- Q1 2014 net investment income, or
“NII,” of approximately $18.3 million, or $0.30 per
share, up 22.0% from Q1 2013
- Q1 2014 distributable net operating
income, or “DNOI,” of $19.9 million, or $0.33 per share, up 22.8%
from Q1 2013
- Strong liquidity position with
approximately $329.5 million available as of March 31, 2014
- Recorded gross realized gains
of $5.4 million in Q1 2014
- Five (5) portfolio companies completed
IPOs in Q1 2014
- Scott Bluestein Promoted to Chief
Investment Officer; Charged with Overseeing Growing Portfolio
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 first quarter ended March 31,
2014.
The Company also announced that its Board of Directors has
declared a first quarter cash dividend of $0.31 per share, that
will be payable on May 19, 2014, to shareholders of record as of
May 12, 2014.
“Hercules has completed another strong quarter, delivering a 22%
increase in net investment income compared to the first quarter of
2013,” said Manuel A. Henriquez, co-founder, chairman, and chief
executive officer of Hercules Technology Growth Capital. “Our
results reflect the strength of our portfolio, our constant focus
on maintaining a strong liquidity position, our methodical approach
to credit analysis and the continued success of our long-term
strategy.”
Recognizing the growing size and breadth of the Hercules
portfolio, the Company has also promoted Scott Bluestein to Chief
Investment Officer. In his new role, Bluestein will oversee all
capital allocation with a mandate to accelerate the growth and
diversity of Hercules’ portfolio.
First Quarter 2014 Highlights:
- Total investment income of
approximately $35.8 million, an increase of 15.5%, in the first
quarter of 2014, compared to $31.0 million for the first
quarter of 2013.
- Increased net investment income, or
“NII”, during the quarter by 22.0% to approximately $18.3 million,
as compared to $15.0 million in the first quarter of 2013. NII per
share increased 11.1% to $0.30 on approximately 60.9 million basic
weighted average shares outstanding for the first quarter of 2014,
as compared to NII of $0.27 per share for the first quarter of
2013.
- Increased distributable net operating
income, or “DNOI”, by 22.8% to approximately $19.9 million compared
to $16.2 million in the first quarter of 2013. DNOI per share
increased 10.0% to $0.33 on approximately 60.9 million basic
weighted average shares outstanding for the first quarter of 2014,
as compared to DNOI of $0.30 per share for the first quarter of
2013.
- Received approximately $132.6 million
in principal and PIK repayments, including approximately $88.6
million of early principal repayments and approximately $44.0
million in scheduled principal payments.
- Announced quarterly dividend of $0.31
per share payable on May 19, 2014, to shareholders of record as of
May 12, 2014; the thirty-fifth consecutive dividend since inception
bringing total dividends declared since inception to $9.37 per
share.
First Quarter Review and Operating Results
Investment Portfolio
As of March 31, 2014, 100% of the Company’s debt investments
portfolio were in a senior secured first lien position, and
approximately 98.0% 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 to move
in either direction.
Hercules entered into commitments to provide debt and equity
financings of approximately $155.7 million to new and existing
portfolio companies during the first quarter. The Company funded
approximately $111.9 million of debt and equity investments,
to new and existing portfolio companies during the first
quarter.
