INFRAREIT, INC., 10-Q filed on 8/7/2015
Quarterly Report
Document and Entity Information
6 Months Ended
Jun. 30, 2015
Aug. 5, 2015
Document And Entity Information [Abstract]
 
 
Document Type
10-Q 
 
Amendment Flag
false 
 
Document Period End Date
Jun. 30, 2015 
 
Document Fiscal Year Focus
2015 
 
Document Fiscal Period Focus
Q2 
 
Trading Symbol
HIFR 
 
Entity Registrant Name
InfraREIT, Inc. 
 
Entity Central Index Key
0001506401 
 
Current Fiscal Year End Date
--12-31 
 
Entity Filer Category
Non-accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
43,565,495 
CONSOLIDATED BALANCE SHEETS (USD $)
Jun. 30, 2015
Dec. 31, 2014
Current Assets
 
 
Cash and cash equivalents
$ 50,495,000 
$ 15,612,000 
Restricted cash
1,682,000 
1,682,000 
Due from affiliates
21,776,000 
27,822,000 
Inventory
6,938,000 
7,393,000 
Assets held for sale
 
41,211,000 
Prepaids and other current assets
1,409,000 
4,897,000 
Total current assets
82,300,000 
98,617,000 
Electric Plant, net
1,325,582,000 
1,227,146,000 
Goodwill
138,384,000 
138,384,000 
Deferred Assets and Other Regulatory Assets, net
36,277,000 
37,948,000 
Investments
2,519,000 
2,519,000 
Total Assets
1,585,062,000 
1,504,614,000 
Current Liabilities
 
 
Accounts payable and accrued liabilities
28,167,000 
25,295,000 
Short-term borrowings
 
219,000,000 
Current portion of long-term debt
19,430,000 
19,234,000 
Dividends and distributions payable
13,634,000 
14,130,000 
Contingent consideration
27,378,000 
Accrued taxes
2,691,000 
2,359,000 
Total current liabilities
63,922,000 
307,396,000 
Long-Term Debt
600,757,000 
610,522,000 
Regulatory Liability
6,177,000 
1,242,000 
Total liabilities
670,856,000 
919,160,000 
Commitments and Contingencies
   
   
Equity
 
 
Members' capital - 35,053,186 shares issued and outstanding as of December 31, 2014
 
440,387,000 
Common stock, $0.01 par value; 450,000,000 shares authorized; 43,565,495 issued and outstanding as of June 30, 2015
436,000 
 
Additional paid-in capital
702,213,000 
 
Accumulated deficit
(38,698,000)
 
Accumulated other comprehensive loss
 
Total InfraREIT, Inc. equity
663,951,000 
440,387,000 
Noncontrolling interest
250,255,000 
145,067,000 
Total equity
914,206,000 
585,454,000 
Total Liabilities and Equity
$ 1,585,062,000 
$ 1,504,614,000 
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
Jun. 30, 2015
Dec. 31, 2014
Statement Of Financial Position [Abstract]
 
 
Members capital, shares issued
 
35,053,186 
Members capital, shares outstanding
 
35,053,186 
Common stock, par or stated value per share
$ 0.01 
 
Common stock, shares authorized
450,000,000 
 
Common stock, shares issued
43,565,495 
 
Common stock, shares, outstanding
43,565,495 
 
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Jun. 30, 2015
Jun. 30, 2014
Income Statement [Abstract]
 
 
 
 
Lease revenue
$ 29,458 
$ 25,225 
$ 58,830 
$ 50,062 
Operating costs and expenses
 
 
 
 
General and administrative expense
4,728 
3,284 
53,461 
6,696 
Depreciation
9,671 
8,366 
19,179 
16,827 
Total operating costs and expenses
14,399 
11,650 
72,640 
23,523 
Income (loss) from operations
15,059 
13,575 
(13,810)
26,539 
Other (expense) income
 
 
 
 
Interest expense, net
(6,939)
(7,984)
(14,361)
(15,665)
Other income, net
847 
172 
1,473 
39 
Total other expense
(6,092)
(7,812)
(12,888)
(15,626)
Income (loss) before income taxes
8,967 
5,763 
(26,698)
10,913 
Income tax expense
124 
250 
332 
408 
Net income (loss)
8,843 
5,513 
(27,030)
10,505 
Less: Net income (loss) attributable to noncontrolling interest
2,481 
1,278 
(6,519)
2,425 
Net income (loss) attributable to InfraREIT, Inc.
$ 6,362 
$ 4,235 
$ (20,511)
$ 8,080 
Net income (loss) attributable to InfraREIT, Inc. common shareholders per share:
 
 
 
 
Basic
$ 0.15 
$ 0.12 
$ (0.48)
$ 0.23 
Diluted
$ 0.15 
$ 0.12 
$ (0.48)
$ 0.23 
Cash dividends declared per common share
$ 0.225 
 
$ 0.625 
 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (USD $)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Jun. 30, 2015
Jun. 30, 2014
Statement Of Income And Comprehensive Income [Abstract]
 
 
 
 
Net income (loss)
$ 8,843 
$ 5,513 
$ (27,030)
$ 10,505 
Change in fair value of cash flow hedging instrument
 
449 
 
844 
Comprehensive income (loss)
8,843 
5,962 
(27,030)
11,349 
Less: Comprehensive income (loss) attributable to noncontrolling interest
2,481 
1,421 
(6,519)
2,659 
Comprehensive income (loss) attributable to InfraREIT, Inc.
$ 6,362 
$ 4,541 
$ (20,511)
$ 8,690 
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (USD $)
In Thousands
Total
Members' Capital
Common Stock
Additional Paid-In Capital
Accumulated Deficit
Total InfraREIT, Inc. Equity
Noncontrolling Interest
Balance at Dec. 31, 2014
$ 585,454 
$ 440,387 
 
 
 
$ 440,387 
$ 145,067 
Dividends and distributions
(33,830)
(8,964)
 
 
(15,902)
(24,866)
(8,964)
Repurchase of common shares
(66,517)
(66,517)
 
 
 
(66,517)
 
Initial public offering, net of offering costs
490,433 
 
230 
490,203 
 
490,433 
 
Merger of InfraREIT, L.L.C. and InfraREIT, Inc. and related Reorganization transactions
(101,885)
(367,191)
206 
212,010 
 
(154,975)
53,090 
Net income (loss)
(27,030)
2,285 
 
 
(22,796)
(20,511)
(6,519)
Equity based compensation
308 
 
 
 
 
 
308 
Non-cash noncontrolling interest equity issuance
67,273 
 
 
 
 
 
67,273 
Balance at Jun. 30, 2015
$ 914,206 
 
$ 436 
$ 702,213 
$ (38,698)
$ 663,951 
$ 250,255 
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
6 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Cash flows from operating activities
 
 
Net (loss) income
$ (27,030,000)
$ 10,505,000 
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
 
 
Depreciation
19,179,000 
16,827,000 
Amortization of deferred financing costs
1,824,000 
1,659,000 
Allowance for funds used during construction - equity
(1,481,000)
(930,000)
Change in fair value of contingent consideration
895,000 
Reorganization structuring fee
44,897,000 
 
Realized gain on sale of marketable securities
(66,000)
 
Equity based compensation
308,000 
120,000 
Changes in assets and liabilities:
 
 
Due from affiliates
6,046,000 
13,865,000 
Inventory
455,000 
(391,000)
Prepaids and other current assets
(855,000)
(1,337,000)
Accounts payable and accrued liabilities
7,683,000 
4,789,000 
Net cash provided by operating activities
50,960,000 
46,002,000 
Cash flows from investing activities
 
 
Additions to electric plant
(115,627,000)
(112,063,000)
Proceeds from sale of assets
41,211,000 
 
Sale of marketable securities
1,065,000 
 
Cash paid to InfraREIT, L.L.C. investors in the merger, net of cash assumed
(172,400,000)
 
Net cash used in investing activities
(245,751,000)
(112,063,000)
Cash flows from financing activities
 
 
Net proceeds from issuance of common stock upon initial public offering
493,722,000 
 
Proceeds from short-term borrowings
33,000,000 
82,000,000 
Repayments of short-term borrowings
(253,000,000)
 
Proceeds from borrowings of long-term debt
 
11,000,000 
Repayments of long-term debt
(9,569,000)
(5,056,000)
Net change in restricted cash
 
(1,000)
Deferred financing costs
(153,000)
(715,000)
Dividends and distributions paid
(34,326,000)
 
Net cash provided by financing activities
229,674,000 
87,228,000 
Net increase in cash and cash equivalents
34,883,000 
21,167,000 
Cash and cash equivalents at beginning of period
15,612,000 
7,746,000 
Cash and cash equivalents at end of period
$ 50,495,000 
$ 28,913,000 
Description of Business and Presentation of Financial Statements
Description of Business and Presentation of Financial Statements

1.

Description of Business and Presentation of Financial Statements

InfraREIT, Inc. is a Maryland corporation and the surviving corporation of a merger (Merger) with InfraREIT, L.L.C., a Delaware limited liability company, completed on February 4, 2015 in connection with the initial public offering (IPO) of InfraREIT, Inc. As used in this Quarterly Report on Form 10-Q, unless the context requires otherwise or except as otherwise noted, the words “Company,” “InfraREIT,” “we,” “our” and “us” refer to InfraREIT, L.L.C., before giving effect to the Merger, and InfraREIT, Inc., after giving effect to the Merger, as the context requires, and also refer to the registrant’s subsidiaries, including InfraREIT Partners, LP (Operating Partnership or InfraREIT LP), a Delaware limited partnership.

The Merger was accounted for as a reverse acquisition which means for accounting purposes, we treated the assets and liabilities of InfraREIT, Inc. as assumed and incorporated with the assets and liabilities of InfraREIT, L.L.C. The main assets and liabilities assumed were marketable securities of $1.1 million and a note payable of $1.0 million. The marketable securities were sold during February 2015 for $1.1 million resulting in a realized gain of $0.1 million which is recorded in other income (expense), net in the Consolidated Statements of Operations. Additionally, the note payable and associated interest were paid in full in February 2015.

We hold 71.9% of the outstanding partnership units (OP Units) in the Operating Partnership as of June 30, 2015 and are its general partner. We include the accounts of the Operating Partnership and its subsidiaries in our consolidated financial statements. MC Transmission Holdings, Inc. (MC Transmission), which is a subsidiary of Marubeni Corporation (Marubeni), seven members of our board of directors and affiliates of Hunt Consolidated, Inc. (HCI) hold the other 28.1% of the outstanding OP Units as of June 30, 2015.

Description of Business

We are the owners of electric transmission and distribution assets (T&D assets) throughout Texas, including the Texas Panhandle near Amarillo (Panhandle assets), the Permian Basin in and around Stanton, Central Texas around Brady, Northeast Texas in and around Celeste (S/B/C assets) and South Texas near McAllen (McAllen assets). InfraREIT, L.L.C. elected to be treated as a real estate investment trust (REIT) for U.S. federal income tax purposes commencing with the taxable year ended December 31, 2010, and InfraREIT, Inc. will elect to be taxed as a REIT commencing with the taxable year ending December 31, 2015. We are externally managed and advised by Hunt Utility Services, LLC (Hunt Manager), which is responsible for overseeing our day-to-day affairs, subject to the oversight of our board of directors.

Initial Public Offering and Reorganization

We completed our IPO on February 4, 2015, issuing 23,000,000 shares of common stock at a price of $23.00, resulting in gross proceeds of $529.0 million.

Immediately after the closing of our IPO, we completed the Merger, with InfraREIT, L.L.C. merging with and into InfraREIT, Inc., and InfraREIT, Inc. as the surviving entity and general partner of the Operating Partnership. InfraREIT, Inc. used $172.4 million of the net proceeds from the IPO to fund the cash portion of the consideration issued in the Merger, as described in greater detail below. We contributed the remaining $323.2 million to the Operating Partnership in exchange for common OP Units (Common OP Units).

The Operating Partnership used the net proceeds from the IPO that it received from InfraREIT, Inc.:

·

to repay an aggregate of $1.0 million of indebtedness to HCI;

·

to repay an aggregate of $72.0 million of indebtedness outstanding under the Operating Partnership’s revolving credit facility and $150.0 million of indebtedness outstanding under Sharyland Distribution & Transmission Services, L.L.C.’s (SDTS) revolving credit facility;

·

to pay offering expenses (other than the underwriting discounts and commissions and the underwriter structuring fee) of $6.3 million; and

·

for general corporate purposes.

The following bullets describe the Merger and related transactions we effected in the first quarter of 2015 (collectively, the Reorganization).

·

On January 29, 2015, the Operating Partnership effected a reverse unit split whereby each holder of OP Units received 0.938550 OP Units of the same class in exchange for each such unit it held immediately prior to such time, which is referred to as the unit split. Also, on January 29, 2015, InfraREIT, L.L.C. effected a reverse share split whereby each holder of shares received 0.938550 shares of the same class in exchange for each such share it held immediately prior to such time, which is referred to as the share split. All references to unit, share, per unit and per share amounts in these unaudited consolidated financial statements and related disclosures have been adjusted to reflect the reverse share split and reverse unit split for all periods presented.

·

On January 29, 2015, InfraREIT, Inc. issued 1,700,000 shares of common stock to Hunt-InfraREIT, L.L.C. (Hunt-InfraREIT) as a non-cash reorganization advisory fee in accordance with the structuring fee agreement, resulting in our recognition of a $44.9 million non-cash expense in the first quarter of 2015.

·

On February 4, 2015, the Operating Partnership issued 1,700,000 OP Units to InfraREIT, Inc. in respect of the structuring fee issuance of 1,700,000 shares of InfraREIT, Inc. common stock described immediately above.

·

On February 4, 2015, the Operating Partnership issued an aggregate of 28,000 of its profit interest partnership units (LTIP Units) to seven of our directors.

·

On February 4, 2015, the Operating Partnership issued 983,814 Common OP Units to Hunt-InfraREIT in settlement of the Operating Partnership’s obligation to issue OP Units to Hunt-InfraREIT related to the construction of transmission assets in the Texas Panhandle and Southern Plains (CREZ Project).

