1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
----- -----
Commission File No. 1-13783
INTEGRATED ELECTRICAL SERVICES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 76-0542208
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
515 Post Oak Boulevard
Suite 450
Houston, Texas 77027-9408
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (713) 860-1500
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
The number of shares outstanding as of May 11, 1998, of the issuer's common
stock was 22,150,025 and of the issuer's restricted voting common stock was
2,655,709.
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INTEGRATED ELECTRICAL SERVICES, INC.
INDEX
PART I. FINANCIAL INFORMATION
Page
----
Item 1. Financial Statements
Overview and Basis of Presentation of Financial Statements................................ 3
Pro Forma Combined Statements of Operations
for the six months ended March 31, 1997 and 1998..................................... 5
Pro Forma Combined Statements of Operations
for the three months ended March 31, 1997 and 1998................................... 6
Consolidated Balance Sheets as of September 30, 1997 and
March 31, 1998....................................................................... 7
Consolidated Statements of Operations for the six months ended
March 31, 1997 and 1998.............................................................. 8
Consolidated Statements of Operations for the three months ended
March 31, 1997 and 1998.............................................................. 9
Consolidated Statements of Cash Flows for the six months ended
March 31, 1997 and 1998.............................................................. 10
Consolidated Statements of Cash Flows for the three months ended
March 31, 1997 and 1998.............................................................. 11
Condensed Notes to Financial Statements................................................... 12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................................... 16
PART II. OTHER INFORMATION
Item 2. Use of Proceeds.............................................................. 25
Item 6. Exhibits and Reports on Form 8-K............................................. 25
Signatures.................................................................................... 26
2
3
INTEGRATED ELECTRICAL SERVICES, INC.
OVERVIEW AND BASIS OF PRESENTATION
FOR FINANCIAL STATEMENTS
Integrated Electrical Services, Inc. ("IES" or the "Company"), a Delaware
corporation, was founded in June 1997 to create a leading national provider and
consolidator of electrical contracting and maintenance services, focusing
primarily on the commercial, industrial and residential markets. On January 30,
1998, concurrent with the closing of its initial public offering of stock, IES
acquired, in separate transactions (collectively, the "Acquisitions"), for
consideration including $53.4 million of cash and 12,313,025 shares of Common
Stock, the following 16 companies and related entities engaged in all facets of
electrical contracting and maintenance services: Houston-Stafford Electric, Inc.
and Stark Investments, Inc., (such two companies, collectively,
"Houston-Stafford"), Mills Electrical Contractors, Inc., BW Consolidated, Inc.,
including Bexar Electric Company, Ltd., and Calhoun Electric Company, Ltd.,
Pollock Electric Inc., Muth Electric, Inc., Daniel Electrical Contractors, Inc.
and Daniel Electrical of Treasure Coast Inc., Amber Electric, Inc., Charles P.
Bagby, Co., Inc. and General Partner, Inc., Summit Electric of Texas,
Incorporated, Thurman & O'Connell Corporation, Rodgers Electric Company, Inc.,
Hatfield Electric, Inc., Ace Electric, Inc., Reynolds Electric Corp. and Thomas
Popp & Company (the foregoing companies referred to herein as the "Founding
Companies").
Pursuant to the Securities and Exchange Commission's ("SEC") Staff Accounting
Bulletin No. 97 ("SAB 97"), Houston-Stafford due to its significance is for
accounting purposes considered the entity which acquired the other Founding
Companies (the "Accounting Acquirer"). As such, the Company's actual results of
operations include the results of operations of Houston-Stafford only for
periods through January 30, 1998, and all the Founding Companies beginning
February 1, 1998. Houston-Stafford's results of operations through January 30,
1998, include for financial statement presentation purposes a non-cash,
non-recurring compensation charge of approximately $17.0 million required by the
SEC in connection with the Acquisitions and related to a note receivable and
rights held by an officer of Houston-Stafford which was exchanged for cash and
shares of IES common stock. IES had not conducted any revenue generating
activities of its own prior to such time. For the period from inception through
January 31, 1998, all of IES's activity related to the completion of its initial
public offering of common stock (the "Offering") and the Acquisitions.
The unaudited pro forma combined financial information for the six and three
months ended March 31, 1997 and 1998, includes the effects at the beginning of
each period presented of (a) the Acquisitions, (b) the Offering (including the
underwriters exercise of their overallotment option), (c) the reversal of
Houston-Stafford's non-cash, non-recurring compensation charge of approximately
$17.0 million related to the Acquisitions as noted above, (d) certain reductions
in salaries and benefits to the former owners of the Founding Companies which
they agreed would take effect as of the effective date of the Acquisitions, (e)
amortization of goodwill resulting from the Acquisitions, (f) reduction in
interest income, and (g) additional interest expense on borrowings of $6.4
million to fund certain S corporation distributions.
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4
The unaudited pro forma combined statements of operations are presented herein
because the Company believes certain investors find the information useful. This
statement should be read in conjunction with the Company's historical unaudited
financial statements and notes thereto included under Part I, Item 1 of the Form
10-Q for the quarterly reporting period ended March 31, 1998. The pro forma
adjustments are based on estimates, available information and certain
assumptions which may be revised as additional information becomes available.
The unaudited pro forma combined statements of operations do not purport to
represent what the Company's consolidated results of operations would actually
have been if such transactions had in fact occurred on those dates and are not
necessarily representative of the Company's results of operations for any future
period. Since the companies acquired were not under common control or
management, historical consolidated results may not be comparable to, or
indicative of, future performance.
4
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INTEGRATED ELECTRICAL SERVICES, INC.
