DALLAS, Aug. 1, 2018 /PRNewswire/ -- InfraREIT, Inc.
(NYSE: HIFR) ("InfraREIT" or the "Company") today reported
financial results for the second quarter and first half of 2018 and
provided the Company's financial outlook.
For the second quarter of 2018, InfraREIT reported the following
highlights:
- Net income was $23.9 million
- Net income attributable to InfraREIT, Inc. common stockholders
per share ("EPS") was $0.39 per
share
- Non-GAAP earnings per share ("Non-GAAP EPS") was $0.29 per share
- Funds from operations ("FFO") was $35.9
million and FFO on an adjusted basis ("AFFO") was
$29.1 million
- Quarterly dividend declared of $0.25 per share of common stock, $1.00 per share annualized
Guidance:
- 2018 EPS range of $1.36 to
$1.46
- 2018 Non-GAAP EPS range of $1.22
to $1.32
- Expect to maintain the Company's quarterly cash dividend of
$0.25 per share, or $1.00 per share annualized through 2018
- Earnings and dividend guidance assumes the existing lease
payments continue as scheduled and that InfraREIT maintains its
real estate investment trust ("REIT") status throughout 2018
- Footprint capital expenditures range of $70 million to $160
million for the period of 2018 through 2020
"We remain focused on executing our business strategy," said
David A. Campbell, Chief Executive
Officer of InfraREIT. "We are committed to investing in
infrastructure needed to support the ERCOT transmission grid and
the vibrant Texas economy.
At the same time, we continue to pursue possible De-REIT
alternatives," added Campbell.
Second Quarter 2018 Results
Lease revenue, consisting
of only base rent, increased 18 percent to $47.8 million for the three months ended June
30, 2018, compared to $40.4
million for the same period in 2017. The increase in
lease revenue was driven by the change in the allocation of the
total rent components between base and percentage rent and
additional assets under lease. There was no percentage rent
recognized during the second quarter of 2018 or 2017.
Net income was $23.9 million in
the second quarter of 2018, compared to net income of $10.1 million in the second quarter of
2017. Net income attributable to InfraREIT, Inc. common
stockholders was $0.39 per share
during the second quarter of 2018 compared to $0.17 per share during the same period in
2017. The $13.8 million
increase in net income was a result of a $7.4 million increase in lease revenue,
$5.6 million benefit from the
Texas franchise tax settlement,
$1.0 million decrease in depreciation
expense and $0.4 million increase in
other income, net partially offset by a $1.0
million increase in interest expense, net.
Additionally, the decrease in general and administrative expense
contributed $0.3 million to net
income. During the second quarter of 2018, the Company
incurred a $1.2 million professional
services fee associated with the settlement of its Texas franchise taxes and a $0.4 million net increase in expenses primarily
due to InfraREIT's continued review of its De-REIT alternatives and
decreased management fees. During the second quarter of 2017,
InfraREIT incurred $1.9 million of
professional services fees related to the asset exchange
transaction completed during the fourth quarter of 2017 ("Asset
Exchange Transaction").
Non-GAAP EPS was $0.29 per share
for the second quarter of 2018 compared to $0.20 per share for the second quarter of 2017,
representing an increase of 45 percent. The drivers of growth
in Non-GAAP EPS were due to an increase in lease revenue of
$7.4 million, an increase of
$0.4 million in other income, net and
a $1.0 million decrease in
depreciation expense offset by a $2.4
million base rent adjustment reduction, an increase of
$1.0 million in interest expense, net
and a $0.4 million net increase in
general and administrative expense. FFO was $35.9 million for the second quarter of 2018,
compared to $23.1 million for the
same period in 2017, representing an increase of $12.8 million. For the second quarter of
2018, AFFO was $29.1 million,
compared to $25.4 million for the
same period in 2017, representing an increase of
15 percent.
First Half of 2018 Results
Lease revenue, consisting
of only base rent, increased 17 percent to $93.5 million for the six months ended June
30, 2018, compared to $80.0
million for the same period in 2017. The increase in
lease revenue was driven by the change in the allocation of the
total rent components between base and percentage rent and
additional assets under lease. There was no percentage rent
recognized during the first half of 2018 or 2017 as Sharyland
Utilities, L.P.'s ("Sharyland") year-to-date adjusted gross revenue
did not exceed the annual specified breakpoints under the Company's
leases. The Company expects to begin recognizing percentage
rent during the third quarter of 2018.
Net income was $41.7 million in
the first half of 2018, compared to net income of $21.1 million for the same period in 2017.
Net income attributable to InfraREIT, Inc. common stockholders was
$0.69 per share for the six months
ended June 30, 2018 compared to
$0.35 per share during the same
period in 2017. The $20.6
million increase in net income is a result of a $13.5 million increase in lease revenue,
$5.6 million benefit from the
Texas franchise tax settlement,
$2.1 million decrease in depreciation
expense and $1.1 million increase in
other income, net partially offset by a $1.9
million increase in interest expense, net.
