Ormat Technologies, Inc. (NYSE:ORA) (“Ormat” or the “Company”)
today announced that it has filed an amended (i) Form 10-Q for the
period ending June 30, 2017 (ii) Form 10-Q for the period ending
September 30, 2017 and (iii) Form 10-K for the year ending December
31, 2017 with the U.S. Securities and Exchange Commission (SEC) to
restate its financial results for the second, third and fourth
quarters of 2017 and for the full-year of 2017. In addition, the
Company has filed its quarterly report on Form 10-Q for the period
ending March 31, 2018 with the SEC containing adjustments from the
amounts previously reported on May 7, 2018.
As previously reported, upon the recommendation
of its Audit Committee, Ormat’s Board of Directors determined that
the Company should restate prior period financial results based on
the Company’s conclusion that there were errors in the income tax
provision primarily relating to the Company’s valuation allowance
based on the Company’s ability to utilize Federal tax credits
in the U.S. prior to their expiration and the resulting impact on
the Company’s deferred tax asset valuation allowance. Additionally,
the Company netted certain deferred income tax assets and deferred
income tax liabilities across different tax jurisdictions that are
not permitted to be netted pursuant to U.S. generally accepted
accounting principles (U.S. GAAP). The restatement impacted the
“income tax (provision) benefit” line item in the Company’s
statements of operations, with associated impacts to net income and
earnings per share and the “deferred income taxes” line items on
its balance sheet.
The previously reported revenue, net income
before tax and adjusted EBITDA for the second, third and fourth
quarters of 2017 and for the full-year of 2017 remained
unchanged.
SCOPE OF RESTATEMENT
|
|
Year Ended December 31, 2017 |
Three Months Ended December 31, 2017 |
Three Months Ended September 30, 2017 |
Three Months Ended June 30, 2017 |
|
As
Reported |
As
Restated |
As Reported |
As
Restated |
As Reported |
As
Restated |
As Reported |
As
Restated |
Income tax (provision) benefit |
1.4 |
(21.7) |
29.7 |
28.3 |
(11.0) |
(6.2) |
(6.4) |
(32.8) |
Net income |
170.2 |
147.1 |
69.4 |
68.1 |
22.8 |
27.6 |
38.2 |
11.8 |
|
|
|
|
|
|
|
|
|
Net income attributable to the Company's stockholders |
155.5 |
132.4 |
66.0 |
64.6 |
19.2 |
24.0 |
35.0 |
8.6 |
Diluted EPS: |
3.06 |
2.61 |
1.29 |
1.27 |
0.38 |
0.47 |
0.69 |
0.17 |
|
|
|
|
|
|
|
|
|
Adjusted net income attributable to the Company’s
stockholders1 |
151.9 |
155.3 |
66.0 |
64.6 |
21.1 |
25.9 |
29.5 |
29.7 |
Adjusted diluted EPS 1 |
2.99 |
3.06 |
1.29 |
1.26 |
0.42 |
0.51 |
0.58 |
0.59 |
In connection with the restatement of the
full-year 2017 financial statements, the Company also made
revisions to the same line items in certain quarterly financial
statements for 2016 and its full-year 2016 and 2015 financial
statements.
Q1 2018
The Company has also filed its quarterly report
on Form 10-Q for the period ending March 31, 2018 with the SEC.
Within this report, the Company adjusted the income tax benefit for
the first quarter of 2018 compared to the amount reported on May 7,
2018. As a result of this adjustment, the Company’s income tax
benefit increased to $26.9 million compared to $2.1 million
reported on May 7, 2018. The Company’s amended net income
attributable to the Company's shareholders is $69.5 million, or
$1.36 per diluted share, compared to $44.7 million, or $0.88 per
diluted share, reported on May 7, 2018. The Company’s amended
adjusted net income attributable to the Company's shareholders is
$25.1 million, or $0.49 per diluted share, compared to $24.4
million, or $0.48 per diluted share, reported on May 7, 2018.
The previously reported revenue, net income
before tax and adjusted EBITDA for the first quarter of 2018
remained unchanged.
