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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November 6, 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 November 6, 2014, Hercules Technology Growth Capital, Inc., issued a
press release announcing its earnings for the quarter ended September
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
99.1
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Press Release dated November 6, 2014
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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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November 6, 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 November 6, 2014
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Exhibit 99.1
Hercules
Announces Third Quarter 2014 Financial Results and Quarterly Dividend of
$0.31 per Share
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Q3
2014 Net Investment Income, or “NII”, of $19.0 million, or $0.30 per
share
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Q3
2014 Adjusted Net Investment Income, or “Adjusted NII”, of $20.0
million, or $0.32 per share, which excludes approximately $1.0 million
of convertible debt extinguishment expense
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Q3
2014 Distributable Net Operating Income, or “DNOI”, of $21.8 million,
or $0.35 per share
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Recorded
net realized gains of ~$5.7 million in Q3 2014 and ~$13.0 million YTD,
or ~$0.20 per share
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Q3
2014 total new debt and equity commitments of ~$193.5 million
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Q3
2014 portfolio effective yield of 16.7%
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Increased
credit facility with Union Bank to $75.0 million
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Strong
liquidity position with approximately $309.0 million available
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Hercules
Received Investment Grade Corporate Rating of BBB- from Standard &
Poor's
PALO ALTO, Calif.--(BUSINESS WIRE)--November 6, 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 third quarter
ended September 30, 2014.
The Company also announced that its Board of Directors has declared a
third quarter cash dividend of $0.31 per share, that will be payable on
November 24, 2014, to shareholders of record as of November 17, 2014.
“Hercules, once again, delivered another outstanding quarterly
performance for our shareholders while also expanding its franchise and
reach to service the needs of companies backed by the top venture
capital firms in the technology, life sciences and energy technology
high growth industries, by achieving nearly $200 million in new
origination commitments in Q3 2014, and putting Hercules on pace to
exceed over $800 million in new commitments for 2014,” said Manuel A.
Henriquez, chairman, president, and CEO of Hercules Technology Growth
Capital. “Hercules’ well-established brand, track record, and
disciplined approach within the venture capital and entrepreneurial
community continues to yield meaningful results as our existing pipeline
of potential new investment opportunities grows, and currently exceeds
$1.0 billion.”
“I am extremely pleased to report another strong quarterly performance
and financial results for Hercules and notwithstanding our ongoing
purposeful focus and desire to exit marginally lower performing loans to
ensure our historically strong overall credit performance is maintained,
while also increasing our overall investment portfolio,” he continued.
“Although we had been expecting continued yield compressions of at least
30-50 bps, we finished the quarter with an all in yield of approximately
of 16.7%, demonstrating the benefits of our focused originations
efforts. In addition, through the first nine months of the year,
Hercules has achieved net realized capital gains of approximately $13.0
million, representing approximately $0.20 per share. We anticipate
potentially generating additional gains in Q4 2014, subject to market
conditions. We finished the quarter with over $240 million in unfunded
commitments, as we continue to extend our leadership position in the
venture debt market.”
“We have also been working very diligently to further enhance and
strengthen our liquidity position,” said Henriquez. “With more than $300
million available at quarter end, we are well positioned to continue to
invest and grow our investment portfolio and eventual dividend. Finally,
in Q3 2014, we received an investment grade rating from Standard &
Poor’s of BBB-, as a further reflection of our ten years of focus on
credit discipline. We believe this achievement will allow us to continue
to access the debt capital markets and lower our overall cost of
capital. We believe our disciplined lending and investment approach
should allow us continue to deliver strong returns to our investors.”
Third Quarter 2014 Highlights
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Increased debt and equity commitments during the quarter by 89.7% to
$193.5 million, as compared to $102.0 million in the third quarter of
2013.
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Net investment income was approximately $19.0 million, including
approximately $1.0 million of convertible debt extinguishment expense
during the quarter, as compared to $21.6 million in the third quarter
of 2013. NII per share was $0.30 on approximately 62.4 million basic
weighted average shares outstanding for the third quarter of 2014, as
compared to NII of $0.35 per share for the third quarter of 2013,
based on approximately 60.5 million basic weighted average shares
outstanding for the third quarter of 2013.
