Exhibit 99.1
HERCULES TECHNOLOGY ANNOUNCES FOURTH QUARTER AND 2005 FINANCIAL RESULTS
HERCULES ORIGINATES $211 MILLION OF NEW DEBT COMMITMENTS IN 2005
PALO ALTO, Calif., Feb. 1 /PRNewswire-FirstCall/ -- Hercules Technology
Growth Capital, Inc. (Nasdaq: HTGC), a leading debt and equity growth capital
provider to technology and life science companies, today announced financial
results for the fourth quarter and year ended Dec. 31, 2005.
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Highlights for the Fourth Quarter ended Dec. 31, 2005
-- Debt commitments totaled $75.5 million to nine new companies
-- Debt fundings totaled approximately $63.0 million to 12 companies
-- Two portfolio companies fully repaid outstanding loans totaling $12.5
million
-- New equity investments totaled $250,000 to one existing portfolio company
-- Exercised a warrant in one public company and sold a portion of the
position for a realized gain of $482,000, and recognized an unrealized
gain of $1.1 million on the remaining shares as of year end
-- Recognized an unrealized loss of $3.3 million on the write down of one
portfolio company
-- Fair value of the company's investment portfolio at Dec. 31, 2005 was
approximately $176.7 million, representing investments in 31 portfolio
companies
-- Net investment income (NII) was approximately $941,000, or $0.10 per
share, including FAS 123R expense
-- Net income before income tax for the quarter was approximately $55,000,
or $0.01 per share
-- Taxable income for the quarter, as adjusted for tax purposes by deferred
revenue, utilization of the net operating loss carryforward, timing
differences for book and tax, and the impact of FAS 123R expense was
approximately $2.5 million, or $0.26 per share, based on 9.8 million
weighted shares outstanding
-- Net assets were approximately $114.4 million, or $11.67 per share
-- Declared and paid a distribution of $0.025 per share on Nov. 17, 2005
-- Declared a second distribution of $0.30 per share that was paid on Jan.
27, 2006
Highlights for the Year ended Dec. 31, 2005
-- Revenues for 2005 were approximately $10.7 million, up from $214,000 in
2004
-- Successfully completed IPO in June 2005 with net proceeds to the company
of approximately $71.0 million
-- Obtained $125.0 million in credit facilities from two providers
-- Total new gross debt commitments were $211.0 million to 28 new companies,
bringing total debt commitments since inception to $227.7 million to 33
companies, including commitments to two portfolio companies that were
cancelled upon loan repayment
-- New gross debt fundings for 2005 totaled approximately $175.3 million to
28 companies, bringing total debt fundings since inception to $192.0
million to 33 companies, including two portfolio companies that fully
repaid outstanding loans totaling $12.5 million
-- Total unfunded debt commitments were $30.5 million as of Dec. 31, 2005
-- New equity investments totaled $3.5 million to six existing portfolio
companies, including the exercise of an option to convert $1.0 million of
debt into equity
-- Net investment income (NII) was $1.5 million, or $0.22 per share,
including FAS 123R expense
-- Recorded a gain on sale of approximately $482,000, attributed to a
realized gain on the sale of shares in one portfolio company
-- Net income before income tax for 2005 was approximately $2.4 million, or
$0.34 per share
-- Taxable income for the year, as adjusted for tax purposes by deferred
revenue, utilization of the net operating loss carryforward, timing
differences for book and tax, and the impact of FAS 123R expense, was
approximately $5.2 million, or $0.75 per share, based on 6.9 million
weighted shares outstanding
-- Overall weighted average yield to maturity on the company's loan
portfolio was 12.87 percent
"I want to thank our entire team for their hard work in building shareholder
value and for the terrific results they produced during the fourth quarter and
throughout 2005," said Manuel Henriquez, Hercules Technology's chairman,
president and CEO. "During the fourth quarter, we experienced positive
developments with many of our portfolio companies. We are optimistic about our
growing warrant and equity portfolio, representing over thirty venture backed
technology and life sciences companies," said Henriquez.
Portfolio and Investment Activity for the Fourth Quarter and Year ended Dec.
