InfraREIT Reports Second Quarter 2018 and Year-to-Date Results

DALLAS, Aug. 1, 2018 /PRNewswire/ -- InfraREIT, Inc. (NYSE: HIFR) ("InfraREIT" or the "Company") today reported financial results for the second quarter and first half of 2018 and provided the Company's financial outlook.

For the second quarter of 2018, InfraREIT reported the following highlights:

    --  Net income was $23.9 million
    --  Net income attributable to InfraREIT, Inc. common stockholders per share
        ("EPS") was $0.39 per share
    --  Non-GAAP earnings per share ("Non-GAAP EPS") was $0.29 per share
    --  Funds from operations ("FFO") was $35.9 million and FFO on an adjusted
        basis ("AFFO") was $29.1 million
    --  Quarterly dividend declared of $0.25 per share of common stock, $1.00
        per share annualized

Guidance:

    --  2018 EPS range of $1.36 to $1.46
    --  2018 Non-GAAP EPS range of $1.22 to $1.32
    --  Expect to maintain the Company's quarterly cash dividend of $0.25 per
        share, or $1.00 per share annualized through 2018
    --  Earnings and dividend guidance assumes the existing lease payments
        continue as scheduled and that InfraREIT maintains its real estate
        investment trust ("REIT") status throughout 2018
    --  Footprint capital expenditures range of $70 million to $160 million for
        the period of 2018 through 2020

"We remain focused on executing our business strategy," said David A. Campbell, Chief Executive Officer of InfraREIT. "We are committed to investing in infrastructure needed to support the ERCOT transmission grid and the vibrant Texas economy. At the same time, we continue to pursue possible De-REIT alternatives," added Campbell.

Second Quarter 2018 Results
Lease revenue, consisting of only base rent, increased 18 percent to $47.8 million for the three months ended June 30, 2018, compared to $40.4 million for the same period in 2017. The increase in lease revenue was driven by the change in the allocation of the total rent components between base and percentage rent and additional assets under lease. There was no percentage rent recognized during the second quarter of 2018 or 2017.

Net income was $23.9 million in the second quarter of 2018, compared to net income of $10.1 million in the second quarter of 2017. Net income attributable to InfraREIT, Inc. common stockholders was $0.39 per share during the second quarter of 2018 compared to $0.17 per share during the same period in 2017. The $13.8 million increase in net income was a result of a $7.4 million increase in lease revenue, $5.6 million benefit from the Texas franchise tax settlement, $1.0 million decrease in depreciation expense and $0.4 million increase in other income, net partially offset by a $1.0 million increase in interest expense, net. Additionally, the decrease in general and administrative expense contributed $0.3 million to net income. During the second quarter of 2018, the Company incurred a $1.2 million professional services fee associated with the settlement of its Texas franchise taxes and a $0.4 million net increase in expenses primarily due to InfraREIT's continued review of its De-REIT alternatives and decreased management fees. During the second quarter of 2017, InfraREIT incurred $1.9 million of professional services fees related to the asset exchange transaction completed during the fourth quarter of 2017 ("Asset Exchange Transaction").

Non-GAAP EPS was $0.29 per share for the second quarter of 2018 compared to $0.20 per share for the second quarter of 2017, representing an increase of 45 percent. The drivers of growth in Non-GAAP EPS were due to an increase in lease revenue of $7.4 million, an increase of $0.4 million in other income, net and a $1.0 million decrease in depreciation expense offset by a $2.4 million base rent adjustment reduction, an increase of $1.0 million in interest expense, net and a $0.4 million net increase in general and administrative expense. FFO was $35.9 million for the second quarter of 2018, compared to $23.1 million for the same period in 2017, representing an increase of $12.8 million. For the second quarter of 2018, AFFO was $29.1 million, compared to $25.4 million for the same period in 2017, representing an increase of 15 percent.

First Half of 2018 Results
Lease revenue, consisting of only base rent, increased 17 percent to $93.5 million for the six months ended June 30, 2018, compared to $80.0 million for the same period in 2017. The increase in lease revenue was driven by the change in the allocation of the total rent components between base and percentage rent and additional assets under lease. There was no percentage rent recognized during the first half of 2018 or 2017 as Sharyland Utilities, L.P.'s ("Sharyland") year-to-date adjusted gross revenue did not exceed the annual specified breakpoints under the Company's leases. The Company expects to begin recognizing percentage rent during the third quarter of 2018.

