AMERESCO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
2020
|
|
2019
|
|
Cash flows from operating activities:
|
|
|
|
|
Net income
|
$
|
33,161
|
|
|
$
|
19,709
|
|
|
Adjustments to reconcile net income to cash flows from operating activities:
|
|
|
|
|
Depreciation of energy assets
|
28,496
|
|
|
26,338
|
|
|
Depreciation of property and equipment
|
2,492
|
|
|
2,115
|
|
|
Amortization of debt discount and deferred financing fees
|
1,849
|
|
|
1,734
|
|
|
Amortization of intangible assets
|
528
|
|
|
681
|
|
|
Accretion of ARO and contingent consideration
|
64
|
|
|
98
|
|
|
Recoveries of bad debts
|
(1,089)
|
|
|
(134)
|
|
|
Loss on disposal / impairment of long-lived assets
|
2,146
|
|
|
—
|
|
|
Gain on deconsolidation of VIE
|
—
|
|
|
(2,160)
|
|
|
Net loss (gain) from derivatives
|
971
|
|
|
(1,072)
|
|
|
Stock-based compensation expense
|
1,380
|
|
|
1,195
|
|
|
Deferred income taxes
|
5,146
|
|
|
152
|
|
|
|
|
|
|
|
Unrealized foreign exchange (gain) loss
|
(43)
|
|
|
149
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
(21,178)
|
|
|
(4,468)
|
|
|
Accounts receivable retainage
|
(7,422)
|
|
|
(3,079)
|
|
|
Federal ESPC receivable
|
(160,231)
|
|
|
(110,374)
|
|
|
Inventory, net
|
155
|
|
|
(2,137)
|
|
|
Costs and estimated earnings in excess of billings
|
24,824
|
|
|
(23,130)
|
|
|
Prepaid expenses and other current assets
|
3,916
|
|
|
(11,084)
|
|
|
Project development costs
|
(2,557)
|
|
|
(5,641)
|
|
|
Other assets
|
1,050
|
|
|
(698)
|
|
|
Accounts payable, accrued expenses and other current liabilities
|
(2,942)
|
|
|
(8,931)
|
|
|
Billings in excess of cost and estimated earnings
|
9,019
|
|
|
(952)
|
|
|
Other liabilities
|
1,972
|
|
|
(1,602)
|
|
|
Income taxes payable, net
|
(5,496)
|
|
|
2,566
|
|
|
Cash flows from operating activities
|
(83,789)
|
|
|
(120,725)
|
|
|
Cash flows from investing activities:
|
|
|
|
|
Purchases of property and equipment
|
(1,968)
|
|
|
(6,188)
|
|
|
Purchases of energy assets, net of grant proceeds
|
(125,504)
|
|
|
(72,140)
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions, net of cash received
|
—
|
|
|
(1,279)
|
|
|
Contributions to equity investment
|
(130)
|
|
|
(323)
|
|
|
Cash flows from investing activities
|
(127,602)
|
|
|
(79,930)
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMERESCO, INC.
|
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
(In thousands) (Unaudited) (Continued)
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
2020
|
|
2019
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Payments of financing fees
|
$
|
(3,955)
|
|
|
$
|
(541)
|
|
|
Proceeds from exercises of options and ESPP
|
6,531
|
|
|
5,265
|
|
|
Repurchase of common stock
|
(6)
|
|
|
(139)
|
|
|
Proceeds from senior secured credit facility, net
|
6,000
|
|
|
41,343
|
|
|
Proceeds from long-term debt financings
|
40,604
|
|
|
7,614
|
|
|
Proceeds from Federal ESPC projects
|
194,586
|
|
|
115,556
|
|
|
Proceeds for energy assets from Federal ESPC
|
1,435
|
|
|
1,639
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from investments by redeemable non-controlling interests, net
|
2,854
|
|
|
20,173
|
|
|
|
|
|
|
|
Payments on long-term debt
|
(42,550)
|
|
|
(18,033)
|
|
|
Cash flows from financing activities
|
205,499
|
|
|
172,877
|
|
|
Effect of exchange rate changes on cash
|
(465)
|
|
|
249
|
|
|
Net decrease in cash, cash equivalents, and restricted cash
|
(6,357)
|
|
|
(27,529)
|
|
|
Cash, cash equivalents, and restricted cash, beginning of period
|
77,264
|
|
|
97,913
|
|
|
Cash, cash equivalents, and restricted cash, end of period
|
$
|
70,907
|
|
|
$
|
70,384
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
Cash paid for interest
|
$
|
14,764
|
|
|
$
|
12,410
|
|
|
Cash paid for income taxes
|
$
|
1,057
|
|
|
$
|
2,983
|
|
|
Non-cash Federal ESPC settlement
|
$
|
56,454
|
|
|
$
|
214,444
|
|
|
Accrued purchases of energy assets
|
$
|
38,747
|
|
|
$
|
17,224
|
|
|
Conversion of revolver to term loan
|
$
|
—
|
|
|
$
|
25,000
|
|
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets to the total of the same such amounts shown above:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
2020
|
|
2019
|
|
Cash and cash equivalents
|
|
$
|
45,351
|
|
|
$
|
34,104
|
|
|
Short-term restricted cash
|
|
15,598
|
|
|
13,498
|
|
|
Long-term restricted cash included in other assets
|
|
9,958
|
|
|
22,782
|
|
|
Total cash and cash equivalents, and restricted cash
|
|
$
|
70,907
|
|
|
$
|
70,384
|
|
See notes to condensed consolidated financial statements.
AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands) (Unaudited)
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements of Ameresco, Inc. (including its subsidiaries, the “Company”) are unaudited, pursuant to certain rules and regulations of the Securities and Exchange Commission, and include, in the opinion of the Company, normal recurring adjustments necessary for a fair presentation in conformity with accounting principles generally accepted in the United States (“GAAP”) of the results for the periods indicated.
The results of operations for the three and nine months ended September 30, 2020 are not necessarily indicative of results which may be expected for the full year. The December 31, 2019 consolidated balance sheet data was derived from audited financial statements, but certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. The interim condensed consolidated financial statements, and notes thereto, should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2019, and notes thereto, included in the Company’s annual report on Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission on March 4, 2020.
Certain prior period amounts were reclassified or rounded to conform to the presentation in the current period.
Significant Risks and Uncertainties
In March 2020, the World Health Organization categorized Coronavirus Disease 2019 (“COVID-19”) as a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency.
The Company’s condensed consolidated financial statements reflect estimates and assumptions made by management that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and reported amounts of revenue and expenses during the reporting periods presented. The Company considered the impact of COVID-19 on the assumptions and estimates used and determined that there was no material adverse impact on the Company’s results of operations for the three or nine months ended September 30, 2020.
The severity of the impact of the COVID-19 pandemic on the Company's business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on the Company's customers, all of which are uncertain and cannot be predicted. The Company's future results of operations and liquidity could be adversely impacted by delays in payments of outstanding receivable amounts beyond normal payment terms, delays in obtaining signed customer contracts for awarded projects, supply chain disruptions and uncertain demand. As of the date of issuance of these condensed consolidated financial statements, the extent to which the COVID-19 pandemic may impact the Company's financial condition, liquidity, or results of operations is uncertain.
On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) which includes modifications to the limitation on business interest expense and net operating loss provisions, and provides a payment delay of employer payroll taxes during 2020 after the date of enactment. The Company estimates the payment of approximately $5,000 of employer payroll taxes otherwise due in 2020 will be delayed with 50% due by December 31, 2021 and the remaining 50% by December 31, 2022. The CARES Act permits net operating losses from the 2018, 2019, and 2020 tax years to be carried back to the previous five tax years (beginning with the earliest year first). The Company estimates the discrete benefit associated with the net operating loss provisions of the CARES Act to be approximately $2,000, an estimated refund of taxes paid in prior years of approximately $1,700, and the carryback also provides an additional refund of approximately $3,600 related to Alternative Minimum Tax credits.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies of the Company are set forth in Note 2 to the consolidated financial statements contained in the Company’s 2019 annual report on Form 10-K. The Company includes herein certain updates to those policies.
Accounts Receivable and allowance for Credit Losses
Accounts receivable are stated at the amount management expects to collect from outstanding balances. Effective January 1, 2020, the Company adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13) prospectively. This ASU replaces the incurred loss impairment model with an expected credit loss impairment model for financial instruments, including trade receivables. The amendment requires entities to consider
AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands) (Unaudited) (Continued)
forward-looking information to estimate expected credit losses, resulting in earlier recognition of losses for receivables that are current or not yet due, which were not considered under the previous accounting guidance. The Company performed an assessment of its allowance for credit losses and determined that no adjustment was required to retained earnings upon adoption.
The Company’s methodology to estimate the allowance for credit losses includes quarterly assessments of historical bad debt write-off experience, current economic and market conditions, management’s evaluation of outstanding accounts receivable, anticipated recoveries and the Company’s forecasts. Due to the short-term nature of its receivables, the estimate of credit losses is primarily based on aged accounts receivable balances and the financial condition of customers. In addition, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default. Bad debts are written off against the allowance when identified. As part of its assessment, the Company also considered the current and expected future economic and market conditions due to the COVID-19 pandemic and determined that the estimate of credit losses was not significantly impacted as of September 30, 2020.
Changes in the allowance for credit losses are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
September 30, 2019
|
|
|
|
Allowance for credit loss, beginning of period
|
$
|
2,260
|
|
|
$
|
2,765
|
|
|
|
|
Recoveries of costs and expenses, net
|
(1,089)
|
|
|
(134)
|
|
|
|
|
Account write-offs and other
|
(191)
|
|
|
(45)
|
|
|
|
|
Allowance for credit loss, end of period
|
$
|
980
|
|
|
$
|
2,586
|
|
|
|
Recent Accounting Pronouncements
Fair Value Measurement
In August 2018, the FASB issued ASU 2018-13 Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements on fair value measurements. ASU 2018-13 was effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company adopted this guidance as of January 1, 2020 and the adoption did not have a material impact on the Company’s condensed consolidated financial statements.
Consolidations
In October 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810), Targeted Improvements to Related Party Guidance for Variable Interest Entities, which aligns the evaluation of whether a decision maker's fee is a variable interest with the guidance in the primary beneficiary test by requiring the decision maker to consider an indirect interest in a VIE held by related party under common control on a proportionate basis. The new standard was effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted. The Company adopted this guidance as of January 1, 2020 and the adoption did not have an impact on the Company’s condensed consolidated financial statements.
Credit Losses
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13), and a subsequent amendment to the initial guidance, ASU 2018-19 Codification Improvements to Topic 326, Financial Instruments—Credit Losses (collectively, Topic 326). Topic 326 requires measurement and recognition of expected credit losses for financial assets held, which include, but are not limited to, trade and other receivables. The new standard was effective for fiscal years beginning after December 15, 2019. The Company adopted this guidance as of January 1, 2020 and the adoption did not have a material impact on the Company’s condensed consolidated financial statements.
