UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM 8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of
the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
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August 7, 2014
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Hercules Technology Growth
Capital, Inc.
(Exact
name of registrant as specified in its charter)
Maryland
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814-00702
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74-3113410
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(State or other jurisdiction
of incorporation)
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(Commission File No.)
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(I.R.S. Employer
Identification No.)
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400 Hamilton Ave., Suite 310
Palo Alto, CA
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94301
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant's telephone number, including area code: (650) 289-3060
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Not Applicable
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(Former name or address, if changed since last report)
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Check the
appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any
of the following provisions (see General Instruction A.2. below):
⃞
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
⃞
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
⃞
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
⃞
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition
On
August 7, 2014, Hercules Technology Growth Capital, Inc., issued a press
release announcing its earnings for the quarter ended June 30, 2014 and
that it had declared a dividend. The text of the press release is
included as an exhibit to this Form 8-K.
The information disclosed under this Item 2.02, including Exhibit 99.1
hereto, is being furnished and shall not be deemed “filed” for purposes
of Section 18 of the Securities Exchange Act of 1934 and shall not be
deemed incorporated by reference into any filing made under the
Securities Act of 1933, except as expressly set forth by specific
reference in such filing.
Item 9.01 Financial Statements
and Exhibits
(d) Exhibits
99.1 Press Release dated August 7, 2014
SIGNATURES
Pursuant to
the requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
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HERCULES TECHNOLOGY GROWTH CAPITAL, INC.
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August 7, 2014
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By:
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/s/ Jessica Baron
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Jessica Baron
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Chief Financial Officer
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EXHIBIT INDEX
Exhibit No.
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Description of Exhibits
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99.1
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Press Release dated August 7, 2014
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Exhibit 99.1
Hercules
Announces Second Quarter 2014 Financial Results and Quarterly Dividend
of $0.31 per Share
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Q2
2014 net investment income, or “NII,” of approximately $18.6 million,
or $0.30 per share, up 5.7% from Q2 2013
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Q2
2014 distributable net operating income, or “DNOI,” of $21.0 million,
or $0.34 per share, up 9.4% from Q2 2013
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Q2
2014 total new loan commitments of ~$238.6 million
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Unfunded
loan commitments of ~$229.3 million as of June 30, 2014
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Recorded
net realized gains of $2.5 million in Q2 2014
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One
completed portfolio company liquidity event during Q2 2014
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Strong
liquidity position with approximately $221.0 million available as of
June 30, 2014
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Kroll
Bond Rating Agency reaffirms HTGC’s rating of BBB+ with a stable
outlook
PALO ALTO, Calif.--(BUSINESS WIRE)--August 7, 2014--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 second quarter ended June 30, 2014.
The Company also announced that its Board of Directors has declared a
second quarter cash dividend of $0.31 per share, that will be payable on
August 25, 2014, to shareholders of record as of August 18, 2014.
“Hercules once again achieved outstanding performance this quarter,”
said Manuel A. Henriquez, co-founder, chairman, and chief executive
officer of Hercules Technology Growth Capital. “We continue our focus on
long-term earnings and dividend growth, as well as continued enhancement
to our balance sheet and liquidity to ensure our ability to grow our
investment portfolio and our company over the next several quarters.
With new loan origination commitments of ~$238.6 million during the
quarter and unfunded loan commitments of ~$229.3 million as of June 30,
2014, we believe we are well positioned for portfolio and earnings
growth as we enter the second half of the year, as a portion of these
commitments may eventually convert to interest earning investment assets
over the next few quarters.”
“During the quarter, we expanded our investment teams, hired additional
operations and credit professionals, and broadened our access to the
debt capital markets while also reducing our cost of financing to better
position ourself for continued growth. In addition, during the quarter,
we expanded and launched our new financing solutions to better serve the
needs of our companies, by offering asset based lending or “ABL”, and
equipment-based financing solutions, among others,” added Henriquez.