Net income was $41.7 million in the first half of 2018, compared to net income of $21.1 million for the same period in 2017. Net income attributable to InfraREIT, Inc. common stockholders was $0.69 per share for the six months ended June 30, 2018 compared to $0.35 per share during the same period in 2017. The $20.6 million increase in net income is a result of a $13.5 million increase in lease revenue, $5.6 million benefit from the Texas franchise tax settlement, $2.1 million decrease in depreciation expense and $1.1 million increase in other income, net partially offset by a $1.9 million increase in interest expense, net. Additionally, the decrease in general and administrative expense contributed $0.1 million to net income. During 2018, the Company incurred a $1.2 million professional services fee associated with the settlement of the Company's Texas franchise taxes and a $1.0 million net increase in expenses primarily due to InfraREIT's continued review of its De-REIT alternatives, evaluation of the impacts of the Tax Cuts and Jobs Act, Asset Exchange Transaction expenses and decreased management fees. During 2017, the Company incurred $0.4 million of regulatory expenses and $1.9 million of professional services fees related to the Asset Exchange Transaction.

Non-GAAP EPS was $0.58 per share for the first half of 2018 compared to $0.40 per share for the first half of 2017, representing an increase of 45 percent. The drivers of growth in Non-GAAP EPS were due to an increase in lease revenue of $13.5 million, an increase of $1.1 million in other income, net and a $2.1 million decrease in depreciation expense offset by a $3.4 million base rent adjustment reduction, an increase of $1.9 million in interest expense, net and a $0.6 million net increase in general and administrative expense. FFO was $65.3 million for the first half of 2018, compared to $46.8 million for the same period in 2017, representing an increase of $18.5 million. For the first six months of 2018, AFFO was $57.7 million, compared to $50.0 million for the same period in 2017, representing an increase of 15 percent.

Liquidity and Capital Resources
As of June 30, 2018, the Company had $2.1 million of unrestricted cash and cash equivalents and $225.5 million of unused capacity under its revolving credit facilities.

Outlook and Guidance
EPS is projected in the range of $1.36 to $1.46 for 2018, updated to reflect the impact of the Texas franchise tax settlement and related costs. Non-GAAP EPS is estimated in the range of $1.22 to $1.32 for 2018. The difference between Non-GAAP EPS and EPS is due to adjustments related to straight-line rent; expenses associated with the Asset Exchange Transaction; professional services fee related to the Texas franchise tax settlement; and the removal of the accrued taxes, penalties and interest related to the Texas franchise tax settlement. InfraREIT expects to maintain the Company's current quarterly cash dividend of $0.25 per share, or $1.00 per share annualized, through 2018. These forecasted amounts assume that InfraREIT maintains its REIT status throughout 2018 and that the existing lease payments are made by Sharyland as scheduled during 2018.

The Company estimates footprint capital expenditures in the following ranges over the next three years: $50 million to $80 million for 2018; $10 million to $30 million for 2019; and $10 million to $50 million for 2020. The footprint capital expenditures range for 2019 was updated to reflect the anticipated timing of the third synchronous condenser.

The Company's consolidated debt profile continues to target debt as a percentage of total capitalization at or below 60 percent and AFFO-to-debt of at least 12 percent.

The guidance provided above constitutes forward-looking statements, which are based on current economic conditions and estimates, and the Company does not include other potential impacts, such as changes in accounting or unusual items. Supplemental information relating to the Company's financial outlook is posted in the Investor Relations section of the Company's Web site at www.InfraREITInc.com.

Company Structure Review
As previously disclosed, InfraREIT's Board of Directors completed its initial review of the Company's REIT status and directed management to pursue an alternative structure that would involve, among other things, terminating InfraREIT's REIT status and opting for a traditional C-corporation structure (a "De-REIT alternative"). Any De-REIT alternative could involve one or more of the following: combining Sharyland with Sharyland Distribution & Transmission Services, L.L.C. ("SDTS"), terminating the leases between SDTS and Sharyland, terminating the Company's operating partnership, and/or other negotiations with Hunt Consolidated, Inc. ("Hunt"), including terminating or renegotiating the Company's management agreement and development agreement, and engaging in related negotiations. As further disclosed, in tandem with our evaluation of a De-REIT alternative, the Conflicts Committee continues to monitor Hunt's Schedule 13D filings regarding their intentions with respect to InfraREIT, including those described below. It is possible that any transaction that might be proposed as a result of the efforts described in Hunt's Schedule 13D filings regarding InfraREIT could serve as the De-REIT alternative that InfraREIT ultimately chooses.