Additionally, the decrease in general and administrative expense
contributed $0.1 million to net
income. During 2018, the Company incurred a $1.2 million professional services fee associated
with the settlement of the Company's Texas franchise taxes and a $1.0 million net increase in expenses primarily
due to InfraREIT's continued review of its De-REIT alternatives,
evaluation of the impacts of the Tax Cuts and Jobs Act, Asset
Exchange Transaction expenses and decreased management fees.
During 2017, the Company incurred $0.4
million of regulatory expenses and $1.9 million of professional services fees
related to the Asset Exchange Transaction.
Non-GAAP EPS was $0.58 per share
for the first half of 2018 compared to $0.40 per share for the first half of 2017,
representing an increase of 45 percent. The drivers of growth
in Non-GAAP EPS were due to an increase in lease revenue of
$13.5 million, an increase of
$1.1 million in other income, net and
a $2.1 million decrease in
depreciation expense offset by a $3.4
million base rent adjustment reduction, an increase of
$1.9 million in interest expense, net
and a $0.6 million net increase in
general and administrative expense. FFO was $65.3 million for the first half of 2018,
compared to $46.8 million for the
same period in 2017, representing an increase of $18.5 million. For the first six months of
2018, AFFO was $57.7 million,
compared to $50.0 million for the
same period in 2017, representing an increase of
15 percent.
Liquidity and Capital Resources
As of June 30, 2018, the Company had $2.1 million of unrestricted cash and cash
equivalents and $225.5 million of
unused capacity under its revolving credit facilities.
Outlook and Guidance
EPS is projected in the range of
$1.36 to $1.46 for 2018, updated to reflect the impact of
the Texas franchise tax settlement
and related costs. Non-GAAP EPS is estimated in the range of
$1.22 to $1.32 for 2018. The difference between
Non-GAAP EPS and EPS is due to adjustments related to straight-line
rent; expenses associated with the Asset Exchange Transaction;
professional services fee related to the Texas franchise tax settlement; and the
removal of the accrued taxes, penalties and interest related to the
Texas franchise tax
settlement. InfraREIT expects to maintain the Company's
current quarterly cash dividend of $0.25 per share, or $1.00 per share annualized, through 2018.
These forecasted amounts assume that InfraREIT maintains its REIT
status throughout 2018 and that the existing lease payments are
made by Sharyland as scheduled during 2018.
The Company estimates footprint capital expenditures in the
following ranges over the next three years: $50 million to $80
million for 2018; $10 million to $30 million for 2019; and $10 million to
$50 million for 2020. The footprint capital expenditures
range for 2019 was updated to reflect the anticipated timing of the
third synchronous condenser.
The Company's consolidated debt profile continues to target debt
as a percentage of total capitalization at or below 60 percent and
AFFO-to-debt of at least 12 percent.
The guidance provided above constitutes forward-looking
statements, which are based on current economic conditions and
estimates, and the Company does not include other potential
impacts, such as changes in accounting or unusual items.
Supplemental information relating to the Company's financial
outlook is posted in the Investor Relations section of the
Company's Web site at www.InfraREITInc.com.
Company Structure Review
As previously disclosed,
InfraREIT's Board of Directors completed its initial review of the
Company's REIT status and directed management to pursue an
alternative structure that would involve, among other things,
terminating InfraREIT's REIT status and opting for a traditional
C-corporation structure (a "De-REIT alternative"). Any
De-REIT alternative could involve one or more of the following:
combining Sharyland with Sharyland Distribution & Transmission
Services, L.L.C. ("SDTS"), terminating the leases between SDTS and
Sharyland, terminating the Company's operating partnership, and/or
other negotiations with Hunt Consolidated, Inc. ("Hunt"), including
terminating or renegotiating the Company's management agreement and
development agreement, and engaging in related negotiations.
As further disclosed, in tandem with our evaluation of a De-REIT
alternative, the Conflicts Committee continues to monitor Hunt's
Schedule 13D filings regarding their intentions with respect to
InfraREIT, including those described below. It is possible
that any transaction that might be proposed as a result of the
efforts described in Hunt's Schedule 13D filings regarding
InfraREIT could serve as the De-REIT alternative that InfraREIT
ultimately chooses.
There is no specific timeline set for completing the evaluation
of a De-REIT alternative, and the Company expects to continue
operating as a REIT until the execution of a De-REIT alternative,
if any. Hunt has informed the Company that it agrees with the
Board's direction.
Hunt Consolidated, Inc.'s Schedule 13D
In January 2018, Hunt filed an amendment to its
Schedule 13D with the U.S. Securities and Exchange Commission
("SEC") stating its intent to focus on evaluating and developing a
"going private" transaction with respect to InfraREIT. On
May 24, 2018, Hunt further amended
its Schedule 13D ("13D Amendment"). According to the 13D
Amendment, Hunt did not believe that a "going private" transaction
was likely to be viable, although Hunt may elect to consider and
pursue such a transaction in the future.
