HOUSTON, Aug. 13 /PRNewswire-FirstCall/ -- Integrated Electrical Services, Inc. today announced net income of $1.2 million and diluted earnings per share of $0.08 for the fiscal 2007 third quarter ended June 30, 2007. The company also announced that it has commenced restructuring its operations into three major lines of business: Industrial, Commercial and Residential from its current decentralized structure. This operational restructuring is another step in the company's long-term strategic plan to reduce its cost structure, reposition its business to better serve its customers, strengthen financial controls and, as a result, position the company to implement a market-based growth strategy in the future.
Michael J. Caliel, IES' President and Chief Executive Officer, stated, "We are pleased to report improved operating results and a profitable third quarter, one in which we were able to drive gross margin higher than second quarter and year ago levels, despite softness in our residential segment and challenging weather conditions in some of our key markets. With our transformation program well underway, we are seeing improvement in our core processes of estimating, screening new work and project management, all of which contributed to a better gross margin in the quarter. Also, our cash management program continues to produce solid results.
"Regarding our operational restructuring, we are building upon the work already underway as a part of our transformation program and are now in a position to proceed with the next phase and address the more structural aspects of the company. We are taking decisive steps to move our cost structure more in line with the industry and the market, as well as strengthen our financial controls across the business. With this new business alignment, we are accelerating our efforts to improve efficiency and productivity while continuing to deliver superior services to our customers."
OPERATIONAL RESTRUCTURING INITIATIVE
The operational restructuring plan will consolidate administrative support functions, eliminating redundant functions currently performed at the company's 27 business units. IES estimates it will achieve a 15-20% reduction in non-operational field resource compensation costs through this restructuring along with improved operational efficiencies. The company expects to incur pre-tax restructuring charges, including severance benefits and facility consolidations and closings, of approximately $10 million over the course of the restructuring process, which will be implemented over approximately 18 months.
"We are carrying out this initiative in a manner that assures our ability to compete and provide high quality service to our customers, while intensifying our focus on building and retaining a first-rate skilled workforce. This is an important step in building the foundation for a more competitive business. Most importantly, these changes will enable our field operations to focus even more on our customers' needs. We look forward to reporting on our progress each quarter as we implement this plan," added Caliel.
FINANCIAL RESULTS OVERVIEW
The company emerged from its financial reorganization on May 12, 2006, therefore, periods ended April 30, 2006 and prior are referred to as Predecessor and periods subsequent to April 30, 2006 are referred to as Successor.
FISCAL THIRD QUARTER RESULTS
Revenues for the third quarter of fiscal 2007 were $222.6 million with gross profit of $38.3 million, a 17.2 percent gross profit margin, compared to revenues of $241.1 million with gross profit of $36.0 million, a 14.9 percent gross profit margin, in the third quarter of fiscal 2006. Operating cash flow for the third quarter of fiscal 2007 was $16.4 million compared to a usage of $2.6 million in the third quarter of fiscal 2006.
Net income from continuing operations for the fiscal 2007 third quarter was $1.0 million, or $0.07 per diluted share, compared to net income from continuing operations of $46.8 million, or $3.04 per diluted share, for the fiscal 2006 third quarter. Included in the fiscal 2006 third quarter results were reorganization items totaling a net gain of approximately $40.3 million, or $2.62 per diluted share. Net income, which includes discontinued operations, for the fiscal 2007 third quarter was $1.2 million, or $0.08 per diluted share, compared to $36.8 million, or $2.39 per diluted share, for the comparable period a year ago including the net gain from reorganization items.
Selling, general and administrative ("SG&A") expenses for the fiscal third quarter of 2007 were $34.1 million, or 15.3 percent of revenues, compared to SG&A expenses of $31.4 million, or 13.0 percent of revenues, in the fiscal 2006 third quarter primarily due to $1.8 million related to the company's ongoing investment in its transformation program to improve overall operational performance.