Second Quarter 2014 Highlights:
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Increased net investment income, or “NII”, during the quarter by 5.7%
to approximately $18.6 million, as compared to $17.6 million in the
second quarter of 2013. NII per share increased 3.4% to $0.30 on
approximately 61.1 million basic weighted average shares outstanding
for the second quarter of 2014, as compared to NII of $0.29 per share
for the second quarter of 2013 based on approximately 60.3 million
basic weighted average shares outstanding for the second quarter of
2013.
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Increased distributable net operating income, or “DNOI”, by 9.4% to
approximately $21.0 million compared to $19.2 million in the second
quarter of 2013. DNOI per share increased 6.3% to $0.34 per share for
the second quarter of 2014, as compared to DNOI of $0.32 per share.
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Received approximately $68.1 million in principal repayments,
including approximately $38.7 million of early principal repayments
and approximately $29.4 million in scheduled principal payments.
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Announced quarterly dividend of $0.31 per share, payable on August 25,
2014 to shareholders of record as of August 18, 2014; the thirty-sixth
consecutive dividend since inception bringing total dividends declared
since inception to $9.68 per share.
Second Quarter Review and Operating Results
Investment Portfolio
As of June 30, 2014, 100% of the Company’s debt investments portfolio
were in a senior secured first lien position, and approximately 98.1% of
the debt investment portfolio was priced at floating interest rates with
a Prime- or LIBOR-based interest rate floor, which we believe positions
us well to benefit when market rates may rise in the near future.
Hercules entered into commitments to provide debt financings of
approximately $238.6 million to new and existing portfolio companies
during the second quarter, and funded approximately $173.0 million of
debt and equity investments, to new and existing portfolio companies
during the second quarter.
Net investment portfolio growth during the second quarter was
approximately $107.9 million, on a cost basis, driven by our strong
originations and funding activities of new investments totaling
approximately $172.5 million in net new debt and equity investments and
approximately $4.0 million in net fee accretion during the second
quarter, offset by approximately $68.1 million of principal repayments
and approximately $0.5 million of fee acceleration and proceeds due to
the sale of investments. In addition, Hercules recorded approximately
$7.3 million of net unrealized depreciation from its loans, warrants and
equity investments during the second quarter.
The Company’s total investment portfolio valued at cost and fair value
by category, quarter-over-quarter, is highlighted below:
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(in millions)
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Loans
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Equity
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Warrants
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Total
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Balances at Cost at 3/31/14
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$
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815.0
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40.8
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$
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31.9
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$
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887.7
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Net activity during Q2 2014*
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103.6
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0.6
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3.7
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107.9
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Balances at Cost at 6/30/14
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$
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918.6
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$
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41.4
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$
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35.6
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$
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995.6
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Q/Q change in cost
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12.7
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%
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1.5
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%
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11.6
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%
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12.2
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%
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Loans
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Equity
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Warrants
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Total
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Balances at Value at 3/31/14
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$
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798.4
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$
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68.7
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$
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23.6
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$
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890.7
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Net activity during Q2 2014*
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103.6
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0.6
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3.7
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107.9
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Net unrealized appreciation
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(4.0
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1.0
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(4.3
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(7.3
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Balances at Value at 6/30/14
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$
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898.0
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$
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70.3
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$
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23.0
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$
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991.3
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Q/Q change in value
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12.5
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%
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2.3
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%
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-2.5
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%
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11.3
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%
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*Net activity includes fee and original issue discount (OID)
collections and amortization during the quarter
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Unfunded Commitments
As of June 30, 2014, Hercules had unfunded debt commitments of
approximately $229.3 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 $134.0 million of these unfunded commitments are
contingent upon the portfolio company reaching certain milestones before
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 second quarter of 2014 with approximately $169.0
million in signed non-binding term sheets with nine (9) new and existing
companies, positioning Hercules for a solid start for Q3 2014. Signed
non-binding term sheets are subject to completion of Hercules’ due
diligence and final investment committee approval process as well as
negotiations of definitive documentation with the prospective portfolio
companies. These non-binding term sheets generally convert to
contractual commitments in approximately 90 days from signing. It is
important to note that not all signed non-binding term sheets are
expected to close and do not necessarily represent future cash
requirements or investments.
