Company Quick10K Filing
Quick10K
IES Holdings
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$16.70 21 $357
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-Q 2018-12-31 Quarter: 2018-12-31
10-K 2018-09-30 Annual: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-Q 2017-12-31 Quarter: 2017-12-31
10-K 2017-09-30 Annual: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-Q 2016-12-31 Quarter: 2016-12-31
10-K 2016-09-30 Annual: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-Q 2015-12-31 Quarter: 2015-12-31
10-K 2015-09-30 Annual: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-Q 2014-12-31 Quarter: 2014-12-31
10-K 2014-09-30 Annual: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-Q 2013-12-31 Quarter: 2013-12-31
8-K 2019-11-06 Amend Bylaw, Exhibits
8-K 2019-09-03 Enter Agreement, Officers, Regulation FD, Exhibits
8-K 2019-08-02 Earnings, Regulation FD, Exhibits
8-K 2019-06-12 Other Events
8-K 2019-05-06 Earnings, Regulation FD, Exhibits
8-K 2019-03-09 Officers
8-K 2019-02-28 Officers, Regulation FD, Exhibits
8-K 2019-02-28 Officers, Exhibits
8-K 2019-02-06 Officers, Shareholder Vote
8-K 2019-02-05 Earnings, Regulation FD, Exhibits
8-K 2019-01-08 Regulation FD, Exhibits
8-K 2018-12-07 Earnings, Regulation FD, Exhibits
8-K 2018-08-03 Earnings, Regulation FD, Exhibits
8-K 2018-07-23 Enter Agreement, Exhibits
8-K 2018-04-06 Regulation FD, Exhibits
8-K 2018-02-07 Shareholder Vote
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EME Emcor Group 4,632
BBU Brookfield Business Partners 2,157
FIX Comfort Systems 1,365
AMRC Ameresco 627
AGX Argan 621
MTRX Matrix Service 512
CADC China Advanced Construction Materials Group 37
LMB Limbach 37
RGSE Real Goods Solar 5
IESC 2019-06-30
Part I. Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-10.2 q32019ex102.htm
EX-31.1 q32019ex311.htm
EX-31.2 q32019ex312.htm
EX-32.1 q32019ex321.htm
EX-32.2 q32019ex322.htm

IES Holdings Earnings 2019-06-30

IESC 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 q3201910-q.htm 10-Q Document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019
 
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission file number 1-13783
q2201910qimage1a02.gif
IES Holdings, Inc.
(Exact name of registrant as specified in its charter)



Delaware
76-0542208
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
5433 Westheimer Road, Suite 500, Houston, Texas 77056
(Address of principal executive offices and zip code)
Registrant’s telephone number, including area code: (713) 860-1500
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol
 
     Name of each exchange on which registered
Common Stock, par value $0.01 per share
 
IESC
 
NASDAQ Global Market
Rights to Purchase Preferred Stock
 
IESC
 
NASDAQ Global Market



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
 
Accelerated filer
þ
Non-accelerated filer
o
 
Smaller reporting company
þ
Emerging growth company
o
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
On July 31, 2019, there were 21,216,036 shares of common stock outstanding.





IES HOLDINGS, INC. AND SUBSIDIARIES
INDEX
 
 
 
 
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 





PART I. FINANCIAL INFORMATION

DEFINITIONS

In this Quarterly Report on Form 10-Q, the words “IES”, the “Company”, the “Registrant”, “we”, “our”, “ours” and “us” refer to IES Holdings, Inc. and, except as otherwise specified herein, to our subsidiaries.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes certain statements that may be deemed “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, all of which are based upon various estimates and assumptions that the Company believes to be reasonable as of the date hereof. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “could,” “should,” “expect,” “plan,” “project,” “intend,” “anticipate,” “believe,” “seek,” “estimate,” “predict,” “potential,” “pursue,” “target,” “continue,” the negative of such terms or other comparable terminology. These statements involve risks and uncertainties that could cause the Company’s actual future outcomes to differ materially from those set forth in such statements. Such risks and uncertainties include, but are not limited to:

the ability of our controlling stockholder to take action not aligned with other stockholders;

the sale or disposition of the shares of our common stock held by our controlling stockholder, which, under certain circumstances, would trigger change of control provisions in our severance benefit plan or financing and surety arrangements, or any other substantial sale of our common stock, which could depress our stock price;

the possibility that certain tax benefits of our net operating losses may be restricted or reduced in a change in ownership or a further change in the federal tax rate;

the potential recognition of valuation allowances or write-downs on deferred tax assets;

the inability to carry out plans and strategies as expected, including our inability to identify and complete acquisitions that meet our investment criteria in furtherance of our corporate strategy, or the subsequent underperformance of those acquisitions;

limitations on the availability of sufficient credit or cash flow to fund our working capital needs and capital expenditures and debt service;

difficulty in fulfilling the covenant terms of our credit facility, including liquidity, EBITDA and other financial requirements, which could result in a default and acceleration of our indebtedness under our revolving credit facility;

the possibility that we issue additional shares of common stock or convertible securities that will dilute the percentage ownership interest of existing stockholders and may dilute the book value per share of our common stock;

the relatively low trading volume of our common stock, which could depress our stock price;

competition in the industries in which we operate, both from third parties and former employees, which could result in the loss of one or more customers or lead to lower margins on new projects;

future capital expenditures and refurbishment, repair and upgrade costs; and delays in and costs of refurbishment, repair and upgrade projects;

a general reduction in the demand for our services;

our ability to enter into, and the terms of, future contracts;

success in transferring, renewing and obtaining electrical and other licenses;

challenges integrating new businesses into the Company or new types of work, products or processes into our segments;

credit and capital market conditions, including changes in interest rates that affect the cost of construction financing and mortgages, and the inability for some of our customers to retain sufficient financing, which could lead to project delays or cancellations;

3



backlog that may not be realized or may not result in profits;

the possibility of errors when estimating revenue and progress to date on percentage-of-completion contracts;

uncertainties inherent in estimating future operating results, including revenues, operating income or cash flow;

complications associated with the incorporation of new accounting, control and operating procedures;

closures or sales of facilities resulting in significant future charges, including potential warranty losses or other unexpected liabilities, or a significant disruption of our operations;

an increased cost of surety bonds affecting margins on work and the potential for our surety providers to refuse bonding or require additional collateral at their discretion;

fluctuations in operating activity due to downturns in levels of construction or the housing market, seasonality and differing regional economic conditions;

our ability to successfully manage projects;

inaccurate estimates used when entering into fixed-priced contracts;

the cost and availability of qualified labor and the ability to maintain positive labor relations;

our ability to pass along increases in the cost of commodities used in our business, in particular, copper, aluminum, steel, fuel and certain plastics;

a change in the mix of our customers, contracts or business;

increases in bad debt expense and days sales outstanding due to liquidity problems faced by our customers;

the recognition of potential goodwill, long-lived assets and other investment impairments;

potential supply chain disruptions due to credit or liquidity problems faced by our suppliers;

accidents resulting from the physical hazards associated with our work and the potential for accidents;

the possibility that our current insurance coverage may not be adequate or that we may not be able to obtain a policy at acceptable rates;

the possibility that our internal controls over financial reporting and our disclosure controls and procedures may not prevent all possible errors that could occur;

disagreements with taxing authorities with regard to tax positions we have adopted;

the recognition of tax benefits related to uncertain tax positions;

the effect of litigation, claims and contingencies, including warranty losses, damages or other latent defect claims in excess of our existing reserves and accruals;

growth in latent defect litigation in states where we provide residential electrical work for home builders not otherwise covered by insurance;

interruptions to our information systems and cyber security or data breaches;

liabilities under laws and regulations protecting the environment; and

loss of key personnel and effective transition of new management.


