IES Holdings, Inc. 10-K

Item 8. Financial Statements and Supplementary Data INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Reports of Independent Registered Public Accounting Firm 40 Consolidated Balance Sheets 42 Consolidated Statements of Comprehensive Income (Loss) 43 Consolidated Statements of Stockholders' Equity 44 Consolidated Statements of Cash Flows 45 Notes to Consolidated Financial Statements 46 39 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of IES Holdings, Inc. and subsidiaries Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of IES Holdings, Inc. and subsidiaries (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 (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at September 30, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2020, in conformity with U.S. generally accepted accounting principles. 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 These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. s/ ERNST & YOUNG LLP We have served as the Company’s auditor since 2002 Houston, Texas December 7, 2020 40 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of IES Holdings, Inc. and subsidiaries Opinion on Internal Control Over Financial Reporting We have audited IES Holdings, Inc. and subsidiaries’ 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), (the COSO criteria). 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, 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. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. s/ ERNST & YOUNG LLP Houston, Texas December 7, 2020 41 IES HOLDINGS, INC. AND SUBSIDIARIES Consolidated Balance Sheets (In Thousands, Except Share Information) September 30, 2020 2019 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 53,577 $ 18,934 Accounts receivable: 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 Prepaid expenses and other current assets 9,153 10,625 Total current assets 371,450 296,455 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 CURRENT LIABILITIES: Accounts payable and accrued expenses 186,710 152,909 Billings in excess of costs and estimated earnings 55,739 40,563 Total current liabilities 242,449 193,472 Long-term debt 217 299 Operating long-term lease liabilities 20,530 — Other non-current liabilities 12,215 1,945 Total liabilities 275,411 195,716 Noncontrolling interest 1,804 3,294 STOCKHOLDERS’ EQUITY: Preferred stock, $ 0.01 par value, 10,000,000 shares authorized, none issued and outstanding — — Common stock, $ 0.01 par value, 100,000,000 shares authorized; 22,049,529 issued and 20,762,395 and 21,165,011 outstanding, respectively 220 220 Treasury stock, at cost, 1,287,134 and 884,518 shares, respectively ( 24,499 ) ( 12,483 ) Additional paid-in capital 200,587 192,911 Retained earnings 107,005 65,600 Total stockholders’ equity 283,313 246,248 Total liabilities and stockholders’ equity $ 560,528 $ 445,258 The accompanying notes are an integral part of these Consolidated Financial Statements. 42 IES HOLDINGS, INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income (Loss) (In Thousands, Except Share Information) 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 Loss (gain) on sale of assets — 52 ( 15 ) Operating income 50,083 41,850 25,954 Interest and other (income) expense: Interest expense 777 1,857 1,946 Other (income) expense, net 12 ( 148 ) ( 340 ) Income from operations before income taxes 49,294 40,141 24,348 Provision for income taxes 8,740 6,663 38,151 Net income (loss) 40,554 33,478 ( 13,803 ) 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. 43 IES HOLDINGS, INC. AND SUBSIDIARIES Consolidated Statements of Stockholders’ Equity (In Thousands, Except Share Information) 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 Issuance of restricted stock & performance stock — — 520 5 ( 5 ) — — Acquisition of treasury stock — — ( 133,459 ) ( 2,059 ) — — ( 2,059 ) Options exercised — — 1,500 15 ( 4 ) — 11 Non-cash compensation — — — — ( 136 ) — ( 136 ) Decrease in noncontrolling interest — — — — — 44 44 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 The accompanying notes are an integral part of these Consolidated Financial Statements. 44 IES HOLDINGS, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (In Thousands) Year Ended September 30, 2020 2019 2018 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 40,554 $ 33,478 $ ( 13,803 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Bad debt expense 1,864 552 421 Deferred financing cost amortization 152 318 288 Depreciation and amortization 12,508 9,557 8,860 Loss (gain) on sale of assets — 52 ( 15 ) Non-cash compensation expense 3,323 2,357 ( 136 ) Goodwill impairment expense 6,976 — — Deferred income taxes 5,122 5,681 38,151 Changes in operating assets and liabilities 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 ) Prepaid expenses and other current assets ( 9,355 ) ( 7,171 ) ( 2,250 ) Other non-current assets 510 ( 444 ) 274 Accounts payable and accrued expenses 20,122 22,472 6,584 Billings in excess of costs and estimated earnings 13,967 6,683 3,570 Other non-current liabilities 8,774 ( 459 ) ( 336 ) Net cash provided by operating activities 76,741 38,724 12,224 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment ( 4,745 ) ( 6,300 ) ( 4,563 ) Proceeds from sales of assets 104 502 108 Cash received (paid) in conjunction with business combinations or dispositions ( 28,952 ) 50 ( 7,406 ) Net cash used in investing activities ( 33,593 ) ( 5,748 ) ( 11,861 ) CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings of debt 592,768 89,261 168 Repayments of debt ( 592,756 ) ( 119,508 ) ( 177 ) Finance lease payment ( 215 ) — — Distribution to noncontrolling interest ( 639 ) ( 240 ) ( 349 ) Purchase of treasury stock ( 7,697 ) ( 9,802 ) ( 2,059 ) Issuance of shares 34 — 11 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 CASH, CASH EQUIVALENTS, end of period $ 53,577 $ 18,934 $ 26,247 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest $ 782 $ 1,743 $ 1,684 Cash paid for income taxes (net) $ 323 $ 1,370 $ 2,839 The accompanying notes are an integral part of these Consolidated Financial Statements. 45 IES HOLDINGS, INC. Notes to the Consolidated Financial Statements (All Amounts in Thousands Except Share Amounts) 1. BUSINESS Description of the Business IES Holdings, Inc . 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: • 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. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The accompanying Consolidated Financial Statements include the accounts of IES Holdings, Inc. and its consolidated subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. 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. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires the use of estimates and assumptions by management in determining the reported amounts of assets and liabilities, disclosures of contingent 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. Estimates are primarily used in our revenue recognition of construction in progress, fair value assumptions in accounting for business combinations and analyzing goodwill, investments, intangible assets and long-lived asset impairments and adjustments, allowance for doubtful accounts receivable, stock-based compensation, reserves for legal matters, realizability of deferred tax assets, unrecognized tax benefits and self-insured claims liabilities and related reserves. Cash and Cash Equivalents We consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. 