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Item 8. Financial Statements and Supplementary Data

2020-12-07 compared with 2019-12-06 · 333 added, 229 removed, 747 unchanged (43% of the section changed)

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We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of September 30, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated December 7, 2020 expressed an unqualified opinion thereon.

Adoption of Accounting Standards Update (ASU) No.

2016-02 Leases

As discussed in Notes 2 and 9 to the consolidated financial statements, the Company changed its method of accounting for leases in 2020 due to the adoption of ASU No.

2016-02, Leases.

Basis for Opinion

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In our opinion, IES Holdings, Inc.

and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of September 30, 2019, based on the COSO criteria.

and subsidiaries (the Company) maintained, in all material respects, effective internal control over ﬁnancial reporting as of September 30, 2020, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of September 30, 2020 and 2019, the related consolidated statements of comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended September 30, 2020, and the related notes and our report dated December 7, 2020 expressed an unqualified opinion thereon.

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Trade, net of allowance 213,016 186,279

Retainage 40,878 29,214

Inventories 24,889 21,543

Costs and estimated earnings in excess of billings 29,937 29,860

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Property and equipment, net 24,589 25,746

Goodwill 53,763 50,622

Intangible assets, net 39,357 26,623

Deferred tax assets 33,803 40,874

Operating right of use assets 31,786 —

Other non-current assets 5,780 4,938

Total assets $ 560,528 $ 445,258

LIABILITIES AND STOCKHOLDERS’ EQUITY

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Long-term debt 217 299

Operating long-term lease liabilities 20,530 —

Other non-current liabilities 12,215 1,945

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Treasury stock, at cost, 1,287,134 and 884,518 shares, respectively

( 24,499 ) ( 12,483 )

Additional paid-in capital 200,587 192,911

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Year Ended September 30,

2020 2019 2018

Revenues $ 1,190,856 $ 1,076,996 $ 876,828

Cost of services 962,897 894,893 726,866

Gross profit 227,959 182,103 149,962

Selling, general and administrative expenses 170,911 140,575 123,920

Goodwill impairment expense 6,976 — —

Contingent consideration ( 11 ) ( 374 ) 103

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Income from operations before income taxes 49,294 40,141 24,348

Provision (benefit) for income taxes

Provision for income taxes 8,740 6,663 38,151

Net income (loss) 40,554 33,478 ( 13,803 )

Net income attributable to noncontrolling interest

Net (income) loss attributable to noncontrolling interest 1,045 ( 272 ) ( 354 )

Comprehensive income (loss) attributable to IES Holdings, Inc.

$ 41,599 $ 33,206 $ ( 14,157 )

Earnings (loss) per share attributable to IES Holdings, Inc.:

Basic $ 1.96 $ 1.56 $ ( 0.67 )

Diluted $ 1.94 $ 1.55 $ ( 0.67 )

Shares used in the computation of earnings (loss) per share:

Basic 20,795,892 21,082,012 21,196,388

Diluted 21,092,410 21,315,245 21,196,388

The accompanying notes are an integral part of these Consolidated Financial Statements.

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(In Thousands, Except Share Information)

Treasury Stock

Retained Earnings

Total Stockholders' Equity

BALANCE, September 30, 2016

Grants under compensation plans

Cumulative effect adjustment from adoption of ASU 2016-09

Acquisition of treasury stock

Stock forfeitures

Options exercised

Non-cash compensation

Increase in noncontrolling interest

Net income attributable to IES Holdings, Inc.

Common Stock Treasury Stock Additional Paid-In Capital Retained Earnings Total Stockholders' Equity

Shares Amount Shares Amount

BALANCE, September 30, 2017 22,049,529 $ 220 ( 712,554 ) $ ( 6,898 ) $ 196,955 $ 46,427 $ 236,704

Grants under compensation plans

Issuance of restricted stock & performance stock — — 520 5 ( 5 ) — —

Acquisition of treasury stock — — ( 133,459 ) ( 2,059 ) — — ( 2,059 )

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Net loss attributable to IES Holdings, Inc.

— — — — — ( 14,157 ) ( 14,157 )

BALANCE, September 30, 2018 22,049,529 $ 220 ( 843,993 ) $ ( 8,937 ) $ 196,810 $ 32,314 $ 220,407

Issuance of restricted stock & performance stock — — 501,797 5,942 ( 5,942 ) — —

Acquisition of treasury stock — — ( 564,822 ) ( 9,802 ) — — ( 9,802 )

Options exercised — — 22,500 314 ( 314 ) — —

Non-cash compensation — — — — 2,357 — 2,357

Cumulative effect adjustment from adoption of new accounting standard — — — — — 80 80

Net income attributable to IES Holdings, Inc.

— — — — — 33,206 33,206

BALANCE, September 30, 2019 22,049,529 $ 220 ( 884,518 ) $ ( 12,483 ) $ 192,911 $ 65,600 $ 246,248

Issuance of restricted stock & performance stock — — 120,197 1,708 ( 1,708 ) — —

Acquisition of treasury stock — — ( 528,563 ) ( 13,808 ) 6,111 — ( 7,697 )

Options exercised — — 5,750 84 ( 50 ) — 34

Non-cash compensation — — — — 3,323 — 3,323

Increase in noncontrolling interest — — — — — ( 194 ) ( 194 )

Net income attributable to IES Holdings, Inc.

— — — — — 41,599 41,599

BALANCE, September 30, 2020 22,049,529 $ 220 ( 1,287,134 ) $ ( 24,499 ) $ 200,587 $ 107,005 $ 283,313

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Year Ended September 30,

2020 2019 2018

CASH FLOWS FROM OPERATING ACTIVITIES:

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Non-cash compensation expense 3,323 2,357 ( 136 )

Goodwill impairment expense 6,976 — —

Deferred income taxes 5,122 5,681 38,151

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Accounts receivable ( 25,389 ) ( 35,254 ) ( 7,574 )

Inventories ( 2,822 ) ( 684 ) ( 3,970 )

Costs and estimated earnings in excess of billings 435 1,586 ( 17,840 )

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Repayments of debt ( 592,756 ) ( 119,508 ) ( 177 )

Contingent consideration payment

Finance lease payment ( 215 ) — —

Distribution to noncontrolling interest ( 639 ) ( 240 ) ( 349 )

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Issuance of shares 34 — 11

Net cash provided by (used in) financing activities

NET DECREASE IN CASH AND CASH EQUIVALENTS

Net cash used in financing activities ( 8,505 ) ( 40,289 ) ( 2,406 )

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 34,643 ( 7,313 ) ( 2,043 )

CASH, CASH EQUIVALENTS, beginning of period 18,934 26,247 28,290

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IES Holdings, Inc .

is a holding company that owns and manages operating subsidiaries in business activities across a variety of end-markets.

is a holding company that owns and manages operating subsidiaries that design and install integrated electrical and technology systems and provide infrastructure products and services across a variety of end-markets, including data centers, residential housing and commercial and industrial facilities.

Our operations are currently organized into four principal business segments, based upon the nature of our current services:

Commercial & Industrial – Provider of electrical and mechanical design, construction, and maintenance services to the commercial and industrial markets in various regional markets and nationwide in certain areas of expertise, such as the power infrastructure market.

Communications – Nationwide provider of technology infrastructure services, including the design, build, and maintenance of the communications infrastructure within data centers for colocation and managed hosting customers for both large corporations and independent businesses.

Infrastructure Solutions – Provider of electro-mechanical solutions for industrial operations, including apparatus repair and custom-engineered products such as generator enclosures to be used in data centers and other industrial applications.

• Communications – Nationwide provider of technology infrastructure services, including the design, build, and maintenance of the communications infrastructure within data centers for co-location and managed hosting customers for both large corporations and independent businesses.

• Residential – Regional provider of electrical installation services for single-family housing and multi-family apartment complexes.

• Infrastructure Solutions – Provider of electro-mechanical solutions for industrial operations, including apparatus repair and custom-engineered products such as generator enclosures to be used in data centers and other industrial applications.

• Commercial & Industrial – Provider of electrical and mechanical design, construction, and maintenance services to the commercial and industrial markets in various regional markets and nationwide in certain areas of expertise, such as the power infrastructure market and data centers.

The words “IES”, the “Company”, “we”, “our”, and “us” refer to IES Holdings, Inc.

and, except as otherwise specified herein, to our consolidated subsidiaries.

Controlling Shareholder

As of September 30, 2019 , Tontine Associates, L.L.C., together with its affiliates (collectively, “Tontine”), is the controlling shareholder of the Company’s common stock.

Accordingly, Tontine has the ability to exercise significant control over our affairs, including the election of directors and most actions requiring the approval of shareholders, including the approval of any potential merger or sale of all or substantially all assets or segments of the Company, or the Company itself.

For a more complete discussion on our relationship with Tontine, please refer to Note 3, “Controlling Shareholder” in the notes to our Consolidated Financial Statements.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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Asset Impairment

At September 30, 2020, we recorded an impairment charge of $ 6,976 to Goodwill related to our Commercial & industrial segment.

