IES Holdings, Inc. - Quarter Report: 2019 March (Form 10-Q)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

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

For the Quarterly Period Ended March 31, 2019

OR

 

☐	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

 

 

 

IES Holdings, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware		76-0542208
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer 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 Rights to Purchase Preferred Stock		IESC IESC		NASDAQ Global Market 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  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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		☐		Accelerated filer		☒
Non-accelerated filer		☐		Smaller reporting company		☒
Emerging growth company		☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

On May 2, 2019, there were 21,368,483 shares of common stock outstanding.

 

 

 

IES HOLDINGS, INC. AND SUBSIDIARIES

INDEX

 

		Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of March  31, 2019 and September 30, 2018			6
Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended March 31, 2019 and 2018			7
Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended March 31, 2019 and 2018			9
Condensed Consolidated Statements of Cash Flows for the Six Months Ended March 31, 2019 and 2018			10
Notes to Condensed Consolidated Financial Statements			11
Item  2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			26
Item 3. Quantitative and Qualitative Disclosures About Market Risk			36
Item 4. Controls and Procedures			36
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			36
Item 1A. Risk Factors			37
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			38
Item 3. Defaults Upon Senior Securities			38
Item 4. Mine Safety Disclosures			38
Item 5. Other Information			38
Item 6. Exhibits			38
Signatures			41

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 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)

 

		March 31, 2019				September 30, 2018
		(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	16,158			$	26,247
Accounts receivable:
Trade, net of allowance of $1,015 and $868, respectively			160,946				151,578
Retainage			22,904				24,312
Inventories			23,729				20,966
Costs and estimated earnings in excess of billings			28,293				31,446
Prepaid expenses and other current assets			10,897				8,144
Total current assets			262,927				262,693
Property and equipment, net			26,520				25,364
Goodwill			50,622				50,702
Intangible assets, net			28,459				30,590
Deferred tax assets			43,081				46,580
Other non-current assets			5,662				6,065
Total assets		$	417,271			$	421,994
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses			129,704				130,591
Billings in excess of costs and estimated earnings			32,932				33,826
Total current liabilities			162,636				164,417
Long-term debt			19,672				29,564
Other non-current liabilities			3,655				4,374
Total liabilities			185,963				198,355
Noncontrolling interest			3,163				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 21,381,847 and 21,205,536 outstanding, respectively			220				220
Treasury stock, at cost, 667,682 and 843,993 shares, respectively			(8,443	)			(8,937	)
Additional paid-in capital			191,579				196,810
Retained earnings			44,789				32,314
Total stockholders’ equity			228,145				220,407
Total liabilities and stockholders’ equity		$	417,271			$	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 March 31,
		2019				2018
Revenues		$	256,914			$	205,677
Cost of services			213,679				171,837
Gross profit			43,235				33,840
Selling, general and administrative expenses			35,070				29,647
Contingent consideration			(149	)			71
Loss (gain) on sale of assets			98				(20	)
Operating income			8,216				4,142
Interest and other (income) expense:
Interest expense			535				473
Other (income) expense, net			(112	)			(43	)
Income from operations before income taxes			7,793				3,712
Provision for income taxes			2,336				1,425
Net income			5,457				2,287
Net (income) loss attributable to noncontrolling interest			32				(66	)
Comprehensive income attributable to IES Holdings, Inc.		$	5,489			$	2,221
Earnings per share attributable to IES Holdings, Inc.:
Basic		$	0.26			$	0.11
Diluted		$	0.26			$	0.11
Shares used in the computation of earnings per share:
Basic			21,139,096				21,182,268
Diluted			21,379,746				21,440,570

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)

 

		Six Months Ended March 31,
		2019				2018
Revenues		$	500,756			$	403,977
Cost of services			415,920				337,073
Gross profit			84,836				66,904
Selling, general and administrative expenses			67,156				59,736
Contingent consideration			(115	)			71
Loss (gain) on sale of assets			95				(34	)
Operating income			17,700				7,131
Interest and other (income) expense:
Interest expense			1,082				914
Other (income) expense, net			(65	)			(141	)
Income from operations before income taxes			16,683				6,358
Provision for income taxes			4,243				33,584
Net income (loss)			12,440				(27,226	)
Net income attributable to noncontrolling interest			(67	)			(122	)
Comprehensive income (loss) attributable to IES Holdings, Inc.		$	12,373			$	(27,348	)
Earnings (loss) per share attributable to IES Holdings, Inc.:
Basic		$	0.58			$	(1.29	)
Diluted		$	0.58			$	(1.29	)
Shares used in the computation of earnings (loss) per share:
Basic			21,187,834				21,189,641
Diluted			21,424,522				21,189,641

