Horizon Technology Finance Corporation (Nasdaq:HRZN) (the "Company"
or "Horizon"), a leading specialty finance company that provides
secured loans to venture capital and private equity backed
development-stage companies in the technology, life science,
healthcare information and services, and clean-tech industries,
today announced its financial results for the quarter ended March
31, 2012 and a cash dividend of $0.45 per share.
First Quarter 2012 Highlights
- Earned net investment income of $3.4 million, or $0.44 per
share, representing a year-over-year increase of more than 50%
- Completed a public offering of $33 million in an aggregate
principal amount of 7.375% senior unsecured notes due 2019
- Funded $31.7 million in venture loans to new and existing
portfolio companies
- Achieved a portfolio weighted average yield of 15.4%
- Increased net assets from operations by $2.5 million, or $0.33
per share
- Ended the quarter with an investment portfolio of $167.3
million and net asset value of $129.0 million, or $16.89 per
share
- Unfunded loan approvals and commitments totaled $16
million
- Declared a quarterly dividend of $0.45 per share, bringing
cumulative dividends to $2.30 per share since going public in
October 2010.
"The combination of high current pay interest income and fees
earned on our investment portfolio of venture loans produced strong
earnings for Horizon in the first quarter of 2012," said Robert D.
Pomeroy, Jr., Chairman and Chief Executive Officer. "During the
quarter, we continued to experience good demand for our loan
products from both new and existing portfolio companies.
Importantly, we have preserved the high credit quality of our
investment portfolio as we maintain our disciplined approach.
Although we funded $31.7 million in new loans in the first quarter,
our portfolio was reduced by a higher than usual level of
prepayment activity."
Mr. Pomeroy added, "We are pleased to declare a first quarter
dividend of $0.45 per share, our third consecutive dividend in this
amount and sixth overall since going public. We also closed a
senior note financing in the quarter that provides attractive
long-term capital for Horizon to be deployed over the coming
quarters. We believe our expanded liquidity, combined with our
strong momentum in the marketplace, significantly enhances our
position to expand our portfolio and continue to provide attractive
dividends to shareholders."
Operating Results
Total investment income increased by $1.2 million, or
21.3%, to $6.6 million for the three months ended March 31,
2012 as compared to the three months ended March 31, 2011. For
the three months ended March 31, 2012, total investment income
consisted primarily of $5.9 million in interest income from
investments, which included $0.6 million in income from the
amortization of discounts and origination fees on investments.
Interest income on investments and other investment income
increased primarily due to the increased average size of the loan
portfolio. Fee income on investments was primarily comprised of
prepayment fees from four portfolio companies. For the three months
ended March 31, 2011, total investment income consisted
primarily of $4.9 million in interest income from investments,
which included $0.4 million in income from the amortization of
discounts and origination fees on investments. Fee income on
investments for the three months ended March 31, 2011 was primarily
comprised of a one-time success fee received upon the completion of
an acquisition of one portfolio company.
The Company's dollar-weighted average annualized portfolio yield
on average loans, excluding warrant gains, for both three month
periods ended March 31, 2012 and 2011 was 15.4%.
Total expenses increased by $0.1 million, or 1.3%, to
$3.3 million for the three months ended March 31, 2012 as
compared to the three months ended March 31, 2011. Total
operating expenses for each period consisted principally of
interest expense, management fees, incentive and administrative
fees and, to a lesser degree, professional fees and general and
administrative expenses. Interest expense, which includes the
amortization of debt issuance costs, decreased year-over-year
primarily due to a decrease in the weighted average of outstanding
borrowings of $19.6 million to $65.5 million for the three months
ended March 31, 2012. Management fee expense for the three
months ended March 31, 2012 decreased compared to the three
months ended March 31, 2011 as a result of a decrease in
average assets as the Company deleveraged its portfolio.
Performance based incentive fees increased by $0.3 million as a
result of the increase in pre-incentive fee net investment income
for the three months ended March 31, 2012 compared to the
three months ended March 31, 2011.
Net investment income for the three months ended March 31, 2012
was $3.4 million, or $0.44 per share, as compared to net investment
income of $2.2 million, or $0.29 per share, in the prior year
period.
For the three months ended March 31, 2012, the Company did not
realize any gains on investments. For the three months ended March
31, 2011, the net realized gain on investments was $0.2 million, or
$0.03 per share, from the sale of stock acquired through the
exercise of warrants in portfolio companies.
For the three months ended March 31, 2012, the net unrealized
depreciation on investments was $0.8 million. The net unrealized
depreciation on investments was primarily due to $1.2 million of
net unrealized depreciation on debt investments, partially offset
by unrealized appreciation on warrant and equity investments. The
net unrealized appreciation on investments for the three months
ended March 31, 2011 was $1.2 million.