In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives, and Hedging, and Topic 825, Financial Instruments. The improvements to Topic 815, among other things, clarifies some areas around partial-term fair value hedges, interest rate risk, the amortization of fair value hedge basis adjustments and their disclosure, and some clarification of matters related to the transitioning to ASU 2017-12, which was adopted by the Company during the year ended December 31, 2018. The improvements to Topic 326 clarify certain aspects surrounding accounting for credit losses in connection with the Company’s receivables. These include that the Company should consider anticipated recoveries in its calculation of credit losses. For those that have already adopted ASU No. 2017-12, the new standard
AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands) (Unaudited) (Continued)
was effective the first annual period beginning after the issuance date of ASU No. 2019-04, or as of January 1, 2020 for the Company, with early adoption permitted. The Company adopted this guidance as of January 1, 2020 and the adoption did not have a material impact on the Company’s condensed consolidated financial statements.
Income Taxes
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, which eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. ASU 2019-12 is effective for the Company for the fiscal year beginning after December 15, 2020. The Company is currently evaluating the impacts of the provisions of ASU 2019-12 on its condensed consolidated financial statements and disclosures.
Others
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-0, which provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. Companies can apply the ASU immediately, however, the guidance will only be available until December 31, 2022. The Company is currently evaluating the impact that adopting this new accounting standard will have on its condensed consolidated financial statements and related disclosures.
AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands) (Unaudited) (Continued)
3. REVENUE FROM CONTRACTS WITH CUSTOMERS
Disaggregation of Revenue
The following tables provide information about disaggregated revenue by line of business, reportable segments, and geographical region for the three and nine months ended September 30, 2020 and 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Regions
|
|
U.S. Federal
|
|
Canada
|
|
Non-Solar DG
|
|
All Other
|
|
Total
|
|
Line of Business
|
|
Three Months Ended September 30, 2020
|
|
Project revenue
|
$
|
79,201
|
|
|
$
|
105,444
|
|
|
$
|
9,311
|
|
|
$
|
7,506
|
|
|
$
|
13,941
|
|
|
$
|
215,403
|
|
|
O&M revenue
|
4,492
|
|
|
11,384
|
|
|
—
|
|
|
2,009
|
|
|
36
|
|
|
17,921
|
|
|
Energy assets
|
9,060
|
|
|
1,325
|
|
|
1,227
|
|
|
18,535
|
|
|
161
|
|
|
30,308
|
|
|
Other
|
191
|
|
|
150
|
|
|
1,725
|
|
|
201
|
|
|
16,608
|
|
|
18,875
|
|
|
Total revenues
|
$
|
92,944
|
|
|
$
|
118,303
|
|
|
$
|
12,263
|
|
|
$
|
28,251
|
|
|
$
|
30,746
|
|
|
$
|
282,507
|
|
|
Three Months Ended September 30, 2019
|
|
Project revenue
|
$
|
72,667
|
|
|
$
|
58,199
|
|
|
$
|
9,380
|
|
|
$
|
3,059
|
|
|
$
|
2,592
|
|
|
$
|
145,897
|
|
|
O&M revenue
|
4,280
|
|
|
11,123
|
|
|
—
|
|
|
2,330
|
|
|
88
|
|
|
17,821
|
|
|
Energy assets
|
6,699
|
|
|
1,339
|
|
|
1,327
|
|
|
16,421
|
|
|
—
|
|
|
25,786
|
|
|
Other
|
433
|
|
|
597
|
|
|
1,958
|
|
|
65
|
|
|
19,469
|
|
|
22,522
|
|
|
Total revenues
|
$
|
84,079
|
|
|
$
|
71,258
|
|
|
$
|
12,665
|
|
|
$
|
21,875
|
|
|
$
|
22,149
|
|
|
$
|
212,026
|
|
|
Nine Months Ended September 30, 2020
|
|
Project revenue
|
$
|
226,734
|
|
|
$
|
233,778
|
|
|
$
|
24,342
|
|
|
$
|
12,881
|
|
|
$
|
22,027
|
|
|
$
|
519,762
|
|
|
O&M revenue
|
13,127
|
|
|
33,765
|
|
|
26
|
|
|
6,144
|
|
|
229
|
|
|
53,291
|
|
|
Energy assets
|
25,556
|
|
|
3,549
|
|
|
3,234
|
|
|
54,341
|
|
|
599
|
|
|
87,279
|
|
|
Other
|
956
|
|
|
447
|
|
|
5,088
|
|
|
738
|
|
|
50,395
|
|
|
57,624
|
|
|
Total revenues
|
$
|
266,373
|
|
|
$
|
271,539
|
|
|
$
|
32,690
|
|
|
$
|
74,104
|
|
|
$
|
73,250
|
|
|
$
|
717,956
|
|
|
Nine Months Ended September 30, 2019
|
|
Project revenue
|
$
|
196,284
|
|
|
$
|
134,954
|
|
|
$
|
20,112
|
|
|
$
|
6,318
|
|
|
$
|
8,818
|
|
|
$
|
366,486
|
|
|
O&M revenue
|
11,580
|
|
|
30,370
|
|
|
5
|
|
|
6,771
|
|
|
109
|
|
|
48,835
|
|
|
Energy assets
|
18,063
|
|
|
2,958
|
|
|
2,585
|
|
|
52,612
|
|
|
582
|
|
|
76,800
|
|
|
Other
|
1,969
|
|
|
1,055
|
|
|
4,994
|
|
|
669
|
|
|
59,513
|
|
|
68,200
|
|
|
Total revenues
|
$
|
227,896
|
|
|
$
|
169,337
|
|
|
$
|
27,696
|
|
|
$
|
66,370
|
|
|
$
|
69,022
|
|
|
$
|
560,321
|
|
AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands) (Unaudited) (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Regions
|
|
U.S. Federal
|
|
Canada
|
|
Non-Solar DG
|
|
All Other
|
|
Total
|
|
Geographical Regions
|
|
Three Months Ended September 30, 2020
|
|
United States
|
$
|
92,944
|
|
|
$
|
118,303
|
|
|
$
|
655
|
|
|
$
|
28,251
|
|
|
$
|
16,173
|
|
|
$
|
256,326
|
|
|
Canada
|
—
|
|
|
—
|
|
|
11,608
|
|
|
—
|
|
|
22
|
|
|
11,630
|
|
|
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,551
|
|
|
14,551
|
|
|
Total revenues
|
$
|
92,944
|
|
|
$
|
118,303
|
|
|
$
|
12,263
|
|
|
$
|
28,251
|
|
|
$
|
30,746
|
|
|
$
|
282,507
|
|
|
Three Months Ended September 30, 2019
|
|
United States
|
$
|
84,079
|
|
|
$
|
71,258
|
|
|
$
|
1,023
|
|
|
$
|
21,875
|
|
|
$
|
17,936
|
|
|
$
|
196,171
|
|
|
Canada
|
—
|
|
|
—
|
|
|
11,642
|
|
|
—
|
|
|
50
|
|
|
11,692
|
|
|
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,163
|
|
|
4,163
|
|
|
Total revenues
|
$
|
84,079
|
|
|
$
|
71,258
|
|
|
$
|
12,665
|
|
|
$
|
21,875
|
|
|
$
|
22,149
|
|
|
$
|
212,026
|
|
|
Nine Months Ended September 30, 2020
|
|
United States
|
$
|
266,373
|
|
|
$
|
271,539
|
|
|
$
|
2,173
|
|
|
$
|
74,104
|
|
|
$
|
49,294
|
|
|
$
|
663,483
|
|
|
Canada
|
—
|
|
|
—
|
|
|
30,517
|
|
|
—
|
|
|
124
|
|
|
30,641
|
|
|
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
23,832
|
|
|
23,832
|
|
|
Total revenues
|
$
|
266,373
|
|
|
$
|
271,539
|
|
|
$
|
32,690
|
|
|
$
|
74,104
|
|
|
$
|
73,250
|
|
|
$
|
717,956
|
|
|
Nine Months Ended September 30, 2019
|
|
United States
|
$
|
227,896
|
|
|
$
|
169,337
|
|
|
$
|
2,281
|
|
|
$
|
66,370
|
|
|
$
|
56,052
|
|
|
$
|
521,936
|
|
|
Canada
|
—
|
|
|
—
|
|
|
25,415
|
|
|
—
|
|
|
157
|
|
|
25,572
|
|
|
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12,813
|
|
|
12,813
|
|
|
Total revenues
|
$
|
227,896
|
|
|
$
|
169,337
|
|
|
$
|
27,696
|
|
|
$
|
66,370
|
|
|
$
|
69,022
|
|
|
$
|
560,321
|
|
For the three months ended September 30, 2020 and 2019, approximately 95% and 93%, respectively, of revenue is recognized over time, and the remainder is for products and services transferred at a point in time. For the nine months ended September 30, 2020 and 2019, approximately 94% and 91%, respectively, of revenue is recognized over time, and the remainder is for products and services transferred at a point in time.
Contract Balances
The following table provides information about receivables, contract assets and contract liabilities from contracts with customers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
December 31, 2019
|
|
Accounts receivable, net
|
|
$
|
121,672
|
|
|
$
|
95,863
|
|
|
Accounts receivable retainage, net
|
|
$
|
24,359
|
|
|
$
|
16,976
|
|
|
Contract Assets:
|
|
|
|
|
|
Costs and estimated earnings in excess of billings
|
|
$
|
179,909
|
|
|
$
|
202,243
|
|
|
Contract Liabilities:
|
|
|
|
|
|
Billings in excess of cost and estimated earnings
|
|
$
|
40,302
|
|
|
$
|
32,178
|
|
AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands) (Unaudited) (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
Accounts receivable, net
|
|
$
|
91,755
|
|
|
$
|
85,985
|
|
|
Accounts receivable retainage, net
|
|
$
|
16,652
|
|
|
$
|
13,516
|
|
|
Contract Assets:
|
|
|
|
|
|
Costs and estimated earnings in excess of billings
|
|
$
|
124,652
|
|
|
$
|
86,842
|
|
|
Contract Liabilities:
|
|
|
|
|
|
Billings in excess of cost and estimated earnings
|
|
$
|
28,768
|
|
|
$
|
30,706
|
|
Accounts receivable retainage represents amounts due from customers, but where payments are withheld contractually until certain construction milestones are met. Amounts retained typically range from 5% to 10% of the total invoice. The Company classifies as a current asset those retainages that are expected to be billed in the next twelve months. Unbilled revenue, presented as costs and estimated earnings in excess of billings, represent amounts earned and billable that were not invoiced at the end of the fiscal period.
Contract assets represent the Company’s rights to consideration in exchange for services transferred to a customer that have not been billed as of the reporting date. The Company’s rights to consideration are generally unconditional at the time its performance obligations are satisfied.
At the inception of a contract, the Company expects the period between when it satisfies its performance obligations, and when the customer pays for the services, will be one year or less. As such, the Company has elected to apply the practical expedient which allows the Company to not adjust the promised amount of consideration for the effects of a significant financing component, when a financing component is present.
When the Company receives consideration, or such consideration is unconditionally due from a customer prior to transferring goods or services to the customer under the terms of a sales contract, the Company records deferred revenue, which represents a contract liability. Such deferred revenue typically results from billings in excess of costs incurred and advanced payments received on project contracts. As of September 30, 2020 and December 31, 2019, the Company classified $4,982 and $5,560, respectively, as a non-current liability, included in other liabilities on the condensed consolidated balance sheets, for those performance obligations expected to be completed beyond the next twelve months.