Please refer to Note 17, “Goodwill and Intangible Assets” for further discussion.

During the fiscal years ended September 30, 2019 and 2018, the Company recorded no asset impairment charges.

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Where shipping and handling costs on inventory purchases are borne by us, these charges are included in inventory and charged to cost of services upon use in our projects or the providing of services.

Securities and Equity Investments

Our investments in entities where we do not have the ability to exercise significant influence are accounted for using the cost method of accounting.

Each period, we evaluate whether an event or change in circumstances has occurred that may indicate an investment has been impaired.

If, upon further investigation of such events, we determine the investment has suffered a decline in value that is other than temporary, we write down the investment to its estimated fair value.

Property and Equipment

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We recognize revenue on project contracts using the percentage of completion method.

Project contracts generally provide that customers accept completion of progress to date and compensate us for services rendered measured in terms of units installed, hours expended or

some other measure of progress.

Project contracts generally provide that customers accept completion of progress to date and compensate us for services rendered measured in terms of units installed, hours expended or some other measure of progress.

We recognize revenue on both signed contracts and change orders.

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Contract costs include all direct material, labor and insurance costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs and depreciation costs.

Changes in job performance, job conditions, estimated contract costs and profitability and final contract settlements can result in change orders under which the customer agrees to pay additional contract price.

Changes in job performance, job

conditions, estimated contract costs and profitability and final contract settlements can result in change orders under which the customer agrees to pay additional contract price.

Revisions can also result in claims we might make against the customer to recover additional costs that have not been resolved through change orders with the customer.

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Comprehensive income (loss) includes all changes in equity during a period except those resulting from investments by and distributions to stockholders.

We follow the asset and liability method of accounting for income taxes.

We follow the liability method of accounting for income taxes.

Under this method, deferred income tax assets and liabilities are recorded for the future income tax consequences of temporary differences between the financial reporting and income tax bases of assets and liabilities, and are measured using enacted tax rates and laws.

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The estimation of required valuation allowances includes estimates of future taxable income.

In assessing the realizability of deferred tax assets at September 30, 2019 , we concluded, based upon the assessment of positive and negative evidence, that it is more likely than not that the Company will generate sufficient taxable income within the applicable NOL carryforward periods to realize its net deferred tax assets of $ 40,874 .

In assessing the realizability of deferred tax assets, we must consider whether it is more likely than not some portion, or all, of the deferred tax assets will not be realized.

We consider all available evidence, both positive and negative, in determining whether a valuation allowance is required.

At September 30, 2020, we concluded, based upon the assessment of positive and negative evidence, that it is more likely than not that the Company will generate sufficient taxable income within the applicable net operating loss ("NOL") carryforward periods to realize its net deferred tax assets of $ 33,803 .

We considered the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.

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Year Ended September 30:

Thereafter 750

Total $ 3,886

We elect to discount the ultimate losses above to present value using an approximate risk-free rate over the average life of our insurance claims.

For the years ended September 30, 2020 and 2019, the discount rate used was 0.3 percent and 1.6 percent, respectively.

The present value of all insurance reserves for the employee group health claims, workers’ compensation, auto and general liability recorded at September 30, 2019 , and 2018 was $ 6,683 and $ 6,202 , respectively.

Our employee group health claims are anticipated to be resolved within the year ended September 30, 2020 .

The present value of all insurance reserves for the workers’ compensation, auto and general liability recorded at September 30, 2020, and 2019 was $ 3,832 and $ 4,702 , respectively.

Our undiscounted reserves for employee group health claims at September 30, 2020, and 2019 were $ 2,422 and $ 1,981 , respectively, and are anticipated to be resolved within the year ended September 30, 2021.

We had letters of credit totaling $ 5,464 outstanding at September 30, 2020 to collateralize certain of our high deductible insurance obligations.

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Estimated fair values are determined based on expected future cash flows discounted at a rate we believe incorporates the time value of money, the expectations about future cash flows and an appropriate risk premium.

At September 30, 2020, we performed an asset impairment test for all long-lived assets within our Commercial & Industrial segment and determined no impairment charge was necessary.

For the years ended September 30, 2019 and 2018, no indicators of impairments were identified, and no impairment charges were recorded.

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Fair Value of Financial Instruments

Our financial instruments consist of cash and cash equivalents, accounts receivable, investments, accounts payable, and a loan agreement.

Our financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, and a loan agreement.

We believe that the carrying value of financial instruments approximates their fair value due to their short-term nature.

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The fair value of restricted stock awards and phantom stock unit awards is determined based on the number of shares granted and the closing price of IES’s common stock on the date of grant.

For awards vesting upon achievement of a market condition, the likelihood of achieving that market condition is considered in determining the fair value of the grant, which we expense ratably over the

vesting period.

For awards vesting upon achievement of a performance condition, we record expense based on the grant date fair value when it becomes probable the performance condition will be achieved.

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The interests retained by those third party sellers are identified on our Consolidated Balance Sheets as noncontrolling interest, classified outside of permanent equity.

Under the terms of the operating agreements governing these entities, after five years from the dates of the acquisitions, we may elect to purchase, or the third party sellers may require us to purchase, part of all of the remaining 20 percent interests in these entities.

Under the terms of the operating agreements governing these entities, after five years from the dates of the acquisitions, we may elect to purchase, or the third party sellers may require us to purchase, part or all of the remaining 20 percent interests in these entities.

The purchase price is variable, based on a multiple of earnings as defined in the operating agreements.

Therefore, this noncontrolling interest is carried at the greater of the balance determined under ASC 810 and the redemption amounts assuming the noncontrolling interests were redeemable at the balance sheet date.

Therefore, this noncontrolling interest is carried at the greater of the balance determined under Accounting Standards Codification Topic 810 ("ASC 810") and the redemption amounts assuming the noncontrolling interests were redeemable at the balance sheet date.

If all of these interests had been redeemable at September 30, 2020, the redemption amount would have been $ 1,582 .

For the year ended September 30, 2020, we recorded a decrease to retained earnings of $ 194 to increase the carrying amount of noncontrolling interest in NEXT Electric to its redemption amount had it been redeemable at September 30, 2020.

For the year ended September 30, 2018, we recorded an increase to retained earnings of $ 44 to offset an increase to noncontrolling interest recorded in fiscal 2017, decreasing the carrying amount of the noncontrolling interest in STR to the balance determined under ASC 810, as if it had been redeemable at September 30, 2018, as the redemption amount would have been less than the carrying amount.

We enter into various contractual arrangements for the right to use facilities, vehicles and equipment.

We evaluate whether each of these arrangements contains a lease and classify all identified leases as either operating or finance.

If the arrangement is subsequently modified, we re-evaluate our classification.

The lease term generally ranges from two to ten years for facilities and three to five years for vehicles and equipment.

Our lease terms may include the exercise of renewal or termination options when it is reasonably certain these options will be exercised.

Our lease agreements do not contain any material residual value guarantees or restrictive covenants.

Upon commencement of the lease, we recognize a lease liability and corresponding right-of use ("ROU") asset for all leases with an initial term greater than twelve months.

Lease liabilities represent the present value of our future lease payments over the expected lease term.

As most of our leases do not provide an implicit rate, we generally use our incremental borrowing rate as the discount rate in calculating the present value of the lease payments.

The incremental borrowing rate is determined by identifying a synthetic credit rating for the consolidated company, where treasury functions are centrally managed, and adjusting the interest rates from associated indexes for differences in credit risk and interest rate risk.

We have elected to combine the lease and nonlease components in the recognition of our lease liabilities across all classes of underlying assets.

ROU assets represent our right to control the use of the leased asset during the lease and are recognized in an amount equal to the lease liability with adjustments for prepaid or accrued rent, lease incentives or unamortized initial direct costs.

Costs associated with operating lease assets are recognized on a straight-line basis over the term of the lease.

Our lease assets are tested for impairment in the same manner as long-lived assets used in operations.

Certain lease contracts include obligations to pay for other services, such as operations and maintenance.

Where the costs of these services can be identified as fixed or fixed-in-substance, the costs are included as part of the future lease payments.

If the cost is not fixed at the inception of the lease, the cost is recorded as a variable cost in the period incurred.

Accounting Standards Not Yet Adopted

In February 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standard Update No.

2016-02, Leases (“ASU 2016-02”).

Under ASU 2016-02, we will recognize a right-of-use asset and a lease liability on our Balance Sheet for all leases, other than those that meet the definition of a short-term lease.

For income statement purposes, leases must be classified as either operating or finance.

Operating leases will result in straight-line expense, similar to current operating leases, while finance leases will be accounted for similar to current capital leases.

We plan to adopt this standard on October 1, 2019, using a modified retrospective transition approach.

We plan to utilize the optional transition method allowed under Accounting Standard Update No.

2018-11, which allows the recognition of a cumulative-effect adjustment to retained earnings on such date and the continued reporting of retrospective periods using the previous accounting standards.

