Table of Contents


 
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20182019
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________.
Commission File Number: 001-34811
Ameresco, Inc.
(Exact name of registrant as specified in its charter)
Delaware 04-3512838
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
Identification No.)
111 Speen Street, Suite 410
Framingham, Massachusetts
 01701
(Address of Principal Executive Offices) (Zip Code)
(508) 661-2200
(Registrant’s Telephone Number, Including Area Code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
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 þ No o
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 þ No o
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 definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer o
Accelerated Filer  þ
Non-accelerated filer  o
Smaller reporting company o
Emerging growth company o
 (Do not check if a smaller reporting company) 
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 pursuentpursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
ClassNew York Stock Exchange SymbolShares outstanding as of October 29, 2018November 1, 2019
Class A Common Stock, $0.0001 par value per share27,976,565AMRC29,033,114
Class B Common Stock, $0.0001 par value per share18,000,000
 
 

AMERESCO, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 20182019
TABLE OF CONTENTS
  Page
 
 
  
   
   
   
   
  
   
   
   
   
 
   
   
   
   
 
   
 



Table of Contents


PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
AMERESCO, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
September 30, December 31,September 30, December 31,
2018 20172019 2018
(Unaudited)  (Unaudited)  
ASSETSASSETS  ASSETS  
Current assets:      
Cash and cash equivalents(1)$64,539
 $24,262
$34,104
 $61,397
Restricted cash(1)13,461
 15,751
13,498
 16,880
Accounts receivable, net90,378
 85,121
Accounts receivable, net of allowance of $2,587 and $2,765, respectively (1)
91,755
 85,985
Accounts receivable retainage, net14,401
 17,484
16,652
 13,516
Costs and estimated earnings in excess of billings(1)66,471
 104,852
124,652
 86,842
Inventory, net8,128
 8,139
9,902
 7,765
Prepaid expenses and other current assets(1)13,123
 14,037
22,585
 11,571
Income tax receivable13,684
 6,053
1,629
 5,296
Project development costs16,776
 11,379
26,305
 21,717
Total current assets(1)300,961
 287,078
341,082
 310,969
Federal ESPC receivable272,953
 248,917
182,012
 293,998
Property and equipment, net(1)6,649
 5,303
10,469
 6,985
Energy assets, net(1)442,018
 356,443
507,759
 459,952
Goodwill58,853
 56,135
57,899
 58,332
Intangible assets, net2,315
 2,440
1,810
 2,004
Other assets30,706
 27,635
Total assets$1,114,455
 $983,951
Operating lease assets (1)
32,540
 
Other assets (1)
36,786
 29,394
Total assets (1)
$1,170,357
 $1,161,634
      
LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITYLIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY  LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY
Current liabilities:      
Current portions of long-term debt and capital lease liabilities$24,397
 $22,375
Accounts payable119,969
 135,881
Accrued expenses and other current liabilities28,067
 23,260
Current portions of long-term debt and financing lease liabilities (1)
$54,958
 $26,890
Accounts payable (1)
133,833
 134,330
Accrued expenses and other current liabilities (1)
28,700
 35,947
Current portions of operating lease liabilities (1)
5,935
 
Billings in excess of cost and estimated earnings32,516
 19,871
23,234
 24,363
Income taxes payable6,348
 755

 1,100
Total current liabilities211,297
 202,142
Long-term debt and capital lease liabilities, less current portions and net of deferred financing fees226,252
 173,237
Total current liabilities (1)
246,660
 222,630
Long-term debt and financing lease liabilities, less current portions and net of deferred financing fees (1)
223,766
 219,162
Federal ESPC liabilities262,484
 235,088
196,584
 288,047
Deferred income taxes, net3,453
 584
Deferred income taxes, net (1)
3,242
 4,352
Deferred grant income6,774
 7,188
6,223
 6,637
Other liabilities25,404
 18,754
Commitments and contingencies (Note 7)
 

Long-term portions of operating lease liabilities, net of current (1)
28,799
 
Other liabilities (1)
30,989
 29,212
Commitments and contingencies (Note 9)
 

      
Redeemable non-controlling interests14,585
 10,338
32,108
 14,719


1

Table(1) Includes restricted assets of Contents


consolidated variable interest entities (“VIEs”) at September 30, 2019 and December 31, 2018 of $136,213 and $126,727, respectively. Includes non-recourse liabilities of consolidated VIEs at September 30, 2019 and December 31, 2018 of $39,548 and $34,684, respectively. See Note 12.
The accompanying notes are an integral part of these condensed consolidated financial statements.
Table of Contents

AMERESCO, INC.
CONSOLIDATED BALANCE SHEETS — (Continued)
(in thousands, except share amounts)
 September 30, December 31,
 2018 2017
 (Unaudited)  
Stockholders’ equity:   
Preferred stock, $0.0001 par value, 5,000,000 shares authorized, no shares issued and outstanding at September 30, 2018 and December 31, 2017$
 $
Class A common stock, $0.0001 par value, 500,000,000 shares authorized, 30,057,605 shares issued and 27,972,108 shares outstanding at September 30, 2018, 29,406,315 shares issued and 27,533,049 shares outstanding at December 31, 20173
 3
Class B common stock, $0.0001 par value, 144,000,000 shares authorized, 18,000,000 shares issued and outstanding at September 30, 2018 and December 31, 20172
 2
Additional paid-in capital121,660
 116,196
Retained earnings258,213
 235,844
Accumulated other comprehensive loss, net(4,101) (5,626)
Less - treasury stock, at cost, 2,085,497 shares at September 30, 2018 and 1,873,266 shares at December 31, 2017(11,571) (9,799)
Total stockholders’ equity364,206
 336,620
Total liabilities, redeemable non-controlling interests and stockholders’ equity$1,114,455
 $983,951

AMERESCO, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS — (Continued)
(in thousands, except share amounts)
 September 30, December 31,
 2019 2018
 (Unaudited)  
Stockholders’ equity:   
Preferred stock, $0.0001 par value, 5,000,000 shares authorized, no shares issued and outstanding at September 30, 2019 and December 31, 2018$
 $
Class A common stock, $0.0001 par value, 500,000,000 shares authorized, 31,134,154 shares issued and 29,033,114 shares outstanding at September 30, 2019, 30,366,546 shares issued and 28,275,506 shares outstanding at December 31, 20183
 3
Class B common stock, $0.0001 par value, 144,000,000 shares authorized, 18,000,000 shares issued and outstanding at September 30, 2019 and December 31, 20182
 2
Additional paid-in capital131,111
 124,651
Retained earnings292,256
 269,806
Accumulated other comprehensive loss, net(9,609) (5,949)
Treasury stock, at cost, 2,101,040 shares at September 30, 2019 and 2,091,040 shares at December 31, 2018(11,777) (11,638)
Total stockholders’ equity401,986
 376,875
Total liabilities, redeemable non-controlling interests and stockholders’ equity$1,170,357
 $1,161,634
The accompanying notes are an integral part of these condensed consolidated financial statements.














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AMERESCO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended September 30, Nine Months Ended September 30,
2018 2017 2018 20172019 2018 2019 2018
Revenues$205,375
 $204,744
 $569,767
 $506,019
$212,026
 $205,375
 $560,321
 $569,767
Cost of revenues159,213
 163,377
 445,356
 403,320
167,333
 159,213
 439,857
 445,356
Gross profit46,162
 41,367
 124,411
 102,699
44,693
 46,162
 120,464
 124,411
Selling, general and administrative expenses28,866
 27,027
 84,871
 80,164
31,231
 28,866
 87,396
 84,871
Operating income17,296
 14,340
 39,540
 22,535
13,462
 17,296
 33,068
 39,540
Other expenses, net3,244
 1,668
 10,754
 5,232
4,192
 3,244
 11,359
 10,754
Income before provision for income taxes14,052
 12,672
 28,786
 17,303
9,270
 14,052
 21,709
 28,786
Income tax provision3,351
 3,881
 1,879
 4,296
939
 3,351
 2,000
 1,879
Net income10,701
 8,791
 26,907
 13,007
8,331
 10,701
 19,709
 26,907
Net (income) loss attributable to redeemable non-controlling interests
 (298) (516) 673
Net loss (income) attributable to redeemable non-controlling interests539
 
 2,524
 (516)
Net income attributable to common shareholders$10,701
 $8,493
 $26,391
 $13,680
$8,870
 $10,701
 $22,233
 $26,391
Net income per share attributable to common shareholders: 
       
      
Basic$0.23
 $0.19
 $0.58
 $0.30
$0.19
 $0.23
 $0.48
 $0.58
Diluted$0.23
 $0.19
 $0.57
 $0.30
$0.19
 $0.23
 $0.47
 $0.57
Weighted average common shares outstanding: 
  
     
  
    
Basic45,854
 45,524
 45,599
 45,500
46,555
 45,854
 46,413
 45,599
Diluted46,944
 45,771
 46,509
 45,664
47,693
 46,944
 47,675
 46,509
The accompanying notes are an integral part of these condensed consolidated financial statements.



Table of Contents


AMERESCO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(Unaudited)
 Three Months Ended September 30,
 2019 2018
Net income$8,331
 $10,701
Other comprehensive (loss) income:   
Unrealized (loss) gain from interest rate hedges, net of tax (provision) benefit of $(410) and $181, respectively(1,135) 125
Foreign currency translation adjustments(356) (163)
Total other comprehensive loss(1,491) (38)
Comprehensive income6,840
 10,663
Comprehensive loss attributable to redeemable non-controlling interests539
 
Comprehensive income attributable to common shareholders$7,379
 $10,663
    
 Nine Months Ended September 30,
 2019 2018
Net income$19,709
 $26,907
Other comprehensive (loss) income:   
Unrealized (loss) gain from interest rate hedges, net of tax (provision) benefit of $(1,308) and $590, respectively(3,949) 1,686
Foreign currency translation adjustments289
 (161)
Total other comprehensive (loss) income(3,660) 1,525
Comprehensive income16,049
 28,432
Comprehensive loss (income) attributable to redeemable non-controlling interests2,524
 (516)
Comprehensive income attributable to common shareholders$18,573
 $27,916
The accompanying notes are an integral part of these condensed consolidated financial statements.





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AMERESCO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)CHANGES IN REDEEMABLE NON-CONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018
(in thousands)thousands except share amounts)
(Unaudited)
 Three Months Ended September 30,
 2018 2017
Net income$10,701
 $8,791
Other comprehensive income (loss):   
Unrealized gain from interest rate hedges, net of tax benefit of $181 and $3, respectively125
 62
Foreign currency translation adjustments(163) 185
Total other comprehensive income (loss)(38) 247
Comprehensive income10,663
 9,038
Comprehensive (income) attributable to redeemable non-controlling interests
 (298)
Comprehensive income attributable to common shareholders$10,663
 $8,740
    
 Nine Months Ended September 30,
 2018 2017
Net income$26,907
 $13,007
Other comprehensive income (loss):   
Unrealized gain (loss) from interest rate hedges, net of tax benefit of $590 and $150, respectively1,686
 (67)
Foreign currency translation adjustments(161) 567
Total other comprehensive income1,525
 500
Comprehensive income28,432
 13,507
Comprehensive (income) loss attributable to redeemable non-controlling interests(516) 673
Comprehensive income attributable to common shareholders$27,916
 $14,180
                Accumulated      
  Redeemable         Additional   Other     Total
  Non-Controlling Class A Common Stock Class B Common Stock Paid-in Retained Comprehensive Treasury Stock Stockholders’
  Interests Shares Amount Shares Amount Capital Earnings Loss Shares Amount Equity
Balance, June 30, 2018 $12,322
 27,732,511
 $3
 18,000,000
 $2
 $119,257
 $247,512
 $(4,495) 2,085,497
 $(11,571) $350,708
Cumulative impact from the adoption of ASU No. 2017-12
 
 
 
 
 
 
 
 (54) 
 
 (54)
Exercise of stock options 
 239,597
 
 
 
 2,012
 
 
 
 
 2,012
Stock-based compensation expense 
 
 
 
 
 391
 
 
 
 
 391
Unrealized gain from interest rate hedge, net 
 
 
 
 
 
 
 611
 
 
 611
Foreign currency translation adjustment 
 
 
 
 
 
 
 (163) 
 
 (163)
Contributions from redeemable non-controlling interests 2,365
 
 
 
 
 
 
 
 
 
 
Distributions to redeemable non-controlling interests (102) 
 
 
 
 
 
 
 
 
 
Net income 
 
 
 
 
 
 10,701
 
 
 
 10,701
Balance, September 30, 2018 $14,585
 27,972,108
 $3
 18,000,000
 $2
 $121,660
 $258,213
 $(4,101) 2,085,497
 $(11,571) $364,206
                       
Balance, June 30, 2019 $32,037
 28,412,894
 $3
 18,000,000
 $2
 $126,693
 $283,386
 $(8,118) 2,091,040
 $(11,638) $390,328
Exercise of stock options 
 630,220
 

 

 

 4,005
 

 

 

 

 4,005
Stock-based compensation expense 
 
 
 
 
 413
 
 
 
 
 413
Open market purchase of common shares 
 (10,000) 
 
 
 
 
 
 10,000
 (139) (139)
Unrealized loss from interest rate hedge, net 
 
 
 
 
 
 
 (1,135) 
 
 (1,135)
Foreign currency translation adjustment 
 
 
 
 
 
 
 (356) 
 
 (356)
Contributions from redeemable non-controlling interests 974
 
 
 
 
 
 
 
 
 
 
Distributions to redeemable non-controlling interests (364) 
 
 
 
 
 
 
 
 
 
Net (loss) income (539) 
 
 
 
 
 8,870
 
 
 
 8,870
Balance, September 30, 2019 $32,108
 29,033,114
 $3
 18,000,000
 $2
 $131,111
 $292,256
 $(9,609)
2,101,040
 $(11,777) $401,986
The accompanying notes are an integral part of these condensed consolidated financial statements.






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AMERESCO, INC.
CONSOLIDATED STATEMENT OF CHANGES IN REDEEMABLE NON-CONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018
(in thousands)
(Unaudited)
               Accumulated                     Accumulated      
 Redeemable         Additional   Other     Total Redeemable         Additional   Other     Total
 Non-Controlling Class A Common Stock Class B Common Stock Paid-in Retained Comprehensive Treasury Stock Stockholders’ Non-Controlling Class A Common Stock Class B Common Stock Paid-in Retained Comprehensive Treasury Stock Stockholders’
 Interests Shares Amount Shares Amount Capital Earnings Loss Shares Amount Equity Interests Shares Amount Shares Amount Capital Earnings Loss Shares Amount Equity
Balance, December 31, 2017 $10,338
 27,533,049
 $3
 18,000,000
 $2
 $116,196
 $235,844
 $(5,626) 1,873,266
 $(9,799) $336,620
 $10,338
 27,533,049
 $3
 18,000,000
 $2
 $116,196
 $235,844
 $(5,626) 1,873,266
 $(9,799) $336,620
Cumulative impact from the adoption of ASU No. 2014-09 (Note 2) 
 
 
 
 
 
 (4,454) 
 
 
 (4,454)
Cumulative impact from the adoption of ASU No. 2017-12 (Note 2) 
 
 
 
 
 
 432
 (486) 
 
 (54)
Cumulative impact from the adoption of ASU No. 2014-09 
 
 
 
 
 
 (4,454) 
 
 
 (4,454)
Cumulative impact from the adoption of ASU No. 2017-12 
 
 
 
 
 
 432
 (486) 
 
 (54)
Exercise of stock options 
 625,215
 
 
 
 4,114
 
 
 
 
 4,114
 
 625,215
 
 
 
 4,114
 
 
 
 
 4,114
Stock-based compensation expense 
 
 
 
 
 1,137
 
 
 
 
 1,137
 
 
 
 
 
 1,137
 
 
 
 
 1,137
Employee Stock Purchase Plan 
 26,075
 
 
 
 213
 
 
 
 
 213
Employee stock purchase plan 
 26,075
 
 
 
 213
 
 
 
 
 213
Open market purchase of common shares 
 (212,231) 
 
 
 
 
 
 212,231
 (1,772) (1,772) 
 (212,231) 
 
 
 
 
 
 212,231
 (1,772) (1,772)
Unrealized gain from interest rate hedge, net 
 
 
 
 
 
 
 2,172
 
 
 2,172
 
 
 
 
 
 
 
 2,172
 
 
 2,172
Foreign currency translation adjustment 
 
 
 
 
 
 
 (161) 
 
 (161) 
 
 
 
 
 
 
 (161) 
 
 (161)
Contributions from redeemable non-controlling interests 4,038
 
 
 
 
 
 
 
 
 
 
 4,038
 
 
 
 
 
 
 
 
 
 
Distributions to redeemable non-controlling interests (307) 
 
 
 
 
 
 
 
 
 
 (307) 
 
 
 
 
 
 
 
 
 
Net income 516
 
 
 
 
 
 26,391
 
 
 
 26,391
 516
 
 
 
 
 
 26,391
 
 
 
 26,391
Balance, September 30, 2018 $14,585
 27,972,108
 $3
 18,000,000
 $2
 $121,660
 $258,213
 $(4,101) 2,085,497
 $(11,571) $364,206
 $14,585
 27,972,108
 $3
 18,000,000
 $2
 $121,660
 $258,213
 $(4,101) 2,085,497
 $(11,571) $364,206
                      
Balance, December 31, 2018 $14,719
 28,275,506
 $3
 18,000,000
 $2
 $124,651
 $269,806
 $(5,949) 2,091,040
 $(11,638) $376,875
Cumulative impact from the adoptions of ASU -No. 2018-02 (Note 2) 
 
 
 
 
 
 217
 (217) 
 
 
Exercise of stock options 
 745,484
 
 
 
 4,960
 
 
 
 
 4,960
Stock-based compensation expense 
 
 
 
 
 1,195
 
 
 
 
 1,195
Employee stock purchase plan 
 22,124
 
 
 
 305
 
 
 
 
 305
Open market purchase of common shares 
 (10,000) 
 
 
 
 
 
 10,000
 (139) (139)
Unrealized loss from interest rate hedge, net 
 
 
 
 
 
 
 (3,732) 
 
 (3,732)
Foreign currency translation adjustment 
 
 
 
 
 
 
 289
 
 
 289
Contributions from redeemable non-controlling interests 20,482
 
 
 
 
 
 
 
 
 
 
Distributions to redeemable non-controlling interests (569) 
 
 
 
 
 
 
 
 
 
Net (loss) income (2,524) 
 
 
 
 
 22,233
 
 
 
 22,233
Balance, September 30, 2019 $32,108
 29,033,114
 $3
 18,000,000
 $2
 $131,111
 $292,256
 $(9,609) 2,101,040
 $(11,777) $401,986
The accompanying notes are an integral part of these condensed consolidated financial statements.


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AMERESCO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Nine Months Ended September 30,Nine Months Ended September 30,
2018 20172019 2018
Cash flows from operating activities: 
  
 
  
Net income$26,907
 $13,007
$19,709
 $26,907
Adjustments to reconcile net income to cash flows from operating activities:      
Depreciation of energy assets19,699
 15,822
26,338
 19,699
Depreciation of property and equipment1,573
 1,931
2,115
 1,573
Amortization of deferred financing fees1,587
 1,194
Amortization of debt issuance costs1,734
 1,587
Amortization of intangible assets771
 1,082
681
 771
Accretion of ARO and contingent consideration98
 
Provision for bad debts483
 68
(134) 483
Loss (gain) on disposal / sale of assets300
 (104)
Loss on disposal / sale of assets
 300
Gain on deconsolidation of VIE(2,160) 
Net gain from derivatives(367) (206)(1,072) (420)
Stock-based compensation expense1,137
 976
1,195
 1,137
Deferred income taxes3,914
 (2,139)152
 3,914
Unrealized foreign exchange (gain) loss486
 (1,494)
Unrealized foreign exchange loss149
 486
Changes in operating assets and liabilities:      
Accounts receivable2,073
 22,599
(4,468) 2,073
Accounts receivable retainage3,008
 308
(3,079) 3,008
Federal ESPC receivable(111,982) (119,093)(110,374) (111,982)
Inventory, net10
 3,503
(2,137) 10
Costs and estimated earnings in excess of billings28,704
 (24,403)(23,130) 28,704
Prepaid expenses and other current assets5,241
 (2,271)(11,084) 5,241
Project development costs(6,984) (4,028)(5,641) (6,984)
Other assets(1,371) 225
(698) (1,371)
Accounts payable, accrued expenses and other current liabilities(16,552) 4,772
(8,931) (16,532)
Billings in excess of cost and estimated earnings11,166
 (4,283)(952) 11,166
Other liabilities194
 (255)(1,602) 227
Income taxes payable(2,038) 2,357
2,566
 (2,038)
Cash flows from operating activities(32,041) (90,432)(120,725) (32,041)
Cash flows from investing activities:      
Purchases of property and equipment(2,961) (1,922)(6,188) (2,961)
Purchases of energy assets(44,059) (68,736)(72,140) (103,154)
Proceeds from sale of assets of a business
 2,777
Acquisitions, net of cash received(62,687) (2,409)(1,279) (3,592)
Contributions to equity investment(323) 
Cash flows from investing activities(109,707) (70,290)(79,930) (109,707)
   
The accompanying notes are an integral part of these condensed consolidated financial statements.
      
      
      
      
      
   


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AMERESCO, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)(in thousands)(Unaudited)
Nine Months Ended September 30,Nine Months Ended September 30,
2018 20172019 2018
Cash flows from financing activities: 
  
 
  
Payments of financing fees(3,667) (2,024)$(541) $(3,667)
Proceeds from exercises of options and ESPP4,327
 1,559
5,265
 4,327
Repurchase of common stock(1,772) (3,029)(139) (1,772)
Proceeds (payments) from senior secured credit facility, net(900) 12,847
41,343
 (900)
Proceeds from long-term debt financings78,914
 48,885
7,614
 78,914
Proceeds from Federal ESPC projects113,570
 122,340
115,556
 113,570
Proceeds for energy assets from Federal ESPC2,269
 
1,639
 2,269
Proceeds from sale-leaseback financings5,145
 30,611

 5,145
Contributions from redeemable non-controlling interests, net3,731
 1,358
Contributions from redeemable non-controlling interests, net of distributions20,173
 3,731
Payments on long-term debt(22,825) (40,228)(18,033) (22,825)
Cash flows from financing activities178,792
 172,319
172,877
 178,792
Effect of exchange rate changes on cash(124) 322
249
 (124)
Net increase in cash, cash equivalents, and restricted cash36,920
 11,919
Net (decrease) increase in cash, cash equivalents, and restricted cash(27,529) 36,920
Cash, cash equivalents, and restricted cash, beginning of period60,105
 52,826
97,913
 60,105
Cash, cash equivalents, and restricted cash, end of period$97,025
 $64,745
$70,384
 $97,025
   
Supplemental disclosures of cash flow information:      
Cash paid for interest$9,618
 $8,152
$12,410
 $9,618
Cash paid for income taxes$2,018
 $4,432
$2,983
 $2,018
Non-cash Federal ESPC settlement$82,536
 $66,830
$214,444
 $82,536
Accrued purchases of energy assets$7,698
 $9,414
$17,224
 $7,698
Conversion of revolver to term loan$25,000
 $
$25,000
 $25,000

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets to the total of the same such amounts shown above:
 Nine Months Ended September 30, Nine Months Ended September 30,
 2018 2017 2019 2018
Cash and cash equivalents $64,539
 $29,559
 $34,104
 $64,539
Short-term restricted cash 13,461
 15,789
 13,498
 13,461
Long-term restricted cash included in other assets 19,025
 19,397
 22,782
 19,025
Total cash and cash equivalents, and restricted cash $97,025
 $64,745
 $70,384
 $97,025
The accompanying notes are an integral part of these condensed consolidated financial statements.