The net decline in Hercules’ investment portfolio of
approximately $18.6 million on a cost basis for the first quarter
was due to $132.6 million of principal and PIK repayments, $1.8
million of fee accelerations due to early payoffs and $2.7 million
due to the sale and write off of investments offset by $113.9
million in new debt, equity and warrant additions and approximately
$4.6 million in net fee accretion. In addition, Hercules recorded
approximately $1.0 million of net unrealized depreciation from its
loans, warrant and equity investments during the first 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 12/31/13 $ 835.9
36.8 $ 33.6 $ 906.3 Net activity during Q1
2014* (20.9 ) 4.0 (1.7 ) (18.6 )
Balances at Cost at 3/31/14 $ 815.0
$ 40.8 $ 31.9 $
887.7 Q/Q change in cost -2.5 % 10.9 %
-5.1 % -2.1 %
Loans Equity
Warrants Total Balances at Value at 12/31/13 $ 822.0
$ 52.7 $ 35.6 $ 910.3 Net activity during Q1 2014* (20.9 )
4.0 (1.7 ) (18.6 ) Net unrealized
appreciation (2.7 ) 12.0 (10.3 )
(1.0 )
Balances at Value at 3/31/14 $ 798.4
$ 68.7 $ 23.6
$ 890.7 Q/Q change in value -2.9 %
30.4 % -33.7 % -2.2 % *Net activity
includes fee and original issue discount (OID) collections and
amortization during the quarter
Unfunded Commitments
As of March 31, 2014, Hercules had unfunded debt commitments of
approximately $189.4 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 $95.6 million of these unfunded commitments
are dependent upon the portfolio company reaching certain
milestones before 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 first quarter of 2014 with approximately
$238.0 million in signed non-binding term sheets with 14 new
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 first quarter was 17.9%, up approximately 280 basis
points from the effective yield in the fourth quarter of 2013 of
15.1%. The increase is primarily due to the effect of fee
accelerations that occurred from early payoffs. 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 107 portfolio companies, with
a fair value of approximately $23.6 million and $31.9 million on a
cost basis and equity positions in 37 portfolio companies with a
fair value of approximately $68.7 million and $40.8 million on a
cost basis as of March 31, 2014.
As of March 31, 2014, Hercules had held warrant positions
in four (4) portfolio companies that had filed registration
statements in contemplation of a potential IPO:
- Box, Inc.
- Three companies filed a Form S-1
Registration confidentially under the JOBS Act
Subsequent to March 31, 2014, one (1) portfolio company
completed their initial public offering or “IPO.”
- Glori Energy, Inc. (GLRI)
Subsequent to quarter-end, as of May 1, 2014, we currently have
four (4) companies who have filed Form S-1 Registration Statements
with the SEC in contemplation of a potential initial public
offering:
- Box, Inc.
- Dance Biopharm, Inc.
- Two (2) portfolio companies filed
confidentially under the JOBS Act
Dance Biopharm had filed confidentially under the JOBS Act as of
March 31, 2014.
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 first quarter of 2014 was
approximately $35.8 million, an increase of 15.5%, compared to
approximately $31.0 million in the first quarter of 2013.
Interest expense and loan fees were approximately $9.2 million
during the first quarter of 2014 as compared to $8.7 million in the
first quarter of 2013. The increase is primarily attributed to an
acceleration of fee amortization related to the partial early
payoffs of SBA debentures and the Asset-Backed notes.
The Company had a weighted average cost of debt comprised of
interest and fees of approximately 6.9% in the first quarter of
2014 versus 5.9% during the first quarter of 2013.
Total operating expenses, excluding interest expense and loan
fees, for the first quarter of 2014 was $8.2 million as compared to
$7.2 million for the first quarter of 2013.
Realized Gains/(Losses)
Hercules recognized gross gains of $5.4 million primarily from
the sale of equity and warrant investments in five portfolio
companies. These gains were offset by gross realized losses of
approximately $500 thousand resulting from the liquidation of debt,
equity and warrant investments in five portfolio
companies. This resulted in recognition of approximately $4.9
million of net realized gains during the first quarter of 2014.
Unrealized Gains/(Losses)
During the first quarter of 2014, the Company recorded
approximately $1.0 million of net unrealized depreciation from its
loans, warrant and equity investments. Of the $1.0 million of
unrealized depreciation, $16.1 million of appreciation was due to
market or yield adjustments in fair value determinations,
approximately $9.7 million of depreciation was related to reversals
due to loan payoffs and sales of warrant and equity investments,
and $7.4 million of depreciation was primarily attributable to
collateral based impairment on debt investments with two portfolio
companies.
