þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware (State or other jurisdiction of incorporation or organization) |
76-0542208 (I.R.S. Employer Identification No.) |
Large accelerated filer o | Accelerated filer o | Non-accelerated filer þ (Do not check if a smaller reporting company) | Smaller reporting company o |
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Exhibit 31.1 |
||||||||
Exhibit 31.2 |
||||||||
Exhibit 32.1 |
||||||||
Exhibit 32.2 |
||||||||
EX-31.1 | ||||||||
EX-31.2 | ||||||||
EX-32.1 | ||||||||
EX-32.2 | ||||||||
EX-101 INSTANCE DOCUMENT | ||||||||
EX-101 SCHEMA DOCUMENT | ||||||||
EX-101 CALCULATION LINKBASE DOCUMENT | ||||||||
EX-101 LABELS LINKBASE DOCUMENT | ||||||||
EX-101 PRESENTATION LINKBASE DOCUMENT |
| fluctuations in operating activity due to downturns in levels of construction, seasonality and differing regional economic conditions; | ||
| competition in the construction industry, 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 contracts; | ||
| a general reduction in the demand for our services; | ||
| a change in the mix of our customers, contracts and business; | ||
| our ability to successfully manage construction projects; | ||
| possibility of errors when estimating revenue and progress to date on percentage-of-completion contracts; | ||
| inaccurate estimates used when entering into fixed-priced contracts; | ||
| challenges integrating new types of work or new processes into our divisions; | ||
| the cost and availability of qualified labor, especially electricians and construction supervisors; | ||
| accidents resulting from the physical hazards associated with our work and the potential for vehicle accidents; | ||
| success in transferring, renewing and obtaining electrical and construction licenses; | ||
| our ability to pass along increases in the cost of commodities used in our business, in particular, copper, aluminum, steel, fuel and certain plastics; | ||
| potential supply chain disruptions due to credit or liquidity problems faced by our suppliers; | ||
| loss of key personnel and effective transition of new management; | ||
| warranty losses or other latent defect claims in excess of our existing reserves and accruals; | ||
| warranty losses or other unexpected liabilities stemming from former divisions which we have sold or closed; | ||
| growth in latent defect litigation in states where we provide residential electrical work for home builders not otherwise covered by insurance; | ||
| limitations on the availability of sufficient credit or cash flow to fund our working capital needs; | ||
| difficulty in fulfilling the covenant terms of our credit facilities; | ||
| 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; |
3
| increases in bad debt expense and days sales outstanding due to liquidity problems faced by our customers; | ||
| changes in the assumptions made regarding future events used to value our stock options and performance-based stock awards; | ||
| the recognition of potential goodwill, fixed asset and other investment impairments; | ||
| uncertainties inherent in estimating future operating results, including revenues, operating income or cash flow; | ||
| disagreements with taxing authorities with regard to tax positions we have adopted; | ||
| the recognition of tax benefits related to uncertain tax positions; | ||
| complications associated with the incorporation of new accounting, control and operating procedures; | ||
| the financial impact of new or proposed accounting regulations; | ||
| the ability of our controlling shareholder to take action not aligned with other shareholders; | ||
| the possibility that certain of our net operating losses may be restricted or reduced in a change in ownership; | ||
| 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; and | ||
| the sale or disposition of the shares of our common stock held by our majority shareholder, which, under certain circumstances, would trigger change of control provisions in contracts such as employment agreements, supply agreements, and financing and surety arrangements. |
4
June 30, | September 30, | |||||||
2011 | 2010 | |||||||
(Unaudited) | ||||||||
ASSETS |
||||||||
CURRENT ASSETS: |
||||||||
Cash and cash equivalents |
$ | 23,039 | $ | 32,924 | ||||
Accounts receivable: |
||||||||
Trade, net of allowance of $2,308 and
$3,360, respectively |
85,749 | 88,252 | ||||||
Retainage |
19,845 | 17,083 | ||||||
Inventories |
6,203 | 12,682 | ||||||
Costs and estimated earnings in excess of
billings on uncompleted contracts |
12,038 | 12,566 | ||||||
Prepaid expenses and other current assets |
4,600 | 5,449 | ||||||
Total current assets |
151,474 | 168,956 | ||||||
LONG-TERM ASSETS |
||||||||
LONG TERM RECEIVABLES, net of allowance of
$64 and $77, respectively |
235 | 440 | ||||||
PROPERTY AND EQUIPMENT, net |
12,097 | 19,846 | ||||||
GOODWILL |
3,981 | 3,981 | ||||||
OTHER NON-CURRENT ASSETS, net |
8,895 | 11,882 | ||||||
Total assets |
$ | 176,682 | $ | 205,105 | ||||
LIABILITIES AND STOCKHOLDERS
EQUITY |
||||||||
CURRENT LIABILITIES: |
||||||||
Current maturities of long-term debt |
$ | 265 | $ | 808 | ||||
Accounts payable and accrued expenses |
67,127 | 67,799 | ||||||
Billings in excess of costs and estimated
earnings on uncompleted contracts |
12,644 | 17,109 | ||||||
Total current
liabilities |
80,036 | 85,716 | ||||||
LONG-TERM DEBT, net of current maturities |
10,346 | 10,448 | ||||||
LONG-TERM DEFERRED TAX LIABILITY |
1,046 | 1,046 | ||||||
OTHER NON-CURRENT LIABILITIES |
6,022 | 6,314 | ||||||
Total liabilities |
97,450 | 103,524 | ||||||
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; 15,407,802 and
15,407,802 shares issued and
14,838,416 and 14,773,904
outstanding, respectively |
154 | 154 | ||||||
Treasury stock, at cost, 569,386 and
633,898 shares, respectively |
(7,081 | ) | (13,677 | ) | ||||
Additional paid-in capital |
165,531 | 171,510 | ||||||
Accumulated other comprehensive income |
| (88 | ) | |||||
Retained deficit |
(79,372 | ) | (56,318 | ) | ||||
Total stockholders equity |
79,232 | 101,581 | ||||||
Total liabilities and stockholders equity |
$ | 176,682 | $ | 205,105 | ||||
5
Three Months Ended | Three Months Ended | |||||||
June 30, 2011 | June 30, 2010 | |||||||
(Unaudited) | (Unaudited) | |||||||
Revenues |
$ | 123,189 | $ | 121,405 | ||||
Cost of services |
113,651 | 106,328 | ||||||
Gross profit |
9,538 | 15,077 | ||||||
Selling, general and administrative expenses |
17,412 | 21,098 | ||||||
Loss (gain) on sale of assets |
136 | (113 | ) | |||||
Restructuring charges |
1,667 | | ||||||
Loss from operations |
(9,677 | ) | (5,908 | ) | ||||
Interest and other: |
||||||||
Interest expense |
571 | 784 | ||||||
Interest income |
(13 | ) | (92 | ) | ||||
Other income, net |
21 | 55 | ||||||
Interest and other expense, net |
579 | 747 | ||||||
Loss from operations before income taxes |
(10,256 | ) | (6,655 | ) | ||||
Benefit for income taxes |
(91 | ) | (98 | ) | ||||
Net loss |
$ | (10,165 | ) | $ | (6,557 | ) | ||
Loss per share |
||||||||
Basic |
$ | (0.70 | ) | $ | (0.45 | ) | ||
Diluted |
$ | (0.70 | ) | $ | (0.45 | ) | ||
Shares used in the computation of loss per share (Note 5): |
||||||||
Basic |
14,491,966 | 14,425,119 | ||||||
Diluted |
14,491,966 | 14,425,119 |
6
Nine Months Ended | Nine Months Ended | |||||||
June 30, 2011 | June 30, 2010 | |||||||
(Unaudited) | (Unaudited) | |||||||
Revenues |
$ | 355,163 | $ | 349,272 | ||||
Cost of services |
329,097 | 300,675 | ||||||
Gross profit |
26,066 | 48,597 | ||||||
Selling, general and administrative expenses |
48,766 | 66,075 | ||||||
(Gain) loss on sale of assets |
(6,679 | ) | (165 | ) | ||||
Asset Impairment |
3,551 | | ||||||
Restructuring charges |
1,667 | 763 | ||||||
Loss from operations |
(21,239 | ) | (18,076 | ) | ||||
Interest and other: |
||||||||
Interest expense |
1,746 | 2,869 | ||||||
Interest income |
(62 | ) | (208 | ) | ||||
Other income, net |
(3 | ) | (172 | ) | ||||
Interest and other expense, net |
1,681 | 2,489 | ||||||
Loss from operations before income taxes |
(22,920 | ) | (20,565 | ) | ||||
Provision for income taxes |
135 | 28 | ||||||
Net loss |
$ | (23,055 | ) | $ | (20,593 | ) | ||
Loss per share |
||||||||
Basic |
$ | (1.59 | ) | $ | (1.43 | ) | ||
Diluted |
$ | (1.59 | ) | $ | (1.43 | ) | ||
Shares used in the computation of loss per share (Note 5): |
||||||||
Basic |
14,472,441 | 14,403,925 | ||||||
Diluted |
14,472,441 | 14,403,925 |
7
Nine Months Ended | Nine Months Ended | |||||||