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AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except per share amounts)



1. DESCRIPTIONBASIS OF BUSINESSPRESENTATION
The accompanying condensed consolidated financial statements of Ameresco, Inc. (including its subsidiaries, the “Company”) was organized as a Delaware corporation on April 25, 2000. The Company is a provider of energy efficiency solutions for facilities throughout North America and Europe. The Company provides solutions, both services and products, that enable customers to reduce their energy consumption, lower their operating and maintenance costs and realize environmental benefits. The Company’s comprehensive set of solutions includes upgrades to a facility’s energy infrastructure and the construction and operation of small-scale renewable energy plants. It also sells certain photovoltaic (“PV”) equipment worldwide. The Company operates in the United States, Canada and Europe.
The Company is compensated through a variety of methods, including: 1) direct payments based on fee-for-services contracts (utilizing lump-sum or cost-plus pricing methodologies); 2) the sale of energy from the Company’s energy assets and the sale of energy assets; and 3) direct payment for PV equipment and systems.
The condensed consolidated financial statements as of September 30, 2018, and for the three and nine months ended September 30, 2018 and 2017, are unaudited, pursuant to certain rules and regulations of the Securities and Exchange Commission, and include, in the opinion of the Company, normal recurring adjustments necessary for a fair presentation in conformity with accounting principles generally accepted in the United States (“GAAP”) of the results for the periods indicated, which, however,indicated.
The results of operations for the three and nine months ended September 30, 2019 are not necessarily indicative of results which may be expected for the full year. The December 31, 20172018 consolidated balance sheet data was derived from audited financial statements, but certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. The interim condensed consolidated financial statements, and notes thereto, should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2017,2018, and notes thereto, included in the Company’s annual report on Form 10-K for the year ended December 31, 20172018 filed with the Securities and Exchange Commission on March 7, 2018.8, 2019.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PrinciplesThe accounting policies of Consolidation
The accompanying condensedthe Company are set forth in Note 2 to the consolidated financial statements includecontained in the accounts of the Company, its subsidiaries in which the Company has a controlling financial interest and three investment funds formed to fund the purchase and operation of solar energy systems, which are consolidated with the Company as variable interest entities (“VIE”)Company’s 2018 annual report on Form 10-K. The Company uses a qualitative approach in assessing the consolidation requirement for VIEs. This approach focuses on determining whether the Company has the powerincludes herein certain updates to direct the activities of the VIE that most significantly affect the VIE’s economic performance and whether the Company has the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. For all periods presented, the Company has determined that it is the primary beneficiary in all of its operational VIEs. The Company evaluates its relationships with the VIEs on an ongoing basis to ensure that it continues to be the primary beneficiary. All significant intercompany accounts and transactions have been eliminated. Gains and losses from the translation of all foreign currency financial statements are recorded in accumulated other comprehensive loss, net, within stockholders’ equity. The Company prepares its financial statements in conformity with GAAP.
Use of Estimates
GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. The most significant estimates and assumptions used in these condensed consolidated financial statements relate to management’s estimates of final construction contract profit in accordance with accounting for long-term contracts, allowance for doubtful accounts, inventory reserves, realization of project development costs, fair value of derivative financial instruments, accounting for business acquisitions, stock-based awards, impairment of long-lived assets, income taxes, self insurance reserves and potential liability in conjunction with certain commitments and contingencies. Actual results could differ from those estimates.
The Company is self-insured for employee health insurance. The maximum exposure in fiscal year 2018 under the plan is $100 per covered participant, after which reinsurance takes effect. The liability for unpaid claims and associated expenses, including incurred but not reported claims, is determined by management and reflected in the Company’s consolidated balance sheets in accrued expenses and other current liabilities. The liability is calculated based on historical data, which considers both


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AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(in thousands, except per share amounts)

the frequency and settlement amount of claims. The Company’s estimated accrual for this liability could be different than its ultimate obligation if variables such as the frequency or amount of future claims differ significantly from management’s assumptions.
Cash and Cash Equivalents
Cash and cash equivalents includes cash on deposit, overnight repurchase agreements and amounts invested in highly liquid money market funds. Cash equivalents consist of short term investments with original maturities of three months or less. The Company maintains accounts with financial institutions and the balances in such accounts, at times, exceed federally insured limits. This credit risk is divided among a number of financial institutions that management believes to be of high quality. The carrying amount of cash and cash equivalents approximates its fair value measured using level 1 inputs per the fair value hierarchy as defined in Note 8.policies.
Restricted Cash
Restricted cash consists of cash and cash equivalents held in an escrow account in association with construction draws for energy savings performance contracts (“ESPC”), construction of energy assets, operations and maintenance (“O&M”) reserve accounts and cash collateralized letters of credit as well as cash required under term loans to be maintained in debt service reserve accounts until all obligations have been indefeasibly paid in full. These accounts are primarily invested in highly liquid money market funds. The carrying amount of the cash and cash equivalents in these accounts approximates its fair value measured using level 1 inputs per the fair value hierarchy as defined in Note 8.10. Restricted cash also includes funds held for clients, which represent assets that, based upon the Company’s intent, are restricted for use solely for the purposes of satisfying the obligations to remit funds to third parties, primarily utility service providers, relating to the Company’s enterprise energy management services. As of September 30, 20182019 and December 31, 2017,2018, the Company classified the non-current portion of restricted cash of $19,025$22,782 and $20,092,$19,637, respectively, in other assets on itsthe accompanying condensed consolidated balance sheets.
Accounts ReceivableLeases
Accounts receivable are statedAs of January 1, 2019, the Company adopted Accounting Standard Update (“ASU”) 2016-02, Leases (Topic 842) and, along with the standard, elected to take the practical expedient that the Company will not reassess lease classifications at adoption. Accordingly, the amount management expects to collect from outstanding balances. An allowance for doubtful accounts is provided for those accounts receivable considered to be uncollectible based upon historical experience and management’s evaluationCompany’s sales-leaseback arrangements entered into as of outstanding accounts receivable. Bad debts are written off against the allowance when identified.
Changes in the allowance for doubtful accounts are as follows:
 Nine Months Ended September 30,
 2018
2017
Allowance for doubtful accounts, beginning of period$3,315
 $7,836
Charges to costs and expenses483
 68
Account write-offs and other(361) (4,088)
Allowance for doubtful accounts, end of period$3,437
 $3,816
During the year ended ended December 31, 2016,2018 will remain under the previous guidance. See Note 8 for additional information on these sale-leasebacks.
All significant lease arrangements are recognized at lease commencement. Operating lease right-of-use (“ROU”) assets and lease liabilities are recognized at commencement. An ROU asset and corresponding lease liability are not recorded for leases with an initial term of 12 months or less (short term leases) as the Company reservedrecognizes lease expense for these leases as incurred over the lease term.
 ROU assets represent the Company’s right to use an underlying asset during the reasonably certain lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The Company uses its incremental borrowing rate, which is updated annually or when a significant event occurs that would indicate a significant change in rates, based on the information available at commencement date, in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments related to initial direct cost and prepayments and excludes lease incentives. Lease expense is recognized on a customer who declared bankruptcy. Of this amount, $2,394 was recorded as an allowance for doubtful accounts in accounts receivable, net. During 2017 a settlement was reached with this customer andstraight-line basis over the lease term. The Company has no additional exposurelease agreements with lease and non-lease components, which are accounted for the remaining receivables.
Accounts Receivable Retainage
Accounts receivable retainage represents amounts due from customers, but where payments are withheld contractually until certain construction milestones are met. Amounts retained typically range from 5% to 10% of the total invoice. The Company classifies as a current asset those retainages that are expected to be billed insingle component. See Note 8 for additional discussion on the next twelve months. No amounts were determined to be uncollectible as of September 30, 2018 and December 31, 2017.
Inventory
Inventories, which consist primarily of PV solar panels, batteries and related accessories, are stated at the lower of cost (“first-in, first-out” method) or net realizable value (determined as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation). Provisions have been made to reduce the carrying value of inventory to the net realizable value.Company’s leases.


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AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(in thousands, except per share amounts)


Prepaid ExpensesVariable Interest Entities
Prepaid expenses consist primarilyThe Company generally aggregates the disclosures of short-term prepaid expenditures that will amortize within one year.
Federal ESPC Receivable
Federal ESPC receivable representsits variable interest entities (“VIEs”) based on certain qualitative and quantitative factors including the amount to be paid by various federal government agencies for work performedpurpose and earned bydesign of the underlying VIEs, the nature of the assets in the VIE, and the type of involvement the Company under specific ESPCs. has with the VIE including its role and type of interest held in the VIE. As of September 30, 2019, all of the fully consolidated VIEs that make up the Company’s investment funds are similar in purpose, design, and the Company’s involvement and, as such, are aggregated in one disclosure. See Note 12 for additional disclosures.
Equity Method Investment
The Company assigns certainhas entered into a joint venture and has determined it is not the primary beneficiary using the methodology previously described for variable interest entities. The Company does not consolidate the operations of its rightsthis joint venture and treats the joint venture as an equity method investment. See Note 12 for additional information on the Company’s equity method investment.
Recent Accounting Pronouncements
Leases
In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, Leases (Topic 842). The guidance in this ASU supersedes the leasing guidance in Topic 840, Leases. Under the new guidance, the Company is electing to receiveonly recognize lease assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the condensed consolidated statements of income. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those payments to third-party investors that provide construction and permanent financingfiscal years.
On January 1, 2019, the Company adopted ASU No. 2016-02 using the modified retrospective approach of applying the new standard at the adoption date. See Note 8 for such contracts. Upon completion and acceptancethe impact of the projectadoption and the new disclosures required by this standard.
In March 2019, the government, typicallyFASB issued ASU No. 2019-01, Leases (Topic 842): Codification Improvements, which provides clarification and improvements to the previous issued guidance. The standard is effective for fiscal years beginning after December 15, 2019 and interim periods within 24those fiscal years. The Company is currently evaluating the impact of ASU 2019-01 on its condensed consolidated financial statements, but does not expect that the adoption of this guidance will have a significant impact on its condensed consolidated financial statements.
Intangibles-Goodwill and Other
In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use-Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which clarifies the accounting for implementation, setup, and upfront costs and aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to 36 monthsdevelop or obtain internal-use software. The new standard is effective interim and annual periods beginning after December 15, 2019, with early adoption permitted, and can be applied either retrospectively or prospectively. The Company adopted this guidance as of construction commencement,January 1, 2019 and the assigned ESPC receivable from the government and corresponding ESPC liability are eliminated fromadoption did not have an impact on the Company’s condensed consolidated financial statements.
Project Development CostsDerivatives and Hedging
In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, which, among other things, clarifies some areas around partial-term fair value hedges interest rate risk, the amortization of fair value hedge basis adjustments and their disclosure, and some clarification of some matters related to transitioning to ASU No. 2017-12, which was adopted by the Company during the year ended December 31, 2018. For those that have already adopted ASU No. 2017-12, the new standard is effective the first annual period beginning after the issuance date of ASU No. 2019-04, or as of January 1, 2020 for the Company, with early adoption permitted. The Company capitalizes as project development costs only those costs incurred in connection withis currently evaluating the developmentimpact of energy projects, primarily direct labor, interest costs, outside contractor services, consulting fees, legal fees and travel, if incurred after a point in time where the realization of related revenue becomes probable. Project development costs incurred prior to the probable realization of revenue are expensed as incurred. The Company classifies as a current asset those project development efforts that are expected to proceed to construction activity in the twelve months that follow. The Company periodically reviews these balances and writes off any amounts where the realization of the related revenue is no longer probable. Project development costs of $3,921 and $1,524 were included in other long-term assets as at September 30, 2018 and December 31, 2017, respectively.
Property and Equipment
Property and equipment consists primarily of office and computer equipment, and is recorded at cost. Major additions and improvements are capitalized as additions to the property and equipment accounts, while replacements, maintenance and repairs that doASU No. 2019-04 on its condensed consolidated financial statements, but does not improve or extend the life of the respective assets are expensed as incurred. Depreciation and amortization of property and equipment are computed on a straight-line basis over the following estimated useful lives:
Asset ClassificationEstimated Useful Life
Furniture and office equipmentFive years
Computer equipment and software costsThree to five years
Leasehold improvementsLesser of term of lease or five years
AutomobilesFive years
LandUnlimited
Gains or losses on disposal of property and equipment are reflected in selling, general and administrative expenses in the consolidated statements of income (loss).
Energy Assets
Energy assets consist of costs of materials, direct labor, interest costs, outside contract services, deposits and project development costs incurred in connection with the construction of small-scale renewable energy plantsexpect that the Company owns. These amounts are capitalized and amortized to costadoption of revenues in the Company’sthis guidance will have a significant impact on its condensed consolidated statements of income (loss) on a straight line basis over the lives of the related assets or the terms of the related contracts.
The Company capitalizes interest costs relating to construction financing during the period of construction. Capitalized interest is included in energy assets, net in the Company’s consolidated balance sheets. Capitalized interest is amortized to cost of revenues in the Company’s consolidated statements of income (loss) on a straight line basis over the useful life of the associated energy asset. There was $638 and $925 of interest capitalized for the three months ended September 30, 2018 and 2017, respectively. There was $2,376 and $3,452 of interest capitalized for the nine months ended September 30, 2018 and 2017, respectively.
Routine maintenance costs are expensed in the current year’s consolidated statements of income (loss) to the extent that they do not extend the life of the asset. Major maintenance, upgrades and overhauls are required for certain components of the Company’s assets. In these instances, the costs associated with these upgrades are capitalized and are depreciated over the shorter of the remaining life of the asset or the period until the next required major maintenance or overhaul.financial statements.


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AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(in thousands, except per share amounts)

Included in energy assets are capital lease assets and accumulated depreciation of capital lease assets.
The Company evaluates its long-lived assets for impairment as events or changes in circumstances indicate the carrying value of these assets may not be fully recoverable. Examples of such triggering events applicable to the Company’s assets include a significant decrease in the market price of a long-lived asset or asset group or a current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset or asset group.
The Company evaluates recoverability of long-lived assets to be held and used by estimating the undiscounted future cash flows before interest associated with the expected uses and eventual disposition of those assets. When these comparisons indicate that the carrying value of those assets is greater than the undiscounted cash flows, the Company recognizes an impairment loss for the amount that the carrying value exceeds the fair value.
From time to time, the Company has applied for and received cash grant awards from the U.S. Treasury Department (the “Treasury”) under Section 1603 of the American Recovery and Reinvestment Act of 2009 (the “Act”). The Act authorized the Treasury to make payments to eligible persons who place in service qualifying renewable energy projects. The grants are paid in lieu of investment tax credits. All of the cash proceeds from the grants were used and recorded as a reduction in the cost basis of the applicable energy assets. If the Company disposes of the property, or the property ceases to qualify as specified energy property, within five years from the date the property is placed in service, then a prorated portion of the Section 1603 payment must be repaid.
The Company did not receive any Section 1603 grants during the nine months ended September 30, 2018 or September 30, 2017. No further Section 1603 grant payments are expected to be received as the program has expired.
For tax purposes, the Section 1603 payments are not included in federal and certain state taxable income and the basis of the property is reduced by 50% of the payment received. Deferred grant income of $6,774 and $7,188 recorded in the accompanying consolidated balance sheets as of September 30, 2018 and December 31, 2017, respectively, represents the benefit of the basis difference to be amortized to income tax expense over the life of the related property.
Deferred Financing Fees
Deferred financing fees relate to the external costs incurred to obtain financing for the Company. Deferred financing fees are amortized over the respective term of the financing using the effective interest method, with the exception of the Company’s revolving credit facility and construction loans, as discussed in Note 13, for which deferred financing fees are amortized on a straight-line basis over the term of the agreement. Deferred financing fees are presented on the consolidated balance sheets as a reduction to long-term debt and capital lease liabilities.
Goodwill and Intangible Assets
The Company has classified as goodwill the amounts paid in excess of fair value of the net assets (including tax attributes) of companies acquired in purchase transactions. The Company has recorded intangible assets related to customer contracts, customer relationships, non-compete agreements, trade names and technology, each with defined useful lives. The Company assesses the impairment of goodwill and intangible assets that have indefinite lives on an annual basis (December 31st) and whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable.
Goodwill is reviewed for impairment annually and whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. The process of evaluating the potential impairment of goodwill requires significant judgment. The Company regularly monitors current business conditions and other factors including, but not limited to, adverse industry or economic trends, restructuring actions and projections of future results. The Company estimates the reporting units fair value and compares it with the carrying value of the reporting unit, including goodwill. If the fair value is greater than the carrying value of its reporting unit, no impairment is recorded. Fair value is determined using both an income approach and a market approach. The estimates and assumptions used in the Company’s calculations include revenue growth rates, expense growth rates, expected capital expenditures to determine projected cash flows, expected tax rates and an estimated discount rate to determine present value of expected cash flows. These estimates are based on historical experiences, the Company’s projections of future operating activity and its weighted-average cost of capital. If the fair value is less than the carrying value, an impairment loss is recognized for the amount that the carrying amount of a reporting unit, including goodwill, exceeds its fair value, limited to the total amount of goodwill allocated to that reporting unit. The impairment charge would be recorded to earnings in the consolidated statements of income (loss). Judgment is required in determining whether an event has occurred that may impair the value of goodwill or identifiable intangible assets.


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AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(in thousands, except per share amounts)

Acquired intangible assets other than goodwill that are subject to amortization include customer contracts and customer relationships, as well as software/technology, trade names and non-compete agreements. The intangible assets are amortized over periods ranging from one to fifteen years from their respective acquisition dates. The Company evaluates its intangible assets for impairment consistent with, and part of, their long-lived assets evaluation, as discussed in Energy Assets above.
See Note 5 for additional disclosures.
Other Assets
Other assets consist primarily of notes and contracts receivable due to the Company from various customers and non-current restricted cash. Other assets also include, the fair value of derivatives determined to be assets, the non-current portion of project development costs, accounts receivable retainages, sale-leaseback deferred loss and deferred contract costs.
Asset Retirement Obligations
The Company recognizes a liability for the fair value of required asset retirement obligations (“AROs”) when such obligations are incurred. The liability is estimated on a number of assumptions requiring management’s judgment, including equipment removal costs, site restoration costs, salvage costs, cost inflation rates and discount rates and is credited to its projected future value over time. The capitalized asset is depreciated using the convention of depreciation of plant assets. Upon satisfaction of the ARO conditions, any difference between the recorded ARO liability and the actual retirement cost incurred is recognized as an operating gain or loss in the consolidated statements of income (loss). As of September 30, 2018 and December 31, 2017, the Company had no ARO liabilities recorded.
Federal ESPC Liabilities
Federal ESPC liabilities, for both projects and energy assets, represent the advances received from third-party investors under agreements to finance certain ESPC projects with various federal government agencies.
For projects related to the construction or installation of certain energy savings equipment or facilities developed for the government customer, upon completion and acceptance of the project by the government, typically within 24 to 36 months of construction commencement, the ESPC receivable from the government and corresponding ESPC liability is eliminated from the Company’s consolidated balance sheet. Until recourse to the Company ceases for the ESPC receivables transferred to the investor, upon final acceptance of the work by the government customer, the Company remains the primary obligor for financing received.
For small-scale energy assets developed for the government customer that the Company owns and operates, upon final acceptance of the work by the government customer, the Company remains the primary obligor for financing received and the liability is eliminated from the Company’s consolidated balance sheet as contract payments assigned by the customer are transferred to the investor.
Sale-Leaseback
During the first quarter of 2015, the Company entered into an agreement with an investor which gives the Company the option to sell and contemporaneously lease back solar photovoltaic (“solar PV”) projects. In September 2016, the Company amended this agreement to increase the investor’s commitment up to a maximum combined funding amount of $100,000 through June 30, 2017 on certain projects. In May 2017, the Company amended this agreement to extend the end date of the agreement to June 30, 2018. Additionally, the Company sold and contemporaneously leased back one solar PV project to another investor, not a party to the master lease agreement, under a new agreement during the nine months ended September 30, 2017. During the third quarter of 2018, the Company entered into an agreement with an investor which gives the Company the option to sell and contemporaneously lease back solar photovoltaic (“solar PV”) projects through August 2019up to a maximum funding amount of $100,000. During the three and nine months ended September 30, 2018 the Company entered into two sale-leaseback agreements. See below for a summary of solar PV project sales in prior year under our sale-leaseback agreements under this facility:



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AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(in thousands, except per share amounts)

Quarter Ended # Solar PV Projects Sold (actual #’s)_ Sale Price Deferred Gain Recorded Deferred Loss Recorded Capital Lease Asset/Liability Recorded Initial Lease Term (years) Minimum Lease Payment Maximum Lease Payment
September 30, 2018 2 $5,145
 $611
 $
 $2,591
 20 $1
 $738
September 30, 2017 3 $9,157
 $642
 $
 $4,114
 20 $13
 $231

As part of these agreements, the Company was a party to master lease agreements that provides for the sale of solar PV projects to a third-party investor and the simultaneous leaseback of the projects, which the Company then operates and maintains, recognizing revenue through the sale of the electricity and solar renewable energy credits generated by these projects. In sale-leaseback arrangements, the Company first determines whether the solar PV project under the sale-leaseback arrangement is “integral equipment.” A solar PV project is determined to be integral equipment when the cost to remove the project from its existing location, including the shipping and reinstallation costs of the solar PV project at the new site, including any diminution in fair value, exceeds 10% of the fair value of the solar PV project at the time of its original installation. When the leaseback arrangement expires, the Company has the option to purchase the solar PV project for the then fair market value or, in certain circumstances, renew the lease for an extended term. All solar PV projects sold to date under the sale-leaseback program have been determined by the Company not to be integral equipment as the cost to remove the project from its existing location would not exceed 10% of its original fair value.
For solar PV projects that the Company has determined not to be integral equipment, the Company then determines if the leaseback should be classified as a capital lease or an operating lease. All solar PV projects sold to date under the sale-leaseback program have been determined by the Company to be capital leases. For leasebacks classified as capital leases, the Company initially records a capital lease asset and capital lease obligation in its consolidated balance sheet equal to the lower of the present value of the Company’s future minimum leaseback payments or the fair value of the solar PV project. For capital leasebacks, the Company defers any gain or loss, representing the excess or shortfall of cash received from the investor compared to the net book value of the asset in the Company’s consolidated balance sheet at the time of the sale. The Company records the long term portion of any deferred gain or loss in other liabilities and other assets, respectively, and the current portion of any deferred gain and loss in accrued expenses and other current liabilities and prepaid expenses and other current assets, respectively, in its consolidated balance sheet and amortizes the deferred amounts over the lease term in cost of revenues in its consolidated statements of income (loss). Net amortization expense in cost of revenues related to deferred gains and losses was $(48) and $(25) of net gains for the three months ended September 30, 2018 and 2017, respectively. Net amortization expense in cost of revenues related to deferred gains and losses was $(153) and $(49) of net gains for the nine months ended September 30, 2018 and2017, respectively.
A summary of amounts related to sale leasebacks in the Company’s consolidated balance sheets is as follows:
 September 30, December 31,
 2018 2017
Capital lease assets, net$38,782
 $36,676
Deferred loss, short-term, net115
 118
Deferred loss, long-term, net1,946
 2,054
Total deferred loss$2,061
 $2,172
Capital lease liabilities, short-term4,838
 4,157
Capital lease liabilities, long-term31,897
 30,712
Total capital lease liabilities$36,735
 $34,869
Deferred gain, short-term, net344
 338
Deferred gain, long-term, net5,935
 5,835
Total deferred gain$6,279
 $6,173
Other Liabilities
Other liabilities consist primarily of deferred revenue related to multi-year operation and maintenance contracts which expire at various dates through 2033. Other liabilities also include the fair value of derivatives and the long term portion of sale-leaseback deferred gains.


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(in thousands, except per share amounts)

See Note 9 for additional disclosures.
Revenue Recognition
On January 1, 2018, the Company adopted ASU 2014-09, “Revenue from Contracts with Customers” (Topic 606) using the modified retrospective method applied to those contracts which were not completed as of December 31, 2017. Results for reporting periods beginning January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior period. The Company recorded an adjustment to retained earnings on January 1, 2018 due to the cumulative impact of adopting Topic 606. See Note 3 "Revenue from Contracts with Customers" for the required disclosures related to the impact of adopting this standard and a discussion of the Company's updated policies related to revenue recognition discussed below.
The Company derives revenues from energy efficiency and renewable energy products and services. Energy efficiency products and services include the design, engineering, and installation of equipment and other measures to improve the efficiency, and control the operation, of a facility’s energy infrastructure. Renewable energy products and services include the construction of small-scale plants that produce electricity, gas, heat or cooling from renewable sources of energy, the sale of such electricity, gas, heat or cooling from plants that the Company owns, and the sale and installation of solar energy products and systems. Below is a description of the Company’s primary lines of business.
Projects - The Company’s principal service relates to energy efficiency projects, which entails the design, engineering and installation of, and assisting with the arranging of financing for an ever-increasing array of innovative technologies and techniques to improve the energy efficiency, and control the operation, of a building’s energy- and water- consuming systems. In certain projects, the Company also designs and constructs for a customer a central plant or cogeneration system providing power, heat and/or cooling to a building, or a small-scale plant that produces electricity, gas, heat or cooling from renewable sources of energy.
Under Topic 606 requirements, the Company recognizes revenue from the installation or construction of projects over time using the cost-based input method. The Company uses the total costs incurred on the the project relative to the total expected costs to satisfy the performance obligation.
When the estimate on a contract indicates a loss, or claims against costs incurred reduce the likelihood of recoverability of such costs, the Company records the entire estimated loss in the period the loss becomes known.
Operations & Maintenance (“O&M”) - After an energy efficiency or renewable energy project is completed, the Company often provides ongoing O&M services under a multi-year contract. These services include operating, maintaining and repairing facility energy systems such as boilers, chillers and building controls, as well as central power and other small-scale plants. For larger projects, the Company frequently maintains staff on-site to perform these services.
Maintenance revenue is recognized using the input method to recognize revenue. In most cases, O&M fees are fixed annual fees. Because the Company is on-site to perform O&M services, the services are typically a distinct series of promises, and those services have the same pattern of transfer to the customer (i.e., evenly over time), the Company records the revenue on a straight-line basis. Some O&M service contract fees are billed on time expended. In those cases, revenue is recorded based on the time expended in that month.
Energy Assets - The Company’s service offerings also includes the sale of electricity, processed renewable gas fuel, heat or cooling from the portfolio of assets that the Company owns and operates. The Company has constructed and is currently designing and constructing a wide range of renewable energy plants using landfill gas (“LFG”), wastewater treatment biogas, solar, biomass, other bio-derived fuels, wind and hydro sources of energy. Most of the Company’s renewable energy projects to date have involved the generation of electricity from solar PV and LFG or the sale of processed LFG. The Company purchases the LFG that otherwise would be combusted or vented, processes it, and either sells it or uses it in its energy plants. The Company has also designed and built, as well as owns, operates and maintains, plants that take biogas generated in the anaerobic digesters of wastewater treatment plants and turns it into renewable natural gas that is either used to generate energy on-site or that can be sold through the nation’s natural gas pipeline grid. Where the Company owns and operates energy producing assets, the Company typically enters into a long-term power purchase agreement (“PPA”) for the sale of the energy. Many of the Company’s energy assets also produce environmental attributes, commonly referred to as renewable energy credits (“RECs”). In most cases, the Company sells RECs under separate agreements with third parties other than the PPA customer.
The Company recognizes revenues from the sale and delivery of the energy output from renewable energy plants, over time as produced and delivered to the customer, in accordance with specific PPA contract terms. REC revenue is recognized at a


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(in thousands, except per share amounts)

point in time, when the RECs are transferred to the customer in accordance with the transfer protocols of the REC market that the Company operates in. In those cases where RECs are sold to the same customer as the energy output, the Company records revenue monthly for both the energy output and the REC output, as generated and delivered to the customer.  =
Other - The Company’s service and product offerings also include integrated-PV and consulting and enterprise energy management services.
The Company recognizes revenues from delivery of engineering, consulting services and enterprise energy management services over time. For the sale of solar materials, revenue is recognized at a point in time when the Company has transferred physical control of the asset to the customer upon shipment.
To the extent a contract is deemed to have multiple performance obligations, the Company allocates the transaction price of the contract to each performance obligation using its best estimate of the standalone selling price of each distinct good or service in the contract.
Billings in excess of cost and estimated earnings represents advanced billings on certain construction contracts. Costs and estimated earnings in excess of billings represent certain amounts under customer contracts that were earned and billable but not invoiced.
Cost of Revenues
Cost of revenues include the cost of labor, materials, equipment, subcontracting and outside engineering that are required for the development and installation of projects, as well as preconstruction costs, sales incentives, associated travel, inventory obsolescence charges, amortization of intangible assets related to customer contracts and, if applicable, costs of procuring financing. A majority of the Company’s contracts have fixed price terms; however, in some cases the Company negotiates protections, such as a cost-plus structure, to mitigate the risk of rising prices for materials, services and equipment.
Cost of revenues also include the costs of maintaining and operating the small-scale renewable energy plants that the Company owns, including the cost of fuel (if any) and depreciation charges.
Income Taxes
The Company provides for income taxes based on the liability method. The Company provides for deferred income taxes based on the expected future tax consequences of differences between the financial statement basis and the tax basis of assets and liabilities calculated using the enacted tax rates in effect for the year in which the differences are expected to be reflected in the tax return.
The Company accounts for uncertain tax positions using a “more-likely-than-not” threshold for recognizing and resolving uncertain tax positions. The evaluation of uncertain tax positions is based on factors that include, but are not limited to, changes in tax law, the measurement of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit, new audit activity and changes in facts or circumstances related to a tax position. The Company evaluates uncertain tax positions on a quarterly basis and adjusts the level of the liability to reflect any subsequent changes in the relevant facts surrounding the uncertain positions.
The Company’s liabilities for uncertain tax positions can be relieved only if the contingency becomes legally extinguished through either payment to the taxing authority or the expiration of the statute of limitations, the recognition of the benefits associated with the position meet the “more-likely-than-not” threshold or the liability becomes effectively settled through the examination process.
The Company considers matters to be effectively settled once the taxing authority has completed all of its required or expected examination procedures, including all appeals and administrative reviews; the Company has no plans to appeal or litigate any aspect of the tax position; and the Company believes that it is highly unlikely that the taxing authority would examine or re-examine the related tax position. The Company also accrues for potential interest and penalties related to unrecognized tax benefits in income tax expense.
The Company has presented all deferred tax assets and liabilities as net and noncurrent on its consolidated balance sheet as of September 30, 2018 and December 31, 2017, respectively.
See Note 6 for additional information on the Company’s income taxes.