31, 2005
During the fourth quarter, Hercules entered into agreements to provide debt
funding of $75.5 million to nine new companies, including companies that had
signed term sheets in the third and fourth quarters. These new commitments bring
the company's total debt commitments to technology and life sciences companies
to $211 million in 28 companies in 2005.
During the fourth quarter, the company funded a total of $63.0 million in
debt commitments to 12 companies, bringing the total amount funded in 2005 to
$175.3 million in 33 portfolio companies. This includes loan repayments of $12.5
million in the fourth quarter from two portfolio companies.
During the fourth quarter, Hercules participated in one new equity funding
to an existing portfolio company, representing an investment of $250,000 in
preferred equity securities, bringing total equity investments at fair value to
$4.9 million at the end of 2005. This amount includes the exercise of a warrant
in one public portfolio company with a fair value of approximately $1.3 million,
including an unrealized gain of $1.1 million at Dec. 31, 2005.
As of Dec. 31, 2005, the company's unfunded debt commitments totaled $30.5
million to six portfolio companies.
The company's investment portfolio at fair value totaled $176.7 million at
Dec. 31, 2005, compared with $130.4 million at Sept. 30, 2005. The net
unrealized gain on the company's investment portfolio totaled $353,000 for 2005,
including an unrealized loss from the write down on one portfolio company of
$3.3 million.
At Dec. 31, 2005, the overall weighted average yield to maturity on the
company's loan portfolio was 12.87 percent.
Funded debt investments to existing and new companies during the fourth
quarter ended Dec. 31, 2005 included:
1. $5.0 million to Predicant Biosciences
2. $5.0 million to Parateck Pharmaceuticals
3. $4.0 million to Acceleron Pharmaceuticals
4. $4.5 million to Guava Technologies
5. $5.5 million to Xillix Technologies
6. $7.7 million to Wageworks, Inc.
7. $12.8 million to Cornice, Inc.
8. $2.0 million to Cradle Technologies
9. $5.0 million to Pathfire, Inc.
10. $5.0 million to Optovia Corp.
11. $1.5 million to Invoke Solutions
12. $5.0 million to Atrenta, Inc.
The company also made an equity investment of $250,000 in Wageworks, Inc.
during the fourth quarter ended Dec. 31, 2005.
Operating Results for the Fourth Quarter ended Dec. 31, 2005
During the fourth quarter, investment income was $4.3 million, an increase
of approximately $680,000, or 19 percent, compared with $3.7 million in the
previous quarter.
Interest expense and loan fees were $1.2 million during the fourth quarter,
an increase of approximately $300,000 over the third quarter. The increase in
interest expense and loan fees was primarily related to $51.0 million of new
borrowings under the Citigroup credit facility.
Operating expenses were $3.4 million, an increase of $0.6 million, from $2.8
million in the third quarter, primarily due to higher compensation expense.
Net investment income for the fourth quarter remained steady at $0.9
million, compared with $0.9 million in the third quarter of 2005. Basic net
investment income was $0.10 per share, based on 9.8 million weighted average
shares outstanding, compared with $0.09 per share in the third quarter, based on
9.8 million weighted average shares outstanding.
The net unrealized loss on investments was $1.4 million in the fourth
quarter, compared with unrealized gains of $0.7 million in the third quarter.
This net unrealized loss was the result of an unrealized loss of $3.3 million in
one portfolio company offset by net unrealized gains of approximately $1.9
million in the warrant and equity portfolio. Certain assets of this portfolio
company were sold in Jan. 2006 from which Hercules received approximately $1.3
million in net proceeds upon disposition of the portfolio company's assets.
The net loss in the fourth quarter was $200,000, compared with a net gain of
$1.6 million in the third quarter. The net loss in the fourth quarter was
primarily due to the unrealized loss in one portfolio company as noted
previously and a tax provision of $255,000. Basic net loss was $0.02 per share,
based on 9.8 million weighted average shares outstanding, compared with a net
gain of $0.16 per share in the third quarter, based on 9.8 million weighted
average shares outstanding.
Taxable income was $2.5 million in the fourth quarter, as adjusted for tax
purposes by deferred revenue, utilization of the net operating loss
carryforward, timing differences for book and tax, and the impact of FAS 123R
expense. Taxable income per share was $0.26, based on 9.8 million weighted
average shares outstanding, compared with $0.10 per share in the third quarter,
based on 9.8 million weighted average shares outstanding.
