- Q2 2014 net investment income, or
“NII,” of approximately $18.6 million, or $0.30 per
share, up 5.7% from Q2 2013
- Q2 2014 distributable net operating
income, or “DNOI,” of $21.0 million, or $0.34 per share, up 9.4%
from Q2 2013
- Q2 2014 total new loan commitments of
~$238.6 million
- Unfunded loan commitments of ~$229.3
million as of June 30, 2014
- Recorded net realized gains
of $2.5 million in Q2 2014
- One completed portfolio company
liquidity event during Q2 2014
- Strong liquidity position with
approximately $221.0 million available as of June 30, 2014
- Kroll Bond Rating Agency reaffirms
HTGC’s rating of BBB+ with a stable outlook
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:
- 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.
- 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.
- 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.
- 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:
(in millions) Loans
Equity Warrants Total Balances at Cost at
3/31/14 $ 815.0 40.8 $ 31.9 $ 887.7
Net activity during Q2 2014* 103.6 0.6
3.7 107.9
Balances at Cost at
6/30/14 $ 918.6 $ 41.4
$ 35.6 $ 995.6 Q/Q
change in cost 12.7 % 1.5 % 11.6 % 12.2
%
Loans Equity Warrants Total
Balances at Value at 3/31/14 $ 798.4 $ 68.7 $ 23.6
$ 890.7 Net activity during Q2 2014* 103.6 0.6 3.7
107.9 Net unrealized appreciation (4.0 ) 1.0
(4.3 ) (7.3 )
Balances at Value at 6/30/14
$ 898.0 $ 70.3 $
23.0 $ 991.3 Q/Q change in value
12.5 % 2.3 % -2.5 % 11.3 % *Net
activity includes fee and original issue discount (OID) collections
and amortization during the quarter
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:
- Box, Inc.
- Dance Biopharm, Inc.
- Good Technology
- Zosano Pharma, Inc.
- 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:
Three Months Ended June 30, 2014 (in
millions) Loans Equity Warrants Total Collateral based impairments
$ (3.3 ) $ (1.1 ) $ (2.3 ) $ (6.7 ) Reversals of Prior Period
Collateral based impairments - 0.6
- 0.6
Net Collateral based
impairments (3.3 ) (0.5 )
(2.3 ) (6.1 ) Reversals due
to Debt Payoffs & Warrant/Equity sales 0.1
(1.0 ) 0.1 (0.8 ) Fair
Value Market/Yield Adjustments Level 1 & 2 Assets - 1.4 (0.4 )
1.0 Level 3 Assets (0.8 ) 1.1 (1.7 )
(1.4 )
Total Fair Value Market/Yield Adjustments
(0.8 ) 2.5 (2.1 ) (0.4
) Total Unrealized
Appreciation/(Depreciation) $ (4.0 )
$ 1.0 $ (4.3 ) $
(7.3 )
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:
Record Date
August 18th, 2014 Payment Date August 25th, 2014
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 $225.1 million or 25.1%
of the total portfolio Grade 2 $482.5 million or 53.7% of the total
portfolio Grade 3 $130.3 million or 14.5% of the total portfolio
Grade 4 $52.6 million or 5.9% of the total portfolio Grade 5 $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.
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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