What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-12-03 compared with 2020-12-07 · 237 added, 238 removed, 842 unchanged (36% of the section changed)

16 unchanged sentences

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, 2021, 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 3, 2021 expressed an unqualified opinion thereon.

Adoption of Accounting Standards Update (ASU) No.

2016-02 Leases

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

2016-02, Leases.

Basis for Opinion

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue recognition for certain fixed-price contracts

Description of the matter As described in Notes 2 and 4 to the consolidated financial statements, the Company generally recognizes revenue for fixed price contracts over time using costs incurred as a percentage of the estimated total costs at completion to determine the extent of progress of performance obligations.

Revenue recognition under this method is subject to judgment as the determination of progress towards completion requires management to prepare estimates of the total project costs to complete.

Auditing management’s estimate of the progress towards completion for certain projects which are larger in size and longer in duration was complex and subjective, requiring considerable judgment to evaluate management’s determination of the forecasted costs to complete, specifically as it relates to labor productivity.

How we addressed the matter in our audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company's cost estimating process, including controls over management's review of cost estimates for significant inputs such as labor.

Our audit procedures included, among others, evaluating the appropriate application of the Company's revenue recognition method;

testing significant assumptions used to develop the estimated costs to complete;

and testing the completeness and accuracy of the underlying data.

To assess the reasonableness of management's estimated costs, we performed audit procedures that included, among others, agreeing the estimates to supporting documentation;

conducting interviews with project personnel;

attending select project review meetings;

and performing sensitivity analyses or retrospective review using historical actual costs and trends.

/s/ ERNST & YOUNG LLP

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In our opinion, IES Holdings, Inc.

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

and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of September 30, 2021, based on the COSO criteria.

As indicated in the accompanying Management’s Report on Internal Controls over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Bayonet Plumbing, Heating & Air-Conditioning, LLC, Edmonson Electric, LLC, K.E.P.

Electric, Inc., and Wedlake Fabricating, Inc., which are included in the 2021 consolidated financial statements of the Company and constituted 11% of total assets, excluding goodwill and intangible assets, as of September 30, 2021 and 12% of consolidated revenues for the year then ended.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Bayonet Plumbing, Heating & Air-Conditioning, LLC, Edmonson Electric, LLC, K.E.P.

Electric, Inc., and Wedlake Fabricating, Inc.

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, 2021 and 2020, 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, 2021, and the related notes and our report dated December 3, 2021 expressed an unqualified opinion thereon.

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Provision for income taxes 16,231 8,740 6,663

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

Net income 68,676 40,554 33,478

Net (income) loss attributable to noncontrolling interest ( 2,018 ) 1,045 ( 272 )

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

Comprehensive income attributable to IES Holdings, Inc.

$ 66,658 $ 41,599 $ 33,206

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

Earnings per share attributable to common stockholders of IES Holdings, Inc.:

Basic $ 3.19 $ 1.96 $ 1.56

Diluted $ 3.15 $ 1.94 $ 1.55

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

Shares used in the computation of earnings per share:

Basic 20,790,307 20,795,892 21,082,012

8 unchanged sentences

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

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

Issuance of share-based compensation — — 501,797 5,942 ( 5,942 ) — —

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

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

Decrease in noncontrolling interest — — — — — 44 44

Net loss attributable to IES Holdings, Inc.

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 — — 501,797 5,942 ( 5,942 ) — —

Issuance of share-based compensation — — 120,197 1,708 ( 1,708 ) — —

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

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

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

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

Net income attributable to IES Holdings, Inc.

1 unchanged sentence

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

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

Issuance of share-based compensation — — 140,660 2,737 ( 2,737 ) — —

Acquisition of treasury stock — — ( 170,524 ) ( 7,538 ) 528 — ( 7,010 )

2 unchanged sentences

Increase in noncontrolling interest — — — — — ( 315 ) ( 315 )

Cumulative effect adjustment from adoption of new accounting standard — — — — — ( 214 ) ( 214 )

Net income attributable to IES Holdings, Inc.

