ffedf
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2017
OR
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number: 001-37511
Sunrun Inc.
(Exact name of registrant as specified in its charter)
Delaware |
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26-2841711 |
(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
595 Market Street, 29th Floor
San Francisco, California 94105
(Address of principal executive offices and Zip Code)
(415) 580-6900
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☒ NO ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES ☒ NO ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Accelerated filer |
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Non-accelerated filer |
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(Do not check if a smaller reporting company) |
Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒
As of May 8, 2017, the number of shares of the registrant’s common stock outstanding was 105,444,765.
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Page |
Item 1 |
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2 |
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2 |
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4 |
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5 |
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6 |
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7 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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24 |
Item 3. |
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35 |
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Item 4. |
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35 |
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Item 1. |
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35 |
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Item 1A. |
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35 |
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Item 2. |
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62 |
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Item 5. |
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62 |
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Item 6. |
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62 |
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63 |
1
(In Thousands, Except Share Par Values)
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March 31, 2017 |
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December 31, 2016 |
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(Unaudited) |
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Assets |
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Current assets: |
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Cash |
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$ |
203,791 |
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$ |
206,364 |
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Restricted cash |
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12,030 |
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11,882 |
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Accounts receivable (net of allowances for doubtful accounts of $1,088 and $1,166 as of March 31, 2017 and December 31, 2016, respectively) |
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54,065 |
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60,258 |
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State tax credits receivable |
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— |
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13,713 |
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Inventories |
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59,603 |
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67,326 |
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Prepaid expenses and other current assets |
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11,585 |
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9,802 |
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Total current assets |
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341,074 |
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369,345 |
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Restricted cash |
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6,117 |
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6,117 |
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Solar energy systems, net |
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2,790,424 |
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2,629,366 |
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Property and equipment, net |
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44,925 |
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48,471 |
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Intangible assets, net |
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17,448 |
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18,499 |
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Goodwill |
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87,543 |
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87,543 |
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Prepaid tax asset |
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— |
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378,541 |
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Other assets |
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31,497 |
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34,936 |
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Total assets (1) |
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$ |
3,319,028 |
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$ |
3,572,818 |
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Liabilities and total equity |
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Current liabilities: |
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Accounts payable |
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$ |
65,520 |
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$ |
66,018 |
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Distributions payable to noncontrolling interests and redeemable noncontrolling interests |
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11,157 |
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10,654 |
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Accrued expenses and other liabilities |
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48,675 |
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59,261 |
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Deferred revenue, current portion |
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74,284 |
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70,849 |
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Deferred grants, current portion |
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8,394 |
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8,011 |
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Capital lease obligations, current portion |
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9,198 |
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10,015 |
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Long-term non-recourse debt, current portion |
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15,797 |
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14,153 |
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Lease pass-through financing obligation, current portion |
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5,872 |
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5,823 |
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Total current liabilities |
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238,897 |
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244,784 |
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Deferred revenue, net of current portion |
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578,425 |
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583,401 |
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Deferred grants, net of current portion |
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224,217 |
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226,893 |
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Capital lease obligations, net of current portion |
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10,701 |
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12,965 |
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Recourse debt |
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247,400 |
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244,000 |
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Long-term non-recourse debt, net of current portion |
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686,078 |
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639,870 |
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Lease pass-through financing obligation, net of current portion |
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138,050 |
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137,958 |
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Other liabilities |
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5,646 |
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5,457 |
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Deferred tax liabilities |
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41,068 |
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415,397 |
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Total liabilities (1) |
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2,170,482 |
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2,510,725 |
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Commitments and contingencies (Note 13) |
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Redeemable noncontrolling interests |
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142,012 |
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137,907 |
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Stockholders’ equity: |
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Preferred stock, $0.0001 par value—authorized, 200,000 shares as of March 31, 2017 and December 31, 2016; no shares issued and outstanding as of March 31, 2017 and December 31, 2016 |
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— |
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— |
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Common stock, $0.0001 par value—authorized, 2,000,000 shares as of March 31, 2017 and December 31, 2016; issued and outstanding, 104,643 and 104,321 shares as of March 31, 2017 and December 31, 2016, respectively |
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10 |
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10 |
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Additional paid-in capital |
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672,896 |
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668,076 |
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Accumulated other comprehensive income |
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236 |
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437 |
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Retained earnings |
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20,161 |
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4,438 |
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Total stockholders’ equity |
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693,303 |
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672,961 |
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Noncontrolling interests |
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313,231 |
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251,225 |
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Total equity |
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1,006,534 |
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924,186 |
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Total liabilities, redeemable noncontrolling interests and total equity |
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$ |
3,319,028 |
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$ |
3,572,818 |
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2
The accompanying notes are an integral part of these consolidated financial statements.