June 30, 2011 | June 30, 2010 | |||||||
(Unaudited) | (Unaudited) | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
Net loss |
$ | (23,055 | ) | $ | (20,593 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: |
||||||||
Bad debt expense |
(1,052 | ) | 6,686 | |||||
Deferred financing cost amortization |
253 | 223 | ||||||
Depreciation and amortization |
2,761 | 4,014 | ||||||
Loss (gain) on sale of assets |
84 | (165 | ) | |||||
Asset Impairment |
3,551 | | ||||||
Gain on sale of business unit |
(6,763 | ) | | |||||
Non-cash compensation expense |
682 | 1,071 | ||||||
Equity in (gains) losses of investment |
88 | | ||||||
Deferred income tax benefit |
(32 | ) | | |||||
Changes in operating assets and liabilities |
||||||||
Accounts receivable |
(4,208 | ) | 20,726 | |||||
Inventories |
1,809 | 324 | ||||||
Costs and estimated earnings in excess of billings |
146 | 966 | ||||||
Prepaid expenses and other current assets |
485 | 1,044 | ||||||
Other non-current assets |
3,201 | 41 | ||||||
Accounts payable and accrued expenses |
2,789 | (20,068 | ) | |||||
Billings in excess of costs and estimated earnings |
(4,407 | ) | (9,740 | ) | ||||
Other non-current liabilities |
| (895 | ) | |||||
Net cash used in operations |
(23,668 | ) | (16,366 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
Purchases of property and equipment |
(2,103 | ) | (536 | ) | ||||
Proceeds from sales of property and equipment |
| 246 | ||||||
Proceeds from sales of facilities |
16,546 | | ||||||
Distribution from unconsolidated affiliates |
57 | 393 | ||||||
Net cash provided by (used in) investing activities |
14,500 | 103 | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
Borrowings of debt |
| 753 | ||||||
Repayments of debt |
(652 | ) | (17,542 | ) | ||||
Purchase of treasury stock |
| (172 | ) | |||||
Shares withheld for Taxes |
(65 | ) | (225 | ) | ||||
Net cash used in financing activities |
(717 | ) | (17,186 | ) | ||||
NET DECREASE IN CASH AND CASH EQUIVALENTS |
(9,885 | ) | (33,449 | ) | ||||
CASH AND CASH EQUIVALENTS, beginning of period |
32,924 | 64,174 | ||||||
CASH AND CASH EQUIVALENTS, end of period |
$ | 23,039 | $ | 30,725 | ||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
||||||||
Cash paid for interest |
$ | 1,499 | $ | 3,334 | ||||
Cash paid for income taxes |
$ | 247 | $ | 284 |
8
9
10
11
Three Months Ended | Three Months Ended | |||||||
June 30, 2011 | June 30, 2010 | |||||||
Revenues |
$ | 11,147 | $ | 13,490 | ||||
Gross profit (loss) |
(4,300 | ) | (177 | ) | ||||
Selling, general, & administrative expenses |
1,900 | 1,870 | ||||||
Restructuring |
1,667 | | ||||||
Loss / (gain) from sale of assets |
(24 | ) | (36 | ) | ||||
Loss from operations |
$ | (7,843 | ) | $ | (2,011 | ) | ||
Nine Months Ended | Nine Months Ended | |||||||
June 30, 2011 | June 30, 2010 | |||||||
Revenues |
$ | 36,758 | $ | 50,588 | ||||
Gross profit (loss) |
(5,611 | ) | 1,889 | |||||
Selling, general, & administrative expenses |
1,133 | 8,467 | ||||||
Restructuring |
1,667 | | ||||||
Loss / (gain) from sale of assets |
(40 | ) | (38 | ) | ||||
Loss from operations |
$ | (8,371 | ) | $ | (6,540 | ) | ||
Other data: |
||||||||
Working capital |
$ | 8,183 | $ | 17,284 | ||||
Total assets: |
$ | 19,256 | $ | 23,650 | ||||
12
Severance | Consulting / | |||||||||||
Charges | Other Charges | Total | ||||||||||
Restructuring liability at September 30, 2010 |
$ | | $ | | $ | | ||||||
Restructuring charges incurred |
749 | 918 | 1,667 | |||||||||
Cash payments made |
(16 | ) | (792 | ) | (808 | ) | ||||||
Restructuring liability at June 30, 2011 |
$ | 733 | $ | 126 | $ | 859 | ||||||
June 30, | September 30, | |||||||
2011 | 2010 | |||||||
Tontine Term Loan, due May 15, 2013, bearing interest at 11.00% |
$ | 10,000 | $ | 10,000 | ||||
Insurance Financing Agreements |
72 | 653 | ||||||
Capital leases |
539 | 603 | ||||||
Total debt |
10,611 | 11,256 | ||||||
Less Short-term debt and current maturities of long-term debt |
(265 | ) | (808 | ) | ||||
Total long-term debt |
$ | 10,346 | $ | 10,448 | ||||
13
Capital Leases | Term Debt | Total | ||||||||||
2011 |
$ | 79 | $ | 67 | $ | 146 | ||||||
2012 |
317 | 4 | 321 | |||||||||
2013 |
317 | 10,001 | 10,318 | |||||||||
2014 |
27 | | 27 | |||||||||
2015 |
| | | |||||||||
Thereafter |
| | | |||||||||
Less: Imputed Interest |
(201 | ) | | (201 | ) | |||||||
Total |
$ | 539 | $ | 10,072 | $ | 10,611 | ||||||
Annual Interest Rate for | ||||
Total Liquidity | Annual Interest Rate for Loans | Letters of Credit | ||
Greater than or equal to $60,000
|
LIBOR plus 3.00% or Base Rate plus 1.00% | 3.00% plus 0.25% fronting fee | ||
Greater than $40,000 and less than $60,000
|
LIBOR plus 3.25% or Base Rate plus 1.25% | 3.25% plus 0.25% fronting fee | ||
Less than or equal to $40,000
|
LIBOR plus 3.50% or Base Rate plus 1.50% | 3.50% plus 0.25% fronting fee |
14
15
Three Months Ended | ||||||||
June 30, | ||||||||
2011 | 2010 | |||||||
Numerator: |
||||||||
Net loss attributable to common shareholders |
$ | (10,165 | ) | $ | (6,557 | ) | ||
Net income attributable to restricted shareholders |
| | ||||||
Net loss |
$ | (10,165 | ) | $ | (6,557 | ) | ||
Denominator: |
||||||||
Weighted average common shares outstanding basic |
14,491,966 | 14,425,119 | ||||||
Effect of dilutive stock options and non-vested restricted stock |
| | ||||||
Weighted average common and common equivalent shares outstanding diluted |
14,491,966 | 14,425,119 | ||||||
Loss per share |
||||||||
Basic |
$ | (0.70 | ) | $ | (0.45 | ) | ||
Diluted |
$ | (0.70 | ) | $ | (0.45 | ) |
Nine Months Ended | ||||||||
June 30, | ||||||||
2011 | 2010 | |||||||
Numerator: |
||||||||
Net loss attributable to common shareholders |
$ | (23,055 | ) | $ | (20,593 | ) | ||
Net income attributable to restricted shareholders |
| | ||||||
Net loss |
$ | (23,055 | ) | $ | (20,593 | ) | ||
Denominator: |
||||||||
Weighted average common shares outstanding basic |
14,472,441 | 14,403,925 | ||||||
Effect of dilutive stock options and non-vested restricted stock |
| | ||||||
Weighted average common and common equivalent shares outstanding diluted |
14,472,441 | 14,403,925 | ||||||
Loss per share |
||||||||
Basic |
$ | (1.59 | ) | $ | (1.43 | ) | ||
Diluted |
$ | (1.59 | ) | $ | (1.43 | ) |
16
Three Months Ended June 30, 2011 | ||||||||||||||||||||
Commercial & | ||||||||||||||||||||
Communications | Residential | Industrial | Corporate | Total | ||||||||||||||||
Revenues |
$ | 23,498 | $ | 30,111 | $ | 69,580 | $ | | $ | 123,189 | ||||||||||
Cost of services |
20,773 | 25,121 | 67,757 | | 113,651 | |||||||||||||||
Gross profit |
2,725 | 4,990 | 1,823 | | 9,538 | |||||||||||||||
Selling, general and administrative |
2,563 | 4,503 | 7,819 | 2,527 | 17,412 | |||||||||||||||
Loss (gain) on sale of assets |
1 | 127 | (25 | ) | 33 | 136 | ||||||||||||||
Restructuring charge |
| | 1,667 | | 1,667 | |||||||||||||||
Income (loss) from operations |
$ | 161 | $ | 360 | $ | (7,638 | ) | $ | (2,560 | ) | $ | (9,677 | ) | |||||||
Other data: |
||||||||||||||||||||
Depreciation and amortization expense |
$ | 20 | $ | 67 | $ | 160 | $ | 504 | $ | 751 | ||||||||||
Capital expenditures |
$ | 378 | $ | 18 | $ | 5 | $ | 897 | $ | 1,298 | ||||||||||
Total assets |
$ | 23,730 | $ | 22,163 | $ | 80,017 | $ | 50,772 | $ | 176,682 |
17
Three Months Ended June 30, 2010 | ||||||||||||||||||||
Commercial & | ||||||||||||||||||||
Communications | Residential | Industrial | Corporate | Total | ||||||||||||||||
Revenues |
$ | 22,126 | $ | 31,489 | $ | 67,790 | $ | | $ | 121,405 | ||||||||||
Cost of services |
18,325 | 25,152 | 62,852 | | 106,328 | |||||||||||||||
Gross profit |
3,801 | 6,337 | 4,939 | | 15,077 | |||||||||||||||
Selling, general and administrative |
1,761 | 6,086 | 9,714 | 3,537 | 21,098 | |||||||||||||||
Loss (gain) on sale of assets |
(7 | ) | 29 | (61 | ) | (74 | ) | (113 | ) | |||||||||||
Restructuring charge |
| | | | | |||||||||||||||
Income (loss) from operations |
$ | 2,047 | $ | 222 | $ | (4,714 | ) | $ | (3,463 | ) | $ | (5,908 | ) | |||||||
Other data: |
||||||||||||||||||||
Depreciation and amortization expense |
$ | 33 | $ | 144 | $ | 287 | $ | 756 | $ | 1,220 | ||||||||||
Capital expenditures |
$ | | $ | 5 | $ | 29 | $ | | $ | 34 | ||||||||||
Total assets |
$ | 23,113 | $ | 31,368 | $ | 78,276 | $ | 68,469 | $ | 201,226 |
Nine Months Ended June 30, 2011 | ||||||||||||||||||||
Commercial & | ||||||||||||||||||||
Communications | Residential | Industrial | Corporate | Total | ||||||||||||||||