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Six Months Ended March 31,
------------------------------
1997 1998
------------ ------------
Revenues .............................................. $ 147,506 $ 173,363
Cost of services ...................................... 115,544 134,903
------------ ------------
Gross profit ....................................... 31,962 38,460
Selling, general & administrative expenses ............ 18,119 20,891
Goodwill amortization ................................. 1,924 1,908
------------ ------------
Operating income ................................... 11,919 15,661
------------ ------------
Other (income)/expense:
Interest expense ................................... 506 430
Interest income .................................... -- (182)
(Gain)/loss on sale of asset ....................... -- 24
Other (income)/expense, net ........................ (378) (91)
------------ ------------
128 181
Income before income taxes ............................ 11,791 15,480
Income tax provision .................................. 5,276 6,736
------------ ------------
Net income ............................................ $ 6,515 $ 8,744
============ ============
Basic earnings per share .............................. $ 0.27 $ 0.36
============ ============
Diluted earnings per share ............................ $ 0.27 $ 0.36
============ ============
Shares used in the pro forma computation
of earnings per share (Note 4)---
Basic- ....................................... 24,415,336 24,415,336
============ ============
Diluted- ..................................... 24,535,336 24,604,197
============ ============
The accompanying condensed notes to financial statements are an integral
part of these financial statements.
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INTEGRATED ELECTRICAL SERVICES, INC.
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended March 31,
------------------------------
1997 1998
------------ ------------
Revenues .................................................................. $ 71,128 $ 87,021
Cost of services .......................................................... 56,851 67,763
------------ ------------
Gross profit ........................................................... 14,277 19,258
Selling, general & administrative expenses ................................ 8,051 10,220
Goodwill amortization ..................................................... 962 946
------------ ------------
Operating income ....................................................... 5,264 8,092
------------ ------------
Other (income)/expense:
Interest expense ....................................................... 289 213
Interest income ........................................................ -- (182)
(Gain)/loss on sale of asset ........................................... -- (5)
Other (income)/expense, net ............................................ (212) (91)
------------ ------------
77 (65)
Income before income taxes ................................................ 5,187 8,157
Income tax provision ...................................................... 2,325 3,505
------------ ------------
Net income ................................................................ $ 2,862 $ 4,652
============ ============
Basic earnings per share .................................................. $ 0.12 $ 0.19
============ ============
Diluted earnings per share................................................. $ 0.12 $ 0.19
============ ============
Shares used in the pro forma computation
of earnings per share (Note 4)---
Basic- ........................................................... 24,415,336 24,415,336
============ ============
Diluted- ......................................................... 24,535,336 24,710,278
============ ============
The accompanying condensed notes to financial statements are an integral
part of these financial statements.
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INTEGRATED ELECTRICAL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
September 30, March 31,
1997 1998
------------ ----------
ASSETS (Audited) (Unaudited)
Cash and cash equivalents .................................. $ 2,492 $ 18,284
Accounts receivable, net of allowance of
$342 in 1997 and $1,786 in 1998 ..................... 12,091 65,740
Costs and estimated earnings recognized in
excess of billings on uncompleted contracts ......... 934 4,851
Inventories ................................................ 2,878 4,963
Prepaid and other current assets ........................... 568 870
Deferred income taxes ...................................... 594 1,220
---------- ----------
Total current assets .................................... 19,557 95,928
Goodwill ................................................... 958 154,638
Property and equipment, net ................................ 2,125 11,752
Other non-current assets ................................... 1,830 1,622
---------- ----------
Total assets ..................................... $ 24,470 $ 263,940
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current maturities of long-term debt ....................... $ 721 $ 458
Accounts payable and accrued expenses ...................... 9,549 31,281
Billings in excess of costs and estimated
earnings recognized on uncompleted contracts ........ 2,417 13,107
Income taxes payable ....................................... 1,234 2,615
Other current liabilities .................................. 222 1,388
---------- ----------
Total current liabilities ............................... 14,143 48,849
Long-term debt, net of current maturities .................. 968 6,930
Deferred income taxes ...................................... 100 365
Other non-current liabilities .............................. 1,051 77
---------- ----------
Total liabilities ....................................... 16,262 56,221
---------- ----------
Commitments and contingencies
Stockholders' equity:
Common stock ............................................ 32 217
Restricted common stock ................................. -- 27
Additional paid-in capital .............................. -- 215,649
Retained earnings (deficit) ............................. 8,176 (8,174)
---------- ----------
Total stockholders' equity .............................. 8,208 207,719
---------- ----------
Total liabilities and stockholders' equity ........ $ 24,470 $ 263,940
========== ==========
The accompanying condensed notes to financial statements are an integral
part of these financial statements.
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INTEGRATED ELECTRICAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
Six Months Ended March 31,
------------------------------
1997 1998
------------ ------------
Revenues .............................................. $ 33,568 $ 89,907
Cost of services ...................................... 26,259 70,194
------------ ------------
Gross profit ....................................... 7,309 19,713
Selling, general & administrative expenses ............ 5,551 16,274
Non-cash non-recurring compensation charge
in connection with the Acquisitions (Note 2) ....... -- 17,036
Goodwill amortization ................................. -- 640
------------ ------------
Operating income (loss) ............................ 1,758 (14,237)
Other (income)/expense:
Interest (income) expense, net ..................... 84 22
Other income, net .................................. (76) (123)
------------ ------------
8 (101)
Income (loss) before income taxes ..................... 1,750 (14,136)
Income tax provision .................................. 769 1,326
------------ ------------
Net income (loss) ..................................... $ 981 $ (15,462)
============ ============
Basic earnings (loss) per share ....................... $ 0.29 $ (1.51)
============ ============
Diluted earnings (loss) per share ..................... $ 0.29 $ (1.51)
============ ============
Shares used in the computation
of earnings per share (Note 4)---
Basic- ....................................... 3,352,039 10,226,953
============ ============
Diluted- ..................................... 3,352,039 10,226,953
============ ============
The accompanying condensed notes to financial statements are an integral
part of these financial statements.
