Business Combination

6 Months Ended

Mar. 31, 2016

Business Combinations [Abstract]

Business Combination Disclosure

13. BUSINESS COMBINATIONS AND DIVESTITURES

Business Combinations

The Company completed two acquisitions in the quarter ended December 31, 2015 for aggregate consideration of $8,555. These acquisitions included:

• Calumet Armature & Electric, LLC (“Calumet”), an Illinois-based provider of design, manufacturing, assembly, and repair services of electric motors for the industrial and mass transit markets.  Calumet is included in our Infrastructure Solutions segment.
• Shanahan Mechanical and Electrical, Inc. (“Shanahan”), a Nebraska-based provider of mechanical and electrical contracting services. Shanahan operates as a subsidiary in IES’s Commercial & Industrial segment.

The total aggregate consideration includes cash consideration of$8,107 and contingent consideration with an acquisition date fair value estimated at $448. Of the cash consideration, $7,338 was paid at closing, and the remaining $769 was paid within 90 days subsequent to the transaction dates, in accordance with working capital settlement provisions pursuant to the agreements with the sellers. The contingent consideration arrangement relates to the purchase of Calumet, and provides that a maximum of $2,250 may be earned over the three year period ended December 31, 2018. As of March 31, 2016 the fair value of the contingent consideration arrangement was $714 . Based on an increase in the fair value of the liability driven by improved actual and expected financial performance of Calumet, we have recorded additional contingent consideration expense as a component of income from continuing operations.

The Company accounted for the transaction under the acquisition method of accounting, which requires recording assets and liabilities at fair value (Level 3). The valuations derived from estimated fair value assessments and assumptions used by management are preliminary pending finalization of the valuations of deferred taxes, fixed assets, and certain intangible assets. While management believes that its preliminary estimates and assumptions underlying the valuations are reasonable, different estimates and assumptions could result in different values being assigned to individual assets acquired and liabilities assumed. This may result in adjustments to the preliminary amounts recorded. The preliminary valuation of the assets acquired and liabilities assumed as of the dates of the acquisitions is as follows:

Current assets		$	4,749
Property and equipment			1,260
Intangible assets (primarily customer relationships)			3,826
Non-tax-deductible goodwill			2,071
Current liabilities			(1,914)
Deferred tax liability			(1,437)
	Net assets acquired	$	8,555

With regard to the $1,437 deferred tax liability recorded in connection with the acquisitions, we reduced a portion of our valuation allowance equal to this deferred tax liability, resulting in a reduction to income tax expense of $1,437.

Pro forma revenues and results of operations for the acquisitions have not been presented because the effects were not material to the consolidated financial statements.

Southern Rewinding

On May 21, 2015, our wholly-owned subsidiary Magnetech Industrial Services, Inc. (“Magnetech”) acquired all of the common stock and certain related real estate of Southern Industrial Sales and Services, Inc. (“Southern Rewinding”), a Columbus, Georgia-based motor repair and related field services company, for total consideration of $3,937.  Of that amount, $3,137 was paid at closing, with additional consideration of $800 scheduled to be paid through the period ending November 2016. Of that additional amount, $200 was paid during the three months ended December 31, 2015. Payment of the remaining $600 is subject to Magnetech’s right to hold back certain amounts in respect of seller obligations.  After closing, we provided the newly-acquired entity with $1,065 of working capital.  Southern Rewinding is included in our Infrastructure Solutions segment.

The Company accounted for the transaction under the acquisition method of accounting, which requires recording assets and liabilities at fair value (Level 3). The valuations derived from estimated fair value assessments and assumptions used by management are preliminary pending finalization of certain intangible asset valuations. While management believes that its preliminary estimates and assumptions underlying the valuations are reasonable, different estimates and assumptions could result in different values being assigned to individual assets acquired and liabilities assumed. This may result in adjustments to the preliminary amounts recorded. The preliminary valuation of the assets acquired and liabilities assumed as of May 21, 2015 is as follows:

Current assets		$	1,225
Property and equipment			911
Intangible assets (primarily customer relationships)			1,700
Non-tax-deductible goodwill			1,532
Current liabilities			(1,431)
	Net assets acquired	$	3,937

Pro forma revenues and results of operations for the acquisition have not been presented because the effects were not material to the consolidated financial statements.

Divestitures

In February 2016, our Board of Directors approved a plan for the sale of substantially all of the operating assets of HK Engine Components, LLC (“HK”), a wholly-owned subsidiary operating in the Infrastructure Solutions segment.   These assets met the criteria to be classified as held for sale as of March 31, 2016, and were classified as “Assets held for sale” within our Condensed Consolidated Balance Sheet as of March 31, 2016.  In connection with the sale, we allocated $577 of goodwill to the disposal group.  In conjunction with the write down of these assets to their net realizable value of $2,200, we then recognized a loss of $778, recorded within “Loss on sale of assets” within our Condensed Consolidated Statement of Comprehensive Income for the three and six months endedMarch 31, 2016. The sale of these assets to a third party was completed on April 15, 2016.