There is no specific timeline set for completing the evaluation of a De-REIT alternative, and the Company expects to continue operating as a REIT until the execution of a De-REIT alternative, if any. Hunt has informed the Company that it agrees with the Board's direction.

Hunt Consolidated, Inc.'s Schedule 13D
In January 2018, Hunt filed an amendment to its Schedule 13D with the U.S. Securities and Exchange Commission ("SEC") stating its intent to focus on evaluating and developing a "going private" transaction with respect to InfraREIT. On May 24, 2018, Hunt further amended its Schedule 13D ("13D Amendment"). According to the 13D Amendment, Hunt did not believe that a "going private" transaction was likely to be viable, although Hunt may elect to consider and pursue such a transaction in the future.

As described in the 13D Amendment, during Hunt's discussions with various parties about participating in a "going private" transaction, certain parties expressed interest in a possible direct acquisition of InfraREIT as an alternative to a "going private" transaction. Hunt further disclosed that it was engaged in discussions with potential third-party acquirers regarding certain transactions and arrangements that would be implemented in connection with an acquisition of InfraREIT by a third party ("Third-Party Acquisition"). Hunt noted that these arrangements may include the possible termination of certain agreements between Hunt and its subsidiaries and affiliates, including Sharyland, and InfraREIT.

No assurances can be given that InfraREIT will agree to any transaction proposed as a result of the efforts described in Hunt's 13D Amendment or that any De-REIT alternatives will be executed. InfraREIT's Board of Directors and the Conflicts Committee intend to explore various De-REIT alternatives and will carefully consider any proposal that may be submitted to the Company in conjunction with the efforts described in Hunt's 13D Amendment. InfraREIT's Board of Directors and its Conflicts Committee are committed to advancing the interests of its stockholders.

InfraREIT does not plan to provide further updates on the status of any Third-Party Acquisition or other De-REIT alternative. If any agreement is reached, or if Hunt further updates its Schedule 13D, InfraREIT will provide additional information at that time.

Dividends and Distributions
On June 1, 2018, InfraREIT's Board of Directors declared cash distributions and dividends of $0.25 per unit and share, respectively, to unitholders and stockholders of record on June 29, 2018, which were paid on July 19, 2018.

Hunt Project Quarterly Updates
InfraREIT's quarterly "Hunt Project Updates" can be found on the Company's Web site (www.InfraREITInc.com) under the "Hunt Transmission-Our Developer" and "Investor Relations" sections and in the "Q2 2018 Results & Supplemental Information" presentation posted on the Company's Web site.

Conference Call and Webcast
As previously announced, management will host a teleconference call on August 1, 2018, at 10 a.m. U.S. Central Time (11 a.m. U.S. Eastern Time). David A. Campbell, Chief Executive Officer, and Brant Meleski, Chief Financial Officer, will discuss InfraREIT's results and financial outlook.

Investors and analysts are invited to participate in the call by phone at 1-855-560-2576, or internationally at 1-412-542-4162 (access code: 10118255) or via the Internet at www.InfraREITInc.com. A replay of the call will be available on the Company's Web site or by phone at 1-877-344-7529, or internationally at 1-412-317-0088 (access code: 10118255), for a seven-day period following the call.

Non-GAAP Measures
This press release contains certain financial measures that are not recognized under generally accepted principles in the United States of America ("GAAP"). In particular, InfraREIT uses Non-GAAP EPS, FFO and AFFO as important supplemental measures of the Company's operating performance. InfraREIT is no longer including cash available for distribution ("CAD"); earnings before interest, taxes, depreciation and amortization ("EBITDA"); and Adjusted EBITDA. The Company presents non-GAAP performance measures because management believes they help investors understand InfraREIT's business, performance and ability to earn and distribute cash to its stockholders by providing perspectives not immediately apparent from net income. Reporting on these measures in InfraREIT's public disclosures also ensures that this information is available to all of InfraREIT's investors. The non-GAAP measures presented in this press release are not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

InfraREIT offers these measures to assist users in assessing the Company's operating performance under GAAP, but these measures are non-GAAP measures and should not be considered measures of liquidity, alternatives to net income or indicators of any other performance measures determined in accordance with GAAP, nor are they indicative of funds available to fund the Company's cash needs, including capital expenditures, make payments on the Company's indebtedness or make distributions. In addition, InfraREIT's method of calculating these measures may be different from methods used by other companies and, accordingly, may not be comparable to similar measures as calculated by other companies. Investors should not rely on these measures as a substitute for any GAAP measure, including net income, cash flows from operating activities or revenues. Reconciliations of these measures to their most directly comparable GAAP measures are included in the Schedules to this press release.