Revenues |
$ | 66,787 | $ | 82,521 | $ | 205,855 | $ | | $ | 355,163 | ||||||||||
Cost of services |
58,403 | 69,370 | 201,324 | | 329,097 | |||||||||||||||
Gross profit |
8,384 | 13,151 | 4,531 | | 26,066 | |||||||||||||||
Selling, general and administrative |
7,177 | 13,789 | 19,223 | 8,577 | 48,766 | |||||||||||||||
Loss (gain) on sale of assets |
1 | 58 | (74 | ) | (6,664 | ) | (6,679 | ) | ||||||||||||
Asset Impairment |
| | | 3,551 | 3,551 | |||||||||||||||
Restructuring charge |
| | 1,667 | | 1,667 | |||||||||||||||
Income (loss) from operations |
$ | 1,206 | $ | (696 | ) | $ | (16,285 | ) | $ | (5,464 | ) | $ | (21,239 | ) | ||||||
Other data: |
||||||||||||||||||||
Depreciation and amortization expense |
$ | 68 | $ | 250 | $ | 553 | $ | 1,890 | $ | 2,761 | ||||||||||
Capital expenditures |
$ | 378 | $ | 92 | $ | 395 | $ | 1,189 | $ | 2,054 | ||||||||||
Total assets |
$ | 23,730 | $ | 22,163 | $ | 80,017 | $ | 50,772 | $ | 176,682 |
18
Nine Months Ended June 30, 2010 | ||||||||||||||||||||
Commercial & | ||||||||||||||||||||
Communications | Residential | Industrial | Corporate | Total | ||||||||||||||||
Revenues |
$ | 57,179 | $ | 88,549 | $ | 203,544 | $ | | $ | 349,272 | ||||||||||
Cost of services |
46,632 | 69,108 | 184,935 | | 300,675 | |||||||||||||||
Gross profit |
10,547 | 19,441 | 18,609 | | 48,597 | |||||||||||||||
Selling, general and administrative |
5,466 | 18,635 | 30,535 | 11,439 | 66,075 | |||||||||||||||
Loss (gain) on sale of assets |
(8 | ) | 26 | (109 | ) | (74 | ) | (165 | ) | |||||||||||
Restructuring charge |
16 | | 698 | 49 | 763 | |||||||||||||||
Income (loss) from operations |
$ | 5,073 | $ | 780 | $ | (12,515 | ) | $ | (11,414 | ) | $ | (18,076 | ) | |||||||
Other data: |
||||||||||||||||||||
Depreciation and amortization expense |
$ | 94 | $ | 541 | $ | 1,079 | $ | 2,300 | $ | 4,014 | ||||||||||
Capital expenditures |
$ | 25 | $ | 83 | $ | 220 | $ | 208 | $ | 536 | ||||||||||
Total assets |
$ | 23,113 | $ | 31,368 | $ | 78,276 | $ | 68,469 | $ | 201,226 |
19
Weighted Average | ||||||||
Shares | Exercise Price | |||||||
Outstanding, September 30, 2010 |
158,500 | $ | 17 | |||||
Options granted |
| | ||||||
Exercised |
| | ||||||
Expired |
| | ||||||
Forfeited |
(58,500 | ) | | |||||
Outstanding, June 30, 2011 |
100,000 | $ | 17 | |||||
Exercisable, June 30, 2011 |
100,000 | $ | 17 | |||||
Remaining | ||||||||||||||||||||
Outstanding as of | Contractual Life | Weighted-Average | Exercisable as of | Weighted-Average | ||||||||||||||||
Range of Exercise Prices | June 30, 2011 | in Years | Exercise Price | June 30, 2011 | Exercise Price | |||||||||||||||
17.36 |
100,000 | | $ | 17 | 100,000 | $ | 17 | |||||||||||||
20
June 30, | September 30, | |||||||
2011 | 2010 | |||||||
Carrying value |
$ | 1,976 | $ | 2,005 | ||||
Unrealized gains (losses) |
(370 | ) | (179 | ) | ||||
Fair value |
$ | 1,606 | $ | 1,826 | ||||
21
Significant | Significant | |||||||||||||||
Other Observable | Unobservable | |||||||||||||||
Total | Quoted Prices | Inputs | Inputs | |||||||||||||
Fair Value | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
Money market accounts |
$ | 4,033 | $ | 4,033 | $ | | $ | | ||||||||
Executive Savings Plan assets |
632 | 632 | | | ||||||||||||
Executive Savings Plan liabilities |
(594 | ) | (594 | ) | | | ||||||||||
Total |
$ | 4,071 | $ | 4,071 | $ | | $ | | ||||||||
22
23
24
25
26
Three Months Ended | Three Months Ended | |||||||||||||||
June 30, 2011 | June 30, 2010 | |||||||||||||||
$ | % | $ | % | |||||||||||||
(Dollars in millions, Percentage of revenues) | ||||||||||||||||
Revenues |
$ | 123.2 | 100.0 | % | $ | 121.4 | 100.0 | % | ||||||||
Cost of services |
113.7 | 92.3 | % | 106.3 | 87.6 | % | ||||||||||
Gross profit |
9.5 | 7.7 | % | 15.1 | 12.4 | % | ||||||||||
Selling, general and administrative expenses |
17.4 | 14.1 | % | 21.1 | 17.4 | % | ||||||||||
Loss (gain) on sale of assets |
0.1 | 0.1 | % | (0.1 | ) | (0.1 | )% | |||||||||
Restructuring charges |
1.7 | 1.4 | % | | | % | ||||||||||
Loss from operations |
(9.7 | ) | (7.9 | )% | (5.9 | ) | (4.9 | )% | ||||||||
Interest and other expense, net |
0.6 | 0.5 | % | 0.8 | 0.6 | % | ||||||||||
Loss before income taxes |
(10.3 | ) | (8.4 | )% | (6.7 | ) | (5.5 | )% | ||||||||
Benefit for income taxes |
(0.1 | ) | (0.1 | )% | (0.1 | ) | (0.1 | )% | ||||||||
Net loss |
$ | (10.2 | ) | (8.3 | )% | $ | (6.6 | ) | (5.4 | )% | ||||||
Three Months Ended | Three Months Ended | |||||||||||||||
June 30, 2011 | June 30, 2010 | |||||||||||||||
$ | % | $ | % | |||||||||||||
(Dollars in millions, Percentage of revenues) | ||||||||||||||||
Communications |
$ | 23.5 | 19.1 | % | $ | 22.1 | 18.2 | % | ||||||||
Residential |
30.1 | 24.4 | % | 31.5 | 25.9 | % | ||||||||||
Commercial & Industrial |
69.6 | 56.5 | % | 67.8 | 55.8 | % | ||||||||||
Total Consolidated |
$ | 123.2 | 100.0 | % | $ | 121.4 | 100.0 | % | ||||||||
27
Three Months Ended | Three Months Ended | |||||||||||||||
June 30, 2011 | June 30, 2010 | |||||||||||||||
$ | % | $ | % | |||||||||||||
(Dollars in millions, Percentage of revenues) | ||||||||||||||||
Communications |
$ | 2.7 | 11.6 | % | $ | 3.8 | 17.2 | % | ||||||||
Residential |
5.0 | 16.6 | % | 6.4 | 20.4 | % | ||||||||||
Commercial & Industrial |
1.8 | 2.6 | % | 4.9 | 7.3 | % | ||||||||||
Total Consolidated |
$ | 9.5 | 7.7 | % | $ | 15.1 | 12.4 | % | ||||||||
28
Three Months Ended | Three Months Ended | |||||||||||||||
June 30, 2011 | June 30, 2010 | |||||||||||||||
$ | % | $ | % | |||||||||||||
(Dollars in millions, Percentage of revenues) | ||||||||||||||||
Communications |
$ | 2.6 | 10.9 | % | $ | 1.8 | 8.0 | % | ||||||||
Residential |
4.5 | 15.0 | % | 6.1 | 19.3 | % | ||||||||||
Commercial & Industrial |
7.8 | 11.2 | % | 9.7 | 14.3 | % | ||||||||||
Corporate |
2.5 | | 3.5 | | ||||||||||||
Total Consolidated |
$ | 17.4 | 14.1 | % | $ | 21.1 | 17.4 | % | ||||||||
29
Three Months Ended | ||||||||
June 30, | ||||||||
2011 | 2010 | |||||||
(Dollars in thousands) | ||||||||
Severance compensation |
$ | 0.7 | $ | | ||||
Consulting and other charges |
1.0 | | ||||||
Total restructuring charges |
$ | 1.7 | $ | | ||||
Three Months Ended | ||||||||
June 30, | ||||||||
2011 | 2010 | |||||||
(Dollars in thousands) | ||||||||
Interest expense |
$ | 0.6 | $ | 0.8 | ||||
Total interest expense |
0.6 | 0.8 | ||||||
Interest income |
| (0.1 | ) | |||||
Other income (expense) |
| 0.1 | ||||||
Total interest and other expense, net |
$ | 0.6 | $ | 0.8 | ||||
30
Nine Months Ended | Nine Months Ended | |||||||||||||||
June 30, 2011 | June 30, 2010 | |||||||||||||||
$ | % | $ | % | |||||||||||||
(Dollars in millions, Percentage of revenues) | ||||||||||||||||
Revenues |
$ | 355.2 | 100.0 | % | $ | 349.3 | 100.0 | % | ||||||||
Cost of services |
329.1 | 92.7 | % | 300.7 | 86.1 | % | ||||||||||
Gross profit |
26.1 | 7.3 | % | 48.6 | 13.9 | % | ||||||||||
Selling, general and administrative expenses |
48.8 | 13.7 | % | 66.1 | 18.9 | % | ||||||||||
Loss (gain) on sale of assets |
(6.7 | ) | (1.9 | )% | (0.2 | ) | (0.1 | )% | ||||||||
Asset impairment |
3.6 | 1.0 | % | | | % | ||||||||||
Restructuring charges |
1.7 | 0.5 | % | 0.8 | 0.2 | % | ||||||||||
Income (loss) from operations |
(21.3 | ) | (6.0 | )% | (18.1 | ) | (5.2 | )% | ||||||||
Interest and other expense, net |
1.7 | 0.5 | % | 2.5 | 0.7 | % | ||||||||||
Loss before income taxes |
(23.0 | ) | (6.5 | )% | (20.6 | ) | (5.9 | )% | ||||||||
Provision for income taxes |
0.1 | 0.0 | % | | | % | ||||||||||
Net loss |
$ | (23.1 | ) | (6.5 | )% | $ | (20.6 | ) | (5.9 | )% | ||||||
Nine Months Ended | Nine Months Ended | |||||||||||||||
June 30, 2011 | June 30, 2010 | |||||||||||||||
$ | % | $ | % | |||||||||||||
(Dollars in millions, Percentage of revenues) | ||||||||||||||||
Communications |
$ | 66.8 | 18.8 | % | $ | 57.2 | 16.4 | % | ||||||||
Residential |
82.5 | 23.2 | % | 88.5 | 25.3 | % | ||||||||||
Commercial & Industrial |
205.9 | 58.0 | % | 203.6 | 58.3 | % | ||||||||||
Total Consolidated |
$ | 355.2 | 100.0 | % | $ | 349.3 | 100.0 | % | ||||||||
31
Nine Months Ended | Nine Months Ended | |||||||||||||||
June 30, 2011 | June 30, 2010 | |||||||||||||||
$ | % | $ | % | |||||||||||||
(Dollars in millions, Percentage of revenues) | ||||||||||||||||
Communications |
$ | 8.4 | 12.6 | % | $ | 10.6 | 18.6 | % | ||||||||
Residential |
13.2 | 15.9 | % | 19.4 | 22.0 | % | ||||||||||
Commercial & Industrial |
4.5 | 2.2 | % | 18.6 | 9.1 | % | ||||||||||
Total Consolidated |
$ | 26.1 | 7.3 | % | $ | 48.6 | 13.9 | % | ||||||||