We plan to elect all of the available practical expedients, which would allow the use of hindsight in the determination of the lease term and impairment assessment of the right-of-use assets, and eliminate the need to reassess whether our existing or expired contracts contain a lease and its corresponding classification.

We have developed processes and internal controls to meet the reporting and disclosure requirements of the standard, including the validation and detailed assessment of our full lease population.

Our balance sheet will be impacted from this standard by recording lease right-of-use assets and lease liabilities in similar amounts, which we currently estimate to be less than $ 35 million as of October 1, 2019, with any difference between the right-of-use asset and the lease liabilities recorded to previously accrued or deferred rent expense relating to prior periods.

We do not anticipate that the standard will have a significant impact on our net earnings, cash flows or compliance with the financial covenants under our revolving credit facility.

In June 2016, the FASB issued Accounting Standard Update No.

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update No.

2016-13, Financial Instruments – Credit Losses (“ASU 2016-13”), which requires companies to consider historical experiences, current market conditions and reasonable and supportable forecasts in the measurement of expected credit losses, with further clarifications made in April 2019 and May 2019 with the issuances of Accounting Standard Updates No.

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This update is effective for fiscal years beginning after December 15, 2019 and for interim periods within those fiscal years, although early adoption is permitted.

We are currently evaluating the impact it will have on our Consolidated Financial Statements.

We plan to adopt this standard on October 1, 2020.

In June 2018, the FASB issued Accounting Standard Update No.

2018-07, Compensation—Stock Compensation (“ASU 2018-07”), to simplify the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments for employees, with certain exceptions.

Under the new guidance, the cost for nonemployee awards may be lower and less volatile than under current GAAP because the measurement generally will occur earlier and will be fixed at the grant date.

This update is effective for the fiscal year ended September 30, 2020.

We plan to adopt this standard on October 1, 2020, and do not expect the adoption to have a material effect on our Consolidated Financial Statements.

In August 2018, the FASB issued Accounting Standard Update No.

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This guidance is effective for fiscal years beginning after December 15, 2019 and for interim periods within those fiscal years, although early adoption is permitted for either the entire standard or only the provisions that eliminate or modify the requirements.

We do not expect ASU 2018-07 or ASU 2018-13 to have a material effect on our Consolidated Financial Statements and we plan to adopt these standards on October 1, 2019 and October 1, 2020, respectively.

We plan to adopt this standard on October 1, 2020, and do not expect the adoption to have a material effect on our Consolidated Financial Statements.

Accounting Standards Recently Adopted

In May 2014, the FASB issued Accounting Standard Update No.

2014-09, which provides a single comprehensive accounting standard for revenue recognition for contracts with customers and supersedes prior industry-specific guidance.

The new standard requires companies to recognize revenue when control of promised goods or services is transferred to customers at an amount that reflects the consideration to which the company expects to be entitled.

The new model requires companies to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time for each obligation.

The new standard also expands disclosure requirements regarding revenue and cash flows arising from contracts with customers.

We adopted the new revenue recognition standard on October 1, 2018 (“Adoption Date”), using the modified retrospective method, which provides for a cumulative effect adjustment to beginning fiscal 2019 retained earnings for uncompleted contracts impacted by the adoption.

We recorded an adjustment of $ 80 to beginning fiscal 2019 retained earnings as a result of adoption of the new standard.

The changes to the method and/or timing of our revenue recognition associated with the new standard primarily affect revenue recognition within our Infrastructure Solutions segment for which, as of October 1, 2018, certain of our contracts do not qualify for revenue recognition over time.

In addition, we have now combined in process contracts that historically had been accounted for as separate contracts in cases where those contracts meet the criteria for combination of contracts under the new standard, and we now capitalize certain commissions which were previously expensed when incurred.

The impact on our results for the year ended September 30, 2019 , of applying the new standard to our contracts was not material.

Consistent with our adoption method, the comparative prior period information continues to be reported using the previous accounting standards in effect for the period presented.

We have elected to utilize the modified retrospective transition practical expedient that allows us to evaluate the impact of contract modifications as of the Adoption Date rather than evaluating the impact of the modifications at the time they occurred prior to the Adoption Date.

See Note 4, “Revenue Recognition” for additional discussion of our revenue recognition accounting policies and expanded disclosures.

In January 2016, the FASB issued Accounting Standard Update No.

2016‑01, Financial Instruments.

This standard is associated with the recognition and measurement of financial assets and liabilities, with further clarifications made in February 2018 with the issuance of Accounting Standard Update No.

The amended guidance requires certain equity investments that are not consolidated and not accounted for under the equity method to be measured at fair value with changes in fair value recognized in net income rather than as a component of accumulated other comprehensive income (loss).

It further states that an entity may choose to measure equity investments that do not have readily determinable fair values using a quantitative approach, or measurement alternative, which is equal to its cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

Our adoption of this standard on October 1, 2018 had no impact on our Consolidated Financial Statements.

In January 2017, the FASB issued Accounting Standard Update No.

2017-01, Business Combinations.

This standard clarifies the definition of a business to assist entities with evaluation of whether transactions should be accounted for as acquisitions or disposals of assets or businesses.

Our adoption of this standard on October 1, 2018 using the prospective transition method had no impact on our Condensed Consolidated Financial Statements.

In May 2017, the FASB issued Accounting Standard Update No.

2017-09, Compensation—Stock Compensation, to reduce the diversity in practice and the cost and complexity when changing the terms or conditions of a share-based payment award.

Our adoption of this standard on October 1, 2018 using the prospective transition method had no impact on our Consolidated Financial Statements.

In February 2016, the FASB issued Accounting Standard Update No.

2016-02, Leases (“ASU 2016-02”).

Under ASU 2016-02, lessees need to recognize a ROU asset and a lease liability on their balance sheets for all leases, other than those that meet the definition of a short-term lease.

For income statement purposes, leases must be classified as either operating or finance.

Operating leases result in straight-line expense, while finance leases are accounted for similar to capital leases under the previous lease accounting standard.

We adopted ASU 2016-02 on October 1, 2019 using a modified retrospective transition approach.

Using the optional transition method allowed under Accounting Standard Update No.

2018-11, prior period amounts were not adjusted retrospectively and continue to be reported using the previous accounting standards in effect for the period presented.

We elected to utilize all of the available practical expedients with the exception of the practical expedient permitting the use of hindsight when determining the lease term and assessing impairment of ROU assets.

Therefore, we did not reassess whether any of our existing or expired contracts contained leases or the classification of or initial direct costs included in our existing or expired leases.

The adoption of ASU 2016-02 resulted in the recognition of ROU assets of approximately $ 32,434 and operating lease liabilities of approximately $ 32,237 on our Consolidated Balance Sheets at the adoption date.

The difference between the ROU assets and lease liabilities was primarily due to previously accrued rent expense relating to periods prior to October 1, 2019.

The adoption did not have a significant impact on our Consolidated Statements of Comprehensive Income or Cash Flows.

See Note 9, “Leases” for additional discussion of our lease accounting policies and expanded disclosures.

In June 2018, the FASB issued Accounting Standard Update No.

This update was adopted as of October 1, 2019 with no impact to our financial statements.

CONTROLLING SHAREHOLDER

Tontine is the Company's controlling shareholder, owning approximately 58 percent of the Company’s outstanding common stock according to a Form 4 filed with the SEC by Tontine on October 3, 2019 .

Tontine Associates, L.L.C.

("Tontine Associates"), together with its affiliates (collectively, "Tontine") is the Company's controlling shareholder, owning approximately 56 percent of the Company’s outstanding common stock based on an amended Schedule 13D filed with the SEC by Tontine on October 9, 2020.

Accordingly, Tontine has the ability to exercise significant control over our affairs, including the election of directors and most actions requiring the approval of shareholders.

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Should Tontine sell or otherwise dispose of all or a portion of its position in IES, a change in ownership of IES could occur.

A change in ownership, as defined by Internal Revenue Code Section 382, could reduce the availability of the Company’s net operating losses (“NOLs”) for federal and state income tax purposes.

A change in ownership, as defined by Internal Revenue Code Section 382, could reduce the availability of the Company’s NOLs for federal and

state income tax purposes.

On November 8, 2016, the Company implemented a tax benefit protection plan (the “NOL Rights Plan”).

The NOL Rights Plan was designed to deter an acquisition of the Company's stock in excess of a threshold amount that could trigger a change in ownership within the meaning of Internal Revenue Code Section 382.

The NOL Rights Plan is designed to deter an acquisition of the Company's stock in excess of a threshold amount that could trigger a change in ownership within the meaning of Internal Revenue Code Section 382.

There can be no assurance that the NOL Rights Plan will be effective in deterring a change in ownership or protecting the NOLs.

Furthermore, a change of control would trigger the change of control provisions in a number of our material agreements, including our credit facility, bonding agreements with our sureties and our executive severance plan.