4


You should understand that the foregoing, as well as other risk factors discussed in this document and those listed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended September 30, 2018, could cause future outcomes to differ materially from those experienced previously or those expressed in such forward-looking statements. We undertake no obligation to publicly update or revise any information, including without limitation information concerning our controlling stockholder, net operating losses, borrowing availability or cash position, or any forward-looking statements to reflect events or circumstances that may arise after the date of this report. Forward-looking statements are provided in this Quarterly Report on Form 10-Q pursuant to the safe harbor established under the Private Securities Litigation Reform Act of 1995 and should be evaluated in the context of the estimates, assumptions, uncertainties and risks described herein.

5


Item 1. Financial Statements
IES HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In Thousands, Except Share Information)

 
 
 
 
 
June 30,
 
September 30,
 
 
 
 
 
2019
 
2018
 
 
 
 
 
(Unaudited)
 
 
ASSETS
 
 
 
 
CURRENT ASSETS:
 
 
 
 
 
 
Cash and cash equivalents
 
$
13,104

 
$
26,247

 
 
Accounts receivable:
 
 
 
 
 
 
 
Trade, net of allowance of $949 and $868, respectively
 
176,527

 
151,578

 
 
 
Retainage
 
27,358

 
24,312

 
 
Inventories
 
24,350

 
20,966

 
 
Costs and estimated earnings in excess of billings
 
34,807

 
31,446

 
 
Prepaid expenses and other current assets
 
8,876

 
8,144

Total current assets
 
285,022

 
262,693

Property and equipment, net
 
26,410

 
25,364

Goodwill
 
50,622

 
50,702

Intangible assets, net
 
27,535

 
30,590

Deferred tax assets
 
43,424

 
46,580

Other non-current assets
 
5,351

 
6,065

Total assets
 
$
438,364

 
$
421,994

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
CURRENT LIABILITIES:
 
 
 
 
 
 
Accounts payable and accrued expenses
 
150,406

 
130,591

 
 
Billings in excess of costs and estimated earnings
 
35,859

 
33,826

Total current liabilities
 
186,265

 
164,417

Long-term debt
 
9,915

 
29,564

Other non-current liabilities
 
1,926

 
4,374

Total liabilities
 
198,106

 
198,355

Noncontrolling interest
 
3,245

 
3,232

STOCKHOLDERS’ EQUITY:
 
 
 
 
 
 
Preferred stock, $0.01 par value, 10,000,000 shares authorized, none issued
 
 
 
 
 
 
 
and outstanding
 

 

 
 
Common stock, $0.01 par value, 100,000,000 shares authorized; 22,049,529
 
 
 
 
 
 
 
issued and 21,218,854 and 21,205,536 outstanding, respectively
 
220

 
220

 
 
Treasury stock, at cost, 830,675 and 843,993 shares, respectively
 
(11,357
)
 
(8,937
)
 
 
Additional paid-in capital
 
192,389

 
196,810

 
 
Retained earnings
 
55,761

 
32,314

Total stockholders’ equity
 
237,013

 
220,407

Total liabilities and stockholders’ equity
 
$
438,364

 
$
421,994



The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.


6


IES HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income
(In Thousands, Except Share Information)
(Unaudited)

 
 
 
 
 
 
Three Months Ended June 30,
 
 
 
 
 
 
2019
 
2018
 
 
Revenues
 
$
282,633

 
$
232,576

 
 
Cost of services
 
 
236,236

 
 
190,039

 
 
 
Gross profit
 
 
46,397

 
 
42,537

 
 
Selling, general and administrative expenses
 
 
36,333

 
 
32,372

 
 
Contingent consideration
 
 
(163
)
 
 
81

 
 
Gain on sale of assets
 
 
(8
)
 
 
(5
)
 
 
 
Operating income
 
 
10,235

 
 
10,089

 
 
Interest and other (income) expense:
 
 
 
 
 
 
 
 
Interest expense
 
 
451

 
 
513

 
 
Other (income) expense, net
 
 
(64
)
 
 
(111
)
 
 
Income from operations before income taxes
 
 
9,848

 
 
9,687

 
 
Provision for (benefit from) income taxes
 
 
(1,207
)
 
 
1,038

 
 
Net income
 
 
11,055

 
 
8,649

 
 
Net income attributable to noncontrolling interest
 
 
(83
)
 
 
(133
)
 
 
Comprehensive income attributable to IES Holdings, Inc.
 
$
10,972

 
$
8,516

 
 
 
 
 
 
 
 
 
 
 
Earnings per share attributable to IES Holdings, Inc.:
 
 
 
 
 
 
 
 
 
Basic
 
$
0.52

 
$
0.40

 
 
 
Diluted
 
$
0.52

 
$
0.40

 
 
 
 
 
 
 
 
 
 
 
 
 
Shares used in the computation of earnings per share:
 
 
 
 
 
 
 
 
Basic
 
 
21,043,425

 
 
21,200,635

 
 
 
Diluted
 
 
21,301,235

 
 
21,331,883



The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.



7


IES HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income
(In Thousands, Except Share Information)
(Unaudited)
 

 
 
 
 
 
 
Nine Months Ended June 30,
 
 
 
 
 
 
2019
 
2018
 
 
Revenues
 
$
783,389

 
$
636,553

 
 
Cost of services
 
 
652,156

 
 
527,112

 
 
 
Gross profit
 
 
131,233

 
 
109,441

 
 
Selling, general and administrative expenses
 
 
103,489

 
 
92,108

 
 
Contingent consideration
 
 
(278
)
 
 
152

 
 
Loss (gain) on sale of assets
 
 
87

 
 
(39
)
 
 
 
Operating income
 
 
27,935

 
 
17,220

 
 
Interest and other (income) expense:
 
 
 
 
 
 
 
 
Interest expense
 
 
1,533

 
 
1,427

 
 
Other (income) expense, net
 
 
(129
)
 
 
(252
)
 
 
Income from operations before income taxes
 
 
26,531

 
 
16,045

 
 
Provision for income taxes
 
 
3,036

 
 
34,622

 
 
Net income (loss)
 
 
23,495

 
 
(18,577
)
 
 
Net income attributable to noncontrolling interest
 
 
(150
)
 
 
(255
)
 
 
Comprehensive income (loss) attributable to IES Holdings, Inc.
 