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(in thousands, except per share amounts)

Foreign Currency
The local currency of the Company’s foreign operations is considered the functional currency of such operations. All assets and liabilities of the Company’s foreign operations are translated into U.S. dollars at period-end exchange rates. Income and expense items are translated at average exchange rates prevailing during the period. Translation adjustments are accumulated as a separate component of stockholders’ equity. Foreign currency translation gains and losses are reported in the consolidated statements of comprehensive income (loss). Foreign currency transaction gains and losses are reported in the consolidated statements of income (loss).
Financial Instruments
Financial instruments consist of cash and cash equivalents, restricted cash, accounts and notes receivable, long-term contract receivables, accounts payable, accrued expenses, capital lease assets and liabilities, contingent considerations, short- and long-term, borrowings interest rate swaps, and commodity swaps. Because of their short maturity, the carrying amounts of cash and cash equivalents, restricted cash, accounts and notes receivable, accounts payable, accrued expenses, contingent considerations, and short-term borrowings approximate fair value.
Fair Value Measurements
The Company follows the guidance related to fair value measurements for all of its non-financial assets and non-financial liabilities, except for those recognized at fair value in the financial statements at least annually. These assets include goodwill and long-lived assets measured at fair value for impairment assessments, and non-financial assets and liabilities initially measured at fair value in a business combination.
The Company’s financial instruments include cash and cash equivalents, restricted cash, accounts and notes receivable, long-term contract receivables, interest rate swaps, commodity swaps, hybrid instruments, accounts payable, accrued expenses, capital lease assets and liabilities, contingent considerations, and short-term and long-term borrowings. Because of their short maturity, the carrying amounts of cash and cash equivalents, restricted cash, accounts and notes receivable, accounts payable, accrued expenses, and short-term borrowings approximate fair value. The carrying value of long-term variable-rate debt approximates fair value. Fair value of the Company’s debt is based on quoted market prices or on rates available to the Company for debt with similar terms and maturities, which are level two inputs of the fair value hierarchy, as defined in Note 8.    
The Company accounts for its interest rate and commodity swaps as derivative financial instruments in accordance with the related guidance. Under this guidance, derivatives are carried on the Company’s consolidated balance sheets at fair value. The fair value of the Company’s interest rate swaps are determined based on observable market data in combination with expected cash flows for each instrument.
The consideration for the Company’s acquisitions often includes future payments that are contingent upon the occurrence of a particular event. The Company records a contingent consideration obligation for such contingent consideration payments at fair value on the acquisition date. The Company estimates the acquisition date fair value of contingent consideration obligations through valuation models that incorporate probability adjusted assumptions related to the achievement of the milestones and the likelihood of making related payments. Each period the Company revalues the contingent consideration obligations associated with the acquisition to fair value and records changes in the fair value as contingent consideration expense. Increases or decreases in the fair value of the contingent consideration obligations can result from changes in assumed discount periods and rates, changes in the assumed timing and amount of revenue and expense estimates and changes in assumed probability with respect to the attainment of certain financial and operational metrics, among others. Significant judgment is employed in determining these assumptions as of the acquisition date and for each subsequent period. Accordingly, future business and economic conditions, as well as changes in any of the assumptions described above, can materially impact the amount of contingent consideration expense recorded in any given period. However, contingent considerations related to certain holdbacks and completion payments are considered short-term in nature. These amounts are recorded at full value and are only revalued if one of those underlying assumptions changes.
The Company accounts for its hybrid instruments as embedded derivatives in accordance with related guidance. Under this guidance, the embedded derivative is bifurcated from its host contract and recorded on the Company’s consolidated balance sheets at fair value. The fair value of the Company’s embedded derivatives are determined based on observable market data.
See Note 8 for additional information related to fair value measurements.


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(in thousands, except per share amounts)

Stock-Based Compensation Expense
Stock-based compensation expense results from the issuance of shares of restricted common stock and grants of stock options to employees, directors, outside consultants and others. The Company recognizes the costs associated with restricted stock option grants, and employee stock purchases made via the Company’s Employee Stock Purchase Plan (the “ESPP”) using the fair value recognition provisions of accounting standards codification (“ASC”) 718, Compensation - Stock Compensation (“ASC 718”) on a straight-line basis over the vesting period of the awards. Certain option grants have performance conditions that must be achieved prior to vesting and are expensed based on the expected achievement at each reporting period. Stock-based compensation expense is also recognized in association with employee stock purchases related to the Company’s employee stock purchase plan.
Stock-based compensation expense is recognized based on the grant-date fair value. The Company estimates the fair value of the stock-based awards, including stock options, using the Black-Scholes option-pricing model. Determining the fair value of stock-based awards requires the use of highly subjective assumptions, including the fair value of the common stock underlying the award, the expected term of the award and expected stock price volatility.
The assumptions used in determining the fair value of stock-based awards represent management’s estimates, which involve inherent uncertainties and the application of management judgment. As a result, if factors change, and different assumptions are employed, the stock-based compensation could be materially different in the future. The risk-free interest rates are based on the U.S. Treasury yield curve in effect at the time of grant, with maturities approximating the expected life of the stock options.
The Company has no history of paying dividends. Additionally, as of each of the grant dates, there was no expectation that the Company would pay dividends over the expected life of the options. The expected life of the awards is estimated using historical data and management’s expectations. The Company uses historical volatility as the expected volatility assumption required in the Black-Scholes model.
The Company is required to recognize compensation expense for only the portion of options that are expected to vest. If there are any modifications or cancellations of the underlying invested securities or the terms of the stock option, it may be necessary to accelerate, increase or cancel any remaining unamortized stock-based compensation expense. As a result of the adoption of ASU 2016-09 during fiscal 2017, no significant changes were made to the Company’s accounting for forfeitures. Upon adoption the Company recorded a $4,000 deferred tax asset and corresponding credit to retained earnings for excess tax benefits that had not previously been recognized because the related tax deductions had not reduced taxes payable.
For the three months ended September 30, 2018 and 2017, the Company recorded stock-based compensation expense, including expense related to the ESPP, of $390 and $326, respectively, in connection with the stock-based payment awards. For the nine months ended September 30, 2018 and 2017, the stock-based compensation expense was $1,137 and $976, respectively. The compensation expense is allocated between cost of revenues and selling, general and administrative expenses in the accompanying consolidated statements of income (loss) based on the salaries and work assignments of the employees holding the options. As of September 30, 2018, there was $3,119 of unrecognized compensation expense related to non-vested stock option awards that is expected to be recognized over a weighted-average period of 2.2 years.
No awards to individuals who were not either an employee or director of the Company occurred during the nine months ended September 30, 2018 or during the year ended December 31,2017.


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(in thousands, except per share amounts)

Share Repurchase Program
In April 2016, the Company’s Board of Directors authorized the repurchase of up to $10,000 of the Company’s Class A common stock from time to time on the open market in privately negotiated transactions. In February 2017, the Company’s Board of Directors authorized an increase in the Company’s share repurchase authorization to $15,000 of the Company's Class A common stock from time to time on the open market or in privately negotiated transactions. The timing and amount of any shares repurchased will be determined by the Company's management based on its evaluation of market conditions and other factors. Any repurchased shares will be available for use in connection with its stock plans and for other corporate purposes. The repurchase program has and will be funded using the Company's working capital and borrowings under its revolving line of credit. The Company accounts for share repurchases using the cost method. Under this method, the cost of the share repurchase is recorded entirely in treasury stock, a contra equity account. During the three months ended September 30, 2018, the Company did not repurchase any shares of common stock. During the nine months ended September 30, 2018, the Company repurchased 212 shares of common stock in the amount of $1,772, net of fees of $9. During the year ended December 31, 2017, the Company repurchased 575 shares of common stock in the amount of $3,412, net of fees of $23.
Derivative Financial Instruments
In the normal course of business, the Company utilizes derivatives contracts as part of its risk management strategy to manage exposure to market fluctuations in interest and commodity rates. These instruments are subject to various credit and market risks. Controls and monitoring procedures for these instruments have been established and are routinely reevaluated. Credit risk represents the potential loss that may occur because a party to a transaction fails to perform according to the terms of the contract. The measure of credit exposure is the replacement cost of contracts with a positive fair value. The Company seeks to manage credit risk by entering into financial instrument transactions only through counterparties that the Company believes to be creditworthy.
Market risk represents the potential loss due to the decrease in the value of a financial instrument caused primarily by changes in interest rates and commodity prices and rates. The Company seeks to manage market risk by establishing and monitoring limits on the types and degree of risk that may be undertaken. As a matter of policy, the Company does not use derivatives for speculative purposes. The Company considers the use of derivatives with all financing transactions to mitigate risk.
The Company recognizes cash flows from derivative instruments as operating activities in the consolidated statements of cash flows. The effective portion of changes in fair value on interest rate swaps designated as cash flow hedges are recognized in the Company’s consolidated statements of comprehensive income (loss). Changes in fair value on derivatives not designated as hedges are recognized in the Company’s consolidated statements of income (loss).
In June 2018, the Company entered into a term loan agreement, discussed in Note 13, that contained an interest make-whole provision. In August 2018, the Company signed a joinder to the above agreement, which added another series of notes to the term loan that also contained an interest make-whole provision. The Company determined that these provisions fulfill the requirements of an embedded derivative instrument that must be bifurcated from its host agreement. The fair value of this hybrid instrument was determined based on available market data using appropriate valuation models, considering all of the rights and obligations of the instrument, and recorded as a liability on the Company’s balance sheet in connection with the derivative liability and a corresponding debt discount. The instrument is revalued periodically and the changes in fair value are recognized as either gains or losses in earnings in the Company’s consolidated statements of income (loss).
In the third quarter of 2018, the Company adopted Accounting Standards Update (“ASU”) 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, effective January 1, 2018. This standard eliminates the requirement to measure and report a hedge’s ineffectiveness separately in earnings going forward and requires a cumulative-effect adjustment to eliminate the separate measure of ineffectiveness to accumulated other comprehensive income for all designated hedges at the time of adoption. As such, the Company recognized an increase to retained earnings and accumulated other comprehensive loss of $432 to remove the cumulative effect of hedging ineffectiveness previously recognized in earnings through 2017. The Company also recognized a decrease in other expenses, net and an increase in accumulated other comprehensive loss of $54 to remove the cumulative effect of hedging ineffectiveness previously recognized in earnings through 2018.
See Notes 8 and 9 for additional information on the Company’s derivative instruments.


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(in thousands, except per share amounts)

Earnings Per Share
Basic earnings per share is calculated using the Company’s weighted-average outstanding common shares, including vested restricted shares. When the effects are not anti-dilutive, diluted earnings per share is calculated using the weighted-average outstanding common shares; the dilutive effect of convertible preferred stock, under the “if converted” method; and the treasury stock method with regard to warrants and stock options; all as determined under the treasury stock method.
 Three Months Ended September 30,  Nine Months Ended September 30,
 2018 2017  2018 2017
Net income attributable to common shareholders$10,701
 $8,493
  $26,391
 $13,680
Basic weighted-average shares outstanding45,854
 45,524
  45,599
 45,500
Effect of dilutive securities:        
Stock options1,090
 247
  910
 164
Diluted weighted-average shares outstanding46,944
 45,771
  46,509
 45,664
For the three months ended September 30, 2018 and 2017, the total number of shares of common stock related to stock options excluded from the calculation of dilutive shares, as the effect would be anti-dilutive, were 758 and 2,627, respectively. For the nine months ended September 30, 2018 and 2017, the total number of shares of common stock related to stock options excluded from the calculation of dilutive shares, as the effect would be anti-dilutive, were 1,273 and 2,605, respectively.
Variable Interest Entities
Certain contracts are executed jointly through partnership and joint venture arrangements with unrelated third parties. The arrangements are often formed for the single business purpose of executing a specific project and allow the Company to share risks and/or secure specialty skills required for project execution.
        The Company evaluates each partnership and joint venture at inception to determine if it qualifies as a VIE under ASC 810, Consolidation. A variable interest entity is an entity used for business purposes that either (a) does not have equity investors with voting rights or (b) has equity investors who are not required to provide sufficient financial resources for the entity to support its activities without additional subordinated financial support. Upon the occurrence of certain events outlined in ASC 810, the Company reassesses its initial determination of whether the partnership or joint venture is a VIE.
        The Company also evaluates whether it is the primary beneficiary of each VIE and consolidates the VIE if the Company has both (a) the power to direct the economically significant activities of the entity and (b) the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the VIE. The Company considers the contractual agreements that define the ownership structure, distribution of profits and losses, risks, responsibilities, indebtedness, voting rights and board representation of the respective parties in determining whether it qualifies as the primary beneficiary. The Company also considers all parties that have direct or implicit variable interests when determining whether it is the primary beneficiary. When the Company is determined to be the primary beneficiary, the VIE is consolidated. As required by ASC 810, management's assessment of whether the Company is the primary beneficiary of a VIE is continuously performed. See Note 10 for additional disclosures.
Redeemable Non-Controlling Interests
In each of September 2015, June 2017 and June 2018, the Company formed an investment fund with a different third party investor which granted the applicable investor ownership interests in the net assets of certain of the Company’s renewable energy project subsidiaries. The Company currently has three such investment funds each with a different third party investor.
In September 2015, the Company formed an investment fund with a third party investor which granted the investor ownership interests in the net assets of certain of the Company’s renewable energy project subsidiaries. In June 2017, the Company formed a second investment fund with a third party investor which granted the investor ownership interests in the net assets of certain of the Company’s renewable energy project subsidiaries. In June 2018, the Company formed a third investment fund with a third party investor which granted the investor ownership interests in the net assets of certain of the Company’s renewable energy project subsidiaries. The Company entered into these agreements in order to finance the costs of constructing energy assets which are under long-term customer contracts. The Company has determined that these entities qualify as VIEs and that it is the primary beneficiary in the operational partnerships for accounting purposes. Accordingly, the Company will


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(in thousands, except per share amounts)

consolidate the assets and liabilities and operating results of the entities in its consolidated financial statements. The Company will recognize the investors’ share of the net assets of the subsidiaries as redeemable non-controlling interests in its consolidated balance sheet.
The Company has determined that the provisions in the contractual arrangements represent substantive profit-sharing arrangements. The Company has further determined that the appropriate methodology for attributing income and loss to the redeemable non-controlling interests each period is a balance sheet approach referred to as the hypothetical liquidation at book value (“HLBV”) method. Under the HLBV method, the amounts of income and loss attributed to the redeemable non-controlling interests in the consolidated statements of income (loss) reflect changes in the amounts the investors would hypothetically receive at each balance sheet date under the liquidation provisions of the contractual agreements, assuming the net assets of this funding structure were liquidated at recorded amounts. The investors’ non-controlling interest in the results of operations of this funding structure is determined as the difference in the non-controlling interest’s claim under the HLBV method at the start and end of each reporting period, after taking into account any capital transactions, such as contributions or distributions, between the Company’s subsidiaries and the investors. The use of the HLBV methodology to allocate income to the redeemable non-controlling interest holders may create volatility in the Company’s consolidated statements of income (loss) as the application of HLBV can drive changes in net income available and loss attributable to the redeemable non-controlling interests from quarter to quarter.
The Company classified the non-controlling interests with redemption features that are not solely within the control of the Company outside of permanent equity on its consolidated balance sheets. The redeemable non-controlling interests will be reported using the greater of their carrying value at each reporting date as determined by the HLBV method or the estimated redemption values in each reporting period.
See Note 10 for additional disclosures.
Recent Accounting Pronouncements
Derivatives and Hedging
In August 2017, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which improves the financial reporting of hedging relationships to better portray the economic results of an entity's risk management activities in its financial statements. ASU 2017-12 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those annual reporting periods. Early adoption is permitted. The Company adopted ASU 2017-12 during the third quarter of 2018. Upon adoption, the Company recognized an increase to retained earnings and an accumulated other comprehensive loss of $432 to remove the cumulative effect of hedging ineffectiveness previously recognized in earnings, as of January 1, 2018, for contracts designated as hedging instruments that were outstanding at the beginning of the third quarter 2018. The Company also recognized a decrease in other expenses, net and an increase in accumulated other comprehensive loss of $54 to remove the cumulative effect of hedging ineffectiveness previously recognized in earnings through 2018.Measurement
In August 2018, the FASB issuesissued ASU No. 2018-13 Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements on fair value measurements. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently evaluating the impact of ASU 2018-13 on its consolidated financial statements.
Leases
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The guidance in this ASU supersedes the leasing guidance in Topic 840, Leases. Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The new guidance must be adopted using either a full retrospective approach for all periods presented in the period of adoption or a modified retrospective approach. The Company will adopt the guidance in the first quarter of 2019, electing to adopt the guidance using the modified retrospective approach. The Company is in the process of its preliminary evaluation, and assessing the impact on thecondensed consolidated financial statements, with an anticipated completion date of December 31, 2018. As of September 30, 2018, the Company has made significant progress in assessing the impact of the ASU on the Company’s financial statements and ensuringbut does not expect that all leases are being identified and considered under the new standard. As part of this assessment, the Company is


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also evaluating the impact the adoption of this ASUguidance will have a significant impact on its systems and its controls and procedures. The Company will implement targeted changes to its internal reporting process to facilitate the gathering the data needed for the new disclosure requirement. The Company will also implement updates to its control processes and procedures, as necessary, based on changes resulting from the new standard.condensed consolidated financial statements.
Accumulated Other Comprehensive Income
In JanuaryFebruary 2018, the FASB issued ASU No. 2018-01, Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842, which provides an optional transition practical expedient to not evaluate under Topic 842 existing or expired land easements that were not previously accounted for as leases under the current leases guidance in Topic 840. ASU 2018-01 is effective in the same period 2016-02 is adopted. The Company is currently evaluating and assessing the the impact on the consolidated financial statements of the adoption of ASU 2016-02, which is expected to be completed as of December 31, 2018.
In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases, which narrowly amends and clarifies aspects of 2016-02. ASU 2018-10 is effective in the same period 2016-06 is adopted. The Company is currently evaluating and assessing the the impact on the consolidated financial statements of the adoption of ASU 2016-02, which is expected to be completed as of December 31, 2018.
In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, which provides an additional transition option when adopting 2016-02 and a practical expedient concerning the separation of components of a contract. The additional transition option allows the Company to initially apply ASU 2016-02 at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings. Prior periods will still be required to include all existing disclosure requirements in accordance with ASC Topic 840. ASU 2018-11 is effective in the same period 2016-10 is adopted. The Company is currently evaluating and assessing the the impact on the consolidated financial statements of the adoption of ASU 2016-02, which is expected to be completed as of December 31, 2018.
Stock Based Compensation Expense
In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting. This new guidance amends the scope of modification accounting for share-based payment awards. ASU 2017-09 provide guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718. ASU 2017-09 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. The Company adopted these requirements on January 1, 2018. The adoption had no impact on the Company’s consolidated financial statements.
In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which expands the scope of current stock compensation recognition standards to include share-based payment transactions for acquiring goods and services from nonemployees. ASU 2018-07 will become effective for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted, but no earlier than an entity's adoption date of ASU 2014-09 (Topic 606), which the Company adopted on January 1, 2018. The Company adopted ASU 2018-07 during the second quarter of 2018. The adoption had no impact on the Company’s consolidated financial statements, as the Company currently has not issued share-payments to non-employees.
Consolidated Statements of Cash Flow
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 eliminates diversity in practice in how certain cash receipts and cash payments are presented and classified in the consolidated statements of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. The Company adopted these requirements on January 1, 2018. The adoption had no impact on the Company’s consolidated financial statements.
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 23), Restricted Cash. ASU 2016-18 requires restricted cash and cash equivalents to be included with cash and cash equivalents on the statement of cash flows. ASU 2016-18 is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The guidance should be applied using a retrospective transition method for each period presented. The Company has adopted this guidance as of January 1, 2018 and the consolidated statement of cash flow has been prepared to conform with ASU 2016-18 for all periods presented.
Accumulated Other Comprehensive Income


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AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(in thousands, except per share amounts)

In February 2018, the Financial Accounting Standard Board (“FASB”) issued ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, to allow entities to reclassify the income tax effects of tax reform legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”) on items within accumulated other comprehensive income to retained earnings. ASU 2018-02 is effective for fiscal years and interim periods within those years beginning after December 15, 2018, and early adoption is permitted. The Company adopted the guidance as of January 1, 2019. Upon adoption, the Company recognized an increase to retained earnings and a corresponding increase to accumulated other comprehensive loss of $217.
Consolidations
In October 2018, the FASB issued ASU No. 2018-17, Consolidation (Topic 810), Targeted Improvements to Related Party Guidance for Variable Interest Entities, which aligns the evaluation of whether a decision maker's fee is a variable interest with the guidance in the primary beneficiary test by requiring the decision maker to consider an indirect interest in a VIE held by related party under common control on a proportionate basis. The new standard is effective interim and annual periods beginning after December 15, 2019, with early adoption permitted. The Company is currently evaluating the impact of ASU 2018-022018-17 on its condensed consolidated financial statements.
Business Combinations
In January 2017,statements, but does not expect that the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definitionadoption of a Business, which providesthis guidance to entities to assist with evaluating when a set of transferred assets and activities (collectively, the “set”) is a business and provides a screen to determine when a set is not a business. Under the new guidance, when substantially all of the fair value of gross assets acquired (or disposed of) is concentrated in a single identifiable asset, or group of similar assets, the assets acquired would not represent a business. Also, to be considered a business, an acquisition would have to include an input and a substantive process that together significantly contribute to the ability to produce outputs. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, and should be applied on a prospective basis to any transactions occurring within the period of adoption. Early adoption is permitted for interim or annual periods in which the financial statements have not been issued. The Company adopted the guidance effective January 1, 2018, and its adoption did notwill have a significant impact on the Company’sits condensed consolidated financial position or financial statement disclosures.statements.

3. REVENUE FROM CONTRACTS WITH CUSTOMERS

Adoption
On January 1, 2018, the Company adopted ASU 2014-09, Revenue from Contracts with Customers, (Topic 606) using the modified retrospective method applied to those contracts which were not completed as of December 31, 2017. Results for reporting periods beginning January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior period. The Company recorded a net decrease to beginning retained earnings of $4,454 on January 1, 2018 due to the cumulative impact of adopting Topic 606, as detailed below.

 January 1, 2018
 As Reported 606 Adjustments Adjusted Balances 
Assets:         
Costs and estimated earnings in excess of billings $104,852
  $(9,194)  $95,658
 
Prepaid expenses and other current assets 14,037
  4,343
  18,380
 
Deferred income taxes, net 
  1,003
  1,003
 
Liabilities:         
Accrued expenses and other current liabilities

 23,260
  1,190
  24,450
 
Deferred income taxes, net 584
  (584)  
 
Shareholders' Equity:         
Retained earnings 235,844
  (4,454)  231,390
 


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AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(in thousands, except per share amounts)


In accordance with Topic 606, the disclosure of the impact of adoption to the Company’s condensed consolidated statements of income (loss) and balance sheets was as follows:

  Impact of changes in accounting policies
  Three Months Ended September 30, 2018Nine Months Ended September 30, 2018
  As Reported Balances without adoption of Topic 606 Effect of Change Higher/(Lower)As Reported Balances without adoption of Topic 606 Effect of Change Higher/(Lower)
Revenues $205,375
 $206,048
 $(673)$569,767
 $568,985
 $782
Cost of revenues 159,213
 157,476
 1,737
445,356
 441,973
 3,383
Gross profit 46,162
 48,572
 (2,410)124,411
 127,012
 (2,601)
Operating expenses:  
  
  
     
Selling, general and administrative expenses 28,866
 28,866
 
84,871
 84,871
 
Operating income 17,296
 19,706
 (2,410)39,540
 42,141
 (2,601)
Other expenses, net 3,244
 3,244
 
10,754
 10,754
 
Income before provision for income taxes 14,052
 16,462
 (2,410)28,786
 31,387
 (2,601)
Income tax provision 3,351
 3,493
 (142)1,879
 2,040
 (161)
Net income 10,701
 12,969
 (2,268)26,907
 29,347
 (2,440)
Net income attributable to redeemable non-controlling interests 
 
 
(516) (516) 
Net income attributable to common shareholders $10,701
 $12,969
 $(2,268)$26,391
 $28,831
 $(2,440)
Basic income per share $0.23
 $0.28
 $(0.05)$0.58
 $0.63
 $(0.05)
Diluted income per share $0.23
 $0.28
 $(0.05)$0.57
 $0.62
 $(0.05)
 September 30, 2018
  As Reported Balances without adoption of Topic 606 Effect of Change Higher/(Lower)
Assets:      
Costs and estimated earnings in excess of billings $66,471
 $74,886
 $(8,415)
Prepaid expenses and other current assets 13,123
 12,196
 927
Liabilities:      
Accrued expenses and other current liabilities

 28,067
 26,910
 1,157
Deferred income taxes, net 3,453
 5,202
 (1,749)
Shareholders' Equity:      
Retained earnings 258,213
 265,110
 (6,897)
The impact in revenue recognition due to the adoption of Topic 606 is primarily from the timing of revenue recognition for uninstalled materials, amortization of contract acquisition costs over the contract term, and timing of revenue recognition from renewable energy credits. See Note 2 for a summary of the Company’s significant policies for revenue recognition.