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INTEGRATED ELECTRICAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
Three Months Ended March 31,
------------------------------
1997 1998
------------ ------------
Revenues .............................................. $ 16,137 $ 66,056
Cost of services ...................................... 13,082 51,503
------------ ------------
Gross profit ....................................... 3,055 14,553
Selling, general & administrative expenses ............ 2,145 9,150
Non-cash non-recurring compensation charge
in connection with the Acquisitions (Note 2) ....... -- 17,036
Goodwill amortization ................................. -- 640
------------ ------------
Operating income (loss) ............................ 910 (12,273)
Other (income)/expense:
Interest (income) expense, net ..................... 40 (25)
Other income, net .................................. (31) (94)
------------ ------------
9 (119)
Income (loss) before income taxes ..................... 901 (12,154)
Income tax provision .................................. 379 2,146
------------ ------------
Net income (loss) ..................................... $ 522 $ (14,300)
============ ============
Basic earnings (loss) per share ....................... $ 0.16 $ (0.84)
============ ============
Diluted earnings (loss) per share ..................... $ 0.16 $ (0.84)
============ ============
Shares used in the computation of
earnings per share (Note 4)---
Basic- ....................................... 3,352,039 17,101,867
============ ============
Diluted- ..................................... 3,352,039 17,101,867
============ ============
The accompanying condensed notes to financial statements are an integral
part of these financial statements.
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INTEGRATED ELECTRICAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
Six Months Ended March 31,
-------------------------
1997 1998
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ...................................................... $ 981 $ (15,462)
Adjustments to reconcile net income to net cash
provided by operating activities --
Non-cash non-recurring compensation charge (Note 2) .................... -- 17,036
Depreciation and amortization ...................................... 111 1,082
Gain on sale of property and equipment ............................. (9) --
Changes in operating assets and liabilities --
(Increase) decrease in --
Accounts receivable .............................................. (648) (5,859)
Inventories ...................................................... (37) 266
Costs and estimated earnings recognized in
excess of billings on uncompleted contacts ................... (61) 601
Prepaid expenses and other current assets ........................ (116) 79
Increase (decrease) in ---
Accounts payable and accrued expenses ............................ 690 (2,255)
Billings in excess of costs and estimated earnings
recognized on uncompleted contracts .......................... (358) 2,503
Other current liabilities ........................................ (232) 815
Other, net ......................................................... (54) (75)
--------- ---------
Net cash provided by (used) in operating activities .................... 267 (1,269)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of businesses, net of assets acquired.......................... -- (35,697)
Proceeds from sale of property and equipment ........................... 29 82
Additions to property and equipment .................................... (239) (1,629)
Collections of notes receivable ........................................ 4 475
--------- ---------
Net cash used in investing activities .................................. (206) (36,769)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of debt ..................................................... 1,655 626
Payments of debt ....................................................... (1,907) (20,551)
Distributions to Founding Company stockholders ......................... -- (17,758)
Proceeds from initial public offering .................................. -- 91,513
--------- ---------
Net cash provided by (used in) financing activities .................... (252) 53,830
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS .................................................. (191) 15,792
--------- ---------
CASH AND CASH EQUIVALENTS, beginning
of period .................................................... 3,691 2,492
CASH AND CASH EQUIVALENTS, end of period .................................. $ 3,500 $ 18,284
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid for ---
Interest ........................................................... $ 63 $ --
Income taxes........................................................ $ 1,204 $ --
Non-cash property distribution...................................... $ -- $ 756
The accompanying condensed notes to financial statements are an integral
part of these financial statements.
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INTEGRATED ELECTRICAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
Three Months Ended March 31,
---------------------------
1997 1998
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ............................................ $ 522 $ (14,300)
Adjustments to reconcile net income to net cash
provided by operating activities --
Non-cash non-recurring compensation charge (Note 2) .......... -- 17,036
Depreciation and amortization ............................ 32 890
Gain on sale of property and equipment ................... (11) (15)
Changes in operating assets and liabilities --
(Increase) decrease in --
Accounts receivable .................................... (1,098) (3,993)
Inventories ............................................ (28) (147)
Costs and estimated earnings recognized in
excess of billings on uncompleted contacts ......... 240 (281)
Prepaid expenses and other current assets .............. 18 (331)
Increase (decrease) in ---
Accounts payable and accrued expenses .................. 727 (448)
Billings in excess of costs and estimated earnings
recognized on uncompleted contracts ................ 335 1,770
Other current liabilities .............................. 277 1,344
Other, net ............................................... (20) (233)
---------- ----------
Net cash provided by operating activities .................... 994 1,292
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of businesses, net of assets acquired ............... -- (35,697)
Proceeds from sale of property and equipment ................. 17 --
Additions to property and equipment .......................... (91) (1,406)
Collections of notes receivable .............................. 4 --
---------- ----------
Net cash used in investing activities ........................ (70) (37,103)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of debt ........................................... 850 235
Payments of debt ............................................. (956) (20,551)
Distributions to Founding Company stockholders ............... -- (17,626)
Proceeds from initial public offering ........................ -- 91,513
---------- ----------
Net cash provided by (used in) financing activities .......... (106) 53,571
---------- ----------
NET INCREASE IN CASH AND CASH
EQUIVALENTS ........................................ 818 17,760
---------- ----------
CASH AND CASH EQUIVALENTS, beginning
of period .......................................... 2,682 524
CASH AND CASH EQUIVALENTS, end of period ........................ $ 3,500 $ 18,284
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid for ---
Interest ................................................. $ 40 $ --
Income taxes ............................................. $ 54 $ --
Non-cash property distribution ........................... $ -- $ 756
The accompanying condensed notes to financial statements are an integral
part of these financial statements.
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INTEGRATED ELECTRICAL SERVICES, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. OVERVIEW
The accompanying unaudited condensed historical financial statements of the
Company and the accompanying unaudited pro forma combined financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and Article 10 and Article 11 of Regulation
S-X, respectively. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements and therefore the financial statements included herein
should be reviewed in conjunction with the financial statements and related
notes thereto contained in the Registration Statement on Form S-1 (No.