FISCAL 2007 YEAR TO DATE
Revenues for the first nine months of fiscal 2007 were $666.0 million with gross profit of $112.0 million, a 16.8 percent gross profit margin, compared to revenues of $683.8 million with gross profit of $104.2 million, a 15.2 percent gross profit margin, in the comparable period of fiscal 2006. SG&A expenses for the first nine months of fiscal 2007 were $104.8 million, or 15.7 percent of revenues, compared to SG&A expenses of $91.2 million, or 13.3 percent of revenues, in the first nine months of fiscal 2006. SG&A expenses increased compared to the prior year due to the following:
* $6.0 million related to the company's ongoing investment in its
transformation program to improve overall operational performance
* $2.5 million of amortization costs as a result of fresh start
accounting implemented on April 30, 2006
* $2.0 million of incentives to business unit management resulting from
improved cash flow of $55.6 million over the prior year
* Non-cash compensation expense of $1.2 million related to restricted
stock
Net income from continuing operations for the first nine months of fiscal 2007 was $0.5 million, or $0.04 per diluted share, compared to net income from continuing operations of $23.7 million, or $1.54 per diluted share, for the comparable period in fiscal 2006. Included in the fiscal 2006 nine month results are reorganization items totaling a net gain of approximately $28.2 million, or $1.83 per diluted share. Net loss, which includes discontinued operations, for the first nine months of fiscal 2007 was $0.3 million, or $0.02 per share, compared to net income of $5.9 million, or $0.38 per diluted share, for the comparable period a year ago including reorganization items.
SEGMENT DATA
Segment revenues for Commercial / Industrial for the third fiscal quarter of 2007 were $136.7 million at a gross margin of 17.0 percent compared to revenues of $138.1 million at a gross margin of 13.9 percent in the fiscal 2006 third quarter. Residential revenues in the third quarter were $85.9 million at a gross margin of 17.5 percent compared to $103.0 million at a gross margin of 16.3 percent in the comparable period a year ago.
Segment revenues for Commercial / Industrial for the first nine months of fiscal 2007 were $406.6 million at a gross margin of 16.3 percent compared to revenues of $397.9 million at a gross margin of 13.4 percent in the comparable period of fiscal 2006. Residential revenues for the first nine months of fiscal 2007 were $259.4 million at a gross margin of 17.6 percent compared to $285.9 million at a gross margin of 17.7 percent in the comparable period a year ago.
BACKLOG
Backlog related to continuing operations was $329.5 million as of June 30, 2007 compared to $352.8 million as of March 31, 2007 and to $330.8 million as of June 30, 2006. The overall quality of backlog continues to improve, reflecting the company's ongoing selectivity regarding new business.
DEBT AND LIQUIDITY
Total debt was $45.8 million as of June 30, 2007. As a result of the company's focus on cash management, unrestricted cash and cash equivalents continued to improve, totaling $68.9 million as of June 30, 2007 compared to $10.9 million as of June 30, 2006.
EBITDA RECONCILIATION
The company has disclosed in this press release EBITDA (earnings before interest, taxes, depreciation and amortization) and EBITDAR (earnings before interest, taxes, depreciation, amortization and restructuring expenses) amounts that are non-GAAP financial measures. EBITDA and EBITDAR are also measures that are used in determining compliance with the company's senior secured credit facility. Therefore, management believes EBITDA and EBITDAR provide useful information to investors as a measure of comparability to peer companies. However, these calculations may vary from company to company, so IES' computations may not be comparable to other companies. In addition, IES has certain assets established as part of applying fresh-start accounting that will be amortized in the future. A reconciliation of EBITDA and EBITDAR to net income is found in the table below. For further details on the company's financial results, please refer to the company's quarterly report on Form 10-Q, to be filed on August 13, 2007.