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Received approximately $116.0 million in principal repayments
including approximately $84.0 million of unscheduled principal
repayments and approximately $32.0 million in scheduled principal
payments.
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Announced quarterly dividend of $0.31 per share, payable on November
24, 2014 to shareholders of record as of November 17, 2014; the
thirty-seventh consecutive dividend since inception bringing total
dividends declared since inception to $9.99 per share.
Third Quarter Review and Operating Results
Investment Portfolio
As of September 30, 2014, 100% of the Company’s debt investments were in
a first lien senior secured 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 will
effectively position us to benefit from market rate increases in the
near future.
Hercules entered into commitments to provide debt and equity financings
of approximately $193.5 million to new and existing portfolio companies
during the third quarter, and funded approximately $129.0 million of
debt and equity investments to new and existing portfolio companies
during the third quarter.
Net investment portfolio growth during the third quarter was
approximately $16.7 million, on a cost basis, driven by our strong
originations and funding activities. The Company’s total investment
portfolio, valued at cost and fair value by category,
quarter-over-quarter, is highlighted below:
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(in millions)
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Loans
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Equity
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Warrants
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Total
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Balances at Cost at 6/30/14
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$
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918.6
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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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Net activity during Q3 2014*
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11.0
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2.5
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3.2
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16.7
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Balances at Cost at 9/30/14
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$
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929.6
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$
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43.9
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$
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38.8
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$
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1,012.3
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Q/Q change in cost
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1.2
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%
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6.0
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%
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9.0
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%
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1.7
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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 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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Net activity during Q3 2014*
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11.0
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2.5
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3.2
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16.7
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Net unrealized depreciation
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(1.1
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(4.2
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(3.8
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(9.1
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Balances at Value at 9/30/14
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$
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907.9
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$
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68.6
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$
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22.4
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$
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998.9
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Q/Q change in value
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1.1
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%
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-2.4
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%
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-2.6
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%
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0.8
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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 September 30, 2014, Hercules had unfunded debt commitments of
approximately $242.5 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 $138.5 million of these unfunded commitments are
contingent upon the portfolio company reaching certain milestones prior
to Hercules debt commitment becoming 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 third quarter of 2014 with approximately $223.0
million in signed non-binding term sheets, positioning Hercules for a
solid start for Q4 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 third quarter was 16.7%, down approximately 20 bps from the
effective yield in the second quarter of 2014 of 16.9%. 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
Hercules increased its warrant positions to 125 portfolio companies as
of September 30, 2014, up from 117 as of June 30, 2014, with a fair
value of approximately $22.4 million and a cost basis of $38.8 million.
Hercules held equity positions in 40 portfolio companies with a fair
value of approximately $68.6 million and a cost basis of $43.9 million
as of September 30, 2014.
As of September 30, 2014, Hercules held warrant and equity positions in
six (6) portfolio companies that had filed Form S-1 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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Two companies filed a Form S-1 Registration Statement confidentially
under the JOBS Act.
In October 2014, Dance Biopharm, Inc. withdrew their Form S-1
Registration Statement.
In October 2014, Hercules’ portfolio company, Neothetics, Inc., filed a
Form S-1 Registration Statement.
In November 2014, Hercules’ portfolio company, Inotek Pharmaceuticals
Corporation, filed a Form S-1 Registration Statement.
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 third quarter of 2014 was approximately
$37.0 million, compared to approximately $41.0 million in the third
quarter of 2013. The decrease in total investment income is attributed
to the lower weighted average loans outstanding as well as approximately
$2.6 million of one-time fees recognized in the third quarter of 2013.
Interest expense and loan fees were approximately $7.9 million during
the third quarter of 2014 as compared to approximately $8.7 million in
the third quarter of 2013. The decrease is the result of a combination
of factors, such as the paydown of approximately $34.8 million SBIC
debentures in the first quarter of 2014, the amortization of $74.5
million of the Asset Backed Notes since the third quarter of 2013, and
the retirement of approximately $34.1 million Convertible Senior Notes.
This decrease is offset by approximately $1.1 million of interest and
fees attributed to the $103.0 million of 2024 Notes issued in the third
quarter of 2014.
