2023 Q2 Form 10-Q Financial Statement

#000163499723000041 Filed on April 26, 2023

View on sec.gov

Income Statement

Concept 2023 Q2 2023 Q1
Revenue $1.587B $2.466B
YoY Change -11.54% 15.61%
Cost Of Revenue $385.0M $977.0M
YoY Change -12.5% 31.85%
Gross Profit $1.202B $1.489B
YoY Change -11.23% 6.97%
Gross Profit Margin 75.74% 60.38%
Selling, General & Admin $3.000M $4.000M
YoY Change 0.0% -20.0%
% of Gross Profit 0.25% 0.27%
Research & Development
YoY Change
% of Gross Profit
Depreciation & Amortization $285.0M $280.0M
YoY Change 5.17% 7.28%
% of Gross Profit 23.71% 18.8%
Operating Expenses $1.076B $1.224B
YoY Change -5.03% 12.29%
Operating Profit $126.0M $265.0M
YoY Change -42.99% -12.25%
Interest Expense -$95.00M $95.00M
YoY Change -220.25% 33.8%
% of Operating Profit -75.4% 35.85%
Other Income/Expense, Net $29.00M $25.00M
YoY Change 222.22% 127.27%
Pretax Income $60.00M $197.0M
YoY Change -61.78% -60.2%
Income Tax $9.000M -$18.00M
% Of Pretax Income 15.0% -9.14%
Net Earnings $85.00M $245.0M
YoY Change -53.8% -44.94%
Net Earnings / Revenue 5.36% 9.94%
Basic Earnings Per Share $0.22 $0.63
Diluted Earnings Per Share $0.22 $0.63
COMMON SHARES
Basic Shares Outstanding 386.6M shares 386.6M shares
Diluted Shares Outstanding 387.1M shares 387.1M shares

Balance Sheet

Concept 2023 Q2 2023 Q1
SHORT-TERM ASSETS
Cash & Short-Term Investments $58.00M $72.00M
YoY Change -85.89% -88.89%
Cash & Equivalents $58.00M $72.00M
Short-Term Investments
Other Short-Term Assets $886.0M $960.0M
YoY Change 2.9% 21.06%
Inventory $451.0M $434.0M
Prepaid Expenses
Receivables $1.354B $1.669B
Other Receivables $2.000M $2.000M
Total Short-Term Assets $2.751B $3.140B
YoY Change -7.96% -2.76%
LONG-TERM ASSETS
Property, Plant & Equipment $31.93B $31.25B
YoY Change 6.22% 5.15%
Goodwill $3.119B $3.119B
YoY Change 0.0% 0.0%
Intangibles $294.0M $278.0M
YoY Change 3.16% -3.81%
Long-Term Investments $490.0M $440.0M
YoY Change 13.69% 1.38%
Other Assets $3.010B $2.981B
YoY Change 646.9% 639.7%
Total Long-Term Assets $38.86B $38.32B
YoY Change 5.69% 5.52%
TOTAL ASSETS
Total Short-Term Assets $2.751B $3.140B
Total Long-Term Assets $38.86B $38.32B
Total Assets $41.61B $41.46B
YoY Change 4.66% 4.85%
SHORT-TERM LIABILITIES
YoY Change
Accounts Payable $1.359B $1.578B
YoY Change 4586.21% 10420.0%
Accrued Expenses $78.00M $105.0M
YoY Change 0.0% 9.38%
Deferred Revenue $17.00M $16.00M
YoY Change 21.43% 100.0%
Short-Term Debt $1.868B $1.293B
YoY Change 1908.6% 3594.29%
Long-Term Debt Due $125.0M $413.0M
YoY Change -64.29% 46.98%
Total Short-Term Liabilities $4.655B $4.570B
YoY Change 39.12% 38.48%
LONG-TERM LIABILITIES
Long-Term Debt $8.318B $8.243B
YoY Change 5.45% 2.61%
Other Long-Term Liabilities $5.894B $5.251B
YoY Change 14.22% 2.22%
Total Long-Term Liabilities $14.21B $16.38B
YoY Change -11.29% 1.22%
TOTAL LIABILITIES
Total Short-Term Liabilities $4.655B $4.570B
Total Long-Term Liabilities $14.21B $16.38B
Total Liabilities $22.13B $20.95B
YoY Change 14.27% 7.53%
SHAREHOLDERS EQUITY
Retained Earnings $1.900B $1.985B
YoY Change -5.14% 9.13%
Common Stock $17.70B $17.70B
YoY Change 0.05% 0.08%
Preferred Stock
YoY Change
Treasury Stock (at cost)
YoY Change
Treasury Stock Shares 108.2K shares
Shareholders Equity $19.48B $19.51B
YoY Change
Total Liabilities & Shareholders Equity $41.61B $41.46B
YoY Change 4.66% 4.85%

