ANNAPOLIS, Md., May 4, 2016 /PRNewswire/ -- Hannon Armstrong
Sustainable Infrastructure Capital, Inc. ("Hannon Armstrong," "we," "our" or the "Company;"
NYSE: HASI), a leading provider of debt and equity financing to the
energy efficiency and renewable energy markets, today reported Core
Earnings, a non GAAP financial measure for the quarter ended
March 31, 2016, were $12.2 million, or $0.32 per share, as compared to $7.4 million, or $0.27 per share, in the same period in 2015, a
19% increase per share.
On a GAAP basis, the Company recorded net income for the quarter
ended March 31, 2016, of $3.2 million, or $0.07 per share, as compared to $2.1 million, or $0.07 per share, in the same period in 2015. A
reconciliation of our Core Earnings to GAAP net income is included
in this press release.
"We continued to execute in the quarter, just as we have since
we went public three years ago and that discipline has helped us
produce an excellent quarter and total stockholder return of over
100% since the IPO," said Chairman and CEO Jeffrey Eckel. "Our efficiency, wind and solar
markets continue to be robust and our pipeline remains strong at
more than $2.5 billion."
Highlights
- Closed $213 million of
transactions in the first quarter of 2016 compared to $104 million in the same period in 2015
- 19% quarterly Core EPS Growth over first quarter 2015
- $0.30 per share quarterly
dividend, for an annualized yield of 6.1% based on our closing
stock price of $19.65 on May 3, 2016
- Grew balance sheet to approximately $1.5
billion, with over 110 separate investments
- Gross asset yield increased to 6.3%, from 6.2% at December 31, 2015
- Achieved 66% fixed rate debt target
- Debt to equity ratio of 2.3 to 1 as of March 31, 2016
- Maintained a diversified pipeline of over $2.5 billion
"Our investment thesis of earning better risk adjusted returns
from investing on the right side of the climate line, combined with
our preference for senior and preferred positions in quality
assets, continues to benefit us during this period of energy and
financial market volatility," said Mr. Eckel.
Portfolio
Our Portfolio totaled approximately $1.4
billion as of March 31, 2016,
and included $387 million of energy
efficiency investments, $955 million
of renewable energy (wind and solar) transactions and $23 million of other sustainable infrastructure
investments. The following is an analysis of our Portfolio by type
of obligor and credit quality as of March
31, 2016:
|
Investment
Grade
|
|
|
|
Total
|
|
Government
(1)
|
Commercial
Investment
Grade(2)
|
Commercial
Non-
Investment
Grade (3)
|
Subtotal,
Debt
and
Real
Estate
|
Equity
Method
Investments(4)
|
|
|
(dollars in
millions)
|
|
Financing
receivables
|
$ 374
|
$ 428
|
$ 17
|
$ 819
|
$ —
|
$ 819
|
Financing receivables
held-for-sale
|
42
|
—
|
—
|
42
|
—
|
42
|
Investments
|
21
|
16
|
—
|
37
|
—
|
37
|
Real
estate(5)
|
—
|
163
|
—
|
163
|
—
|
163
|
Equity method
investments
|
—
|
—
|
—
|
—
|
304
|
304
|
Total
|
$ 437
|
$ 607
|
$
17
|
$ 1,061
|
$ 304
|
$ 1,365
|
% of Debt and Real
Estate Portfolio
|
41%
|
57%
|
2%
|
100%
|
N/A
|
N/A
|
Average Remaining
Balance(6)
|
$ 12
|
$ 10
|
$ 17
|
$ 11
|
$ 25
|
$ 12
|
(1)
|
Transactions where
the ultimate obligor is the U.S. federal government or state or
local governments where the obligors are rated investment grade
(either by an independent rating agency or based upon our internal
credit analysis). This amount includes $260 million of U.S. federal
government transactions
and $177 million of transactions where the ultimate obligors are
state or local governments. Transactions may have guaranties
of energy savings from third
party service providers, the majority of which are entities rated
investment grade by an independent rating agency.
