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

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) 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 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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