POWR Powersecure International, Inc.

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 3, 2015

 

 

POWERSECURE INTERNATIONAL, INC.

(Exact name of Registrant as specified in its charter)

 

 

 

Delaware		1-12014		84-1169358
(State or other jurisdiction of incorporation)		(Commission File Number)		(I.R.S Employer Identification No.)
1609 Heritage Commerce Court, Wake Forest, North Carolina				27587
(Address of principal executive offices)				(Zip code)

Registrant’s telephone number, including area code: (919) 556-3056

Not Applicable

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions (see General Instruction A.2. below):

 

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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

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Item 1.01

Entry into a Material Definitive Agreement.

On November 3, 2015, PowerSecure International, Inc., a Delaware corporation (the “Company”), entered into a Sixth Amendment to Amended and Restated Credit Agreement (the “Amendment”) with Citibank, N.A. (“Citibank”) and Branch Banking and Trust Company in their capacity as lenders (the “Lenders”), and Citibank, in its capacity as the administrative agent (the “Agent”). The Amendment amends that certain Amended and Restated Credit Agreement, dated as of December 21, 2011 (as amended and restated, the “Credit Agreement”), among the Company, the Lenders and the Agent, to amend the credit facility (the “Credit Facility”) thereunder to:

 

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increase the size of the revolving line of credit to $40 million, from $20 million,

 

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extend the maturity date of the entire credit facility to June 30, 2020, from November 12, 2016 for the revolving line of credit and the $2.6 million term loan,

 

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add a provision permitting the Company to request an increase in the revolving loan by up to an additional $20 million that each Lender can choose whether or not it will agree to participate in, and

 

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reduce the Company’s financial covenant of its maximum debt to capitalization ratio at the end of each fiscal quarter commencing with the fiscal quarter ended September 30, 2015 to 0.25 to 1.00, from 0.30 to 1.00.

Except as amended by the Amendment, the remainder of the Credit Agreement, including all other terms, conditions and financial and other covenants, remains in full force and effect.

The Credit Agreement, as amended by the Amendment, provides for a senior, first-priority secured Credit Facility to the Company consisting of the following three components: (i) a $40 million revolving line of credit maturing on June 30, 2020, of which no balance was outstanding as of November 4, 2015, (ii) a $2.6 million term loan amortizing through June 30, 2020, and (iii) a $25 million, 7 year amortizing term loan maturing on June 30, 2020. The Credit Agreement, which includes customary representations, warranties, covenants and events of default, has been guaranteed by all active subsidiaries of the Company and is secured by the assets of the Company and those subsidiaries. Those subsidiaries acknowledged and agreed to the terms and conditions of the Amendment. The Company’s ability to borrow on the revolving line of credit is subject to its continued compliance with its financial covenants and other covenants under the Credit Agreement.

The foregoing description of the Credit Agreement and the Amendment, and the Credit Facility provided thereunder, is only a summary of, and does not purport to be a complete statement of, the Credit Agreement, the Amendment and the Credit Facility and the rights and obligations of the parties thereunder, and is qualified in its entirety by reference to the full text of the Credit Agreement and the Amendment, which are exhibits to this Report and incorporated herein by this reference.

 

Item 2.02

Results of Operations and Financial Condition.

On November 4, 2015, the Company issued a press release announcing its financial results for the fiscal quarter ended September 30, 2015 and announcing that it is holding a conference call regarding its financial results and its business operations, strategic initiatives and future prospects at 5:30 p.m., Eastern time, on November 4, 2015. The full text of the Company’s press release containing this announcement is attached to this Report as Exhibit 99.1 and incorporated herein by this reference.

 

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The press release attached to this Report as Exhibit 99.1 contains references by the Company to certain non-GAAP financial information. A reconciliation of these non-GAAP financial measures to the comparable GAAP financial measures is contained in the attached press release.

The press release attached to this Report as Exhibit 99.1 also contains forward-looking statements relating to the Company’s future performance, and such forward-looking statements are made within the meaning of and pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. A more thorough discussion of certain risks, uncertainties and other factors that may affect the Company’s operating results is set forth under the items “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the fiscal year ending December 31, 2014 and in the Company’s Quarterly Report on Form 10-Q for fiscal quarter ended September 30, 2015 that the Company expects to file on or about November 4, 2015, as well as other risks, uncertainties and other factors discussed in subsequent reports, including Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, that the Company files with or furnishes to the Securities and Exchange Commission.

The information in this Item 2.02, including Exhibit 99.1, is being furnished pursuant to Item 2.02 and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, and such information shall not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

 

Item 2.03

Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The information provided in Item 1.01 of this Report is hereby incorporated by reference into this Item 2.03.

 

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Item 9.01

Financial Statements and Exhibits.

 

(d)

Exhibits

 

10.1

Amended and Restated Credit Agreement, dated as of December 21, 2011, as amended through June 19, 2013, among Registrant, as borrower, Citibank, N.A., as administrative agent and lender, and Branch Banking and Trust Company, as lender. (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed June 20, 2013).

 

10.2

Third Amendment to Amended and Restated Credit Agreement, dated as of July 2, 2014, among PowerSecure International, Inc., as borrower, Citibank, N.A., as administrative agent and lender, and Branch Banking and Trust Company, as lender. (Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed November 5, 2014).

 

10.3

Fourth Amendment to Amended and Restated Credit Agreement, dated as of October 10, 2014, among PowerSecure International, Inc., as borrower, Citibank, N.A., as administrative agent and lender, and Branch Banking and Trust Company, as lender. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed October 14, 2014).

 

10.4

Fifth Amendment to Amended and Restated Credit Agreement, dated as of October 1, 2015, among PowerSecure International, Inc., as borrower, Citibank, N.A., as administrative agent and lender, and Branch Banking and Trust Company, as lender. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed October 7, 2015).

 

10.5

Sixth Amendment to Amended and Restated Credit Agreement, dated as of November 3, 2015, among PowerSecure International, Inc., as borrower, Citibank, N.A., as administrative agent and lender, and Branch Banking and Trust Company, as lender. (Filed herewith).

 

99.1

Press Release of PowerSecure International, Inc., issued November 4, 2015, announcing its financial results for the fiscal quarter ended September 30, 2015. (Filed herewith).

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Dated: November 4, 2015

 

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Exhibit 10.5

SIXTH AMENDMENT TO

AMENDED AND RESTATED CREDIT AGREEMENT

THIS SIXTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this “Sixth Amendment”), dated as of November 3, 2015, among POWERSECURE INTERNATIONAL, INC., a Delaware corporation (the “Borrower”), the lenders as identified as Lenders on the signature pages hereof (collectively, the “Lenders”) and CITIBANK, N.A., in its capacity as Administrative Agent (the “Administrative Agent”).

BACKGROUND

A. The Borrower, the Lenders, and the Administrative Agent are parties to that certain Amended and Restated Credit Agreement, dated as of December 21, 2011 (said Credit Agreement, as amended and restated, the “Credit Agreement”; the terms defined in the Credit Agreement and not otherwise defined herein shall be used herein as defined in the Credit Agreement).