|
(2)
|
Transactions where
the projects or the ultimate obligors are commercial entities,
including institutions such as hospitals or universities, that
have been rated
investment grade (either by an independent rating agency or based
on our internal credit analysis). Of this total, $11 million
of the transactions have been rated
investment grade by an independent rating agency. Commercial
investment grade financing receivables include $174 million of
internally rated residential solar
loans where the cash flows which support our financing receivables
are subordinated to the tax equity investors (whose return is
largely derived from the
renewable energy tax incentives) and for which we rely on certain
tax related indemnities of the publicly traded residential solar
provider.
|
(3)
|
Transactions where
the projects or the ultimate obligors are commercial entities,
including institutions such as hospitals or universities, that
have ratings below investment grade (either by an independent
rating agency or using our internal credit
analysis).
|
(4)
|
Consists of ownership
interests in operating wind projects.
|
(5)
|
Includes the real
estate and the lease intangible assets through which we receive
scheduled lease payments, typically under long-term triple net
lease agreements.
|
(6)
|
Excludes 79
transactions each with outstanding balances that are less than $1
million and that in the aggregate total $28 million.
|
First Quarter Financial Results
Hannon Armstrong reported
first-quarter 2016 Core Earnings of $12.2
million, or $0.32 per share,
as compared with Core Earnings of $7.4
million, or $0.27 per share,
in first quarter 2015. The Core Total Revenue increase of
approximately $11 million was offset
by higher interest expense of approximately $5 million and higher Core Other Expenses, net of
approximately $1 million.
As of March 31, 2016, we had 66%
of our debt at fixed rates as shown in the chart below:
|
March 31, 2016
|
|
% of
Total
|
|
($ in
millions)
|
|
|
Floating-Rate
Borrowings
|
$ 333
|
|
34%
|
Fixed-Rate
debt
|
635
|
|
66%
|
Total Debt(1)
|
$ 968
|
|
100%
|
|
(1) Floating-Rate
Borrowings include borrowings under our floating-rate Credit
Facility and approximately $11 million of nonrecourse debt that
has not been hedged. Fixed-Rate debt includes the present
notional value of nonrecourse debt that is hedged using interest
rate swaps.
|
As of March 31, 2016, leverage, as
measured by our debt-to-equity ratio, was 2.3 to 1. This
calculation excludes securitizations that are not consolidated on
our balance sheet (where the collateral is typically financing
receivables with U.S. government obligors).
"We continue to execute towards our 2.5 to 1 leverage target and
utilize our long-standing securitization platform in order to
minimize equity capital requirements in 2016," said Chief Financial
Officer Brendan Herron. "We have
become more flexible in the timing of equity capital raises, which
is especially important in periods of market volatility."
Conference Call and Webcast Information
Hannon Armstrong will host an investor
conference call today, May 4, 2016 at
5:00 pm eastern time. The conference
call can be accessed live over the phone by dialing 1-800-289-0508,
or for international callers, 1-913-312-0658. A replay will be
available beginning two hours after the call until May 11, 2016 and can be accessed by dialing
1-877-870-5176, or for international callers, 1-858-384-5517. The
passcode for the live call and the replay is 4282853.
A webcast of the conference call will also be available through
the Investor Relations section of our website, at
www.hannonarmstrong.com. A copy of this press release is also
available on our website.
About Hannon
Armstrong
Hannon
Armstrong (NYSE: HASI) provides debt and equity financing to
the energy efficiency and renewable energy markets. We focus
on providing preferred or senior level capital to established
sponsors and high credit quality obligors for assets that generate
long-term, recurring, and predictable cash flows. We are based
in Annapolis, Maryland.