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AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(in thousands, except per share amounts)

3. REVENUE FROM CONTRACTS WITH CUSTOMERS
Disaggregation of Revenue
The following table provides information about disaggregated revenue by line of business, reportable segments, and geographical region for the three and nine months ended September 30, 2019 and 2018.
US Regions U.S. Federal Canada Non-Solar DG All Other TotalUS Regions U.S. Federal Canada Non-Solar DG All Other Total
Line of Business
Three Months Ended September 30, 2018
Three Months Ended September 30, 2019Three Months Ended September 30, 2019
Project revenue$77,345
 $49,762
 $9,206
 $1,268
 $4,074
 $141,655
$72,667
 $58,199
 $9,380
 $3,059
 $2,592
 $145,897
O&M revenue4,432
 10,733
 15
 2,006
 
 17,186
4,280
 11,123
 
 2,330
 88
 17,821
Energy assets4,064
 1,507
 921
 18,790
 222
 25,504
6,699
 1,339
 1,327
 16,421
 
 25,786
Other561
 376
 1,462
 74
 18,557
 21,030
433
 597
 1,958
 65
 19,469
 22,522
Total revenues$86,402
 $62,378
 $11,604
 $22,138
 $22,853
 $205,375
$84,079
 $71,258
 $12,665
 $21,875
 $22,149
 $212,026
Nine months ended September 30, 2018
Three months ended September 30, 2018Three months ended September 30, 2018
Project revenue$223,662
 $135,037
 $21,459
 $3,368
 $8,844
 $392,370
$77,345
 $49,762
 $9,206
 $1,268
 $4,074
 $141,655
O&M revenue12,396
 29,477
 34
 6,260
 
 48,167
4,432
 10,733
 15
 2,006
 
 17,186
Energy assets12,844
 3,416
 2,304
 50,405
 821
 69,790
4,064
 1,507
 921
 18,790
 222
 25,504
Other969
 447
 4,669
 143
 53,212
 59,440
561
 376
 1,462
 74
 18,557
 21,030
Total revenues$249,871
 $168,377
 $28,466
 $60,176
 $62,877
 $569,767
$86,402
 $62,378
 $11,604
 $22,138
 $22,853
 $205,375
           
Geographical Regions

Three Months Ended September 30, 2018
United States$86,402
 $62,378
 $419
 $22,138
 $17,445
 $188,782
Canada
 
 11,185
 
 33
 11,218
Nine Months Ended September 30, 2019Nine Months Ended September 30, 2019
Project revenue$196,284
 $134,954
 $20,112
 $6,318
 $8,818
 $366,486
O&M revenue11,580
 30,370
 5
 6,771
 109
 48,835
Energy assets18,063
 2,958
 2,585
 52,612
 582
 76,800
Other
 
 
 
 5,375
 5,375
1,969
 1,055
 4,994
 669
 59,513
 68,200
Total revenues$86,402
 $62,378
 $11,604
 $22,138
 $22,853
 $205,375
$227,896
 $169,337
 $27,696
 $66,370
 $69,022
 $560,321
Nine months ended September 30, 2018
United States$249,871
 $168,377
 $1,587
 $60,176
 $51,336
 $531,347
Canada
 
 26,879
 
 261
 27,140
Nine Months Ended September 30, 2018Nine Months Ended September 30, 2018
Project revenue$223,662
 $135,037
 $21,459
 $3,368
 $8,844
 $392,370
O&M revenue12,396
 29,477
 34
 6,260
 
 48,167
Energy assets12,844
 3,416
 2,304
 50,405
 821
 69,790
Other
 
 
 
 11,280
 11,280
969
 447
 4,669
 143
 53,212
 59,440
Total revenues$249,871
 $168,377
 $28,466
 $60,176
 $62,877
 $569,767
$249,871
 $168,377
 $28,466
 $60,176
 $62,877
 $569,767
AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(in thousands, except per share amounts)



 US Regions U.S. Federal Canada Non-Solar DG All Other Total
Geographical Regions
Three Months Ended September 30, 2019
United States$84,079
 $71,258
 $1,023
 $21,875
 $17,936
 $196,171
Canada
 
 11,642
 
 50
 11,692
Other
 
 
 
 4,163
 4,163
Total revenues$84,079
 $71,258
 $12,665
 $21,875
 $22,149
 $212,026
Three Months Ended September 30, 2018
United States$86,402
 $62,378
 $419
 $22,138
 $17,445
 $188,782
Canada
 
 11,185
 
 33
 11,218
Other
 
 
 
 5,375
 5,375
Total revenues$86,402
 $62,378
 $11,604
 $22,138
 $22,853
 $205,375
Nine Months Ended September 30, 2019
United States$227,896
 $169,337
 $2,281
 $66,370
 $56,052
 $521,936
Canada
 
 25,415
 
 157
 25,572
Other
 
 
 
 12,813
 12,813
Total revenues$227,896
 $169,337
 $27,696
 $66,370
 $69,022
 $560,321
Nine Months Ended September 30, 2018
United States$249,871
 $168,377
 $1,587
 $60,176
 $51,336
 $531,347
Canada
 
 26,879
 
 261
 27,140
Other
 
 
 
 11,280
 11,280
Total revenues$249,871
 $168,377
 $28,466
 $60,176
 $62,877
 $569,767
Contract Balances
The following table provides information about receivables, contract assets and contract liabilities from contracts with customers:
  September 30, 2019 December 31, 2018
Accounts receivable, net $91,755
 $85,985
Accounts receivable retainage, net 16,652
 13,516
Contract Assets:    
Costs and estimated earnings in excess of billings 124,652
 86,842
Contract Liabilities:    
Billings in excess of cost and estimated earnings 28,768
 30,706
  September 30, 2018 January 1, 2018
Accounts receivable, net $90,378
 $85,121
Accounts receivable retainage, net 14,401
 17,484
Contract Assets:    
Costs and estimated earnings in excess of billings 66,471
 95,658
Contract Liabilities:    
Billings in excess of cost and estimated earnings 39,533
 27,248
  January 1, 2018 September 30, 2018 
Accounts receivable, net $85,121
 $90,378
 
Accounts receivable retainage, net 17,484
 14,401
 
Contract Assets:     
Costs and estimated earnings in excess of billings 95,658
 66,471
 
Contract Liabilities:     
Billings in excess of cost and estimated earnings 27,248
 39,533
 
AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(in thousands, except per share amounts)


Accounts receivable retainage represents amounts due from customers, but where payments are withheld contractually until certain construction milestones are met. Amounts retained typically range from 5% to 10% of the total invoice. The


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AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(in thousands, except per share amounts)

Company classifies as a current asset those retainages that are expected to be billed in the next twelve months. Unbilled revenue, presented as costs and estimated earnings in excess of billings, represent amounts earned and billable that were not invoiced at the end of the fiscal period.
Contract assets represent the Company’s rights to consideration in exchange for services transferred to a customer that have not been billed as of the reporting date. The Company’s rights to consideration are generally unconditional at the time its performance obligations are satisfied.
At the inception of a contract, the Company expects the period between when it satisfies its performance obligations, and when the customer pays for the services, will be one year or less. As such, the Company has elected to apply the practical expedient which allows the Company to not adjust the promised amount of consideration for the effects of a significant financing component, when a financing component is present.
When the Company receives consideration, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a sales contract, the Company records deferred revenue, which represents a contract liability. Such deferred revenue typically results from billings in excess of costs incurred and advanceadvanced payments received on project contracts. As of September 30, 2019 and December 31, 2018, the Company classified $7,017$5,534 and $6,343, respectively, as a non-current liability, included in other liabilities on the condensed consolidated balance sheets, for those performance obligations expected to be completed beyond the next twelve months.
The increase in contract assets for the nine months ended September 30, 2019 was primarily due to revenue recognized of approximately $351,180, offset in part by billings of approximately $321,344. The increase in contract liabilities was primarily driven by recognition of revenue as performance obligations were satisfied exceeding increases from the receipt of advance payments from customers, and related billings. For the nine months ended September 30, 2019, the Company recognized revenue of $58,594 that was previously included in the beginning balance of contract liabilities, and billed customers $53,652. Changes in contract liabilities are also driven by reclassifications to or from contract assets as a result of timing of customer payments.
The decrease in contract assets for the nine months ended September 30, 2018 was primarily due to billings of approximately $398,917, offset in part by revenue recognized of $344,768. The changedecrease in contract liabilities was primarily driven by reductions from recognition of revenue as performance obligations were satisfied exceeding the receipt of advance payments from customers, and related billings, exceeding reductions from recognition of revenue as performance obligations were satisfied.billings. For the nine months ended September 30, 2018, the Company recognized revenue of $116,892 and billed customers $119,961, that was previously included in the beginning balance of contract liabilities.liabilities, and billed customers $119,961. Changes in contract liabilities are also driven by reclassifications to or from contract assets as a result of timing of customer payments.
Contracts are often modified for a change in scope or other requirements. The Company considers contract modifications to exist when the modification either creates new or changes the existing enforceable rights and obligations. Most of the Company’s contract modifications are for goods or services that are not distinct from the existing performance obligations.  The effect of a contract modification on the transaction price, and the measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase or decrease) on a cumulative catchup basis.
The Company elected to utilize the modified retrospective transition practical expedient which allows the Company to evaluate the impact of contract modifications as of the adoption date rather than evaluating the impact of the modifications at the time they occurred prior to the adoption date.

Performance obligationsObligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in ASC Topic 606.customer. Performance obligations are satisfied as of a point in time or over time and are supported by contracts with customers. For most of the Company’s contracts, there are multiple promises of goods or services. Typically, the Company provides a significant service of integrating a complex set of tasks and components such as design, engineering, construction management, and equipment procurement for a project contract. The bundle of goods and services are provided to deliver one output for which the customer has contracted. In these cases, the Company considers the bundle of goods and services to be a single performance obligation. The Company may also promise to provide distinct goods or services within a contract, such as a project contract for installation of energy conservation measures and post-installation O&M services. In these cases the Company separates the contract into more than one performance obligation. If a contract is separated into more than one performance obligation, the Company allocates the total transaction price to each performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods or services underlying each performance obligation.
AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(in thousands, except per share amounts)


Backlog - The Company’s remaining performance obligations (hereafter referred to as “backlog”) represent the unrecognized revenue value of the Company’s contract commitments. The Company’s backlog may vary significantly each reporting period based on the timing of major new contract commitments and the backlog may fluctuate with currency movements. In addition, our customers have the right, under some circumstances, to terminate contracts or defer the timing of the Company’s services and their payments to us. At September 30, 2018,2019, the Company had backlog of


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AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(in thousands, except per share amounts)

approximately $1,757,000.$1,696,200. Approximately 26%,29% of our September 30, 20182019 backlog is anticipated to be recognized as revenue in the next twelve months and the remaining, thereafter.
The Company has applied the practical expedient for certain revenue streams to exclude the value of remaining performance obligations for (i) contracts with an original expected term of one year or less or (ii) contracts for which the Company recognizes revenue in proportion to the amount it has the right to invoice for services performed.
Contract acquisition costs:Acquisition Costs
In connection with the adoption of Topic 606, theThe Company is required to accountaccounts for certain acquisition costcosts over the life of the contract, consisting primarily of commissions when paid. Commission costs are incurred commencing at contract signing. Commission costs are allocated across all performance obligations and deferred and amortized over the contract term on a progress towardsof each performance obligations’ completion basis.period.
As of January 1, 2018, the Company capitalized $927 in commission costs related to contracts that were not completed. For contracts that have a duration of less than one year, the Company follows a practical expedient and expenses these costs when incurred. During the three and nine months ended September 30, 2019 and 2018, the amortization of commission costs related to contracts werewas not material and havehas been included in the accompanying condensed consolidated statements of income.
The Company capitalizes costs incurred related to the development of projects prior to contract signing as it is partial fulfillment of its performance obligations.  Capitalized project development costs include only those costs incurred in connection with the development of energy projects, primarily direct labor, interest costs, outside contractor services, consulting fees, legal fees and travel, if incurred after a point in time where the realization of related revenue becomes probable. Project development costs incurred prior to the probable realization of revenue are expensed as incurred. The Company classifies as a current asset those project development efforts that are expected to proceed to construction activity in the twelve months that follow. The Company periodically reviews these balances and writes off any amounts where the realization of the related revenue is no longer probable. Project development costs of $1,673 and $639 were included in other long-term assets as of September 30, 2019 and December 31, 2018, respectively.
During the three months ended September 30, 2019 and 2018, $2,048 and $7,561, respectively, of project development costs were recognized in the condensed consolidated statements of income (loss). Additionally, noon projects that converted to customer contracts. During the nine months ended September 30, 2019 and 2018, $13,081 and $13,571, respectively, of project development costs were recognized in the condensed consolidated statements of income on projects that converted to customer contracts.
No impairment charges in connection with the Company’s commission costs or project development costs were recorded during the periodperiods ended September 30, 2018.
The Company analyzed the impact of adoption of Topic 606 on the Company’s project development costs2019 and determined no change in the Company’s accounting policy was required. In the three and nine months ended September 30, 2018, $7,561 and $13,571, respectively, of project development costs were recognized in the consolidated statement of income (loss) on projects that converted to customer contracts.

2018.
4. BUSINESS ACQUISITIONS AND RELATED TRANSACTIONS
The Company accounts for acquisitions using the acquisition method in accordance with ASC 805, Business Combinations. The purchase price for each has been allocated to the net assets based on their estimated fair values at the date of each acquisition as set forth in the table below. The excess purchase price over the estimated fair value of the net assets, which are calculated using level 3 inputs per the fair value hierarchy as defined in Note 8,10, acquired has been recorded as goodwill. Intangible assets, if identified, have been recorded and are being amortized over periods ranging from one to fifteen years. See Note 5 for additional information.
Determining the fair value of certain assets and liabilities assumed is judgmental in nature and often involves the use of significant estimates and assumptions. Certain amounts below are provisional based on our best estimates using information available as of the reporting date. The Company is waiting for information to become available to finalize its valuation of certain elements of this transaction.these transactions. Specifically, the assigned values for energy assets, intangibles, and goodwill are provisional in nature and subject to change upon the completion of the final valuation of such elements.
In January 2017, the Company acquired two solar PV projects currently under construction as well as associated construction loan agreements with a bank for use in providing non-recourse financing for these acquired solar PV projects currently under construction. The Company paid $2,409 to acquire the assets under construction, and assumed $5,635 of associated non-recourse financing. The pro-forma effects of this acquisition on our operations are not material.
During the nine months ended September 30, 2018, in order to expand its portfolio of energy assets, the Company acquired five solar projects from two developers for total consideration of $63,119, which included contingent consideration of $4,022 that will be paid upon final completion of the respective projects between the end of 2018 and throughout 2019. None of the contingent consideration has been paid to date. For all these projects, as of September 30, 2018, the Company has paid $59,097  to the developers of the projects. The Company also entered into a definitive agreement to acquire another solar project from one of the same developers. The total consideration for this solar project is $3,019. As of September 30, 2018, the Company has paid $916 to the developer of this project.
During the nine months ended September 30, 2018,2019, the Company completed an acquisition of certain assets of Washington, DCa Massachusetts based mechanical, electrical, plumbing,solar operations and fire protection design company, JVP Engineers, P.C. The consideration consisted of $2,326, of which, $1,901 has been paid to date. The remaining balance is attributed to a contingent consideration holdback contingent on the collection of certain receivables and will be be paid fifteen months from the completion of the


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AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(in thousands, except per share amounts)

acquisition. No debt was assumed or cash acquired in the transaction. The pro-forma effects of this acquisition on our operations are not material.
During the nine months ended September 30, 2018, the Company completed an acquisition of certain assets of the Hawaii-based building science and design engineering consultingmaintenance firm Chelsea Group Limited. The consideration consisted of $1,691 of cash and potential contingentfor consideration of up to $2,000 based upon meeting certain future revenue targets over the next five years.$1,279. The final purchase price is subject to a net working capital adjustment, dependent on the level of working capital at the acquisition date, that has not yet been finalized yet. The fair value of the contingent consideration was $555 as of the date of acquisition. No debt was assumed or cash acquired in the transaction.at September 30, 2019. The pro-forma effects of this acquisition on
AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(in thousands, except per share amounts)


our operations are not material. During the nine months ended September 30, 2019, the Company had a measurement period adjustment of $91, which was recorded as a reduction to goodwill in connection with this acquisition.
A summary of the cumulative consideration paid and the allocation of the purchase price of all of the acquisitions in each respective yearperiod is as follows:
2018 2017September 30, 2019 December 31, 2018
Accounts receivable$793
 $
 $150
 $1,015
Prepaid expenses and other current assets11
 256
 2
 12
Property and equipment and energy assets63,119
 7,788
 315
 
Intangibles680
 
 500
 680
Goodwill3,042
 
 315
 2,845
Accounts payable(42) 
 (32) (67)
Billings in excess of cost and estimated earnings
(62) 
Purchase price$67,687
 $8,044
 $1,188
 $4,485
Total, net of cash received$67,687
 $8,044
 $1,188
 $4,485
Debt assumed$
 $5,635
 $
 $
Total fair value of consideration$67,687
 $2,409
 $1,188
 $4,485
The results of the acquired assets since the dates of the acquisitions have been included in the Company’s operations as presented in the accompanying condensed consolidated statements of income, (loss),condensed consolidated statements of comprehensive income (loss) and condensed consolidated statements of cash flows.

During the nine months ended September 30, 2019, the Company had an additional measurement period adjustment of $628 related to a 2018 acquisition which was recorded as a reduction to goodwill and included a $398 reduction in the hold back contingency discussed further in Notes 5 and 9.
During the nine months ended September 30, 2019, in order to expand its portfolio of energy assets, the Company acquired 4 solar projects from a developer. The Company has concluded that in accordance with ASC 805, Business Combinations, these acquisitions did not constitute a business as the assets acquired in each case are considered a single asset or group of similar assets that made up substantially all of the fair market value of the acquisitions. See Note 6 for additional disclosures on these asset acquisitions.
5. GOODWILL AND INTANGIBLE ASSETS
The changes in the carrying value of goodwill attributable to each reportable segment are as follows:
 U.S. Regions U.S. Federal Canada Non-solar DG Other Total
Balance, December 31, 2017$24,759
 $3,375
 $3,494
 $
 $24,507
 $56,135
Goodwill acquired during the year1,611
 1,431
 
 
 
 3,042
Currency effects
 
 (96) 
 (228) (324)
Balance, September 30, 2018$26,370
 $4,806
 $3,398
 $
 $24,279
 $58,853
Accumulated Goodwill Impairment Balance, December 31, 2017$
 $
 $(1,016) $
 $
 $(1,016)
Accumulated Goodwill Impairment Balance, September 30, 2018$
 $
 $(1,016) $
 $
 $(1,016)
 U.S. Regions U.S. Federal Canada Non-solar DG Other Total
Balance, December 31, 2018$26,370
 $4,609
 $3,217
 $
 $24,136
 $58,332
Goodwill acquired during the year406
 
 
 
 
 406
Re-measurement adjustment(91) (628) 
 
 
 (719)
Currency effects
 
 95
 
 (215) (120)
Balance, September 30, 2019$26,685
 $3,981
 $3,312
 $
 $23,921
 $57,899
Accumulated Goodwill Impairment           
Balance, December 31, 2018$
 $
 $(1,016) $
 $
 $(1,016)
Balance, September 30, 2019$
 $
 $(1,016) $
 $
 $(1,016)
The Company completed two acquisitionsone acquisition during the nine months ended September 30, 2018,2019, which resulted in a $3,042$315 net increase in goodwill.goodwill as disclosed in Note 4. During the nine months ended September 30, 2019, the Company recorded measurement period adjustments which resulted in a reduction of goodwill of $719. See Note 4 for further discussion surrounding the measurement period adjustments.
Since the Company’s annual goodwill impairment test there have been no events that would have triggered a need for an interim impairment test.
Separable intangible assets that are not deemed to have indefinite lives are amortized over their useful lives. The Company annually assesses whether a change in the life over which the Company’s assets are amortized is necessary, or more frequently if events or circumstances warrant.



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AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(in thousands, except per share amounts)

Acquired intangible assets other than goodwill that are subject to amortization include customer contracts, customer relationships, non-compete agreements, technology and trade names. Customer contracts are amortized ratably over the period of the acquired customer contracts ranging in periods from approximately one to five years. All other acquired intangible assets are amortized over periods ranging from approximately four to fifteen years, as defineddetermined by the nature of the respective intangible asset. TheAs discussed in Note 4, the Company completed an acquisition during the nine months ended September 30, 2018in January 2019 which resulted in a $500 increase in customer relationships, which will be amortized over an eight year period. The Company completed another acquisition during the nine months ended September 30, 2018 which resulted in a $180 increase in customer contracts, which will be amortized over a two8 year period.
The gross carrying amount and accumulated amortization of intangible assets are as follows:
As of September 30, As of December 31,As of September 30, As of December 31,
2018 20172019 2018
Gross Carrying Amount      
Customer contracts$7,888
 $7,786
$7,778
 $7,818
Customer relationships12,195
 11,863
12,438
 12,082
Non-compete agreements3,029
 3,052
2,991
 3,013
Technology2,737
 2,751
2,722
 2,710
Trade names544
 546
543
 541
26,393
 25,998
26,472
 26,164
Accumulated Amortization      
Customer contracts7,708
 7,786
7,695
 7,668
Customer relationships10,151
 9,557
10,740
 10,302
Non-compete agreements3,028
 3,048
2,991
 3,013
Technology2,665
 2,642
2,707
 2,651
Trade names526
 525
529
 526
24,078
 23,558
24,662
 24,160
Intangible assets, net$2,315
 $2,440
$1,810
 $2,004
Amortization expense related to customer contracts is included in cost of revenues in the condensed consolidated statements of income (loss).income. Amortization expense related to all other acquired intangible assets is included in selling, general and administrative expenses in the condensed consolidated statements of income (loss).income. Amortization expense for the three months ended September 30, 20182019 and 20172018 related to customer contracts was $22 and $0, respectively. Amortization expense for the three months ended September 30, 2019 and $8,2018 related to all other acquired intangible assets and was $202 and $269, respectively. Amortization expense for the nine months ended September 30, 20182019 and 20172018 related to customer contracts was $0$67 and $23, respectively. Amortization expense for the three months ended September 30, 2018 and 2017 related to all other acquired intangible assets was $269 and $358,$0, respectively. Amortization expense for the nine months ended September 30, 20182019 and 20172018 related to all other acquired intangible assets and was $771$614 and $1,059,$771, respectively.