·

On February 4, 2015, the Operating Partnership issued Hunt-InfraREIT 1,167,287 Common OP Units as an accelerated payment of a portion of the carried interest agreed to in 2010 in connection with the organization of InfraREIT, L.L.C. To effect the shift in ownership from the pre-IPO investors to Hunt-InfraREIT, an equal number of OP Units held by InfraREIT, L.L.C. in the Operating Partnership were canceled at the same time.

·

On February 4, 2015, as a result of the Merger, (1) holders of 8,000,000 common shares of InfraREIT, L.L.C. received $21.551 per common share, which was equal to the IPO price less the underwriting discounts and commissions and an underwriting structure fee, (2) holders of the remaining 19,617,755 common shares of InfraREIT, L.L.C. received 19,617,755 shares of InfraREIT, Inc. Class A common stock and (3) holders of 25,145 Class C shares of InfraREIT, L.L.C. received 25,145 shares of InfraREIT, Inc. Class C common stock.

·

Marubeni, John Hancock Life Insurance Company (U.S.A), Teachers Insurance and Annuity Association of America, OpTrust Infrastructure N.A. Inc. (OpTrust) (collectively, founding investors) each received both cash and stock consideration in the Merger, and all other pre-IPO investors received shares of InfraREIT, Inc. Class A common stock or Class C common stock in the Merger. InfraREIT, L.L.C. gave each other holder of its common shares the opportunity to receive cash consideration in the Merger, and each such holder elected (or was deemed to have elected) to receive shares of Class A common stock under the merger agreement. All holders of InfraREIT, L.L.C.’s Class C common shares, as a separate class, received shares of Class C common stock pursuant to the merger agreement.

·

On February 4, 2015, InfraREIT, Inc. contributed $323.2 million to the Operating Partnership in exchange for 15,000,000 Common OP Units.

·

On February 4, 2015, InfraREIT, Inc. issued 1,551,878 shares of common stock to Hunt-InfraREIT in exchange for 1,551,878 OP Units tendered for redemption by Hunt-InfraREIT in accordance with a redemption agreement.

·

On February 4, 2015, we purchased 6,242,999 common shares in consideration for the issuance of a promissory note to Westwood Trust in the principal amount of $66.5 million.

·

Westwood Trust immediately transferred the promissory note to MC Transmission, and, immediately following receipt of the promissory note, MC Transmission purchased 3,325,874 Common OP Units from the Operating Partnership in consideration for the assignment of the promissory note. The promissory note was then transferred to InfraREIT, Inc. in exchange for the redemption of 6,242,999 OP Units held by InfraREIT, Inc. and the subsequent cancellation of such promissory note, resulting in no cash consideration being paid or received pursuant to the purchase from Westwood Trust or the sale of Common OP Units to MC Transmission.

·

On March 9, 2015, the Operating Partnership issued 2,329,283 Common OP Units to Hunt-InfraREIT, and InfraREIT, Inc. canceled an equal number of shares of Class A common stock and Class C common stock. Each remaining share of Class A common stock and Class C common stock then converted to common stock on a one-for-one basis. This issuance settled InfraREIT, L.L.C.’s pre-IPO investors carried interest obligation agreed to by Hunt-InfraREIT under the investment documents entered into by the parties in 2010.

·

On March 9, 2015, the 11,264 long-term incentive plan units issued to two of InfraREIT, L.L.C.’s non-voting directors in May 2014 converted on a one-to-one basis to Common OP Units.

Limited Partnership Agreement

In connection with the Reorganization, we adopted a Second Amended and Restated Limited Partnership Agreement which became effective with the closing of our IPO. Upon completion of the IPO, the Operating Partnership had five types of OP Units outstanding: Common OP Units, Class A OP Units, Class B OP Units, Class C OP Units and LTIP Units.

On March 9, 2015, the Operating Partnership issued Common OP Units in exchange for outstanding Class A OP Units and Class C OP Units. Such Common OP Units were allocated among the holders of Class A OP Units and Class C OP Units, and the Class A OP Units, Class B OP Units and Class C OP Units were canceled. Following such allocation, we adopted a third amended and restated partnership agreement that eliminated the provisions related to the Reorganization and the description of the Class A OP Units, Class B OP Units and Class C OP Units; however, it continues to allow amendments to authorize and issue additional classes of OP Units in the future.

Basis of Presentation

The accompanying unaudited interim consolidated financial statements of InfraREIT, Inc. include our accounts and the accounts of all other entities in which we have a controlling financial interest with noncontrolling interest of consolidated subsidiaries reported separately. This Quarterly Report on Form 10-Q presents the operating results of InfraREIT, L.L.C. for the three and six months ended June 30, 2014 and the InfraREIT, L.L.C. balance sheet as of December 31, 2014. Our operating results for the three and six months ended June 30, 2015 reflect the operations of InfraREIT, L.L.C. prior to the effectiveness of the Merger, and the operations of InfraREIT, Inc. for the period from the Merger through June 30, 2015, and our balance sheet as of June 30, 2015 is the balance sheet of InfraREIT, Inc.

These unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015.

The Consolidated Balance Sheet at December 31, 2014 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. For further information, refer to the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2014, filed with the Securities and Exchange Commission on March 18, 2015.

Recently Issued Accounting Pronouncements

In February 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2015-02, Consolidation (Topic 810) – Amendments to the Consolidation Analysis. This amendment affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. ASU 2015-02 is effective for periods beginning after December 15, 2015 with early adoption permitted. The adoption of the new guidance is not expected to have a material impact on our financial position, results of operations or cash flows.

In April 2015, the FASB issued ASU 2015-03, Interest – Imputation of Interest (Subtopic 835-30), Simplifying the Presentation of Debt Issuance Costs. ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the debt liability, consistent with debt discounts. This ASU is effective for periods beginning after December 15, 2015 with early adoption permitted. When adopted, the new guidance will be applied on a retrospective basis with each balance sheet presented reflecting the new guidance along with transitional disclosures. The adoption is not expected to have a material impact on our financial position, results of operations or cash flows.

Related Party Transactions
Related Party Transactions

2.

Related Party Transactions

Our subsidiaries are parties to several lease agreements with Sharyland Utilities, L.P. (Sharyland), through which we lease our T&D assets to Sharyland. Under the leases we have agreed to fund capital expenditures for footprint projects. Our leases define “footprint projects” to be transmission or distribution projects primarily situated within our distribution service territory, or that physically hang from our existing transmission assets.

We earned lease revenues under these agreements of $29.5 million and $25.2 million from Sharyland during the three months ended June 30, 2015 and 2014, respectively. We earned $58.8 million and $50.1 million from Sharyland during the six months ended June 30, 2015 and 2014, respectively. In connection with our leases with Sharyland, we recorded a deferred rent liability of $16.7 million and $5.0 million as of June 30, 2015 and December 31, 2014, respectively, which is included in accounts payable and accrued liabilities on the Consolidated Balance Sheets.

We and Sharyland also make payments to each other under the leases that primarily consist of payments to reimburse Sharyland for the costs of gross plant and equipment added to our T&D assets. For the six months ended June 30, 2015 and 2014, the net amount of the payments we made to Sharyland was $121.3 million and $90.8 million, respectively.

As of June 30, 2015 and December 31, 2014, accounts payable and accrued liabilities on the Consolidated Balance Sheets included $10.7 million and $16.1 million, respectively, related to amounts owed to Sharyland. As of June 30, 2015 and December 31, 2014, amounts due from affiliates on the Consolidated Balance Sheets included $21.8 million and $27.8 million, respectively, related to amounts owed by Sharyland associated with our leases.

Our management fee paid to Hunt Manager for the six months ended June 30, 2015 and 2014 was $5.8 million and $1.3 million, respectively. As of June 30, 2015 and December 31, 2014, there were no prepaid or accrued amounts associated with management fees on the Consolidated Balance Sheets. Additionally, during the six months ended June 30, 2015 and 2014, we paid Hunt Manager $0.3 million and $0.2 million, respectively, for reimbursement of annual software license and maintenance fees and other expenses in accordance with our management agreement.

Our current management agreement with Hunt Manager, which was effective February 4, 2015, provided for an annual base fee, or management fee, of $10.0 million through April 1, 2015. Effective as of April 1, 2015, the annual base fee was adjusted to $13.1 million annually through March 31, 2016. The base fee for each twelve month period beginning April 1 thereafter will equal 1.50% of our total equity as of December 31 of the immediately preceding year, subject to a $30.0 million cap. The term of the management agreement expires December 31, 2019, and will automatically renew for successive five-year terms unless a majority of our independent directors decides to terminate the agreement.

In connection with the organization of InfraREIT, L.L.C. in November 2010, the Operating Partnership agreed to issue deemed capital credits and Class A OP Units to Hunt-InfraREIT with respect to certain development projects. The amount of the capital account credits the Operating Partnership was required to issue equaled 5% of our capital expenditures on these projects, including allowance for funds used during construction (AFUDC). The number of Class A OP Units the Operating Partnership was required to issue equaled the amount of the capital account credit divided by $10.65. During the six months ended June 30, 2014, the Operating Partnership issued approximately 37,241 Class A OP Units, and on January 1, 2015, the Operating Partnership issued an additional 17,600 Class A OP Units to Hunt-InfraREIT. Following the consummation of our IPO, the Operating Partnership no longer has the obligation to issue deemed capital credits and related equity to Hunt-InfraREIT. We recorded these capital account credits as asset acquisition costs included as part of the capital project in our construction work in progress (CWIP) balance.

InfraREIT LP also issued deemed capital and equity in connection with its CREZ Project. For further information, see Note 11, Contingent Consideration.

Prior to our IPO, we and one of our stockholders were parties to a secondee agreement under which employees of the stockholder provided services to us for a secondment fee. We incurred costs associated with secondment fees of less than $0.1 million during the six months ended June 30, 2014. We have not and will not incur any fees associated with this agreement in 2015. These fees are included in general and administrative expense in the Consolidated Statements of Operations. As of June 30, 2015 and December 31, 2014, there were no amounts owed to the member included in accounts payable and accrued liabilities on the Consolidated Balance Sheets related to the secondee agreement. As a result of our IPO, the secondee agreement terminated.

In connection with the IPO, Reorganization and related transactions, we incurred an aggregate of $5.0 million of legal fees, a portion of which was paid to reimburse Hunt and its affiliates, the founding investors and independent directors for legal expenses they incurred in connection with such transactions. This legal expense reimbursement relates to the fees and expenses of outside counsel incurred by those parties and was negotiated separately from the reorganization advisory fee that we paid to Hunt-InfraREIT in connection with the reorganization advisory services provided in connection with the IPO. For further information on additional related party transactions we entered into as a result of the Reorganization, see the caption Initial Public Offering and Reorganization included in Note 1, Description of Business and Presentation of Financial Statements.

On November 20, 2014, InfraREIT, Inc. borrowed $1.0 million from HCI pursuant to a promissory note. The note accrued interest at 2.5% per year and was due on November 1, 2015. This note and accrued interest were repaid in February 2015 with proceeds from our IPO for a total of $1.0 million.

On January 15, 2015, we sold assets related to the Cross Valley transmission line (Cross Valley) and the Golden Spread Electric Coop (GSEC) interconnection to Hunt for a total purchase price of $41.2 million. For further information, see Note 3, Assets Held for Sale.

 

Assets Held for Sale
Assets Held For Sale Not Part Of Disposal Group Disclosure [Text Block]

3.

Assets Held for Sale

In October 2014, InfraREIT, L.L.C.’s board of directors approved a plan to sell the assets related to the Cross Valley and GSEC interconnection projects. As of December 31, 2014, these assets were classified as assets held for sale at the lower of historical carrying amount or fair value on the Consolidated Balance Sheets as they met the criteria for “held for sale” accounting as of December 31, 2014. These assets represent labor, materials, AFUDC and various other costs associated with the construction of the Cross Valley and GSEC interconnections projects.

The assets of the Cross Valley and GSEC interconnection projects classified as assets held for sale on the Consolidated Balance Sheets were $41.2 million as of December 31, 2014. Since these assets were not placed in service as of December 31, 2014, no depreciation was taken.

Effective January 15, 2015, we sold all the assets related to Cross Valley to a newly formed development company owned by Hunt and certain of our founding investors for cash of $34.2 million, which equaled the CWIP of the project on the date of the sale, plus reimbursement of out of pocket expenses associated with the project financing.

Also effective January 15, 2015, we sold all the assets related to the GSEC interconnection project to Hunt for cash of $7.0 million, which equaled the CWIP of the project on the date of the sale.

In accordance with our development agreement, Hunt will continue to fund the construction of these identified projects and is required to offer them to us at least 90 days before each project is placed in service.

 

Prepaids and Other Current Assets
Prepaids Expenses And Other Current Assets

4.

Prepaids and Other Current Assets

Prepaids and other current assets are as follows:

(In thousands)

 

June 30,

2015

 

 

December 31, 2014

 

Offering costs

 

$

 

 

$

4,397

 

Prepaid insurance

 

 

874

 

 

 

249

 

Other

 

 

535

 

 

 

251

 

Total prepaids and other current assets

 

$

1,409

 

 

$

4,897

 

Offering costs consisted of costs directly attributable to the registration of our common stock in connection with our IPO. These offering costs, which were netted against our IPO proceeds, equaled $6.3 million in the aggregate, of which $4.4 million were on the Consolidated Balance Sheet at December 31, 2014.

 

Electric Plant and Depreciation
Electric Plant and Depreciation

5.