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Finance lease payment ( 648 ) ( 215 ) —

Contingent consideration payment — — ( 240 )

Purchase of noncontrolling interest ( 1,188 ) — —

Distribution to noncontrolling interest ( 311 ) ( 639 ) ( 240 )

1 unchanged sentence

Issuance of shares — 34 —

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

Net cash provided by (used in) financing activities 31,173 ( 8,505 ) ( 40,289 )

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ( 30,472 ) 34,643 ( 7,313 )

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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:

designs and installs integrated electrical and technology systems and provides infrastructure products and services across a variety of end markets, including data centers, residential housing and commercial and industrial facilities.

Our operations are organized into four principal business segments, based upon the nature of our 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.

• Residential – Regional provider of electrical installation services for single-family housing and multi-family apartment complexes, as well as heating, ventilation and air conditioning (HVAC) and plumbing installation services in certain markets.

• 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.

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Asset Impairment

During the fiscal year ended September 30, 2021, the Company recorded no asset impairment charges.

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

During the fiscal year ended September 30, 2019, the Company recorded no asset impairment charges.

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

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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.

Estimates are primarily used in our revenue recognition of construction in progress, fair value assumptions in accounting for business combinations and analyzing goodwill, intangible assets and long-lived asset impairments and adjustments, allowance for credit losses, 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

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Revenue Recognition

Revenue is generally recognized from a contract with a customer when:

Revenue is 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.

We recognize revenue on project contracts over time 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.

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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.

We do not recognize revenue or margin based on change orders or claims if it is probable such revenue will be reversed.

The amount of revenue associated with unapproved change orders and claims was immaterial for the years ended September 30, 2021, 2020 and 2019.

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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.

Certain divisions in the Residential and Infrastructure Solutions segments recognize revenue as of a point-in-time at the completion of the contract ("completed contract") 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.

Accounts Receivable and Allowance for Credit Losses

As described below under “Accounting Standards Recently Adopted”, we adopted the new accounting standard for measuring credit losses effective October 1, 2020.

We record accounts receivable for all amounts billed and not collected and amounts for which we have an unconditional right to bill our customers.

Additionally, we provide an allowance for credit losses based on historical company-specific uncollectable accounts, as well as current and expected market conditions.

From time to time, we establish additional allowance for credit losses for financial asset balances with specific customers where collectability has been determined to be improbable based on specific facts and circumstances.

Such allowances are established 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.

Our allowance for credit losses at September 30, 2021 and 2020 was $ 2,387 and $ 2,613 , respectively.

Comprehensive Income (Loss)

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If actual future taxable income is different from these estimates, our results could be affected.

We record reserves for income taxes related to certain tax positions when management considers it more likely than not that additional taxes may be due in excess of amounts reflected on income tax returns filed.

When recording these reserves, we assume that taxing authorities have full knowledge of the position and all relevant facts.

We continually review exposure to additional tax obligations, and as further information is known or events occur, changes in tax reserves may be recorded.

To the extent interest and penalties may be assessed by taxing authorities on any underpayment of income tax, such amounts have been accrued and included in the provision for income taxes.

Risk Management

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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.

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.

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.

The undiscounted ultimate losses of our workers’ compensation, auto and general liability insurance reserves at September 30, 2021 and 2020, were $ 3,266 and $ 3,886 , respectively.

Based on historical payment patterns, we expect payments of undiscounted ultimate losses to be made as follows:

Year Ended September 30:

Year Ending September 30:

Thereafter 601

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The present value of all insurance reserves for the workers’ compensation, auto and general liability recorded at September 30, 2021 and 2020 was $ 3,234 and $ 3,832 , 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.

Our undiscounted reserves for employee group health claims at September 30, 2021 and 2020 were $ 2,553 and $ 2,422 , respectively, and are anticipated to be resolved within the year ending September 30, 2022.

We had letters of credit totaling $ 4,327 outstanding at September 30, 2021 to collateralize certain of our high deductible insurance obligations.

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

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

For the years ended September 30, 2021 and 2019, no indicators of impairments were identified, and no impairment charges were recorded.

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.

Risk Concentration

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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.

No single customer accounted for more than 10% of our consolidated revenues or accounts receivable for the years ended September 30, 2021, 2020 and 2019.

Fair Value of Financial Instruments

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The carrying value of our debt approximates fair value, as debt incurs interest at a variable rate.

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

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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.