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AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(in thousands, except per share amounts)


6. INCOME TAXESENERGY ASSETS
The provision for income taxes was $3,351Energy assets consist of the following:
 September 30, December 31,
 2019 2018
Energy assets$693,916
 $619,708
Less - accumulated depreciation and amortization(186,157) (159,756)
Energy assets, net$507,759
 $459,952
Included in energy assets are financing lease assets and $3,881accumulated depreciation of financing lease assets. Financing lease assets consist of the following:
 September 30, December 31,
 2019 2018
Financing lease assets$42,402
 $42,402
Less - accumulated depreciation and amortization(5,736) (4,139)
Financing lease assets, net$36,666
 $38,263
Depreciation and amortization expense on the above energy assets, net of deferred grant amortization, for the three months ended September 30, 2019 and 2018 was $8,843 and 2017,$6,753, respectively, and is included in cost of revenues in the accompanying condensed consolidated statements of income. Included in these depreciation and amortization expense totals are depreciation and amortization expense on financing lease assets of $533 and $499 for the three months ended September 30, 2019 and 2018, respectively. The provision for income taxes was $1,879Depreciation and $4,296amortization expense on the above energy assets, net of deferred grant amortization, for the nine months ended September 30, 2019 and 2018 was $26,338 and 2017,$19,699, respectively, and is included in cost of revenues in the accompanying condensed consolidated statements of income. Included in these depreciation and amortization expense totals are depreciation and amortization expense on financing lease assets of $1,597 and $1,538 for the nine months ended September 30, 2019 and 2018, respectively.
The estimated 2018 effective tax rateCompany capitalizes interest costs relating to construction financing during the period of construction. Capitalized interest is 23.8%included in energy assets, net in the Company’s condensed consolidated balance sheets. Capitalized interest is amortized to cost of revenues in the Company’s condensed consolidated statements of income on a straight line basis over the useful life of the associated energy asset. There was $632 and $638 of interest capitalized for the three months ended September 30, 2019 and 2018, comparedrespectively. There was $2,210 and $2,376 of interest capitalized for the nine months ended September 30, 2019 and 2018, respectively.
As of September 30, 2019 and December 31, 2018, there are 3 ESPC asset projects which are included within energy assets, net on the Company’s condensed consolidated balance sheets. The Company controls and operates the assets as well as obtains financing during the construction period of the assets. As the Company has an obligation to the customer for performance of the asset, the Company records a 30.6% estimated annual effective tax rateliability associated with these energy assets, although, the customer is responsible for payments to the lender based on the energy asset’s production. As of September 30, 2019 and December 31, 2018, the liabilities recognized in association with these assets were $10,233 and $8,224, respectively, of which $724 and $354, respectively, has been classified as the current portion and is included in accrued expenses and other current liabilities and the remainder is included in other liabilities in the accompanying condensed consolidated balance sheets.
During the nine months ended September 30, 2019, in order to expand its portfolio of energy assets, the Company acquired several energy projects, which did not constitute businesses under ASU 2017-01, Business Combinations. The Company acquired and closed on 4 solar projects from a developer for a total purchase price of $2,529. The purchase price included deferred consideration of $668 that will be paid upon final completion of the respective projects throughout 2019. As of September 30, 2019, the Company has paid $1,861 to the developers of the projects. The Company also has a definitive agreement to purchase an additional 3 solar projects from a developer for a total purchase price of $4,556, of which, the Company has paid $456 to the developers of the projects. As of September 30, 2019, the Company has remaining deferred purchase price consideration on previously closed projects of $4,122.
AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(in thousands, except per share amounts)


As of September 30, 2019, the Company had $863 in ARO assets recorded in project assets, net of accumulated depreciation, and $930 in ARO liabilities recorded in accrued expenses and other current liabilities and other liabilities. During the three and nine months ended September 30, 2019, the Company recorded $12 and $34, respectively, of depreciation expense related to the ARO asset. During the three and nine months ended September 30, 2019, the Company recorded $10 and $32, respectively, in accretion expense to the ARO liability, which is reflected in the accretion of ARO and contingent consideration on the condensed consolidated statements of cash flows. The Company’s current ARO liabilities relate to the removal of equipment and pipelines at certain renewable gas projects and obligations related to the decommissioning of certain solar facilities.
7. INCOME TAXES
The Company recorded a provision for income taxes of $939 and $3,351, respectively, for the three months ended September 30, 2017.2019 and 2018. The Company recorded a provision for income taxes of $2,000 for the nine months ended September 30, 2019 and a provision for income taxes of $1,879 for the nine months ended September 30, 2018. The estimated 2018 effective annualized tax rate wasimpacted by discrete items is 10.1% for the three months ended September 30, 2019 compared to a 23.8% estimated effective annualized tax rate impacted by the period discrete items for the three months ended September 30, 2018. The estimated effective annualized tax rate impacted by period discrete items is 9.2% for the nine months ended September 30, 2019 compared to 6.5% for the nine months ended September 30, 2018 compared to a 24.8% estimated annual effective tax rate for the nine months ended September 30, 2017.2018.
The principal reason for the difference between the statutory rate and the estimated annual effective rate for 2019 were the effects of investment tax credits to which the Company is entitled from solar plants which have been placed into service or are forecasted to be placed into service during 2019. The principle reasons for the difference between the statutory rate and the estimated annual effective tax rate for 2018 were the effects of a $5,900 benefit of the 2017 Section 179D deduction, which was extended in February 2018 and treatedwas included as a discrete eventtax deduction in the year to date period,2018, and the use of investment tax credits to which the Company is entitled from owned plants. The principal reason for the difference between the statutory rate and the estimated annual effective rate for 2017 were the effects of investment tax credits to which the Company is entitled from owned plants.


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AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(in thousands, except per share amounts)

The investment tax credits and production tax credits to which the Company may be entitled fluctuate from year to year based on the cost of the renewable energy plants the Company places or expects to place in service and production levels at company owned facilities in that year. As part of the Bipartisan Budget Act signed into law on February 9, 2018 the Section 179D deduction for 2017 was retroactively extended. The Section 179D deduction expired on December 31,has not been re-approved for tax years beginning after 2017.
A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows:
Gross Unrecognized Tax BenefitsGross Unrecognized Tax Benefits
Balance, December 31, 2017$600
Balance, December 31, 2018$1,600
Additions for prior year tax positions

Settlements with tax authorities

Reductions of prior year tax positions

Balance, September 30, 2018$600
Balance, September 30, 2019$1,600
At September 30, 20182019 and December 31, 2017,2018, the Company had approximately $600$1,600 of total gross unrecognized tax benefits. At September 30, 20182019 and December 31, 2017,2018, the Company had approximately $80$705 of total gross unrecognized tax benefits (net(both net of the federal benefit on state amounts) representing the amount of unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in any future periods.
The 2017 Tax Cuts and Jobs Act (the “2017 Tax Act”) was signed into law on December 22, 2017. The 2017 Tax Act significantly revises the U.S. corporate income tax by, among other things, lowering the statutory corporate tax rate from 35% to 21%. The 2017 Tax Act also enhanced and extended through 2026 the option to claim accelerated depreciation deductions on qualified property.
On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Legislation. The Company has recognized the provisional tax impacts related to the revaluation ofpresented all deferred tax assets and liabilities as net liabilities and included these amountsnoncurrent on its condensed consolidated balance sheets as of September 30, 2019 and December 31, 2018.
8. LEASES
On January 1, 2019, the Company adopted ASU No. 2016-02, Leases (Topic 842), using the modified retrospective approach. The Company elected the package of practical expedients available in its consolidated financial statementsthe standard and as a result, did not reassess the lease classification of existing contracts or leases or the initial direct costs associated with existing leases. The Company has also elected the practical expedient to not separate lease components and non-lease components and will account for the yearleases as a single lease component for all classes of leases.
AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(in thousands, except per share amounts)


As a result of the adoption of ASC 842, the Company recognized an increase in lease ROU assets of $31,639, current portions of operating lease ROU liabilities of $5,084 and an increase to long-term portions of operating lease liabilities of $28,480. There was no net impact to the condensed consolidated statements of income or retained earnings for the adoption of ASC 842. No impairment was recognized on the ROU asset upon adoption. These adjustments are detailed as follows:
 As of January 1, 2019
 As Reported 842 Adjustment Adjusted Balances
Operating Leases:     
Operating lease assets$
 $31,639
 $31,639
Current portions of operating lease liabilities
 5,084
 5,084
Long-term portions of operating lease liabilities
 28,480
 28,480
Total operating lease liabilities$
 $33,564
 $33,564
Weighted-average remaining lease term    10 years
Weighted-average discount rate    6.0%
      
Financing Leases:     
Energy assets, net$38,263
 $
 $38,263
Current portions of financing lease liabilities4,956
 
 4,956
Long-term financing lease liabilities, less current portions and net of deferred financing fees28,407
 
 28,407
Total financing lease liabilities$33,363
 $
 $33,363
Weighted-average remaining lease term    18 years
Weighted-average discount rate    11.7%
The Company enters into a variety of operating lease agreements through the normal course of its business including certain administrative offices. The leases are long-term, non-concealable real estate lease agreements, expiring at various dates through fiscal 2025. The agreements generally provide for fixed minimum rental payments and the payment of utilities, real estate taxes, insurance and repairs. The Company also leases certain land parcels related to our energy projects, expiring at various dates through fiscal 2044. The office and land leases make up a significant portion of the Company’s operating lease activity. Many of these leases have one or more renewal options that allow the Company, at it’s discretion, to renew the lease for six months to seven years. Only renewal options that the Company believed were likely to be exercised were included in our lease calculations. Many land leases include minimum lease payments that increase when the related project becomes operational. In these cases, the commercial operation date was estimated by the Company and used to calculate the estimated minimum lease payments.
The Company also enters into leases for IT equipment and service agreements, automobiles, and other leases related to our construction projects such as equipment, mobile trailers and other temporary structures. The Company utilizes the portfolio approach for this class of lease. These leases are either short-term in nature or immaterial.
A portion of the Company’s real estate leases are generally subject to annual changes in the Consumer Price Index (“CPI”). The Company utilized each lease’s minimum lease payments to calculate the lease balances upon transition. The subsequent increases in rent based on changes in CPI were excluded and will be excluded for future leases from the calculation of the lease balances, but will be recorded to the condensed consolidated statement of income as part of our operating lease costs.
The Company has elected the practical expedient to not separate lease and non-lease components for existing leases for real estate and land leases. Going forward if a lease has non-lease components the Company will allocate consideration based on price information in the agreement or, if this information is not available, the Company will make a good faith estimate based on available pricing information at the time.



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AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(in thousands, except per share amounts)


The discount rate was calculated using an incremental borrowing rate based on financing rates on secured comparable notes with comparable terms and a synthetic credit rating calculated by a third party. The Company elected to apply the discount rate using the remaining lease term at the date of adoption.
The Company has a number of leases that are classified as financing leases, which relate to transactions that are considered sale-leasebacks under ASC 840. See the sale-leaseback section below for additional information on the Company’s financing leases.
Supplemental balance sheet information related to leases at September 30, 2019 is as follows:
 September 30, 2019
Operating Leases: 
Operating lease assets

$32,540
Current operating lease liabilities5,935
Long-term portions of operating lease liabilities28,799
Total operating lease liabilities$34,734
Weighted-average remaining lease term10 years
Weighted-average discount rate6.3%
  
Financing Leases: 
Energy assets, net$36,666
Current portions of financing lease liabilities5,008
Long-term financing lease liabilities, less current portions and net of deferred financing fees26,098
Total financing lease liability$31,106
Weighted-average remaining lease term17 years
Weighted-average discount rate11.8%
The costs related to our leases are as follows:
 Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019
Operating Lease:   
Operating lease costs$1,913
 $5,660
    
Financing Lease:   
Amortization expense533
 1,597
Interest on lease liabilities854
 2,750
    
Total lease costs$3,300
 $10,007



20

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AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(in thousands, except per share amounts)


The Company’s estimated minimum future lease obligations under our leases are as follows:
 Operating Leases Financing Leases
Year ended December 31, 
  
2019$1,851
 $4,302
20207,523
 7,881
20216,156
 6,775
20225,600
 5,173
20234,348
 3,686
Thereafter22,977
 26,799
Total minimum lease payments$48,455
 $54,616
Less: interest13,721
 23,510
Present value of lease liabilities$34,734
 $31,106
The Company has determined that certain power purchase agreements (“PPAs”) contain a lease component in accordance with ASC 840, Leases. The Company recognized $2,243 and $6,737 of operating lease revenue under these agreements during the three and nine months ended December 31, 2017. AsSeptember 30, 2019, respectively, which was reflected in revenues on the condensed consolidated statements of December 31, 2017,income. PPAs signed after January 1, 2019 no longer meet the definition of a lease upon the adoption of ASC 842, Leases, and are instead accounted for in accordance with ASC 606, Revenues From Contracts With Customers.
Sale-Leaseback
For solar PV projects that the Company has substantially completeddetermined not to be integral equipment, the Company then determines if the leaseback should be classified as a financing lease or an operating lease. All solar PV projects sold to date under the sale-leaseback program have been determined by the Company to be financing leases. For leasebacks classified as financing leases, the Company initially records a financing lease asset and financing lease obligation in its accounting forcondensed consolidated balance sheets equal to the tax effectslower of the 2017 Tax Act.  If revisions are needed as new information becomes available, the final determination of the deemed re-measurementpresent value of the Company’s deferred assets and liabilities,future minimum leaseback payments or the deemed mandatory repatriation or other applicable provisionsfair value of the Tax Legislation will be completed as additional information becomes available, but no later than one yearsolar PV project. For financing leasebacks, the Company defers any gain or loss, representing the excess or shortfall of cash received from the enactmentinvestor compared to the net book value of the 2017 Tax Act.asset in the Company’s condensed consolidated balance sheets at the time of the sale. The Company records the long term portion of any deferred gain or loss in other liabilities and other assets, respectively, and the current portion of any deferred gain and loss in accrued expenses and other current liabilities and prepaid expenses and other current assets, respectively, in its condensed consolidated balance sheets and amortizes the deferred amounts over the lease term in cost of revenues in its condensed consolidated statements of income. Net amortization expense in cost of revenues related to deferred gains and losses was $57 and $48 of net gains for the three months ended September 30, 2019 and 2018, respectively. Net amortization expense in cost of revenues related to deferred gains and losses was $172 and $153 for the nine months ended September 30, 2019 and2018, respectively.
During the third quarter of 2018, the Company entered into an agreement with an investor which gives us the option to sell and contemporaneously lease back solar photovoltaic (“solar PV”) projects through August 2019up to a maximum funding amount of $100.0 million. The Company amended this agreement to extend the term through November 2019. As of September 30, 2019, $90.2 million remained available under the lending commitment.







21

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AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(in thousands, except per share amounts)


A summary of amounts related to sale leasebacks in the Company’s condensed consolidated balance sheets is as follows:
 September 30, December 31,
 2019 2018
Financing lease assets, net$36,666
 $38,263
Deferred loss, short-term, net115
 115
Deferred loss, long-term, net1,830
 1,917
Total deferred loss$1,945
 $2,032
Financing lease liabilities, short-term5,008
 4,956
Financing lease liabilities, long-term26,098
 28,407
Total financing lease liabilities$31,106
 $33,363
Deferred gain, short-term, net345
 345
Deferred gain, long-term, net5,549
 5,808
Total deferred gain$5,894
 $6,153

7.9. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
The Company also is involved in a variety of claims and other legal proceedings generally incidental to its normal business activities. While the outcome of any of these proceedings cannot be accurately predicted, the Company does not believe the ultimate resolution of any of these existing matters would have a material adverse effect on its financial condition or results of operations.
Commitments as a Result of Acquisitions
Related to the Company's acquisition of Energy Excel LLP (“EEX”)in the second quarter of 2014, the former owners of EEX, who are now employees of the Company, may be entitled to receive up to 4,500 GBP ($5,861 converted as of September 30, 2018) in additional consideration, accounted for as compensation for post-combination services, if the acquired business meets certain financial performance milestones through December 31, 2018. No amounts were accrued as of September 30, 2018 and December 31, 2017, respectively, as milestones are not considered likely to be achieved.
During the nine months ended September 30,In May 2018, the Company completed an acquisition which provided for a $425 cash consideration holdback contingenthold back upon the Company collecting certain acquired receivables. The contingent



29

Tablereceivables, which was subsequently reduced to $27. As of Contents
AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(in thousands, except per share amounts)

September 30, 2019. the consideration will be paid fifteen months from the completion of the acquisitionis currently due and is recorded in the accrued expenses and other current liabilities line on the condensed consolidated balance sheets.
During the nine months ended September 30,In August 2018, the Company completed an acquisition which provided for a revenue earn-out contingent upon the acquired business meeting certain cumulative revenue targets over five years from the next five years.acquisition date. The Company evaluated financial forecasts of the acquired business and concluded that the fair value of this earn-out iswas approximately $555, which was subsequently increased to $650 as of September 30, 2019 and is recorded in the other liabilities on the condensed consolidated balance sheets. The contingent consideration will be paid yearly, commencing in 2020, if any of the cumulative revenue targets are achieved and theachieved. The fair value of the earn-out will be periodically re-evaluated and adjustments will be recorded as needed. See Note 10 for additional information.
During the nine months ended September 30,In November 2018, the Company completed thean acquisition of five solar projectscertain lease options, which provided for an earn-out if the lease option is exercised and if certain financial metrics are achieved. The Company evaluated the acquired lease options and concluded that includedthe fair-value of this contingent consideration of $4,022 thatliability was approximately $363, which was subsequently increased to $378 at September 30, 2019 and is recorded in accrued expenses and other current liabilities and other liabilities on the condensed consolidated balance sheets. Payments will be paid upon final completion of the respective projects between the end of 2018made when milestones are achieved. The contingent liability will be periodically re-evaluated and throughout 2019.
adjustments will be recorded as needed. See Note 10 for additional information.
8.10. FAIR VALUE MEASUREMENT
The Company recognizes its financial assets and liabilities at fair value on a recurring basis (at least annually). Fair value is defined as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.



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AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(in thousands, except per share amounts)


Three levels of inputs that may be used to measure fair value are as follows:
Level 1:  Inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.
Level 2:  Inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3:  Inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.
The following table presents the input level used to determine the fair values of the Company’s financial instruments measured at fair value on a recurring basis:
 Fair Value as of Fair Value as of
 September 30, December 31, September 30, December 31,
Level 2018 2017Level 2019 2018
Assets:        
Interest rate swap instruments2 $1,494
 $233
2 $41
 $733
Commodity swap instruments2 34
 
2 167
 33
Total assets $1,528
 $233
 $208
 $766
Liabilities:        
Interest rate swap instruments2 $1,548
 $3,529
2 $7,600
 $3,187
Commodity swap instruments2 46
 
2 
 70
Interest make-whole provisions2 1,488
 
2 873
 1,808
Contingent revenue earn-out3 555
 
3 1,028
 962
Total liabilities $3,637
 $3,529
 $9,501
 $6,027
The fair value of the Company’s interest rate swaps was determined using a cash flow analysis on the expected cash flow of the contract in combination with observable market-based inputs, including interest rate curves and implied volatilities. As part of this valuation, the Company considered the credit ratings of the counterparties to the interest rate swaps to determine if a credit risk adjustment was required.
The fair value of the Company’s commodity swaps was determined using a cash flow analysis on the expected cash flow of the contract in combination with observable forward price inputs obtained from a third-party pricing source. As part of this



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valuation, the Company considered the credit ratings of the counterparties to the commodity swaps to determine if a credit risk adjustment was required.
The fair value of the Company’s make-whole provisions were determined by comparing them against the rates of similar debt instruments under similar terms without a make-whole provision obtained from various highly rated third-party pricing sources.
The fair value of the Company’s contingent revenue earn-out wasconsideration liabilities were determined by evaluating the acquired company’sasset’s future financial forecasts and evaluating which, if any, of the cumulative revenue targets, financial metrics and/or milestones are likely to be met. The Company has classified contingent consideration related to certain acquisitions within Levellevel 3 of the fair value hierarchy because the fair value is derived using significant unobservable inputs, which include discount rates and probability-weighted cash flows. The Company determined the fair value of its contingent consideration obligations based on a probability-weighted income approach derived from financial performance estimates and probability assessments of the attainment of certain targets. The Company establishes discount rates to be utilized in its valuation models based on the cost to borrow that would be required by a market participant for similar instruments. In determining the probability of attaining certain technical, financial and operation targets, the Company utilizes data regarding similar milestone events from our ownthe Company’s experience, while considering the inherent difficulties and uncertainties in developing a product. On a quarterly basis, the Company reassesses the probability factors associated with the financial, operational and technical targets for its contingent consideration obligations. Significant judgment is employed in determining the appropriateness of these assumptions as of the acquisition date and for each subsequent period.



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(in thousands, except per share amounts)


The key assumptions as of September 30, 20182019, related to the contingent consideration from the August 2018 acquisition of certain assets, used in the model include:include a discount rate of 18% for purposes of discounting the low and base case scenarios associated with achievement of the financial based earn-out. The probabilities assigned to these scenarios were 50% for both the low and base case scenarios. An increase or decrease in the probability of achievement of any scenario could result in a significant increase or decrease to the estimated fair value of the contingent consideration liability.

The key assumptions as of September 30, 2019, related to the contingent consideration from the November 2018 acquisition of certain lease options, used in the model include a discount rate of 18% for purposes of discounting the low, base and high case scenarios associated with achievement of the financial based earn-out. The probabilities assigned to these scenarios were 20% for the low case, 75% for the base case and 5% for the high case. An increase or decrease in the probability of achievement of any scenario could result in a significant increase or decrease to the estimated fair value of the contingent consideration liability.
The following table sets forth a summary of changes in fair value of contingent liabilities classified as Level 3 for the nine months ended September 30, 2019:
 Nine Months Ended
 September 30, 2019
Contingent consideration liabilities balance at December 31, 2018$962
     Changes in the fair value of contingent consideration obligation$66
Contingent consideration liabilities balance at September 30, 2019$1,028
The fair value of financial instruments is determined by reference to observable market data and other valuation techniques, as appropriate. The only category of financial instruments where the difference between fair value and recorded book value is notable is long-term debt. At September 30, 20182019 and December 31, 20172018 the fair value of the Company’s long-term debt was estimated using discounted cash flows analysis, based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements which are considered to be level two inputs. There have been no transfers in or out of level two or level three financial instruments for the nine months ended September 30, 20182019 and the year ended December 31, 2017. 2018.
Based on the analysis performed, the fair value and the carrying value of the Company’s long-term debt, excluding capitalfinancing leases, are as follows:
 As of September 30, 2018 As of December 31, 2017
 Fair Value Carrying Value Fair Value Carrying Value
Long-term debt value (Level 2)$213,632
 $213,877
 $160,108
 $160,598
 As of September 30, 2019 As of December 31, 2018
 Fair Value Carrying Value Fair Value Carrying Value
Long-term debt (Level 2)$249,404
 $247,618
 $211,823
 $212,687
The Company is also required periodically to measure certain other assets at fair value on a nonrecurring basis, including long-lived assets, goodwill and other intangible assets, among other items.assets. There were no assets recorded at fair value on a non-recurring basis at September 30, 20182019 or December 31, 2017.2018.



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(in thousands, except per share amounts)


9.11. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
At September 30, 20182019 and December 31, 2017,2018, the following table presents information about the fair value amounts of the Company’s derivative instruments isare as follows:
 Derivatives as of
 September 30, 2019 December 31, 2018
 Balance Sheet Location Fair Value Balance Sheet Location Fair Value
Derivatives Designated as Hedging Instruments:       
Interest rate swap contractsOther assets $41
 Other assets $703
Interest rate swap contractsOther liabilities 7,565
 Other liabilities 3,187
Derivatives Not Designated as Hedging Instruments:       
Interest rate swap contractsOther assets $
 Other assets $30
Interest rate swap contractsOther liabilities 35
 Other liabilities 
Commodity swap contractsOther assets 167
 Other assets 33
Commodity swap contractsOther liabilities 
 Other liabilities 70
Interest make-whole provisionsOther liabilities 873
 Other liabilities 1,808
As of September 30, 2019 and December 31, 2018 all but three and four, respectively, of the Company’s freestanding derivatives were designated as hedging instruments.
The following tables present information about the effects of the Company’s derivative instruments on the condensed consolidated statements of income and condensed consolidated statements of comprehensive income:
 Location of (Gain) Loss Recognized in Net Income Amount of (Gain) Loss Recognized in Net Income
   Three Months Ended September 30, Nine Months Ended September 30,
   2019 2018 2019 2018
Derivatives Designated as Hedging Instruments:         
Interest rate swap contractsOther expenses, net $44
 $(41) $(6) $(166)
Derivatives not Designated as Hedging Instruments:         
Interest rate swap contractsOther expenses, net $(3) $(271) $66
 $(344)
Commodity swap contractsOther expenses, net $(31) $(33) $(203) $12
Interest make-whole provisionOther expenses, net $(150) $16
 $(935) $16
 Nine Months Ended
 September 30, 2019
Derivatives Designated as Hedging Instruments: 
     Accumulated loss in AOCI at the beginning of the period$(1,824)
            Cumulative impact from the adoption of ASU No. 2018-02
(217)
            Unrealized loss recognized in AOCI(3,714)
            Gain reclassified from AOCI to other expenses, net7
     Accumulated loss in AOCI at the end of the period$(5,748)



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(in thousands, except per share amounts)


 Derivatives as of
 September 30, 2018 December 31, 2017
 Balance Sheet Location Fair Value Balance Sheet Location Fair Value
Derivatives Designated as Hedging Instruments:       
Interest rate swap contractsOther assets $1,428
 Other assets $233
Interest rate swap contractsOther liabilities $1,548
 Other liabilities $3,529
Derivatives Not Designated as Hedging Instruments:       
Interest rate swap contractsOther assets $66
 Other assets $
Interest rate swap contractsOther liabilities $
 Other liabilities $
Commodity swap contractsOther assets $34
 Other assets $
Commodity swap contractsOther liabilities $46
 Other liabilities $
Interest make-whole provisionsOther liabilities $1,488
 Other liabilities $
All but fourIn the third quarter of 2018, the Company’s freestanding derivatives wereCompany adopted ASU 2017-12, which resulted in an increase to retained earnings of $432 and accumulated other comprehensive loss of $486 to remove the cumulative effect of hedging ineffectiveness previously recognized in earnings, as of July 1, 2018, for contracts designated as hedging instruments asthat were outstanding at the beginning of the third quarter 2018. Upon adoption of the ASU, the impact to reclassify the ineffectiveness of the Company’s hedge instruments in connection with prior periods was recorded. Accordingly, the Company’s condensed consolidated statement of changes in redeemable non-controlling interests and stockholders’ equity for the nine months ended September 30, 2018 and all but onereflect the adoption of the Company’s derivatives were designated as hedging instruments as of December 31, 2017.ASU 2017-12.