Electric Plant and Depreciation

The major classes of electric plant are as follows:

(In thousands)

 

June 30,

2015

 

 

December 31, 2014

 

Electric plant:

 

 

 

 

 

 

 

 

Transmission plant

 

$

981,159

 

 

$

966,560

 

Distribution plant

 

 

422,857

 

 

 

387,329

 

General plant

 

 

15,620

 

 

 

15,018

 

Total plant in service

 

 

1,419,636

 

 

 

1,368,907

 

CWIP

 

 

101,523

 

 

 

41,222

 

Total electric plant

 

 

1,521,159

 

 

 

1,410,129

 

Accumulated depreciation

 

 

(232,695

)

 

 

(220,101

)

Electric plant held for future use

 

 

37,118

 

 

 

37,118

 

Electric plant, net

 

$

1,325,582

 

 

$

1,227,146

 

General plant consists primarily of a warehouse, buildings and associated assets. CWIP relates to various transmission and distribution projects underway. The capitalized amounts of CWIP consist primarily of route development expenditures, labor and materials expenditures, right of way acquisitions, engineering services and legal fees. Electric plant, net includes plant acquisition adjustments of $29.0 million and $28.7 million at June 30, 2015 and December 31, 2014, respectively.

Electric plant held for future use includes approximately 66 miles of existing transmission lines and two substations located near Stanton, Texas purchased on December 30, 2013 from Southwestern Public Service Company. SDTS holds legal title to the assets and they are subject to a lease with Sharyland. Sharyland will have the responsibility for operating these T&D assets and complying with all applicable regulatory requirements.

 

Goodwill
Goodwill

6.

Goodwill

Goodwill represents the excess of costs of an acquired business over the fair value of the assets acquired, less liabilities assumed. We conduct an impairment test of goodwill at least annually. As of June 30, 2015 and December 31, 2014, $138.4 million was recorded as goodwill in the Consolidated Balance Sheets.

Deferred Assets and Other Regulatory Assets, Net
Deferred Assets and Other Regulatory Assets, Net

7.

Deferred Assets and Other Regulatory Assets, net

Deferred financing costs primarily consist of costs incurred in connection with the establishment of the InfraREIT LP revolving credit facility and issuance of $25.0 million aggregate principal amount of 8.50% per annum senior notes, see Note 8, Borrowings Under Credit Facilities and Note 9, Long-Term Debt.

Other regulatory assets consist of deferred financing costs within our regulated entities. These assets are classified as regulatory assets and amortized over the length of the related loan. These costs will be included in the costs to be recovered in connection with a future rate case. Deferred financing costs included in other regulatory assets primarily consist of debt issuance costs incurred in connection with the construction credit agreement entered into by Sharyland Projects, LLC (SPLLC) on June 20, 2011 and refinancing costs incurred in connection with the amended and restated revolving credit facility entered into by SDTS on June 28, 2013. On December 10, 2014, the SDTS credit facility was amended and restated in order to increase the revolving credit facility to a total of $250.0 million revolving credit facility with additional financing costs incurred, see Note 8, Borrowings Under Credit Facilities and Note 9, Long-Term Debt.

Deferred costs recoverable in future years of $23.8 million at June 30, 2015 and December 31, 2014 represent operating costs incurred from inception of Sharyland through December 31, 2007. We have determined that these costs are probable of recovery through future rates based on orders of the Public Utility Commission of Texas (PUCT) in Sharyland’s prior rate cases and regulatory precedent.

Deferred assets and other regulatory assets, net are as follows:

 

 

June 30, 2015

 

 

December 31, 2014

 

(In thousands)

 

Gross

Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net

Carrying

Amount

 

 

Gross

Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net

Carrying

Amount

 

Deferred financing costs

 

$

1,292

 

 

$

(255

)

 

$

1,037

 

 

$

1,290

 

 

$

(143

)

 

$

1,147

 

Other regulatory assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred financing costs

 

 

25,852

 

 

 

(14,405

)

 

 

11,447

 

 

 

25,701

 

 

 

(12,693

)

 

 

13,008

 

Deferred costs recoverable in future years

 

 

23,793

 

 

 

 

 

 

23,793

 

 

 

23,793

 

 

 

 

 

 

23,793

 

Deferred financing costs and other regulatory

   assets, net

 

$

50,937

 

 

$

(14,660

)

 

$

36,277

 

 

$

50,784

 

 

$

(12,836

)

 

$

37,948

 

 

Borrowings Under Credit Facilities
Borrowings Under Credit Facilities

8.

Borrowings Under Credit Facilities

InfraREIT LP Revolving Credit Facilities

On January 3, 2014, InfraREIT LP entered into a credit agreement, as amended, led by Bank of America, N.A., as administrative agent, which established a revolving credit facility of $130.0 million that included a letter of credit facility. On November 13, 2014, the credit facility was amended to extend the maturity date to March 31, 2015. On December 10, 2014, the credit facility was repaid and terminated using proceeds from InfraREIT LP’s new $75.0 million credit facility and SDTS’s amended credit agreement entered into on December 10, 2014, as discussed below.

On December 10, 2014, InfraREIT LP entered into a new $75.0 million revolving credit facility, led by Bank of America, N.A., as administrative agent, with up to $15.0 million available for issuance of letters of credit and a maturity date of December 10, 2019. The revolving credit facility is secured by substantially all of the assets of the Operating Partnership, including the Operating Partnership’s equity interests in its subsidiary, Transmission and Distribution Company, LLC (TDC). In addition, TDC guarantees the revolving credit facility and this guarantee is secured by the assets of, and InfraREIT LP’s equity interests in, TDC. Upon consummation of the IPO and Merger, InfraREIT, Inc. became a guarantor under this revolving credit facility.

The credit agreement requires InfraREIT LP to comply with coverage ratios on a consolidated basis and contains affirmative and negative covenants, including, but not limited to, limitations on additional debt, liens, investments, mergers, acquisitions, dispositions or entry into any line of business other than the business of the transmission and distribution of electric power and the provision of ancillary services and certain restrictions on the payment of dividends. The credit agreement also contains restrictions on the amount of Sharyland’s indebtedness and other restrictions on, and covenants applicable to, Sharyland.

Borrowings and other extensions of credit under the revolving credit facility bear interest, at InfraREIT LP’s election, at a rate equal to (i) the one, two, three or six month London Interbank Offered Rate (LIBOR) plus 2.5%, or (ii) a base rate (equal to the highest of (A) the Federal Funds Rate plus ½ of 1%, (B) the Bank of America prime rate and (C) LIBOR plus 1%) plus 1.5%. Letters of credit are subject to a letter of credit fee equal to the daily amount available to be drawn times 2.5%. InfraREIT LP is also required to pay a commitment fee and other customary fees under the new revolving credit facility. InfraREIT LP may prepay amounts outstanding under the revolving credit facility in whole or in part without premium or penalty.

There were no outstanding borrowings or letters of credit under the revolving credit facility at June 30, 2015 and there was $75.0 million borrowing capacity available. At December 31, 2014, $57.0 million of borrowings were outstanding at a 2.66% interest rate and no letters of credit outstanding with $18.0 million of remaining capacity under this revolving credit facility. As of June 30, 2015 and December 31, 2014, InfraREIT LP was in compliance with all debt covenants under this agreement.

SDTS Credit Agreements

On June 28, 2013, SDTS entered into a second amended and restated credit agreement led by Royal Bank of Canada, as administrative agent, which established a revolving credit facility of $75.0 million that originally matured on June 28, 2018 and included a letter of credit facility.

On December 10, 2014, SDTS’s second amended and restated credit agreement was amended and restated in order to, among other things, increase the amount of the revolving credit facility to a total of $250.0 million and extend the maturity date to December 10, 2019. Up to $25.0 million of the revolving credit facility is available for issuance of letters of credit, and up to $5.0 million of the revolving facility is available for swingline loans. The revolving credit agreement is secured by substantially all of the assets of, and TDC’s equity interests in, SDTS on the same basis as the senior secured notes described below in Note 9, Long-Term Debt.

The interest rate for the revolving credit facility is based, at SDTS’s option, at a rate equal to either (1) a base rate, determined as the greatest of (A) the administrative agent’s prime rate, (B) the federal funds effective rate plus ½ of 1% and (C) LIBOR plus 1.00% per annum, plus a margin of either 0.75% or 1.00% per annum, depending on the total debt to capitalization ratio of SDTS on a consolidated basis or (2) LIBOR plus a margin of either 1.75% or 2.00% per annum, depending on the total debt to capitalization ratio of SDTS on a consolidated basis. SDTS is also required to pay a commitment fee and other customary fees under its revolving credit facility. SDTS is entitled to prepay amounts outstanding under the revolving credit facility with no prepayment penalty.

There were no outstanding borrowing or letters of credit under the credit agreement at June 30, 2015 and there was $250.0 million borrowing capacity available. At December 31, 2014, $162.0 million of borrowings were outstanding at an effective interest rate of 1.91% with no letters of credit outstanding and $88.0 million of capacity under this revolving credit facility. As of June 30, 2015 and December 31, 2014, SDTS was in compliance with all debt covenants under this agreement.

The revolving credit facilities of InfraREIT LP and SDTS are subject to customary events of default. If an event of default occurs and is continuing, the required lenders may accelerate amounts due under each revolving credit facility (except in the case of a bankruptcy event of default, in which case such amounts will automatically become due and payable).

Long-Term Debt
Long-Term Debt

9.

Long-Term Debt

Long-term debt consisted of the following:

 

 

 

 

June 30, 2015

 

 

December 31, 2014

 

(In thousands)

 

Current

Maturity Date

 

Amount

Outstanding

 

 

Interest

Rate

 

 

Amount

Outstanding

 

 

Interest

Rate

 

Senior secured notes - $53.5 million

 

December 30, 2029

 

$

45,418

 

 

 

7.25%

 

 

$

46,291

 

 

 

7.25%

 

Senior secured notes - $110.0 million

 

September 30, 2030

 

 

103,657

 

 

 

6.47%

 

 

 

105,622

 

 

 

6.47%

 

Senior secured notes - $25.0 million

 

December 30, 2020

 

 

19,375

 

 

 

8.50%

 

 

 

20,000

 

 

 

8.50%

 

Senior secured notes - $60.0 million

 

June 20, 2018

 

 

60,000

 

 

 

5.04%

 

 

 

60,000

 

 

 

5.04%

 

Senior secured credit facilities - $407.0 million

 

June 20, 2018

 

 

391,737

 

 

2.44%*

 

 

 

397,843

 

 

2.42%*

 

Total long-term debt

 

 

 

 

620,187

 

 

 

 

 

 

 

629,756

 

 

 

 

 

Less current portion of long-term debt

 

 

 

 

(19,430

)

 

 

 

 

 

 

(19,234

)

 

 

 

 

Debt classified as long-term debt

 

 

 

$

600,757

 

 

 

 

 

 

$

610,522

 

 

 

 

 

 

*

Interest based on LIBOR at June 30, 2015 and December 31, 2014, respectively, plus an applicable margin.

Senior Secured Notes – On December 31, 2009, SDTS issued $53.5 million aggregate principal amount of 7.25% per annum senior secured notes to The Prudential Insurance Company of America and affiliates. Principal and interest on the senior secured notes is payable quarterly and the senior secured notes are collateralized by SDTS’s T&D assets and the equity interests of SDTS.

On July 13, 2010, in connection with the acquisition of Cap Rock Holding Corporation (Cap Rock), SDTS issued $110.0 million aggregate principal amount of 6.47% per annum senior secured notes to The Prudential Insurance Company of America. Principal and interest on the senior secured notes is payable quarterly and the senior secured notes are collateralized by SDTS’s T&D assets and the equity interests of SDTS.

On July 13, 2010, in connection with the acquisition of Cap Rock, TDC issued $25.0 million aggregate principal amount of 8.50% per annum senior secured notes to The Prudential Insurance Company of America and affiliates. Principal and interest on the senior secured notes is payable quarterly and the senior secured notes are collateralized by the equity interest of TDC and certain accounts of TDC.

SDTS and TDC are entitled to prepay amounts outstanding under the notes, subject to a prepayment penalty equal to the excess of the discounted value of the remaining scheduled payments with respect to such notes over the amount of the prepaid notes.

The senior secured notes contain certain default triggers, including without limitation: failure to maintain compliance with financial and other covenants contained in the agreements, limitation on liens, investments and the incurrence of additional indebtedness. As of June 30, 2015 and December 31, 2014, SDTS and TDC were in compliance with all debt covenants under these agreements.

Senior Secured Credit Facilities - On June 20, 2011, SPLLC entered into a construction term loan agreement consisting of a $667.0 million construction term loan, reduced to $447.0 million on March 8, 2013, syndicated broadly to a group of 14 international banks, and $60.0 million in fixed rate notes issued to The Prudential Insurance Company of America and affiliates. The senior secured credit facility is collateralized by SPLLC’s assets and SDTS’s equity interest in SPLLC.

The $447.0 million construction term loan accrued interest at LIBOR plus 2.00%. LIBOR reset at each selected interest period (one, two, three or six months), at SPLLC’s discretion, at the current market rate. The outstanding borrowing under the construction term loan at December 31, 2013 was $396.0 million. On May 16, 2014, the construction term loan outstanding was converted into a term loan with a balance of $407.0 million. After this conversion, interest accrues at LIBOR plus 2.25% for a period of three years, at which point the interest rate will increase to LIBOR plus 2.50%. Interest under the loan is payable the last day of the selected interest period for interest periods of three months or less, and every three months for interest periods greater than three months. Amortized principal amounts of the term loan are payable quarterly after the conversion.

Interest is payable quarterly on the $60.0 million fixed rate notes with the full principal balance due at maturity.

The term loan agreement and fixed rate notes contain certain default triggers, including without limitation: failure to maintain compliance with financial and other covenants contained in the agreements, limitation on liens, investments and the incurrence of additional indebtedness. SPLLC was in compliance with all debt covenants for the term loan and fixed rate notes as of June 30, 2015 and December 31, 2014.

 

Derivative Instruments
Derivative Instruments

10.

Derivative Instruments

Interest – During 2011, SPLLC entered into an interest rate swap agreement designated as a cash flow hedge against variable interest rate exposure on a portion of the construction term loan which established a fixed rate on the LIBOR interest rates specified in the SPLLC construction term loan at 0.832% per annum until June 30, 2014. Notional amounts reset on a monthly basis and did not exceed $261.0 million at any given time. There were no notional amounts as of June 30, 2014 as this swap agreement terminated on June 30, 2014. We have not entered into any new derivative instruments since the termination of this swap agreement.