The decrease in contract assets for the nine months ended September 30, 2020 was primarily due to billings of $464,712, offset in part by revenue recognized of approximately $434,709. The increase in contract liabilities was primarily driven by the receipt of advance payment from customers, and related billings, exceeding reductions from recognition of revenue as performance obligations were satisfied. For the nine months ended September 30, 2020, the Company recognized revenue of $85,356 that was previously included in the beginning balance of contract liabilities and billed customers $86,203. Changes in contract liabilities are also driven by reclassifications to or from contract assets as a result of timing of customer payments.
The increase in contract assets for the nine months ended September 30, 2019 was primarily due to revenue recognized of $317,088, offset in part by billings of approximately $282,568. The decrease in contract liabilities was primarily driven by recognition of revenue as performance obligations were satisfied exceeding increases from the receipt of advance payment from customers, and related billings. For the nine months ended September 30, 2019, the Company recognized revenue of $92,685 that was previously included in the beginning balance of contract liabilities, and billed customers $92,427. Changes in contract liabilities are also driven by reclassifications to or from contract assets as a result of timing of customer payments.
Contracts are often modified for a change in scope or other requirements. The Company considers contract modifications to exist when the modification either creates new or changes the existing enforceable rights and obligations. Most of the Company’s contract modifications are for goods or services that are not distinct from the existing performance obligations. The effect of a contract modification on the transaction price, and the measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase or decrease) on a cumulative catchup basis.
Performance Obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. Performance obligations are satisfied at a point in time or over time and are supported by contracts with customers. For most of the Company’s contracts, there are multiple promises of goods or services. Typically, the Company provides a significant service of integrating a complex set of tasks and components such as design, engineering, construction management, and equipment procurement for a project
AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands) (Unaudited) (Continued)
contract. The bundle of goods and services are provided to deliver one output for which the customer has contracted. In these cases, the Company considers the bundle of goods and services to be a single performance obligation. The Company may also promise to provide distinct goods or services within a contract, such as a project contract for installation of energy conservation measures and post-installation O&M services. In these cases the Company separates the contract into more than one performance obligation. If a contract is separated into more than one performance obligation, the Company allocates the total transaction price to each performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods or services underlying each performance obligation.
Backlog
The Company’s remaining performance obligations (hereafter referred to as “backlog”) represent the unrecognized revenue value of the Company’s contract commitments. The Company’s backlog may vary significantly each reporting period based on the timing of major new contract commitments and the backlog may fluctuate with currency movements. In addition, our customers have the right, under some circumstances, to terminate contracts or defer the timing of the Company’s services and their payments to the Company. At September 30, 2020, the Company had backlog of $2,154,526 of which approximately 31% is anticipated to be recognized as revenue in the next twelve months and the remaining, thereafter.
The Company applied the practical expedient for certain revenue streams to exclude the value of remaining performance obligations for (i) contracts with an original expected term of one year or less, or (ii) contracts for which the Company recognizes revenue in proportion to the amount it has the right to invoice for services performed.
Contract Acquisition Costs
The Company accounts for certain acquisition costs over the life of the contract, consisting primarily of commissions when paid. Commission costs are incurred commencing at contract signing. Commission costs are allocated across all performance obligations and deferred and amortized over the contract term on a progress toward completion basis.
As of September 30, 2020 and December 31, 2019, $1,735 of capitalized commission costs related to contracts that were not completed were included in other assets in the accompanying condensed consolidated balance sheets. For contracts that have a duration of less than one year, the Company follows a practical expedient and expenses these costs when incurred. During the three and nine months ended September 30, 2020 and 2019, the amortization of commission costs related to contracts was not material and was included in the accompanying condensed consolidated statements of income.
The Company capitalizes costs incurred related to the development of projects prior to contract signing as it is partial fulfillment of its performance obligations. Capitalized project development costs include only those costs incurred in connection with the development of energy projects, primarily direct labor, interest costs, outside contractor services, consulting fees, legal fees and travel, if incurred after a point in time where the realization of related revenue becomes probable. Project development costs incurred prior to the probable realization of revenue are expensed as incurred. The Company classifies as a current asset those project development costs that are expected to proceed to construction activity in the twelve months that follow. The Company periodically reviews these balances and writes off any amounts where the realization of the related revenue is no longer probable. Project development costs of $1,228 and $1,080 were included in other long-term assets in the accompanying condensed consolidated balance sheets as of September 30, 2020 and December 31, 2019, respectively. During the three months ended September 30, 2020 and 2019, $3,611 and $2,048, respectively, of project development costs were recognized in the condensed consolidated statements of income on projects that converted to customer contracts. During the nine months ended September 30, 2020 and 2019, $9,546 and $13,081, respectively, of project development costs were recognized in the condensed consolidated statements of income on projects that converted to customer contracts.
No impairment charges in connection with the Company’s commission costs or project development costs were recorded during the nine months ended September 30, 2020 and 2019.
4. BUSINESS ACQUISITIONS AND RELATED TRANSACTIONS
The Company accounts for acquisitions using the acquisition method in accordance with ASC 805, Business Combinations. The purchase price for each is allocated to the net assets based on their estimated fair values at the date of each acquisition. The excess purchase price over the estimated fair value of net assets acquired, which are calculated using level 3 inputs per the fair value hierarchy as defined in Note 10, are recorded as goodwill. Intangible assets, if identified, are recorded and are amortized over periods ranging from one to fifteen years. See Note 5 for additional information.
AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands) (Unaudited) (Continued)
During the three and nine months ended September 30, 2020, the Company did not complete any acquisitions.
The results of acquired assets since the dates of the acquisitions have been included in the Company’s operations as presented in the accompanying condensed consolidated statements of income, condensed consolidated statements of comprehensive income and condensed consolidated statements of cash flows.
5. GOODWILL AND INTANGIBLE ASSETS
The changes in the carrying value of goodwill attributable to each reporting unit are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Regions
|
|
U.S. Federal
|
|
Canada
|
|
Non-solar DG
|
|
Other
|
|
Total
|
|
Carrying Value of Goodwill
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2019
|
$
|
26,705
|
|
|
$
|
3,981
|
|
|
$
|
3,369
|
|
|
$
|
—
|
|
|
$
|
24,359
|
|
|
$
|
58,414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency effects
|
—
|
|
|
—
|
|
|
(88)
|
|
|
—
|
|
|
(154)
|
|
|
(242)
|
|
|
Balance, September 30, 2020
|
$
|
26,705
|
|
|
$
|
3,981
|
|
|
$
|
3,281
|
|
|
$
|
—
|
|
|
$
|
24,205
|
|
|
$
|
58,172
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Goodwill Impairment
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2019
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(1,016)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(1,016)
|
|
|
Balance, September 30, 2020
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(1,016)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(1,016)
|
|
The Company performs its annual goodwill impairment testing in the fourth quarter of each year, or more frequently if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying amount. During the Company’s annual goodwill impairment testing in 2019, all reporting units had fair values that exceeded their carrying values by at least 15%. If the Company believes that one or more indicators of impairment have occurred, then the Company will perform an impairment test. The Company has the option to perform a qualitative assessment (commonly referred to as “step zero” test) to determine whether further quantitative analysis for impairment of goodwill and indefinite-lived intangible assets is necessary. The qualitative assessment includes a review of macroeconomic conditions, industry and market considerations, internal cost factors, and the Company’s own overall financial and share price performance, among other factors. If, after assessing the totality of events or circumstances the Company determines that it is not more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, the Company does not need to perform a quantitative analysis. Upon assessment, the Company concluded it was not more likely than not that the fair value of the reporting units were less than the carrying value of the reporting units as of September 30, 2020. The Company will monitor future results and will perform a test if indicators trigger an impairment review. At this time, the Company has not deemed the impact that the current macroeconomic environment surrounding the COVID-19 pandemic has or is expected to have on the business to be a triggering event for impairment purposes.
Separable intangible assets that are not deemed to have indefinite lives are amortized over their useful lives. The Company annually assesses whether a change in the life over which the Company’s assets are amortized is necessary, or more frequently if events or circumstances warrant.
Acquired intangible assets other than goodwill that are subject to amortization include customer contracts, customer relationships, non-compete agreements, technology and trade names. Customer contracts are amortized ratably over the period of the acquired customer contracts ranging in periods from approximately one to five years. All other acquired intangible assets are amortized over periods ranging from approximately four to fifteen years, as determined by the nature of the respective intangible asset. The Company did not complete any acquisitions nor acquire any intangible assets during the nine months ended September 30, 2020.
AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands) (Unaudited) (Continued)
The gross carrying amount and accumulated amortization of intangible assets are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2020
|
|
As of December 31, 2019
|
|
Gross Carrying Amount
|
|
|
|
|
Customer contracts
|
$
|
7,847
|
|
|
$
|
7,904
|
|
|
Customer relationships
|
12,634
|
|
|
12,749
|
|
|
Non-compete agreements
|
3,021
|
|
|
3,037
|
|
|
Technology
|
2,719
|
|
|
2,732
|
|
|
Trade names
|
542
|
|
|
544
|
|
|
Total gross carrying amount
|
26,763
|
|
|
26,966
|
|
|
Accumulated Amortization
|
|
|
|
|
Customer contracts
|
7,847
|
|
|
7,844
|
|
|
Customer relationships
|
11,585
|
|
|
11,236
|
|
|
Non-compete agreements
|
3,021
|
|
|
3,037
|
|
|
Technology
|
2,706
|
|
|
2,704
|
|
|
Trade names
|
532
|
|
|
531
|
|
|
Total accumulated amortization
|
25,691
|
|
|
25,352
|
|
|
Intangible assets, net
|
$
|
1,072
|
|
|
$
|
1,614
|
|
Amortization expense is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
Asset type
|
|
Location
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Customer contracts
|
|
Cost of revenues
|
|
$
|
15
|
|
|
$
|
22
|
|
|
$
|
60
|
|
|
$
|
67
|
|
|
All other intangible assets
|
|
Selling, general and administrative expenses
|
|
157
|
|
|
202
|
|
|
468
|
|
|
614
|
|
|
Total
|
|
|
|
$
|
172
|
|
|
$
|
224
|
|
|
$
|
528
|
|
|
$
|
681
|
|
6. ENERGY ASSETS
Energy assets consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
December 31, 2019
|
|
Energy assets
|
$
|
885,148
|
|
|
$
|
767,331
|
|
|
Less - accumulated depreciation and amortization
|
(215,009)
|
|
|
(187,870)
|
|
|
Energy assets, net
|
$
|
670,139
|
|
|
$
|
579,461
|
|
AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands) (Unaudited) (Continued)
Included in the above energy assets are financing lease assets and associated accumulated depreciation and amortization, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
December 31, 2019
|
|
Financing lease assets
|
$
|
42,402
|
|
|
$
|
42,402
|
|
|
Less - accumulated depreciation and amortization
|
(7,865)
|
|
|
(6,268)
|
|
|
Financing lease assets, net
|
$
|
34,537
|
|
|
$
|
36,134
|
|
Depreciation and amortization expense on the above energy assets, net of deferred grant amortization, included in the condensed consolidated statements of income is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
Location
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Cost of revenues
|
|
$
|
9,547
|
|
|
$
|
8,843
|
|
|
$
|
28,496
|
|
|
$
|
26,338
|
|
Included in the above depreciation and amortization expense on energy assets is depreciation and amortization on financing lease assets, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
Location
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Cost of revenues
|
|
$
|
533
|
|
|
$
|
533
|
|
|
$
|
1,597
|
|
|
$
|
1,597
|
|
The Company evaluates long-lived assets for impairment as events or changes in circumstances indicate the carrying value of these assets may not be fully recoverable. Examples of such triggering events applicable to our assets include a significant decrease in the market price of a long-lived asset or asset group or a current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset or asset group. The Company performs its annual long-lived asset impairment testing in the fourth quarter of each year. In addition to the annual impairment test, the Company regularly assesses whether a triggering event has occurred which would require interim impairment testing.