Gendell was appointed as a member of the Board of Directors and as Chairman of the Board in November 2016.

Furthermore, a change of control would trigger the change of control provisions in a number of our material agreements, including our credit agreement, bonding agreements with our sureties and our executive severance plan.

Gendell was appointed as Chief Executive Officer of the Company effective October 1, 2020, having served as the Company's Interim Chief Executive Officer since July 31, 2020.

Gendell also serves as Chairman of the Board of Directors, a position he has held since November 2016.

He is the managing member and founder of Tontine, and the brother of David B.

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Contract costs include all direct material, labor and indirect costs related to contract performance.

Changes in job performance, job conditions, estimated contract costs and profitability and final contract settlements may result in revisions to costs and income, and the effects of these revisions are recognized in the period in which the revisions are determined.

Changes in job

performance, job conditions, estimated contract costs and profitability and final contract settlements may result in revisions to costs and income, and the effects of these revisions are recognized in the period in which the revisions are determined.

Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined.

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We disaggregate our revenue from contracts with customers by activity and contract type, as these categories reflect how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.

Our consolidated 2019 , 2018 , and 2017 revenue was derived from the following service activities.

Our consolidated 2020, 2019, and 2018 revenue was derived from the following activities.

See details in the following tables:

Year Ended September 30,

Commercial & Industrial

2020 2019 2018

Communications $ 395,141 $ 321,246 $ 219,655

Single-family 239,140 212,358 190,379

Multi-family and Other 172,650 100,978 95,332

Total Residential 411,790 313,336 285,711

Infrastructure Solutions

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Total Infrastructure Solutions 128,379 136,790 97,163

Single-family

Multi-family and Other

Total Residential

Commercial & Industrial 255,546 305,624 274,299

Total Revenue $ 1,190,856 $ 1,076,996 $ 876,828

Year Ended September 30, 2020

Commercial & Industrial

Communications

Infrastructure Solutions

Communications Residential Infrastructure Solutions Commercial & Industrial Total

Fixed-price $ 309,567 $ 411,790 $ 121,922 $ 241,864 $ 1,085,143

Time-and-material 85,574 — 6,457 13,682 105,713

1 unchanged sentence

Year Ended September 30, 2019

Commercial & Industrial

Communications

Infrastructure Solutions

Communications Residential Infrastructure Solutions Commercial & Industrial Total

Fixed-price $ 229,143 $ 313,336 $ 129,096 $ 286,319 $ 957,894

Time-and-material 92,103 — 7,694 19,305 119,102

1 unchanged sentence

Year Ended September 30, 2018

Commercial & Industrial

Communications

Infrastructure Solutions

Communications Residential Infrastructure Solutions Commercial & Industrial Total

Fixed-price $ 166,258 $ 285,711 $ 90,155 $ 244,464 $ 786,588

Time-and-material 53,397 — 7,008 29,835 90,240

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As a result, contract revenue recognized in the statement of operations can and usually does differ from amounts that can be billed to the customer at any point during the contract.

Amounts by which cumulative contract revenue recognized on a contract as of a given date exceeds cumulative billings and unbilled receivables to the customer under the contract are reflected as a current asset in our balance sheet under the caption “Costs and estimated earnings in excess of billings”.

Amounts by which cumulative billings to the customer under a contract as of a given date exceed cumulative contract revenue recognized are reflected as a current liability in our balance sheet under the caption “Billings in excess of costs and estimated earnings”.

The net asset (liability) position for contracts in process consisted of the following:

September 30,

Costs and estimated earnings on uncompleted contracts

Billings to date and unbilled accounts receivable

The net asset (liability) position for contracts in process included in the accompanying consolidated balance sheets was as follows:

September 30,

Costs and estimated earnings in excess of billings

Billings in excess of costs and estimated earnings

During the year ended September 30, 2019 , and 2018 , we recognized revenue of $ 31,831 and $ 31,135 related to our contract liabilities at October 1, 2018 and 2017 , respectively.

Amounts by which cumulative contract revenue recognized on a contract as of a given date exceeds cumulative billings and unbilled receivables to the customer under the contract are reflected as a current asset in our Consolidated Balance Sheets under the caption “Costs and estimated earnings in excess of billings”.

Amounts by which cumulative billings to the customer under a contract as of a given date exceed cumulative contract revenue recognized are reflected as a current liability in our Consolidated Balance Sheets under the caption “Billings in excess of costs and estimated earnings”.

During the years ended September 30, 2020, and 2019, we recognized revenue of $ 34,035 and $ 31,831 related to our contract liabilities at October 1, 2019 and 2018, respectively.

We did not have any impairment losses recognized on our receivables or contract assets for the years ended September 30, 2020, 2019, or 2018.

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Property and equipment consists of the following:

Estimated Useful Lives in Years

Year Ended September 30,

Estimated Useful Lives in Years Year Ended September 30,

Land N/A $ 1,436 $ 1,436

Buildings and improvements 5 - 20 14,378 13,608

2 unchanged sentences

Furniture and fixtures 5 - 7 1,746 1,587

$ 58,751 $ 55,176

Less-Accumulated depreciation ( 34,544 ) ( 29,560 )

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Year Ended September 30,

2020 2019 2018

Net income (loss) attributable to common shareholders of IES Holdings, Inc.

$ 40,830 $ 32,950 $ ( 14,113 )

Increase (decrease) in noncontrolling interest 194 — ( 44 )

1 unchanged sentence

Net income (loss) attributable to IES Holdings, Inc.

$ 41,599 $ 33,206 $ ( 14,157 )

Weighted average common shares outstanding — basic 20,795,892 21,082,012 21,196,388

1 unchanged sentence

Weighted average common and common equivalent shares outstanding — diluted 21,092,410 21,315,245 21,196,388

Earnings (loss) per share attributable to IES Holdings, Inc.:

Earnings (loss) per share attributable to common shareholders of IES Holdings, Inc.:

Basic $ 1.96 $ 1.56 $ ( 0.67 )

Diluted $ 1.94 $ 1.55 $ ( 0.67 )

For the years ended September 30, 2020 and September 30, 2019, the average price of our common shares exceeded the exercise price of outstanding options;

therefore, outstanding stock options were included in the computation of fully diluted earnings per share.

therefore, outstanding stock options were included in the computation of diluted earnings per share.

When an entity has a net loss, it is prohibited from including potential common shares in the computation of diluted per share amounts.

Accordingly, we have utilized basic shares outstanding to calculate both basic and diluted loss per share for the year ended September 30, 2018 .

Accordingly, we have utilized basic shares outstanding to calculate both basic and diluted loss per share for the year ended

September 30, 2018.

The number of potential anti-dilutive shares excluded from the calculation was 301,879 shares for the year ended September 30, 2018.

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Accrued insurance liabilities 6,254 6,683

Current operating lease liabilities 11,056 —

Other accrued expenses 22,152 18,122

$ 186,710 $ 152,909

Other non-current assets are comprised of the following:

2 unchanged sentences

Securities and equity investments — 408

Other 5,014 3,767

Total $ 5,780 $ 4,938

Debt consists of the following:

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Other long-term debt 205 299

(1) At September 30, 2019, the remaining unamortized debt issuance costs of $ 782 were reclassified to Other non-current assets on the Consolidated Balance Sheet.

At September 30, 2019 , we had no outstanding borrowings under our revolving credit facility, $ 6,468 in outstanding letters of credit and $ 93,532 available to us under our revolving credit facility with Wells Fargo Bank, N.A.

Total debt $ 217 $ 299

(1) At September 30, 2020 and 2019, the remaining unamortized debt issuance costs of $ 736 and $ 782 , respectively, were reclassified to Other non-current assets on the Consolidated Balance Sheets.

At September 30, 2020, we had outstanding borrowings of $ 12 , $ 5,664 in outstanding letters of credit and $ 94,324 of availability under our revolving credit facility with Wells Fargo Bank, N.A.

("Wells Fargo").

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The Revolving Credit Facility

We maintain a $ 100,000 revolving credit facility with Wells Fargo that matures in September 2024, pursuant to a Second Amended and Restated Credit and Security Agreement with Wells Fargo Bank dated as of April 10, 2017, which was amended on July 14, 2017, August 2, 2017, July 23, 2018, May 17, 2019 and September 6, 2019 (as amended, the “Amended Credit Agreement”).

The Fourth Amendment to the Second Amended and Restated Credit and Security Agreement, which was entered into on May 20, 2019, permits the Company to repurchase up to 1.0 million additional shares of common stock pursuant to its previously authorized stock repurchase program for an aggregate purchase price (including for any remaining shares under the previous share repurchase authorization) not to exceed $ 25,000 .

The Fifth Amendment to the Second Amendment and Restated Credit and Security Agreement, which was entered into on September 6, 2019, reduced the interest rate margin applicable to borrowings by 50 basis points, removed the Company's minimum EBITDA financial covenant, granted pre-approval for acquisitions meeting certain conditions with an aggregate purchase price of up to $25,000, and reduced the minimum liquidity covenant from 30% to 20% of the maximum revolver amount.

