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 March 31, 2020

or

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

 

Commission File Number: 1-35327


GENIE ENERGY LTD.

(Exact Name of Registrant as Specified in its Charter)



Delaware

 

45-2069276

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification Number)

 

 

 

520 Broad Street, Newark, New Jersey

 

07102

(Address of principal executive offices)

 

(Zip Code)


(973) 438-3500

(Registrant’s telephone number, including area code)


Securities registered pursuant to Section 12(b)-2 of the Exchange Act:

Title of each Class Trading Symbol Name of exchange of which registered
Class B common stock, par value $0.1 per share GNE New York Stock Exchange
Series 2012-A Preferred stock, par value $0.1 per share GNE-PRA New York Stock Exchange


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 May 7, 2020, the registrant had the following shares outstanding:

 

Class A common stock, $.01 par value:

1,574,326 shares

Class B common stock, $.01 par value:

24,763,416 shares (excluding 1,041,957 treasury shares)

 

 


 

GENIE ENERGY LTD.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
1



Item 1.
Financial Statements (Unaudited) 1






CONSOLIDATED BALANCE SHEETS 1






CONSOLIDATED STATEMENTS OF OPERATIONS 2






CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 3






CONSOLIDATED STATEMENTS OF EQUITY 4






CONSOLIDATED STATEMENTS OF CASH FLOWS 5






NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6




Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations 25





Item 3.
Quantitative and Qualitative Disclosures About Market Risks 38





Item 4.
Controls and Procedures 38


PART II. OTHER INFORMATION
39




Item 1.
Legal Proceedings 39





Item 1A.
Risk Factors 39





Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds 39





Item 3.
Defaults upon Senior Securities 39





Item 4.
Mine Safety Disclosures 39





Item 5.
Other Information 39





Item 6.
Exhibits 40



SIGNATURES
41

   

i



 GENIE ENERGY LTD. 

(in thousands, except per share amounts)

 

 

March 31,
2020

 

 

December 31,
2019

 

 

 

(Unaudited)

 

 

(Note 1)

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

29,710

 

 

$

31,242

 

Restricted cashshort-term

6,185


6,792

Trade accounts receivable, net of allowance for doubtful accounts of $3,134 and $2,631 at March 31, 2020 and December 31, 2019, respectively

 

 

45,494

 

 

 

49,822

 

Inventory

 

 

18,061

 

 

 

16,632

 

Prepaid expenses

 

 

7,674

 

 

 

6,318

 

Other current assets

 

 

13,699

 

 

 

2,133

 

Total current assets

 

 

120,823

 

 

 

112,939

 

Property and equipment, net

 

 

443

 

 

 

3,607

 

Goodwill

 

 

12,102

 

 

 

12,135

 

Other intangibles, net

 

 

6,327

 

 

 

6,837

 

Investment in equity method investees

 

 

293

 

 

 

675

 

Restricted cash—long-term

 

 

493

 

 

 

520

 

Deferred income tax assets, net

 

 

9,801

 

 

 

12,154

 

Other assets

 

 

6,894

 

 

 

7,377

 

Total assets

 

$

157,176

 

 

$

156,244

 

Liabilities and equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Loan payable
$ 925

$ 921

Trade accounts payable

 

 

24,243

 

 

 

24,387

 

Accrued expenses

 

 

28,936

 

 

 

26,116

 

Contract liability

3,893


13,426

Income taxes payable

 

 

1,796

 

 

 

1,591

 

Due to IDT Corporation, net

 

 

137

 

 

 

381

 

Short-term revolving line of credit

3,518


2,514

Other current liabilities

 

 

6,281

 

 

 

2,820

 

Total current liabilities

 

 

69,729

 

 

 

72,156

 

Long-term notes payable




777

Other liabilities

 

 

2,238

 

 

 

2,381

 

Total liabilities

 

 

71,967

 

 

 

75,314

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

Genie Energy Ltd. stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.01 par value; authorized shares—10,000:

 

 

 

 

 

 

 

 

Series 2012-A, designated shares—8,750; at liquidation preference, consisting of 2,322 shares issued and outstanding at March 31, 2020 and December 31, 2019

19,743


19,743
Class A common stock, $0.01 par value; authorized shares—35,000; 1,574 shares issued and outstanding at March 31, 2020 and December 31, 2019

16


16
Class B common stock, $0.01 par value; authorized shares—200,000; 25,805 and 25,785 shares issued and 24,763 and 24,755 shares outstanding at March 31, 2020 and December 31, 2019, respectively

258


258

Additional paid-in capital

 

 

140,069

 

 

 

139,615

 

Treasury stock, at cost, consisting of 1,042 and 1,030 shares of Class B common stock at March 31, 2020 and December 31, 2019    
(7,763 )

(7,675 )
Accumulated other comprehensive income

2,230


2,519

Accumulated deficit

 

 

(56,184

)

 

 

(59,671

)

Total Genie Energy Ltd. stockholders’ equity

 

 

98,369


 

 

94,805


Noncontrolling interests

 

 

(13,160

)

 

 

(13,875

)

Total equity

 

 

85,209


 

 

80,930


Total liabilities and equity

 

$

157,176

 

 

$

156,244

 


 See accompanying notes to consolidated financial statements. 

1




GENIE ENERGY LTD.