333-38715) (the "Registration Statement"), as amended, filed by IES with the
Securities and Exchange Commission. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Historical operating results for the six
and three months ended March 31, 1998, are not necessarily indicative of the
results that may be expected for the year ended September 30, 1998.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
There were no significant changes in the accounting policies of the Company, the
Accounting Acquirer or the other Founding Companies during the periods
presented. For a description of these policies, refer to Note 2 of the Notes to
Financial Statements of IES, the Accounting Acquirer and each of the other
Founding Companies included in the Registration Statement.
USE OF ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and 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.
2. INITIAL PUBLIC OFFERING, FOUNDING COMPANY ACQUISITIONS, AND NON-CASH,
NON-RECURRING COMPENSATION CHARGE
On January 30, 1998, the Company completed its initial public offering of its
stock, which involved the sale to the public of 7,000,000 shares of the
Company's common stock at $13.00 per share. The Company received net proceeds
from the Offering of approximately $78.8 million. Concurrent with the completion
of the Offering, IES acquired the Founding Companies for consideration
consisting of $53.4 million in cash and 12,313,025 shares of common stock.
Additionally, on February 5, 1998, the Company sold 1,050,000 shares of its
common stock
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pursuant to the overallotment option granted to the underwriters in connection
with the Offering for net proceeds of approximately $12.7 million. The Company
used approximately $7.6 million of the net proceeds from the Offering to retire
outstanding third party debt and approximately $16.0 million to pay indebtedness
incurred by the Founding Companies for distributions to the owners prior to the
Acquisitions. The Company will use the remaining net proceeds for working
capital and general corporate purposes, which are expected to include future
acquisitions.
The Founding Companies had pro forma combined revenues of $312.7 million for the
year ended September 30, 1997. Pursuant to the SEC's SAB 97, Houston-Stafford
due to its significance is for accounting purposes considered the entity which
acquired the other Founding Companies. As such, the Company's actual results of
operations for the six and three months ended March 31, 1997 and 1998,
respectively, include the results of operations of Houston-Stafford only for
periods through January 30, 1998 (the date of the Acquisitions), and all the
Founding Companies beginning February 1, 1998.
Houston-Stafford's results of operations through January 30, 1998, include for
financial statement presentation purposes a non-cash, non-recurring compensation
charge of approximately $17.0 million required by the SEC in connection with the
Acquisitions and related to a note receivable and rights held by an officer of
Houston-Stafford which was exchanged for cash and shares of IES Common Stock
(see Overview and Basis of Presentation for Financial Statements).
3. LONG-TERM DEBT
The Company has a $70.0 million credit facility with NationsBank of Texas, N.A.
as agent (the "Credit Facility"). The Credit Facility matures on January 31,
2001, bears interest at the bank's prime rate or LIBOR, at the Company's option,
plus an applicable margin based on the ratio of debt to EBITDA (as defined). An
annual commitment fee from 0.25% to 0.375% is payable on any unused portion of
the Credit Facility. The Company's subsidiaries have guaranteed the repayment of
all amounts due under the facility, and the facility is secured by the capital
stock of the guarantors and the accounts receivable of the Company and the
guarantors. As of March 31, 1998, no amounts have been borrowed under the Credit
Facility.
The Credit Facility will be used to fund acquisitions, capital expenditures and
working capital requirements. Under the terms of the Credit Facility the Company
is required to comply with various affirmative and negative covenants including:
(i) the maintenance of certain financial ratios, (ii) restrictions on additional
indebtedness, and (iii) restrictions on liens, guarantees and dividends.
4. PER SHARE INFORMATION
In October 1997, the Company adopted the provisions of the Financial Accounting
Standards Board Statement of Accounting Standards No. 128, "Earnings Per Share"
("SFAS No. 128"). SFAS No. 128 requires the calculation of basic and diluted
earnings per share. Basic earnings per share calculations are based on the
weighted average number of common
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shares outstanding. Diluted earnings per share calculations are based on the
weighted average number of common shares outstanding and common equivalent
shares from the assumed exercise of outstanding stock options.
Upon completion of the Acquisitions, the Offering, and the exercise of the
underwriters' overallotment option for 1,050,000 shares, the Company had
21,759,627 shares of its common stock and 2,655,709 shares of its restricted
voting common stock issued and outstanding. As of March 31, 1998, the Company
had outstanding options to purchase up to a total of (i) approximately 2,746,000
shares of Common Stock issued pursuant to the Company's 1997 Stock Plan, and
(ii) 15,000 shares of Common Stock issued pursuant to the Company's 1997
Directors Stock Plan. The shares used to calculate the pro forma and historical
earnings per share for the periods presented are summarized as follows:
Six Months Ended March 31,
-------------------------
1997 1998
---------- ----------
Pro Forma -
Weighted average shares outstanding ........... 24,415,336 24,415,336
Weighted average equivalent shares
from outstanding stock options .............. 120,000 188,861
---------- ----------
24,535,336 24,604,197
========== ==========
Historical -
Weighted average shares outstanding ........... 3,352,039 10,226,953
========== ==========
Three Months Ended March 31,
-------------------------
1997 1998
---------- ----------
Pro Forma -
Weighted average shares outstanding ........... 24,415,336 24,415,336
Weighted average equivalent shares
from outstanding stock options .............. 120,000 294,942
---------- ----------
24,535,336 24,710,278
========== ==========
Historical -
Weighted average shares outstanding ........... 3,352,039 17,101,867
========== ==========
The weighted average equivalent shares from outstanding stock options are
excluded from the historical earnings (loss) per share calculations for the six
and three month periods ended March 31, 1998, because the effect would be
anti-dilutive.
5. INVENTORIES
Inventories consist of parts and supplies held for use in the ordinary course of
business and are generally valued at the lower of cost or market using the
first-in, first-out (FIFO) method.
6. COMMITMENTS AND CONTINGENCIES
Subsidiaries of the Company are involved in various legal proceedings that have
arisen in the ordinary course of business. While it is not possible to predict
the outcome of such proceedings
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with certainty, in the opinion of the Company's management, all such proceedings
are either adequately covered by insurance or, if not so covered should not
ultimately result in any liability which would have a material adverse effect on
the financial position, liquidity or results of operations of the Company.