About InfraREIT, Inc.
InfraREIT is engaged in owning and leasing rate-regulated electric transmission assets in the state of Texas and is structured as a real estate investment trust. The Company is externally managed by Hunt Utility Services, LLC, an affiliate of Hunt Consolidated, Inc. (a diversified holding company based in Dallas, Texas, and managed by the Ray L. Hunt family). The Company's shares are traded on the New York Stock Exchange under the symbol "HIFR." Additional information on InfraREIT is available at www.InfraREITInc.com.

Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the federal securities laws. These statements give InfraREIT management's current expectations and include projections of results of operations or financial condition or forecasts of future events. Words such as "could," "will," "may," "assume," "forecast," "strategy," "guidance," "outlook," "target," "expect," "intend," "plan," "estimate," "anticipate," "believe" or "project" and similar expressions are used to identify forward-looking statements. Without limiting the generality of the foregoing, forward-looking statements contained in this press release include InfraREIT's expectations regarding anticipated financial and operational performance, including projected or forecasted financial results, distributions to stockholders, capital expenditures, AFFO-to-debt ratios, capitalization matters and other forecasted metrics and statements regarding a potential De-REIT alternative. The assumptions and estimates underlying the forward-looking statements included in this press release are inherently uncertain and, though considered reasonable by InfraREIT's management team as of the date of its preparation, are subject to a wide variety of significant business, economic and competitive risks and uncertainties that could cause actual results to differ materially from those contained in this press release. Risks and uncertainties that could cause actual results to differ materially from those indicated in the forward-looking statements include, among others, the following: (a) decisions by regulators or changes in governmental policies or regulations with respect to the Company's organizational structure, lease arrangements, capitalization, acquisitions and dispositions of assets, recovery of investments, the Company's authorized rate of return and other regulatory parameters; (b) the impact of any De-REIT alternative; (c) the implications of the Company's relationships with HCI and its affiliates on any transaction or arrangement that may be proposed with respect to InfraREIT's business or structure; (d) the Company's current reliance on its tenant for all of its revenues and, as a result, its dependency on the tenant's solvency and financial and operating performance; (e) the amount of available investment to grow the Company's rate base; (f) the Company's ability to negotiate future rent payments or to renew leases with its tenant; (g) insufficient cash available to meet distribution requirements; and (h) the effects of existing and future tax and other laws and governmental regulations. These and other applicable uncertainties, factors and risks are described more fully in the Company's filings with the SEC. For the above reasons, there can be no assurance that any forward-looking statements included herein will prove to be indicative of the Company's future performance or that actual results will not differ materially from those presented. In no event should the inclusion of forecasted financial information in this press release be regarded as a representation by any person that the results contained in the forecasted financial information will be achieved.

Any forward-looking statement made by the Company in this press release is based only on information currently available to InfraREIT and speaks only as of the date on which it is made. InfraREIT undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, other than as required by applicable law.


                                                                                             InfraREIT, Inc.

                                                                                    CONSOLIDATED STATEMENTS OF INCOME

                                                                                (In thousands, except per share amounts)

                                                                                               (Unaudited)


                                           Three Months Ended June 30,                Six Months Ended June 30,
                                         ---------------------------             -------------------------

                                            2018                           2017                                          2018        2017
                                            ----                           ----                                          ----        ----

    Revenue

    Base rent                                                      $47,827                                   $40,422             $93,483      $80,046

    Percentage rent                                                      -                                        -                  -           -
                                                                       ---                                      ---                ---         ---

    Total lease revenue                                             47,827                                    40,422              93,483       80,046

    Operating costs and expenses

    General and administrative expense                               6,631                                     6,866              12,719       12,847

    Depreciation                                                    11,992                                    12,982              23,569       25,669

    Total operating costs and expenses                              18,623                                    19,848              36,288       38,516
                                                                    ------                                    ------              ------       ------