A break-down of the net unrealized appreciation/(depreciation)
in the investment portfolio is highlighted below:
Three Months Ended March 31, 2014 (in
millions) Loans Equity Warrants
Total Collateral based impairments $ (7.2 ) $ - $ (0.2 ) $
(7.4 ) Reversals due to Loan Payoffs & Warrant/Equity
sales (0.3 ) 0.2 (9.6 ) (9.7 ) Fair Value Market/Yield Adjustments
Level 1 & 2 Assets - 3.5 0.1 3.6 Level 3 Assets 4.8
8.3 (0.6 ) 12.5 Total Fair Value
Market/Yield Adjustments 4.8 11.8 (0.5 ) 16.1
Total Unrealized Appreciation/(Depreciation) $ (2.7 ) $ 12.0
$ (10.3 ) $ (1.0 )
History of Credit Performance
Cumulative net realized losses on investments since first
origination commencing on October 2004 through March 31, 2014
totaled approximately $27.2 million, on a GAAP basis. When compared
to total commitments of approximately $4.2 billion over the same
period, the net realized loss since inception represents
approximately 65 basis points “bps” or 0.65% of total commitments
or an annualized loss rate of approximately 7 bps.
NII – Net Investment Income
NII for the first quarter of 2014 was approximately $18.3
million, compared to $15.0 million in the first quarter of
2013, representing an increase of approximately 22.0%. NII per
share increased 11.1% for the first quarter of 2014 to $0.30 based
on 60.9 million basic weighted average shares outstanding, compared
to $0.27 based on 53.7 million basic weighted average shares
outstanding in the first quarter 2013.
DNOI - Distributable Net Operating Income
DNOI for the first quarter was approximately $19.9 million or
$0.33 per share, as compared to $16.2 million or $0.30 per share in
the first quarter of 2013. 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 first quarter cash
dividend of $0.31 per share that will be payable on May
19, 2014 to shareholders of record as of May 12, 2014. This
dividend would represent the Company’s thirty-fifth consecutive
dividend declaration since its initial public offering, bringing
the total cumulative dividend declared to date to $9.37 per share.
The following shows the key dates of our first quarter 2014
dividend payment:
Declaration Date
April 28th, 2014 Record Date May 12th, 2014 Payment Date May
19th, 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.
Future Ability to Cover Dividends
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. If the Company
had determined the tax attributes of our distributions year-to-date
as of March 31, 2014, approximately 100.0% would be from ordinary
income and spillover earnings from 2013. However there can be no
certainty to shareholders that this determination is representative
of what the tax attributes of its 2014 distributions to
shareholders will actually be. As a result of the Company’s strong
2013 performance, it will distribute approximately $3.8 million, or
approximately $0.06 per share, of spillover earnings to its
shareholders in 2014.
Liquidity and Capital Resources
The Company ended the first quarter with
approximately $329.5 million in available liquidity, including
$224.5 million in cash and $105.0 million in credit facility
availability. As of March 31, 2014, 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 March 31, 2014 under the Wells
Fargo credit facility was LIBOR+3.50% with a floor of 4.25%.
As of March 31, 2014, 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 March 31, 2014 under the Union Bank
credit facility is LIBOR+2.25% with a floor of 4.0%. As of March
31, 2014, Hercules did not have any outstanding borrowings under
the Union Bank credit facility.
As of March 31, 2014, Hercules had approximately $72.8 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 $2.2
million in unaccreted discount initially recorded upon issuance of
the Convertible Senior Notes.
As of March 31, 2014 Hercules had approximately $63.8 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 March 31, 2014, 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 March 31, 2014, Hercules had approximately $190.2
million in outstanding debentures under the SBIC program. In
February 2014, Hercules repaid outstanding SBA debentures totaling
$34.8 million. These debentures were originally issued March 26,
2008, carried a combined interest rate and annual charge of 6.38%
and were scheduled to retire March 1, 2018.
Hercules’ debt to equity ratio at March 31, 2014 was
approximately 76.1%. However, if the outstanding cash at March 31,
2014 of approximately $224.5 million was deducted from total debt
of approximately $497.1 million and divided by total equity of
approximately $653.3 million, then the net leverage ratio would be
approximately 41.7%. 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 approximately
$346.4 million, bringing the maximum potential leverage to $843.5
million, or approximately 129.1%, as of March 31, 2014, if it had
access to such additional leverage.