Liquidity and Capital Resources
At Dec. 31, 2005, net assets totaled $114.4 million, with a net asset value
per share of $11.67.
During the fourth quarter, we drew down $51 million under the credit
facility with Citigroup. Proceeds from the loan advances were primarily used to
fund additional loan investments.
Portfolio Quality
At Dec. 31, 2005, grading of the debt portfolio, excluding warrants and
equity investments, was as follows:
-- Grade 1 investments totaled approximately $9.9 million, or 5.9% of the
total portfolio
-- Grade 2 investments totaled approximately $145.5 million, or 87.3% of
the total portfolio
-- Grade 3 investments totaled approximately $5.5 million, or 3.3% of the
total portfolio
-- Grade 4 investments totaled approximately $4.6 million, or 2.7% of the
total portfolio
-- Grade 5 investments totaled approximately $1.3 million, or 0.8% of the
total portfolio. Grade 5 investments were net of a write-off of
approximately $3.3 million in the fourth quarter.
The company's investments value had a weighted average investment rating of
2.05 at Dec. 31, 2005, compared with a weighted average investment rating of
2.17 at Sept. 30, 2005.
Hercules continued to diversify its portfolio within the following
technology and life sciences industries (percentages are approximate and reflect
the portfolio at fair value as of Dec. 31, 2005):
-- 25 percent in biopharmaceutical companies
-- 19 percent in communications and networking companies
-- 16 percent in software companies
-- 11 percent in consumer and business products companies
-- 10 percent in electronics and computer hardware
-- 8 percent in medical device and equipment companies
-- 6 percent in semiconductor companies
-- 5 percent in Internet companies
Conference Call
Hercules will host its fourth quarter 2005 financial results conference call
today, Feb. 1, 2006 at 2 p.m. Pacific time (5 p.m. Eastern time).
To listen to the call, dial (866) 362-4829 approximately 10 minutes prior to
the start of the call. A taped replay will be made available approximately two
hours after the conclusion of the call and will remain available for one week.
To access the replay, dial (888) 286-8010 and enter passcode 60316659.
The Hercules financial results conference call will also be available via a
live webcast on the investor relations section of the Hercules web site at
http://www.herculestech.com . Please access the web site 15 minutes prior to the
start of the call to download and install any necessary audio software. An
archived webcast replay will be available on the web site for 12 months.
About Hercules Technology Growth Capital
Founded in December 2003, Hercules Technology Growth Capital, Inc. is a
NASDAQ traded specialized finance company providing debt and equity growth
capital to technology-related companies at all stages of development. The
company primarily finances privately-held companies backed by leading venture
capital and private equity firms and also may finance certain publicly-traded
companies. Hercules focuses its investments in companies active in technology
and technology-related industries such as computer software and hardware,
networking systems, semiconductors, semiconductor capital equipment, information
technology infrastructure, Internet consumer and business services,
telecommunications, and life sciences. The company's investments are originated
through its principal office located in Silicon Valley, as well as additional
offices in the Boston, Boulder and Chicago areas. Providing capital to publicly
traded or privately held companies backed by leading venture capital and private
equity firms involves a high degree of credit risk and may result in potential
losses.
For more information, please visit http://www.herculestech.com . Companies
interested in learning more about financing opportunities should contact
info@herculestech.com or call 650-289-3060.
Forward-Looking Statements
The statements contained in this release that are not purely historical are
forward-looking statements, which involve risk and uncertainties that could
cause actual results to differ materially from those expressed in the
forward-looking statements. These statements may be identified by their use of
forward-looking terminology such as "believes," "expects," "may," "should,"
"would," "will," "intends," "plans," "estimates," "anticipates" and similar
words, and include, but are not limited to, statements regarding the
expectations, intentions or strategies of Hercules Technology Growth Capital,
Inc. For these statements, Hercules claims the protection of the safe harbor for
forward-looking statements provisions contained in the Private Securities
Litigation Reform Act of 1995. You should be aware that Hercules' actual results
could differ materially from those contained in the forward-looking statements
due to a number of risks and uncertainties affecting its business. Factors that
may cause actual results to differ from forward-looking statements include
Hercules' limited operating history as a business development company, the
extent to which Hercules incurs debt to fund its investments, fluctuations in
interest rates, the concentration of Hercules' investments in a limited number
of emerging-growth or expansion stage technology-related companies, the illiquid
nature of the securities Hercules' holds, the highly competitive market for
investment opportunities in which Hercules operates and others discussed in
Hercules' filings with the Securities and Exchange Commission. 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.