Forward-Looking Statements
Some of the information contained in this press release are
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. When used in this
press release, the words such as "believe," "expect," "anticipate,"
"estimate," "plan," "continue," "intend," "should," "may,"
"target," or similar expressions, are intended to identify such
forward-looking statements. Forward-looking statements are subject
to significant risks and uncertainties. Investors are cautioned
against placing undue reliance on such statements. Actual results
may differ materially from those set forth in the forward-looking
statements. Factors that could cause actual results to differ
materially from those described in the forward-looking statements
include those discussed under the caption "Risk Factors" included
in our most recent Annual Report on Form 10-K filed with the U.S.
Securities and Exchange Commission, as well as in other reports
that we file with the SEC. Statements regarding the following
subjects, among others, may be forward-looking:
- our expected returns and performance of our
investments;
- the state of government legislation, regulation and policies
that support energy efficiency, renewable energy and sustainable
infrastructure projects and that enhance the economic feasibility
of energy efficiency, renewable energy and sustainable
infrastructure projects and the general market demands for such
projects;
- market trends in our industry, energy markets, commodity
prices, interest rates, the debt and lending markets or the general
economy;
- our business and investment strategy;
- availability of opportunities to finance energy efficiency,
renewable energy and sustainable infrastructure projects and our
ability to complete potential new opportunities in our
pipeline;
- our relationships with originators, investors, market
intermediaries and professional advisers;
- competition from other providers of financing;
- our or any other companies' projected operating
results;
- actions and initiatives of the U.S. federal, state and local
governments and changes to U.S. federal, state and local government
policies, regulations, tax laws and rates and the execution and
impact of these actions, initiatives and policies;
- the state of the U.S. economy generally or in specific
geographic regions, states or municipalities; economic trends and
economic recoveries;
- our ability to obtain and maintain financing arrangements on
favorable terms, including securitizations;
- general volatility of the securities markets in which we
participate;
- changes in the value of our assets, our portfolio of assets
and our investment and underwriting process;
- interest rate and maturity mismatches between our assets and
any borrowings used to fund such assets;
- changes in interest rates and the market value of our assets
and target assets;
- changes in commodity prices;
- effects of hedging instruments on our assets;
- rates of default or decreased recovery rates on our
assets;
- the degree to which our hedging strategies may or may not
protect us from interest rate volatility;
- impact of and changes in accounting guidance and similar
matters;
- our ability to maintain our qualification, as a real estate
investment trust for U.S. federal income tax purposes (a
"REIT");
- our ability to maintain our exception from registration
under the Investment Company Act of 1940, as amended (the "1940
Act");
- availability of qualified personnel;
- estimates relating to our ability to make distributions to
our stockholders in the future; and
- our understanding of our competition.
Forward-looking statements are based on beliefs, assumptions
and expectations as of the date of this press
release. Any forward-looking statement speaks only as
of the date on which it is made. New risks and uncertainties arise
over time, and it is not possible for us to predict those events or
how they may affect us. Except as required by law, we are not
obligated to, and do not intend to, update or revise any
forward-looking statements after the date of this earnings release,
whether as a result of new information, future events or
otherwise.
The risks included here are not exhaustive. Other sections of
our 2015 Form 10-K or other regulatory filings may include
additional factors that could adversely affect our business and
financial performance. Moreover, we operate in a very
competitive and rapidly changing environment. New risk factors
emerge from time to time and it is not possible for management to
predict all such risk factors, nor can it assess the impact of all
such risk factors on our business or the extent to which any
factor, or combination of factors, may cause actual results to
differ materially from those contained in any forward‑looking
statements. Given these risks and uncertainties,
investors should not place undue reliance on forward‑looking
statements as a prediction of actual results.
Investor Relations
410-571-6189
investors@hannonarmstrong.com
EXPLANATORY NOTES
Non-GAAP Financial Measures
Core Earnings
Core Total Revenue, Core Total Investment Revenue, net of
investment interest expense and provision, Core Other Expenses, net
and Core Earnings (collectively "Core Financial Metrics") are
non-GAAP financial measures. The Core Total Revenue amounts
reflects the wind equity investments adjusted to an effective
interest method and the add-back of non-cash real estate intangible
amortization and the provision for credit losses, if any.