In connection with our acquisitions of Edmonson Electric, LLC ("Edmonson") and Bayonet Plumbing, Heating & Air-Conditioning, LLC ("Bayonet") in fiscal 2021, NEXT Electric, LLC ("NEXT") in fiscal 2017, and STR Mechanical, LLC ("STR") in fiscal 2016, we acquired an 80 percent interest in each of the entities, with the remaining 20 percent interest in each such entity being retained by the respective 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.

Under the terms of each entity’s operating agreement, after five years from the date of the acquisition, we may elect to purchase, or the third party seller may require us to purchase, part or all of the remaining 20 percent interest in the applicable entity.

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.

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

During the year ended September 30, 2021, we acquired the noncontrolling interest in STR for $ 1,188 .

If all of the noncontrolling interests remaining outstanding at September 30, 2021 had been redeemable at that date, the redemption amount would have been $ 18,262 .

For the year ended September 30, 2021, we recorded a decrease to Retained Earnings of $ 315 to increase the carrying amount of noncontrolling interest in NEXT and STR to their redemption amounts.

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 to its redemption amount.

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

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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.

Costs associated with ROU 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.

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Accounting Standards Not Yet Adopted

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

In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update No.

2019-12, “Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.” This standard simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in Topic 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

The standard also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.

This update is effective for fiscal years beginning after December 15, 2020 and for interim periods within that year.

Early adoption is permitted.

We adopted this standard as of October 1, 2021, and do not expect it to have a material impact on our Consolidated Financial Statements.

Accounting Standards Recently Adopted

In June 2016, 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.

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

We adopted this standard on October 1, 2020, using a modified retrospective transition method through a cumulative-effect adjustment to beginning retained earnings in the period of adoption.

As a result, we recorded an increase in the Allowance for Credit Losses of $ 284 , an increase to Deferred Tax Assets of $ 70 , and a decrease to Retained Earnings of $ 214 .

ASU 2016-13 requires the recognition of expected credit losses on financial assets measured at amortized cost basis.

In calculating our expected credit losses, we considered trade receivables, retainage, and costs and estimated earnings in excess of billings, all of which constitute a homogenous portfolio, and therefore, to measure the expected credit loss, they have been grouped together.

We have elected to calculate an expected credit loss based on loss rates from historical data.

Each segment groups financial assets with similar risk characteristics and collectively assesses the expected credit losses.

If an individual asset experiences credit deterioration to the extent the credit risk is no longer characteristic of the other assets in the group, it will be analyzed individually.

The loss rates for our portfolios include our history of credit loss expense, the aging of our receivables, our expectation of payments and adjustment for forward-looking factors specific to the macroeconomic trends in the U.S.

construction market.

Activity in our allowance for credit losses consists of the following:

Year Ended September 30,

Balance at beginning of period $ 2,613 $ 1,184

Additions to costs and expenses, inclusive of ASU 2016-13 adoption adjustment 1,216 1,864

Deductions for uncollectible receivables written off, net of recoveries ( 1,442 ) ( 435 )

Balance at end of period $ 2,387 $ 2,613

Other than trade receivables due in one year or less, we do not have any other financial assets that are past due or are on non-accrual status.

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

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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

This guidance is effective for fiscal years beginning after December 15, 2019 and for interim periods within those fiscal years.

We adopted this standard on October 1, 2020, with no impact on our Consolidated Financial Statements.

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

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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.

("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 as of December 1, 2021, based on Form 4 filed by Tontine with the SEC on November 18, 2021.

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

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

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

state income tax purposes.

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

The NOL Rights Plan 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.

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

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.

The Company previously had in place a tax benefit protection plan (the “NOL Rights Plan”), 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.

However, on May 7, 2021, we amended the NOL Rights Plan, accelerating the expiration of the plan from December 31, 2021 to May 21, 2021.

As a result of this amendment, the NOL Rights Plan has now expired.

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.

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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”).

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.

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

Changes in job

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

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

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

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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.

extent incentives reflected in transaction price are not earned, there could be reductions in, or reversals of, previously recognized revenue.

Disaggregation of Revenue

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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:

The following table reconciles the components of the basic and diluted earnings per share for the years ended September 30, 2021, 2020 and 2019:

Year Ended September 30,

2021 2020 2019

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

Net income attributable to IES Holdings, Inc.

