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Section 1: 10-Q (FORM 10-Q)

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0001296445falseORMAT TECHNOLOGIES, INC.false--12-31Q22019falsefalsetruefalseElectricity segment revenues in the United States are all accounted under ASC 842, Leases, except for $12.9 million and $29.9 million in the three and six months ended June 30, 2019 that are accounted under ASC 606. For the three and six months ended June 30, 2018, Electricity segment revenues in the United States are all accounted under ASC 840, Leases, except for $5.3 million and $11.9 million that are accounted under ASC 606.Contract assets and contract liabilities are presented as "Costs and estimated earnings in excess of billings on uncompleted contracts" and "Billings in excess of costs and estimated earnings on uncompleted contracts", respectively, on the consolidated balance sheets.These amounts relate to contingent receivables and payables relating to acquisition of the Guadeloupe power plant, valued primarily based on unobservable inputs and are included within "Prepaid expenses and other", "Accounts payable and accrued expenses" and "Other long-term liabilities" on June 30, 2019 and December 31, 2018 in the consolidated balance sheets with the corresponding gain or loss being recognized within Derivatives and foreign currency transaction gains (losses) in the consolidated statement of operations and comprehensive income.Electricity segment assets include goodwill in the amount of $20.2 million and $26.7 million as of June 30, 2019 and 2018, respectively. Other segment assets include goodwill in the amount of $13.5 million as of June 30, 2018. No goodwill is included in the Other segments assets as of June 30, 2019. For the three and six months ended June 30, 2019, Electricity segment revenues in foreign countries are all accounted under ASC 842, Leases, and Product revenues in foreign countries are accounted under ASC 606. For the three and six months ended June 30, 2018, Electricity segment revenues in foreign countries are all accounted under ASC 840, Leases, and Product revenues in foreign countries are accounted under ASC 606.These amounts relate to currency forward contracts valued primarily based on observable inputs, including forward and spot prices for currencies, net of contracted rates and then multiplied by notional amounts, and are included within "Prepaid expenses and other" and "Accounts payable and accrued expenses", as applicable, on June 30, 2019 and December 31, 2018, in the consolidated balance sheet with the corresponding gain or loss being recognized within "Derivatives and foreign currency transaction gains (losses)" in the consolidated statement of operations and comprehensive 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Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

________________

 

 

Form 10-Q

________________

 

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

   
 

For the quarterly period ended June 30, 2019

   
 

or

   

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: 001-32347

 

ORMAT TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

88-0326081

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

   
6140 Plumas Street, Reno, Nevada 89519-6075
(Address of principal executive offices) (Zip Code)

 

(775356-9029

(Registrant’s telephone number, including area code)

 

 

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 ☑     No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).  Yes ☑     No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer ☑     Accelerated filer ☐     Non-accelerated filer ☐     Smaller reporting company ☐

 

Emerging growth 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 pursuant to Section 13(a) of the Exchange Act.  ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  ☐ Yes     ☑ No

 

As of August 5, 2019, the number of outstanding shares of common stock, par value $0.001 per share, was 50,862,581.

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock

ORA

NYSE

 



 

 

Table of Contents

 

 

ORMAT TECHNOLOGIES, INC.

 

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2019

 

PART I — FINANCIAL INFORMATION

 
       

ITEM 1.

 

FINANCIAL STATEMENTS

4

       

ITEM 2.

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

28

       

ITEM 3.

 

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

52

       

ITEM 4.

 

CONTROLS AND PROCEDURES

52

   

PART II — OTHER INFORMATION

 
   

ITEM 1.

 

LEGAL PROCEEDINGS

53

       

ITEM 1A.

 

RISK FACTORS

53

       

ITEM 2.

 

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

53

       

ITEM 3.

 

DEFAULTS UPON SENIOR SECURITIES

53

       

ITEM 4.

 

MINE SAFETY DISCLOSURES

53

       

ITEM 5.

 

OTHER INFORMATION

53

       

ITEM 6.

 

EXHIBITS

54

       

SIGNATURES

55

 

ii

Table of Contents
 
 

 

Certain Definitions

 

Unless the context otherwise requires, all references in this quarterly report to “Ormat”, “the Company”, “we”, “us”, “our company”, “Ormat Technologies” or “our” refer to Ormat Technologies, Inc. and its consolidated subsidiaries.