The Company had a weighted average cost of debt comprised of interest,
fees and loss on debt extinguishment of approximately 6.6% in the third
quarter of 2014 versus 6.0% during the third quarter of 2013. This
increase is primarily attributed to the acceleration of fee amortization
triggered by $18.6 million of amortization of the Asset-Backed Notes.
Total operating expenses, excluding interest expense and loan fees, for
the third quarter of 2014 was $9.1 million as compared to $10.8 million
for the third quarter of 2013. This decrease is primarily due to a
decrease in variable compensation expense.
Realized Gains/(Losses)
Hercules recognized net realized gains of $5.7 million, or $0.09 per
share, during the third quarter of 2014. This net gain was comprised of
approximately $5.9 million of gross realized gains primarily from the
sale of investments in three portfolio companies. These gains were
offset by gross realized losses of approximately $200,000 resulting from
the liquidation of warrant investments in two portfolio companies.
Unrealized Gains/(Losses)
During the third quarter of 2014, the Company recorded approximately
$9.1 million of net unrealized depreciation from its loans, warrant and
equity investments (excluding unrealized depreciation on escrow
receivable and taxes payable). Of the $9.1 million of unrealized
depreciation, $2.6 million of depreciation was primarily attributable to
collateral based impairments on debt, equity and warrant investments in
three portfolio companies, $2.8 million of depreciation was due to
market or yield adjustments in fair value determinations, and
approximately $3.7 million of depreciation was related to reversals of
prior appreciation due to loan payoffs and sales of warrant and equity
investments.
A break-down of the net unrealized appreciation/(depreciation) in the
investment portfolio is highlighted below:
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Three Months Ended September 30, 2014
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(in millions)
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Loans
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Equity
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Warrants
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Total
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Collateral based impairments
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$
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(2.1
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$
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(0.1
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$
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(0.4
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$
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(2.6
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Reversals due to Debt Payoffs & Warrant/Equity sales
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0.5
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(3.9
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(0.3
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(3.7
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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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(1.2
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(2.1
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(3.3
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Level 3 Assets
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0.5
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1.0
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(1.0
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0.5
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Total Fair Value Market/Yield Adjustments
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0.5
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(0.2
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(3.1
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(2.8
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Total Unrealized Appreciation/(Depreciation)*
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$
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(1.1
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$
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(4.2
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$
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(3.8
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$
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(9.1
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* Excludes unrealized depreciation from escrow receivable and taxes
payable
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Continued Credit Discipline and Performance
Cumulative net realized losses on investments, since our first
origination commencing in October 2004, through September 30, 2014,
totaled approximately $19.1 million, on a GAAP basis. When compared to
total commitments of approximately $4.6 billion over the same period,
the net realized loss since inception represents approximately 41 basis
points “bps” or 0.41% of total commitments, or an annualized loss rate
of approximately 4 bps.
NII – Net Investment Income
NII for the third quarter of 2014 was approximately $19.0 million,
including approximately $1.0 million of convertible debt extinguishment
expense, compared to approximately $21.6 million in the third quarter of
2013, representing a decrease of approximately 12.0%. NII per share
decreased 14.3% for the third quarter of 2014 to $0.30 based on 62.4
million basic weighted average shares outstanding, compared to $0.35
based on 60.5 million basic weighted average shares outstanding in the
third quarter 2013.
Adjusted NII – Adjusted Net Investment Income (Non-GAAP)
Adjusted NII was $0.32 per share on approximately 62.4 million basic
weighted average shares outstanding for the third quarter of 2014.
Adjusted NII measures operating performance excluding approximately $1.0
million of convertible debt extinguishment expense, an expense incurred
in relation to the exercise and retirement of the Convertible Senior
Notes in the third quarter of 2014. Please refer to the “Reconciliation
of Net Investment Income to Adjusted NII” table for more details.