Portfolio Effective Yield
The effective yield on the Company’s debt investments portfolio during
the second quarter was 16.9%, down approximately 1.0% from the effective
yield in the first quarter of 2014 of 17.9%. The decrease is primarily
due to the effect of fee accelerations that occurred from a higher
volume of loan early payoffs and loan restructures in the first quarter
of 2014, as compared the second quarter of 2014. 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 increased its warrant positions to 117 portfolio companies, up
from 107 as of March 31, 2014, with a fair value of approximately $23.0
million and a cost basis of $35.6 million.
Hercules held equity positions in 38 portfolio companies with a fair
value of approximately $70.3 million and a cost basis of $41.4 million
as of June 30, 2014, with the majority of the increase in fair value
representing our recent exercise of our warrants into equity in Box, Inc.
As of June 30, 2014, Hercules had held warrant and equity positions in
five (5) portfolio companies that had filed registration statements in
anticipation of a potential IPO:
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Box, Inc.
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Dance Biopharm, Inc.
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Good Technology
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Zosano Pharma, Inc.
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One company filed a Form S-1 Registration Statement confidentially
under the JOBS Act
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 2014 was approximately
$34.0 million, a decrease of 1.4%, compared to approximately $34.5
million in the second quarter of 2013. The decrease in total investment
income is attributed to the lower weighted average loans outstanding and
is partially offset by increased loan fee acceleration due to loan early
payoffs and loan restructures in the second quarter of 2014 versus the
second quarter of 2013.
Interest expense and loan fees were approximately $7.6 million during
the second quarter of 2014 as compared to $8.8 million in the second
quarter of 2013. The decrease is primarily attributed to $34.8 million
of payoffs of SBA debentures and $63.7 million of amortization of the
Asset-Backed Notes since June 30, 2013.
The Company had a weighted average cost of debt comprised of interest
and fees of approximately 6.3% in the second quarter of 2014 versus 6.0%
during the second quarter of 2013 primarily attributed to the
acceleration of fee amortization triggered by $17.2 million of
amortization of the Asset-Backed Notes which occurred during the second
quarter of 2014.
Total operating expenses, excluding interest expense and loan fees, for
the second quarter of 2014 was $7.8 million as compared to $8.2 million
for the second quarter of 2013.
Realized Gains/(Losses)
Hercules recognized net realized gains of $2.5 million primarily from
the sale of equity investments in five portfolio companies.
Unrealized Gains/(Losses)
During the second quarter of 2014, the Company recorded approximately
$7.3 million of net unrealized depreciation from its loans, warrant and
equity investments. Of the $7.3 million of unrealized depreciation, $6.1
million of depreciation was primarily attributable to net collateral
based impairments on debt, equity and warrant investments in seven
portfolio companies, $0.4 million of depreciation was due to market or
yield adjustments in fair value determinations, and approximately $0.8
million of depreciation was related to reversals of prior appreciation
due to loan payoffs and sales of warrant and equity investments.
A break-down of the net unrealized appreciation/(depreciation) in the
investment portfolio is highlighted below:
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Three Months Ended June 30, 2014
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(in millions)
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Loans
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Equity
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Warrants
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Total
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Collateral based impairments
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$
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(3.3
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$
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(1.1
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$
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(2.3
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$
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(6.7
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Reversals of Prior Period Collateral based impairments
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-
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0.6
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-
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0.6
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Net Collateral based impairments
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(3.3
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(0.5
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(2.3
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(6.1
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Reversals due to Debt Payoffs & Warrant/Equity sales
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0.1
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(1.0
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0.1
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(0.8
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Fair Value Market/Yield Adjustments
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Level 1 & 2 Assets
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-
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1.4
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(0.4
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1.0
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Level 3 Assets
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(0.8
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1.1
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(1.7
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(1.4
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Total Fair Value Market/Yield Adjustments
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(0.8
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2.5
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(2.1
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(0.4
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Total Unrealized Appreciation/(Depreciation)
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$
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(4.0
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$
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1.0
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$
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(4.3
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$
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(7.3
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Continued Credit Discipline and Performance
Cumulative net realized losses on investments, since first origination
commencing on October 2004, through June 30, 2014 totaled approximately
$24.8 million, on a GAAP basis. When compared to total commitments of
approximately $4.4 billion over the same period, the net realized loss
since inception represents approximately 56 basis points “bps” or 0.56%
of total commitments or an annualized loss rate of approximately 6 bps.