 

 

 



Three Months Ended
March 31,

 



2020


2019

 

(in thousands, except per share data)


Revenues:









Electricity


$ 69,972

$ 62,614

Natural gas



16,070


18,706

Other



18,009


5,297

Total revenues



104,051


86,617

Cost of revenues



75,146


61,026

Gross profit



28,905


25,591

Operating expenses and losses:









Selling, general and administrative (i)



19,499


15,757
Impairment of property and equipment

192



Income from operations



9,214


9,834

Interest income



128


93

Interest expense



(123 )

(140 )

Equity in the net loss in equity method investees, net



(379 )

(797 )

Other income, net



150


73

Income before income taxes



8,990

9,063

Provision for income taxes



(2,569 )

(2,903 )

Net income



6,421

6,160

Net income attributable to noncontrolling interests



589


91

Net income attributable to Genie Energy Ltd.



5,832

6,069

Dividends on preferred stock



(370 )

(370 )

Net income attributable to Genie Energy Ltd. common stockholders


$ 5,462
$ 5,699

 









Earnings per share attributable to Genie Energy Ltd. common stockholders:









Basic


$ 0.21
$ 0.21

Diluted


$ 0.20
$ 0.21

Weighted-average number of shares used in calculation of earnings per share:









Basic



26,108


26,532

Diluted



26,749


27,240

 









Dividends declared per common share


$ 0.075

$ 0.075

(i) Stock-based compensation included in selling, general and administrative expenses


$ 483

$ 448

 

See accompanying notes to consolidated financial statements.


2



GENIE ENERGY LTD.

 

(Unaudited)

 

 

Three Months Ended
March 31,

 

 

2020

 

 

2019

 

 

(in thousands)

Net income

$

6,421

 

$

6,160

Other comprehensive (loss) income:

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

(94

)

 

 

96

Comprehensive income

 

6,327

 

 

6,256

Comprehensive (income) loss attributable to noncontrolling interests

 

(778

)

 

 

103

 

Comprehensive income attributable to Genie Energy Ltd.

$

5,549

 

$

6,359

  

See accompanying notes to consolidated financial statements.

 

3




GENIE ENERGY LTD.

 

(in thousands, except dividend per share)

 

 

 

Preferred

 


Class A

 


Class B

 


Additional

 


 

 


Accumulated Other

 


 

 


 

 


 

 

 

 

Stock

 


Common Stock

 


Common Stock

 


Paid-In

 


Treasury

 


Comprehensive

 


Accumulated

 


Noncontrolling

 


Total

 

 

 

Shares

 


Amount

 


Shares

 


Amount

 


Shares

 


Amount

 


Capital

 


Stock

 


Income

 


Deficit

 


Interests

 


Equity

 

BALANCE AT JANUARY 12020    
2,322
$ 19,743

1,574
$ 16

25,785
$ 258
$ 139,615
$ (7,675 ) $ 2,519
$ (59,671 ) $ (13,875 ) $ 80,930
Dividends on preferred stock ($ 0.01594 per share)  


















(370 )


(370)
Dividends on common stock ($ 0.075 per share)  


















(1,975 )


(1,975)
Stock-based compensation








20



483









483
Repurchase of Class B common stock from stock repurchase program 














(88 )






(88)
Noncontrolling interest from acquisition of Lumo 












(29 )






29


Deconsolidation of subsidiaries
















(6)



(92)

(98)
Other comprehensive income
















(283)



189

(94)
Net income for three months ended March 31, 2019  


















5,832

589

6,421
BALANCE AT  MARCH 31, 2020
2,322

19,743

1,574

16

25,805

258

140,069

(7,763 )
2,230

(56,184 )
(13,160 )
85,209





































BALANCE AT JANUARY 1, 2019

 

 

2,322

 

$

19,743

 


1,574

 

$

16

 


25,544

 

$

255

 

$

136,629

 

$

(1,624

) $

2,591

 

$

(53,939

) $

(11,009

) $

92,662

 

Adoption of ASU 2018-07















312





(312 )



Dividends on preferred stock ($0.01594 per share)  

 

 

 


 


 


 


 


 


 


 


 


(370

)

 


(370

)

Dividends on common stock ($0.075 per share)

 

 

 


 


 


 


 


 


 


 


 


(2,006

)

 


(2,006

)

Stock-based compensation 

 

 

 


 


 


 


198

 


2

 


446

 


 


 


 


 


448

 

Exercise of stock options









25



172









172
Options issued to Howard S. Jonas














325









325
Noncontrolling interest from acquisition of Lumo






























884


884

Other comprehensive income 

 

 

 


 


 


 


 


 


 


 


290



 


(194

)

96

 

Net income for three months ended March 31, 2019      

 

 

 


 


 


 


 


 


 


 


 


6,069


91


6,160

BALANCE AT MARCH 31, 2019

2,322
$ 19,743


1,574
$ 16

25,767

$ 257

$ 137,884


(1,624
) $ 2,881

$ (50,558 ) $ (10,228
) $ 98,371




4



GENIE ENERGY LTD. 