DNOI - Distributable Net Operating Income
DNOI for the third quarter was approximately $21.8 million or $0.35 per
share, as compared to $23.2 million or $0.38 per share in the third
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 includes
paid-in-kind, or “PIK”, and back-end fees that are generally 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 third quarter cash dividend
of $0.31 per share. This dividend would represent the Company’s
thirty-seventh consecutive dividend declaration since its initial public
offering, bringing the total cumulative dividend declared to date to
$9.99 per share. The following shows the key dates of our third quarter
2014 dividend payment:
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Record Date
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November 17th, 2014
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Payment Date
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November 24th, 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 choose
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.
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, determinations made on a quarterly basis may not be
representative of the actual tax attributes of its distributions for a
full year. If the Company determines the tax attributes of our
distributions year-to-date as of September 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 third quarter with approximately $308.6 million in
available liquidity, including $158.6 million in cash and approximately
$150.0 million in available credit facilities. As of September 30, 2014,
100% of the Company’s debt outstanding was in fixed rate debt
instruments, well positioning Hercules for any increase in short term
rates, should they occur.
Bank Facilities
Hercules has a committed credit facility with Wells Fargo for $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 September 30, 2014 under the Wells Fargo credit facility was
LIBOR+3.50% with a floor of 4.0%. As of September 30, 2014, Hercules did
not have any outstanding borrowings under the Wells Fargo credit
facility.
In addition, Hercules has a committed credit facility with Union Bank,
which was increased during the quarter to $75.0 million in initial
credit capacity under a $300.0 million accordion credit facility.
Pricing at September 30, 2014 under the Union Bank credit facility is
LIBOR+2.25% with no floor. As of September 30, 2014, Hercules did not
have any outstanding borrowings under the Union Bank credit facility.
Convertible Senior Notes
As of September 30, 2014, Hercules had approximately $40.0 million in
6.00% Convertible Senior Notes which mature in April 2016 remaining.
The Notes are comprised of $40.9 million in aggregate principal amount
outstanding less approximately $900,000 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 December 31, 2014. During the third quarter of 2014, holders of
approximately $34.1 million of these Notes elected to exercise their
conversion rights. Upon conversion of the Convertible Senior 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 $11.42 per share of common
stock, in each case subject to adjustment in certain circumstances.
Subsequent to the end of the third quarter, holders of approximately
$23.1 million of additional Convertible Senior Notes elected to exercise
their conversion rights. These notes will settle in the fourth quarter
of 2014 with a combination of cash equal to the outstanding principal
amount of the converted notes and shares of the Company’s common stock
for the remainder of the settlement amount and are expected to generate
an expense of approximately $1 million in the fourth quarter.
Senior Unsecured Notes
As of September 30, 2014, Hercules had approximately $103.0 million in
aggregate principal amount of its 6.25% Unsecured Senior Notes due 2024
(the “2024 Notes”). The Notes are listed on the New York Stock Exchange
under the trading symbol “HTGX.”
As of September 30, 2014, Hercules had approximately $170.4 million in
7.00% Senior Unsecured Notes (the “2019 Notes”). These notes are
comprised of approximately $84.5 million of notes maturing in April 2019
and approximately $85.9 million of notes maturing September 2019.
Asset Backed Notes
As of September 30, 2014, Hercules had approximately $28.0 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.
SBIC Debentures
At September 30, 2014, Hercules had approximately $190.2 million in
outstanding debentures under the SBIC program.
Leverage
Hercules’ debt to equity ratio at September 30, 2014 was approximately
81.0%. However, if the outstanding cash at September 30, 2014 of
approximately $158.5 million was deducted from total debt of
approximately $531.5 million and divided by total equity of
approximately $656.2 million, then the net leverage ratio would be
approximately 56.8%.
As of September 30, 2014, the Company’s asset coverage ratio under our
regulatory requirements as a business development company was 292.2%,
excluding the SBIC debentures as a result of our exemptive order from
the SEC. Given the SEC exemptive order relief, the Company has the
potential capacity on its balance sheet to add leverage of approximately
$314.9 million, bringing the maximum potential leverage to $846.4
million, or approximately 129.0%, as of September 30, 2014, if it had
access to such additional leverage.
Net Asset Value
As of September 30, 2014, the Company’s net assets were approximately
$656.2 million, an increase of 2.0% as compared to $643.4 million as of
September 30, 2013. Net assets were $658.9 million as of June 30, 2014.
