Hercules Technology Growth Capital, Inc. (NYSE:HTGC), the
leading specialty finance company focused on providing senior
secured loans to entrepreneurial venture capital and private
equity-backed companies in technology-related markets at all stages
of development, including technology, biotechnology, life science,
healthcare services and clean-tech industries, today announced its
financial results for the second quarter ended June 30, 2012.
Second Quarter 2012 Highlights:
- Record high total investment income of
$23.9 million, an increase of 14.9%, in the second quarter of 2012,
compared to $20.8 million for the second quarter of
2011.
- Increased NII during the quarter by
18.3% to approximately $12.3 million, compared to $10.4 million in
the second quarter of 2011. NII per share was $0.25, up 4.2%, on
48.6 million outstanding shares for the second quarter of 2012,
compared to $0.24 per share on 43.0 million outstanding shares in
the second quarter of 2011.
- Increased DNOI by approximately 19.5%
to $13.5 million compared to $11.3 million in the second quarter of
2011. DNOI per share was $0.28, up 7.7%, on 48.6 million
outstanding shares for the second quarter of 2012, compared to
$0.26 per share on 43.0 million outstanding shares in the second
quarter of 2011.
- Record high total investment assets
increased 52.1% year over year to approximately $722.8 million as
of June 30, 2012, compared to $ 475.2 million as of June 30,
2011.
- Originated approximately $139.0 million
in total debt and equity commitments to new and existing portfolio
companies.
- Funded approximately $112.0 million of
debt and equity investments during the second quarter.
- Received approximately $64.1 million in
principal repayments, including $46.0 million of early
principal repayments and $18.1 million in scheduled
principal payments.
- Ended the second quarter with
approximately $207.3 million in available liquidity, including
$56.1 million in cash, $24.3 million in available SBA borrowing
capacity and $126.9 million in bank credit facility
availability.
-
Declared a quarterly dividend of $0.24 per share payable on
August 24, 2012, to shareholders of record as of August 17, 2012;
the twenty-eighth consecutive dividend since inception bringing
total dividends declared since inception to $7.40 per share.
- Two of Hercules’ portfolio companies
completed their initial public offering (“IPO”) during the quarter
and one portfolio company was acquired.
“I am pleased to announce another solid quarter of performance
and financial results for Hercules. We delivered record total
investment income and record total investment assets, and harvested
net realized gains of approximately $8.3 million from the
monetization of our warrant and equity portfolio during the second
quarter. These gains are testament to our team’s ability to pick
the leaders in their respective sectors and unlock value for our
shareholders,” said Manuel A. Henriquez, Hercules' co-founder,
president, chairman and chief executive officer.
“We continue to add significant flexibility to our financing
options, executing our first baby bond offerings totaling
approximately $84.5 million, receiving approval to borrow $24.3
million in debentures under our second SBIC license, and improving
the terms under our Wells credit facility further bolstering our
balance sheet. As we turn our attention to the third quarter,
typically our slowest quarter, we expect to moderate our new
investment activities and will continue to adhere to a cautious and
conservative new origination and credit management strategy in
light of the current economic environment and pending U.S.
election.”
Second Quarter Review and Operating Results
Investment Portfolio
As of June 30, 2012, over 99.0% of the Company’s debt
investments were in a senior secured first lien position, and 94.9%
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 $139.0 million to new and existing
portfolio companies.
The Company funded and renewed existing credit
facilities of approximately $111.9 million and $26.3
million, respectively in debt and equity investments to new and
existing portfolio companies during the second quarter.
Hercules received approximately $64.1 million of
principal repayments, including approximately $46.0
million of early principal repayments and approximately
$18.1 million in scheduled principal payments in the second
quarter.
Net investment growth on Hercules portfolio on a cost basis was
approximately $48.3 million. Of the net investment growth,
approximately $41.7 million relates to interest-earnings assets on
the debt portfolio and $4.7 million and $1.9 million was
attributable to equity and warrants, respectively.
Hercules recorded approximately $20.0 million of net unrealized
depreciation from its loans, warrant and equity investments,
primarily related to mark to market adjustments in fair market
valuations. Of the unrealized depreciation, approximately $9.2
million was attributable to debt investments and $5.0 and $5.8
million was attributable to equity and warrants, respectively.