As described in the 13D Amendment, during Hunt's discussions
with various parties about participating in a "going private"
transaction, certain parties expressed interest in a possible
direct acquisition of InfraREIT as an alternative to a "going
private" transaction. Hunt further disclosed that it was
engaged in discussions with potential third-party acquirers
regarding certain transactions and arrangements that would be
implemented in connection with an acquisition of InfraREIT by a
third party ("Third-Party Acquisition"). Hunt noted that
these arrangements may include the possible termination of certain
agreements between Hunt and its subsidiaries and affiliates,
including Sharyland, and InfraREIT.
No assurances can be given that InfraREIT will agree to any
transaction proposed as a result of the efforts described in Hunt's
13D Amendment or that any De-REIT alternatives will be
executed. InfraREIT's Board of Directors and the Conflicts
Committee intend to explore various De-REIT alternatives and will
carefully consider any proposal that may be submitted to the
Company in conjunction with the efforts described in Hunt's 13D
Amendment. InfraREIT's Board of Directors and its Conflicts
Committee are committed to advancing the interests of its
stockholders.
InfraREIT does not plan to provide further updates on the status
of any Third-Party Acquisition or other De-REIT alternative.
If any agreement is reached, or if Hunt further updates its
Schedule 13D, InfraREIT will provide additional information at that
time.
Dividends and Distributions
On June 1, 2018, InfraREIT's Board of Directors
declared cash distributions and dividends of $0.25 per unit and share, respectively, to
unitholders and stockholders of record on June 29, 2018, which were paid on July 19, 2018.
Hunt Project Quarterly Updates
InfraREIT's quarterly
"Hunt Project Updates" can be found on the Company's Web site
(www.InfraREITInc.com) under the "Hunt Transmission-Our Developer"
and "Investor Relations" sections and in the "Q2 2018 Results &
Supplemental Information" presentation posted on the Company's Web
site.
Conference Call and Webcast
As previously announced,
management will host a teleconference call on August 1, 2018, at 10
a.m. U.S. Central Time (11
a.m. U.S. Eastern Time). David
A. Campbell, Chief Executive Officer, and Brant Meleski, Chief Financial Officer, will
discuss InfraREIT's results and financial outlook.
Investors and analysts are invited to participate in the call by
phone at 1-855-560-2576, or internationally at 1-412-542-4162
(access code: 10118255) or via the Internet at
www.InfraREITInc.com. A replay of the call will be available
on the Company's Web site or by phone at 1-877-344-7529, or
internationally at 1-412-317-0088 (access code: 10118255), for a
seven-day period following the call.
Non-GAAP Measures
This press release contains certain
financial measures that are not recognized under generally accepted
principles in the United States of
America ("GAAP"). In particular, InfraREIT uses
Non-GAAP EPS, FFO and AFFO as important supplemental measures of
the Company's operating performance. InfraREIT is no longer
including cash available for distribution ("CAD"); earnings before
interest, taxes, depreciation and amortization ("EBITDA"); and
Adjusted EBITDA. The Company presents non-GAAP performance
measures because management believes they help investors understand
InfraREIT's business, performance and ability to earn and
distribute cash to its stockholders by providing perspectives not
immediately apparent from net income. Reporting on these
measures in InfraREIT's public disclosures also ensures that this
information is available to all of InfraREIT's investors. The
non-GAAP measures presented in this press release are not intended
to be considered in isolation or as a substitute for, or superior
to, the financial information prepared and presented in accordance
with GAAP.
InfraREIT offers these measures to assist users in assessing the
Company's operating performance under GAAP, but these measures are
non-GAAP measures and should not be considered measures of
liquidity, alternatives to net income or indicators of any other
performance measures determined in accordance with GAAP, nor are
they indicative of funds available to fund the Company's cash
needs, including capital expenditures, make payments on the
Company's indebtedness or make distributions. In addition,
InfraREIT's method of calculating these measures may be different
from methods used by other companies and, accordingly, may not be
comparable to similar measures as calculated by other
companies. Investors should not rely on these measures as a
substitute for any GAAP measure, including net income, cash flows
from operating activities or revenues. Reconciliations of
these measures to their most directly comparable GAAP measures are
included in the Schedules to this press release.
About InfraREIT, Inc.
InfraREIT is engaged in owning
and leasing rate-regulated electric transmission assets in the
state of Texas and is structured
as a real estate investment trust. The Company is externally
managed by Hunt Utility Services, LLC, an affiliate of Hunt
Consolidated, Inc. (a diversified holding company based in
Dallas, Texas, and managed by the
Ray L. Hunt family). The Company's shares are traded on the
New York Stock Exchange under the symbol "HIFR." Additional
information on InfraREIT is available at www.InfraREITInc.com.