B. The Borrower, the Lenders and the Administrative Agent desire to make certain amendments to the Credit Agreement and waive an Event of Default.

NOW, THEREFORE, in consideration of the covenants, conditions and agreements hereafter set forth, and for other good and valuable consideration, the receipt and adequacy of which are all hereby acknowledged, the parties hereto covenant and agree as follows:

1. AMENDMENTS.

(a) Section 1.01 of the Credit Agreement is hereby amended by adding the following defined terms thereto in proper alphabetical order:

“New Revolving Lender” has the meaning specified in Section 2.17.

“Sixth Amendment” means that certain Sixth Amendment to Amended and Restated Credit Agreement, dated as of November 3, 2015, among the Borrower, the Lenders and the Administrative Agent.

“Sixth Amendment Closing Date” means the date that all conditions to effectiveness of the Sixth Amendment are satisfied.

(b) The definition of “Aggregate Revolving Commitments” set forth in Section 1.01 of the Credit Agreement is hereby amended to read as follows:

“Aggregate Revolving Commitments” means the Revolving Commitments of all Lenders, which, as of the Sixth Amendment Closing Date, are $40,000,000.

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(c) The definition of “Revolving Commitment Increase Effective Date” set forth in Section 1.01 of the Credit Agreement is hereby amended to read as follows:

“Revolving Commitment Increase Effective Date” has the meaning specified in Section 2.17.

(d) The definition of “Revolving Maturity Date” set forth in Section 1.01 of the Credit Agreement is hereby amended to read as follows:

“Revolving Maturity Date” means (a) June 30, 2020 or (b) such earlier date as the (i) the Obligations become due and payable pursuant to this Agreement (whether by acceleration, prepayment in full, scheduled reduction or otherwise) or (ii) there shall exist an Event of Default under Section 8.01(f) of this Agreement.

(e) The definition of “Term B Maturity Date” set forth in Section 1.01 of the Credit Agreement is hereby amended to read as follows:

“Term B Maturity Date” means (a) June 30, 2020 or (b) such earlier date as (i) the Obligations become due and payable pursuant to this Agreement (whether by acceleration, prepayment in full, scheduled reduction or otherwise) or (ii) there shall exist an Event of Default under Section 8.01(f).

(f) Section 2.08(c) of the Credit Agreement is hereby amended to read as follows:

(c) To the extent not otherwise required to be paid earlier as provided herein, the Borrower shall repay the aggregate principal amount of the Term B Loans outstanding on the following dates in amounts determined by multiplying the percentage set forth opposite such dates times the initial principal amount of the Term B Loans (which amounts may be reduced as a result of the application of prepayments of the Term B Loans in accordance with the order of priority set forth in Section 2.06):

 

Date		% of Initial Aggregate Principal Amount
March 31, 2012			1.667	%
June 30, 2012			1.667	%
September 30, 2012			1.667	%
December 31, 2012			1.667	%
March 31, 2013			1.667	%
June 30, 2013			1.667	%
September 30, 2013			1.667	%
December 31, 2013			1.667	%
March 31, 2014			1.667	%
June 30, 2014			1.667	%
September 30, 2014			1.667	%
December 31, 2014			1.667	%

 

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Date		% of Initial Aggregate Principal Amount
March 31, 2015			1.667	%
June 30, 2015			1.667	%
September 30, 2015			1.667	%
December 31, 2015			1.667	%
March 31, 2016			1.667	%
June 30, 2016			1.667	%
September 30, 2016			1.667	%
December 31, 2016			1.667	%
March 31, 2017			1.667	%
June 30, 2017			1.667	%
September 30, 2017			1.667	%
December 31, 2017			1.667	%
March 31, 2018			1.667	%
June 30, 2018			1.667	%
September 30, 2018			1.667	%
December 31, 2018			1.667	%
March 31, 2019			1.667	%
June 30, 2019			1.667	%
September 30, 2019			1.667	%
December 31, 2019			1.667	%
March 31, 2020			1.667	%
June 30, 2020			The aggregate principal amount of all Term B Loans outstanding on such date

(g) Article II of the Credit Agreement is hereby amended by adding the following new Section 2.17 thereto to read as follows:

Section 2.17 Increase in Aggregate Revolving Commitments.

(a) Request for Increase. Provided there exists no Default, upon notice to the Administrative Agent (which shall promptly notify the Lenders), the Borrower may from time to time, request an increase in the Aggregate Revolving Commitments by an amount not exceeding $20,000,000; provided that any such request shall be in a minimum amount of $5,000,000 and in whole multiples of $2,000,000 in excess thereof (or, if less,

 

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the entire remaining amount of the increase provided for in this Section 2.17). At the time of sending such notice, the Borrower (in consultation with the Administrative Agent) shall specify the time period within which each Revolving Lender is requested to respond (which shall in no event be less than ten (10) Business Days from the date of delivery of such notice to the Revolving Lenders).

(b) Lender Elections to Increase. Each Revolving Lender shall notify the Administrative Agent within such time period whether or not it agrees to increase its Revolving Commitment and, if so, whether by an amount equal to, greater than, or less than its Revolving Pro Rata Share of such requested increase. Any Revolving Lender not responding within such time period shall be deemed to have declined to increase its Revolving Commitment.

(c) Notification by Administrative Agent; Additional Revolving Lenders. The Administrative Agent shall notify the Borrower and each Revolving Lender of the Revolving Lenders’ responses to each request made hereunder. To achieve the full amount of a requested increase, and subject to the approval of the Administrative Agent, the L/C Issuer and the Swing Line Lender (such approval not to be unreasonably withheld), the Borrower may also invite additional Eligible Assignees to become Revolving Lenders pursuant to a joinder agreement (“New Revolving Lenders”) in form and substance reasonably satisfactory to the Administrative Agent and its counsel.

(d) Effective Date and Allocations. If the Aggregate Revolving Commitments are increased in accordance with this Section 2.17, the Administrative Agent and the Borrower shall determine the effective date (the “Revolving Commitment Increase Effective Date”) and the final allocation of such increase. The Administrative Agent shall promptly notify the Borrower and the Revolving Lenders and any New Revolving Lenders of the final allocation of such increase and the Revolving Commitment Increase Effective Date.