For the three months ended March 31, 2012 and 2011, the net
increase in net assets resulting from operations was $2.5 million
and $3.6 million, respectively.
Portfolio Summary and Investment Activity
As of March 31, 2012, the Company's debt portfolio consisted of
35 secured loans with an aggregate fair value of $162.0 million. In
addition, the Company's warrant portfolio had an aggregate fair
value of $4.6 million as of March 31, 2012. Total portfolio
investment activity as of and for the quarters ended March 31, 2012
and 2011 was as follows:
|
|
For the three
months ended March 31, |
|
|
2012 |
|
2011 |
|
|
($ in
thousands) |
Beginning portfolio |
|
$ 178,013 |
|
$ 136,810 |
New loan funding |
|
31,700 |
|
28,833 |
Less refinanced balances |
|
(18,739) |
|
(2,770) |
Net new loan funding |
|
12,961 |
|
26,063 |
Principal received on investments |
|
(9,120) |
|
(7,759) |
Early pay-offs |
|
(14,205) |
|
(3,347) |
Accretion of loan fees |
|
642 |
|
395 |
New loan fees |
|
(182) |
|
(513) |
New equity investments |
|
– |
|
577 |
Proceeds from sale of investments |
|
– |
|
(321) |
Net realized gain on investments |
|
– |
|
289 |
Net (depreciation) appreciation on
investments |
|
(813) |
|
1,022 |
Ending portfolio |
|
$ 167,296 |
|
$ 153,216 |
Portfolio Asset Quality
As of both March 31, 2012 and 2011, the Company's loan portfolio
had a weighted average credit rating of 3.2, with 4 being the
highest credit quality rating and 3 being the rating for a standard
level of risk. A rating of 2 or 1 represents a deteriorating credit
quality and increased risk. As of March 31, 2012, there was one
investment on non-accrual status with an approximate fair value of
$1.9 million. There were no loans on non-accrual status as of March
31, 2011.
Liquidity and Capital Resources
As of March 31, 2012, Horizon had cash and investments in money
market funds totaling $28.6 million.
On March 23, 2012, Horizon completed an underwritten public
offering of $30 million in an aggregate principal amount of 7.375%
senior unsecured notes due 2019. The notes will mature on March 15,
2019, and may be redeemed in whole or in part at any time or from
time to time at the Company's option on or after March 15, 2015.
The notes bear interest at a rate of 7.375% per year payable
quarterly on March 15, June 15, September 15 and December 15 of
each year, beginning June 15, 2012. On April 18, 2012, in
connection with the public offering, the underwriters exercised
their option to purchase an additional $3.0 million in aggregate
principal amount of notes to cover over-allotments, increasing the
total size of the offering to $33.0 million. The Company intends to
use the net proceeds of this public offering for investment in
portfolio companies in accordance with its investment objective and
strategies, and for working capital and general corporate
purposes.
Borrowings outstanding under the Company's $150 million
accordion credit facility, which contains an initial commitment of
$75 million from Wells Fargo Capital Finance, totaled $4.8 million
as of March 31, 2012. Based on eligible debt investments held by
the Company as of March 31, 2012, the Company has availability of
approximately $25.5 million as of March 31, 2012 under the Wells
credit facility. Borrowings outstanding under the Company's WestLB
credit facility, which continues to provide leverage to the Company
through March 2015, totaled $35.4 million as of March 31, 2012.
First Quarter 2012 Dividend
On May 3, 2012, Horizon's Board of Directors declared a first
quarter dividend of $0.45 per share, payable on May 31, 2012 to
stockholders of record on May 17, 2012. The Company expects the
dividend to be paid from taxable earnings with specific tax
characteristics reported to stockholders after the end of the 2012
calendar year.
Conference Call
Management will host a conference call on Tuesday, May 8, 2012
at 9:00 a.m. ET to discuss the latest corporate developments and
financial results. The dial-in number for callers in the U.S. is
(877) 677-9112 and the dial-in number for international callers is
(708) 290-1396. The access code for all callers is 69437374. A live
webcast will also be available on the Company's website at
www.horizontechnologyfinancecorp.com.
A replay of the call will be available through May 15, 2012. To
access the replay, please dial (855) 859-2056 in the U.S. and (404)
537-3406 outside the U.S., and then enter the access code 69437374.
An online archive of the webcast will be available on the Company's
website for 30 days following the call.
About Horizon Technology Finance
Horizon Technology Finance Corporation is a business development
company that provides secured loans to development-stage companies
backed by established venture capital and private equity firms
within the technology, life science, healthcare information and
services, and clean-tech industries. The investment objective of
Horizon Technology Finance is to maximize total risk-adjusted
returns by generating current income from a portfolio of directly
originated secured loans as well as capital appreciation from
warrants to purchase the equity of portfolio companies.