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 March 31, 2019
		Common Stock								Treasury Stock								APIC				Retained Earnings				Total Stockholders’ Equity
		Shares				Amount				Shares				Amount
BALANCE, December 31, 2018			22,049,529			$	220				(763,426	)		$	(8,896	)		$	194,607			$	39,300			$	225,231
Issuances under compensation plans			—				—				3,991				71				(71	)			—				—
Grants under compensation plan			—				—				283,195				3,582				(3,582	)			—				—
Acquisition of treasury stock			—				—				(191,442	)			(3,200	)			—				—				(3,200	)
Non-cash compensation			—				—				—				—				625				—				625
Net income attributable to IES Holdings, Inc.			—				—				—				—				—				5,489				5,489
BALANCE, March 31, 2019			22,049,529			$	220				(667,682	)		$	(8,443	)		$	191,579			$	44,789			$	228,145

 

		Three Months Ended March 31, 2018
		Common Stock								Treasury Stock								APIC				Retained Earnings				Total Stockholders’ Equity
		Shares				Amount				Shares				Amount
BALANCE, December 31, 2017			22,049,529			$	220				(710,784	)		$	(6,881	)		$	197,312			$	16,858			$	207,509
Grants under compensation plans			—				—				250				2				(2	)			—				—
Acquisition of treasury stock			—				—				(79,817	)			(1,229	)			—				—				(1,229	)
Non-cash compensation			—				—				—				—				(475	)			—				(475	)
Increase in noncontrolling interest			—				—				—				—				—				44				44
Net income attributable to IES Holdings, Inc.			—				—				—				—				—				2,221				2,221
BALANCE, March 31, 2018			22,049,529			$	220				(790,351	)		$	(8,108	)		$	196,835			$	19,123			$	208,070

 

		Six Months Ended March 31, 2019
		Common Stock								Treasury Stock								APIC				Retained Earnings				Total Stockholders’ Equity
		Shares				Amount				Shares				Amount
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			—				—				(323,563	)			(5,411	)			—				—				(5,411	)
Non-cash compensation			—				—				—				—				674				—				674
Net income attributable to IES Holdings, Inc.			—				—				—				—				—				12,373				12,373
BALANCE, March 31, 2019			22,049,529			$	220				(667,682	)		$	(8,443	)		$	191,579			$	44,789			$	228,145

 

		Six Months Ended March 31, 2018
		Common Stock								Treasury Stock								APIC				Retained Earnings				Total Stockholders’ Equity
		Shares				Amount				Shares				Amount
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			—				—				(79,817	)			(1,230	)							—				(1,230	)
Options exercised			—				—				1,500				15				(4	)			—				11
Non-cash compensation			—				—				—				—				(111	)			—				(111	)
Increase in noncontrolling interest			—				—				—				—				—				44				44
Net loss attributable to IES Holdings, Inc.			—				—				—				—				—				(27,348	)			(27,348	)
BALANCE, March 31, 2018			22,049,529			$	220				(790,351	)		$	(8,108	)		$	196,835			$	19,123			$	208,070

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)

 

		Six Months Ended March 31,
		2019				2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)		$	12,440			$	(27,226	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Bad debt expense			248				96
Deferred financing cost amortization			156				142
Depreciation and amortization			4,846				4,269
Loss (gain) on sale of assets			95				(34	)
Non-cash compensation expense			674				(111	)
Deferred income taxes			4,243				33,584
Changes in operating assets and liabilities:
Accounts receivable			(9,616	)			14,945
Inventories			(2,873	)			(665	)
Costs and estimated earnings in excess of billings			3,152				(1,921	)
Prepaid expenses and other current assets			(764	)			97
Other non-current assets			(1,370	)			(52	)
Accounts payable and accrued expenses			(144	)			(10,081	)
Billings in excess of costs and estimated earnings			(948	)			(2,098	)
Other non-current liabilities			(736	)			214
Net cash provided by operating activities			9,403				11,159
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment			(3,929	)			(2,327	)
Proceeds from sale of assets			7				94
Cash paid in conjunction with business combinations			—				(175	)
Net cash used in investing activities			(3,922	)			(2,408	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of debt			122				68
Repayments of debt			(10,144	)			(109	)
Distribution to noncontrolling interest			(137	)			(69	)
Purchase of treasury stock			(5,411	)			(1,229	)
Issuance of shares			—				11
Net cash used in financing activities			(15,570	)			(1,328	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			(10,089	)			7,423
CASH, CASH EQUIVALENTS and RESTRICTED CASH, beginning of period			26,247				28,290
CASH, CASH EQUIVALENTS and RESTRICTED CASH, end of period		$	16,158			$	35,713
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest		$	1,008			$	788
Cash paid for income taxes (net)		$	523			$	1,456

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

 

11

IES HOLDINGS, INC.