 

iii

Table of Contents

 

 

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ORMAT TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

   

June 30,

   

December 31,

 
   

2019

   

2018

 
   

(Dollars in thousands)

 

ASSETS

 

Current assets:

               

Cash and cash equivalents

  $ 110,665     $ 98,802  

Restricted cash and cash equivalents (primarily related to VIEs)

    70,974       78,693  

Receivables:

               

Trade

    135,756       137,581  

Other

    19,499       19,393  

Inventories

    38,880       45,024  

Costs and estimated earnings in excess of billings on uncompleted contracts

    27,352       42,130  

Prepaid expenses and other

    9,225       51,441  

Total current assets

    412,351       473,064  

Investment in an unconsolidated company

    71,047       71,983  

Deposits and other

    20,281       18,209  

Deferred income taxes

    130,461       113,760  

Property, plant and equipment, net ($1,863,523 and $1,859,228 related to VIEs, respectively)

    1,963,086       1,959,578  

Construction-in-process ($134,519 and $104,085 related to VIEs, respectively)

    306,810       261,690  

Operating leases right of use

    58,921        

Finance leases right of use ($8,992 related to VIEs)

    15,469        

Deferred financing and lease costs, net

    1,988       3,242  

Intangible assets, net

    193,142       199,874  

Goodwill

    20,225       19,950  

Total assets

  $ 3,193,781     $ 3,121,350  

LIABILITIES AND EQUITY

 

Current liabilities:

               

Accounts payable and accrued expenses

  $ 115,011     $ 116,362  

Short term revolving credit lines with banks (full recourse)

    53,100       159,000  

Billings in excess of costs and estimated earnings on uncompleted contracts

    14,130       18,402  

Current portion of long-term debt:

               

Limited and non-recourse (primarily related to VIEs):

               

Senior secured notes

    37,343       33,493  

Other loans

    34,181       29,687  

Full recourse

    9,368       5,000  

Operating lease liabilities

    9,906        

Finance lease liabilities

    3,555        

Total current liabilities

    276,594       361,944  

Long-term debt, net of current portion:

               

Limited and non-recourse (primarily related to VIEs):

               

Senior secured notes (less deferred financing costs of $6,869 and $7,434, respectively)

    355,151       375,337  

Other loans (less deferred financing costs of $11,018 and $9,354, respectively)

    334,384       320,242  

Full recourse:

               

Senior unsecured bonds (less deferred financing costs of $779 and $758, respectively)

    353,554       303,575  

Other loans (less deferred financing costs of $1,612 and $921, respectively)

    73,336       41,579  

Operating lease liabilities

    15,296        

Finance lease liabilities

    13,000        

Liability associated with sale of tax benefits

    66,999       69,893  

Deferred lease income

    44,040       48,433  

Deferred income taxes

    79,837       61,323  

Liability for unrecognized tax benefits

    14,478       11,769  

Liabilities for severance pay

    18,058       17,994  

Asset retirement obligation

    43,094       39,475  

Other long-term liabilities

    5,499       16,087  

Total liabilities

    1,693,320       1,667,651  

Commitments and contingencies (Note 10)

               
                 

Redeemable noncontrolling interest

    8,820       8,603  
                 

Equity:

               

The Company's stockholders' equity:

               

Common stock, par value $0.001 per share; 200,000,000 shares authorized; 50,862,581 and 50,699,781 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively

    51       51  

Additional paid-in capital

    906,366       901,363  

Retained earnings

    470,880       422,222  

Accumulated other comprehensive income (loss)

    (7,736 )     (3,799 )

Total stockholders' equity attributable to Company's stockholders

    1,369,561       1,319,837  

Noncontrolling interest

    122,080       125,259  

Total equity

    1,491,641       1,445,096  

Total liabilities, redeemable noncontrolling interest and equity

  $ 3,193,781     $ 3,121,350  

 

The accompanying notes are an integral part of the consolidated financial statements.

 

4

Table of Contents

 

 

ORMAT TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE INCOME

(Unaudited)

 

   

Three Months Ended June 30,

   

Six Months Ended June 30,

 
   

2019

   

2018

   

2019

   

2018

 
   

(Dollars in thousands,

except per share data)

   

(Dollars in thousands,

except per share data)

 

Revenues:

                               

Electricity

  $ 129,079     $ 122,179     $ 271,987     $ 254,668  

Product

    52,030       54,915       104,158       103,587  

Other

    2,956       1,205       6,958       4,067  

Total revenues

    184,065       178,299       383,103       362,322  

Cost of revenues:

                               

Electricity

    73,775       81,236       151,318       154,718  

Product

    41,316       37,573       83,422       71,299  

Other

    3,827       2,028       9,037       5,471  

Total cost of revenues

    118,918       120,837       243,777       231,488  

Gross profit

    65,147       57,462       139,326       130,834  

Operating expenses:

                               

Research and development expenses

    810       1,251       1,710       2,359  

Selling and marketing expenses

    3,276       3,712       7,141       7,411  

General and administrative expenses

    14,181       15,866       29,870       29,719  

Write-off of unsuccessful exploration activities

                      119  

Operating income

    46,880       36,633       100,605       91,226  

Other income (expense):

                               

Interest income

    420       189       713       302  

Interest expense, net

    (21,517 )     (15,846 )     (42,740 )     (30,190 )

Derivatives and foreign currency transaction gains (losses)

    19       (529 )     491       (2,128 )

Income attributable to sale of tax benefits

    4,637       3,556       12,401       10,917  

Other non-operating income (expense), net

    1,027       7,373       1,118       7,353  

Income from operations before income tax and equity in earnings (losses) of investees

    31,466       31,376       72,588       77,480  

Income tax (provision) benefit

    3,529       (29,105 )     (10,510 )     (2,163 )

Equity in earnings (losses) of investees, net

    1,202       388       2,249       1,598  

Net income

    36,197       2,659       64,327       76,915  

Net income attributable to noncontrolling interest

    (2,259 )     (3,002 )     (4,443 )     (7,750 )

Net income attributable to the Company's stockholders

  $ 33,938     $ (343 )   $ 59,884     $ 69,165  

Comprehensive income:

                               

Net income

    36,197       2,659       64,327       76,915  

Other comprehensive income (loss), net of related taxes:

                               

Change in foreign currency translation adjustments

    482       (2,496 )     (866 )     (968 )

Change in unrealized gains or losses in respect of the Company's share in derivatives instruments of unconsolidated investment

    (2,087 )     529       (3,232 )     3,163  

Loss in respect of derivative instruments designated for cash flow hedge

    18       20       40       40  

Amortization of unrealized gains in respect of derivative instruments designated for cash flow hedge

    (9 )     (15 )     (17 )     (30 )

Comprehensive income

    34,601       697       60,252       79,120  

Comprehensive income attributable to noncontrolling interest

    (2,443 )     (2,428 )     (4,305 )     (7,546 )

Comprehensive income attributable to the Company's stockholders

  $ 32,158     $ (1,731 )   $ 55,947     $ 71,574  

Earnings per share attributable to the Company's stockholders:

                               

Basic:

                               

Net income

  $ 0.67     $ (0.01 )   $ 1.18     $ 1.37  

Diluted:

                               

Net income

  $ 0.66     $ (0.01 )   $ 1.17     $ 1.36  

Weighted average number of shares used in computation of earnings per share attributable to the Company's stockholders:

                               

Basic

    50,800       50,623       50,757       50,618  

Diluted

    51,094       50,958       51,058       51,001  

 

The accompanying notes are an integral part of the consolidated financial statements.

 

5

Table of Contents

 

 

ORMAT TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

 

   

The Company's Stockholders' Equity

                 
                           

Retained

   

Accumulated

                         
                   

Additional

   

Earnings

   

Other

                         
   

Common Stock

   

Paid-in

   

(Accumulated

   

Income

           

Noncontrolling

   

Total

 
   

Shares

   

Amount

   

Capital

   

Deficit)

   

(Loss)

   

Total

   

Interest

   

Equity

 
                                                                 
   

(Dollars in thousands, except per share data)

 
                                                                 

Balance at December 31, 2017

    50,609     $ 51     $ 888,778     $ 327,255     $ (4,706 )   $ 1,211,378     $ 84,322     $ 1,295,700  

Cumulative effect of changes in accounting principles

                            25,635               25,635               25,635  

Adjusted balance as of the beginning of the year

    50,609       51       888,778       352,890       (4,706 )     1,237,013       84,322       1,321,335  

Stock-based compensation

                1,707                   1,707             1,707  

Exercise of options by employees and directors

    8                                            

Cash paid to noncontrolling interest

                                        (4,674 )     (4,674 )

Cash dividend declared, $0.23 per share

                      (11,640 )           (11,640 )           (11,640 )

Net income

                      69,508             69,508       4,482       73,990  

Other comprehensive income (loss), net of related taxes:

                                                               

Currency translation adjustment

                            1,158       1,158       370       1,528  

Loss in respect of derivative instruments designated for cash flow hedge (net of related tax of $13)

                            20       20             20  

Change in unrealized gains or losses in respect of the Company's share in derivative instruments of unconsolidated investment (net of related tax of $0)