NII – Net Investment Income
NII for the second quarter of 2014 was approximately $18.6 million,
compared to $17.6 million in the second quarter of 2013, representing an
increase of approximately 5.7%. NII per share increased 3.4% for the
second quarter of 2014 to $0.30 based on 61.1 million basic weighted
average shares outstanding, compared to $0.29 based on 60.3 million
basic weighted average shares outstanding in the second quarter 2013,
despite an approximately 1.0% increase in the basic weighted average
shares outstanding.
DNOI - Distributable Net Operating Income
DNOI for the second quarter was approximately $21.0 million or $0.34 per
share, as compared to $19.2 million or $0.32 per share in the second
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 second quarter cash dividend
of $0.31 per share that will be payable on August 25, 2014 to
shareholders of record as of August 18, 2014. This dividend would
represent the Company’s thirty-sixth consecutive dividend declaration
since its initial public offering, bringing the total cumulative
dividend declared to date to $9.68 per share. The following shows the
key dates of our second quarter 2014 dividend payment:
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Record Date
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August 18th, 2014
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Payment Date
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August 25th, 2014
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Hercules' Board of Directors maintains a variable dividend policy with
the objective of distributing four quarterly distributions in an amount
that approximates 90% to 100% of our taxable quarterly income or
potential annual income for a particular year.
In addition, at the end of the year, our Board of Directors may chose to
pay an additional special dividend, or fifth dividend, so that we may
distribute approximately all of our annual taxable income in the year it
was earned, or electing to maintain the option to spill over our excess
taxable income into the coming year for future dividend payments.
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 June 30, 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 second quarter with approximately $221.0 million
in available liquidity, including $116.0 million in cash and $105.0
million in credit facility availability. As of June 30, 2014, 100% of
the Company’s debt outstanding was in fixed rate debt instruments,
positioning Hercules well for any increase in short term rates, should
they occur.
In June 2014, Hercules utilized the “At-The-Market” (“ATM”) equity
distribution agreement that was initiated in August 2013 with JMP
Securities LLC. During the quarter, Hercules sold 650,000 shares of
common stock for total accumulated net proceeds of approximately $9.5
million, all accretive to net asset value. As of June 30, 2014,
approximately 7.35 million shares remained available for issuance and
sale under the equity distribution agreement.
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 June 30, 2014 under the Wells Fargo credit facility was
LIBOR+3.50% with a floor of 4.25%. As of June 30, 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 June 30, 2014 under the Union Bank credit
facility is LIBOR+2.25% with a floor of 4.0%. As of June 30, 2014,
Hercules did not have any outstanding borrowings under the Union Bank
credit facility. The Union Bank Facility will expire as of August 15,
2014. The Company continues to explore potential financing arrangements
with Union Bank that may be implemented following the expiration of the
Union Bank Facility.
As of June 30, 2014, Hercules had approximately $73.1 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 $1.9 million in unaccreted discount
initially recorded upon issuance of the Convertible Senior Notes. These
Notes became convertible on July 1, 2014 and continue to be convertible
through September 30, 2014. Upon conversion of the Convertible Notes,
the Company has the choice to pay or deliver, as the case may be, at our
election, cash, shares of our common stock or a combination of cash and
shares of the Company’s common stock. The current conversion price of
the Convertible Senior Notes is approximately $11.49 per share of common
stock, in each case subject to adjustment in certain circumstances.
As of June 30, 2014, Hercules had approximately $46.5 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. $17.2 million of the Asset-Backed Notes were repaid
during the second quarter of 2014.
As of June 30, 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 June 30, 2014, Hercules had approximately $190.2 million in
outstanding debentures under the SBIC program.
Hercules’ debt to equity ratio at June 30, 2014 was approximately 72.9%.