32
Nine Months Ended | Nine Months Ended | |||||||||||||||
June 30, 2011 | June 30, 2010 | |||||||||||||||
$ | % | $ | % | |||||||||||||
(Dollars in millions, Percentage of revenues) | ||||||||||||||||
Communications |
$ | 7.2 | 10.8 | % | $ | 5.5 | 9.6 | % | ||||||||
Residential |
13.8 | 16.7 | % | 18.6 | 21.0 | % | ||||||||||
Commercial & Industrial |
19.2 | 9.3 | % | 30.5 | 15.0 | % | ||||||||||
Corporate |
8.6 | | 11.4 | | ||||||||||||
Total Consolidated |
$ | 48.8 | 13.7 | % | $ | 66.1 | 18.9 | % | ||||||||
33
Nine Months Ended | ||||||||
June 30, | ||||||||
2011 | 2010 | |||||||
(Dollars in thousands) | ||||||||
Severance compensation |
$ | 0.7 | $ | 0.8 | ||||
Consulting and other charges |
1.0 | | ||||||
Total restructuring charges |
$ | 1.7 | $ | 0.8 | ||||
Nine Months Ended | ||||||||
June 30, | ||||||||
2011 | 2010 | |||||||
(Dollars in thousands) | ||||||||
Interest expense |
$ | 1.7 | $ | 2.9 | ||||
Total interest expense |
1.7 | 2.9 | ||||||
Interest income |
| (0.2 | ) | |||||
Other income (expense) |
| (0.2 | ) | |||||
Total interest and other expense, net |
$ | 1.7 | $ | 2.5 | ||||
34
June 30, | September 30, | |||||||
2011 | 2010 | |||||||
(Dollars in millions) | ||||||||
CURRENT ASSETS: |
||||||||
Cash and cash equivalents |
$ | 23.0 | $ | 32.9 | ||||
Accounts receivable |
||||||||
Accounts Receivable, net of Allowance |
85.8 | 88.3 | ||||||
Retainage |
19.9 | 17.1 | ||||||
Inventories |
6.2 | 12.7 | ||||||
Costs and estimated earnings in excess of billings on uncompleted contracts |
12.0 | 12.6 | ||||||
Prepaid expenses and other current assets |
4.6 | 5.4 | ||||||
Total current assets |
$ | 151.5 | $ | 169.0 | ||||
CURRENT LIABILITIES: |
||||||||
Current maturities of long-term debt |
$ | 0.3 | $ | 0.8 | ||||
Accounts payable and accrued expenses |
67.1 | 67.8 | ||||||
Billings in excess of costs and estimated earnings on uncompleted contracts |
12.6 | 17.1 | ||||||
Liabilities from discontinued operations |
| | ||||||
Total current liabilities |
$ | 80.0 | $ | 85.7 | ||||
Working capital |
$ | 71.5 | $ | 83.3 | ||||
35
36
37
2011 | 2012 | 2013 | 2014 | 2015 | 2016 | Thereaf | Total | |||||||||||||||||||||||||
Long-term debt obligations |
$ | 0.1 | $ | | $ | 10.0 | $ | | $ | | $ | | $ | | $ | 10.1 | ||||||||||||||||
Operating lease obligations |
$ | 1.7 | $ | 5.2 | $ | 2.7 | $ | 1.4 | $ | 0.6 | $ | 0.3 | $ | 0.9 | $ | 12.8 | ||||||||||||||||
Capital lease obligations |
$ | 0.1 | $ | 0.2 | $ | 0.2 | $ | | $ | | $ | | $ | | $ | 0.5 | ||||||||||||||||
Total |
$ | 1.9 | $ | 5.4 | $ | 12.9 | $ | 1.4 | $ | 0.6 | $ | 0.3 | $ | 0.9 | $ | 23.4 | ||||||||||||||||
(1) | The tabular amounts exclude the interest obligations that will be created if the debt and capital lease obligations are outstanding for the periods presented. |
38
39
3.1 | Second Amended and Restated Certificate of Incorporation of Integrated Electrical Services, Inc. (Incorporated by reference to Exhibit 4.1 to the Companys Registration Statement on Form S-8 filed on May 12, 2006) | |||||
3.2 | Bylaws of Integrated Electrical Services, Inc. (Incorporated by reference to Exhibit 4.2 to the Companys Registration Statement on Form S-8, filed on May 12, 2006) | |||||
* 31.1 | Rule 13a-14(a)/15d-14(a) Certification of James M. Lindstrom, Interim Chief Executive Officer | |||||
* 31.2 | Rule 13a-14(a)/15d-14(a) Certification of Terry L. Freeman, Chief Financial Officer | |||||
* 32.1 | Section 1350 Certification of James M. Lindstrom, Interim Chief Executive Officer | |||||
* 32.2 | Section 1350 Certification of Terry L. Freeman, Chief Financial Officer | |||||
** 101.INS | XBRL Instance Document | |||||
** 101.SCH | XBRL Schema Document | |||||
** 101.CAL | XBRL Calculation Linkbase Document | |||||
** 101.LAB | XBRL Label Linkbase Document | |||||
** 101.PRE | XBRL Presentation Linkbase Document | |||||
* | Filed herewith. | |
** | Furnished herewith |
40
INTEGRATED ELECTRICAL SERVICES, INC. |
||||
Date: August 15, 2011 | By: | /s/ Terry L. Freeman | ||
Terry L. Freeman | ||||
Senior Vice President and Chief Financial Officer |
41
3.1
|
Second Amended and Restated Certificate of Incorporation of Integrated Electrical Services, Inc. (Incorporated by reference to Exhibit 4.1 to the Companys Registration Statement on Form S-8 filed on May 12, 2006) | |
3.2
|
Bylaws of Integrated Electrical Services, Inc. (Incorporated by reference to Exhibit 4.2 to the Companys Registration Statement on Form S-8, filed on May 12, 2006) | |
* 31.1
|
Rule 13a-14(a)/15d-14(a) Certification of James M. Lindstrom, Interim President and Chief Executive Officer | |
* 31.2
|
Rule 13a-14(a)/15d-14(a) Certification of Terry L. Freeman, Chief Financial Officer | |
* 32.1
|
Section 1350 Certification of James M. Lindstrom, Interim President and Chief Executive Officer | |
* 32.2
|
Section 1350 Certification of Terry L. Freeman, Chief Financial Officer | |
** 101.INS
|
XBRL Instance Document | |
** 101.SCH
|
XBRL Schema Document | |
** 101.CAL
|
XBRL Calculation Linkbase Document | |
** 101.LAB
|
XBRL Label Linkbase Document | |
** 101.PRE
|
XBRL Presentation Linkbase Document | |
* | Filed herewith. | |
** | Furnished herewith |
1. | I have reviewed this Quarterly Report on Form 10-Q of Integrated Electrical Services, Inc.; | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and; |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: August 15, 2011 | By: | /s/ James M. Lindstrom | ||
James M. Lindstrom | ||||
Interim President and Chief Executive Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of Integrated Electrical Services, Inc.; | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and; |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: August 15, 2011 | By: | /s/ Terry L. Freeman | ||
Terry L. Freeman | ||||
Senior Vice President and Chief Financial Officer |
(1) | The Report fully complies with the requirements of section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and | ||
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: August 15, 2011 | By: | /s/ James M. Lindstrom | ||
James M. Lindstrom | ||||
Interim President and Chief Executive Officer |
(1) | The Report fully complies with the requirements of section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and | ||
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date August 15, 2011 | By: | /s/ Terry L. Freeman | ||
Terry L. Freeman | ||||
Senior Vice President and Chief Financial Officer | ||||
Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Share data |
Jun. 30, 2011
|
Sep. 30, 2010
|
---|---|---|
Condensed Consolidated Balance Sheets | Â | Â |
Trade, allowance | $ 2,308 | $ 3,360 |
LONG TERM RECEIVABLES, allowance | $ 64 | $ 77 |
Preferred stock, par value | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 15,407,802 | 15,407,802 |
Common stock, shares outstanding | 14,838,416 | 14,773,904 |
Treasury stock, shares | 569,386 | 633,898 |
Condensed Consolidated Statements Of Operations (USD $)
In Thousands, except Share data |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2011
|
Jun. 30, 2010
|
Jun. 30, 2011
|
Jun. 30, 2010
|
|
Condensed Consolidated Statements Of Operations | Â | Â | Â | Â |
Revenues | $ 123,189 | $ 121,405 | $ 355,163 | $ 349,272 |
Cost of services | 113,651 | 106,328 | 329,097 | 300,675 |
Gross profit | 9,538 | 15,077 | 26,066 | 48,597 |
Selling, general and administrative expenses | 17,412 | 21,098 | 48,766 | 66,075 |
(Gain) loss on sale of assets | 136 | (113) | (6,679) | (165) |
Asset Impairment | Â | Â | 3,551 | Â |
Restructuring charges | 1,667 | Â | 1,667 | 763 |
Loss from operations | (9,677) | (5,908) | (21,239) | (18,076) |
Interest and other: | Â | Â | Â | Â |
Interest expense | 571 | 784 | 1,746 | 2,869 |
Interest income | (13) | (92) | (62) | (208) |
Other income, net | 21 | 55 | (3) | (172) |
Interest and other expense, net | 579 | 747 | 1,681 | 2,489 |
Loss from operations before income taxes | (10,256) | (6,655) | (22,920) | (20,565) |
Provision \ Benefit for income taxes | (91) | (98) | 135 | 28 |
Net loss | $ (10,165) | $ (6,557) | $ (23,055) | $ (20,593) |
Loss per share | Â | Â | Â | Â |
Basic | $ (0.70) | $ (0.45) | $ (1.59) | $ (1.43) |
Diluted | $ (0.70) | $ (0.45) | $ (1.59) | $ (1.43) |
Shares used in the computation of loss per share (Note 5): | Â | Â | Â | Â |
Basic | 14,491,966 | 14,425,119 | 14,472,441 | 14,403,925 |
Diluted | 14,491,966 | 14,425,119 | 14,472,441 | 14,403,925 |
Document And Entity Information
|
9 Months Ended | |
---|---|---|