We maintain a $ 100,000 revolving credit facility that matures on September 30, 2024 pursuant to a credit agreement with Wells Fargo (as amended, the “Amended Credit Agreement”).

Terms of the Amended Credit Agreement

The Amended Credit Agreement contains other customary affirmative, negative and financial covenants, as well as events of default.

The Amended Credit Agreement contains customary affirmative, negative and financial covenants, as well as customary events of default.

As of September 30, 2020, we were in compliance with the financial covenants under the Amended Credit Agreement, requiring that we maintain:

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Our Fixed Charge Coverage Ratio is calculated as follows (with capitalized terms as defined in the Amended Credit Agreement):

(i) our trailing twelve month EBITDA, less Non-Financed Capital Expenditures (other than capital expenditures financed by means of an advance under the credit facility), cash taxes and all Restricted Junior Payments consisting of certain Pass-Through Tax Liabilities, divided by (ii) the sum of our cash interest (other than interest paid-in-kind, amortization of financing fees, and other non-cash interest expense) and principal debt payments (other than repayment of principal on advances under the credit facility and including cash payments with respect to capital leases), any management, consulting, monitoring, and advisory fees paid to an affiliate, and all Restricted Junior Payments (other than Pass-Through Tax Liabilities) and other cash distributions;

provided, that if any acquisition is consented to by the lender after the date of the Amended Credit Agreement, the components of the Fixed Charge Coverage Ratio will be calculated for such fiscal period after giving pro forma effect to the acquisition assuming that such transaction has occurred on the first day of such period (including pro forma adjustments arising out of events which are directly attributable to such acquisition, are factually supportable, and are expected to have a continuing impact, in each case to be reasonably agreed to by the lender).

If in the future our Liquidity falls below $20,000 (or Excess Availability falls below 50% of our minimum Liquidity), our Fixed Charge Coverage Ratio is less than 1.1:1.0, or if we otherwise fail to perform or otherwise comply with certain of our covenants or other agreements under the Amended Credit Agreement, it would result in an event of default under the Amended Credit Agreement, which could result in any indebtedness we may take on becoming immediately due and payable.

We enter into operating leases for many of our facilities, vehicle and equipment needs.

These leases allow us to retain cash, and we pay a monthly lease rental fee.

At the end of the lease, we have no further obligation to the lessor.

We may cancel or terminate a lease before the end of its term.

Typically, we would be liable to the lessor for various lease cancellation or termination costs and the difference between the fair market value of the leased asset and the implied book value of the leased asset as calculated in accordance with the lease agreement.

(i) our trailing twelve month EBITDA, less Non-Financed Capital Expenditures (other than capital expenditures financed by means of an advance under the credit facility), cash taxes and all Restricted Junior Payments (as defined in the Amended Credit Agreement) consisting of certain Pass-Through Tax Liabilities (as defined in the Amended Credit Agreement), divided by (ii) the sum of our cash interest (other than interest paid-in-kind, amortization of financing fees, and other non-cash interest expense) and principal debt payments (other than repayment of principal on advances under the credit facility and including cash payments with respect to capital leases), any management, consulting, monitoring, and advisory fees paid to an affiliate, and all Restricted Junior Payments (other than Pass-Through Tax Liabilities) and other cash distributions;

provided, that if we make an acquisition consented to by Wells Fargo, the components of the Fixed Charge Coverage Ratio will be calculated for such fiscal period after giving pro forma effect to the acquisition assuming that such transaction has occurred on the first day of such period (including pro forma adjustments arising out of events which are directly attributable to such acquisition, are factually supportable, and are expected to have a continuing impact, in each case to be reasonably agreed to by Wells Fargo).

As defined in the Amended Credit Agreement, EBITDA is calculated as consolidated net income (or loss), less extraordinary gains, interest income, non-operating income and income tax benefits and decreases in any change in LIFO reserves, plus stock compensation expense, non-cash extraordinary losses (including, but not limited to, a non-cash impairment charge or write-down), Interest Expense, income taxes, depreciation and amortization, and increases in any change in LIFO reserves for such period, determined on a consolidated basis in accordance with GAAP.

If in the future our Liquidity falls below $20,000 (or Excess Availability falls below 50% of our minimum Liquidity), our Fixed Charge Coverage Ratio is less than 1.1:1.0, or if we otherwise fail to perform or otherwise comply with certain of our covenants or other agreements under the Amended Credit Agreement, it would result in an event of default under the Amended Credit Agreement, which could result in some or all of any indebtedness we may take on becoming immediately due and payable.

We enter into various contractual arrangements for the right to use facilities, vehicles and equipment.

The lease term generally ranges from two to ten years for facilities and three to five years for vehicles and equipment.

Our lease terms may include the exercise of renewal or termination options when it is reasonably certain these options will be exercised.

Our lease agreements do not contain any material residual value guarantees or restrictive covenants.

Current operating and finance liabilities of $ 11,056 and $ 418 , respectively, were included in "Accounts payable and accrued expenses" in the Consolidated Balance Sheets as of September 30, 2020.

Non-current finance lease liabilities and finance lease right-of-use assets were included in the "Other non-current liabilities" and "Other non-current assets", respectively, in the Consolidated Balance Sheets.

The maturities of our lease liabilities as of September 30, 2020, are as follows:

Operating Leases Finance Leases Total

2021 $ 11,269 $ 430 $ 11,699

2022 8,743 403 9,146

2023 5,822 401 6,223

2024 3,488 368 3,856

2025 2,110 167 2,277

Thereafter 3,175 — 3,175

Total undiscounted lease payments $ 34,607 $ 1,769 $ 36,376

imputed interest 3,021 182 3,203

Present value of lease liabilities $ 31,586 $ 1,587 $ 33,173

The total future undiscounted cash flows related to lease agreements committed to but not yet commenced as of September 30, 2020, is $ 3,946 .

Lease cost recognized in our Consolidated Statements of Comprehensive Income is summarized as follows:

September 30 , 2020

Operating lease cost $ 12,910

Finance lease cost

Amortization of lease assets 203

Interest on lease liabilities 47

Finance lease cost 250

Short-term lease cost 1,163

Variable lease cost 827

Total lease cost $ 15,150

Other information about lease amounts recognized in our Consolidated Financial Statements is summarized as follows:

September 30 , 2020

Operating cash flows used for operating leases $ 12,934

Operating cash flows used for finance leases 47

Right-of-use assets obtained in exchange for new operating lease liabilities 10,640

Right-of-use assets obtained in exchange for new finance lease liabilities 1,803

September 30 , 2020

Weighted-average remaining lease term - operating leases 4.3 years

Weighted-average remaining lease term - finance leases 4.4 years

Weighted-average discount rate - operating leases 3.9 %

Weighted-average discount rate - finance leases 5.1 %

For a discussion of leases with certain related parties which are included below, see Note 13, “Related-Party Transactions.”

Rent expense was $ 14,073 , $ 10,553 and $ 7,680 for the years ended September 30, 2020, 2019 and 2018, respectively.

Future minimum lease payments under these non-cancelable operating leases that had commenced as of September 30, 2019 with terms in excess of one year are as follows:

Year Ended September 30:

Some of the lease agreements entered into will not commence until the year ended September 30, 2020 .

The total future undiscounted cash flows related to lease agreements committed to but not yet commenced as of September 30, 2019 , is $ 1,964 .We also entered into two large building lease renewals at our Infrastructure Solutions segment in October 2019 that will commence in the year ended September 30, 2020 and have total future undiscounted cash flows of $ 2,422 .

Federal and state income tax provisions are as follows:

Year Ended September 30,

2020 2019 2018

Current $ ( 39 ) $ ( 1,330 ) $ ( 2,345 )

Deferred 9,317 5,908 38,744

Current 3,657 2,312 1,536

Deferred ( 4,195 ) ( 227 ) 216

Total provision for income taxes $ 8,740 $ 6,663 $ 38,151

2 unchanged sentences

Year Ended September 30,

2020 2019 2018

Provision at the statutory rate (1)

$ 10,352 $ 8,430 $ 5,973

Increase resulting from:

2 unchanged sentences

Change in valuation allowance — — 1,761

Rate change — — 31,333

Other 261 — 183

Decrease resulting from:

2 unchanged sentences

Contingent tax liabilities ( 1,313 ) ( 3,967 ) ( 1,908 )

Component 2 goodwill utilization ( 1,787 ) ( 144 ) —

State deferred true up — — ( 1,387 )

Other — ( 303 ) —

Total provision for income taxes $ 8,740 $ 6,663 $ 38,151

(1) A statutory rate of 21 % was used in 2020, 21 % in 2019 and 24.53 % in 2018.

The lower effective tax rate used in 2019 and 2018 is related to the enactment of Tax Cuts and Jobs Act enacted on December 22, 2017.

The lower effective tax rate used in 2020 and 2019 is related to the Tax Cuts and Jobs Act enacted on December 22, 2017.