A break-down of the 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 3/31/2012
$ 619.5
$ 46.3 $ 29.5 $
695.4 Net activity during Q2 2012* 41.7
4.7 1.9 48.3 Balances at
Cost at 6/30/2012
$ 661.2 $ 51.1
$ 31.4 $ 743.7 Q/Q
Change 6.7 % 10.2 % 6.5 % 7.0 %
Balances at value at 3/31/2012
$ 614.6
$ 47.9 $ 32.0 $
694.5 Net activity during Q2 2012* 41.7 4.7 1.9 48.3
Net unrealized depreciation (9.2 ) (5.0 ) (5.8
) (20.0 ) Balances at Value at 6/30/12
$ 647.1
$ 47.6 $ 28.1
$ 722.8 Q/Q Change 5.3 % -0.6 % -12.2 % 4.1 %
*Net activity includes fee and OID collections and
amortization during the quarter
Unfunded Commitments
As of June 30, 2012, Hercules had unfunded debt commitments of
approximately $92.7 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 $32.6 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 second quarter of 2012 with approximately
$48.0 million in signed non-binding term sheets with 6 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 quarter was 15.2%, which is up from the first quarter of
2012 yield of 14.6%. Excluding the effect of fee accelerations that
occurred from early payoffs and one-time events, the effective
yield for the second quarter of 2012 was 13.3%, down approximately
40 basis points from the adjusted effective yield in the first
quarter of 2012 of 13.7%. 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 115 portfolio
companies, with a fair value of approximately $28.1 million at June
30, 2012 down by 13.5% as compared to approximately $32.5 million
at June 30, 2011. The decrease was primarily driven by the realized
gain and exit from two of our portfolio companies during the
quarter.
If exercised, these warrant holdings would require Hercules to
invest an approximate additional $74.6 million. Warrants may
appreciate or depreciate in value depending largely upon the
underlying portfolio company’s performance and overall market
conditions. Of the warrants which have monetized since inception,
Hercules has realized warrant and equity gain multiples in the
range of approximately 1.04x to 10.17x based on the historical rate
of return on our investments. However, our current warrant
positions may not appreciate in value and, in fact, may decline in
value, potentially rendering some of these warrants worthless.
During the quarter, two of Hercules' portfolio companies
completed IPOs including:
- WageWorks, Inc. (“WAGE”)
- Facebook. Inc. (“FB”)
As of June 30, 2012, Hercules had warrants or equity
positions in the following three companies which had filed Form S-1
Registration Statements with the SEC in contemplation of a
potential IPO:
- Glori Energy, Inc.
- iWatt, Inc.
- One company filed a Form S-1
Registration confidentially under the JOBS Act.
During the second quarter, BrightSource Energy,
Inc. withdrew its Registration Statement for its IPO.
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 second quarter of 2012 was
approximately $23.9 million compared to approximately $20.8 million
in the second quarter of 2011. This increase was due to a higher
average balance of interest earning investments outstanding during
the second quarter of 2012 and accelerated fees related to early
payoffs.
Interest expense and loan fees were approximately $5.2 million
during the second quarter of 2012 as compared to $3.8 million in
the second quarter of 2011. The increase is primarily attributed to
approximately $668,000 of interest and fee expenses related to the
$43.0 million of senior unsecured notes due 2019 issued during Q2
2012 (“2019 Notes”) and approximately $250,000 of interest expense
on a higher SBA debenture balance outstanding during the second
quarter of 2012 versus the second quarter of 2011.
The Company had a weighted average cost of debt comprised of
interest and fees of approximately 6.7% in the second quarter of
2012 versus 6.6% during the second quarter of 2011.
Total operating expenses excluding interest expense and loan
fees for the second quarter of 2012 was $6.3 million as compared to
$6.6 million for the second quarter of 2011. The decrease is
primarily due to non recurring executive severance costs incurred
in the second quarter of 2011.
Hercules recognized net realized gains of approximately $8.3
million on the portfolio in the second quarter. The Company
recorded $2.4 million and $0.8 million of realized gains from the
sale warrants in Annie's (NYSE: BNNY) and Bullhorn, Inc.,
respectively. The Company also recorded $5.3 million of realized
gains from the sale of warrants and equity in NEXX Systems, Inc.