3
Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts)
(Unaudited)
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Three Months Ended March 31, |
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2017 |
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2016 |
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Revenue: |
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Operating leases and incentives |
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$ |
48,098 |
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$ |
34,540 |
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Solar energy systems and product sales |
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56,019 |
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64,203 |
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Total revenue |
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104,117 |
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98,743 |
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Operating expenses: |
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Cost of operating leases and incentives |
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44,336 |
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38,100 |
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Cost of solar energy systems and product sales |
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49,431 |
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57,512 |
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Sales and marketing |
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31,676 |
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43,188 |
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Research and development |
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2,996 |
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2,463 |
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General and administrative |
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24,621 |
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23,248 |
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Amortization of intangible assets |
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1,051 |
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1,052 |
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Total operating expenses |
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154,111 |
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165,563 |
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Loss from operations |
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(49,994 |
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(66,820 |
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Interest expense, net |
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15,277 |
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11,515 |
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Other expenses (income), net |
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475 |
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(532 |
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Loss before income taxes |
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(65,746 |
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(77,803 |
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Income tax expense |
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7,338 |
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— |
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Net loss |
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(73,084 |
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(77,803 |
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Net loss attributable to noncontrolling interests and redeemable noncontrolling interests |
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(85,811 |
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(90,937 |
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Net income available to common stockholders |
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$ |
12,727 |
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$ |
13,134 |
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Net income per share available to common stockholders |
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Basic |
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$ |
0.12 |
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$ |
0.13 |
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Diluted |
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$ |
0.12 |
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$ |
0.13 |
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Weighted average shares used to compute net income per share available to common stockholders |
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Basic |
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104,038 |
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101,273 |
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Diluted |
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106,469 |
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104,219 |
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The accompanying notes are an integral part of these consolidated financial statements.
4
Consolidated Statements of Comprehensive Income
(In Thousands)
(Unaudited)
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Three Months Ended March 31, |
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2017 |
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2016 |
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Net income attributable to common stockholders |
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$ |
12,727 |
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$ |
13,134 |
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Other comprehensive income: |
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Unrealized loss on derivatives, net of income taxes |
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(764 |
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(5,798 |
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Less: Interest expense on derivatives recognized into earnings, net of income taxes |
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(563 |
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(525 |
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Comprehensive income |
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$ |
12,526 |
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$ |
7,861 |
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5
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
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Three Months Ended March 31, |
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2017 |
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2016 |
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Operating activities: |
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Net loss |
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$ |
(73,084 |
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$ |
(77,803 |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization, net of amortization of deferred grants |
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31,710 |
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21,596 |
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Deferred income taxes |
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7,337 |
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— |
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Stock-based compensation expense |
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5,874 |
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3,809 |
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Noncash interest expense |
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5,931 |
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3,502 |
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Interest on lease pass-through financing obligations |
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2,961 |
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3,002 |
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Reduction in lease pass-through financing obligations |
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(4,546 |
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(4,236 |
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Other noncash losses and expenses |
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2,898 |
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1,657 |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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6,362 |
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3,595 |
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Inventories |
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7,723 |
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(23,314 |
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Prepaid and other assets |
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(1,441 |