As of March 31, 2014, the Company’s asset coverage ratio under
our regulatory requirements as a business development company was
312.8%, excluding the SBIC debentures as a result of our exemptive
order from the SEC.
Net Asset Value
As of March 31, 2014, the Company’s net assets were
approximately $653.3 million, an increase of 6.1% as compared to
$615.6 million as of March 31, 2013. Net assets were $650.0 as of
December 31, 2013.
As of March 31, 2014, net asset value per share was $10.58 on
61.8 million outstanding shares representing an increase of 5.8%,
compared to $10.00 on 61.6 million outstanding shares as of March
31, 2013. Net asset value per share was $10.51 on 61.8 million
outstanding shares as of December 31, 2013.
Portfolio Asset Quality
As of March 31, 2014, grading of the loans portfolio at fair
value, excluding warrants and equity investments, was as
follows:
Grade 1
$225.7 million or 28.3% of the total portfolio Grade 2 $391.2
million or 49.0% of the total portfolio Grade 3 $159.0 million or
19.9% of the total portfolio Grade 4 $14.6 million or 1.8% of the
total portfolio Grade 5 $7.9 million or 1.0% of the total portfolio
At March 31, 2014, the weighted average loan grade of the
portfolio was 2.05 on a scale of 1 to 5, with 1 being the highest
quality, compared with 2.20 as of December 31, 2013 and 2.03 as of
March 31, 2013. 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 April 28, 2014, Hercules has:
a. Closed commitments of approximately $60.0
million to new and existing portfolio companies, and funded
approximately $27.1 million since the close of the first
quarter.
b. Pending commitments (signed non-binding
term sheets) of approximately $171.0 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 $155.7
Q2-14 Closed Commitments (as of April 28, 2014)(a)
$60.0 Pending Commitments (as of April 28, 2014)(b)
$171.0
Year-to-date 2014 Closed and Pending
Commitments $386.7
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 April 2014, Hercules portfolio company Glori Energy,
Inc. (NASDAQ: GLRI) completed its $185 million reverse merger
with Infinity Cross Border Acquisition Corp. (NASDAQ: INXB) and
closed a share tender offer and a warrant tender offer.
3. In April 2014, Hercules portfolio company Dance Biopharm,
Inc. filed its initial public offering “IPO” Form S-1
registration statement in contemplation of a potential IPO. The
company had initially filed confidentially in January 2014.
Conference Call
Hercules has scheduled its first quarter 2014 financial results
conference call for May 1, 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 31611509.
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 & renewable technology industries, at
all stages of development. Since inception (December 2003),
Hercules has committed more than $4.2 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
(unaudited)
(dollars in thousands, except per share data)
March 31, 2014 December 31, 2013 Assets
Investments: Non-control/Non-affiliate investments (cost of
$872,226 and $891,059, respectively) $ 879,469 $ 899,314 Affiliate
investments (cost of $15,402 and $15,238, respectively)
11,193 10,981 Total investments, at value
(cost of $887,628 and $906,297, respectively) 890,662 910,295 Cash
and cash equivalents 224,538 268,368 Restricted cash 4,784 6,271
Interest receivable 8,176 8,962 Other assets 31,239
27,819 Total assets $ 1,159,399 $ 1,221,715
Liabilities Accounts payable and accrued
liabilities $ 8,962 $ 14,268 Long-term Liabilities (Convertible
Senior Notes) 72,789 72,519 Asset-Backed Notes 63,782 89,557 2019
Notes 170,364 170,364 Long-term SBA Debentures 190,200
225,000 Total liabilities $ 506,097 $ 571,708
Commitments and Contingencies (Note 10)
Net assets
consist of: Common stock, par value 62 62 Capital in excess of
par value 656,869 656,594 Unrealized appreciation on investments
2,607 3,598 Accumulated realized losses on investments (10,368 )
(15,240 ) Undistributed net investment income 4,132
