Yield Adjustments 1.5 9.5 2.9 13.9
Total Unrealized Appreciation/(Depreciation) $
2.0 $ 1.0 $ 0.6 $ 3.6
History of Credit Performance
Cumulative net realized losses on investments since first
origination commencing on October 2004 through December 31, 2013
totaled approximately $32.1 million, on a GAAP basis. When compared
to total commitments of approximately $4.0 billion over the same
period, the net realized loss since inception represents
approximately 79 basis points “bps” or 0.79% of total commitments
or an annualized loss rate of approximately 9 bps.
NII – Net Investment Income
NII for the fourth quarter of 2013 was approximately $18.9
million, compared to $13.1 million in the fourth quarter of
2012, representing an increase of approximately 44.3%. NII per
share increased 24.0% for the fourth quarter of 2013 to $0.31 based
on 60.7 million basic weighted average shares outstanding, compared
to $0.25 based on 51.9 million basic weighted average shares
outstanding in the fourth quarter 2012.
DNOI - Distributable Net Operating Income
DNOI for the fourth quarter was approximately $20.5 million or
$0.34 per share, as compared to $14.2 million or $0.27 per share in
the fourth quarter of 2012. 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 has declared a fourth quarter cash
dividend of $0.31 per share that will be payable on March
17, 2014 to shareholders of record as of March 10, 2014. This
dividend would represent the Company’s thirty-fourth consecutive
dividend declaration since its initial public offering, bringing
the total cumulative dividend declared to date to $9.06 per share.
The following shows the key dates of our fourth quarter 2013
dividend payment:
Declaration Date
February 24th, 2014
Record Date
March 10th, 2014
Payment Date
March 17th, 2014
Hercules' Board of Directors maintains a variable dividend
policy with the objective of distributing four quarterly
distributions in an amount that approximates 90 - 100% of our
taxable quarterly income or potential annual income for a
particular year. In addition, at the end of the year, we may also
pay an additional special dividend or fifth dividend; such that we
may distribute approximately all of our annual taxable income in
the year it was earned, while maintaining the option to spill over
our excess taxable income.
The determination of the tax attributes of the Company's
distributions is made annually as of the end of the Company's
fiscal year based upon its taxable income for the full year and
distributions paid for the full year. Therefore, a determination
made on a quarterly basis may not be representative of the actual
tax attributes of its distributions for a full year. Of the
dividends declared during the year ended December 31 2013, 100%
were distributions of ordinary income. The Company intends to
distribute approximately $3.8 million, or approximately $0.06 per
share, of spillover earnings from 2013 to its shareholders in
2014.
Liquidity and Capital Resources
The Company ended the fourth quarter with
approximately $373.4 million in available liquidity, including
$268.4 million in cash and $105.0 million in credit facility
availability. As of December 31, 2013, 100% of the
Company’s debt outstanding was in fixed rate debt instruments.
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. 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, 2013 under the Wells
Fargo credit facility was LIBOR+3.50% with a floor of 4.25%.
As of December 31, 2013, Hercules did not have any outstanding
borrowings under the Wells Fargo credit facility.
Hercules has a committed credit facility with Union Bank with
access to $30.0 million. Pricing
at December 31, 2013 under the Union Bank
credit facility is LIBOR+2.25% with a floor of 4.0%. As of December
31, 2013, Hercules did not have any outstanding borrowings under
the Union Bank credit facility. In January 2014, the credit
facility was amended to extend the revolving period to May 2,
2014.
As of December 31, 2013, Hercules had approximately $72.5
million in 6.00% Convertible Senior Notes which mature in April
2016. The carrying value of these Notes is comprised of $75 million
in aggregate principal amount outstanding less approximately $2.5
million in unaccreted discount initially recorded upon issuance of
the Convertible Senior Notes.
As of December 31, 2013 Hercules had approximately $89.6 million
outstanding of the initial $129.3 million in aggregate principal
amount of fixed-rate asset-backed notes (the “Asset-Backed Notes”),
which were rated A2(sf) by Moody’s Investors Service, Inc. The
Asset-Backed Notes have a fixed interest rate of 3.32% per annum
and a stated maturity of December 16, 2017.