 

 

Three Months Ended
March 31,

 

 

 

2020

 

 

2019

 

 

 

(in thousands)

 

Operating activities

 

 

 

 

 

 

Net income

 

$

6,421

 

$

6,160


Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

826

 

 

 

921

 

Impairment of property and equipment

192



Deferred income taxes

 

 

2,353

 

 

 

2,442


Provision for doubtful accounts receivable

 

 

608

 

 

 

72

 

Stock-based compensation

 

 

483

 

 

 

448

 

Equity in the net loss in equity method investees

 

 

379

 

 

 

797

 

Gain on deconsolidation of subsidiaries

(98 )


Change in assets and liabilities:

 

 

 

 

 

 

 

 

Trade accounts receivable

 

 

3,719

 

 

(3,554

)

Inventory

 

 

(1,429

)

 

 

208

Prepaid expenses

 

 

(1,356

)

 

 

1,320

Other current assets and other assets

 

 

(8,473

)

 

 

(1,041

)

Trade accounts payable, accrued expenses and other current liabilities

 

 

3,344

 

 

(859

)
Contract liability

(9,648 )

(256 )

Due to IDT Corporation

 

 

(244

)

 

 

(100

)

Income taxes payable

 

 

206

 

 

460

Net cash (used in) provided by operating activities

 

 

(2,717

)

 

 

7,018

 

Investing activities

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(5

)

 

 

(325

)

Payments for business acquisition, net of cash acquired

 

 

 

 

(1,852

)

Investments in notes receivables

 

 

 

 

(177

)

Repayment of notes receivable

 

 

 

 

 

122

 

Net cash used in investing activities

 

 

(5

)

 

 

(2,232

)

Financing activities

 

 

 

 

 

 

 

 

Dividends paid

 

 

(370

)

 

 

(2,377

)

Repayment of short-term debt—Lumo

 

 

 

 

(2,260

)
Proceeds from revolving line of credit

1,000



Exercise of stock options

 

 

 

 

 

172

 

Purchases of Class B common stock

(88 )


Repayment of notes payable

 

 

(9

)

 

 

(20

)

Net cash provided by (used in) financing activities

 

 

533

 

 

(4,485

)

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

 

 

23

 

 

(35

)

Net (decrease) increase in cash, cash equivalents, and restricted cash

 

 

(2,166

)

 

 

266


Cash, cash equivalents, and restricted cash at beginning of period

 

 

38,554

 

 

 

44,197

 

Cash, cash equivalents, and restricted cash at end of period

 

$

36,388

 

 

$

44,463

 


See accompanying notes to consolidated financial statements.

5



GENIE ENERGY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

 

Note 1—Basis of Presentation

 

The accompanying unaudited consolidated financial statements of Genie Energy Ltd. and its subsidiaries (the “Company” or “Genie”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. The balance sheet at December 31, 2019 has been derived from the Company’s audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. For further information, please refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the U.S. Securities and Exchange Commission (the “SEC”).

 

The Company owns 99.3% of its subsidiary, Genie Energy International Corporation (“GEIC”), which owns 100% of Genie Retail Energy (“GRE”), 100% of Genie Retail Energy International LLC ("GRE International" or "GREI"), 100% of Genie Energy Services ("GES") and 97.0% of Genie Oil and Gas, Inc. (“GOGAS”).


GRE owns and operates retail energy providers (“REPs”), including IDT Energy, Inc. (“IDT Energy”), Residents Energy, Inc. (“Residents Energy”), Town Square Energy, LLC and Town Square Energy East, LLC (collectively, "TSE"), Southern Federal Power LLC ("Southern Federal") and Mirabito Natural Gas (“Mirabito”). GRE's REP businesses resell electricity and natural gas to residential and small business customers primarily in the Eastern and Midwestern United States.


GRE International holds the Company's 73.0% interest Shoreditch Energy Limited, its joint venture that serves retail customers in the United Kingdom ("U.K.") through its wholly owned subsidiary Orbit Energy Ltd., its wholly-owned venture in Japan, which launched commercial operations in second quarter of 2019, the Company's 92.5% controlling interest in Lumo Energia Oyj ("Lumo"), a REP serving residential customers in Finland, and its 100% interest in Lumo Energi AB, which was formed in 2019 to serve retail energy customers in Sweden. 


          GES oversees Diversegy LLC ("Diversegy"), a retail energy advisory and brokerage company that serves commercial and industrial customers throughout the United States ("U.S.") and manages GRE's 60.0% interest in Prism Solar Technology, Inc. ("Prism"), a solar solutions company that is engaged in U.S.-based manufacturing of solar panels, solar installation design and solar energy project management. 


GOGAS is an oil and gas exploration company and owns an interest in a contracted drilling services operation. GOGAS holds an 86.1% interest in Afek Oil and Gas, Ltd. (“Afek”), an oil and gas exploration project in the Golan Heights in Northern Israel. GOGAS also holds controlling interests in inactive oil and gas projects. GOGAS also holds a 37.5% interest in a contracted drilling services company in Israel ("Atid 613").

 

Seasonality and Weather

 

The weather and the seasons, among other things, affect GRE’s revenues. Weather conditions have a significant impact on the demand for natural gas used for heating and electricity used for heating and cooling. Typically, colder winters increase demand for natural gas and electricity, and hotter summers increase demand for electricity. Milder winters or summers have the opposite effect. Unseasonable temperatures in other periods may also impact demand levels. Natural gas revenues typically increase in the first quarter due to increased heating demands and electricity revenues typically increase in the third quarter due to increased air conditioning use. Approximately 46.9% and 50.3% of GRE’s natural gas revenues for the relevant years were generated in the first quarters of 2019 and 2018, respectively, when demand for heating was highest. Although the demand for electricity is not as seasonal as natural gas (due, in part, to usage of electricity for both heating and cooling), approximately 31.8% and 29.5% of GRE’s electricity revenues for the relevant years were generated in the third quarters of 2019 and 2018, respectively. GRE’s REPs’ revenues and operating income are subject to material seasonal variations, and the interim financial results are not necessarily indicative of the estimated financial results for the full year.  