Forward-Looking Statements
This press release contains
forward-looking statements within the meaning of the federal
securities laws. These statements give InfraREIT management's
current expectations and include projections of results of
operations or financial condition or forecasts of future events.
Words such as "could," "will," "may," "assume," "forecast,"
"strategy," "guidance," "outlook," "target," "expect," "intend,"
"plan," "estimate," "anticipate," "believe" or "project" and
similar expressions are used to identify forward-looking
statements. Without limiting the generality of the foregoing,
forward-looking statements contained in this press release include
InfraREIT's expectations regarding anticipated financial and
operational performance, including projected or forecasted
financial results, distributions to stockholders, capital
expenditures, AFFO-to-debt ratios, capitalization matters and other
forecasted metrics and statements regarding a potential De-REIT
alternative. The assumptions and estimates underlying the
forward-looking statements included in this press release are
inherently uncertain and, though considered reasonable by
InfraREIT's management team as of the date of its preparation, are
subject to a wide variety of significant business, economic and
competitive risks and uncertainties that could cause actual results
to differ materially from those contained in this press release.
Risks and uncertainties that could cause actual results to
differ materially from those indicated in the forward-looking
statements include, among others, the following: (a) decisions by
regulators or changes in governmental policies or regulations with
respect to the Company's organizational structure, lease
arrangements, capitalization, acquisitions and dispositions of
assets, recovery of investments, the Company's authorized rate of
return and other regulatory parameters; (b) the impact of any
De-REIT alternative; (c) the implications of the Company's
relationships with HCI and its affiliates on any transaction or
arrangement that may be proposed with respect to InfraREIT's
business or structure; (d) the Company's current reliance on its
tenant for all of its revenues and, as a result, its dependency on
the tenant's solvency and financial and operating performance; (e)
the amount of available investment to grow the Company's rate base;
(f) the Company's ability to negotiate future rent payments or to
renew leases with its tenant; (g) insufficient cash available to
meet distribution requirements; and (h) the effects of existing and
future tax and other laws and governmental regulations. These
and other applicable uncertainties, factors and risks are described
more fully in the Company's filings with the SEC. For the
above reasons, there can be no assurance that any forward-looking
statements included herein will prove to be indicative of the
Company's future performance or that actual results will not differ
materially from those presented. In no event should the
inclusion of forecasted financial information in this press release
be regarded as a representation by any person that the results
contained in the forecasted financial information will be
achieved.
Any forward-looking statement made by the Company in this press
release is based only on information currently available to
InfraREIT and speaks only as of the date on which it is made.
InfraREIT undertakes no obligation to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise, other than as required by applicable
law.
InfraREIT,
Inc.
CONSOLIDATED
STATEMENTS OF INCOME
(In thousands, except
per share amounts)
(Unaudited)
|
|
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base rent
|
|
$
|
47,827
|
|
|
$
|
40,422
|
|
|
$
|
93,483
|
|
|
$
|
80,046
|
|
Percentage
rent
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total lease
revenue
|
|
|
47,827
|
|
|
|
40,422
|
|
|
|
93,483
|
|
|
|
80,046
|
|
Operating costs
and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and
administrative expense
|
|
|
6,631
|
|
|
|
6,866
|
|
|
|
12,719
|
|
|
|
12,847
|
|
Depreciation
|
|
|
11,992
|
|
|
|
12,982
|
|
|
|
23,569
|
|
|
|
25,669
|
|
Total operating costs
and expenses
|
|
|
18,623
|
|
|
|
19,848
|
|
|
|
36,288
|
|
|
|
38,516
|
|
Income from
operations
|
|
|
29,204
|
|
|
|
20,574
|
|
|
|
57,195
|
|
|
|
41,530
|
|
Other (expense)
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
|
|
(11,070)
|
|
|
|
(10,141)
|
|
|
|
(21,744)
|
|
|
|
(19,839)
|
|
Other income,
net
|
|
|
374
|
|
|
|
17
|
|
|
|
1,107
|
|
|
|
20
|
|
Total other
expense
|
|
|
(10,696)
|
|
|
|
(10,124)
|
|
|
|
(20,637)
|
|
|
|
(19,819)
|
|
Income before
income taxes
|
|
|
18,508
|
|
|
|
10,450
|
|
|
|
36,558
|
|
|
|
21,711
|
|
Income tax (benefit)
expense
|
|
|
(5,428)
|
|
|
|
321
|
|
|
|
(5,142)
|
|
|
|
565
|
|
Net
income
|
|
|
23,936
|
|
|
|
10,129
|
|
|
|
41,700
|
|
|
|
21,146
|
|
Less: Net income
attributable to noncontrolling interest
|
|
|
6,602
|
|
|
|
2,821
|
|
|
|
11,502
|
|
|
|
5,889
|
|
Net income
attributable to InfraREIT, Inc.