During the three months ended September 30, 2020, the Company performed an engine overhaul on one of its energy assets, however, the engine consistently failed to achieve emissions compliance and the Company considered the engine unsalvageable. As a result of this event, the Company performed an impairment analysis on this energy asset group and recorded an impairment charge of $1,028, which fully impaired this asset group. The impairment charge is included in selling, general and administrative expenses within the condensed consolidated statements of income for the three and nine months ended September 30, 2020.
The Company assessed the impact that the current macroeconomic environment surrounding the COVID-19 pandemic has or is expected to have on the business, and concluded that it was not a triggering event for impairment purposes and there was no indication of impairment of long-lived assets, except as indicated above, for the nine months ended September 30, 2020.
The Company capitalizes interest costs relating to construction financing during the period of construction, which is included in energy assets, net in the Company’s condensed consolidated balance sheets. Capitalized interest is amortized to cost of revenues in the Company’s condensed consolidated statements of income on a straight line basis over the useful life of the associated energy asset.
The Company capitalized interest costs as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Capitalized interest
|
|
$
|
1,096
|
|
|
$
|
632
|
|
|
$
|
2,870
|
|
|
$
|
2,210
|
|
As of September 30, 2020 and December 31, 2019, there are three ESPC asset projects which are included within energy assets, net on the Company’s condensed consolidated balance sheets. The Company controls and operates the assets as well as obtains financing during the construction period of the assets. As the Company has an obligation to the customer for performance of the
AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands) (Unaudited) (Continued)
asset, the Company records a liability associated with these energy assets, although, the customer is responsible for payments to the lender based on the energy asset’s production. As of September 30, 2020 and December 31, 2019, the liabilities recognized in association with these assets were $11,077 and $10,243, respectively, of which $225 and $827, respectively, have been classified as the current portion and are included in accrued expenses and other current liabilities. The remainder is included in other liabilities in the accompanying condensed consolidated balance sheets.
During the three months ended June 30, 2020, the Company acquired one energy project, which did not constitute a business in accordance with ASC 805-50, Business Combinations. The Company acquired the energy project in exchange for a total purchase price of $1,251, which included cash of $1,031 paid by the Company, issuance of a promissory note payable to the sellers of $204, detailed further in Note 16, and $16 of rollover equity in connection with shares of one of the Company’s subsidiaries issued to the sellers. As of September 30, 2020, the Company has remaining deferred purchase price consideration on previously closed projects of $1,446 that will be paid upon final completion of the respective projects and throughout 2020. The Company has a definitive agreement from prior periods, which has recently been amended, to purchase eight additional solar projects from developers for a total purchase price of $10,242, of which the Company has not made any payments to the developers for those projects.
As of September 30, 2020, the Company had $1,484 in asset retirement obligations (“AROs”) assets recorded in project assets, net of accumulated depreciation, and $1,622 in ARO liabilities recorded in accrued expenses and other current liabilities and other liabilities. During the three and nine months ended September 30, 2020, the Company recorded $20 and $58, respectively, of depreciation expense related to the ARO assets. During the three and nine months ended September 30, 2020, the Company recorded $21 and $64, respectively, in accretion expense to the ARO liabilities, which is reflected in the accretion of ARO and contingent consideration on the condensed consolidated statements of cash flows. The Company’s current ARO liabilities relate to the removal of equipment and pipelines at certain renewable gas projects and obligations related to the decommissioning of certain solar facilities and wind turbines.
7. INCOME TAXES
The Company recorded a provision for income taxes of $3,100 and $939 for the three months ended September 30, 2020 and 2019, respectively. The Company recorded a provision for income taxes of $597 and $2,000 for the nine months ended September 30, 2020 and 2019, respectively. The estimated effective annualized tax rate impacted by the period discrete items is 14.9% for the three months ended September 30, 2020, compared to a 10.1% of estimated effective annualized tax rate for the three months ended September 30, 2019. The estimated effective annualized tax rate impacted by the period discrete items is 1.8% for the nine months ended September 30, 2020, compared to a 9.2% of estimated effective annualized tax rate for the nine months ended September 30, 2019.
The principal reasons for the difference between the statutory rate and the estimated annual effective rate for 2020 were the effects of investment tax credits to which the Company is entitled from solar plants which have been placed into service or are forecasted to be placed into service during 2020, the tax deductions related to the Section 179D deduction, the tax rate benefits associated with net operating loss carryback made possible by the passing of the CARES Act on March 27, 2020 and tax basis adjustments on certain partnership flip transactions. The principal reason for the difference between the statutory rate and the estimated annual effective rate for 2019 were the effects of investment tax credits to which the Company is entitled from solar plants which have been placed into service or were forecasted to be placed into service during 2019.
The investment tax credits and production tax credits to which the Company may be entitled fluctuate from year to year based on the cost of the renewable energy plants the Company places or expects to place in service and production levels at company owned facilities in that year. As part of the Tax Extender and Disaster Relief Act of 2019, signed into law December 20, 2019, Section 179D was extended through December 31, 2020.
AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands) (Unaudited) (Continued)
A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows:
|
|
|
|
|
|
|
|
|
Gross Unrecognized
Tax Benefits
|
|
Balance, December 31, 2019
|
$
|
400
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2020
|
$
|
400
|
|
At September 30, 2020 and December 31, 2019, the Company had approximately $80 of total gross unrecognized tax benefits (both net of the federal benefit on state amounts) representing the amount of unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in any future periods.
The Company has presented all deferred tax assets and liabilities as noncurrent, net liabilities on its condensed consolidated balance sheets as of September 30, 2020, and December 31, 2019.
8. LEASES
The Company enters into a variety of operating lease agreements through the normal course of its business including certain administrative offices. The leases are long-term, non-concealable real estate lease agreements, expiring at various dates through fiscal 2028. The agreements generally provide for fixed minimum rental payments and the payment of utilities, real estate taxes, insurance and repairs. The Company also leases certain land parcels related to our energy projects, expiring at various dates through fiscal 2050. The office and land leases make up a significant portion of the Company’s operating lease activity. Many of these leases have one or more renewal options that allow the Company, at its discretion, to renew the lease for six months to seven years. Only renewal options that the Company believed were likely to be exercised were included in our lease calculations. Many land leases include minimum lease payments that increase when the related project becomes operational. In these cases, the commercial operation date was estimated by the Company and used to calculate the estimated minimum lease payments.
Supplemental balance sheet information related to leases at September 30, 2020 and December 31, 2019 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
December 31, 2019
|
|
Operating Leases:
|
|
|
|
|
Operating lease assets
|
$
|
36,336
|
|
|
$
|
32,791
|
|
|
Current operating lease liabilities
|
6,010
|
|
|
5,802
|
|
|
Long-term portions of operating lease liabilities
|
32,509
|
|
|
29,101
|
|
|
Total operating lease liabilities
|
$
|
38,519
|
|
|
$
|
34,903
|
|
|
Weighted-average remaining lease term
|
11 years
|
|
11 years
|
|
Weighted-average discount rate
|
6.0
|
%
|
|
6.3
|
%
|
|
|
|
|
|
|
Financing Leases:
|
|
|
|
|
Energy assets, net
|
$
|
34,537
|
|
|
$
|
36,134
|
|
|
Current portions of financing lease liabilities
|
4,746
|
|
|
4,997
|
|
|
Long-term financing lease liabilities, less current portions and net of deferred financing fees
|
21,352
|
|
|
23,500
|
|
|
Total financing lease liabilities
|
$
|
26,098
|
|
|
$
|
28,497
|
|
|
Weighted-average remaining lease term
|
16 years
|
|
17 years
|
|
Weighted-average discount rate
|
11.9
|
%
|
|
11.8
|
%
|
AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands) (Unaudited) (Continued)
The costs related to the Company’s leases are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Operating Lease:
|
|
|
|
|
|
|
|
|
|
Operating lease costs
|
|
$
|
2,001
|
|
|
$
|
1,913
|
|
|
$
|
5,933
|
|
|
$
|
5,660
|
|
|
|
|
|
|
|
Financing Lease:
|
|
|
|
|
|
|
|
|
|
Amortization expense
|
|
533
|
|
|
533
|
|
1,597
|
|
|
1,597
|
|
|
Interest on lease liabilities
|
|
723
|
|
854
|
|
2,282
|
|
|
2,750
|
|
|
Total lease costs
|
|
$
|
3,257
|
|
|
$
|
3,300
|
|
|
$
|
9,812
|
|
|
$
|
10,007
|
|
The Company’s estimated minimum future lease obligations under our leases are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Leases
|
|
Financing Leases
|
|
Year ended December 31,
|
|
|
|
|
2020
|
$
|
2,339
|
|
|
$
|
4,014
|
|
|
2021
|
7,342
|
|
|
6,792
|
|
|
2022
|
6,716
|
|
|
5,178
|
|
|
2023
|
5,381
|
|
|
3,676
|
|
|
2024
|
4,500
|
|
|
2,565
|
|
|
Thereafter
|
28,115
|
|
|
24,080
|
|
|
Total minimum lease payments
|
$
|
54,393
|
|
|
$
|
46,305
|
|
|
Less: interest
|
15,874
|
|
|
20,207
|
|
|
Present value of lease liabilities
|
$
|
38,519
|
|
|
$
|
26,098
|
|
The Company has determined that certain power purchase agreements (“PPAs”) contain a lease component in accordance with ASC 840, Leases. The Company recognized $2,261 and $6,546 of operating lease revenue under these agreements during the three and nine months ended September 30, 2020, respectively, which was reflected in revenues on the condensed consolidated statements of income. The Company recognized $2,243 and $6,737 of operating lease revenue under these agreements during the three and nine months ended September 30, 2019, respectively, which was reflected in revenues on the condensed consolidated statements of income.