    Income from operations                                          29,204                                    20,574              57,195       41,530
                                                                    ------                                    ------              ------       ------

    Other (expense) income

    Interest expense, net                                         (11,070)                                 (10,141)           (21,744)    (19,839)

    Other income, net                                                  374                                        17               1,107           20
                                                                       ---                                       ---               -----          ---

    Total other expense                                           (10,696)                                 (10,124)           (20,637)    (19,819)
                                                                   -------                                   -------             -------      -------

    Income before income taxes                                      18,508                                    10,450              36,558       21,711

    Income tax (benefit) expense                                   (5,428)                                      321             (5,142)         565
                                                                    ------                                       ---              ------          ---

    Net income                                                      23,936                                    10,129              41,700       21,146

    Less: Net income attributable to
     noncontrolling interest                                         6,602                                     2,821              11,502        5,889
                                                                     -----                                     -----              ------        -----

    Net income attributable to
     InfraREIT, Inc.                                               $17,334                                    $7,308             $30,198      $15,257
                                                                   =======                                    ======             =======      =======

    Net income attributable to
     InfraREIT, Inc. common stockholders
     per share:

    Basic                                                            $0.39                                     $0.17               $0.69        $0.35
                                                                     =====                                     =====               =====        =====

    Diluted                                                          $0.39                                     $0.17               $0.69        $0.35
                                                                     =====                                     =====               =====        =====

    Cash dividends declared per common
     share                                                           $0.25                                     $0.25               $0.50        $0.50
                                                                     =====                                     =====               =====        =====

    Weighted average common shares
     outstanding (basic shares)                                     43,961                                    43,778              43,897       43,776

    Redemption of operating partnership
     units                                                               -                                        -                  -           -
                                                                       ---                                      ---                ---         ---

    Weighted average dilutive shares
     outstanding (diluted shares)                                   43,961                                    43,778              43,897       43,776
                                                                    ======                                    ======              ======       ======

    Due to the anti-dilutive effect,
     the computation of diluted earnings
     per share does not reflect the
     following adjustments:

    Net income attributable to
     noncontrolling interest                                        $6,602                                    $2,821             $11,502       $5,889

    Redemption of operating partnership
     units                                                          16,743                                    16,897              16,807       16,899


                                                                  InfraREIT, Inc.

                                                            CONSOLIDATED BALANCE SHEETS

                                                        (In thousands, except share amounts)


                                          June 30, 2018                                      December 31, 2017
                                          -------------                                      -----------------

                                           (Unaudited)

                           Assets

    Current Assets

    Cash and cash equivalents                                               $2,102                                 $2,867

    Restricted cash                                                          1,685                                  1,683

    Due from affiliates                                                     32,423                                 35,172

    Inventory                                                                7,302                                  6,759

    Prepaids and other current assets                                        1,039                                  2,460
                                                                             -----                                  -----

    Total current assets                                                    44,551                                 48,941

    Electric Plant, net                                                  1,788,991                              1,772,229

    Goodwill                                                               138,384                                138,384

    Other Assets                                                            32,188                                 34,314
                                                                            ------                                 ------

    Total Assets                                                        $2,004,114                             $1,993,868
                                                                        ==========                             ==========

                   Liabilities and Equity

    Current Liabilities

    Accounts payable and accrued
     liabilities                                                           $22,955                                $21,230

    Short-term borrowings                                                   99,500                                 41,000

    Current portion of long-term debt                                        7,957                                 68,305

    Dividends and distributions payable                                     15,176                                 15,169

    Accrued taxes                                                              491                                  5,633
                                                                               ---                                  -----

    Total current liabilities                                              146,079                                151,337

    Long-Term Debt, Less Deferred
     Financing Costs                                                       837,486                                841,215

    Regulatory Liabilities                                                 108,023                                100,458
                                                                           -------                                -------

    Total liabilities                                                    1,091,588                              1,093,010

    Commitments and Contingencies

    Equity

    Common stock, $0.01 par value;
     450,000,000 shares authorized;
     43,962,167 and 43,796,915 issued and
     outstanding as of June 30, 2018 and
     December 31, 2017, respectively                                           440                                    438

    Additional paid-in capital                                             709,488                                706,357

    Accumulated deficit                                                   (41,510)                              (49,728)

    Total InfraREIT, Inc. equity                                           668,418                                657,067

    Noncontrolling interest                                                244,108                                243,791
                                                                           -------                                -------

    Total equity                                                           912,526                                900,858
                                                                           -------                                -------

    Total Liabilities and Equity                                        $2,004,114                             $1,993,868
                                                                        ==========                             ==========


                                                            InfraREIT, Inc.

