IES Holdings(IESC) - 2019 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements This section presents the unaudited Condensed Consolidated Financial Statements for Q1 2019, highlighting a 23.0% revenue increase and a return to profitability with $7.0 million net income Condensed Consolidated Balance Sheets Total assets slightly increased to $423.1 million as of December 31, 2018, while total liabilities decreased and stockholders' equity grew Condensed Consolidated Balance Sheet Highlights (in thousands) | | December 31, 2018 | September 30, 2018 | | :--- | :--- | :--- | | Total Current Assets | $265,783 | $262,693 | | Total Assets | $423,137 | $421,994 | | Total Current Liabilities | $161,181 | $164,417 | | Total Liabilities | $194,575 | $198,355 | | Total Stockholders' Equity | $225,231 | $220,407 | Condensed Consolidated Statements of Comprehensive Income The company achieved a $7.0 million net income for the three months ended December 31, 2018, a significant turnaround from the prior-year loss, with revenues growing 23.0% Three Months Ended December 31 (in thousands, except per share data) | Metric | 2018 | 2017 | | :--- | :--- | :--- | | Revenues | $243,842 | $198,300 | | Gross Profit | $41,601 | $33,064 | | Operating Income | $9,484 | $2,989 | | Net Income (Loss) | $6,983 | $(29,513) | | Diluted EPS | $0.32 | $(1.39) | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities was $1.4 million for the quarter, primarily due to increased working capital, leading to a $5.7 million decrease in cash and cash equivalents Cash Flow Summary for Three Months Ended December 31 (in thousands) | Activity | 2018 | 2017 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $(1,365) | $4,985 | | Net cash used in investing activities | $(2,085) | $(1,361) | | Net cash used in financing activities | $(2,219) | $(26) | | Net (Decrease) Increase in Cash | $(5,669) | $3,598 | Notes to Condensed Consolidated Financial Statements These notes detail the company's four business segments, accounting policies, new standard adoption, controlling shareholder, and the settlement of a significant legal claim - The company operates through four segments: Commercial & Industrial, Communications, Infrastructure Solutions, and Residential[33] - On October 1, 2018, the company adopted the new revenue recognition standard (ASU 2014-09) using the modified retrospective method, resulting in a $102 thousand adjustment to retained earnings[43][44] - The company's controlling shareholder, Tontine Associates, L.L.C., owned approximately 57.5% of the outstanding common stock as of January 11, 2019[50] - The USAMRIID legal claim was settled in December 2018, with IES set to receive $2.5 million in cash payments[110] Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes Q1 FY2019 results, highlighting a 23.0% consolidated revenue increase to $243.8 million, improved gross margin, and increased backlog Results of Operations Consolidated revenue for Q1 2019 increased by $45.5 million (23.0%), with gross profit rising and SG&A decreasing as a percentage of revenue Consolidated Results for Three Months Ended December 31 (in thousands) | | 2018 | 2017 | | :--- | :--- | :--- | | Revenues | $243,842 | $198,300 | | Gross Profit | $41,601 | $33,064 | | Operating Income | $9,484 | $2,989 | - Revenue increased across all four segments, driven by higher demand and improved market conditions[124] Segment Performance All four segments contributed to growth, with Commercial & Industrial, Communications, and Infrastructure Solutions showing strong double-digit revenue increases Segment Revenue Growth (Q1 2019 vs Q1 2018) | Segment | Revenue (Q1 2019) | Growth vs. Q1 2018 | | :--- | :--- | :--- | | Commercial & Industrial | $72.6M | +36.9% | | Communications | $69.3M | +27.3% | | Infrastructure Solutions | $29.5M | +35.9% | | Residential | $72.5M | +4.8% | Backlog The company's backlog increased to $538 million at December 31, 2018, reflecting expected revenue from uncompleted and newly contracted work - Backlog increased to $538 million at December 31, 2018, up from $482 million at the end of the prior quarter[151] Liquidity and Capital Resources As of December 31, 2018, the company maintained $78.5 million in total liquidity and was in compliance with all credit facility covenants - The company was in compliance with its credit facility covenants, with Liquidity of $78.5 million and a Fixed Charge Coverage Ratio of 7.4:1.0[161] - Operating activities used $1.4 million in cash during the quarter, compared to providing $5.0 million in the prior-year period, mainly due to working capital increases[165] - Financing activities used $2.2 million, primarily for share repurchases[167] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks include commodity price fluctuations and interest rate changes on its floating-rate debt, impacting annual pre-tax interest expense by $0.3 million for a 1% rate increase - The company is exposed to commodity price risk for materials like copper, aluminum, steel, and fuel, which can impact margins on fixed-price contracts[173][174] - The company is subject to interest rate risk on its floating-rate debt; a 1% increase in interest rates would cause a $0.3 million annual increase in interest expense[175][176] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of December 31, 2018, with no material changes to internal control over financial reporting during the quarter - Management concluded that disclosure controls and procedures were effective as of December 31, 2018[178] - No material changes to internal control over financial reporting occurred during the quarter ended December 31, 2018[177] PART II. OTHER INFORMATION Legal Proceedings Information regarding legal proceedings is incorporated by reference from Note 13, 'Commitments and Contingencies—Legal Matters,' in the financial statements - For details on legal proceedings, refer to Note 13 of the financial statements[180] Risk Factors No material changes to the risk factors disclosed in the company's Annual Report on Form 10-K for the fiscal year ended September 30, 2018, were reported - No material changes to risk factors were reported for the quarter[181] Unregistered Sales of Equity Securities and Use of Proceeds During the quarter, the company repurchased 132,121 shares of common stock, including open market purchases and shares surrendered for tax withholding Share Repurchases for Three Months Ended December 31, 2018 | Period | Total Shares Purchased | Average Price Paid Per Share | Shares Purchased Under Plan | Remaining Shares Authorized for Plan | | :--- | :--- | :--- | :--- | :--- | | Dec 1 - Dec 31, 2018 | 132,121 | $16.74 | 46,133 | 678,671 | - Of the total shares purchased, 85,988 were surrendered by employees to satisfy tax withholding obligations related to vested Performance Based Phantom Stock Units (PPSUs)[182] Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications from the President and CFO, and XBRL data files - Exhibits filed include Rule 13a-14(a)/15d-14(a) certifications from the President and CFO, Section 1350 certifications, and XBRL interactive data files[189]