($M) |
Three Months Ended March 31, 2018 |
|
As
reported on May 7, 2018 |
As
filed |
Income tax benefit |
2.1 |
26.9 |
Net
income |
49.4 |
74.3 |
|
|
|
Net
income attributable to the Company's stockholders |
44.7 |
69.5 |
Diluted EPS: |
0.88 |
1.36 |
|
|
|
Adjusted net income attributable to the Company’s stockholders
2 |
24.4 |
25.1 |
Adjusted diluted EPS 2 |
0.48 |
0.49 |
In addition, during the first quarter of 2018,
based upon continued analysis of the specific provisions of the
“Tax Cuts and Jobs Act", specifically the newly created requirement
that global intangible low-taxed income (GILTI) earned by
controlled foreign corporations (CFCs) must be included currently
in gross income of the CFC’s U.S. shareholder, the Company
concluded it was more likely than not that the Section 78 gross up
included in the GILTI calculation would provide an additional
source of realization for the Company’s foreign tax credits and
production tax credits. Accordingly, in the first quarter of
2018, the Company recorded a tax benefit of $44.4 million for the
reduction of the valuation allowance related to foreign tax credits
and production tax credits. In addition, due to the complexity of
the new GILTI tax rules, the Company is continuing to evaluate this
provision of the Act and the application of ASC 740. In May 2018,
certain officials from the U.S. Department of the Treasury and the
Internal Revenue Service made public comments about a plan to
propose regulations related to GILTI that will confirm how to
allocate certain income in the GILTI calculation. As a result, all
or substantially all of the tax benefit of $44.4 million recorded
by the Company for the period ended March 31, 2018 is expected to
be reversed in the period ended June 30, 2018. The range of
the ultimate adjustment in the second quarter results is dependent
upon multiple variables and the release of additional guidance in
future periods may require changes to the Company’s provisional
estimates.
Furthermore, as previously reported, the Company
identified a material weakness in its internal control over
financial reporting related to accounting for income taxes.
Management, with the oversight of the Audit Committee and the Board
of Directors, continues to dedicate significant resources and
efforts to improve the Company’s control environment and take steps
to address the material weakness identified. These efforts are
intended both to address the identified material weakness and to
enhance the Company’s overall financial control environment.
ABOUT ORMAT TECHNOLOGIES
With over five decades of experience, Ormat is a
leading geothermal company and the only vertically integrated
company engaged in geothermal and recovered energy generation
(REG), with the objective of becoming a leading global provider of
renewable energy. The company owns, operates, designs, manufactures
and sells geothermal and REG power plants primarily based on the
Ormat Energy Converter – a power generation unit that converts
low-, medium- and high-temperature heat into electricity. With 77
U.S. patents, Ormat’s power solutions have been refined and
perfected under the most grueling environmental conditions. Ormat
has 530 employees in the United States and 770 overseas. Ormat’s
flexible, modular solutions for geothermal power and REG are ideal
for the vast range of resource characteristics. The company has
engineered, manufactured and constructed power plants, which it
currently owns or has installed to utilities and developers
worldwide, totaling over 2,600 MW of gross capacity. Ormat’s
current approximately 851 MW generating portfolio is spread
globally in the U.S., Kenya, Guatemala, Indonesia, Honduras and
Guadeloupe. In March 2017, Ormat expanded its operations to provide
energy storage and energy management solutions, by leveraging its
core capabilities and global presence as well as through its
Viridity Energy Solutions, Inc. subsidiary, a Philadelphia-based
company with nearly a decade of expertise and leadership in demand
response, energy management and storage.
ORMAT’S SAFE HARBOR STATEMENT
Information provided in this press release may
contain statements relating to current expectations, estimates,
forecasts and projections about future events that are
"forward-looking statements" as defined in the Private Securities
Litigation Reform Act of 1995. These forward-looking statements
generally relate to Ormat's plans, objectives and expectations for
future operations and are based upon its management's current
estimates and projections of future results or trends. Actual
future results may differ materially from those projected as a
result of certain risks and uncertainties. For a discussion of such
risks and uncertainties, see "Risk Factors" as described in Ormat
Technologies, Inc.'s Form 10-K/A filed with the SEC on June 19,
2018 and Form 10-Q for the period ended March 31, 2018 filed with
the SEC on June 19, 2018.
These forward-looking statements are made only
as of the date hereof, and we undertake no obligation to update or
revise the forward-looking statements, whether as a result of new
information, future events or otherwise.