7. SUBSEQUENT EVENTS:
Subsequent to March 31, 1998, the Company completed the acquisitions of Howard
Brothers Electric Co., Inc., in Charlotte, NC; Galbraith Electric Co., Inc., in
Abilene, TX; Paulin Electric Co., Inc., in Louisville, KY; J.W. Gray Electric
Co., in Houston, TX; and Aladdin-Ward Electric, Inc., in Sarasota, FL. All of
the acquisitions were accounted for using the purchase method of accounting.
These five companies had combined 1997 historical annualized revenues of
approximately $42 million.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
The following should be read in conjunction with the response to Part I, Item 1
of this Report and the Registration Statement. Any capitalized terms used but
not defined in this Item have the same meaning given to them in Part I, Item 1.
This report on Form 10-Q includes certain statements that may be deemed to be
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. These statements are based on the Company's expectations and involve
risks and uncertainties that could cause the Company's actual results to differ
materially from those set forth in the statements. Such risks and uncertainties
include, but are not limited to, risks associated with acquisitions,
fluctuations in operating results because of acquisitions and seasonality,
national and regional industry and economic conditions, competition and risks
entailed in the operation and growth of existing and newly acquired businesses.
The foregoing and other factors are discussed in the Registration Statement.
RESULTS OF OPERATIONS
The pro forma financial information for the six and three months ended March 31,
1997 and 1998, include the effects at the beginning of each period presented of
(a) the Acquisitions, (b) the Offering (including the underwriters exercise of
their overallotment option), (c) the reversal of Houston-Stafford's non-cash,
non-recurring compensation charge of approximately $17.0 million related to the
Acquisitions, (d) certain reductions in salaries and benefits to the former
owners of the Founding Companies which they agreed would take effect as of the
effective date of the Acquisitions, (e) amortization of goodwill resulting from
the Acquisitions, (f) reduction in interest income, and (g) additional interest
expense on borrowings of $6.4 million that would have been necessary to fund
certain S corporation distributions.
The pro forma adjustments are based on estimates, available information and
certain assumptions which may be revised as additional information becomes
available. The pro forma financial data do not purport to represent what the
Company's combined financial position or results of operations would actually
have been if such transactions had in fact occurred on those dates and are not
necessarily representative of the Company's financial position or results of
operations for any future period. Since IES and the Founding Companies were not
under common control or management, historical combined results may not be
comparable to, or indicative of, future performance.
16
17
PRO FORMA COMBINED RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 1997
COMPARED TO THE SIX MONTHS ENDED MARCH 31, 1998
The following table presents selected pro forma combined historical financial
information for the six months ended March 31, 1997 and 1998. The information
presented in the table is in thousands of dollars.
Six Months Ended March 31,
----------------------------------------------
1997 % 1998 %
---------- ----- ---------- -----
Revenues ......................................... $ 147,506 100% $ 173,363 100%
Cost of services ................................. 115,544 78% 134,903 78%
Selling, general & administrative
expenses .................................... 18,119 12% 20,891 12%
Goodwill amortization ............................ 1,924 2% 1,908 1%
---------- ----- ---------- -----
Operating income.................................. $ 11,919 8% $ 15,661 9%
========== ===== ========== =====
REVENUES. Pro forma combined revenues increased $25.9 million, or 18%, from
$147.5 million for the six months ended March 31, 1997, to $173.4 million for
the six months ended March 31, 1998. The increase in combined revenues was
principally due to higher demand for commercial services related to high rise
condominiums and retail establishments, higher demand for multi-family
apartments, increased demand for single-family electrical installation, and the
acquisition of an electrical supply company in 1997, which were partially offset
by the completion of several large manufacturing and distribution facility
projects and the delayed start of several mid-sized commercial projects. The
1997 results were also negatively affected by an abnormally harsh winter in
South Dakota and the impact of extended wet weather on residential construction
in Texas.
COST OF SERVICES. Pro forma combined cost of services increased $19.4 million,
or 17%, from $115.5 million for the six months ended March 31, 1997, to $134.9
million for the six months ended March 31, 1998. The increase in pro forma
combined cost of services was principally due to additional variable costs
associated with the overall increase in revenues and the acquisition of an
electrical supply company noted above. As a percentage of pro forma combined
revenues, pro forma combined cost of services remained constant at 78% over the
periods presented.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Pro forma combined selling,
general and administrative expenses increased $2.8 million or 15% from $18.1
million for the six months ended March 31, 1997, to $20.9 million for the six
months ended March 31, 1998. The increase in pro forma combined selling, general
and administrative expenses was principally due to additional variable costs
associated with the overall increase in revenues and the acquisition of an
electrical supply company noted above. As a percentage of pro forma combined
revenues,
17
18
pro forma combined selling, general and administrative expenses remained
constant at 12% of revenue for the six months ended March 31, 1997 and 1998,
respectively.
OPERATING INCOME. Pro forma combined operating income increased $3.8 million, or
32%, from $11.9 million for the six months ended March 31, 1997, to $15.7
million for the six months ended March 31, 1998. The increase in pro forma
combined operating income was attributable to the factors discussed above. As a
percentage of pro forma combined revenues, pro forma combined operating income
increased from 8% for the six months ended March 31, 1997, to 9% for the six
months ended March 31, 1998.
PRO FORMA COMBINED RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31,
1997 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 1998
The following table presents selected pro forma combined historical financial
information for the three months ended March 31, 1997 and 1998. The information
presented in the table is in thousands of dollars.