Note 2—Cash, Cash Equivalents, and Restricted Cash

 

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported in the consolidated balance sheet that equals the total of the same amounts reported in the consolidated statements of cash flows:

 

(in thousands)

 

March 31,

2020

 

 

December 31,

2019

 

Cash and cash equivalents

 

$

29,710

 

 

$

31,242

 

Restricted cash—short-term

 

 

6,185

 

 

 

6,792

 

Restricted cash—long-term

 

 

493

 

 

 

520

 

Total cash, cash equivalents, and restricted cash

 

$

36,388

 

 

$

38,554

 

 

Restricted cash—short-term includes amounts set aside in accordance with the Amended and Restated Preferred Supplier Agreement with BP Energy Company (“BP”) (see Note 18) and Credit Agreement with JPMorgan Chase (see Note 19). Restricted cash—long-term includes Afek’s security deposits for its exploration license from the Government of Israel, and its customs and other import duties for the import of exploration equipment.

 

Note 3—Inventories

 

Inventories consisted of the following:

 

(in thousands)  

 

March 31,

2020

 

 

December 31,

2019

 

Natural gas

 

$

415

 

 

$

1,052

 

Renewable credits

 

 

16,920

 

 

14,940

Solar Panels:

 

 

           

 

 

Finished goods

510

424

Raw materials

 

 

216

 

 

 

216

 

Total solar panels inventory

726

640

Totals

 

$

18,061

 

 

$

16,632

6


 

Note 4—Revenue Recognition

Revenue from the single performance obligation to deliver a unit of electricity and/or natural gas is recognized as the customer simultaneously receives and consumes the benefit. Variable quantities in requirements contracts are considered to be options for additional goods and services because the customer has a current contractual right to choose the amount of additional distinct goods to purchase. Utility companies offer purchase of receivable, or POR, programs in most of the service territories in which the Company operates, and GRE’s REPs participate in POR programs for a majority of their receivables. The Company estimates variable consideration related to its rebate programs using the expected value method and a portfolio approach. The Company’s estimates related to rebate programs are based on the terms of the rebate program, the customer’s historical electricity and natural gas consumption, the customer’s rate plan, and a churn factor. Taxes that are imposed on the Company’s sales and collected from customers are excluded from the transaction price.

Revenue from sales of solar panels are recognized at a point in time following the transfer of control of the solar panels to the customer, which typically occurs upon shipment or delivery depending on the terms of the underlying contracts. For sales contracts that contain multiple performance obligations, such as the shipment or delivery of solar modules, the Company allocates the transaction price to each performance obligation identified in the contract based on relative standalone selling prices, or estimates of such prices, and recognize the related revenue as control of each individual product is transferred to the customer, in satisfaction of the corresponding performance obligations. Revenues from sale of solar panels are included in Other revenues in the consolidated statements of operations.

The Company recognizes the incremental costs of obtaining a contract with a customer as an asset if it expects the benefit of those costs to be received in a period longer than one year. The Company determined that certain sales commissions to acquire customers meet the requirements to be capitalized. For GRE, the Company applies a practical expedient to expense costs as incurred for sales commissions to acquire customers as the period would have been one year or less. Incremental customer acquisition cost of Lumo are capitalized and amortized over eighteen months. These costs and the related amortization are recorded within sales and marketing expenses. Total capitalized customer acquisition costs to obtain a contract was $0.2 million for the three months ended March 31, 2020 and 2019. At March 31, 2020, customer acquisition costs of $0.6 million and $0.1 million were included in other current assets and other assets, respectively, on the consolidated balance sheet. The Company continuously monitors its customer relationship periods to ensure compliance with the application of the standard.

Disaggregated Revenues 

The following table shows the Company’s revenues disaggregated by pricing plans offered to customers:


 

Electricity

 

 

Natural Gas

 

 

Other

 

 

Total

 



(in thousands)

Three Months Ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed rate

 

$

27,519

 

 

$

1,832

 

 

$

 

 

$

29,351

 

Variable rate

 

 

42,453

 

 

 

14,238

 

 

 

 

 

 

56,691

 

Other

 

 

 

 

 

 

 

 

18,009

 

 

 

18,009

 

Total

 

$

69,972

 

 

$

16,070

 

 

$

18,009

 

 

$

104,051

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed rate

 

$

23,317

 

 

$

1,062

 

 

$

 

 

$

24,379

 

Variable rate

 

 

39,297

 

 

 

17,644

 

 

 

 

 

 

56,941

 

Other

 

 

 

 

 

 

 

 

5,297

 

 

 

5,297

 

Total

 

$

62,614

 

 

$

18,706

 

 

$

5,297

 

 

$

86,617

 

7


 

The following table shows the Company’s revenues disaggregated by non-commercial and commercial channels:

 


 

Electricity

 

 

Natural Gas

 

 

Other

 

 

Total

 



(in thousands)

Three Months Ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-Commercial Channel

 

$

60,972

 

 

$

14,372

 

 

$

 

 

$

75,344

 

Commercial Channel

 

 

9,000

 

 

 

1,698

 

 

 

 

 

 

10,698

 

Other

 

 

 

 

 

 

 

 

18,009

 

 

 

18,009

 

Total

 

$

69,972

 

 

$

16,070

 

 

$

18,009

 

 

$

104,051

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-Commercial Channel

 

$

60,341

 

 

$

16,527

 

 

$

 

 

$

76,868

 

Commercial Channel

 

 

2,273

 

 

 

2,179

 

 

 

 

 

 

4,452

 

Other

 

 

 

 

 

 

 

 

5,297

 

 

 

5,297

 

Total

 

$

62,614

 

 

$

18,706

 

 

$

5,297

 

 

$

86,617

 

 

Contract Liabilities

Certain revenue contracts in GES include provisions that require advance payment from customers. These advance payments are recognized as revenue as the Company satisfies the performance obligations to the other party. A portion of the transaction price allocated to the performance obligations to be satisfied in the future periods is recognized as contract liability. 