46 Inventories Inventories consist of raw materials, work in process, finished goods, and parts and supplies held for use in the ordinary course of business. Inventory is valued at the lower of cost or net realizable value generally using the historical average cost or first-in, first-out (FIFO) method. When circumstances dictate, we write down inventory to its estimated net realizable value based on assumptions about future demand, market conditions, plans for disposal, and physical condition of the product. 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. Property and Equipment Additions of property and equipment are recorded at cost, and depreciation is computed using the straight-line method over the estimated useful life of the related asset. Leasehold improvements are capitalized and depreciated over the lesser of the life of the lease or the estimated useful life of the asset. Expenditures for repairs and maintenance are charged to expense when incurred. Expenditures for major renewals and betterments, which extend the useful lives of existing property and equipment, are capitalized and depreciated. Upon retirement or disposition of property and equipment, the capitalized cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the statements of comprehensive income in the caption (gain) loss on sale of assets. Goodwill Goodwill attributable to each reporting unit is tested for impairment either by comparing the fair value of each reporting unit with its carrying value or by a qualitative assessment. These impairment tests are required to be performed at least annually. On an ongoing basis (absent any impairment indicators), we perform an impairment test annually using a measurement date of September 30. In evaluating goodwill for impairment, we have the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is greater than its carrying value. If we determine that it is more likely than not that the carrying value of a reporting unit is greater than its fair value, then we perform an impairment test by calculating the fair value of the reporting unit and comparing this calculated fair value with the carrying value of the reporting unit. We estimate the fair value of the reporting unit based on both a market approach and an income approach, using discounted estimated future cash flows. The market approach uses market multiples of enterprise value to earnings before interest, taxes, depreciation and amortization for comparable publicly traded companies. The income approach relies on significant estimates for future cash flows, projected long-term growth rates, and the weighted average cost of capital. Intangible Assets Intangible assets with definite lives are amortized over their estimated useful lives based on expected economic benefit with no residual value. Debt Issuance Costs Debt issuance costs are included as a reduction of our debt outstanding, or alternately classified within other non-current assets if we have no borrowings drawn on our credit facility at the balance sheet date, and are amortized to interest expense over the scheduled maturity of the debt. Amortization expense of debt issuance costs was $ 152 , $ 318 and $ 288 , respectively, for the years ended 2020, 2019 and 2018. Remaining unamortized capitalized debt issuance costs were $ 736 and $ 782 at September 30, 2020, and 2019, respectively. Revenue Recognition Revenue is generally recognized from a contract with a customer when: (i) it has approval and commitment from both parties, (ii) the rights of the parties are identified, (iii) payment terms are identified, (iv) the contract has commercial substance, and (v) collectability of consideration is probable. We consider the start of a project to be when the above criteria have been met and we have written authorization from the customer to proceed. 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. We recognize revenue on both signed contracts and change orders. A discussion of our treatment of claims and unapproved change orders is described later in this section. Percentage of completion for construction contracts is measured principally by the percentage of costs incurred and accrued to date for each contract to the estimated total cost for each contract at completion. We generally consider contracts to be substantially complete upon departure from the work site and acceptance by the customer. 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 47 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. Except in certain circumstances, we do not recognize revenue or margin based on change orders or claims until they have been agreed upon with the customer. The amount of revenue associated with unapproved change orders and claims was immaterial for the years ended September 30, 2020, 2019 and 2018. Provisions for total estimated losses on uncompleted contracts are made in the period in which such losses are determined. The balances billed but not paid by customers pursuant to retainage provisions in project contracts are typically due upon completion of the contracts and acceptance by the customer. Based on our experience, the retention balance at each balance sheet date will be collected within the subsequent fiscal year. Certain divisions in the Residential and Infrastructure Solutions segments use the completed contract method of accounting because the duration of their contracts is short in nature. We recognize revenue on completed contracts when the project is complete and billable to the customer. Provisions for estimated losses on these contracts are recorded in the period such losses are determined. Accounts Receivable and Allowance for Doubtful Accounts We record accounts receivable for all amounts billed and not collected. Generally, we do not charge interest on outstanding accounts receivable; however, from time to time we may believe it necessary to charge interest on a case by case basis. Additionally, we provide an allowance for doubtful accounts for specific accounts receivable where collection is considered doubtful as well as for general unknown collection issues based on historical trends. Accounts receivable not determined to be collectible are written off as deemed necessary in the period such determination is made. As is common in our industry, some of these receivables are in litigation or require us to exercise our contractual lien rights in order to collect. Our allowance for doubtful accounts at September 30, 2020 and 2019 was $ 2,613 and $ 1,184 , respectively. We believe that our allowance for doubtful accounts is sufficient to cover uncollectible receivables as of September 30, 2020. Comprehensive Income (Loss) Comprehensive income (loss) includes all changes in equity during a period except those resulting from investments by and distributions to stockholders. 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. We regularly evaluate valuation allowances established for deferred tax assets for which future realization is uncertain. We perform this evaluation on a quarterly basis. The estimation of required valuation allowances includes estimates of future taxable income. 