Cashflow Statement

Concept 2023 Q2 2023 Q1
OPERATING ACTIVITIES
Net Income $85.00M $245.0M
YoY Change -53.8% -44.94%
Depreciation, Depletion And Amortization $285.0M $280.0M
YoY Change 5.17% 7.28%
Cash From Operating Activities $526.0M $204.0M
YoY Change 26.14% -47.42%
INVESTING ACTIVITIES
Capital Expenditures $799.0M $836.0M
YoY Change -234.97% 3.08%
Acquisitions
YoY Change
Other Investing Activities $61.00M $11.00M
YoY Change 27.08% -93.6%
Cash From Investing Activities -$738.0M -$819.0M
YoY Change 35.66% -13.61%
FINANCING ACTIVITIES
Cash Dividend Paid $170.0M
YoY Change 0.0%
Common Stock Issuance & Retirement, Net
YoY Change
Debt Paid & Issued, Net $4.000M
YoY Change -95.51%
Cash From Financing Activities 198.0M $618.0M
YoY Change -280.0% -332.33%
NET CHANGE
Cash From Operating Activities 526.0M $204.0M
Cash From Investing Activities -738.0M -$819.0M
Cash From Financing Activities 198.0M $618.0M
Net Change In Cash -14.00M $3.000M
YoY Change -94.09% -100.36%
FREE CASH FLOW
Cash From Operating Activities $526.0M $204.0M
Capital Expenditures $799.0M $836.0M
Free Cash Flow -$273.0M -$632.0M
YoY Change -127.06% 49.41%

