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  PowerSecure International, Inc., headquartered in Wake Forest, North Carolina, is a leading provider of Energy and Smart Grid Solutions to electric utilities, their commercial, institutional and industrial customers.

 
Our core business is our Energy and Smart Grid Solutions segment, operated through our largest wholly-owned subsidiary PowerSecure, Inc., which we refer to as "our PowerSecure subsidiary". This segment includes our three core strategic business areas: Interactive Distributed Generation, Utility Infrastructure and Energy Efficiency. These three areas are focused on providing utilities and their commercial, institutional and industrial customers with products and services to help them generate, deliver, and utilize electricity more efficiently and are intended to deliver strong returns on investment. They share common or complementary utility relationships and customer types, common sales and overhead resources, and facilities. However, each business area in this segment possesses distinct technical disciplines and specific capabilities that are designed to provide a competitive advantage in the marketplace for its specific products and services, including personnel, technology, engineering, and intellectual capital. This segment operates primarily out of our Wake Forest, North Carolina headquarters office, and its operations also include several satellite offices and manufacturing facilities, the largest of which are in Raleigh, North Carolina, Randleman, North Carolina, McDonough, Georgia, and Anderson, South Carolina. The locations of our sales organization for this segment are generally in close proximity to the utilities and commercial, industrial, and institutional customers they serve.
Until recently, our Energy Services segment operated through our two other principal operating subsidiaries, Southern Flow Companies, Inc., which we refer to as "Southern Flow", and WaterSecure Holdings, Inc., which we refer to as "WaterSecure". WaterSecure holds a significant noncontrolling minority portion of the equity interests in an unconsolidated business, Marcum Midstream 1995-2 Business Trust, a Delaware statutory trust, which we refer to as "MM 1995-2" or as our "WaterSecure operations". Our WaterSecure operations provided water processing, recycling, and disposal services for oil and natural gas producers in northeastern Colorado utilizing environmentally responsible technologies and processes. In June 2011, substantially all of the assets and business of MM 1995-2 were sold. Accordingly, our WaterSecure subsidiary no longer has any on-going operating activity. See Note 5 for more information regarding the sale of MM 1995-2. Our Southern Flow business, which was sold in January 2011 pursuant to a purchase agreement executed in December 2010, provided oil and natural gas measurement services to customers involved in oil and natural gas production, transportation, and processing, with a focus on the natural gas market. Due to its sale, Southern Flow's operations are now reflected as discontinued operations in the accompanying consolidated financial statements. See Note 4 for more information regarding the sale of Southern Flow. The sales of our WaterSecure and Southern Flow operations were the fulfillment of our strategy to monetize our non-core assets to focus on the businesses in our Energy and Smart Grid Solutions business segment. As a result of these sales, our Energy Services segment ceased business activities in June 2011 and we will no longer report ongoing operations in the Energy Services segment in financial periods after June 30, 2011.


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POWR.. $.4.62  PowerSecure Reports Third Quarter Results

 Growth Progression Continues, Revenues Increase 45% to a Record $38 Million, and Backlog Grows to $149 Million

WAKE FOREST, N.C.--(BUSINESS WIRE)--

PowerSecure International, Inc. (Nasdaq: POWR) today reported its third quarter 2011 results, including record revenue of $38.2 million which increased 45% on a year-over-year basis compared to the third quarter of 2010, and increased 27% on a sequential basis compared to the second quarter of 2011. Third quarter 2011 diluted earnings per share ("E.P.S.") were $0.05, which compares on a year-over-year basis to $0.03 in the third quarter of 2010, and on a sequential basis to $0.90 of GAAP E.P.S. and $0.00 of Non-GAAP E.P.S. in the second quarter of 2011. The Company's Non-GAAP E.P.S. for the second quarter of 2011 includes adjustments to GAAP E.P.S. to exclude the gain on the sale of its non-core WaterSecure business and charges related to the exit of its PowerPackages business (see Non-GAAP reconciliation, below). Third quarter 2011 diluted E.P.S. from continuing operations were $0.05, which compares on a year-over-year basis to ($0.01) in the third quarter of 2010, and on a sequential basis to $0.90 of GAAP E.P.S. and $0.00 of Non-GAAP E.P.S. in the second quarter of 2011.

The Company's record third quarter revenue of $38.2 million continues the consistent growth progression demonstrated throughout 2011, with revenue increases across business lines driven by the expansion of its base of utility partners, a growing customer roster, and the introduction and sales of new products and services:

                            
($ in 000's)    4Q10        1Q11        2Q11        3Q11 
Revenue by Product/Service             
Distributed Generation    10,254    11,202    12,856    19,999 
              
Utility Infrastructure    6,785    7,578    11,510    13,300 
              
Energy Efficiency    3,966        4,933        5,851        4,930 
Total Revenue    21,005    23,713    30,217    38,229 

The Company also announced that an additional $14 million of new business has been added to its revenue backlog from new business received in late-October. This new business is in addition to the $15 million of new awards announced on October 11, 2011. As a result, the Company's revenue backlog stands at $149 million, representing revenue expected to be recognized after September 30, 2011, for periods including the fourth quarter of 2011 onward. This backlog figure compares to $147 million of revenue backlog announced in conjunction with the Company's second quarter earnings release issued on August 4, 2011.

Sidney Hinton, CEO of PowerSecure, said, "2011 is a very gratifying year for the PowerSecure team, as our growth initiatives have accelerated our top-line growth, and we are realizing the positive bottom-line impact of these revenue increases as the year unfolds. We are building a business platform with increasing diversity in areas where we can utilize our core competencies to serve a growing list of utility partners and customers with products and services that have significant long-term potential. We are building a strong foundation to achieve our mid-range goal of $300 million in revenue and double-digit operating margins by 2015. Importantly, we are achieving our near-term results while at the same time succeeding in our long-term strategic objectives of growing our product lines and growing our Distributed Generation recurring revenue business, which posted another record quarter. Our growth strategies are working, and we are pleased with the progress we are making toward unlocking our revenue and profit potential."

The Company's $11.9 million, or 45.3% year-over-year quarterly revenue increase, was driven by an increase in Distributed Generation revenues of $6.3 million, or 46.1%, as well as an increase in Utility Infrastructure revenues of $7.2 million, or 118.1%, partially offset by a decrease in Energy Efficiency revenues of $1.6 million, or 24.5%. On a sequential basis, compared to the second quarter of 2011, the Company's $8.0 million , or 26.5% revenue increase was driven by an increase in Distributed Generation revenues of $7.1 million, or 55.6%, and an increase in Utility Infrastructure revenues of $1.8 million, or 15.6%, partially offset by a decrease in Energy Efficiency revenues of $0.9 million, or 15.7%.

The Company's third quarter gross margin as a percentage of revenue was 30.5% compared to 32.6% in the third quarter of 2010 and 25.4% in the second quarter of 2011. The lower year-over-year gross margins were driven by approximately $0.8 million, or 2.0 percentage points, of additional fuel costs incurred from the extensive operation during the months of July and August of a PowerSecure-owned distributed generation system which serves a Midwest utility, due to record Summer heat causing high demand on the utility system. Excluding this incremental fuel cost, the Company's third quarter gross margin was 32.5%. Additionally, period-to-period gross margins were affected, as they are each quarter, by the specific mix of projects completed in each period, and by the relative mix of higher-margin Distributed Generation revenues compared to lower-margin Utility Infrastructure service revenues in each period.

The Company's strong quarterly revenue and profit results were achieved while at the same time the platform of Company-owned recurring revenue Distributed Generation projects continued to build. The Company invested $3.8 million in capital to deploy systems under high margin long-term recurring revenue contracts, although these projects result in deferred current period revenue and profit recognition. Since the start of 2011, the Company has invested $11.4 million of capital to deploy these projects in support of its long-term growth and profit objectives. These investments have grown its recurring revenue business to record levels, with third quarter recurring revenue reaching $4.1 million, which would have been approximately $3.8 million excluding the incremental operation of the Distributed Generation system discussed above due to the extraordinary Summer heat. This adjusted figure is approximately double compared to the prior year's third quarter.