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. If actual future taxable income is different from these estimates, our results could be affected. Risk Management We retain the risk for workers’ compensation, employer’s liability, automobile liability, construction defects, general liability and employee group health claims, as well as pollution coverage, resulting from uninsured deductibles per accident or occurrence which are generally subject to annual aggregate limits. Our general liability program provides coverage for bodily injury and property damage. In many cases, we insure third parties, including general contractors, as additional insureds under our insurance policies. Losses are accrued based upon our known claims incurred and an estimate of claims incurred but not reported. Each year, we compile our historical data pertaining to the insurance experiences and actuarially develop the ultimate loss associated with our insurance programs other than pollution coverage for our Infrastructure Solutions segment. We believe that the actuarial valuation provides the best estimate of the ultimate losses to be expected under these programs. 48 The undiscounted ultimate losses of our workers’ compensation, auto and general liability insurance reserves at September 30, 2020, and 2019, was $ 3,886 and $ 4,975 , respectively. Based on historical payment patterns, we expect payments of undiscounted ultimate losses to be made as follows: Year Ended September 30: 2021 $ 1,195 2022 839 2023 538 2024 347 2025 217 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 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. Realization of Long-Lived Assets We evaluate the recoverability of property and equipment and other long-lived assets as facts and circumstances indicate that any of those assets might be impaired. If an evaluation is required for our assets we plan to hold and use, the estimated future undiscounted cash flows associated with the asset are compared to the asset’s carrying amount to determine if an impairment of such property has occurred. The effect of any impairment would be to expense the difference between the fair value of such property and its carrying value. 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. Risk Concentration Financial instruments, which potentially subject us to concentrations of credit risk, consist principally of cash deposits and accounts receivable. Through delayed payment terms, we at times grant credit, usually without collateral, to our customers, who are generally large public companies, contractors and homebuilders throughout the United States. Consequently, we are subject to potential credit risk related to changes in business and economic factors throughout the United States, specifically, within the construction, homebuilding and mission critical facility markets. However, we are entitled to payment for work performed and generally have certain lien rights in that work. Further, management believes that its contract acceptance, billing and collection policies are adequate to manage potential credit risk. We routinely maintain cash balances in financial institutions in excess of federally insured limits. We periodically assess the financial condition of these institutions where these funds are held and believe the credit risk is minimal. We maintain the majority of our cash and cash equivalents in money market mutual funds. There can be no assurance, however, that we will not be adversely affected by credit risks we face. No single customer accounted for more than 10% of our consolidated revenues for the years ended September 30, 2020, 2019 and 2018. Fair Value of Financial Instruments 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. The carrying value of our debt approximates fair value, as debt incurs interest at a variable rate. 49 Stock-Based Compensation We measure and record compensation expense for all share-based payment awards based on the fair value of the awards granted at the date of grant. 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. Forfeitures are recorded in the period in which they occur. The resulting compensation expense is recognized on a straight-line basis over the requisite service period, which is generally the vesting period. Deferred Compensation Plans The Company maintains a rabbi trust to fund certain deferred compensation plans. The securities held by the trust are classified as trading securities. The investments are recorded at fair value and are classified as other non-current assets in the accompanying Consolidated Balance Sheets as of September 30, 2020, and 2019. The changes in fair values are recorded as a component of other income (expense) in the Consolidated Statements of Comprehensive Income (Loss). The corresponding deferred compensation liability is included in other non-current liabilities on the Consolidated Balance Sheets and changes in this obligation are recognized as adjustments to compensation expense in the period in which they are determined. Noncontrolling Interest In connection with our acquisitions of STR Mechanical, LLC (“STR Mechanical”) in fiscal 2016 and NEXT Electric, LLC (“NEXT Electric”) in fiscal 2017, we acquired 80 percent interests in these entities, and the remaining 20 percent was retained by the third party sellers. 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 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 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. Leases 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. 50 Accounting Standards Not Yet Adopted 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. 2019-04 and 2019-05. 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 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. 2018-13, Fair Value Measurement Disclosure Framework (“ASU 2018-13”), to modify certain disclosure requirements for fair value measurements. Under the new guidance, registrants will need to disclose weighted average information for significant unobservable inputs for all Level 3 fair value measurements. The guidance does not specify how entities should calculate the weighted average, but requires them to explain their calculation. The new guidance also requires disclosing the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements of instruments held at the end of the reporting period. 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 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 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. 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 was adopted as of October 1, 2019 with no impact to our financial statements. 3. CONTROLLING SHAREHOLDER 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. While Tontine is subject to certain restrictions under federal securities laws on sales of its shares as an affiliate, the Company has filed a shelf registration statement to register all of the shares of IES common stock owned by Tontine at the time of registration. As long as the shelf registration statement remains effective and the Company remains eligible to use it, Tontine has the ability to resell any or all of its registered shares from time to time in one or more offerings, as described in the shelf registration statement and in any prospectus supplement filed in connection with an offering pursuant to the shelf registration statement. 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 NOLs for federal and 51 state income tax purposes. On November 8, 2016, the Company implemented a tax benefit protection plan (the “NOL Rights Plan”). 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 agreement, bonding agreements with our sureties and our executive severance plan. Jeffrey L. 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. Mr. 