Delicious
Digg
Facebook
LinkedIn
Twitter
Fourth Quarter 2011 Highlights:
2011 Highlights:
"We converted significant liquidity into earning assets in 2011,
delivering record gross commitments and fundings and growing our total
investment assets by approximately 38% year over year to
Henriquez continued, "As we look forward to 2012, we expect to continue
to benefit from the high demand for venture capital investment in the
marketplace and expect continued monetization of our warrant portfolio
which currently contains over 105 venture backed companies, seven of
which have on file with the SEC Form S-1 registration statements to
complete their initial public offerings, one of which is
In the fourth quarter, Hercules entered into an agreement to acquire
approximately
Fourth Quarter Review and Operating Results
Investment Portfolio
As of December 31, 2011, over 99.2% of the Company's debt investments were in a senior secured first lien position, and more than 90.7% of the debt investment portfolio was priced at floating interest rates or floating interest rates with a Prime or LIBOR based interest rate floor. We believe we are well positioned to benefit should market rates increase.
Hercules entered into commitments to provide debt and equity financings
of approximately $165.3 million and
Debt and equity fundings were approximately $96.0 million and $1.2 million, respectively, to new and existing portfolio companies during the fourth quarter. Hercules received approximately $24.5 million of principal repayments, including $13.3 million of early principal repayments and $11.2 million in scheduled principal payments in the fourth quarter.
| (at Fair Value, in $ Millions) | ||||||||
| Period | Q4 2011 | Q4 2010 | Change ($) | Change % | ||||
| Interest Earning Debt Investments | ||||||||
| Loans |
|
|
|
45.8% | ||||
| Non-Interest Earning Equity | ||||||||
| Equity Investments |
|
|
|
(20.6)% | ||||
| Warrant Portfolio |
|
|
|
26.6% | ||||
| Total Investment Assets |
|
|
$ 180.8 | 38.3 % | ||||
Unfunded Commitments
As of December 31, 2011, Hercules had unfunded debt commitments of
approximately $168.2 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
Signed Term Sheets
Hercules finished 2011 with approximately $82.5 million in signed non-binding term sheets with seven companies, which generally convert to contractual commitments within approximately 45 to 60 days of signing. Non-binding outstanding term sheets are subject to completion of Hercules' due diligence and final approval process as well as negotiation of definitive documentation with the prospective portfolio companies. It is important to note that not all non-binding term sheets are expected to close and do not necessarily represent future cash requirements. Closed commitments generally fund 70-80% of the committed amount in aggregate over the life of the commitment.
Portfolio Effective Yield
The effective yield on the Company's debt portfolio investments during the quarter was 15.6%, which is down from the fourth quarter of 2010 effective yield of 17.7%, impacted by one portfolio company early payoff. Excluding the effect of fee accelerations that occurred from early payoffs and one-time events, the effective yield for the fourth quarter ended 2011 was 14.0%, compared to the adjusted effective yield in the third quarter of 2011 and fourth quarter of 2010 of approximately 14.2% and 15.8%, respectively. The effective yield is derived by dividing total investment income by the weighted average earning assets during the quarter, which excludes non-interest earning assets such as warrants and equity investments.
Existing Warrants Portfolio and Potential Future Gains
Hercules held warrant positions in approximately 109 portfolio
companies, with a fair value of approximately
As of
|
1. |
6. |
||||
|
2. |
7. WageWorks, Inc. | ||||
|
3. |
8. |
||||
|
4. |
9. |
||||
|
5. |
As of
Subsequent to
Income Statement
Total investment income in the fourth quarter of 2011 was approximately $21.2 million compared to approximately $ 17.5 million in the fourth quarter of 2010, due to higher average balance of interest earning investments. The loan portfolio increased by approximately $180.8 million year-over-year as the Company accelerated its investment pace in 2011.
Interest expense and loan fees were approximately $4.6 million during the fourth quarter of 2011 as compared to $2.7 million in the fourth quarter of 2010. The increase is primarily attributed to $1.3 million of interest and fee expense due to the $75.0 million of senior unsecured convertible notes issued on April 15, 2011. Additionally, the Company incurred approximately $271,000 of non cash interest expense attributed to the accretion of the fair value of the conversion feature on the senior notes. The overall cost of the senior unsecured convertible notes is approximately 8.2%, taking into account accretion of the convertible feature.
The Company had a weighted average cost of debt comprised of interest and fees of approximately 6.23% at Dec. 31, 2011, versus 6.27% during the fourth quarter of 2010. SBA debentures had a lower weighted average cost of debt on outstanding SBA debentures of approximately 5.0% in the fourth quarter of 2011 versus 6.2% in the fourth quarter of 2010.