The following tables present information about the effects of the Company’s derivative instruments on the consolidated statements of income (loss) and consolidated statements of comprehensive income (loss):
 Location of (Gain) Loss Recognized in Net Income (Loss) Amount of (Gain) Loss Recognized in Net Income (Loss)
   Three Months Ended September 30, Nine Months Ended September 30,
   2018 2017 2018 2017
Derivatives Designated as Hedging Instruments:         
Interest rate swap contractsOther expenses, net $(41) $(28) $(166) $(206)
Derivatives not Designated as Hedging Instruments:         
Interest rate swap contractsOther expenses, net $(271) $
 $(344) $
Commodity swap contractsOther expenses, net $(33) $
 $12
 $
Interest make-whole provisionOther expenses, net $16
 $
 $16
 $
 Nine Months Ended
 September 30, 2018
Derivatives Designated as Hedging Instruments: 
     Accumulated loss in AOCI at the beginning of the period$(2,197)
            Unrealized gain recognized in AOCI2,300
            Gain reclassified from AOCI to other expenses, net(166)
     Accumulated loss in AOCI at the end of the period$(63)
The followings tables present a listing of all the Company’s active derivative instruments as of September 30, 2018:
2019:



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(in thousands, except per share amounts)

Active Interest Rate SwapEffective DateExpiration DateInitial Notional Amount ($)Status
11-Year, 5.77% Fixed
October 2018October 2029$9,200
Designated
15-Year, 3.19% FixedJune 2018June 203310,000
Designated
3-Year, 2.46% FixedMarch 2018December 202017,100
Not Designated
10-Year, 4.74% FixedJune 2017December 202714,100
Designated
15-Year, 3.26% FixedFebruary 2023December 203814,084
Designated
7-Year, 2.19% FixedFebruary 2016February 202320,746
Designated
8-Year, 3.70% FixedMarch 2020June 202814,643
Designated
8-Year, 3.70% FixedMarch 2020June 202810,734
Designated
8-Year, 1.71% FixedOctober 2012March 20209,665
Designated
8-Year, 1.71% FixedOctober 2012March 20207,085
Designated
15-Year, 5.30% FixedFebruary 2006February 20213,256
Designated
15.5-Year, 5.40% FixedSeptember 2008March 202413,081
Designated
Active Interest Rate SwapEffective DateExpiration DateInitial Notional Amount ($)Status
15-Year, 3.19% FixedJune 2018June 2033$10,000
Designated
3-Year, 2.46% FixedMarch 2018December 202017,100
Not Designated
10-Year, 4.74% FixedJune 2017December 202714,100
Designated
15-Year, 3.26% FixedFebruary 2023December 203814,084
Designated
7-Year, 2.19% FixedFebruary 2016February 202320,746
Designated
8-Year, 3.70% FixedMarch 2020June 202814,643
Designated
8-Year, 3.70% FixedMarch 2020June 202810,734
Designated
8-Year, 1.71% FixedOctober 2012March 20209,665
Designated
8-Year, 1.71% FixedOctober 2012March 20207,085
Designated
15-Year, 5.30% FixedFebruary 2006February 20213,256
Designated
15.5-Year, 5.40% FixedSeptember 2008March 202413,081
Designated
Active Commodity SwapEffective DateExpiration DateInitial Notional Amount (Volume)Commodity MeasurementStatus
1-Year, $2.84 MMBtu FixedMay 2018April 2019323,390
MMBtusNot Designated
1-Year, $2.68 MMBtu FixedMay 2019April 2020437,004
MMBtusNot Designated
1-Year, $2.70 MMBtu FixedMay 2020April 2021435,810
MMBtusNot Designated
Active Hybrid InstrumentEffective DateExpiration DateFair Value ($)
Other DerivativesClassificationEffective DateExpiration DateFair Value ($)
Interest make-whole provisionsJune/August 2018December 2038$1,488
LiabilityJune/August 2018December 2038$873

10.12. INVESTMENT FUNDS AND OTHER VARIABLE INTEREST ENTITIES
Investment Funds
In each of September 2015, June 2017, June 2018 and JuneOctober 2018, the Company formed an investment fund with a different third partythird-party investor which granted the applicable investor ownership interests in the net assets of certain of the Company’s renewable energy project subsidiaries. The Company currently has threefour such investment funds each with a different third partythird-party investor.
During the third quarter of 2015, the Company formed an investment fund for the purpose of funding the purchase and operation of a solar energy system. During the second quarter of 2017, the Company formed an additional investment fund for the purpose of funding the purchase and operation of a solar energy system. During the second quarter of 2018, the Company formed an additional investment fund for the purpose of funding the purchase and operation of a solar energy systems. The Company consolidates the investment funds, and all inter-company balances and transactions between the Company and the investment funds are eliminated in its condensed consolidated financial statements. The Company determined that the investment funds meet the definition of a VIE.
The Company uses a qualitative approach in assessing the consolidation requirement for VIEs that focuses on determining whether the Company has the power to direct the activities of the VIE that most significantly affect the VIE’s economic performance



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(in thousands, except per share amounts)


and whether the Company has the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.
The Company has considered the provisions within the contractual arrangements that grant it power to manage and make decisions that affect the operation of these VIEs, including determining the solar energy systems and associated long term customer contracts to be sold or contributed to the VIEs, and installation, operation and maintenance of the solar energy systems. The Company considers that the rights granted to the other investors under the contractual arrangements are more protective in nature rather than participating rights. As such, the Company has determined it is the primary beneficiary of the



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(in thousands, except per share amounts)

VIEs for all periods presented. The Company evaluates its relationships with VIEs on an ongoing basis to ensure that it continues to be the primary beneficiary.
Under the related agreements, cash distributions of income and other receipts by the funds, net of agreed-upon expenses and estimated expenses, tax benefits and detriments of income and loss, and tax benefits of tax credits, are assigned to the funds’ investorsinvestor and Company’s subsidiaries as specified in contractual arrangements. Certain of these arrangements have call and put options to acquire the investors’investor’s equity interest as specified in the contractual agreements. See Note 13 for additional information on the call and put options.
A summary of amounts related to the investment funds in the Company’s condensed consolidated balance sheets is as follows:
September 30, December 31,September 30, December 31,
2018 2017
2019(1)
 
2018(1)
Cash$3,515
 $444
Cash and cash equivalents$2,777
 $1,255
Restricted cash1,690
 1,553
156
 156
Accounts receivable554
 328
Accounts receivable, net695
 374
Costs and estimated earnings in excess of billings278
 360
2,531
 498
Prepaid expenses and other current assets25
 8
134
 190
Total VIE current assets6,293
 2,473
Property and equipment, net285
 
Energy assets, net106,818
 55,712
121,918
 122,641
Operating lease assets6,048
 
Other assets1,669
 1,613
Total VIE assets$136,213
 $126,727
Current portions of long-term debt and financing lease liabilities$2,270
 $1,712
Accounts payable3,891
 764
149
 234
Accrued liabilities29
 74
Accrued expenses and other current liabilities3,948
 4,146
Current portions of operating lease liabilities91
 
Total VIE current liabilities6,458
 6,092
Long-term debt and financing lease liabilities, less current portions and net of deferred financing fees25,493
 26,461
Deferred income taxes, net460
 
Long-term portions of operating lease liabilities6,264
 
Other liabilities1,543
 75
873
 2,131
Long term debt, net deferred financing fees28,055
 
Total VIE liabilities$39,548
 $34,684
(1) The amounts in the above table are reflected in footnote 1 on the Company’s condensed consolidated balance sheets. See the Company’s condensed consolidated balance sheets for additional information.
Other Variable Interest Entities
The Company follows guidance on the consolidation of VIEs that requires companies to utilize a qualitative approach to determine whether it is the primary beneficiary of a VIE. The process for identifying the primary beneficiary of a VIE requires consideration of the factors that indicate a party has the power to direct the activities that most significantly impact the joint ventures



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(in thousands, except per share amounts)


economic performance, including powers granted to the joint ventures program manager, powers contained in the joint venture governing board and, to a certain extent, a company's economic interest in the joint venture. The Company analyzes its joint ventures and classifies them as either:
a VIE that must be consolidated because the Company is the primary beneficiary or the joint venture is not a VIE and the Company holds the majority voting interest with no significant participative rights available to the other partners; or 
a VIE that does not require consolidation and is treated as an equity method investment because the Company is not the primary beneficiary or the joint venture is not a VIE and the Company does not hold the majority voting interest.
The Company executes certain contracts jointly with third parties through various forms of joint ventures. Although the joint ventures own and hold the contracts with the clients, the services required by the contracts are typically performed by the Company and the Company’s joint venture partners, or by other subcontractors under subcontracting agreements with the joint ventures. Many of these joint ventures are formed for a specific project. The assets of the Company’s joint ventures generally consist almost entirely of cash and land, and the liabilities of our joint ventures generally consist almost entirely of amounts due to the joint venture partners. Many of the joint ventures are deemed to be VIEs because they lack sufficient equity to finance the activities of the joint venture.
In January 2019, the Company entered into a joint venture with one other party to co-own an entity whose purpose is owning and leasing a parcel of land and attached structures to third-party entities. The joint venture has no employees and is controlled by the board of directors made up of representatives from both companies. Prior to January 2019, the Company had determined it was the primary beneficiary of the VIE and fully consolidated the entity. Upon the formation of the joint venture, the Company determined it was no longer the primary beneficiary, based on the assessment of considerations referenced above, and deconsolidated the VIE and recorded the Company’s investment in the joint venture as an equity method investment. With the deconsolidation of the VIE and the recognition of the equity method investment the Company recognized a gain of $2,160 in operating income and recorded an equity method investment of $1,361 in other assets. In addition, the Company has loaned the joint venture $1,506 and made an initial contribution at its formation in exchange for 50% of the shares in the joint venture.
Unconsolidated joint ventures are accounted for under the equity method. For those joint ventures, the Company's investment balances for the joint venture are included in other assets on the condensed consolidated balance sheets and the Company’s pro rata share of net income or loss is included in operating income. The Company’s investments in equity method joint ventures on the condensed consolidated balance sheets as of September 30, 2019 and December 31, 2018 was a net asset of $1,290 and $0, respectively. During the three and nine months ended September 30, 2019, the Company recognized expense of $73 and $147, respectively, from equity method joint ventures.
11.13. NON-CONTROLLING INTERESTS AND EQUITY
Redeemable Non-controlling Interests
The Company’s wholly owned subsidiary with a membership interest in the investment fund formed in the third quarter of 2015 has the right, beginning on the fifth anniversary of the final funding of the variable rate construction and term loans due 2023 and extending for six months, to elect to require the non-controlling interest holder to sell all of its membership units to the Company’s wholly owned subsidiary, a call option.(the “Call Option”). The Company’s investment fund, which was formed in the third quarter of 2015, also includes a right, beginning on the sixth anniversary of the final funding and extending for one year, for the non-controlling interest holder to elect to require the Company’s wholly owned subsidiary to purchase all of its membership interests in the fund, a put option.(the “Put Option”).
The Company’s wholly owned subsidiary with a membership interest in the investment fund formed in the second quarter of 2017 has the right, beginning on the fifth anniversary of the final funding of the non-controlling interest holder and extending for six months, to elect to require the non-controlling interest holder to sell all of its membership units to the Company’s wholly owned subsidiary, a call option. The Company’s investment fund formed in the second quarter of 2017 also includes a right, beginning on the sixth anniversary of the final funding and extending for one year, for the non-controlling interest holder to elect to require the Company’s wholly owned subsidiary to purchase all of its membership interests in the fund, a put option.



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(in thousands, except per share amounts)


The Company’s wholly owned subsidiary with a membership interest in the investment fund formed in the second quarter of 2018 has the right, beginning on the fifth anniversary of the investment fund’s final funding of the non-controlling interest holderproject being placed into service and extending for six months, to elect to require the non-controlling interest holder to sell all of its membership units to the Company’s wholly owned subsidiary, a call option. The Company’s investment fund formed in the second quarter of 2018 also includes a right, beginningupon on the sixth anniversaryexpiration of the final fundingcall option and extending for one year,six months, for the non-controlling interest holder to elect to require the Company’s wholly owned subsidiary to purchase all of its membership interests in the fund, a put option.
The Company’s wholly owned subsidiary with a membership interest in the investment fund formed in the fourth quarter of 2018 has the right, beginning on the fifth anniversary on the last projects placed in-service date and extending for six months, to elect to require the non-controlling interest holder to sell all of its membership units to the Company’s wholly owned subsidiary, a call option. The Company’s investment fund formed in the fourth quarter of 2018 also includes a right, upon the expiration of the call option and extending for six months, for the non-controlling interest partner to elect to require the Company’s wholly owned subsidiary to purchase all of its membership interests in the fund, a put option.
The purchase price for two of the investment funds investors’ interests under the call options is equal to the fair market value of such interest at the time the option is exercised. The purchase price for the other two investment funds investor’s interests under the call options is equal to the greater of (i) the fair market value of such interests at the time the option is exercised or (ii) 7% of the investors’ contributed capital balance at the time the option is exercisable. The call options are exercisable beginning on the date that specified conditions are met for each respective fund. None of the call options are expected to become exercisable prior to 2021.
The purchase price for two of the funds investors’ interests in the investment funds under the put options is the lessor of fair market value at the time the option is exercised and a specified amount, ranging from $544$659 - $917. The purchase price for the other two of the fund investors’ interest in the investment funds under the put options is the sum of (i) the fair market value at the time the option is exercised, and (ii) the closing costs incurred by the investor in connection with the exercise of the put option. The put options for these



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(in thousands, except per share amounts)

the investment funds are exercisable beginning on the date that specified conditions are met for each respective fund. The put options are not expected to become exercisable prior to 2022.
Because the put options represents redemption features that are not solely within the control of the Company, the non-controlling interests in these funds are presented outside of permanent equity. Redeemable non-controlling interests are reported using the greater of their carrying value at each reporting date (which is impacted by attribution under the HLBVhypothetical liquidation at book value method) or their estimated redemption value in each reporting period. At both September 30, 20182019 and December 31, 20172018 redeemable non-controlling interests were reported at their carrying value totaling $14,585$32,108 and $10,338,$14,719, respectively, as the carrying value at each reporting period was greater than the estimated redemption value.
14. EARNINGS PER SHARE AND OTHER EQUITY RELATED INFORMATION
Earnings Per Share
Basic earnings per share is calculated using the Company’s weighted-average outstanding common shares, including vested restricted shares. When the effects are not anti-dilutive, diluted earnings per share is calculated using the weighted-average outstanding common shares; the dilutive effect of convertible preferred stock, under the “if converted” method; and the treasury stock method with regard to warrants and stock options; all as determined under the treasury stock method.
 Three Months Ended September 30,  Nine Months Ended September 30,
 2019 2018  2019 2018
Net income attributable to common shareholders$8,870
 $10,701
  $22,233
 $26,391
Basic weighted-average shares outstanding46,555
 45,854
  46,413
 45,599
Effect of dilutive securities:        
Stock options1,138
 1,090
  1,262
 910
Diluted weighted-average shares outstanding47,693
 46,944
  47,675
 46,509
For the three months ended September 30, 2019 and 2018, the total number of shares of common stock related to stock options excluded from the calculation of dilutive shares, as the effect would be anti-dilutive, were 1,152 and 758, respectively. For the nine months ended September 30, 2019 and 2018, the total number of shares of common stock related to stock options excluded from the calculation of dilutive shares, as the effect would be anti-dilutive, were 642 and 1,273, respectively.

12.


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(in thousands, except per share amounts)


Stock-Based Compensation Expense
For the three months ended September 30, 2019 and 2018, the Company recorded stock-based compensation expense, including expense related to the Employee Stock Purchase Plan (“ESPP”), of $413 and $390, respectively, in connection with the stock-based payment awards. For the nine months ended September 30, 2019 and 2018, the Company recorded stock-based compensation expense, including expense related to the ESPP, of $1,195 and $1,137, respectively, in connection with the stock-based payment awards. The compensation expense is included in selling, general and administrative expenses in the accompanying condensed consolidated statements of income. As of September 30, 2019, there was $4,641 of unrecognized compensation expense related to non-vested stock option awards that is expected to be recognized over a weighted-average period of 3.0 years.
No awards to individuals who were not either an employee or director of the Company occurred during the nine months ended September 30, 2019 or during the year ended December 31, 2018.
Stock Option Grants
During the three months ended September 30, 2019, the Company granted 1,000 common stock options to certain employees and directors under its 2010 Stock Incentive Plan, which have a contractual life of ten years and vest based upon the achievement of specific performance goals over a three years period.
Share Repurchase Program
In April 2016, the Company’s Board of Directors authorized the repurchase of up to $10,000 of the Company’s Class A common stock from time to time on the open market in privately negotiated transactions. The Company’s Board of Directors authorized an increase in the Company’s share repurchase authorization to $15,000 of the Company's Class A common stock in February 2017 and to $17,553 of the Company's Class A common stock in August 2019, in each case, from time to time on the open market or in privately negotiated transactions. The timing and amount of any shares repurchased will be determined by the Company's management based on its evaluation of market conditions and other factors. Any repurchased shares will be available for use in connection with its stock plans and for other corporate purposes. The repurchase program has and will be funded using the Company's working capital and borrowings under its revolving line of credit. The Company accounts for share repurchases using the cost method. Under this method, the cost of the share repurchase is recorded entirely in treasury stock, a contra equity account. During the three and nine months ended September 30, 2019, the Company repurchased 10 shares of common stock in the amount of $139, net of immaterial fees. During the three months ended September 30, 2018, the Company did not repurchase any shares of common stock. During the nine months ended September 30, 2018, the Company purchased 212 shares of common stock in the amount of $1,772, net of fees of $9.
15. BUSINESS SEGMENT INFORMATION
The Company reports results under ASC 280, Segment Reporting. The Company’s reportable segments are U.S. Regions, U.S. Federal, Canada and Non-Solar Distributed Generation (“DG”). The Company’s U.S. Regions, U.S. Federal and Canada segments offer energy efficiency products and services, which include the design, engineering and installation of equipment and other measures to improve the efficiency and control the operation of a facility’s energy infrastructure, renewable energy solutions and services, which include the construction of small-scale plants that the company owns or develops for customers that produce electricity, gas, heat or cooling from renewable sources of energy and O&M services. The Company’s Non-Solar DG segment sells electricity, processed renewable gas fuel, heat or cooling, produced from renewable sources of energy, other than solar, and generated by small-scale plants that the Company owns and O&M services for customer owned small-scale plants. As of the fourth quarter of 2017, the Company’s U.S. Regions segment now includes certain small-scale solar grid-tie plants developed for customers previously included in our Non-Solar DG segment. Previously reported amounts have been restated for comparative purposes. The “All Other” category offers enterprise energy management services, consulting services and the sale of solar-PV energy products and systems which we refer to as integrated-PV.
These segments do not include results of other activities, such as corporate operating expenses not specifically allocated to the segments. Certain reportable segments are an aggregation of operating segments. The reports of the Company’s chief operating decision maker do not include assets at the operating segment level. The accounting policies are the same as those described in the summary of significant accounting policies in Note 2. During 2017, the Company2 included in unallocated corporate activity $1,001 as a reserve the Company’s annual report on Form 10-K for a customer who declared bankruptcy. For the threeyear ended December 31, 2018 filed with the Securities and nine months ended September 30, 2018, the Company has not recorded any additional reserve.Exchange Commission on March 8, 2019.
The reportsAn analysis of the Company’s chief operating decision maker do not include assets atbusiness segment information and reconciliation to the operating segment level.condensed consolidated financial statements is as follows:



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AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(in thousands, except per share amounts)


An analysis of the Company’s business segment information and reconciliation to the condensed consolidated financial statements is as follows:
U.S. Regions U.S. Federal Canada Non-Solar DG All Other Total ConsolidatedU.S. Regions U.S. Federal Canada Non-Solar DG All Other Total Consolidated
Three Months Ended September 30, 2019           
Revenues$84,079
 $71,258
 $12,665
 $21,875
 $22,149
 $212,026
Interest income69
 92
 
 21
 
 182
Interest expense1,548
 209
 179
 1,213
 
 3,149
Depreciation and amortization of intangible assets2,538
 901
 396
 5,149
 429
 9,413
Unallocated corporate activity
 
 
 
 
 (8,482)
Income before taxes, excluding unallocated corporate activity3,350
 10,967
 1,577
 977
 881
 17,752
Three Months Ended September 30, 2018                      
Revenues$86,402
 $62,378
 $11,604
 $22,138
 $22,853
 $205,375
$86,402
 $62,378

$11,604
 $22,138
 $22,853
 $205,375
Interest income2
 36
 
 38
 
 76
2
 36
 
 38
 
 76
Interest expense1,403
 225
 480
 1,681
 (13) 3,776
1,403
 225
 480
 1,681
 (13) 3,776
Depreciation and amortization of intangible assets1,341
 671
 294
 4,530
 378
 7,214
1,341
 671
 294
 4,530
 378
 7,214
Unallocated corporate activity
 
 
 
 
 (8,648)
 
 
 
 
 (8,648)
Income before taxes, excluding unallocated corporate activity5,256
 10,969
 664
 3,851
 1,959
 22,699
5,256
 10,969
 664
 3,851
 1,959
 22,699
Three Months Ended September 30, 2017           
Nine Months Ended September 30, 2019           
Revenues$82,633
 $63,873

$14,719
 $22,847
 $20,672
 $204,744
$227,896
 $169,337
 $27,696
 $66,370
 $69,022
 $560,321
Interest income1
 14
 
 26
 
 41
132
 160
 
 65
 39
 396
Interest expense856
 292
 512
 1,118
 13
 2,791
4,118
 627
 517
 4,075
 
 9,337
Depreciation and amortization of intangible assets867
 644
 303
 3,875
 497
 6,186
7,184
 2,524
 986
 16,051
 1,153
 27,898
Unallocated corporate activity
 
 
 
 
 (6,839)
 
 
 
 
 (25,331)
Income before taxes, excluding unallocated corporate activity6,432
 8,753
 1,537
 1,798
 991
 19,511
5,530
 26,631
 1,529
 5,758
 7,592
 47,040
Nine Months Ended September 30, 2018                      
Revenues$249,871
 $168,377
 $28,466
 $60,176
 $62,877
 $569,767
$249,871
 $168,377
 $28,466
 $60,176
 $62,877
 $569,767
Interest income5
 84
 
 120
 
 209
5
 84
 
 120
 
 209
Interest expense3,911
 771
 1,464
 4,575
 
 10,721
3,911
 771
 1,464
 4,575
 
 10,721
Depreciation and amortization of intangible assets4,048
 2,004
 873
 12,942
 1,134
 21,001
4,048
 2,004
 873
 12,942
 1,134
 21,001
Unallocated corporate activity
 
 
 
 
 (23,268)
 
 
 
 
 (23,269)
Income (loss) before taxes, excluding unallocated corporate activity14,606
 26,864
 (1,983) 8,796
 3,771
 52,054
14,606
 26,864
 (1,983) 8,796
 3,771
 52,054
Nine Months Ended September 30, 2017           
Revenues$191,956
 $170,903
 $33,211
 $53,703
 $56,246
 $506,019
Interest income2
 29
 1
 55
 
 87
Interest expense1,950
 888
 1,465
 3,214
 38
 7,555
Depreciation and amortization of intangible assets1,940
 1,951
 878
 11,416
 1,407
 17,592
Unallocated corporate activity
 
 
 
 
 (20,931)
Income before taxes, excluding unallocated corporate activity7,388
 23,079
 1,638
 3,825
 2,304
 38,234



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AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(in thousands, except per share amounts)


13. LONG-TERM16. DEBT
Long-termAs of September 30, 2019, the Company’s debt comprised the following:
      
 Rate as of September 30, 2018 September 30, 2018 December 31, 2017
 Senior secured credit facility, due June 2020, interest at varying rates monthly in arrears4.40% $44,552
 $49,986
Variable rate term loan payable in semi-annual installments through February 20214.59% 1,071
 1,220
Variable rate term loan payable in semi-annual installments through June 20244.09% 7,781
 8,295
Variable rate term loan payable in quarterly installments through December 2024% 
 8,757
Term loan payable in quarterly installments through March 20217.25% 1,769
 2,218
Term loan payable in monthly installments through June 20286.11% 4,076
 4,551
Variable rate term loan payable in quarterly installments through June 20205.59% 31,308
 32,711
Variable rate term loan payable in quarterly installments through October 20234.84% 17,966
 18,346
Term loan payable in quarterly installments through June 20314.95% 4,191
 4,605
Term loan payable in quarterly installments through February 20345.61% 2,888
 3,128
Variable rate construction loan payable, due June 20187.00% 
 1,721
Term loan payable in quarterly installments through April 20274.50% 22,081
 13,325
Term loan payable in quarterly installments through March 20285.00% 4,050
 4,258
Variable rate term loan payable in quarterly installments through December 20274.79% 13,477
 14,034
Variable rate term loan payable in quarterly installments through August 20229.84% 26,842
 
Term loan payable in quarterly installments through December 20385.15% 30,029
 
Variable rate term loan payable in semi-annual installments through June 20334.39% 9,971
 
Capital leases  36,772
 35,013
   $258,824
 $202,168
Less - current maturities  24,397
 22,375
Less - deferred financing fees  8,175
 6,556
Long-term debt  $226,252
 $173,237
 Commencement DateMaturity Date
Acceleration Clause(2)
Rate as of   
 September 30, 2019September 30, 2019 December 31, 2018
Senior secured credit facility, interest at varying rates monthly in arrearsJune 2015June 2024NA3.84%$81,410
 $43,074
Variable rate term loan payable in semi-annual installmentsJanuary 2006February 2021Yes4.34%774
 936
Variable rate term loan payable in semi-annual installmentsJanuary 2006June 2024Yes4.09%6,953
 7,426
Term loan payable in quarterly installmentsMarch 2011March 2021Yes7.25%993
 1,464
Term loan payable in monthly installmentsOctober 2011June 2028NA6.11%3,606
 3,843
Variable rate term loan payable in quarterly installmentsOctober 2012June 2020NA5.59%28,844
 30,674
Variable rate term loan payable in quarterly installmentsSeptember 2015March 2023NA4.59%16,782
 17,208
Term loan payable in quarterly installmentsAugust 2016July 2031NA4.95%3,753
 3,925
Term loan payable in quarterly installmentsMarch 2017March 2028NA5.00%3,627
 3,945
Term loan payable in monthly installmentsApril 2017April 2027NA4.50%23,211
 22,081
Term loan payable in quarterly installments
April 2017February 2034NA5.61%2,661
 2,735
Variable rate term loan payable in quarterly installmentsJune 2017December 2027NA4.54%12,330
 12,915
Variable rate term loan payable in quarterly installmentsFebruary 2018August 2022Yes9.59%16,366
 21,475
Term loan payable in quarterly installments
June 2018December 2038Yes5.15%29,463
 30,069
Variable rate term loan payable in semi-annual installments
June 2018June 2033Yes4.14%9,337
 9,668
Variable rate term loan payable in monthly/quarterly installmentsOctober 2018October 2029Yes4.60%9,086
 9,072
Long term finance liability in semi-annual installmentsJuly 2019July 2039NA0.28%4,872
 
Financing leases(1)
    31,106
 33,363
     $285,174
 $253,873
Less - current maturities    54,958
 26,890
Less - deferred financing fees    6,450
 7,821
Long term debt and financing lease liabilities    $223,766
 $219,162

(1) Financing leases do not include approximately $23,510 in future interest payments
February 2018 Term Loan
In February 2018,(2) These agreements have acceleration causes that, in the Company entered into a credit agreement for gross proceedsevent of $28,500, with a bank for use in providing non-recourse financing for a new renewable natural gas energy asset at a rate of 7.5% above LIBOR. Principaldefault, as defined, the payee has the option to accelerate payment terms and make due the remaining principal and the required interest amounts are due in quarterly installments. The note matures on August 31, 2022 with all remaining unpaid amounts outstanding underbalance according to the agreement due at that time. At September 30, 2018, $26,842 was outstanding under the term loan. The interest rate at September 30, 2018 was 9.8410%.
Senior Secured Credit Facility - Revolver and Term Loan
In June 2018,2019, the Company entered into an additional amendment toamended and restated the Third Amended and Restated bankCompany’s senior secured credit facility. The amendment added SunTrust Robinson Humphrey, Inc as an additional lender, increased the aggregate amount of the revolving commitments from $75,000$85,000 to $85,000$115,000 through the existingan extended June 30, 2020 end28, 2024 maturity date, increased the term loan from $40,000 to $65,000 to reduce the outstanding revolving loan balance by the same amount and extend



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AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(in thousands, except per share amounts)


$25,000 to $46,000 to reduce the outstanding revolving loan balances by the same amount and, for the period of June 30, 2018 throughmaturity date from June 30, 2020 to June 28, 2024, and increased the Total Funded Debttotal funded debt to EBITDA covenant ratio from a maximum of 2.753.00 to 3.00.3.25. The total commitment under the amended credit facility (revolving credit, term loan and swing line) was $136,000.is $185,000.
At September 30, 2018 $72,334 was2019 funds of $46,480 are available for borrowing under the revolving credit facility.