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(4,355 |
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Accounts payable |
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(4,357 |
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(10,103 |
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Accrued expenses and other liabilities |
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(15,445 |
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(317 |
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Deferred revenue |
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(1,030 |
) |
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5,572 |
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Net cash used in operating activities |
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(29,107 |
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(77,395 |
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Investing activities: |
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Payments for the costs of solar energy systems, leased and to be leased |
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(168,149 |
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(164,629 |
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Purchases of property and equipment |
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(2,610 |
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(5,023 |
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Net cash used in investing activities |
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(170,759 |
) |
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(169,652 |
) |
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Financing activities: |
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Proceeds from state tax credits, net of recapture |
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13,388 |
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9,202 |
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Proceeds from issuance of recourse debt |
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57,400 |
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141,000 |
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Repayment of recourse debt |
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(54,000 |
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(147,000 |
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Proceeds from issuance of non-recourse debt |
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38,225 |
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106,400 |
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Repayment of non-recourse debt |
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(4,904 |
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(2,160 |
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Payment of debt fees |
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— |
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(9,369 |
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Proceeds from lease pass-through financing obligations |
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1,448 |
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9,746 |
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Contributions received from noncontrolling interests and redeemable noncontrolling interests |
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162,565 |
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154,944 |
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Distributions paid to noncontrolling interests and redeemable noncontrolling interests |
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(12,887 |
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(9,986 |
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(Payments) proceeds from exercises of stock options, net of withholding taxes on restricted stock units |
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(1,067 |
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452 |
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Offering costs paid related to initial public offering |
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— |
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(437 |
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Payment of capital lease obligations |
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(2,749 |
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(3,115 |
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Change in restricted cash |
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(126 |
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1,819 |
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Net cash provided by financing activities |
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197,293 |
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251,496 |
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Net change in cash |
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(2,573 |
) |
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4,449 |
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Cash, beginning of period |
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206,364 |
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203,864 |
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Cash, end of period |
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$ |
203,791 |
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$ |
208,313 |
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Supplemental disclosures of cash flow information |
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Cash paid for interest |
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$ |
9,347 |
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$ |
4,681 |
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Supplemental disclosures of noncash investing and financing activities |
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Purchases of solar energy systems and property and equipment included in accounts payable and accrued expenses |
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$ |
22,468 |
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$ |
15,769 |
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Purchases of solar energy systems included in non-recourse debt |
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$ |
12,873 |
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$ |
— |
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Distributions payable to noncontrolling interests and redeemable noncontrolling interests |
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$ |
11,157 |
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$ |
7,368 |
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Vehicles acquired under capital leases |
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$ |
76 |
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$ |
7,318 |
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The accompanying notes are an integral part of these consolidated financial statements.
6
Sunrun Inc.
Notes to Consolidated Financial Statements
(Unaudited)
Note 1. Organization
Sunrun Inc. (“Sunrun” or the “Company”) was originally formed in 2007 as a California limited liability company and was converted into a Delaware corporation in 2008. The Company is engaged in the design, development, installation, sale, ownership and maintenance of residential solar energy systems (“Projects”) in the United States.
Sunrun acquires customers directly and through relationships with various solar and strategic partners (“Partners”). The Projects are constructed either by Sunrun or by Sunrun’s Partners and are owned by the Company. Sunrun’s customers enter into a power purchase agreement (“PPA”) or a lease (each, a “Customer Agreement”) which typically has a term of 20 years. Sunrun monitors, maintains and insures the Projects. The Company also sells solar energy systems and products, such as panels and racking and solar leads generated to customers.
The Company has formed various subsidiaries (“Funds”) to finance the development of Projects. These Funds, structured as limited liability companies, obtain financing from outside investors and purchase or lease Projects from Sunrun under master purchase or master lease agreements. The Company currently utilizes three legal structures in its investment Funds, which are referred to as: (i) lease pass-throughs, (ii) partnership-flips and (iii) joint venture (“JV”) inverted leases.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. As such, these unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s annual report on Form 10-K for the year ended December 31, 2016. The unaudited consolidated financial statements are prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments (all of which are considered of normal recurring nature) considered necessary to present fairly the Company’s financial results. The results of the three months ended March 30, 2017 are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2017 or other future periods.