Total operating expenses, excluding interest expense and loan fees, for
the fourth quarter of 2011 was approximately
During the fourth quarter, net unrealized appreciation was
approximately $7.4 million, primarily attributed to
Hercules recognized net realized losses of approximately $688,000 in the
fourth quarter of 2011 primarily due to the realized loss of
approximately
Cumulative net realized losses on investments since October 2004 to date
total approximately
NII — Net Investment Income
NII for the fourth quarter of 2011 was approximately $10.8 million, compared to $8.6 million in the third quarter of 2011 and $9.5 million in the fourth quarter of 2010. This increase was due to a higher average balance of interest-earning investments outstanding during the fourth quarter of 2011. NII per share for the fourth quarter of 2011 was $0.25 based on 43.2 million basic shares outstanding, compared to $0.20 per share based on 43.1 million basic shares outstanding in the third quarter 2011 and $0.24 per share based on 38.9 million basic shares outstanding in the fourth quarter of 2010.
DNOI - Distributable Net Operating Income
DNOI for the fourth quarter was approximately
Dividends
The Board of Directors increased the quarterly cash dividend by 5.0% and
declared a cash dividend of
Hercules' Board of Directors maintains a variable dividend policy with the objective of distributing four quarterly distributions in an amount that approximates 90 - 100% of our taxable quarterly income or potential annual income for a particular year. In addition, at the end of the year, we may also pay an additional special dividend or fifth dividend; such that we may distribute approximately all of our annual taxable income in the year it was earned, while maintaining the option to spill over our excess taxable income.
The determination of the tax attributes of the Company's distributions
is made annually as of the end of the Company's fiscal year based upon
its taxable income for the full year and distributions paid for the full
year. Therefore, a determination made on a quarterly basis may not be
representative of the actual tax attributes of its distributions for a
full year. The tax attributes of the Company's distributions for the
year ended
Share Repurchases
In
Liquidity and Capital Resources
The Company ended the fourth quarter with approximately $184.3 million in liquidity including $64.5 million in cash, and $119.8 million in credit facilities.
As of December 31, 2011, Hercules had approximately $10.2 million in outstanding borrowings under the Wells Fargo credit facility. 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. Additional lenders may be added to the facility over time to reach up to an aggregate of $300.0 million. We expect to continue discussions with various other potential lenders to join the Wells facility; however, there can be no assurances that additional lenders will join the facility.
As of
Pricing at December 31, 2011 under the Wells Fargo and Union Bank credit facilities are LIBOR+3.25% with a floor of 5.0%, and LIBOR+2.25% with a floor of 4.0%, respectively.
At December 31, 2011, Hercules had approximately $225.0 million in outstanding debentures under the SBIC program, as part of its total potential maximum debentures of $225.0 million allowed under the SBIC program.
As of December 31, 2011, the Company's asset coverage ratio, under our regulatory requirements as a BDC was 914.6%, excluding SBIC debentures as a result of exemptive relief from the SEC which allows us to exclude all SBA leverage from our asset coverage ratio, and 241.1% when including our SBIC debentures. Based on Hercules' existing stockholders' equity coupled with the Company's ability to exclude all if its SBA leverage from its 200% asset coverage ratio requirement, the Company has the potential capacity on its balance sheet to leverage up to in excess of $650.0 million. However, Hercules does not currently have access to credit facilities to leverage the portfolio to the fullest capacity. There are no assurances that we may be able to find additional lenders to extend or provide additional credit facilities to fully utilize the Company's available borrowing capacity or expand its existing credit facilities.
At December 31, 2011, the Company's debt to equity leverage ratio, excluding all SBA leverage was 18.7%. The same ratio including our SBIC debentures is approximately 70.8% at the end of the fourth quarter of 2011.
Net Asset Value
At
As of
Portfolio Asset Quality and Diversification
As of
| Grade 1 |
|
||||
| Grade 2 |
|
||||
| Grade 3 |
|
||||
| Grade 4 |
|
||||
| Grade 5 |
|
At
Hercules' portfolio diversification as of
Subsequent Events
1. As of
a. Closed commitments of approximately
b. Pending commitments (signed non-binding term sheets) of approximately
The table below summarizes our year-to-date closed and pending commitments as follows:
| Closed Commitments and Pending Commitments (in millions) | |||
|
Q1-12 Closed Commitments(as of |
|
||
|
Pending Commitments (as of |
|
||
| Year-to-date 2012 Closed and Pending Commitments |
|
||
Notes:
a. Not all Closed Commitments result in future cash requirements. Commitments generally fund over the two succeeding quarters from close.
b. Not all pending commitments (signed non-binding term sheets) are expected to close and do not necessarily represent any future cash requirements.