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. Gendell, who has served as a member of our Board of Directors since February 2012, and who previously served as Interim Director of Operations from November 2017 to January 2019, as Vice Chairman of the Board from November 2016 to November 2017 and as Chairman of the Board from January 2015 to November 2016. David B. Gendell was an employee of Tontine from 2004 until December 31, 2017. The Company is party to a sublease agreement with Tontine Associates for corporate office space in Greenwich, Connecticut. The sublease extends through February 27, 2023, with monthly payments due in the amount of approximately $ 8 . Payments by the Company are at a rate consistent with that paid by Tontine Associates to its landlord. On December 6, 2018, the Company entered into a Board Observer Letter Agreement (the "Observer Agreement") with Tontine Associates, in order to assist Tontine in managing its investment in the Company. Subject to the terms and conditions set forth in the Observer Agreement, the Company granted Tontine the right, at any time that Tontine holds at least 20% of the outstanding common stock of the Company, to appoint a representative to serve as an observer to the Board (the “Board Observer”). The Board Observer, who must be reasonably acceptable to those members of the Board who are not affiliates of Tontine, shall have no voting rights or other decision making authority. Subject to the terms and conditions set forth in the Observer Agreement, so long as Tontine has the right to appoint a Board Observer, the Board Observer will have the right to attend and participate in meetings of the Board and the committees thereof, subject to confidentiality requirements, and to receive reimbursement for reasonable out-of-pocket expenses incurred in his or her capacity as a Board Observer and such rights to coverage under the Company’s directors’ and officers’ liability insurance policy as are available to the Company’s directors. 4. REVENUE RECOGNITION Contracts Our revenue is derived from contracts with customers, and we determine the appropriate accounting treatment for each contract at its inception. Our contracts primarily relate to electrical and mechanical contracting services, technology infrastructure products and services, and electro-mechanical solutions for industrial operations. Revenue is earned based upon an agreed fixed price or actual costs incurred plus an agreed upon percentage. We account for a contract when: (i) it has approval and commitment from both parties, (ii) the rights of the parties are identified, (iii) payment terms are identified, (iv) the contract has commercial substance, and (v) collectability of consideration is probable. We consider the start of a project to be when the above criteria have been met and we have written authorization from the customer to proceed. Performance Obligations A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. We recognize revenue over time for the majority of the services we perform as (i) control continuously transfers to the customer as work progresses at a project location controlled by the customer and (ii) we have the right to bill the customer as costs are incurred. Within our Infrastructure Solutions segment, we often perform work inside our own facilities, where control does not continuously transfer to the customer as work progresses. In such cases, we evaluate whether we have the right to bill the customer as costs are incurred. Such assessment involves an evaluation of contractual termination clauses. Where we have a contractual right to payment for work performed to date, we recognize revenue over time. If we do not have such a right, we recognize revenue upon completion of the contract, when control of the work transfers to the customer. For fixed price arrangements, we use the percentage of completion method of accounting under which revenue recognized is measured principally by the costs incurred and accrued to date for each contract as a percentage of the estimated total cost for each contract at completion. Contract costs include all direct material, labor and indirect costs related to contract performance. Changes in job 52 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. This measurement and comparison process requires updates to the estimate of total costs to complete the contract, and these updates may include subjective assessments and judgments. Variable Consideration The transaction price for our contracts may include variable consideration, which includes changes to transaction price for approved and unapproved change orders, claims and incentives. Change orders, claims and incentives are generally not distinct from the existing contract due to the significant integration service provided in the context of the contract and are accounted for as a modification of the existing contract and performance obligation. We estimate variable consideration for a performance obligation at the probability weighted value we expect to receive (or the most probable amount we expect to incur in the case of liquidated damages, if any), utilizing estimation methods that best predict the amount of consideration to which we will be entitled (or will be incurred in the case of liquidated damages, if any). We include variable consideration in the estimated transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include estimated amounts in transaction price are based largely on an assessment of our anticipated performance and all information (historical, current and forecasted) that is reasonably available to us. The effect of variable consideration on the transaction price of a performance obligation is recognized as an adjustment to revenue on a cumulative catch-up basis. To the extent unapproved change orders and claims reflected in transaction price (or accounted for as a reduction of the transaction price in the case of liquidated damages) are not resolved in our favor, or to the extent incentives reflected in transaction price are not earned, there could be reductions in, or reversals of, previously recognized revenue. Costs of Obtaining a Contract In certain of our operations, we incur commission costs related to entering into a contract that we only incurred because of that contract. When this occurs, we capitalize that cost and amortize it over the expected term of the contract. At September 30, 2020, we had capitalized commission costs of $ 94 . We generally do not incur significant incremental costs related to obtaining or fulfilling a contract prior to the start of a project. When significant pre‑contract costs are incurred, they will be capitalized and amortized on a percentage of completion basis over the life of the contract. Disaggregation of Revenue 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 2020, 2019, and 2018 revenue was derived from the following activities. See details in the following tables: Year Ended September 30, 2020 2019 2018 Communications $ 395,141 $ 321,246 $ 219,655 Residential 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 Industrial Services 40,701 48,948 44,701 Custom Power Solutions 87,678 87,842 52,462 Total Infrastructure Solutions 128,379 136,790 97,163 Commercial & Industrial 255,546 305,624 274,299 Total Revenue $ 1,190,856 $ 1,076,996 $ 876,828 53 Year Ended September 30, 2020 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 Total revenue $ 395,141 $ 411,790 $ 128,379 $ 255,546 $ 1,190,856 Year Ended September 30, 2019 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 Total revenue $ 321,246 $ 313,336 $ 136,790 $ 305,624 $ 1,076,996 Year Ended September 30, 2018 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 Total revenue $ 219,655 $ 285,711 $ 97,163 $ 274,299 $ 876,828 Accounts Receivable Accounts receivable include amounts which we have billed or have an unconditional right to bill our customers. As of September 30, 2020, Accounts receivable included $ 10,710 of unbilled receivables for which we have an unconditional right to bill. Contract Assets and Liabilities Project contracts typically provide for a schedule of billings on percentage of completion of specific tasks inherent in the fulfillment of our performance obligation(s). The schedules for such billings usually do not precisely match the schedule on which costs are incurred. 