Jun. 30, 2011
|
Aug. 15, 2011
|
|
Document And Entity Information | Â | Â |
Entity Registrant Name | INTEGRATED ELECTRICAL SERVICES INC | Â |
Entity Central Index Key | 0001048268 | Â |
Document Type | 10-Q | Â |
Document Period End Date | Jun. 30, 2011 | |
Amendment Flag | false | Â |
Document Fiscal Year Focus | 2011 | Â |
Document Fiscal Period Focus | Q3 | Â |
Current Fiscal Year End Date | --09-30 | Â |
Entity Filer Category | Non-accelerated Filer | Â |
Entity Common Stock, Shares Outstanding | Â | 14,938,416 |
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Stockholder's Equity
|
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
|
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Stockholder's Equity | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholder's Equity | 7. STOCKHOLDERS' EQUITY
The 2006 Equity Incentive Plan (as amended, the "2006 Plan") became effective on May 12, 2006. The 2006 Plan provides for grants of both stock options and common stock, including restricted stock and performance-based restricted stock. We have approximately 1.3 million shares of common stock authorized for issuance under the 2006 Plan.
Treasury Stock
During the nine months ended June 30, 2011, we repurchased 18,846 shares of common stock from our employees to satisfy minimum tax withholding requirements upon the vesting of restricted stock issued under the 2006 Plan, 204,000 shares of restricted stock were issued from treasury stock to employees and 130,258 unvested shares of restricted stock were forfeited by former employees and returned to treasury stock. Additionally, 9,616 phantom stock units granted to members of the Board of Directors vested, triggering an issuance of 9,616 unrestricted shares from the balance held in treasury shares.
During the nine months ended June 30, 2010, we repurchased 27,622 shares of common stock from our employees to satisfy minimum tax withholding requirements upon the vesting of restricted stock issued under the 2006 Plan, 12,886 were issued from treasury stock to employees and 38,000 unvested shares of restricted stock were forfeited by former employees and returned to treasury stock.
Restricted Stock
We granted 204,000 shares of restricted stock to employees during the nine months ended June 30, 2011, of which 8,900 have vested and 53,100 have been forfeited as of June 30, 2011. These restricted shares, which were granted at a prices ranging from $3.49 to $3.51 per share, will vest on an annual pro-rata basis each December, from 2011 through 2013.
During the nine months ended June 30, 2011 and 2010, we recognized $566 and $977, respectively, in compensation expense related to all restricted stock awards. As of June 30, 2011, the unamortized compensation cost related to outstanding unvested restricted stock was $622. We expect to recognize $99 in compensation expense related to these awards during the remaining three months of our 2011 fiscal year, and $523 thereafter. All the restricted shares granted under the 2006 Plan participate in dividends, if any, issued to common shareholders.
Stock Options
Our determination of the fair value of share-based payment awards on the date of grant using a binomial option-pricing model is affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, our expected stock price volatility over the term of the awards, the risk-free rate of return, and actual and projected employee stock option exercise behaviors.
During the nine months ended June 30, 2011 and 2010, we granted no stock options, and 58,500 options were forfeited. During the nine months ended June 30, 2011 and 2010, we recognized $17 and $94, respectively, in compensation expense related to previously granted stock options.
The following table summarizes activity regarding our stock option and incentive compensation plans:
The following table summarizes all options outstanding and exercisable at June 30, 2011:
Upon exercise of stock options, it is our policy to first issue shares from treasury stock, then to issue new shares. Unexercised options expire at September 29, 2011. |
Strategic Actions
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Strategic Actions | 3. STRATEGIC ACTIONS
2011 Restructuring Plan
During the second quarter of our 2011 fiscal year, the Company determined that certain underperforming facilities within our Commercial & Industrial operations will be either sold or closed during the next six to twelve months (the "2011 Restructuring Plan"). This is one part of management's overall plan to return the Company to profitability. The facilities directly affected by this decision are in several locations throughout the country, including Arizona, Florida, Iowa, Massachusetts, Nevada and Texas. These facilities were selected due to current business prospects and the extended time frame needed to return to a profitable position. We expect that closure costs could range from $4,500 to $5,500 in the aggregate. Closure costs associated with the 2011 Restructuring Plan would include equipment and facility lease termination expenses, incremental management consulting expenses and severance costs for employees. The Company is in the process of winding down these facilities. As the Company concludes the wind-down and closure process for each of these facilities, their respective results of operations will be reclassified and presented within future statements of operations as "Discontinued Operations." US GAAP does not permit an earlier reclassification. Restructuring expenses for the three and nine months ended June 30, 2011 in respect of the 2011 Restructuring Plan were comprised of severance costs and external consulting and management services and totaled $1,667. At June 30, 2011 the estimated costs to complete the ninety-five projects remaining totaled $22,493; of which $8,530 have been subcontracted to other electrical contractors, and $7,527 have been assigned to other electrical contractors, leaving approximately $6,436 of contracts for which we will continue to execute. With respect to the assigned contracts we have obtained acknowledgement of our release responsibility on all but one contract, which we expect to receive by September 30, 2011. We expect the majority of the retained backlog of $6,436 to be completed by September 30, 2011. For the three and nine months ended June 30, 2011, these facilities had the following results:
The following table summarizes the activities related to our restructuring activities by component:
2009 Restructuring Plan
In the first three months of our 2009 fiscal year, we began a restructuring program (the "2009 Restructuring Plan") that was designed to consolidate operations within our three segments at that time. Our plan was to streamline local project and support operations, which were managed through regional operating centers, and to capitalize on the investments we had made in the previous year to further leverage our resources. In addition, as a result of the continuing significant effects of the recession, during the third quarter of fiscal year 2009, we implemented a more expansive cost reduction program, by further reducing administrative personnel, primarily in the corporate office, and consolidating our Commercial and Industrial administrative functions into one shared service center. The 2009 Restructuring Plan was completed in our 2010 fiscal year. Costs incurred with respect to the 2009 Restructuring Plan for the three months and nine months ended June 30, 2010 are reflected within the Operating Segments, please refer to Note 6 "Operating Segments." |
Employee Benefit Plans
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Employee Benefit Plans | 9. EMPLOYEE BENEFIT PLANS
Executive Savings Plan
Under the Executive Deferred Compensation Plan adopted on July 1, 2004 (the "Executive Savings Plan"), certain employees are permitted to defer a portion (up to 75%) of their base salary and/or bonus for a Plan Year. The Compensation Committee of the Board of Directors may, in its sole discretion, credit one or more participants with an employer deferral (contribution) in such amount as the Committee may choose ("Employer Contribution"). The Employer Contribution, if any, may be a fixed dollar amount, a fixed percentage of the participant's compensation, base salary, or bonus, or a "matching" amount with respect to all or part of the participant's elective deferrals for such plan year, and/or any combination of the foregoing as the Committee may choose.
