Business Context and Reporting Period
Ormat Technologies, Inc. filed this Form 8-K on February 23, 2010, to report its earnings for the fourth fiscal quarter and full fiscal year ended December 31, 2009. The filing also addresses a material restatement of financial statements for the year ended December 31, 2008, and interim periods in 2009.
Key Financial Metrics and Restatement Impact
The filing does not provide specific revenue, profit, or cash flow figures for the 2009 period within the text of the 8-K; these are contained in the referenced press release (Exhibit 99.1). However, the filing details specific adjustments required for prior periods due to a change in accounting treatment for exploration and development costs:
- 2008 Restatement Impact:
- Decrease in construction-in-process: $9.8 million
- Decrease in deferred tax liability: $3.6 million
- Decrease in equity: $6.2 million
- Decrease in net income: $6.2 million
- Decrease in comprehensive income: $6.2 million
- 2009 Interim Revision:
- Planned reduction in net income for the three and nine months ended September 30, 2009: Approximately $1.5 million.
Material Changes and Accounting Adjustments
The Board of Directors and Audit Committee concluded that the 2008 financial statements require restatement and should no longer be relied upon. The change involves the accounting treatment for exploration and development costs. Previously, these costs were capitalized on an area-of-interest basis using a method analogous to the full cost method. Following SEC review, the Company determined this treatment was inappropriate for certain respects. The new policy requires expensing costs in the period a decision is made to abandon further exploration and development of a project, rather than capitalizing them.
Guidance, Risks, and Management Commentary
The filing includes a Safe Harbor Statement regarding forward-looking statements, noting that actual results may differ materially from projections due to risks and uncertainties detailed in the Company's 2008 Form 10-K. Management, the Audit Committee, and the Board have discussed the restatement matters with the independent registered public accounting firm, PricewaterhouseCoopers LLP. The Company does not undertake an obligation to update forward-looking statements.
Investor Verification Checklist
- Review Exhibit 99.1 (Press Release) for specific 2009 revenue, earnings, and cash flow figures not detailed in the 8-K text.
- Verify the impact of the $6.2 million net income reduction on 2008 per-share metrics and historical comparisons.
- Confirm the revised financial statements for the third quarter of 2009 reflecting the $1.5 million expense adjustment.
- Assess the Company's future capitalization policies for exploration and development costs to understand potential impacts on future earnings volatility.
- Check the upcoming Form 10-K for the year ended December 31, 2009, for the finalized restated 2008 financial statements.