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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.
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.
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| 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 | ||||
| | ||||||||
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| 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 | ||||
| | ||||||||
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| 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 | ||||||||
| | ||||||||||||||||
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| 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 | ||||
| | ||||||||
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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 | ||||||
| | ||||||||||||
| 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 | ||||||
| | ||||||||||||
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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