Operating expenses for the third quarter of 2011 were $11.3 million on a GAAP basis, and $10.8 million on a Non-GAAP basis after adjusting for $0.5 million of operating expenses related to the wind-down of the Company's PowerPackages business, which it is in the process of exiting (see Non-GAAP financial measures, below). This compares to $9.5 million in the third quarter of 2010. The year-over-year increase in operating expenses is due to "step-up investments" the Company has made to expand and grow each of its Interactive Distributed Generation, Utility Infrastructure, and Energy Efficiency businesses. These expenses support new product and customer development, engineering, personnel and equipment, as well as additional sales and marketing activities, and include increases in depreciation from capital expenditures for recurring revenue distributed generation systems.

During the third quarter of 2011 the Company also realized revenue of $1.6 million and gross margin of $0.4 million from the sale of inventory related to the wind-down of its PowerPackages business. These inventory sales, combined with $0.5 million of PowerPackages operating expenses discussed above, generated a pre-tax loss from PowerPackages exit activities of $0.1 million. In addition, the Company recognized a pre-tax gain of just under $0.1 million related to positive adjustments to the purchase price of the sale of its WaterSecure investment, which was completed in the second quarter. In accordance with GAAP, each of these items was recorded as a component of continuing operations during the third quarter. However, because these businesses have been sold or are in the process of being exited by the Company, Non-GAAP Pro-forma results of operations are provided below to adjust for this small WaterSecure gain on sale and PowerPackages wind-down loss (see Non-GAAP financial measures, below). Adjusting for these items, Non-GAAP diluted E.P.S. was $0.05 for the Company's third quarter, essentially the same as GAAP diluted E.P.S of $0.05.

The Company's $149 million revenue backlog and the estimated timing of revenue recognition are outlined below, including "project-based revenues" expected to be recognized as projects are completed, and "recurring revenues" expected to be recognized over the life of the contracts:

Revenue Backlog expected to be recognized after September 30, 2011               
   Anticipated    Estimated Primary 
Description        Revenue        Recognition Period 
        
Project-based Revenue -- Near term    $59 Million    4Q11 through 2Q12 
Project-based Revenue -- Long term    $21 Million    3Q12 through 2013 
Recurring Revenue    $69 Million    4Q11 through 2019 
Revenue Backlog expected to be recognized after September 30, 2011    $149 Million    
        
Note: Anticipated revenue and estimated primary recognition periods are subject to risks and uncertainties
 
as indicated in the Company's safe harbor statement, below. Consistent with past practice, these figures 
are not intended to constitute the Company's total revenue over the indicated time periods, as the Company 
has additional, regular on-going revenues. Examples of additional, regular recurring revenues include 
revenues from the engineering fees, and service revenue, among others. Numbers may not add due to rounding. 

Orders in the Company's revenue backlog are subject to delay, deferral, acceleration, resizing, or cancellation from time to time. Given the irregular sales cycle of customer orders, and especially of large orders, the revenue backlog at any given time is not necessarily an accurate indication of our future revenues.

The Company will host a conference call commencing today at 5:30 p.m. eastern time to discuss its third quarter 2011 results, business operations, strategic initiatives and prospects for the future. The conference call will be webcast live and can be accessed from the Investor Relations section of the Company's website at www.powersecure.com. Participants can also access the call by dialing 888-679-8034 (or 617-213-4847 if dialing internationally), and providing pass code 33260174. If you are unable to participate during the live webcast, a replay of the conference call will be available beginning today at 8:30 p.m. eastern time through midnight on December 1, 2011. To listen to the replay, dial toll-free 888-286-8010 (or 617-801-6888 if dialing internationally), and enter pass code 53518420. In addition, the webcast will be archived on the Company's website at www.powersecure.com.

About PowerSecure

PowerSecure International, Inc. is a leading provider of Energy and Smart Grid Solutions to electric utilities, and their commercial, institutional, and industrial customers. PowerSecure's Energy and Smart Grid Solutions businesses provide products and services in the areas of Energy Efficiency, Interactive Distributed Generation, and Utility Infrastructure. The Company is a pioneer in developing Interactive Distributed Generation® systems with sophisticated, proactive smart grid capabilities, including the ability to 1) forecast electricity demand and electronically deploy the systems to deliver more efficient, and environmentally friendly power at peak power times, 2) provide utilities with dedicated electric power generation capacity to utilize for demand response purposes, and 3) provide customers with the most dependable standby power in the industry. PowerSecure also provides utilities with transmission and distribution infrastructure construction and maintenance services, and engineering and regulatory consulting services. The Company's Energy Efficiency business provides customers with energy efficient lighting technologies that deliver improved quality of light, including its proprietary EfficientLights LED lighting products for grocery, drug, and convenience stores, and its SecureLiteTM and PowerLiteTM street lights for utilities and municipalities which are available through its EnergyLite business unit. Additional information is available at www.powersecure.com.

This press release contains forward-looking statements within the meaning of and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are all statements other than statements of historical facts, including but not limited to statements concerning the outlook for the Company's future revenues, earnings, margins, cash resources and cash flow and other financial and operating information and data; the Company's future business operations, strategies and prospects; and all other statements concerning the plans, intentions, expectations, projections, hopes, beliefs, objectives, goals and strategies of management, including statements about other future financial and non-financial items, performance or events and about present and future products, services, technologies and businesses; and statements of assumptions underlying the foregoing. Forward-looking statements are not guarantees of future performance or events and are subject to a number of known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those expressed, projected or implied by such forward-looking statements. Important risks, uncertainties and other factors include, but are not limited to, the on-going downturn, disruption and volatility in the economy, financial markets and business markets and the effects thereof on the Company's markets and customers, the demand for its products and services, and the Company's access to capital; the size, timing and terms of sales and orders, including the Company's revenue backlog discussed in this press release, and the risk of customers delaying, deferring or canceling purchase orders or making smaller purchases than expected; the effects of the sale of Southern Flow business and WaterSecure investment and the Company's strategy of monetizing its non-core businesses on the Company's financial condition and results of operations; the effects of exiting the Company's PowerPackages business, including current and future charges related to the exit plan, and timing of the completion of the exit and wind-down activities; the timely and successful development, production and market acceptance of new and enhanced products, services and technologies of the Company; the ability of the Company to obtain adequate supplies of key components and materials of sufficient reliability and quality for its products and technologies on a timely and cost-effective basis and the effects of related warranty claims and disputes; the ability of the Company to successfully expand its core distributed generation products and services, to successfully develop and achieve market acceptance of its new energy-related businesses, to successfully expand its recurring revenue projects, to manage its growth and to address the effects of any future changes in utility tariff structures and environmental requirements on its business solutions; the effects of competition; changes in customer and industry demand and preferences; the ability of the Company to continue the growth and diversification of its customer base; the ability of the Company to attract, retain, and motivate its executives and key personnel; changes in the energy industry in general and the electricity, oil, and natural gas markets in particular, including price levels; the effects of competition; the ability of the Company to secure and maintain key contracts and relationships; the effects of pending and future litigation, claims and disputes; and other risks, uncertainties and other factors identified from time to time in its reports filed with or furnished to the Securities and Exchange Commission, including the Company's most recent Annual Report on Form 10-K, as well as subsequently filed reports on Form 10-Q and Form 8-K. Accordingly, there can be no assurance that the results expressed, projected or implied by any forward-looking statements will be achieved, and readers are cautioned not to place undue reliance on any forward-looking statements. The forward-looking statements in this press release speak only as of the date hereof and are based on the current plans, goals, objectives, strategies, intentions, expectations and assumptions of, and the information currently available to, management. The Company assumes no duty or obligation to update or revise any forward-looking statements for any reason, whether as the result of changes in expectations, new information, future events, conditions or circumstances or otherwise.