Sale-Leaseback
Most of the solar photovoltaic (“solar PV”) projects sold to date under the sale-leaseback program have been determined by the Company to be financing leases. The Company defers any gain or loss, representing the excess or shortfall of cash received from the investor compared to the net book value of the asset in the Company’s condensed consolidated balance sheets at the time of the sale. The Company records the long term portion of any deferred gain or loss in its condensed consolidated balance sheets in other liabilities and other assets, respectively, and the current portion in accrued expenses and other current liabilities and prepaid expenses and other current assets. The deferred amounts are amortized over the lease term and are included in cost of revenues in its condensed consolidated statements of income. Net gains from amortization expense in cost of revenues related to deferred gains and losses was $57 and $57 for the three months ended September 30, 2020 and 2019, respectively. Net gains from amortization expense in cost of revenues related to deferred gains and losses was $170 and $172 for the nine months ended September 30, 2020 and 2019, respectively.
During the third quarter of 2018, the Company entered into an agreement with an investor which gives us the option to sell and contemporaneously lease back solar PV projects through August 2019 up to a maximum funding amount of $100 million. In January 2020, the Company amended the August 2018 agreement with the investor to extend the end date of the agreement to November 24, 2020 and increase the maximum funding amount up to $150 million. During the nine months ended September 30,
AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands) (Unaudited) (Continued)
2020, the Company completed one acquisition of a solar PV project and $130 million remained available under the lending commitment.
A summary of amounts related to sale leasebacks in the Company’s condensed consolidated balance sheets is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
December 31, 2019
|
|
|
|
|
|
|
|
Financing lease assets, net
|
$
|
34,537
|
|
|
$
|
36,134
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred loss, short-term, net
|
115
|
|
|
115
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred loss, long-term, net
|
1,715
|
|
|
1,801
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred loss
|
$
|
1,830
|
|
|
$
|
1,916
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing lease liabilities, short-term
|
4,746
|
|
|
4,997
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing lease liabilities, long-term
|
21,352
|
|
|
23,500
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financing lease liabilities
|
$
|
26,098
|
|
|
$
|
28,497
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred gain, short-term, net
|
345
|
|
|
345
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred gain, long-term, net
|
5,206
|
|
|
5,463
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred gain
|
$
|
5,551
|
|
|
$
|
5,808
|
|
|
|
|
|
|
|
|
|
|
|
9. COMMITMENTS AND CONTINGENCIES
The Company from time to time issues letters of credit and performance bonds, with their third-party lenders, to provide collateral.
Legal Proceedings
The Company is involved in a variety of claims and other legal proceedings generally incidental to its normal business activities. While the outcome of any of these proceedings cannot be accurately predicted, the Company does not believe the ultimate resolution of any of these existing matters would have a material adverse effect on its financial condition or results of operations.
Commitments as a Result of Acquisitions
In August 2018, the Company completed an acquisition which provided for a revenue earn-out contingent upon the acquired business meeting certain cumulative revenue targets over five years from the acquisition date. The Company evaluated financial forecasts of the acquired business and concluded that the fair value of this earn-out was approximately $555, which was subsequently increased to $678 as of December 31, 2019 which remained consistent at September 30, 2020, and is recorded in other liabilities on the condensed consolidated balance sheets. The contingent consideration will be paid annually, beginning in May 2020, if any of the cumulative revenue targets are achieved. No payments have been made to date. The fair value of the earn-out will be re-evaluated at each reporting period and adjustments will be recorded as needed. See Note 10 for additional information.
In November 2018, the Company completed an acquisition of certain lease options, which provided for an earn-out if the lease option is exercised and if certain financial metrics are achieved. The Company evaluated the acquired lease options and concluded that the fair-value of this contingent liability was approximately $363, which was subsequently increased to $378 at December 31, 2019 which remained consistent at September 30, 2020, and is recorded in accrued expenses and other current liabilities and other liabilities on the condensed consolidated balance sheets. Payments will be made when milestones are achieved. The contingent liability will be re-evaluated at each reporting period and adjustments will be recorded as needed.
In April 2020, the Company completed an acquisition which provided for a profit earn-out contingent upon the acquired project meeting certain financial return targets. The Company evaluated the financial forecasts of the acquired asset and concluded that fair value of the earn-out was $0 at completion of the acquisition which will be re-evaluated at each reporting period. The contingent consideration will be paid annually beginning in 2021, if the financial return targets are achieved.
AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands) (Unaudited) (Continued)
10. FAIR VALUE MEASUREMENT
The Company recognizes certain financial assets and liabilities at fair value on a recurring basis (at least annually). Fair value is defined as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
Three levels of inputs that may be used to measure fair value are as follows:
Level 1: Inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.
Level 2: Inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3: Inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.
The following table presents the input level used to determine the fair values of the Company’s financial instruments measured at fair value on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value as of
|
|
|
Level
|
|
September 30, 2020
|
|
December 31, 2019
|
|
Assets:
|
|
|
|
|
|
|
Interest rate swap instruments
|
2
|
|
$
|
—
|
|
|
$
|
15
|
|
|
Commodity swap instruments
|
2
|
|
—
|
|
|
198
|
|
|
Total assets
|
|
|
$
|
—
|
|
|
$
|
213
|
|
|
Liabilities:
|
|
|
|
|
|
|
Interest rate swap instruments
|
2
|
|
$
|
11,128
|
|
|
$
|
6,236
|
|
|
Commodity swap instruments
|
2
|
|
44
|
|
|
—
|
|
|
Make-whole provisions
|
2
|
|
1,352
|
|
|
918
|
|
|
Contingent consideration
|
3
|
|
678
|
|
|
678
|
|
|
Total liabilities
|
|
|
$
|
13,202
|
|
|
$
|
7,832
|
|
The fair value of the Company’s interest rate swaps was determined using cash flow analysis on the expected cash flow of the contract in combination with observable market-based inputs, including interest rate curves and implied volatility. As part of this valuation, the Company considered the credit ratings of the counterparties to the interest rate swaps to determine if a credit risk adjustment was required.
The fair value of the Company’s commodity swaps was determined using a cash flow analysis on the expected cash flow of the contract in combination with observable forward price inputs obtained from a third-party pricing source. As part of this valuation, the Company considered the credit ratings of the counterparties to the commodity swaps to determine if a credit risk adjustment was required.
The fair value of the Company’s make-whole provisions was determined by either comparing it against the rates of similar debt instruments under similar terms without a make-whole provision obtained from various highly rated third-party pricing sources or evaluating the present value of the prepayment fee.
The fair value of the Company’s contingent consideration liabilities were determined by evaluating the acquired asset’s future financial forecasts and evaluating which, if any, of the cumulative revenue targets, financial metrics and/or milestones are likely to be met. The Company has classified contingent consideration related to certain acquisitions within level 3 of the fair value hierarchy because the fair value is derived using significant unobservable inputs, which include discount rates and probability-weighted cash flows. The Company determined the fair value of its contingent consideration obligations based on a probability-weighted income approach derived from financial performance estimates and probability assessments of the attainment of certain
AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands) (Unaudited) (Continued)
targets. The Company establishes discount rates to be utilized in its valuation models based on the cost to borrow that would be required by a market participant for similar instruments.
The key assumptions as of September 30, 2020 related to the contingent consideration from the acquisition of certain assets of Chelsea Group Limited, used in the model include a discount rate of 18% for purposes of discounting the low and base case scenarios associated with achievement of the financial based earn-out. The probabilities assigned to these scenarios were 50% for both the low and base case scenarios. An increase or decrease in the probability of achievement of any scenario could result in a significant increase or decrease to the estimated fair value of the contingent consideration liability.
The following table sets forth a summary of changes in fair value of contingent liability classified as level 3 for the nine months ended September 30, 2020 and September 30, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2020
|
|
Nine Months Ended September 30, 2019
|
|
Contingent consideration liability balance at December 31, 2019 and 2018
|
$
|
678
|
|
|
$
|
600
|
|
|
|
|
|
|
|
Changes in the fair value of contingent consideration obligation
|
—
|
|
|
50
|
|
|
Contingent consideration liability balance at September 30, 2020 and 2019
|
$
|
678
|
|
|
$
|
650
|
|
The fair value of financial instruments is determined by reference to observable market data and other valuation techniques, as appropriate. The only category of financial instruments where the difference between fair value and recorded book value is notable is long-term debt. At September 30, 2020 and December 31, 2019 the fair value of the Company’s long-term debt was estimated using discounted cash flows analysis, based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements which are considered to be level 2 inputs. There have been no transfers in or out of level 2 or level 3 financial instruments for the nine months ended September 30, 2020 and the year ended December 31, 2019.
Based on the analysis performed, the fair value and the carrying value of the Company’s long-term debt, excluding financing leases, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2020
|
|
As of December 31, 2019
|
|
|
Fair Value
|
|
Carrying Value
|
|
Fair Value
|
|
Carrying Value
|
|
Long-term debt (Level 2)
|
$
|
318,816
|
|
|
$
|
313,550
|
|
|
$
|
309,377
|
|
|
$
|
307,508
|
|
The Company is also required periodically to measure certain other assets at fair value on a nonrecurring basis, including long-lived assets, goodwill and other intangible assets. There were no assets recorded at fair value on a non-recurring basis at September 30, 2020 or December 31, 2019.
AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands) (Unaudited) (Continued)
11. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The following table presents information about the fair value amounts of the Company’s derivative instruments as follows at September 30, 2020 and December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives as of
|
|
|
|
|
September 30, 2020
|
|
December 31, 2019
|
|
|
Balance Sheet Location
|
|
Fair Value
|
|
Fair Value
|
|
Derivatives Designated as Hedging Instruments:
|
|
|
|
|
|
|
Interest rate swap contracts
|
Other assets
|
|
$
|
—
|
|
|
$
|
15
|
|
|
Interest rate swap contracts
|
Other liabilities
|
|
$
|
10,816
|
|
|
$
|
6,210
|
|
|
Derivatives Not Designated as Hedging Instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap contracts
|
Other liabilities
|
|
$
|
312
|
|
|
$
|
26
|
|
|
Commodity swap contracts
|
Other assets
|
|
$
|
—
|
|
|
$
|
198
|
|
|
Commodity swap contracts
|
Other liabilities
|
|
$
|
44
|
|
|
$
|
—
|
|
|
Make-whole provisions
|
Other liabilities
|
|
$
|
1,352
|
|
|
$
|
918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the three months ended September 30, 2020, as a result of a qualitative assessment of the original volatility inputs used to calculate the hedge effectiveness related to two interest rate swaps that were executed in May 2020, the Company de-designated these interest rate swaps as effective hedging instruments and reclassified $303 out of accumulated other comprehensive income (“AOCI”) into other expenses, net.
As of September 30, 2020, all but four of the Company’s freestanding derivatives were designated as hedging instruments. As of December 31, 2019 all but three of the Company’s freestanding derivatives were designated as hedging instruments.
