Ormat Technologies Files Restated Financial Reports and Files Q1 2018 Financial Report Containing Adjusted Results

Reno, Nevada, UNITED STATES


RENO, Nev., June 19, 2018 (GLOBE NEWSWIRE) -- 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) benefit1.4(21.7)29.728.3(11.0)(6.2)(6.4)(32.8)
Net income170.2147.169.468.122.827.638.211.8
         
Net income attributable to the Company's stockholders155.5132.466.064.619.224.035.08.6
Diluted EPS:3.062.611.291.270.380.470.690.17
         
Adjusted net income attributable to the Company’s stockholders1151.9155.366.064.621.125.929.529.7
Adjusted diluted EPS 12.993.061.291.260.420.510.580.59

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 benefit2.126.9
Net income49.474.3
   
Net income attributable to the Company's stockholders44.769.5
Diluted EPS:0.881.36
   
Adjusted net income attributable to the Company’s stockholders 224.425.1
Adjusted diluted EPS 20.480.49

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 ReportedAs RestatedAs ReportedAs RestatedAs ReportedAs RestatedAs ReportedAs Restated
Net income attributable to the Company's stockholders155.5132.466.064.619.224.035.08.6
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 loan1.91.9  1.91.9  
Adjusted net income attributable to the Company's stockholders151.9155.266.064.621.125.929.529.5

ORMAT TECHNOLOGIES, INC. AND SUBSIDIARIES

Ormat Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
For 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 SUBSIDIARIES
Ormat Technologies, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
As 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 SUBSIDIARIES
Reconciliation 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 Lavi

VP Corporate Finance and Head of Investor Relations

775-356-9029 (ext. 65726)

slavi@ormat.com
   Investor Relations Agency Contact:

Rob Fink

Hayden - IR

646-415-8972

rob@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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