Three Months Ended March 31,
-----------------------------------------------
1997 % 1998 %
---------- ----- ---------- ------
Revenues.......................................... $ 71,128 100% $ 87,021 100%
Cost of services ................................. 56,851 80% 67,763 78%
Selling, general & administrative
expenses .................................... 8,051 11% 10,220 12%
Goodwill amortization ............................ 962 1% 946 1%
---------- ----- ---------- ------
Operating income.................................. $ 5,264 8% $ 8,092 9%
========== ===== ========== ======
REVENUES. Pro forma combined revenues increased $15.9 million, or 22%, from
$71.1 million for the three months ended March 31, 1997, to $87.0 million for
the three months ended March 31, 1998. The increase in combined revenues was
principally due to higher demand for commercial services related to high rise
condominiums and retail establishments, higher demand for multi-family
apartments, increased demand for single-family electrical installation, and the
acquisition of an electrical supply company in 1997, which were partially offset
by the delayed start of several mid-sized commercial projects. The 1997 results
were also negatively affected by an abnormally harsh winter in South Dakota and
the impact of extended wet weather on residential construction in Texas.
COST OF SERVICES. Pro forma combined cost of services increased $10.9 million,
or 19%, from $56.9 million for the three months ended March 31, 1997, to $67.8
million for the three months ended March 31, 1998. The increase in pro forma
combined cost of services was principally due to additional variable costs
associated with the overall increase in revenues and the acquisition of an
electrical supply company noted above. As a percentage of pro forma combined
revenues, pro forma combined cost of services decreased from 80% for the three
18
19
months ended March 31, 1997, to 78% for the three months ended March 31, 1998.
This decrease was primarily attributable to the significant revenue growth in
the current year, as well as lower margins in the prior year due to inclement
weather in Texas and South Dakota, and to a lesser extent the redistribution of
labor after the completion of several large manufacturing and distribution
projects in December 1996.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Pro forma combined selling,
general and administrative expenses increased $2.1 million, or 26%, from $8.1
million for the three months ended March 31, 1997, to $10.2 million for the
three months ended March 31, 1998. This increase in pro forma combined selling,
general and administrative expenses was primarily attributable to the additional
variable costs necessary to support the overall increase in revenues and the
acquisition of an electrical supply company noted above. As a percentage of pro
forma combined revenues, pro forma combined selling, general and administrative
expenses increased from 11% for the three months ended March 31, 1997, to 12%
for the three months ended March 31, 1997.
OPERATING INCOME. Pro forma combined operating income increased $2.8 million, or
53%, from $5.3 million for the three months ended March 31, 1997, to $8.1
million for the three months ended March 31, 1998. The increase in pro forma
combined operating income was attributable to the factors discussed above. As a
percentage of pro forma combined revenues, pro forma combined operating income
increased from 7% for the three months ended March 31, 1997, to 9% for the three
months ended March 31, 1998.
HISTORICAL RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 1997
COMPARED TO THE SIX MONTHS ENDED MARCH 31, 1998
The following table presents selected historical financial information for the
six months ended March 31, 1997 and 1998. The historical results of operations
presented below include the results of operations of Houston-Stafford for the
six months ended March 31, 1997 and 1998, which results include the results of
operations of IES and the other Founding Companies beginning February 1, 1998.
See Overview and Basis of Presentation of Financial Statements for further
discussion. The information presented in the table is in thousands of dollars.
Six Months Ended March 31,
-----------------------------------------------
1997 % 1998 %
---------- ------ ---------- -----
Revenues.......................................... $ 33,568 100% $ 89,907 100%
Cost of services ................................. 26,259 78% 70,194 78%
Selling, general & administrative
expenses .................................... 5,551 17% 16,274 18%
Goodwill amortization ............................ -- --% 640 1%
---------- ------ ---------- -----
Operating income before non-cash
non-recurring compensation
charge in connection with
the Acquisitions............................. $ 1,758 5% $ 2,799 3%
========== ====== ========== =====
19
20
REVENUES. Revenues increased $56.3 million, or 168%, from $33.6 million for the
six months ended March 31, 1997, to $89.9 million for the six months ended March
31, 1998. The increase in revenues was principally due to approximately $43.3
million of revenue related to the Acquisitions of the Founding Companies
(excluding Houston-Stafford) on January 30, 1998, higher demand national
multi-family apartments, and increased demand for single-family electrical
installation services in Houston.
COST OF SERVICES. Cost of services increased $43.9 million, or 167%, from $26.3
million for the six months ended March 31, 1997, to $70.2 million for the six
months ended March 31, 1998. The increase in cost of services was principally
due to the Acquisitions of the Founding Companies (excluding Houston-Stafford)
on January 30, 1998, and the additional variable costs associated with the
increased revenues noted above. As a percentage of revenues, cost of services
remained constant at 78% for the six months ended March 31, 1997, compared to
the six months ended March 31, 1998.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $10.7 million, or 191%, from $5.6 million for
the six months ended March 31, 1997, to $16.3 million for the six months ended
March 31, 1998. This increase in selling, general and administrative expenses
was primarily attributable to the Acquisitions of the Founding Companies
(excluding Houston-Stafford) on January 30, 1998, and to a $5.6 million bonus
paid to the owners of Houston-Stafford during the four months ended in January
1998, compared to a $1.5 million bonus during the four months ended in January,
1997. Excluding such bonuses, selling, general and administrative expenses as a
percentage of revenues remained constant at 12% for the six months ended March
31, 1997, compared to the six months ended March 31, 1998.
OPERATING INCOME. Operating income increased $1.0 million, or 56%, from $1.8
million for the six months ended March 31, 1997, to $2.8 million for the six
months ended March 31, 1998. Excluding the owner bonuses noted above, operating
income increased $5.1 million, or 155%, from $3.3 million for the six months
ended March 31, 1997, to $8.4 million for the six months ended March 31, 1998.
This increase in operating income is primarily attributed to the Acquisitions of
the Founding Companies (excluding Houston-Stafford) on January 30, 1998. As a
percentage of revenues, operating income (excluding the owner bonuses noted
above) decreased from 10% for the six months ended March 31, 1997, to 9% for the
six months ended March 31, 1998.
