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 Ormat Technologies Reports Record Revenue of $184.6 Million in the Third Quarter, up 13% over the Prior Year Period
   Monday, November 07, 2016 5:01:02 PM ET

Ormat Technologies, Inc. (ORA ) today announced financial results for the third quarter ended September 30, 2016.

Third Quarter Summary:
                              Three Months ended September 30
                              2016            2015            Change
Revenues
Electricity                   109.8           97.2               12.9  %
Product                       74.8            65.6               14.0  %
Total Revenues                184.6           162.9              13.4  %
Gross margin                  74.5            59.3               25.6  %
Operating income              48.2            46.5               3.7   %
Operating income, As Adjusted 59.2            46.5               27.4  %
Adjusted EBITDA               85.4            79.0               8.1   %
GAAP EPS                      0.24            1.41               -83.0 %
EPS, As Adjusted              0.56            0.46               21.7  %

Operating income, as adjusted, excludes $11.0 million of one-time settlement expenses.

Adjusted EBITDA for the third quarter of 2016 include $3.5 million of income attributable to sale of tax benefits compared to $8.6 million for the third quarter of 2015.

EPS, as adjusted, excludes an $11.0 million one-time settlement expenses and $5.0 million one-time prepayment fees for the third quarter of 2016 and $48.7 million tax benefit and related expenses for the third quarter of 2015.

Third Quarter 2016 Highlights and Recent Developments:

-- Electricity segment revenues of $109.8 million, up 12.9% compared to the third quarter of 2015, mainly due to new power plants commencing operations in the fourth quarter of 2015 and early 2016, higher energy rates at the Heber 1 power plant and the consolidation of the Guadeloupe power plant acquired from Geothermie Bouillante SA in July 2016;

-- Electricity generation increased 10.8% compared to the third quarter of 2015, from 1.1 million MWh to 1.3 million MWh;

-- Gross margin increased to 40.3% of total revenues compared to 36.4% in the third quarter of 2015, mainly as a result of improved operating efficiencies;

-- Operating income increased 3.8% to $48.2 million, including of $11.0 million of one-time settlement expenses, compared to $46.5 million in the third quarter of 2015; excluding the one-time settlement expenses, operating income grew 27.4%;

-- Net income attributable to the company’s shareholders of $12.1 million or $0.24 per diluted share, including $5.0 million of one-time fees related to the prepayment of the Company’s senior unsecured bonds and $11.0 million of one-time settlement expenses, compared to $72.1 million or $1.41 per diluted share, including a $48.7 million tax benefit and related expenses related to a tax law change in Kenya, in the third quarter of 2015;

-- Net income attributable to the company’s shareholders of $28.1 million or $0.56 per diluted share excluding $5.0 million of one-time fees and $11.0 million of one-time settlement expenses, compared to $23.4 million or $0.46 per diluted share, excluding the $48.7 million tax benefit and related expenses related to a tax law change in Kenya, in the third quarter of 2015; an increase of 21.7%;

-- Adjusted EBITDA of $85.4 million, up 8.1% compared to $79.0 million in the third quarter of 2015. EBITDA and Adjusted EBITDA for the third quarter of 2016 include $3.5 million of income attributable to sale of tax benefits, compared to $8.6 million for the third quarter of 2015; and

-- Declared a quarterly dividend of $0.07 per share for the third quarter of 2016.

"We continue to execute on our strategic plan and advance initiatives to enhance operational efficiency that will position Ormat for continued profitable growth," Isaac Angel, Chief Executive Officer. "We again delivered double-digit revenue growth, due to strong performances from both our electricity and product segment, and prudent expense management enabled us to generate a 25.6% year-over-year increase in gross margin. We prepaid the $250 million high-cost indebtedness that was due on August 2017 and successfully raised over $200 million in two tranches of senior unsecured bonds, which will enable us to significantly reduce our ongoing interest expense. We also signed a settlement agreement with respect to the previously disclosed False Claims Act litigation to avoid the burden, inconvenience and expense of continued litigation with no admission of wrongdoing by Ormat. The total $16 million one-time expenses that we incurred in the third quarter (comprising the False Claims Act litigation settlement expenses and the prepayment premium on the bonds) will result in significant savings in future expenses. Our results exceeded expectations and give us confidence to increase 2016 guidance. We are increasingly optimistic about our growth and profitability prospects in 2017 and beyond."