Three Months Ended March 31,

 

2020

 

 

2019

 

(in thousands)

Contract liability, beginning

 

$

13,426

 

 

$

1,137

 

   Recognition of revenue included in the beginning of year contract liability

 

 

(12,716

)

 

 

(332

)

   Additions during the period, net of revenue recognized during the period

 

 

3,183

 

 

 

76

 

Contract liability, end

 

$

3,893

 

 

$

881

 

The increase in contract liabilities primarily related to a significant advance payment by a customer to purchase solar panels, which the Company expects to deliver in 2020.

Note 5—Acquisition

 

Acquisition of Lumo Energia, Oyj


On January 2, 2019 (the “Lumo Closing Date”), pursuant to a Stock Purchase Agreement dated December 17, 2018, the Company completed the purchase of an 80.0% controlling interest in Lumo Energia Oyj ("Lumo"), a Finnish public limited company. The Company paid the sellers a total of €1.6 million (equivalent to $1.9 million). The Company contributed €1.3 million (equivalent to $1.5 million) as a capital loan to fund Lumo's working capital requirements. The Company also provided Lumo with a secured loan for €2.0 million (equivalent to $2.3 million) to pay off and replace its remaining debt. The secured loan is payable in 4 years from inception and bears interest at annual rate of 4.0%, payable monthly. The Company also issued 176,104 shares of its Class B common stock to certain of the sellers which are subject to restrictions as described in the agreement (the “Lumo Restricted Shares”). The Lumo Restricted Shares are subject to vesting conditions related to employment and services to be provided by the recipients of up to two years following the Lumo Closing Date. The Lumo Restricted Shares are accounted for as a share-based compensation and is amortized to the consolidated statement of income over the vesting period of two years.

 

In November 2019, the Company acquired an additional 9.0% interest in Lumo for $0.2 million, increase its aggregate ownership to 89.0%. In January 2020, Lumo paid off half of the secured loan to GREI in exchange for additional shares which resulted in GREI's interest in Lumo increasing to 92.5%. Of the remaining 7.5% noncontrolling interest retained by the sellers, 33.3% vested in January 2020 with the balance subject to restrictions, which will lapse over a period of up to two years following the initial annual anniversary of the Lumo Closing Date, subject to employment and service conditions.

 

The Company has a conditional continuing call option to purchase a portion or the entire noncontrolling interest from the sellers during the period beginning at the third anniversary of the Lumo Closing Date and ending three years later.

 

The sellers, as a group, have a one-time option to sell a portion or all of their noncontrolling interest to the Company, which subject to certain conditions, may be exercised on one occasion only, at any time during the two-year period beginning at the fourth anniversary of the Lumo Closing Date. 

 

 The Company recorded revenue for Lumo of approximately $4.9 million and $4.8 million in its consolidated statements of operations the three months ended March 31, 2020 and 2019, respectively. The net income or loss attributable to this acquisition cannot be identified on a stand-alone basis because it is in the process of being integrated into the Company's operations.  

 

8


 

The Company conducted an assessment of assets and liabilities related to the acquisition of Lumo. The impact of the acquisition’s purchase price allocations on the Company’s consolidated balance sheet and the acquisition date fair value of the total consideration transferred were as follows:


(in thousands)

 

 

 

Cash

$

1,539

Trade accounts receivable              

 

2,520

 

Other current assets              

 

 

411

 

Intangible assets:

   Trademark (5-year useful life)           

 

 

294

 

   Non-compete agreements (3-year useful life)      

 

 

34

 

   Customer relationship (2-year useful life)

 

 

1,924

 

Goodwill              

 

 

1,744

 

Other assets

95

Accounts and other current liabilities             

 

 

(2,403

)

Short-term debts

(2,260

)

Other liabilities

 

 

(97

)

Noncontrolling interest

(410

)

Net assets          

 

$

3,391

 

 

(in thousands)

 

 

Supplemental information

 

 

 

 

Cash paid to sellers   

 

1,869

 

Cash contributed to Lumo

 

 

1,522

Total consideration

 

$

3,391

 


Goodwill was allocated to the GRE International segment. Goodwill is the excess of the consideration transferred over the net assets recognized and represents the expected revenue and cost synergies of the combined company and assembled workforce. Goodwill recognized as a result of the acquisition is not deductible for income tax purposes.