As of December 31, 2013, Hercules had approximately $170.4
million in 7.00% Senior Unsecured Notes (the “2019 Notes”). These
notes were comprised of approximately $84.5 million of notes
maturing in April 2019 and approximately $85.9 million of notes
maturing September 2019.
At December 31, 2013, 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 ratio at December 31, 2013 was
approximately 85.8%. However, if the outstanding cash at December
31, 2013 of approximately $268.4 million was deducted from total
debt of approximately $557.4 million and divided by total equity of
approximately $650.0 million, then the net leverage ratio would be
approximately 44.5%. 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 add leverage of $317.5 million,
bringing the maximum potential leverage to $875.0 million, or
approximately 134.6%, as of December 31, 2013, if it had access to
such additional leverage.
As of December 31, 2013, the Company’s asset coverage ratio
under our regulatory requirements as a business development company
was 295.5%, excluding the SBIC debentures as a result of our
exemptive order from the SEC.
Net Asset Value
At December 31, 2013, the Company’s net assets were
approximately $650.0 million, an increase of 26.0% as compared to
$516.0 million as of December 31, 2012 and $643.4 million as of
September 30, 2013.
As of December 31 2013, net asset value per share was $10.51 on
61.8 million outstanding shares representing an increase of 7.8%,
compared to $9.75 on 52.9 million outstanding shares and $10.42 on
61.8 million outstanding shares as of December 31, 2012 and
September 30, 2013, respectively.
Portfolio Asset Quality
As of December 31, 2013, grading of the loans portfolio at fair
value, excluding warrants and equity investments, was as
follows:
Grade 1 $162.6 million or 19.8% of the
total portfolio Grade 2 $429.8 million or 52.3% of the total
portfolio Grade 3 $184.7 million or 22.5% of the total portfolio
Grade 4 $30.7 million or 3.7% of the total portfolio Grade 5 $14.2
million or 1.7% of the total portfolio
At December 31, 2013, the weighted average loan grade of the
portfolio was 2.20 on a scale of 1 to 5, with 1 being the highest
quality, compared with 2.13 as of September 30, 2013 and 2.06 as of
December 31, 2012. 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 24, 2014, Hercules has:
a. Closed commitments of approximately $46.4
million to new and existing portfolio companies, and funded
approximately $37.1 million since the close of the fourth
quarter.
b. Pending commitments (signed non-binding
term sheets) of approximately $112.3 million.
The table below summarizes our year-to-date closed and pending
commitments as follows:
Closed Commitments and Pending Commitments (in millions)
Q1-14 Closed Commitments (as of February 24, 2014)(a)
$46.4 Pending Commitments (as of
February 24, 2014)(b)
$112.3
Year-to-date 2014 Closed and Pending Commitments
$158.7
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.
2. In January 2014, Toshiba Corporation completed its
acquisition of Hercules portfolio company OCZ Technology.
The acquisition resulted in full repayment of the Hercules debt
investment in OCZ Technology.
3. In January 2014, Dicerna Pharmaceuticals, Inc.
(NASDAQ: DRNA) completed its initial public offering of 6,900,000
shares of its common stock at $15.00 per share.
4. In January 2014, two (2) portfolio companies filed their
initial public offering “IPO” Form S-1 or F-1 registration
statements confidentially under the JOBS Act. In total, as of
February 24, 2014, the Company holds investments in five (5)
companies with Form S-1 registration statements filed pending their
respective initial public offerings.
5. In February 2014, Revance Therapeutics, Inc.
(NASDAQ:RVNC) completed its initial public offering of 6,900,000
shares of its common stock at $16.00 per share. The company had
initially filed confidentially in April 2013.
6. In February 2014, Concert Pharmaceuticals, Inc.
(NASDAQ:CNCE) completed its initial public offering of 6,000,000
shares of its common stock at $14.00 per share. The company had
initially filed confidentially in December 2013.
7. In February 2014, Uniqure B.V. (NASDAQ:QURE) completed
its initial public offering of 5,400,000 shares of its common stock
at $17.00 per share. The company had initially filed confidentially
in November 2013.