4,993
Total net assets $ 653,302 $
650,007
Total liabilities and net assets $ 1,159,399
$ 1,221,715
Shares of common stock
outstanding ($0.001 par value, 100,000,000 authorized) 61,760
61,837
Net asset value per share $ 10.58 $ 10.51
HERCULES TECHNOLOGY GROWTH
CAPITAL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share data) Three Months
Ended March 31, 2014 2013
Investment income: Interest Income Non-Control/Non-Affiliate
investments $ 29,382 $ 28,319 Affiliate investments 1,464
610 Total interest income 30,846
28,929 Fees Non-Control/Non-Affiliate investments
4,913 2,028 Affiliate investments 11 -
Total fees 4,924 2,028 Total investment
income 35,770 30,957 Operating expenses: Interest 7,148 7,631 Loan
fees 2,076 1,079 General and administrative 2,461 2,252 Employee
Compensation: Compensation and benefits 4,221 3,798 Stock-based
compensation 1,560 1,165 Total employee
compensation 5,781 4,963 Total
operating expenses 17,466 15,925 Net
investment income 18,304 15,032 Net realized gain on investments
Non-Control/Non-Affiliate investments 4,872
1,991 Total net realized gain on investments 4,872
1,991 Net change in unrealized appreciation
(depreciation) on investments Non-Control/Non-Affiliate investments
(1,038 ) (768 ) Affiliate investments 47 434
Total net unrealized appreciation (depreciation) on
investments (991 ) (334 ) Total net realized and
unrealized gain 3,881 1,657 Net
increase in net assets resulting from operations $ 22,185 $
16,689 Net investment income before investment gains and
losses per common share: Basic $ 0.30 $ 0.27 Change
in net assets per common share: Basic $ 0.36 $ 0.30
Diluted $ 0.35 $ 0.30 Weighted average shares
outstanding Basic 60,870 53,682 Diluted
62,695 53,823 Dividends declared per
common share: Basic $ 0.31 $ 0.27
HERCULES
TECHNOLOGY GROWTH CAPITAL, INC.
NON GAAP FINANCIAL MEASURES
(in thousands, except per share
data)
Three Months Ended March 31,
2014 2013
Reconciliation of Net Investment Income to Adjusted NII Net
Investment Income 18,304 15,032 Dividends paid on unvested
restricted shares (1) (237 ) (331 ) Net investment
income, net of dividends paid on unvested restricted shares $
18,067 $ 14,701 Adjusted net investment income before
investment gains and losses per common share: (2) Basic $ 0.30
$ 0.27 Weighted average shares outstanding
Basic 60,870 53,682
Three
Months Ended March 31, 2014
2013 Reconciliation of Change in Net Assets to
Adjusted Change in Net Assets Net increase in net assets
resulting from operations $ 22,185 $ 16,689 Dividends paid on
unvested restricted shares (1) (237 ) (331 ) Net
increase in net assets resulting from operations, net of dividends
paid on unvested restricted shares $ 21,948 $ 16,358
Adjusted Change in net assets per common share (3) Basic $ 0.36
$ 0.30 Weighted average shares outstanding
Basic 60,870 53,682 (1) Unvested
restricted shares as of the dividend record date in the first
quarter of 2014 and 2013 was approximately 0.8 million and 1.3
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 March 31, Reconciliation of Net
investment income to DNOI 2014 2013
Net investment income $ 18,304 $ 15,032 Stock-based compensation
1,560 1,165 DNOI $ 19,864 $ 16,197 DNOI per
share-weighted average common shares Basic $ 0.33 $ 0.30
Weighted average shares outstanding Basic 60,870
53,682
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)
March 31, 2014 Total Debt $ 497,135 Cash and cash
equivalents (224,538 ) Numerator: net debt (total debt less
cash and cash equivalents) $ 272,597 Denominator: Total net
assets $ 653,302 Net Leverage Ratio 41.7 %
Net leverage ratio is calculated by deducting the outstanding
cash at March 31, 2014 of approximately $224.5 million from total
debt of approximately $497.1 million divided by our total equity of
approximately $653.3 million, resulting in a net leverage ratio of
41.7%. 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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