(e) Conditions to Effectiveness of Increase. As a condition precedent to such increase, the Borrower shall deliver to the Administrative Agent a certificate of the Borrower dated as of the Revolving Commitment Increase Effective Date (in sufficient copies for each Lender) signed by a Responsible Officer of the Borrower (i) certifying and attaching the resolutions adopted by the Borrower approving or consenting to such increase, and (ii) certifying that, before and after giving effect to such increase, (A) the representations and warranties contained in Article V and the other Loan Documents (i) that contain a materiality qualification, are true and correct, on and as of the Revolving Commitment Increase Effective Date and (ii) that do not contain a materiality qualification, are true and correct in all material respects, on and as of the Revolving Commitment Increase Effective Date, and except that for purposes of this Section, the representations and warranties contained in subsections (a) and (b) of Section 5.05 shall be deemed to refer to the most recent statements furnished pursuant to clauses (a) and (b), respectively, of Section 6.01, and (B) both before and after giving effect to the increase in the Aggregate Revolving Commitments, no Default exists. The Borrower shall prepay any Revolving Loans outstanding on the Revolving Commitment Increase Effective Date (and pay any additional amounts required pursuant to Section 3.05) to the extent

 

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necessary to keep the outstanding Revolving Loans ratable with any revised Revolving Pro Rata Shares arising from any non-ratable increase in the Aggregate Revolving Commitments under this Section 2.17.

(f) Conflicting Provisions. This Section 2.17 shall supersede any provisions in Section 2.13 or 10.01 to the contrary.

(h) Section 7.12(b) of the Credit Agreement is hereby amended to read as follows:

(b) Debt to Capitalization Ratio. Permit the Debt to Capitalization Ratio at the end of any Fiscal Quarter commencing on and after September 30, 2015 to exceed 0.25 to 1.00 at any time.

(i) Schedule 1.01 of the Credit Agreement is hereby amended to be in the form of Schedule 1.01 attached to this Sixth Amendment.

(j) Schedule 2.01 of the Credit Agreement is hereby amended to be in the form of Schedule 2.01 attached to this Sixth Amendment.

(k) Schedule 5.13 of the Credit Agreement is hereby amended to be in the form of Schedule 5.13 attached to this Sixth Amendment.

(l) Exhibit G, the Compliance Certificate, is hereby amended to be in the form of Exhibit G attached to this Sixth Amendment.

2. WAIVER. Subject to satisfaction of the conditions to effectiveness to this Sixth Amendment set forth in Section 4 hereof, the Lenders hereby waive the Event of Default that occurred under Section 8.01(c) of the Credit Agreement as a result of the failure of the Borrower to cause 65% of the Equity Interests of PowerSecure Canada Energy Services, Inc., a British Columbia company (“PowerSecure Canada”), to be pledged to secure the Secured Obligations within the time required by Section 6.14 of the Credit Agreement.

3. REPRESENTATIONS AND WARRANTIES. By its execution and delivery hereof, the Borrower represents and warrants that, as of the date hereof, and after giving effect to the waiver provided in Section 2 hereof:

(a) the representations and warranties contained in the Credit Agreement and the other Loan Documents are true and correct on and as of the date hereof as made on and as of such date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct as of such earlier date, and except that the representations contained in subsections (a) and (b) of Section 5.05 of the Credit Agreement shall be deemed to refer to the most recent statements furnish pursuant to subsections (a) and (b), respectively, of Section 6.01 of the Credit Agreement;

(b) no event has occurred and is continuing which constitutes a Default or an Event of Default;

 

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(c) (i) the Borrower has full power and authority to execute and deliver this Sixth Amendment and the Revolving Loan Notes in the principal amount of each Revolving Lender’s Revolving Commitment, as increased by this Sixth Amendment (the “New Revolving Loan Notes”), (ii) this Sixth Amendment and the New Revolving Loan Notes have been duly executed and delivered by the Borrower, and (iii) this Sixth Amendment, the New Revolving Loan Notes and the Credit Agreement, as amended hereby, constitute the legal, valid and binding obligations of the Borrower, enforceable in accordance with their respective terms, except as enforceability may be limited by applicable Debtor Relief Laws and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law) and except as rights to indemnity may be limited by federal or state securities laws;

(d) neither the execution, delivery and performance of this Sixth Amendment, the New Revolving Loan Notes or the Credit Agreement, as amended hereby, nor the consummation of any transactions contemplated herein or therein, will violate any Law or conflict with any Organization Documents of the Borrower, or any indenture, agreement or other instrument to which the Borrower or any of its property is subject; and

(e) no authorization, approval, consent, or other action by, notice to, or filing with, any Governmental Authority or other Person not previously obtained is required for (i) the execution, delivery or performance by the Borrower, of this Sixth Amendment or the New Revolving Loan Notes or (ii) the acknowledgement and reaffirmation by each Guarantor of this Sixth Amendment.

4. CONDITIONS TO EFFECTIVENESS. All provisions of this Sixth Amendment shall be effective upon satisfaction or completion of the following:

(a) the Administrative Agent shall have received counterparts of this Sixth Amendment executed by the Lenders;

(b) the Administrative Agent shall have received counterparts of this Sixth Amendment executed by the Borrower and acknowledged by each Guarantor;

(c) the Administrative Agent shall have received the New Revolving Loan Notes for each Lender executed by the Borrower;

(d) the Administrative Agent shall have received certified resolutions of the Borrower authorizing the execution, delivery and performance by the Borrower of this Sixth Amendment and the New Revolving Loan Notes;

(e) the Administrative Agent shall have received an original stock certificate evidencing 65% of the Equity Interests of PowerSecure Canada issued in the name of PowerSecure, Inc., together with an undated stock power with respect to such Equity Interests executed by PowerSecure, Inc.;

(f) the Administrative Agent shall have received in immediately available funds for the account of each Lender an amount equal to the product of (i) 0.25% and (ii) the Outstanding Amount of the Term B Loans owed to each such Lender as of the date of this Sixth Amendment;

 

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(g) the Administrative Agent shall have received in immediately available funds for its own account such fee as agreed to be paid by the Borrower in a separate letter agreement between Borrower and Administrative Agent in connection with this Sixth Amendment; and

(h) the Administrative Agent shall have received, in form and substance satisfactory to the Administrative Agent and its counsel, such other documents, certificates and instruments as the Administrative Agent shall require.

5. REFERENCE TO THE CREDIT AGREEMENT.

(a) Upon the effectiveness of this Sixth Amendment, each reference in the Credit Agreement to “this Agreement”, “hereunder”, or words of like import shall mean and be a reference to the Credit Agreement, as affected and amended hereby.

(b) The Credit Agreement, as amended by the amendments referred to above, shall remain in full force and effect and is hereby ratified and confirmed.

6. COSTS, EXPENSES AND TAXES. The Borrower agrees to pay on demand all costs and expenses of the Administrative Agent in connection with the preparation, reproduction, execution and delivery of this Sixth Amendment and the other instruments and documents to be delivered hereunder (including the reasonable fees and out-of-pocket expenses of counsel for the Administrative Agent with respect thereto).

7. GUARANTOR’S ACKNOWLEDGMENT. By signing below, each Guarantor (a) acknowledges, consents and agrees to the execution, delivery and performance by the Borrower of this Sixth Amendment, (b) acknowledges and agrees that its obligations in respect of its Guaranty (i) are not released, diminished, waived, modified, impaired or affected in any manner by this Sixth Amendment or any of the provisions contemplated herein and (ii) cover the Guarantied Obligations (as defined in its Guaranty) as increased by this Sixth Amendment, (c) ratifies and confirms its obligations under its Guaranty, and (d) acknowledges and agrees that it has no claims or offsets against, or defenses or counterclaims to, its Guaranty.