                   
PowerSecure International, Inc. 
Consolidated Statements of Operations (unaudited) 
($000's except per share data) 
             
 Three Months Ended     Nine Months Ended 
 September 30,   September 30,    September 30,   September 30, 
 2011    2010     2011    2010 
             
Revenue  38,229    26,316     92,159    76,509 
Cost of sales  26,582    17,747     65,183    50,098 
Gross Profit  11,647    8,569     26,976    26,411 
             
Operating expenses            
General and administrative  9,168    7,388     25,596    21,176 
Selling, marketing, and service  1,279    1,383     3,657    3,777 
Depreciation and amortization  858    756     2,499    2,011 
Total operating expenses  11,305    9,527     31,752    26,964 
             
Operating income (loss)  342    (958)     (4,776)    (553) 
             
Other income (expense)            
Gain on sale of unconsolidated affiliate  44    0     21,830    0 
Equity income from unconsolidated affiliate  0    598     1,559    2,435 
Management fees from unconsolidated affiliate  0    136     282    432 
Interest income and other income  31    24     73    77 
Interest expense  (168)    (177)     (454)    (457) 
             
Income (loss) before income taxes  249    (377)     18,514    1,934 
Income tax benefit (provision)  493    (42)     (1,763)    (475) 
             
Net income (loss) from continuing operations  742    (419)     16,751    1,459 
             
Discontinued operations - income from operations (net of tax)  0    777     0    1,587 
Discontinued operations - gain on sale (net of tax)  0    0     5,636    0 
Net income (loss)  742    358     22,387    3,046 
Net income attributable to noncontrolling interest  230    132     573    (15) 
Net income (loss) attributable to PowerSecure International, Inc.  972    490     22,960    3,031 
             
Summary of Amounts Attributable to PowerSecure International, Inc. shareholders    
Income from continuing operations (net of tax)  972    (287)     17,324    1,444 
Income from discontinued operations (net of tax)  0    777     5,636    1,587 
Net income (loss) attributable to PowerSecure

International, Inc.
 972    490     22,960    3,031 
             
EARNINGS PER SHARE AMOUNTS ("E.P.S") ATTRIBUTABLE TO          
POWERSECURE INTERNATIONAL, INC. SHAREHOLDERS:           
Continuing Operations            
Basic  0.05    (0.01)     0.92    0.08 
Diluted  0.05    (0.01)     0.91    0.08 
             
Discontinued Operations            
Basic  0.00    0.04     0.30    0.09 
Diluted  0.00    0.04     0.29    0.08 
             
Net Income            
Basic  0.05    0.03     1.22    0.17 
Diluted  0.05    0.03     1.20    0.16 
             
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING           
Basic  18,966    18,640     18,848    17,942 
Diluted  19,163    18,640     19,122    18,447 
  
PowerSecure International, Inc. 
Condensed Consolidated Balance Sheets (unaudited) 
($000's) 
        
 September 30,   December 31, 
ASSETS  2011    2010 
CURRENT ASSETS:     
Cash and cash equivalents  32,692    8,202 
Trade receivables, net of allowance for doubtful accounts  47,322    29,290 
Assets of discontinued operations held for sale  0    12,183 
Inventories  24,441    25,011 
Current deferred income taxes  1,667    1,731 
Prepaid expenses and other current assets  658    933 
Total Current Assets  106,780    77,350 
      
PROPERTY, PLANT, AND EQUIPMENT:     
Equipment  35,660    24,946 
Furniture and fixtures  281    280 
Land, building, and improvements  5,874    5,720 
Total property, plant, and equipment at cost  41,815    30,946 
Less accumulated depreciation and amortization  7,485    5,899 
Property, plant, and equipment, net  34,330    25,047 
      
OTHER ASSETS:     
Goodwill  7,970    7,970 
Deferred income taxes, net of current portion  154    1,244 
Restricted annuity contract  2,358    2,306 
Intangible rights and capitalized software, net of accum amort  1,768    1,942 
Investment in unconsolidated affiliate  195    4,346 
Other assets  273    324 
Total other assets  12,718    18,132 
        
TOTAL ASSETS  153,828    120,529 
      
LIABILITIES AND STOCKHOLDERS' EQUITY     
      
CURRENT LIABILITIES     
Accounts payable  8,549    8,438 
Accrued and other liabilities  16,629    10,986 
Liabilities of discontinued operations held for sale  0    1,411 
Current income taxes payable  395    251 
Current unrecognized tax benefit  287    954 
Current portion of capital lease obligations  828    796 
Total current liabilities
 26,688    22,836 
      
LONG-TERM LIABILITIES     
Revolving Line of Credit  10,000    5,000 
Capital lease obligations, net of current portion  3,022    3,647 
Unrecognized tax benefit  731    749 
Other long-term liabilities  2,236    1,053 
Total long-term liabilities  15,989    10,449 
      
STOCKHOLDERS' EQUITY     
Preferred stock - undesignated
 0    0 
Preferred stock - Series C  0    0 
Common stock  190    187 
Additional paid-in-capital  116,308    114,791 
Accumulated deficit  (6,529)    (29,489) 
Total PowerSecure International, Inc. stockholders' equity  109,969    85,489 
Noncontrolling Interest  1,182    1,755 
Total stockholders' equity  111,151    87,244 
      
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  153,828    120,529 
  
PowerSecure International, Inc. 
Condensed Consolidated Statement of Cash Flows (unaudited) 
($000's) 
        
 Nine Months Ended 
 September 30,    September 30, 
 2011    2010 
CASH FLOWS FROM OPERATING ACTIVITIES:     
Net income (loss)  22,387    3,046 
Adjustments to reconcile net income (loss) to net cash provided by    
(used in) operating activities:     
Gain on sale of unconsolidated affiliate  (21,830)    0 
Income from discontinued operations  (5,636)    (1,587) 
Depreciation and amortization  2,499    2,011 
Stock compensation expense  1,376    1,270 
Distributions to noncontrolling interest shareholder  0    (877) 
Loss on writedown or disposal of equipment  420    29 
Deferred income taxes  1,154    0 
Equity in income of unconsolidated affiliate  (1,559)    (2,435) 
Distributions from unconsolidated affiliate  1,537    2,225 
Changes in operating assets and liabilities, net of     
effect of acquisitions:
    
Trade receivables, net  (18,032)    (5,927) 
Inventories  570    (2,249) 
Other current assets and liabilities  (248)    402 
Other noncurrent assets and liabilities  1,163    429 
Accounts payable  111    169 
Restructuring charges  0    (325) 
Accrued and other liabilities  5,537    (2,938) 
Net cash provided by (used in) continuing operations  (10,551)    (6,757) 
Net cash provided by (used in) discontinued operations  0    1,808 
Net cash provided by (used in) operating activities  (10,551)    (4,949) 
      
CASH FLOWS FROM INVESTING ACTIVITIES:     
Additions to property, plant and equipment  (13,743)    (3,695) 
Additions to intangible rights and software development  (365)    (518) 
Acquisitions  0    (4,413) 
Proceeds from sale of property, plant and equipment  12    21 
Proceeds from sale of unconsolidated affiliate  25,974    0 
Proceeds from sale of discontinued operations  16,515    0 
Discontinued operations investing activities  0    (147) 
Net cash provided by (used in) investing activities  28,393    (8,752) 
      
CASH FLOWS FROM FINANCING ACTIVITIES:     
Net borrowings (payments) on revolving line of credit  5,000    7,500 
Proceeds from sale-leaseback transactions  2,097    0 
Payments on capital lease obligations  (593)    (563) 
Proceeds from stock option and warrant exercises, net of shares tendered  144    1,263 
Net cash provided by (used in) financing activities  6,648    8,200 
NET INCREASE (DECREASE) IN CASH     
AND CASH EQUIVALENTS  24,490    (5,501) 
      
