ANNAPOLIS, Md., May 2, 2017 /PRNewswire/ -- Hannon Armstrong
Sustainable Infrastructure Capital, Inc. ("Hannon Armstrong," "we," "our" or the "Company")
(NYSE: HASI), a leading investor in sustainable infrastructure,
including energy efficiency and renewable energy, today reported
earnings as shown in the table below:
|
For the Three Months
Ended
March 31,
2017
|
|
For the Three Months
Ended
March 31,
2016
|
|
$ in
thousands
|
|
Per Share
|
|
$ in
thousands
|
|
Per Share
|
GAAP Net
Income
|
$7,199
|
|
$0.14
|
|
$3,169
|
|
$0.07
|
Core
Earnings(1)
|
$15,496
|
|
$0.32
|
|
$12,196
|
|
$0.32
|
|
|
|
|
"Another strong quarter of putting capital to work in
long-duration, high credit quality assets has taken our balance
sheet over the $2 billion mark,
creating long term recurring revenue streams," said Hannon Armstrong President & CEO,
Jeffrey Eckel. "Looking
forward, we see a strong, diversified pipeline in each of our
efficiency, wind and solar markets, as well as sustainable
infrastructure."
Highlights
- Grew balance sheet to more than $2.0
billion, now totaling over 155 separate investments
- Completed approximately $288
million of transactions in the first quarter, compared to
approximately $213 million in the
same period in 2016
- $64 million raised in follow-on
equity offering
- Delivered 100% quarterly GAAP EPS growth as a result of an
increase in equity method income from new renewable energy project
investments
- Core EPS was flat as a result of lower gain on sale income,
higher interest costs and lower leverage levels following the
March 2017 offering
- Paid $0.33 per share quarterly
dividend, for an annualized yield of 6.0% based on our closing
stock price of $22.11 on May 1,
2017
- Closed an $84 million
SustainableYield® Bond Offering with Moody's Green Bond Assessment
and CarbonCount®
- Debt to equity ratio of 1.9 to 1 as of March 31, 2017
- 64% fixed-rate debt
- Diversified pipeline of over $2.5
billion
(1)The difference between GAAP Net Income and Core
Earnings is primarily the result of adjusting for distributions,
net of an estimated return of capital, from our equity investments
in renewable energy projects and adding back non-cash equity-based
compensation. A reconciliation of our GAAP Net Income to Core
Earnings is included in this press release.
Portfolio
Our Portfolio totaled approximately $1.9
billion as of March 31, 2017,
and included approximately $0.6
billion of energy efficiency and other sustainable
infrastructure investments and approximately $1.3 billion of renewable energy (wind and solar)
transactions. The following is an analysis of our Portfolio by type
of obligor and credit quality as of March
31, 2017:
|
Investment
Grade
|
|
|
|
|
|
Government
(1)
|
Commercial (2)
|
Commercial
Non-
Investment
Grade
(3)
|
Subtotal,
Debt
and
Real
Estate
|
Equity
Method
Investments
|
Total
|
|
|
|
|
|
|
|
(in
millions)
|
|
Financing receivables
and
investments
|
$599
|
$518
|
$21
|
$1,138
|
$ -
|
$1,138
|
Real estate
(4)
|
-
|
289
|
-
|
289
|
21
|
310
|
Equity investments in
renewable
energy projects
|
-
|
-
|
-
|
-
|
428
|
428
|
Total
|
$599
|
$
807
|
$
21
|
$1,427
|
$449
|
$1,876
|
% of Debt and Real
Estate Portfolio
|
42%
|
57%
|
1%
|
100%
|
N/A
|
N/A
|
Average Remaining
Balance (5)
|
$ 12
|
$9
|
$10
|
$10
|
$ 20
|
$11
|
|
|
|
|
(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 $334 million of U.S. federal
government transactions and $265 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, 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 $306 million of internally
rated residential solar loans made on a nonrecourse basis to
special purpose subsidiaries of SunPower Corporation, for which we
rely on certain limited indemnities, warranties and other
obligations of SunPower Corporation or its other
subsidiaries.
|
(3)
|
Transactions where
the projects or the ultimate obligors are commercial entities that
have ratings below investment grade (either by an independent
rating agency or using our internal credit
analysis).
|
(4)
|
Includes the real
estate and the lease intangible assets (including those held
through equity method investments) from which we receive scheduled
lease payments, typically under long-term triple net lease
agreements.
|
(5)
|
Excludes
approximately 125 transactions each with outstanding balances that
are less than $1 million and that in the aggregate total $45
million.
|
First Quarter Financial Results
Revenue grew by over $3 million,
or 16%, in the quarter as compared to last year. Increases
were primarily driven by growth in the Portfolio to $1.9 billion as of March
31, 2017 from $1.4 billion as
of March 31, 2016, offset by
approximately $1 million of lower
gain on sale and fee income. GAAP equity method income grew
by approximately $4 million over
the same quarter last year primarily due to new renewable energy
equity investments.