Our equity method investments in the wind projects are
structured using typical wind partnership "flip" structures where
we, along with other institutional investors, if any, receive a
pre-negotiated preferred return consisting of priority
distributions from the project cash flows along with tax
attributes. Once this preferred return is achieved, the partnership
flips and the wind energy company, which operates the project,
receives the majority of the cash flows through its equity
interests with the institutional investors retaining an ongoing
residual interest. Given this structure, we negotiated our
purchase price of our wind investments based on our assessment of
the expected cash flows from each investment discounted back to net
present value based on a discount rate that represented an expected
yield on the investment. This is similar to how we value the
expected cash flows in financing receivables. Under U.S. GAAP, we
are required to account for these investments utilizing the
hypothetical liquidation at book value method ("HLBV"), in which we
recognize income or loss based on the change in the amount each
partner would receive if the assets were liquidated at book value,
in this case, at the end of the immediately preceding quarter after
adjusting for any distributions or contributions made during such
quarter. As HLBV incorporates non-cash items, such as
depreciation, and because we are entitled to receive a preferred
return of cash flows on our investments independent of how profits
and losses are allocated, the HLBV allocation does not, in our
opinion, reflect the economics of our investments. As a result, and
in an attempt to treat these investments in a manner similar to our
other investments and our initial valuation, in calculating Core
Total Revenue for the above periods, we adjusted the income we
receive from these investments as if we were recognizing income or
loss based on an effective interest methodology. Generally, under
this methodology, income is recognized over the life of the asset
using a constant effective yield. The initial constant
effective yield we selected is equal to the discount rates we
determined when making our investment decisions. On at least a
quarterly basis, we will review and, if appropriate, adjust the
discount rates and the income or loss we receive from these
investments for purposes of calculating Core Total Revenue in
future periods, as necessary, to reflect changes in both actual
cash flows received and our estimates of the future cash flows from
the projects. Our allocation of profits and losses is projected to
change in 2019 in our transactions with JPMorgan Chase & Co.
("JPMorgan"), which is expected to result in an increase of the
amount of HLBV profits or losses allocated to us.
We have borrowed approximately $225
million on a nonrecourse basis as of March 31, 2016, using our equity method
investments as collateral. Included in our U.S. GAAP
investment interest expense for the three months ended March 31, 2016, was approximately $4 million of interest expense related to these
nonrecourse loans. For the three months ended March 31, 2016, we collected cash distributions
from our wind investments of approximately $16 million, of which $7
million represents our Core Earnings adjustment for these
investments based upon the effective yield methodology discussed
above.
Core Other Expenses, net reflects the add back of non-cash
equity-based compensation, amortization of intangible assets, GAAP
HLBV income or loss on our equity method investments, and business
acquisition costs, if any. Core Earnings represent earnings
utilizing the adjustments for Core Total Revenue and Core Other
Expenses, net and adjusting for any non-cash taxes and the minority
interest. Our Core Financial Metrics are also adjusted to exclude
one-time events pursuant to changes in GAAP and certain other
non-cash charges, if any, as approved by a majority of our
independent directors.
We believe that the Core Financial Metrics provide additional
measures of our core operating performance by eliminating the
impact of certain non-cash income and expenses and facilitating a
comparison of our financial results to those of other comparable
REITs with fewer or no non-cash charges and a comparison of our
operating results from period to period. Our management uses Core
Financial Metrics in this way. We believe that our investors also
use our Core Financial Metrics or a comparable supplemental
performance measure to evaluate and compare our performance to our
peers, and as such, we believe that the disclosure of our Core
Financial Metrics is useful to our investors.