On February 13, 2009, we suspended Company matching cash contributions to employee's contributions due to the significant impact the economic recession has had on the Company's financial performance. As such, there have been no contributions by us to the Executive Savings Plan for the three and nine months ended June 30, 2011 and 2010. |
Fair Value Measurements
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Fair Value Measurements | 10. FAIR VALUE MEASUREMENTS
Fair value is considered the price to sell an asset, or transfer a liability, between market participants on the measurement date. Fair value measurements assume that the asset or liability is (1) exchanged in an orderly manner, (2) the exchange is in the principal market for that asset or liability, and (3) the market participants are independent, knowledgeable, able and willing to transact an exchange.
Fair value accounting and reporting establishes a framework for measuring fair value by creating a hierarchy for observable independent market inputs and unobservable market assumptions and expands disclosures about fair value measurements. Considerable judgment is required to interpret the market data used to develop fair value estimates. As such, the estimates presented herein are not necessarily indicative of the amounts that could be realized in a current exchange. The use of different market assumptions and/or estimation methods could have a material effect on the estimated fair value.
Financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2011, are summarized in the following table by the type of inputs applicable to the fair value measurements:
Below is a description of the inputs used to value the assets summarized in the preceding table:
Level 1 — Inputs represent unadjusted quoted prices for identical assets exchanged in active markets.
Level 2 — Inputs include directly or indirectly observable inputs other than Level 1 inputs such as quoted prices for similar assets exchanged in active or inactive markets; quoted prices for identical assets exchanged in inactive markets; and other inputs that are considered in fair value determinations of the assets.
Level 3 — Inputs include unobservable inputs used in the measurement of assets. Management is required to use its own assumptions regarding unobservable inputs because there is little, if any, market activity in the assets or related observable inputs that can be corroborated at the measurement date. |
Securities And Equity Investments
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Securities And Equity Investments | 8. SECURITIES AND EQUITY INVESTMENTS
Investment in EnerTech Capital Partners II L.P.
Our investment in EnerTech was approximately 2% of the overall ownership in EnerTech at June 30, 2011 and September 30, 2010. As such, we accounted for this investment using the cost method of accounting.
EnerTech's investment portfolio periodically results in unrealized losses reflecting a possible, other-than temporary impairment of our investment. If facts arise that lead us to determine that any unrealized losses are not temporary, we would write-down our investment in EnerTech through a charge to other expense in the period of such determination. The carrying value of our investment in EnerTech at June 30, 2011 and September 30, 2010 was $1,976 and $2,005, respectively, and is currently recorded as a component of Other Non-Current Assets in our Consolidated Balance Sheets. The following table presents the reconciliation of the carrying value and unrealized gains (losses) to the fair value of the investment in EnerTech as of June 30, 2011 and September 30, 2010:
On December 31, 2010, EnerTech's general partner, with the consent of the fund's investors, extended the fund for an additional year through December 31, 2011. The fund will terminate on this date unless extended by the fund's valuation committee. The fund may be extended for another one-year period through December 31, 2012 with the consent of the fund's valuation committee.
Arbinet Corporation
On May 15, 2006, we received a distribution from our investment in EnerTech of 32,967 shares in Arbinet Corporation ("Arbinet"), formerly Arbinet-thexchange Inc. On June 11, 2010, Arbinet consummated a 1-for-4 reverse common stock split. As a result of this transaction, we held 8,241 shares of Arbinet common stock. On November 22, 2010, we sold our shares of Arbinet common stock for $57, net of commissions and other fees. As a result of this sale, we recognized a $96 loss in Other Expense in our Consolidated Statements of Operation, which was previously recorded as an unrealized loss included in other comprehensive income.
The amount of unrealized holding losses included in other comprehensive income at June 30, 2011 and September 30, 2010 is $0 and $88, respectively. Both the carrying and market value of the investment at June 30, 2011 and September 30, 2010 were $0 and $60, respectively. |
Business
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Business | 1. BUSINESS
Integrated Electrical Services, Inc., a Delaware corporation, is a leading provider of electrical and communication services, focusing primarily on the commercial, industrial, residential and communications markets with service, maintenance and construction services. We provide a broad range of services, including designing, building, maintaining and servicing electrical, data communications and utilities systems for commercial, industrial and residential customers. The words "IES", the "Company", "we", "our", and "us" refer to Integrated Electrical Services, Inc. and, except as otherwise specified herein, to our wholly-owned subsidiaries.
Our electrical contracting services include design of electrical systems within a building or complex, procurement and installation of wiring and connection to power sources, end-use equipment and fixtures, as well as contract maintenance. We service commercial, industrial and residential markets and have a diverse customer base, including: general contractors; property managers and developers; corporations; government agencies; municipalities; and homeowners. We focus on projects that require special expertise, such as design-and-build projects that utilize the capabilities of our in-house experts, or projects which require specific market expertise, such as hospitals or power generation facilities. We also focus on service, maintenance and certain renovation and upgrade work, which tends to be either recurring or have lower sensitivity to economic cycles, or both. We provide services for a variety of projects, including: high-rise residential and office buildings, power plants, manufacturing facilities, data centers, chemical plants, refineries, wind farms, solar facilities, municipal infrastructure and health care facilities and residential developments, including both single-family housing and multi-family apartment complexes. We also offer low voltage contracting services as a complement to our electrical contracting business. Our low voltage services include design and installation of structured cabling for corporations, universities, data centers and switching stations for data communications companies as well as the installation of fire and security alarm systems. Our utility services consist of overhead and underground installation and maintenance of electrical and other utilities transmission and distribution networks, installation and splicing of high-voltage transmission and distribution lines, substation construction and substation and right-of-way maintenance. Our maintenance services generally provide recurring revenues that are typically less affected by levels of construction activity.
CONTROLLING SHAREHOLDER
At June 30, 2011, Tontine Capital Partners, L.P. together with its affiliates ("Tontine"), was the controlling shareholder of the Company's common stock. Accordingly, Tontine has the ability to exercise significant control of our affairs, including the election of directors and any action requiring the approval of shareholders, including the approval of any potential merger or sale of all or substantially all assets or divisions of the Company, or the Company itself. In its most recent amended Schedule 13D, Tontine stated that it has no current plans to make any material change in the Company's business or corporate structure. For a more complete discussion on our relationship with Tontine, please refer to Note 2, "Controlling Shareholder" to these Condensed Consolidated Financial Statements.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These unaudited condensed consolidated financial statements reflect, in the opinion of management, all adjustments necessary to present fairly the financial position as of, and the results of operations for, the periods presented. All adjustments are considered to be normal and recurring unless otherwise described herein. Interim period results are not necessarily indicative of results of operations or cash flows for the full year. During interim periods, we follow the same accounting policies disclosed in our annual report on Form 10-K for the year ended September 30, 2010. Please refer to the Notes to Consolidated Financial Statements in our annual report on Form 10-K for the year ended September 30, 2010, when reviewing our interim financial results set forth herein.
RECLASSIFICATIONS
In connection with a change in reportable segments, certain prior period amounts have been reclassified to conform to the current year presentation of our segments with no effect on net income (loss) or retained deficit. Specifically, our Communications segment has been separated from our Commercial & Industrial segment. For additional information, please refer to Note 6, "Operating Segments" to these Condensed Consolidated Financial Statements.
SALES OF FACILITIES Sale of Non-Strategic Manufacturing Facility
On November 30, 2010, a subsidiary of the Company ("Seller") and Siemens Energy, Inc., a Delaware corporation, ("Buyer"), executed an Asset Purchase Agreement (the "Agreement") providing for the sale of substantially all the assets and assumption of certain liabilities of a non-strategic manufacturing facility engaged in manufacturing and selling fabricated metal buildings housing electrical equipment such as switchgears, motor starters and control systems. In addition, another subsidiary of the Company which is also a party to the Agreement, sold certain real property where the fabrication facilities are located.
Pursuant to the terms of the Agreement assets excluded from the sale include, but are not limited to, cash and cash equivalents, rights to names which include "IES", business records relating to pre-closing matters, which are required by law to be retained by Seller, performed contracts and fulfilled purchase orders, insurance policies, non-assignable permits, licenses and software and tax refunds relating to periods ending prior to the closing. Buyer also assumed liabilities and obligations of Seller relating to certain customer contracts, vendor contracts and financing leases as well as accounts and trade payables arising in the ordinary course of business other than inter-company accounts payable.
The purchase price of $10,690 was adjusted to reflect variances between Historical Working Capital and Closing Working Capital (each as defined in the Agreement). Finally, the Agreement contains representations and warranties by Seller and Buyer as well as covenants by Seller, termination provisions and indemnifications by Seller and Buyer. The transaction was completed on December 10, 2010 at which time we recognized a gain of $6,763.
Sale of Non-Core Electrical Distribution Facility
On February 28, 2011, Key Electrical Supply, Inc, a wholly owned subsidiary of the Company ("Seller") and Elliot Electric Supply, Inc, a Texas corporation, ("Buyer"), executed an Asset Purchase Agreement (the "Agreement") providing for the sale of substantially all the assets and assumption of certain liabilities of a non-core electrical distribution facility engaged in distributing wiring, lighting, electrical distribution, power control and generators for residential and commercial applications.
Pursuant to the terms of the Agreement assets excluded from the sale include, but are not limited to, cash and cash equivalents, certain receivables, rights to the Key Electrical Supply, Inc name, business records relating to pre-closing matters, which are required by law to be retained by Seller, insurance policies, licenses and software and tax refunds relating to periods ending prior to the closing. Buyer also assumed liabilities and obligations of Seller relating to certain vendor contracts and financing notes and leases as well as accounts and trade payables arising in the ordinary course of business other than inter-company accounts payable.