These gains were partially offset by realized losses of $0.2
million due to the write off of warrants in three portfolio
companies.
Cumulative net realized losses on investments since October 2004
to date total approximately $39.0 million, on a pre-tax adjusted
GAAP basis. When compared to total commitments of approximately
$3.0 billion over the same period, the net realized loss represents
approximately 1.3% of total commitments, or an annualized loss rate
of approximately 17 basis points.
During the second quarter of 2012, the Company recorded
approximately $20.0 million of net unrealized depreciation from its
loans, warrant and equity investments. Additionally, Hercules
recorded approximately $500,000 of unrealized depreciation
attributed to reduced expectations of escrow proceeds previously
anticipated to be collected.
A break-down of the total net depreciation in the investment
portfolio by category is highlighted below:
(in millions) Q2-12 Unrealized
Appreciation/(Depreciation) Loans Equity Warrants Total
Collateral based impairments $ (0.6 ) $ (0.6 ) Reversals due
to Loan Payoffs & Warrant/Equity sales (0.3 ) (1.7 ) (5.2 )
(7.2 ) Fair Value Market/Yield Adjustments* Level 1 & 2
Assets (3.9 ) 0.4 (3.5 ) Level 3 Assets (8.3 ) 0.6
(1.0 ) (8.7 ) Total Fair Value Market/Yield
Adjustments (8.3 ) (3.3 ) (0.6 ) (12.2 )
Total Unrealized Appreciation/(Depreciation) $ (9.2 ) $ (5.0
) $ (5.8 ) $ (20.0 )
*Level 1 assets are generally equities
listed in active markets and level 2 assets are generally warrants
held in a public company. Observable market prices are typically
the primary input in valuing level 1 and 2 assets. Level 3 asset
valuations require inputs that are both significant and
unobservable. Generally, level 3 assets are debt investments,
warrants, and equities held in a private company.
Of the $20.0 million of unrealized depreciation of on our loan,
warrant and equity investments, $12.2 million was due to market or
yield adjustments in the fair value determination, $600,000 was
attributable to credit impairments of our debt portfolio and $7.2
million was related to the reversal of net unrealized appreciation
to realized gains on warrants and equity.
NII – Net Investment Income
NII for the second quarter of 2012 was approximately $12.3
million, compared to $10.4 million in the second quarter of 2011,
representing an increase of approximately 18.3%. The increase was
primarily attributed to higher interest and fees earned from debt
investments as previously highlighted. NII per share for the second
quarter of 2012 was $0.25, up 4.2%, based on 48.6 million basic
weighted shares outstanding, compared to $0.24 based on 43.0
million basic weighted shares outstanding in the second quarter
2011.
DNOI - Distributable Net Operating Income
DNOI for the second quarter was approximately $13.5 million or
$0.28 per share, as compared to $11.3 million or $0.26 per share in
the second 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 has declared a second quarter cash
dividend of $0.24 per share that will be payable
on August 24, 2012, to shareholders of record as
of August 17, 2012. This dividend would represent the
Company’s twenty-eighth consecutive dividend declaration since its
initial public offering, bringing the total cumulative dividend
declared to date to $7.40 per share.
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.
Share Repurchases
In July 2012, the Board of Directors approved extending
Hercules’ share repurchase program through February 2013. During
the second quarter of 2012 the Company did not repurchase shares of
its common stock.
Liquidity and Capital Resources
The Company ended the second quarter with
approximately $207.3 million in available liquidity, including
$56.1 million in cash, $24.3 million in SBA borrowing capacity and
$126.9 million in credit facility availability.
In April 2012, Hercules closed a public offering
of $43.0 million in aggregate principal amount of its
7.0% senior unsecured notes due 2019. Subsequent to quarter end,
the Company re-opened its 7.0% senior unsecured notes due 2019 and
issued approximately $41.5 million in additional notes bringing the
total amount of notes issued year to date to approximately $84.5
million. The notes will mature on April 30, 2019, and may be
redeemed in whole or in part at any time or from time to time at
the Company's option on or after April 30, 2015. The Notes trade on
the New York Stock Exchange (the "NYSE") under the trading symbol
"HTGZ".