Core Earnings does not represent cash generated from operating
activities in accordance with GAAP and should not be considered as
an alternative to net income (determined in accordance with GAAP),
or an indication of our cash flows from operating activities
(determined in accordance with GAAP), a measure of our liquidity or
an indication of funds available to fund our cash needs, including
our ability to make cash distributions. In addition, our
methodology for calculating our Core Financial Metrics may differ
from the methodologies employed by other REITs to calculate the
same or similar supplemental performance measures, and accordingly,
our reported Core Earnings may not be comparable to the Core
Earnings reported by other REITs.
The table below provides a reconciliation of the GAAP Total
Revenue to Core Total Revenue:
|
For the
Three Months Ended
|
|
March 31,
2016
|
|
March 31,
2015
|
|
($ in
thousands)
|
|
|
Total Revenue
(GAAP)
|
$20,483
|
|
$13,908
|
Adjustments:
|
|
|
|
Real estate
intangibles (1)
|
299
|
|
149
|
Equity affiliate
adjustment (2)
|
6,911
|
|
2,830
|
Core Total Revenue,
Adjustments
|
7,210
|
|
2,979
|
Core Total
Revenue
|
$27,693
|
|
$16,887
|
|
(1)
|
Reflects
add-back of non-cash amortization of lease intangibles primarily
related to in-place leases for land acquired in a business
combination under GAAP.
|
(2)
|
See discussion of
Core Earnings above.
|
The table below provides a reconciliation of the GAAP Other
Expenses, net to Core Other Expenses, net:
|
For the Three
Months Ended
|
|
March 31,
2016
|
|
March 31,
2015
|
|
($ in
thousands)
|
|
|
|
|
Other Expenses, net
(GAAP)
|
$5,964
|
|
$5,636
|
|
|
|
|
Adjustments:
|
|
|
|
Non-cash
equity-based compensation charge (1)
|
(2,008)
|
|
(2,201)
|
|
|
|
|
Equity method income (loss)
|
270
|
|
(53)
|
Amortization of
intangibles (2)
|
(51)
|
|
(50)
|
Core Other Expenses,
net Adjustments
|
(1,789)
|
|
(2,304)
|
Core Other
Expenses, net
|
$4,175
|
|
$3,332
|
(1)
|
Reflects add-back of
non-cash amortization of equity-based compensation. Outstanding
shares related to equity-based compensation are included in the
Core Earnings per share calculation.
|
(2)
|
Adds back non-cash
amortization of pre IPO intangibles.
|
We calculated our Core Earnings and provide a reconciliation of our
net income to Core Earnings for the three months ended March 31, 2016 and 2015, respectively, in the
table below:
|
For the
Three
Months Ended
|
For the
Three
Months Ended
|
|
March 31, 2016
|
Per Share
|
|
March 31,
2015
|
Per Share
|
|
($ in
thousands, except per share data)
|
Net income
attributable to controlling shareholders
|
$3,169
|
|
$0.07
|
|
$2,122
|
|
|
$0.07
|
Adjustments:
|
Core Total Revenue,
Adjustments
|
7,210
|
|
|
2,979
|
|
|
|
Core Other Expenses,
net Adjustments
|
1,789
|
|
|
2,304
|
|
|
|
Net income
attributable to minority interest
|
28
|
|
|
25
|
|
|
|
Non-cash provision for
taxes
|
-
|
|
|
|
(27)
|
|
|
|
Core
Earnings(1)
|
$12,196
|
|
$0.32
|
|
$7,403
|
|
|
$0.27
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Core Earnings per
share for the three months ended March 31, 2016 and 2015,
respectively, are based on 38,591,182 shares and 27,774,980 shares,
respectively, which represent the weighted average number of fully
diluted shares outstanding and includes the share equivalent of the
minority interest in our Operating Partnership, as the income
attributable to the minority interest is also included.