The following tables present information about the effects of the Company’s derivative instruments on the condensed consolidated statements of income and condensed consolidated statements of comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of (Gain) Loss Recognized in Net Income
|
|
|
Location of (Gain) Loss Recognized in Net Income
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Derivatives Designated as Hedging Instruments:
|
|
|
|
|
|
|
|
|
|
Interest rate swap contracts
|
Other expenses, net
|
|
$
|
503
|
|
|
$
|
44
|
|
|
$
|
908
|
|
|
$
|
(6)
|
|
|
Derivatives Not Designated as Hedging Instruments:
|
|
|
|
|
|
|
|
|
|
Interest rate swap contracts
|
Other expenses, net
|
|
$
|
287
|
|
|
$
|
(3)
|
|
|
$
|
287
|
|
|
$
|
66
|
|
|
Commodity swap contracts
|
Other expenses, net
|
|
194
|
|
|
(31)
|
|
|
241
|
|
|
(203)
|
|
|
Make-whole provisions
|
Other expenses, net
|
|
(27)
|
|
|
(150)
|
|
|
443
|
|
|
(935)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2020
|
|
|
|
Derivatives Designated as Hedging Instruments:
|
|
|
|
|
Accumulated loss in AOCI at the beginning of the period
|
$
|
(4,742)
|
|
|
|
|
|
|
|
|
|
Unrealized loss recognized in AOCI
|
(4,623)
|
|
|
|
|
Loss reclassified from AOCI to other expenses, net
|
1,211
|
|
|
|
|
Net loss on derivatives
|
(3,412)
|
|
|
|
|
Accumulated loss in AOCI at the end of the period
|
$
|
(8,154)
|
|
|
|
AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands) (Unaudited) (Continued)
The following tables present a listing of the Company’s active derivative instruments as of September 30, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Active Interest Rate Swap
|
|
Effective Date
|
|
Expiration Date
|
|
Initial Notional
Amount ($)
|
|
Status
|
|
11-Year, 5.77% Fixed
|
|
October 2018
|
|
October 2029
|
|
$
|
9,200
|
|
|
Designated
|
|
15-Year, 5.24% Fixed
|
|
June 2018
|
|
June 2033
|
|
10,000
|
|
|
Designated
|
|
3-Year, 2.46% Fixed
|
|
March 2018
|
|
December 2020
|
|
17,100
|
|
|
Not Designated
|
|
10-Year, 4.74% Fixed
|
|
June 2017
|
|
December 2027
|
|
14,100
|
|
|
Designated
|
|
15-Year, 3.26% Fixed
|
|
February 2023
|
|
December 2038
|
|
14,084
|
|
|
Designated
|
|
7-Year, 2.19% Fixed
|
|
February 2016
|
|
February 2023
|
|
20,746
|
|
|
Designated
|
|
8-Year, 3.70% Fixed
|
|
March 2020
|
|
June 2028
|
|
14,643
|
|
|
Designated
|
|
8-Year, 3.70% Fixed
|
|
March 2020
|
|
June 2028
|
|
10,734
|
|
|
Designated
|
|
13-Year, 0.93% Fixed
|
|
May 2020
|
|
March 2033
|
|
9,505
|
|
|
Not Designated
|
|
13-Year, 0.93% Fixed
|
|
May 2020
|
|
March 2033
|
|
6,968
|
|
|
Not Designated
|
|
15-Year, 5.30% Fixed
|
|
February 2006
|
|
February 2021
|
|
3,256
|
|
|
Designated
|
|
15.5-Year, 5.40% Fixed
|
|
September 2008
|
|
March 2024
|
|
13,081
|
|
|
Designated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Active Commodity Swap
|
|
Effective Date
|
|
Expiration Date
|
|
Initial Notional Amount (Volume)
|
|
Commodity Measurement
|
|
Status
|
|
1-Year, $2.70 MMBtu Fixed
|
|
May 2020
|
|
April 2021
|
|
435,810
|
|
|
MMBtus
|
|
Not Designated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Derivatives
|
|
Classification
|
|
Effective Date
|
|
Expiration Date
|
|
Fair Value ($)
|
|
Make-whole provisions
|
|
Liability
|
|
June/August 2018
|
|
December 2038
|
|
$
|
534
|
|
|
Make-whole provisions
|
|
Liability
|
|
August 2016
|
|
April 2031
|
|
432
|
|
|
Make-whole provisions
|
|
Liability
|
|
April 2017
|
|
February 2034
|
|
386
|
|
12. INVESTMENT FUNDS AND OTHER VARIABLE INTEREST ENTITIES
Investment Funds
In each of September 2015, June 2017, June 2018, October 2018, and December 2019, the Company formed an investment fund with a different third-party investor which granted the applicable investor ownership interests in the net assets of certain of the Company’s renewable energy project subsidiaries. The Company currently has five such investment funds each with a different third-party investor.
The Company consolidates the investment funds, and all inter-company balances and transactions between the Company and the investment funds are eliminated in its condensed consolidated financial statements. The Company determined that the investment funds meet the definition of a variable interest entity (“VIE”). The Company uses a qualitative approach in assessing the consolidation requirements for VIEs that focuses on determining whether the Company has the power to direct the activities of the VIE that most significantly affect the VIE’s economic performance and whether the Company has the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.
The Company has considered the provisions within the contractual arrangements that grant it power to manage and make decisions that affect the operation of these VIEs, including determining the solar energy systems and associated long-term customer contracts to be sold or contributed to the VIEs, and installation, operation and maintenance of the solar energy systems. The Company considers that the rights granted to the other investors under the contractual arrangements are more protective in
AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands) (Unaudited) (Continued)
nature rather than participating rights. As such, the Company has determined it is the primary beneficiary of the VIEs for all periods presented. The Company evaluates its relationships with VIEs on an ongoing basis to ensure that it continues to be the primary beneficiary.
Under the related agreements, cash distributions of income and other receipts by the funds, net of agreed-upon expenses and estimated expenses, tax benefits and detriments of income and loss, and tax benefits of tax credits, are assigned to the funds’ investor and Company’s subsidiaries as specified in contractual arrangements. Certain of these arrangements have call and put options to acquire the investor’s equity interest as specified in the contractual agreements. See Note 13 for additional information on the call and put options.
A summary of amounts related to the investment funds in the Company’s condensed consolidated balance sheets is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
2020(1)
|
|
2019(1)
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
9,179
|
|
|
$
|
4,666
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted cash
|
1,248
|
|
|
586
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
867
|
|
|
532
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and estimated earnings in excess of billings
|
2,168
|
|
|
1,125
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets
|
128
|
|
|
108
|
|
|
|
|
|
|
|
|
|
|
|
|
Total VIE current assets
|
13,590
|
|
|
7,017
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
1,266
|
|
|
1,266
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy assets, net
|
145,008
|
|
|
142,456
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease assets
|
6,483
|
|
|
6,511
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets
|
331
|
|
|
1,662
|
|
|
|
|
|
|
|
|
|
|
|
|
Total VIE assets
|
$
|
166,678
|
|
|
$
|
158,912
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portions of long-term debt and financing lease liabilities
|
$
|
2,243
|
|
|
$
|
2,252
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
594
|
|
|
2,006
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued expenses and other current liabilities
|
1,553
|
|
|
2,203
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portions of operating lease liabilities
|
121
|
|
|
102
|
|
|
|
|
|
|
|
|
|
|
|
|
Total VIE current liabilities
|
4,511
|
|
|
6,563
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt and financing lease liabilities, net of current portion and deferred financing fees
|
23,626
|
|
|
24,654
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term operating lease liabilities, net of current portion
|
6,302
|
|
|
6,180
|
|
|
|
|
|
|
|
|
|
|
|
|
Other liabilities
|
895
|
|
|
1,171
|
|
|
|
|
|
|
|
|
|
|
|
|
Total VIE liabilities
|
$
|
35,334
|
|
|
$
|
38,568
|
|
|
|
|
|
|
|
|
|
|
|
(1) The amounts in the above table are reflected in Note 1 on the Company’s condensed consolidated balance sheets. See the Company’s condensed consolidated balance sheets for additional information.
Other Variable Interest Entities
The Company follows guidance on the consolidation of VIEs that requires companies to utilize a qualitative approach to determine whether it is the primary beneficiary of a VIE. The process for identifying the primary beneficiary of a VIE requires consideration of the factors that indicate a party has the power to direct the activities that most significantly impact the joint ventures economic performance, including powers granted to the joint ventures program manager, powers contained in the joint venture governing board and, to a certain extent, a company's economic interest in the joint venture. The Company analyzes its joint ventures and classifies them as either:
•a VIE that must be consolidated because the Company is the primary beneficiary or the joint venture is not a VIE and the Company holds the majority voting interest with no significant participative rights available to the other partners; or
AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands) (Unaudited) (Continued)
•a VIE that does not require consolidation and is treated as an equity method investment because the Company is not the primary beneficiary or the joint venture is not a VIE and the Company does not hold the majority voting interest.
Many of the joint ventures are deemed to be VIEs because they lack sufficient equity to finance the activities of the joint venture.
Unconsolidated joint ventures are accounted for under the equity method. For those joint ventures, the Company's investment balances for the joint venture are included in other assets on the condensed consolidated balance sheets and the Company’s pro rata share of net income or loss is included in operating income. The Company’s investments in equity method joint ventures on the condensed consolidated balance sheets as of September 30, 2020 and December 31, 2019 were a net asset of $1,370 and $1,292, respectively. During the three and nine months ended September 30, 2020, the Company recognized expense of $50 and $127, respectively, from equity method joint ventures. During the three and nine months ended September 30, 2019, the Company recognized expense of $73 and $147, respectively from equity method joint ventures.
13. REDEEMABLE NON-CONTROLLING INTERESTS
The Company’s wholly owned subsidiary with a membership interest in the investment fund formed in the third quarter of 2015 has the right, beginning on the fifth anniversary of the final funding of the variable rate construction and term loans due 2023 and extending for six months, to elect to require the non-controlling interest holder to sell all of its membership units to the Company’s wholly owned subsidiary, a call option. The Company’s investment fund, which was formed in the third quarter of 2015, also includes a right, beginning on the sixth anniversary of the final funding and extending for one year, for the non-controlling interest holder to elect to require the Company’s wholly owned subsidiary to purchase all of its membership interests in the fund, a put option.
The Company’s wholly owned subsidiary with a membership interest in the investment fund formed in the second quarter of 2017 has the right, beginning on the fifth anniversary of the final funding of the non-controlling interest holder and extending for six months, to elect to require the non-controlling interest holder to sell all of its membership units to the Company’s wholly owned subsidiary, a call option. The Company’s investment fund formed in the second quarter of 2017 also includes a right, beginning on the sixth anniversary of the final funding and extending for one year, for the non-controlling interest holder to elect to require the Company’s wholly owned subsidiary to purchase all of its membership interests in the fund, a put option.
The Company’s wholly owned subsidiary with a membership interest in the investment fund formed in the second quarter of 2018 has the right, beginning on the fifth anniversary of the investment fund’s final project being placed into service and extending for six months, to elect to require the non-controlling interest holder to sell all of its membership units to the Company’s wholly owned subsidiary, a call option. The Company’s investment fund formed in the second quarter of 2018 also includes a right, upon the expiration of the call option and extending for six months, for the non-controlling interest holder to elect to require the Company’s wholly owned subsidiary to purchase all of its membership interests in the fund, a put option.
