OREANDA-NEWS. IES Holdings, Inc. (or “IES”) (NASDAQ:IESC) today announced financial results for the quarter ended June 30, 2016. 

THIRD QUARTER AND YEAR-TO-DATE 2016 FINANCIAL HIGHLIGHTS

  • Revenue of $179.6 million for the third quarter of fiscal 2016, an increase of 24.7% compared with the third quarter of fiscal 2015
  • Net income of $10.8 million for the third quarter of fiscal 2016 (including an acquisition-related tax benefit of $3.6 million), compared to net income of $4.0 million for the third quarter of fiscal 2015
  • Earnings per share of $0.50 in the third quarter of fiscal 2016 (including an acquisition-related tax benefit of $0.17), compared to $0.19 for the third quarter of fiscal 2015
  • Backlog of approximately $361 million as of June 30, 2016, compared to approximately $301 million as of March 31, 2016, and approximately $241 million as of June 30, 2015

MANAGEMENT COMMENTARY
Robert Lewey, President, stated, “Our third quarter results reflect the collective strong performance and diversity of our operating segments.  I am pleased to report that our quarterly revenue grew by 24.7%, gross margins increased from 17.4% to 18.9% and operating margins increased from 3.2% to 4.6% when compared to the same quarter in the previous year. We believe the significant and continued improvement of our operating metrics, combined with a $60 million increase in backlog, have us well positioned to continue to achieve profitable growth.  Lastly and as previously disclosed, during the quarter we completed several strategic and corporate initiatives, including the acquisitions of STR Mechanical on April 27 and Technibus on June 15, the completion of our name change to IES Holdings, Inc., and the amendment of our credit facility with improved terms.”

Tracy McLauchlin, Chief Financial Officer, added, “We continue to execute on our strategy of prudently allocating capital to expand and diversify IES.  During the nine months ended June 30, 2016, we deployed $60 million on four business acquisitions, which included the most significant capital investment since beginning our holding company strategy. These acquisitions were financed in large part with cash on hand, adding only approximately $20 million of debt.  We believe that our strong balance sheet and available liquidity, as well as expected cash flow from both our legacy and acquired businesses, will support our organic and acquisition growth strategies.”

STOCK BUYBACK PLAN
The Company’s Board of Directors has authorized and previously announced a stock repurchase program for purchasing up to 1.5 million shares of our common stock from time to time.  The Company had 970,915 shares remaining under its stock repurchase authorization at June 30, 2016.  During the quarter ended June 30, 2016, the Company repurchased 39,237 shares at an average price of $11.82 per share.

NET OPERATING LOSS CARRYFORWARDS (NOLs)
The Company estimates that it had available net operating loss carryforwards for U.S. federal income tax purposes of approximately $439 million at September 30, 2015, including approximately $142 million resulting from the additional amortization of personal goodwill. The Company's common stock is subject to a Rights Plan dated January 28, 2013 intended to assist in limiting the number of 5% or more owners, and thus reduce the risk of a possible “change of ownership” under Section 382 of the Internal Revenue Code. Any such “change of ownership” under these rules would limit or eliminate the ability of the Company to use its existing NOLs for federal income tax purposes.  There is no guarantee, however, that the Rights Plan will achieve the objective of preserving the value or realization of the NOLs.

For further details on the Company’s financial results, please refer to the Company’s annual report on Form 10-K for the fiscal year ended September 30, 2015 and quarterly report on Form 10-Q for the period ended June 30, 2016, to be filed with the Securities and Exchange Commission by August 8, 2016, and any amendments thereto.

NON-GAAP FINANCIAL MEASURES AND OTHER ADJUSTMENTS
This press release includes certain financial measures that are not calculated in accordance with generally accepted accounting principles in the U.S. ("GAAP").  Management believes that these measures provide useful information to our investors by reflecting additional ways to view aspects of the Company's operations that, when reconciled to the corresponding GAAP measures, help our investors to better identify underlying trends in our business and facilitate easier comparisons of our financial performance with prior and future periods and to our peers.  Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information calculated in accordance with GAAP.  Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures.  A reconciliation of the non-GAAP financial measures presented above to GAAP results has been provided in the financial tables included in this press release.