This cash flow hedging instrument was recorded as a liability in the Consolidated Balance Sheets at fair value, with an offset to accumulated other comprehensive income to the extent the cash flow hedging instrument was effective. The cash flow hedging instrument gains and losses included in other comprehensive income were reclassified into earnings as the underlying transaction occurred. There was no cash flow hedging instrument ineffectiveness recorded for this swap agreement.

The Company reclassified $0.4 million and $0.8 million, included in other comprehensive income, during the three and six months ended June 30, 2014, respectively, to interest expense, net on the Consolidated Statements of Operations.

Contingent Consideration
Contingent Consideration

11.

Contingent Consideration

In connection with our acquisition of InfraREIT LP in 2010, we agreed to contingent consideration in the form of future deemed capital credits in an amount up to $82.5 million to Hunt-InfraREIT. The capital account credits, which were generated pro rata with our cash expenditures on the CREZ Project up to $737.0 million, were issued to Hunt-InfraREIT in the form of Class A OP Units at the agreed upon deemed issue price of $10.65 per unit on the first day of each quarter following the actual expenditures. The future deemed capital credits were determined to be contingent consideration and were assessed a fair value of $78.6 million at the date of acquisition and included as a component of long-term liabilities in the Consolidated Balance Sheets.

As of December 31, 2014, InfraREIT LP had issued, as described above, approximately 6.7 million of Class A OP Units to Hunt-InfraREIT. During the first quarter of 2015, the following transactions occurred:

·

On January 1, 2015, InfraREIT LP issued 53,246 Class A OP Units to Hunt-InfraREIT.

·

On February 4, 2015, in connection with the Reorganization, InfraREIT LP issued Hunt-InfraREIT 983,418 Common OP Units in full settlement of InfraREIT LP’s contingent consideration obligation.

We recognized $0.3 million and $0.9 million as expense due to changes in fair value of our contingent consideration in accordance with the acquisition agreement during the three and six months ended June 30, 2014, respectively. This expense was recorded as part of other (expense) income, net on the Consolidated Statements of Operations. There was no expense recorded during the three and six months ended June 30, 2015 related to our contingent consideration. As of December 31, 2014, $27.4 million was recorded as a current liability in the form of contingent consideration in the Consolidated Balance Sheets. As of June 30, 2015, no such liability was recorded as the contingent consideration was fully settled.

Fair Value of Financial Instruments
Fair Value of Financial Instruments

12.

Fair Value of Financial Instruments

The carrying amounts of our cash and cash equivalents, restricted cash, due from affiliates and accounts payable approximate fair value due to the short-term nature of these assets and liabilities.

Our derivative contracts consisted of cash flow hedging instruments which are not traded on a public exchange. The fair values of the cash flow hedging instrument contracts were determined using discounted cash flow techniques. The techniques incorporated Level 2 inputs and quotes from the counterparty to the interest swap contract. These market inputs were utilized in a discounted cash flow calculation considering the cash flow hedging instrument term, credit risk, notional amount and discount rate and were classified as Level 2 in the fair value hierarchy.

As of June 30, 2015 and December 31, 2014, we had $391.7 million and $397.8 million, respectively, of borrowings under the construction term loan which accrued interest under floating interest rate structures. Accordingly, the carrying value of such indebtedness approximated fair value for the amounts outstanding.

We also had borrowings totaling $228.5 million and $231.9 million under senior secured notes with a weighted average interest rate of 6.42% and 6.43% per annum as of June 30, 2015 and December 31, 2014, respectively. The fair value of these borrowings is estimated using discounted cash flow analysis based on current market rates.

We assessed the fair market value of our contingent consideration associated with the acquisition of InfraREIT LP using observable Level 2 inputs at December 31, 2014.

Financial instruments, measured at fair value, by level within the fair value hierarchy were as follows:

 

 

Carrying

 

 

Fair Value

 

(In thousands)

 

Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

June 30, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt

 

$

620,187

 

 

$

 

 

$

648,818

 

 

$

 

December 31, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt

 

$

629,756

 

 

$

 

 

$

658,306

 

 

$

 

Contingent consideration - long-term

 

 

27,378

 

 

 

 

 

 

27,378

 

 

 

 

 

Regulatory Liability
Regulatory Liability

13.

Regulatory Liability

Our regulatory liability is established through our depreciation rates related to cost of removal and represents amounts that we expect to incur in the future. As of June 30, 2015 and December 31, 2014, we recorded on the Consolidated Balance Sheets as a long-term liability $6.2 million and $1.2 million, respectively, net of actual removal costs incurred.

Commitments and Contingencies
Commitments and Contingencies

14.

Commitments and Contingencies

The amounts reported as regulatory assets as of June 30, 2015 and December 31, 2014 are subject to the review by the PUCT and as with all utility assets may change at a later date based on that review, see Note 7, Deferred Assets and Other Regulatory Assets, net.

We are not a party to any legal proceedings other than legal proceedings arising in the ordinary course of business. We do not believe the resolution of these proceedings, individually or in the aggregate, will have a material impact on our business, financial condition or results of operations, liquidity and cash flows.

 

Equity
Equity

15.

Equity

On January 12, 2015, InfraREIT, Inc. amended its charter to increase the number of authorized common shares from 3,000 to 450,000,000. In addition, the par value of our common stock was reduced from $1 per share to $0.01 per share. Both the authorized number of shares of common stock and the par value were unaffected by the Merger or Reorganization.

On June 5, 2015, our board of directors approved a cash distribution by the Operating Partnership to all unit holders of record, including InfraREIT, Inc., on June 30, 2015 of $0.225 per unit for a total distribution of $13.6 million ($9.8 million to InfraREIT, Inc.). Also, on June 5, 2015, our board of directors approved a cash dividend to shareholders of record on June 30, 2015 of $0.225 per share for a total of $9.8 million. The cash distribution and cash dividend were paid on July 23, 2015.

On March 6, 2015, our board of directors approved a cash distribution by the Operating Partnership to all unit holders of record, including InfraREIT, Inc., on March 31, 2015 of $0.14 per unit for a total distribution of $8.5 million ($6.1 million to InfraREIT, Inc.). Also, on March 6, 2015, our board of directors approved a cash dividend to shareholders of record on March 31, 2015 of $0.14 per share for a total of $6.1 million. The cash distribution and cash dividend were paid on April 23, 2015.

On January 13, 2015, InfraREIT, L.L.C.’s board of directors approved a cash distribution by the Operating Partnership to all unit holders of record, including InfraREIT, L.L.C., on January 20, 2015 of $0.26 per unit for a total distribution of $11.7 million ($9.0 million to InfraREIT, L.L.C.). Also, on January 13, 2015, InfraREIT, L.L.C.’s board of directors approved a cash dividend to shareholders of record on January 20, 2015 of $0.26 per share for a total of $9.0 million. The cash distribution and cash dividend were paid on January 29, 2015.

On December 18, 2014, InfraREIT, L.L.C.’s board of directors approved a cash distribution by the Operating Partnership to all unit holders of record, including InfraREIT, L.L.C., on December 18, 2014 of $0.31 per unit for a total distribution of $14.1 million ($10.8 million to InfraREIT, L.L.C.). Also on December 18, 2014, InfraREIT, L.L.C.’s board of directors approved a cash dividend to shareholders of record on December 18, 2014 of $0.31 per share for a total of $10.8 million. The cash distribution and cash dividend were paid on January 16, 2015. For federal income tax purposes, this dividend was classified as ordinary income.

Accumulated Other Comprehensive Loss
Accumulated Other Comprehensive Loss

16.

Accumulated Other Comprehensive Loss

There were no changes in accumulated other comprehensive loss for the three and six months ended June 30, 2015. Changes in accumulated other comprehensive loss for the three and six months ended June 30, 2014 associated with the interest rate swap designated as a cash flow hedge was as follows:

(In thousands)

 

Accumulated

Other

Comprehensive

Loss

Attributable to

InfraREIT, Inc.

 

 

Accumulated

Other

Comprehensive

Loss

Attributable to

Noncontrolling

Interest

 

 

Total

Accumulated

Other

Comprehensive

Loss

 

Three Months Ended June 30, 2014

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss before

   reclassifications

 

$

(40

)

 

$

39

 

 

$

(1

)

Amounts reclassified from accumulated

   other comprehensive loss

 

 

346

 

 

 

104

 

 

 

450

 

Net period other comprehensive loss

 

$

306

 

 

$

143

 

 

$

449

 

Six Months Ended June 30, 2014

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss before

   reclassifications

 

$

(77

)

 

$

28

 

 

$

(49

)

Amounts reclassified from accumulated

   other comprehensive loss

 

 

687

 

 

 

206

 

 

 

893

 

Net period other comprehensive loss

 

$

610

 

 

$

234

 

 

$

844

 

 

Noncontrolling Interest
Noncontrolling Interest

17.

Noncontrolling Interest

We present as a noncontrolling interest the portion of any equity in entities that we control and consolidate but do not own. Generally, Common OP Units participate in net income allocations and distributions and entitle their holder the right, subject to the terms set forth in the partnership agreement, to require the Operating Partnership to redeem all or a portion of the Common OP Units held by such limited partner. At our option, we may satisfy this redemption with cash or by exchanging shares of InfraREIT, Inc. common stock on a one-for-one basis. Prior to the cancellation of all outstanding Class A OP Units, these units also participated in net income allocations and distributions and had the same redemption rights. As of June 30, 2015 and December 31, 2014, there were a total of 17.0 million and 10.7 million OP Units held by the limited partners of the Operating Partnership.

On May 1, 2014, the limited partnership agreement of InfraREIT LP was amended in order to incorporate a long-term incentive plan and InfraREIT LP issued related OP Units (pre-IPO LTIP Units) to independent non-voting members of the InfraREIT, L.L.C. board of directors as part of their compensation, which were fully vested upon grant. During the first quarter of 2015, an aggregate of 28,000 LTIP Units were issued by the Operating Partnership to seven of our directors which included a one year vesting period. We recognized $0.2 million and $0.3 million of compensation expense as general and administrative expense in the Consolidated Statements of Operations during the three and six months ended June 30, 2015, respectively. As of June 30, 2014, 11,264 pre-IPO LTIP Units were issued with an aggregate value of $0.1 million with $0.1 million of compensation expense recognized as general and administrative expense during the three and six months ended June 30, 2014.

We follow the guidance issued by the FASB regarding the classification and measurement of redeemable securities. Accordingly, we have determined that the Common OP Units meet the requirements to be classified as permanent equity. During the six months ended June 30, 2015, we did not redeem any OP Units other than, in connection with the Reorganization: (i) 1,551,878 Class A OP Units held by Hunt-InfraREIT, which were exchanged with InfraREIT, Inc. for 1,551,878 shares of common stock of InfraREIT, Inc. and (ii) 6,242,999 Class A OP Units in exchange for the assignment of a promissory note in the principal amount of $66.5 million. The Operating Partnership did not redeem any OP Units during the six months ended June 30, 2014.

Earnings Per Share
Earnings Per Share

18.

Earnings Per Share

Basic earnings per share is calculated by dividing net earnings after noncontrolling interest by the weighted average shares outstanding. Diluted earnings per share is calculated similarly, except that it includes the dilutive effect of the assumed redemption of OP Units for shares of common stock of InfraREIT, Inc. or common shares of InfraREIT, L.L.C., as applicable, if such redemption were dilutive. The redemption of OP Units would have been anti-dilutive during the three and six months ended June 30, 2015 and 2014.

Earnings per share are calculated as follows:

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(In thousands, except per share data)

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Basic net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to InfraREIT, Inc.

 

$

6,362

 

 

$

4,235

 

 

$

(20,511

)

 

$

8,080

 

Weighted average common shares outstanding

 

 

43,565

 

 

 

35,053

 

 

 

42,391

 

 

 

35,053

 

Basic net income (loss) per share

 

$

0.15

 

 

$

0.12

 

 

$

(0.48

)

 

$

0.23

 

Diluted net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to InfraREIT, Inc.

 

$

6,362

 

 

$

4,235

 

 

$

(20,511

)

 

$

8,080

 

Weighted average common shares outstanding

 

 

43,565

 

 

 

35,053

 

 

 

42,391

 

 

 

35,053

 

Redemption of operating partnership units

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average dilutive shares outstanding

 

 

43,565

 

 

 

35,053

 

 

 

42,391

 

 

 

35,053

 

Diluted net income (loss) per share

 

$

0.15

 

 

$

0.12

 

 

$

(0.48

)

 

$

0.23

 

Due to the anti-dilutive effect, the computation of diluted earnings

    per share does not reflect the following adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to noncontrolling interest

 

$

2,481

 

 

$

1,278

 

 

$

(6,519

)

 

$

2,425

 

Redemption of operating partnership units

 

 

17,028

 

 

 

10,562

 

 

 

15,424

 

 

 

10,523

 

 

Leases
Leases

19.

Leases

The following table shows the composition of our lease revenue:

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(In thousands)

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Base rent (straight-line)

 

$

29,458

 

 

$

24,542

 

 

$

58,830

 

 

$

49,379

 

Percentage rent

 

 

 

 

 

683

 

 

 

 

 

 

683

 

Total lease revenue

 

$

29,458

 

 

$

25,225

 

 

$

58,830

 

 

$

50,062

 

SDTS and SPLLC have entered into various leases with Sharyland for all of our placed in service T&D assets. The master lease agreements, as amended, expire at various dates from December 31, 2015 through December 31, 2022. Each agreement includes annual base rent while all but one agreement includes additional percentage rent (based on an agreed upon percentage of the gross revenue of Sharyland, as defined in the lease agreements, in excess of annual specified breakpoints, which decrease over the term of the agreements). The rate used for percentage rent varies by lease and ranges from a high of 37% to a low of 23% over the term of the agreements. Percentage rent was not recognized during the three and six months ended June 30, 2015 as Sharyland’s revenue had not exceeded the annual specified breakpoints. Percentage rent was recognized during the three and six months ended June 30, 2014 as Sharyland’s revenue did exceed the annual specified breakpoints. Because an annual specified breakpoint must be met under our leases before we can recognize any percentage rent, we anticipate our revenue will grow over the year with little to no percentage rent recognized in the first and second quarters of each year with the largest amounts recognized during the third and fourth quarters of each year.