RECONCILIATION OF ADJUSTED NET INCOME
ATTRIBUTABLE TO THE COMPANY'S STOCKHOLDERS
|
|
Year Ended December 31, 2017 |
Three Months Ended December 31, 2017 |
Three Months Ended September 30, 2017 |
Three Months Ended June 30, 2017 |
|
As
Reported |
As
Restated |
As Reported |
As
Restated |
As Reported |
As
Restated |
As Reported |
As
Restated |
Net income attributable to the Company's stockholders |
155.5 |
132.4 |
66.0 |
64.6 |
19.2 |
24.0 |
35.0 |
8.6 |
Adjusted for: |
|
|
|
|
|
|
|
|
Tax benefit related to valuation allowance and other tax
restructuring |
(5.5) |
20.9 |
|
|
|
|
(5.5) |
20.9 |
One-time make whole premium paid in connection with the
prepayment of OFC Senior Secured Notes and DEG loan |
1.9 |
1.9 |
|
|
1.9 |
1.9 |
|
|
Adjusted net income attributable to the Company's
stockholders |
151.9 |
155.2 |
66.0 |
64.6 |
21.1 |
25.9 |
29.5 |
29.5 |
ORMAT TECHNOLOGIES, INC. AND SUBSIDIARIES
Ormat Technologies, Inc. and
SubsidiariesCondensed Consolidated Statements of OperationsFor the
Three-Month Periods Ended March 31, 2018 and 2017(Unaudited)
|
|
|
|
|
|
|
|
|
Three Months Ended March
31 |
|
|
2018 |
|
|
2017 |
|
|
|
|
|
|
|
|
|
|
(In thousands, except
per share data) |
|
Revenues: |
|
|
|
|
|
|
Electricity |
$ |
132,489 |
|
|
$ |
115,776 |
|
|
Product |
|
48,672 |
|
|
|
74,122 |
|
|
Other |
|
2,862 |
|
|
|
— |
|
|
Total
revenues |
|
184,023 |
|
|
|
189,898 |
|
|
Cost of
revenues: |
|
|
|
|
|
|
Electricity |
|
73,482 |
|
|
|
66,036 |
|
|
Product |
|
33,726 |
|
|
|
49,452 |
|
|
Other |
|
3,443 |
|
|
|
— |
|
|
Total
cost of revenues |
|
110,651 |
|
|
|
115,488 |
|
|
Gross
profit |
|
73,372 |
|
|
|
74,410 |
|
|
Operating expenses: |
|
|
|
|
|
|
Research
and development expenses |
|
1,108 |
|
|
|
602 |
|
|
Selling
and marketing expenses |
|
3,699 |
|
|
|
4,363 |
|
|
General
and administrative expenses |
|
13,849 |
|
|
|
9,949 |
|
|
Write-off
of unsuccessful exploration activities |
|
123 |
|
|
|
— |
|
|
Operating
income |
|
54,593 |
|
|
|
59,496 |
|
|
Other
income (expense): |
|
|
|
|
|
|
Interest
income |
|
113 |
|
|
|
244 |
|
|
Interest
expense, net |
|
(14,344 |
) |
|
|
(14,923 |
) |
|
Derivatives and foreign currency transaction gains (losses) |
|
(1,599 |
) |
|
|
1,338 |
|
|
Income
attributable to sale of tax benefits |
|
7,361 |
|
|
|
6,157 |
|
|
Other
non-operating expense, net |
|
(20 |
) |
|
|
(92 |
) |
|
Income
before income taxes and equity in |
|
|
|
|
|
|
losses of
investees |
|
46,104 |
|
|
|
52,220 |
|
|
Income
tax (provision) benefit |
|
26,942 |
|
|
|
(11,004 |
) |
|
Equity
in losses of investees, net |
|
1,210 |
|
|
|
(1,599 |
) |
|
|
|
|
|
|
|
|
Net
income |
|
74,256 |
|
|
|
39,617 |
|
|
Net
income attributable to noncontrolling interest |
|
(4,748 |
) |
|
|
(4,423 |
) |
|
Net
income attributable to the Company's stockholders |
$ |
69,508 |
|
|
$ |
35,194 |
|
|
|
|
|
|
|
|
|
Earnings per share attributable to the Company's stockholders -
Basic and diluted: |
|
Basic: |
|
|
|
|
|
|
Net
Income |
$ |
1.37 |
|
|
$ |
0.71 |
|
|
|
|
|
|
|
|
|
Diluted: |
|
|
|
|
|
|
Net
Income |
$ |
1.36 |
|
|
$ |
0.70 |
|
|
|
|
|
|
|
|
|
Weighted
average number of shares used in computation of earnings per share
attributable to the Company's stockholders: |
|
|
|
|
|
|
Basic |
|
50,614 |
|
|
|
49,680 |
|
|
Diluted |
|
51,051 |
|
|
|
50,491 |
|
|
|
|
|
|
|
|
ORMAT TECHNOLOGIES, INC. AND SUBSIDIARIESOrmat
Technologies, Inc. and SubsidiariesCondensed Consolidated Balance
SheetsAs of March 31, 2018, and December 31,
2017 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