ABOUT IES HOLDINGS, INC.
IES is a holding company that owns and manages diverse operating subsidiaries, comprised of providers of industrial infrastructure services to a variety of end markets. Our over 3,500 employees serve clients in the United States. 

                 
IES HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
(UNAUDITED)
                 
  Three Months Ended June 30,   Nine Months Ended June 30,  
    2016       2015       2016       2015    
                 
Revenues $   179.6     $   144.1     $   490.3     $   414.2    
Cost of services   145.6       119.0       400.9       344.7    
Gross profit     34.0       25.1         89.4       69.5    
Selling, general and administrative expenses   25.7       20.5       72.5       58.6    
Contingent consideration expense   0.1       -       0.3       -    
Loss on sale of assets   -       -       0.8       -    
Income from operations     8.2         4.6         15.8         10.9    
Interest expense, net   0.3       0.3       0.9       0.9    
Other expense (income), net   -       -       -       (0.2 )  
(Benefit) provision for income taxes   (2.9 )     0.3       (3.9 )     0.9    
Net income from continuing operations     10.8       4.0         18.8       9.3    
Net loss from discontinued operations   -       -       -       (0.2 )  
Net income attributable to noncontrolling interest   -       -       -       -    
Net income attributable to IES Holdings, Inc. $   10.8     $   4.0     $   18.8     $   9.1    
                 
Income (loss) per share attributable to IES Holdings, Inc.:              
Continuing operations $   0.50     $   0.19     $   0.88     $   0.43    
Discontinued operations   -       -       -     $   (0.01 )  
Basic $   0.50     $   0.19     $   0.88     $   0.42    
                 
Diluted income (loss) per share attributable to IES Holdings, Inc.:              
Continuing operations $   0.50     $   0.19     $   0.87     $   0.43    
Discontinued operations   -       -       -     $   (0.01 )  
Diluted $   0.50     $   0.19     $   0.87     $   0.42    
                 
Shares used in the computation of income (loss) per share:              
Basic (in thousands)   21,298       21,319       21,280       21,542    
Diluted (in thousands)   21,457       21,371       21,412       21,589    

 

               
IES HOLDINGS, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATION OF ADJUSTED NET INCOME (LOSS) AND ADJUSTED EARNINGS PER SHARE
(DOLLARS IN MILLIONS)
(UNAUDITED)
               
  Three Months Ended June 30,   Nine Months Ended June 30,
    2016       2015       2016       2015  
               
Net income attributable to IES Holdings, Inc. $   10.8     $   4.0     $   18.8     $   9.1  
Contingent consideration expense     0.1       -         0.3       -  
Loss on sale of non-core assets   -       -         0.8       -  
Purchase price accounting tax benefit     (3.6 )     -         (5.0 )     -  
Adjusted net income $   7.4     $   4.0     $   15.0     $   9.1  
               
Adjusted earnings per share:              
Basic $   0.34     $   0.19     $   0.70     $   0.42  
Diluted $   0.34     $   0.19     $   0.69     $   0.42  
               
Shares used in the computation of earnings per share:              
Basic (in thousands)   21,298       21,319       21,280       21,542  
Diluted (in thousands)   21,457       21,371       21,412       21,589  

 

           
IES HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS)
(UNAUDITED)
           
    June 30, 2016   September 30, 2015  
ASSETS          
CURRENT ASSETS:          
Cash and cash equivalents   $   22.8     $   49.4    
Restricted cash       0.3       -    
Accounts receivable:          
Trade, net of allowance       109.9         93.0    
Retainage       20.7         17.5    
Inventories       17.4         14.0    
Costs and estimated earnings in excess of billings on uncompleted contracts       9.4         12.3    
Prepaid expenses and other current assets       4.3         3.0    
Total current assets       184.8         189.0    
Property and equipment, net       15.3         11.7    
Goodwill       39.6         17.2    
Intangible assets, net       33.0         4.7    
Other non-current assets       4.9         4.0    
Total assets   $   277.5     $   226.7    
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
CURRENT LIABILITIES:          
Accounts payable and accrued expenses   $   90.7     $   82.9    
Billings in excess of costs and estimated earnings on uncompleted contracts       27.6         25.2    
Total current liabilities       118.4         108.1    
Long-term debt, net of current maturities       30.2         10.2    
Other non-current liabilities       6.8         7.0    
Total liabilities       155.4         125.3    
Noncontrolling interest       1.7       -    
           