|
|
$
|
17,334
|
|
|
$
|
7,308
|
|
|
$
|
30,198
|
|
|
$
|
15,257
|
|
Net income
attributable to InfraREIT, Inc. common stockholders per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.39
|
|
|
$
|
0.17
|
|
|
$
|
0.69
|
|
|
$
|
0.35
|
|
Diluted
|
|
$
|
0.39
|
|
|
$
|
0.17
|
|
|
$
|
0.69
|
|
|
$
|
0.35
|
|
Cash dividends
declared per common share
|
|
$
|
0.25
|
|
|
$
|
0.25
|
|
|
$
|
0.50
|
|
|
$
|
0.50
|
|
Weighted average
common shares outstanding (basic shares)
|
|
|
43,961
|
|
|
|
43,778
|
|
|
|
43,897
|
|
|
|
43,776
|
|
Redemption of
operating partnership units
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Weighted average
dilutive shares outstanding (diluted shares)
|
|
|
43,961
|
|
|
|
43,778
|
|
|
|
43,897
|
|
|
|
43,776
|
|
Due to the
anti-dilutive effect, the computation of diluted
earnings per share does not reflect
the following adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
attributable to noncontrolling interest
|
|
$
|
6,602
|
|
|
$
|
2,821
|
|
|
$
|
11,502
|
|
|
$
|
5,889
|
|
Redemption of
operating partnership units
|
|
|
16,743
|
|
|
|
16,897
|
|
|
|
16,807
|
|
|
|
16,899
|
|
InfraREIT,
Inc.
CONSOLIDATED
BALANCE SHEETS
(In thousands, except
share amounts)
|
|
|
|
June 30,
2018
|
|
|
December 31,
2017
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
2,102
|
|
|
$
|
2,867
|
|
Restricted
cash
|
|
|
1,685
|
|
|
|
1,683
|
|
Due from
affiliates
|
|
|
32,423
|
|
|
|
35,172
|
|
Inventory
|
|
|
7,302
|
|
|
|
6,759
|
|
Prepaids and other
current assets
|
|
|
1,039
|
|
|
|
2,460
|
|
Total current
assets
|
|
|
44,551
|
|
|
|
48,941
|
|
Electric Plant,
net
|
|
|
1,788,991
|
|
|
|
1,772,229
|
|
Goodwill
|
|
|
138,384
|
|
|
|
138,384
|
|
Other
Assets
|
|
|
32,188
|
|
|
|
34,314
|
|
Total
Assets
|
|
$
|
2,004,114
|
|
|
$
|
1,993,868
|
|
Liabilities and
Equity
|
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable and
accrued liabilities
|
|
$
|
22,955
|
|
|
$
|
21,230
|
|
Short-term
borrowings
|
|
|
99,500
|
|
|
|
41,000
|
|
Current portion of
long-term debt
|
|
|
7,957
|
|
|
|
68,305
|
|
Dividends and
distributions payable
|
|
|
15,176
|
|
|
|
15,169
|
|
Accrued
taxes
|
|
|
491
|
|
|
|
5,633
|
|
Total current
liabilities
|
|
|
146,079
|
|
|
|
151,337
|
|
Long-Term Debt,
Less Deferred Financing Costs
|
|
|
837,486
|
|
|
|
841,215
|
|
Regulatory
Liabilities
|
|
|
108,023
|
|
|
|
100,458
|
|
Total
liabilities
|
|
|
1,091,588
|
|
|
|
1,093,010
|
|
Commitments and
Contingencies
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
Common stock, $0.01
par value; 450,000,000 shares authorized; 43,962,167 and
43,796,915 issued and outstanding as of
June 30, 2018 and December 31, 2017, respectively
|
|
|
440
|
|
|
|
438
|
|
Additional paid-in
capital
|
|
|
709,488
|
|
|
|
706,357
|
|
Accumulated
deficit
|
|
|
(41,510)
|
|
|
|
(49,728)
|
|
Total InfraREIT, Inc.