$
23,345

 
$
(18,832
)
 
 
 
 
 
 
 
 
 
 
 
Earnings (loss) per share attributable to IES Holdings, Inc.:
 
 
 
 
 
 
 
 
 
Basic
 
$
1.10

 
$
(0.89)

 
 
 
Diluted
 
$
1.09

 
$
(0.89)

 
 
 
 
 
 
 
 
 
 
 
 
 
Shares used in the computation of earnings (loss) per share:
 
 
 
 
 
 
 
 
 
Basic
 
 
21,139,697

 
 
21,193,306

 
 
 
Diluted
 
 
21,382,178

 
 
21,193,306



The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.


8


IES HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders’ Equity (unaudited)
(In Thousands, Except Share Information)

 
 
Three Months Ended June 30, 2019
 
 
Common Stock
 
Treasury Stock
 
 
 
 
Retained Earnings
 
Total Stockholders' Equity
 
 
Shares
 
Amount
 
Shares
 
Amount
 
APIC
 
 
BALANCE, March 31, 2019
22,049,529

 
$
220

 
(667,682
)
 
$
(8,443
)
 
$
191,579

 
$
44,789

 
$
228,145

 
Acquisition of treasury stock

 
 

 
(162,993
)
 
 
(2,914
)
 
 

 
 

 
 
(2,914
)
 
Non-cash compensation

 
 

 

 
 

 
 
810

 
 

 
 
810

 
Net income attributable to IES Holdings, Inc.

 
 

 

 
 

 
 

 
 
10,972

 
 
10,972

BALANCE, June 30, 2019
22,049,529

 
$
220

 
(830,675
)
 
$
(11,357
)
 
$
192,389

 
$
55,761

 
$
237,013


 
 
Three Months Ended June 30, 2018
 
 
Common Stock
 
Treasury Stock
 
 
 
 
Retained Earnings
 
Total Stockholders' Equity
 
 
Shares
 
Amount
 
Shares
 
Amount
 
APIC
 
 
BALANCE, March 31, 2018
22,049,529

 
$
220

 
(790,351
)
 
$
(8,108
)
 
$
196,835

 
$
19,123

 
$
208,070

 
Acquisition of treasury stock

 
 

 
(53,642
)
 
 
(829
)
 
 

 
 

 
 
(829
)
 
Non-cash compensation

 
 

 

 
 

 
 
(284
)
 
 

 
 
(284
)
 
Net income attributable to IES Holdings, Inc.

 
 

 

 
 

 
 
 
 
 
8,516

 
 
8,516

BALANCE, June 30, 2018
22,049,529

 
$
220

 
(843,993
)
 
$
(8,937
)
 
$
196,551

 
$
27,639

 
$
215,473



 
 
Nine Months Ended June 30, 2019
 
 
Common Stock
 
Treasury Stock
 
 
 
 
Retained Earnings
 
Total Stockholders' Equity
 
 
Shares
 
Amount
 
Shares
 
Amount
 
APIC
 
 
BALANCE, September 30, 2018
22,049,529

 
$
220

 
(843,993
)
 
$
(8,937
)
 
$
196,810

 
$
32,314

 
$
220,407

 
Issuances under compensation plans

 
 

 
216,679

 
 
2,323

 
 
(2,323
)
 
 

 
 

 
Grants under compensation plan

 
 

 
283,195

 
 
3,582

 
 
(3,582
)
 
 

 
 

 
Cumulative effect adjustment from adoption of new accounting standard

 
 

 

 
 

 
 

 
 
102

 
 
102

 
Acquisition of treasury stock

 
 

 
(486,556
)
 
 
(8,325
)
 
 

 
 

 
 
(8,325
)
 
Non-cash compensation

 
 

 
 
 
 

 
 
1,484

 
 

 
 
1,484

 
Net income attributable to IES Holdings, Inc.

 
 

 

 
 

 
 

 
 
23,345

 
 
23,345

BALANCE, June 30, 2019
22,049,529

 
$
220

 
(830,675
)
 
$
(11,357
)
 
$
192,389

 
$
55,761

 
$
237,013


 
 
Nine Months Ended June 30, 2018
 
 
Common Stock
 
Treasury Stock
 
 
 
 
Retained Earnings
 
Total Stockholders' Equity
 
 
Shares
 
Amount
 
Shares
 
Amount
 
APIC
 
 
BALANCE, September 30, 2017
22,049,529

 
$
220

 
(712,554
)
 
$
(6,898
)
 
$
196,955

 
$
46,427

 
$
236,704

 
Grants under compensation plans

 
 

 
520

 
 
5

 
 
(5
)
 
 

 
 

 
Acquisition of treasury stock

 
 

 
(133,459
)
 
 
(2,059
)
 
 

 
 

 
 
(2,059
)
 
Options exercised

 
 

 
1,500

 
 
15

 
 
(4
)
 
 

 
 
11

 
Non-cash compensation

 
 

 

 
 

 
 
(395
)
 
 

 
 
(395
)
 
Decrease in noncontrolling interest

 
 

 

 
 

 
 

 
 
44

 
 
44

 
Net loss attributable to IES Holdings, Inc.

 
 

 

 
 

 
 

 
 
(18,832
)
 
 
(18,832
)
BALANCE, June 30, 2018
22,049,529

 
$
220

 
(843,993
)
 
$
(8,937
)
 
$
196,551

 
$
27,639

 
$
215,473



The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.


9


IES HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)

 
 
 
 
Nine Months Ended June 30,
 
 
 
 
2019
 
2018
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
 
 
Net income (loss)
 
$
23,495

 
$
(18,577
)
 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
 
 
 
 
 
Bad debt expense
 
 
209

 
 
250

 
 
Deferred financing cost amortization
 
 
236

 
 
214

 
 
Depreciation and amortization
 
 
7,200

 
 
6,706

 
 
Loss (gain) on sale of assets
 
 
87

 
 
(39
)
 
 
Non-cash compensation expense
 
 
1,484

 
 
(395
)
 
 
Deferred income taxes
 
 
3,036

 
 
34,622

 
Changes in operating assets and liabilities:
 
 
 
 
 
 
 
 
Accounts receivable
 
 
(25,158
)
 
 
4,992

 
 
Inventories
 
 
(3,491
)
 
 
(1,721
)
 
 
Costs and estimated earnings in excess of billings
 
 
(3,362
)
 
 
(8,990
)
 
 
Prepaid expenses and other current assets
 
 
(3,567
)
 