20
21
HISTORICAL RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997
COMPARED TO THE THREE MONTHS ENDED MARCH 31, 1998
The following table presents selected historical financial information for the
three months ended March 31, 1997 and 1998. The historical results of operations
presented below include the results of operations of Houston-Stafford for the
three months ended March 31, 1997 and 1998, which results include the results of
operations of IES and the other Founding Companies beginning February 1, 1998.
See Overview and Basis of Presentation of Financial Statements for further
discussion. The information presented in the table is in thousands of dollars.
Three Months Ended March 31,
----------------------------------------------
1997 % 1998 %
---------- ----- ---------- -----
Revenues ......................................... $ 16,137 100% $ 66,056 100%
Cost of services ................................. 13,082 81% 51,503 78%
Selling, general & administrative
expenses .................................... 2,145 13% 9,150 14%
Goodwill amortization ............................ -- --% 640 1%
---------- ----- ---------- -----
Operating income before non-cash
non-recurring compensation
charge in connection with
the Acquisitions ............................ $ 910 6% $ 4,763 7%
========== ===== ========== =====
REVENUES. Revenues increased $50.0 million, or 310%, from $16.1 million for the
three months ended March 31, 1997, to $66.1 million for the three months ended
March 31, 1998. The increase in revenues was principally due to approximately
$43.3 million of revenue related to the Acquisitions of the Founding Companies
(excluding Houston-Stafford) on January 30, 1998, higher demand for residential
services under contract with a national provider of multi-family apartments, and
increased demand for single-family electrical installation services in Houston.
COST OF SERVICES. Cost of services increased $38.4 million, or 293%, from $13.1
million for the three months ended March 31, 1997, to $51.5 million for the
three months ended March 31, 1998. The increase in cost of services was
principally due to the Acquisitions of the Founding Companies (excluding
Houston-Stafford) on January 30, 1998, and the additional variable costs
associated with the increased revenues noted above. As a percentage of revenues,
cost of services decreased from 81% for the three months ended March 31, 1997,
to 78% for the three months ended March 31, 1998. This decrease was due to
Houston-Stafford's lower markup on certain materials acquired under significant
contracts for multi-family apartments and additional overtime in the prior year.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $7.1 million, or 338%, from $2.1 million for
the three months ended March 31, 1997, to $9.2 million for the three months
ended March 31, 1998. This increase in selling, general and administrative
expenses was primarily attributable to the Acquisitions of the
21
22
Founding Companies (excluding Houston-Stafford) on January 30, 1998, and to a
$1.2 million bonus paid to the owners of Houston-Stafford during the one month
ended January 31, 1998, compared to a $0.1 million bonus during the three months
ended March 31, 1997. Excluding such bonuses, selling, general and
administrative expenses as a percentage of revenues remained constant at 12% for
the six months ended March 31, 1997, compared to the six months ended March 31,
1998.
OPERATING INCOME. Operating income increased $3.9 million, or 433%, from $0.9
million for the three months ended March 31, 1997, to $4.8 million for the three
months ended March 31, 1998. Excluding the owner bonuses noted above, operating
income increased $5.0 million, or 500%, from $1.0 million for the three months
ended March 31, 1997, to $6.0 million for the three months ended March 31, 1998.
This increase in operating income is primarily attributed to the Acquisitions of
the Founding Companies (excluding Houston-Stafford) on January 30, 1998. As a
percentage of revenues, operating income (excluding the owner bonuses noted
above) increased from 6% for the three months ended March 31, 1997, to 9% for
the three months ended March 31, 1998.
FINANCIAL CONDITION, LIQUIDITY AND CASH FLOWS
As of March 31, 1998, the Company had cash of $18.8 million and available
capacity under its Credit Facility of $70.0 million.
The Company has a three-year revolving credit facility of up to $70.0 million
(the "Credit Facility") to be used for working capital, capital expenditures,
other corporate purposes and acquisitions. The amounts borrowed under the Credit
Facility bear interest at an annual rate equal to either (a) the London
interbank offered rate ("LIBOR") plus 1.0% to 2.0%, as determined by the ratio
of the Company's total funded debt to EBITDA (as defined), or (b) the higher of
(i) the bank's prime rate and (ii) the Federal Funds rate plus 0.5%, plus up to
an additional 0.5% as determined by the ratio of the Company's total funded debt
to EBITDA. Commitment fees of 0.25% to 0.375%, as determined by the ratio of the
Company's total funded debt to EBITDA, are due on any unused borrowing capacity
under the Credit Facility. The Company's subsidiaries have guaranteed the
repayment of all amounts due under the facility, and the facility is secured by
the capital stock of the guarantors and the accounts receivable of the Company
and the guarantors. The Credit Facility requires the consent of the lenders for
acquisitions exceeding a certain level of cash consideration, prohibits the
payment of cash dividends on the Common Stock, restricts the ability of the
Company to incur other indebtedness and requires the Company to comply with
certain financial covenants. Availability of the Credit Facility is subject to
customary drawing conditions.
On January 30, 1998, the Company completed its Offering of 7,000,000 shares of
common stock for which it received net proceeds of approximately $78.8 million.
Concurrent with the completion of the Offering, IES acquired the Founding
Companies for consideration consisting of $53.4 million in cash and 12,313,025
shares of common stock. Additionally, on February 5, 1998, the Company sold an
additional 1,050,000 shares of its common stock pursuant to the overallotment
option granted to the underwriters in connection with the Offering for net
proceeds
22
23
of $12.7 million. The Company used $7.6 million of the net proceeds from the
Offering to retire outstanding third party debt and $16.0 million to pay
indebtedness incurred by the Founding Companies for distributions to the owners
prior to the Acquisitions. The Company will use the net proceeds for working
capital and general corporate purposes, which are expected to include future
acquisitions.
The Company anticipates that its cash flow from operations and proceeds from the
Offering will provide sufficient cash to enable the Company to meet its working
capital needs, debt service requirements and planned capital expenditures for
property and equipment through 1998.
Through May 15, 1998, the Company has acquired five companies in addition to the
Founding Companies with annualized revenues of approximately $42 million. The
cash component of the consideration paid for these companies was funded with
existing cash.