equity
|
|
|
668,418
|
|
|
|
657,067
|
|
Noncontrolling
interest
|
|
|
244,108
|
|
|
|
243,791
|
|
Total
equity
|
|
|
912,526
|
|
|
|
900,858
|
|
Total Liabilities
and Equity
|
|
$
|
2,004,114
|
|
|
$
|
1,993,868
|
|
InfraREIT,
Inc.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In
thousands)
(Unaudited)
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
2018
|
|
|
2017
|
|
Cash flows from
operating activities
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
41,700
|
|
|
$
|
21,146
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
23,569
|
|
|
|
25,669
|
|
Amortization of
deferred financing costs
|
|
|
2,142
|
|
|
|
2,030
|
|
Allowance for funds
used during construction - other funds
|
|
|
(1,094)
|
|
|
|
—
|
|
Equity based
compensation
|
|
|
320
|
|
|
|
285
|
|
Changes in assets and
liabilities:
|
|
|
|
|
|
|
|
|
Due from
affiliates
|
|
|
2,749
|
|
|
|
5,227
|
|
Inventory
|
|
|
(543)
|
|
|
|
104
|
|
Prepaids and other
current assets
|
|
|
(211)
|
|
|
|
(296)
|
|
Accounts payable and
accrued liabilities
|
|
|
(3,390)
|
|
|
|
1,986
|
|
Net cash provided by
operating activities
|
|
|
65,242
|
|
|
|
56,151
|
|
Cash flows from
investing activities
|
|
|
|
|
|
|
|
|
Additions to electric
plant
|
|
|
(31,699)
|
|
|
|
(91,601)
|
|
Proceeds from asset
exchange transaction
|
|
|
1,632
|
|
|
|
—
|
|
Net cash used in
investing activities
|
|
|
(30,067)
|
|
|
|
(91,601)
|
|
Cash flows from
financing activities
|
|
|
|
|
|
|
|
|
Proceeds from
short-term borrowings
|
|
|
92,500
|
|
|
|
65,500
|
|
Repayments of
short-term borrowings
|
|
|
(34,000)
|
|
|
|
(203,000)
|
|
Proceeds from
borrowings of long-term debt
|
|
|
—
|
|
|
|
200,000
|
|
Repayments of
long-term debt
|
|
|
(64,093)
|
|
|
|
(3,869)
|
|
Deferred financing
costs
|
|
|
—
|
|
|
|
(801)
|
|
Dividends and
distributions paid
|
|
|
(30,345)
|
|
|
|
(30,330)
|
|
Net cash (used in)
provided by financing activities
|
|
|
(35,938)
|
|
|
|
27,500
|
|
Net decrease in cash,
cash equivalents and restricted cash
|
|
|
(763)
|
|
|
|
(7,950)
|
|
Cash, cash
equivalents and restricted cash at beginning of period
|
|
|
4,550
|
|
|
|
19,294
|
|
Cash, cash
equivalents and restricted cash at end of period
|
|
$
|
3,787
|
|
|
$
|
11,344
|
|
Schedule 1
InfraREIT,
Inc.
Explanation and Reconciliation of Non-GAAP
EPS
Non-GAAP EPS
InfraREIT defines non-GAAP net
income as net income (loss) adjusted in a manner the Company
believes is appropriate to show its core operational performance,
which includes (a) an adjustment for the difference between the
amount of base rent payments that the Company receives with respect
to the applicable period and the amount of straight-line base rent
recognized under GAAP; (b) adding back the transaction costs
related to the Asset Exchange Transaction; (c) adding back the
professional services fee related to the franchise tax settlement
with the state of Texas; and (d)
removing the effect of the Texas
franchise tax settlement. The Company defines Non-GAAP EPS as
non-GAAP net income (loss) divided by the weighted average shares
outstanding calculated in the manner described in the footnotes
below.
The following tables set forth a reconciliation of net income
attributable to InfraREIT, Inc. per diluted share to Non-GAAP
EPS:
|
|
Three Months Ended
June 30, 2018
|
|
|
Three Months Ended
June 30, 2017
|
|
(In thousands,
except per share amounts, unaudited)
|
|
Amount
|
|
|
Per Share
(5)
|
|
|
Amount
|
|
|
Per Share
(7)
|
|
Net income
attributable to InfraREIT, Inc.
|
|
$
|
17,334
|
|
|
$
|
0.39
|
|
|
$
|
7,308
|
|
|
$
|
0.17
|
|
Net income
attributable to noncontrolling interest
|
|
|
6,602
|
|
|
|
0.39
|
|
|
|
2,821
|
|
|
|
0.17
|
|
Net income
|
|
|
23,936
|
|
|
|
0.39
|
|
|
|
10,129
|
|
|
|
0.17
|
|
Base rent adjustment
(1)
|
|
|
(2,021)
|
|
|
|
(0.03)
|
|
|
|
342
|
|
|
|
—
|
|
Transaction costs
(2)
|
|
|
—
|
|
|
|
—
|
|
|
|
1,937
|
|
|
|
0.03
|
|
Texas franchise tax
professional services fee (3)
|
|
|
1,196
|
|
|
|
0.02
|
|
|
|
—
|
|
|
|
—
|
|
Texas franchise tax
settlement (4)
|
|
|
(5,633)
|
|
|
|
(0.09)
|
|
|
|
—
|
|
|
|
—
|
|
Non-GAAP net
income
|
|
$
|
17,478
|
|
|
$
|
0.29
|
|
|
$
|
12,408
|
|
|
$
|
0.20
|
|
|
|
|
|
Six Months Ended
June 30, 2018
|
|
|
Six Months Ended
June 30, 2017
|
|
(In thousands,
except per share amounts, unaudited)
|
|
Amount
|
|
|
Per Share
(6)
|
|
|
Amount
|
|
|
Per Share
(7)
|
|
Net income
attributable to InfraREIT, Inc.