Guidance

Mr. Angel added, "We are well-ahead of the pace for our previous guidance, and with a strong backlog and increasing confidence in both our electricity and product segment, we are increasing our 2016 full-year outlook. We now expect full-year 2016 total revenue of between $637.0 million and $647.0 million, with product segment revenue of between $215.0 million and $220.0 million. For the electricity segment, we expect revenues to be between $422.0 million and $427.0 million. We now expect 2016 Adjusted EBITDA of between $318.0 million and $323.0 million for the full year."

Financial Summary

Third Quarter Results

For the three months ended September 30, 2016, total revenues were $184.6 million, up from $162.9 million for the three months ended September 30, 2015, an increase of 13.4%. Electricity segment revenues increased 12.9% to $109.8 million in the three months ended September 30, 2016, up from $97.2 million for the three months ended September 30, 2015. Product segment revenues increased 14.0% to $74.8 million for the three months ended September 30, 2016, up from $65.6 million in the three months ended September 30, 2015.

General and administrative expenses for the three months ended September 30, 2016 were $19.1 million, compared to $8.0 million for the three months ended September 30, 2015. The increase was mainly due to a non-recurring $11.0 million expense related to a settlement of the previously disclosed False Claims Act litigation. Excluding the one-time expenses, general and administrative expenses for the three months ended September 30, 2016 constituted 4.5% of total revenues for the period, compared to 4.9% for the three months ended September 30, 2015.

Other non-operating expense for the three months ended September 30, 2016 was $5.5 million, including of prepayment fees of approximately $5.0 million due to the repayment of the Company’s senior unsecured bonds in September 2016, compared to $0.1 million for the three months ended September 30, 2015.

Income tax provision for the three months ended September 30, 2016 was $12.0 million, compared to income tax benefit of $38.2 million for the three months ended September 30, 2015. Income tax benefit for the three months ended September 30, 2015 includes a $49.4 million deferred tax asset relating to the release of the valuation allowance for the additional 50% investment deduction for our Olkaria 3 power plant based on amendments to the Kenya Income Tax Act that came into effect on September 11, 2015 and which extended the period to utilize such investment deduction from five years to ten years. Income tax provision for the three months ended September 30, 2015, excluding the $49.4 million, was $11.2 million.

The company reported net income attributable to the company’s shareholders of $12.1 million, including $11.0 million in one-time settlement expenses and $5.0 million in repayment fees, each referenced above, or $0.24 per diluted share, compared to net income attributable to the company’s shareholders of $72.1 million, including a $48.7 million tax benefit and related expenses, also referenced above, or $1.41 per diluted share, for the same period last year.

Net income attributable to the company’s shareholders of $28.1 million or $0.56 per diluted share excluding $16 million one-time expenses comprising the False Claims Act litigation settlement expenses and the prepayment premium on the bonds , compared to $23.4 million, excluding $48.7 million tax benefit and related expenses, or $0.46 per diluted share, for the third quarter of 2015;

Adjusted EBITDA for the three months ended September 30, 2016 was $85.4 million, compared to $79.0 million for the three months ended September 30, 2015, an increase of 8.1%. EBITDA and Adjusted EBITDA for the third quarter of 2016 includes $3.5 million of Income attributable to sale of tax benefits compared to $8.6 million for the third quarter of 2015. The reconciliation of GAAP net cash provided by (used in) operating activities and net income to EBITDA and Adjusted EBITDA and additional cash flow information is set forth below in this release.

On November 7, 2016, Ormat’s Board of Directors approved payment of a quarterly dividend of $0.07 per share pursuant to the company’s dividend policy. The dividend will be paid on December 6, 2016 to shareholders of record as of the close of business on November 21, 2016.