8. In February 2014, Teva Pharmaceutical Industries Ltd.
(NYSE:TEVA) completed its acquisition of Hercules portfolio company
NuPathe Inc. (NASDAQ: PATH) at a price of $3.65 per share in
cash and the right to receive contingent cash consideration
payments of up to $3.15 per share, net to the seller in cash
without interest.
9. In February 2014, Everyday Health, Inc. filed an
initial public offering “IPO” Form S-1 registration statement in
contemplation of a potential IPO.
Conference Call
Hercules has scheduled its fourth quarter and fiscal year 2013
financial results conference call for February 27, 2014 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 internationally 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 42917588.
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 energy and renewable technology industries, at
all stages of development. Since inception (December 2003),
Hercules has committed more than $4.0 billion to over 270 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
December 31, (Dollars in thousands, except per share
data)
2013 2012
Assets Investments: Non-control/Non-affiliate investments
(cost of $891,059 and $896,031, respectively) $ 899,314 $ 894,428
Affiliate investments (cost of $15,238 and $18,307, respectively)
10,981 11,872 Total investments, at
value (cost of $906,297 and $914,338, respectively) 910,295 906,300
Cash and cash equivalents 268,368 182,994 Restricted cash 6,271 -
Interest receivable 8,962 9,635 Other assets 27,819
24,714 Total assets $ 1,221,715 $ 1,123,643
Liabilities Accounts payable and accrued
liabilities $ 14,268 $ 11,575 Long-term Liabilities (Convertible
Senior Notes) 72,519 71,436 Asset-Backed Notes 89,557 129,300 2019
Notes 170,364 170,364 Long-term SBA Debentures 225,000
225,000 Total liabilities $ 571,708 $ 607,675
Commitments and Contingencies (Note 10)
Net assets
consist of: Common stock, par value 62 53 Capital in excess of
par value 656,594 564,508 Unrealized appreciation / (depreciation)
on investments 3,598 (7,947 ) Accumulated realized losses on
investments (15,240 ) (36,916 ) Undistributed net investment income
/ (Distributions in excess of investment income) 4,993
(3,730 ) Total net assets $ 650,007 $ 515,968
Total liabilities and net assets $ 1,221,715 $
1,123,643
Shares of common stock outstanding
($0.001 par value, 100,000,000 authorized) 61,837 52,925 Net
asset value per share $ 10.51 $ 9.75
HERCULES TECHNOLOGY GROWTH CAPITAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS Three
Months Ended December 31, Year Ended December 31,
(Dollars in thousands, except per share data)
2013
2012 2013 2012
2011 Investment income: Interest
Income Non-Control/Non-Affiliate investments $ 27,580 $ 23,561 $
121,302 $ 85,258 $ 69,552 Affiliate investments 685 854 2,369 2,345
- Control investments - - - -
794 Total interest income 28,265
24,415 123,671 87,603 70,346
Fees Non-Control/Non-Affiliate investments 4,929 2,974
16,016 9,897 9,400 Affiliate investments 16 6 26 20 14 Control
investments - - - -
95 Total fees 4,945 2,980 16,042
9,917 9,509 Total investment
income 33,210 27,395 139,713 97,520 79,855 Operating expenses:
Interest 7,545 6,526 30,334 19,835 13,252 Loan fees 1,466 940 4,807
3,917 2,635 General and administrative 2,523 1,982 9,354 8,108
7,992 Employee Compensation: Compensation and benefits 1,186 3,760
16,179 13,326 13,260 Stock-based compensation 1,626
1,116 5,974 4,227 3,128
Total employee compensation 2,812 4,876 22,153
17,553 16,388 Total operating
expenses 14,346 14,324 66,648
49,413 40,267 Net investment income 18,864
13,071 73,065 48,107 39,588 Net realized gain on investments
Non-Control/Non-Affiliate investments 3,527 1,119
14,836 3,168 2,741 Total
net realized gain on investments 3,527 1,119 14,836 3,168 2,741 Net
increase (decrease) in unrealized appreciation on investments
Non-Control/Non-Affiliate investments 1,863 4,865 12,370 (2,448 )
(3,976 ) Affiliate investments 643 5,806 (825 ) (2,068 ) 3,425
Control investments - - - -
5,158 Total net unrealized appreciation
(depreciation) on investments 2,506 10,671
11,545 (4,516 ) 4,607 Total net
realized and unrealized gain (loss) 6,033 11,790
26,381 (1,348 ) 7,348 Net
increase in net assets resulting from operations $ 24,897 $ 24,861
$ 99,446 $ 46,759 $ 46,936 Net investment
income before investment gains and losses per common share: Basic $
0.31 $ 0.25 $ 1.22 $ 0.96 $ 0.91 Change in net
assets per common share: Basic $ 0.40 $ 0.47 $ 1.67 $ 0.93
$ 1.08 Diluted $ 0.39 $ 0.47 $ 1.63 $ 0.93
$ 1.07 Weighted average shares outstanding Basic
60,712 51,862 58,838 49,068
42,988 Diluted 63,419 51,895
60,292 49,156 43,299
HERCULES TECHNOLOGY GROWTH CAPITAL,
INC.