 

Supplemental Cash Flow Information
Supplemental Cash Flow Information

20.

Supplemental Cash Flow Information

Supplemental cash flow information and non-cash investing and financing activities are as follows:

 

 

Six Months Ended June 30,

 

(In thousands)

 

2015

 

 

2014

 

Supplemental cash flow information

 

 

 

 

 

 

 

 

Cash paid during the period for interest

 

$

13,569

 

 

$

15,015

 

Cash paid during the period for taxes

 

 

 

 

 

75

 

Non-cash investing and financing activities

 

 

 

 

 

 

 

 

Non-cash right of way additions to electric plant

 

 

 

 

 

344

 

Change in accrued additions to electric plant

 

 

5,475

 

 

 

22,388

 

Allowance for funds used during construction - debt

 

 

919

 

 

 

778

 

Net non-cash equity issuances related to the Merger and Reorganization

 

 

97,193

 

 

 

 

Net non-cash noncontrolling equity issuances related to the Merger and Reorganization

 

 

119,607

 

 

 

 

Non-cash noncontrolling interests equity issuance

 

 

755

 

 

 

3,706

 

Dividends and distributions payable

 

 

13,634

 

 

 

 

 

Description of Business and Presentation of Financial Statements (Policies)

Description of Business

We are the owners of electric transmission and distribution assets (T&D assets) throughout Texas, including the Texas Panhandle near Amarillo (Panhandle assets), the Permian Basin in and around Stanton, Central Texas around Brady, Northeast Texas in and around Celeste (S/B/C assets) and South Texas near McAllen (McAllen assets). InfraREIT, L.L.C. elected to be treated as a real estate investment trust (REIT) for U.S. federal income tax purposes commencing with the taxable year ended December 31, 2010, and InfraREIT, Inc. will elect to be taxed as a REIT commencing with the taxable year ending December 31, 2015. We are externally managed and advised by Hunt Utility Services, LLC (Hunt Manager), which is responsible for overseeing our day-to-day affairs, subject to the oversight of our board of directors.

Initial Public Offering and Reorganization

We completed our IPO on February 4, 2015, issuing 23,000,000 shares of common stock at a price of $23.00, resulting in gross proceeds of $529.0 million.

Immediately after the closing of our IPO, we completed the Merger, with InfraREIT, L.L.C. merging with and into InfraREIT, Inc., and InfraREIT, Inc. as the surviving entity and general partner of the Operating Partnership. InfraREIT, Inc. used $172.4 million of the net proceeds from the IPO to fund the cash portion of the consideration issued in the Merger, as described in greater detail below. We contributed the remaining $323.2 million to the Operating Partnership in exchange for common OP Units (Common OP Units).

The Operating Partnership used the net proceeds from the IPO that it received from InfraREIT, Inc.:

·

to repay an aggregate of $1.0 million of indebtedness to HCI;

·

to repay an aggregate of $72.0 million of indebtedness outstanding under the Operating Partnership’s revolving credit facility and $150.0 million of indebtedness outstanding under Sharyland Distribution & Transmission Services, L.L.C.’s (SDTS) revolving credit facility;

·

to pay offering expenses (other than the underwriting discounts and commissions and the underwriter structuring fee) of $6.3 million; and

·

for general corporate purposes.

The following bullets describe the Merger and related transactions we effected in the first quarter of 2015 (collectively, the Reorganization).

·

On January 29, 2015, the Operating Partnership effected a reverse unit split whereby each holder of OP Units received 0.938550 OP Units of the same class in exchange for each such unit it held immediately prior to such time, which is referred to as the unit split. Also, on January 29, 2015, InfraREIT, L.L.C. effected a reverse share split whereby each holder of shares received 0.938550 shares of the same class in exchange for each such share it held immediately prior to such time, which is referred to as the share split. All references to unit, share, per unit and per share amounts in these unaudited consolidated financial statements and related disclosures have been adjusted to reflect the reverse share split and reverse unit split for all periods presented.

·

On January 29, 2015, InfraREIT, Inc. issued 1,700,000 shares of common stock to Hunt-InfraREIT, L.L.C. (Hunt-InfraREIT) as a non-cash reorganization advisory fee in accordance with the structuring fee agreement, resulting in our recognition of a $44.9 million non-cash expense in the first quarter of 2015.

·

On February 4, 2015, the Operating Partnership issued 1,700,000 OP Units to InfraREIT, Inc. in respect of the structuring fee issuance of 1,700,000 shares of InfraREIT, Inc. common stock described immediately above.

·

On February 4, 2015, the Operating Partnership issued an aggregate of 28,000 of its profit interest partnership units (LTIP Units) to seven of our directors.

·

On February 4, 2015, the Operating Partnership issued 983,814 Common OP Units to Hunt-InfraREIT in settlement of the Operating Partnership’s obligation to issue OP Units to Hunt-InfraREIT related to the construction of transmission assets in the Texas Panhandle and Southern Plains (CREZ Project).

·

On February 4, 2015, the Operating Partnership issued Hunt-InfraREIT 1,167,287 Common OP Units as an accelerated payment of a portion of the carried interest agreed to in 2010 in connection with the organization of InfraREIT, L.L.C. To effect the shift in ownership from the pre-IPO investors to Hunt-InfraREIT, an equal number of OP Units held by InfraREIT, L.L.C. in the Operating Partnership were canceled at the same time.

·

On February 4, 2015, as a result of the Merger, (1) holders of 8,000,000 common shares of InfraREIT, L.L.C. received $21.551 per common share, which was equal to the IPO price less the underwriting discounts and commissions and an underwriting structure fee, (2) holders of the remaining 19,617,755 common shares of InfraREIT, L.L.C. received 19,617,755 shares of InfraREIT, Inc. Class A common stock and (3) holders of 25,145 Class C shares of InfraREIT, L.L.C. received 25,145 shares of InfraREIT, Inc. Class C common stock.

·

Marubeni, John Hancock Life Insurance Company (U.S.A), Teachers Insurance and Annuity Association of America, OpTrust Infrastructure N.A. Inc. (OpTrust) (collectively, founding investors) each received both cash and stock consideration in the Merger, and all other pre-IPO investors received shares of InfraREIT, Inc. Class A common stock or Class C common stock in the Merger. InfraREIT, L.L.C. gave each other holder of its common shares the opportunity to receive cash consideration in the Merger, and each such holder elected (or was deemed to have elected) to receive shares of Class A common stock under the merger agreement. All holders of InfraREIT, L.L.C.’s Class C common shares, as a separate class, received shares of Class C common stock pursuant to the merger agreement.

·

On February 4, 2015, InfraREIT, Inc. contributed $323.2 million to the Operating Partnership in exchange for 15,000,000 Common OP Units.

·

On February 4, 2015, InfraREIT, Inc. issued 1,551,878 shares of common stock to Hunt-InfraREIT in exchange for 1,551,878 OP Units tendered for redemption by Hunt-InfraREIT in accordance with a redemption agreement.

·

On February 4, 2015, we purchased 6,242,999 common shares in consideration for the issuance of a promissory note to Westwood Trust in the principal amount of $66.5 million.

·

Westwood Trust immediately transferred the promissory note to MC Transmission, and, immediately following receipt of the promissory note, MC Transmission purchased 3,325,874 Common OP Units from the Operating Partnership in consideration for the assignment of the promissory note. The promissory note was then transferred to InfraREIT, Inc. in exchange for the redemption of 6,242,999 OP Units held by InfraREIT, Inc. and the subsequent cancellation of such promissory note, resulting in no cash consideration being paid or received pursuant to the purchase from Westwood Trust or the sale of Common OP Units to MC Transmission.

·

On March 9, 2015, the Operating Partnership issued 2,329,283 Common OP Units to Hunt-InfraREIT, and InfraREIT, Inc. canceled an equal number of shares of Class A common stock and Class C common stock. Each remaining share of Class A common stock and Class C common stock then converted to common stock on a one-for-one basis. This issuance settled InfraREIT, L.L.C.’s pre-IPO investors carried interest obligation agreed to by Hunt-InfraREIT under the investment documents entered into by the parties in 2010.

·

On March 9, 2015, the 11,264 long-term incentive plan units issued to two of InfraREIT, L.L.C.’s non-voting directors in May 2014 converted on a one-to-one basis to Common OP Units.

Limited Partnership Agreement

In connection with the Reorganization, we adopted a Second Amended and Restated Limited Partnership Agreement which became effective with the closing of our IPO. Upon completion of the IPO, the Operating Partnership had five types of OP Units outstanding: Common OP Units, Class A OP Units, Class B OP Units, Class C OP Units and LTIP Units.

On March 9, 2015, the Operating Partnership issued Common OP Units in exchange for outstanding Class A OP Units and Class C OP Units. Such Common OP Units were allocated among the holders of Class A OP Units and Class C OP Units, and the Class A OP Units, Class B OP Units and Class C OP Units were canceled. Following such allocation, we adopted a third amended and restated partnership agreement that eliminated the provisions related to the Reorganization and the description of the Class A OP Units, Class B OP Units and Class C OP Units; however, it continues to allow amendments to authorize and issue additional classes of OP Units in the future.

Basis of Presentation

The accompanying unaudited interim consolidated financial statements of InfraREIT, Inc. include our accounts and the accounts of all other entities in which we have a controlling financial interest with noncontrolling interest of consolidated subsidiaries reported separately. This Quarterly Report on Form 10-Q presents the operating results of InfraREIT, L.L.C. for the three and six months ended June 30, 2014 and the InfraREIT, L.L.C. balance sheet as of December 31, 2014. Our operating results for the three and six months ended June 30, 2015 reflect the operations of InfraREIT, L.L.C. prior to the effectiveness of the Merger, and the operations of InfraREIT, Inc. for the period from the Merger through June 30, 2015, and our balance sheet as of June 30, 2015 is the balance sheet of InfraREIT, Inc.

These unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015.

The Consolidated Balance Sheet at December 31, 2014 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. For further information, refer to the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2014, filed with the Securities and Exchange Commission on March 18, 2015.

Recently Issued Accounting Pronouncements

In February 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2015-02, Consolidation (Topic 810) – Amendments to the Consolidation Analysis. This amendment affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. ASU 2015-02 is effective for periods beginning after December 15, 2015 with early adoption permitted. The adoption of the new guidance is not expected to have a material impact on our financial position, results of operations or cash flows.

In April 2015, the FASB issued ASU 2015-03, Interest – Imputation of Interest (Subtopic 835-30), Simplifying the Presentation of Debt Issuance Costs. ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the debt liability, consistent with debt discounts. This ASU is effective for periods beginning after December 15, 2015 with early adoption permitted. When adopted, the new guidance will be applied on a retrospective basis with each balance sheet presented reflecting the new guidance along with transitional disclosures. The adoption is not expected to have a material impact on our financial position, results of operations or cash flows.

Prepaids and Other Current Assets (Tables)
Schedule Of Prepaid Expenses And Other Current Assets

Prepaids and other current assets are as follows:

(In thousands)

 

June 30,

2015

 

 

December 31, 2014

 

Offering costs

 

$

 

 

$

4,397

 

Prepaid insurance

 

 

874

 

 

 

249

 

Other

 

 

535

 

 

 

251

 

Total prepaids and other current assets

 

$

1,409

 

 

$

4,897

 

 

Electric Plant and Depreciation (Tables)
Schedule of Major Classes of Electric Plant

The major classes of electric plant are as follows:

(In thousands)

 

June 30,

2015

 

 

December 31, 2014

 

Electric plant:

 

 

 

 

 

 

 

 

Transmission plant

 

$

981,159

 

 

$

966,560

 

Distribution plant

 

 

422,857

 

 

 

387,329

 

General plant

 

 

15,620

 

 

 

15,018

 

Total plant in service

 

 

1,419,636

 

 

 

1,368,907

 

CWIP

 

 

101,523

 

 

 

41,222

 

Total electric plant

 

 

1,521,159

 

 

 

1,410,129

 

Accumulated depreciation

 

 

(232,695

)

 

 

(220,101

)

Electric plant held for future use

 

 

37,118

 

 

 

37,118

 

Electric plant, net

 

$

1,325,582

 

 

$

1,227,146

 

 

Deferred Assets and Other Regulatory Assets (Tables)
Summary of Deferred Assets and Other Regulatory Assets, Net

Deferred assets and other regulatory assets, net are as follows:

 

 

June 30, 2015

 

 

December 31, 2014

 

(In thousands)

 

Gross

Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net

Carrying

Amount

 

 

Gross

Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net

Carrying

Amount

 

Deferred financing costs

 

$

1,292

 

 

$

(255

)

 

$

1,037

 

 

$

1,290

 

 

$

(143

)

 

$

1,147

 

Other regulatory assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred financing costs

 

 

25,852

 

 

 

(14,405

)

 

 

11,447

 

 

 

25,701

 

 

 

(12,693

)

 

 

13,008

 

Deferred costs recoverable in future years

 

 

23,793

 

 

 

 

 

 

23,793

 

 

 

23,793

 

 

 

 

 

 

23,793

 

Deferred financing costs and other regulatory

   assets, net

 

$

50,937

 

 

$

(14,660

)

 

$

36,277

 

 

$

50,784

 

 

$

(12,836

)

 

$

37,948

 

 

Long-Term Debt (Tables)
Components of Long-Term Debt

Long-term debt consisted of the following:

 

 

 

 

June 30, 2015

 

 

December 31, 2014

 

(In thousands)

 

Current

Maturity Date

 

Amount

Outstanding

 

 

Interest

Rate

 

 

Amount

Outstanding

 

 

Interest

Rate

 

Senior secured notes - $53.5 million

 

December 30, 2029

 

$

45,418

 

 

 

7.25%

 

 

$

46,291

 

 

 

7.25%

 

Senior secured notes - $110.0 million

 

September 30, 2030

 

 

103,657

 

 

 

6.47%

 

 

 

105,622

 

 

 

6.47%

 

Senior secured notes - $25.0 million

 

December 30, 2020

 

 

19,375

 

 

 

8.50%

 

 

 

20,000

 

 

 

8.50%

 

Senior secured notes - $60.0 million

 

June 20, 2018

 

 

60,000

 

 

 

5.04%

 

 

 

60,000

 

 

 

5.04%

 

Senior secured credit facilities - $407.0 million

 

June 20, 2018

 

 

391,737

 

 

2.44%*

 

 

 

397,843

 

 

2.42%*

 

Total long-term debt

 

 

 

 

620,187

 

 

 

 

 

 

 

629,756

 

 

 

 

 

Less current portion of long-term debt

 

 

 

 

(19,430

)

 

 

 

 

 

 

(19,234

)

 

 

 

 

Debt classified as long-term debt

 

 

 

$

600,757

 

 

 

 

 

 

$

610,522

 

 

 

 

 

 

*

Interest based on LIBOR at June 30, 2015 and December 31, 2014, respectively, plus an applicable margin.