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. As of June 30, 2012, $3.1 million was outstanding on this
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 June 30,
2012 under the Wells Fargo was LIBOR+3.50% with a
floor of 5.0%. Effective as of August 1, 2012 the credit facility
was amended to among other things, reduce the interest rate floor
by 75 basis points to 4.25% and to extend the maturity date by one
year to August 2015. Additionally, an amortization period of 12
months was added to pay down the principal balance as of the
maturity date.
Hercules has access to $55.0 million under the Union Bank
facility. Union Bank and RBC Capital Markets have made
commitments of $30.0 million and $25.0 million,
respectively. As of June 30, 2012, Hercules did not have any
outstanding borrowings under the Union Bank/RBC credit
facility. Pricing at June 30, 2012 under the Union
Bank credit facility is LIBOR+2.25% with a floor of 4.0%.
At June 30, 2012, Hercules had approximately $200.7
million in outstanding debentures under the SBIC program, as
part of its total potential maximum debentures of $225.0
million allowed under the SBIC program. In June 2012, Hercules
received approval from the SBA to borrow the $24.3 million in
debentures under its second SBIC license. There can be no
assurances what the pricing will be or whether we will draw on any
possible commitment.
As of June 30, 2012, the Company's asset coverage ratio,
under our regulatory requirements as a BDC was 654.3%, excluding
SBIC debentures as a result of exemptive relief from the SEC
which allows us to exclude all SBA leverage from our asset coverage
ratio, and 246.2% when including our SBIC debentures. Based on
Hercules' existing stockholders' equity coupled with the Company's
ability to exclude all if its SBA leverage from its 200% asset
coverage ratio requirement, the Company has the potential capacity
on its balance sheet to leverage up to in excess of $699.0
million. However, Hercules does not currently have access to credit
facilities to leverage the portfolio to the fullest capacity. There
are no assurances that we may be able to find additional lenders to
extend or provide additional credit facilities to fully utilize the
Company's available borrowing capacity or expand its existing
credit facilities.
At June 30, 2012, the Company's debt to equity leverage
ratio, excluding all SBA leverage was 24.6%. The same ratio
including our SBIC debentures is approximately 66.9% at the
end of the second quarter of 2012.
See subsequent events discussion for further details on recent
financing activities in Q3 2012.
Net Asset Value
At June 30, 2012, the Company’s net assets were approximately
$474.8 million, down 2.2% as compared to $485.4 million as of March
31, 2012.
As of June 30, 2012, net asset value per share was $9.54 on 49.7
million outstanding shares, compared to $9.76 on 49.7 million
shares as of March 31, 2012, respectively. This decrease in the
second quarter of 2012 is primarily attributable unrealized
depreciation on the investment portfolio.
Portfolio Asset Quality and Diversification
As of June 30, 2012, grading of the debt portfolio at fair
value, excluding warrants and equity investments, was as
follows:
Grade 1 $119.7 million or 18.5% of the total portfolio
Grade 2 $389.6 million or 60.2% of the total portfolio
Grade 3 $128.4 million or 19.9% of the total portfolio
Grade 4 $9.2 million or 1.4% of the total portfolio
Grade 5 $0.2 million or 0.0% of the total portfolio
At June 30, 2012, the weighted average loan grade of the
portfolio was 2.08 on a scale of 1 to 5, with 1 being the highest
quality, compared with 2.08 as of March 31, 2012. Hercules’ policy
is to generally adjust the grading down on its portfolio companies
as they approach the need for additional equity capital.
Hercules’ portfolio diversification as of June 30, 2012 was as
follows:
- 18.9% in drug discovery companies
- 12.2% in software companies
- 11.6% in clean technologies
- 9.7% in drug delivery companies
- 9.5% in internet consumer &
business services companies
- 6.6% in media/content/info
companies
- 5.7% in communications and networking
companies
- 5.3% in healthcare services, other
- 4.7% in information services
companies
- 2.7% in therapeutics companies
- 2.4% in diagnostic companies
- 1.9% in medical device and
equipment
- 1.8% in consumer and business products
companies
- 1.8% in specialty pharmaceutical
companies
- 1.7% in surgical devices companies
- 1.7% in biotechnology tools
companies
- 1.1% in semiconductor companies
- 0.7% in electronic & computer
hardware companies
Subsequent Events
1. As of August 2, 2012, Hercules has:
a. Closed commitments of approximately
$100,000 to new and existing portfolio companies, and funded
approximately $3.3 million since the close of the second
quarter.
b. Pending commitments (signed non-binding
term sheets) of approximately $129.5 million.