8. REAFFIRMATION. By signing below, each Loan Party, (a) affirms that each of the Liens granted in or pursuant to the Collateral Documents to which it is a party are valid and subsisting and (b) agrees that (i) this Sixth Amendment shall in no manner impair or otherwise adversely affect any of the Liens granted in or pursuant to the Collateral Documents and (ii) the Collateral Documents secure the Secured Obligations as increased by this Sixth Amendment.

9. EXECUTION IN COUNTERPARTS. This Sixth Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which when taken together shall constitute but one and the same instrument. For purposes of this Sixth Amendment, a counterpart hereof (or signature page thereto) signed and transmitted by any Person party hereto to the Administrative Agent (or its counsel) by facsimile machine, telecopier or electronic mail is to be treated as an original. The signature of such Person thereon, for purposes hereof, is to be considered as an original signature, and the counterpart (or signature page thereto) so transmitted is to be considered to have the same binding effect as an original signature on an original document.

 

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10. GOVERNING LAW; BINDING EFFECT. This Sixth Amendment shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed entirely within such state, provided that each party shall retain all rights arising under federal law, and shall be binding upon the parties hereto and their respective successors and assigns; provided, however, that the Borrower may not assign any of its rights arising from this Sixth Amendment or any other Loan Document, and any prohibited assignment shall be null and void.

11. HEADINGS. Section headings in this Sixth Amendment are included herein for convenience of reference only and shall not constitute a part of this Sixth Amendment for any other purpose.

12. ENTIRE AGREEMENT. THE CREDIT AGREEMENT, AS AMENDED BY THIS SIXTH AMENDMENT, AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

REMAINDER OF PAGE LEFT INTENTIONALLY BLANK

 

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IN WITNESS WHEREOF, the parties hereto have executed this Sixth Amendment as of the date first above written.

 

Signature Page – Sixth Amendment

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Signature Page – Sixth Amendment

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Signature Page – Sixth Amendment

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ACKNOWLEDGED AND AGREED:

POWERSECURE, INC.

POWERSERVICES, INC.

ENERGYLITE, INC.

UTILITYENGINEERING, INC.

UTILITYDESIGN, INC.

REID’S TRAILER, INC.

INNOVATION ENERGIES, LLC

POWERSECURE SOLAR, LLC

SOLAIS LIGHTING, INC.

POWERSECURE LIGHTING, LLC

 

By:		/s/ Eric Dupont
		Eric Dupont
		Chief Financial Officer for all

Signature Page – Sixth Amendment

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SCHEDULE 1.01

INACTIVE SUBSIDIARIES

PowerPackages, LLC (Delaware limited liability company)

PowerSecure Haiti USA, Inc. (Delaware corporation)

WaterSecure Holdings, Inc. (Colorado corporation)

Schedule 1.01 – Sixth Amendment

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SCHEDULE 2.01

REVOLVING COMMITMENTS

AND REVOLVING PRO RATA SHARES

 

Lender		Revolving Commitment				Revolving Pro Rata Share
Citibank, N.A.		$	28,000,000				70.00	%
Branch Banking and Trust Company		$	12,000,000				30.00	%
Total		$	40,000,000				100.00	%

Schedule 2.01 – Sixth Amendment

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SCHEDULE 5.13

SUBSIDIARIES AND OTHER EQUITY INVESTMENTS

 

Part (a): Subsidiaries
PowerSecure, Inc.				-		100% owned
		UtilityEngineering, Inc.		-		100% owned
		PowerServices, Inc.		-		100% owned
		EnergyLite, Inc.		-		100% owned
		Reid’s Trailer, Inc.		-		100% owned
		UtilityDesign, Inc.		-		100% owned
		Innovation Energies, LLC		-		100% owned
		PowerSecure Solar, LLC		-		100% owned
		Solais Lighting, Inc.		-		100% owned
		PowerSecure Lighting, LLC		-		100% owned

Note: Does not include Inactive Subsidiaries listed on Schedule 1.01

Part (b): Other Equity Investments

None.

Schedule 5.13 – Sixth Amendment

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EXHIBIT G

FORM OF COMPLIANCE CERTIFICATE

Financial Statement Date:                    

To: Citibank, N.A., as Administrative Agent under the Agreement defined below

Ladies and Gentlemen:

Reference is made to that certain Amended and Restated Credit Agreement, dated as of December 21, 2011 (as amended, extended, supplemented or otherwise modified in writing from time to time, the “Agreement;” the terms defined therein being used herein as therein defined), among PowerSecure International, Inc. (the “Borrower”), the Lenders from time to time party thereto, and Citibank, N.A., as Administrative Agent.

The undersigned Responsible Officer hereby certifies as of the date hereof that                                  he/she is the of the Borrower, that, as such, he/she is authorized to execute and deliver this Certificate to the Administrative Agent on the behalf of the Borrower, and that:

[Use following for Fiscal Year-end financial statements]

1. Attached hereto as Schedule 1 are the Fiscal Year end audited financial statements required by Section 6.01(a) of the Agreement for the Fiscal Year of the Borrower ended as of the date set forth above as the Financial Statement Date, together with the report and opinion of an independent certified public accountant required by such section. Such financial statements fairly present in all material respects when considered in relation to the consolidated financial statements of the Borrower and its Subsidiaries.

[Use following for Fiscal Quarter-end financial statements]

1. Attached hereto as Schedule 1 are the unaudited financial statements required by Section 6.01(b) of the Agreement for the Fiscal Quarter of the Borrower ended as of the date set forth above as the Financial Statement Date. Such financial statements fairly present in all material respects when considered in relation to the consolidated financial statements of the Borrower and its Subsidiaries.

2. The undersigned has reviewed and is familiar with the terms of the Agreement and has made, or has caused to be made under his/her supervision, a detailed review of the transactions and condition (financial or otherwise) of the Borrower during the accounting period covered by the attached financial statements.

3. A review of the activities of the Borrower during such fiscal period has been made under the supervision of the undersigned with a view to determining whether during such fiscal period the Borrower performed and observed all its Obligations under the Loan Documents [add, if applicable: except as hereinafter listed], and to the best knowledge of the undersigned as of the date hereof no Default or Event of Default under the Agreement has occurred and is continuing as of the date hereof [add, if applicable: except the following list of each Default or Event of Default under the Agreement, and its nature and status, that has occurred and is continuing as of the date of this Certificate.]

 

Exhibit G - Page 1

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4. The financial covenant analyses and information set forth on Schedule 2 attached hereto are true and accurate on and as of the date set forth above as the Financial Statement Date.

 

Exhibit G - Page 2

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IN WITNESS WHEREOF, the undersigned has executed this Certificate as of                     .