|
|
$
|
30,198
|
|
|
$
|
0.69
|
|
|
$
|
15,257
|
|
|
$
|
0.35
|
|
Net income
attributable to noncontrolling interest
|
|
|
11,502
|
|
|
|
0.69
|
|
|
|
5,889
|
|
|
|
0.35
|
|
Net income
|
|
|
41,700
|
|
|
|
0.69
|
|
|
|
21,146
|
|
|
|
0.35
|
|
Base rent adjustment
(1)
|
|
|
(2,141)
|
|
|
|
(0.04)
|
|
|
|
1,299
|
|
|
|
0.02
|
|
Transaction costs
(2)
|
|
|
151
|
|
|
|
—
|
|
|
|
1,937
|
|
|
|
0.03
|
|
Texas franchise tax
professional services fee (3)
|
|
|
1,196
|
|
|
|
0.02
|
|
|
|
—
|
|
|
|
—
|
|
Texas franchise tax
settlement (4)
|
|
|
(5,633)
|
|
|
|
(0.09)
|
|
|
|
—
|
|
|
|
—
|
|
Non-GAAP net
income
|
|
$
|
35,273
|
|
|
$
|
0.58
|
|
|
$
|
24,382
|
|
|
$
|
0.40
|
|
|
|
(1)
|
This adjustment
relates to the difference between the timing of cash base rent
payments made under the Company's leases and when the Company
recognizes base rent revenue under GAAP. The Company
recognizes base rent on a straight-line basis over the applicable
term of the lease commencing when the related assets are placed in
service, which is frequently different than the period in which the
cash base rent becomes due.
|
(2)
|
This adjustment
reflects the transaction costs related to the Asset Exchange
Transaction. These costs are exclusive of the Company's
routine business operations or typical rate case costs and have
been excluded to present additional insights on InfraREIT's core
operations.
|
(3)
|
This adjustment
reflects the professional services fee paid by the Company related
to the Texas franchise tax settlement. These costs are
exclusive of the Company's routine business operations and have
been excluded to present additional insights on InfraREIT's core
operations.
|
(4)
|
This adjustment
relates to the potential taxes and associated accrued interest and
penalties that were removed from the Company's Consolidated Balance
Sheets and recognized as an income tax benefit on the Consolidated
Statements of Operations as a result of the franchise tax
settlement with the state of Texas. This adjustment is not
typical of the Company's business operations and has been excluded
to provide additional insights into InfraREIT's core
operations.
|
(5)
|
The weighted average
common shares outstanding of 44.0 million was used to calculate net
income attributable to InfraREIT, Inc. per diluted share. The
weighted average redeemable partnership units outstanding of 16.7
million was used to calculate net income attributable to
noncontrolling interest per share. The combination of the
weighted average common shares and redeemable partnership units
outstanding of 60.7 million was used for the remainder of the per
share calculations.
|
(6)
|
The weighted average
common shares outstanding of 43.9 million was used to calculate net
income attributable to InfraREIT, Inc. per diluted share. The
weighted average redeemable partnership units outstanding of 16.8
million was used to calculate net income attributable to
noncontrolling interest per share. The combination of the
weighted average common shares and redeemable partnership units
outstanding of 60.7 million was used for the remainder of the per
share calculations.
|
(7)
|
The weighted average
common shares outstanding of 43.8 million was used to calculate net
income attributable to InfraREIT, Inc. per diluted share. The
weighted average redeemable partnership units outstanding of 16.9
million was used to calculate net income attributable to
noncontrolling interest per share. The combination of the
weighted average common shares and redeemable partnership units
outstanding of 60.7 million was used for the remainder of the per
share calculations.
|
Schedule 2
InfraREIT,
Inc.
Explanation and Reconciliation of FFO and
AFFO
FFO and AFFO
The National Association of Real
Estate Investment Trusts ("NAREIT") defines FFO as net income
(computed in accordance with GAAP), excluding gains and losses from
sales of property (net) and impairments of depreciated real estate,
plus real estate depreciation and amortization (excluding
amortization of deferred financing costs) and after adjustments for
unconsolidated partnerships and joint ventures. Applying the
NAREIT definition to the Company's consolidated financial
statements, which is the basis for the FFO presented in this press
release and the reconciliations below, results in FFO representing
net income (loss) before depreciation, impairment of assets and
gain (loss) on sale of assets. FFO does not represent cash
generated from operations as defined by GAAP and it is not
indicative of cash available to fund all cash needs, including
distributions.