Fair Value of Financial Instruments (Tables)
Financial Instruments Measured at Fair Value

Financial instruments, measured at fair value, by level within the fair value hierarchy were as follows:

 

 

Carrying

 

 

Fair Value

 

(In thousands)

 

Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

June 30, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt

 

$

620,187

 

 

$

 

 

$

648,818

 

 

$

 

December 31, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt

 

$

629,756

 

 

$

 

 

$

658,306

 

 

$

 

Contingent consideration - long-term

 

 

27,378

 

 

 

 

 

 

27,378

 

 

 

 

 

Accumulated Other Comprehensive Loss (Tables)
Changes in Accumulated Other Comprehensive Loss Associated with the Interest Rate Swap Designated as Cash Flow Hedge

There were no changes in accumulated other comprehensive loss for the three and six months ended June 30, 2015. Changes in accumulated other comprehensive loss for the three and six months ended June 30, 2014 associated with the interest rate swap designated as a cash flow hedge was as follows:

(In thousands)

 

Accumulated

Other

Comprehensive

Loss

Attributable to

InfraREIT, Inc.

 

 

Accumulated

Other

Comprehensive

Loss

Attributable to

Noncontrolling

Interest

 

 

Total

Accumulated

Other

Comprehensive

Loss

 

Three Months Ended June 30, 2014

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss before

   reclassifications

 

$

(40

)

 

$

39

 

 

$

(1

)

Amounts reclassified from accumulated

   other comprehensive loss

 

 

346

 

 

 

104

 

 

 

450

 

Net period other comprehensive loss

 

$

306

 

 

$

143

 

 

$

449

 

Six Months Ended June 30, 2014

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss before

   reclassifications

 

$

(77

)

 

$

28

 

 

$

(49

)

Amounts reclassified from accumulated

   other comprehensive loss

 

 

687

 

 

 

206

 

 

 

893

 

Net period other comprehensive loss

 

$

610

 

 

$

234

 

 

$

844

 

 

Earnings Per Share (Tables)
Computation of Earnings Per Share

Earnings per share are calculated as follows:

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(In thousands, except per share data)

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Basic net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to InfraREIT, Inc.

 

$

6,362

 

 

$

4,235

 

 

$

(20,511

)

 

$

8,080

 

Weighted average common shares outstanding

 

 

43,565

 

 

 

35,053

 

 

 

42,391

 

 

 

35,053

 

Basic net income (loss) per share

 

$

0.15

 

 

$

0.12

 

 

$

(0.48

)

 

$

0.23

 

Diluted net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to InfraREIT, Inc.

 

$

6,362

 

 

$

4,235

 

 

$

(20,511

)

 

$

8,080

 

Weighted average common shares outstanding

 

 

43,565

 

 

 

35,053

 

 

 

42,391

 

 

 

35,053

 

Redemption of operating partnership units

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average dilutive shares outstanding

 

 

43,565

 

 

 

35,053

 

 

 

42,391

 

 

 

35,053

 

Diluted net income (loss) per share

 

$

0.15

 

 

$

0.12

 

 

$

(0.48

)

 

$

0.23

 

Due to the anti-dilutive effect, the computation of diluted earnings

    per share does not reflect the following adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to noncontrolling interest

 

$

2,481

 

 

$

1,278

 

 

$

(6,519

)

 

$

2,425

 

Redemption of operating partnership units

 

 

17,028

 

 

 

10,562

 

 

 

15,424

 

 

 

10,523

 

 

Leases (Tables)
Schedule of Composition of Lease Revenue

The following table shows the composition of our lease revenue:

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(In thousands)

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Base rent (straight-line)

 

$

29,458

 

 

$

24,542

 

 

$

58,830

 

 

$

49,379

 

Percentage rent

 

 

 

 

 

683

 

 

 

 

 

 

683

 

Total lease revenue

 

$

29,458

 

 

$

25,225

 

 

$

58,830

 

 

$

50,062

 

 

Supplemental Cash Flow Information(Tables)
Supplemental Cash Flow Information and Non-cash Investing and Financing Activities

Supplemental cash flow information and non-cash investing and financing activities are as follows:

 

 

Six Months Ended June 30,

 

(In thousands)

 

2015

 

 

2014

 

Supplemental cash flow information

 

 

 

 

 

 

 

 

Cash paid during the period for interest

 

$

13,569

 

 

$

15,015

 

Cash paid during the period for taxes

 

 

 

 

 

75

 

Non-cash investing and financing activities

 

 

 

 

 

 

 

 

Non-cash right of way additions to electric plant

 

 

 

 

 

344

 

Change in accrued additions to electric plant

 

 

5,475

 

 

 

22,388

 

Allowance for funds used during construction - debt

 

 

919

 

 

 

778

 

Net non-cash equity issuances related to the Merger and Reorganization

 

 

97,193

 

 

 

 

Net non-cash noncontrolling equity issuances related to the Merger and Reorganization

 

 

119,607

 

 

 

 

Non-cash noncontrolling interests equity issuance

 

 

755

 

 

 

3,706

 

Dividends and distributions payable

 

 

13,634

 

 

 

 

 

Description of Business and Presentation of Financial Statements - Additional Information (Details) (USD $)
0 Months Ended 6 Months Ended 0 Months Ended 6 Months Ended 0 Months Ended 6 Months Ended 0 Months Ended 6 Months Ended 0 Months Ended 3 Months Ended 0 Months Ended 1 Months Ended 6 Months Ended
Feb. 4, 2015
Director
Jun. 30, 2015
Dec. 31, 2014
Feb. 4, 2015
Westwood Trust
Feb. 4, 2015
Common Class A
Feb. 4, 2015
Common Class C
Feb. 4, 2015
LTIP Units
Jun. 30, 2015
Revolving Credit Facility
Jun. 30, 2015
Sharyland Distribution & Transmission Services
Revolving Credit Facility
Feb. 4, 2015
InfraREIT, L.L.C.
Jun. 30, 2015
InfraREIT, L.L.C.
Feb. 4, 2015
InfraREIT, L.L.C.
Common Class A
Feb. 4, 2015
InfraREIT, L.L.C.
Common Class C
Mar. 9, 2015
InfraREIT, L.L.C.
LTIP Units
Jun. 30, 2015
InfraREIT, L.L.C.
LTIP Units
Jan. 29, 2015
InfraREIT, L.L.C.
Operating Partnership Unit
Mar. 9, 2015
Hunt-InfraREIT
Feb. 4, 2015
Hunt-InfraREIT
Mar. 31, 2015
Hunt-InfraREIT
Jan. 29, 2015
Hunt-InfraREIT
Feb. 4, 2015
Hunt-InfraREIT
CREZ Project
Feb. 4, 2015
Hunt-InfraREIT
Operating Partnership Unit
Feb. 4, 2015
MC Transmission Holdings Inc.
Operating Partnership Unit
Feb. 4, 2015
Initial Public Offering
Dec. 31, 2014
Initial Public Offering
Feb. 28, 2015
Hunt Consolidated Incorporation
Jun. 30, 2015
Hunt Consolidated Incorporation
Description Of Business And Presentation Of Financial Statements [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Business combination, assets assumed, marketable securities
 
$ 1,100,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Business combination, liabilities assumed, notes payable
 
1,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Proceeds from sale of marketable securities
 
1,065,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Realized gain on sale of marketable securities
 
66,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of partnership units outstanding
 
71.90% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
28.10% 
Common stock, shares issued under IPO
 
43,565,495 
 
 
 
 
 
 
 
1,700,000 
 
 
 
 
 
 
 
1,551,878 
 
1,700,000 
 
 
 
23,000,000 
 
 
 
Common stock sold under IPO, per share
 
 
 
 
 
 
 
 
 
$ 21.551 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 23.00 
 
 
 
Net proceeds from issuance of common stock upon initial public offering
172,400,000 
493,722,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
529,000,000 
 
 
 
Contributed to the operating partnership
323,200,000 
 
 
 
 
 
 
 
 
323,200,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Repayments of related party debt
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,000,000 
1,000,000 
Repayments of outstanding revolving credit facility
 
 
 
 
 
 
 
72,000,000 
150,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Offering expenses
 
6,300,000 
4,397,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4,400,000 
 
 
Reverse share split
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0.938550 
 
 
 
 
 
 
 
 
 
 
 
Non-cash expense
 
44,897,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
44,900,000 
 
 
 
 
 
 
 
 
Operating partnership issued
 
 
 
 
 
 
28,000 
 
 
 
 
 
 
 
 
 
 
1,167,287 
 
 
983,814 
 
 
 
 
 
 
Number of directors
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Partners capital received
 
 
 
 
 
 
 
 
 
8,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common shares received
 
 
 
 
19,617,755 
25,145 
 
 
 
 
 
19,617,755 
25,145 
11,264 
 
 
2,329,283 
 
 
 
 
1,551,878 
 
 
 
 
 
Members capital, shares issued
 
 
35,053,186 
 
 
 
 
 
 
15,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares purchased consideration for promissory note
 
 
 
6,242,999 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,325,874 
 
 
 
 
Principal amount of shares purchased consideration for promissory note
 
 
 
$ 66,500,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock conversion basis
 
 
 
 
 
 
 
 
 
 
one-for-one basis 
 
 
 
one-to-one basis 
 
 
 
 
 
 
 
 
 
 
 
 
Related Party Transactions - Additional Information (Details) (USD $)
6 Months Ended 6 Months Ended 12 Months Ended 3 Months Ended 6 Months Ended 6 Months Ended 6 Months Ended 1 Months Ended 6 Months Ended
Jun. 30, 2014
Jun. 30, 2015
Dec. 31, 2014
Jun. 30, 2015
Hunt Utility Services L L C
Jun. 30, 2014
Hunt Utility Services L L C
Mar. 31, 2015
Hunt Utility Services L L C
Mar. 31, 2016
Hunt Utility Services L L C
Scenario, Forecast
Jan. 15, 2015
Hunt Consolidated, Inc. and affiliates
Cross Valley and GSEC
Jun. 30, 2015
Sharyland
Jun. 30, 2014
Sharyland
Jun. 30, 2015
Sharyland
Jun. 30, 2014
Sharyland
Dec. 31, 2014
Sharyland
Jun. 30, 2015
Hunt-InfraREIT
Jun. 30, 2015
Hunt-InfraREIT
Class A OP Units
Jun. 30, 2014
Hunt-InfraREIT
Class A OP Units
Jun. 30, 2015
Hunt And Affiliated Entity
Feb. 28, 2015
Hunt Consolidated Incorporation
Jun. 30, 2015
Hunt Consolidated Incorporation
Nov. 20, 2014
Hunt Consolidated Incorporation
Related Party Transaction [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Lease revenue from related party
 
 
 
 
 
 
 
 
$ 29,500,000 
$ 25,200,000 
$ 58,800,000 
$ 50,100,000 
 
 
 
 
 
 
 
 
Deferred rent liability
 
 
 
 
 
 
 
 
16,700,000 
 
16,700,000 
 
5,000,000 
 
 
 
 
 
 
 
Payments to acquire plant, and equipment
 
 
 
 
 
 
 
 
 
 
121,300,000 
90,800,000 
 
 
 
 
 
 
 
 
Accounts payable and accrued liabilities
 
 
 
 
 
 
 
 
10,700,000 
 
10,700,000 
 
16,100,000 
 
 
 
 
 
 
 
Due from affiliates
 
21,776,000 
27,822,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Payment for management fee
 
 
 
5,800,000 
1,300,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Prepaid management fee
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accrued management fee
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reimbursement of annual software license and maintenance fees
 
 
 
200,000 
200,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective date of management agreement
 
 
 
Feb. 04, 2015 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Management fee
 
 
 
 
 
10,000,000 
13,100,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
Management agreement expiration date
 
 
 
Dec. 31, 2019 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Agreement successive renewal terms
 
 
 
5 years 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Management fee, description
 
 
 
The base fee for each twelve month period beginning April 1 thereafter will equal 1.50% of our total equity as of December 31 of the immediately preceding year, subject to a $30.0 million cap 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment management fee equity multiplier
 
 
 
1.50% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Management fee cap
 
 
 
30,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of capital expenditure agreed to issue upon operating partnership units
 
 
 
 
 
 
 
 
 
 
 
 
 
5.00% 
 
 
 
 
 
 
Shares issued price per share
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 10.65 
 
 
 
 
 
Members capital, shares issued
 
 
35,053,186 
 
 
 
 
 
 
 
 
 
 
 
17,600 
37,241 
 
 
 
 
Secondment fees
100,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Aggregate legal fees
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5,000,000 
 
 
 
Borrowings from related parties
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,000,000 
Accrued interest bearing note
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2.50% 
Interest bearing note, maturity date
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nov. 01, 2015 
 
Interest bearing note, maturity date, description
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
This note and accrued interest were repaid in February 2015 with proceeds from our IPO for a total of $1.0 million 
 