 

 

Exhibit G – Page 3

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For the Fiscal Quarter/Year ended                     (“Financial Statement Date”)

SCHEDULE 2

to the Compliance Certificate

($ in 000’s)

 

I.		Section 7.12(a) – Fixed Charge Coverage Ratio [To be calculated for each Fiscal Quarter in which there is no Excess Cash]1.
		A.		Consolidated EBITDA:
				1.		Consolidated Net Income for Subject Period:		$
				2.		To the extent involved in calculating such Consolidated Net Income and without duplication, Consolidated Interest Charges:		$
				3.		To the extent included in calculating such Consolidated Net Income and without duplication, amount of taxes, based on or measured by income, deducted in determining such Consolidated Net Income for Subject Period:		$
				4.		To the extent included in calculating such Consolidated Net Income and without duplication, depreciation and amortization expense deducted in determining such Consolidated Net Income for Subject Period:		$
				5.		To the extent included in calculating such Consolidated Net Income and without duplication, all non-cash charges or losses which do not represent a cash charge or loss for Subject Period or in a future period:		$
				6.		To the extent included in calculating such Consolidated Net Income, Federal, state, local and foreign income tax credits of the Borrower and its Subsidiaries for Subject Period:		$
				7.		To the extent included in calculating such Consolidated Net Income, Consolidated Interest Income for Subject Period:		$
				8.		To the extent included in calculating such Consolidated Net Income, all non-cash items increasing Consolidated Net Income for Subject Period:		$

 

1

(i) For the Fiscal Quarter ending September 30, 2014, the components of the Fixed Charge Coverage Ratio shall be calculated only for such Fiscal Quarter ending on such date, (ii) for the Fiscal Quarter ending December 31, 2014, the components of the Fixed Charge Coverage Ratio shall be calculated for the period of two consecutive Fiscal Quarters ending on such date and (iii) for the Fiscal Quarter ending March 31, 2015, the components of the Fixed Charge Coverage Ratio shall be calculated for the period of three consecutive Fiscal Quarters ending on such date.

 

4

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				9.		Consolidated EBITDA (Lines I.A.1. + 2. + 3. + 4. + 5. - 6. - 7. - 8.):		$
		B.		Consolidated Lease Expense for Subject Period:				$
		C.		Taxes based on income and paid in cash (net of tax refunds) for Subject Period but excluding cash taxes paid in respect of the Southern Flow Disposition and the WaterSecure Disposition:				$
		D.		Consolidated Interest Charges (excluding, to the extent included in Consolidated Lease Expense, the interest component of Capital Leases) for Subject Period:				$
		E.		Scheduled payments of principal of Consolidated Funded Indebtedness (excluding, to the extent included in Consolidated Lease Expense, the principal component of Capital Leases) for Subject Period:				$
		F.		Consolidated Lease Expense for Subject Period:				$
		G.		Restricted Payments (excluding repurchases of common Equity Interests pursuant to Stock Repurchase Program) for Subject Period:				$
		H.		During Revolving Availability Period, an amount equal to the product of (x) 0.20 and (y) the amount by which Total Revolving Outstandings exceeds $15,000,000 on the Financial Statement Date:				$
		I.		Fixed Charge Coverage Ratio ((Line I.A.9. + I.B. – I.C.) ÷ (Lines I.D. + I.E. + I.F. + I.G. + I.H., if applicable)):				to 1.00
		Minimum permitted – See Section 7.12(a) of the Agreement						1.25 to 1.00
II.		Leverage Ratio [For purposes of determining Applicable Rate].
		A.		Consolidated Funded Indebtedness at Financial Statement Date:
				1.		all obligations for borrowed money and all obligations evidenced by bonds, debentures, notes, loan agreements or other similar instruments:		$
				2.		Non-contingent obligations outstanding in respect of letters of credit (including standby and commercial), bankers’ acceptances, bank guaranties, surety bonds or other similar instruments:		$

 

5

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				3.		all obligations to pay the deferred purchase price of property or services (other than trade accounts payable in the ordinary course of business):		$
				4.		indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed or is limited in recourse:		$
				5.		Attributable Indebtedness in respect of Capital Leases and Synthetic Lease Obligations:		$
				6.		Guarantees of Indebtedness of types specified in Lines II.A.1., II.A.2., II.A.3., II.A.4. and II.A.5. above:		$
				7.		Consolidated Funded Indebtedness		$
						(Lines II.A.1. + 2. + 3. + 4. + 5. + 6.):
		B.		Amount, if any, by which unrestricted cash and Cash Equivalents at Financial Statement Date exceeds $5,000,000:				$
		C.		Line II.A.7. – Line II.B.				$
		D.		Consolidated EBITDA for Subject Period:
				1.		Consolidated EBITDA for Subject Period (See Line I.A.9.):		$
		E.		Leverage Ratio (Line II.C. ÷ Line II.D.1.):				to 1.00
III.		Section 7.12(b) – Debt to Capitalization Ratio.
		A.		Consolidated Funded Indebtedness at Financial Statement Date (Line II.A.7.):				$
		B.		Total Capitalization:
				1.		Consolidated Funded Indebtedness at Financial Statement Date (Line II.A.7.):		$
				2.		Shareholders’ Equity at Financial Statement Date:		$
				3.		Total Capitalization (Lines III.B.1. + III.B.2.):		$

 

6

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		C.		Debt to Capitalization Ratio (Line III.A. ÷ Line III.B.3.):				to 1.00
		Maximum permitted – See Section 7.12(b) of the Agreement						0.25 to 1.00
IV.		Section 7.12(c) – Consolidated Net Worth.
		A.		Consolidated Net Worth:				$
		B.		Minimum Consolidated Net Worth:
				1.		$142,066,409:		$
				2.		50% of Consolidated Net Income for each Fiscal Year beginning with each Fiscal Year commencing with Fiscal Year ending December 31, 2014 (with no reduction for any net loss in any such Fiscal Year):		$
				3.		90% of the aggregate increases in Shareholders’ Equity after Fourth Amendment Effective Date by reason of issuance and sale of Equity Interests of the Borrower or any Subsidiary (other than issuances to the Borrower or a wholly-owned Subsidiary):		$
				4.		Non-cash charges or losses after Fourth Amendment Effective Date which do not subsequently represent a cash charge or loss:		$
				5.		Minimum Consolidated Net Worth (Lines IV.B.1. + 2. + 3. - 4.:		$
For purposes hereof, “Subject Period” is the period of four consecutive Fiscal Quarters ending on the Financial Statement Date.

 

7

Exhibit 99.1

 

POWERSECURE REPORTS THIRD QUARTER 2015 RESULTS

Wake Forest, N.C. – November 4, 2015 – PowerSecure International, Inc. (NYSE: POWR) today reported its third quarter 2015 results.