 

     

Note 6—Fair Value Measurements

 

The following table presents the balance of assets and liabilities measured at fair value on a recurring basis:

 

 

 

Level 1 (1)

 

 

Level 2 (2)

 

 

Level 3 (3)

 

 

Total

 

 

 

(in thousands)

 

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Derivative contracts

 

$

184

 

 

$

12

 

 

$

    

 

 

$

196

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative contracts

 

$

2,799

 

 

$

 

 

$

 

 

$

2,799

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

          Derivative contracts

 

$

5

 

 

$

322

 

 

$

 

 

$

327

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative contracts

 

$

1,569

 

 

$

410

 

 

$

 

 

$

1,979

 

 

(1) – quoted prices in active markets for identical assets or liabilities

(2) – observable inputs other than quoted prices in active markets for identical assets and liabilities

(3) – no observable pricing inputs in the market

 

The Company’s derivative contracts consist of natural gas and electricity put and call options and swaps. The underlying asset in the Company’s put and call options is a forward contract. The Company’s swaps are agreements whereby a floating (or market or spot) price is exchanged for a fixed price over a specified period.


The Company did not have any transfers of assets or liabilities between Level 1, Level 2 or Level 3 of the fair value measurement hierarchy during the March 31, 2020 and 2019.

 

9


 

Fair Value of Other Financial Instruments

 

The estimated fair value of the Company’s other financial instruments was determined using available market information or other appropriate valuation methodologies. However, considerable judgment is required in interpreting this data to develop estimates of fair value. Consequently, the estimates are not necessarily indicative of the amounts that could be realized or would be paid in a current market exchange.

 

Restricted cash—short-term and long-term, trade receivables, due to IDT Corporation, and other current liabilities. At March 31, 2020 and December 31, 2019, the carrying amounts of these assets and liabilities approximated fair value. The fair value estimate for restricted cash—short-term and long-term was classified as Level 1. The carrying value of other current assets, due to IDT Corporation, and other current liabilities approximated fair value.  

 

Other assets, revolving line of credit and notes payable. At March 31, 2020 and December 31, 2019, other assets included notes receivable. At March 31, 2020, the outstanding balance of the sellers of Lumo's one-time option was not significant and was included in other liabilities account in the consolidated balance sheet. The carrying amount of the note receivable, revolving line of credit and notes payable approximated fair value. The fair values were estimated based on the Company’s assumptions, and were classified as Level 3 of the fair value hierarchy.


The following table presents the items measured at fair value on a non-recurring basis:  


    

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

  

 

 

(in thousands)

  

March 31, 2020 

 

 

 

 

 

 

 

 

 

 

 

  

Impairment of property and equipment

 

 

 

$

 

 

$

192

 

 

$

192

  

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

          Impairment of goodwill

 

 

 

 

 

400

 

 

400

  


The primary non-recurring fair value estimates typically are in the context of business acquisitions (Note 5) which involve a combination of Level 2 and Level 3 inputs, goodwill impairment testing, which involves Level 3 inputs, and asset impairments (Note 8) which utilize Level 3 inputs.


Concentration of Credit Risks


The Company holds cash, cash equivalents, and restricted cash at several major financial institutions, which may exceed Federal Deposit Insurance Corporation insured limits. Historically, the Company has not experienced any losses due to such concentration of credit risk. The Company’s temporary cash investments policy is to limit the dollar amount of investments with any one financial institution and monitor the credit ratings of those institutions. While the Company may be exposed to credit losses due to the nonperformance of the holders of its deposits, the Company does not expect the settlement of these transactions to have a material effect on its results of operations, cash flows or financial condition.


The following table summarizes the percentage of consolidated revenues from customers that equal or exceed 10.0% of the Company’s consolidated revenues in the period (no other single customer accounted for more than 10.0% of consolidated revenues in these periods):



 

March 31,

 



2020

2019

Customer A

 


16.1

 


na

%  

 

na-less than 10% of consolidated revenue in the period


At March 31, 2020 and December 31, 2019 no other single utility company accounted for 10% or greater of our consolidated gross trade accounts receivable.





 

Note 7—Derivative Instruments

 

The primary risk managed by the Company using derivative instruments is commodity price risk, which is accounted for in accordance with Accounting Standards Codification 815 — Derivatives and Hedging. Natural gas and electricity put and call options and swaps are entered into as hedges against unfavorable fluctuations in market prices of natural gas and electricity. The Company does not apply hedge accounting to these options or swaps, therefore the changes in fair value are recorded in earnings. By using derivative instruments to mitigate exposures to changes in commodity prices, the Company exposes itself to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes the Company, which creates credit risk. The Company minimizes the credit or repayment risk in derivative instruments by entering into transactions with high-quality counterparties. At March 31, 2020, GRE’s swaps and options were traded on the Intercontinental Exchange. GRE International's swaps and options were traded through counterparties.


The summarized volume of GRE’s outstanding contracts and options at March 31, 2020 was as follows (MWh – Megawatt hour and Dth – Decatherm):

 

Settlement Dates

 

Volume

 

 

 

Electricity (in MWH)

 

 

Gas (in Dth)

 

Second quarter 2020

 

 

73,240

 

 

 

88,350

 

Third quarter 2020

 

 

85,840

 

 

 

91,612

 

Fourth quarter 2020

 

 

123,814

 

 

 

110,701

 

First quarter 2021

 

 

 

 

 

97,800

 

Second quarter 2021

 

 

 

 

 

67,250

 

Third quarter 2021

 

 

 

 

 

49,300

 

Fourth quarter 2021

 

 

 

 

 

28,750

 

First quarter 2022

 

 

 

 

 

34,150

 

Second quarter 2022




18,000
Third quarter 2022




4,100
Fourth quarter 2022




2,700
First quarter 2023




1,200
Second quarter 2023




300

 

10


 