STATEMENT OF ASSETS AND LIABILITIES
December 31,
---------------------------------
2005 2004
--------------- ---------------
Assets
Investments, at value (cost of
$176,004,865 and $16,700,000,
respectively) $ 176,673,226 $ 16,700,000
Deferred loan origination revenue (2,729,982) (285,232)
Cash and cash equivalents 15,362,447 8,678,329
Interest receivable 1,479,375 80,902
Prepaid expenses and other assets 1,310,594 20,942
Deferred Tax Asset 1,454,000 --
Property and equipment, net 77,673 35,231
Other assets 20,546 2,500
Total assets 193,647,879 25,232,672
Liabilities
Accounts payable 150,081 1,979
Income tax payable 1,709,000 --
Accrued liabilities 1,436,468 152,560
Short-term loan payable 76,000,000 --
Total liabilities 79,295,549 154,539
Net assets $ 114,352,330 $ 25,078,133
Net assets consist of:
Par value $ 9,802 $ 2,059
Paid-in capital in excess of
par value 114,524,833 27,117,896
Distributable earnings
(Accumulated loss) (182,305) (2,041,822)
Total net assets $ 114,352,330 $ 25,078,133
Shares of common stock outstanding
($0.001 par value, 30,000,000
authorized) 9,801,965 2,059,270
Net asset value per share $ 11.67 $ 12.18
HERCULES TECHNOLOGY GROWTH CAPITAL, INC.
STATEMENT OF OPERATIONS
Period from
February 2,
2004
(commencement
of
Three Months Ended Year operations)
December 31, Ended to
------------------------------- December 31, December 31,
2005 2004 2005 2004
-------------- -------------- -------------- --------------
Investment income:
Interest $ 3,976,210 $ 159,424 $ 9,791,214 $ 214,100
Fees 363,638 -- 875,429 --
Total investment income 4,339,848 159,424 10,666,643 214,100
Operating expenses:
Interest 770,319 -- 1,800,536 --
Loan fees 411,840 -- 1,098,506 --
Compensation and benefits 1,353,860 480,647 3,705,784 1,164,504
General and administrative 797,410 191,869 2,261,434 388,885
Stock-based compensation 57,000 15,000 252,000 680,000
Organization costs -- 15,000 -- 15,000
Depreciation 8,248 2,963 23,605 7,533
Total operating expenses 3,398,677 705,479 9,141,865 2,255,922
Net investment income 941,171 (546,055) 1,524,778 (2,041,822)
Net realized gain on
investment 481,694 -- 481,694 --
Net unrealized
appreciation on
investments (1,367,389) -- 353,093 --
Net income before income
tax 55,476 (546,055) 2,359,565 (2,041,822)
Income tax provision (255,000) -- (255,000) --
Net income (loss) $ (199,524) $ (546,055) $ 2,104,565 $ (2,041,822)
Net investment loss per common share:
Basic $ 0.10 $ (0.27) $ 0.22 $ (1.96)
Diluted $ 0.09 $ (0.27) $ 0.22 $ (1.58)
Net income (loss) per common share:
Basic $ (0.02) $ (0.27) $ 0.30 $ (1.96)
Diluted $ (0.02) $ (0.27) $ 0.30 $ (1.58)
Weighted average shares
outstanding
Basic 9,802,000 2,059,000 6,939,000 1,043,000
Diluted 9,917,000 2,059,000 7,016,000 1,293,000
SOURCE Hercules Technology Growth Capital, Inc.
-0- 02/01/2006
/CONTACT: David M. Lund, VP of Finance and Corporate Controller of Hercules
Technology Growth Capital, Inc., +1-650-289-3077; or Deb Stapleton or Christina
Carrabino, both of Stapleton Communications Inc., +1-650-470-0200, for Hercules
Technology Growth Capital, Inc./
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