The consolidated financial statements reflect the accounts and operations of the Company and those of its subsidiaries, including Funds, in which the Company has a controlling financial interest. The typical condition for a controlling financial interest ownership is holding a majority of the voting interests of an entity. However, a controlling financial interest may also exist in entities, such as variable interest entities (“VIEs”), through arrangements that do not involve controlling voting interests. In accordance with the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 810 (“ASC 810”) Consolidation, the Company consolidates any VIE of which it is the primary beneficiary. The primary beneficiary, as defined in ASC 810, is the party that has (1) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and (2) the obligation to absorb the losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. The Company evaluates its relationships with its VIEs on an ongoing basis to determine whether it continues to be the primary beneficiary. The consolidated financial statements reflect the assets and liabilities of VIEs that are consolidated. All intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates
The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The Company regularly makes significant estimates and assumptions, including, but not limited to, the estimates that affect the collectability of accounts receivable, the valuation of inventories, the useful lives of solar energy systems, the useful lives of property and equipment, the valuation and useful lives of intangible assets, the fair value of assets acquired and liabilities assumed in business combinations, the effective interest rate used to amortize lease pass-through financing
7
obligations, the fair value used to value solar energy systems, the valuation of stock-based compensation, the determination of valuation allowances associated with deferred tax assets, the fair value of debt instruments disclosed and the redemption value of redeemable noncontrolling interests. The Company bases its estimates on historical experience and on various other assumptions believed to be reasonable. Actual results may differ from such estimates.
Segment Information
The Company has one operating segment with one business activity, providing solar energy services and products to customers. The Company’s chief operating decision maker (“CODM”) is its Chief Executive Officer, who manages operations on a consolidated basis for purposes of allocating resources. When evaluating performance and allocating resources, the CODM reviews financial information presented on a consolidated basis.
Revenues from external customers (including, but not limited to homeowners) for each group of similar products and services are as follows (in thousands):
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Three Months Ended March 31, |
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2017 |
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2016 |
|
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Operating leases |
|
$ |
35,062 |
|
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$ |
25,327 |
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Incentives |
|
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13,036 |
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|
|
9,213 |
|
Operating leases and incentives |
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|
48,098 |
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34,540 |
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Solar energy systems |
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20,619 |
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|
30,192 |
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Products |
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35,400 |
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|
34,011 |
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Solar energy systems and product sales |
|
|
56,019 |
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|
|
64,203 |
|
Total revenue |
|
$ |
104,117 |
|
|
$ |
98,743 |
|
Fair Value of Financial Instruments
The Company defines fair value as the exchange price that would be received for an asset or an exit price that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company uses valuation approaches to measure fair value that maximize the use of observable inputs and minimize the use of unobservable inputs. The FASB establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows:
|
• |
Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date; |
|
• |
Level 2—Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and |
|
• |
Level 3—Inputs that are unobservable, significant to the measurement of the fair value of the assets or liabilities and are supported by little or no market data. |
The Company’s financial instruments include cash, receivables, accounts payable, accrued expenses, distributions payable to noncontrolling interests, derivatives, and recourse and non-recourse debt.
Recently Issued Accounting Standards
In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09 Revenue from Contracts with Customers (Topic 606), to replace the existing revenue recognition criteria for contracts with customers and to establish the disclosure requirements for revenue from contracts with customers. The core principle of this standard is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. The FASB has issued several updates to the standard which (i) clarify the application of the principal versus agent guidance; (ii) clarify the guidance relating to performance obligations and licensing; and (iii) clarify assessment of the collectability criterion, presentation of sales taxes, measurement date for non-cash consideration and completed contracts at transition. This ASU is effective for the Company for annual reporting
8
periods beginning after December 15, 2017 including the interim reporting periods within that fiscal year. Adoption of this ASU is either retrospective to each prior period presented or retrospective with a cumulative adjustment to retained earnings or accumulated deficit as of the adoption date. The Company is evaluating whether certain of its Customer Agreements will no longer meet the definition of a lease under ASU 842, Leases, and whether such arrangements would then need to be accounted for under ASC 606. The Company is continuing to assess the impact of such a change, as well as other potential impacts of the standard on its various revenue streams, including Customer Agreements. The Company has a project plan in place to meet the requirements of this standard using internal resources by the effective date. The Company has completed its initial assessment and is currently performing contract reviews and developing a preliminary accounting policy.