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 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. Remaining Performance Obligations Remaining performance obligations represent the unrecognized revenue value of our contract commitments. New awards represent the total expected revenue value of new contract commitments undertaken during a given period, as well as additions to the scope of existing contract commitments. Our new performance obligations vary significantly each reporting period based on the timing of our major new contract commitments. At September 30, 2020, we had remaining performance obligations of $ 505,352 . The Company expects to recognize revenue on approximately $ 438,253 of the remaining performance obligations over the next 12 months, with the remaining recognized thereafter. For the year ended September 30, 2020, net revenue recognized from our performance obligations satisfied in previous periods was not material. 54 5. PROPERTY AND EQUIPMENT Property and equipment consists of the following: Estimated Useful Lives in Years Year Ended September 30, 2020 2019 Land N/A $ 1,436 $ 1,436 Buildings and improvements 5 - 20 14,378 13,608 Machinery and equipment 3 - 10 32,695 30,600 Information systems 2 - 8 8,496 7,945 Furniture and fixtures 5 - 7 1,746 1,587 $ 58,751 $ 55,176 Less-Accumulated depreciation ( 34,544 ) ( 29,560 ) Construction in progress 382 130 Property and equipment, net $ 24,589 $ 25,746 Depreciation expense was $ 6,084 , $ 5,607 and $ 4,759 , respectively, for the years ended September 30, 2020, 2019 and 2018. 6. PER SHARE INFORMATION Basic earnings per share is calculated as income (loss) available to common stockholders, divided by the weighted average number of common shares outstanding during the period. If the effect is dilutive, participating securities are included in the computation of basic earnings per share. Our participating securities do not have a contractual obligation to share in the losses in any given period. As a result, these participating securities will not be allocated any losses in the periods of net losses, but will be allocated income in the periods of net income using the two-class method. The following table reconciles the components of the basic and diluted earnings (loss) per share for the years ended September 30, 2020, 2019 and 2018: Year Ended September 30, 2020 2019 2018 Numerator: Net income (loss) attributable to common shareholders of IES Holdings, Inc. $ 40,830 $ 32,950 $ ( 14,113 ) Increase (decrease) in noncontrolling interest 194 — ( 44 ) Net income attributable to restricted shareholders of IES Holdings, Inc. 575 256 — Net income (loss) attributable to IES Holdings, Inc. $ 41,599 $ 33,206 $ ( 14,157 ) Denominator: Weighted average common shares outstanding — basic 20,795,892 21,082,012 21,196,388 Effect of dilutive stock options and non-vested securities 296,518 233,233 — Weighted average common and common equivalent shares outstanding — diluted 21,092,410 21,315,245 21,196,388 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 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 55 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. 7. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS Activity in our allowance for doubtful accounts on accounts receivable consists of the following: Year Ended September 30, 2020 2019 Balance at beginning of period $ 1,184 $ 868 Additions to costs and expenses 1,864 552 Deductions for uncollectible receivables written off, net of recoveries ( 435 ) ( 236 ) Balance at end of period $ 2,613 $ 1,184 Accounts payable and accrued expenses consist of the following: Year Ended September 30, 2020 2019 Accounts payable, trade $ 93,315 $ 85,276 Accrued compensation and benefits 53,933 42,828 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: Year Ended September 30, 2020 2019 Executive Savings Plan assets $ 766 $ 763 Securities and equity investments — 408 Other 5,014 3,767 Total $ 5,780 $ 4,938 8. DEBT Debt consists of the following: Year Ended September 30, 2020 2019 Revolving loan (long-term debt) $ 12 $ — Debt issuance costs (1) — — Other long-term debt 205 299 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"). All amounts outstanding under our revolving credit facility are due and payable in September 2024, upon expiration of our revolving credit facility, and all amounts described as available are available without triggering our financial covenant under the Amended Credit Agreement (as defined below). Our interest rate on our outstanding borrowings under our revolving credit facility was 1.48 % at September 30, 2020. For the years ended September 30, 2020, 2019 and 2018, we incurred interest expense of $ 777 , $ 1,857 and $ 1,946 , respectively. 56 The Revolving Credit Facility 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 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: • a Fixed Charge Coverage Ratio (as defined in the Amended Credit Agreement), measured quarterly on a trailing four-quarter basis at the end of each quarter, of at least 1.1 to 1.0; and • minimum Liquidity (as defined in the Amended Credit Agreement) of at least twenty percent (20%) of the Maximum Revolver Amount (as defined in the Amended Credit Agreement), or $20,000; with, for purposes of this covenant, at least fifty percent (50%) of our Liquidity comprised of Excess Availability (as defined in the Amended Credit Agreement). At September 30, 2020, our Liquidity was $ 147,902 and our Excess Availability was $ 94,324 (or greater than 50% of minimum Liquidity), our Fixed Charge Coverage Ratio was 8.3 :1.0. 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 (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. 9. LEASES 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. 57 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 Less: 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: Year Ended 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: Year Ended 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. 