 

•

DG revenues increase more than 90 percent y-o-y with more than 50 percent of 3Q 2015 DG revenues coming from data center customers

 

•

Double digit revenue growth across all segments drives 64.5 percent total y-o-y revenue growth to $107 million

 

•

New business wins drive non-solar backlog to all-time high of $274 million; total backlog of $447 million

 

•

Operating margin percentage doubles sequentially and increases 420 basis points y-o-y

 

•

Earnings per share of $0.09

“Our operational focus across the business drove an expanded corporate operating margin and significant revenue growth in all segments in the third quarter. We continue to see strong contributions from new data center opportunities, which drove revenue growth of more than 90 percent in our DG business,” said Sidney Hinton, chief executive officer of PowerSecure.

“We also grew our non-solar backlog by approximately 25 percent year-over-year and are excited about the additional opportunities we are chasing for the remainder of 2015 and for 2016,” Hinton added.

Third Quarter 2015:

Revenues

PowerSecure’s third quarter 2015 (3Q 2015) revenues of $107.0 million, an increase of $41.9 million, or 64.5 percent, over the third quarter of 2014 (3Q 2014), were driven by revenue increases in all segments, including a 91.3 percent year-over-year (y-o-y) increase in revenues from distributed generation (DG) products and services, a 13.2 percent y-o-y increase in revenues from energy efficiency (EE) products and services, a 54.5 percent y-o-y increase in revenues from utility infrastructure (UI) products and services, and a 150.6 percent y-o-y increase in revenues from solar energy products and services, as shown below.

 

		Quarter Ended September 30,								Period-over-Period Difference
($000’s)		2015				2014				$				%
Segment Revenues:
Distributed Generation		$	37,616			$	19,664			$	17,952				91.3	%
Solar Energy			15,744				6,282				9,462				150.6	%
Utility Infrastructure			34,693				22,460				12,233				54.5	%
Energy Efficiency			19,031				16,806				2,225				13.2	%
Intersegment Eliminations			(102	)			(168	)			66				(39.3	)%
Total		$	106,982			$	65,044			$	41,938				64.5	%

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Gross Profit Margin

Gross profit margin was 25.1 percent in 3Q 2015, compared to 27.8 percent in 3Q 2014. The decrease in y-o-y gross profit margin was due to overall project mix, including a greater portion of revenue from the solar energy business in 3Q 2015 as compared to 3Q 2014.

 

		Quarter Ended September 30,								Period-over-Period Difference
($000’s)		2015				2014				$				%
Segment Gross Profit:
Distributed Generation		$	13,305			$	7,638			$	5,667				74.2	%
Solar Energy			1,004				702				302				43.0	%
Utility Infrastructure			5,668				3,315				2,353				71.0	%
Energy Efficiency			6,928				6,416				512				8.0	%
Total		$	26,905			$	18,071			$	8,834				48.9	%
		Quarter Ended September 30,
($000’s)		2015				2014
Segment Gross Profit Margins:
Distributed Generation			35.4	%			38.8	%
Solar Energy			6.4	%			11.2	%
Utility Infrastructure			16.3	%			14.8	%
Energy Efficiency			36.4	%			38.2	%
Total			25.1	%			27.8	%

Operating Expenses

Our operating expenses as a percentage of revenue decreased by 6.9 percentage points in 3Q 2015 compared to 3Q 2014. This decrease is due primarily to improved operating efficiency and operating expense leverage on the significant increase in revenues.

Operating expenses for 3Q 2015 were $23.2 million, compared to $18.6 million in 3Q 2014, as shown in the table below. The increase in 3Q 2015 operating expenses was primarily due to incremental operating cost related to the late 2014 acquisitions of our mission critical data center and retail energy services capabilities, increased personnel and stock compensation expenses, higher professional fees, an increase in selling expenses due to investments in the data center sales team, increased depreciation and amortization from our investments in equipment and company-owned distributed generation systems, and acquisition-related intangibles.

 

		Quarter Ended September 30,								Period-over-Period Difference
($000’s)		2015				2014				$				%
Consolidated Operating Expenses:
General and administrative		$	17,995			$	14,280			$	3,715				26.0	%
Selling, marketing and service			2,515				2,136				379				17.7	%
Depreciation and amortization			2,707				2,181				526				24.1	%
Total		$	23,217			$	18,597			$	4,620				24.8	%

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Operating Margin

Operating margin as a percentage of revenue was 3.4 percentage points in 3Q 2015. This compares to negative 0.8 percentage points in 3Q 2014. The 4.2 percentage point increase in our operating margin was driven by a decrease in operating expenses as a percentage of revenue.

 

		Quarter Ended September 30,								Period-over-Period Difference
($000’s)		2015				2014				$				%
Segment operating income (loss):
Distributed Generation		$	6,115			$	2,705			$	3,410				126.1	%
Solar Energy			(92	)			36				(128	)			(355.6	)%
Utility Infrastructure			984				(845	)			1,829				216.4	%
Energy Efficiency			2,850				2,737				113				4.1	%
Corporate and other unallocated costs			(6,169	)			(5,159	)			(1,010	)			(19.6	)%
Total		$	3,688			$	(526	)		$	4,214				801.1	%

Earnings Per Share

Diluted earnings per share (EPS) were $0.09 in 3Q 2015, compared to a loss of ($0.02) in 3Q 2014.

Capital Resources and Working Capital

The company ended 3Q 2015 with $26.2 million in cash and cash equivalents, and term debt, and capital leases of $19.0 million. The company’s capital expenditures during 3Q 2015 were $2.4 million in total, with $0.9 million of this capital invested to deploy systems to support PowerSecure-owned long-term recurring revenue DG projects, and the remaining $1.5 million to purchase equipment and other items for its business and continued investment in capital improvements at the company’s PowerFab facility.

The company also announced today that it has taken advantage of the favorable financing environment to secure an additional $20 million of capacity for its revolving debt facility to support significant potential growth in its distributed generation and other business segments, and to support potential future general corporate needs.

The company now has a total capacity of $40 million in this revolving debt facility. There is currently nothing drawn against this revolver.

In addition, the company has extended the maturity date of its entire credit facility, which includes the revolver, from November 12, 2016 to June 30, 2020. The facility is backed by Citibank and BB&T.

As is customary with facilities of this type, the company must continue to meet certain financial covenants in order to be in compliance with the terms of the underlying credit agreement and to fully utilize the facility. As of November 4, 2015, approximately $36 million was available to borrow under the revolving line of credit within the limits of our financial covenants. The terms and a copy of the amendments to the company’s credit facility are contained in a current report on Form 8-K filed with the Securities and Exchange Commission.

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Backlog

The company’s revenue backlog stands at $447 million, as of October 21, 2015. This revenue backlog represents revenue expected to be recognized after September 30, 2015, for periods including the fourth quarter of 2015 onward.

The company’s revenue backlog includes a total of $90 million in new business from awards announced on September 10, 2015 and October 21, 2015, and reflects a $25 million downward adjustment to the expected revenue from a solar project based on our current estimate of a possible reduction in project size and scope by the customer.

The company’s $447 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 underlying contracts. Also outlined below, the company’s $447 million revenue backlog is broken down between non-solar revenue backlog and solar revenue backlog.