In February 2016, the FASB issued ASU No. 2016-02 to replace existing lease guidance with ASC 842, Leases. Entities are required to determine whether a contract is a lease or contains a lease at the inception of the contract. Under the new guidance, lessees will be required to recognize for all leases (with the exception of short-term leases) a lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The accounting for lessors is largely unchanged. This ASU is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted. Adoption of this ASU is applied using a modified retrospective approach. The Company currently accounts for Customer Agreements pursuant to ASC 840, Leases. The Company is evaluating whether the Customer Agreements will continue to meet the definition of a lease pursuant to ASC 842, Leases, or whether such agreements will be accounted for in accordance with ASC 606, Revenue from Contracts with Customers. The Company is continuing to assess all potential impacts of this standard, including the timing of adoption and the potential application of the standard’s practical expedients.
In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation. The new guidance requires all income tax effects of awards to be recognized in the income statement when the awards vest or are settled. It also requires the Company to make an accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures as they occur. The Company adopted the new ASU effective January 1, 2017. The Company elected to continue to estimate the number of awards that are expected to vest. Upon the adoption, deferred tax liabilities decreased by $3.3 million, and retained earnings increased by $3.3 million as of January 1, 2017.
In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, which replaces the current incurred loss impairment methodology with a current expected credit losses model. The amendment applies to entities which hold financial assets and net investment in leases that are not accounted for at fair value through net income as well as loans, debt securities, trade receivables, net investments in leases, off-balance sheet credit exposures, reinsurance receivables and any other financial assets not excluded from the scope that have the contractual right to receive cash. This ASU is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. Early adoption is permitted. Adoption of this ASU is applied using a modified retrospective approach, with certain aspects requiring a prospective approach. The Company is currently evaluating this guidance and the impact it may have on the Company’s consolidated financial statements.
In October 2016, the FASB issued ASU 2016-16, Intra-Entity Transfers of Assets Other Than Inventory, which requires entities to recognize income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. As a result, a reporting entity will recognize the tax expense from the sale of assets in the seller’s tax jurisdiction when the transfer occurs, even though the pre-tax effects of the transaction are eliminated in the consolidated financial statements. Any deferred tax asset that arises in the buyer’s jurisdiction will also be recognized at the time of the transfer. The Company adopted the standard effective January 1, 2017. As the Company sells solar energy systems to Funds, the Company will record the current tax effects of the gain on such sales as well as a deferred tax asset related to the Company’s increased tax basis in the partnership as a result of such sales. As a result of the adoption, the Company reversed net prepaid tax assets of $378.5 million, recognized gross deferred tax assets of $378.2 million and recorded a cumulative adjustment decreasing retained earnings by $0.3 million as of January 1, 2017.
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230), Restricted Cash, which require a statement of cash flows to present the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash and restricted cash equivalents. This ASU is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. Early adoption is permitted. Adoption of this ASU is applied using a retrospective approach. As a result, the Company will no longer present transfers between cash and restricted cash in the consolidated cash flow statements upon adoption in the first quarter of 2018.
9
In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment, which eliminates Step 2 from the goodwill impairment test. Instead, under this amendment, an entity shall perform its annual, or interim, goodwill impairment test by comparing the fair value of the reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The ASU is effective for annual or any interim goodwill impairment tests beginning in fiscal years after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The adoption of this standard would only have an effect on the Company’s consolidated financial statements if it failed Step 1 of the goodwill impairment test, which has not occurred to date.
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805), Clarifying the Definition of a Business, to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions of assets or businesses. The amendments in this update provide a screen to determine when a set of operations is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This screen reduces the number of transactions that need to be further evaluated. The Company early adopted the new ASU effective January 1, 2017 on a prospective basis.