The table below summarizes our year-to-date closed and pending
commitments as follows:
Closed Commitments and Pending Commitments (in millions)
January 1- June 30, 2012 Closed Commitments $240.3 Q3-12
Closed Commitments (as of August 2, 2012) $0.1
Total 2012
Closed Commitments(a) $240.4 Pending Commitments
(as of August 2, 2012)(b) $129.5
Total
$369.9
Notes:
a. 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 July 2012, Hercules closed an additional issuance of its
7.0% senior unsecured notes due 2019 that the Company had
originally issued on April 17, 2012. Hercules issued
approximately $41.5 million in additional notes, bringing the total
amount of notes issued in the single series to approximately $84.5
million.
3. Effective August 1, 2012, Hercules amended its credit
facility with Wells Fargo, under which WFCF has
committed $75.0 million in initial credit capacity under
a $300.0 million accordion credit facility. The
amendment, among other things, reduces the interest rate floor by
75 basis points to 4.25% and extends the maturity date by one year
to August 2015. Additionally, an amortization period of 12 months
was added to pay down the principal balance as of the maturity
date.
4. On July 25, 2012, the Board of Directors approved the
extension of the stock repurchase plan as previously approved under
the same terms and conditions that allows the Company to repurchase
up to $35.0 million of its common stock. Unless renewed, the stock
repurchase plan will expire on February 26, 2013.
5. On July 31, 2012, Hercules received payment of $2.0 million
for its total debt investments in Maxvision Holding, L.L.C. As of
June 30, 2012 Hercules valued these debt investments, which had a
total cost basis of approximately $7.1 million, at a fair value of
approximately $169,000. These investments were accounted for on a
non-accrual basis. In the third quarter of 2012, Hercules will
record a realized loss of $5.1 million and a reversal of previously
recorded unrealized depreciation of $6.9 million for the Maxvision
debt investments.
Conference Call
Hercules has scheduled its 2012 second quarter financial results
conference call for August 2, 2012 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 98295783.
About Hercules Technology Growth Capital, Inc.:
Hercules Technology Growth Capital (NYSE: HTGC), is a leading
specialty finance firm providing customized loans to public and
private technology-related companies at all stages of development
including technology, biotechnology, life science, healthcare
services and clean-tech industries. Since inception, Hercules has
committed more than $2.9 billion to over 211 companies and is the
lender of choice for entrepreneurs, venture capital and private
equity firms seeking ideal, customized growth capital financing to
accelerate business growth and reach the next critical milestone.
Hercules common stock trades on the New York Stock Exchange
(“NYSE”) under the ticker symbol “HTGC”.
In addition, the Company's 7.00% Senior Notes due 2019 trade on
the NYSE under the symbol "HTGZ”.