Headquartered in Farmington, Connecticut, with a regional office in
Walnut Creek, California, the Company is externally managed by its
investment advisor, Horizon Technology Finance Management LLC.
Horizon's common stock trades on the NASDAQ Global Select Market
under the ticker symbol "HRZN." In addition, the Company's 7.375%
Senior Notes due 2019 trade on the New York Stock Exchange under
the ticker symbol "HTF." To learn more, please visit
www.horizontechnologyfinancecorp.com.
Forward-Looking Statements
Statements included herein may constitute "forward-looking
statements," which relate to future events or our future
performance or financial condition. These statements are not
guarantees of future performance, condition or results and involve
a number of risks and uncertainties. Actual results may differ
materially from those in the forward-looking statements as a result
of a number of factors, including those described from time to time
in our filings with the Securities and Exchange Commission. The
Company undertakes no duty to update any forward-looking statement
made herein. All forward-looking statements speak only as of the
date of this press release.
Horizon Technology
Finance Corporation and Subsidiaries |
Consolidated Statements
of Assets and Liabilities |
(In thousands, except share
data) |
|
|
|
|
|
|
|
|
|
|
March 31, 2012 |
December 31,
2011 |
Assets |
|
|
Non-affiliate investments at fair value (cost
of $170,745 and $180,651, respectively) |
$ 167,296 |
$ 178,013 |
Investment in money market funds |
22,944 |
13,518 |
Cash |
5,697 |
1,298 |
Interest receivable |
2,502 |
2,985 |
Other assets |
2,958 |
1,997 |
|
|
|
Total assets |
$ 201,397 |
$ 197,811 |
|
|
|
Liabilities |
|
|
Borrowings |
$ 70,236 |
$ 64,571 |
Base management fee payable |
595 |
330 |
Incentive fee payable |
838 |
1,766 |
Other accrued expenses |
683 |
1,260 |
|
|
|
Total liabilities |
72,352 |
67,927 |
|
|
|
Net assets |
|
|
Preferred stock, par value $0.001 per share,
1,000,000 shares authorized, zero shares issued and outstanding as
of March 31, 2012 and December 31, 2011 |
— |
— |
Common stock, par value $0.001 per share,
100,000,000 shares authorized, 7,640,049 and 7,636,532
shares outstanding as of March 31, 2012
and December 31, 2011, respectively |
8 |
8 |
Paid-in capital in excess of par |
124,570 |
124,512 |
Accumulated undistributed net investment
income |
4,881 |
4,965 |
Net unrealized depreciation on
investments |
(3,472) |
(2,659) |
Net realized gains on investments |
3,058 |
3,058 |
|
|
|
Total net assets |
129,045 |
129,884 |
|
|
|
Total liabilities and net
assets |
$ 201,397 |
$ 197,811 |
|
|
|
Net asset value per common
share |
$ 16.89 |
$ 17.01 |
|
|
Horizon Technology
Finance Corporation and Subsidiaries |
Consolidated Statements
of Operations |
(In thousands, except share
data) |
|
|
|
|
|
|
|
Three Months Ended March 31,
2012 |
Three Months Ended March 31,
2011 |
Investment income |
|
|
Interest income on non-affiliate
investments |
$5,910 |
$4,893 |
Interest income on money market funds |
— |
65 |
Fee income on non-affiliate investments |
715 |
502 |
|
|
|
Total investment
income |
6,625 |
5,460 |
|
|
|
Expenses |
|
|
Interest expense |
675 |
810 |
Base management fee |
994 |
1,075 |
Performance based incentive fee |
838 |
529 |
Administrative fee |
256 |
295 |
Professional fees |
307 |
318 |
General and administrative |
203 |
205 |
|
|
|
Total expenses |
3,273 |
3,232 |
|
|
|
Net investment income |
3,352 |
2,228 |
|
|
|
Net realized and unrealized (loss)
gain on investments |
|
|
Net realized gain on investments |
— |
206 |
Net change in unrealized (depreciation)
appreciation on investments |
(813) |
1,194 |
|
|
|
Net realized and unrealized (loss)
gain on investments |
(813) |
1,400 |
|
|
|
Net increase in net assets resulting
from operations |
$2,539 |
$3,628 |
|
|
|
Net investment income per common share |
$ 0.44 |
$ 0.29 |
|
|
|
Change in net assets per common share |
$ 0.33 |
$ 0.48 |
|
|
|
Weighted average shares outstanding |
7,636,609 |
7,593,421 |
CONTACT: Horizon Technology Finance Corporation
Christopher M. Mathieu
Chief Financial Officer
(860) 676-8653
chris@horizontechfinance.com
Investor Relations and Media Contacts:
The IGB Group
Leon Berman / Michael Cimini
(212) 477-8438 / (212) 477-8261
lberman@igbir.com / mcimini@igbir.com
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