 
(1,645
)
 
 
Other non-current assets
 
 
(869
)
 
 
270

 
 
Accounts payable and accrued expenses
 
 
20,132

 
 
(6,862
)
 
 
Billings in excess of costs and estimated earnings
 
 
1,979

 
 
(4,019
)
 
 
Other non-current liabilities
 
 
(1,114
)
 
 
172

Net cash provided by operating activities
 
 
20,297

 
 
4,978

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
 
 
 
Purchases of property and equipment
 
 
(5,172
)
 
 
(3,383
)
 
Proceeds from sale of assets
 
 
68

 
 
107

 
Cash paid in conjunction with business combinations
 
 

 
 
(5,981
)
Net cash used in investing activities
 
 
(5,104
)
 
 
(9,257
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
 
 
Borrowings of debt
 
 
22,468

 
 
99

 
Repayments of debt
 
 
(42,342
)
 
 
(136
)
 
Distribution to noncontrolling interest
 
 
(137
)
 
 
(235
)
 
Purchase of treasury stock
 
 
(8,325
)
 
 
(2,058
)
 
Options exercised
 
 

 
 
11

Net cash used in financing activities
 
 
(28,336
)
 
 
(2,319
)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
 
 
(13,143
)
 
 
(6,598
)
CASH, CASH EQUIVALENTS and RESTRICTED CASH, beginning of period
 
 
26,247

 
 
28,290

CASH, CASH EQUIVALENTS and RESTRICTED CASH, end of period
 
$
13,104

 
$
21,692

 
 
 
 
 
 
 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 
 
 
 
 
 
 
 
Cash paid for interest
 
$
1,405

 
$
1,227

 
 
Cash paid for income taxes (net)
 
$
1,321

 
$
2,313



The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

10



IES HOLDINGS, INC.
Notes to the Condensed Consolidated Financial Statements
(All Amounts in Thousands Except Share Amounts)
(Unaudited)
1. BUSINESS AND ACCOUNTING POLICIES

Description of the Business

IES Holdings, Inc. is a holding company that owns and manages operating subsidiaries in business activities across a variety of end markets. Our operations are currently organized into four principal business segments, based upon the nature of our current services:

Commercial & Industrial – Provider of electrical and mechanical design, construction, and maintenance services to the commercial and industrial markets in various regional markets and nationwide in certain areas of expertise, such as the power infrastructure market.
Communications – Nationwide provider of technology infrastructure products and services to large corporations and independent businesses.
Infrastructure Solutions – Provider of electro-mechanical solutions for industrial operations, including apparatus repair and custom-engineered products.
Residential – Regional provider of electrical installation services for single-family housing and multi-family apartment complexes.

The words “IES”, the “Company”, “we”, “our”, and “us” refer to IES Holdings, Inc. and, except as otherwise specified herein, to our subsidiaries.

Seasonality and Quarterly Fluctuations

Results of operations from our Residential construction segment are seasonal, depending on weather trends, with typically higher revenues generated during spring and summer and lower revenues generated during fall and winter, with an impact from precipitation in the warmer months. The Commercial & Industrial, Communications and Infrastructure Solutions segments of our business are less subject to seasonal trends, as work in these segments generally is performed inside structures protected from the weather, although weather can still impact these businesses, especially in the early stages of projects. Our service and maintenance business is generally not affected by seasonality. Our volume of business may be adversely affected by declines in construction projects resulting from adverse regional or national economic conditions. Quarterly results may also be materially affected by the timing of new construction projects. Results for our Infrastructure Solutions segment may be affected by the timing of outages at our customers’ facilities. Accordingly, operating results for any fiscal period are not necessarily indicative of results that may be achieved for any subsequent fiscal period.

Basis of Financial Statement Preparation

The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of IES, our wholly-owned subsidiaries, and entities that we control due to ownership of a majority of voting interest and have been prepared in accordance with the instructions to interim financial reporting as prescribed by the Securities and Exchange Commission (the “SEC”). The results for the interim periods are not necessarily indicative of results for the entire year. These interim financial statements do not include all disclosures required by U.S. generally accepted accounting principles (“GAAP”), and should be read in conjunction with the consolidated financial statements and notes thereto filed with the SEC in our Annual Report on Form 10-K for the fiscal year ended September 30, 2018. In the opinion of management, the unaudited Condensed Consolidated Financial Statements contained in this report include all known accruals and adjustments necessary for a fair presentation of the financial position, results of operations, and cash flows for the periods reported herein. Any such adjustments are of a normal recurring nature.

Noncontrolling Interest

In connection with our acquisitions of STR Mechanical, LLC (“STR Mechanical”) in fiscal 2016 and NEXT Electric, LLC (“NEXT Electric”) in fiscal 2017, we acquired an 80 percent interest in each of the entities, with the remaining 20 percent interest in each such entity being retained by the respective third party seller. The interests retained by those third party sellers are identified on our Condensed Consolidated Balance Sheets as noncontrolling interest, classified outside of permanent equity. Under the terms of each entity’s operating agreement, after five years from the date of the acquisition, we may elect to purchase, or the third party seller may require us to purchase, part or all of the remaining 20 percent interest in the applicable entity. The purchase price is variable, based on a multiple of earnings as defined in the operating agreements. Therefore, this noncontrolling interest is carried at the greater of the balance determined under Accounting Standards Codification (“ASC”) 810 and the redemption amounts assuming the noncontrolling interests were redeemable at

11


the balance sheet date. If all of these interests had been redeemable at June 30, 2019, the redemption amount would have been $2,446. For the nine months ended June 30, 2018, we recorded an increase to retained earnings of $44 to decrease the carrying amount of the noncontrolling interest in STR Mechanical to the balance determined under ASC 810, as, if it had been redeemable at June 30, 2018, the redemption amount would have been less than the carrying amount.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires the use of estimates and assumptions by management in determining the reported amounts of assets and liabilities, disclosures of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates are primarily used in our revenue recognition of construction in progress, fair value assumptions in accounting for business combinations and analyzing goodwill, investments, intangible assets and long-lived asset impairments and adjustments, allowance for doubtful accounts receivable, stock-based compensation, reserves for legal matters, realizability of deferred tax assets, unrecognized tax benefits and self-insured claims liabilities and related reserves.

Income Taxes

For the nine months ended June 30, 2019, our effective tax rate differed from the statutory rate as a result of a benefit of $4,020 related to the recognition of previously unrecognized tax benefits. In December 2017, the Tax Cuts and Jobs Act (the “Act”) was enacted, which, among other changes, reduced the federal statutory corporate tax rate from 35% to 21%, effective January 1, 2018. As a result of this change, the Company’s statutory tax rate for fiscal 2018 was a blended rate of 24.53% and decreased to 21% in 2019. For the nine months ended June 30, 2018, our effective tax rate differed from the statutory tax rate as a result of a charge of $31,506 to re-measure our deferred tax assets and liabilities to reflect the impact of the new statutory tax rate, slightly offset by a benefit of $1,840 related to the reversal of unrecognized tax benefits. The Company completed its accounting for the income tax effects of the Act and fully recorded the impact in the year ended September 30, 2018.