58 10. INCOME TAXES Federal and state income tax provisions are as follows: Year Ended September 30, 2020 2019 2018 Federal: Current $ ( 39 ) $ ( 1,330 ) $ ( 2,345 ) Deferred 9,317 5,908 38,744 State: Current 3,657 2,312 1,536 Deferred ( 4,195 ) ( 227 ) 216 Total provision for income taxes $ 8,740 $ 6,663 $ 38,151 Actual income tax expense differs from income tax expense computed by applying the U.S. federal statutory corporate rate to income (loss) before income taxes as follows: Year Ended September 30, 2020 2019 2018 Provision at the statutory rate (1) $ 10,352 $ 8,430 $ 5,973 Increase resulting from: Non-deductible expenses 1,974 1,277 1,241 State income taxes, net of federal deduction 2,662 2,009 1,193 Change in valuation allowance — — 1,761 Rate change — — 31,333 Other 261 — 183 Decrease resulting from: Share-based compensation ( 75 ) ( 556 ) ( 238 ) Change in valuation allowance ( 3,334 ) ( 83 ) — 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 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. The income tax effects of these temporary differences, representing deferred income tax assets and liabilities, result principally from the following: 59 Year Ended September 30, 2020 2019 Deferred income tax assets: Allowance for doubtful accounts $ 592 $ 245 Accrued expenses 14,619 9,783 Net operating loss carryforward 22,623 39,045 Various reserves 1,764 1,396 Equity losses in affiliate 210 119 Share-based compensation 897 672 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 Total deferred income tax assets 50,194 48,427 Deferred income tax liabilities: Property and equipment 517 840 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 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. This carry forward, which may provide future tax benefits, will begin to expire in 2027. As of September 30, 2020, we had available approximately $ 76,055 state net tax operating loss carry forwards, including $ 6,696 from net operating losses on which no tax benefit has been recognized and has not been recorded as a deferred tax asset. The carry forwards, which may provide future tax benefits, will begin to expire in 2021. We have provided valuation allowances on all net operating losses where it is determined it is more likely than not that they will expire without being utilized. In assessing the realizability of deferred tax assets at September 30, 2020, we considered whether it was more likely than not that some portion or all of the deferred tax assets will not be realized. Our realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which these temporary differences become deductible. As a result, we have recorded a net deferred tax asset of $ 33,803 on our Consolidated Balance Sheets. 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 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 . The tax basis in amortizable goodwill in excess of book basis is not reflected as a deferred tax asset. To the extent the amortization of the excess tax basis results in a cash tax benefit, the benefit will first go to reduce goodwill, then other long-term intangible assets, and then tax expense. GAAP requires financial statement reporting of the expected future tax consequences of uncertain tax return reporting positions on the presumption that all relevant tax authorities possess full knowledge of those tax reporting positions, as well as all of the pertinent facts and circumstances, but it prohibits discounting of any of the related tax effects for the time value of money. The evaluation of a tax position is a two-step process. The first step is the recognition process to determine if it is more likely than not that a tax position will be sustained upon examination by the appropriate taxing authority, based on the technical merits of the position. The second step is a measurement process whereby a tax position that meets the more likely than not recognition threshold is calculated to determine the amount of benefit/expense to recognize in the financial statements. The tax position is measured at the largest amount of benefit/expense that is more likely than not of being realized upon ultimate settlement. 60 A reconciliation of the beginning and ending balances of unrecognized tax benefit is as follows: Year Ended September 30, 2020 2019 Balance at beginning of period $ 26,294 $ 30,256 Additions for position related to current year 111 93 Additions for positions of prior years 29 19 Reduction resulting from the lapse of the applicable statutes of limitations 1,573 4,074 Balance at end of period $ 24,861 $ 26,294 As of September 30, 2020, and 2019, $ 24,861 and $ 26,294 , respectively, of unrecognized tax benefits would result in a decrease in the provision for income tax expense. We anticipate that approximately $ 3,061 in liabilities for unrecognized tax benefits, including accrued interest, primarily from net operating losses on which no tax benefit has been recognized, may be reversed in the next twelve months. The reversal is predominately due to the expiration of the statutes of limitation for unrecognized tax benefits. We had approximately $ 55 and $ 43 accrued for the payment of interest and penalties at September 30, 2020, and 2019, respectively. We recognize interest and penalties related to unrecognized tax benefits as part of the provision for income taxes. The tax years ended September 30, 2017, and forward are subject to federal audit as are tax years prior to September 30, 2017, to the extent of unutilized net operating losses generated in those years. The tax years ended September 30, 2017, and forward are subject to state audits as are tax years prior to September 30, 2017, to the extent of unutilized net operating losses generated in those years. 11. OPERATING SEGMENTS We manage and measure performance of our business in four distinct operating segments: Commercial & Industrial, Communications, Infrastructure Solutions and Residential. These segments are reflective of how the Company’s Chief Operating Decision Maker (“CODM”) reviews operating results for the purposes of allocating resources and assessing performance. The Company’s CODM is its Chief Executive Officer. Transactions between segments, if any, are eliminated in consolidation. 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. Segment information for the years ended September 30, 2020, 2019 and 2018 is as follows: Year Ended September 30, 2020 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 ) Loss (gain) on sale of assets 8 2 35 ( 45 ) — — Income (loss) from operations $ 40,446 $ 30,086 $ 14,568 $ ( 17,994 ) $ ( 17,023 ) $ 50,083 Other data: Depreciation and amortization expense $ 1,351 $ 2,276 $ 6,020 $ 2,768 $ 93 $ 12,508 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 61 Year Ended September 30, 2019 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 Contingent consideration ( 97 ) — ( 277 ) — — ( 374 ) Loss (gain) on sale of assets ( 6 ) ( 17 ) 105 ( 30 ) — 52 Income (loss) from operations $ 24,753 $ 17,927 $ 12,435 $ 2,117 $ ( 15,382 ) $ 41,850 Other data: Depreciation and amortization expense $ 1,513 $ 852 $ 4,528 $ 2,563 $ 101 $ 9,557 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 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 Contingent consideration ( 85 ) — 288 ( 100 ) — 103 Loss (gain) on sale of assets ( 4 ) 8 18 ( 37 ) — ( 15 ) Income (loss) from operations $ 14,223 $ 16,947 $ 3,227 $ 2,749 $ ( 11,192 ) $ 25,954 Other data: Depreciation and amortization expense $ 1,247 $ 637 $ 4,672 $ 2,197 $ 107 $ 8,860 Capital expenditures $ 647 $ 932 $ 735 $ 2,216 $ 33 $ 4,563 Total assets $ 80,528 $ 55,176 $ 109,506 $ 89,729 $ 87,055 $ 421,994 12. STOCKHOLDERS’ EQUITY Equity Incentive Plan The Company’s 2006 Equity Incentive Plan, as amended and restated (the “Equity Incentive Plan”), provides for grants of stock options as well as grants of stock, including restricted stock. Approximately 3.0 million shares of common stock are authorized for issuance under the Equity Incentive Plan, of which approximately 928,669 shares were available for issuance at September 30, 2020. Stock Repurchase Program In 2015, our Board of Directors authorized a stock repurchase program for the purchase from time to time of up to 1.5 million shares of the Company’s common stock, and on May 2, 2019, authorized the repurchase from time to time of up to an additional 1.0 million shares of our common stock under the stock repurchase program. Share purchases are made for cash in open market transactions at prevailing market prices or in privately negotiated transactions or otherwise. The timing and amount of purchases under the program are determined based upon prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. All or part of the repurchases may be implemented under a Rule 10b5-1 trading plan, which allows repurchases under pre-set terms at times when the Company might otherwise be prevented from purchasing under insider trading laws or because of self-imposed blackout periods. The program does not require the Company to purchase any specific number of shares and may be modified, suspended or reinstated at any time at the Company’s discretion and without notice. We repurchased 263,160 shares of our common stock during the year ended September 30, 2020, in open market transactions at an average price of $ 23.29 per share. 