                                                 CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                             (In thousands)

                                                              (Unaudited)


                                                   Six Months Ended June 30,
                                                 -------------------------

                                                   2018                                2017
                                                   ----                                ----

    Cash flows from operating activities

    Net income                                                            $41,700              $21,146

    Adjustments to reconcile net income to net
     cash provided by operating activities:

    Depreciation                                                           23,569               25,669

    Amortization of deferred financing costs                                2,142                2,030

    Allowance for funds used during construction
     -other funds                                                         (1,094)                   -

    Equity based compensation                                                 320                  285

    Changes in assets and liabilities:

    Due from affiliates                                                     2,749                5,227

    Inventory                                                               (543)                 104

    Prepaids and other current assets                                       (211)               (296)

    Accounts payable and accrued liabilities                              (3,390)               1,986
                                                                           ------                -----

    Net cash provided by operating activities                              65,242               56,151

    Cash flows from investing activities

    Additions to electric plant                                          (31,699)            (91,601)

    Proceeds from asset exchange transaction                                1,632                    -
                                                                            -----                  ---

    Net cash used in investing activities                                (30,067)            (91,601)

    Cash flows from financing activities

    Proceeds from short-term borrowings                                    92,500               65,500

    Repayments of short-term borrowings                                  (34,000)           (203,000)

    Proceeds from borrowings of long-term debt                                  -             200,000

    Repayments of long-term debt                                         (64,093)             (3,869)

    Deferred financing costs                                                    -               (801)

    Dividends and distributions paid                                     (30,345)            (30,330)
                                                                          -------              -------

    Net cash (used in) provided by financing
     activities                                                          (35,938)              27,500

    Net decrease in cash, cash equivalents and
     restricted cash                                                        (763)             (7,950)

    Cash, cash equivalents and restricted cash
     at beginning of period                                                 4,550               19,294
                                                                            -----               ------

    Cash, cash equivalents and restricted cash
     at end of period                                                      $3,787              $11,344
                                                                           ======              =======

Schedule 1
InfraREIT, Inc.
Explanation and Reconciliation of Non-GAAP EPS

Non-GAAP EPS
InfraREIT defines non-GAAP net income as net income (loss) adjusted in a manner the Company believes is appropriate to show its core operational performance, which includes (a) an adjustment for the difference between the amount of base rent payments that the Company receives with respect to the applicable period and the amount of straight-line base rent recognized under GAAP; (b) adding back the transaction costs related to the Asset Exchange Transaction; (c) adding back the professional services fee related to the franchise tax settlement with the state of Texas; and (d) removing the effect of the Texas franchise tax settlement. The Company defines Non-GAAP EPS as non-GAAP net income (loss) divided by the weighted average shares outstanding calculated in the manner described in the footnotes below.

The following tables set forth a reconciliation of net income attributable to InfraREIT, Inc. per diluted share to Non-GAAP EPS:


                                Three Months Ended June 30, 2018                   Three Months Ended June 30, 2017
                                --------------------------------                   --------------------------------

    (In thousands, except per
     share amounts, unaudited)   Amount                          Per Share (5)                  Amount              Per Share (7)
    --------------------------   ------                          ------------                   ------              ------------

    Net income attributable to
     InfraREIT, Inc.                          $17,334                                  $0.39                                 $7,308  $0.17

    Net income attributable to
     noncontrolling interest                    6,602                                   0.39                                  2,821   0.17
                                                -----                                                                        -----

    Net income                                 23,936                                   0.39                                 10,129   0.17

    Base rent adjustment (1)                  (2,021)                                (0.03)                                   342      -

    Transaction costs (2)                           -                                     -                                 1,937   0.03

    Texas franchise tax
     professional services fee
     (3)                                       1,196                                   0.02                                      -     -

    Texas franchise tax
     settlement (4)                           (5,633)                                (0.09)                                     -     -

    Non-GAAP net income                       $17,478                                  $0.29                                $12,408  $0.20
                                              =======                                  =====                                =======  =====


                               Six Months Ended June 30, 2018                  Six Months Ended June 30, 2017
                               ------------------------------                  ------------------------------