The Company has signed letters of intent with eight companies with aggregate
revenue of $160 million. These transactions are subject to due diligence,
regulatory approval, and customary closing conditions, as such there is no
assurance that these transactions will be consummated.
The Company intends to continue to pursue acquisition opportunities. The timing,
size or success of any acquisition effort and the associated potential capital
commitments cannot be predicted. The Company expects to fund future acquisitions
primarily with a portion of the net proceeds of the Offering, working capital,
cash flow from operations and borrowings, including any unborrowed portion of
the Credit Facility, as well as issuances of additional equity. To the extent
the Company funds a significant portion of the consideration for future
acquisitions with cash, it may have to increase the amount of the Credit
Facility or obtain other sources of financing. Capital expenditures for
equipment and expansion of facilities are expected to be funded from cash flow
from operations and supplemented as necessary by borrowings from the Credit
Facility.
SEASONALITY AND QUARTERLY FLUCTUATIONS
The Company's results of operations from residential construction are seasonal,
depending on weather trends, with typically higher revenues generated during the
spring and summer and lower revenues during the fall and winter. The commercial
and industrial aspect of the Company's business is less subject to seasonal
trends, as this work is performed inside structures protected from the weather.
The Company's service business is generally not affected by seasonality. In
addition, the construction industry has historically been highly cyclical. The
Company's 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
acquisitions and the timing and magnitude of acquisition assimilation costs.
Accordingly, operating results for any fiscal period are not necessarily
indicative of results that may be achieved for any subsequent fiscal period.
23
24
RECENT ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation," allows entities to choose between a new fair value
based method of accounting for employee stock options or similar equity
instruments and the current intrinsic, value-based method of accounting
prescribed by Accounting Principles Board Opinion No. 25 ("APB No. 25").
Entities electing to remain with the accounting in APB No. 25 must make pro
forma disclosures of net income and earnings per share as if the fair value
method of accounting had been applied. The Company will provide pro forma
disclosure of net income and earnings per share, as applicable, in the notes to
future consolidated annual financial statements.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS No. 128").
SFAS No. 128 simplifies the standards required under current accounting rules
for computing earnings per share and replaces the presentation of primary
earnings per share and fully diluted earnings per share with a presentation of
basic earnings per share ("basic EPS") and diluted earnings per share ("diluted
EPS"). Basic EPS excludes any dilution and is determined by dividing net income
by the weighted average number of common shares outstanding during the period.
Diluted EPS reflects the potential dilution that could occur if securities and
other contracts to issue common stock were exercised or converted into common
stock. The Company's pro forma and historical earnings per share have been
calculated in accordance with SFAS No. 128.
In June, 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" which establishes standards for the way
public enterprises are to report information about operating segments in annual
financial statements and requires the reporting of selected information about
operating segments in interim financial reports issued to shareholders. SFAS No.
131 also establishes standards for related disclosures about products and
services, geographic areas, and major customers. SFAS No. 131 is effective for
fiscal years beginning after December 15, 1997, at which time the Company will
adopt the provision. This statement is not anticipated to have a material impact
on the Company's financial disclosures.
YEAR 2000 DATE CONVERSION
The Company is in the process of identifying and evaluating its potential Year
2000 software issues. The Company does not currently expect that the cost of
addressing Year 2000 issues will materially exceed the cost of normal software
upgrades and replacements expected to occur through the Year 2000.
24
25
INTEGRATED ELECTRICAL SERVICES, INC.
PART II. OTHER INFORMATION
ITEM 2. USE OF PROCEEDS
(d) Use of Proceeds
On January 26, 1998, the Company commenced its initial public offering
of 7,000,000 shares of the Company's common stock, par value $0.01 per
share, at $13.00 per share pursuant to a Registration Statement on Form
S-1 (333-38715) with respect to 8,050,000 shares of common stock which
became effective on January 26, 1998. The managing underwriters of the
offering were Merrill Lynch & Co., Donaldson, Lufkin & Jenrette
Securities Corporation, SunTrust Equitable Securities Corporation and
Sanders Morris Mundy. The Offering, which closed on January 30, 1998,
yielded proceeds of $91.0 million. Additionally, on February 5, 1998,
the Company sold the entire 1,050,000 shares of its common stock
subject to the overallotment option granted to the underwriters in
connection with the Offering and yielded additional proceeds of $13.6
million. Of these total proceeds, $7.3 million was retained by the
underwriters as their discount and commission and approximately $5.8
million was used to repay expenses incurred in connection with the
Offering. Of the approximate $5.8 million in expenses, $3.2 million was
paid to a director of the Company in order to repay principal and
interest on funds advanced by such director with respect to expenses
incurred by the Company. A portion of the remaining net proceeds to the
Company of $91.5 million were used to pay approximately $53.4 million
of partial consideration to the owners of the Founding Companies
(including approximately $23.5 million to certain directors of the
Company), to retire approximately $7.6 million of outstanding third
party debt and pay approximately $16.0 million of indebtedness incurred
by the Founding Companies for distributions to the owners prior to the
Acquisitions. The Company will use the remaining net proceeds for
working capital and general corporate purposes, which are expected to
include future acquisitions.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS:
27. Financial Data Schedule
25
26
INTEGRATED ELECTRICAL SERVICES, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized, who has signed this report on behalf of
the Registrant and as the principal financial officer of the Registrant.
INTEGRATED ELECTRICAL SERVICES, INC.
Date: May 15, 1998 By: /s/ JIM P. WISE
Jim P. Wise
Senior Vice President and
Chief Financial Officer
26
27
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
27. Financial Data Schedule
5
1,000
6-MOS
SEP-30-1998
OCT-01-1997
MAR-31-1998
18,284
0
67,526
1,786
4,963
95,928
13,361
1,609
263,940
48,849
0
0
0
217
207,502
263,940
173,363
173,363
134,903
157,702
181
0
430
15,480
6,736
8,744
0
0
0
8,744
.36
.36