<span style="text-decoration: underline;" data-mce-style="text-decoration: underline;">Conference Call Details</span>

Ormat will host a conference call to discuss its financial results and other matters discussed in this press release at 9 a.m. ET on Tuesday, November 8, 2016. The call will be available as a live, listen-only webcast at investor.ormat.com. During the webcast, management will refer to slides that will be posted on the website. The slides and accompanying webcast can be accessed through the Events & Presentations in the Investor Relations section of Ormat’s website.

An archive of the webcast will be available approximately 30 minutes after the conclusion of the live call.

Please ask to be joined into the Ormat Technologies, Inc. call.
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PARTICIPANT DIAL IN (TOLL FREE):    1-412-902-4141
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CONFERENCE REPLAY
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<span style="text-decoration: underline;" data-mce-style="text-decoration: underline;">About Ormat Technologies</span>

With over five decades of experience, Ormat Technologies, Inc. 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 72 U.S. patents, Ormat’s power solutions have been refined and perfected under the most grueling environmental conditions. Ormat has 450 employees in the United States and over 600 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 2,000 MW of gross capacity. Ormat’s current 710 MW generating portfolio is spread globally in the U.S., Guatemala, Guadeloupe, and Kenya.

<span style="text-decoration: underline;" data-mce-style="text-decoration: underline;">Ormat’s Safe Harbor Statement</span>

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 Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 26, 2016.

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.