The growth in both revenue and income from the equity method
investments was offset by an approximately $3 million increase in interest expense for the
three months ended March 31, 2017, as
compared to the same period the previous year. This increase
was primarily the result of higher average levels of debt
outstanding in the first quarter of 2017 as compared to
2016.
Core Earnings grew by $3 million
over the same quarter last year as a result of the above
factors.
Other expenses (compensation and benefits and general and
administrative expenses) increased by $1
million for the three months ended March 31, 2017, as compared to the same period in
2016.
A reconciliation of our GAAP Net Income to Core Earnings is
included in this press release.
An analysis of our fixed-rate debt and leverage ratios is shown
in the chart below.
|
As of
|
|
March 31,
2017
|
|
% of
Total
|
|
March 31,
2016
|
|
% of Total
|
|
($ in
millions)
|
|
|
Floating-rate
borrowings (1)
|
$435
|
|
36%
|
|
$333
|
|
34%
|
Fixed-rate debt
(2)
|
$761
|
|
64%
|
|
$635
|
|
66%
|
Total
|
$1,196
|
|
100%
|
|
$968
|
|
100%
|
Leverage
(3)
|
1.9 to
1
|
|
|
|
2.3 to
1
|
|
|
|
|
(1)
|
Floating-rate
borrowings include borrowings under our floating-rate credit
facilities, including approximately $100 million of newly raised
floating rate debt used to acquire a $146 million portfolio of real
estate assets in February 2017 and approximately $28 million and
approximately $11 million of nonrecourse debt that has not been
hedged as of March 31, 2017, and March 31, 2016,
respectively.
|
(2)
|
Fixed-rate debt also
includes the present notional value of nonrecourse debt that is
hedged using interest rate swaps.
|
(3)
|
Leverage, as measured
by our debt-to-equity ratio. 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 added approximately $100
million of additional fixed rate debt and approximately
$100 million of additional floating
rate debt in the quarter, resulting in a slight decline in our
fixed rate debt as a percentage due to an increase in total debt
levels. Over the next several quarters, we expect to add
additional fixed rate debt as we work towards our increased fixed
rate debt target," said Chief Financial Officer Brendan Herron.
Conference Call and Webcast Information
Hannon Armstrong will host an investor
conference call today, May 2, 2017,
at 5:00 pm eastern time. The
conference call can be accessed live over the phone by dialing
1-800-211-3767, or for international callers, 1-719-457-2617. A
replay will be available beginning two hours after the call
and can be accessed by dialing 1-844-512-2921, or for international
callers, 1-412-317-6671. The passcode for the live call and the
replay is 9706420. The replay will be available until May 9, 2017.
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)
invests in the sustainable infrastructure markets, including energy
efficiency and renewable energy. 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 is
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 that are subject to
risks and uncertainties. For these statements, we claim the
protections of the safe harbor for forward-looking statements
contained in such Sections. These forward-looking statements
include information about possible or assumed future results of our
business, financial condition, liquidity, results of operations,
plans and objectives. 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 or enhance the economic feasibility of sustainable
infrastructure projects, including energy efficiency and renewable
energy 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 invest in sustainable
infrastructure projects, including energy efficiency and renewable
energy 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 capital;
- our or any other companies' projected operating
results;
- actions and initiatives of the federal, state and local
governments and changes to 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;
- rates of default or decreased recovery rates on our
assets
- 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 or
liabilities;
- 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. Our 2016 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
We calculate Core Earnings as U.S. GAAP Net Income excluding
non-cash equity compensation expense, non-cash provision for credit
losses, amortization of intangibles, one-time acquisition related
costs, if any, any non-cash tax charges and add back earnings
attributable to our non-controlling interest. We also make an
adjustment to account for our equity method investments in the
renewable energy projects as described below. In the future, Core
Earnings may also exclude one-time events pursuant to changes in
U.S. GAAP and certain other non-cash charges as approved by a
majority of our independent directors.
Certain of our equity method investments in the renewable energy
projects are structured using typical 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, in many cases, along
with tax attributes. Once this preferred return is achieved, the
partnership flips and the renewable energy company, which operates
the project, receives more of the cash flows through its equity
interests with the institutional investors retaining an ongoing
residual interest. The cash flows in renewable energy
projects are often significantly different from the net income due
to high levels of depreciation and other non-cash expense and the
agreed upon allocation of cash flow in a project with these
preferred returns may be different than the profit and loss
allocation.