Successor Successor Predecessor
(in millions) Three Months Two Months One Month
Ended Ended Ended
June 30, June 30, April 30,
2007 2006 2006
Continuing Operations:
Net Income $1.0 $1.0 $45.7
Interest Expense 1.8 1.5 1.5
Provision (Benefit) for
Income Taxes 1.7 0.0 (4.8)
Depreciation and Amortization 2.6 1.4 0.5
EBITDA for Continuing Operations $7.0 $3.9 $42.9
EBITDA for Discontinued
Operations $--- $(3.0) $(2.2)
Total EBITDA $7.0 $0.9 $40.7
Restructuring Expenses $--- $0.4 $(40.7)
Total EBITDAR* $7.0 $1.3 $---
Successor Successor Predecessor
Nine Months Two Months Seven Months
(in millions) Ended Ended Ended
June 30, June 30, April 30,
2007 2006 2006
Continuing Operations:
Net Income $0.5 $1.0 $22.7
Interest Expense 4.9 1.5 14.9
Provision (Benefit) for
Income Taxes 2.1 0.0 0.8
Depreciation and Amortization 7.5 1.4 4.0
EBITDA for Continuing Operations $15.0 $3.9 $42.4
EBITDA for Discontinued
Operations $(2.5) $(3.0) $(14.8)
Total EBITDA $12.5 $0.9 $27.6
Restructuring Expenses $--- $0.4 $(28.6)
Total EBITDAR* $12.5 $1.3 $(1.0)
* Earnings before Interest, Taxes, Depreciation, Amortization, and
Restructuring Expenses
CONFERENCE CALL
Integrated Electrical Services has scheduled a conference call for Tuesday, August 14, 2007, at 9:30 a.m. eastern time. To participate in the conference call, dial (303) 205-0055 at least ten minutes before the call begins and ask for the Integrated Electrical Services conference call. A replay of the call will be available approximately two hours after the live broadcast ends and will be accessible until August 30, 2007. To access the replay, dial (303) 590-3000 using a pass code of due 11094726#.
Investors, analysts and the general public will also have the opportunity to listen to the conference call over the Internet by visiting http://www.ies-co.com/. To listen to the live call on the web, please visit the company's web site at least fifteen minutes before the call begins to register, download and install any necessary audio software. For those who cannot listen to the live web cast, an archive will be available shortly after the call.
Integrated Electrical Services, Inc. is a national provider of electrical solutions to the commercial and industrial, residential and service markets. The company offers electrical system design and installation, contract maintenance and service to large and small customers, including general contractors, developers and corporations of all sizes.
Certain statements in this release including statements regarding the restructuring plan and total estimated charges and cost reductions associated with this plan are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, all of which are based upon various estimates and assumptions that the company believes to be reasonable as of the date hereof. These statements involve risks and uncertainties that could cause the company's actual future outcomes to differ materially from those set forth in such statements. Such risks and uncertainties include, but are not limited to the company's ability to meet financial covenants; increased costs of surety bonds required for certain projects; the inherent uncertainties relating to estimating future operating results and the company's ability to generate sales, or operating income; potential difficulty in addressing material weaknesses in the inventory and control environment at one business unit that has been identified by the company and its independent auditors; fluctuations in operating results because of downturns in levels of construction particularly residential construction; inaccurate estimates used in entering into and executing contracts; inaccuracies in estimating revenue and percentage of completion on contracts; difficulty in managing the operation of existing entities; the high level of competition in the construction industry both from third parties and ex-employees; increases in costs or limitations on availability of labor, especially qualified electricians, increase in costs of commodities used in our industry of steel, copper and gasoline; weather related delays; accidents resulting from the numerous physical hazards associated with the company's work; loss of key personnel particularly presidents of business units; litigation risks and uncertainties, including in connection with the ongoing SEC investigation; unexpected liabilities or losses associated with warranties; difficulties in integrating new types of work into existing subsidiaries; inability of the company to incorporate new accounting, control and operating procedures and centralization of back office functions; the loss of productivity, either at the corporate office or operating level resulting from changed procedures or management personnel; disruptions or inability to effectively manage consolidations.
You should understand that the foregoing, as well as other risk factors discussed in this document, in IES' annual report on Form 10-K for the year ended September 30, 2006 and in IES' quarterly report on Form 10-Q for the quarter ended March 31, 2007, could cause future outcomes to differ materially from those expressed in such forward-looking statements. IES undertakes no obligation to publicly update or revise information concerning the company's restructuring efforts, borrowing availability, or its cash position or any forward-looking statements to reflect events or circumstances that may arise after the date of this release. Forward-looking statements are provided in this press release pursuant to the safe harbor established under the private Securities Litigation Reform Act of 1995 and should be evaluated in the context of the estimates, assumptions, uncertainties, and risks described herein.
General information about us can be found at http://www.ies-co.com/ under "Investor Relations." Our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, as well as any amendments to those reports, are available free of charge through our website as soon as reasonably practicable after we file them with, or furnish them to, the SEC.