The purchase price of $6,676 was adjusted to reflect variances between Historical Working Capital and Closing Working Capital (each as defined in the Agreement). The Agreement contains representations and warranties by Seller and Buyer as well as covenants by Seller, termination provisions and indemnifications by Seller and Buyer. The gain on this transaction was immaterial.
REVENUE RECOGNITION
As of June 30, 2011 the Company had an aggregate of $3,815 of revenues associated with three contract claims. The aggregate amount of revenues recorded in connection with contract claims at June 30, 2010 was not material. We believe these revenues are collectible, with some risk associated. They are in various stages of litigation and will take time to reach resolution.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Our financial instruments consist of cash and cash equivalents, accounts receivable, notes receivable, investments, accounts payable, a line of credit, notes payable issued to finance insurance policies, and a $10,000 senior subordinated loan agreement (the "Tontine Term Loan"). We believe that the carrying value of financial instruments, with the exception of the Tontine Term Loan and our cost method investment in EnerTech Capital Partners II L.P. ("EnerTech"), in the accompanying consolidated balance sheets, approximates their fair value due to their short-term nature.
We estimate that the fair value of the Tontine Term Loan is $10,565 based on comparable debt instruments at June 30, 2011. For additional information, please refer to Note 4, "Debt and Liquidity — The Tontine Capital Partners Term Loan" to these Condensed Consolidated Financial Statements. We estimate that the fair value of our investment in EnerTech is $1,606 at June 30, 2011. For additional information, please refer to Note 8, "Securities and Equity Investments — Investment in EnerTech Capital Partners II L.P." to these Condensed Consolidated Financial Statements.
ASSET IMPAIRMENT
During the first quarter of our 2011 fiscal year, the Company recorded a pretax non-cash asset impairment charge of $3,551 related to internally-developed capitalized software. The Company ceased use of the software in December, 2010. As a result, the software has a fair value of zero. The charge of $3,551 was recorded separately in the accompanying consolidated statements of operations as a component of loss from operations.
USE OF ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("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 analyzing goodwill, investments, intangible assets and long-lived asset impairments and adjustments, allowance for doubtful accounts receivable, stock-based compensation, reserves for legal matters, assumptions regarding estimated costs to exit certain divisions, realizability of deferred tax assets, and self-insured claims liabilities and related reserves.
SEASONALITY AND QUARTERLY FLUCTUATIONS
Results of operations from our Residential construction segment are more seasonal, depending on weather trends, with typically higher revenues generated during spring and summer and lower revenues during fall and winter. The Communications and Commercial & Industrial segments of our business are less subject to seasonal trends, as work in these segments generally is performed inside structures protected from the weather. Our service and maintenance business is generally not affected by seasonality. In addition, the construction industry has historically been highly cyclical. 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. Accordingly, operating results for any fiscal period are not necessarily indicative of results that may be achieved for any subsequent fiscal period.
SUBSEQUENT EVENTS
We have reviewed subsequent events through the date of filing. |
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Debt And Liquidity | 4. DEBT AND LIQUIDITY
Debt consists of the following:
Future payments on debt at June 30, 2011 are as follows:
For the three months ended June 30, 2011 and 2010, we incurred interest expense of $571 and $784, respectively. For the nine months ended June 30, 2011 and 2010, we incurred interest expense of $1,746 and $2,869, respectively.
The Revolving Credit Facility
On May 12, 2006, we entered into a Loan and Security Agreement (the "Loan and Security Agreement"), for a revolving credit facility (the "Revolving Credit Facility") with Bank of America, N.A. and certain other lenders. On April 30, 2010, we renegotiated the terms of, and entered into an amendment to, the Loan and Security Agreement. Under the terms of the amended Revolving Credit Facility, the size of the facility remains at $60,000 and the maturity date has been extended to May 12, 2012. In connection with the amendment, we incurred an amendment fee of $225 and legal fees of $53, which are being amortized over 24 months.
The Revolving Credit Facility is guaranteed by our subsidiaries and secured by first priority liens on substantially all of our subsidiaries' existing and future acquired assets, exclusive of collateral provided to our surety providers. The Revolving Credit Facility contains customary affirmative, negative and financial covenants. The Revolving Credit Facility also restricts us from paying cash dividends and places limitations on our ability to repurchase our common stock.
Borrowings under the Revolving Credit Facility may not exceed a "borrowing base" that is determined monthly by our lenders based on available collateral, primarily certain accounts receivables and inventories. Under the terms of the Revolving Credit Facility, in effect as of June 30, 2011, interest for loans and letter of credit fees is based on our Total Liquidity, which is calculated for any given period as the sum of the average daily availability for such period plus the average daily unrestricted cash on hand for such period as follows:
At June 30, 2011, we had $17,697 available to us under the Revolving Credit Facility, based on a borrowing base of $25,808, outstanding letters of credit of $8,111, and no outstanding borrowings.
As of June 30, 2011, we were subject to the financial covenant under the Revolving Credit Facility requiring that we maintain a fixed charge coverage ratio of not less than 1.0:1.0 at any time that our aggregate amount of unrestricted cash on hand plus availability is less than $25,000 and, thereafter, until such time as our aggregate amount of unrestricted cash on hand plus availability has been at least $25,000 for a period of 60 consecutive days. As of June 30, 2011, our Total Liquidity was in excess of $25,000 for the previous 60 days. Had our Total Liquidity been less than $25,000 for the previous 60 days at June 30, 2011, we would not have met the 1.0:1.0 fixed charge coverage ratio test.
At June 30, 2011, our Total Liquidity was $40,736. For the nine months ended June 30, 2011, we paid no interest for loans under the Revolving Credit Facility and a weighted average interest rate, including fronting fees, of 3.50% for letters of credit. In addition, we are charged monthly in arrears (1) an unused commitment fee of 0.50%, and (2) certain other fees and charges as specified in the Loan and Security Agreement, as amended. Finally, the Revolving Credit Facility would have been subject to termination charges of 0.25% of the total borrowing capacity plus $50. We intend to enter into discussions with our existing bank group to extend the maturity date of this facility although there can be no assurance that we will be successful. The Tontine Term Loan
On December 12, 2007, we entered into the Tontine Term Loan, a $25,000 senior subordinated loan agreement, with Tontine. The Tontine Term Loan bears interest at 11.0% per annum and is due on May 15, 2013. Interest is payable quarterly in cash or in-kind at our option. Any interest paid in-kind will bear interest at 11.0% in addition to the loan principal. On April 30, 2010, we prepaid $15,000 of principal on the Tontine Term Loan. On May 1, 2010, Tontine assigned the Tontine Term Loan to TCP Overseas Master Fund II, L.P. ("TCP 2"), an affiliate of Tontine. Although the Tontine Term Loan may be repaid at any time prior to the maturity date at par, plus accrued interest without penalty, our Revolving Credit Facility currently prohibits any further repayments. The Tontine Term Loan is subordinated to our existing Revolving Credit Facility with Bank of America, N.A. The Tontine Term Loan is an unsecured obligation of the Company and its subsidiary borrowers. The Tontine Term Loan contains no financial covenants or restrictions on dividends or distributions to stockholders. |
Earnings Per Share
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Jun. 30, 2011
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Earnings Per Share | 5. EARNINGS PER SHARE
Our restricted shares granted under the 2006 Equity Incentive Plan participate in any dividends declared on our common stock. Accordingly, the restricted shares are considered participating securities under the two-class method, which is an earnings allocation formula that determines earnings for each class of common stock and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. Under the two-class method, net income is reduced by the amount of dividends declared in the current period for each class of stock and by the contractual amounts of dividends that must be paid for the current period. The remaining earnings are then allocated to common stock and participating securities to the extent that each security may share in earnings as if all of the earnings for the period had been distributed. Diluted earnings per share is calculated using the treasury stock and "if converted" methods for potential common stock. Basic earnings per share is calculated as income (loss) available to common stockholders, divided by the weighted average number of common shares outstanding during the period. If the effect is dilutive, participating securities are included in the computation of basic earnings per share. Our participating securities do not have a contractual obligation to share in the losses in any given period. As a result, these participating securities will not be allocated any losses in the periods of net losses, but will be allocated income in the periods of net income using the two-class method.
The tables that follow reconcile the components of the basic and diluted earnings per share for the three and nine months ended June 30, 2011 and 2010:
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Operating Segments
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Jun. 30, 2011
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Operating Segments | 6. OPERATING SEGMENTS
In 2010, our Communications segment was separated from our Commercial & Industrial segment to form a new operating segment. The decision to report Communications as a separate segment was made as the Company changed its internal reporting structure and the communications business gained greater significance as a percentage of consolidated revenues, gross profit and operating income. Moreover, the Communications segment is a separate and specific part of future strategic growth plans of the Company. We now manage and measure performance of our business in three distinct operating segments: Communications, Residential and Commercial & Industrial. These segments are reflective of how the Company's Chief Operating Decision Maker ("CODM") reviews operating results for the purposes of allocating resources and assessing performance. The Company's CODM is its Chief Executive Officer. Prior period disclosures have been adjusted to reflect the change in reportable segments. The Communications segment consists of low voltage installation, design, planning and maintenance for data centers and information technology infrastructure. The segment's customers are primarily in the information technology and commercial industries.
The Residential segment consists of electrical installation, replacement and renovation services in single-family, condominium, townhouse and low-rise multifamily housing units.
The Commercial & Industrial segment provides electrical design, installation, renovation, engineering and maintenance and replacement services in facilities such as office buildings, health care facilities, educational facilities, military installations, airports, information technology infrastructure, manufacturing and distribution centers, water treatment facilities, refineries, petrochemical and power plants, and alternative energy facilities.