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR  8,202    20,169 
      
CASH AND CASH EQUIVALENTS AT END OF PERIOD  32,692    14,668 
  
 
 
PowerSecure International, Inc. 
Non-GAAP Pro-forma Financial Measures - 3Q11 
Results of Operations Excluding PowerPackages Business Exit and WaterSecure Gain 
                           
    Adjustments for PowerPackages Exit Activities    
    and WaterSecure Gain on Sale    
 
 As Reported

3Q11
   WaterSecure

Gain on Sale
  PowerPackages

Exit Activities
   Pro-forma

3Q11
 
               
Revenue  38,229        (1,645)      36,584 
Cost of sales  26,582          (1,210)      25,372 
Gross Profit  11,647    0     (435)      11,212 
Gross Profit % Revenue  30.5%             30.6% 
Operating expenses              
General and administrative  9,168        (376)      8,792 
Selling, marketing, and service  1,279        (161)      1,118 
Depreciation and amortization  858                 858 
Total operating expenses  11,305    0     (537)      10,768 
               
Operating income (loss)  342    0     102      444 
               
Other income (expense)              
Gain on sale of unconsolidated affiliate  44    (44)          0 
Equity income from unconsolidated affiliate  0             0 
Management fees from unconsolidated affiliate  0             0 
Interest income and other income  31             31 
Interest expense  (168)                 (168) 
               
Income (loss) before income taxes  249    (44)     102      307 
Income tax benefit (provision)  493    17     (38)      471 
               
Net income (loss) from continuing operations  742    (28)     64      778 
               
Discontinued operations - income from operations (net of tax)  0    0     0      0 
Discontinued operations - gain on sale (net of tax)  0    0     0      0 
Net income (loss)  742    (28)     64      778 
Net income attributable to noncontrolling interest  230                 230 
Net income (loss) attributable to PowerSecure International, Inc.  972    (28)     64      1,008 
               
Summary of Amounts Attributable to PowerSecure International, Inc. shareholders        
Income from continuing operations (net of tax)  972    (28)     64      1,008 
Income from discontinued operations (net of tax)  0    0     0      0 
Net income (loss) attributable to PowerSecure International, Inc.  972    (28)     64      1,008 
               
EARNINGS PER SHARE AMOUNTS ("E.P.S") ATTRIBUTABLE TO             
POWERSECURE INTERNATIONAL, INC. SHAREHOLDERS:             
Continuing Operations              
Basic  0.05    0.00     0.00      0.05 
Diluted  0.05    0.00     0.00      0.05 
               
Discontinued Operations              
Basic  0.00    0.00     0.00      0.00 
Diluted  0.00    0.00     0.00      0.00 
               
Net Income              
Basic  0.05    0.00     0.00      0.05 
Diluted  0.05    0.00     0.00      0.05 
               
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING             
Basic  18,966    18,966     18,966      18,966 
Diluted  19,163    19,163     19,163      19,163 
  
  
PowerSecure International, Inc. 
Non-GAAP Pro-forma Financial Measures -- 2Q11 
Results of Operations Excluding WaterSecure Gain on Sale and PowerPackages Exit Plan Charges 
                     
     

Adjustments for WaterSecure Gain on Sale,
   
    and PowerPackages Exit Plan Charges    
 As Reported

2Q11
   WaterSecure

Gain on Sale
  PowerPackages

Charges
   Pro-forma

2Q11
 
             
Revenue  30,217           30,217 
Cost of sales  22,547         (1,692)     20,855 
Gross Profit  7,670    0    1,692     9,362 
Gross Profit % Revenue  25.4%           31.0% 
Operating expenses            
General and administrative  8,509       (383)     8,126 
Selling, marketing, and service  1,220           1,220 
Depreciation and amortization  835               835 
Total operating expenses  10,564    0    (383)     10,181 
             
Operating income (loss)  (2,894)    0    2,075     (819) 
             
Other income (expense)            
Gain on sale of unconsolidated affiliate  21,786    (21,786)        0 
Equity income from unconsolidated affiliate  548           548 
Management fees from unconsolidated affiliate  114           114 
Interest income and other income  22           22 
Interest expense  (144)               (144) 
             
Income (loss) before income taxes  19,432    (21,786)    2,075     (279) 
Income tax benefit (provision)  (2,339)    2,622    (250)     34 
             
Net income (loss) from continuing operations  17,093    (19,164)    1,825     (245) 
             
Discontinued operations - income from operations (net of tax)  0    0    0     0 
Discontinued operations - gain on sale (net of tax)  0    0    0     0 
Net income (loss)  17,093    (19,164)    1,825     (245) 
Net income attributable to noncontrolling interest  159               159 
Net income (loss) attributable to PowerSecure International, Inc.  17,252    (19,164)    1,825     (86) 
             
Summary of Amounts Attributable to PowerSecure International, Inc. shareholders      
Income from continuing operations (net of tax)  17,252    (19,164)    1,825     (86) 
Income from discontinued operations (net of tax)  0    0    0     0 
Net income (loss) attributable to PowerSecure International, Inc.  17,252    (19,164)    1,825     (86) 
             
EARNINGS PER SHARE AMOUNTS ("E.P.S") ATTRIBUTABLE

TO
          
POWERSECURE INTERNATIONAL, INC. SHAREHOLDERS:           
Continuing Operations            
Basic  0.91    (1.02)    0.10     0.00 
Diluted  0.90    (1.00)    0.10     0.00 
             
Discontinued Operations            
Basic  0.00    0.00    0.00     0.00 
Diluted  0.00    0.00    0.00     0.00 
             
Net Income            
Basic  0.91    (1.02)    0.10     0.00 
Diluted  0.90    (1.00)    0.10     0.00 
             
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING           
Basic  18,857    18,857    18,857     18,857 
Diluted  19,146    19,146    19,146     19,146 

Non-GAAP Pro-forma Financial Measures:

Our references to our third quarter 2011 "Non-GAAP Pro-forma" financial measures of revenue, gross profit, gross margin as a percentage of revenue, operating expenses, operating income, net income from continuing operations, net income, net income attributable to PowerSecure International, Inc., diluted E.P.S. from continuing operations, diluted E.P.S. from discontinued operations, and diluted E.P.S. discussed and shown above constitute non-GAAP financial measures. They refer to our GAAP results, adjusted to show the results 1) without the gain on the sale of our WaterSecure investment (identified in our financial statements as our unconsolidated affiliate), with the third quarter 2011 amount representing a small positive adjustment from the gain on the sale which was announced and recorded in the Company's second quarter of 2011, and 2) without the wind-down activity and charges related to the plan to exit our PowerPackages business, which was announced and initiated in the Company's second quarter of 2011. For each of these two items we are utilizing a 37.5% effective tax rate to calculate their impact on net income.

Our references to our second quarter 2011 "Non-GAAP Pro-forma" financial measures of revenue, gross profit, gross margin as a percentage of revenue, operating expenses, operating income, net income from continuing operations, net income, net income attributable to PowerSecure International, Inc., diluted E.P.S. from continuing operations, diluted E.P.S. from discontinued operations, and diluted E.P.S. discussed and shown above constitute non-GAAP financial measures. They refer to our GAAP results, adjusted to show our results 1) without the gain on the sale of the WaterSecure investment (identified in our financial statements as our unconsolidated affiliate), 2) without the charges related to the write-down of assets in conjunction with our plan to exit our PowerPackages business, and 3) after allocating the tax expense incurred in our second quarter to each of the elements of our Non-GAAP Pro-forma reconciliation utilizing the second quarter of 2011's effective tax rate, reflecting that virtually all of our tax net operating loss carry forwards ("NOL's") will be utilized as a result of the gain on the sale of our WaterSecure business.