|
|
|
2018 |
|
2017 (As Restated) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(In
thousands) |
|
|
ASSETS |
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and
cash equivalents |
|
$ |
54,723 |
|
|
$ |
47,818 |
|
|
|
Restricted cash, cash equivalents and marketable securities |
|
|
50,332 |
|
|
|
48,825 |
|
|
|
Receivables: |
|
|
|
|
|
|
|
|
Trade |
|
|
103,580 |
|
|
|
110,410 |
|
|
|
Other |
|
|
10,018 |
|
|
|
13,828 |
|
|
|
Inventories |
|
|
20,069 |
|
|
|
19,551 |
|
|
|
Costs and
estimated earnings in excess of billings on uncompleted
contracts |
|
|
41,134 |
|
|
|
40,945 |
|
|
|
Prepaid
expenses and other |
|
|
42,274 |
|
|
|
40,269 |
|
|
|
Total
current assets |
|
|
322,130 |
|
|
|
321,646 |
|
|
|
Investment in an
unconsolidated company |
|
|
63,109 |
|
|
|
34,084 |
|
|
|
Deposits and other |
|
|
21,205 |
|
|
|
21,599 |
|
|
|
Deferred income
taxes |
|
|
124,304 |
|
|
|
57,337 |
|
|
|
Deferred charges |
|
|
— |
|
|
|
49,834 |
|
|
|
Property, plant and
equipment, net |
|
|
1,723,560 |
|
|
|
1,734,691 |
|
|
|
Construction-in-process |
|
|
345,563 |
|
|
|
293,542 |
|
|
|
Deferred financing and
lease costs, net |
|
|
4,922 |
|
|
|
4,674 |
|
|
|
Intangible assets,
net |
|
|
84,771 |
|
|
|
85,420 |
|
|
|
Goodwill |
|
|
21,253 |
|
|
|
21,037 |
|
|
|
Total
assets |
|
$ |
2,710,817 |
|
|
$ |
2,623,864 |
|
|
|
LIABILITIES AND
EQUITY |
|
|
Current
liabilities: |
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses |
|
$ |
103,551 |
|
|
$ |
153,796 |
|
|
|
Short-term revolving credit lines with banks (full recourse) |
|
|
38,500 |
|
|
|
51,500 |
|
|
|
Billings
in excess of costs and estimated earnings on uncompleted
contracts |
|
|
10,458 |
|
|
|
20,241 |
|
|
|
Current
portion of long-term debt: |
|
|
|
|
|
|
|
|
Limited
and non-recourse: |
|
|
|
|
|
|
|
|
Senior
secured notes |
|
|
28,398 |
|
|
|
33,226 |
|
|
|
Other
loans |
|
|
21,495 |
|
|
|
21,495 |
|
|
|
Full
recourse |
|
|
2,809 |
|
|
|
3,087 |
|
|
|
Total
current liabilities |
|
|
205,211 |
|
|
|
283,345 |
|
|
|
Long-term debt, net of
current portion: |
|
|
|
|
|
|
|
|
Limited
and non-recourse: |
|
|
|
|
|
|
|
|
Senior
secured notes |
|
|
305,905 |
|
|
|
311,668 |
|
|
|
Other
loans |
|
|
237,245 |
|
|
|
242,385 |
|
|
|
Full
recourse: |
|
|
|
|
|
|
|
|
Senior
unsecured bonds |
|
|
303,469 |
|
|
|
203,752 |
|
|
|
Other
loans |
|
|
46,506 |
|
|
|
46,489 |
|
|
|
Liability associated
with sale of tax benefits |
|
|
42,622 |
|
|
|
44,634 |
|
|
|
Deferred lease
income |
|
|
50,745 |
|
|
|
51,520 |
|
|
|
Deferred income
taxes |
|
|
48,074 |
|
|
|
61,961 |
|
|
|
Liability for
unrecognized tax benefits |
|
|
9,074 |
|
|
|
8,890 |
|
|
|
Liabilities for
severance pay |
|
|
20,874 |
|
|
|
21,141 |
|
|
|
Asset retirement
obligation |
|
|
27,639 |
|
|
|
27,110 |
|
|
|
Other long-term
liabilities |
|
|
21,625 |
|
|
|
18,853 |
|
|
|
Total
liabilities |
|
|
1,318,989 |
|
|
|
1,321,748 |
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable
non-controlling interest |
|
|
6,943 |
|
|
|
6,416 |
|
|
|
|
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
|
|
The
Company's stockholders' equity: |
|
|
|
|
|
|
|
|
Common
stock |
|
|
51 |
|
|
|
51 |
|
|
|
Additional paid-in capital |
|
|
890,485 |
|
|
|
888,778 |
|
|
|
Retained
earnings (accumulated deficit) |
|
|
410,758 |
|
|
|
327,255 |
|
|
|
Accumulated other comprehensive income (loss) |
|
|
(909 |
) |
|
|
(4,706 |
) |
|
|
|
|
|
1,300,385 |
|
|
|
1,211,378 |
|
|
|
Noncontrolling interest |
|
|
84,500 |
|
|
|
84,322 |
|
|
|
Total
equity |
|
|