Accounting Standards Not Yet Adopted

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update No. 2016-02, Leases (“ASU 2016-02”). Under ASU 2016-02, lessees will need to recognize a right-of-use asset and a lease liability on our Balance Sheet for all leases, other than those that meet the definition of a short-term lease. For income statement purposes, leases must be classified as either operating or finance. Operating leases will result in straight-line expense, similar to current operating leases, while finance leases will be accounted for similar to current capital leases. ASU 2016-02 becomes effective for the fiscal year ended September 30, 2020. We are currently evaluating the impact it will have on our Condensed Consolidated Financial Statements. We anticipate the adoption will result in a significant amount of lease right-of-use assets and corresponding lease liabilities being recorded on our balance sheets. We plan to adopt this standard on October 1, 2019 and will apply the transition method that allows the recognition of a cumulative-effect adjustment to retained earnings on such date.

In June 2016, the FASB issued Accounting Standard Update No. 2016-13, Financial Instruments – Credit Losses (“ASU 2016-13”), which requires companies to consider historical experiences, current market conditions and reasonable and supportable forecasts in the measurement of expected credit losses, with further clarifications made in April 2019 and May 2019 with the issuances of Accounting Standard Updates No. 2019-04 and 2019-05. This update is effective for fiscal years beginning after December 15, 2019 and for interim periods within those fiscal years, although early adoption is permitted. We are currently evaluating the impact it will have on our Condensed Consolidated Financial Statements. We plan to adopt this standard on October 1, 2020.

In June 2018, the FASB issued Accounting Standard Update No. 2018-07, Compensation—Stock Compensation (“ASU 2018-07”), to simplify the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments for employees, with certain exceptions. Under the new guidance, the cost for nonemployee awards may be lower and less volatile than under current GAAP because the measurement generally will occur earlier and will be fixed at the grant date. This update is effective for the fiscal year ended September 30, 2020.

In August 2018, the FASB issued Accounting Standard Update No. 2018-13, Fair Value Measurement Disclosure Framework (“ASU 2018-13”), to modify certain disclosure requirements for fair value measurements. Under the new guidance, registrants will need to disclose weighted average information for significant unobservable inputs for all Level 3 fair value measurements. The guidance does not specify how entities should calculate the weighted average, but requires them to explain their calculation. The new guidance also requires disclosing the changes in unrealized gain and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements of instruments held at the end of the reporting period. This guidance is effective for fiscal years beginning after December 15, 2019 and for interim periods within those fiscal years, although early adoption is permitted for either the entire standard or only the provisions that eliminate or modify the requirements.

We do not expect ASU 2018-07 or ASU 2018-13 to have a material effect on our Condensed Consolidated Financial Statements and

12


we plan to adopt these standards on October 1, 2019 and October 1, 2020, respectively.

Accounting Standards Recently Adopted

In May 2014, the FASB issued Accounting Standard Update No. 2014-09, which provides a single comprehensive accounting standard for revenue recognition for contracts with customers and supersedes prior industry-specific guidance. The new standard requires companies to recognize revenue when control of promised goods or services is transferred to customers at an amount that reflects the consideration to which the company expects to be entitled. The new model requires companies to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time for each obligation. The new standard also expands disclosure requirements regarding revenue and cash flows arising from contracts with customers.

We adopted the new revenue recognition standard on October 1, 2018 (“Adoption Date”), using the modified retrospective method, which provides for a cumulative effect adjustment to beginning fiscal 2019 retained earnings for uncompleted contracts impacted by the adoption. We recorded an adjustment of $102 to beginning fiscal 2019 retained earnings as a result of adoption of the new standard. The changes to the method and/or timing of our revenue recognition associated with the new standard primarily affect revenue recognition within our Infrastructure Solutions segment for which, as of October 1, 2018, certain of our contracts do not qualify for revenue recognition over time. In addition, we have now combined in process contracts that historically had been accounted for as separate contracts in cases where those contracts meet the criteria for combination of contracts under the new standard, and we now capitalize certain commissions which were previously expensed when incurred. The impact on our results for the three and nine months ended June 30, 2019, of applying the new standard to our contracts was not material.

Consistent with our adoption method, the comparative prior period information for the three and nine months ended June 30, 2018, continues to be reported using the previous accounting standards in effect for the period presented. We have elected to utilize the modified retrospective transition practical expedient that allows us to evaluate the impact of contract modifications as of the Adoption Date rather than evaluating the impact of the modifications at the time they occurred prior to the Adoption Date.

See Note 3, “Revenue Recognition” for additional discussion of our revenue recognition accounting policies and expanded disclosures.

In January 2016, the FASB issued Accounting Standard Update No. 2016‑01, Financial Instruments. This standard is associated with the recognition and measurement of financial assets and liabilities, with further clarifications made in February 2018 with the issuance of Accounting Standard Update No. 2018-03. The amended guidance requires certain equity investments that are not consolidated and not accounted for under the equity method to be measured at fair value with changes in fair value recognized in net income rather than as a component of accumulated other comprehensive income (loss). It further states that an entity may choose to measure equity investments that do not have readily determinable fair values using a quantitative approach, or measurement alternative, which is equal to its cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Our adoption of this standard on October 1, 2018 had no impact on our Condensed Consolidated Financial Statements.

In January 2017, the FASB issued Accounting Standard Update No. 2017-01, Business Combinations. This standard clarifies the definition of a business to assist entities with evaluation of whether transactions should be accounted for as acquisitions or disposals of assets or businesses. Our adoption of this standard on October 1, 2018 using the prospective transition method had no impact on our Condensed Consolidated Financial Statements.

In May 2017, the FASB issued Accounting Standard Update No. 2017-09, Compensation—Stock Compensation, to reduce the diversity in practice and the cost and complexity when changing the terms or conditions of a share-based payment award. Our adoption of this standard on October 1, 2018 using the prospective transition method had no impact on our Condensed Consolidated Financial Statements.


2. CONTROLLING STOCKHOLDER

Tontine Associates, L.L.C. and its affiliates (collectively, “Tontine”), is the Company’s controlling stockholder, owning approximately 57.4 percent of the Company’s outstanding common stock according to a Form 4 filed with the SEC by Tontine on July 3, 2019. Accordingly, Tontine has the ability to exercise significant control over our affairs, including the election of directors and most actions requiring the approval of stockholders.