However, if the outstanding cash at June 30, 2014 of approximately
$116.0 million was deducted from total debt of approximately $480.2
million and divided by total equity of approximately $658.9 million,
then the net leverage ratio would be approximately 55.3%. 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 $368.9 million, bringing the maximum potential leverage to
$849.1 million, or approximately 128.9%, as of June 30, 2014, if it had
access to such additional leverage.
As of June 30, 2014, the Company’s asset coverage ratio under our
regulatory requirements as a business development company was 327.1%,
excluding the SBIC debentures as a result of our exemptive order from
the SEC.
Net Asset Value
As of June 30, 2014, the Company’s net assets were approximately $658.9
million, an increase of 6.0% as compared to $621.8 million as of June
30, 2013. Net assets were $653.3 as of March 31, 2014.
As of June 30, 2014, net asset value per share was $10.42 on 63.3
million outstanding shares representing an increase of 3.3%, compared to
$10.09 on 61.6 million outstanding shares as of June 30, 2013. Net asset
value per share was $10.58 on 61.8 million outstanding shares as of
March 31, 2014.
Portfolio Asset Quality
As of June 30, 2014, grading of the loans portfolio at fair value,
excluding warrants and equity investments, was as follows:
Grade 1
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$225.1 million or 25.1% of the total portfolio
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Grade 2
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$482.5 million or 53.7% of the total portfolio
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Grade 3
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$130.3 million or 14.5% of the total portfolio
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Grade 4
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$52.6 million or 5.9% of the total portfolio
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Grade 5
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|
|
$7.5 million or 0.8% of the total portfolio
|
At June 30, 2014, the weighted average loan grade of the portfolio at
cost was 2.10 on a scale of 1 to 5, with 1 being the highest quality,
compared with 2.05 as of March 31, 2014 and 2.11 as of June 30, 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 August 4, 2014, Hercules has:
a. Closed commitments of approximately $47.7 million to new and existing
portfolio companies, and funded approximately $14.2 million since the
close of the second quarter.
b. Pending commitments (signed non-binding term sheets) of approximately
$134.6 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, 2014 Closed Commitments(a)
|
|
|
$394.2
|
Q3-14 Closed Commitments (as of August 4, 2014)
|
|
|
$47.7
|
Pending Commitments (as of August 4, 2014)(b)
|
|
|
$134.6
|
Year-to-date 2014 Closed and Pending Commitments
|
|
|
$576.5
|
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 July 2014, Hercules portfolio company Transcept
Pharmaceuticals, Inc. (Nasdaq: TSPT) and Hercules portfolio company Paratek
Pharmaceuticals, Inc. entered into a definitive merger agreement
under which the stockholders of Paratek will become the majority owners
of Transcept and the operations of Transcept and Paratek will be
combined.
3. In July 2014, approximately $33.9 million of the Convertible Senior
Notes converted, and in August 2014, these Notes were settled
with a combination of cash equal to the outstanding principal amount of
the converted notes and approximately 921,000 shares of the Company’s
common stock. An additional approximately $8,000 of the Convertible
Senior Notes converted in August 2014, and will be settled in August
2014.
4. In July 2014, Hercules closed its underwritten public offering of
$100 million in aggregate principal amount of its 6.25% senior notes due
2024 (the “2024 Notes”). The Company has listed the Notes on the New
York Stock Exchange under the trading symbol “HTGX.” In August 2014, the
underwriters issued notification to exercise their over-allotment option
for an additional $3.0 million in aggregate principal amount of the 2024
Notes.
5. In August 2014, one Hercules portfolio company was acquired. This
liquidity event represents a net gain of approximately $1.6 million, an
internal rate of return of approximately 18.5% (excluding proceeds in
escrow), and a gross multiple of approximately 3.0x on Hercules total
investment in this portfolio company.
Conference Call
Hercules has scheduled its second quarter 2014 financial results
conference call for August 7, 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 75516831.
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 $4.4 billion
to over 290 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 three outstanding bond issuances of 7.00%
Senior Notes due April 2019, 7.00% Senior Notes due September 2019, and
6.25% Senior Notes due July 2024, which trade on the NYSE under the
symbols “HTGZ”, “HTGY,” and “HTGX,” respectively.