July 2019 Long Term Finance Liability
June 2018 Term Loan
In June 2018,During the third quarter ended September 30, 2019, the Company entered into a non-recourse term loanclosed on one solar PV project under the Company’s master lease agreement, as discussed in Note 8, with a bank,twenty-year term. In accordance with ASC 842, Leases, this transaction was accounted for as a failed sale as the Company retains control of the underlying assets. The proceeds received from the transaction were recorded by the Company as a long term financing facility with an original principal amount of $12,407. In August 2018, the Company entered into a joinder agreement which increased the principal amount with an additional note of $19,252, for a total principal amount of $31,659. The loan bears interest at a fixed rate of 5.15%.0.28%, as a result of tax credits which were transferred to the counterparty. The principal and interest payments are due in quarterlysemi annual installments and the loanlong term finance facility matures on December 31, 2038,July 16, 2039, with all remaining unpaid amounts outstanding under the agreement due at that time. These agreements contain interest make-whole provisions that the Company determined qualified as hybrid instruments that are required to be bifurcated and valued separately from the host contract. See Notes 8 and 9 for additional discussions on the interest make-whole provisions and how the Company determined their value. At September 30, 2018,  $30,0292019, $4,872 was outstanding under the long term loan, including debt discounts and the embedded derivatives.
June 2018 Variable Note
In June 2018, the Company entered into a loan agreement for use in providing non-recourse financing for a solar PV project in operation. The loan agreement provides for a $10,000 term loan credit facility and bears interest at a variable rate, with interest payments due in semi-annual installments. The term loan matures on June 15, 2033, with all remaining unpaid amounts outstanding under the facility due at that time. At September 30, 2018, $9,971, net of debt discounts, was outstanding under the term loan. The variable interest rate for this loan at September 30, 2018 was 4.39%.
The Company was in compliance with all financial and operational covenants as of September 30, 2018.


14. SUBSEQUENT EVENTS
During October 2018, the Company closed the acquisition of one solar project for total consideration of $3,019. The Company financed this project along with three previously acquired solar projects from the same developer through a tax equity partnership and a term loan for aggregate gross proceeds of $10,400.
During October 2018, the Company entered into a definitive agreement to acquire seven early-stage solar projects which the Company will construct from the same developer. The total consideration for these projects is $10,800.finance liability.






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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and the related notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 20172018 included in our Annual Report on Form 10-K for the year ended December 31, 20172018 filed on March 3, 20188, 2019 with the U.S. Securities and Exchange Commission (“SEC”). This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Forward looking statements include statements regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans, objectives of management, expected market growth and other characterizations of future events or circumstances. All statements, other than statements of historical fact, including statements that refer to our expectations as to the future growth of our business and associated expenses; our expectations as to revenue generation; the future availability of borrowings under our revolving credit facility; the expected future growth of the market for energy efficiency and renewable energy solutions; our backlog, awarded projects and recurring revenue and the timing of such matters; our expectations as to acquisition activity; the impact of any restructuring; the uses of future earnings; our intention to repurchase shares of our Class A common stock; the expected energy and cost savings of our projects; and the expected energy production capacity of



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our renewable energy plants; and other characterizations of future events or circumstances are forward-looking statements. These statements are often, but not exclusively, identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” “target,” “project,” “predict” or “continue,” and similar expressions or variations. These forward-looking statements are based on current expectations and assumptions that are subject to risks, uncertainties and other factors that could cause actual results and the timing of certain events to differ materially and adversely from future results expressed or implied by such forward-looking statements. Risks, uncertainties and factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section titled “Risk Factors,” set forth in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2017.2018. The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date of this Quarterly Report on Form 10-Q. Subsequent events and developments may cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so and undertake no obligation to do so except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report on Form 10-Q.
Overview
Ameresco is a leading provider of energy efficiency solutions for facilities throughout North America and Europe. We provide solutions that enable customers to reduce their energy consumption, lower their operating and maintenance costs and realize environmental benefits. Our comprehensive set of services includes upgrades to a facility’s energy infrastructure and the construction and operation of small-scale renewable energy plants.
In each of September 2015, June 2017 and June 2018, the Company formed an investment fund with a different third party investor which granted the applicable investor ownership interests in the net assets of certain of the Company’s renewable energy project subsidiaries. The Company currently has three such investment funds each with a different third party investor. We entered into these agreements in order to finance the costs of constructing certain energy assets which are under long-term customer contracts. We have determined that we are the primary beneficiary in the operational partnerships for accounting purposes. Accordingly, we consolidate the assets and liabilities and operating results of the entities in our consolidated financial statements. We recognize the investors’ share of the net assets of the investors’ funds as redeemable non-controlling interests in our consolidated balance sheets. These income or loss allocations, which are reflected on our consolidated statements of income (loss), may create significant volatility in our reported results of operations, including potentially changing net income available to common stockholders from income to loss, or vice versa, from quarter to quarter.
In addition to organic growth, strategic acquisitions of complementary businesses and assets have been an important part of our historical development. Since inception, we have completed numerous acquisitions, which have enabled us to broaden our service offerings and expand our geographical reach.
Effects of Seasonality
We are subject to seasonal fluctuations and construction cycles, particularly in climates that experience colder weather during the winter months, such as the northern United States and Canada, or at educational institutions, where large projects are typically carried out during summer months when their facilities are unoccupied. In addition, government customers, many of which have fiscal years that do not coincide with ours, typically follow annual procurement cycles and appropriate funds on a fiscal-year basis even though contract performance may take more than one year. Further, government contracting cycles can be affected by the timing of, and delays in, the legislative process related to government programs and incentives that help drive demand for energy efficiency and renewable energy projects. As a result, our revenues and operating income in the third and fourth quarter are typically higher, and our revenues and operating income in the first quarter are typically lower, than in other quarters of the year. As a result of such fluctuations, we may occasionally experience declines in revenuerevenues or earnings as compared to the immediately preceding quarter, and comparisons of our operating results on a period-to-period basis may not be meaningful.
Our annual and quarterly financial results are also subject to significant fluctuations as a result of other factors, many of which are outside of our control. See “Our business is affected by seasonal trends and construction cycles, and these trends and cycles could
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have an adverse effect on our operating results.” in Item 1A, Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 20172018 (“Annual Report”).
Backlog and Awarded Projects
Total construction backlog represents projects that are active within our ESPC sales cycle. Our sales cycle begins with the initial contact with the customer and ends, when successful, with a signed contract, also referred to as fully-contracted backlog.


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Our sales cycle recently has been averaging 18 to 42 months. Awarded backlog is created when a potential customer awards a project to Ameresco following a request for proposal. Once a project is awarded but not yet contracted, we typically conduct a detailed energy audit to determine the scope of the project as well as identify the savings that may be expected to be generated from upgrading the customer’s energy infrastructure. At this point, we also determine the sub-contractor, what equipment will be used, and assist in arranging for third party financing, as applicable. Recently, awarded projects have been taking an average of 12 to 24 months to result in a signed contract and convert to fully-contracted backlog. It may take longer, however, depending upon the size and complexity of the project. Historically, approximately 90% of our awarded backlog projects have resulted in a signed contract. After the customer and Ameresco agree to the terms of the contract and the contract becomes executed, the project moves to fully-contracted backlog. The contracts reflected in our fully-contracted backlog typically have a construction period of 12 to 36 months and we typically expect to recognize revenue for such contracts over the same period. Fully-contracted backlog begins converting into revenues generated from backlog over time using cost based input methods once construction has commenced. See “We may not recognize all revenues from our backlog or receive all payments anticipated under awarded projects and customer contracts” and “In order to secure contracts for new projects, we typically face a long and variable selling cycle that requires significant resource commitments and requires a long lead time before we realize revenues” in Item 1A, Risk Factors in our Annual Report.
As of September 30, 2019, we had fully-contracted backlog of approximately $787.2 million in expected future revenues under signed customer contracts for the installation or construction of projects; and we also had been awarded projects for which we had not yet signed customer contracts with estimated total future revenues of an additional $1,434.9 million. As of September 30, 2018, we had fully-contracted backlog of approximately $819.4 million in expected future revenues under signed customer contracts for the installation or construction of projects; and we also had been awarded projects for which we had not yet signed customer contracts with estimated total future revenues of an additional $1,215.4 million. As of September 30, 2017, we had fully-contracted backlog of approximately $627.5 million in expected future revenues under signed customer contracts for the installation or construction of projects; and we also had been awarded projects for which we had not yet signed customer contracts with estimated total future revenues of an additional $1,097.0 million.
We define our 12-month backlog as the estimated amount of revenues that we expect to recognize in the next twelve months from our fully-contracted backlog. As of September 30, 20182019 and 2017,2018, our 12-month backlog was $395.9$437.7 million and $411.9$395.9 million, respectively.
Assets in development, which represents the potential design/build project value of small-scale renewable energy plants that have been awarded or for which we have secured development rights, was $319.8were $572.0 million and $177.7$319.8 million as of September 30, 20182019 and 2017,2018, respectively.
Critical Accounting Policies and Estimates
This discussion and analysis of our financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expense and related disclosures. The most significant estimates with regard to these condensed consolidated financial statements relate to our estimates of total expected costs under the cost-based input method, as well as the estimated impact of uninstalled materials, under the revenue recognition requirements of contracts with our customers, allowance for doubtful accounts, inventory reserves, realization of project development costs, fair value of derivative financial instruments, leases, accounting for business acquisitions, stock-based awards, impairment of long-lived assets, goodwill, income taxes, self insurance reserves and potential liability in conjunction with certain commitments and contingencies. Actual results could differ from those estimates.
Such estimates and assumptions are based on historical experience and on various other factors that management believes to be reasonable under the circumstances. Estimates and assumptions are made on an ongoing basis, and accordingly, the actual results may differ from these estimates under different assumptions or conditions.
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The following are certain critical accounting policies that, among others, affect our more significant judgments and estimates used in the preparation of our condensed consolidated financial statements:
Revenue Recognition;
Energy Assets (formerly referred to as Project Assets);Assets;
Leases;
Goodwill and Intangible Assets;
Derivative Financial Instruments; and
Variable Interest Entities.


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Further details regarding our critical accounting policies and estimates can be found in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report. In addition, please refer to Note 2, “Summary of Significant Accounting Policies,” of our Notes to Condensed Consolidated Financial Statementsthe audited consolidated financial statements for the year ended December 31, 2018, and notes thereto, included under Part I, Item 1 of this Quarterly Report on Form 10-Q.in the Company’s Annual Report. Except for accounting policies related to our adoption of ASC 606, ManagementASU No. 2016-02, Leases (Topic 842), and accounting policies related to our equity method investments, the Company has determined that no additional material changes concerning our critical accounting policies have occurred since December 31, 2017.2018.
Recent Accounting Pronouncements
See Note 2, Summary of Significant Accounting Policies, of Notes to Condensed Consolidated Financial Statements for a discussion of recent accounting pronouncements.
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers, as amended (Topic 606) (commonly referred to as ASC 606). The Company adopted the requirements of the new standard, including additional accounting standard updates issued during 2016 which provide clarification and expanded guidance on ASU 2014-09 topics, on January 1, 2018 using the modified retrospective method. Refer to Note 3, Revenue from Contracts with Customers, of Notes to the Condensed Consolidated Financial Statements for further discussion of the adoption of the standard and the impact on the Company’s consolidated financial statements.
Results of Operations
On January 1, 2018, the Company adopted new accounting guidance on revenue from contracts with customers, using the modified retrospective method applied to contracts that were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under that guidance, while prior period amounts are not adjusted and continue to be reported in accordance with the previous guidance. See Note 3, Revenue From Contracts with Customers, of Notes to Condensed Consolidated Financial Statements for further details.


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Results of Operations
The following tables set forth certain financial data from the condensed consolidated statements of income (loss) expressed as a percentage of revenues for the periods presented (in thousands):
Three Months Ended September 30,Three Months Ended September 30,
2018 20172019 2018
Dollar % of Dollar % ofDollar % of Dollar % of
Amount Revenues Amount RevenuesAmount Revenues Amount Revenues
Revenues$205,375
 100.0 % $204,744
 100.0 %$212,026
 100.0% $205,375
 100.0 %
Cost of revenues159,213
 77.5 % 163,377
 79.8 %167,333
 78.9% 159,213
 77.5 %
Gross profit46,162
 22.5 % 41,367
 20.2 %44,693
 21.1% 46,162
 22.5 %
Selling, general and administrative expenses28,866
 14.1 % 27,027
 13.2 %31,231
 14.7% 28,866
 14.1 %
Operating income17,296
 8.4 % 14,340
 7.0 %13,462
 6.3% 17,296
 8.4 %
Other expenses, net3,244
 1.6 % 1,668
 0.8 %4,192
 2.0% 3,244
 1.6 %
Income before provision from income taxes14,052
 6.8 % 12,672
 6.2 %9,270
 4.4% 14,052
 6.8 %
Income tax provision3,351
 1.6 % 3,881
 1.9 %939
 0.4% 3,351
 1.6 %
Net income10,701
 5.2 % 8,791
 4.3 %8,331
 3.9% 10,701
 5.2 %
Net income attributable to redeemable non-controlling interest
  % (298) (0.1)%
Net loss attributable to redeemable non-controlling interest539
 0.3% 
  %
Net income attributable to common shareholders$10,701
 5.2 % $8,493
 4.1 %$8,870
 4.2% $10,701
 5.2 %
              
Nine Months Ended September 30,Nine Months Ended September 30,
2018 20172019 2018
Dollar % of Dollar % ofDollar % of Dollar % of
Amount Revenues Amount RevenuesAmount Revenues Amount Revenues
Revenues$569,767
 100.0 % $506,019
 100.0 %$560,321
 100.0% $569,767
 100.0 %
Cost of revenues445,356
 78.2 % 403,320
 79.7 %439,857
 78.5% 445,356
 78.2 %
Gross profit124,411
 21.8 % 102,699
 20.3 %120,464
 21.5% 124,411
 21.8 %
Selling, general and administrative expenses84,871
 14.9 % 80,164
 15.8 %87,396
 15.6% 84,871
 14.9 %
Operating income39,540
 6.9 % 22,535
 4.5 %33,068
 5.9% 39,540
 6.9 %
Other expenses, net10,754
 1.9 % 5,232
 1.0 %11,359
 2.0% 10,754
 1.9 %
Income before provision from income taxes28,786
 5.1 % 17,303
 3.4 %21,709
 3.9% 28,786
 5.1 %
Income tax provision1,879
 0.3 % 4,296
 0.8 %2,000
 0.4% 1,879
 0.3 %
Net income26,907
 4.7 % 13,007
 2.6 %19,709
 3.5% 26,907
 4.7 %
Net (income) loss attributable to redeemable non-controlling interest(516) (0.1)% 673
 0.1 %
Net loss (income) attributable to redeemable non-controlling interest2,524
 0.5% (516) (0.1)%
Net income attributable to common shareholders$26,391
 4.6 % $13,680
 2.7 %$22,233
 4.0% $26,391
 4.6 %
Revenues
The following tables set forth a comparison of our revenues for the periods presented (in thousands):
Three Months Ended September 30, Dollar PercentageThree Months Ended September 30, Dollar Percentage
2018 2017 Change Change2019 2018 Change Change
Revenues$205,375
 $204,744
 $631
 0.3%$212,026
 $205,375
 $6,651
 3.2 %
              
Nine Months Ended September 30, Dollar PercentageNine Months Ended September 30, Dollar Percentage
2018 2017 Change Change2019 2018 Change Change
Revenues$569,767
 $506,019
 $63,748
 12.6%$560,321
 $569,767
 $(9,446) (1.7)%
Revenues remained consistent, increasing $0.6 million, or 0.3%, for the three months ended September 30, 2018 compared to the same period of 2017.


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Revenues increased $63.7$6.7 million, or 12.6%3.2%, to $212.0 million for the three months ended September 30, 2019 compared to the same period of 2018 primarily due to a $8.9 million increase in our U.S. Federal segment and a $1.1 million increase in our Canada segment, partially offset by a $2.3 million decrease in our U.S. Regions segment, a $0.7 million decrease in our All Other segment and a $0.3 million decrease in revenues from our Non-Solar DG segment.
Revenues decreased $9.4 million, or 1.7%, to $560.3 million for the nine months ended September 30, 20182019 compared to the same period of 20172018 primarily due to a $57.9$22.0 million increasedecrease in revenues from our U.S. Regions segment and a $6.5$0.8 million decrease in our Canada segment, partially offset by a $6.2 million increase in our Non-Solar DG segment, a $6.6$1.0 million increase in our U.S. Federal segment and a $6.1 million increase in our All Other segment, offset by $4.7 million decrease in our Canada segment, and a decrease of $2.5 million in our U.S. Federal segment.

Cost of Revenues and Gross Profit
The following tables set forth a comparison of our cost of revenues and gross profit for the periods presented (in thousands):
Three Months Ended September 30, Dollar PercentageThree Months Ended September 30, Dollar Percentage
2018 2017 Change Change2019 2018 Change Change
Cost of revenues$159,213
 $163,377
 $(4,164) (2.5)%$167,333
 $159,213
 $8,120
 5.1 %
Gross margin22.5% 20.2%    21.1% 22.5%    
              
Nine Months Ended September 30, Dollar PercentageNine Months Ended September 30, Dollar Percentage
2018 2017 Change Change2019 2018 Change Change
Cost of revenues$445,356
 $403,320
 $42,036
 10.4 %$439,857
 $445,356
 $(5,499) (1.2)%
Gross margin21.8% 20.3%    21.5% 21.8%    
Cost of revenues decreased $4.2increased $8.1 million, or 2.5%5.1%, to $167.3 million and gross margin increasedpercentage decreased to 22.5%21.1%, from 20.2%22.5%, for the three months ended September 30, 20182019 compared to the same period of 2017, respectively. The decrease in cost of revenues and the increase in gross margin is primarily due to an increase in higher margin energy and incentive revenue from renewable gas assets the Company owns in our Non-Solar DG segment.
Cost of revenues increased $42.0 million, or 10.4%, and gross margin percentage increased to 21.8%, from 20.3%, for the nine months ended September 30, 2018 compared to the same period of 2017, respectively.2018. The increase in cost of revenues is primarily due to anthe increase in project revenues from our U.S. Federal segment. The decrease in gross margin is primarily due to a mix of lower margin projects in our U.S. Federal segment as well as higher depreciation expenses attributed to the growth of our energy assets in operation in our U.S. Regions and Non-Solar DG segments.
Cost of revenues decreased $5.5 million, or 1.2%, to $439.9 million and gross margin percentage decreased to 21.5%, from 21.8%, for the nine months ended September 30, 2019 compared to the same period of 2018, respectively. The decrease in cost of revenues is primarily due to a decrease in project revenues from our U.S. Regions segment. The increasedecrease in gross margin is primarily due to an increasehigher depreciation expenses attributed to the growth of our energy assets in higher margin energyoperation in our U.S. Regions and incentive revenue from renewable gas assets as described above.

Non-Solar DG segments.
Selling, General and Administrative Expenses
The following tables set forth a comparison of our selling, general and administrative expenses for the periods presented (in thousands):
Three Months Ended September 30, Dollar PercentageThree Months Ended September 30, Dollar Percentage
2018 2017 Change Change2019 2018 Change Change
Selling, general and administrative expenses$28,866
 $27,027
 $1,839
 6.8%$31,231
 $28,866
 $2,365
 8.2%
              
Nine Months Ended September 30, Dollar PercentageNine Months Ended September 30, Dollar Percentage
2018 2017 Change Change2019 2018 Change Change
Selling, general and administrative expenses$84,871
 $80,164
 $4,707
 5.9%$87,396
 $84,871
 $2,525
 3.0%
Selling, general and administrative expenses increased $1.8$2.4 million, or 6.8%8.2%, to $31.2 million for the three months ended September 30, 2018,2019, compared to the same period of 2017,2018, primarily due to an increase in salaries and benefits of $1.7$0.9 million resulting from increased headcount.headcount, higher project development costs of $0.6 million and increased other charges of $0.9 million. For the nine months ended September 30, 2018,2019, selling, general and administrative expenses increased $4.7$2.5 million, or 5.9%3.0%, to $87.4 million compared to the same period of 2018, primarily due to an increase in salaries and benefits of $3.7$2.8 million resulting
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from increased headcount.headcount, and increased other charges of $1.9 million partially offset by a gain of $2.2 million recognized on the deconsolidation of a variable interest entity.
Amortization expense of intangible assets related to customer relationships, non-compete agreements, technology and trade names is included in selling, general and administrative expenses in the condensed consolidated statements of income (loss).income. For the three months ended September 30, 20182019 and 2017,2018, we recorded amortization expense related to these intangible assets of $0.3$0.2 million and $0.4$0.3 million, respectively. For the nine months ended September 30, 20182019 and 2017,2018, we recorded amortization expense related to these intangible assets of $0.6 million and $0.8 million, and $1.1 million, respectively.