While Tontine is subject to certain restrictions under federal securities laws on sales of its shares as an affiliate, the Company has filed a shelf registration statement to register all of the shares of IES common stock owned by Tontine at the time of registration. As long as the shelf registration statement remains effective and the Company remains eligible to use it, Tontine has the ability to resell any or all of its registered shares from time to time in one or more offerings, as described in the shelf registration statement and in any prospectus supplement filed in connection with an offering pursuant to the shelf registration statement.


13


Should Tontine sell or otherwise dispose of all or a portion of its position in IES, a change in ownership of IES could occur. A change in ownership, as defined by Internal Revenue Code Section 382, could reduce the availability of the Company’s net operating losses (“NOLs”) for federal and state income tax purposes. On November 8, 2016, the Company implemented a new tax benefit protection plan (the “NOL Rights Plan”). The NOL Rights Plan was designed to deter an acquisition of the Company's stock in excess of a threshold amount that could trigger a change of control within the meaning of Internal Revenue Code Section 382. There can be no assurance that the NOL Rights Plan will be effective in deterring a change of ownership or protecting the NOLs. Furthermore, a change in control would trigger the change of control provisions in a number of our material agreements, including our credit facility, bonding agreements with our sureties and our severance arrangements.

Jeffrey L. Gendell was appointed as a member of the Board of Directors and as Chairman of the Board in November 2016. He is the managing member and founder of Tontine, and the brother of David B. Gendell, who has served as a member of our Board of Directors since February 2012, and who previously served as Interim Director of Operations from November 2017 to January 2019, as Vice Chairman of the Board from November 2016 to November 2017 and as Chairman of the Board from January 2015 to November 2016. David B. Gendell was an employee of Tontine from 2004 until December 31, 2017.

The Company is party to a sublease agreement with Tontine Associates, L.L.C. for corporate office space in Greenwich, Connecticut. On May 1, 2019, the sublease was extended for a six month term expiring December 31, 2019, with an increase in the monthly rent to $9, reflecting the increase paid by Tontine Associates, L.L.C. to its landlord. The lease has terms at market rates, and payments by the Company are at a rate consistent with that paid by Tontine Associates, L.L.C. to its landlord.

On December 6, 2018, the Company entered into a Board Observer Letter Agreement with Tontine Associates, L.L.C. in order to assist Tontine in managing its investment in the Company. Subject to the terms and conditions set forth in the Letter Agreement, the Company granted Tontine the right, at any time that Tontine holds at least 20% of the outstanding common stock of the Company, to appoint a representative to serve as an observer to the Board (the “Board Observer”). The Board Observer, who must be reasonably acceptable to those members of the Board who are not affiliates of Tontine, shall have no voting rights or other decision making authority. Subject to the terms and conditions set forth in the Letter Agreement, so long as Tontine has the right to appoint a Board Observer, the Board Observer will have the right to attend and participate in meetings of the Board and the committees thereof, subject to confidentiality requirements, and to receive reimbursement for reasonable out-of-pocket expenses incurred in his or her capacity as a Board Observer and such rights to coverage under the Company’s directors’ and officers’ liability insurance policy as are available to the Company’s directors.


3. REVENUE RECOGNITION

Contracts

Our revenue is derived from contracts with customers, and we determine the appropriate accounting treatment for each contract at contract inception. Our contracts primarily relate to electrical and mechanical contracting services, technology infrastructure products and services, and electro-mechanical solutions for industrial operations. Revenue is earned based upon an agreed fixed price or actual costs incurred plus an agreed upon percentage.

We account for a contract when: (i) it has approval and commitment from both parties, (ii) the rights of the parties are identified, (iii) payment terms are identified, (iv) the contract has commercial substance, and (v) collectability of consideration is probable. We consider the start of a project to be when the above criteria have been met and we have written authorization from the customer to proceed.

Performance Obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.

We recognize revenue over time for the majority of the services we perform as (i) control continuously transfers to the customer as work progresses at a project location controlled by the customer and (ii) we have the right to bill the customer as costs are incurred. Within our Infrastructure Solutions segment, we often perform work inside our own facilities, where control does not continuously transfer to the customer as work progresses. In such cases, we evaluate whether we have the right to bill the customer as costs are incurred. Such assessment involves an evaluation of contractual termination clauses. Where we have a contractual right to payment for work performed to date, we recognize revenue over time. If we do not have such a right, we recognize revenue upon completion of the contract, when control of the work transfers to the customer.

For fixed price arrangements, we use the percentage of completion method of accounting under which revenue recognized is measured principally by the costs incurred and accrued to date for each contract as a percentage of the estimated total cost for each contract at completion. Contract costs include all direct material, labor and indirect costs related to contract performance. Changes in job performance, job conditions, estimated contract costs and profitability and final contract settlements may result in revisions to costs and income, and

14


the effects of these revisions are recognized in the period in which the revisions are determined. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. This measurement and comparison process requires updates to the estimate of total costs to complete the contract, and these updates may include subjective assessments and judgments.
 
Variable Consideration

The transaction price for our contracts may include variable consideration, which includes increases to transaction price for approved and unapproved change orders, claims and incentives, and reductions to transaction price for liquidated damages. Change orders, claims and incentives are generally not distinct from the existing contract due to the significant integration service provided in the context of the contract and are accounted for as a modification of the existing contract and performance obligation. We estimate variable consideration for a performance obligation at the probability weighted value we expect to receive (or the most probable amount we expect to incur in the case of liquidated damages, if any), utilizing estimation methods that best predict the amount of consideration to which we will be entitled (or will be incurred in the case of liquidated damages, if any). We include variable consideration in the estimated transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include estimated amounts in transaction price are based largely on an assessment of our anticipated performance and all information (historical, current and forecasted) that is reasonably available to us. The effect of variable consideration on the transaction price of a performance obligation is recognized as an adjustment to revenue on a cumulative catch-up basis. To the extent unapproved change orders and claims reflected in transaction price (or excluded from transaction price in the case of liquidated damages) are not resolved in our favor, or to the extent incentives reflected in transaction price are not earned, there could be reductions in, or reversals of, previously recognized revenue.

Costs of Obtaining a Contract

In certain of our operations, we incur commission costs related to entering into a contract that we only incurred because of that contract. When this occurs, we capitalize that cost and amortize it over the expected term of the contract. At June 30, 2019, we had capitalized commission costs of $96.
 
We generally do not incur significant incremental costs related to obtaining or fulfilling a contract prior to the start of a project. When significant pre‑contract costs are incurred, they will be capitalized and amortized on a percentage of completion basis over the life of the contract.