2. In January 2012, Hercules completed a follow-on public offering of 5.0 million shares of common stock for gross proceeds of approximately $48.0 million. Hercules expects to use the net proceeds to fund investments in debt and equity securities in accordance with its investment objective and for other general corporate purposes.
3. In February 2012, Hercules repaid $24.3 million of SBA debentures
under its first license, priced at 6.63%, including annual fees.
Hercules plans to submit a request to the SBA to borrow the
4. In
In
5. In
6. In January 2012, Hercules' portfolio company
7. In
Conference Call
Hercules has scheduled its fourth quarter and full year 2011 financial
results conference call for
About
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
|
|
||||||||
| CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES | ||||||||
| December 31, | ||||||||
| 2011 |
|
|||||||
| (unaudited) | 2010 | |||||||
| Assets | ||||||||
| Investments: | ||||||||
|
Non-Control/Non-Affiliate investments (cost of |
$ | 651,843 | $ | 428,782 | ||||
|
Affiliate investments (cost of |
- | 3,069 | ||||||
|
Control investments (cost of |
1,027 | 40,181 | ||||||
|
Total investments, at value (cost of |
652,870 | 472,032 | ||||||
| Cash and cash equivalents | 64,474 | 107,014 | ||||||
| Interest receivable | 5,820 | 4,520 | ||||||
| Other assets | 24,230 | 7,681 | ||||||
| Total assets | $ | 747,394 | $ | 591,247 | ||||
| Liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | 10,813 | $ | 8,716 | ||||
| Wells Fargo Securitization Loan | 10,187 | - | ||||||
| Long-term Liabilities (Convertible Debt) | 70,353 | - | ||||||
| Long-term SBA Debentures | 225,000 | 170,000 | ||||||
| Total liabilities | $ | 316,353 | $ | 178,716 | ||||
| Net assets consist of: | ||||||||
| Common stock, par value | 43 | 43 | ||||||
| Capital in excess of par value | 487,613 | 477,549 | ||||||
| Unrealized appreciation on investments | (3,430 | ) | (8,038 | ) | ||||
| Accumulated realized gains on investments | (48,293 | ) | (51,033 | ) | ||||
| Distributions in excess of investment income | (4,892 | ) | (5,990 | ) | ||||
| Total net assets | $ | 431,041 | $ | 412,531 | ||||
| Total liabilities and net assets | $ | 747,394 | $ | 591,247 | ||||
|
Shares of common stock outstanding ( |
43,853 | 43,444 | ||||||
| Net asset value per share | $ | 9.83 | $ | 9.50 | ||||
|
|
|||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||
|
Three Months Ended |
Twelve Months Ended |
||||||||||||||
| (in thousands, except per share amounts) | 2011 | 2010 | 2011 | 2010 | |||||||||||
| Investment income: | |||||||||||||||
| Interest | $ | 19,413 | $ | 16,281 | $ | 70,346 | $ | 54,700 | |||||||
| Fees | 1,786 | 1,233 | 9,509 | 4,774 | |||||||||||
| Total investment income | 21,199 | 17,514 | 79,855 | 59,474 | |||||||||||
| Operating expenses: | |||||||||||||||
| Interest | 3,681 | 2,335 | 13,252 | 8,572 | |||||||||||
| Loan fees | 909 | 323 | 2,635 | 1,259 | |||||||||||
| General and administrative | 1,778 | 1,865 | 7,992 | 7,086 | |||||||||||
| Employee Compensation: | |||||||||||||||
| Compensation and benefits | 3,372 | 2,784 | 13,260 | 10,474 | |||||||||||
| Stock-based compensation | 628 | 750 | 3,128 | 2,709 | |||||||||||
| Total employee compensation | 4,000 | 3,534 | 16,388 | 13,183 | |||||||||||
| Total operating expenses | 10,368 | 8,057 | 40,267 | 30,100 | |||||||||||
| Net investment income | 10,831 | 9,458 | 39,588 | 29,374 | |||||||||||
| Net realized gain (loss) on investments | (688 | ) | (11,238 | ) | 2,741 | (26,382 | ) | ||||||||
| Net increase in unrealized appreciation on investments | 7,430 | 13,625 | 4,607 | 1,990 | |||||||||||
| Net realized and unrealized gain | 6,742 | 2,387 | 7,348 | (24,392 | ) | ||||||||||
| Net increase in net assets resulting from operations | $ | 17,573 | $ | 11,844 | $ | 46,936 | $ | 4,982 | |||||||
|
Net investment income before provision for income taxes and investment gains and losses per common share: |
