Ormat Technologies Reports Record Revenue Of $184.6 Million In The Third Quarter, Up 13% Over The Prior Year Period

RENO, Nev., Nov. 07, 2016 (GLOBE NEWSWIRE) -- Ormat Technologies, Inc. (NYSE:ORA) today announced financial results for the third quarter ended September 30, 2016.
Third Quarter Summary:    
  Three Months ended September 30  
($ millions, except EPS data) 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 (1) 59.2 46.5   27.4 %
Adjusted EBITDA ([2]) 85.4 79.0   8.1 %
GAAP EPS 0.24 1.41   -83.0 %
EPS, As Adjusted (3) 0.56 0.46   21.7 %

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

2 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.

3 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.

Conference Call Details

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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About Ormat Technologies

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.

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 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   attributable to the Company's stockholders:     50,289       51,113  
                 
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 MaasHayden - IR646-415-8972/646-536-7331 rob@haydenir.com / brett@haydenir.com

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