Deferred income tax provisions result from temporary differences in the recognition of income and expenses for financial reporting purposes and for income tax purposes.

9 unchanged sentences

Capital loss carryforward 74 74

Lease asset 7,681 —

Other 2,444 1,137

Subtotal 50,904 52,471

Less valuation allowance 710 4,044

3 unchanged sentences

Intangible assets 7,926 5,978

Lease liability 7,677 —

Other 271 735

Total deferred income tax liabilities 16,391 7,553

Net deferred income tax assets $ 33,803 $ 40,874

In fiscal 2019 and 2018 , the valuation allowance on our deferred tax assets decreased by $ 83 and increased by $ 1,761 , respectively, which is included in “Provision (benefit) for income taxes” in our Consolidated Comprehensive Income Statement.

In fiscal 2020 and 2019, the valuation allowance on our deferred tax assets decreased by $ 3,334 and $ 83 , respectively, which is included in “Provision (benefit) for income taxes” in our Consolidated Comprehensive Income Statement.

As of September 30, 2020, we had available approximately $ 217,328 of federal net tax operating loss carry forward for federal income tax purposes, including $ 128,044 from net operating losses on which no tax benefit has been recognized and has not been recorded as a deferred tax asset.

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We will continue to evaluate the appropriateness of our remaining deferred tax assets and need for valuation allowances on a quarterly basis.

Further, any future reduction in the federal statutory tax rate could result in a charge to reduce the book value of the net deferred tax assets recorded on our Consolidated Balance Sheet.

Further, any future reduction in the federal statutory tax rate could result in a charge to reduce the book value of the net deferred tax assets recorded on our Consolidated Balance Sheets.

As a result of a 2006 reorganization and related adjustment to the book basis in goodwill, we have tax basis in excess of book basis in amortizable goodwill of approximately $ 14,539 .

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Reduction resulting from the lapse of the applicable statutes of limitations 1,573 4,074

Reduction resulting from rate change

Balance at end of period $ 24,861 $ 26,294

12 unchanged sentences

Transactions between segments, if any, are eliminated in consolidation.

Our corporate office provides general and administrative, as well as support services, to our four operating segments.

Our corporate office provides general and administrative services, as well as support services, to our four operating segments.

Management allocates certain shared costs between segments for selling, general and administrative expenses and depreciation expense.

1 unchanged sentence

Year Ended September 30, 2020

Commercial & Industrial

Communications

Infrastructure Solutions

Communications Residential Infrastructure Solutions Commercial & Industrial Corporate Total

Revenues $ 395,141 $ 411,790 $ 128,379 $ 255,546 $ — $ 1,190,856

Cost of services 317,013 318,034 93,358 234,492 — 962,897

Gross profit 78,128 93,756 35,021 21,054 — 227,959

Selling, general and administrative 37,674 63,668 20,418 32,128 17,023 170,911

Goodwill impairment expense — — — 6,976 — 6,976

Contingent consideration — — — ( 11 ) — ( 11 )

3 unchanged sentences

Capital expenditures $ 830 $ 1,459 $ 795 $ 1,362 $ 299 $ 4,745

Total assets $ 154,808 $ 110,998 $ 124,640 $ 68,318 $ 101,764 $ 560,528

Year Ended September 30, 2019

Commercial & Industrial

Communications

Infrastructure Solutions

Communications Residential Infrastructure Solutions Commercial & Industrial Corporate Total

Revenues $ 321,246 $ 313,336 $ 136,790 $ 305,624 $ — $ 1,076,996

Cost of services 264,746 248,562 105,863 275,722 — 894,893

Gross profit 56,500 64,774 30,927 29,902 — 182,103

Selling, general and administrative 31,850 46,864 18,664 27,815 15,382 140,575

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Capital expenditures $ 973 $ 1,412 $ 1,377 $ 2,402 $ 136 $ 6,300

Total assets $ 109,263 $ 63,903 $ 116,867 $ 82,050 $ 73,175 $ 445,258

Year Ended September 30, 2018

Commercial & Industrial

Communications

Infrastructure Solutions

Communications Residential Infrastructure Solutions Commercial & Industrial Corporate Total

Revenues $ 219,655 $ 285,711 $ 97,163 $ 274,299 $ — $ 876,828

Cost of services 179,518 227,355 75,337 244,656 — 726,866

Gross profit 40,137 58,356 21,826 29,643 — 149,962

Selling, general and administrative 26,003 41,401 18,293 27,031 11,192 123,920

4 unchanged sentences

Capital expenditures $ 647 $ 932 $ 735 $ 2,216 $ 33 $ 4,563

Total assets $ 80,528 $ 55,176 $ 109,506 $ 89,729 $ 87,055 $ 421,994

STOCKHOLDERS’ EQUITY

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During the year ended September 30, 2020, we issued 113,408 shares of common stock from treasury and repurchased 56,806 shares of common stock from our employees to satisfy statutory tax withholding requirements upon the vesting of certain performance phantom stock units under the Equity Incentive Plan.

We also repurchased 467,819 shares of common stock on the open market pursuant to our stock repurchase program.

We also repurchased 263,160 shares of common stock on the open market pursuant to our stock repurchase program, and 208,597 shares were forfeited by former employees and returned to treasury stock.

During the year ended September 30, 2020, we issued 6,789 unrestricted shares of common stock from treasury to members of our Board of Directors as part of their overall compensation and 5,750 unrestricted shares to satisfy the exercise of outstanding options.

We also issued 283,195 shares out of treasury for restricted shares granted upon the appointment of the Company’s Chief Executive Officer in March 2019 (as described below).

During the year ended September 30, 2018 , we repurchased 32,832 shares of common stock from our employees to satisfy minimum tax withholding requirements upon the vesting of restricted stock under the Equity Incentive Plan and repurchased 100,627 shares of common stock on the open market pursuant to our stock repurchase program.

During the year ended September 30, 2019, we issued 216,679 shares of common stock from treasury and repurchased 97,003 shares of common stock from our employees to satisfy statutory tax withholding requirements upon the vesting of certain performance phantom stock units under the Equity Incentive Plan.

We also repurchased 467,819 shares of common stock on the open market pursuant to our stock repurchase program.

During the year ended September 30, 2019, we issued 1,923 unrestricted shares of common stock from treasury to members of our Board of Directors as part of their overall compensation and 22,500 unrestricted shares to satisfy the exercise of outstanding options.

We also issued 283,195 shares out of treasury for restricted shares granted upon the appointment of the Company’s former Chief Executive Officer in March 2019.

Restricted Stock

During the years ended September 30, 2020, 2019, and 2018, we recognized $ 2,441 , $ 776 , and $ 256 , respectively, in compensation expense related to our restricted stock awards.

During the year ended September 30, 2020, $ 1,100 of the compensation expense was settled with cash.

At September 30, 2020, the unamortized compensation cost related to outstanding unvested restricted stock was $ 312 .

1 unchanged sentence

Year Ended September 30,

2020 2019 2018

Unvested at beginning of year 283,195 — 140,668

Granted 69,338 283,195 —

Vested ( 105,000 ) — ( 140,668 )

Forfeited ( 208,597 ) — —

Unvested at end of year 38,936 283,195 —

The fair value of shares vesting during the years ended September 30, 2019 , 2018 , and 2017 was $ 0 , $ 2,201 and $ 460 , respectively.

The fair value of shares vesting during the years ended September 30, 2020, 2019, and 2018 was $ 2,984 , zero and $ 2,201 , respectively.

Fair value was calculated as the number of shares vested times the market price of shares on the date of vesting.

At September 30, 2019 , we had unvested restricted stock of $ 3,800 .

Vesting of this restricted stock is as follows:

Time-Based Award:

80,000 restricted shares vest over a four-year period ending March 4, 2023, based on continued employment with the Company, with 20,000 shares vesting each year.

Long-term Incentive Plan Award:

Subject to a service requirement, 23,195 restricted shares vest contingent upon the Company achieving specified performance targets for the three-year period ending September 30, 2021.

Stock Price-Based Awards:

Subject to a service requirement, 180,000 restricted shares vest in four tranches when the closing price per share of the Company's common stock equals or exceeds the price specified below for such tranche for any 20 trading days out of 25 consecutive trading days (the "Vesting Stock Price") at any time during the five years ending March 4, 2024.

60,000 shares with a Vesting Stock Price of $35 per share;

40,000 shares with a Vesting Stock Price of $40 per share;

40,000 shares with a Vesting Stock Price of $45 per share;

40,000 shares with a Vesting Stock Price of $50 per share;

The weighted average grant date fair value of unvested restricted stock at September 30, 2020 was $ 23.57 .

All the restricted shares granted under the Equity Incentive Plan (vested or unvested) participate in dividends issued to common shareholders, if any.

1 unchanged sentence

Director phantom stock units (“Director PSUs”) are primarily granted to the members of the Board of Directors as part of their overall compensation.