$ 66,658 $ 41,599 $ 33,206

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

Increase in noncontrolling interest ( 315 ) ( 194 ) —

Net income attributable to restricted shareholders of IES Holdings, Inc.

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

( 56 ) ( 575 ) ( 256 )

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

$ 66,287 $ 40,830 $ 32,950

Weighted average common shares outstanding — basic 20,790,307 20,795,892 21,082,012

1 unchanged sentence

Weighted average common and common equivalent shares outstanding — diluted 21,086,432 21,092,410 21,315,245

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

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

Basic $ 3.19 $ 1.96 $ 1.56

Diluted $ 3.15 $ 1.94 $ 1.55

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;

For the years ended September 30, 2021, 2020, and 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

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.

DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS

Activity in our allowance for doubtful accounts on accounts receivable consists of the following:

Year Ended September 30,

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:

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Securities and equity investments 10 —

Right of use asset - finance leases 3,927 1,600

Other 2,175 3,414

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Total debt $ 39,746 $ 217

(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.

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

At September 30, 2021, we had $ 40,339 of outstanding borrowings, $ 4,527 in outstanding letters of credit and $ 55,134 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.

Following the amendment discussed below of our Prior Credit Agreement (as defined below) on December 2, 2021, all amounts outstanding under our revolving credit facility are due and payable in September 2026, upon expiration of our revolving credit facility, and all amounts described as available are available without triggering our financial covenants under the Amended Credit Agreement (as defined below).

The interest rate on outstanding borrowings under our revolving credit facility was 1.38 % at September 30, 2021.

For the years ended September 30, 2021, 2020 and 2019, we incurred interest expense of $ 962 , $ 777 and $ 1,857 , respectively.

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;

• 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.

We maintain a revolving credit facility pursuant to an agreement with Wells Fargo (as amended, the "Prior Credit Agreement").

On December 2, 2021, we amended the Prior Credit Agreement (the "Ninth Amendment" and the Prior Credit Agreement as so amended, the "Amended Credit Agreement") to, among other things, increase the size of the facility from $ 100,000 to $ 125,000 , reduce our required minimum Liquidity (as defined in the Amended Credit Agreement) from $ 20,000 to $ 12,500 , and extend the maturity date from September 30, 2024 to September 30, 2026.

Please see Note 20 - "Subsequent Events" for further information about the terms of the Ninth Amendment.

Terms of the Prior Credit Agreement

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

As of September 30, 2021, we were in compliance with the financial covenants in effect as of that date under the Prior Credit Agreement, requiring that we maintain:

• a Fixed Charge Coverage Ratio (as defined in the Prior Credit Agreement), measured quarterly on a trailing four-quarter basis at the end of each quarter, of at least 1.1 to 1.0;

• minimum Liquidity of at least twenty percent (20%) of the Maximum Revolver Amount (as defined in the Prior 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 Prior Credit Agreement).

At September 30, 2021, our Liquidity was $ 78,239 , our Excess Availability was $ 55,134 (or greater than 50% of minimum Liquidity), and our Fixed Charge Coverage Ratio was 12.0 :1.0.

There was no change to the Fixed Charge Coverage Ratio covenant under the Ninth Amendment.

The Ninth Amendment reduced the minimum Liquidity requirement from twenty percent (20%) to ten percent (10%) of the Maximum Revolver Amount, or $12,500.

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

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

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

September 30 , 2020

Year Ended September 30,

Operating lease cost $ 13,405 $ 12,910

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

September 30 , 2020

Year Ended September 30,

Operating cash flows used for operating leases $ 15,011 $ 12,934

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Right-of-use assets obtained in exchange for new finance lease liabilities 2,962 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

Year Ended September 30,

Weighted-average remaining lease term - operating leases 5.0 years 4.3 years

Weighted-average remaining lease term - finance leases 4.2 years 4.4 years

Weighted-average discount rate - operating leases 3.7 % 3.9 %

Weighted-average discount rate - finance leases 4.3 % 5.1 %

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

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

Rent expense was $ 14,980 , $ 14,073 and $ 10,553 for the years ended September 30, 2021, 2020 and 2019, respectively.