|||||||||||||||
| Basic | $ | 0.25 | $ | 0.24 | $ | 0.91 | $ | 0.80 | |||||||
| Change in net assets per common share: | |||||||||||||||
| Basic | $ | 0.41 | $ | 0.30 | $ | 1.08 | $ | 0.12 | |||||||
| Diluted | $ | 0.40 | $ | 0.30 | $ | 1.07 | $ | 0.12 | |||||||
| Weighted average shares outstanding | |||||||||||||||
| Basic | 43,190 | 38,910 | 42,988 | 36,156 | |||||||||||
| Diluted | 43,442 | 39,313 | 43,299 | 36,870 | |||||||||||
|
NON GAAP FINANCIAL MEASURES (in thousands, except per share data) |
||||||||
|
Three Months Ended |
||||||||
| 2011 | 2010 | |||||||
| Reconciliation of Adjusted NII to Net Investment Income | ||||||||
| Net Investment Income | $ | 10,831 | $ | 9,458 | ||||
| Dividends paid on unvested restricted shares (1) | (143 | ) | (158 | ) | ||||
|
Net investment income, net of dividends paid on unvested restricted shares |
$ | 10,688 | $ | 9,300 | ||||
|
Net investment income before investment gains and losses per common share: (2) |
||||||||
| Basic | $ | 0.25 | $ | 0.24 | ||||
|
Adjusted net investment income before investment gains and losses per common share: (3) |
||||||||
| Basic | $ | 0.25 | $ | 0.24 | ||||
| Weighted average shares outstanding | ||||||||
| Basic | 43,190 | 38,910 | ||||||
| (1) Unvested restricted shares as of the dividend record date for in the third quarter of 2011 and 2010 was approximately 649,000 and 791,000 respectively | ||||||||
| (2) Net investment income per share is calculated as the ratio of income and losses allocated to common shareholders divided by shares outstanding. | ||||||||
| (3) Adjusted net income per share is calculated as Net investment income per share, adding dividends paid on unvested restricted shares to the amounts of income and losses allocated to common shareholders. | ||||||||
Adjusted net investment income per basic and diluted share, "Adjusted NII" consists of GAAP net investment income, excluding the impact of dividends paid on unvested restricted common stock divided by the weighted average basic and fully diluted share outstanding for the period under measurement. For reporting purposes, Hercules calculates net investment income per share and change in net assets per share on a basic and fully diluted basis by applying the two-class method, under GAAP. This GAAP method excludes unvested restricted shares and the pro rata earnings associated with the shares from per share calculations.
Hercules believes that providing Adjusted NII affords investors a view of results that may be more easily compared to other companies and enables investors to consider the Company's results on both a GAAP and Adjusted basis. Adjusted NII should not be considered as an alternative to, as an independent indicator of the Company's operating performance, or as a substitute for Net Investment Income per basic and diluted share (each computed in accordance with GAAP). Instead, Adjusted NII should be reviewed in connection with Hercules' consolidated financial statements, to help analyze how the Company is performing. Investors should use Non-GAAP measures only in conjunction with its reported GAAP results.
|
NON GAAP FINANCIAL MEASURES (in thousands, except per share data) |
||||||||||||
|
Three Months Ended |
Year Ended |
|||||||||||
|
Reconciliation of DNOI to Net investment income |
2011 | 2010 | 2011 | 2010 | ||||||||
| Net investment income | $ | 10,831 | $ | 9,458 | $ | 39,588 | $ | 30,081 | ||||
| Stock-based compensation | 628 | 750 | 3,195 | 2,709 | ||||||||
| DNOI | $ | 11,459 | $ | 10,208 | $ | 42,783 | $ | 32,790 | ||||
| DNOI per share-weighted average common shares | ||||||||||||
| Basic | $ | 0.27 | $ | 0.26 | $ | 1.00 | $ | 0.91 | ||||
| Weighted average shares outstanding | ||||||||||||
| Basic | 43,190 | 38,910 | 42,988 | 36,156 | ||||||||
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.
Main, 650-289-3060 HT-HN
info@htgc.com
sborg@htgc.com
Source:
News Provided by Acquire Media
Yahoo! Buzz