We believe providing non-GAAP measures which show our pro-forma results with these items adjusted is valuable and useful as it allows our management and our board of directors to measure, monitor and evaluate our second and third quarter 2011 operating performance with the same consistent financial context as the business was managed and evaluated throughout the 2011 fiscal year. Additionally, because our WaterSecure business was sold in June, 2011, and our PowerPackages exit plan was also initiated in June, 2011, these Non-GAAP Pro-forma measures are not indicative of our current or future results.

We believe these Non-GAAP Pro-forma measures also provide meaningful information to investors in terms of enhancing their understanding of our second and third quarter 2011 operating performance and results, as they allow investors to more easily compare our financial performance on a consistent basis with the way it was reported and evaluated throughout 2011. These Non-GAAP Pro-forma measures also correspond with the way the majority of analysts' current financial estimates are calculated. Our Non-GAAP Pro-forma measures should be considered only as supplements to, and not as substitutes for or in isolation from, our other measures of financial information prepared in accordance with GAAP, such as GAAP revenue, operating income, net income from continuing operations, net income, net income attributable to PowerSecure International, Inc., diluted E.P.S. from continuing operations, diluted E.P.S. from discontinued operations, and diluted E.P.S.

 


PowerSecure International, Inc.
Chris Hutter, 919-453-1760
Chief Financial Officer


Source: PowerSecure International, Inc.

 

POWERSECURE INTERNATIONAL, INC. AND SUBSIDIARIES

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CONSOLIDATED BALANCE SHEETS{C}{C}(unaudited)
(in thousands, except share data)
{C}{C}{C}{C}{C}{C}{C}{C}{C}{C}{C} {C}{C}{C}{C}{C}{C}{C}{C}{C}{C}{C}
                 
    June 30,     December 31,  
    2011     2010  
Assets
               
Current Assets:
               
Cash and cash equivalents
  $ 36,148     $ 8,202  
Trade receivables, net of allowance for doubtful accounts of $302 and $415, respectively
    41,869       29,290  
Assets of discontinued operations held for sale
    -       12,183  
Inventories
    26,028       25,011  
Current deferred income taxes
    1,667       1,731  
Prepaid expenses and other current assets
    776       933  
 
           
 
               
Total current assets
    106,488       77,350  
 
           
 
               
Property, plant and equipment:
               
Equipment
    31,257       24,946  
Furniture and fixtures
    280       280  
Land, building and improvements
    5,627       5,720  
 
           
Total property, plant and equipment, at cost
    37,164       30,946  
 
             
Less accumulated depreciation and amortization
    6,857       5,899  
 
           
 
               
Property, plant and equipment, net
    30,307       25,047  
 
           
 
               
Other assets:
               
Goodwill
    7,970       7,970  
Deferred income taxes, net of current portion
    154       1,244  
Restricted annuity contract
    2,341       2,306  
Intangible rights and capitalized software costs, net of accumulated amortization of $2,816 and $2,463, respectively
    1,853       1,942  
Investment in unconsolidated affiliate
    1,445       4,346  
Other assets
    287       324  
 
           
 
               
Total other assets
    14,050       18,132  
 
           
 
               
Total Assets
  $ 150,845     $ 120,529  
 
           
See accompanying notes to consolidated financial statements.

 

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POWERSECURE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands, except share data)
{C}{C}{C}{C}{C}{C} {C}{C}{C}{C}{C} {C}{C}{C}{C}{C}
                 
    June 30,     December 31,  
    2011     2010  
Liabilities and Stockholders' Equity
               
Current liabilities:
               
Accounts payable
  $ 7,339     $ 8,438  
Accrued and other liabilities
    14,618       10,986  
Liabilities of discontinued operations held for sale
    -       1,411  
Current income taxes payable
    989       251  
Current unrecognized tax benefit
    954       954  
Current portion of capital lease obligations
    818       796  
 
           
 
               
Total current liabilities
    24,718       22,836  
 
           
 
               
Long-term liabilites:
               
Revolving line of credit
    10,000       5,000  
Capital lease obligations, net of current portion
    3,233       3,647  
Unrecognized tax benefit
    749       749  
Other long-term liabilities
    2,182       1,053  
 
           
 
               
Total long-term liabilities
    16,164       10,449  
 
           
 
               
Commitments and contingencies (Notes 8 and 10)
    -       -  
 
               
Stockholders' Equity:
               
PowerSecure International stockholders' equity:
               
Preferred stock - undesignated, $.01 par value; 2,000,000 shares authorized; none issued and outstanding
    -       -  
Preferred stock - Series C, $.01 par value; 500,000 shares authorized; none issued and outstanding
    -       -  
Common stock, $.01 par value; 25,000,000 shares authorized; 18,966,529 and 18,701,614 shares issued and outstanding, respectively
    190       187  
Additional paid-in-capital
    115,862       114,791  
Accumulated deficit
    (7,501 )     (29,489 )
 
           
Total PowerSecure International, Inc. stockholders' equity
    108,551       85,489  
Noncontrolling interest
    1,412       1,755  
 
           
 
               
Total stockholders' equity
    109,963       87,244  
 
           
 
               
Total Liabilities and Stockholders' Equity
  $ 150,845     $ 120,529  
 
           
See accompanying notes to consolidated financial statements.
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POWERSECURE INTERNATIONAL, INC. AND SUBSIDIARIES
{C}{C}
CONSOLIDATED STATEMENTS OF OPERATIONS
{C}{C}
(in thousands, except per share data)
{C}{C}{C}{C}{C}{C}{C}{C}{C}{C}{C}{C}{C}{C}{C}{C}{C}{C}{C} {C}{C}{C}{C}{C}{C}{C}{C}{C}{C}{C}{C}{C}{C}{C}{C}{C}{C}{C}
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2011     2010     2011     2010  
Revenues
  $ 30,217     $ 29,733     $ 53,930     $ 50,193  
Cost of sales
    22,547       20,000       38,601       32,351  
 
                       
 
             
Gross profit
    7,670       9,733       15,329       17,842  
 
                       
 
                               
Operating expenses:
                               
General and administrative
    8,509       7,326       16,428       13,788  
Selling, marketing and service
    1,220       1,348       2,378       2,394  
Depreciation and amortization
    835       671       1,641       1,255  
 
                       
 
                               
Total operating expenses
    10,564       9,345       20,447       17,437  
 
                       
 
                               
Operating income (loss)
    (2,894 )     388       (5,118 )     405  
 
                               
Other income and (expenses):
                               
Gain on sale of unconsolidated affiliate
    21,786       -       21,786       -  
Equity income from unconsolidated affiliate
    548       807       1,559       1,837  
Management fees
    114       142       282       296  
Interest income and other income
    22       23       42       53  
Interest expense
    (144 )     (139 )     (286 )     (280 )
 
                       
 
                               
Income before income taxes
    19,432       1,221       18,265       2,311  
Income tax benefit (provision)
    (2,339 )     (228 )     (2,256 )     (433 )
 
                       
 
                               
Income from continuing operations
    17,093       993       16,009       1,878  
 
                       
 
                               
Discontinued operations (Note 4):
                               
Income from operations, net of tax
    -       291       -       810  
Gain on disposal, net of tax
    -       -       5,636       -  
 
                       
 
                               
Income from discontinued operations, net of tax
    -       291       5,636       810  
 
                       
 
                               
Net income
    17,093       1,284       21,645       2,688  
Less: Net (income) loss attributable to noncontrolling interest
    159       40       343       (147 )
 
                       
 
                               
Net income attributable to PowerSecure International, Inc.
  $ 17,252     $ 1,324     $ 21,988     $ 2,541  
 
                       
 
                               
Amounts attributable to PowerSecure International, Inc. common stockholders:
                               
Income from continuing operations, net of tax
  $ 17,252     $ 1,033     $ 16,352     $ 1,731  
Income from discontinued operations, net of tax
    -       291       5,636       810  
 
                       
 