    (In thousands, except per
     share amounts, unaudited)   Amount                          Per Share (6)                  Amount              Per Share (7)
    --------------------------   ------                          ------------                   ------              ------------

    Net income attributable to
     InfraREIT, Inc.                          $30,198                                  $0.69                                $15,257  $0.35

    Net income attributable to
     noncontrolling interest                   11,502                                   0.69                                  5,889   0.35
                                               ------                                                                        -----

    Net income                                 41,700                                   0.69                                 21,146   0.35

    Base rent adjustment (1)                  (2,141)                                (0.04)                                 1,299   0.02

    Transaction costs (2)                         151                                      -                                 1,937   0.03

    Texas franchise tax
     professional services fee
     (3)                                       1,196                                   0.02                                      -     -

    Texas franchise tax
     settlement (4)                           (5,633)                                (0.09)                                     -     -

    Non-GAAP net income                       $35,273                                  $0.58                                $24,382  $0.40
                                              =======                                  =====                                =======  =====


    (1)              This adjustment relates to the
                     difference between the timing of
                     cash base rent payments made under
                     the Company's leases and when the
                     Company recognizes base rent
                     revenue under GAAP.  The Company
                     recognizes base rent on a
                     straight-line basis over the
                     applicable term of the lease
                     commencing when the related assets
                     are placed in service, which is
                     frequently different than the
                     period in which the cash base rent
                     becomes due.

    (2)              This adjustment reflects the
                     transaction costs related to the
                     Asset Exchange Transaction.  These
                     costs are exclusive of the
                     Company's routine business
                     operations or typical rate case
                     costs and have been excluded to
                     present additional insights on
                     InfraREIT's core operations.

    (3)              This adjustment reflects the
                     professional services fee paid by
                     the Company related to the Texas
                     franchise tax settlement.  These
                     costs are exclusive of the
                     Company's routine business
                     operations and have been excluded
                     to present additional insights on
                     InfraREIT's core operations.

    (4)              This adjustment relates to the
                     potential taxes and associated
                     accrued interest and penalties
                     that were removed from the
                     Company's Consolidated Balance
                     Sheets and recognized as an income
                     tax benefit on the Consolidated
                     Statements of Operations as a
                     result of the franchise tax
                     settlement with the state of
                     Texas.  This adjustment is not
                     typical of the Company's business
                     operations and has been excluded
                     to provide additional insights
                     into InfraREIT's core operations.

    (5)              The weighted average common shares
                     outstanding of 44.0 million was
                     used to calculate net income
                     attributable to InfraREIT, Inc.
                     per diluted share.  The weighted
                     average redeemable partnership
                     units outstanding of 16.7 million
                     was used to calculate net income
                     attributable to noncontrolling
                     interest per share.  The
                     combination of the weighted
                     average common shares and
                     redeemable partnership units
                     outstanding of 60.7 million was
                     used for the remainder of the per
                     share calculations.

    (6)              The weighted average common shares
                     outstanding of 43.9 million was
                     used to calculate net income
                     attributable to InfraREIT, Inc.
                     per diluted share.  The weighted
                     average redeemable partnership
                     units outstanding of 16.8 million
                     was used to calculate net income
                     attributable to noncontrolling
                     interest per share.  The
                     combination of the weighted
                     average common shares and
                     redeemable partnership units
                     outstanding of 60.7 million was
                     used for the remainder of the per
                     share calculations.

    (7)              The weighted average common shares
                     outstanding of 43.8 million was
                     used to calculate net income
                     attributable to InfraREIT, Inc.
                     per diluted share.  The weighted
                     average redeemable partnership
                     units outstanding of 16.9 million
                     was used to calculate net income
                     attributable to noncontrolling
                     interest per share.  The
                     combination of the weighted
                     average common shares and
                     redeemable partnership units
                     outstanding of 60.7 million was
                     used for the remainder of the per
                     share calculations.

Schedule 2
InfraREIT, Inc.
Explanation and Reconciliation of FFO and AFFO

FFO and AFFO
The National Association of Real Estate Investment Trusts ("NAREIT") defines FFO as net income (computed in accordance with GAAP), excluding gains and losses from sales of property (net) and impairments of depreciated real estate, plus real estate depreciation and amortization (excluding amortization of deferred financing costs) and after adjustments for unconsolidated partnerships and joint ventures. Applying the NAREIT definition to the Company's consolidated financial statements, which is the basis for the FFO presented in this press release and the reconciliations below, results in FFO representing net income (loss) before depreciation, impairment of assets and gain (loss) on sale of assets. FFO does not represent cash generated from operations as defined by GAAP and it is not indicative of cash available to fund all cash needs, including distributions.