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2021 2020 2019

Provision at the statutory rate (1)

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

Provision at the federal statutory rate $ 17,830 $ 10,352 $ 8,430

Increase resulting from:

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State income taxes, net of federal deduction 3,876 2,662 2,009

Change in valuation allowance — — 1,761

Rate change — — 31,333

Other — 261 —

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Component 2 goodwill utilization ( 2,241 ) ( 1,787 ) ( 144 )

State deferred true up — — ( 1,387 )

Other ( 161 ) — ( 303 )

Total provision for income taxes $ 16,231 $ 8,740 $ 6,663

(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.

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Deferred income tax assets:

Allowance for doubtful accounts $ 592 $ 245

Allowance for credit losses $ 541 $ 592

Accrued expenses 17,134 14,619

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As of September 30, 2021, we had available approximately $ 61,396 state net tax operating loss carry forwards, including $ 5,398 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.

The significant majority of these carry forwards, which may provide future tax benefits, will not begin to expire until 2026.

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.

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

Further, any future reduction in the federal statutory tax rate could result in a charge to reduce the book value of the net deferred tax assets recorded on our Consolidated Balance 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 $ 3,869 .

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We manage and measure performance of our business in four distinct operating segments:

Commercial & Industrial, Communications, Infrastructure Solutions and Residential.

Communications, Residential, Infrastructure Solutions and Commercial & Industrial.

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.

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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.

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

Segment information for the years ended September 30, 2021, 2020 and 2019 is as follows:

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Selling, general and administrative 41,373 92,761 23,966 28,172 15,979 202,251

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

Contingent consideration — 211 — — — 211

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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 )

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Approximately 3.0 million shares of common stock are authorized for issuance under the Equity Incentive Plan, of which approximately 817,452 shares were available for issuance at September 30, 2021.

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 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.

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.

In 2015, our Board 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, our Board authorized the repurchase from time to time of an additional 1.0 million

shares of the Company's 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.

All or part of the repurchases may be implemented under a Rule 10b5-1 trading plan, which allows repurchases under predetermined 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.

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We also repurchased 124,205 shares of common stock on the open market pursuant to our stock repurchase program, and 13,996 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, 2021, we issued 380 unrestricted shares of common stock from treasury to members of our Board of Directors as part of their overall compensation.

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

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

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

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

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Unvested at end of year 16,757 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.

The fair value of shares vesting during the years ended September 30, 2021, 2020, and 2019 was $ 308 , $ 2,984 and zero , respectively.

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

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As of September 30, 2020, the Company had outstanding Employee PSUs, which, subject to the achievement of certain performance metrics, could have resulted in the issuance of 204,501 shares of common stock.

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

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

During the year ended September 30, 2021, 13,402 Employee PSUs were forfeited and 71,420 vested, and the Company granted additional Employee PSUs, which, subject to the achievement of certain performance metrics, could result in the issuance of 163,264 shares of common stock.

As of September 30, 2021, a maximum of 282,942 shares of common stock may be issued under outstanding Employee PSUs.

During the year ended September 30, 2021, 2020, and 2019 we recognized compensation expense of $ 2,986 , $ 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.

The vesting of these awards is subject to either the achievement of specified levels of cumulative net income before taxes (a performance condition) or specified stock price levels (a market condition) and continued performance of services, or based on continued performance of services through the vesting date alone.

For stock awards where vesting depends on achievement of a performance condition, we record expense when we conclude it is probable that the performance condition will be met.

At September 30, 2021, it is deemed probable that the portion of the awards that vest based on performance conditions will vest.

RELATED-PARTY TRANSACTIONS

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No compensation earned during the years ended September 30, 2021, 2020, or 2019 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

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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.

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).

Financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2021 and 2020, are summarized in the following tables by the type of inputs applicable to the fair value measurements:

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Executive savings plan liabilities ( 806 ) ( 806 ) —

Contingent consideration liability ( 4,181 ) — ( 4,181 )

Total $ ( 4,050 ) $ 131 $ ( 4,181 )

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Executive savings plan liabilities ( 644 ) ( 644 ) —

Contingent consideration liability ( 11 ) — ( 11 )

Total $ 122 $ 122 $ —

In fiscal year 2021, we entered into a contingent consideration arrangement related to the acquisition of Bayonet.