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Other Expenses, Net
Other expenses, net, includes gains and losses from derivatives and foreign currency transactions, interest income and expenses and amortization of deferred financing costs. Other expenses, net increased $1.6$0.9 million and $5.5 million for the three and nine months ended September 30, 2018, respectively, compared to the same periods of 2017, primarily due to increases in interest expense and unfavorable foreign exchange rate fluctuations realized.
Income Before Taxes
Income before taxes increased $1.4 million, or 10.9%, from $12.7$4.2 million for the three months ended September 30, 20172019 compared to $14.1the same period of 2018, primarily due to higher interest expenses and unfavorable foreign exchange rate fluctuations realized. Other expenses, net increased $0.6 million to $11.4 million for the nine months ended September 30, 2019 compared to the same period of 2018, primarily due to higher interest expenses and increased amortization of deferred financing costs partially offset by increased interest income.
Income Before Taxes
Income before taxes decreased $4.8 million, or 34.0%, to $9.3 million for the three months ended September 30, 2019 compared to the same period of 2018, due to the reasons described above. Income before taxes increased $11.5decreased $7.1 million, or 66.4%24.6%, from $17.3to $21.7 million for the nine months ended September 30, 20172019 compared to $28.8 million for the nine months ended September 30,same period of 2018, due to the reasons described above.
Provision from Income Taxes
The provision for income taxes was $0.9 million for the three months ended September 30, 2019, compared to a provision of $3.4 million for the three months ended September 30, 2018, compared to $3.9 million for the three months ended September 30, 2017.2018. The estimated annual effective annualized tax rate impacted by period discrete items applied for the three months ended September 30, 20182019 was 23.8%10.1% compared to 30.6%23.8% for the three months ended September 30, 2017.2018. The decrease in the rate compared to the same period in the prior year was due primarily to the effects of the reduction in the U.S. federal statutory tax rate, 21% for 2018 compared to 35% for 2017 and the inclusion of a $5.9 million discrete tax benefit related to the 2017 Section 179D deduction which was extended in February 2018. The effects of the higher U.S. federal statutory tax rateadditional Investment Tax Credits for 2017 was partially offset by the use of investment tax credits, to which2019 on solar projects the Company was entitled from plants it placedplans to retain and place in service in 2017.2019.
The provision for income taxes was $2.0 million for the nine months ended September 30, 2019, compared to a provision of $1.9 million for the nine months ended September 30, 2018, compared to a provision of $4.3 million for the nine months ended September 30, 2017.2018. The estimated annual effective annualized tax rate impacted by period discrete items applied for the nine months ended September 30, 20182019 was 6.5%9.2% compared to 24.8%6.5% for the nine months ended September 30, 2017.2018. The decreaseincrease in the rate compared to the same period in the prior year was due primarily to the effects of the reductioninclusion in the U.S. federal statutory tax rate, 21% for 2018 compared to 35% in 2017, and the effectsprior year of a $5.9 million discrete tax deduction under Internal Revenue Codebenefit for the 2017 Section 179D.179D deductions.
The principal reason for the difference between the statutory rate and the estimated annual effective rate for 2019 was the effects of investment tax credits to which the Company is entitled from solar plants which have been or will be placed in service in 2019. The principle reasons for the difference between the statutory rate and the estimated annual effective tax rate for 2018 were the effects of a $5.9 million benefit of the 2017 Section 179D deduction, which was extended in February 2018 and treatedwas included as a discrete eventtax deduction in the year to date period,2018, and the use of investment tax credits to which the Company is entitled from owned plants. The principal reason for the difference between the statutory rate and the estimated annual effective rate for 2017 were the effects of investment tax credits to which the Company is entitled from owned plants.
The investment tax credits and other energy relatedproduction tax incentivescredits to which we arethe Company may be entitled fluctuate from year to year based on our investmentthe cost of the renewable energy plants we placethe Company places or expectexpects to place in service and production levels at company owned facilities in that year.
Net Income and Earnings Per Share
Net income increased $1.9decreased $2.4 million, or 21.7%22.1%, to $10.7$8.3 million for the three months ended September 30, 20182019 compared to $8.8$10.7 million for the same period of 2017.2018. Net income increased $13.9decreased $7.2 million, or 106.9%26.8%, to $26.9$19.7 million for the nine months ended September 30, 20182019 compared to $13.0$26.9 million for the same period of 2017.2018.
Basic and diluted earnings per share for the three months ended September 30, 2018 were $0.23, an increase2019 was $0.19, a decrease of $0.04 per share compared to the same period of 2017.2018. Diluted earnings per share for the three months ended September 30, 2019 and 2018 was $0.23 per share. Basic earnings per share for the nine months ended September 30, 20182019 was $0.58, an increase$0.48, a decrease of $0.28$0.10 per share compared to the same period of 2017.2018. Diluted earnings per share for the nine months ended September 30, 20182019 was $0.57, an increase$0.47, a decrease of $0.27$0.10 per share, compared to the same period of 2017.2018.
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Business Segment Analysis
We report results under ASC 280, Segment Reporting. Our reportable segments for the three and sixnine months ended JuneSeptember 30, 20182019 are U.S. Regions, U.S. Federal, Canada and Non-Solar DistributionDistributed Generation (“DG”). Our U.S. Regions, U.S. Federal and Canada segments offer energy efficiency products and services, which include: the design, engineering and installation of equipment and other measures to improve the efficiency and control the operation of a facility’s energy infrastructure; renewable energy solutions and services, which include the construction of small-scale plants that we own or develop for customers that produce electricity, gas, heat or cooling from renewable sources of energy; and O&M services. Our Non-Solar


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DG segment sells electricity, processed renewable gas fuel, heat or cooling, produced from renewable sources of energy, other than solar, and generated by small-scale plants that we own; and O&M services for customer-owned small-scale plants. As of December 31, 2017, the Company’s U.S. Regions segment now includes certain small-scale solar grid-tie plants developed for customers previously included in our Non-Solar DG segment. Previously reported amounts have been restated for comparative purposes. The “All Other” category offers enterprise energy management services, consulting services and integrated-PV. These segments do not include results of other activities, such as corporate operating expenses not specifically allocated to the segments.
U.S. Regions
Three Months Ended September 30, Dollar PercentageThree Months Ended September 30, Dollar Percentage
2018 2017 Change Change2019 2018 Change Change
Revenues$86,402
 $82,633
 $3,769
 4.6 %$84,079
 $86,402
 $(2,323) (2.7)%
Income before taxes$5,256
 $6,432
 $(1,176) (18.3)%$3,350
 $5,256
 $(1,906) (36.3)%
              
Nine Months Ended September 30, Dollar PercentageNine Months Ended September 30, Dollar Percentage
2018 2017 Change Change2019 2018 Change Change
Revenues$249,871
 $191,956
 $57,915
 30.2 %$227,896
 $249,871
 $(21,975) (8.8)%
Income before taxes$14,606
 $7,388
 $7,218
 97.7 %$5,530
 $14,606
 $(9,076) (62.1)%
Revenues for our U.S. Regions segment increased $3.8decreased $2.3 million, or 4.6%2.7%, to $86.4$84.1 million for the three months ended September 30, 2018 and increased $57.92019 compared to the same period of 2018. Revenues for our U.S. Regions segment decreased $22.0 million, or 30.2%8.8%, to $249.9$227.9 million for the nine months ended September 30, 20182019 compared to the same period of 2017, primarily due to an increase2018. The decrease in project revenues attributable to an increase in the average project size versus the prior year.
Income before taxes for our U.S. Regions segment decreased $1.2 million, or 18.3%, to $5.3 million for the three months ended September 30, 2018 primarily due to primarily due to an increase in interest expense related to a larger portfolio of energy assets that are financed, as well as the timing of revenues from the sale of renewable energy credits. For theand nine months ended September 30, 2018, income before taxes increased $7.2 million, or 97.7%, to $14.6 million compared to the same periods of 20172019 were primarily due to the increasea decrease in project revenues described above.
U.S. Federal
 Three Months Ended September 30, Dollar Percentage
 2018 2017 Change Change
Revenues$62,378
 $63,873
 $(1,495) (2.3)%
Income before taxes$10,969
 $8,753
 $2,216
 25.3 %
        
 Nine Months Ended September 30, Dollar Percentage
 2018 2017 Change Change
Revenues$168,377
 $170,903
 $(2,526) (1.5)%
Income before taxes$26,864
 $23,079
 $3,785
 16.4 %
Revenues for our U.S. Federal segment decreased $1.5 million, or 2.3%, to $62.4 million for the three months ended September 30, 2018, and $2.5 million, or 1.5%, to $168.4 million for the nine months ended September 30, 2018 compared to the same period of 2017, primarily dueattributable to timing of revenue recognized as a result of the phase of active projects.projects versus the prior year partially offset by an increase in energy and incentive revenue from small-scale solar grid tie plants that the Company owns.
Income before taxes for our U.S. FederalRegions segment increased $2.2decreased $1.9 million, or 25.3%36.3%, from $5.3 million to $11.0$3.4 million for the three months ended September 30, 2019 and 2018, respectively, primarily due to an increase in salaries and $3.8benefits and project development costs. Income before taxes for our U.S. Regions segment decreased $9.1 million, or 16.4%62.1%, from $14.6 million to $26.9$5.5 million for the nine months ended September 30, 2019 and 2018, respectively, primarily due to the decrease in revenues described above, higher depreciation expenses, and increased salaries and benefits expenses.
U.S. Federal
 Three Months Ended September 30, Dollar Percentage
 2019 2018 Change Change
Revenues$71,258
 $62,378
 $8,880
 14.2 %
Income before taxes$10,967
 $10,969
 $(2)  %
        
 Nine Months Ended September 30, Dollar Percentage
 2019 2018 Change Change
Revenues$169,337
 $168,377
 $960
 0.6 %
Income before taxes$26,631
 $26,864
 $(233) (0.9)%
Revenues for our U.S. Federal segment increased $8.9 million, or 14.2%, to $71.3 million for the three months ended September 30, 2019 compared to the same periodsperiod of 2017,2018. Revenues for our U.S. Federal segment increased $1.0 million, or 0.6%, to $169.3 million for the nine months ended September 30, 2019 compared to the same period of 2018. The increase in revenues for the three months ended September 30, 2019 was due primarily due to gross profit attributedan increase in project revenue attributable to timing of revenue recognized as a favorable mixresult of higher margin projects.the phase of active projects versus the prior year.


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Income before taxes for our U.S. Federal segment remained consistent at $11.0 million for three months ended September 30, 2019 compared to $11.0 million for the same period of 2018, even with the increase in revenues described above primarily due to higher direct costs resulting in lower gross margins. Income before taxes for our U.S. Federal segment decreased $0.2 million, or 0.9%, to $26.6 million for the nine months ended September 30, 2019 compared to the same periods of 2018, even with the increase in revenues described above primarily due to higher direct costs resulting in lower gross margins.
Canada
Three Months Ended September 30, Dollar PercentageThree Months Ended September 30, Dollar Percentage
2018 2017 Change Change2019 2018 Change Change
Revenues$11,604
 $14,719
 $(3,115) (21.2)%$12,665
 $11,604
 $1,061
 9.1 %
Income before taxes$664
 $1,537
 $(873) (56.8)%$1,577
 $664
 $913
 137.5 %
              
Nine Months Ended September 30, Dollar PercentageNine Months Ended September 30, Dollar Percentage
2018 2017 Change Change2019 2018 Change Change
Revenues$28,466
 $33,211
 $(4,745) (14.3)%$27,696
 $28,466
 $(770) (2.7)%
Income (loss) before taxes$(1,983) $1,638
 $(3,621) (221.1)%$1,529
 $(1,983) $3,512
 177.1 %
Revenues for our Canada segment decreased $3.1 million, or 21.2%,increased to $11.6$12.7 million for the three months ended September 30, 2019 compared to $11.6 million the same period of 2018, primarily due to an increase in energy assets and $4.7other revenues. Revenues for our Canada segment decreased $0.8 million, or 14.3%2.7%, to $28.5$27.7 million for the nine months ended September 30, 20182019 compared to the same periodsperiod of 2017,2018, primarily due to a decrease in project revenues related to slowerthe progression of certain active projects.
Income before taxes for our Canada segment decreasedincreased $0.9 million to $0.7 million for the three months ended September 30, 20182019 to $1.6 million of income compared to a $0.7 million for the same period of 20172018. The increase is due primarily due to the decreaseincrease in revenues described above. Forabove and a decrease in salaries and benefits. Income before taxes for our Canada segment increased $3.5 million for the nine months ended September 30, 2018, income (loss) before taxes decreased $3.6 million2019 to a loss of $2.0$1.5 million compared to income of $1.6a $2.0 million loss before taxes for the same period of 2017.2018. The decrease for the nine-month periodincrease is primarily due to thea decrease in revenues described above, highersalaries and benefits, project development costs, interest expense and unfavorablefavorable foreign currency exchange rate fluctuations.fluctuations versus the prior year.
Non-Solar DG
Three Months Ended September 30, Dollar PercentageThree Months Ended September 30, Dollar Percentage
2018 2017 Change Change2019 2018 Change Change
Revenues$22,138
 $22,847
 $(709) (3.1)%$21,875
 $22,138
 $(263) (1.2)%
Income before taxes$3,851
 $1,798
 $2,053
 114.2 %$977
 $3,851
 $(2,874) (74.6)%
              
Nine Months Ended September 30, Dollar PercentageNine Months Ended September 30, Dollar Percentage
2018 2017 Change Change2019 2018 Change Change
Revenues$60,176
 $53,703
 $6,473
 12.1 %$66,370
 $60,176
 $6,194
 10.3 %
Income before taxes$8,796
 $3,825
 $4,971
 130.0 %$5,758
 $8,796
 $(3,038) (34.5)%
Revenues for our Non-Solar DG segment decreased $0.7$0.3 million, or 3.1%1.2%, to $22.1$21.9 million for the three months ended September 30, 2018,2019 compared to the same period of 2018. The decrease in revenues for the three months ended September 30, 2019 was primarily due to a decrease in project revenues which wasenergy and incentive revenue partially offset by an increase in energy and incentive revenue. Forproject revenues. Revenues for our Non-Solar DG segment increased $6.2 million, or 10.3%, to $66.4 million for the nine months ended September 30, 2018, revenues increased $6.5 million, or 12.1%, to $60.2 million2019 compared to the same period of 2017,2018. The increase in revenues for the nine months ended September 30, 2019 was primarily due to an increase in energy and incentive revenue which was partially offset by a decrease in project revenue.
Income before taxes for our Non-Solar DG segment increased $2.1decreased $2.9 million, or 114.2%74.6%, to $3.9$1.0 million for the three months ended September 30, 2019 compared to the same period of 2018 and $5.0primarily due to higher direct costs resulting in lower gross margins. Income before taxes for our Non-Solar DG segment decreased $3.0 million, or 130.0%34.5%, to $8.8$5.8 million for the nine months ended September 30, 20182019 compared to the same periodsperiod of 2017,2018 primarily due to higher depreciation expenses compared to the increaseprior year attributed to the growth of our assets in higher margin energy and incentive revenues described above.operations.


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All Other & Unallocated Corporate Activity
Three Months Ended September 30, Dollar PercentageThree Months Ended September 30, Dollar Percentage
2018 2017 Change Change2019 2018 Change Change
Revenues$22,853
 $20,672
 $2,181
 10.6 %$22,149
 $22,853
 $(704) (3.1)%
Income before taxes$1,959
 $991
 $968
 97.7 %$881
 $1,959
 $(1,078) (55.0)%
Unallocated corporate activity$(8,648) $(6,839) $(1,809) (26.5)%$(8,482) $(8,648) $166
 1.9 %
              
Nine Months Ended September 30, Dollar PercentageNine Months Ended September 30, Dollar Percentage
2018 2017 Change Change2019 2018 Change Change
Revenues$62,877
 $56,246
 $6,631
 11.8 %$69,022
 $62,877
 $6,145
 9.8 %
Income before taxes$3,771
 $2,304
 $1,467
 63.7 %$7,592
 $3,771
 $3,821
 101.3 %
Unallocated corporate activity$(23,268) $(20,931) $(2,337) (11.2)%$(25,331) $(23,269) $(2,062) (8.9)%
Revenues for our All Other segment increased $2.2decreased $0.7 million, or 10.6%3.1%, to $22.9$22.1 million for the three months ended September 30, 2018,2019 compared to the same period of 20172018 primarily due to a decrease in project revenues attributable to timing of revenue recognized as a result of the phase of active projects versus the prior year. Revenues for our All Other segment increased $6.1 million, or 9.8%, to $69.0 million for the nine months ended September 30, 2019 compared to the same period of 2018 primarily due to an increase in project revenues and consulting services revenue. Revenues increased $6.6 million, or 11.8%, to $62.9 million for the nine months ended September 30, 2018 compared to the same period of 2017 primarily due to an increase in project revenues related to the size of active projects and integrated-PV revenues attributed to sales to customers for oilfield microgrid applications.
Income before taxes for our All Other segment increased $1.0decreased $1.1 million, or 97.7%55.0%, to $2.0$0.9 million for the three months ended September 30, 2019 compared to the same period of 2018 due to an increase in salaries and $1.5benefits and project development costs. Income before taxes for our All Other segment increased $3.8 million, or 63.7%101.3%, to $3.8$7.6 million for the nine months ended September 30, 20182019 compared to the same periodsperiod of 2017 primarily2018 due to the increase in revenues described above.above, and a gain of $2.2 million recognized on the deconsolidation of a variable interest entity.
Unallocated corporate activity includes all corporate level selling, general and administrative expenses and other expenses not allocated to the segments. We do not allocate any indirect expenses to the segments.
Liquidity and Capital Resources
Sources of liquidity. Since inception, we have funded operations primarily through cash flow from operations, advances from Federal ESPC projects and various forms of debt. We believe that the cash and cash equivalents and availability under our revolving senior secured credit facility, combined with our access to credit markets, will be sufficient to fund our operations through the next twelve months and thereafter. See Note 2 of the audited consolidated financial statements for the year ended December 31, 2018, and notes thereto, included in the Company’s Annual Report.
Proceeds from our Federal ESPC projects are generally received through agreements to sell the ESPC receivables related to certain ESPC contracts to third-party investors. We use the advances from the investors under these agreements to finance the projects. Until recourse to us ceases for the ESPC receivables transferred to the investor, upon final acceptance of the work by the government customer, we are the primary obligor for financing received. The transfers of receivables under these agreements do not qualify for sales accounting until final customer acceptance of the work, so the advances from the investors are not classified as operating cash flows. Cash draws that we receive under these ESPC agreements are recorded as financing cash inflows. The use of the cash received under these arrangements to pay project costs is classified as operating cash flows. Due to the manner in which the ESPC contracts with the third-party investors are structured, our reported operating cash flows are materially impacted by the fact that operating cash flows only reflect the ESPC contract expenditure outflows and do not reflect any inflows from the corresponding contract revenues. Upon acceptance of the project by the federal customer the ESPC receivable and corresponding ESPC liability are removed from our condensed consolidated balance sheet as a non-cash settlement. See Note 2, Summary of Significant Accounting Policies, to our Notes to Condensed Consolidated Financial Statements appearing in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Our service offering also includes the development, construction and operation of small-scale renewable energy plants. Small-scale renewable energy projects, or energy assets, can either be developed for the portfolio of assets that we own and operate or designed and built for customers. Expenditures related to projects that we own are recorded as cash outflows from investing activities. Expenditures related to projects that we build for customers are recorded as cash outflows from operating activities as cost of revenues.
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The amount of interest capitalized relating to construction financing during the period of construction for the three months ended September 30, 2018 and 2017 was $0.6 million and $0.9 million, respectively. The amount of interest capitalized


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relating to construction financing during the period of construction for the nine months ended September 30, 2019 and 2018 and 2017 was $2.4$2.2 million and $3.5$2.4 million, respectively.
Cash flows from operating activities. Operating activities used $32.0$120.7 million of net cash during the nine months ended September 30, 2018.2019. During that period, we had net income of $26.9$19.7 million, which is net of non-cash compensation, depreciation, amortization, accretion, contingent consideration, deferred income taxes, lossgain on saledeconsolidation of assets,a VIE, net gain on derivatives, unrealized foreign exchange loss and other non-cash items totaling $29.6$29.1 million. Increase in other assets, project development cost, and decrease in accounts payable and accrued expenses, other liabilities and income tax payable used $26.9 million in cash. These were offset by decreasesIncreases in accounts receivable including retainage, inventory, costs and estimated earnings in excess of billings, prepaids,prepaid expenses and increasesother current assets, project development costs, other assets, and decreases in accounts payable, accrued expenses and other current liabilities, billings in excess of costscost and estimated earnings, and other liabilities used $61.7 million in cash. These were offset by an increase in income taxes payable which provided for $50.4$2.6 million in cash. Increases in Federal ESPC receivables used an additional $112.0$110.4 million. As described above, Federal ESPC operating cash flows only reflect the ESPC expenditure outflows and do not reflect any inflows from the corresponding contract revenues, which are recorded as cash inflows from financing activities due to the timing of the receipt of cash related to the assignment of the ESPC receivables to the third-party investors.
Operating activities used $90.4$32.0 million of net cash during the nine months ended September 30, 2017.2018. During that period, we had net income of $13.0$26.9 million, which is net of non-cash compensation, depreciation, amortization, deferred income taxes, unrealized foreign exchange loss, net gain on derivatives and other non-cash items totaling $17.1$29.5 million. Decreases accounts receivable, including retainage, inventory, andIncreases in project development costs, other assets, and increasesdecreases in accounts payable, and accrued expenses and other current liabilities, and income taxtaxes payable provided $33.8used $26.9 million in cash. These were offset by increasesdecreases in accounts receivable including retainage, inventory, costs and estimated earnings in excess of billings, prepaid expenses and other current assets, and project development costs and decreasesincreases in billings in excess of cost and estimated earnings, and other liabilities, which used $35.2provided for $50.4 million. An increaseIncreases in Federal ESPC receivables used an additional $119.1$112.0 million.
Cash flows from investing activities. Cash flows from investing activities during the nine months ended September 30, 2019 used $79.9 million. We invested $72.1 million on purchases of energy assets during the nine months ended September 30, 2019. In addition, we invested $6.2 million in purchases of other property and equipment, $1.3 million related to acquisition of a business and made contributions of $0.3 million in an equity investment. We currently plan to invest approximately $40.0 million to $50.0 million in additional capital expenditures in 2019, principally for the construction or acquisition of new renewable energy plants.
Cash flows from investing activities during the nine months ended September 30, 2018 used $109.7 million. We invested $44.1$103.2 million on purchases of energy assets during the nine months ended September 30, 2018. In addition, we invested $3.0 million in purchases of other property and equipment and $62.7invested $3.6 million related to acquisitionsin the acquisition of businesses and renewable energy plants. We plan to invest an additional $30.0 million on capital expenditures, principally for energy asset acquisitions and construction, for the remainder of 2018.a business.
Cash flows from investingfinancing activities. Cash flows from financing activities during the nine months ended September 30, 2017 used $70.32019 provided $172.9 million. Development of our renewable energy plants used $68.7 million. In addition, we invested $1.9 million in purchases of other property and equipment and $2.4 million related to the acquisitions of renewable energy assets. This was primarily due to proceeds received from Federal ESPC projects and energy assets of $117.2 million, proceeds from exercises of stock options and ESPP of $5.3 million, net proceeds from our senior secured credit facility of $41.3 million, proceeds from project financings of $7.6 million and net contributions from redeemable non-controlling interests of $20.2 million. This was partially offset by proceeds from the salespayments on long-term debt of assets$18.0 million, payments of $2.8 million.financing fees of $0.5 million and repurchase of common stock of $0.1 million, including fees.
Cash flows from financing activities. Cash flows from financing activities during the nine months ended September 30, 2018 provided $178.8 million. This was primarily due to proceeds received from Federal ESPC projects and energy assets of $115.8 million, proceeds from project financings of $78.9 million, proceeds from sales leaseback financing of $5.1 million, net proceeds from redeemable non-controlling interests of $3.7 million, and proceeds from exercises of stock options and ESPP of $4.3 million. This was partially offset by payments on long-term debt of $22.8 million, repurchase of common stock of $1.8 million, including fees, net draws on our revolvingsenior credit facility of $0.9 million, and payments of financing fees of $3.7 million.
Cash flows from financing activities during the nine months ended September 30, 2017 provided $172.3 million. This was primarily due to proceeds received from Federal ESPC projects of $122.3 million, $30.6 million received under sale-leaseback financings, proceeds from project financings of $48.9 million, proceeds from exercises of options of $1.6 million, net draws on our revolving credit facility of $12.8 million and net proceeds from redeemable non-controlling interests of $1.4 million. These was partially offset by payments on long-term debt of $40.2 million, payments of financing fees of $2.0 million, and repurchase of stock of $3.0 million, including fees.
We currently plan additional project financings of approximately $20.0 million to $30.0 million for the remainder of 2018.2019 to fund the construction or acquisition of new renewable energy plants discussed above.

See Note 13, 16,Long-term Debt, of Notes to Condensed Consolidated Financial Statements for additional discussion of items impacting the Company’s liquidity.

Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under SEC rules, such as relationships with unconsolidated entities or financial partnerships, which are often referred to as structured


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as structured finance or special purpose entities, established for the purpose of facilitating financing transactions that are not required to be reflected on our balance sheet.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As of September 30, 2018,2019, there have been no significant changes in market risk exposures that materially affected the quantitative and qualitative disclosures as described in Item 7A to our Annual Report.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this quarterly report, or the evaluation date. Disclosure controls and procedures are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our management, after evaluating the effectiveness of our disclosure controls and procedures as of the evaluation date, concluded that as of the evaluation date, our disclosure controls and procedures were effective at a reasonable level of assurance.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We implemented internal controls to ensure we adequately evaluated our contracts and account for revenue recognition under the new accounting standard. There were no significant changes to our internal control over financial reporting due to the adoption of the new standard.


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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In the ordinary conduct of our business we are subject to periodic lawsuits, investigations and claims. Although we cannot predict with certainty the ultimate resolution of such lawsuits, investigations and claims against us, we do not believe that any currently pending or threatened legal proceedings to which we are a party will have a material adverse effect on our business, results of operations or financial condition.
For additional information about certain proceedings, please refer to Note 7, 9, Commitments and Contingencies,, to our Condensed Consolidated Financial Statements included included under Part I, Item 1 of this Quarterly Report on Form 10-Q, which is incorporated into this item by reference.
Item 1A. Risk Factors
As of September 30, 2018,2019, there have been no material changes to the risk factors described in Item 1A to our Annual Report on Form 10-K for the year ended December 31, 2017.2018.
Item 2. Unregistered Sales of Equity and Use of Proceeds
Stock Repurchase Program

The following table provides information as of and for the quarter ended September 30, 20182019 regarding shares of our Class A common stock that were repurchased under our stock repurchase program authorized by the Board of Directors on April 27, 2016 (the “Repurchase Program”):

PeriodTotal Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs 
Approximate
Dollar Value of
Shares that May
Yet Be Purchased
Under the Plans
or Programs
July 1, 2018 - July 31, 2018
 
 
 $3,513,372
August 1, 2018 - August 31, 2018
 
 
 $3,513,372
September 1, 2018 - September 30, 2018
 
 
 $3,513,372
Total
 $
 
 $3,513,372
PeriodTotal Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs 
Approximate
Dollar Value of
Shares that May
Yet Be Purchased
Under the Plans
or Programs
July 1, 2019 - July 31, 2019
 
 
 $6,047,027
August 1, 2019 - August 31, 2019
 
 
 $6,047,027
September 1, 2019 - September 30, 201910,000
 13.93
 10,000
 $5,907,722
Total10,000
 $13.93
 10,000
 $5,907,722

Under the Repurchase Program, we are authorized to repurchase up to $15.0$17.6 million of our Class A common stock, as increased by the Board of Directors in February 2017.stock. Stock repurchases may be made from time to time through the open market and privately negotiated transactions. The amount and timing of any share repurchases will depend upon a variety of factors, including the trading price of our Class A common stock, liquidity, securities laws restrictions, other regulatory restrictions, potential alternative uses of capital, and market and economic conditions.  The Repurchase Program may be suspended or terminated at any time without prior notice, and has no expiration date.


Item 6. Exhibits
The exhibits listed in the Exhibit Index immediately preceding the exhibits are filed (other than exhibit 32.1) as part of this Quarterly Report on Form 10-Q and such Exhibit Index is incorporated herein by reference.



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Exhibit Index
Exhibit
Number
Description
31.1*
31.2*
32.1**
101*
The following condensed consolidated financial statements from Ameresco, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018,2019, formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets (ii) Consolidated Statements of Income, (Loss), (iii) Consolidated Statements of Comprehensive Income, (Loss), (iv) Consolidated Statement of Changes in Redeemable Non-Controlling Interests and Stockholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Condensed Consolidated Financial Statements.
 *Filed herewith.
 + Identifies a management contract or compensatory plan or arrangement in which an executive officer or director of Ameresco participates.
 **Furnished herewith.


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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 AMERESCO, INC.  
Date: November 2, 20185, 2019By:/s/ Mark ChiplockSpencer Doran Hole
  Mark ChiplockSpencer Doran Hole 
  
Senior Vice President and Interim Chief Financial Officer
(duly authorized and principal financial officer)



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