Disaggregation of Revenue

We disaggregate our revenue from contracts with customers by activity and contract type, as these categories reflect how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. Our consolidated 2019 and 2018 revenue was derived from the following service activities. See details in the following tables:

 
 
Three Months Ended June 30,
 
Nine Months Ended June 30,
 
 
2019
 
2018
 
2019
 
2018
Commercial & Industrial
 
$
75,370

 
$
78,156

 
$
227,928

 
$
196,747

Communications
 
90,438

 
54,368

 
230,200

 
159,071

Infrastructure Solutions
 
 
 
 
 
 
 
 
Industrial Services
 
12,339

 
11,417

 
36,707

 
32,874

Custom Power Solutions
 
23,770

 
13,439

 
63,331

 
37,533

Total
 
36,109

 
24,856

 
100,038

 
70,407

Residential
 
 
 
 
 
 
 
 
Single-family
 
54,200

 
51,028

 
156,168

 
139,235

Multi-family and Other
 
26,516

 
24,168

 
69,055

 
71,093

Total
 
80,716

 
75,196

 
225,223

 
210,328

Total Revenue
 
$
282,633

 
$
232,576

 
$
783,389

 
$
636,553

 
 
 
 
 
 
 
 
 


15


 
 
Three Months Ended June 30, 2019
 
 
 
Commercial & Industrial
 
Communications
 
Infrastructure Solutions
 
Residential
 
Total
Fixed-price
 
$
70,917

 
$
65,219

 
$
29,925

 
$
80,716

 
$
246,777

Time-and-material
 
 
4,453

 
 
25,219

 
 
6,184

 
 

 
 
35,856

Total revenue
 
$
75,370

 
$
90,438

 
$
36,109

 
$
80,716

 
$
282,633

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2018
 
 
 
Commercial & Industrial
 
Communications
 
Infrastructure Solutions
 
Residential
 
Total
Fixed-price
 
$
68,762

 
$
42,927

 
$
19,865

 
$
75,196

 
$
206,750

Time-and-material
 
 
9,394

 
 
11,441

 
 
4,991

 
 

 
 
25,826

Total revenue
 
$
78,156

 
$
54,368

 
$
24,856

 
$
75,196

 
$
232,576

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended June 30, 2019
 
 
 
Commercial & Industrial
 
Communications
 
Infrastructure Solutions
 
Residential
 
Total
Fixed-price
 
$
213,214

 
$
162,650

 
$
87,566

 
$
225,223

 
$
688,653

Time-and-material
 
 
14,714

 
 
67,550

 
 
12,472

 
 

 
 
94,736

Total revenue
 
$
227,928

 
$
230,200

 
$
100,038

 
$
225,223

 
$
783,389

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended June 30, 2018
 
 
 
Commercial & Industrial
 
Communications
 
Infrastructure Solutions
 
Residential
 
Total
Fixed-price
 
$
175,866

 
$
124,428

 
$
60,172

 
$
210,328

 
$
570,794

Time-and-material
 
 
20,881

 
 
34,643

 
 
10,235

 
 

 
 
65,759

Total revenue
 
$
196,747

 
$
159,071

 
$
70,407

 
$
210,328

 
$
636,553


Accounts Receivable

Accounts receivable include amounts which we have billed or have an unconditional right to bill our customers. As of June 30, 2019, Accounts receivable included $10,617 of unbilled receivables for which we have an unconditional right to bill.

Contract Assets and Liabilities

Project contracts typically provide for a schedule of billings on percentage of completion of specific tasks inherent in the fulfillment of our performance obligation(s). The schedules for such billings usually do not precisely match the schedule on which costs are incurred. As a result, contract revenue recognized in the statement of operations can and usually does differ from amounts that can be billed to the customer at any point during the contract. Amounts by which cumulative contract revenue recognized on a contract as of a given date exceed cumulative billings and unbilled receivables to the customer under the contract are reflected as a current asset in our balance sheet under the caption “Costs and estimated earnings in excess of billings”. To the extent amounts by which cumulative billings to the customer under a contract as of a given date exceed cumulative contract revenue recognized are reflected as a current liability in our balance sheet under the caption “Billings in excess of costs and estimated earnings”.

The net asset (liability) position for contracts in process consisted of the following:

 
 
June 30,
 
September 30,
 
 
2019
 
2018
Costs and estimated earnings on uncompleted contracts
 
$
720,469

 
$
539,226

Less: Billings to date and unbilled accounts receivable
 
 
(721,521
)
 
 
(541,606
)
 
 
$
(1,052
)
 
$
(2,380
)


16


The net asset (liability) position for contracts in process included in the accompanying consolidated balance sheets was as follows:

 
 
June 30,
 
September 30,
 
 
2019
 
2018
Costs and estimated earnings in excess of billings
 
$
34,807

 
$
31,446

Billings in excess of costs and estimated earnings
 
 
(35,859
)
 
 
(33,826
)
 
 
$
(1,052
)
 
$
(2,380
)

During the three months ended June 30, 2019, and 2018, we recognized revenue of $18,472 and $15,076 related to our contract liabilities at April 1, 2019 and 2018, respectively. During the nine months ended June 30, 2019, and 2018, we recognized revenue of $28,816 and $28,627 related to our contract liabilities at October 1, 2018 and 2017, respectively.
 
We did not have any impairment losses recognized on our receivables or contract assets for the three and nine months ended June 30, 2019 or 2018.

Remaining Performance Obligations

Remaining performance obligations represent the unrecognized revenue value of our contract commitments. New awards represent the total expected revenue value of new contract commitments undertaken during a given period, as well as additions to the scope of existing contract commitments. Our new performance obligations vary significantly each reporting period based on the timing of our major new contract commitments. At June 30, 2019, we had remaining performance obligations of $487. The Company expects to recognize revenue on approximately $387 of the remaining performance obligations over the next 12 months, with the remaining recognized thereafter.
 
For the three and nine months ended June 30, 2019, net revenue recognized from our performance obligations satisfied in previous periods was not material.

4.  DEBT

At June 30, 2019, and September 30, 2018, our long-term debt of $9,915 and $29,564, respectively, primarily related to amounts drawn on our revolving credit facility. Our weighted-average annual interest rate on these borrowings was 4.48% at June 30, 2019, and 3.86% at September 30, 2018. At June 30, 2019, we also had $6,551 in outstanding letters of credit and total availability of $85,024 under our revolving credit facility without violating our financial covenants.

Pursuant to our Second Amended and Restated Credit and Security Agreement with Wells Fargo Bank, N.A. (as amended, the “Credit Agreement”), the Company is subject to the financial or other covenants disclosed in Item 7 of our Annual Report on Form 10-K for the year ended September 30, 2018.

Effective May 20, 2019, the Company entered into a Fourth Amendment to the Credit Agreement, which permits the Company to repurchase up to 1.0 million additional shares of common stock pursuant to its previously authorized stock repurchase program for an aggregate purchase price (including for any remaining shares under the previous share repurchase authorization) not to exceed $25,000. There have been no other changes to the financial or other covenants disclosed in Item 7 of our Annual Report on Form 10-K for the year ended September 30, 2018. The Company was in compliance with the financial covenants as of June 30, 2019.