At September 30, 2021, we estimated the fair value of this contingent consideration liability at $ 4,181 .

The table below presents the fair value of this obligation, which used significant unobservable inputs (Level 3).

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

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Fair Value at September 30, 2020 $ —

Acquisitions ( 4,074 )

Net adjustments to fair value ( 107 )

Fair Value at September 30, 2021 $ ( 4,181 )

Below is a description of the inputs used to value the assets summarized in the preceding tables:

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

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

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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.

Acquisitions (Note 19) — 35,151 3,481 — 38,632

Balance at September 30, 2021 $ 2,816 $ 51,370 $ 38,209 $ — $ 92,395

Based on the results of our annual goodwill impairment assessment at September 30, 2021, we concluded the fair value of each of our reporting units exceeded its book value, and therefore we recorded no impairment charges for the year ended September 30, 2021.

In 2020, our Commercial & Industrial reporting unit experienced operating losses.

Our performance was affected by the 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 as of September 30, 2020 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.

Intangible Assets

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Year Ending September 30,

2022 $ 13,683

Thereafter 21,573

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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.

On June 22, 2021, the United States Department of Labor Wage and Hour Division (the “DOL”) notified IES Residential, Inc.

(“IESR”), our subsidiary, that the DOL had commenced an administrative investigation of IESR’s compliance with laws regulating employee wage payment.

The inquiry concerned overtime calculations and record keeping with respect to certain Arizona employees who are paid on a piece rate basis.

In response to certain DOL requests, IESR produced documents and made employees available for interviews.

On November 10, 2021, the DOL indicated that it believes IESR piece rate employees did not record all hours worked, and therefore IESR was not in compliance with the Fair Labor Standards Act.

We dispute this claim, and plan to vigorously defend ourselves.

To date, the Company has not established a reserve with respect to this matter, as we believe the likelihood of our responsibility for damages is not probable and a potential range of exposure is not reasonably estimable.

Risk Management

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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.

In many cases, we insure third parties, including general contractors, as additional insured parties under our insurance policies.

Losses are accrued based upon our known claims incurred and an estimate of claims incurred but not reported.

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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.

As of September 30, 2021 and 2020, we had $ 8 and $ 36 , 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.

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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.

At September 30, 2021 and 2020, $ 4,327 and $ 5,464 , respectively, of our outstanding letters of credit was utilized to collateralize our insurance program.

As of September 30, 2021, the estimated cost to complete our bonded projects was approximately $ 80,285 .

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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.

As of September 30, 2021, we had commitments of $ 12,292 outstanding under agreements to purchase copper wire and other materials over the next 12 months in the ordinary course of business.

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 completed four acquisitions during the year ended September 30, 2021 for a total aggregate cash consideration of $ 92,463 .

• Edmonson Electric, LLC ("Edmonson") - On May 18, 2021, we acquired an 80% ownership interest in Edmonson, a Land O'Lakes, Florida-based provider of residential electric, low voltage, and heating, ventilation and air conditioning (HVAC) installation services.

The acquisition of Edmonson expanded our presence in the Florida market and added electrical to our Florida service offerings.

Edmonson is part of our Residential segment and continues to operate under the Edmonson name.

• Bayonet Plumbing, Heating & Air-Conditioning, LLC ("Bayonet") - On December 21, 2020, we acquired an 80% ownership interest in Bayonet, a Hudson, Florida-based provider of residential HVAC and plumbing installation and maintenance services.

The acquisition of Bayonet allowed us to expand into the Florida market, while adding plumbing and HVAC to our service offerings.

Bayonet is part of our Residential segment and continues to operate under the Bayonet name.

• Wedlake Fabricating, Inc.

(“Wedlake”) - On November 19, 2020, we acquired Wedlake, a Tulsa, Oklahoma-based manufacturer of custom generator enclosures that are primarily used by data centers and large commercial and industrial facilities.

The acquisition of Wedlake expanded our generator enclosures business and our geographic footprint.

Wedlake is part of our Infrastructure Solutions segment and continues to operate under the Wedlake name.

Electric, Inc.