62 We repurchased 467,819 shares of our common stock during the year ended September 30, 2019, in open market transactions at an average price of $ 17.34 per share. Treasury Stock 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 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. 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 . A summary of restricted stock awards for the years ended September 30, 2020, 2019, and 2018 is provided in the table below: 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, 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. 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. Director Phantom Stock Units 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 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. Employee Phantom Stock Units An employee phantom stock unit (an “Employee PSU”) is a contractual right to receive one share of the Company’s common stock. 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. 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 63 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, 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 We did not issue stock options during the years ended September 30, 2020, 2019 and 2018. The following table summarizes activity relating to options granted in the years ended September 30, 2013 and 2015. Shares Weighted Average Exercise Price Outstanding, September 30, 2017 45,750 $ 6.42 Options granted — — Exercised 1,500 7.21 Forfeited and canceled — — Outstanding, September 30, 2018 44,250 $ 6.39 Options granted — — Exercised 22,500 6.43 Forfeited and canceled — — Outstanding, September 30, 2019 21,750 $ 6.35 Options granted — — Exercised 5,750 5.95 Forfeited and canceled — — Outstanding, September 30, 2020 16,000 $ 6.49 The following table summarizes options outstanding and exercisable at September 30, 2020: 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. All options expire ten years from the grant date if they are not exercised. Upon exercise of stock options, it is our policy to first issue shares from treasury, then issue new shares. Unexercised stock options expire May 2023, January 2025 and February 2025. 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. The intrinsic value is calculated as the difference between the fair value as of the end of the period and the exercise price of the stock options. 64 13. RELATED-PARTY TRANSACTIONS The Company is a party to a sublease agreement with Tontine Associates, for corporate office space in Greenwich, Connecticut. The lease was renewed in November 2019, with monthly rent of approximately $ 8 . Payments by the Company are at a rate consistent with that paid by Tontine Associates to its landlord. See Note 3, “Con trolling Shareholder” for additional information regarding Tontine. 14. EMPLOYEE BENEFIT PLANS 401(k) Plan In November 1998, we established the IES Holdings, Inc. 401(k) Retirement Savings Plan. All full-time IES employees are eligible to participate on the first day of the month subsequent to completing sixty days of service and attaining age twenty-one. Participants become vested in our matching contributions following three years of service. We also maintain several subsidiary retirement savings plans. We recognized $ 2,326 , $ 2,144 , and $ 1,895 in matching expenses in fiscal years 2020, 2019, and 2018, respectively. Executive Savings Plan Under the Executive Deferred Compensation Plan adopted on July 1, 2004 (the “Executive Savings Plan”), certain employees are permitted to defer a portion (up to 75%) of their base salary and/or bonus for a plan year. The Human Resources and Compensation Committee of the Board of Directors may, in its sole discretion, credit one or more participants with an employer deferral (contribution) in such amount as the Committee may choose (“Employer Contribution”). The Employer Contribution, if any, may be a fixed dollar amount, a fixed percentage of the participant’s compensation, base salary, or bonus, or a “matching” amount with respect to all or part of the participant’s elective deferrals for such plan year, and/or any combination of the foregoing as the Committee may choose. No compensation earned during the years ended September 30, 2020, 2019, or 2018 was deferred under this plan. Post Retirement Benefit Plans 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 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 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 one of our collective bargaining agreements. We do not administer the plan. We do not significantly participate in this plan. As of December 31, 2019, this plan was funded at 83.32 %. 15. FAIR VALUE MEASUREMENTS Fair value is considered the price to sell an asset, or transfer a liability, between market participants on the measurement date. Fair value measurements assume that (1) the asset or liability is exchanged in an orderly manner, (2) the exchange is in the principal market for that asset or liability, and (3) the market participants are independent, knowledgeable, able and willing to transact an exchange. Fair value accounting and reporting establishes a framework for measuring fair value by creating a hierarchy for observable independent market inputs and unobservable market assumptions and expands disclosures about fair value measurements. Considerable judgment is required to interpret the market data used to develop fair value estimates. As such, the estimates presented herein are not necessarily indicative of the amounts that could be realized in a current exchange. The use of different market assumptions and/or estimation methods could have a material effect on the estimated fair value. 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). 