AFFO is defined as FFO adjusted in a manner the Company believes
is appropriate to show its core operational performance, including:
(a) an adjustment for the difference between the amount of base
rent payments that the Company receives with respect to the
applicable period and the amount of straight-line base rent
recognized under GAAP; (b) adding back the transaction costs
related to the Asset Exchange Transaction; (c) adjusting for other
income (expense), net; (d) adding back the professional services
fee related to the franchise tax settlement with the state of
Texas; and (e) removing the effect of the Texas franchise tax
settlement.
The following table sets forth a reconciliation of net income to
FFO and AFFO:
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
(In thousands,
unaudited)
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Net income
|
|
$
|
23,936
|
|
|
$
|
10,129
|
|
|
$
|
41,700
|
|
|
$
|
21,146
|
|
Depreciation
|
|
|
11,992
|
|
|
|
12,982
|
|
|
|
23,569
|
|
|
|
25,669
|
|
FFO
|
|
|
35,928
|
|
|
|
23,111
|
|
|
|
65,269
|
|
|
|
46,815
|
|
Base rent adjustment
(1)
|
|
|
(2,021)
|
|
|
|
342
|
|
|
|
(2,141)
|
|
|
|
1,299
|
|
Other income, net
(2)
|
|
|
(374)
|
|
|
|
(17)
|
|
|
|
(1,107)
|
|
|
|
(20)
|
|
Transaction costs
(3)
|
|
|
—
|
|
|
|
1,937
|
|
|
|
151
|
|
|
|
1,937
|
|
Texas franchise tax
professional services fee (4)
|
|
|
1,196
|
|
|
|
—
|
|
|
|
1,196
|
|
|
|
—
|
|
Texas franchise tax
settlement (5)
|
|
|
(5,633)
|
|
|
|
—
|
|
|
|
(5,633)
|
|
|
|
—
|
|
AFFO
|
|
$
|
29,096
|
|
|
$
|
25,373
|
|
|
$
|
57,735
|
|
|
$
|
50,031
|
|
|
|
(1)
|
See footnote (1) on
Schedule 1 on Explanation and Reconciliation of Non-GAAP
EPS
|
(2)
|
Includes allowance
for funds used during construction ("AFUDC") on other funds of $0.4
million and $1.1 million for the three and six months ended June
30, 2018. There was no AFUDC on other funds recorded during
the three and six months ended June 30, 2017.
|
(3)
|
See footnote (2) on
Schedule 1 on Explanation and Reconciliation of Non-GAAP
EPS
|
(4)
|
See footnote (3) on
Schedule 1 on Explanation and Reconciliation of Non-GAAP
EPS
|
(5)
|
See footnote (4) on
Schedule 1 on Explanation and Reconciliation of Non-GAAP
EPS
|
Schedule 3
InfraREIT,
Inc.
Explanation and Reconciliation of Forecasted
Guidance for 2018
Forecasted GAAP Net Income Attributable to InfraREIT, Inc.
Per Share to Non-GAAP EPS
The Company provides yearly
guidance for Non-GAAP EPS, which is one of the supplemental
financial measures it uses in evaluating the Company's operating
performance. The Company believes that Non-GAAP EPS helps the
Company and investors better understand the Company's business and
performance by providing perspectives not immediately apparent from
net income.
The following table sets forth a reconciliation of the
forecasted GAAP net income attributable to InfraREIT, Inc. per
share to Non-GAAP EPS for the year ending December 31, 2018:
|
|
Full Year
2018
|
|
(Per share
amounts, unaudited)
|
|
Low
|
|
|
High
|
|
Net income
attributable to InfraREIT, Inc.
|
|
$
|
1.36
|
|
|
$
|
1.46
|
|
Net income
attributable to noncontrolling interest
|
|
|
1.36
|
|
|
|
1.46
|
|
Net
income
|
|
|
1.36
|
|
|
|
1.46
|
|
Base rent
adjustment
|
|
|
(0.08)
|
|
|
|
(0.08)
|
|
Transaction
costs
|
|
|
0.01
|
|
|
|
0.01
|
|
Texas franchise tax
professional services fee
|
|
|
0.02
|
|
|
|
0.02
|
|
Texas franchise tax
settlement
|
|
|
(0.09)
|
|
|
|
(0.09)
|
|
Non-GAAP
EPS
|
|
$
|
1.22
|
|
|
$
|
1.32
|
|
For additional
information, contact:
|
|
For
Investors:
|
Brook
Wootton
|
|
Vice President,
Investor Relations
|
|
InfraREIT,
Inc.
|
|
214-855-6748
|
|
|
For Media:
|
Jeanne
Phillips
|
|
Senior Vice
President, Corporate Engagement & International
Relations
|
|
Hunt Consolidated,
Inc.
|
|
214-978-8534
|
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SOURCE InfraREIT, Inc.