                            2,634       2,634             2,634  

new

                                                               

Amortization of unrealized gains in respect of derivative instruments designated for cash flow hedge (net of related tax of $9)

                            (15 )     (15 )           (15 )
                                                                 

Balance at March 31, 2018

    50,617     $ 51     $ 890,485     $ 410,758     $ (909 )   $ 1,300,385     $ 84,500     $ 1,384,885  
                                                                 

Balance as of the beginning of the period

    50,617       51       890,485       410,758       (909 )     1,300,385       84,500       1,384,885  

Stock-based compensation

                2,116                   2,116             2,116  

Exercise of options by employees and directors

    13                                            

Cash paid to noncontrolling interest

                                        (1,703 )     (1,703 )

Cash dividend declared, $0.10 per share

                      (5,062 )           (5,062 )           (5,062 )

Increase in noncontrolling interest in Guadeloupe

                                        2,165       2,165  

Increase in noncontrolling interest in Tungsten

                                        996       996  

Increase in noncontrolling interest in U.S. Geothermal

                                        34,898       34,898  

Net income

                      (343 )           (343 )     2,807       2,464  

Other comprehensive income (loss), net of related taxes:

                                                               

Currency translation adjustment

                            (1,922 )     (1,922 )     (574 )     (2,496 )

Loss in respect of derivative instruments designated for cash flow hedge (net of related tax of $11)

                            20       20             20  

Change in unrealized gains or losses in respect of the Company's share in derivative instruments of unconsolidated investment (net of related tax of $0)

                            529       529             529  

Amortization of unrealized gains in respect of derivative instruments designated for cash flow hedge (net of related tax of $9)

                            (15 )     (15 )           (15 )
                                                                 

Balance at June 30, 2018

    50,630     $ 51     $ 892,601     $ 405,353     $ (2,297 )   $ 1,295,708     $ 123,089     $ 1,418,797  
                                                                 
                                                                 

Balance at December 31, 2018

    50,700     $ 51     $ 901,363     $ 422,222     $ (3,799 )   $ 1,319,837     $ 125,259     $ 1,445,096  

Cumulative effect of changes in accounting principles

                            (58 )             (58 )             (58 )

Adjusted balance as of the beginning of the year

    50,700       51       901,363       422,164       (3,799 )     1,319,779       125,259       1,445,038  

Stock-based compensation

                2,360                   2,360             2,360  

Exercise of options by employees and directors

    52                                            

Cash paid to noncontrolling interest

                                        (4,146 )     (4,146 )

Cash dividend declared, $0.11 per share

                      (5,579 )           (5,579 )           (5,579 )

Net income

                      25,946             25,946       1,855       27,801  

Other comprehensive income (loss), net of related taxes:

                                                               

Currency translation adjustment

                            (1,026 )     (1,026 )     (322 )     (1,348 )

Loss in respect of derivative instruments designated for cash flow hedge 

                            22       22             22  

Change in unrealized gains or losses in respect of the Company's share in derivative instruments of unconsolidated investment (net of related tax of $0)

                            (1,145 )     (1,145 )           (1,145 )

new

                                                               

Amortization of unrealized gains in respect of derivative instruments designated for cash flow hedge (net of related tax of $6)

                            (8 )     (8 )           (8 )
                                                                 

Balance at March 31, 2019

    50,752     $ 51     $ 903,723     $ 442,531     $ (5,956 )   $ 1,340,349     $ 122,646     $ 1,462,995  
                                                                 

Balance as of the beginning of the period

    50,752       51       903,723       442,531       (5,956 )     1,340,349       122,646       1,462,995  

Stock-based compensation

                2,643                   2,643             2,643  

Exercise of options by employees and directors

    110                                            

Cash paid to noncontrolling interest

                                        (2,767 )     (2,767 )

Cash dividend declared, $0.11 per share

                      (5,589 )           (5,589 )           (5,589 )

Net income

                      33,938             33,938       2,017       35,955  

Other comprehensive income (loss), net of related taxes:

                                                               

Currency translation adjustment

                            298       298       184       482  

Loss in respect of derivative instruments designated for cash flow hedge 

                            18       18             18  

Change in unrealized gains or losses in respect of the Company's share in derivative instruments of unconsolidated investment (net of related tax of $0)

                            (2,087 )     (2,087 )           (2,087 )
0.0                                                                

Amortization of unrealized gains in respect of derivative instruments designated for cash flow hedge (net of related tax of $6)