- Tables to follow -
INTEGRATED ELECTRICAL SERVICES, INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Successor Successor Predecessor
Three Months Two Months One Month
Ended Ended Ended
June 30, June 30, April 30,
2007 2006 2006
(Unaudited) (Unaudited) (Unaudited)
Revenues $222,631 $166,951 $74,147
Cost of services 184,322 142,643 62,440
Gross profit 38,309 24,308 11,707
Selling, general and
administrative expenses 34,113 21,390 9,995
(Gain) loss on asset sales (91) (71) 1
Income from operations 4,287 2,989 1,711
Reorganization items --- 436 (40,719)
Interest and other expense, net 1,561 1,515 1,463
Income (loss) from continuing
operations before income taxes 2,726 1,038 40,967
Provision (benefit) for income
taxes 1,693 8 (4,756)
Net income from continuing
operations 1,033 1,030 45,723
Discontinued operations
Loss from discontinued operations (29) (2,940) (2,210)
Benefit from income taxes (203) --- 4,804
Net income (loss) from
discontinued operations 174 (2,940) (7,014)
Net income (loss) $1,207 $(1,910) $38,709
Basic income (loss) per share:
Continuing operations $0.07 $0.07 $3.05
Discontinued operations 0.01 (0.20) (0.47)
Total $0.08 $(0.13) $2.59
Diluted income (loss) per share:
Continuing operations $0.07 $0.07 $2.97
Discontinued operations 0.01 (0.19) (0.46)
Total $0.08 $(0.12) $2.52
Shares used in the computation of
earnings loss per share:
Basic 15,086 14,971 14,971
Diluted 15,163 15,374 15,374
Successor Successor Predecessor
Nine Months Two Months Seven Months
Ended Ended Ended
June 30, June 30, April 30,
2007 2006 2006
(Unaudited) (Unaudited) (Unaudited)
Revenues $665,977 $166,951 $516,864
Cost of services 553,969 142,643 436,947
Gross profit 112,008 24,308 79,917
Selling, general and
administrative expenses 104,774 21,390 69,772
(Gain) loss on asset sales (117) (71) 107
Income from operations 7,351 2,989 10,038
Reorganization items --- 436 (28,608)
Interest and other expense, net 4,743 1,515 15,171
Income (loss) from continuing
operations before income taxes 2,608 1,038 23,475
Provision (benefit) for income
taxes 2,077 8 758
Net income from continuing
operations 531 1,030 22,717
Discontinued operations
Loss from discontinued
operations (2,204) (2,940) (14,929)
Benefit from income taxes (1,340) --- ---
Net income (loss) from
discontinued operations (864) (2,940) (14,929)
Net income (loss) $(333) $(1,910) $7,788
Basic income (loss) per share:
Continuing operations $0.04 $0.07 $1.52
Discontinued operations (0.06) (0.20) (1.00)
Total $(0.02) $(0.13) $0.52
Diluted income (loss) per share:
Continuing operations $0.04 $0.07 $1.48
Discontinued operations (0.06) (0.19) (0.97)
Total $(0.02) $(0.12) $0.51
Shares used in the computation of
earnings loss per share:
Basic 15,048 14,971 14,971
Diluted 15,063 15,374 15,374
SELECTED BALANCE SHEET DATA
Successor Successor Successor
6/30/2007 9/30/2006 6/30/2006
Cash and Cash Equivalents $68,943 $28,166 $10,938
Working Capital (Including
Cash and Cash Equivalents) 161,384 136,506 152,775
Goodwill 14,289 14,589 14,832
Restricted Cash 20,000 20,000 20,000
Total Assets 361,560 375,515 377,899
Total Debt 45,809 55,765 54,058
Total Stockholders' Equity 157,038 154,643 158,953
SELECTED CASH FLOW DATA
Successor Successor Predecessor
Three Months Two Months One Month
Ended Ended Ended
6/30/2007 6/30/2006 4/30/2006
Cash provided by (used in)
operating activities $16,355 $(1,786) $(805)
Cash (used in) investing
activities (328) (197) (127)
Cash (used in) financing
activities (14,374) (4,052) (229)
Successor Successor Successor
Nine Months Two Months Seven Months
Ended Ended Ended
6/30/2007 6/30/2006 4/30/2006
Cash provided by
operating activities $56,640 $(1,786) $2,781
Cash used in investing
activities (895) (197) (6,525)
Cash used in financing
activities (14,968) (4,052) (7,632)
Contacts: Randy Guba, CFO
Integrated Electrical Services, Inc.
713-860-1500
Ken Dennard /