1,384,885 |
|
|
|
1,295,700 |
|
|
|
Total
liabilities and equity |
|
$ |
2,710,817 |
|
|
$ |
2,623,864 |
|
|
|
|
|
|
|
|
|
|
|
ORMAT TECHNOLOGIES, INC. AND
SUBSIDIARIESReconciliation of EBITDA and Adjusted EBITDA For the
Three-Month Periods Ended March 31, 2018 and 2017(Unaudited)
We calculate EBITDA as net income before
interest, taxes, depreciation and amortization. We calculate
Adjusted EBITDA as net income before interest, taxes, depreciation
and amortization, adjusted for (i) termination fees, (ii)
impairment of long-lived assets, (iii) write-off of unsuccessful
exploration activities, (iv) any mark-to-market gains or losses
from accounting for derivatives, (v) merger and acquisition
transaction costs (vi) stock-based compensation, (vii) gains or
losses from extinguishment of liability, (viii) gains or losses on
sales of subsidiaries and property, plant and equipment and (ix)
other unusual or non-recurring items. EBITDA and Adjusted EBITDA
are not measurements of financial performance or liquidity under
U.S. GAAP and should not be considered as an alternative to cash
flow from operating activities or as a measure of liquidity or as
an alternative to net earnings as indicators of our operating
performance or any other measures of performance derived in
accordance with U.S. GAAP. EBITDA and Adjusted EBITDA are presented
because we believe they are frequently used by securities analysts,
investors and other interested parties in the evaluation of a
company’s ability to service and/or incur debt. However, other
companies in our industry may calculate EBITDA and Adjusted EBITDA
differently than we do.
The following table reconciles net income to
EBITDA and Adjusted EBITDA for the three-month periods ended March
31, 2018 and 2017.
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31 |
|
|
|
2018 |
|
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
Net income |
|
$ |
74,256 |
|
|
$ |
39,617 |
|
|
Adjusted for: |
|
|
|
|
|
|
|
Interest expense, net
(including amortization |
|
|
|
|
|
|
|
of
deferred financing costs) |
|
|
14,231 |
|
|
|
14,679 |
|
|
Income tax
provision |
|
|
(26,942 |
) |
|
|
11,004 |
|
|
Adjustment to
investment in uncosolidated company: |
|
|
|
|
|
|
|
our proportionate share
in interest, tax and depreciation and amortization |
|
|
3,530 |
|
|
|
— |
|
|
Depreciation and
amortization |
|
|
29,437 |
|
|
|
25,542 |
|
|
EBITDA |
|
$ |
94,512 |
|
|
$ |
90,842 |
|
|
|
|
|
|
|
|
|
|
Mark-to-market on
derivatives instruments |
|
|
962 |
|
|
|
(1,523 |
) |
|
Stock-based
compensation |
|
|
1,707 |
|
|
|
1,713 |
|
|
Merger and acquisition
transaction cost |
|
|
1,095 |
|
|
|
800 |
|
|
Write-off of
unsuccessful exploration activities |
|
|
123 |
|
|
|
— |
|
|
Adjusted EBITDA |
|
$ |
98,399 |
|
|
$ |
91,832 |
|
|
|
|
|
|
|
|
|
Ormat
Technologies Contact:Smadar LaviVP Corporate Finance and Head of
Investor Relations775-356-9029 (ext. 65726)slavi@ormat.com |
|
|
|
Investor
Relations Agency Contact:Rob FinkHayden -
IR646-415-8972rob@haydenir.com |
1 A reconciliation of Adjusted Net income attributable to the
Company’s stockholders is set forth below in this release
2 Adjusted Net income attributable to the Company’s stockholders
and diluted EPS for the first quarter of 2018 excludes the $20.3
million and $ 44.4 million tax benefits recorded for the reduction
of the valuation allowance related to foreign tax credits and
production tax credits as reported on May 7, 2018 and as filed,
respectively.
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