As of September 30, 2014, net asset value per share was $10.22 on 64.2
million outstanding shares, representing a decrease of 1.9% compared to
$10.42 on 61.8 million outstanding shares as of September 30, 2013. Net
asset value per share was $10.42 on 63.3 million outstanding shares as
of June 30, 2014.
Portfolio Asset Quality
As of September 30, 2014, grading of the loan portfolio at fair value,
excluding warrants and equity investments, was as follows:
Grade 1
|
|
|
$279.3 million or 30.8% of the total portfolio
|
Grade 2
|
|
|
$422.9 million or 46.6% of the total portfolio
|
Grade 3
|
|
|
$155.2 million or 17.1% of the total portfolio
|
Grade 4
|
|
|
$28.3 million or 3.1% of the total portfolio
|
Grade 5
|
|
|
$22.2 million or 2.4% of the total portfolio
|
|
|
|
|
At September 30, 2014, the weighted average loan grade of the portfolio
at cost was 2.07 on a scale of 1 to 5, with 1 being the highest quality,
compared with 2.10 as of June 30, 2014 and 2.13 as of September 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 November 3, 2014, Hercules has:
|
|
|
|
a.
|
Closed debt and equity commitments of approximately $83.7 million to
new and existing portfolio companies.
|
|
|
|
|
b.
|
Pending commitments (signed non-binding term sheets) of
approximately $211.3 million.
|
|
|
|
The table below summarizes our year-to-date closed and pending
commitments as follows:
Closed Commitments and Pending Commitments (in millions)
|
January 1 – September 30, 2014 Closed Commitments(a)
|
|
$587.7
|
Q4-14 Closed Commitments (as of November 3, 2014)
|
|
$83.7
|
Pending Commitments (as of November 3, 2014)(b)
|
|
$211.3
|
Year-to-date 2014 Closed and Pending Commitments
|
|
$882.7
|
|
|
|
Notes:
|
|
|
|
a.
|
Closed Commitments may include renewals of existing credit
facilities. Not all Closed Commitments result in future cash
requirements. Commitments generally fund over the two succeeding
quarters from close.
|
|
b.
|
Not all pending commitments (signed non-binding term sheets) are
expected to close and do not necessarily represent any future cash
requirements.
|
2.
|
|
In October 2014, approximately $23.1 million of the Convertible
Senior Notes converted, and these notes will settle in the fourth
quarter of 2014 with a combination of cash equal to the outstanding
principal amount of the converted notes and shares of the Company’s
common stock for the remainder of the settlement amount.
|
|
|
|
3.
|
|
On November 4, 2014, the Company priced a $129.3 million term debt
securitization in connection with which an affiliate of the Company
will make an offering of $129.3 million in aggregate principal
amount of fixed-rate asset-backed notes (the ”2021 Asset Backed
Notes”), which 2021 Asset Backed Notes are anticipated to be rated
A(sf) by Kroll Bond Rating Agency, Inc. (“KBRA”). The securitization
is expected to close on November 13, 2014 and is subject to
customary closing conditions.
|
|
|
|
4.
|
|
In October 2014, Hercules’ portfolio company Transcept
Pharmaceuticals, Inc. completed its merger with Hercules’
portfolio company Paratek Pharmaceuticals, Inc. (Nasdaq:
PRTK) in an all-stock transaction. Immediately prior to the
merger, Paratek received gross proceeds of approximately $93.0
million from a combination of current and new investors.
|
|
|
|
5.
|
|
In October 2014, InterCloud Systems, Inc. (NASDAQ: ICLD) completed
its acquisition of Hercules’ portfolio company VaultLogix,
LLC. The transaction consists of $16 million in cash and
$12.75 million in restricted common stock, of which $11.5 million
was valued at $16.50 per share, with the balance valued at market
price, and $15.5 million in three year convertible seller notes,
convertible at a fixed price of $6.37 per share.
|
|
|
|
6.
|
|
In October 2014, AVG Technologies (NYSE: AVG) completed its
acquisition of Hercules’ portfolio company Location Labs.