AFFO is defined as FFO adjusted in a manner the Company believes is appropriate to show its core operational performance, including: (a) an adjustment for the difference between the amount of base rent payments that the Company receives with respect to the applicable period and the amount of straight-line base rent recognized under GAAP; (b) adding back the transaction costs related to the Asset Exchange Transaction; (c) adjusting for other income (expense), net; (d) adding back the professional services fee related to the franchise tax settlement with the state of Texas; and (e) removing the effect of the Texas franchise tax settlement.

The following table sets forth a reconciliation of net income to FFO and AFFO:


                      Three Months Ended June 30,        Six Months Ended June 30,
                      ---------------------------        -------------------------

    (In thousands,
     unaudited)          2018                     2017                 2018               2017
    --------------       ----                     ----                 ----               ----

    Net income                   $23,936               $10,129                        $41,700   $21,146

    Depreciation                  11,992                12,982                         23,569    25,669
                                  ------                ------                         ------    ------

    FFO                           35,928                23,111                         65,269    46,815

    Base rent
     adjustment (1)              (2,021)                  342                        (2,141)    1,299

    Other income, net
     (2)                          (374)                 (17)                       (1,107)     (20)

    Transaction costs
     (3)                              -                1,937                            151     1,937

    Texas franchise
     tax professional
     services fee (4)              1,196                     -                         1,196         -

    Texas franchise
     tax settlement
     (5)                        (5,633)                    -                       (5,633)        -

    AFFO                         $29,096               $25,373                        $57,735   $50,031
                                 =======               =======                        =======   =======


    (1)              See footnote (1) on Schedule 1 on
                     Explanation and Reconciliation of
                     Non-GAAP EPS

    (2)              Includes allowance for funds used
                     during construction ("AFUDC") on
                     other funds of $0.4 million and
                     $1.1 million for the three and six
                     months ended June 30, 2018.  There
                     was no AFUDC on other funds
                     recorded during the three and six
                     months ended June 30, 2017.

    (3)              See footnote (2) on Schedule 1 on
                     Explanation and Reconciliation of
                     Non-GAAP EPS

    (4)              See footnote (3) on Schedule 1 on
                     Explanation and Reconciliation of
                     Non-GAAP EPS

    (5)              See footnote (4) on Schedule 1 on
                     Explanation and Reconciliation of
                     Non-GAAP EPS

Schedule 3
InfraREIT, Inc.
Explanation and Reconciliation of Forecasted Guidance for 2018

Forecasted GAAP Net Income Attributable to InfraREIT, Inc. Per Share to Non-GAAP EPS
The Company provides yearly guidance for Non-GAAP EPS, which is one of the supplemental financial measures it uses in evaluating the Company's operating performance. The Company believes that Non-GAAP EPS helps the Company and investors better understand the Company's business and performance by providing perspectives not immediately apparent from net income.

The following table sets forth a reconciliation of the forecasted GAAP net income attributable to InfraREIT, Inc. per share to Non-GAAP EPS for the year ending December 31, 2018:


                                         Full Year 2018
                                         --------------

    (Per share amounts, unaudited)   Low                High
    -----------------------------    ---                ----

    Net income attributable to
     InfraREIT, Inc.                           $1.36           $1.46

    Net income attributable to
     noncontrolling interest                    1.36            1.46

    Net income                                  1.36            1.46

    Base rent adjustment                      (0.08)         (0.08)

    Transaction costs                           0.01            0.01

    Texas franchise tax professional
     services fee                               0.02            0.02

    Texas franchise tax settlement            (0.09)         (0.09)
                                               -----           -----

    Non-GAAP EPS                               $1.22           $1.32
                                               =====           =====


    For additional information, contact:


    For Investors:                Brook Wootton

                                  Vice President, Investor Relations

                                  InfraREIT, Inc.

                                  214-855-6748


    For Media:                    Jeanne Phillips

                                   Senior Vice President, Corporate
                                   Engagement & International
                                   Relations

                                  Hunt Consolidated, Inc.

                                  214-978-8534

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SOURCE InfraREIT, Inc.