Repayments of related party debt
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,000,000 
1,000,000 
 
Total purchase price of assets sold
 
 
$ 41,211,000 
 
 
 
 
$ 41,200,000 
 
 
 
 
 
 
 
 
 
 
 
 
Assets Held for Sale - Additional Information (Details) (USD $)
6 Months Ended 12 Months Ended
Jun. 30, 2015
Dec. 31, 2014
Jan. 15, 2015
Cross Valley
Jan. 15, 2015
GSEC
Income Statement Balance Sheet And Additional Disclosures Assets Held For Sale Not Part Of Disposal Group [Line Items]
 
 
 
 
Assets held for sale
 
$ 41,211,000 
$ 34,200,000 
$ 7,000,000 
Depreciation
 
$ 0 
 
 
Minimum Development Agreement Period
90 days 
 
 
 
Prepaids and Other Current Assets - Summary of Prepaids and Other Current Assets (Details) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2015
Dec. 31, 2014
Prepaid Expense And Other Assets Current [Abstract]
 
 
Offering costs
$ 6,300 
$ 4,397 
Prepaid insurance
874 
249 
Other
535 
251 
Total prepaids and other current assets
$ 1,409 
$ 4,897 
Prepaids and Other Current Assets - Additional Information (Details) (USD $)
6 Months Ended
Jun. 30, 2015
Dec. 31, 2014
Prepaid And Other Current Assets [Line Items]
 
 
Offering costs
$ 6,300,000 
$ 4,397,000 
Initial Public Offering
 
 
Prepaid And Other Current Assets [Line Items]
 
 
Aggregate offering costs
6,300,000 
 
Offering costs
 
$ 4,400,000 
Electric Plant and Depreciation - Schedule of Major Classes of Electric Plant (Details) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2015
Dec. 31, 2014
Electric plant:
 
 
Transmission plant
$ 981,159 
$ 966,560 
Distribution plant
422,857 
387,329 
General plant
15,620 
15,018 
Total plant in service
1,419,636 
1,368,907 
CWIP
101,523 
41,222 
Total electric plant
1,521,159 
1,410,129 
Accumulated depreciation
(232,695)
(220,101)
Electric plant held for future use
37,118 
37,118 
Electric plant, net
$ 1,325,582 
$ 1,227,146 
Electric Plant and Depreciation - Additional Information (Details) (USD $)
In Millions, unless otherwise specified
0 Months Ended
Jun. 30, 2015
Dec. 31, 2014
Dec. 30, 2013
Electric Plant Held For Future Use
mi
Dec. 30, 2013
Electric Plant Held For Future Use
Stanton
Substations
Public Utility Property Plant And Equipment [Line Items]
 
 
 
 
Electric plant, net includes plant acquisition adjustments
$ 29.0 
$ 28.7 
 
 
Electric plant, transmission lines
 
 
66 
 
Number of substations
 
 
 
Goodwill (Details) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2015
Dec. 31, 2014
Goodwill And Intangible Assets Disclosure [Abstract]
 
 
Goodwill
$ 138,384 
$ 138,384 
Deferred Assets and Other Regulatory Assets, Net - Additional Information (Details) (USD $)
Jun. 30, 2015
Dec. 31, 2014
Jun. 30, 2015
Sharyland Distribution & Transmission Services
Dec. 10, 2014
Revolving Credit Facility
Sharyland Distribution & Transmission Services
Jun. 30, 2015
Senior Notes
Deferred Finance Costs And Other Regulatory Assets Net [Line Items]
 
 
 
 
 
Issuance of aggregate principal amount
$ 25,000,000 
 
 
 
 
Long-term debt, stated interest rate
 
 
 
 
8.50% 
Credit facility, maximum borrowing capacity
 
 
250,000,000 
250,000,000 
 
Deferred costs recoverable in future years
$ 23,793,000 
$ 23,793,000 
 
 
 
Deferred Assets and Other Regulatory Assets, Net - Summary of Deferred Assets and Other Regulatory Assets, Net (Details) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2015
Dec. 31, 2014
Deferred Finance Costs And Other Regulatory Assets Net [Abstract]
 
 
Deferred financing costs, Gross Carrying Amount
$ 1,292 
$ 1,290 
Other regulatory assets Deferred financing costs, Gross Carrying Amount
25,852 
25,701 
Deferred costs recoverable in future years
23,793 
23,793 
Deferred financing costs and other regulatory assets, Net Gross Carrying Amount
50,937 
50,784 
Deferred financing costs, Accumulated Amortization
(255)
(143)
Other regulatory assets Deferred financing costs, Accumulated Amortization
(14,405)
(12,693)
Deferred financing costs and other regulatory assets, Net Accumulated Amortization
(14,660)
(12,836)
Deferred financing costs, Net Carrying Amount
1,037 
1,147 
Other regulatory assets Deferred financing costs, Net Carrying Amount
11,447 
13,008 
Deferred costs recoverable in future years, Net Carrying Amount
23,793 
23,793 
Deferred financing costs and other regulatory assets, Net Carrying Amount
$ 36,277 
$ 37,948 
Borrowings Under Credit Facilities - Additional Information (Details) (USD $)
6 Months Ended 6 Months Ended 6 Months Ended 6 Months Ended 6 Months Ended
Jun. 30, 2015
Dec. 31, 2014
Jun. 30, 2015
SDTS Credit Agreements
Dec. 31, 2014
SDTS Credit Agreements
Dec. 10, 2014
SDTS Credit Agreements
Swingline Loans
Jun. 30, 2015
Revolving Credit Facility
Jan. 3, 2014
Revolving Credit Facility
Jun. 30, 2015
Revolving Credit Facility
SDTS Credit Agreements
Dec. 31, 2014
Revolving Credit Facility
SDTS Credit Agreements
Dec. 10, 2014
Revolving Credit Facility
SDTS Credit Agreements
Jun. 28, 2013
Revolving Credit Facility
SDTS Credit Agreements
Jun. 30, 2015
New Revolving Credit Facility
Dec. 10, 2014
New Revolving Credit Facility
Line Of Credit Facility [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
Amount of revolving credit facility under agreement
$ 0 
$ 57,000,000 
$ 0 
$ 162,000,000 
 
 
$ 130,000,000 
 
 
 
$ 75,000,000 
 
$ 75,000,000 
Credit facility, maturity date
 
 
 
 
 
Mar. 31, 2015 
 
Jun. 28, 2018 
 
 
 
Dec. 10, 2019 
 
Line of credit facility, remaining borrowing capacity
75,000,000 
18,000,000 
 
 
5,000,000 
 
 
 
88,000,000 
25,000,000 
 
 
15,000,000 
Revolving credit facility, interest rate description
a rate equal to (i) the one, two, three or six month London Interbank Offered Rate (LIBOR) plus 2.5%, or (ii) a base rate (equal to the highest of (A) the Federal Funds Rate plus ½ of 1%, (B) the Bank of America prime rate and (C) LIBOR plus 1%) plus 1.5%. Letters of credit are subject to a letter of credit fee equal to the daily amount available to be drawn times 2.5%. 
 
a rate equal to either (1) a base rate, determined as the greatest of (A) the administrative agent’s prime rate, (B) the federal funds effective rate plus ½ of 1% and (C) LIBOR plus 1.00% per annum, plus a margin of either 0.75% or 1.00% per annum, depending on the total debt to capitalization ratio of SDTS on a consolidated basis or (2) LIBOR plus a margin of either 1.75% or 2.00% per annum 
 
 
 
 
 
 
 
 
 
 
Interest rate on credit facility
 
2.66% 
 
1.91% 
 
 
 
 
 
 
 
 
 
Credit facility, maximum borrowing capacity
 
 
$ 250,000,000 
 
 
 
 
 
 
$ 250,000,000 
 
 
 
Credit facility, extended maturity date
 
 
 
 
 
 
 
Dec. 10, 2019 
 
 
 
 
 
Long-Term Debt - Components of Long-Term Debt (Details) (USD $)
In Thousands, unless otherwise specified
6 Months Ended
Jun. 30, 2015
Dec. 31, 2014
Debt Instrument [Line Items]
 
 
Long-term debt, Amount Outstanding
$ 620,187 
$ 629,756 
Less current portion of long-term debt
(19,430)
(19,234)
Debt classified as long-term debt
600,757 
610,522 
Senior Secured Notes, 7.25% [Member]
 
 
Debt Instrument [Line Items]
 
 
Interest bearing note, maturity date
Dec. 30, 2029 
 
Long-term debt, Amount Outstanding
45,418 
46,291 
Long-term debt, Interest Rate
7.25% 
7.25% 
Senior Secured Notes, 6.47% [Member]
 
 
Debt Instrument [Line Items]
 
 
Interest bearing note, maturity date
Sep. 30, 2030 
 
Long-term debt, Amount Outstanding
103,657 
105,622 
Long-term debt, Interest Rate
6.47% 
6.47% 
Senior Secured Notes, 8.50% [Member]
 
 
Debt Instrument [Line Items]
 
 
Interest bearing note, maturity date
Dec. 30, 2020 
 
Long-term debt, Amount Outstanding
19,375 
20,000 
Long-term debt, Interest Rate
8.50% 
8.50% 
Senior Secured Notes, 5.04% [Member]
 
 
Debt Instrument [Line Items]
 
 
Interest bearing note, maturity date
Jun. 20, 2018 
 
Long-term debt, Amount Outstanding
60,000 
60,000 
Long-term debt, Interest Rate
5.04% 
5.04% 
Senior Secured Credit Facilities, 2.42% [Member]
 
 
Debt Instrument [Line Items]
 
 
Interest bearing note, maturity date
Jun. 20, 2018 
 
Long-term debt, Amount Outstanding
$ 391,737 
$ 397,843 
Long-term debt, Interest Rate
2.44% 
2.42% 
Long-Term Debt - Components of Long-Term Debt (Parenthetical) (Details) (USD $)
In Millions, unless otherwise specified
Jun. 30, 2015
Debt Instrument [Line Items]
 
Long-term debt, face amount
$ 25.0 
Senior Secured Notes, 7.25% [Member]
 
Debt Instrument [Line Items]
 
Long-term debt, face amount
53.5 
Senior Secured Notes, 6.47% [Member]
 
Debt Instrument [Line Items]
 
Long-term debt, face amount
110.0 
Senior Secured Notes, 8.50% [Member]
 
Debt Instrument [Line Items]
 
Long-term debt, face amount
25.0 
Senior Secured Notes, 5.04% [Member]
 
Debt Instrument [Line Items]
 
Long-term debt, face amount
60.0 
Senior Secured Credit Facilities, 2.42% [Member]
 
Debt Instrument [Line Items]
 
Long-term debt, face amount
$ 407.0 
Long-Term Debt - Additional Information (Details) (USD $)
0 Months Ended 6 Months Ended
Jun. 30, 2015
Dec. 31, 2014
Jun. 30, 2015
Senior Secured Notes, 7.25% [Member]
Dec. 31, 2014
Senior Secured Notes, 7.25% [Member]
Jun. 30, 2015
Senior Secured Notes, 6.47% [Member]
Dec. 31, 2014
Senior Secured Notes, 6.47% [Member]
Jun. 30, 2015
Senior Secured Notes, 8.50% [Member]
Dec. 31, 2014
Senior Secured Notes, 8.50% [Member]
Dec. 31, 2009
SDTS Credit Agreements
Senior Secured Notes, 7.25% [Member]
Jul. 13, 2010
SDTS Credit Agreements
Senior Secured Notes, 6.47% [Member]
Jul. 13, 2010
TDC [Member]
Senior Secured Notes, 8.50% [Member]
May 16, 2014
Sharyland Projects, L.L.C [Member]
Senior Secured Credit Facilities [Member]
Mar. 8, 2013
Sharyland Projects, L.L.C [Member]
Senior Secured Credit Facilities [Member]
Bank
Dec. 31, 2013
Sharyland Projects, L.L.C [Member]
Senior Secured Credit Facilities [Member]
Jun. 20, 2011
Sharyland Projects, L.L.C [Member]
Senior Secured Credit Facilities [Member]
Jun. 30, 2015
Sharyland Projects, L.L.C [Member]
Senior Secured Credit Facilities [Member]
LIBOR [Member]
Jun. 30, 2015
Sharyland Projects, L.L.C [Member]
Senior Secured Credit Facilities [Member]
Period of Three Years [Member]
LIBOR [Member]
Jun. 30, 2015
Sharyland Projects, L.L.C [Member]
Senior Secured Credit Facilities [Member]
Period After Three Years [Member]
LIBOR [Member]
Debt Instrument [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long-term debt, face amount
$ 25,000,000 
 
$ 53,500,000 
 
$ 110,000,000 
 
$ 25,000,000 
 
$ 53,500,000 
$ 110,000,000 
$ 25,000,000 
 
$ 60,000,000 
 
 
 
 
 
Long-term debt, stated interest rate
 
 
7.25% 
7.25% 
6.47% 
6.47% 
8.50% 
8.50% 
7.25% 
6.47% 
8.50% 
 
 
 
 
 
 
 
Construction-term loan
 
 
 
 
 
 
 
 
 
 
 
 
447,000,000 
 
667,000,000 
 
 
 
Number of banks, providing construction-term loan
 
 
 
 
 
 
 
 
 
 
 
 
14 
 
 
 
 
 
Interest rate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2.00% 
2.25% 
2.50% 
Long-term debt, Amount Outstanding
620,187,000 
629,756,000 
45,418,000 
46,291,000 
103,657,000 
105,622,000 
19,375,000 
20,000,000 
 
 
 
 
 
396,000,000 
 
 
 
 
Construction term loan outstanding converted into term loan
 
 
 
 
 
 
 
 
 
 
 
$ 407,000,000 
 
 
 
 
 
 
Derivative Instruments - Additional Information (Details) (USD $)
3 Months Ended 6 Months Ended
Jun. 30, 2014
Jun. 30, 2014
Jun. 30, 2015
Sharyland Projects, L.L.C [Member]
Jun. 30, 2014
Sharyland Projects, L.L.C [Member]
Dec. 31, 2011
Sharyland Projects, L.L.C [Member]
Maximum [Member]
Derivative [Line Items]
 