Companies interested in learning more about financing opportunities
should contact info@htgc.com, or call 650.289.3060.
Forward-Looking Statements:
The information disclosed in this release is made as of the date hereof
and reflects Hercules most current assessment of its historical
financial performance. Actual financial results filed with the
Securities and Exchange Commission may differ from those contained
herein due to timing delays between the date of this release and
confirmation of final audit results. These forward-looking statements
are not guarantees of future performance and are subject to
uncertainties and other factors that could cause actual results to
differ materially from those expressed in the forward-looking statements
including, without limitation, the risks, uncertainties, including the
uncertainties surrounding the current market volatility, and other
factors we identify from time to time in our filings with the Securities
and Exchange Commission. Although we believe that the assumptions on
which these forward-looking statements are based are reasonable, any of
those assumptions could prove to be inaccurate and, as a result, the
forward-looking statements based on those assumptions also could be
incorrect. You should not place undue reliance on these forward-looking
statements. The forward-looking statements contained in this release are
made as of the date hereof, and Hercules assumes no obligation to update
the forward-looking statements for subsequent events.
|
HERCULES TECHNOLOGY GROWTH CAPITAL, INC.
|
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES
|
(dollars in thousands, except per share data)
|
|
|
|
|
|
|
|
June 30, 2014
|
|
December 31, 2013
|
Assets
|
|
|
|
|
Investments:
|
|
|
|
|
Non-control/Non-affiliate investments (cost of $980,524 and
$891,059, respectively)
|
|
$
|
983,952
|
|
|
$
|
899,314
|
|
Affiliate investments (cost of $15,054 and $15,238, respectively)
|
|
|
7,393
|
|
|
|
10,981
|
|
Total investments, at value (cost of $995,577 and $906,297,
respectively)
|
|
|
991,345
|
|
|
|
910,295
|
|
Cash and cash equivalents
|
|
|
116,008
|
|
|
|
268,368
|
|
Restricted cash
|
|
|
3,491
|
|
|
|
6,271
|
|
Interest receivable
|
|
|
8,700
|
|
|
|
8,962
|
|
Other assets
|
|
|
29,929
|
|
|
|
27,819
|
|
Total assets
|
|
$
|
1,149,473
|
|
|
$
|
1,221,715
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
10,393
|
|
|
$
|
14,268
|
|
Long-term Liabilities (Convertible Senior Notes)
|
|
|
73,060
|
|
|
|
72,519
|
|
Asset-Backed Notes
|
|
|
46,547
|
|
|
|
89,557
|
|
2019 Notes
|
|
|
170,364
|
|
|
|
170,364
|
|
Long-term SBA Debentures
|
|
|
190,200
|
|
|
|
225,000
|
|
Total liabilities
|
|
$
|
490,564
|
|
|
$
|
571,708
|
|
|
|
|
|
|
|
|
|
|
|
Net assets consist of:
|
|
|
|
|
Common stock, par value
|
|
|
64
|
|
|
|
62
|
|
Capital in excess of par value
|
|
|
668,673
|
|
|
|
656,594
|
|
Unrealized appreciation (depreciation) on investments
|
|
|
(5,224
|
)
|
|
|
3,598
|
|
Accumulated realized losses on investments
|
|
|
(7,897
|
)
|
|
|
(15,240
|
)
|
Unrealized net investment income
|
|
|
3,293
|
|
|
|
4,993
|
|
Total net assets
|
|
$
|
658,909
|
|
|
$
|
650,007
|
|
Total liabilities and net assets
|
|
$
|
1,149,473
|
|
|
$
|
1,221,715
|
|
|
|
|
|
|
Shares of common stock outstanding ($0.001 par value, 100,000,000
authorized)
|
|
|
63,251
|
|
|
|
61,837
|
|
Net asset value per share
|
|
$
|
10.42
|
|
|
$
|
10.51
|
|
|
|
|
|
|
|
|
|
|
|
HERCULES TECHNOLOGY GROWTH CAPITAL, INC.