These Director PSUs are paid via unrestricted stock grants to each director upon their departure from the Board of Directors.

These Director PSUs are contractual rights to receive one share of the Company's common stock and are paid via unrestricted stock grants to each director upon their departure from the Board of Directors.

We record compensation expense for the full value of the grant on the date of grant.

For the years ended September 30, 2020, 2019, and 2018, we recognized $ 390 , $ 300 , and $ 189 , respectively, in compensation expense related to these grants.

At September 30, 2019 , the Company had an aggregate of 210,386 Director PSUs outstanding.

Employee Phantom Stock Units

1 unchanged sentence

Depending on the terms of each grant, Employee PSUs may vest upon the achievement of certain specified performance objectives and continued performance of services, or may vest based on continued performance of services through the vesting date.

On February 6, 2019, the Company granted Employee PSUs, which, subject to the achievement of certain performance metrics, could result in the issuance of 264,815 shares of common stock.

Of these Employee PSUs, 97,985 Employee PSUs were forfeited during the year ended September 30, 2019, and 3,991 Employee PSUs vested in conjunction with the departure of Company employees.

As of September 30, 2019, the Company had outstanding Employee PSUs, which, subject to the achievement of certain performance metrics, could have resulted in the issuance of 162,840 shares of common stock.

During the year ended September 30, 2020, 3,435

Employee PSUs were forfeited and 45,686 vested, and the Company granted additional Employee PSUs, which, subject to the achievement of certain performance metrics, could result in the issuance of 90,782 shares of common stock.

As of September 30, 2020, a maximum of 204,501 shares of common stock may be issued under outstanding Employee PSUs.

During the year ended September 30, 2019 , we recognized compensation expense of $ 1,151 related to these grants.

The vesting of these awards is subject to either the achievement of specified levels of cumulative net income before taxes or specified stock price levels and continued performance of services through mid-December 2021, or based on continued performance through the vesting date alone.

At September 30, 2019 , redemption of a portion of the awards is deemed probable.

During the year ended September 30, 2018 , we recognized a benefit to compensation expense of $ 581 related to Employee PSU grants.

This benefit was the result of a reduction in the estimated number of units deemed probable of vesting, based on the projected achievement of specified performance objectives.

During the year ended September 30, 2020 and 2019, we recognized compensation expense of $ 1,443 and $ 1,151 , respectively, related to Employee PSUs.

The vesting of these awards is subject to either the achievement of specified levels of cumulative net income before taxes or specified stock price levels and continued performance of services through mid-December 2021 and 2022, or based on continued performance through the vesting date alone.

At September 30, 2020, it is deemed probable that of a portion of the awards which vest based on performance conditions will vest.

Stock Options

1 unchanged sentence

The following table summarizes activity relating to options granted in the years ended September 30, 2013 and 2015.

Weighted Average Exercise Price

Shares Weighted Average Exercise Price

Outstanding, September 30, 2017 45,750 $ 6.42

Options granted — —

Exercised 1,500 7.21

Forfeited and canceled — —

1 unchanged sentence

Options granted — —

Exercised 22,500 6.43

Forfeited and canceled — —

1 unchanged sentence

Options granted — —

Exercised 5,750 5.95

Forfeited and canceled — —

1 unchanged sentence

The following table summarizes options outstanding and exercisable at September 30, 2020:

Outstanding and Exercisable as of September 30, 2019

Remaining Contractual Life in Years

Weighted-Average Exercise Price

Outstanding and Exercisable as of September 30, 2020 Remaining Contractual Life in Years Weighted-Average Exercise Price

8,000 2.58 $ 5.76

1,000 4.29 $ 7.27

7,000 4.34 $ 7.21

16,000 $ 6.49

Our 2013 and 2015 options cliff vested at the end of a two year period ending at the anniversary date of the grant.

2 unchanged sentences

Unexercised stock options expire May 2023, January 2025 and February 2025.

During the years ended September 30, 2019 , 2018 , and 2017 , we recognized zero, zero and $ 23 , respectively, in compensation expense related to our stock option awards.

During the years ended September 30, 2020, 2019, and 2018, we recognized zero in compensation expense related to our stock option awards.

The intrinsic value of stock options outstanding and exercisable was $ 405 and $ 254 at September 30, 2020, and 2019, respectively.

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Certain individuals at one of the Company’s locations are entitled to receive fixed annual payments that reach a maximum amount, as specified in the related agreements, for a ten year period following retirement or, in some cases, the attainment of 62 years of age.

We recognize the unfunded status of the plan in accrued expenses and other non-current liabilities in our Consolidated Balance Sheet.

We recognize the unfunded status of the plan in accrued expenses and other non-current liabilities in our Consolidated Balance Sheets.

Benefits vest 50% after ten years of service, which increases by 10% per annum until benefits are fully vested after 15 years of service.

We had an unfunded benefit liability of $ 719 and $ 738 recorded as of September 30, 2020 and 2019, respectively.

We recognized compensation expense related to these agreements of $ 42 , zero and zero during the years ended September 30, 2019 , 2018 , and 2017 , respectively.

We recognized compensation expense included in "Selling, general and administrative expenses" in the Consolidated Statement of Comprehensive Income related to these agreements of $ 41 , $ 42 , and zero during the years ended September 30, 2020, 2019, and 2018, respectively.

Multiemployer Pension Plan

The Infrastructure Solutions segment participates in a multiemployer direct benefit pension plan for employees covered under our collective bargaining agreement.

The Infrastructure Solutions segment participates in a multiemployer direct benefit pension plan for employees covered under one of our collective bargaining agreements.

We do not administer the plan.

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The use of different market assumptions and/or estimation methods could have a material effect on the estimated fair value.

At September 30, 2019, financial assets and liabilities measured at fair value on a recurring basis were limited to our Executive Deferred Compensation Plan, under which certain employees are permitted to defer a portion of their base salary and/or bonus for a Plan Year (as defined in the plan), and contingent consideration liabilities related to certain of our acquisitions.

At September 30, 2020, financial assets and liabilities measured at fair value on a recurring basis were limited to our Executive Deferred Compensation Plan, under which certain employees are permitted to defer a portion of their base salary and/or bonus for a Plan Year (as defined in the plan).

Financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2020 and 2019, are summarized in the following tables by the type of inputs applicable to the fair value measurements:

September 30 , 2020

Total Fair Value

Quoted Prices (Level 1)

Significant Unobservable (Level 3)

Total Fair Value Quoted Prices (Level 1) Significant Unobservable (Level 3)

Executive savings plan assets $ 766 $ 766 $ —

Executive savings plan liabilities ( 644 ) ( 644 ) —

Contingent consideration liability

Total $ 122 $ 122 $ —

September 30, 2019

Total Fair Value

Quoted Prices (Level 1)

Significant Unobservable (Level 3)

Total Fair Value Quoted Prices (Level 1) Significant Unobservable (Level 3)

Executive savings plan assets $ 763 $ 763 $ —

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Contingent consideration liability ( 11 ) — ( 11 )

Total $ 106 $ 117 $ ( 11 )

In fiscal years 2016, 2017, and 2018, we entered into contingent consideration arrangements related to certain acquisitions.

Please see Note 19, “Business Combinations” for further discussion.

At September 30, 2019 , we estimated the fair value of these contingent consideration liabilities at $ 11 .

At September 30, 2020, we estimated the fair value of these contingent consideration liabilities at zero .

The table below presents a reconciliation of the fair value of these obligations, which used significant unobservable inputs (Level 3).

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Fair Value at September 30, 2019 $ 11

Settlements —

Net adjustments to fair value ( 11 )

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The following summarizes changes in the carrying value of goodwill by segment for the years ended September 30, 2020 and 2019:

Commercial & Industrial

Communications

Infrastructure Solutions

Communications Residential Infrastructure Solutions Commercial & Industrial Total

Balance at September 30, 2018 $ 2,816 $ 9,979 $ 30,931 $ 6,976 $ 50,702

Acquisitions (Note 19)

Divestitures — — ( 119 ) — ( 119 )

Purchase accounting adjustments — 39 — — 39

Balance at September 30, 2019 2,816 10,018 30,812 6,976 50,622

Purchase accounting adjustments

Acquisitions (Note 19) — 6,201 3,916 — 10,117

Goodwill impairment — — — ( 6,976 ) ( 6,976 )

Balance at September 30, 2020 $ 2,816 $ 16,219 $ 34,728 $ — $ 53,763

Based upon the results of our annual impairment assessment, the fair value of our each of our four segments exceeded the book value at September 30, 2019 , and warranted no impairment.

Throughout 2020, our Commercial & Industrial reporting unit continued to experience operating losses.

Although we have maintained a focus on operational improvements and cost reductions, our performance continued to be affected by the ongoing COVID-19 pandemic and other market factors which delayed the awarding of new projects, decreased demand for new construction in market sectors such as retail, office, and hospitality, and negatively impacted our revenue, profitability and backlog.