Revenue Backlog expected to be recognized after September 30, 2015

 

Description		Anticipated Revenue				Estimated Primary Recognition Period
Project-based Revenue — Near term		$	275 million				4Q15 through 2Q16
Project-based Revenue — Long term		$	88 million				3Q16 through 2Q17
Recurring Revenue		$	84 million				4Q15 through 2020
Revenue Backlog expected to be recognized after September 30, 2015		$	447 million
Description		Anticipated Non-Solar Revenue				Anticipated Solar Revenue
Revenue Backlog to be recognized after September 30, 2015 by category		$	274 million			$	173 million
Revenue Backlog as reported November 5, 2014 by category		$	220 million			$	140 million
Change in Revenue Backlog by category		$	54 million			$	33 million
% Change in Revenue Backlog by category			24.5	%			23.6	%

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 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, and estimates are utilized in the determination of the backlog amounts. 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.

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PowerSecure Segment Results:

Commencing with the first quarter of 2015, the company began reporting the financial results of its solar energy business as a separate segment, as a result of which the company has four operating segments. For current period reporting and prior period comparisons, the distributed generation segment does not include any financial results from the solar energy business.

Distributed Generation (non-solar)

Distributed generation revenues in 3Q 2015 of $37.6 million reflect a 91.3 percent increase compared to DG revenues in 3Q 2014. Total DG gross margin in 3Q 2015, was 35.4 percent, compared to 38.8 percent in 3Q 2014.

The y-o-y increase in DG revenues was driven primarily by increased revenues from our traditional customer categories and new data center revenues. The decrease in DG gross margin was due to the DG project mix in 3Q 2015 as compared to 3Q 2014.

Utility Infrastructure

Utility infrastructure revenues in 3Q 2015 of $34.7 million reflect a 54.5 percent increase versus 3Q 2014. Utility infrastructure gross margin in 3Q 2015 increased to 16.3 percent from 14.8 percent in 3Q 2014.

The y-o-y increase in UI revenues was primarily due to our new business development efforts, which we initiated as we improved operational performance in our UtilityServices operations. These business development efforts have generated new transmission, grid hardening and distribution projects for new and existing customers. The increase in UI gross margin was due to improved operational efficiency and the higher margin profile of our UI project mix.

Energy Efficiency

Energy efficiency revenues in 3Q 2015 of $19.0 million reflect a 13.2 percent increase versus 3Q 2014. EE gross margin in 3Q 2015 decreased to 36.4 percent from 38.2 percent in 3Q 2014.

The y-o-y increase in EE revenues was primarily driven by increased revenue from energy efficiency services projects, including incremental revenue from the recently acquired retail energy services business, and higher LED sales from our Solais products to retailers, which was offset slightly by lower LED sales in our traditional LED business. The decrease in our EE gross margin was driven primarily by the reduction of sales of our higher margin LED solutions as a percentage of total EE revenues.

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Solar Energy

Solar energy revenues in 3Q 2015 of $15.7 million reflect a 150.6 percent increase versus 3Q 2014. Solar energy gross margin in 3Q 2015 decreased to 6.4 percent from 11.2 percent in 3Q 2014.

The y-o-y increase in solar energy revenues was primarily due to revenue from two large, utility-scale solar projects, as well as an increase in the overall customer demand for solar solutions. The decrease in solar energy gross margin was primarily due to the lower gross margins associated with the large utility-scale solar projects.

Conference Call Information

Company management will webcast a conference call at 5:30 p.m. ET on Wednesday, November 4, 2015. To access the live webcast, please log on to the investor section of the company’s website at http://www.powersecure.com.

The call can also be accessed by dialing 888-680-0869 (or 617-213-4854 if dialing internationally) and providing pass code 86027871. If you are unable to participate during the live webcast, a replay of the conference call will be available approximately two hours after the completion of the call through midnight on November 18, 2015. To listen to the replay, dial 888-286-8010 (or 617-801-6888 if dialing internationally), and enter passcode 10120020. 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 utility and energy technologies to electric utilities, and their industrial, institutional and commercial customers. PowerSecure provides products and services in the areas of Interactive Distributed Generation^® (IDG^®), solar energy, energy efficiency and utility infrastructure.

The company is a pioneer in developing IDG^® power systems with sophisticated 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. Its proprietary distributed generation system designs utilize a range of technologies to deliver power, including renewables.

The company’s energy efficiency products and services include energy efficient lighting solutions that utilize LED technologies to improve lighting quality, and the design, installation and maintenance of energy conservation measures which we offer, primarily as a subcontractor, to large energy service company providers, called ESCOs, for the benefit of commercial, industrial and institutional customers as end users and directly to retailers.

PowerSecure also provides electric utilities with transmission and distribution infrastructure maintenance and construction services, and engineering and regulatory consulting services. Additional information is available at www.powersecure.com.

Forward-Looking Statements

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 growth and profitability and its future revenues, earnings, margins, cash resources and cash flow and other financial and

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operating information and data; the company’s future business operations, strategies and prospects; the impact and prospects of acquisitions; strategic alliances and relationships and new business awards and projects; 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 are difficult to predict and 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 uncertainty and inconsistency 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, including a further reduction in or entire loss of revenues from a large solar project discussed in the backlog section of this release that could result from a potential modification or termination of that project; the potential adverse financial and reputational consequences that can result from safety risks and hazards such as accidents inherent in the company’s operations; the company’s ability to execute on its business orders, awards and projects efficiently and with operational excellence, such as the large solar projects, in order to generate customer satisfaction, company profitability and future new business; the impact of the company’s acquisitions; the company’s ability to reduce and control its costs and expenses and enhance its operating income; the company’s ability to grow its business and revenues on a profitable basis and enhance its gross margin and operating margin; the company’s product mix, especially with respect to the proportion of its growing solar energy business with the lowest gross margin of its business units; the impact of the company’s restructuring actions on its LED lighting operations; 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 including the securities class action; 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, copies of which may be obtained by visiting the investor relations page of the company’s website at www.powersecure.com or the SEC’s website at www.sec.gov.

Accordingly, there is 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

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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.

Contact:

John Bluth

PowerSecure International, Inc.

(919) 453-2103

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PowerSecure International, Inc.