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Background and Nature of Operations<div style="margin-top:6pt;text-align:justify"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%">Avangrid, Inc. (AVANGRID, we or the Company) is an energy services holding company engaged in the regulated energy transmission and distribution business through its principal subsidiary, Avangrid Networks, Inc. (Networks), and in the renewable energy generation business through its principal subsidiary, Avangrid Renewables Holding, Inc. (ARHI). ARHI in turn holds subsidiaries including Avangrid Renewables, LLC (Renewables). Iberdrola, S.A. (Iberdrola), a corporation organized under the laws of the Kingdom of Spain, owns 81.6% of the outstanding common stock of AVANGRID. The remaining outstanding shares are owned by various shareholders, with approximately 14.7% of AVANGRID's outstanding shares publicly-traded on the New York Stock Exchange (NYSE).</span></div><div style="margin-top:6pt;text-align:justify"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-style:italic;font-weight:400;line-height:120%">Proposed Merger with PNMR</span></div><div style="margin-top:6pt;text-align:justify"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%">On October 20, 2020, AVANGRID, PNM Resources, Inc., a New Mexico corporation (PNMR) and NM Green Holdings, Inc., a New Mexico corporation and wholly-owned subsidiary of AVANGRID (Merger Sub), entered into an Agreement and Plan of Merger (Merger Agreement), pursuant to which Merger Sub was expected to merge with and into PNMR, with PNMR surviving the Merger as a direct wholly-owned subsidiary of AVANGRID (Merger). Pursuant to the Merger Agreement, each issued and outstanding share of the common stock of PNMR (PNMR common stock) (other than (i) the issued shares of PNMR common stock that are owned by AVANGRID, Merger Sub, PNMR or any wholly-owned subsidiary of AVANGRID or PNMR, which will be automatically cancelled at the time the Merger is consummated and (ii) shares of PNMR common stock held by a holder who has not voted in favor of, or consented in writing to, the Merger who is entitled to, and who has demanded, payment for fair value of such shares) will be converted, at the time the Merger is consummated, into the right to receive $50.30 in cash (Merger Consideration).</span></div><div style="margin-top:6pt;text-align:justify"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%">Consummation of the Merger (Closing) is subject to the satisfaction or waiver of certain customary closing conditions, including, without limitation, the approval of the Merger Agreement by the holders of at least a majority of the outstanding shares of PNMR common stock entitled to vote thereon, the absence of any material adverse effect on PNMR, the receipt of certain required regulatory approvals (including approvals from the Public Utility Commission of Texas (PUCT), the New Mexico Public Regulation Commission (NMPRC), the Federal Energy Regulatory Commission (FERC), the Federal Communications Commission (FCC), the Committee on Foreign Investment in the United States (CFIUS), the Nuclear Regulatory Commission (NRC) and approval under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR)), the Four Corners Divestiture Agreements (as defined below) being in full force and effect and all applicable regulatory filings associated therewith being made, as well as holders of no more than 15% of the outstanding shares of PNMR common stock validly exercising their dissenters’ rights. On February 12, 2021, the shareholders of PNMR approved the proposed Merger. As of November 1, 2021, the Merger had obtained all regulatory approvals other than from the NMPRC. On November 1, 2021, after public hearing and briefing on the matter, the hearing examiner in the Merger proceeding at the NMPRC issued an unfavorable recommendation related to the amended stipulated agreement entered into by PNMR's subsidiary, Public Service Company of New Mexico (PNM), AVANGRID and a number of interveners in the NMPRC proceeding with respect to consideration of the joint Merger application. On December 8, 2021, the NMPRC issued an order rejecting the amended stipulated agreement. On January 3, 2022, AVANGRID and PNM filed a notice of appeal of the December 8, 2021 decision of the NMPRC with the New Mexico Supreme Court. The Statement of Issues was filed on February 2, 2022 and the Brief in Chief was filed on April 7, 2022. On June 14, 2022, the NMPRC filed its Answer Brief. On June 13, 2022, New Energy Economy, an intervener in the Merger proceeding, filed its Answer Brief. AVANGRID's Reply Brief was filed on August 5, 2022. On March 8, 2023, AVANGRID, PNM and the NMPRC filed a motion to dismiss the appeal and remand the proceeding back to the NMPRC for further proceedings. The motion states that, once granted, AVANGRID and PNM intend to file a motion for rehearing and/or reconsideration at the NMPRC. One party opposed the motion and certain other parties have sought clarification regarding the process that the NMPRC would implement on remand.</span></div><div style="margin-top:6pt;text-align:justify"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%">On February 24, 2022, the FCC granted an extension to its approval to transfer operating licenses in connection with the Merger, which was further extended on August 9, 2022 and again on February 16, 2023. On May 20, 2022, the NRC issued an order extending the effectiveness of its approval until May 25, 2023, and again on March 14, 2023 until May 25, 2024. Furthermore, a new HSR filing was submitted and the waiting period expired at 11:50 pm on March 10, 2023, providing HSR clearance for another year. On September 21, 2022, New Energy Economy filed a motion to show cause with the NMPRC alleging that AVANGRID and PNM have engaged in a misleading joint advertising and sponsorship strategy and requesting an investigation. AVANGRID and PNM filed a reply to the motion to show cause on October 11, 2022. On December 14, 2022, the NMPRC issued an order denying the motion. </span></div><div style="margin-top:9pt;text-align:justify"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%">In addition, on January 3, 2022, AVANGRID, PNMR and Merger Sub entered into an Amendment to the Merger Agreement (the First Amendment), pursuant to which AVANGRID, PNMR and Merger Sub each agreed to extend the “End Date” for consummation of the Merger until April 20, 2023. The parties acknowledged in the First Amendment that the required regulatory approval from the NMPRC had not been obtained and that the parties reasonably determined that such outstanding approval would not be obtained by April 20, 2022. In light of this outstanding approval, the parties determined to approve the First Amendment. Subsequently, on April 12, 2023, AVANGRID, PNMR and Merger Sub entered into a Second Amendment to the Merger Agreement (the Second Amendment), pursuant to which AVANGRID, PNMR and Merger Sub each agreed to further extend the “End Date” for consummation of the