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(unaudited)
|
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Investment income:
|
|
|
|
|
|
|
|
|
Interest Income
|
|
|
|
|
|
|
|
|
Non-Control/Non-Affiliate investments
|
|
$
|
30,384
|
|
|
$
|
29,780
|
|
|
$
|
59,766
|
|
|
$
|
58,099
|
|
Affiliate investments
|
|
|
152
|
|
|
|
514
|
|
|
|
1,616
|
|
|
|
1,124
|
|
Total interest income
|
|
|
30,536
|
|
|
|
30,294
|
|
|
|
61,382
|
|
|
|
59,223
|
|
Fees
|
|
|
|
|
|
|
|
|
Non-Control/Non-Affiliate investments
|
|
|
3,454
|
|
|
|
4,227
|
|
|
|
8,366
|
|
|
|
6,255
|
|
Affiliate investments
|
|
|
11
|
|
|
|
4
|
|
|
|
23
|
|
|
|
4
|
|
Total fees
|
|
|
3,465
|
|
|
|
4,231
|
|
|
|
8,389
|
|
|
|
6,259
|
|
Total investment income
|
|
|
34,001
|
|
|
|
34,525
|
|
|
|
69,771
|
|
|
|
65,482
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Interest
|
|
|
6,534
|
|
|
|
7,570
|
|
|
|
13,682
|
|
|
|
15,202
|
|
Loan fees
|
|
|
1,091
|
|
|
|
1,191
|
|
|
|
3,167
|
|
|
|
2,269
|
|
General and administrative
|
|
|
2,126
|
|
|
|
2,403
|
|
|
|
4,587
|
|
|
|
4,655
|
|
Employee Compensation:
|
|
|
|
|
|
|
|
|
Compensation and benefits
|
|
|
3,233
|
|
|
|
4,164
|
|
|
|
7,454
|
|
|
|
7,962
|
|
Stock-based compensation
|
|
|
2,466
|
|
|
|
1,587
|
|
|
|
4,026
|
|
|
|
2,753
|
|
Total employee compensation
|
|
|
5,699
|
|
|
|
5,751
|
|
|
|
11,480
|
|
|
|
10,715
|
|
Total operating expenses
|
|
|
15,450
|
|
|
|
16,915
|
|
|
|
32,916
|
|
|
|
32,841
|
|
Net investment income
|
|
|
18,551
|
|
|
|
17,610
|
|
|
|
36,855
|
|
|
|
32,641
|
|
|
|
|
|
|
|
|
|
|
Net realized gain on investments
|
|
|
|
|
|
|
|
|
Non-Control/Non-Affiliate investments
|
|
|
2,470
|
|
|
|
2,192
|
|
|
|
7,343
|
|
|
|
4,184
|
|
Total net realized gain on investments
|
|
|
2,470
|
|
|
|
2,192
|
|
|
|
7,343
|
|
|
|
4,184
|
|
|
|
|
|
|
|
|
|
|
Net increase in unrealized appreciation (depreciation) on investments
|
|
|
|
|
|
|
|
|
Non-Control/Non-Affiliate investments
|
|
|
(4,378
|
)
|
|
|
1,987
|
|
|
|
(5,418
|
)
|
|
|
2,087
|
|
Affiliate investments
|
|
|
(3,452
|
)
|
|
|
(910
|
)
|
|
|
(3,404
|
)
|
|
|
(1,344
|
)
|
Total net unrealized appreciation (depreciation) on investments
|
|
|
(7,830
|
)
|
|
|
1,077
|
|
|
|
(8,822
|
)
|
|
|
743
|
|
Total net realized and unrealized gain (loss)
|
|
|
(5,360
|
)
|
|
|
3,269
|
|
|
|
(1,479
|
)
|
|
|
4,927
|
|
Net increase in net assets resulting from operations
|
|
|
13,191
|
|
|
|
20,879
|
|
|
|
35,376
|
|
|
|
37,568
|
|
|
|
|
|
|
|
|
|
|
Net investment income before investment gains and losses per
common share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.30
|
|
|
$
|
0.29
|
|
|
$
|
0.59
|
|
|
$
|
0.56
|
|
|
|
|
|
|
|
|
|
|
Change in net assets per common share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.21
|
|
|
$
|
0.34
|
|
|
$
|
0.57
|
|
|
$
|
0.65
|
|
Diluted
|
|
$
|
0.20
|
|
|
$
|
0.34
|
|
|
$
|
0.55
|
|
|
$
|
0.64
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
|
|
|
|
|
|
Basic
|
|
|
61,089
|
|
|
|
60,339
|
|
|
|
60,980
|
|
|
|
57,029
|
|
Diluted
|
|
|
62,588
|
|
|
|
61,145
|
|
|
|
62,642
|
|
|
|
57,802
|
|
Dividends declared per common share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.31
|
|
|
$
|
0.28
|
|
|
$
|
0.62
|
|
|
$
|
0.55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HERCULES TECHNOLOGY GROWTH CAPITAL, INC.