Notes to the Condensed Consolidated Financial Statements

(All Amounts in Thousands Except Share Amounts)

(Unaudited)

 

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 the balance sheet date. If all of these interests had been redeemable at March 31, 2019, the redemption amount would have been $1,428. For the six months ended March 31, 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 March 31, 2019, 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

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 six months ended March 31, 2018, our effective tax rate differed from the statutory tax rate as a result of a charge of $31,487 to re-measure our deferred tax assets and liabilities to reflect the impact of the new statutory tax rate. 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.

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. 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.

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.

 

12

IES HOLDINGS, INC.

Notes to the Condensed Consolidated Financial Statements

(All Amounts in Thousands Except Share Amounts)

(Unaudited)

 

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

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 quarter and year ended March 31, 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 six months ended March 31, 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 57.5 percent of the Company’s outstanding common stock according to a Schedule 13D/A filed with the SEC by Tontine on January 11, 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.

 

13

IES HOLDINGS, INC.

Notes to the Condensed Consolidated Financial Statements

(All Amounts in Thousands Except Share Amounts)

(Unaudited)

 

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.

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, 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.

 

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IES HOLDINGS, INC.

Notes to the Condensed Consolidated Financial Statements

(All Amounts in Thousands Except Share Amounts)

(Unaudited)

 

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 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 March 31, 2019, we had capitalized commission costs of $100.

We generally do not incur significant incremental costs related to obtaining or fulfilling a contract prior to the start of a project. On rare occasions, 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.

 

15

IES HOLDINGS, INC.

Notes to the Condensed Consolidated Financial Statements

(All Amounts in Thousands Except Share Amounts)

(Unaudited)

 

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 March 31,								Six Months Ended March 31,
		2019				2018				2019				2018
Commercial & Industrial		$	79,975				65,589				152,558				118,591
Communications			70,437				50,244				139,762				104,703
Infrastructure Solutions
Industrial Services			12,145				10,404				24,368				21,457
Custom Power Solutions			22,305				13,462				39,561				24,094
Total			34,450				23,866				63,929				45,551
Residential
Single-family			51,492				43,594				101,968				88,208
Multi-family and Other			20,560				22,384				42,539				46,924
Total			72,052				65,978				144,507				135,132
Total Revenue		$	256,914			$	205,677			$	500,756			$	403,977

 

		Three Months Ended March 31, 2019
		Commercial & Industrial				Communications				Infrastructure Solutions				Residential				Total
Fixed-price		$	76,467			$	48,602			$	30,130			$	72,052			$	227,251
Time-and-material			3,508				21,835				4,320				—				29,663
Total revenue		$	79,975			$	70,437			$	34,450			$	72,052			$	256,914
		Three Months Ended March 31, 2018
		Commercial & Industrial				Communications				Infrastructure Solutions				Residential				Total
Fixed-price		$	58,183			$	37,344			$	20,636			$	65,978			$	182,141
Time-and-material			7,406				12,900				3,230				—				23,536
Total revenue		$	65,589			$	50,244			$	23,866			$	65,978			$	205,677
		Six Months Ended March 31, 2019
		Commercial & Industrial				Communications				Infrastructure Solutions				Residential				Total
Fixed-price		$	142,297			$	97,431			$	57,641			$	144,507			$	441,876
Time-and-material			10,261				42,331				6,288				—				58,880
Total revenue		$	152,558			$	139,762			$	63,929			$	144,507			$	500,756
		Six Months Ended March 31, 2018
		Commercial & Industrial				Communications				Infrastructure Solutions				Residential				Total
Fixed-price		$	107,103			$	81,500			$	40,309			$	135,132			$	364,044
Time-and-material			11,488				23,203				5,242				—				39,933
Total revenue		$	118,591			$	104,703			$	45,551			$	135,132			$	403,977

Accounts Receivable

Accounts receivable include amounts which we have billed or have an unconditional right to bill our customers. As of March 31, 2019, Accounts receivable included $10,173 of unbilled receivables for which we have an unconditional right to bill.

 

16

IES HOLDINGS, INC.