Ormat Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
For the Three-Month Periods Ended September 30, 2016 and 2015
(Unaudited)
                                                                                   Three Months Ended September 30        Nine Months Ended September 30
                                                                                   2016             2015                  2016             2015
                                                                                   (In thousands, except per share data)  (In thousands, except per share data)
Revenues:
Electricity                                                                        $     109,795    $     97,245          $     321,664    $     278,124
Product                                                                                  74,822           65,607                174,408          145,446
Total revenues                                                                           184,617          162,852               496,072          423,570
Cost of revenues:
Electricity                                                                              66,481           61,501                192,410          179,604
Product                                                                                  43,647           42,019                99,504           89,826
Total cost of revenues                                                                   110,128          103,520               291,914          269,430
Gross margin                                                                             74,489           59,332                204,158          154,140
Operating expenses:
Research and development expenses                                                        1,086            335                   2,030            1,112
Selling and marketing expenses                                                           4,793            4,383                 12,136           12,099
General and administrative expenses                                                      19,093           7,950                 36,625           25,597
Write-off of unsuccessful exploration activities                                         1,294            185                   2,714            359
Operating income                                                                         48,223           46,479                150,653          114,973
Other income (expense):
Interest income                                                                          266              53                    831              106
Interest expense, net                                                                    (17,137 )        (17,748 )             (51,561 )        (54,435 )
Derivatives and foreign currency transaction gains (losses)                              (222    )        1,296                 (2,592  )        (641    )
Income attributable to sale of tax benefits                                              3,463            8,634                 12,380           18,917
Other non-operating expense, net                                                         (5,546  )        (131    )             (5,306  )        (1,523  )
Income before income taxes and equity in
losses of investees                                                                      29,047           38,583                104,405          77,397
Income tax provision (benefit)                                                           (11,988 )        38,211                (29,387 )        26,696
Equity in losses of investees, net                                                       (2,653  )        (3,133  )             (4,734  )        (4,892  )
Net income                                                                               14,406           73,661                70,284           99,201
Net income attributable to noncontrolling interest                                       (2,326  )        (1,522  )             (4,584  )        (2,616  )
Net income attributable to the Company’s stockholders                              $     12,080     $     72,139          $     65,700     $     96,585
Earnings per share attributable to the Company’s stockholders - Basic and diluted:
Basic:
Net Income                                                                         $     0.24       $     1.47            $     1.33       $     2.00
Diluted:
Net Income                                                                         $     0.24       $     1.41            $     1.31       $     1.93
Weighted average number of shares used in computation of earnings per share
attributable to the Company’s stockholders:
Basic                                                                                    49,599           49,023                49,410           48,388
Diluted                                                                                  50,289           51,113                50,097           50,011
Ormat Technologies, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
As of September 30, 2016 and December 31, 2015
(Unaudited)
                                                                             September 30,      December 31,
                                                                             2016               2015
                                                                                   (In thousands)
ASSETS
Current assets:
Cash and cash equivalents                                                    $     90,066       $     185,919
Restricted cash, cash equivalents and marketable securities                        50,525             49,503
Receivables:
Trade                                                                              65,198             55,301
Other                                                                              13,645             7,885
Inventories                                                                        12,973             18,074
Costs and estimated earnings in excess of billings on uncompleted contracts        38,025             25,120
Prepaid expenses and other                                                         38,940             33,334
Total current assets                                                               309,372            375,136
Deposits and other                                                                 18,738             17,968
Deferred charges                                                                   40,690             42,811
Property, plant and equipment, net                                                 1,570,307          1,559,335
Construction-in-process                                                            271,853            248,835
Deferred financing and lease costs, net                                            5,188              4,022
Intangible assets, net                                                             56,052             25,875
Goodwill                                                                           7,071              --
Total assets                                                                 $     2,279,271    $     2,273,982
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued expenses                                        $     102,854      $     91,955
Billings in excess of costs and estimated earnings on uncompleted contracts        37,134             33,892
Current portion of long-term debt:
Limited and non-recourse:
Senior secured notes                                                               28,121             29,930
Other loans                                                                        21,494             21,495
Full recourse                                                                      12,302             11,229
Total current liabilities                                                          201,905            188,501
Long-term debt, net of current portion:
Limited and non-recourse:
Senior secured notes                                                               273,017            294,476
Other loans                                                                        267,210            275,888
Full recourse:
Senior unsecured bonds                                                             203,483            249,698
Other loans                                                                        12,373             18,687
Accumulated losses of unconsolidated company in excess of investment               16,664             8,100
Liability associated with sale of tax benefits                                     1,043              11,665
Deferred lease income                                                              55,460             58,099
Deferred income taxes                                                              34,961             32,654
Liability for unrecognized tax benefits                                            10,260             10,385
Liabilities for severance pay                                                      19,020             19,323
Asset retirement obligation                                                        22,099             20,856
Other long-term liabilities                                                        20,862             1,776
Total liabilities                                                                  1,138,357          1,190,108
Reedemable non-controlling interest                                                4,972              --
Equity:
The Company’s stockholders’ equity:
Common stock                                                                       50                 49
Additional paid-in capital                                                         859,855            849,223
Retained earnings (accumulated deficit)                                            191,627            148,396
Accumulated other comprehensive income (loss)                                      (11,503   )        (7,667    )
                                                                                   1,040,029          990,001
Noncontrolling interest                                                            95,913             93,873
Total equity                                                                       1,135,942          1,083,874
Total liabilities and equity                                                 $     2,279,271    $     2,273,982

Ormat Technologies, Inc. and Subsidiaries

Reconciliation of EBITDA, Adjusted EBITDA and Additional Cash Flows Information

For the Three-Month Periods Ended September 30, 2016 and 2015

(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 cost, (vi) stock-based compensation, (vii) gains or losses from extinguishment of liability, (viii) gains or losses on sale of subsidiary and property, plant and equipment and (ix) settlement expenses. EBITDA and Adjusted EBITDA are not a measurement of financial performance or liquidity under accounting principles generally accepted in the United States of America and should not be considered as an alternative to cash flow from operating activities or as a measure of liquidity or an alternative to net earnings as indicators of our operating performance or any other measures of performance derived in accordance with accounting principles generally accepted in the United States of America. 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 tables reconcile net cash provided by (used in) operating activities and net income to EBITDA and Adjusted EBITDA for the three-month periods ended September 30, 2016 and 2015.