The fair value of outstanding derivative instruments recorded in the accompanying consolidated balance sheets were as follows:

 

Asset Derivatives

 

Balance Sheet Location

 

March 31,
2020

 

 

December 31,
2019

 

 

 

 

 

(in thousands)

 

Derivatives not designated or not qualifying as hedging instruments: 

 

 

 

 

 

 

 

 

 

 

Energy contracts and options1
Other current assets
$ 193

$ 324 
Energy contracts and options
Other assets

3


3

Total derivatives not designated or not qualifying as hedging instruments Assets

 


 

$

196

 

 

$

327

 

 

 

 

 

 

 

 

 

 

 

 

Liability Derivatives

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives not designated or not qualifying as hedging instruments:

 

 

 

 

 

 

 

 

 

 

Energy contracts and options1
Other current liabilities
$ 2,749


1,909
Energy contracts and options
Other liabilities

50


70

Total derivatives not designated or not qualifying as hedging instruments — Liabilities

 


 

$

2,799

 

 

$

1,979

 

 

(1The Company classifies derivative assets and liabilities as current based on the cash flows expected to be incurred within the following 12 months.


The effect of derivative instruments on the consolidated statements of operations was as follows:

 

 

Amount of Net Loss Recognized on Derivatives

 

Derivatives not designated or not qualifying as

 

Location of Loss Recognized

 

Three Months Ended March 31,

 

hedging instruments

 

on Derivatives

 

2020

 

 

2019

 

 

 

 

(in thousands)

 

Energy contracts and options

 

 Cost of revenues

 

$

(12,388

)

 

$

(2,909

)

 

Note 8—Assets and Liabilities Held for Sale


In March 2020, the Company initiated a plan to sell the property, plant and equipment of Prism. Prism's 4.75% notes payable to Catskill Hudson Bank are collateralized by Prism's land, building and improvements, and will be settled from the proceeds of the sale of the assets. At March 31, 2020, Prism's property, plant and equipment and notes payable were reclassified as assets and liabilities held for sale and reported at lower of fair value less cost to sell and net book value. In the three months ended March 31, 2020, the Company recorded a $0.2 million write-down to fair value of certain property and equipment. The Company used the market approach to estimate the fair values of assets and liabilities held for sale. The related inputs were corroborated by observable market data for similar assets and liabilities, therefore the estimated fair values were classified as Level 2 of the fair value hierarchy.

The pending disposition of Prism's assets and liabilities held for sale did not meet the criteria to be reported as a discontinued operation. At March 31, 2020, assets held of sale of $2.8 million and liabilities held for sale of $0.9 million were included in other current assets and other current liabilities, respectively, in the consolidated balance sheet.

In December 11, 2019, the Company refinanced the 5.95% notes payable from Catskill Hudson Bank that was due in November 2019. The outstanding balance of notes payable of $0.9 million at December 11, 2019 will be payable in monthly equal annual installments for period of ten years. The outstanding principal amount incurs fixed interest at 4.75% per annum. The notes payable are secured by Prism's commercial property in Highland, New York. In March 2020, the outstanding balance of the notes payable was transferred to liabilities held for sale as described above.


Note 9—Investment in Equity Method Investees

 

Investment in Shoreditch


On July 17, 2017, the Company’s subsidiary, Genie Energy UK Ltd. (“GEUK”), entered into a definitive agreement with Energy Global Investments Pty Ltd (“EGC”) to launch Shoreditch Energy Limited (“Shoreditch”), a joint venture to offer electricity and natural gas service to residential and small business customers in the U.K., through its wholly owned subsidiary operating under the trade name Orbit Energy. Through March 31, 2020, the Company contributed a total of $8.0 million to Shoreditch. The Company owns 73.0% of the equity.


EGC has significant participation rights in the management of Shoreditch that limits GEUK’s ability to direct the activities that most significantly impact Shoreditch’s economic performance. GEUK, therefore, accounts for its ownership interest in Shoreditch using the equity method since GEUK has the ability to exercise significant influence over its operating and financial matters, although it does not control Shoreditch.

 

11


 

In 2018, the Company extended a $0.2 million loan to EGC (“EGC Loan”), in connection with EGC’s contribution to Shoreditch. The EGC Loan, which is secured by EGC’s interest in Shoreditch, bears a fixed annual interest rate of 2.0% and is due, together with the principal amount on September 17, 2023. As of March 31, 2020, the outstanding balance, including accrued interest, of the EGC Loan was $ 0.2 million.

 

At March 31, 2020, the net book value of the Company's investment in Shoreditch was nil. There were no other arrangements, events or circumstances that could expose the Company to additional loss, aside from the balance of EGC Loan discussed above.

 

Summarized unaudited statements of operations of Shoreditch are as follows:

 

 

 

Three Months Ended March 31,

 


 

2020

 

 

2019

 



(in thousands)

Revenues

 

$

19,670

 

 

$

3,911

 

Operating expenses:

 

 

 

 

 

 

 

 

Cost of revenues

 

 

18,120

 

 

 

3,700

 

Selling, general and administrative

 

 

3,822

 

 

 

1,807

 

Loss from operations

 

 

(2,272

)

 

 

(1,596

)

Other

 

 

 

 

 

 

Net loss

 

$

(2,272

)

 

$

(1,596

)

Genie’s equity in net loss

 

$

 

$

(1,070

)

 

Investment in Atid 613

 

In September 2018, the Company divested a majority interest in Atid Drilling Ltd. in exchange for 37.5% interest in a contracting drilling company in Israel ("Atid 613") which the Company accounts for using equity method of accounting.