STOCKHOLDERS' EQUITY:          
Preferred stock     -       -    
Common stock       0.2         0.2    
Treasury stock, at cost       (4.9 )       (4.4 )  
Additional paid-in capital       194.3         193.6    
Retained deficit       (69.2 )       (88.0 )  
Total stockholders' equity       120.4         101.4    
Total liabilities and stockholders' equity   $   277.5     $   226.7    
           

 

         
IES HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
(UNAUDITED)
  Nine Months Ended June 30,  
    2016       2015    
         
CASH FLOWS FROM OPERATING ACTIVITIES:        
  Net income $   18.8     $   9.1    
  Adjustments to reconcile net income to net cash provided       
  by operating activities:        
  Bad debt expense     0.3       -    
  Amortization of deferred financing cost     0.3         0.2    
  Depreciation and amortization     3.5         1.8    
  Loss on sale of assets     0.8       -    
  Non-cash compensation      0.6         0.3    
Changes in operating assets and liabilities        
  Accounts receivable     (8.0 )       (4.1 )  
  Inventories     (0.2 )       2.8    
  Costs and estimated earnings in excess of billings     3.0         (4.2 )  
  Prepaid expenses and other current assets     (3.1 )       (3.0 )  
  Other non-current assets     (1.3 )       0.1    
  Accounts payable and accrued expenses     1.6         (1.9 )  
  Billings in excess of costs and estimated earnings     2.5         4.9    
  Other non-current liabilities     (4.8 )       0.2    
Net cash provided by operating activities     13.9         6.2    
CASH FLOWS USED IN INVESTING ACTIVITIES:        
  Purchases of property and equipment     (2.2 )       (2.4 )  
  Proceeds from sale of property and equipment     2.2       -    
  Consideration for acquisitions, net of cash acquired     (59.7 )       (3.1 )  
Net cash used in investing activities     (59.7 )       (5.5 )  
CASH FLOWS FROM FINANCING ACTIVITIES:        
  Borrowings of debt     20.0       -    
  Repayments of debt     (0.1 )     -    
  Options exercised      0.1       -    
  Purchase of treasury stock     (0.6 )       (3.2 )  
  Change in restricted cash     (0.3 )     -    
Net cash provided by (used in) financing activities     19.2         (3.2 )  
NET DECREASE IN CASH EQUIVALENTS     (26.6 )       (2.5 )  
CASH AND CASH EQUIVALENTS, beginning of period     49.4         47.3    
CASH AND CASH EQUIVALENTS, end of period $   22.8     $   44.8    
         

 

               
IES HOLDINGS, INC. AND SUBSIDIARIES
OPERATING SEGMENT STATEMENTS OF OPERATIONS
(DOLLARS IN MILLIONS)
(UNAUDITED)
               
  Three Months Ended Nine Months Ended
  June 30, June 30,
    2016       2015       2016       2015  
               
Revenue              
Communications $   48.7     $   35.5     $   128.8     $   95.3  
Residential     56.9         53.0         162.4         151.8  
Commercial & Industrial     59.5         44.4         158.9         132.7  
Infrastructure Solutions     14.5         11.2         40.2         34.5  
Total Revenue $   179.6     $   144.1     $   490.3     $   414.2  
               
Operating Income              
Communications $   3.0     $   2.8     $   8.1     $   5.8  
Residential     4.2         2.7         11.1         6.5  
Commercial & Industrial     2.9         1.5         4.7         4.2  
Infrastructure Solutions*     1.3         (0.1 )       0.7         1.0  
Corporate     (3.3 )       (2.3 )       (8.7 )       (6.6 )
Total Operating Income $   8.2     $   4.6     $   15.8     $   10.9  
               
* Infrastructure Solutions for the nine months ended June 30, 2016 includes contingent
   consideration expense and loss on sale of non-core assets