Note 3. Fair Value Measurement
At March 31, 2017 and December 31, 2016, the carrying value of receivables, accounts payable, accrued expenses and distributions payable to noncontrolling interests approximates fair value due to their short-term nature. The carrying values and fair values of debt instruments are as follows (in thousands):
|
|
March 31, 2017 |
|
|
December 31, 2016 |
|
||||||||||
|
|
Carrying Value |
|
|
Fair Value |
|
|
Carrying Value |
|
|
Fair Value |
|
||||
Lines of credit |
|
$ |
526,300 |
|
|
$ |
526,300 |
|
|
$ |
489,200 |
|
|
$ |
489,200 |
|
Syndicated term loans |
|
|
189,163 |
|
|
|
189,165 |
|
|
|
189,989 |
|
|
|
189,989 |
|
Bank term loans |
|
|
96,258 |
|
|
|
95,450 |
|
|
|
81,307 |
|
|
|
80,542 |
|
Note payable |
|
|
37,363 |
|
|
|
36,404 |
|
|
|
36,232 |
|
|
|
35,396 |
|
Solar asset-backed notes |
|
|
100,191 |
|
|
|
104,599 |
|
|
|
101,295 |
|
|
|
102,869 |
|
Total |
|
$ |
949,275 |
|
|
$ |
951,918 |
|
|
$ |
898,023 |
|
|
$ |
897,996 |
|
At March 31, 2017 and December 31, 2016, the fair value of the Company’s lines of credit, syndicated term loans and certain bank term loans approximate their carrying values because their interest rates are variable rates that approximate rates currently available to the Company. At March 31, 2017 and December 31, 2016, the fair value of the Company’s other debt instruments are based on rates currently offered for debt with similar maturities and terms. The Company’s fair value of the debt instruments fell under the Level 3 hierarchy. These valuation approaches involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market.
The Company determines the fair value of its interest rate swaps using a discounted cash flow model which incorporates an assessment of the risk of non-performance by the interest rate swap counterparty and an evaluation of the Company’s credit risk in valuing derivative instruments. The valuation model uses various inputs including contractual terms, interest rate curves, credit spreads and measures of volatility.
The Company determines the fair value of its warrants issued using the Black-Scholes option-pricing model. The significant unobservable input used in the fair value measurement of the warrant liability was the expected volatility of the Company. Generally, increases (decreases) in the expected volatility of the Company would result in a directionally similar impact to the measurement of the Company’s warrants.
10
At March 31, 2017 and December 31, 2016, financial instruments measured at fair value on a recurring basis, based upon the fair value hierarchy are as follows (in thousands):
|
|
March 31, 2017 |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Derivative assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
|
$ |
— |
|
|
$ |
804 |
|
|
$ |
— |
|
|
$ |
804 |
|
Total |
|
$ |
— |
|
|
$ |
804 |
|
|
$ |
— |
|
|
$ |
804 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
27 |
|
|
$ |
27 |
|
Total |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
27 |
|
|
$ |
27 |
|
|
|
December 31, 2016 |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Derivative assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
|
$ |
— |
|
|
$ |
1,632 |
|
|
$ |
— |
|
|
$ |
1,632 |
|
Total |
|
$ |
— |
|
|
$ |
1,632 |
|
|
$ |
— |
|
|
$ |
1,632 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
20 |
|
|
$ |
20 |
|
Total |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
20 |
|
|
$ |
20 |
|
Note 4. Inventories
Inventories consist of the following (in thousands):
|
|
March 31, 2017 |
|
|
December 31, 2016 |
|
||
Raw materials |
|
$ |
56,290 |
|
|
$ |
62,037 |
|
Work-in-process |
|
|
3,313 |
|
|
|
5,289 |
|
Total |
|
$ |
59,603 |
|
|
$ |
67,326 |
|
Note 5. Solar Energy Systems, net
Solar energy systems, net consists of the following (in thousands):
|
|
March 31, 2017 |
|
|
December 31, 2016 |
|
||
Solar energy system equipment costs |
|
$ |
2,637,668 |
|
|
$ |
2,459,856 |
|
Inverters |
|
|
275,267 |
|
|
|
260,011 |
|
Initial direct costs |
|
|
125,980 |
|
|
|
117,587 |
|
Total solar energy systems |
|
|
3,038,915 |
|
|
|
2,837,454 |
|
Less: accumulated depreciation and amortization |
|
|
(330,427 |
) |
|
|
(303,305 |
) |
Add: construction-in-progress |
|
|
81,936 |
|
|
|
95,217 |
|
Total solar energy systems, net |
|
$ |
2,790,424 |
|
|
$ |
2,629,366 |
|
All solar energy systems, construction-in-progress and inverters have been leased to or are subject to signed Customer Agreements with customers. The Company recorded depreciation expense related to solar energy systems of $27.6 million and $20.4 million for the three months ended March 31, 2017 and 2016, respectively. The depreciation expense was reduced by the amortization of deferred grants of $2.0 million and $4.0 million for the three months ended March 31, 2017 and 2016, respectively.