Under the terms of the agreement, AVG will pay approximately
$140.0 million initially, plus up to an additional approximately
$80.0 million in cash consideration over the next two years based
on the achievement of certain performance metrics and milestones.
|
|
|
|
7.
|
|
In October 2014, Premiere Global Services, Inc. (NYSE: PGI)
completed its acquisition of Hercules’ portfolio company Central
Desktop, Inc.
|
|
|
|
8.
|
|
In October 2014, Breg, Inc. and Hercules’ portfolio company United
Orthopedic Group, Inc. announced that they had merged. United
Orthopedic Group, Inc. will operate as a wholly-owned subsidiary
of Breg, Inc. and financial terms were not disclosed.
|
|
|
|
9.
|
|
In October 2014, Hercules’ portfolio company SiTime
Corporation reached a definitive agreement to be acquired by
MegaChips Corporation (Tokyo Stock Exchange: 6875) in a
transaction valued at approximately $200.0 million, subject to
customary closing conditions.
|
|
|
|
10.
|
|
In October 2014, a former Hercules portfolio company Zayo Group
Holdings, Inc. (NYSE: ZAYO) completed its initial public
offering of 24,079,002 shares of its common stock, consisting of
16,008,679 shares sold by the Company and 8,070,323 shares sold by
the selling stockholders (including shares sold by the selling
stockholders pursuant to the exercise in full of the underwriters’
option to purchase additional shares), at a price to the public of
$19.00 per share. Hercules no longer holds investments in the
company.
|
|
|
|
Conference Call
Hercules has scheduled its third quarter 2014 financial results
conference call for November 6, 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 17964172.
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 $4.6 billion
to over 300 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
|
(unaudited)
|
(dollars in thousands, except per share data)
|
|
|
|
|
|
|
|
September 30, 2014
|
|
December 31, 2013
|
Assets
|
|
|
|
|
Investments:
|
|
|
|
|
Non-control/Non-affiliate investments (cost of $996,338 and
$891,059, respectively)
|
|
$
|
990,068
|
|
|
$
|
899,314
|
|
Affiliate investments (cost of $15,959 and $15,238, respectively)
|
|
|
8,845
|
|
|
|
10,981
|
|
Total investments, at value (cost of $1,012,297 and $906,297,
respectively)
|
|
|
998,913
|
|
|
|
910,295
|
|
Cash and cash equivalents
|
|
|
158,627
|
|
|
|
268,368
|
|
Restricted cash
|
|
|
2,096
|
|
|
|
6,271
|
|
Interest receivable
|
|
|
9,146
|
|
|
|
8,962
|
|
Other assets
|
|
|
30,556
|
|
|
|
27,819
|
|
Total assets
|
|
$
|
1,199,338
|
|
|
$
|
1,221,715
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
11,613
|
|
|
$
|
14,268
|
|
Long-term Liabilities (Convertible Senior Notes)
|
|
|
40,012
|
|
|
|
72,519
|
|
Asset-Backed Notes
|
|
|
27,951
|
|
|
|
89,557
|
|
2019 Notes
|
|
|
170,364
|
|
|
|
170,364
|
|
2024 Notes
|
|
|
103,000
|
|
|
|
-
|
|
Long-term SBA Debentures
|
|
|
190,200
|
|
|
|
225,000
|
|
Total liabilities
|
|
$
|
543,140
|
|
|
$
|
571,708
|
|
|
|
|
|
|
|
|
|
|
|
Net assets consist of:
|
|
|
|
|
Common stock, par value
|
|
|
65
|
|
|
|
62
|
|
Capital in excess of par value
|
|
|
670,711
|
|
|
|
656,594
|
|
Unrealized appreciation (depreciation) on investments
|
|
|
(14,706
|
)
|
|
|
3,598
|
|
Accumulated realized losses on investments
|
|
|
(2,233
|
)
|
|
|
(15,240
|
)
|
Unrealized net investment income
|
|
|
2,361
|
|
|
|
4,993
|
|
Total net assets
|
|
$
|
656,198
|
|
|
$
|
650,007
|
|
Total liabilities and net assets
|
|
$
|
1,199,338
|
|
|
$
|
1,221,715
|
|
|
|
|
|
|
Shares of common stock outstanding ($0.001 par value, 100,000,000
authorized)
|
|
|
64,182
|
|
|
|
61,837
|
|
Net asset value per share
|
|
$
|
10.22
|
|
|
$
|
10.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HERCULES TECHNOLOGY GROWTH CAPITAL, INC.