Condensed Consolidated Statements of Operations (unaudited)

($000’s except per share data)

 

		Three Months Ended								Nine Months Ended
		September 30 2015				September 30 2014				September 30 2015				September 30 2014
Revenue			106,982				65,044				293,673				174,910
Cost of sales			80,077				46,973				221,368				131,467
Gross Profit (excluding depreciation and amortization)			26,905				18,071				72,305				43,443
Operating expenses
General and administrative			17,995				14,280				50,334				40,994
Selling, marketing, and service			2,515				2,136				8,236				6,611
Depreciation and amortization			2,707				2,181				7,796				6,496
Restructuring charges			0				0				0				427
Total operating expenses			23,217				18,597				66,366				54,528
Operating income (loss)			3,688				(526	)			5,939				(11,085	)
Other income (expense)
Interest income and other income			1				5				4				14
Interest expense			(312	)			(329	)			(868	)			(921	)
Income (loss) before income taxes			3,377				(850	)			5,075				(11,992	)
Income tax expense (benefit)			1,385				(314	)			2,091				(4,449	)
Net income (loss)			1,992				(536	)			2,984				(7,543	)
EARNINGS (LOSS) PER SHARE AMOUNTS (“E.P.S”)
Basic			0.09				(0.02	)			0.13				(0.34	)
Diluted			0.09				(0.02	)			0.13				(0.34	)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic			22,469				22,353				22,435				22,228
Diluted			22,583				22,353				22,558				22,228

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PowerSecure International, Inc.

Condensed Consolidated Balance Sheets (unaudited)

($000’s)

 

		September 30, 2015				December 31, 2014
ASSETS
CURRENT ASSETS:
Cash and cash equivalents			26,217				33,775
Trade receivables, net of allowance for doubtful accounts			112,125				81,381
Inventories			35,467				35,144
Income taxes receivable			0				382
Deferred tax asset, net			2,320				2,320
Prepaid expenses and other current assets			3,226				3,478
Total current assets			179,355				156,480
PROPERTY, PLANT, AND EQUIPMENT:
Equipment			67,647				62,231
Furniture and fixtures			738				617
Land, building, and improvements			8,020				7,413
Total property, plant, and equipment at cost			76,405				70,261
Less accumulated depreciation and amortization			24,265				20,392
Property, plant, and equipment, net			52,140				49,869
OTHER ASSETS:
Goodwill			40,210				40,210
Restricted annuity contract			3,137				3,137
Intangible rights and capitalized software, net of accum amort			12,134				13,642
Other assets			2,442				1,879
Total other assets			57,923				58,868
TOTAL ASSETS			289,418				265,217
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable			56,706				39,699
Accrued and other liabilities			44,834				41,113
Accrued restructuring liabilities			53				114
Income taxes payable			1,467				0
Current portion of long-term debt			3,731				3,731
Current portion of capital lease obligation			252				986
Total current liabilities			107,043				85,643
LONG-TERM LIABILITIES:
Revolving Line of Credit			0				0
Term loan, net of current portion			15,033				17,832
Capital lease obligation, net of current portion			0				0
Deferred tax liability, net			1,421				1,460
Other long-term liabilities			4,172				3,913
Total long-term liabilities			20,626				23,205
STOCKHOLDERS’ EQUITY:
Preferred stock - undesignated			0				0
Preferred stock - Series C			0				0
Common stock			225				224
Additional paid-in-capital			163,613				161,163
Accumulated other comprehensive earnings (loss)			(132	)			(77	)
Retained earnings (deficit)			(1,957	)			(4,941	)
Total stockholders’ equity			161,749				156,369
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY			289,418				265,217

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PowerSecure International, Inc.

Condensed Consolidated Statements of Cash Flows (unaudited)

($000’s)

 

		Nine Months Ended
		September 30 2015				September 30 2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)			2,984				(7,543	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization			7,796				6,496
Stock compensation expense			2,017				1,504
(Gain) Loss on disposal of miscellaneous assets			150				(92	)
Changes in operating assets and liabilities, net of effect of acquisitions:
Trade receivables, net			(30,744	)			10,459
Inventories			(323	)			(12,606	)
Deferred income taxes			0				79
Other current assets and liabilities			2,099				(6,316	)
Other noncurrent assets and liabilities			(397	)			(482	)
Accounts payable			17,007				5,201
Accrued and other liabilities			3,721				8,181
Accrued restructuring liabilities			(61	)			(780	)
Net cash provided by (used in) operating activities			4,249				4,101
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions, net of cash acquired			0				(750	)
Purchases of property, plant and equipment			(7,707	)			(8,527	)
Additions to intangible rights and software development			(1,306	)			(494	)
Proceeds from sale of property, plant and equipment			305				465
Net cash provided by (used in) investing activities			(8,708	)			(9,306	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments) on revolving line of credit			0				0
Principal payments on long-term debt			(2,799	)			(2,798	)
Principal payments on capital lease obligations			(735	)			(696	)
Repurchases of common stock			(116	)			(416	)
Proceeds from stock option exercises			551				2,060
Net cash provided by (used in) financing activities			(3,099	)			(1,850	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			(7,558	)			(7,055	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR			33,775				50,915
CASH AND CASH EQUIVALENTS AT END OF PERIOD			26,217				43,860

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References to our third quarter 2015 and third quarter 2014 adjusted EBITDA, which we define as our earnings before interest, taxes, depreciation and amortization, and charges, as discussed and shown in this release, constitutes a non-GAAP “pro forma” financial measure.

We believe that adjusted EBITDA, as a non-GAAP pro forma financial measure, provides meaningful information to investors in terms of enhancing their understanding of our operating performance and results, as it allows investors to more easily compare our financial performance on a consistent basis compared to the prior year periods. This non-GAAP financial measure also corresponds with the way we expect investment analysts to evaluate and compare our results. We understand that measures similar to adjusted EBITDA are broadly used by analysts, rating agencies, investors, and financial institutions in assessing our performance. Accordingly, we believe that the presentation of adjusted EBITDA provides useful information to investors. Any non-GAAP pro forma financial measures should be considered only as supplements to, and not as substitutes for or in isolation from, or superior to, our other measures of financial information prepared in accordance with GAAP, such as net income.

We define and calculate adjusted EBITDA as net income (loss) attributable to PowerSecure International, Inc., minus 1) interest income and other income, plus 2) income tax expense (or minus an income tax benefit) and 3) interest expense and 4) depreciation and amortization and 5) stock compensation expense and 6) restructuring charges. The following table provides a reconciliation of adjusted EBITDA to net income (loss), the most directly comparable GAAP financial measure.

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PowerSecure International, Inc.

Non-GAAP Pro forma Measures

Adjusted EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization, and Charges)

Calculations and Reconciliation

($000’s except per share data, some rounding throughout)

 

		Three Months Ended								Nine Months Ended
		September 30, 2015				September 30, 2014				September 30, 2015				September 30, 2014
Adjusted EBITDA Calculation/Reconciliation
Net income (loss)			1,992				(536	)			2,984				(7,543	)
Items to Subtract from Net Income
Interest income and other income			(1	)			(5	)			(4	)			(14	)
Items to Add to Net Income
Restructuring Charges - Cost of Sales			0				0				0				312
Restructuring Charges - Op Expense			0				0				0				427
Acquisition Expenses			0				16				0				16
Income tax expense (benefit)			1,385				(314	)			2,091				(4,449	)
Interest expense			312				329				868				921
Depreciation and Amortization			2,707				2,181				7,796				6,496
Stock compensation expense			692				610				2,017				1,504
Adjusted EBITDA			7,087				2,281				15,752				(2,330	)