 

Summarized unaudited statements of operations of Atid 613 are as follows:

 

 

 

Three Months Ended March 31,

 


 

2020

 

 

2019

 



(in thousands)

Revenues

 

$

232

 

 

$

2,055

 

Operating expenses

 

 

934

 

 

 

1,340

  

(Loss) income from operations

(702 )

715

Others

 

 

(7

)

 

 

(8

)

Net (loss) income

 

$

(695

)

 

$

707

Genie’s equity in net (loss) income

 

$

(260

)

 

$

274

 

The Company also entered into a Shareholder Agreement with Atid 613's other shareholders to govern certain issues regarding management of the new company. Under the Shareholder Agreement, among other things, Genie Israel has agreed to make available Atid 613 working capital financing up to $0.4 million ("Credit Facility"). The credit Facility bears a variable interest rate as defined in the Shareholder Agreement. As of March 31, 2020, the outstanding balance of Credit Facility was nil. 


On August 12, 2019, the Company, together with the other shareholders of Atid 613 signed a Funding Agreement to provide aggregate loans to Atid 613 in an amount of up to New Israeli Shekel or NIS 5.1 million (equivalent to $1.5 million), including the Company's commitment to extend up to NIS1.9 million (equivalent to $0.5 million) of such amount. In August 2019, the Company extended NIS 0.8 million (equivalent to $0.2 million) in loans. The loans which are secured by Atid 613’s assets bore no interest until March 1, 2020 and bear interest at 5.5% for all subsequent periods. 


At March 31, 2020, there were $0.2 million loan receivables from Atid 613, included in other current assets in the Company's consolidated balance sheet.


At March 31, 2020, the Company’s maximum exposure to loss as a result of its involvement with Atid 613 was the minimal net book value of the investment and $0.2 million of notes receivablesince there were no other arrangements, events or circumstances that could expose the Company to additional loss.  

 

12


 

Note 10—Goodwill and Other Intangible Assets


The table below reconciles the change in the carrying amount of goodwill for the period from January 1, 2019 to March 31, 2020:

 


 

  GRE

GRE International




GES

Total

 



(in thousands)

Balance at January 1, 2020               

 

9,998

$

1,733



$ 404

$

12,135

 

Cumulative translation adjustment




(33 )




(33 )

Balance at March 31, 2020              

 

$

9,998

$

1,700



$ 404

$

12,102

 


The table below presents information on the Company’s other intangible assets: 



 

Weighted Average Amortization Period

 

 

Gross Carrying Amount

 

 

Accumulated Amortization

 

 

Net
Balance

 



(in thousands)

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

Patents and trademarks              

 

 

17.1 years

 

 

$

3,836

 

 

$

626

 

$

3,210

 

Non-compete agreements              

 

 

1.6 years

 

 

 

148

 

 

 

129

 

 

19

 

Customer relationships             

 

 

3.9 years

 

 

 

6,683

 

 

 

4,331

 

 

2,352

 

Licenses              

 

10.0 years

 

 

 

895

 

 

 

149

 

 

746

 

Total

 

 

 

 

$

11,562

 

 

$

5,235

 

$

6,327

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trademark             

 

 

17.1 years

 

 

$

3,842

 

 

$

560

 

$

3,282

 

Non-compete agreement             

 

 

1.6 years

 

 

 

148

 

 

 

126

 

 

22

 

Customer relationships             

 

 

3.9 years

 

 

 

6,706

 

 

 

3,941

 

 

2,765

 

Licenses              

 

 

10.0 years

  

 

 

895

 

 

 

127

 

 

 

768

 

Total      

 

 

 

 

$

11,591

 

 

$

4,754

 

$

6,837

 

 

Amortization expense of intangible assets (including minimal amounts reported in cost of revenues) was $0.7 million and $0.7 million in the three months ended March 31, 2020 and 2019, respectively. The Company estimates that amortization expense of intangible assets will be $1.5 million, $1.0 million, $0.5 million, $0.5 million, $0.4 million and $2.5 million for the remainder of 2020, and for 2021, 2022, 2023, 2024 and thereafter, respectively.


13


 

Note 11—Leases

The Company entered into operating lease agreements primarily for offices in domestic and foreign locations where it has operations with lease periods expiring between 2019 and 2030. The Company has no finance leases. 
The Company determine if a contract is a lease at inception. Operating lease assets and liabilities are included on our consolidated balance sheet beginning January 1, 2019. Right-of-Use ("ROU") assets were included under other assets in the consolidated balance sheet. The current portion of the operating lease liabilities were included in other current liabilities and the noncurrent portion is included in other liabilities in the consolidated balance sheet.
ROU assets and operating lease liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value of the future lease payments is the incremental borrowing rate, because the interest rate implicit in most of our leases is not readily determinable. The incremental borrowing rate is estimated to approximate the interest rate on a collateralized borrowing rate based on information available at the lease commencement date. ROU assets also include any prepaid lease payments and lease incentives. The lease terms include periods under options to extend or terminate the lease when it is reasonably certain that we will exercise that option. The Company use the base, non-cancelable, lease term when determining the lease assets and liabilities. Operating lease expense is recognized on a straight-line basis over the lease term.
 

 

 

March 31, 2020

 

December 31, 2019



(in thousands)

ROU Assets 

$

2,236

$ 2,357