Notes to the Condensed Consolidated Financial Statements

(All Amounts in Thousands Except Share Amounts)

(Unaudited)

 

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:

 

		March 31, 2019				September 30, 2018
Costs and estimated earnings on uncompleted contracts		$	586,289			$	539,226
Less: Billings to date and unbilled accounts receivable			(590,928	)			(541,606	)
		$	(4,639	)		$	(2,380	)

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

 

		March 31, 2019				September 30, 2018
Costs and estimated earnings in excess of billings		$	28,293			$	31,446
Billings in excess of costs and estimated earnings			(32,932	)			(33,826	)
		$	(4,639	)		$	(2,380	)

During the three months ended March 31, 2019, and 2018, we recognized revenue of $18,114 and $14,977 related to our contract liabilities at January 1, 2019 and 2018, respectively. During the six months ended March 31, 2019, and 2018, we recognized revenue of $24,701 and $25,575 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 six months ended March 31, 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 March 31, 2019, we had remaining performance obligations of $423,718. The Company expects to recognize revenue on approximately $376,680 of the remaining performance obligations over the next 12 months, with the remaining recognized thereafter.

For the three and six months ended March 31, 2019, net revenue recognized from our performance obligations satisfied in previous periods was not material.

4. DEBT

At March 31, 2019, and September 30, 2018, our long-term debt of $19,672 and $29,564, respectively, primarily related to amounts drawn on our revolving credit facility. Our weighted-average annual interest rate on these borrowings was 4.52% at March 31, 2019, and 3.86% at September 30, 2018. At March 31, 2019, we also had $6,551 in outstanding letters of credit and total availability of $71,698 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.

 

17

IES HOLDINGS, INC.

Notes to the Condensed Consolidated Financial Statements

(All Amounts in Thousands Except Share Amounts)

(Unaudited)

 

There have been no other changes to those covenants. The Company was in compliance with the financial covenants as of March 31, 2019.

At March 31, 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.

5. PER SHARE INFORMATION

The following tables reconcile the components of basic and diluted earnings per share for the three and six months ended March 31, 2019, and 2018:

 

		Three Months Ended March 31,
		2019				2018
Numerator:
Net income attributable to common stockholders of IES Holdings, Inc.		$	5,467			$	2,250
Decrease in noncontrolling interest			—				(44	)
Net income attributable to restricted stockholders of IES Holdings, Inc.			22				15
Net income attributable to IES Holdings, Inc.		$	5,489			$	2,221
Denominator:
Weighted average common shares outstanding — basic			21,139,096				21,182,268
Effect of dilutive stock options and non-vested restricted stock			240,650				258,302
Weighted average common and common equivalent shares outstanding — diluted			21,379,746				21,440,570
Earnings per share attributable to IES Holdings, Inc.:
Basic		$	0.26			$	0.11
Diluted		$	0.26			$	0.11
		Six Months Ended March 31,
		2019				2018
Numerator:
Net income (loss) attributable to common stockholders of IES Holdings, Inc.		$	12,348			$	(27,304	)
Decrease in noncontrolling interest			—				(44	)
Net income (loss) attributable to restricted stockholders of IES Holdings, Inc.			25				—
Net income (loss) attributable to IES Holdings, Inc.		$	12,373			$	(27,348	)
Denominator:
Weighted average common shares outstanding — basic			21,187,834				21,189,641
Effect of dilutive stock options and non-vested restricted stock			236,688				—
Weighted average common and common equivalent shares outstanding — diluted			21,424,522				21,189,641
Earnings (loss) per share attributable to IES Holdings, Inc.:
Basic		$	0.58			$	(1.29	)
Diluted		$	0.58			$	(1.29	)

 

18

IES HOLDINGS, INC.

Notes to the Condensed Consolidated Financial Statements

(All Amounts in Thousands Except Share Amounts)

(Unaudited)

 

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 six months ended March 31, 2018. The number of potential anti-dilutive shares excluded from the calculation was 255,146 shares. For the three months ended March 31, 2018, and the three and six months ended March 31, 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.

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 six months ended March 31, 2019, and 2018 is as follows:

 