                                                                         Three Months Ended September 30       Nine Months Ended September 30
                                                                         2016               2015               2016                2015
                                                                         (in thousands)                        (in thousands)
Net cash provided by operating activities                                $    38,454        $    10,239        $    158,027        $    122,965
Adjusted for:
Interest expense, net (excluding amortization
of deferred financing costs)                                                  15,977             15,244             47,269              47,571
Interest income                                                               (266    )          (53     )          (831     )          (106    )
Income tax provision                                                          11,988             (38,211 )          29,387              (26,696 )
Adjustments to reconcile net income or loss to net cash
provided by operating activities (excluding
depreciation and amortization)                                                2,259              91,326             (10,178  )          56,699
EBITDA                                                                   $    68,412        $    78,545        $    223,674        $    200,433
Mark-to-market gains or losses from accounting for derivatives                (1,697  )          (645    )          797                 2,794
Stock-based compensation                                                      1,724              921                3,383               3,077
Gains or losses on sale of subsidiary and property, plant and equipment       (686    )          --                 (686     )          --
Termination fees                                                              --                 --                 --                  --
Impairment of long-lived assets                                               --                 --                 --                  --
Gains or losses from extinguishment of liability                              5,780              --                 5,780               1,710
Merger and acquisition transaction cost                                       (412    )          --                 235                 3,800
Settlement expenses                                                           11,000             --                 11,000              --
Write-off of unsuccessful exploration activities                              1,294              185                2,714               359
Adjusted EBITDA                                                          $    85,415        $    79,006        $    246,897        $    212,173
Net cash used in investing activities                                    $    (69,900 )     $    2,895         $    (125,189 )     $    (76,538 )
Net cash provided by (used in) financing activities                      $    (71,044 )     $    20,742        $    (128,691 )     $    84,884
                                                                         Three Months Ended September 30       Nine Months Ended September 30
                                                                         2016               2015               2016                2015
                                                                         (in thousands)                        (in thousands)
Net income                                                               $    14,406        $    73,661        $    70,284         $    99,201
Adjusted for:
Interest expense, net (including amortization
of deferred financing costs)                                                  16,871             17,695             50,730              54,329
Income tax provision                                                          11,988             (38,211 )          29,387              (26,696 )
Depreciation and amortization                                                 25,147             25,400             73,273              73,599
EBITDA                                                                   $    68,412        $    78,545        $    223,674        $    200,433
Mark-to-market gains or losses from accounting for derivatives                (1,697  )          (645    )          797                 2,794
Stock-based compensation                                                      1,724              921                3,383               3,077
Gains or losses on sale of subsidiary and property, plant and equipment       (686    )          --                 (686     )          --
Termination fees                                                              --                 --                 --                  --
Impairment of long-lived assets
Gains or losses from extinguishment of liability                              5,780              --                 5,780               1,710
Merger and acquisition transaction cost                                       (412    )          --                 235                 3,800
Settlement expenses                                                           11,000             --                 11,000              --
Write-off of unsuccessful exploration activities                              1,294              185                2,714               359
Adjusted EBITDA                                                          $    85,415        $    79,006        $    246,897        $    212,173
Ormat Technologies, Inc. and Subsidiaries
Reconciliation of EPS as adjusted
For the Three-Month Periods Ended September 30, 2016 and 2015
(Unaudited)
                                                                                     Three Months Ended September 30
                                                                                     2016           2015
                                                                                     (in thousands)
Net income attributable to the Company’s stockholders                                $      12,080  $       72,139
One-time settlement expenses                                                                11,000          --
One-time prepayment fees                                                                    5,000           --
One-time tax benefit                                                                        --              (48,700 )
Adjusted net income attributable to the Company’s stockholders                       $      28,080  $       23,439
Weighted average number of shares diluted used in computation of earnings per share         50,289          51,113
attributable to the Company’s stockholders:
Adjusted earnings per share attributable to the Company’s stockholders diluted:             0.56            0.46
Ormat Technologies Contact:
Smadar Lavi
Investor Relations
775-356-9029 (ext. 65726)
slavi@ormat.com

Investor Relations Agency Contact:
Rob Fink/Brett Maas
Hayden - IR
646-415-8972/646-536-7331
rob@haydenir.com / brett@haydenir.com

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