NON GAAP FINANCIAL MEASURES
(in thousands, except per share data)
|
|
|
Three Months Ended June 30,
|
|
|
2014
|
|
2013
|
Reconciliation of Net Investment Income to Adjusted NII
|
|
|
|
|
Net Investment Income
|
|
|
18,551
|
|
|
|
17,610
|
|
Dividends paid on unvested restricted shares (1)
|
|
|
(488
|
)
|
|
|
(340
|
)
|
Net investment income, net of dividends paid on unvested restricted
shares
|
|
$
|
18,063
|
|
|
$
|
17,270
|
|
|
|
|
|
|
Adjusted net investment income before investment gains and losses
per common share: (2)
|
|
|
|
|
Basic
|
|
$
|
0.30
|
|
|
$
|
0.29
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
|
|
Basic
|
|
|
61,089
|
|
|
|
60,339
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
2014
|
|
2013
|
Reconciliation of Change in Net Assets to Adjusted Change in Net
Assets
|
|
|
|
|
Net increase in net assets resulting from operations
|
|
$
|
13,191
|
|
|
$
|
20,879
|
|
Dividends paid on unvested restricted shares (1)
|
|
|
(488
|
)
|
|
|
(340
|
)
|
Net increase in net assets resulting from operations, net of
dividends paid on unvested restricted shares
|
|
$
|
12,703
|
|
|
$
|
20,539
|
|
|
|
|
|
|
Adjusted Change in net assets per common share (3)
|
|
|
|
|
Basic
|
|
$
|
0.21
|
|
|
$
|
0.34
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
|
|
Basic
|
|
|
61,089
|
|
|
|
60,339
|
|
|
|
|
|
|
(1) Unvested restricted shares as of the dividend record date in the
second quarter of 2014 and 2013 was approximately 1.6 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 June 30,
|
Reconciliation of Net investment income to DNOI
|
|
2014
|
|
2013
|
Net investment income
|
|
$
|
18,551
|
|
$
|
17,610
|
Stock-based compensation
|
|
|
2,466
|
|
|
1,587
|
DNOI
|
|
$
|
21,017
|
|
$
|
19,197
|
|
|
|
|
|
DNOI per share-weighted average common shares
|
|
|
|
|
Basic
|
|
$
|
0.34
|
|
$
|
0.32
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
|
|
Basic
|
|
|
61,089
|
|
|
60,339
|
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)
|
|
|
|
|
|
June 30, 2014
|
Total Debt
|
|
$
|
480,172
|
|
Cash and cash equivalents
|
|
|
(116,008
|
)
|
Numerator: net debt (total debt less cash and cash equivalents)
|
|
$
|
364,164
|
|
|
|
|
Denominator: Total net assets
|
|
$
|
658,909
|
|
Net Leverage Ratio
|
|
|
55.3
|
%
|
Net leverage ratio is calculated by deducting the outstanding cash at
June 30, 2014 of approximately $116.0 million from total debt of
approximately $480.2 million divided by our total equity of
approximately $658.9 million, resulting in a net leverage ratio of
55.3%. 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.
CONTACT:
Hercules Technology Growth Capital, Inc.
Main,
650-289-3060 HT-HN
info@htgc.com
Or
Market Street
Partners
Ed Keaney, 415-445-3238
ekeaney@marketstreetpartners.com
Hercules Capital (NYSE:HTGC)
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