                               
Net income
  $ 17,252     $ 1,324     $ 21,988     $ 2,541  
 
                       
 
                               
Basic earnings per share attributable to
                               
PowerSecure International, Inc. common stockholders:
                               
Income from continuing operations
  $ 0.91     $ 0.06     $ 0.87     $ 0.10  
Income from discontinued operations
    .00       0.01       0.30       0.04  
 
                       
Net income attributable to PowerSecure
                               
International, Inc. common stockholders
  $ 0.91     $ 0.07     $ 1.17     $ 0.14  
 
                       
 
                               
Diluted earnings per share attributable to
                               
PowerSecure International, Inc. common stockholders:
                               
Income from continuing operations
  $ 0.90     $ 0.06     $ 0.86     $ 0.10  
Income from discontinued operations
    .00       0.01       0.29       0.04  
 
                       
Net income attributable to PowerSecure
                               
International, Inc. common stockholders
  $ 0.90     $ 0.07     $ 1.15     $ 0.14  
 
                       
See accompanying notes to consolidated financial statements.
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POWERSECURE INTERNATIONAL, INC. AND SUBSIDIARIES
{C}{C}
CONSOLIDATED STATEMENTS OF CASH FLOWS{C}{C}(unaudited)
(in thousands)
{C}{C}{C}{C}{C}{C}{C}{C}{C}{C}{C} {C}{C}{C}{C}{C}{C}{C}{C}{C}{C}{C}
                 
    Six Months  
    Ended June 30,  
    2011     2010  
Cash flows from operating activities:
               
Net income
  $ 21,645     $ 2,688  
Adjustments to reconcile net income to net cash used in operating activities:
               
Gain on sale of unconsolidated affiliate
    (21,786 )     -  
Income from discontinued operations
    (5,636 )     (810 )
Depreciation and amortization
    1,641       1,255  
Stock compensation expense
    926       988  
Distributions to noncontrolling shareholder
    -       (877 )
Loss on write-down or disposal of equipment
    428       3  
Deferred income taxes
    1,154       -  
Equity in income of unconsolidated affiliate
    (1,559 )     (1,837 )
Distributions from unconsolidated affiliate
    607       1,618  
Changes in operating assets and liabilities, net of effect of aquisiton:
               
Trade receivables, net
    (12,580 )     (9,031 )
Inventories
    (1,016 )     (5,440 )
Other current assets and liabilities
    895       578  
Other noncurrent assets and liabilities
    1,132       193  
Accounts payable
    (1,099 )     1,952  
Restructuring charges
    -       (325 )
Accrued and other liabilities
    3,525       (411 )
 
           
Net cash used by continuing operations
    (11,723 )     (9,456 )
Net cash provided by discontinued operations
    -       956  
 
           
Net cash used in operating activities
    (11,723 )     (8,500 )
 
           
 
               
Cash flows from investing activities:
               
Acquisition
    -       (4,413 )
Purchases of property, plant and equipment
    (9,040 )     (2,489 )
Additions to intangible rights and software development
    (268 )     (432 )
Proceeds from sale of property, plant and equipment
    -       6  
Proceeds from sale of unconsolidated affiliate
    25,610       -  
Proceeds from sale of discontinued operations
    16,515       -  
Discontinued operations investing activities
    -       (63 )
 
           
 
               
Net cash provided by (used in) investing activities
    32,817       (7,391 )
 
           
 
               
Cash flows from financing activities:
               
Borrowings (payments) on revolving line of credit
    5,000       -  
Proceeds from sale leaseback transactions
    2,097       -  
Payments on capital lease obligations
    (393 )     (373 )
Proceeds from stock option exercises, net of shares tendered
    148       69  
 
           
 
               
Net cash provided by (used in) financing activities
    6,852       (304 )
 
           
 
               
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    27,946       (16,195 )
 
               
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
    8,202       20,169  
 
           
 
               
CASH AND CASH EQUIVALENTS AT END OF PERIOD
  $ 36,148     $ 3,974  
 
           
See accompanying notes to consolidated financial statements.
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POWERSECURE INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
As of June 30, 2011 and December 31, 2010 and
For the Three and Six Month Periods Ended June 30, 2011 and 2010
(in thousands, except per share data)
{C}{C}
1. Description of Business and Basis of Presentation
{C}{C}
Description of Business
PowerSecure International, Inc., headquartered in Wake Forest, North Carolina, is a leading provider of Energy and Smart Grid Solutions to electric utilities, their commercial, institutional and industrial customers.
Our core business is our Energy and Smart Grid Solutions segment, operated through our largest wholly-owned subsidiary PowerSecure, Inc., which we refer to as "our PowerSecure subsidiary". This segment includes our three core strategic business areas: Interactive Distributed Generation, Utility Infrastructure and Energy Efficiency. These three areas are focused on providing utilities and their commercial, institutional and industrial customers with products and services to help them generate, deliver, and utilize electricity more efficiently and are intended to deliver strong returns on investment. They share common or complementary utility relationships and customer types, common sales and overhead resources, and facilities. However, each business area in this segment possesses distinct technical disciplines and specific capabilities that are designed to provide a competitive advantage in the marketplace for its specific products and services, including personnel, technology, engineering, and intellectual capital. This segment operates primarily out of our Wake Forest, North Carolina headquarters office, and its operations also include several satellite offices and manufacturing facilities, the largest of which are in Raleigh, North Carolina, Randleman, North Carolina, McDonough, Georgia, and Anderson, South Carolina. The locations of our sales organization for this segment are generally in close proximity to the utilities and commercial, industrial, and institutional customers they serve.
Until recently, our Energy Services segment operated through our two other principal operating subsidiaries, Southern Flow Companies, Inc., which we refer to as "Southern Flow", and WaterSecure Holdings, Inc., which we refer to as "WaterSecure". WaterSecure holds a significant noncontrolling minority portion of the equity interests in an unconsolidated business, Marcum Midstream 1995-2 Business Trust, a Delaware statutory trust, which we refer to as "MM 1995-2" or as our "WaterSecure operations". Our WaterSecure operations provided water processing, recycling, and disposal services for oil and natural gas producers in northeastern Colorado utilizing environmentally responsible technologies and processes. In June 2011, substantially all of the assets and business of MM 1995-2 were sold. Accordingly, our WaterSecure subsidiary no longer has any on-going operating activity. See Note 5 for more information regarding the sale of MM 1995-2. Our Southern Flow business, which was sold in January 2011 pursuant to a purchase agreement executed in December 2010, provided oil and natural gas measurement services to customers involved in oil and natural gas production, transportation, and processing, with a focus on the natural gas market. Due to its sale, Southern Flow's operations are now reflected as discontinued operations in the accompanying consolidated financial statements. See Note 4 for more information regarding the sale of Southern Flow. The sales of our WaterSecure and Southern Flow operations were the fulfillment of our strategy to monetize our non-core assets to focus on the businesses in our Energy and Smart Grid Solutions business segment. As a result of these sales, our Energy Services segment ceased business activities in June 2011 and we will no longer report ongoing operations in the Energy Services segment in financial periods after June 30, 2011.