The Company’s wholly owned subsidiary with a membership interest in the investment fund formed in the fourth quarter of 2018 has the right, beginning on the fifth anniversary on the last projects placed in-service date and extending for six months, to elect to require the non-controlling interest holder to sell all of its membership units to the Company’s wholly owned subsidiary, a call option. The Company’s investment fund formed in the fourth quarter of 2018 also includes a right, upon the expiration of the call option and extending for six months, for the non-controlling interest partner to elect to require the Company’s wholly owned subsidiary to purchase all of its membership interests in the fund, a put option.
The Company’s wholly owned subsidiary with a membership interest in the investment fund formed in the fourth quarter of 2019 has the right, beginning on the fifth anniversary on the last projects placed in-service date and extending for six months, to elect to require the non-controlling interest holder to sell all of its membership units to the Company’s wholly owned subsidiary, a call option. The Company’s investment fund formed in the fourth quarter of 2019 also includes a right, beginning six months after the fifth anniversary of the final funding and extending for one year, for the non-controlling interest partner to elect to require the Company’s wholly owned subsidiary to purchase all of its membership interests in the fund, a put option.
The purchase price for two of the investment funds investors’ interests under the call options is equal to the fair market value of such interest at the time the option is exercised. The purchase price for two of the investment funds investor’s interests under the call options is equal to the greater of (i) the fair market value of such interests at the time the option is exercised or (ii) 7% of the investors’ contributed capital balance at the time the option is exercisable. The purchase price for the remaining investment fund investor’s interests under the call options is equal to the greater of (i) the fair market value of such interests at the time the option is exercised or (ii) 5% of the investors’ contributed capital balance at the time the option is exercisable. The call options are
AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands) (Unaudited) (Continued)
exercisable beginning on the date that specified conditions are met for each respective fund. None of the call options are expected to become exercisable prior to 2021.
The purchase price for two of the funds investors’ interests in the investment funds under the put options is the lessor of fair market value at the time the option is exercised and a specified amount, ranging from $659 - $917. The purchase price for the two of the remaining funds investors’ interest in the investment funds under the put options is the sum of (i) the fair market value at the time the option is exercised, and (ii) the closing costs incurred by the investor in connection with the exercise of the put option. The purchase price for the remaining fund investors’ interest in the investment funds under the put options is the lessor of fair market value at the time the option is exercised and the sum of (i) 5% of the investors’ contributed capital balance at the time the option is exercisable, and (ii) the fair market value of any unpaid tax law change losses incurred by the investor in connection with the exercise of the put option. The put options for the investment funds are exercisable beginning on the date that specified conditions are met for each respective fund. The put options are not expected to become exercisable prior to 2022.
Because the put options represents redemption features that are not solely within the control of the Company, the non-controlling interests in these funds are presented outside of permanent equity. Redeemable non-controlling interests are reported using the greater of their carrying value at each reporting date (which is impacted by attribution under the hypothetical liquidation at book value method) or their estimated redemption value in each reporting period. At both September 30, 2020 and December 31, 2019 redeemable non-controlling interests were reported at their carrying value totaling $36,421 and $31,616, respectively, as the carrying value at each reporting period was greater than the estimated redemption value.
14. EARNINGS PER SHARE AND OTHER EQUITY RELATED INFORMATION
Earnings Per Share
Basic earnings per share is calculated using the Company’s weighted-average outstanding common shares, including vested restricted shares. When the effects are not anti-dilutive, diluted earnings per share is calculated using the weighted-average outstanding common shares; the dilutive effect of convertible preferred stock, under the “if converted” method; and the treasury stock method with regard to warrants and stock options; all as determined under the treasury stock method.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net income attributable to common shareholders
|
$
|
20,002
|
|
|
$
|
8,870
|
|
|
$
|
30,568
|
|
|
$
|
22,233
|
|
|
Adjustment for accretion of tax equity financing fees
|
(91)
|
|
|
—
|
|
|
(91)
|
|
|
—
|
|
|
Income attributable to common shareholders
|
$
|
19,911
|
|
|
$
|
8,870
|
|
|
$
|
30,477
|
|
|
$
|
22,233
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Basic weighted-average shares outstanding
|
47,788
|
|
|
46,555
|
|
|
47,597
|
|
|
46,413
|
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
Stock options
|
1,313
|
|
|
1,138
|
|
|
1,188
|
|
|
1,262
|
|
|
Diluted weighted-average shares outstanding
|
49,101
|
|
|
47,693
|
|
|
48,785
|
|
|
47,675
|
|
|
Net income per share attributable to common shareholders:
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.42
|
|
|
$
|
0.19
|
|
|
$
|
0.64
|
|
|
$
|
0.48
|
|
|
Diluted
|
$
|
0.41
|
|
|
$
|
0.19
|
|
|
$
|
0.62
|
|
|
$
|
0.47
|
|
|
|
|
|
|
|
|
|
|
|
Potentially dilutive shares(1)
|
1,268
|
|
|
1,152
|
|
|
1,146
|
|
|
642
|
|
|
|
|
|
|
|
|
|
|
|
(1) Potentially dilutive shares attributable to stock options were excluded from the computation of diluted earnings per share as the effect would have been anti-dilutive.
|
AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands) (Unaudited) (Continued)
Stock-based Compensation Expense
The Company recorded stock-based compensation expense, including expense related to the ESPP, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Stock-based compensation expense
|
$
|
521
|
|
|
$
|
413
|
|
|
$
|
1,380
|
|
|
$
|
1,195
|
|
The compensation expense is included in selling, general and administrative expenses in the condensed consolidated statements of income. As of September 30, 2020, there was $11,970 of unrecognized compensation expense related to non-vested stock option awards that is expected to be recognized over a weighted-average period of 2.6 years.
No awards to individuals who were not either an employee or director of the Company were granted during the nine months ended September 30, 2020 or during the year ended December 31, 2019.
Stock Option Grants
The Company’s 2020 Stock Incentive Plan (the “2020 Plan”), was adopted by the Company’s Board of Directors in February 2020 and approved by its stockholders in May 2020. The 2020 Plan provides for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock awards and other stock-based awards. Upon its effectiveness, 5,000 shares of the Company’s Class A common stock were reserved for issuance under the 2020 Plan.
During the three months ended September 30, 2020, the Company granted 95 common stock options to certain employee and directors under its 2020 Stock Incentive Plan, which have a contractual life of ten years and vest over a five-year period. During the nine months ended September 30, 2020, the Company granted 376 common stock options to certain employees and directors under its 2010 and 2020 Stock Incentive Plans, which have a contractual life of ten years and vest over a five-year period.
Employee Stock Purchase Plan
In May 2020, the Company amended its 2017 Employee Stock Purchase Plan ("ESPP") which permits eligible employees to purchase up to an aggregate of 350 shares of the Company’s Class A common stock. This plan commenced December 1, 2017 and was previously amended on August 2018. The ESPP allows participants to purchase shares of common stock at a 5% discount from the fair market value of the stock as determined on specific dates at six-month intervals. During the nine months ended September 30, 2020 and 2019, the Company issued 28 and 22 shares, respectively, under the ESPP.
Share Repurchase Program
In April 2016, the Company’s Board of Directors authorized the repurchase of up to $10,000 of the Company’s Class A common stock from time to time on the open market in privately negotiated transactions. The Company’s Board of Directors authorized an increase in the Company’s share repurchase authorization to $15,000 of the Company's Class A common stock in February 2017 and to $17,553 of the Company's Class A common stock in August 2019, in each case, from time to time on the open market or in privately negotiated transactions. The timing and amount of any shares repurchased will be determined by the Company's management based on its evaluation of market conditions and other factors. Any repurchased shares will be available for use in connection with its stock plans and for other corporate purposes. The repurchase program has and will be funded using the Company's working capital and borrowings under its revolving line of credit. The Company accounts for share repurchases using the cost method. Under this method, the cost of the share repurchase is recorded entirely in treasury stock, a contra equity account. During the nine months ended September 30, 2020, the Company repurchased an immaterial amount of shares of common stock. During the three and nine months ended September 30, 2019, the Company repurchased 10 shares of common stock.
15. BUSINESS SEGMENT INFORMATION
The Company reports results under ASC 280, Segment Reporting. The Company’s reportable segments are U.S. Regions, U.S. Federal, Canada and Non-Solar Distributed Generation (“DG”). The Company’s U.S. Regions, U.S. Federal and Canada segments offer energy efficiency products and services, which include the design, engineering and installation of equipment and other measures to improve the efficiency and control the operation of a facility’s energy infrastructure, renewable energy solutions and services, which include the construction of small-scale plants that the company owns or develops for customers that produce electricity, gas, heat or cooling from renewable sources of energy and O&M services. The Company’s Non-Solar DG segment
AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands) (Unaudited) (Continued)
sells electricity, processed renewable gas fuel, heat or cooling, produced from renewable sources of energy, other than solar, and generated by small-scale plants that the Company owns and O&M services for customer owned small-scale plants. The “All Other” category offers enterprise energy management services, consulting services and the sale of solar-PV energy products and systems which we refer to as integrated-PV.
These segments do not include results of other activities, such as corporate operating expenses not specifically allocated to the segments. Certain reportable segments are an aggregation of operating segments. The reports of the Company’s chief operating decision maker do not include assets at the operating segment level. The accounting policies are the same as those described in the summary of significant accounting policies in Note 2 included in the Company’s annual report on Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission on March 4, 2020.
AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands) (Unaudited) (Continued)
An analysis of the Company’s business segment information and reconciliation to the condensed consolidated financial statements is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Regions
|
|
U.S. Federal
|
|
Canada
|
|
Non-Solar DG
|
|
All Other
|
|
Total Consolidated
|
|
Three Months Ended September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
92,944
|
|
|
$
|
118,303
|
|
|
$
|
12,263
|
|
|
$
|
28,251
|
|
|
$
|
30,746
|
|
|
$
|
282,507
|
|
|
Interest income
|
32
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
34
|
|
|
Interest expense
|
892
|
|
|
340
|
|
|
992
|
|
|
1,510
|
|
|
34
|
|
|
3,768
|
|
|
Depreciation and amortization of intangible assets
|
3,239
|
|
|
995
|
|
|
402
|
|
|
5,013
|
|
|
426
|
|
|
10,075
|
|
|
Unallocated corporate activity
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9,361)
|
|
|
Income before taxes, excluding unallocated corporate activity
|
7,225
|
|
|
16,121
|
|
|
446
|
|
|
2,391
|
|
|
3,967
|
|
|
30,150
|
|
|
Three Months Ended September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
84,079
|
|
|
$
|
71,258
|
|
|
$
|
12,665
|
|
|
$
|
21,875
|
|
|
$
|
22,149
|
|
|
$
|
212,026
|
|
|
Interest income
|
69
|
|
|
92
|
|
|
—
|
|
|
21
|
|
|
—
|
|
|
182
|
|
|
Interest expense
|
1,548
|
|
|
209
|
|
|
179
|
|
|
1,213
|
|
|
—
|
|
|
3,149
|
|
|
Depreciation and amortization of intangible assets
|
2,538
|
|
|
901
|
|
|
396
|
|
|
5,149
|
|
|
429
|
|
|
9,413
|
|
|
Unallocated corporate activity
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8,482)
|
|
|
Income before taxes, excluding unallocated corporate activity
|
3,350
|
|
|
10,967
|
|
|
1,577
|
|
|
977
|
|
|
881
|
|
|
17,752
|
|
|
Nine Months Ended September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
266,373
|
|
|
$
|
271,539
|
|
|
$
|
32,690
|
|
|
$
|
74,104
|
|
|
$
|
73,250
|
|
|
$
|
717,956
|
|
|
Interest income
|
102
|
|
|
76
|
|
|
—
|
|
|
16
|
|
|
—
|
|
|
194
|
|
|
Interest expense
|
4,563
|
|
|
1,431
|
|
|
1,329
|
|
|
3,683
|
|
|
67
|
|
|
11,073
|
|
|
Depreciation and amortization of intangible assets
|
9,002
|
|
|
2,953
|
|
|
1,174
|
|
|
15,720
|
|
|
1,231
|
|
|
30,080
|
|
|
Unallocated corporate activity
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(30,104)
|
|
|
Income before taxes, excluding unallocated corporate activity
|
15,960
|
|
|
33,162
|
|
|
741
|
|
|
6,964
|
|
|
7,035
|
|
|
63,862
|
|
|
Nine Months Ended September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
227,896
|
|
|
$
|
169,337
|
|
|
$
|
27,696
|
|
|
$
|
66,370
|
|
|
$
|
69,022
|
|
|
$
|
560,321
|
|
|
Interest income
|
132
|
|
|
160
|
|
|
—
|
|
|
65
|
|
|
39
|
|
|
396
|
|
|
Interest expense
|
4,118
|
|
|
627
|
|
|
517
|
|
|
4,075
|
|
|
—
|
|
|
9,337
|
|
|
Depreciation and amortization of intangible assets
|
7,184
|
|
|
2,524
|
|
|
986
|
|
|
16,051
|
|
|
1,153
|
|
|
27,898
|
|
|
Unallocated corporate activity
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(25,331)
|
|
|
Income before taxes, excluding unallocated corporate activity
|
5,530
|
|
|
26,631
|
|
|
1,529
|
|
|
5,758
|
|
|
7,592
|
|
|
47,040
|
|
AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands) (Unaudited) (Continued)
16. DEBT
As of September 30, 2020 and December 31, 2019, the Company’s outstanding debt obligations are comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commencement Date
|
|
Maturity Date
|
|
Acceleration Clause(2)
|
|
Rate as of September 30, 2020
|
|
September 30, 2020
|
|
December 31, 2019
|
|
Senior secured credit facility, interest at varying rates monthly in arrears
|
Jun 2015
|
|
Jun 2024
|
|
NA
|
|
3.41
|
%
|
|
$
|
114,632
|
|
|
$
|
112,216
|
|
|
Variable rate term loan payable in semi-annual installments
|
Jan 2006
|
|
Feb 2021
|
|
Yes
|
|
2.48
|
%
|
|
350
|
|
|
625
|
|
|
Variable rate term loan payable in semi-annual installments
|
Jan 2006
|
|
Jun 2024
|
|
Yes
|
|
2.23
|
%
|
|
6,081
|
|
|
6,609
|
|
|
Term loan payable in quarterly installments
|
Mar 2011
|
|
Mar 2021
|
|
Yes
|
|
7.25
|
%
|
|
339
|
|
|
831
|
|
|
Term loan payable in monthly installments
|
Oct 2011
|
|
Jun 2028
|
|
NA
|
|
6.11
|
%
|
|
3,196
|
|
|
3,649
|
|
|
Variable rate term loan payable in quarterly installments
|
Oct 2012
|
|
May 2025
|
|
NA
|
|
2.48
|
%
|
|
39,936
|
|
|
28,217
|
|
|
Variable rate term loan payable in quarterly installments
|
Sep 2015
|
|
Mar 2023
|
|
NA
|
|
2.98
|
%
|
|
15,534
|
|
|
15,976
|
|
|
Term loan payable in quarterly installments
|
Aug 2016
|
|
Jul 2031
|
|
NA
|
|
4.95
|
%
|
|
3,378
|
|
|
3,769
|
|
|
Term loan payable in quarterly installments
|
Mar 2017
|
|
Mar 2028
|
|
NA
|
|
5.00
|
%
|
|
3,204
|
|
|
3,521
|
|
|
Term loan payable in monthly installments
|
Apr 2017
|
|
Apr 2027
|
|
NA
|
|
4.50
|
%
|
|
19,538
|
|
|
22,553
|
|
|
Term loan payable in quarterly installments
|
Apr 2017
|
|
Feb 2034
|
|
NA
|
|
5.61
|
%
|
|
2,479
|
|
|
2,706
|
|
|
Variable rate term loan payable in quarterly installments
|
Jun 2017
|
|
Dec 2027
|
|
NA
|
|
2.68
|
%
|
|
11,126
|
|
|
11,740
|
|
|
Variable rate term loan payable in quarterly installments
|
Feb 2018
|
|
Aug 2022
|
|
Yes
|
|
7.73
|
%
|
|
9,236
|
|
|
15,645
|
|
|
Term loan payable in quarterly installments
|
Jun 2018
|
|
Dec 2038
|
|
Yes
|
|
5.15
|
%
|
|
27,363
|
|
|
28,583
|
|
|
Variable rate term loan payable in semi-annual installments
|
Jun 2018
|
|
Jun 2033
|
|
Yes
|
|
2.28
|
%
|
|
8,665
|
|
|
9,003
|
|
|
Variable rate term loan payable in monthly/quarterly installments
|
Oct 2018
|
|
Oct 2029
|
|
Yes
|
|
2.65
|
%
|
|
8,583
|
|
|
9,092
|
|
|
Long term finance liability in semi-annual installments(3)
|
Jul 2019
|
|
Jul 2039
|
|
NA
|
|
0.28
|
%
|
|
3,732
|
|
|
3,841
|
|
|
Long term finance liability in semi-annual installments(3)
|
Nov 2019
|
|
July 2040
|
|
NA
|
|
—
|
%
|
|
8,312
|
|
|
8,794
|
|
|
Term loan payable in quarterly installments
|
Dec 2019
|
|
Dec 2021
|
|
Yes
|
|
6.50
|
%
|
|
15,655
|
|
|
27,226
|
|
|
Fixed rate note
|
Apr 2020
|
|
Apr 2040
|
|
NA
|
|
5.00
|
%
|
|
218
|
|
|
—
|
|
|
Construction revolver payable July 2021
|
Jul 2020
|
|
Jul 2022
|
|
Yes
|
|
1.98
|
%
|
|
10,659
|
|
|
—
|
|
|
Construction revolver payable Nov 2020
|
Jul 2020
|
|
Nov 2020
|
|
Yes
|
|
5.25
|
%
|
|
7,564
|
|
|
—
|
|
|
Financing leases(1)
|
|
|
|
|
|
|
|
|
26,098
|
|
|
28,497
|
|
|
|
|
|
|
|
|
|
|
$
|
345,878
|
|
|
$
|
343,093
|
|
|
Less - current maturities
|
|
|
|
|
|
|
|
|
61,521
|
|
|
69,969
|
|
|
Less - deferred financing fees
|
|
|
|
|
|
|
|
|
6,230
|
|
|
6,943
|
|
|
Long-term debt and financing lease liabilities, net
|
|
|
|
|
|
|
|
$
|
278,127
|
|
|
$
|
266,181
|
|
(1) Financing leases do not include approximately $20,207 and $22,015 in future interest payments as of September 30, 2020 and December 31, 2019, respectively.
(2) These agreements have acceleration causes that, in the event of default, as defined, the payee has the option to accelerate payment terms and make due the remaining principal and the required interest balance according to the agreement.
AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands) (Unaudited) (Continued)
(3) These agreements are sale-leaseback arrangements that provide for the sale of solar PV projects to a third party investor and the simultaneous leaseback of the projects. In accordance with Topic 842, Leases, these transactions are accounted for as failed sales as the Company retains control of the underlying assets and as such, are classified as financing liabilities. The low interest rates are the results of tax credits which were transferred to the counterparty.
Senior Secured Credit Facility - Revolver and Term Loan
In March 2020, the Company amended the Company’s senior secured credit facility which increased the total funded debt to EBITDA covenant ratio to a maximum of 3.75 for the year ended December 31, 2020. The amendment also increased the Eurocurrency Rate floor to 1% from 0%. The total commitment under the amended credit facility (revolving credit, term loan and swing line) remains unchanged, which is $185,000.
At September 30, 2020, funds of $45,668 are available for borrowing under the revolving credit facility.
April 2020 Note
In April 2020, the Company issued a note to a developer in connection with the acquisition of one energy project, discussed in Note 6. The note provides a principal amount of $218 and bears interest at a fixed rate of 5%. The principal and interest payments can be redeemed at any time after the issue date within 20 years before the note is expired after the issuance and prior to maturity in April 2040. At September 30, 2020, $218 was outstanding under this note.
May 2020 Credit Facility
In May 2020, the Company amended a non-recourse credit facility with two banks. The amended and restated credit facility replaces and extended the Company’s existing credit facility to May 27, 2025 from May 31, 2020. The amended credit facility provides an amended principal amount of $41,850. The amended credit facility bears interest at a rate of 2.25% above LIBOR. The interest rate increases by 0.125% above the base rate every three years following the date of execution. The principal and interest payments are due in quarterly installments. At September 30, 2020, $39,936 was outstanding under the amended credit facility, net of debt discount and deferred financing fees.
June 2020 Construction Revolver
In June 2020, the Company entered into a revolving credit agreement with a bank, with an aggregate borrowing capacity of $100,000 for use in financing the construction cost of its owned projects. The facility bears interest at (i) 1.5% above LIBOR or (ii) 0.5% above a base rate defined in the credit agreement, dependent on the type of borrowing requested by the Company. The revolving facility matures in November 2020, with all remaining unpaid amounts outstanding under the facility due at that time. As of September 30, 2020, the Company has drawn $7,564 under the construction revolving facility.
July 2020 Construction Revolver
In July 2020, the Company entered into a revolving credit agreement with a bank, with an aggregate borrowing capacity of $30,000 for use in financing the Company’s construction cost of energy projects. The facility may, at the Company’s request, be increased by up to an additional $20,000 after certain conditions have been met. The facility bears interest at a rate of 1.75% over LIBOR and matures in July 2022, with all remaining unpaid amounts outstanding under the facility due at that time.
The project loan drawn under the revolving facility matures at the earlier of (i) 12 months from the funding of project loan or (ii) July 17, 2022. As of September 30, 2020, $10,659 was outstanding under the revolving facility, net of debt discount and deferred financing fees. Funds of $18,956 are available for borrowing under this revolving facility.
17. SUBSEQUENT EVENT
On October 23, 2020, the Company amended a non-recourse credit facility with a bank. The amended and restated credit facility replaced and extended the Company's existing facility to March 31, 2026 from August 31, 2022. The amended credit facility provides an amended principal amount up to $50 million and bears interest at a rate of 6% above LIBOR. The principal and interest payments are due in quarterly installments. Within 60 days following October 23, 2020, the Company is required to maintain interest rate protection through hedging agreements covering an aggregate notional amount of not less than 50% of and not more than 95% of the aggregate outstanding principal amount of the loans.