|
HANNON ARMSTRONG
SUSTAINABLE INFRASTRUCTURE CAPITAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
|
|
|
For the Three
Months Ended
March 31,
|
|
2016
|
2015
|
Revenue:
|
|
|
Interest income,
financing receivables
|
$ 11,489
|
$ 8,328
|
Interest income, investments
|
375
|
396
|
Rental
income
|
2,815
|
2,088
|
Gain on sale of
receivables and investments
|
5,502
|
2,870
|
Fee income
|
302
|
226
|
Total
Revenue
|
20,483
|
13,908
|
Investment interest
expense
|
(11,275)
|
(6,148)
|
Provision for credit
losses
|
-
|
-
|
Total Revenue, net
of investment interest expense and provision
|
9,208
|
7,760
|
Compensation and
benefits
|
(4,418)
|
(3,851)
|
General and
administrative
|
(1,934)
|
(1,505)
|
Other, net
|
118
|
(227)
|
Income (loss) from
equity method investments in affiliates
|
270
|
(53)
|
Other Expenses,
net
|
(5,964)
|
(5,636)
|
Net income before
income taxes
|
3,244
|
2,124
|
Income tax (expense)
benefit
|
(47)
|
23
|
Net
Income
|
$
3,197
|
$
2,147
|
Net income
attributable to non-controlling interest holders
|
28
|
25
|
Net Income
Attributable to Controlling Shareholders
|
$
3,169
|
$
2,122
|
Basic earnings per
common share
|
$
0.07
|
$
0.07
|
Diluted earnings per
common share
|
$
0.07
|
$
0.07
|
Weighted average
common shares outstanding—basic
|
37,016,210
|
26,386,080
|
Weighted average
common shares outstanding—diluted
|
37,016,210
|
26,386,080
|
HANNON ARMSTRONG
SUSTAINABLE INFRASTRUCTURE CAPITAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2016 and DECEMBER 31, 2015
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
|
|
|
March 31,
2016
|
December 31,
2015
|
Assets
|
|
|
Financing
receivables
|
$ 818,789
|
$ 783,967
|
Financing receivables
held-for-sale
|
42,041
|
60,376
|
Investments
available-for-sale
|
36,733
|
29,017
|
Real estate
|
131,695
|
128,769
|
Real estate related
intangible assets
|
31,032
|
26,930
|
Equity method
investments in affiliates
|
304,180
|
318,769
|
Cash and cash
equivalents
|
26,585
|
42,645
|
Other
assets
|
85,922
|
79,148
|
Total
Assets
|
$ 1,476,977
|
$ 1,469,621
|
Liabilities and
Stockholders' Equity
|
|
|
Liabilities:
|
|
|
Accounts payable,
accrued expenses and other
|
$ 22,899
|
$ 17,875
|
Deferred funding
obligations
|
62,541
|
108,499
|
Credit
facility
|
321,944
|
247,350
|
Asset-backed
nonrecourse debt (secured by assets
of $701 million and $718 million, respectively)
|
551,691
|
563,189
|
Other nonrecourse debt
(secured by financing receivables of
$91 million and $97 million, respectively)
|
94,231
|
100,602
|
Total
Liabilities
|
1,053,306
|
1,037,515
|
|
|
|
Stockholders'
Equity:
|
|
|
Preferred stock, par
value $0.01 per share, 50,000,000 shares
authorized, no shares issued and outstanding
|
—
|
—
|
Common stock, par
value $0.01 per share, 450,000,000 shares
authorized, 37,030,467 and 37,010,603 shares issued and
outstanding, respectively
|
370
|
370
|
Additional paid in
capital
|
485,756
|
482,431
|
Retained
deficit
|
(61,202)
|
(52,701)
|
Accumulated other
comprehensive loss
|
(5,091)
|
(1,905)
|
Non-controlling
interest
|
3,838
|
3,911
|
Total Stockholders'
Equity
|
423,671
|
432,106
|
Total Liabilities
and Stockholders' Equity
|
$ 1,476,977
|
$ 1,469,621
|
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SOURCE Hannon Armstrong Sustainable Infrastructure Capital,
Inc.