 

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See Note 12 for more information concerning our reportable segments.
Basis of Presentation
Organization - The accompanying consolidated financial statements include the accounts of PowerSecure International, Inc. and its subsidiaries, primarily, PowerSecure, Inc. ("our PowerSecure subsidiary") (and its majority-owned and wholly-owned subsidiaries, UtilityEngineering, Inc., PowerServices, Inc., EnergyLite, Inc., EfficientLights, LLC, Innovative Electronic Solutions Lighting, LLC ("IES"), Reid's Trailer, Inc. and PowerPackages, LLC), Southern Flow Companies, Inc. ("Southern Flow"), WaterSecure Holdings, Inc. ("WaterSecure"), and Marcum Gas Metering, Inc. (fka Metretek International, Inc. and Metretek, Incorporated) ("Metretek Florida"), collectively referred to as the "Company" or "we" or "us" or "our".
These consolidated financial statements have been prepared pursuant to rules and regulations of the Securities and Exchange Commission. The accompanying consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2010.
In management's opinion, all adjustments (all of which are normal and recurring) have been made which are necessary for a fair presentation of the consolidated financial position of us and our subsidiaries as of June 30, 2011 and the consolidated results of our operations and cash flows for the three and six months ended June 30, 2011 and June 30, 2010.
Principles of Consolidation - The consolidated financial statements include the accounts of PowerSecure International, Inc. and its subsidiaries after elimination of intercompany accounts and transactions. We use the equity method to account for our investment in our unconsolidated affiliate.
Noncontrolling Interest - The noncontrolling ownership interests in the income or losses of our majority-owned subsidiaries is included in our consolidated statements of operations as a reduction or addition to net income to derive income attributable to PowerSecure International stockholders. Similarly, the noncontrolling ownership interest in the undistributed equity of our majority-owned subsidiaries is shown as a separate component of stockholders' equity in our consolidated balance sheet.
Until April 30, 2010, our PowerSecure subsidiary held a 67% controlling ownership interest in EfficientLights. On April 30, 2010, we acquired the 33% noncontrolling ownership interest in EfficientLights at which time EfficientLights became a wholly-owned subsidiary of our PowerSecure subsidiary. Also, on April 1, 2010, our PowerSecure subsidiary acquired a 67% controlling ownership interest in IES which is consolidated in our financial statements. Accordingly, the noncontrolling interest for the three and six months ended June 30, 2011, consists solely of the noncontrolling shareholders' interest in the results of IES. Similarly, the noncontrolling interest for the three and six months ended June 30, 2010 consists of the noncontrolling shareholders' interest in the results of EfficientLights through April 30, 2010 and the noncontrolling shareholders' interest in the results of IES commencing April 1, 2010. As a result, period-to-period comparisons of the aggregate amount of noncontrolling interests are not necessarily comparable.

 

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The following is a reconciliation of the amounts attributable to the noncontrolling interest for the six months ended June 30, 2011:
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    Noncontrolling Interest  
    EfficientLights     IES     Total  
Balance, December 31, 2010
  $ -     $ 1,755     $ 1,755  
Income (loss)
    -       (343 )     (343 )
Distributions
    -       -       -  
 
                 
 
                       
Balance, June 30, 2011
  $ -     $ 1,412     $ 1,412  
 
                 
The following is a reconciliation of the amounts attributable to the noncontrolling interest for the six months ended June 30, 2010:
{C}{C}{C}{C}{C}
                         
    Noncontrolling Interest  
    EfficientLights     IES     Total  
Balance, December 31, 2009
  $ 1,107     $ -     $ 1,107  
Capital contributions
    -       2,188       2,188  
Income (loss)
    280       (133 )     147  
Distributions
    (877 )     -       (877 )
Acquisition of noncontrolling interes
    (510 )     -       (510 )
 
                 
 
                       
Balance, June 30, 2010
  $ -     $ 2,055     $ 2,055  
 
                 
Use of Estimates - The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires that our management make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include percentage-of-completion estimates for revenue and cost of sales recognition, incentive compensation and commissions, allowance for doubtful accounts receivable, inventory valuation reserves, warranty reserves and our deferred tax valuation allowance.
Reclassifications - During the fourth quarter of 2010, our board of directors approved a plan to sell our Southern Flow business (see Note 4). The operations of Southern Flow have been reclassified to discontinued operations for all periods presented in the accompanying consolidated financial statements. In addition, certain 2010 amounts have been reclassified to conform to current year presentation. Such reclassifications had no effect on net income or stockholders' equity.
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2. Summary of Significant Accounting Policies and Recent Accounting Standards
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Revenue Recognition - For our distributed generation turn-key project-based sales and our utility infrastructure projects, we recognize revenue and profit as work progresses using the percentage-of-completion method, which relies on various estimates. We believe the use of the percentage-of-completion method of accounting for our distributed generation and utility infrastructure projects is preferable to the completed contract method because our typical projects occurs over several accounting periods and the percentage-of-completion method is a better method to match the revenues and costs to the reporting period in which the construction services are performed. Nearly all of our distributed generation and utility infrastructure projects are fixed-price contracts.

 

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In applying the percentage-of-completion method to our distributed generation turn-key projects, we have identified the key output project phases that are standard components of these projects. We have further identified, based on past experience, an estimate of the value of each of these output phases based on a combination of costs incurred and the value added to the overall construction project. While the order of these phases varies depending on the project, each of these output phases is necessary to complete each project and each phase is an integral part of the turnkey product solution we deliver to our customers. We use these output phases and percentages to measure our progress toward completion of our construction projects. For each reporting period, the status of each project, by phase, is determined by employees who are managers of or are otherwise directly involved with the construction project and is reviewed by our accounting personnel. Utilizing this information, we recognize project revenues (and associated project costs) and gross profit based on the percentage associated with output phases that are complete or in process on each of our projects.
In applying the percentage-of-completion method to our utility infrastructure projects, revenues and gross profit are recognized as work is performed based on the relationship between actual costs incurred and total estimated costs at completion.
In all cases where we utilize the percentage-of-completion, revenues and gross profit are adjusted prospectively for revisions in estimated total contract costs and contract values. Estimated losses, if any, are recorded when identified. While a project is in process, amounts billed to customers in excess of revenues recognized to date are classified as current liabilities. Likewise, amounts recognized as revenue in excess of actual billings to date are recorded as unbilled accounts receivable. In the event adjustments are made to the contract price, including, for example, adjustments for additional wire or other raw materials, we adjust the purchase price and related costs for these items when they are identified.
Because the percentage-of-completion method of accounting relies upon estimates described above, recognized revenues and profits are subject to revision as a project progresses to completion. Revisions in profit estimates are charged to income in the period in which the facts that give rise to the revision become known. In the event we were required to adjust any particular project's estimated revenues or costs, the effect on the current period earnings may or may not be significant. If, however, conditions arise that requires us to adjust our estimated revenues or costs for a series of similar construction projects, the effect on current period earnings would more likely be significant. In addition, certain contracts provide for cancellation provisions prior to completion of a project. The cancellation provisions generally provide for payment of costs incurred, but may result in an adjustment to profit already recognized in a prior period.
We recognize equipment and product revenue when persuasive evidence of a commercial arrangement exists, delivery has occurred and/or services have been rendered, the price is fixed or determinable, and collectability is reasonably assured. Equipment and product sales are generally made directly to end users of the product, who are responsible for payment for the product.
Service revenue includes regulatory consulting and rate design services, power system engineering services, energy conservation services, and monitoring and maintenance services. Revenues from these services are recognized when the service is performed and the customer has accepted the work.
Additionally, our utility infrastructure business provides services to utilities involving construction, maintenance, and upgrades to their electrical transmission and distribution systems which is not fixed price project-based work. These services are delivered by us under contracts which are generally of two types. In the first type, we are paid a fixed fee based on the number of units of work we complete, an example of which is number of new utility poles we replace. In the second type, we are paid for the time and materials utilized to complete the work, plus a profit margin. In both cases, we recognize revenue as these services are delivered.