Under U.S. GAAP, we account for these investments utilizing the
hypothetical liquidation at book value method ("HLBV"). Under
this method, we recognize income or loss based on the change in the
amount each partner would receive, typically based on the profit
and loss allocation, if the assets were liquidated at book value,
after adjusting for any distributions or contributions made during
such quarter. Given the structure of the investments, we negotiated
the purchase prices of our renewable energy investments based on
our assessment of the expected cash flows we will receive 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. In an attempt to treat these investments in a
manner similar to our other investments and our initial valuation
and because we are entitled to receive a preferred return of cash
flows on our investments independent of how profits and losses are
allocated, in calculating Core Earnings for the below periods, we
include as Core Earnings the distributions received from these
investments less an estimated return of capital. Generally, under
this methodology, we reflect our initial capital investment as
being amortized over the life of the project using a constant
yield. The initial constant 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 expected amortization for
purposes of calculating Core Earnings 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 in certain of our equity
investment transactions is projected to change in 2019, which is
expected to result in an increase of the amount of HLBV profits or
losses allocated to us.
For the three months ended March 31,
2017, we collected cash distributions from our equity
investments of approximately $17
million. We recognized $4
million under GAAP for our equity method investments and an
additional $5 million for our Core
Earnings adjustment based upon the constant yield methodology
discussed above.
We believe that Core Earnings provides an additional measure of
our core operating performance by eliminating the impact of certain
non-cash expenses and facilitating a comparison of our financial
results to those of other comparable REITs with fewer or no
non-cash charges and comparison of our own operating results from
period to period. Our management uses Core Earnings in this way. We
believe that our investors also use Core Earnings, or a comparable
supplemental performance measure, to evaluate and compare our
performance to that of our peers, and as such, we believe that the
disclosure of Core Earnings is useful to (and expected by) our
investors.
However, Core Earnings does not represent cash generated from
operating activities in accordance with U.S. GAAP and should not be
considered as an alternative to net income (determined in
accordance with U.S. GAAP), or an indication of our cash flow from
operating activities (determined in accordance with U.S. 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 Core
Earnings 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.
Reconciliation of our GAAP Net Income to Core
Earnings
We have calculated our Core Earnings and provided a
reconciliation of our GAAP Net Income to Core Earnings for the
three months ended March 31, 2017 and
2016 in the tables below:
|
Three Months Ended
March 31,
|
|
2017
|
|
2016
|
|
$
|
|
Per
Share
|
|
$
|
|
Per
Share
|
|
(dollars in
thousands, except per share amounts)
|
Net Income
attributable to controlling stockholders
|
$
7,199
|
|
$
0.14
|
|
$
3,169
|
|
$
0.07
|
Core Earnings
Adjustments
|
|
|
|
|
|
|
|
Equity method
investments (1)
|
5,178
|
|
|
|
6,641
|
|
|
Non-cash equity-based
compensation charges (2)
|
2,569
|
|
|
|
2,008
|
|
|
Other Core Adjustments
(3)
|
550
|
|
|
|
378
|
|
|
Core Earnings
(4)
|
$
15,496
|
|
$0.32
|
|
$12,196
|
|
$0.32
|
(1)
|
Reflects adjustment for
equity method investments described above.
|
(2)
|
Reflects adjustment for
non-cash equity based compensation.
|
(3)
|
See detail
below.
|
(4)
|
Core Earnings per share
for the three months ended March 31, 2017 and March 31, 2016, are
based on 49,080,573 shares and 38,591,182 shares outstanding,
respectively, which represent the weighted average number of fully
diluted shares outstanding during such period and includes the
unvested restricted stock grants and the shares issuable upon
redemption of limited partnership interests in the operating
partnership as the income attributable to the non-controlling
interest is also included.
|
|
|
The table below provides a reconciliation of the Other Core
Adjustments:
|
For the Three
Months Ended
|
|
|
March 31,
2017
|
|
March 31,
2016
|
|
|
($ in
thousands)
|
Other Core
Adjustments:
|
|
|
|
|
Real estate
intangibles (1)
|
$457
|
|
$299
|
|
Amortization
of intangibles (2)
|
50
|
|
51
|
|
Net
income attributable to non-controlling interest
|
43
|
|
28
|
|
Other Core
Adjustments
|
$550
|
|
$378
|
|
|
|
|
|
|
|
(1)
|
Reflects add back of
non-cash amortization of lease intangibles.
|
(2)
|
Adds back non-cash
amortization of pre IPO intangibles.
|
The table below provides a reconciliation of the GAAP SG&A
Expenses to Core SG&A Expenses:
|
For the Three
Months Ended
|
|
|
March 31,
2017
|
|
March 31,
2016
|
|
|
($ in
thousands)
|
GAAP SG&A
Expenses
|
|
|
|
|
Compensation and
benefits
|
$4,726
|
|
$4,418
|
|
General and
administrative
|
2,188
|
|
1,816
|
|
Total SG&A
Expenses (GAAP)
|
6,914
|
|
6,234
|
|
Adjustments:
|
|
|
|
|
Non-cash equity-based compensation
charge (1)
|
(2,569)
|
|
(2,008)
|
|
Amortization of
intangibles (2)
|
(50)
|
|
(51)
|
|
Core SG&A
Expenses Adjustments
|
(2,619)
|
|
(2,059)
|
|
Core SG&A
Expenses
|
$4,295
|
|
$4,175
|
|
|
|
|
|
|
|
(1)
|
Reflects add back of
non-cash amortization of stock based compensation.