(“KEP”) - On November 5, 2020, we acquired KEP, a Batavia, Ohio-based electrical contractor specializing in the design and installation of electrical systems for single-family housing and multi-family developments.

The acquisition of KEP, which has operations in Ohio and Kentucky, advanced the expansion of our Residential service offerings into the Midwest.

KEP is part of our Residential segment and continues to operate under the KEP name.

Total aggregate cash consideration for these acquisitions was $ 92,463 , of which $ 10,916 was paid into escrow pending discharge of the acquired companies' indebtedness under the Paycheck Protection Program ("PPP") established by the Coronavirus Aid, Relief, and Economic Security Act and implemented by the U.S.

Small Business Administration.

Loans made under the PPP are eligible to be forgiven if certain criteria are met.

As of September 30, 2021, all PPP loans were forgiven and escrow payments have been distributed to the respective sellers.

In addition to the cash consideration, the purchase price also includes contingent consideration with respect to the acquisition of Bayonet of up to $ 4,500 due in December 2023.

Amounts to be paid are contingent on earnings achieved over a three year period, and will accrue interest on the $ 4,500 at a rate of 3%, to be paid quarterly.

This contingent liability was valued at $ 4,074 as of the date of the acquisition.

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:

The valuations derived from the estimated fair value assessments and assumptions used by management are preliminary pending finalization of certain tangible and intangible asset valuations and assessment of deferred taxes.

While management believes the preliminary estimates and assumptions underlying the valuations are reasonable, different estimates and assumptions could result in different values being assigned to individual assets acquired and liabilities assumed.

This may result

in further adjustments to the preliminary amounts recorded.

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

Current assets $ 36,348

Property and equipment 11,965

Operating right of use asset 331

Intangible assets 59,648

Goodwill 38,632

Operating right of use assets 837

Current liabilities ( 29,149 )

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Deferred tax liability ( 3,282 )

Noncontrolling interest ( 21,813 )

Net assets acquired $ 92,463

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.

In connection with these acquisitions, the preliminary estimate of acquired goodwill is $ 38,632 of which $ 20,741 is tax deductible.

The intangible assets acquired primarily consisted of Customer Relationships and Trade Names with a total weighted-average amortization period of 6.4 years.

These acquisitions contributed $ 179,628 in revenue and $ 6,508 in operating income during the year ended September 30, 2021.

We completed two acquisitions in fiscal 2020 for total aggregate cash consideration of $ 28,952 .

In February 2020, we acquired both Aerial Lighting & Electric, Inc.

("Aerial"), a Naugatuck, Connecticut-based electrical contractor specializing in the design and installation of electrical systems for multi-family developments, and Plant Power and Control Systems, L.L.C.

("PPCS"), a Birmingham, Alabama-based manufacturer and installer of custom engineered power distribution equipment.

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

Unaudited Pro Forma Information

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SUBSEQUENT EVENTS

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

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

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

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

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

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

QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

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.

On December 2, 2021, we entered into the Ninth Amendment of our Prior Credit Agreement with Wells Fargo.

The Ninth Amendment, among other things, increases the maximum revolver amount from $ 100,000 to $ 125,000 , reduces our required minimum Liquidity from $ 20,000 to $ 12,500 , and extends the maturity date from September 30, 2024 to September 30, 2026.

The Ninth Amendment also addresses the banking industry's transition away from the London Interbank Offered Rate ("LIBOR") as a benchmark interest rate by replacing LIBOR with the Secured Overnight Financing Rate ("SOFR") as the benchmark for establishing the interest rate charged on our borrowings.

Under the terms of the Ninth Amendment, amounts outstanding bear interest at a per annum rate equal to a Daily Three Month SOFR, plus an interest rate margin, which is determined quarterly, based on the following thresholds:

Interest Rate Margin

If Liquidity is less than 35% of the Maximum Revolver Amount at any time during the period

2.00 percentage points

If Liquidity is greater than or equal to 35% of the Maximum Revolver Amount at all times during the period and less than 50% of the Maximum Revolver Amount at any time during the period

1.75 percentage points

If Liquidity is greater than or equal to 50% of the Maximum Revolver Amount at all times during the period

1.50 percentage points

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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What changed 10-K

Item 8. Financial Statements and Supplementary Data