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(unaudited)
|
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
|
2014
|
|
|
|
2013
|
|
|
|
2014
|
|
|
|
2013
|
|
Investment income:
|
|
|
|
|
|
|
|
|
Interest Income
|
|
|
|
|
|
|
|
|
Non-Control/Non-Affiliate investments
|
|
$
|
33,210
|
|
|
$
|
35,623
|
|
|
$
|
92,975
|
|
|
$
|
93,722
|
|
Affiliate investments
|
|
|
130
|
|
|
|
561
|
|
|
|
1,747
|
|
|
|
1,684
|
|
Total interest income
|
|
|
33,340
|
|
|
|
36,184
|
|
|
|
94,722
|
|
|
|
95,406
|
|
Fees
|
|
|
|
|
|
|
|
|
Non-Control/Non-Affiliate investments
|
|
|
3,671
|
|
|
|
4,832
|
|
|
|
12,037
|
|
|
|
11,088
|
|
Affiliate investments
|
|
|
8
|
|
|
|
5
|
|
|
|
30
|
|
|
|
9
|
|
Total fees
|
|
|
3,679
|
|
|
|
4,837
|
|
|
|
12,067
|
|
|
|
11,097
|
|
Total investment income
|
|
|
37,019
|
|
|
|
41,021
|
|
|
|
106,789
|
|
|
|
106,503
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Interest
|
|
|
6,495
|
|
|
|
7,587
|
|
|
|
20,177
|
|
|
|
22,788
|
|
Loan fees
|
|
|
1,364
|
|
|
|
1,072
|
|
|
|
4,531
|
|
|
|
3,341
|
|
General and administrative
|
|
|
2,397
|
|
|
|
2,176
|
|
|
|
6,984
|
|
|
|
6,831
|
|
Employee Compensation:
|
|
|
|
|
|
|
|
|
Compensation and benefits
|
|
|
3,922
|
|
|
|
7,030
|
|
|
|
11,375
|
|
|
|
14,992
|
|
Stock-based compensation
|
|
|
2,823
|
|
|
|
1,596
|
|
|
|
6,849
|
|
|
|
4,349
|
|
Total employee compensation
|
|
|
6,745
|
|
|
|
8,626
|
|
|
|
18,224
|
|
|
|
19,341
|
|
Total operating expenses
|
|
|
17,001
|
|
|
|
19,461
|
|
|
|
49,916
|
|
|
|
52,301
|
|
Loss on debt extinguishment (Long-term Liabilities - Convertible
Senior Notes)
|
|
|
(1,023
|
)
|
|
|
-
|
|
|
|
(1,023
|
)
|
|
|
-
|
|
Net investment income
|
|
|
18,995
|
|
|
|
21,560
|
|
|
|
55,850
|
|
|
|
54,202
|
|
|
|
|
|
|
|
|
|
|
Net realized gain on investments
|
|
|
|
|
|
|
|
|
Non-Control/Non-Affiliate investments
|
|
|
5,664
|
|
|
|
7,125
|
|
|
|
13,007
|
|
|
|
11,309
|
|
Total net realized gain on investments
|
|
|
5,664
|
|
|
|
7,125
|
|
|
|
13,007
|
|
|
|
11,309
|
|
|
|
|
|
|
|
|
|
|
Net increase in unrealized appreciation (depreciation) on investments
|
|
|
|
|
|
|
|
|
Non-Control/Non-Affiliate investments
|
|
|
(10,029
|
)
|
|
|
9,288
|
|
|
|
(15,447
|
)
|
|
|
10,506
|
|
Affiliate investments
|
|
|
547
|
|
|
|
(992
|
)
|
|
|
(2,857
|
)
|
|
|
(1,468
|
)
|
Total net unrealized appreciation (depreciation) on investments
|
|
|
(9,482
|
)
|
|
|
8,296
|
|
|
|
(18,304
|
)
|
|
|
9,038
|
|
Total net realized and unrealized gain (loss)
|
|
|
(3,818
|
)
|
|
|
15,421
|
|
|
|
(5,297
|
)
|
|
|
20,347
|
|
Net increase in net assets resulting from operations
|
|
|
15,177
|
|
|
|
36,981
|
|
|
|
50,553
|
|
|
|
74,549
|
|
|
|
|
|
|
|
|
|
|
Net investment income before investment gains and losses per
common share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.30
|
|
|
$
|
0.35
|
|
|
$
|
0.89
|
|
|
$
|
0.91
|
|
|
|
|
|
|
|
|
|
|
Change in net assets per common share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.24
|
|
|
$
|
0.61
|
|
|
$
|
0.80
|
|
|
$
|
1.26
|
|
Diluted
|