65 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) Executive savings plan assets $ 766 $ 766 $ — Executive savings plan liabilities ( 644 ) ( 644 ) — Total $ 122 $ 122 $ — September 30, 2019 Total Fair Value Quoted Prices (Level 1) Significant Unobservable (Level 3) Executive savings plan assets $ 763 $ 763 $ — Executive savings plan liabilities ( 646 ) ( 646 ) — 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, 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). Contingent Consideration Agreement Fair Value at September 30, 2019 $ 11 Issuances — Settlements — Net adjustments to fair value ( 11 ) Fair Value at September 30, 2020 $ — Below is a description of the inputs used to value the assets summarized in the preceding tables: Level 1 — Inputs represent unadjusted quoted prices for identical assets exchanged in active markets. Level 2 — Inputs include directly or indirectly observable inputs other than Level 1 inputs such as quoted prices for similar assets exchanged in active or inactive markets; quoted prices for identical assets exchanged in inactive markets; and other inputs that are considered in fair value determinations of the assets. Level 3 — Inputs include unobservable inputs used in the measurement of assets. Management is required to use its own assumptions regarding unobservable inputs because there is little, if any, market activity in the assets or related observable inputs that can be corroborated at the measurement date. 16. INVENTORY Inventories consist of the following components: September 30, 2020 2019 Raw materials $ 3,232 $ 4,104 Work in process 4,894 6,301 Finished goods 1,186 1,861 Parts and supplies 15,577 9,277 Total inventories $ 24,889 $ 21,543 66 17. GOODWILL AND INTANGIBLE ASSETS Goodwill The following summarizes changes in the carrying value of goodwill by segment for the years ended September 30, 2020 and 2019: Communications Residential Infrastructure Solutions Commercial & Industrial Total Balance at September 30, 2018 $ 2,816 $ 9,979 $ 30,931 $ 6,976 $ 50,702 Divestitures — — ( 119 ) — ( 119 ) Purchase accounting adjustments — 39 — — 39 Balance at September 30, 2019 2,816 10,018 30,812 6,976 50,622 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 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 Intangible assets consist of the following: September 30 , 2020 Estimated Useful Lives (in Years) Gross Carrying Amount Accumulated Amortization Net Trademarks/trade names 5 - 20 $ 7,754 $ ( 1,741 ) $ 6,013 Technical library 20 400 ( 141 ) 259 Customer relationships 6 - 15 46,449 ( 14,900 ) 31,549 Non-competition arrangements 5 40 ( 17 ) 23 Backlog and construction contracts 1 3,383 ( 1,870 ) 1,513 Total $ 58,026 $ ( 18,669 ) $ 39,357 67 September 30, 2019 Estimated Useful Lives (in Years) Gross Carrying Amount Accumulated Amortization Net Trademarks/trade names 5 - 20 $ 5,084 $ ( 1,267 ) $ 3,817 Technical library 20 400 ( 121 ) 279 Customer relationships 6 - 15 33,539 ( 11,051 ) 22,488 Non-competition arrangements 5 40 ( 9 ) 31 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. Our estimated future amortization expense for years ending September 30 is as follows: Year Ending September 30, 2021 $ 6,217 2022 4,634 2023 4,241 2024 3,898 2025 3,571 Thereafter 16,796 Total $ 39,357 18. COMMITMENTS AND CONTINGENCIES Legal Matters From time to time we are a party to various claims, lawsuits and other legal proceedings that arise in the ordinary course of business. We maintain various insurance coverages to minimize financial risk associated with these proceedings. None of these proceedings, separately or in the aggregate, are expected to have a material adverse effect on our financial position, results of operations or cash flows. With respect to all such proceedings, we record reserves when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. We expense routine legal costs related to these proceedings as they are incurred. As of September 30, 2020, we did not have any material pending legal proceedings. Risk Management We retain the risk for workers’ compensation, employer’s liability, automobile liability, construction defects, general liability and employee group health claims, as well as pollution coverage, resulting from uninsured deductibles per accident or occurrence which are generally subject to annual aggregate limits. Our general liability program provides coverage for bodily injury and property damage. In many cases, we insure third parties, including general contractors, as additional insureds under our insurance policies. Losses are accrued based upon our known claims incurred and an estimate of claims incurred but not reported. As a result, many of our claims are effectively self-insured. Many claims against our insurance are in the form of litigation. At September 30, 2020 and 2019, we had $ 6,254 and $ 6,683 , respectively, accrued for self-insurance liabilities. We are also subject to construction defect liabilities, primarily within our Residential segment. As of September 30, 2020 and 2019, we had $ 36 and $ 90 , respectively, reserved for these claims. Because the reserves are based on judgment and estimates, and involve variables that are inherently uncertain, such as the outcome of litigation and an assessment of insurance coverage, there can be no assurance that the ultimate liability will not be higher or lower than such estimates or that the timing of payments will not create liquidity issues for the Company. Some of the underwriters of our casualty insurance program require us to post letters of credit as collateral. This is common in the insurance industry. To date, we have not had a situation where an underwriter has had reasonable cause to effect payment under a letter of credit. At September 30, 2020, $ 5,464 of our outstanding letters of credit was utilized to collateralize our insurance program. 68 Surety As of September 30, 2020, the estimated cost to complete our bonded projects was approximately $ 92,856 . We evaluate our bonding requirements on a regular basis, including the terms offered by our sureties. We believe the bonding capacity presently provided by our current sureties is adequate for our current operations and will be adequate for our operations for the foreseeable future. Posting letters of credit in favor of our sureties reduces the borrowing availability under our revolving credit facility. Other Commitments and Contingencies Some of our customers and vendors require us to post letters of credit, or provide intercompany guarantees, as a means of guaranteeing performance under our contracts and ensuring payment by us to subcontractors and vendors. If our customer has reasonable cause to effect payment under a letter of credit, we would be required to reimburse our creditor for the letter of credit. At September 30, 2020, $ 200 of our outstanding letters of credit were to collateralize our vendors. From time to time, we may enter into firm purchase commitments for materials, such as copper or aluminum wire, which we expect to use in the ordinary course of business. These commitments are typically for terms of less than one year and require us to buy minimum quantities of materials at specific intervals at a fixed price over the term. As of September 30, 2020, we had no such significant commitments. 19. BUSINESS COMBINATIONS 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 Operating right of use asset 331 Intangible assets 18,276 Goodwill 10,117 Current liabilities ( 3,802 ) Operating long-term lease liabilities ( 170 ) Deferred tax liability ( 1,949 ) Net assets acquired $ 28,952 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 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. 69 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. Unaudited Twelve Months Ended September 30, 2020 2019 Revenues $ 1,208,020 $ 1,118,460 Net income attributable to IES Holdings, Inc. $ 43,285 $ 34,967 20. 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. 21. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) Quarterly financial information for the years ended September 30, 2020 and 2019 is summarized as follows: 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. $ 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. $ 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. 70 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.