At June 30, 2019, the carrying value of amounts outstanding on our revolving credit facility approximated fair value, as debt incurs interest at a variable rate. The fair value of the debt is classified as a Level 2 measurement.



17


5. PER SHARE INFORMATION

The following tables reconcile the components of basic and diluted earnings per share for the three and nine months ended June 30, 2019, and 2018:
 
 
Three Months Ended June 30,
 
 
2019
 
2018
Numerator:
 
 
 
 
 
 
Net income attributable to common stockholders of IES Holdings, Inc.
 
$
10,826

 
$
8,513

Net income attributable to restricted stockholders of IES Holdings, Inc.
 
 
146

 
 
3

Net income attributable to IES Holdings, Inc.
 
$
10,972

 
$
8,516

 
 
 
 
 
 
 
Denominator:
 
 
 
 
 
 
Weighted average common shares outstanding — basic
 
 
21,043,425

 
 
21,200,635

Effect of dilutive stock options and non-vested restricted stock
 
 
257,810

 
 
131,248

Weighted average common and common equivalent shares outstanding — diluted
 
 
21,301,235

 
 
21,331,883

 
 
 
 
 
 
 
Earnings per share attributable to IES Holdings, Inc.:
 
 
 
 
 
 
Basic
 
$
0.52

 
$
0.40

Diluted
 
$
0.52

 
$
0.40

 
 
 
 
 
 
 
 
 
Nine Months Ended June 30,
 
 
2019
 
2018
Numerator:
 
 
 
 
 
 
Net income (loss) attributable to common stockholders of IES Holdings, Inc.
 
$
23,210

 
$
(18,788
)
Decrease in noncontrolling interest
 
 

 
 
(44
)
Net income (loss) attributable to restricted stockholders of IES Holdings, Inc.
 
 
135

 
 

Net income (loss) attributable to IES Holdings, Inc.
 
$
23,345

 
$
(18,832
)
 
 
 
 
 
 
 
Denominator:
 
 
 
 
 
 
Weighted average common shares outstanding — basic
 
 
21,139,697

 
 
21,193,306

Effect of dilutive stock options and non-vested restricted stock
 
 
242,481

 
 

Weighted average common and common equivalent shares outstanding — diluted
 
 
21,382,178

 
 
21,193,306

 
 
 
 
 
 
 
Earnings (loss) per share attributable to IES Holdings, Inc.:
 
 
 
 
 
 
Basic
 
$
1.10

 
$
(0.89)

Diluted
 
$
1.09

 
$
(0.89)


When an entity has a net loss, it is prohibited from including potential common shares in the computation of diluted per share amounts. Accordingly, we have utilized basic shares outstanding to calculate both basic and diluted loss per share for the nine months ended June 30, 2018. The number of potential anti-dilutive shares excluded from the calculation was 211,669 shares. For the three months ended June 30, 2018, and the three and nine months ended June 30, 2019, the average price of our common shares exceeded the exercise price of all of our outstanding options; therefore, all of our outstanding stock options were included in the computation of fully diluted earnings per share.


6. OPERATING SEGMENTS

We manage and measure performance of our business in four distinct operating segments: Commercial & Industrial, Communications, Infrastructure Solutions and Residential. These segments are reflective of how the Company’s Chief Operating Decision Maker (“CODM”) reviews operating results for the purpose of allocating resources and assessing performance. The Company’s CODM is its Chief Executive Officer.

18



Transactions between segments, if any, are eliminated in consolidation. Our corporate office provides general and administrative, as well as support services, to our four operating segments. Management allocates certain shared costs between segments for selling, general and administrative expenses and depreciation expense.

Segment information for the three and nine months ended June 30, 2019, and 2018 is as follows:

 
 
Three Months Ended June 30, 2019
 
 
Commercial & Industrial
 
Communications
 
Infrastructure Solutions
 
Residential
 
Corporate
 
Total
Revenues
$
75,370

 
$
90,438

 
$
36,109

 
$
80,716

 
$

 
$
282,633

Cost of services
69,171

 
75,044

 
27,671

 
64,350

 

 
236,236

Gross profit
6,199

 
15,394

 
8,438

 
16,366

 

 
46,397

Selling, general and administrative
6,827

 
8,406

 
4,937

 
11,812

 
4,351

 
36,333

Contingent consideration

 

 
(163
)
 

 

 
(163
)
Loss (gain) on sale of assets
(4
)
 

 
(4
)
 

 

 
(8
)
Operating income (loss)
(624
)
 
6,988

 
3,668

 
4,554

 
(4,351
)
 
10,235

Other data:
 
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization expense
$
652

 
$
339

 
$
1,122

 
$
218

 
$
23

 
$
2,354

 
Capital expenditures
$
507

 
$
74

 
$
311

 
$
329

 
$
22

 
$
1,243

 
Total assets
$
81,693

 
$
111,270

 
$
118,143

 
$
57,866

 
$
69,392

 
$
438,364


 
 
Three Months Ended June 30, 2018
 
 
Commercial & Industrial
 
Communications
 
Infrastructure Solutions
 
Residential
 
Corporate
 
Total
Revenues
$
78,156

 
$
54,368

 
$
24,856

 
$
75,196

 
$

 
$
232,576

Cost of services
67,839

 
43,436

 
18,701

 
60,063

 

 
190,039

Gross profit
10,317

 
10,932

 
6,155

 
15,133

 

 
42,537

Selling, general and administrative
6,980

 
7,193

 
4,568

 
10,941

 
2,690

 
32,372

Contingent consideration

 

 
81

 

 

 
81

Loss (gain) on sale of assets
(6
)
 

 
1

 

 

 
(5
)
Operating income (loss)
3,343

 
3,739

 
1,505

 
4,192

 
(2,690
)
 
10,089

Other data:
 
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization expense
$
548

 
$
595

 
$
1,120

 
$
156

 
$
18

 
$
2,437

 
Capital expenditures
$
715

 
$
119

 
$
112

 
$
110

 
$

 
$
1,056

 
Total assets
$
86,012

 
$
67,270

 
$
102,233

 
$
52,500

 
$
87,948

 
$
395,963


 
 
Nine Months Ended June 30, 2019
 
 
 
Commercial & Industrial
 
Communications
 
Infrastructure Solutions
 
Residential
 
Corporate
 
Total
Revenues
 
$
227,928

 
$
230,200

 
$
100,038

 
$
225,223

 
$

 
$
783,389

Cost of services
 
204,263

 
190,895

 
78,227

 
178,771

 

 
652,156

Gross profit
 
23,665

 
39,305

 
21,811

 
46,452

 

 
131,233

Selling, general and administrative
 
20,906

 
23,006

 
14,103

 
34,136

 
11,338

 
103,489

Contingent consideration
 

 

 
(278
)
 

 

 
(278
)
Loss (gain) on sale of assets
 
(8
)
 

 
97

 
(2
)
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