|
$
|
0.23
|
|
|
$
|
0.59
|
|
|
$
|
0.78
|
|
|
$
|
1.23
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
|
|
|
|
|
|
Basic
|
|
|
62,356
|
|
|
|
60,522
|
|
|
|
61,466
|
|
|
|
58,206
|
|
Diluted
|
|
|
63,779
|
|
|
|
60,750
|
|
|
|
63,576
|
|
|
|
58,396
|
|
Dividends declared per common share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.31
|
|
|
$
|
0.31
|
|
|
$
|
0.93
|
|
|
$
|
0.86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HERCULES TECHNOLOGY GROWTH CAPITAL, INC.
NON GAAP FINANCIAL MEASURES
(in thousands, except per share data)
|
|
|
Three Months Ended September 30,
|
|
|
2014
|
|
2013
|
Reconciliation of Net Investment Income to Adjusted NII
|
|
|
|
|
Net Investment Income
|
|
|
18,995
|
|
|
21,560
|
Loss on debt extinguishment (Long-term Liabilities - Convertible
Senior Notes)
|
|
|
1,023
|
|
|
-
|
Adjusted net investment income (1)
|
|
$
|
20,018
|
|
$
|
21,560
|
|
|
|
|
|
Adjusted net investment income before investment gains and losses
per common share:
|
|
|
|
|
Basic
|
|
$
|
0.32
|
|
$
|
0.36
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
|
|
Basic
|
|
|
62,356
|
|
|
60,522
|
(1) Adjusted net investment income is calculated as net investment
income, excluding the Loss on debt extinguishment (Long-term Liabilities
- Convertible Senior Notes).
Adjusted Net Investment Income, or “Adjusted NII”, consists
of GAAP Net Investment Income, excluding the Loss on debt extinguishment
(Long-term Liabilities – Convertible Senior Notes), divided by the
weighted average basic shares outstanding for the period under
measurement.
Hercules believes that providing Adjusted NII affords investors a view
of results that may be more easily compared to other companies by
adjusting for non-recurring events, 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 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 September 30,
|
Reconciliation of Net investment income to DNOI
|
|
2014
|
|
2013
|
Net investment income
|
|
$
|
18,995
|
|
$
|
21,560
|
Stock-based compensation
|
|
|
2,823
|
|
|
1,596
|
DNOI
|
|
$
|
21,818
|
|
$
|
23,156
|
|
|
|
|
|
DNOI per share-weighted average common shares
|
|
|
|
|
Basic
|
|
$
|
0.35
|
|
$
|
0.38
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
|
|
Basic
|
|
|
62,356
|
|
|
60,522
|
|
|
|
|
|
|
|
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)
|
|
|
|
|
|
September 30, 2014
|
Total Debt
|
|
$
|
531,527
|
|
Cash and cash equivalents
|
|
|
(158,627
|
)
|
Numerator: net debt (total debt less cash and cash equivalents)
|
|
$
|
372,900
|
|
|
|
|
Denominator: Total net assets
|
|
$
|
656,198
|
|
Net Leverage Ratio
|
|
|
56.8
|
%
|
|
|
|
|
|
Net leverage ratio is calculated by deducting the outstanding cash at
September 30, 2014 of approximately $158.6 million from total debt of
approximately $531.5 million divided by our total equity of
approximately $656.2 million, resulting in a net leverage ratio of
56.8%. 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
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