Merger until July 20, 2023. The parties acknowledged in the Second Amendment that the required regulatory approval from the NMPRC had not been obtained and that the parties reasonably determined that such outstanding approval would not be obtained by April 20, 2023. As amended by the Second Amendment, the Merger Agreement may be terminated by each of AVANGRID and PNMR under certain circumstances, including if the Merger is not consummated by July 20, 2023. During the pendency of the appeal described above, certain required regulatory approvals and consents may expire and AVANGRID and PNMR will reapply and/or apply for extensions of such approvals, as the case may be. We cannot predict the outcome of any other re-applications or requests for extensions of such approvals that may be required. </span></div><div style="margin-top:9pt;text-align:justify"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%">The Merger Agreement contains representations, warranties and covenants of PNMR, AVANGRID and Merger Sub, which are customary for transactions of this type. In addition, among other things, the Merger Agreement contains a covenant requiring PNMR to, prior to the closing, enter into agreements (Four Corners Divestiture Agreements) providing for, and to make filings required to, exit from all ownership interests in the Four Corners Power Plant, all with the objective of having the closing date for such exit be no later than December 31, 2024.</span></div><div style="margin-top:9pt;text-align:justify"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%">The Merger Agreement (as amended) provides for certain customary termination rights including the right of either party to terminate the Merger Agreement if the Merger is not completed on or before July 20, 2023. The Merger Agreement further provides that, upon termination of the Merger Agreement under certain specified circumstances (including if AVANGRID terminates the Merger Agreement due to a change in recommendation of the board of directors of PNMR or if PNMR terminates the Merger Agreement to accept a superior proposal (as defined in the Merger Agreement)), PNMR will be required to pay AVANGRID a termination fee of $130 million. In addition, the Merger Agreement provides that (i) if the Merger Agreement is terminated by either party due to a failure of a regulatory closing condition and such failure is the result of AVANGRID’s breach of its regulatory covenants, or (ii) AVANGRID fails to effect the Closing when all closing conditions have been satisfied and it is otherwise obligated to do so under the Merger Agreement, then, in either such case, upon termination of the Merger Agreement, AVANGRID will be required to pay PNMR a termination fee of $184 million as the sole and exclusive remedy. Upon the termination of the Merger Agreement under certain specified circumstances involving a breach of the Merger Agreement, either PNMR or AVANGRID will be required to reimburse the other party’s reasonable and documented out-of-pocket fees and expenses up to $10 million (which amount will be credited toward, and offset against, the payment of any applicable termination fee).</span></div><div style="margin-top:9pt;text-align:justify"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%">In connection with the Merger, Iberdrola has provided AVANGRID a commitment letter (Iberdrola Funding Commitment Letter), pursuant to which Iberdrola has unilaterally agreed to provide to AVANGRID, or arrange the provision to AVANGRID of, funds to the extent necessary for AVANGRID to consummate the Merger, up to a maximum aggregate amount of approximately $4,300 million, including the payment of the aggregate Merger Consideration.</span></div><div style="margin-top:9pt;text-align:justify"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%">On April 15, 2021, AVANGRID entered into a side letter agreement with Iberdrola, which sets forth certain terms and conditions relating to the Iberdrola Funding Commitment Letter (the Side Letter Agreement). The Side Letter Agreement provides that any drawing in the form of indebtedness made by the Corporation pursuant to the Funding Commitment Letter shall bear interest at an interest rate equal to 3-month LIBOR plus 0.75% per annum calculated on the basis of a 360-day year for the actual number of days elapsed and, commencing on the date of the Funding Commitment Letter, we shall pay Iberdrola a facility fee equal to 0.12% per annum on the undrawn portion of the funding commitment set forth in the Funding Commitment Letter.</span></div><div style="margin-top:9pt;text-align:justify"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%">On May 18, 2021, we issued 77,821,012 shares of common stock in two private placements. Iberdrola purchased 63,424,125 shares and Hyde Member LLC, a Delaware limited liability company and a wholly owned subsidiary of Qatar Investment Authority, purchased 14,396,887 shares of our common stock, par value $0.01 per share, at the purchase price of $51.40 per share, which was the closing price of the shares of our common stock on the NYSE as of May 11, 2021. Proceeds of the private placements were $4,000 million. $3,000 million of the proceeds were used to repay the Iberdrola Loan. After the effect of the private placements, Iberdrola retained its 81.6% ownership interest in AVANGRID.</span></div>
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Basis of Presentation<div style="margin-top:6pt;text-align:justify"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%">The accompanying condensed consolidated financial statements should be read in conjunction with the Form 10-K for the fiscal year ended December 31, 2022.</span></div><div style="margin-top:9pt;text-align:justify"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%">The accompanying unaudited financial statements are prepared on a consolidated basis and include the accounts of AVANGRID and its consolidated subsidiaries, Networks and ARHI. All intercompany transactions and accounts have been eliminated in consolidation. The year-end balance sheet data was derived from audited financial statements. The unaudited condensed consolidated financial statements for the interim periods 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, the interim condensed consolidated financial statements do not include all the information and note disclosures required by U.S. GAAP for complete financial statements.</span></div><div style="margin-top:9pt;text-align:justify"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%">In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments necessary to present fairly our condensed consolidated financial statements for the interim periods described herein. All such adjustments are of a normal and recurring nature, except as otherwise disclosed. The results for the three months ended March 31, 2023, are not necessarily indicative of the results for the entire fiscal year ending December 31, 2023.</span></div>
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