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) June 30, 2012 December 31,
(unaudited) 2011 Assets
Investments: Non-control/Non-affiliate investments (cost of
$724,952 and $642,038, respectively) $ 715,447 $ 651,843 Affiliate
investments (cost of $8,065 and $3,236, respectively) 7,197 -
Control investments (cost of $10,696 and $11,266, respectively)
169 1,027 Total investments, at value
(cost of $743,713 and $656,540, respectively) 722,813 652,870 Cash
and cash equivalents 56,140 64,474 Interest receivable 7,111 5,820
Other assets 15,808 24,230 Total assets
$ 801,872 $ 747,394
Liabilities
Accounts payable and accrued liabilities $ 9,317 $ 10,813 Wells
Fargo Loan 3,130 10,187 2019 Notes 43,000 - Long-term Liabilities
(Convertible Debt) 70,894 70,353 Long-term SBA Debentures
200,750 225,000 Total liabilities 327,091
316,353
Net assets consist of: Common stock, par
value 50 44 Capital in excess of par value 534,165 484,244
Unrealized depreciation on investments (21,102 ) (3,431 )
Accumulated realized losses on investments (31,902 ) (43,042 )
Distributions in excess of investment income (6,430 ) (6,774 )
Total net assets 474,781 431,041
Total liabilities and net assets $ 801,872 $ 747,394
Shares of common stock outstanding ($0.001 par
value, 100,000,000 authorized) 49,743 43,853
Net asset value
per share $ 9.54 $ 9.83
HERCULES TECHNOLOGY GROWTH CAPITAL,
INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in
thousands, except per share data)
Three Months Ended June 30, Six Months Ended June 30,
2012 2011
2012 2011 Investment Income:
Interest income Non Control/Non Affliate investments $ 20,934 $
17,669 $ 40,989 $ 33,742 Affliate investments 205 3 450 3 Control
investments - 394 -
777 Total interest income 21,139
18,066 41,439 34,522 Fees Non
Control/Non Affliate investments 2,706 2,702 4,760 5,375 Control
investments 13 52 26
74 Total fees 2,719 2,754
4,786 5,449 Total investment income
23,858 20,820 46,225
39,971 Operating expenses: Interest 4,507 3,161 8,403
5,394 Loan fees 731 678 1,808 1,612 General and administrative
1,864 2,331 3,681 4,536 Employee Compensation: Compensation and
benefits 3,251 3,363 6,647 6,615 Stock-based compensation
1,195 927 2,002 1,649
Total employee compensation 4,446 4,290
8,649 8,264 Total operating
expenses 11,548 10,460 22,541
19,806 Net investment income 12,310 10,360
23,684 20,165 Net realized gains (loss) on investments Non
Control/Non Affliate investments 8,263 659
11,140 5,029 Total net realized
gain (loss) on investments 8,263 659
11,140 5,029 Net increase (decrease) in
unrealized appreciation (depreciation) on investments Non
Control/Non Affliate investments (21,295 ) 17,692 (19,761 ) 4,878
Affliate investments 1,083 (2,334 ) 2,377 (3,372 ) Control
investments (313 ) (2,060 ) (287 )
(3,560 ) Total net unrealized (depreciation) appreciation on
investments (20,525 ) 13,298 (17,671 )
(2,054 ) Total net realized and unrealized gain (loss)
(12,262 ) 13,957 (6,531 ) 2,975
Net increase (decrease) in net assets resulting from
operations $ 48 $ 24,317 $ 17,153
23,140
Net investment income before provision for
income taxes and investment gains and losses per common share:
Basic $ 0.25 $ 0.24 $ 0.48 $ 0.46 Net
increase in net assets resulting from operations per common share
Basic $ - $ 0.56 $ 0.35 $ 0.53 Diluted
$ - $ 0.56 $ 0.35 $ 0.53 Weighted
average shares outstanding Basic 48,616 42,971
47,817 42,843 Diluted
48,687 43,313 47,948
43,211
HERCULES TECHNOLOGY GROWTH
CAPITAL, INC.
NON GAAP FINANCIAL MEASURES
(in thousands, except per share
data)
Three Months Ended June 30, 2012
2011 Reconciliation of Adjusted NII to Net
Investment Income Net Investment Income $ 12,310 $ 10,360
Dividends paid on unvested restricted shares (1) (263 )
(191 ) Net investment income, net of dividends paid on
unvested restricted shares $ 12,046 $ 10,169
Net investment income before investment
gains and losses per common share: (2)
Basic $ 0.25 $ 0.24
Adjusted net investment income before
investment gains and losses per common share: (3)
Basic $ 0.25 $ 0.24 Weighted average shares
outstanding Basic 48,616 42,971
(1) Unvested restricted shares as of the dividend record date in
the second quarter of 2012 and 2011 was approximately 1,097,000 and
867,000 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 June 30, Reconciliation
of DNOI to Net investment income 2012
2011 Net investment income $ 12,310 $ 10,360 Stock-based
compensation 1,195 927 DNOI $ 13,504 $ 11,287
DNOI per share-weighted average common shares Basic $ 0.28 $ 0.26
Weighted average shares outstanding Basic 48,616
42,971
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.
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