11
As of March 31, 2017, debt consisted of the following (in thousands, except percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unused |
|
|
Annual |
|
|
|
|
|
|
|
|
|
Carrying Values, net of |
|
|
Borrowing |
|
|
Contractual |
|
Interest |
|
|
Maturity |
|||||||||||
|
|
debt discount |
|
|
Capacity |
|
|
Interest Rate |
|
Rate |
|
|
Date |
|||||||||||
|
|
Current |
|
|
Long Term |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Recourse debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank line of credit |
|
$ |
— |
|
|
$ |
247,400 |
|
|
$ |
247,400 |
|
|
$ |
6 |
|
|
Varies (1) |
|
4.19% - 6.25% |
|
|
April 2018 |
|
Total recourse debt |
|
$ |
— |
|
|
$ |
247,400 |
|
|
$ |
247,400 |
|
|
$ |
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-recourse debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Line of credit (Aggregation Facility) |
|
|
— |
|
|
|
278,900 |
|
|
|
278,900 |
|
|
|
5,200 |
|
|
Varies (2) |
|
3.35% - 3.54% |
|
|
December 2020 |
|
Term Loan A |
|
|
575 |
|
|
|
145,854 |
|
|
|
146,429 |
|
|
|
5,000 |
|
|
LIBOR + 2.75% |
|
|
3.79 |
% |
|
December 2021 |
Bank term loans due in September 2022 |
|
|
1,504 |
|
|
|
33,015 |
|
|
|
34,519 |
|
|
|
— |
|
|
LIBOR + 2.25% |
|
|
3.03 |
% |
|
September 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIBOR + 3.00% |
|
|
4.03 |
% |
|
September 2022 |
Bank term loan due in April 2022 |
|
|
1,372 |
|
|
|
25,886 |
|
|
|
27,258 |
|
|
|
— |
|
|
4.50% |
|
|
4.50 |
% |
|
April 2022 |
Solar asset-backed notes |
|
|
3,789 |
|
|
|
96,402 |
|
|
|
100,191 |
|
|
|
— |
|
|
4.40% - Class A |
|
|
4.40 |
% |
|
July 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.38% - Class B |
|
|
5.38 |
% |
|
July 2024 |
Term Loan and Term Loan B |
|
|
116 |
|
|
|
42,618 |
|
|
|
42,734 |
|
|
|
— |
|
|
LIBOR + 5.00% |
|
|
6.04 |
% |
|
December 2020 and 2021 |
Bank term loan due in July 2021 |
|
|
8,441 |
|
|
|
26,040 |
|
|
|
34,481 |
|
|
|
— |
|
|
Varies (3) |
|
6.55% - 10.05% |
|
|
July 2021 |
|
Note payable |
|
|
— |
|
|
|
37,363 |
|
|
|
37,363 |
|
|
|
— |
|
|
12.00% |
|
|
12.00 |
% |
|
December 2018 |
Total non-recourse debt |
|
|
15,797 |
|
|
|
686,078 |
|
|
|
701,875 |
|
|
|
10,200 |
|
|
|
|
|
|
|
|
|
Total debt |
|
$ |
15,797 |
|
|
$ |
933,478 |
|
|
$ |
949,275 |
|
|
$ |
10,206 |
|
|
|
|
|
|
|
|
|
As of December 31, 2016, debt consisted of the following (in thousands, except percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unused |
|
|
Annual |
|
|
|
|
|
|
|
|
|
Carrying Values, net of |
|
|
Borrowing |
|
|
Contractual |
|
Interest |
|
|
Maturity |
|||||||||||
|
|
debt discount |
|
|
Capacity |
|
|
Interest Rate |
|
Rate |
|
|
Date |
|||||||||||
|
|
Current |
|
|
Long Term |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Recourse debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank line of credit |
|
$ |
— |
|
|
$ |
244,000 |