 

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Revenues for our recurring revenue distributed generation projects are recognized over the term of the contract or when energy savings are realized by the customer at its site. Under these arrangements, we provide utilities and their customers with access to PowerSecure-owned and operated distributed generation systems for standby power and to deliver peak shaving benefits. These contracts can involve multiple parties, with one party paying us for the value of backup power (usually, but not always, a commercial, industrial, or institutional customer), and one party paying us for the value of the electrical capacity provided by the system (either the customer or a utility).
Sales of certain goods and services sometimes involve the provision of multiple deliverables. Revenues from contracts with multiple deliverables are recognized as each element is earned based on the selling price for each deliverable. The selling price for each deliverable is generally based on our selling price for that deliverable on a stand-alone basis, third-party evidence if we do not sell that deliverable on a stand-alone basis, or an estimated selling price if neither specific selling prices nor third-party evidence exists.
Cash and Cash Equivalents - Cash and all highly liquid investments with a maturity of three months or less from the date of purchase, including money market mutual funds, short-term time deposits, and government agency and corporate obligations, are classified as cash and cash equivalents.
Accounts Receivable - Our customers include a wide variety of mid-sized and large businesses, utilities and institutions. We perform ongoing credit evaluations of our customers' financial condition and generally do not require collateral. We continuously monitor collections and payments from our customers and regularly adjust credit limits of customers based upon payment history and a customer's current credit worthiness, as judged by us. We maintain a provision for estimated credit losses.
Concentration of Credit Risk - We are subject to concentrations of credit risk from our cash and cash equivalents and accounts receivable. We limit our exposure to credit risk associated with cash and cash equivalents by placing it with multiple domestic financial institutions. Nevertheless, our cash in bank deposit accounts at these financial institutions frequently exceeds federally insured limits. We further limit our exposure to credit risk associated with these cash accounts by adherence to our investment policy. We have not experienced any losses in such accounts.
From time to time, we have derived a material portion of our revenues from one or more significant customers. To date, nearly all our revenues have been derived from sales to customers within the United States.
Warranty Reserve - We provide a standard warranty for our distributed generation equipment, switchgear equipment, utility infrastructure equipment, and our Energy Efficiency unit's lighting products, which range generally between one and five years. In addition, we offer extended warranty terms on our distributed generation turn-key and switchgear projects. We reserve for the estimated cost of product warranties when revenue is recognized, and we evaluate our reserve periodically by comparing our warranty repair experience by product. The purchase price for extended warranties or extended warranties included in the contract terms are deferred as a component of our warranty reserve. The balance of our warranty reserve included in accrued and other liabilities at June 30, 2011 and December 31, 2010 was $1,060 and $1,087, respectively.

 

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  About PowerSecure

PowerSecure International, Inc. is a leading provider of Energy and Smart Grid Solutions to electric utilities, and their commercial, institutional, and industrial customers, as well as Energy Services to the oil and natural gas industry. PowerSecure's Energy and Smart Grid Solutions businesses provide products and services in the areas of Energy Efficiency, Interactive Distributed Generation, and Utility Infrastructure. The Company's Energy Efficiency business provides customers with energy efficient lighting technologies that deliver improved quality of light, including its proprietary EfficientLights LED lighting product that saves grocery, drug, and convenience stores 70% off the cost to operate traditional fluorescent lighting in their refrigerated cases. The Company is a pioneer in developing Interactive Distributed Generation(R) systems with sophisticated, proactive smart grid capabilities, including the ability to 1) forecast electricity demand and electronically deploy the systems to deliver more efficient, and environmentally friendly power at peak power times, 2) provide utilities with dedicated electric power generation capacity to utilize for demand response purposes, and 3) provide customers with the most dependable standby power in the industry. PowerSecure also provides utilities with transmission


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#106   Look at the chart! uzzo 05/06/15 07:38:44 AM
#105   20$ here we go in a short time uzzo 05/06/15 07:13:39 AM
#104   Great news today! 2014shelby 10/15/14 09:50:59 AM
#103   Roth Capital Upgrades PowerSecure To A Buy Following maytepper 08/08/14 01:21:08 PM
#102   GREAT NEWS TODAY... She's moving up nicely Money Penny 07/23/14 01:53:06 PM
#101   POWER SECURE FOLKS LIKE I SAID BEFORE I SOUTHGAS 07/09/14 07:07:14 PM
#100   POWR 9.58 50d coming down to intersect the PAC 07/05/14 11:03:01 AM
#99   POWR 9.58 thinking it could pull hard if PAC 06/28/14 10:24:24 PM
#98   POWR 10 nice action. Huge gap to cover PAC 06/26/14 10:12:00 AM
#97   Back to 8's. Looking very good. Andco 05/21/14 08:52:46 AM
#96   Strong holding!!!!! Cubanwinner 05/17/14 05:46:30 PM
#95   Yes sir MARINO 05/15/14 04:56:44 AM
#94   Looking great!!! POWR need to gap up.! Cubanwinner 05/15/14 12:24:22 AM
#93   $8 is very possible this week MARINO 05/14/14 09:56:00 AM
#92   Oh yes-this co isnt one to do crazy SOUTHGAS 05/13/14 09:20:56 PM
#91   Today was amazing day!!! company putting they Cubanwinner 05/13/14 08:41:50 PM
#90   Closer to $8 by weeks end, IMO MARINO 05/13/14 08:34:09 PM
#89   I use to work for a company that SOUTHGAS 05/13/14 05:17:27 PM
#88   Nice news and reversal. Looking for $8-9 wassupasud 05/13/14 05:06:30 PM
#87   Try harder lol MARINO 05/13/14 12:52:22 PM
#86   Yea, great news, but the stock is going Adgonca 05/13/14 11:56:08 AM
#85   nice slap 62K @ ask. Boom!! Cubanwinner 05/13/14 11:37:57 AM
#84   Yes!!! 5M = 700K+ shares at this price......company Cubanwinner 05/13/14 10:27:38 AM
#83   Shorties go burned!!!hahaahaha BUY-HOLD!!!! Cubanwinner 05/13/14 10:15:52 AM
#82   Great Awesome NEWS MARINO 05/13/14 10:15:07 AM
#81   Oversold..... let her RUN MARINO 05/13/14 10:14:32 AM
#80   * Powersecure Authorizes $5M Buy Back like I Cubanwinner 05/13/14 10:12:36 AM
#79   Turning back up, if we close green today Cubanwinner 05/12/14 12:17:29 PM
#78   Buying and holding, putting lower my avg Cubanwinner 05/12/14 12:03:14 PM
#77   Yuuupp! I can wait for that big bounce liquidledges3 05/10/14 04:39:47 PM
#76   everything is possible.....waiting for the big bounce... Cubanwinner 05/09/14 09:44:16 PM
#75   I knew where u where coming from LoL MARINO 05/09/14 10:51:39 AM
#74   Just being realistic, in the 8k filed yesterday TheGent 05/09/14 10:50:46 AM
#73   Or is it you thats wishes it goes MARINO 05/09/14 10:42:21 AM
#72   Still at 30 times earnings here this could TheGent 05/09/14 10:21:57 AM
#71   Good buy. Theyre still loading for GapUp MARINO 05/09/14 10:20:03 AM
#70   Got some at $7.10, not going to sell wassupasud 05/09/14 10:14:29 AM
#69   Oversold $$$ MARINO 05/09/14 09:37:30 AM
#68   looking like a bounce :) focus2011 05/09/14 09:11:09 AM
#67   looking like a bounce :) focus2011 05/09/14 09:11:08 AM
#66   Couple of POWR Downgrades today PreMarket. Lake focus2011 05/09/14 08:20:16 AM
#65   Nice entry yourself also! Hope we all make liquidledges3 05/09/14 01:55:15 AM
#64   AH recovery slow....looking for great morning tomorrow... Cubanwinner 05/09/14 12:54:29 AM
#63   yes, thanks for join!!....the shorties will be burned.....strong Cubanwinner 05/09/14 12:52:58 AM
#62   Good buy! Should be easy flip MARINO 05/08/14 09:00:42 PM
#61   Got some at $7.02 before market closed. Looks liquidledges3 05/08/14 08:43:46 PM
#60   you will be rewarded MARINO 05/08/14 08:00:24 PM
#59   up in AH MARINO 05/08/14 07:59:33 PM
#58   TheStreet Ratings team rates POWERSECURE INTL INC as MARINO 05/08/14 07:58:50 PM
#57   Marino in at $7.01 MARINO 05/08/14 04:03:13 PM
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