		Three Months Ended March 31, 2019
		Commercial & Industrial				Communications				Infrastructure Solutions				Residential				Corporate				Total
Revenues		$	79,975			$	70,437			$	34,450			$	72,052			$	—			$	256,914
Cost of services			71,184				58,492				27,004				56,999				—				213,679
Gross profit			8,791				11,945				7,446				15,053				—				43,235
Selling, general and administrative			7,363				7,666				4,685				11,187				4,169				35,070
Contingent consideration			—				—				(149	)			—				—				(149	)
Loss (gain) on sale of assets			(1	)			—				101				(2	)			—				98
Operating income (loss)		$	1,429			$	4,279			$	2,809			$	3,868			$	(4,169	)		$	8,216
Other data:
Depreciation and amortization expense		$	629			$	426			$	1,175			$	217			$	27			$	2,474
Capital expenditures		$	615			$	193			$	635			$	398			$	—			$	1,841
Total assets		$	77,898			$	91,960			$	114,739			$	55,417			$	77,257			$	417,271
		Three Months Ended March 31, 2018
		Commercial & Industrial				Communications				Infrastructure Solutions				Residential				Corporate				Total
Revenues		$	65,589			$	50,244			$	23,866			$	65,978			$	—			$	205,677
Cost of services			59,068				40,892				18,842				53,035				—				171,837
Gross profit			6,521				9,352				5,024				12,943				—				33,840
Selling, general and administrative			6,849				6,201				4,637				9,688				2,272				29,647
Contingent consideration			—				—				71				—				—				71
Loss (gain) on sale of assets			(17	)			(8	)			6				(1	)			—				(20	)
Operating income (loss)		$	(311	)		$	3,159			$	310			$	3,256			$	(2,272	)		$	4,142
Other data:
Depreciation and amortization expense		$	527			$	219			$	1,140			$	155			$	20			$	2,061
Capital expenditures		$	413			$	398			$	205			$	108			$	—			$	1,124
Total assets		$	72,559			$	60,102			$	100,884			$	47,695			$	103,747			$	384,987

 

19

IES HOLDINGS, INC.

Notes to the Condensed Consolidated Financial Statements

(All Amounts in Thousands Except Share Amounts)

(Unaudited)

 

		Six Months Ended March 31, 2019
		Commercial & Industrial				Communications				Infrastructure Solutions				Residential				Corporate				Total
Revenues		$	152,558			$	139,762			$	63,929			$	144,507			$	—			$	500,756
Cost of services			135,092				115,851				50,556				114,421				—				415,920
Gross profit			17,466				23,911				13,373				30,086				—				84,836
Selling, general and administrative			14,079				14,600				9,166				22,324				6,987				67,156
Contingent consideration			—				—				(115	)			—				—				(115	)
Loss (gain) on sale of assets			(4	)			—				101				(2	)			—				95
Operating income (loss)		$	3,391			$	9,311			$	4,221			$	7,764			$	(6,987	)		$	17,700
Other data:
Depreciation and amortization expense		$	1,255			$	841			$	2,269			$	426			$	55			$	4,846
Capital expenditures		$	1,467			$	693			$	822			$	845			$	102			$	3,929
Total assets		$	77,898			$	91,960			$	114,739			$	55,417			$	77,257			$	417,271
		Six Months Ended March 31, 2018
		Commercial & Industrial				Communications				Infrastructure Solutions				Residential				Corporate				Total
Revenues		$	118,591			$	104,703			$	45,551			$	135,132			$	—			$	403,977
Cost of services			107,227				86,231				35,842				107,773				—				337,073
Gross profit			11,364				18,472				9,709				27,359				—				66,904
Selling, general and administrative			12,644				12,285				9,194				20,054				5,559				59,736
Contingent consideration			—				—				71				—				—				71
Loss (gain) on sale of assets			(29	)			(9	)			5				(1	)			—				(34	)
Operating income (loss)		$	(1,251	)		$	6,196			$	439			$	7,306			$	(5,559	)		$	7,131
Other data:
Depreciation and amortization expense		$	1,084			$	435			$	2,383			$	296			$	71			$	4,269
Capital expenditures		$	923			$	473			$	345			$	586			$	—			$	2,327
Total assets		$	72,559			$	60,102			$	100,884			$	47,695			$	103,747			$	384,987

7. STOCKHOLDERS’ EQUITY

Equity Incentive Plan

The Company’s 2006 Equity Incentive Plan, as amended and restated (the “Equity Incentive Plan”), provides for grants of stock options as well as grants of stock, including restricted stock. Approximately 3.0 million shares of common stock are authorized for issuance under the Equity Incentive Plan, of which approximately 847,891 shares were available for issuance at March 31, 2019.

Stock Repurchase Program

In 2015, our Board of Directors authorized a stock repurchase program for the purchase from time to time of up to 1.5 million shares of the Company’s common stock. Share purchases are made for cash in open market transactions at prevailing market prices or in privately negotiated transactions or otherwise. The timing and amount of purchases under the program are determined based upon prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. All or part of the repurchases may be implemented under a Rule 10b5-1 trading plan, which allows repurchases under pre-set terms at times when the Company might otherwise be prevented from purchasing under insider trading laws or because of self-imposed blackout periods. The program does not require the Company to purchase any specific number of shares and may be modified, suspended or reinstated at any time at the Company’s discretion and without notice. We repurchased 189,821 and 235,954 shares, respectively, of our common stock during the

 

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