NON GAAP FINANCIAL MEASURES
(in thousands, except per share
data)
Three Months Ended December 31, Year Ended
December 31, 2013 2012
2013 2012
Reconciliation of Net Investment Income to Adjusted NII Net
Investment Income $ 18,864 $ 13,071 $ 73,065 $ 48,107 Dividends
paid on unvested restricted shares (1) (332 ) (227 )
(1,331 ) (1,016 ) Net investment income, net of
dividends paid on unvested restricted shares $ 18,532 $ 12,844 $
71,734 $ 47,091 Adjusted net investment income before
investment gains and losses per common share: (2) Basic $ 0.31
$ 0.25 $ 1.22 $ 0.96 Weighted
average shares outstanding Basic 60,712 51,862
58,838 49,068
Three Months Ended December 31, Year Ended December
31, 2013 2012
2013 2012 Reconciliation of
Change in Net Assets to Adjusted Change in Net Assets Net
increase in net assets resulting from operations $ 25,328 $ 24,861
$ 99,877 $ 46,759 Dividends paid on unvested restricted shares (1)
(332 ) (227 ) (1,331 ) (1,016 ) Net
increase in net assets resulting from operations, net of dividends
paid on unvested restricted shares $ 24,996 $ 24,634 $ 98,546 $
45,743 Adjusted Change in net assets per common share (3)
Basic $ 0.41 $ 0.47 $ 1.67 $ 0.93
Weighted average shares outstanding Basic 60,712
51,862 58,838 49,068
(1) Unvested restricted shares as of the dividend
record date in the fourth quarter of 2013 and 2012 was
approximately 1.1 million and 1.0 million, respectively (2)
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. (3) Adjusted change in net assets 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 share, ”Adjusted NII”,
and Adjusted Change in Net Assets per basic share, 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 and Adjusted
Change in Net Assets 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 Net investment income to
DNOI 2013 2012 2013
2012 Net investment income $ 18,864 $ 13,071 $ 73,065
$ 48,107 Stock-based compensation 1,626 1,116
5,975 4,227 DNOI $ 20,490 $ 14,187 $ 79,040 $ 52,334
DNOI per share-weighted average common shares Basic $ 0.34 $ 0.27 $
1.34 $ 1.07 Weighted average shares outstanding Basic
60,712 51,862 58,838 49,068
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)
December 31, 2013 Total Debt $ 557,440 Cash and cash
equivalents (268,368 ) Numerator: net debt (total debt less
cash and cash equivalents) $ 289,072 Denominator: Total net
assets $ 650,007 Net Leverage Ratio 44.5 %
Net leverage ratio is calculated by deducting the outstanding
cash at December 31, 2013 of approximately $268.4 million from
total debt of approximately $557.4 million divided by our total
equity of approximately $650.0 million, resulting in a net leverage
ratio of 44.5%. 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.
Hercules Technology Growth Capital, Inc.Main, 650-289-3060
HT-HNinfo@htgc.comorMarket Street PartnersEd Keaney,
415-445-3238ekeaney@marketstreetpartners.com
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