We also have a corporate office and shared service centers that provide general and administrative as well as support services to our three operating segments. We allocate certain corporate selling, general and administrative costs across our segments to more accurately reflect the costs associated with operating each segment. The Company allocates the costs of these services to its segments based upon expected revenues at the beginning of the year.
The significant accounting policies of the segments are the same as those described in the summary of significant accounting policies, set forth in Note 2 to our Consolidated Financial Statements included in our annual report on Form 10-K for the year ended September 30, 2010. Transactions between segments are eliminated in consolidation.
Segment information for the three and nine months ended June 30, 2011 and 2010 is as follows:
We have no operations or long-lived assets outside of the United States. |
Controlling Shareholder
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9 Months Ended |
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Jun. 30, 2011
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Controlling Shareholder | Â |
Controlling Shareholder | 2. CONTROLLING SHAREHOLDER
On June 30, 2011, James M. Lindstrom, an affiliate of Tontine and Chairman of the Company's Board of Directors since February 2011, began serving as Interim Chief Executive Officer and President of the Company. While serving as Interim Chief Executive Officer and President, Mr. Lindstrom has the ability to affect the composition of the Company's management and influence the business operations of the Company or extraordinary transactions outside the normal course of the Company's business.
Based on Tontine's most recent amended Schedule 13D, Tontine has not indicated any plans to alter its ownership level in the Company. Should Tontine reconsider its investment plans and sell its controlling interest in the Company, a change in ownership would occur. A change in ownership, as defined by Internal Revenue Code Section 382, could reduce the availability of net operating losses for federal and state income tax purposes. Furthermore, a change in control would trigger the change of control provisions in a number of our material agreements, including our Revolving Credit Facility (as defined below), bonding agreements with our sureties and employment contracts with certain officers and employees of the Company.On April 30, 2010, we prepaid $15,000 of the original $25,000 principal outstanding on the Tontine Term Loan; accordingly $10,000 remains outstanding under the Tontine Term Loan as of June 30, 2011. |
Commitments And Contingencies
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Jun. 30, 2011
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Commitments And Contingencies | Â |
Commitments And Contingencies | 11. COMMITMENTS AND CONTINGENCIES
From time to time we are a party to various claims, lawsuits and other legal proceedings that arise in the ordinary course of business. We maintain insurance coverage to minimize the financial risk associated with these proceedings. None of these proceedings, separately or in the aggregate, are expected to have a material adverse effect on our financial position, results of operations or cash flows. With respect to all such proceedings, we record reserves when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. We expense routine legal costs related to these proceedings as they are incurred.
The following is a discussion of certain of our significant legal matters:
Centerpoint Project
We were a co-plaintiff in a breach of contract and mechanics' lien foreclosure action in Maricopa County, Arizona superior court. The defendants were Centerpoint Construction, LLC and Tempe Land Company, LLC, the general contractor and owner, respectively, of a condominium and retail development project in Tempe, Arizona. In December 2008, Tempe Land Company, LLC filed for Chapter 11 bankruptcy reorganization in the U.S. Bankruptcy Court in Phoenix, Arizona. The principal amount of our claim was approximately $3,992, exclusive of interest, attorneys' fees and costs. In March 2009, we transferred $3,992 of trade accounts receivable to long-term receivable. At the same time, we reserved the costs in excess of billings of $278 associated with this receivable.
In April 2010, the project property was sold at foreclosure to the project lender. In the sale, the project lender acquired the project property subject only to superior encumbrances. The priority of the mechanics' lien claims over the project lender's deeds of trust was to be determined at trial, which was anticipated to occur in April 2011.
As a result of the April 2010 foreclosure sale and the uncertainties associated with the outcome of the lawsuit, we determined that there was a reasonable possibility, but not a probability, of collection of our claim. As a result, we wrote-off the remaining $3,714 long-term receivable. In February 2011, we entered into a $2,850 settlement in connection with the breach of contract and mechanics' lien foreclosure actions. The $2,850 recovery was recorded in the accompanying consolidated statements of operations as a component of selling, general, and administrative expenses. Ward Transformer Site
One of our subsidiaries has been identified as one of more than 200 potentially responsible parties (PRPs) with respect to the clean-up of an electric transformer resale and reconditioning facility, known as the Ward Transformer Site, located in Raleigh, North Carolina. The facility built, repaired, reconditioned and sold electric transformers from approximately 1964 to 2005. We did not own or operate the facility but a subsidiary that we acquired in July 1999 is believed to have sent transformers to the facility during the 1990's. During the course of its operation, the facility was contaminated by Polychlorinated Biphenyls (PCBs), which also have been found to have migrated off the site.
Four PRPs have commenced clean-up of on-site contaminated soils under an Emergency Removal Action pursuant to a settlement agreement and Administrative Order on Consent entered into between the four PRPs and the U.S. Environmental Protection Agency (EPA) in September 2005. We are not a party to that settlement agreement or Order on Consent. In April 2009, two of these PRPs, Carolina Power and Light Company and Consolidation Coal Company, filed suit against us and most of the other PRPs in the U.S. District Court for the Eastern District of North Carolina (Western Division) to contribute to the cost of the clean-up. In addition to the on-site clean-up, the EPA has selected approximately 50 PRPs to which it sent a Special Notice Letter in late 2008 to organize the clean-up of soils off site and address contamination of groundwater and other miscellaneous off-site issues. We were not a recipient of that letter.
Based on our investigation to date, there is evidence to support our defense that our subsidiary contributed no PCB contamination to the site. In addition, we have tendered a demand for indemnification to the former owner of our subsidiary that may have transacted business with the facility and are exploring the existence and applicability of insurance policies that could mitigate potential exposure. As of June 30, 2011 and September 30, 2010, we have not recorded a reserve for this matter, as we believe the likelihood of our responsibility for damages is not probable and a potential range of exposure is not estimable.
Insurance
We are subject to large deductibles ranging from $100 to $350 on our property and casualty and worker's compensation insurance policies. As a result, many of our claims are effectively self-insured. Many claims against our insurance are in the form of litigation. At June 30, 2011, we had $5,955 accrued for self-insurance liabilities, including $1,278 for general liability coverage losses. We are also subject to construction defect liabilities, primarily within our Residential segment. We believe the likely range of our potential liability for construction defects is from $250 to $750. As of June 30, 2011, we had reserved $371 for these claims.
Some of our insurance carriers require us to post letters of credit as a means of guaranteeing performance under our policies. If an insurance carrier has reasonable cause to effect payment under a letter of credit, we would be required to reimburse the lenders under our Revolving Credit Facility for such letter of credit. At June 30, 2011, $7,481 of our outstanding letters of credit was used to collateralize our high deductible insurance programs.
Sureties
As is common in the surety industry, sureties issue bonds on a project-by-project basis and can decline to issue bonds at any time. We believe that our relationships with our sureties will allow us to provide surety bonds as they are required. However, current market conditions, as well as changes in our sureties' assessment of our operating and financial risk, could cause our sureties to decline to issue bonds for our work. If our sureties decline to issue bonds for our work, our alternatives would include posting other forms of collateral for project performance, such as letters of credit or cash, seeking bonding capacity from other sureties, or engaging in more projects that do not require surety bonds. In addition, if we are awarded a project for which a surety bond is required but we are unable to obtain a surety bond, the result can be a claim for damages by the customer for the costs of replacing us with another contractor.
Many customers, particularly in connection with new construction, require us to post performance and payment bonds issued by a surety. Those bonds provide a guarantee to the customer that we will perform under the terms of our contract and that we will pay our subcontractors and vendors. If we fail to perform under the terms of our contract or to pay subcontractors and vendors, the customer may demand that the surety make payments or provide services under the bond. We must reimburse the sureties for any expenses or outlays they incur on our behalf. To date, we have not been required to make any reimbursements to our sureties for bond-related costs. As of June 30, 2011, the estimated cost to complete our bonded projects was approximately $113,644. We believe we have adequate remaining available bonding capacity to meet our current needs; however, the duration, size, and aggregate number of outstanding bonds are subject to the sole discretion of our surety providers at any point in time. There can be no assurance that the current bonding facility will be available to us in the future. As of June 30, 2011, we utilized cash and accumulated interest thereon (as included in Other Non-Current Assets in our Consolidated Balance Sheet) of $3,985 to collateralize our obligations to our former sureties. On March 14, 2011, a former surety released $2,600 of cash back to the Company. We evaluate our bonding requirements on a regular basis, including the terms offered by our sureties. On May 7, 2010, we entered into agreements with two primary sureties. We do not have any cash or letters of credit held as collateral by these sureties.
Other Commitments and Contingencies
Between October 2004 and September 2005, we sold all or substantially all of the assets of certain of our wholly-owned subsidiaries. These sales were made to facilitate the business needs and purposes of the organization as a whole. Since we were a consolidator of electrical contracting businesses, often the best candidate to purchase these assets was a previous owner of the assets who usually was still associated with the subsidiary, often as an officer of that subsidiary, or otherwise. To facilitate the desired timing, the sales were made with more than ordinary reliance on the representations of the purchaser who was, in those cases, often the person most familiar with the business sold. As these sales were assets sales, rather than stock sales, we may be required to fulfill obligations that were assigned or sold to others, if the purchaser is unwilling or unable to perform the transferred liabilities. If this were to occur, we would seek reimbursement from the purchasers. These potential liabilities will continue to diminish over time. As of June 30, 2011, all projects transferred have been completed. To date, we have not been required to perform on any projects sold under this divestiture program.
From time to time, we may enter into firm purchase commitments for materials such as copper or aluminum wire which we expect to use in the ordinary course of business. These commitments are typically for terms less than one year and require us to buy minimum quantities of materials at specific intervals at a fixed price over the term. As of June 30, 2011, we had no such open purchase commitments. |