Outstanding grants related to stock based compensation are included
in Core Earnings per share calculation.
|
(2)
|
Adds back non-cash
amortization of pre IPO intangibles.
|
HANNON ARMSTRONG
SUSTAINABLE INFRASTRUCTURE CAPITAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
|
|
For the Three
Months Ended March
31,
|
|
2017
|
|
2016
|
Revenue:
|
|
|
|
Interest income,
financing receivables
|
$
14,118
|
|
$
11,489
|
Interest income,
investments
|
942
|
|
375
|
Rental
income
|
4,110
|
|
2,815
|
Gain on sale of receivables and investments
|
3,949
|
|
5,502
|
Fee
income
|
681
|
|
302
|
Total
Revenue
|
23,800
|
|
20,483
|
Expenses:
|
|
|
|
Interest
expense
|
13,783
|
|
11,275
|
Compensation and
benefits
|
4,726
|
|
4,418
|
General and
administrative
|
2,188
|
|
1,816
|
Total
Expenses
|
20,697
|
|
17,509
|
Income before
equity method investments
|
3,103
|
|
2,974
|
Income (loss) from
equity method investments
|
4,171
|
|
270
|
Income before
income taxes
|
7,274
|
|
3,244
|
Income tax (expense)
benefit
|
(32)
|
|
(47)
|
Net Income
(loss)
|
$
7,242
|
|
$
3,197
|
Net income
attributable to non-controlling interest holders
|
43
|
|
28
|
Net Income (loss)
attributable to Controlling Shareholders
|
$
7,199
|
|
$
3,169
|
Basic earnings per common
share
|
$
0.14
|
|
$
0.07
|
Diluted earnings per common
share
|
$
0.14
|
|
$
0.07
|
Weighted average
common shares outstanding—basic
|
47,497,107
|
|
37,016,210
|
Weighted average
common shares outstanding—diluted
|
47,497,107
|
|
37,016,210
|
HANNON ARMSTRONG
SUSTAINABLE INFRASTRUCTURE CAPITAL, INC.
CONSOLIDATED BALANCE SHEET
($ IN THOUSANDS,
EXCEPT PER SHARE DATA)
|
|
|
March
31,
2017
|
|
December
31,
2016
|
Assets
|
(unaudited)
|
|
|
Financing
receivables
|
$
1,012,522
|
|
$
1,042,237
|
Investments
|
124,859
|
|
58,058
|
Real
estate
|
288,602
|
|
172,257
|
Equity method
investments
|
449,165
|
|
363,297
|
Cash and cash
equivalents
|
16,331
|
|
29,428
|
Other
assets
|
151,715
|
|
80,610
|
Total
Assets
|
$
2,043,194
|
|
$
1,745,887
|
Liabilities and
Stockholders' Equity
|
|
|
|
Liabilities:
|
|
|
|
Accounts payable, accrued
expenses and other
|
$
35,475
|
|
$
25,219
|
Deferred funding
obligations
|
174,601
|
|
170,892
|
Credit
facilities
|
406,487
|
|
283,346
|
Nonrecourse debt
(secured by assets
of $954 million and
$864 million, respectively)
|
789,827
|
|
692,091
|
Total
Liabilities
|
1,406,390
|
|
1,171,548
|
|
|
|
|
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,
50,194,089 and 46,493,155 shares issued and outstanding,
respectively
|
502
|
|
465
|
Additional paid in
capital
|
734,625
|
|
663,744
|
Accumulated
deficit
|
(102,090)
|
|
(92,213)
|
Accumulated other
comprehensive income (loss)
|
64
|
|
(1,388)
|
Non-controlling
interest
|
3,703
|
|
3,731
|
Total Stockholders'
Equity
|
636,804
|
|
574,339
|
Total Liabilities
and Stockholders' Equity
|
$
2,043,194
|
|
$
1,745,887
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/hannon-armstrong-announces-q1-2017-gaap-earnings-per-share-of-014-and-core-earnings-per-share-of-032-300449885.html
SOURCE Hannon Armstrong Sustainable Infrastructure Capital,
Inc.