 
 
 
 
Term loan, fixed interest rate
 
 
0.832% 
 
 
Derivative, notional amount
 
 
 
$ 0 
$ 261,000,000 
Amount reclassified, interest expense
$ 400,000 
$ 800,000 
 
 
 
Contingent Consideration - Additional Information (Details) (USD $)
3 Months Ended 6 Months Ended 1 Months Ended 0 Months Ended 12 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Jun. 30, 2015
Jun. 30, 2014
Dec. 31, 2014
Dec. 31, 2010
CREZ Project
Dec. 31, 2010
Hunt-InfraREIT
Feb. 4, 2015
Hunt-InfraREIT
Operating Partnership Unit
Jan. 1, 2015
Hunt-InfraREIT
Class A Partnership Units
Dec. 31, 2014
Hunt-InfraREIT
Class A Partnership Units
Dec. 31, 2010
Hunt-InfraREIT
CREZ Project
Class A Partnership Units
Business Acquisition [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Business combination, contingent consideration, capital credits
 
 
 
 
 
 
$ 82,500,000 
 
 
 
 
Business combination, contingent consideration, cash payments
 
 
 
 
 
737,000,000 
 
 
 
 
 
Shares issued price per share
 
 
 
 
 
 
 
 
 
 
$ 10.65 
Business combination, contingent consideration, fair value
 
 
 
 
 
78,600,000 
 
 
 
 
 
Shares issued
 
 
 
 
 
 
 
983,418 
53,246 
6,700,000 
 
Change in fair value of contingent consideration
300,000 
895,000 
 
 
 
 
 
 
 
Contingent consideration
$ 0 
 
$ 0 
 
$ 27,378,000 
 
 
 
 
 
 
Fair Value of Financial Instruments - Additional Information (Details) (USD $)
Jun. 30, 2015
Dec. 31, 2014
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
 
 
Borrowings under construction term loan
$ 391,700,000 
$ 397,800,000 
Long-Term Debt
600,757,000 
610,522,000 
Senior Secured Notes
 
 
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
 
 
Long-Term Debt
$ 228,500,000 
$ 231,900,000 
Debt Instrument, weighted average rate
6.42% 
6.43% 
Fair Value of Financial Instruments - Financial Instruments Measured at Fair Value (Details) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2015
Dec. 31, 2014
Carrying Value
 
 
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Long-term debt
$ 620,187 
$ 629,756 
Contingent consideration - long-term
 
27,378 
Level 2 |
Fair Value
 
 
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Long-term debt
648,818 
658,306 
Contingent consideration - long-term
 
$ 27,378 
Regulatory Liability - Additional Information (Details) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2015
Dec. 31, 2014
Regulated Operations [Abstract]
 
 
Regulatory Liability
$ 6,177 
$ 1,242 
Equity - Additional Information (Details) (USD $)
In Millions, except Share data, unless otherwise specified
3 Months Ended 6 Months Ended 0 Months Ended 6 Months Ended 0 Months Ended 6 Months Ended 0 Months Ended 6 Months Ended 0 Months Ended 6 Months Ended 0 Months Ended 3 Months Ended 0 Months Ended
Jun. 30, 2015
Jun. 30, 2015
Jan. 12, 2015
Jan. 11, 2015
Jun. 5, 2015
Cash Distribution Approved on June 5, 2015
Jun. 30, 2015
Cash Distribution Approved on June 5, 2015
Mar. 6, 2015
Cash Distribution Approved on March 6, 2015
Jun. 30, 2015
Cash Distribution Approved on March 6, 2015
Jan. 13, 2015
Cash Distribution Approved on January 13, 2015
Jun. 30, 2015
Cash Distribution Approved on January 13, 2015
Dec. 18, 2014
Cash Distribution Approved on December 18, 2014
Jun. 30, 2015
Cash Distribution Approved on December 18, 2014
Jun. 5, 2015
Retained Earnings
Cash Distribution Approved on June 5, 2015
Mar. 6, 2015
Retained Earnings
Cash Distribution Approved on March 6, 2015
Jan. 13, 2015
Retained Earnings
Cash Distribution Approved on January 13, 2015
Mar. 31, 2015
Retained Earnings
Cash Distribution Approved on December 18, 2014
Jun. 5, 2015
InfraREIT, L.L.C.
Cash Distribution Approved on June 5, 2015
Mar. 6, 2015
InfraREIT, L.L.C.
Cash Distribution Approved on March 6, 2015
Jan. 13, 2015
InfraREIT, L.L.C.
Cash Distribution Approved on January 13, 2015
Mar. 31, 2015
InfraREIT, L.L.C.
Cash Distribution Approved on December 18, 2014
Dec. 18, 2014
InfraREIT, L.L.C.
Cash Distribution Approved on December 18, 2014
Jun. 5, 2015
InfraREIT, L.L.C.
Retained Earnings
Cash Distribution Approved on June 5, 2015
Mar. 6, 2015
InfraREIT, L.L.C.
Retained Earnings
Cash Distribution Approved on March 6, 2015
Jan. 13, 2015
InfraREIT, L.L.C.
Retained Earnings
Cash Distribution Approved on January 13, 2015
Mar. 31, 2015
InfraREIT, L.L.C.
Retained Earnings
Cash Distribution Approved on December 18, 2014
Class Of Stock [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock, shares authorized
450,000,000 
450,000,000 
450,000,000 
3,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock, par or stated value per share
$ 0.01 
$ 0.01 
$ 0.01 
$ 1 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash distribution declaration date
 
 
 
 
 
Jun. 05, 2015 
 
Mar. 06, 2015 
 
Jan. 13, 2015 
 
Dec. 18, 2014 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash distributions to unit holders, date of record
 
 
 
 
 
Jun. 30, 2015 
 
Mar. 31, 2015 
 
Jan. 20, 2015 
 
Dec. 18, 2014 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash distributions declared to unit holders, per unit
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 0.225 
$ 0.14 
$ 0.26 
 
$ 0.31 
 
 
 
 
Cash distribution to unit holders
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 13.6 
$ 8.5 
$ 11.7 
$ 14.1 
 
 
 
 
 
Cash dividends declared to shareholders
 
 
 
 
 
 
 
 
 
 
 
 
$ 9.8 
$ 6.1 
$ 9.0 
$ 10.8 
 
 
 
 
 
$ 9.8 
$ 6.1 
$ 9.0 
$ 10.8 
Dividends Payable, date declared
 
 
 
 
 
Jun. 05, 2015 
 
Mar. 06, 2015 
 
Jan. 13, 2015 
 
Dec. 18, 2014 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividends payable date of record
 
 
 
 
 
Jun. 30, 2015 
 
Mar. 31, 2015 
 
Jan. 20, 2015 
 
Dec. 18, 2014 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash dividends declared per share to shareholders
$ 0.225 
$ 0.625 
 
 
$ 0.225 
 
$ 0.14 
 
$ 0.26 
 
$ 0.31 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash distribution and dividend paid date
 
 
 
 
 
Jul. 23, 2015 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash distribution and dividend paid date
 
 
 
 
 
 
 
Apr. 23, 2015 
 
Jan. 29, 2015 
 
Jan. 16, 2015 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accumulated Other Comprehensive Loss - Additional Information (Details) (USD $)
Jun. 30, 2015
Mar. 31, 2015
Accumulated Other Comprehensive Income Loss Net Of Tax [Abstract]
 
 
Changes in accumulated other comprehensive loss
$ 0 
$ 0 
Accumulated Other Comprehensive Loss - Changes in Accumulated Other Comprehensive Loss (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2014
Jun. 30, 2014
Accumulated Other Comprehensive Income Loss [Line Items]
 
 
Other comprehensive loss before reclassifications
$ (1)
$ (49)
Amounts reclassified from accumulated other comprehensive loss
450 
893 
Net period other comprehensive loss
449 
844 
Accumulated Other Comprehensive Loss Attributable to InfraREIT, Inc.
 
 
Accumulated Other Comprehensive Income Loss [Line Items]
 
 
Other comprehensive loss before reclassifications
(40)
(77)
Amounts reclassified from accumulated other comprehensive loss
346 
687 
Net period other comprehensive loss
306 
610 
Accumulated Other Comprehensive Loss Attributable To Noncontrolling Interest
 
 
Accumulated Other Comprehensive Income Loss [Line Items]
 
 
Other comprehensive loss before reclassifications
39 
28 
Amounts reclassified from accumulated other comprehensive loss
104 
206 
Net period other comprehensive loss
$ 143 
$ 234 
Noncontrolling Interest - Additional Information (Details) (USD $)
6 Months Ended 0 Months Ended 6 Months Ended 3 Months Ended 6 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Dec. 31, 2014
Mar. 9, 2015
Hunt-InfraREIT
Jun. 30, 2015
Class A OP Units
Jun. 30, 2015
Class A OP Units
Hunt-InfraREIT
Jun. 30, 2015
General and Administrative Expense
Jun. 30, 2014
General and Administrative Expense
Jun. 30, 2015
General and Administrative Expense
Jun. 30, 2014
General and Administrative Expense
Jun. 30, 2015
LTIP Units
Jun. 30, 2014
LTIP Units
Minority Interest [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
Description of units redeemed for cash or, at option, exchanged for common shares
one-for-one basis 
 
 
 
 
 
 
 
 
 
 
 
OP Units held by the limited partners
17,000,000 
 
10,700,000 
 
 
 
 
 
 
 
 
 
Operating partnership units issued
 
 
 
 
 
 
 
 
 
 
28,000 
11,264 
Directors vesting period
 
 
 
 
 
 
 
 
 
 
1 year 
 
Compensation Expenses
$ 308,000 
$ 120,000 
 
 
 
 
$ 200,000 
$ 100,000 
$ 300,000 
$ 100,000 
 
 
Aggregate value of pre-IPO LTIP units
 
 
 
 
 
 
 
 
 
 
100,000 
 
Operating partnership units redeem
 
 
 
 
 
1,551,878 
 
 
 
 
 
 
Common shares received
 
 
 
2,329,283 
 
1,551,878 
 
 
 
 
 
 
Shares purchased consideration for promissory note
 
 
 
 
6,242,999 
 
 
 
 
 
 
 
Principal amount of shares purchased consideration for promissory note
 
 
 
 
$ 66,500,000 
 
 
 
 
 
 
 
Earnings Per Share - Computation of Earnings Per Share (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Jun. 30, 2015
Jun. 30, 2014
Basic net income per share:
 
 
 
 
Net income (loss) attributable to InfraREIT, Inc.
$ 6,362 
$ 4,235 
$ (20,511)
$ 8,080 
Weighted average common shares outstanding
43,565 
35,053 
42,391 
35,053 
Basic net income (loss) per share
$ 0.15 
$ 0.12 
$ (0.48)
$ 0.23 
Diluted net income per share:
 
 
 
 
Net income (loss) attributable to InfraREIT, Inc.
6,362 
4,235 
(20,511)
8,080 
Weighted average common shares outstanding
43,565 
35,053 
42,391 
35,053 
Weighted average dilutive shares outstanding
43,565 
35,053 
42,391 
35,053 
Diluted net income (loss) per share
$ 0.15 
$ 0.12 
$ (0.48)
$ 0.23 
Due to the anti-dilutive effect, the computation of diluted earnings per share does not reflect the following adjustments:
 
 
 
 
Net income (loss) attributable to noncontrolling interest
$ 2,481 
$ 1,278 
$ (6,519)
$ 2,425 
Redemption of operating partnership units
17,028 
10,562 
15,424 
10,523 
Leases - Schedule of Composition of Lease Revenue (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Jun. 30, 2015
Jun. 30, 2014
Leases [Abstract]
 
 
 
 
Base rent (straight-line)
$ 29,458 
$ 24,542 
$ 58,830 
$ 49,379 
Percentage rent
 
683 
 
683 
Total lease revenue
$ 29,458 
$ 25,225 
$ 58,830 
$ 50,062 
Leases - Additional Information (Details) (USD $)
3 Months Ended 6 Months Ended 3 Months Ended 6 Months Ended
Jun. 30, 2014
Jun. 30, 2015
Jun. 30, 2014
Jun. 30, 2015
Maximum [Member]
Jun. 30, 2015
Minimum
Jun. 30, 2015
Sharyland
Jun. 30, 2015
Sharyland
Operating Leased Assets [Line Items]
 
 
 
 
 
 
 
Rate of rent used, Percentage
 
 
 
37.00% 
23.00% 
 
 
Operating leases placed in services dates description
 
SDTS and SPLLC have entered into various leases with Sharyland for all of our placed in service T&D assets. The master lease agreements, as amended, expire at various dates from December 31, 2015 through December 31, 2022. 
 
 
 
 
 
Lease expiration date range, start date
 
Dec. 31, 2015 
 
 
 
 
 
Lease expiration date range, end date
 
Dec. 31, 2022 
 
 
 
 
 
Percentage of rent recognized
$ 683,000 
 
$ 683,000 
 
 
$ 0 
$ 0 
Supplemental Cash Flow Information - Supplemental Cash Flow Information and Non-cash Investing and Financing Activities (Details) (USD $)
In Thousands, unless otherwise specified
6 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Dec. 31, 2014
Supplemental cash flow information
 
 
 
Cash paid during the period for interest
$ 13,569 
$ 15,015 
 
Cash paid during the period for taxes
 
75 
 
Non-cash investing and financing activities
 
 
 
Non-cash right of way additions to electric plant
 
344 
 
Change in accrued additions to electric plant
5,475 
22,388 
 
Allowance for funds used during construction - debt
919 
778 
 
Net non-cash equity issuances related to the Merger and Reorganization
97,193 
 
 
Net non-cash noncontrolling equity issuances related to the Merger and Reorganization
119,607 
 
 
Non-cash noncontrolling interests equity issuance
755 
3,706 
 
Dividends and distributions payable
$ 13,634 
 
$ 14,130