As a result of this increasingly competitive and uncertain environment, and the financial performance of this reporting unit, we concluded in performing our annual goodwill impairment assessment that the fair value of our Commercial & Industrial reporting unit was less than its carrying amount, which resulted in the recognition of a non-cash goodwill impairment charge of $ 6,976 for the year ended September 30, 2020.

In performing the goodwill impairment test, we compare each reporting unit’s carrying amount, including goodwill, to the fair value of the reporting unit.

The fair value of the reporting unit is estimated using a combination of (i) an analysis of trading multiples of comparable companies (market method) and (ii) discounted projected cash flows (income method).

The market method utilizes comparable publicly traded companies’ enterprise values, as compared to their recent and forecasted earnings.

The income method measures the present value of the reporting unit’s projected future annual cash flows over the next five years with a terminal value assumption.

We use a variety of underlying assumptions to estimate these future cash flows, including assumptions relating to future economic market conditions, costs and expenses and capital expenditures.

We believe the combination of these approaches and our judgment regarding underlying assumptions and estimates provides us with the best estimate of fair value for each of our reporting units, and that these valuation methods are widely used by market participants in our industry.

The fair value of our reporting units is affected by assumptions regarding future market conditions and the demand for our services, our ability to execute future projects successfully, and the cost of capital.

Our estimate of fair value requires us to use significant unobservable inputs, representative of Level 3 fair value measurements.

Intangible Assets

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September 30 , 2020

Estimated Useful Lives (in Years)

Gross Carrying Amount

Accumulated Amortization

Estimated Useful Lives (in Years) Gross Carrying Amount Accumulated Amortization Net

Trademarks/trade names 5 - 20 $ 7,754 $ ( 1,741 ) $ 6,013

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Backlog and construction contracts 1 3,383 ( 1,870 ) 1,513

Total $ 58,026 $ ( 18,669 ) $ 39,357

September 30, 2019

Estimated Useful Lives (in Years)

Gross Carrying Amount

Accumulated Amortization

Estimated Useful Lives (in Years) Gross Carrying Amount Accumulated Amortization Net

Trademarks/trade names 5 - 20 $ 5,084 $ ( 1,267 ) $ 3,817

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Backlog and construction contracts 1 599 ( 591 ) 8

Total $ 39,662 $ ( 13,039 ) $ 26,623

For the years ended September 30, 2020, 2019, and 2018, amortization expense of intangible assets was $ 6,424 , $ 3,950 and $ 4,101 , respectively.

The weighted average useful life of our intangible assets at September 30, 2019 , was 9.3 years.

Our estimated future amortization expense for years ended September 30 is as follows:

Year Ended September 30,

Our estimated future amortization expense for years ending September 30 is as follows:

Year Ending September 30,

Thereafter 16,796

Total $ 39,357

COMMITMENTS AND CONTINGENCIES

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We expense routine legal costs related to these proceedings as they are incurred.

As of September 30, 2019 , we did not have any significant outstanding legal matters.

As of September 30, 2020, we did not have any material pending legal proceedings.

Risk Management

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BUSINESS COMBINATIONS

The Company completed two acquisitions in the year ended September 30, 2018, for a total aggregate consideration of $ 7,413 , which includes cash consideration paid at closing of $ 7,091 , cash consideration paid subsequent to closing of $ 125 , cash consideration payable in the next fiscal year of $ 15 , and contingent consideration payable in July 2019 and 2020 with aggregate acquisition date fair value estimated at $ 182 .

Azimuth Communications, Inc.

(“Azimuth”) – On April 6, 2018, the Company’s Communications segment acquired all of the outstanding capital stock of Azimuth, a Portland, Oregon-based provider of design and integration services for structured cabling, physical security, access control systems, distributed antenna systems, wireless access, and audio visual systems.

The acquisition of Azimuth has accelerated our Communications segment's expansion into the Pacific Northwest market, which the Company believes to be an attractive market.

Electrical Contractors North, Inc.

("ECNI") – On July 31, 2018, the Company’s Residential segment acquired substantially all of the assets of ECNI, a Salt Lake City, Utah-based provider of electrical contracting for multi-family residential and hotel construction.

We believe the acquisition of ECNI furthers our Residential segment’s growth strategy by providing a foothold in the Salt Lake City market.

The Company accounted for these fiscal 2018 transactions under the acquisition method of accounting, which requires recording assets and liabilities at fair value (Level 3).

The valuation of the assets and liabilities assumed for our fiscal 2018 acquisitions as of the acquisition dates is as follows:

The Company completed two acquisitions during the year ended September 30, 2020 for a total aggregate cash consideration of $ 28,952 .

• Aerial Lighting & Electric, Inc.

(“Aerial”) – On February 18, 2020, we acquired 100% of the equity interests in Aerial, a Naugatuck, Connecticut-based electrical contractor specializing in the design and installation of electrical systems for multi-family developments.

The acquisition of Aerial furthers our Residential segment's growth strategy by providing a foothold in the Northeast market.

• Plant Power & Control Systems, LLC (“PPCS”) – On February 21, 2020, we acquired 100% of the membership interests in PPCS, a Birmingham, Alabama-based manufacturer and installer of custom engineered power distribution equipment.

The acquisition of PPCS furthers our Infrastructure Solutions segment's growth strategy by accelerating their expansion in the Southeast market.

The Company accounted for the transactions under the acquisition method of accounting, which requires recording assets and liabilities at fair value (Level 3).

The valuation of the assets and liabilities assumed is as follows:

Current assets $ 5,660

Property and equipment 489

Intangible assets (primarily customer relationships)

Operating right of use asset 331

Intangible assets 18,276

Goodwill 10,117

Current liabilities ( 3,802 )

Long term liabilities

Operating long-term lease liabilities ( 170 )

Deferred tax liability ( 1,949 )

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With regard to goodwill, the balance is attributable to the workforce of the acquired business and other intangibles that do not qualify for separate recognition.

In connection with the Azimuth and ECNI acquisitions, we acquired aggregate goodwill of $ 4,164 , of which $ 1,448 is tax deductible.

In connection with these acquisitions, we acquired goodwill of $ 10,117 of which $ 3,916 is tax deductible.

The intangible assets acquired primarily consisted of customer relationships with a total weighted-average amortization period of 8.8 years.

In conjunction with these acquisitions, we acquired receivables totaling $ 3,190 , of which we estimated none to be uncollectible at the date of acquisition.

These acquisitions contributed $ 21,836 in revenue and $ 812 in operating income during the year ended September 30, 2020.

Unaudited Pro Forma Information

The following unaudited supplemental pro forma results of operations for the year ended September 30, 2020 are calculated as if each acquisition occurred as of October 1 of the fiscal year prior to consummation.

Twelve Months Ended September 30,

Revenues $ 1,208,020 $ 1,118,460

Net income attributable to IES Holdings, Inc.

$ 43,285 $ 34,967

SUBSEQUENT EVENTS

On November 5, 2020, we acquired all of the stock in K.E.P.

Electric, Inc., a Batavia, Ohio-based electrical contractor specializing in the design and installation of electrical systems for single-family housing and multi-family developments.

This business will operate as a subsidiary in our Residential segment.

On November 19, 2020, we acquired all of the stock of Wedlake Fabricating, Inc., a Tulsa, Oklahoma-based manufacturer of custom generator enclosures.

This business will operate as a subsidiary in our Infrastructure Solutions segment.

The acquisitions were financed using cash on hand, and do not have a material impact on our overall liquidity.

QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

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Year Ended September 30, 2020

First Second Third Fourth

Quarter Quarter Quarter Quarter

Revenues $ 276,043 $ 291,277 $ 293,125 $ 330,411

Gross profit $ 50,215 $ 51,264 $ 58,320 $ 68,160

Net income (loss) attributable to IES Holdings, Inc.

Earnings (loss) per share:

$ 8,502 $ 6,231 $ 12,260 $ 14,606

Earnings (loss) per share attributable to IES Holdings, Inc.:

Basic $ 0.40 $ 0.30 $ 0.58 $ 0.69

Diluted $ 0.39 $ 0.29 $ 0.58 $ 0.68

Year Ended September 30, 2019

First Second Third Fourth

Quarter Quarter Quarter Quarter

Revenues $ 243,842 $ 256,914 $ 282,633 $ 293,607

Gross profit $ 41,601 $ 43,235 $ 46,397 $ 50,870

Net income (loss) attributable to IES Holdings, Inc.

Earnings (loss) per share:

$ 6,884 $ 5,489 $ 10,972 $ 9,861

Earnings (loss) per share attributable to IES Holdings, Inc.:

Basic $ 0.32 $ 0.26 $ 0.52 $ 0.47

Diluted $ 0.32 $ 0.26 $ 0.52 $ 0.46

The sum of the individual quarterly earnings per share amounts may not agree with year-to-date earnings per share as each period’s computation is based on the weighted average number of shares outstanding during the period.

We recorded a goodwill impairment charge of $ 6,976 in the fourth quarter 2020.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data